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The Pamphlet Collection of Sir Robert Stout: Volume 74

Report of the Directors to the Shareholders of the New Zealand Midland Railway Co"., Limited

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Report of the Directors to the Shareholders of the New Zealand Midland Railway Co"., Limited.

The Preamble of an important Act of the New Zealand Legislature, entitled "Railways Construction and Land "Act, 1881," explains clearly the policy of the New Zealand Parliament and people at that time. That policy, if cautiously, and at the same time vigorously, pushed, would have secured in the course of a few years the practical completion of the main lines of railway essential to the development of the country at little or no pecuniary cost. Constant employment would have been afforded to a very large number of artificers and workmen. Capital would have been freely introduced for undertakings, encouraged and stimulated and rendered possible by the existence of a complete railway system.

The Preamble of the Act ran thus :—

"Whereas it would conduce to the more speedy settlement of the Colony if provision were made enabling Joint Stock Companies to page 2 enter into contracts for the construction of railways, or for the construction and working thereof upon receiving aid, for all or any of such purposes, by grants of Crown Lands upon the terms and in the manner provided by this Act.

Be it therefore enacted by the General Assembly of New Zealand in Parliament assembled, and by the authority of the same as follows :—"

Here follow the provisions of the Act, which need not be quoted here.

Shortly after the passing of the Act, a scheme was propounded for the building of a railway then called The Canterbury, Westland and Nelson Railway.

This scheme will be best explained by a quotation from a memorandum drawn up by its promoters and dated London, March, 1885.

"In 1881 the Legislature of New Zealand decided to supplement the construction of railways by the Government by adopting the system of making grants of land to capitalist undertaking their construction, and an Act was passed on that basis under which contracts have been let for the Wellington and Manawatu Railway, and Taurunga Railway, and other lines. The financial success of the first named, which alone is sufficiently advanced to be judged of seems now assured.

The desirability of constructing the Canterbury, Westland, and Nelson Railway in this manner has, for some time, been strongly felt, page 3 but those moving in the matter considered that the concessions authorised by the Act of 1881 were not suitable to this line, and, in consequence, in October, 1884, a special Act was passed enabling the Government to contract for the construction of this railway, conceding to the contractor a bonus or grant of £1,250,000 in land calculated upon its estimated market value before the making of the contract, and without regard to the prospective value to be given to the land by the Undertaking, such market value to be ascertained by arbitration.

Under this Act, an influential and representative body of the inhabitants of Christchurch and Nelson and the surrounding districts have entered into a contract with the Government of New Zealand for the construction of the railway."

These simple and clear paragraphs describe the commencement of the Undertaking, as it was, in fact, a purely New Zealand enterprise. The Memorandum was signed by H. Alan Scott and Arthur Dudley Dobson, of Canterbury, and Charles Yates Fell, of Nelson. Naturally, the next question was how to raise the necessary capital. For this purpose, after much negotiation, the contract was transferred to a company, formed in England under the Companies Acts, 1862 and 1882, the price paid being £6,000, claimed for surveys and preliminary expenses. The transfer to be made to the satisfaction of the Agent-General as representing the New Zealand Government. Very considerable expectations were held out to the English Company to induce them to embark in the undertaking. page 4 These are summed up in one paragraph of the Memorandum, which runs thus :—

On the whole, having regard to the increase in value which will certainly take place as population spreads, minerals are worked and fresh townships judiciously laid out, it may be fairly assumed that the contractors will ultimately receive from the land grant alone more than the whole cost of the line, leaving the railway a valuable asset in their hands."

And the concluding paragraph is very important.

"The Contractors are acting purely in a public capacity as the representatives of those portions of the Colony of New Zealand concerned in the undertaking, and they have authorised their delegates to dispose of the contract on the refund of moderate preliminary expenses actually disbursed to such person as may satisfy the Agent-General of the Colony (as representing the Government) and the delegates, of his capacity to carry the undertaking to a successful termination."

Thus the Company was brought into touch with the New Zealand Government, who, through the Agent-General, must have been satisfied of its stability and character before it was permitted to assume the contract.

