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I.—7a

value of the land-grant was made so prospectively large that it appeared to the representatives of the company as if it would not be necessary for them to have any large amount of share capital, as they would be able to finance from time to time on their land-grant. Soon after the floating of the company negotiations for a new contract were proceeded with between the company and the Government; and in the meantime contracts for the construction were let, payments for contracts being provided for by the issue of share capital which I have just mentioned. At that time the company believed they would have the cordial assistance of the Government of the colony, and not only that, but such assistance as would enable it to finance from time to time. I would refer you to a speech or memorandum by Sir Julius Vogel to his successor in October, 1889, as showing the relation of the parties at that time, and the feeling which existed between the Government and the Midland Eailway Company : — To my Successor, — The board is composed of high-charactered, influential men. The enterprise could not be in better hands, and there is no room to doubt that they wish to proceed with the railway, and will be content with any equitable arrangement that will enable them to obtain the necessary capital. Negotiations have been continuously proceeding during many months. The Agent-General has acted for the Government on the basis of endeavouring to manage within the four corners of the powers given by the Legislature. . . . The matter, therefore, must be left to our successors. In referring to it, I wish to express the opinion (and Mr. Richardson concurs) that there should be no difficulty now in putting the last proposals of the company into a shape that will be satisfactory alike to the colony and to the company. Julius Vogel. 7th October, 1887. Shortly after the memorandum was drawn up a new Ministry was returned. The Midland Eailway Contract Act of 1887 was passed in December of that year. This Act provided for the substitution of a new contract with the company, and a contract was subsequently entered into; but it is not necessary, for the purpose of my present address, to refer further to it. Shortly after entering into this new contract the company met with very considerable financial difficulties. From the company's point of view these were principally owing to rumours which were circulated that the land-grant was not anything like the value that was placed on it at the time the company was formed, and particularly to the reservation of the mining reserves by the proclamation known as Larnach's proclamation. The effect of that proclamation was, however, subsequently got over; but from the middle of 1891 down to the beginning of 1895 reservations of these mining reserves were made persistently, the effect of which was that the company's credit at Home was practically stopped. I say this : that, whether these reservations were made rightly or wrongly (and at that time it was not known), the effect was that the company was crippled. Subsequently the arbitration proceedings brought on by the company proved that the action of the Government was right—that the reserves were properly made ; but whether they were rightly made or not does not affect the present position of the company in coming before you with their petition. The effect on the company's finance was identically the same whether they were made legally or not. Now, I think I can come to the proposal of the company, which I have just read. Shortly put, it is that the company asks the Government, in return for a re-lease of the land-grant, to give six hundred and eighteen thousand two hundred and fifty pounds' worth of 3-|-per-cent. debenture stock, payable by equal half-yearly instalments, covering a period of ten years. In return for this, the company will undertake to float a new company. This would settle all difficulties which have arisen or may arise between the company and the Government, or between the debenture-holders and the Government; and the company will construct the line from the East to the West Coast within a period of five years. 5. That is, you mean, from Christchurch to the West Coast ?—Yes. I wish now to point out the advantages to be gained by the Government and the colony in accepting the present proposal by the Midland Eailway Company. By some people it is considered that the arbitration proceedings of last year have effectually settled the Midland Eailway question. But I wish to point out most strongly, and, if possible, to convince you, that is not at all the case. Notwithstanding the result of the arbitration, the company still owns a railway-line of a hundred miles in length. Very few people know what that line is really like. Ido not know whether any members of this Committee have been there. I have been over the line, and I have met other men who have been over it, and from all people who have travelled over the line I have heard but one opinion—that it is the best constructed line on this side of the world. The company have also their claim on the land-grant. I wish to put the position clearly as to what will happen if the present condition of things remains for any length of time. At the present time the Government, having possession of the railway, is in the position of a trustee for the company; and, while it runs the railway on that part of the line that is constructed, it has also to construct another portion of the railway in terms of the Midland Eailway contract. If the Government were to continue the construction of the line as they have been doing during the last year, then, should the company pay the balances of account that are owing by it on the usual stated accounts as they fall due, the company will be from time to time entitled to selection from the land-grant as each section is completed. Thus an enormous area, known as the Midland Eailway Company's authorised area, must be locked up until such time as the Government shall have completed the railway not only east and west, but also north and south. That is one of the legal difficulties; but there are several others—for instance, the debenture-holders. I am at a loss to understand why the debenture-holders have done —what I observe they have done—in stating that they have no direct legal redress against the Crown, while they carefully reserve all their rights against the Government. In my opinion, they have some legal redress against the Crown; and it may be, at some future time, if this proposal is not carried out, that the debenture-holders may be found commencing an action against the Government of the colony. But the greatest legal difficulty which presents itself to my mind is the difficulty involved in the position of trust which the Government has taken upon itself by the seizure of the Midland Eailway line. Undoubtedly the colony is a trustee for the company; and, while there may be many advantages to the Government in