Murdoch to Elliot (Assistant Under-Secretary)

I have to acknowledge your letter of 11th inst, with a despatch
from the Governor of Vancouvers Island on the subject of the proposed
surrender of the Land Revenue of that Colony in exchange for a Civil
List. Enclosed in the Governor's despatch are an Address to him from
the Legislative Assembly—together with a Report from a Committee of
that Body and the evidence taken by them on the subject of the
disposal of Crown Lands.

2. The Committee of the Assembly summoned before them a number of
witnesses connected with the Crown Land Department, and took much
evidence on the manner in which the Sale of Land had been managed—on
the amount disposed of—and the probable value of what remained.
They also received evidence from one witness (Mr Homfray) impugning
the good faith and honesty with which Mr Pemberton the Surveyor
General had discharged his duties. As however, that witness, who had
been employed in the Surveyor Generals Office, admitted that he was
on bad terms with Mr Pemberton—as his evidence was distinctly
contradicted by others who had as good means of forming a judgment as
himself—and as the Committee, so far as they notice the matter in
their report, acquit the Surveyor General of misconduct—it
is unnecessary to refer to it further.

3. The result of the evidence taken by the Committee as to the value
of the Land still at the disposal of the Crown is recapitulated in
their report. The conclusion to which they come is that the Revenue
to be derived from it is not likely "within any very short period" to
be considerable, and that even when it is increased by the advance of
settlement, it will probably not be much in excess of the expenditure
necessary for surveys and roads. They report, therefore, that if the
proposal of the Secretary of State be accepted, either new taxes must
be levied to meet the additional charge of the Civil List, or public
works of great utility must be postponed. The decision on these
alternatives they leave to the Assembly.

4. In the course of their enquiry the attention of the Committee was
naturally directed to the transactions between the Home Government
and the Hudsons Bay Co which led to the Indenture of 3rd Febry
1862. The general effect of that Indenture was to admit the claim of
the Hudsons Bay Co to two Sections of Country Land containing 723
and 1118 Acres respectively, and to 1212 Acres in Victoria all of
which they claimed on the ground of possession previous to the Oregon
Treaty of 1846. The greater part of the Land in Victoria had been
already sold by them. The Committee calculated the value of the Land
sold by or surrendered to the Company at $765,437 to which they added
a conjectural sum of $500,000 for the value of certain water
frontages included in the Sales of the Company.

5. The Legislative Assembly in their address to the Governor
scarcely notice the question of Civil List, but adopting the above
calculation of their Committee urge the Governor to procure the
annulment of the Indenture of 3rd Febry 1862 and the repayment to the
Colony by the Hudsons Bay Co of the amount they are assumed to have
received for Land in Victoria. They also urge that the sale to Mr
Lowenberg of the portion of the Government Reserve known as Lot Z
should not be recognized.

6. The annulment of the Indenture of 3rd Febry 1862 is of course
out of the question. That Agreement was made by competent authority
and it is not alleged that any fraud was used at the time, or that
any breach of the conditions had been committed since by the Hudsons
Bay Company, which would justify H.M. Government in calling it in
question. The circumstances which led H.M. Government to admit the
claim of the Hudsons Bay Co to the Land at Victoria which they are
said to have sold for so large a sum, are stated in the report from
this Board of 28th Decr 1861. It may, however, be convenient that
I should recapitulate them at length in this place.

7. In 1843 the Company established a Station at the Southern point
of Vancouvers Island and called it Fort Victoria. In that time the
North Western Boundary between the Territory of Great Britain and the
United States had not been accurately ascertained, but in June 1846 a
Treaty was concluded between the two Countries by which Vancouvers
Island was assigned to Great Britain, and on the Continent the 49th
parallel of Latitude was taken as the Boundary. The third Article of
the Treaty was in the following terms—

In the future appropriations of the Territory south of the 49th
parallel of North Latitude, as provided in the first Article of this
Treaty, the possessory rights of the Hudson's Bay Co and of all
British subjects who may be already in the occupation of Land or
other property lawfully acquired within the said Territory shall be
respected.