The views of the Government at that time as to the importance of the Railway and its prospects may be gathered from the following extracts taken—

1. From the Public Works Statement of 1885 :—

There now, however, seems some difficulty in obtaining the construction of the lines under page 5 the Act of last year, and it remains for the House to consider what should be done. The Government are of opinion that the lines are of immense importance. They will tend to increase the mining population, and to develop a large amount of mineral traffic, and commerce generally, There are also considerable tracts of land which will be profitably occupied by settlers, whilst the bringing of the produce of the eastern side of the Middle Island to the western at a cheap rate will tend to promote the welfare of the West Coast settlers, and open a new market for the agriculturists on the eastern side."

2. From a speech of the Colonial Treasurer, Sir J. Vogel, delivered in October, 1885 :—

"But lately, as I stated the other evening, I am beginning to think that the railway is so desirable that it may be better that the Colony should make and own it rather than procure its construction by even a small guarantee, which would involve in the end a heavier cost if the Colony purchased the railway, because of its having given the lands in addition. What i am now considering is the treatment you were subjected to when it appeared that, by some extra concessions, the railway might be made. From one end of the districts concerned to the other, men of large properties came forward and were ready to see themselves burdened with a liability for part of the guarantee rather than that the arrangement should not be made.

"This railway virtually brings to useful purposes a new territory to the Colony, and a page 6 new population. I believe that it will ultimately prove one of the best-paying lines in the Colony."

3. From a speech of Mr. Richardson, Minister for Public Works, delivered in February, 1886 :—

"And in addition to that, the population is at the two ends of the line, and the traffic would nearly all be that which pays best of all to a railway, namely, with long carriage. And there is no need to anticipate having those continuous stoppages and large number of intermediate stations which make our railways so expensive to work, I estimated last session that the traffic would return a net profit, from the opening of the line, of at least 2 per cent., and I feel sure that I am within the mark."

4. From a speech of the Colonial Treasurer, delivered in February, 1886 :—

"Now the population which would be directly benefited by this railway amounts to one-third of the whole Colony. It will unite several great districts and enable them to exchange, on the one hand, agricultural productions for gold and coal, and enable the large plains of Canterbury to be supplied with that great agency of human manufacture—coal—which so abundantly exists upon the West Coast. I shall conclude by quoting a few observations made by the Hon. Mr. Bowen, in which he aptly epitomises the arguments in favour of this railway :' Briefly, those who advocate the immediate prosecution of the East and West Coast and Nelson Railway do so because they are satisfied that it will pay page 7 better than any other railway now projected in New Zealand; because it is a part of the trunk line, connecting all parts of the Island together; because it will practically add a new territory to the Colony—a territory teeming with all sorts of minerals—with large, undeveloped wealth hitherto cut off.'"

The result of negotiations based upon the above Memorandum was that the original contract was, by a Deed dated 30th April, 1886, transferred with the consent of the Governor of New Zealand from the original contractors to the New Zealand Midland Railway Company. The names of the original contractors were as follows: William Chrystall, John Tucker Ford, George Hart, John Thomas Matson, Thomas Shailer Weston, John Honeycombe Cock, Charles Yates Fell, Henry Douglas Jackson, Albert Pitt, and James Sclanders. This is now known as the Chrystall Contract.

The scheme was supported by strong representations in its favour by the Agent-General for New Zealand in London, Sir F. Dillon Bell, who stated that, speaking not only as an individual but also on behalf of his Government, the contract was most valuable, and that the Government were most anxious to, and would, help this scheme in every way then and for the future. The prospectus of the new Company was submitted to, and approved by, the Agent-General, and was issued in May, 1886. The first issue was for a share capital of £250,000, part of £500,000.

It was always obvious that such a capital was inadequate for the undertaking, but the reasons for fixing it at that figure were, first, that the position of the Company was distinctly explained to the Agent-General, and through page 8 him to the New Zealand Government, whose cordial assistance had been promised, so that it was open to them to raise any objections if they considered that the capital was too small for the commencement of the railway. No such objections were made, but, on the contrary, the Agent-General had pressed the Company to accept the transfer of the contract and to commence the works, and was a party to the deed of transfer.

Secondly, that various modifications in the contract had been agreed with the Government, rendering necessary the framing of a new contract, which would, of course, occupy some time, but meanwhile certain parts of the line could be usefully constructed with the money subscribed, and detailed surveys be made.

