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1. We claim for contract sum £80,494. The Government claim to deduct therefrom moneys for alleged reductions in the work, the right to do which we dispute. 2. We claim for additions to contract, as per details already rendered, including station accommodation, percentage on cost of telegraph line, extra maintenance, and interest charges, the sum of £33,401 Bs. 9d. We also claim a further additional sum of £436 9s. 4d., including interest charges to the 30th April, 1876, for repairs to rolling-stock during construction, as per clause 19 of specification. We also claim a further additional sum of £280 lis. 6d., including interest charges to the 30th April, 1876, for maintenance of extras, making a total of additions to contract of £34,118 9s. 7d. We also claim further interest charges until date of payment. The Government dispute our claim to part of the above. We therefore give you notice that we require that the matters so in dispute be referred to arbitration after the expiration of one month from the service of this notice, as provided by the 27th clause of the General Conditions of our contract. We have, &c,

John Beogden and Sons, The Hon. the Minister for Public Works. (per John Hendeeson.)

The Hon. the Ministee for Public Woeks to the Undee-Seoeetaev for Public Woeks.

(Telegram.) Christchurch, 25th December, 1876. Take the earliest opportunity to lay Brogden's claims before Solicitor-General, and get his advice how to act. The sooner these questions are brought to an issue the better. I have telegraphed to Carruthers on subject. Edwaed Eichaedson. John Knowles, Esq., Wellington.

The Solicitob-Geneeal to the Undee-Seceetaey for Public Woeks. The Under-Secretary for Public Works.

I find notices delivered by Messrs. Brogden and Sons as under: — 1. Waitara and New Plymouth Bailway. 2. Invercargill and Mataura Bailway. 3. Napier and Pakipaki Bailway. 4. Picton and Blenheim Bailway. All these are substantially in one form, making a general claim for the amount of the contract, then stating that the Government claim to make deductions, the right to which is disputed. Next follows a claim for additions to the contracts, for percentages and other moneys, according to details said to have been rendered. None of these details are with the present papers, but I presume they are to be found in your department. In preparing an answer to these several claims, and in order to a right understanding of the position of the Government, the following general particulars must be obtained : — 1. The contract with its conditions and specifications. 2. Any deviation or alterations therein, and how the same have been effected, i.e., by what writing or other evidence. 3. Any correspondence on the matters affected by these notices. 4. Accounts showing payments made on the contract, or any addition or alteration, but keeping the latter distinct from the general payments. Coming to particulars, information must be got showing what is the particular dispute between the Government and the contractors ; and in this respect the following order may be observed:— 1. Whether the dispute is with the Engineer or with the Government; and, if former, how it has been settled or disposed of. (See " Government Contractors Arbitration Act, 1872," section 4.) 2. What is claimed by Government as deduction from contract, showing how these sums are arrived at; whether Messrs. Brogden had notice of them ; whether they have acquiesced in the deduction expressly or impliedly; and generally get together any correspondence on the matter.

3. How the claim for additions is made up, and under what authority claimed; when these claims were first made, and whether details have been rendered; and whether there are any variations in the accounts or details rendered at different times; and also all correspondence relating to these details. The result of our answer to the claims now made could be tabulated, so as to show at a glance what the claim is, and how we dispose of it. Of course if there are admissions of any of these claims they should be so stated, and kept distinct from the general answer. Any correspondence as to these admissions should also be procured. I am aware that getting up this detail will involve a good deal of trouble, but, as the matter will finally be decided by the Judge of the Supreme Court, who sits as Arbitrator, special care must be taken to set everything out concisely but clearly. The notices themselves are, I think, irregular, and ought to have been given under the Government Contractors Act of 1872 ; and in this Act is a provision that the party desiring a reference shall take proceedings under the Act within six months after the dispute has arisen, unless with consent of the other party. This is not a provision which the Government would take advantage of, unless for good cause; but it may be useful to us should Messrs. Brogden desire to put the Government to inconvenience by bringing on all these claims at once in different parts of the colony. I think these notices should be acknowledged, and Messrs. Brogden informed that there are several matters stated in their notices which cannot be settled in the absence of the Engineer-in-Chief, but that on his return a final reply will be sent.