I.—7a.

5

would, in any event, defray the cost of their agent and his staff; and, as I understand, the acceptance of that responsibility would have been insisted upon by the agent as a condition-precedent to the commencement of surveying operations by himself and his staff. Immediately after I arrived in London Mr. Alexander Brogden, M.P. (the head of the firm), waited upon me, and asked whether 1 would advise him to send out the party, and whether I was prepared on behalf of the Government to guarantee its cost. I replied that I was not prepared to make any recommendation on the subject, or to guarantee the cost of the proposed expedition, because it appeared to me that, were I to do so, something like an understanding would be established that his firm should have the first offer to construct the railways, and that, therefore, a very long time might elapse, whilst his agent was making investigations or surveys, during which the Government might be held bound not to take any other steps towards the initiation of a railway system. It was my impression (I told Mr, Brogden) that the Government were so bent upon proceeding with railway construction that they would not be prepared to enter into any arrangements which, from their very nature, would iuvolve tediously-protracted references to England. Besides, I did not see why the Government should be at the cost of the proposed surveys, since it was distinctly provided by the legislation of last session that the Government should have their own engineer and surveying staff. I added that I should be prepared to consider proposals for an agreement, upon the basis of which, somewhat more prompt measures for the construction of railways in New Zealand might be devised. Although negotiations were uninterruptedly continued, it was only after very great difficulties on both sides that the agreements were signed. I hand to you herewith the agreements as signed, together with a letter from Mr. J. Mackrell, the solicitor who acted for me throughout the negotiations, aud who was recommended to me by Mr. Magniac, M.P.; and also a letter from the gentleman who throughout acted as my counsel —Mr. Charles Dennistoun Wood, formerly Attorney-General of Victoria. I may with confidence assert that I have, on behalf of the Government, concluded an arrangement highly favourable to the colony, but one which should entail upon it the exercise of great forbearance and encouragement towards the Contractors, who, I am convinced, would not have concluded the arrangement had they not calculated upon the Government affording to them all reasonable consideration and aid. The Government have the power of choosing between the two agreements, and of adopting either or,both of them, and, whichever decision may be come to, it will be absolutely binding upon the Con< tractors. In negotiating with Messrs. Brogden, I took care that one of the contracts should be such as to be completely within the limits of the discretion already intrusted to the Government by the Assembly; so that, whilst the commencement of works should be secured, the adoption of the larger contract should be a matter upon which the opinion of the Assembly could be taken. It did not escape my consideration that, possibly, the Assembly might prefer to enter into specific arrangements for the construction of particular railways, but, obviously, it was not in my power to make any such arrangements. The agreements as signed, however, not only leave to the Government absolute discretion as to the railways to be constructed, but, from the very nature of the agreements, I have pleasure in stating that, should the Government prefer, in lieu of them or either of them, to make with Messrs. Brogden specific arrangements for the construction of particular railways, there will be found, on the part of those gentlemen, every disposition to consent to such a course. In reality, therefore, what has been secured for the colony is—power for the Government to secure the construction of railways under the provisions of either or both of the agreements, or the holding of a position which enables the Government to ask Messrs. Brogden to substitute for the agreements specific arrangements for the construction of particular railways. At New York I received a telegram from Mr. Alexander Brogden, M.P., stating that he would leave England for New Zealand on 23rd August, and asking that the decision between the agreements should be deferred until after his arrival in the colony. On receipt of that telegram I telegraphed to Mr. John Morrison, authorizing him to inform Messrs. Brogden that, although I was not able to say that the decision would be delayed, I felt sure that the desire of the Government would be to show to the Contractors every consideration consistent with the interests of the colony. In order that the Government might not be prejudiced if they delayed their decision, I asked Mr. Morrison to consult Mr. Mackrell, and to get him to procure from Messrs. Brogden such an undertaking as would, in the event of the Government consenting to await Mr. A. Brogden's arrival, secure that the rights of the Government under the agreements should not be in any way prejudiced or jeopardized. On reaching San Francisco I received from Mr. Mackrell a telegram stating that Messrs. Brogden had given such an undertaking as left the Government free to decide at once between the agreements, or to delay the decision. I may observe that, compared with the terms offered for the large number of colonial and foreign railway enterprises that are being floated in the London market, the agreements made with Messrs. Brogden are very favourable to the colony; and I feel sure that, with proper precautions, they will lead to the construction of railways upon advantageous terms. It may be found desireable to make some alterations in the agreements ; but I must repeat my conviction that any wish in that direction on the part of the Government will be readily responded to by Messrs. Brogden, who to the last expressed themselves strongly as to the terms being rather harsh towards them, and as to their hope that the agreements would be so worked out as to put them in as favourable a position as possible for giving effect to their various provisions. I have received from the Bank of New Zealand an acknowledgment of the deposit by Messrs. Brogden and Sons of securities to the value of £25,000 for the due performance of the agreements. Under the terms of the agreements, Mr. John Henderson, C.8., Messrs. Brogden's representative or agent, has accompanied me to the colony ; aud with him are Mr. C. N. Bell, C.E., and Mr. J. G. Dees, surveyor. I have the honour to state that throughout the progress of the negotiations with Messrs. Brogden, Mr. John Morrison, Agent in London for the Government, rendered me most cordial and zealous assistance, and that I have written to him thanking him for the same.