In the third place, it had to be remembered that tie undertaking did not consist merely of the building of a railway, but also of the management and development of a large amount of land, which, as is clear from the above extracts, was represented to be of great value, not only as agricultural land but also for settlement, and as being rich in timber and in minerals.

It was reasonable, therefore, to expect that, having the Government as a firm ally, the Company could raise money from time to time as the work progressed, and so money was raised and contracts were let for the building of the railway.

Assurances were given to the Directors of the Company on substantial and sufficient legal authority that no penalty existed for the non-completion of the railway, except of course the loss of the unearned grants of lands. It was therefore reasonably anticipated that a stoppage of the works through bad times, accident, or any unforeseen page 9 circumstance would only lead to negotiation and some delay until the difficulty could be overcome. Without this verbal assurance the Directors would not have proceeded with the undertaking.

The Act confirming the contract under which the work was started was passed on 30th July, 1886; but the negotiations as to the new contract were continued between the Company and Mr. Richardson, the Minister of Public Works, and Sir Julius Vogel, the Colonial Treasurer, until those Ministers went out of office, upon a change of Ministry, which took place in 1887, and caused consequent delay. The retiring Treasurer left a memorandum to his successor, which contained the following :—

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.

page 10page 11

The new Government came in shortly after that date, and in the ensuing Session referred the subject to a Select Committee, which reported in November of that year, and on 23rd December, 1887, the Midland Railway Contract Act was passed, which provided for the substitution of a new contract.

Meantime the difficulties in the path of the Company accumulated. Soon after the capital had been raised, rumours were persistently circulated, originating in New Zealand, chiefly on the authority of Ministers themselves, that the land grant was of no value, and the whole affair likely to prove a failure. These rumours of course created great difficulty in raising capital sufficient to complete the railway, for which object negotiations were in satisfactory progress; and early in 1887 two events occurred of interest as connected with these transactions.

Acting on the understanding that considerable modifications and extensions of the original contract of 1885 would be necessary, the New Zealand Government prepared a new contract, which met with the approval of Mr. Brodie Hoare, the Deputy-Chairman of the Company, and of Mr. Scott, the then Manager of the Company, who were both in New Zealand at that time. But this contract was found quite inadeqate to remove the doubt—of which probably they were not aware—which had been created in financial circles in London as to the bona fides of the Government and the value of the land concession. Amendments were therefore made by the Company in order to satisfy the minds of financiers, and to remove any suspicion as to the bona fides of the Government. These alterations in effect simply gave assurance that the land to be granted as the Railway proceeded should at its completion be worth at least £1,250,000.

The other event was of far more importance. Mr. Larnach the Minister for Crown Lands, issued a proclamation on 20th January, 1887, reserving for mining purposes 750,000 acres of land on the West Coast. This would have effectually hindered the promotion of settlement and of trade along an important section of the railway. Mr. Scott protested, urging that the proclamation was not in accordance with the agreement with the Company, and it was accordingly withdrawn in June, 1887.

In July, 1887, the Company was able to send out to the New Zealand Government an offer of the whole of the money required for the building of the line, accompanied by a contract upon which the financiers were prepared to act. The main feature of this contract being a clause to confirm and ensure the minimum value of the land grant, was subsequently accepted. It was most unfortunate that, owing to long delays in New Zealand, this opportunity was lost to the Colony and to the Company. The financiers expected a prompt reply. They could not and would not wait beyond a moderate and reasonable time.

The contract sent out in July, 1887, was ultimately, after many alterations, agreed to and dated 3rd August, 1888, but it was not until 23rd September, 1888, that information that it had been finally sealed was sent to the Company. One of the conditions contained in it, and insisted upon by the Government, was that the Company should immediately spend £120,000 in construction £60,000 at the Christchurch, and £60,000 at the Nelson ends of the line. This demand was insisted on, and reluctantly conceded as the only means of obtaining what were believed to be valuable modifications of the contract.

