TO THE GOVERNOR OE NEW ZEALAND.

5

A.—No. 1a

the loss which they believe the Colony of New Zealand has sustained from the manner in which the Debentures for £500,000 remitted to the Imperial Government were disposed of by Her Majesty's Government. I forwarded a copy of your Despatch to the Lords Commissioners of the Treasury for their consideration, and I transmit to you for your information the copy of a letter from their Lordships' Department, with one from the Crown Agents, respecting the course adopted on the occasion. I have, &c, BUCKINGHAM AND CIIANDOS. Governor Sir George Grey, K.C.B.

Enclosure 1 in No. 9. Mr. Hamilton to the Undee Secbetaey op State, Colonial Office. Snt,— Treasury Chambers, 28th October, 1807. The Lords Commissioners of Her Majesty's Treasury have had under consideration the Despatch from the Governor of New Zealand of 4th April last, which was enclosed in your letter of the sth June, together with a Memorandum from his llesponsible Advisers relative to the course adopted by Her Majesty's Government with regard to the disposal of the New Zealand Debentures for £500,000 remitted bj the Colonial Government on account of Imperial claims. The Memorandum states that " Ministers have learned with regret that the Debentures wore dis- " posed of privately instead of being placed in the open market; " that "they are advised that if the " Debentures in question had been offered to the public they would have realized a considerable " premium, which is estimated by the Crown Agents at £20,000;" and that they consider that " they " may fairly claim that the Colony shall not suffer from the manner in which its Bonds have been " disposed of by the Imperial Government, but that the additional amount which they would have sold " for in the open market may be estimated by competent persons and placed to the credit of the " Colony." In consequence of the reference made to the Crown Agents my Lords directed that an explanation should be called for from those gentlemen ; and have received a communication from them, copy of which is herewith enclosed, from which the Secretary of State will perceive that the ground upon which the assertion of the Colonial Ministers with regard to the supposed loss sustained by the Colony, is apparently founded upon a letter addressed by the Crown Agents to the Secretary of State on the 26th June, 1565. Without entering into the question as to the right of the Imperial Government to dispose of any securities of this nature which may have been accepted by them, in the manner which they may consider most conducive to Imperial interests, my Lords would observe that all reference to the .state of the money market between the period when the debentures were placed at the disposal of Her Majesty's Government, and that when they could legally have been disposed of by Her Majesty's Government, would seem to have been altogether lost sight of by the Government of New Zealand. The Secretary of State is aware that when in May, 18G5, the first intimation was received by this Board that the Colonial Government was prepared to hand over Debentures to this amount with the view to the adjustment of the debt due to this country, Her Majesty's Government hesitated to accept them, doubts having arisen whether they had legal power to accept securities of this nature for such a purpose ; that they were eventually accepted in the end of August, 1865, as "collateral security" only; and that the final arrangement for the receipt of the Bonds from the Crown Agents was not completed until the end of January, 1866. It then became necessary to obtain the proper guarantee from Parliament, in order ( as stated in the Act 29 and 30 Viet., c. 104,) "to make the said Debentures available," and the Act which was passed for this purpose receired the Koyal assent on 10th August, 1806. If, as has been suggested, the Debentures had been disposed of without such guarantee, there can be little doubt, judging from the market value of the unguaranteed securities of the Colony, that a very considerable loss would have been sustained by the Colony. The Colonial Government must be fully aware of the peculiar state of the money market which existed in this country during the period referred to between the receipt of the first intimation from the Colony with regard to the Debentures, and the date of the Act of Parliament providing for the guarantee ; and it is therefore unnecessary to enter into any details of the reasons which led to the depreciation in value of all securities in general. My Lords would therefore add, in conclusion, that, considering it necessary for the interests of the public that the Debentures should be realized, and the proceeds placed to the credit of Her Majesty's Exchequer, they satisfied themselves that the price given by the Bank of England was fair and reasonable. They must therefore decline to admit any claim on the part of the New Zealand Government with regard to these Debentures. I have, &c, The Under Secretary of State, Colonial Office. Geo. A. Hamilton.

Enclosure 2 in No. 9. Mr. Saegeaunt to Mr. Hamilton. Offices of the Crown Agents for the Colonies, Spring Gardens, Sin, — London S.W., 23rd August, 1867. I have the honor to acknowledge the receipt of your letter of the 13th instant, in which you 2