Murdoch to Elliot (Assistant Under-Secretary)

In my letter of 30th March last I stated that it would be my duty at
a future day to submit to the Duke of Newcastle a report on the
Hudsons Bay Cos accounts [marginal note: herewith returned] of
expenditure connected with Vancouvers Island which accompanied your
letter of 26th March. I now proceed to submit such a report, but in
doing so it will be convenient that I should recapitulate very
briefly what has already passed on the subject.

2. At the close of 1857 Her Majestys Government gave notice to the
Company of the intention of the Crown to resume Vancouvers Island,
and called on them for a statement of the amount of which under the
grant of Janry 1849 they would be consequently entitled to claim
repayment.

3. The Company in answer sent in a claim embracing their whole
expenditure to the amount of £225,699—but on being informed that
H.M. Government did not propose to take over the property or
Establishments connected with their Commercial transactions they
reduced their claim to 3 items only vizt.

1. Balance due on VanC. Isld )

Trust account for works & ) 8505. 6.11

Establishments to 31st Decr 1857 )

2. Cost of sending out Settlers 25550.—.—

3. Expense of searching for Coal )

at Fort Rupert ) 12469. 4. 7

___________

£46524.11. 6

The first two items (assuming the details to be properly vouched)
were at once admitted—but respecting the third a correspondence
ensued which ended in an Agreement to divide it equally between the
Government and the Company. The account therefore at the
commencement of last year stood, as far as it had been rendered, as
follows.

Claims admitted by the Government )

(£8505.6.11 + 25550) ) £34055. 6.11

Half expense of Fort Rupert 6234.12. 3

___________

£40289.19. 2

subject, however, to the completion to the end of the year of the
Vancouvers Island Trust Account. That Account had nominally been
furnished to 31st Decr 1857, but the subsidiary accounts from the
Colony had really been made up only to October 1856. But it was
stated in a note that the receipts & disbursements from that date to
October 1857 would probably reduce the balance against the Crown by
about £600, leaving that balance therefore, in October 1857 somewhat
under £8000. Under these circumstances, considering the extent of
the Land sales in the last two years and the high prices which had
been obtained, it was anticipated that the completion of the account
would still further reduce the balance against the Crown, even if it
did not throw it on the other side. The sum, therefore, paid to the
Company on account last year was limited to £25000.

4. The volume now before me brings up the Accounts between the
Company and the Crown to 31st December last, but with a different
result from what had been expected. Instead of showing a balance
against the Crown after giving credit for the above £25000 of about
£15000 the Company make out a balance due to them of £53,569.14.2.
The excess, therefore, is upwards of £38000 or after giving credit
for £24000 of outstanding land claims, upwards of £14000 upon
accounts which profess to extend only over an additional 3 years. I
proceed to explain as far as I am able to do so, in what manner this
large excess is created.

5. First a sum of £15.123.19.3 is charged for services & expenditure
of various descriptions extending generally from 1851 & 1853 to May
1859. Among these charges the principal are:

For the Salary of the Secretary )

to the Governor & Treasurer ) £ 1600.—.—

Maintenance of the Governor 2062.10.—

Government Office Messenger 600.—.—

Powder and Arms &c 825.—.—

Medical attendance & Medicines 1200.—.—

Maintenance of Clergyman 687.10.—

Maintenance of Chief Justice )

and Clerks ) 3128. 2. 7

Services of Steamer "Otter" as )

a Guard Ship ) 4000.—.—

___________

£14103. 2. 7

Now of these charges, which being either in the nature of Salaries or
of estimated expenditure are spread equally over the whole periods
for which they are respectively charged, three fourths had been
incurred before the 31st Decr 1857 to which date

*

the Companys accounts were furnished in February 1858. There is no
explanation of the ground on which they are now brought forward
further than the words "per statement received from Alexr G. Dallas
Esq dated Janry 1860" appended to them. But if, as may be assumed
from their silence, the Company did not consider themselves entitled
in February 1858 to make a charge for such services it will be
necessary that they should explain upon what principle they have now
changed their view. Any estimate which H.M. Government may make of
their liabilities to the Company must be valueless if the Company are
at liberty thus to reopen accounts which have been once sent in

**

and admitted, for the purpose of interpolating new charges.

6. Second. Interest on balances is charged to the extent in all of
£3279. 6. 5. The principle on which this interest is calculated is
not stated, but I conjecture it to be at the rate of 5 percent on the
mean amount of the balance assumed to be due in each year. Whether
this is a customary and correct mode of calculation I am unable to
say. But it appears to me very questionable whether the Company is
entitled to claim any interest at all.

