Ellice to Newcastle

I have the honor to acknowledge the receipt of Mr Fortescue's letter of
the 5th instant transmitting the Copy of a despatch which your Grace
proposes to address to Governor Douglas.

I beg to suggest that the Governor should be expressly cautioned
against acting upon Your Grace's instructions in regard to the land
in Vancouver's Island until he receives the requisite authority from
this Company, which is to be sent out to him as soon as the payment
of the £25,000 shall have been made.

I think it right also to advert to that part of the proposed despatch
which refers to the sums to be paid to this Company on the
reconveyance of the Island of Vancouver. The claim originally sent
in, as stated in the despatch, embraced the whole of the expenditure
of the Company, and amounted to £225,699; but I would submit that the
despatch is not quite correct when it goes on to state that,

on being informed that
it was not the desire of Her Majesty's Government
to take over any of the establishments or property connected with
their commercial transactions

this Company furnished an amended account.

I think it right to observe that the first communication received by
this Company after the account alluded to was sent in, was under date
the 28th July 1858, from Lord Carnarvon the then Under-Secretary for
the Colonies, in which he stated 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 a repurchase, extends only
to sums laid out by the Company upon the Island and premises as
Owners thereof, and the value of the establishments, property, and
effects of the Company being thereon, and connected with such
Ownership;

and he went on to state that Her Majesty's Government did not
recognize any obligation to compensate the Company for such of their
establishments and property as had been erected and got together in
consequence of, and in relation to, their commercial operations as a
Company carrying on Trade with the Indians.

This Company were advised that they had a right to call for payment
of the full amount of the claims they had sent in, but not wishing to
create discussion, or to occasion inconvenience to the Government, so
long as it could be avoided without an undue sacrifice of the
interests of their constituents, the Directors were induced to
furnish an amended claim, assuming the Company to retain that part of
their property which the Government declined to take off their hands.
Upon reference to the subsequent correspondence, Your Grace will find
that when the discussion arose about the expenses incurred in
searching for Coal, which it was proposed to refer to Sir John
Coleridge, this Company were anxious that the whole question should be
submitted to him, but this was refused on the part of the Government.

I am anxious there should be no misunderstanding on this part of the
question, as it will necessarily be brought into discussion when this
Company's rights in Vancouver's Island come to be considered before
the Judicial Committee of the Privy Council; and it is desirable
therefore that its real position should be fully understood.