D.—sa

10

The Government will thus acquire the line at its certified cost, without any loading for goodwill or interest on shareholders' capital. A sale on the above terms will barely admit of the return of the paid-up capital, and my directors will not feel justified in entertaining any proposal resulting in further loss to the shareholders. The sale not to take effect till after the 31st March next, in order that the company's right to the guaranteed interest for the current year may be preserved. The foregoing definite offer is made in order to remove the misapprehension that exists as to the position taken by the company in the negotiations. For the reasons previously stated, lam directed to request that you will be so good as to give my directors an early intimation of the probability or otherwise of the offer now made being accepted. I have, &c, B. H. Leaet, The Hon. the Minister for Public Works, Wellington. Secretary.

13. —The Hon. Sir Julius Vogel, K.C.M.G., Colonial Treasurer, to the Seceetaey, Waimea Plains Eailway Company. Sic, — " Dunedin, 31st March, 1885. In reference to the interview which I had with you and your directors on the subject of the purchase of the Waimea Eailway, I have to express regret that it has not led to an agreement between your company and the Government. The Minister for Public Works requested me, in the event of your directors wishing to do so, to verbally communicate with them respecting your letter of the 20th February. It would be as well, now, in order to complete the correspondence, that a written reply should be made to it, and I have to say that the Government are unable to accept the proposal it contains. There are several points referred to by you in the letter, upon some of which it is perhaps desirable that I should comment. You raise the question as to what amount would be calculated to return to the shareholders the capital they invested. It does not seem to the Government that they are concerned in considering what effect the purchase would have upon the shareholders. That is a matter which rests between them and their directors. But, if it were the business of the Government to see what effect the proposed purchase would have upon the shareholders, obviously that effect would have to be traced, not from the time, some years ago, when the shareholders originally invested their money, but from the time when the negotiations with the Government commenced. lam informed on excellent authority that before the negotiations commenced shares in the Eailway Company could be purchased at a very considerable discount —in fact, that no purchasers could be found for them; whilst since negotiations have commenced with the Government the price has largely advanced. It is evident, therefore, that, as far as the shareholders are concerned, the proposals of the Government had a highly favourable effect upon their interests. The shareholders also have to bear in mind that the losses they may make will arise from the undertaking having been commenced without sufficient capital. For example, to the price the Government may give you they will have to add several thousands of pounds for redeeming the longcurrency debentures of the company held by the Insurance Association. lam informed also that enormous rates of interest were paid by the company on some of the advances it obtained. Obviously the Government are not concerned in indemnifying shareholders for losses of this kind. With respect to your statement as to the cost of the railway as certified to by the Hon. the Minister for Public Works, I have to say that it has been discovered that a serious mistake has been made in certifying to the cost of the railway. The certificate of cost appears to have been based upon the cost estimated by the engineer, whilst it is in evidence that a large amount of work included in the engineer's estimate has not been carried out. To the best of our belief some sixteen or eighteen thousand pounds' worth of work has not been completed ; so that the ratepayers are paying a guarantee upon an amount of capital which has not been expended on the works, or, rather, which has not been expended in such a manner as would entitle it to be included in the guarantee. I am aware that the cost stands in the books of the company at about the amount of the guarantee ; but in that cost is comprised interest and financing which clearly should not be included. The intention of the Acts under which the railway was constituted was that the shareholders should find the money required, and not receive interest until the work was completed. lam bound to say that it appears to me you will have to finish the works not completed, and that meanwhile the Government and the ratepayers have a right to a material reduction on the amount on which they are asked to pay a guarantee. As far as the Government are concerned they are entitled to the return of a considerable part of the sum paid you during the last two years, and I shall be glad to learn you are willing to restore it. In order to come to a clear conclusion as to the value of the railway, it would be desirable that a valuation should be made ; and I have to ask you to allow the Minister for Public Works to send engineers upon the ground to make such valuation. I have, &c, E. H. Leary, Esq., Secretary, Julius Vogel. Waimea Plains Eailway Company, Dunedin.

14. —The Seceetabt, Waimea Plains Eailway Company, to the Hon. the Colonial Teeasueeb The Waimea Plains Eailway Company (Limited), Sir,— Dunedin, 11th June, 1885. I am instructed by my directors to acknowledge the receipt of your letter of 31st March referring to the interview you had with them on the subject of the purchase of the Waimea Plains Eailway, and to reciprocate your expressions of regret that it has not led to an agreement between the Government and the company.