***

The delay in settling these
accounts arose first from the introduction into them by the Company
of inadmissible items—and second from the delay of the company in
furnishing complete statements. The only professedly complete
account furnished by the Company is that
now under consideration which was received at the Colonial office
only at the end of March last.

7. Third. Additional sums amounting in the aggregate to £34300 are
charged for buildings, Establishments &c. Of this £13641.7.5 would
appear from the manner in which it is brought to account in the
"Balance Account" to be of the same nature as £6956.15.1 charged in
the account to Decr 1857, i.e. to be expenditure on buildings or
permanent structures.
****

The items which compose the remaining £20.660. may be found in the
"Vancouvers Island Trust Account," and appear to be for
Administrative expenses—such as the administration of Justice—the
Survey Department—Road making—Militia—Churches & Schools—Gaol—"General expenses" &c. These if properly vouched would appear to
be legitimate charges.

*****

8. Fourth. A sum of £1000 is charged as Cash advanced to the
Governor on his Bill.

9. Fifth. The sum of £3490 is charged as Commission on Land Sales,
and £160 on Royalties at the rate of 10 per cent. At the same time
the amount with which the Company debit themselves on account of Land
Sales is only £11430. The apparent discrepancy arises from the fact
that on the 31st Decr last there was, according to a statement in
the Company's account, a sum of £24056.18.4 still outstanding on Land
sales effected in October 1858. This amount will of course be
hereafter paid to the Crown.

10. These are the principal items to which I think it my duty to
call the Duke of Newcastle's notice, but I am bound to add that from
the manner in which the accounts are made up I cannot feel any
confidence in the scrutiny to which we have been able to subject them
in this Office. The accounts are divided into (1) a Chief account,
(2) a series of Fur Trade Outfit accounts, (3) Forty three
subordinate accounts, (4) The Vancouvers Island Trust account, (5) A
Stock Account, and (6) a balance account. The items comprized in
them appear to have been extracted from the Hudsons Bay Companys
Books where they formed no doubt a portion of the General and much
more extensive accounts of the Company, and they have thus fallen
naturally into the form in which they are here presented. But
without an acquaintance with the principles on which the Hudsons Bay
Company's accounts are kept we cannot do more where doubts arise than
guess at the explanation of the entries which we find here. For
instance—with a few exceptions all the principal charges appear
first in the Fur Trade outfit accounts. Among these charges we
constantly find the item "supplies" for a specified service—which
item is subsequently transferred to its appropriate subordinate
account. So far all is clear. But many of these items are
afterwards credited to the Comp[an]y partly in the Vancouvers
Island Trust Account and partly in Balances. There is no explanation
of the reasons for this distribution and we can only, therefore,
suppose that part of the supplies were for permanent and part for
transitory services, and that they have been charged accordingly.
But this is merely a conjecture adopted for want of any other way of
explaining the matter. I may add that the amount expended under the
term "supplies" or the equally indefinite terms "expenses", "Cash",
"outlay" or "sundries" is in the whole upward of £35000.

11. Again the amounts with which the Company debit themselves for
Land Sales appear to have been in the first instance carried chiefly
to the Fur Trade outfit Accounts, but also partly to the Hudsons Bay
Company's Accounts and the Land Office account, and whilst a portion
of them have been carried through the Land Sales account, a large
portion do not appear there at all. I am unable to explain the
reasons for these different processes.

12. If then H.M. Government should think it necessary (as I presume
they will) to subject these accounts to a careful examination and to
require the production of proper vouchers before any further payments
are made to the Company the most satisfactory course would probably
be to entrust the duty to the Commissioners of Audit or to a
professional Accountant. Whoever is employed must pursue his
examination at the Hudson's Bay Co's house, and must depend on the
Company's Officers for assistance in performing his Task. A
reference to the Company's Books will be constantly necessary, and
the Company could not of course be expected to trust them out of
their own custody, but they would probably not object to allow any
person commissioned by the Government such access to them as may be
necessary.

13. That such an examination can, however, be speedily executed or
can fail to give rise to a multiplicity of questions it would be too
much to expect. The largeness of the terms in which the grant of
Janry 1849 is couched leaves a wide field for discussion as to the
principles by which the Company's claims are to be governed. It may
under these circumstances be worth considering whether it might not
be easier and more convenient to settle the questions between the
Crown & the Company by a reference to Arbitration rather than by
attempting a strict enforcement of the terms of the grant of Janry 1849. In considering that question it will be desirable to bear in
mind the manner in which the amount to be repaid by the Crown on the
resumption of the Island is described in that grant.

******