Sir,—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 railway, and to reciprocate your expressions of regret that it has not led to an agreement between the Government and its Company.

My directors have been made fully aware during this correspondence that the Government are not concerned as to what effect the sale and purchase would have upon the shareholders, and they do not ask sympathy from the Government, but simply claim the rights and privileges the Legislature intended this Company in common with others should enjoy. Please consider, therefore, any reference to the resulting effects upon the shareholders of a sale of their property as simply a statement of facts, which my Board feels bound to consider, notwithstanding that, according to your view, they do not concern the Government.

My directors are of opinion that neither Parliament nor the Colony desire that in a purely commercial transaction like that forming the subject of the negotiations, any of the parties concerned—namely, the Colony, the ratepayers, and the Company should suffer any injustice.

The Government quota of guaranteed interest for the twelve months ended 31st March 1884, was £1943, so that as stated, the ratepayers would be entirely relieved, and the contribution from the Treasury considerably lessened.

In fulfilment of a promise made to the ratepayers in response to a memorial presented by them, and recognising the hardship of exacting a crushing rate from the settlers, my directors have met the Government in a fair spirit, as must be manifest to anyone perusing the correspondence. The Company has offered to dispose of what is now undoubtedly a good property, when in sight of steady dividends secured by law, at a price that so far from returning any interest on their investment, will not admit of the refund of the shareholders' capital, whilst the Colony would acquire the railway on terms that would secure the ostensible object of the Legislature—namely, the relief of the guarantors, as shown in my letter of 9th January last.

With reference to your remark that previous to the negotiations opened by the Government for the purchase of the line the Company's shares were unsaleable except at a discount, and that as a consequence of the negotiations the shares have materially advanced in price, my directors think you must have placed too much reliance upon the source of your information, as practically no transactions in shares have taken place. Up to the present time the Company has been unable to declare a dividend owing to the faulty legislation previously complained of, but now happily remedied; and it is to the previous doubtful character of the statutory guarantee of interest must be attributed the fact that the Company's shares were practically unsaleable.

In reply to your contention that the cost of the railway has been certified to at too high a figure, I have to repeat what has been previously stated in the correspondence—namely, that by section 22 of "The District Railways Act, 1877, Amendment Act, 1878," the certificate of the Minister of the cost of the railway is made conclusive for the purpose of the guaranteed interest. Since the granting of that certificate the accounts of the Company have been audited three times by the Government auditor, and the Government has for two years paid its quota of the guaranteed interest on the basis of the cost as certified to page 14 by the Minister; and although my directors submit that it is not competent to the Government to raise the question, they are prepared to submit the details of the cost of construction as appearing in the Company's books (and amounting to the sum of £109,048 1s 7d) to any competent disinterested person, and to abide by his decision as to the amount fairly chargeable under the head "cost of railway and its equipment,"

My Board admits that as regards the details of the engineer's estimate some of the works specified have not amounted to the sum estimated, but on the other hand other items have exceeded the estimate, thus swelling the cost to an amount in excess of that certified.

Seeing that the present Minister of Public Works has, after consulting (I understand) the Crown Law Officer, signed a direction to the Company to levy a rate based upon the certified cost of the railway (£108,713) it may fairly be presumed that the Government has been advised that your contention that the Company is not entitled to the guaranteed interest on that amount is erroneous. I am directed to remind you that according to the District Railways Acts the Government quota of the guaranteed interest (£2162 16s 0d) is now due and payable, and I shall be glad to receive the amount at once, seeing that all claims upon the Company by the Government and the Insurance Association have been promptly paid.

With regard to your contention that the shareholders should have subscribed the whole cost of constructing the railway, my directors fail to see how you can reconcile such a contention with the provisions in the statute expressly authorising the District Railway Companies to borrow money by the issue of debentures, as such authority would obviously not be required if it bad been contemplated that the total amount required for the construction of the railway should be subscribed by shareholders. Moreover it could hardly be expected that such undertaking could be carried out with locally subscribed capital only.

These negotiations were not opened at the instance of the Company, and whilst I am instructed to repeat that for the reasons previously stated in the correspondence, my Board are willing to sell on terms fair and equitable to all concerned, they are equally content to retain the property, and 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, I owing to the defective provisions of the District Railways 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 director are not prepared to renew the offer made in my letter of February 20, 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.

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.