8. On the 7th Septr 1846 Sir J. Pelly, the Governor of the Hudsons
Bay Co wrote to Earl Grey, at that time Colonial Secretary of State,
enquiring the intentions of H.M. Government as to the acquisition of
Lands or formation of Settlement within the Territory assigned by the
above Treaty to Great Britain. He stated that

the Hudsons Bay Co having formed an Establishment on the Southern
point of Van Couvers Island which they are annually enlarging, are
anxious to know whether they will be confirmed in the possession of
such lands as they may find it expedient to add to those which they
already possess.

In answer Lord Grey desired further information as to the natural
qualities of the Land in question, and as to the legal competency of
the Hudsons Bay Co to hold land in the British Territory beyond the
Rocky Mountains, and after receiving an answer on those points he
informed the Company (Sir B. Hawes 14 Decr 1846) that

he is prepared to assent on Her Majesty's behalf to your proposal
that certain Lands in Vancouvers Island, or in other parts of the
Oregon Territory, should be granted to the Hudsons Bay Co, but
before making that grant his Lordship would require the production by
the Company of an opinion from H.M. Attorney and Solicitor General,
to the effect that the acceptance by the Company of such a grant
would be consistent with their charter of incorporation.

That opinion was obtained and submitted to Lord Grey and on the 2nd
Febry 1847 Sir B. Hawes informed the Company that with reference to
that opinion Lord Grey was

ready to receive and consider the Draft of such a Grant as the
Company would desire to receive of lands belonging to the British
Crown in the Oregon Territory.

9. No such grant was ever proposed, but instead, Sir J. Pelly, in
consequence apparently of personal communications between himself and
Lord Grey, submitted (5 March 1847) the Draft of a grant conveying to
the Company the whole of the Territory belonging to the Crown to the
North and West of Ruperts Land. Such a Grant was, however,
considered by Lord Grey too extensive & eventually on 13th Janry
1849, a grant was passed conveying to the Company Vancouvers Island
only—

to the intent that the said Governor and Company shall establish on
the said Island a Settlement or Settlements of Resident Colonists &c.

In this Grant no reference was made to any Land already in possession
of the Company as a Trading Body.

10. In 1851-2 the question as to the Lands held by the Company in
Vancouvers Island was again brought into discussion. In a
correspondence which then took place between the Company and the
Colonial Office, Lord Grey's attention was drawn to a distinction
which the Company made between Land possessed by them previous to the
Oregon Treaty of 1846 and Land which they had since acquired. "The
former" they said "will be made over to them" (the Company) "without
purchase and for any addition thereto they will have to pay 20s/-
per acre as all others do." Lord Grey having desired a fuller
explanation of this distinction the Company, in a letter dated 4
Febry 1852, gave that explanation as follows.

During the period that elapsed between the original connexion of the
Hudsons Bay Co with the Country West of the Rocky Mountains, and the
division of the Territory by the Boundary Treaty of June 1864 while
in fact the Sovereignty was in abeyance, the Company reclaimed from
the wilderness and occupied portions of Land wherever their trading
Establishments were planted. These Lands they claim as theirs
without purchase, and the possessory rights thus acquired in that
portion of the Territory which is south of the 49th parallel of
North Latitude have been guaranteed to them by the Boundary Treaty.
Among the Lands occupied by the Company north of the 49th parallel
is that situate at Fort Victoria in Vancouvers Island, where they
formed an Establishment in the year 1843, and this is the Land
alluded to in the 4th paragraph of my letter of 14th of Decr.
Its exact extent has not been yet ascertained by the Company's
Surveyors but whatever that may be, the Company consider they have a
right to hold it, while for any additional quantity that may be
required to be taken by the Fur Trade (which is merely a subordinate
branch of the Hudsons Bay Co) the same price will be paid as is
paid by other purchasers of Land.

11. Lord Grey's conclusion on this explanation was conveyed to the
Company by His Under Secretary in the following terms—

His Lordship having considered this explanation directs me to state,
that he is not disposed to question the right of the Company to Land
actually occupied by them previously to the arrangement for
constituting Vancouvers Island a Colony, but that he wishes to be
furnished as soon as possible with a statement of the extent and
description of the Lands so claimed by the Company, and has
consequently addressed a despatch to the Governor of the Island
applying for such information. I am to add that his Lordship
understands the claim preferred to be strictly confined to Land
actually occupied and made use of, beyond which he conceives that it
ought not on any account to be extended.