The question of the limit of time within which the railway was to be completed was not forgotten in arranging this contract. The Company's solicitor, while settling it, objected to the term for the completion of the railway remaining as in the original contract, and altered the date to 1897. The Agent-General pointed out that such an alteration would necessitate fresh legislation, as it was not possible under the Act of 1887, and consequently considerable further delay. He also pointed to the provision which appeared in the draft for extending the time, and added that the Company need have no apprehension on that point, because, as so much, time had then already elapsed, no reasonable extension would be refused, and that both the Government and Colony were anxious to assist the Company in every possible way.

This date, September, 1888, was a turning-point in the history of the Company, and it may be useful to give here a letter written by the Chairman of the Company to the Premier, The Honourable Sir H. A. Atkinson. Although the letter was private and unofficial, there can be no objection to its production at this time, as it may serve the purpose of making more clear a series of transactions that are somewhat difficult and intricate. The letter ran thus :—

page 12

My Dear Sir,

I hope you will allow me to send you a few lines privately upon the conclusion of the contract with the New Zealand Midland Railway. I beg to express appreciation of the trouble and care with which you have dealt with this somewhat difficult matter, and to express a hope that in the end your page 13 expectations may be most fully realised with respect to the benefits to be derived by the country of New Zealand through the making of the railway. I very much wish that during these negotiations, and especially in the autumn of last year, when we were so singularly fortunate as to obtain for a time an offer of the whole of the money for the building of the railway, I could have had a personal interview with yourself and other ministers. I think that I could have smoothed many difficulties and removed many doubts. I have always taken an interest in colonial matters, and have been for some years possessed of a small property in Queensland. Some two years ago I lost my seat in Parliament, and was occupying my leisure in considering how some scheme of emigration could be devised which would be based upon the introduction of both men and capital into a country fit for development. Just at that moment the scheme of the New Zealand Midland Railway presented itself to me, and I took it up with some enthusiasm as a means by which apparently very great benefits could be bestowed both upon an old and upon a new country. If in the first instance I had entered upon the matter merely as a commercial undertaking, I probably should never have dealt with it in the way that I have done, or more probably still, I should never have touched it at all. I confess, too, that I never expected the excessive delay and the harrowing negotiations which have taken place and possibly are not even yet concluded.

Having, however, entered upon the scheme, possibly with too much of a philanthropic and page 14 enthusiastic spirit, I certainly intend to do my utmost to carry it through, and hope that in the end the undertaking will not only be a public benefit but also a commercial success.

I was very much disappointed when last autumn the offer of an expenditure of £2,500,000 was practically refused. The terms were fair, and what was of the greatest importance, they were intelligible to the London financial people, and drawn in language which they could understand, I had always been led to expect that upon a definite offer of the money any reasonable terms would be warmly welcomed by the New Zealand people. However, that is past, and having now by your capacity and firmness arrived at a settlement, we shall do our best to raise the money that is necessary to proceed vigorously with the work. Of course the original offer £2,500,000 made last autumn has passed away, as we at the time distinctly indicated would be the case. I hope you will pardon me for troubling you with this letter. I have been anxious for some time to express to you in confidence our true views and position, which have, I think, been a good deal mistaken, though not perhaps unnaturally so. I hope that you will allow me to communicate with you again as to our general scheme and progress as soon as the money necessary to make some advance with the line has been obtained. We are rather hindered by the fact that the long delay in completing the negotiations has driven us into the holiday time, so that some weeks, or even months, may elapse before we can get on a satisfactory page 15 footing. It will give me intense satisfaction to be able to report to you privately that everything is progressing well.

Politics in England are in a troubled condition, and like the rest of the world, those of us who are quiet business people hate party politics, and wish for calm and common sense.

With many apologies for troubling you, I remain,

Yours faithfully,

(Signed) Thos. Salt.

The Honourable Sir H. A. Atkinson, K.C.M.G., Wellington, New Zealand.
The reply of the Premier was as follows :— Premier's Office, Wellington, N.Z.,

My Dear Sir,

Thank you very much for your interesting letter of August 16, re The Midland Railway. You will ere this have learned that the contract was signed by the Governor on the 23rd September, and that it was mutually agreed by your General Manager, Mr. Scott, and the Government that it should be understood as taking effect from that date. No doubt the matter was surrounded with great difficulties from past failures of unwise proposals and the suspicions engendered thereby, and also from the dislike of the scheme in any form by a large number of members. I am sure page 16 things would, as you say, have been greatly facilitated had we had an opportunity of personal interview. It is to be regretted that the negotiations could not have been settled sooner, but I trust that the delay will not really prejudice you in the money market, and that we shall soon hear that you have obtained the necessary capital on favourable terms.

