r>.—l

VII

The company has until recently met the claims made upon it, the amount received during the late financial year being £20,567, while the profits on the working of the opened sections of the railway credited to Construction Account during the same period amounted to £1,250, making a gross total sum earned by the railway or recovered from the company since possession of the line was taken by the Government of £50,588. Accounts for a further sum of £11,018 were rendered to the company in April last, and formal notice, in terms of section 125 of " The Bailways Construction and Land Act, 1881," was served early in May, but the amount demanded has not yet been paid. As honourable members are aware, the debenture-holders claim that, under section 14 of " The East and West Coast (Middle Island) and Nelson Bailway and Bailways Construction Act, 1884," they, and not the Government, are entitled to possession of the line. They claim that they have a first charge upon the property, even against the Crown, and notwithstanding that the company has failed to carry out its contract. As against this contention the Government is advised that it was fully justified, and well within its rights, in taking possession, and proceeding with the construction of the railway. An application by some of the debenture-holders was recently made to the Supreme Court in the colony for the appointment of a Beceiver, so that an action could be brought against the Government to determine whether the rights of the debenture-holders are subject and subordinate to the rights of the Crown under " The Bailways Construction and Land Act, 1881," or whether they are entitled to precedence over those rights. The Beceiver was duly appointed by the Judge, and he has since initiated the contemplated action. The statement of claim and the Government's statement of defence have both been filed in Court, and we now await further action on the part of the Beceiver. This being the case, much as I regret the complicated position existing, 1 fear that until the legal position is defined by the Courts nothing can be done to improve the situation, which, contrary to the wish of both parties, may be described as a strained relationship. When the line is completed to the Otira, the question as to whether the incline section from there to the summit of the range at Arthur's Pass shall be constructed with a switchback in the Bolleston Valley or with a spiral tunnel under Mount Bolleston will require to be definitely decided. At present the matter is engaging the attention of the highest engineers in the colony. A reduction in the present rate of expenditure will be necessary if this question is not settled at an early date. The expenditure on construction-works on this railway last year amounted to £36,527. The total vote proposed for the current year is £35,000, including cost of permanent-way materials; but, allowing for credits, the net amount is £30,000. SUEVEYS. Considerable work has been undertaken during the year in the matter of surveying projected lines of railway. Beference has already been made to the surveys at both ends of the North island Main Trunk Bailway, the Nelson end of the Midland Bailway, and the Paeroa-Waihi and the Bimutaka deviation surveys. In addition to chese, a survey party is now engaged in exploring for a suitable line between Napier and Gisborne. On a portion of this route the country is of a very rough and broken character, and four different routes will have to be tried in order to ascertain which of them presents the greatest advantages. The survey has not yet made sufficient progress for any practical results to be laid before Parliament during the present session, but it seems evident that between Napier and Wairoa, at any rate, the line will be of a heavy and costly character. It has for some time past been in contemplation to have a trial-survey made for a light railway between Gisborne and Botorua. The large amount of surveywork the department has in hand at present has prevented my setting apart a suitable officer for this survey, but I am now making arrangements which wall enable this work to be put in hand. This line throughout a great part of its