12. The statement of the extent and description of the Land thus
called for was furnished by Governor Douglas in a despatch dated
25th June 1852. After describing the District first marked out by
the Company for occupation which comprized 25 Square Miles the
Governor stated, that the Company, he understood, proposed to retain
of this Land only 3 Farms comprizing about 4000 acres, one at
Victoria and the other two at the distance of 3 or 4 miles from that
place. The extent of these Farms was more precisely given in the
report from the Governor of the Company to Sir J. Pakington of 24
Novr 1852 as 3084 Acres. No answer was returned, nor apparently any
action taken by Government with reference to Land in question, in
consequence of either Governor Douglas' despatch or the letter from
the Governor of the Company.

13. It was admitted that no conveyance of this Land had been made by
the Crown before the grant to the Company of the whole Island by the
Deed of 13th Janry 1849. The Company state that subsequently to
that grant the Colonial Surveyor sent home the usual Deeds for the
conveyance of the Land to the Company, but that they were advised
that as the whole Island was already vested in them by the grant of
Janry 1849 it would be anomalous for them to convey to themselves
these special Lots. They, therefore, contented themselves with
passing a Resolution and order to be entered on their records to the
effect that the Lots in question were to be considered as the
property of the Company.

14. It had been intended at one time to submit to the Judicial
Committee of the Privy Council the question whether, under the
circumstances above stated, the Company had a legal claim to this
Land—or if they had not a claim in Law whether they had such a claim
in equity as H.M. Government were bound in justice and good
conscience to admit. But before the necessary steps were completed
for that purpose, the Company proposed that the matter should be
settled by arbitration, in the same manner as had been recently done
with Lands held by them in British Columbia. To this the Duke of
Newcastle assented, and we were directed to undertake the
arbitration. The result was the Indenture of 2nd Febry 1862 which
the Legislative Assembly denounces.

15. The general principle by which we were influenced in framing
that Agreement was, that H.M. Government had during many years and on
repeated occasions when the matter was brought to their notice
acquiesced in the claim of the Company to consider the Land at
Victoria their private property—that this had been especially the
case in the course of the negociations with Lord Grey, and that it
was only because their right was believed to be undoubted that they
did not at that time put it beyond question by paying the prescribed
price of £1 an Acre for the Land. The Land itself had been actually
disposed of to purchasers and could not of course have been
reclaimed. The only question was, therefore, whether the Company
could be required to account for the money they had received for this
Land as money received by them, not in their private characters, but
as Trustees for the Crown. It appeared to us impossible under the
circumstances to come to such a conclusion with justice. Nor if such
a conclusion had been adopted could it have been carried into effect
except through legal proceedings which must have been expensive and
dilatory and the result doubtful. But the principal object of
referring the matter to arbitration was to put an end as speedily as
possible to all questions between the Crown and the Company which
would impede the retransfer to the Crown.

*

This it was supposed the Agreement would do. Unfortunately
unforeseen circumstances, but especially the questions connected with
the Government reserve, have defeated that expectation.

16. As respects the Address of the Assembly I would venture to
submit that the Governor should be directed to inform them that H.M.
Government have no power to set aside the Indenture of 2nd Febry
1862. The question of the grant of a Civil List in exchange for the
Land Revenue can hardly be said to have been considered by them.
Whether it is desirable in their present temper again to bring it
under their consideration is a question on which I do not presume to
give an opinion. But the sooner, and the more distinctly they are
made to understand that the Agreement of Febry 1862 is final, the
better it will be for the peace of the Colony.

17. In the enquiry before the Committee of the Assembly some
evidence was taken about the sale to Mr Lowenberg of Lot Z on the
Government Reserve,

**

and the Assembly, as I have stated, in their Address to the Governor
urge that no steps should be taken to confirm that sale until the
question has been again brought before H.M. Government. But no
evidence is adduced to affect the conclusion on the subject which I
submitted in my reports of 30th March and 10th May last. It is
therefore unnecessary for me to add anything on that point.