Berens to Lytton

I have the honour to acknowledge the receipt of the Earl of Carnarvon's letter of the 28th Ultimo, in which his Lordship,
adverting to the accounts furnished by the Directors of the
Hudson's Bay Company to Her Majesty's Government, showing the
probable amount which would be claimed by the Company as
compensation in the event of the resumption by the Government,
of Vancouver's Island, states 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
repurchase extends only 
to sums laid out by the Company on this
Island and premises as owners thereof, and to the value of the
establishments, property, and effects of the Company, being
thereon, and connected with such ownership,

and that they therefore do not acknowledge any obligation on
their part to compensate the Company for such of their
establishments and property as are connected with their
operations as a Company carrying on trade with the Indians.
His Lordship adds that, on this account, Her Majesty's
Government cannot hold themselves responsible as regards "the
Inventories of the goods, stock, and vessels" referred to at the
end of the account in question, and concludes by stating that it
will be a matter of separate consideration how far this
principle may affect the other items of the account.

In reply I beg to state that the account was drawn up in the
form in which it now appears by directions from the Colonial
Office. On the 20th of January last the Governor received a
letter from Mr Secretary Labouchere, in which he announced the
intention of the Government 
to repurchase and take Vancouver's
Island from the Hudson's Bay Company at the approaching
expiration of the Company's License of Trade, and asked for a
statement of the Sums for which the Company would claim
repayment upon that event taking place. In compliance with this
request the Governor thought it necessary to instruct our
Accountant to draw up a Statement in Strict conformity with the
terms of the Grant of the 13th of January 1849, of which I beg
to subjoin the Clause which has reference to this subject. It
is there stated that at

the expiration of the Company's grant or license of or for the
exclusive privilege of trading with the Indians, the Government
reserves to itself full powers to repurchase and take of and
from the said Governor and Company the said Vancouver's Island
and premises hereby granted, in consideration of payment being
made by us, our heirs and successors, to the said Governor and
Company of the sum or sums of money theretofore laid out and
expended by them in and upon the said Island and premises, and
of the value of their establishments, property, and effects 
then being thereon.

It appeared to me that the meaning of these words was perfectly
clear, and left no doubt that at the period when the Grant was
made it was understood upon both sides that, in the event of the
Government resuming possession of the Island, the Hudson's Bay
Company should be compensated for all their outlays, and for the
value of any establishments, property, and effects which they
might leave in the Island, without any reference to the object
for which those establishments may have been created; and we
felt that we were the more entitled to take this view of the
case because the Grant makes no distinction between the
establishments belonging to the Company as "owners of the
Island," and those belonging to them "as a Company carrying on
trade with the Indians."

It now appears, however, that the Law Officers of the Crown take
a different view of the matter, and are of opinion that in case
of the repurchase of the Island, there is no obligation on the
Government to compensate the Company for any such goods, stock,
trading vessels or other property as have been created in
consequence of their Commercial operations. On this point I
have merely to say that there is no wish on the part of the
Company to call upon the Government to assume any responsibility
which does not fall strictly within the terms of the Grant. And
as the Government is legally advised that it is not under any
obligation to assume any of the establishments or other property
connected with our trading operations, we will raise no
objection to the principle laid down by Lord Carnarvon with
respect to any property of that class which may remain on the
Island.

With respect to the expenses to which we have been put in the
colonization of the Island, the affair is different. We
conceive that under the Grant of 1849 our rights in that respect
are undoubted, and they are not objected to in Lord Carnarvon's
communication. His Lordship, indeed, makes a reserve in so far
as the principle of excluding the Inventories may affect the
other items of the account, but we believe that no difficulty
will arise on this point as the account has been carefully drawn
up with a view to the separation 
of those claims which have
reference to the colonization of the Island, and those which
were more directly connected with the trading interests of the
Company.

It is most satisfactory to us to learn that you are disposed
to devote early attention to this important subject; and we
venture respectfully, but urgently, to impress upon you the
necessity of as early a settlement as possible of such questions
as may arise. Indeed in this respect we have reason to hope
that no great delay need occur, as we feel, from the careful
manner in which the accounts have been kept, that there will be
no great difficulty in adjusting all the claims which the
Company may have upon the Government.