I thank you very much for your kind expression of appreciation of my efforts to get the matter through the Parliament in a form fair alike to the Colony and the Company, and join with you in hoping that our expectations as to the benefits to be derived from the undertaking by the Colony and the Company may be realised. I shall be pleased if you will follow out your idea of communicating with me from time to time as to your progress. You may be sure that it will afford me equal satisfaction to hear that everything is going on well. Should you at any time decide to visit us—and I think you should if you can spare the time—I shall be delighted to do all I can to make your visit a pleasant one.

You are aware that we have passed through a time of anxiety and trouble, but I think that I may now safely say that the Colony has taken a turn for the better. From every side I hear more favourable accounts of our progress towards prosperity.

Yours sincerely,

H. A Atkinson.

Thomas Salt, Esq.

page 17

These letters describe the position of affairs in the autumn of 1888. From the commencement of the business it was understood that considerable modifications would have to be made in the first contract. Within about fifteen months of the formation of the Company the whole of the money required to build the railway was offered, upon terms that were reasonable and were subsequently granted, but only when it was obviously too late. In fact, the offer was virtually rejected.

As was anticipated, owing to the long and vexatious delays and the adverse rumours respecting the value of the land grant, the greatest possible difficulty was experienced in raising the capital. At length, in April, 1889, the Company were able to issue £745,000 £5 per cent. debentures, but at a great cost. So the work of the railway could now proceed. Much time and much prestige had unfortunately been lost. The debenture prospectus and trust deed were submitted to and approved by the Agent-General, who agreed to become one of the trustees, but afterwards withdrew his name, under direction of the New Zealand Government. Contracts were let for construction of the railway to Reefton and also in the direction of Lake Brunner.

The line to Reefton was completed and opened on the 15th February, 1892, and the extension as far as Jackson's in the direction towards Canterbury was finished on the 2nd March, 1894, the pieces of line at the Nelson and Christchurch end having been completed some time before. During the progress of the works, unforeseen difficulties arose from delay and disputes or misunderstandings connected with the following matters :—

1. A deviation of the railway at Lake Brunner applied for in December, 1889, was approved by the inspector page 18 15th April, 1890. An Act of Parliament was then passed, and not until ten months after the passing of the Act was the consent of the Governor given. Nineteen months of valuable time and much money was thus wasted. Yet clause 4 of the contract 1888 indicates the power of the Governor to consent to a deviation of the line of railway without any Act of Parliament.

2. A proposal for the substitution of an incline line instead of a tunnel at Arthur's Pass (which presented great engineering difficulties as well as a great cost in time and money), was applied for on August 19th, 1891. This arrangement was distinctly provided for by clause 4 of the contract (1888). Consent was not given until October, 1892. More than a year was lost, for it was obviously impossible to raise further capital until this important point had been decided.

3. These delays, added to the various circumstance attending the undertaking from its commencement, justified an application for extension of the time for the completion of the contract. Indeed, it became obvious that without an extension of time no capitalist could possibly entertain a proposal for further supplies of money to push forward the work. Such an extension of time was contemplated by clause 2 of the contract, and had been promised by the Agent-General in 1888.

Accordingly, on 15th March, 1892, the Company applied to the Government under clause 42 of the contract, for an extension of time for completion. That clause provided that the Governor in Council might, if satisfied that the delay had not been caused by the wilful default or neglect of the Company, extend the time; and, as no extension page 19 had in the meantime been granted by the Governor, they presented a petition to the New Zealand Parliament on 9th August, 1892, asking, among other things, for an extension of time.

That petition was referred to a Committee, who on 8th October, 1892, reported "that the time allowed in the original contract for the completion of the work was sufficient; but that, owing to the delays consequent upon the negotiations for modifications of the contract, and also owing to the many other difficulties under which the Company has laboured, it is evident the work cannot now be completed within the contract time. The Committee, therefore, recommend that the Government should grant a reasonable extension of time for the completion of the contract."

However, the Governor, after a delay of three years, refused it, and so made further progress impossible.

