D.—sa

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have only to ask from the Government and the Legislature such powers, privileges, and facilities as are expressed and implied in the statute under the provisions of which the company was formed. My directors also admit that at one time, owing to the defective provisions of the District Eailways Act, for which the company was obviously not responsible, they were forced to obtain advances at a high rate of interest, by reason of their debentures not being negotiable; but on inquiry it will be found that the amount of the difference between the rates paid and fair rates of interest, if deducted, will not sensibly reduce the amount payable by the guarantors. In reply to the last paragraph of your letter I am instructed to say that, as my directors are not prepared to renew the offer made in my letter of the 20th February, they see no necessity for a valuation of the line by the Government Engineer. If, however, negotiations are renewed, they see no objection to acceding to your request, on the understanding that such a valuation shall in no way be binding upon the company. It may interest the Government to know that the expectations of the board regarding increase of traffic have been more than fulfilled. The increase for the six weeks ending the 6th instant, as compared with the corresponding period last year, has been £1,041 10s. 4d., thus : —■

As it has come to the knowledge of the board that misapprehension exists in the public mind as to the company's attitude in the negotiations, my directors propose to publish the correspondence on the subject. I have, &c, E. H. Leaey, The Hon. Sir Julius Vogel, K.C.M.G., Colonial Treasurer, Wellington. Secretary.

15. —The Hon. the Colonial Teeasueee to the Secebtaey, Waimea Plains Eailway Company. Sir,— 16th June, 1885. I have the honour to acknowledge the receipt of your letter of the 11th June, in reply to mine of the 31st March. You must not suppose, because the Government looked upon the transaction as a commercial one, that therefore they would not sympathize with the shareholders in any loss they might sustain. The conditions of the purchase, not the effect of it on the shareholders, were what the Government had to consider. In making the purchase the Government had to determine what terms would be likely to be acceptable to Parliament. You will, I hope, permit me to say that the calculation you have been kind enough to furnish of the position the Government would be in if they accepted your offer is totally incorrect. Passing over the fact that it is based on the principle that the Government can borrow money cheaper than a private corporation — a fact which might equally be urged in favour of the Government buying up every business in the colony—your figures are quite erroneous. They are founded on the assumption that the Government can pay off the whole purchase-money by money borrowed at 4 per cent., whereas a great deal more than half the amount yoti ask is represented by debentures with a long currency, on which the interest is over 6 per cent., which the Government would either have to continue to pay or give a very large premium to redeem the debentures before their due date. This disposes of the calculations you furnish. With regard to the question of the cost of the railways, I am unable to see that a mistake which presses injuriously on the Government and on the ratepayers should not be as much open to remedy as the mistakes of legislation, of which you have so bitterly complained, which affected the company. The company, which has asked for retrospective measures to enforce its liability against the ratepayers, can hardly deny the right to remedy a false valuation. That the valuation was a mistake, is beyond question, because it was based on an estimate of work by the engineers, some part of which was never constructed. You say that some other works were done instead, and that the cost of the railway stands in your books at a little over the amount of the guarantee. This is a mere coincidence. It is certain that the Government guarantee has been based on an erroneous conclusion. The fact of the Government having paid for three years an excessive amount surely does not bar its claims to ask for reconsideration. But you state that the amount is not excessive, and that you are willing the cost, as it stands in your books, should be examined by an impartial person. This is a fair offer, which it will be for the Minister for Public Works to consider. It is theoretically impossible that the mistaken estimate on which the present guarantee is founded may by coincidence not be wide of what a proper estimate would show. But the question of examination is really prefaced by one of principle. The cost, as it stands in your books, includes interest and financing. The Government contend that these charges have no business to be taken into account. They read the Acts to mean that the company, when it has completed the railway, is thenceforth to enjoy a guarantee; but the cost to date is the cost without interest,

Local Traffic. Through Traffic. Total. Corresponding Period, 1884. April 1 to April 25 April 26 to May 23 May 24 to June 6 £ s. d. 661 15 5 899 17 6 516 12 11 £ s. d. 118 9 11 141 0 0 Not returned. £ s. d. 780 5 4 1,040 17 6 516 12 11 £ s. d. 384 15 3 555 5 6 356 4 8 Total 2,078 5 10 259 9 11 2,337 15 9 1,296 5 5