Re Proposed Purchase of the Waimea Plains Railway by Government.

Sir,—My directors have had your letter of the 11th instant under consideration, and I am directed to express their regret that you should have so completely misunderstood the tenor of my letter of the 4th Instant, and formed an incorrect opinion of their attitude in relation to this matter, and after a re-perusal of that letter fail to see how exception can be taken to its tenor or the facts therein stated.

It must be remembered that thin Company has never taken any action in the direction of selling its property to the Government; my directors, however, for the reason stated in my previous letter, desire to express to you their willingness to negotiate for a sale upon terms and conditions to be mutually arranged, and submit that such a disposition on their part was expressed in my letter of the 4th instant, and the position of the Company explained in moderate language.

It appears to my directors that the resolution passed by the House of Representatives does not preclude the Government from dealing with each line of railway upon its merits, nor do they think that it was expected that the several district railways would be acquired by the Colony on uniform terms and conditions.

My directors are of course alive to the fact that any unreasonable agreement for the purchase of the railway would not be likely to receive the approval of Parliament; and unless they were prepared to sell on terms and conditions favourable to the Colony, and such as would probably be regarded by Parliament as fair and reasonable, they would not have expressed their willingness to negotiate Whilst therefore you may assume that my letter of 4th inst. may be regarded as a rejection of a proposal to purchase on certain hard and fast conditions upon which my directors have never been consulted, they decline to admit that they are unwilling to sell at a price and upon conditions favourable to the Colony. On this basis they are willing to negotiate, and again beg to suggest a personal interview, with a view to bringing the negotiations to a satisfactory conclusion.

My directors consider that they would be doing an injustice to themselves and the shareholders if they passed over that portion of your letter under reply which specially refers to the defective legislation in relation to the district railways, and charges the Board with mismanagement. Regarding the first, you express the inability of the Government to perceive how the Company can justly complain, and state it as the opinion of the Government that the Colony at large, and the ratepayers within the railway district are the aggrieved parties. It is to be regretted that you should have made so serious a charge against the Board and committed the Government to the opinion stated, without offering some facts in support. The loss to this Company and the gain to the Colony at large and the ratepayers by reason of the defective legislation complained of is so manifest that it seems scarcely necessary to again point out to you how seriously the Company has suffered thereby—viz., the impossibility of selling its debentures, necessitating financial arrangements involving the payment of high rates of interest, and large sums of money for commission and legal expenses, to meet which heavy calls had to be made upon the shareholders to their serious inconvenience; also the loss of nearly two years' guaranteed interest in consequence of the provisions of the Statute relating thereto being found practically in-operative. Inasmuch as the two years' interest should have been paid partly out of the consolidated revenue, and partly by the ratepayers, it seems perfectly clear that the ratepayers and the Colony at large, so far from being the aggrieved parties, have been the gainers, and the shareholders of the Company the losers, by the defective legislation alluded to.

With regard to your further and more serious charge of mismanagement, my directors would be disposed to resent your insinuation in strong terms did not they feel convinced page 5 that such a charge would not have been made had you been correctly informed of the facts, and they desire me to express their regret that you should have made such serious statements without being first assured that there were at least some reasonable grounds for your accusation.

You seem to doubt my statement that "the Company has not materially altered its time-table since the line was opened." Nevertheless, it is true, and can easily be corroborated by reference to the Government time-table in force during the subsistence of the agreement between the Government and the Company and the Company's time table which I have the honour to enclose.

At the time the line was opened, the departure and arrival of our trains was arranged so as to connect with the Dunedin and Invercargill express, the Government intending to arrange an alternate service to Kingston, via Invercargill, thrice weekly, and three days a week via the Waimea Plains; but the Invercargill people objecting to any alteration in the service then existing, the Government arranged with this Company to run its train between Elbow and Kingston three times a week each way, at the absurdly low charge of £9 per week, the agreement to be terminable at one month's notice.

My Board considered this only a temporary arrangement, and repeatedly complained that the service was being performed at a very serious loss to the Company, and finally the consideration was altered to £12 per week. The Company performed the service for three years, but found that it entailed very serious loss; the Board accordingly gave the General Manager notice of its intention to terminate the agreement, and discontinued running trains over the Government line between Elbow and Kingston at the beginning of this year.

As the contract with the Government expired by effluxion of time on 3lst December last, the Company cannot be fairly charged with cancelling the agreement. No offer was made on behalf of the Government to allow an increase in the charge for the service, nor has any proposed ever been made to connect with our trains at Elbow, so that if the line has "ceased to be of use as a through line, over which passengers can travel from Dunedin to Kingston and vice versa," the blame should be charged to the Government, and not to my Board.

The Board never having been asked to do to, cannot fairly be charged with refusing to guarantee any permanency in the time-table.

I am directed to state that with the exception of keeping the train an hour longer at Gore on Saturdays, at the request and for the convenience of the ratepayers (and which was not done for a considerable time after the through service was discontinued) the time-table is now, and has always been, practically the same as when the Company's train first ran to Kingston, under the agreement previously mentioned, Passengers can now, and have always been able to leave Elbow every morning and go through to Dunedin or Invercargill the same day, and vice versa.

As an answer to your charge that the line has not been worked to the best advantage with a view to profit, I am directed to state, for your information, that the result of the current year's working will disprove that charge. So far from the Government having any just ground of complaint against the Company, on the contrary, the Company may fairly complain of the illiberal treatment it has received, and continues to receive, in its dealings with the Railway Department in the matter of the exorbitant charges for the supply of rolling stock, the whole of which, with the exception of locomotives, is hired from the department. The Government has, from the first, been exacting and exorbitant in its dealings with the Company, and has thus materially diminished the profits of the line, and consequently increased the amount required from the guarantors.

My directors submit that the Government is wholly responsible for the inconvenience to the public, and loss of revenue to the Government line that has resulted from the discontinuance of the through service to Kingston, and respectfully invite you to offer any evidence opposed to the facts stated by them.

They think it unnecessary to add anything further with reference to the charges expressed and implied, except to express their willingness that their management of the Company's affairs should be most strictly investigated in order that your most unjust and unfounded insinuation that the line has simply been managed to gain the Government and ratepayers' contributions to the guaranteed interest, regardless of economy, may be disproved.

With regard to the extraordinary threat contained in the last paragraph of your letter—namely, of applying to Parliament for authority to compel the Company to surrender its control over its own business, in order that the line may be worked in the interest of the guarantors, I am directed to state that my directors will be prepared to recommend the shareholders to hand over the management to the Government with the least possible delay, provided the Government will undertake that the Company shall receive the amount of guaranteed interest secured to it by law, being convinced that such an arrangement will considerably lessen the amount required to make good the deficiency between the net profits and the amount guaranteed; and thus the ratepayers and the consolidated revenue will be considerably relieved, for it must be manifest that great saving of expense will result from the line being worked as part of the Government system.

I enclose copy of the Company's time-table and tariff by which you will observe that the passenger fares agree with those on the Government lines, and that although the rate of carriage For the first 10 miles is slightly under that charged on Government lines, but being a uniform rate per mile the average per mile does not decrease to pro page 6 portion to the distance as under the Government tariff.—I have the honour to be, Sir, your obedient servant,