4. The graduated land tax was imposed in 1891. This tax was imposed after the agreement upon which the Company relied that grants of land to the value of £1,250,000 should be given, and the effect has been to make it difficult, if not impossible, to hold lands to which they are or may become entitled. This has, of course, placed a serious obstacle in the way of raising fresh capital, besides depreciating the value of the land grant;

5. As to the land grant—a matter of a much more serious character, as affecting the position and prospects of the Company—the controversy about the Gold Mining Reserves was revived. Certain lands within the area reserved for selection by the Company were excepted page 20 by clause 16 of the contract (1888). Amongst these exceptions were lands "required for bona fide mining " purposes, and the several purposes connected there with or conducive there to, and which lands shall from time to time be set apart and defined by proclamation to be issued in that behalf."

The total amount to be taken was not to exceed 750,000 acres, and not more than 10,000 could be proclaimed in one block at one time. It is obvious that if 750,000 acres of real bona fide mining ground could be found and worked on the West Coast, the gain to the Railway Company would have been so great that many other considerations, and even just claims, might have been disregarded by them, but unfortunately the gold mining industry has been steadily declining. Nevertheless, by a series of proclamations, commencing on the 20th August, 1891, and issued at short intervals of time so as to comply with the letter of the above clause, in spite of repeated protests urged by the Manager of the Company in New Zealand, 680,000 acres were proclaimed and reserved. Thus the Company was deprived, justly or unjustly, of the power of creating settlements along the line of railway, and of developing the traffic, and the resources of the district upon which they had been led to rely for the profit of their enterprise.

6. Clause 18 of the contract (1888) gave the Company power to select timber on lands reserved under clause 16. Complaints were made by the Company that between the years 1890 and 1892, licenses were granted and timber cat for other purposes than mining purposes, and that the land grant was thereby injured and deteriorated.

7. Another clause, namely, clause 33 of the contract (1888), was inserted in order to give special faci- page 21 lities for the purchase of lands in the Nelson district. Under this clause the Queen was empowered to sell portions of land in the Nelson and Westland districts upon applications from intending purchasers being sent in by the Company; the money, when paid, to be retained by the Receiver-General on behalf of the Company, and to be handed over to them when claimed and due on account of railway construction. More than a thousand applications were sent in. They were delayed until the purchasers could wait no longer. Thus the distribution of land and settlement on a fertile district were hindered. It will readily be seen how enormous the difficulties were with which the Company had to deal. The land grant became discredited and uncertain, the prospects and inducements originally held out were vanishing away, and the time assigned for the completion of the work, namely, ten years from the year 1885, was rapidly drawing to a close. To reconcile or to settle speedily the disputes that had arisen under the heads mentioned above seemed hopeless, for the attitude of the Governor and of the Government towards the Company had completely changed. They had now to deal with a bitter enemy instead of, as originally promised, an ally and a friend. Accordingly, negotiations were entered into in the year 1892 for cutting the knot of existing troubles by throwing the agreement between the Governor and the Company into a new shape.

These negotiations continued during the greater part of the years 1892, 1893 and 1894. A Parliamentary Committee sat in each of these years. The reports of these Committees are to be found in the Parliamentary papers, together with a considerable amount of important and interesting evidence. Several discussions also took page 22 place in Parliament. Generally speaking, the object of the proposals made by the Company was : first, to remove as far as possible all causes and occasions of dispute between the Governor and the Company; secondly, to release the large area of land reserved for selection by the Company; thirdly, to enable the Company to complete the railway, and this in the first instance from Jackson's to Springfield, that is, the East and West Section. It was never the intention of the Directors to abandon the building of the North and South line from Reefton to the vicinity of Nelson, but they were compelled to postpone this portion of the undertaking until the many difficulties surrounding the construction of the railway, caused by the action of the Government, had been removed.

The proposals for carrying out these objects assumed various forms from time to time as the protracted negotiations proceeded, and a Bill embodying the result of them was introduced by the Government in the Session of 1894; but this Bill was rejected by a narrow majority, composed of many of the supporters of the Government. The Company at the close of that year were, therefore, compelled to refer the whole of the matters in dispute to arbitration under clause 47 of the contract (1888).

