Colonial Despatches

I have the honour to acknowledge the receipt of the Earl of Carnarvon's letter of the 28th Ultimo, in which his Lordship, adverting to the accounts furnished by the Directors of the Hudson's Bay Company to Her Majesty's Government, showing the probable amount which would be claimed by the Company as compensation in the event of the resumption by the Government, of Vancouver's Island, states that Her Majesty's Government are of opinion, and are legally advised, that according to the proper and fair construction of the Royal Grant of the 13th January 1849, the obligation of Her Majesty's Government to compensate the Company in the event of repurchase extends onlyto to sums laid out by the Company on this Island and premises as owners thereof, and to the value of the establishments, property, and effects of the Company, being thereon, and connected with such ownership, and that they therefore do not acknowledge any obligation on their part to compensate the Company for such of their establishments and property as are connected with their operations as a Company carrying on trade with the Indians. His Lordship adds that, on this account, Her Majesty's Government cannot hold themselves responsible as regards "the Inventories of the goods, stock, and vessels" referred to at the end of the account in question, and concludes by stating that it will be a matter of separate consideration how far this principle may affect the other items of the account.

In reply I beg to state that the account was drawn up in the form in which it now appears by directions from the Colonial Office. On the 20th of January last the Governor received a letter from Mr Secretary Labouchere, in which he announced the intention of the Government to repurchase and take Vancouver's Island from the Hudson's Bay Company at the approaching expiration of the Company's License of Trade, and asked for a statement of the Sums for which the Company would claim repayment upon that event taking place. In compliance with this request the Governor thought it necessary to instruct our Accountant to draw up a Statement in Strict conformity with the terms of the Grant of the 13th of January 1849, of which I beg to subjoin the Clause which has reference to this subject. It is there stated that at the expiration of the Company's grant or license of or for the exclusive privilege of trading with the Indians, the Government reserves to itself full powers to repurchase and take of and from the said Governor and Company the said Vancouver's Island and premises hereby granted, in consideration of payment being made by us, our heirs and successors, to the said Governor and Company of the sum or sums of money theretofore laid out and expended by them in and upon the said Island and premises, and of the value of their establishments, property, and effects then being thereon.

It appeared to me that the meaning of these words was perfectly clear, and left no doubt that at the period when the Grant was made it was understood upon both sides that, in the event of the Government resuming possession of the Island, the Hudson's Bay Company should be compensated for all their outlays, and for the value of any establishments, property, and effects which they might leave in the Island, without any reference to the object for which those establishments may have been created; and we felt that we were the more entitled to take this view of the case because the Grant makes no distinction between the establishments belonging to the Company as "owners of the Island," and those belonging to them "as a Company carrying on trade with the Indians."

It now appears, however, that the Law Officers of the Crown take a different view of the matter, and are of opinion that in case of the repurchase of the Island, there is no obligation on the Government to compensate the Companyfor for any such goods, stock, trading vessels or other property as have been created in consequence of their Commercial operations. On this point I have merely to say that there is no wish on the part of the Company to call upon the Government to assume any responsibility which does not fall strictly within the terms of the Grant. And as the Government is legally advised that it is not under any obligation to assume any of the establishments or other property connected with our trading operations, we will raise no objection to the principle laid down by Lord Carnarvon with respect to any property of that class which may remain on the Island.

With respect to the expenses to which we have been put in the colonization of the Island, the affair is different. We conceive that under the Grant of 1849 our rights in that respect are undoubted, and they are not objected to in Lord Carnarvon's communication. His Lordship, indeed, makes a reserve in so far as the principle of excluding the Inventories may affect the other items of the account, but we believe that no difficulty will arise on this point as the account has been carefully drawn up with a view to the separation of those claims which have reference to the colonization of the Island, and those which were more directly connected with the trading interests of the Company.

It is most satisfactory to us to learn that you are disposed to devote early attention to this important subject; and we venture respectfully, but urgently, to impress upon you the necessity of as early a settlement as possible of such questions as may arise. Indeed in this respect we have reason to hope that no great delay need occur, as we feel, from the careful manner in which the accounts have been kept, that there will be no great difficulty in adjusting all the claims which the Company may have upon the Government.