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PUBLIC RECORD OFFICE

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TTIC.O. 882

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SIR,

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APPENDIX II.

WAR OFFICE to COLONIAL OFFICE.

War Office, Pall Mall, August 11, 1892. I AM directed by the Secretary of State for War to acknowledge the receipt of your letter of the 21st July, and to acquaint you, for the information of Lord Knutsford, that it scarcely appears to Mr. Stanhope that any practical object will be served by further discussion between the two Departments; and that he has caused a letter to be addressed to the Treasury-copy enclosed-with a view to eliciting the opinion of their Lordships as to the right mode of calculating the value of military lands surrendered to a Colony, and the desirability of referring the question to legal authority.

The Under Secretary of State, Colonial Office.

I have, &c. (Signed) RALPH THOMPSON,

WAR OFFICE to TREASURY.

SIR,

War Office, August 9, 1892. Wrru reference to the letter addressed to you from this Office on the 22nd July, enclosing copies of correspondence between the Colonial Office and this Office on the subject of the general principles which should govern the assessment of the value of military lands surrendered to a Colony, I am directed by the Secretary of State for War to transinit herewith, for the information of the Lords Commissioners of Her Majesty's Treasury, the enclosed copy of a further letter from the Colonial Office, and to request that you will be good enough to move their Lordships to express their opinion upon questions at issue between the two Departments.

2. Briefly stated these questions are:-

the

I. Whether the value of the lands should be taken (a) as the full saleable value; or (6) as the saleable value less any interest which the Colony may be considered to possess in the lands, notwithstanding their having been set aside for defensive purposes.

II. Whether the above question is one that should be decided (c) as a matter of law by reference to legal authority; or (d) on final resort, if the three Departments concerned are unable to agree, by reference to the Govern-

ment.

3. The opinion of Mr. Stanhope on Questions I. and II. is fully stated in the letters addressed to the Colonial Office from this Office on the 23rd March, Hong Kong, 8/1289, and 4th July, Hong Kong, 8/1298, nor does it seem necessary that he should do more than make the following observations on the enclosed letter from the Colonial Office.

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4. The Colonial Office in paragraph 2 states that the proper interpretation of the language of the memorandum enclosed in the Colonial Office Circular of the 9th June 1890 addressed to the various Colonies "is strictly a legal question, and it was for this reason that Lord Knutsford proposed to submit the case to the Lord Chancellor ;" but this is scarcely borne out by the Colonial Office letters of the 4th December 1891, 10th February 1892, and 19th May 1892, in which the question proposed for legal arbitration is the general question of the mode of valuing the lands, and not the inter- pretation of the memorandum.

Moreover the memorandum itself does not possess the character of an Act of the Legislature or of a legal instrument. It was the outcome of the deliberations of an Inter-departmental Committee, endorsed by The Treasury, Colonial Office, and War Office, and its right interpretation and application are not matters of pure law but of policy, and belong in last resort, as this Office contends, to the Government.

5. Again, with regard to the 4th paragraph of the Colonial Office letter, I am to observe that Mr. Stanhope is not unprepared to accept the contention of the Colonial Office, with the proviso that the Colony having set aside the value of the land in question as a capital contribution towards its defence holds itself liable to reproduce such value when required for similar purposes.

6. A copy of this letter has been sent to the Colonial Office.

The Secretary to the Treasury.

I have, &c.

(Signed) R. H. KNOX.

9

APPENDIX III.

TREASURY to COLONIAL OFFICE.

SIR,

Treasury Chambers, August 17, 1892. THE Lords Commissioners of Her Majesty's Treasury have had before them your letter of the 25th ultimo, and the preceding correspondence sent to them by the War Office respecting the valuation to be set upon military land in Hong Kong when surrendered by the War Department to the Colonial Government, a point on which a difference of opinion has arisen between Lord Knutsford and the Secretary of State for War, and which Mr. Stanhope wishes to submit for the decision of the Treasury, whilst Lord Knutsford would prefer either the arbitration of the Lord Chancellor, or a reference to the Law Officers of the Crown, because the question is one between the Imperial and Colonial Exchequers on which my Lords are interested parties.

Under the agreement arrived at by Her Majesty's Government, on the recommenda- tion of the Colonial Military Contributions Committee, and communicated by the Colonial Office to the Colonies in a Circular Depatch of the 9th June 1890, when Colonial military land, occupied by the military authorities without any title deed, or conveyed to the Board of Ordnance or Secretary of State for War by grant from the Crown signed by the Governor, for purposes of defence, is no longer required for those purposes, it is to be surrendered to the Colonial Government, on payment of its estimated value in kind or money, if that value be immediately required for the military defence of the Colony, or if not, on condition that the Government agrees to hold its recorded value at the time of transfer, or its actual proceeds if subsequently sold, at the disposal of the War Department, in case they are obliged at any future time to obtain land for purposes of defence in the Colony.

The War Department contend that the value to be either immediately paid for the land, or held to their credit at call, is the full estimated market value, or the full actual proceeds of sale, of the land, in accordance with the probable intention of the Colonial Military Contributions Committee. The War Department are trustees of this land for defence purposes, i

and it would be a breach of trust if they surrendered it without retaining

the right to resume possession of it, or of its equivalent in land or money, when required for the purposes of the trust. If the future need can be met by something less than this equivalent, the War Department will be content with less, for the time being; but their duty as trustees compels them to reserve the right of regaining possession of the full equivalent of whatever they surrender, and the only practical measure of that equivalent is the sum which the surrender will enable the Colonial Government to obtain for the land. On the other hand, the Colonial Office maintain that the value to be recorded or paid ought to be substantially less than the full market value of the land, because the War Department are but limited owners of it, possessing only a right to its perpetual use for a particular purpose. The War Department have, it is assumed, no power of alienating the land from the purpose for which they hold it in trust, except by surrendering it, to its reversionary owner, the Colonial Government. The full market value of the land could not be realised without a surrender of the rights of both parties, of the War Department as potentially permanent occupier, and of the Colonial Government as reversioner. It would be unfair, therefore, to make the Colonial Government pay to the Department the value of its own rights as well as the value of those of that Department. The rights of either party alone would probably be quite unsaleable. If the union of those rights be necessary to produce a price, that price must belong to both parties jointly.

My Lords acknowledge the force of the arguments on both sides.

For the integrity of the trust and in the interest of the defence of the Colony, the War Department must be enabled by the Colonial Government to replace what they surrender, whenever necessary. The limited purpose for which the War Department would require the new land would probably not enable them to obtain it for less than its full market value; therefore the Colonial Government must hold at the disposal of the War Department the full market value of the land surrendered. But, in return, the Colonial Government may fairly ask to be given the same reversionary rights over the land acquired by the War Department in substitution for that surrendered as they enjoyed over the surrendered land.

What has been said of land applies equally to buildings.

To take an example, my Lords hold that the Colonial Government should pay to the War Department the full market value of Murray Battery at once, if it be surrendered to the Colony, because the War Department have to spend that value (and much more)