Re Proposed Purchase of the Waimea Plains District Railway by the Government.

Sir,—I have the honour to acknowledge the receipt of your two letters of the 24th and 29th December last respectively.

The former of these was abundantly commented upon during the lengthy interview which you had with the Hon. the Colonial Treasurer and myself at the beginning of this week, and it is only necessary for me to say now concerning it, that I am assured by ample evidence that your Company desired to stop all through running of trains between Dunedin and Kingston by the Waimea Plains railway route, and that this was explained to be your reason for the changes made in December 1883. I am further assured that those changes were not in the least degree necessitated by any of the features of the arrangement then subsisting, seeing that the Railway Department would have been willing to make any reasonable modification in that arrangement, to pre- page 7 serve the through character of the line. But the wish of the Company was otherwise, and the Government was warned to discontinue the issue of tickets for through traffic.

With regard to the losses sustained by the Company, to meet which you state in your letter now under reply, that "heavy calls had to be made upon the shareholders," I beg to point out to you that the debenture and paidup share capital of the Company apparently only exceeds by something under £2000 the cost of the railway as formally certified to by the Minister of Public Works, and it is evident, therefore, that the cost has been certified to at too high a figure.

Indeed, the admissions which you made during our interview, already alluded to, show that items were included in the cost as certified to which should not have been admitted, and it is further evident that in justice to the guarantors there should be another valuation.

This in part disposes of your theory that the shareholders hold a guarantee of 8½ per cent., and as you refer to faulty legislation, I feel compelled to point out to you that it is quite at much opposed to the intention of the Legislature that the guarantors should pay the shareholders 8½ per cent. as that there should be any difficulty in recovering the amount guaranteed.

With regard to your letter of the 29th ult., it would seem that you somewhat minunderstood the alternative proposal suggested at our second interview, as in your calculations concerning it yon have included the charge of £9000 for redeeming your Company's debentures from the Government Life Insurance Department. What was intended an as alternative proposal was that the Government should arrange with the Life Insurance Department to redeem the debentures on 3lst March 1885, the Company to pay interest thereon from the day of purchase up to the 31st March 1885 aforesaid, and that only the balance of £31,000 should be paid to the Company, and that that payment should be made in four per cent debentures (redeemable in 15 years), with interest and principal payable in the Colony.

You complain in your letter that there would be a heavy discount on these debentures, and it is quite possible that there might be if they had to be sold for cash, but the inference was that they would be divided amongst the share holders, and the debts of the Company paid off by means of the collection of the half-rates and by a small call.

The Government consider that in offering £106,000 they are offering a sum which will cover the cost of the railway, as well as the half-rates uncollected.

With a view to meeting your objections as to the discount on the debentures, the Government is now willing to make the interest upon them payable within the Colony for two years only, and after that time the interest and principal to be payable in London, if so desired by the holders. The rate of interest to be 4 per cent.