There are, as is apparent from the foregoing remarks, four periods in the history of the Company.

The first, from March, 1885, to the autumn of 1887. During this period the scheme was introduced to the Company with strong promises of success and of support, while, nevertheless, the offer of the whole sum required to build the railway was practically rejected.

The second, from the autumn of 1887 to the autumn of 1892, during which an amended contract was framed, capital was raised; the construction of the railway made progress and very serious complications arose between the Government and the Company.

The third, from the autumn of 1892 to the autumn of 1894, when earnest efforts were made by the Company to bring matters into harmony and to finish the railway.*

The fourth period, commencing with the year 1895, is that of arbitration.

In the Spring of 1895, Sir Bruce Burnside, ex-Chief Justice of Ceylon, proceeded to New Zealand as arbitrator on behalf of the Company. After a long delay the New Zealand Government selected Sir Charles Lilley, ex-Chief Justice of Queensland. It was necessary to appoint an umpire, and the selection rested with the two arbitrators. They were unable to agree. Ultimately it was arranged to refer the matter to the Honble. Sir Robert Herbert, G.C.B., with the understanding that the Government arbitrator, Sir C. Lilley, should accept one page 24 of two umpires nominated by him. Sir Robert Herbert nominated two, of whom the Honble. E. Blake, Q.C., ALP, was selected by Sir C. Lilley, and Sir Bruce Burnside acquiesced. These transactions caused very great delay and expense, and an adjournment of the arbitration from the Spring to the Autumn of 1895. On or about 25th November the Arbitration Court was formed at Wellington, the umpire sitting with the two arbitrators. On November 29th, the umpire sat alone, in consequence of insuperable differences having arisen between the arbitrators. After constant and somewhat protracted sittings, the decision of the umpire was given. It was adverse to the Company on nearly all points. A copy of the award can be seen by any Shareholder who calls at the Office of the Company. 61, Gracechurch Street, London, E.C.

In May, 1895, the Railway was seized by the Governor, during the adjournment of the arbitration.

The opinion expressed by the Prime Minister, the Honourable Mr. Seddon, in 1894 is important.

During a debate in the Legislative Assembly upon the latest proposals of the Company, he spoke as follows :—

"Under all the circumstances, I say to Members representing each and every part of New Zealand, if you carry these proposals you will find that they will be in the interests of the Colony, you will remove a serious difficulty, yon will leave untarnished the honour of the Colony, and you will prevent litigation. Otherwise, you will have the position of matters brought before the world by our friends at home, who instead page 25 of being oar friends and assisting us to maintain our credit in the future, will say that they cannot trust us, for when the opportunity was given us we failed to do what was right in the case of this Company. I say that if justice is done this Bill will be read a second time."

The "Auckland Herald" of January 22, 1896, says :

"It is impossible .... to withhold sympathy for the unfortunate shareholders and debenture holders who, after expending nearly a million pounds on a railway intended to benefit the Colony, find that their money has gone and that their security has been seized by the Government of New Zealand. That the Government have done nothing that they were not entitled to do is not, of course, disputed in face of Mr. Blake's award, but there are equities which have a stronger moral force than even cast-iron legalities, and should the claims of the debenture holders be completely ignored on the plea of legal rights rigidly interpreted, it will, we venture to say, be generally regarded as a grievous wrong which would eventually in many ways prove hurtful to the Colony. We do not, however, believe that the Government seriously contemplate confiscating the security on which these British investors lent the Midland Railway Company their money. Such a proceeding would inflict an irreparable injury to New Zealand's credit on the London market, where it is essential to our progress and prosperity that it should stand high and untarnished. It is page 26 surely possible that some modus vivendi can be discovered by which a satisfactory arrangement may be come to between all parties concerned without farther and costly litigation."

The "Grey River Argus," under date 2nd January, 1896, says:—* * * * * * * *

"Whether the Company will accept the award as the last word in the unhappy dispute we are, of course, not in a position to speak at all; but we imagine that the award just given is more likely to prove a mere incident in the case than anything in the nature of a solution, and that the final phase has yet to be reached. In the meantime, the work itself will be hung up—perhaps for good—unless as a convenient field of operations for unemployed stragglers. It is very unlikely that the Company will do anything more to the line, and there is about an equal chance that the Colony, in the present distressful state of its finance, will push it on to completion as a great colonial work. That the matter, therefore, should have arrived at this position is more than a cause for deep regret—it is nothing short of a calamity, and from more than one point of view.

