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parties when these arrangements were made, is shown by the very reservation, in favor of Great Britain, apparently relied upon by their Lordships as a legal or technical means of escape from the moral liabilities of what, it cannot be denied, are virtual and mutual engagements. No doubt Her Majesty's Government have legally and technically the right to withdraw from and to insist on an alteration of the terms of existing arrangements in their own favour. But how do they possess this right ? They possess it by the confidence placed in them by the other parties concerned—that is to say, by the colonies, who submitted to place this reservation in the hands of Her Majesty's Government, considered as Imperial trustee aud guardian of national as well as of general rights —certainly not to be used as a means of driving a hard bargain with, and forcing the other parties to agree to another and totally different arrangement, injurious to the latter and advantageous for the former, and wholly at variance with the spirit and principles of the original arrangement. Another proof of the same general understanding, and of the confidence thereby reposed in Her Majesty's Government by the other parties concerned, is to be found in the course taken by all or many of those other parties, in extending the original arrangements over longer periods, and in the formation of collateral contracts which are evident corollaries, as it were, of the original arrangement. By these contracts New South AVales and New Zealand are bound, and must continue to be bound, for many years to come. Of course, if the Imperial Government insist upon full reimbursement for their expenses, a heavier and disproportionate loss and burden will fall upon those colonies which, relying upon the recognition by the Imperial Government of the spirit and principles already above adverted to, have involved themselves in engagements which, equally with their original one, may be fairly assumed to be for the benefit of the Empire generally. 7. I can scarcely find language to express the deep disappointment aud alarm with which this proposal of the Imperial Government, involving, as I have endeavoured to show, such pernicious consequences, and such injustice to other portions of the Empire, will be viewed by the Government and Colony of New South Wales. That their feelings will be shared by other Governments and colonies similarly situated may be reasonably assumed. In short, the shock of the proposed alteration will be felt throughout tho Empire. And though, doubtless, the sentiments of affection and attachment to the mother-country are capable of the severest trials, yet I cannot but fear that persistence in a policy ofthe sort involved in the proposal under consideration must eventually put an extreme and dangerous strain even upon the notorious loyalty of British colonies. 8. I enclose herewith printed copies of the correspondence on this subject which has passed through this oflice up to the present date, and I have the honor to invite your special consideration ofthe following parts thereof:—--(1.) My letter of the 18th ultimo to the Chief Secretary of New South Wales, with enclosed memoranda by Sir Daniel Cooper, Bart. —to whom, in compliance with the request contained in Mr. Herbert's letter of tho sth ultimo, the correspondence therewith transmitted was communicated—and by Captain Jopp, E.E., Secretary of this Agency. (2.) My letter of the 2nd instant to the Chief Secretary of New South AVales. These letters and memoranda explain the course which I have thought it my duty to take in this matter, and embody, moreover, certain facts and arguments which may be taken in connection with the remarks which I have now the honor to submit. I may add, that this communication is only apparently at variance with the instructions in the telegram of the 7th instant from my Government — to the effect that I am to take such steps as may seem to me desirable in conjunction with the AgentGeneral for New Zealand —inasmuch as Sir Julius Vogel and the other Agents-General had already taken a similar course by communicating with you, whereas in the first instance I thought it better to wait for full instructions and authority from my Government, lam of course now prepared, pursuant to the instructions of that telegram, to act in conjunction with Sir Julius Vogel, and I desire to express my concurrence in the steps taken by him and the other Agents-General to the extent of those instructions. 9. In further pursuance of my instructions, I shall now, if it be your pleasure to receive me, be happy to wait upon you at any time that you may appoint for a personal interview. 10. I regret, in conclusion, that the Chief Secretary's telegram of tho 7th instant speaks of the matter at issue as a " decision of the Colonial Office." lam not aware what has led in the colony to this inference, which you will observe from the correspondence is not borne out by any communication from this office, nor is it in accordance with the views entertained by myself or expressed in this letter. The Eight Hon. the Secretary of State for the Colonies, I have, Ac, Colonial Office, Downing Street. William Forster.

No. 51. The Agent-General to the Hon. the Postmaster-General, Wellington. Sib, — 7, Westminster Chambers, London, S.W., 30th August, 1878. In continuation of my letter of 29th August, I have the honor to forward copy of a telegram Michie. After the receipt, Sir Arthur Blyth, Mr. Forster, Sir Archibald Michie, and 1, having taken it from tho Hon. the Chief Secretary of Victoria,* which was communicated to me by Sir Archibald into consideration, despatched the telegram of which I also enclose a copy. I have, Ac, Julius Vogel, The Hon. the Postmaster-General, Wellington. Agent-General. * Vide F.-4A., 1878, No. 27, Enclosures 1 and 2.