Murdoch and Walcott to Elliot (Assistant Under-Secretary)

We have to acknowledge your letter of 21st instant, enclosing one
from the Hudsons Bay Co in which it is proposed to refer to
arbitration the questions respecting Land in VanCouvers Island in
dispute between the Company and Her Majesty's Government. The
Company nominate Mr Maynard and Mr Dallas to act on their behalf,
and you convey to us the Duke of Newcastle's directions to act on
behalf of the Crown.

2. In obedience to these directions we have had interviews with
Messrs Maynard and Dallas on the 24th and 27th inst
and we proceed
to state the result. But before doing so it will be desirable, in
order to explain and justify the conclusion at which we have arrived,
to recapitulate the facts of the case.

3. In 1843 the Hudsons Bay Co established a station at the Southern
point of Van Couvers Island and called it Fort Victoria. At that
time the North Western Boundary between the territory of Gt Britain
and the United States had not been accurately ascertained—but in
June 1846 a Treaty was concluded between Gt Britain and the United
States by which VanCouvers Island was assigned to Gt Britain.

4. On 7th Septr 1846 Sir J Pelly, the Governor of the Hudsons Bay
Co addressed a letter to Earl Grey inquiring the intentions of Her
Majesty's Government as to the acquisition of lands or formation of
Settlements within the Territory assigned by the above Treaty to Gt
Britain. He stated that

The Hudsons Bay Co having formed an establishment on the Southern
point of VanCouvers 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 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 on
the latter point he subsequently required to be furnished with an
opinion from the law Officers of the Crown. The Law Officers opinion
having been submitted to him, Sir Benj[ami]n Hawes was directed, on
2nd Febry 1847, to inform the Co that Lord Grey was
"ready to receive and consider the draft of such a Grant as the Co
would desire to receive of lands belonging to the British Crown in
the Oregon territory."

5. 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 and eventually on 13th
Jan[ua]ry 1849 a grant was passed conveying to the Company Van Couvers 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 Co as a Trading Company.

6. In 1851-2 the question as to the Lands held by the Co in Van Couvers Island was again brought into discussion. In a
correspondence which took place in those years between the Company and
the Colonial Office, Lord Greys 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 Co) without
purchase and for any addition thereto they will have to pay 20s/-
per Acre as all other Settlers do." Lord Grey having desired a
further explanation of this distinction the Company in a letter
dated 4th 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 1846, while
in fact the Sovereignty was in abeyance, the Co reclaimed from the
Wilderness and occupied portions of land wherever their trading
Establishments were planted. These lands they claimed as theirs
without purchase and the possessory rights thus acquired in that
portion of 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 December.
Its exact extent has not been yet ascertained by the Company
Surveyors—but whatever that may be the Co 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 by other
purchasers of land.

7. Lord Greys conclusion on this explanation was conveyed to the Co
by his Under Secretary [marginal note: Mr Peel 14 Feby 1852] 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 Co to land
actually occupied by them previous 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 Co 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.

8. The information which Lord Grey thus announced he had 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 Co 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 three or four 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 24th Novr 1852 as 3084 Acres. No answer was returned nor apparently any action taken by Government
with reference to the land in question, in consequence of either
Governor Douglas' despatch or the letter from the Governor of the
Company.

9. Of the 3 Farms alluded to by Governor Douglas that at Victoria
comprized 1212 Acres—the other two were of 1144 and 724 Acres
respectively. A Fort having been built at Victoria Settlers
collected round it, and the land which had originally been under
tillage was sold for building lots. A Town gradually grew up to which
the Gold discoveries of 1858 gave an unexpected impulse, and a large
proportion of the land has now been disposed of, some of it,
latterly, at very high prices. Our discussions with Messrs Maynard
and Dallas had reference principrincipally=pallyprincipally to this land—the outlying Farms
being comparatively of little public importance. The point which we
had to determine was how far the claim which the Company derive from
Lord Grey's implied promises—from the length of their
possession—and from the legal effect of the Grant of 1849 could be
reconciled with the public interests involved not only in the revenue
to be derived from the sale of this land—but in the mode and extent
of the Sale.

10. After earnest consideration and a full discussion with Messrs
Maynard and Dallas it appeared to us that all that was necessary or
could be justly demanded on public grounds would be obtained if what
remained unsold of this Victoria lot could be recovered from the Co
and placed at the disposal of the Crown. We, therefore, informed
Messrs Maynard & Dallas that we should be prepared to recommend to
the Duke of Newcastle that the Companys claim to the two outlying
farms—and to the proceeds of the land they had sold in Victoria and
to the land about their Fort, should be recognized, on condition of
their surrendering to the Crown the whole of the land still unsold
lying south and West of James Bay, together with a water frontage
close to their Fort which had been previously marked out for a
Harbor Masters Office. This proposal, as might naturally be
expected, met at first with strong opposition from them. They urged
that the land came clearly within the principle laid down by Earl
Grey in the letter (already quoted) of 13th Febry 1852 viz.
that it was land "actually occupied and made use of." They
pointed out that it was not necessarily nor even naturally the site
of a Town but had become so in consequence of their settling there,
and they argued that if in 1852 the Co had paid for this land at the
then price vizt £1 an Acre their right could not have been disputed,
and that they did not make that payment only because the letter of
13th Febr[uar]y 1852 was understood by the Co as admitting their
right without payment. It was impossible to deny the force of these
arguments which as between individuals would, we think, have been
irresistible. But it appeared to us that the Crown acting on behalf
of the public was entitled and bound to insist more strictly on its
rights than would be done in the case of private individuals. We
therefore declined to recommend a compromize which Messs Maynard and
Dallas proposed viz that the unsold land should be divided between
the Crown and the Co even although the direction of the Sales were
given to the Crown—but we consented to recommend some slight
modifications of our proposal, so as to allow the Co to retain a
homestead which they have established in the unsold portion of the
land (but not to exceed 50 acres) and to set at rest titles to land
between high and low water mark which has been sold to individuals.

11. Messrs Maynard & Dallas left us with the intention of submitting the above terms to the Governor and Directors of the Co
and we have since received from Mr Dallas the enclosed document
embodying them. We have the honor to submit this document to the
consideration of the Duke of Newcastle. Whether the Co will be
willing to accept the proposed terms we are unable to foretell. Both
Mr Maynard and Mr Dallas described them as very severe, but we have
reason to hope that they will recommend them to the acceptance of the
Co. If the Co should be willing to accept them we have no
hesitation in recommending that H.M. Government should close with the
arrangement. We do not think that the public are likely to obtain,
or have a right to demand, any greater sacrifice on the part of the
Co and if more is sought it would be necessary to have recourse to
litigation before the Judicial Committee of the Privy Council—which
must necessarily be slow, expensive, and of doubtful issue—and which
by keeping the public mind in suspense would certainly retard the
progress of the Colony.