NELSON AND MARLBOROUGH PROVINCIAL DEBTS.

11

A.—No. 10.

injured by calling upon the General Government to fulfil engagements imposed upon them by the Legislature, or that the interests of the Province would bo served by the payment of a considerable sum of money for the relief of the Colonial Treasury. I have, &c., The Hon. the Colonial Secretary, Wellington. Oswald Cttetis, Superintendent.

No. 26. Copy of a Letter from the Hon. E. W. Staffobd to His Honor 0. Citetis. (No. 313.) Colonial Secretary's Office, Sin,— Wellington, 16th June, 1868. I have to acknowledge the receipt of your Honor's letter of the Ist instant, on the subject of the payment of the Nelson debentures which will become payable on the Ist proximo. The main question at issue is whether the sum of £15,000 appropriated by the Nelson Provincial Legislature as sinking fund for the payment of their debentures, of which sum £12,000 was invested by the late Superintendent of that Province in the Union Bank as a fixed deposit with interest in trust for this purpose, is under existing law available towards such payments. Tour Honor admits in your letter that the Colonial Legislature did not, in assuming the repayment of Provincial Loans, relieve the Provinces concerned from such repayment, so far at least as the operation of the sinking funds is concerned, and I am unable to perceive that your Honor has drawn, or even attempted to draw, any distinction either in law or equity between the sinking fund appropriated by the Nelson Provincial Legislature, in respect of this loan in the eleventh section of " The Nelson Waterworks Loan Act, 1864," and the sum (now in question) of £15,000, similarly appropriated in 1565, by the same Legislature. " The Nelson Provincial Appropriation Acl~, 1865," appropriated distinctly £15,000 as sinking fund on the Provincial Loan, and in reference to that appropriation, Mr. Saunders, then Superintendent, in his letter of the Gth July, 1866, clearly speaks of it as the sinking fund of the Nelson Loan raised under " The Nelson Debentures Act, 1858," and states that it was his intention to transfer the sum of £15,000 to trustees appointed for the investment of the sinking fund already established, of that loan, and he requested the directions of the Governor as to the mode of investment. He thus treated the whole amounts appropriated as one sinking fund of the loan raised under the Debentures Act, and in his letter of the 28th of July, 1866, he reiterated that this sum had been so appropriated, and stated that it was lying at the Bank ready for investment. Pending some arrangement for this investment, the sum of £12,000, to which I have before referred as part of the sum of £15,000, was paid by the Superintendent to a separate account at the Union Bank, as a fixed deposit at interest in trust for the object named. It appears also from the Deputy Superintendent's letter, dated 21st February, 1867, that at that time the Provincial Government considered that this sum of £12,000 was set aside as part of the sinking fund for the payment of the loan. The reasons why this money was not otherwise invested in the names of trustees on an express trust were chiefly of a technical character, but one reason is specially stated in that letter of the 21st of February, 1867, to be " that the debentures issued under ' The Nelson Debentures Act, 1858,' become payable on the Ist July, 1868, and that an investment for so short a period of so large a sum of money could not readily be found." It cannot therefore be disputed that this sum of £12,000 did, from the time of deposit, cease to be Provincial revenue, and became strictly a trust fund for payment of the loan. The mere fact of your Honor's omitting to include this sum in a return furnished to the Government of the available amount of sinking fund, or any wish on the part of the Provincial Government of Nelson to treat the sum as discharged of the trust, does not discharge it of the trust fastened on it. Tour Honor seems to consider, in your telegram of the 25th April last, that because the money was invested in the bank in the names of your Executive Council, " the Council" (which may mean either the Provincial or the Executive Council) has control over it, and can alter its disposition. But as this money ceased to be revenue (and it could not otherwise have been invested in the names of persons named by the Superintendent), and had been issued from the Provincial Treasury under the Appropriation Act, and deposited at interest in the name of certain persons (whether members of the Executive or otherwise is of no moment) to await the maturity of the debentures for the purpose of paying them, it would, even if the Provincial Legislature had power to do so, be a distinct breach of faith with the public creditor to abolish this security. It could not be pretended that the Provincial Legislature could properly pass a measure dealing with the sums heretofore appropriated to pay the two pounds per cent, per annum towards the sinking fund, and the position of these sums does not differ from that of the £12,000. Both were alike appropriated, issued, and applied towards the sinking fund. Nor is there anything in the Public Debts Act, on which your Honor appears to rely, to relieve the Province from payment of the Provincial Loan, nor anything which can be construed as releasing this sum of £12,000 from the trust to which it was applied. It is clear from the second section of ;' The Public Debts Act, 1867," and from the forty-fourth section of- " The Public Bevenues Act, 1867," (and, as I have already stated, your Honor admits the fact), that the existing sinking funds were to be maintained. If then this sum became, as it is evident it did, part of the sinking fund, it is equally clear that it is still charged with the trust imposed on it, and is only applicable to the discharge of that trust, namely, the payment of the loan. Nor can I concur with the opinion apparently entertained by your Honor, that the Provinces were, by the Public Debts Act, absolved from all duty and responsibility with respect to their loans. It would be more correct to state that the Public Debts Act superadded the Colonial security to the Provincial security which the creditor already possessed. The Provinces are, as the Government is advised, still liable and bound to meet their creditors, and the absence in the Public Debts and Public Eevenues Acts of any provision charging the principal directly against the Provinces, does not justify the conclusion that the Colony undertook the whole responsibility and liability, and that the Provinces were accordingly discharged