Despite the dictum of the umpire, we are as firmly convinced as ever that the Company has substantial grievances against the Colony, and that it has not received adequate justice, whatever it has received in respect to the technicalities of law. From the very first the Company never received that sympathy and page 27 support that the nature, magnitude, and conditions of the undertaking should have entitled them to get. There can be no question that the Company were led to expect that the construction of the line would be as profitable to them as it would undoubtedly prove beneficial to the Colony. In these circumstances the Administrators of the Colony were bound in honour to do all in their power to make good their assurances. Yet what did we see ? One of the foremost public men in the Colony throwing ridicule on the undertaking by proclaiming the worthlessness of the land in stating on a public occasion, and very shortly after the contract was entered into, that a thousand acres of it would not feed a sheep. If sentiment of that kind afforded any clue to the feeling in high places regarding the Company's undertaking, it was anything but creditable. To our mind the subsequent attitude of the Government towards the Company could not be construed into anything like a desire to show them that consideration to which we undoubtedly think they were entitled.

"We are free to admit that the Company has all along been weak in its finance. It might have been otherwise, but they were exceedingly unfortunate in the preliminary stage of the enterprise. Unfortunately for the success of the undertaking, unexpected differences arose on this side at the most inopportune time they could have happened, and led to the complete breakdown of financial page 28 arrangements that had almost arrived at the point of completion. In itself, this was and almost irreparable disaster. Its ill-effects were still further emphasised by the action of the Government in regard to the so-called auriferous reserves, and the alteration in the incidence of land taxation. By sweeping up all the available lands along the line between Greymouth and Reefton, under the plea that they might be wanted some day for mining purposes, tie Company was deprived of its most valuable asset, and received a deadly wound. Had this not been done a great part of that land would have been settled upon. Also, in passing tie graduated land tax, there was an utter want of consideration to the Company on account of the peculiar position in which it was placed. It could not have been treated worse if it had been the very embodiment of a ' social pest,'and, therefore, perfectly fair game for any sharp practice. In both these instances we must still maintain that the Company were not only harshly, but most unfairly treated." * * * * * * * * * * * *

With these separate opinions—one expressed by the present Premier of New Zealand before the arbitration, the others by leading journalists in New Zealand after the arbitration—the Company will of course concur, and deeply regret that they were not expressed and acted upon throughout the whole of the transactions between the Company and the Government.

The Company has always desired to act fairly, and to carry out the conditions of its contract to the utmost of page 29 its power. It is most difficult to understand why any persons in New Zealand, even acting only from a selfish desire for their own interest, should be hostile to a Company that has been willing to spend large sums of capital, and to develop a country possessing agricultural and mineral wealth.

The case stands thus—for it lies in a nutshell:

Certain persons, countenanced and introduced by the Government, induce a Company, by promises of profit and of support, to accept a contract for the building of a railway. The Government becomes, after a short time, hostile, and so deals with the Company that it is unable to carry out its contract. A reference to arbitration results in heavy loss, and forfeiture for non-fulfilment of the contract. This may be law; it is not equity.

With fair and friendly treatment the Company had a reasonable prospect of success, and such an end could never have been foreseen.

What is to be done now ? The debenture holders have a receiver, who has gone to New Zealand. The shareholders are of course entitled to nothing until the debenture holders are satisfied. It is the interest of both to work together. The Company still exists, with its contract, its claim for the land grant, and its rights in the railway, which the Governor holds only as its Trustee.

The best solution, alike for the Colony and the Company, would be some equitable compromise. How far this is possible may unfortunately depend more upon political views and necessities than anything else. It is, therefore, essential that steps should at once be taken to ascertain page 30 whether the property of the Company can be saved by an appeal to the Privy Council or by any other course. For this purpose it is desirable that a few of the most influential persons interested in the Company should meet in consultation at an early date.

By order of the Board,

Thos. Salt, Chairman.

Æneas R. McDonell, Secretary.

Charles Skipper & East, Printers, 49, Great Tower Street, E.C.