Murdoch to Elliot (Assistant Under-Secretary)

With reference to the correspondence which has passed on the subject
of the claims of the Hudsons Bay Co, as administrator of the
Government of VanCouvers Island, I have the honor to submit the
following report for the consideration of the Duke of Newcastle.

2. The claim of the Hudson's Bay Co, as far as it had been
rendered up to 1860, amounted to £40.289.19.2. In that year a sum of
£25000 was paid on account. It was expected that when the complete
accounts were sent in the balance against the Crown would not be
increased beyond the sum then left owing vizt £15.000.

3. The complete accounts were sent in in March 1861, and the balance
made out against the Government instead of £15.000 was £53.569. In a
report dated 25 May last I explained the manner in which this balance
was made up and the objections to which I thought many of the items
obnoxious.

The items which appeared to me peculiarly open to
objection were—

A new Charge for various services between 1857

and 1859 amounting to . . . . . . . £15123.19.‹3 +

Interest on balances amounting to  3276. 6. 5

making a total of . . . . . . . . . £18400. 5.‹8

I also pointed out that sums amounting in all to upwards of £35.000
were charged under the head of "Supplies," "expenses," "Cash" or
equally indefinite terms.

4. The whole of the papers were referred by the Treasury to Mr
Andoe of the Audit Office, and after a careful and minute inspection
of the Company's Books Mr Andoe

on 14th of December last reported the result of his investigation to
the Treasury. The conclusion to which he came was that charges
amounting in all to £26157.3.10 might properly be struck off the
Company's account, thereby reducing the balance due to them to
£27.412.10.4. The Company on being put in possession of Mr Andoe's
report withdrew a claim of £4000 on account of the services of the
"Otter" but adhered to their other charges. Their claim, therefore,
against the Government is according to their own statement
£49.469.14.2.

5. Having been put by the Treasury in communication with Mr Andoe
it appeared to me, after going through the accounts with him, that it
would be desirable, before attempting to report to the Duke of
Newcastle, that I should enter into personal communication with the
Governor and some of the Directors of the Company. I accordingly
requested an interview with the Governor and he called at this Office
some days ago accompanied by Mr Maynard the Solicitor of the
Company, and Mr Colvile. After some discussion I stated to them my
willingness to recommend to the Duke of Newcastle a payment of
£25.000 in satisfaction of their claim. To this, however, they
refused to listen and demanded as their minimum £40.000. As that sum
appeared to me more than the Crown could with justice be required to
pay I declined to recommend it.

6. The offer of £25.000 is so small as compared with the balance
claimed, that I feel bound to explain how I arrived at it. It will
be seen from Mr Andoes report that the charge for sending out
settlers was in the first accounts stated as

Passage for 350 at £23 each £ 8 050.—

Maintenance for one year at £50 each 17 500.—

£25.550.—

But in a later statement this charge was altered to

Pass[ag]e for 557 1/2 at £23 each £12.717. 5

Maintenance for one year at about £23 each 12.832.15

25.550.—

The explanation of the Company is that the whole number of Settlers
sent out was 700—that of these the Puget Sound Co was expected to
take half—that they did not do so—and all they did not take were
therefore, charged as Settlers to the Crown—that on enquiry it was
found that the charge for subsistence had been calculated too high,
and therefore though the actual expenditure slightly exceeded the sum
of £25.550 (the exact amount is said to have been £25642.14.7) they
decided to adhere to the sum which had been inserted in their first
account. This appeared to me an unsatisfactory explanation—and I
considered that the Government were entitled, if they chose, to take
the number of Settlers and the cost of maintenance at the lowest
amounts stated by the Company—i.e. the number of Settlers at 350 and
the cost of their maintenance at about £23 a head.
This would reduce the claim of £25.550 to £16.100 being a reduction
of £9.450 which added to £15.723.19.3 the new claim inserted by Mr
Dallas which I considered inadmissible—and £3279.6.5 for interest
which I thought questionable—would make a reduction of £27853.5.8
and bring the claim down to £25.716.8.6. I was confirmed in my view
by discovering that Mr Andoe had arrived independently at the same
conclusion.

7. I admit, however, that £25.000 was a low estimate of the amount
due, and had the Governor been willing to accept £30.000 or £32.000 I
should have been prepared to recommend that sum to the Duke of
Newcastle's favorable consideration. Mr Andoes report as I have
stated admits a claim to £27.412.10.4 and that report having been
communicated to the Company they naturally claim the benefit of it.
But one item which Mr Andoe disallows—that for commission on Land
Sales effected but not realized—amounting to £2405.13.10 must, I
think, be admitted—and further consideration leads me to the
conclusion that a charge for interest, though perhaps not to the full
extent claimed, would not be unreasonable. A payment, therefore, of
about £32,000 would not in my opinion be excessive.

8. From later communications I have had with one of the Directors I
understand that the Company would be prepared to accept £35.000 in
full of all their demands,

and it is for Her Majesty's Government to consider whether it is
worth while, with a view to an early settlement, to accede to that
arrangement. In considering this question it is on the one hand to
be borne in mind that the Government are accepting accounts which the
Company themselves have no means of verifying—but which they receive
on the credit of their Officers in the Colony—that a portion of
those accounts are estimates, and that those estimates have in one
instance (that of the maintenance of Settlers) been admitted to be
entirely inaccurate. This appears a strong ground for concession on
the part of the Company. But on the other hand it must be remembered
that without the consent of the Company VanCouver's Island could be
recovered from them only by legal proceedings—that
such proceedings might be protracted for years to the injury of the
Colony—that they would be very expensive, and the result doubtful at
last. Under these circumstances, although I do not acknowledge the
Company's title to so large a sum as £35.000, I think it would be
good policy and economy to pay that sum if the matter cannot be
settled for less, rather than have recourse to legal proceedings for
the settlement of the points in dispute.