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2. I request that you will make further enquiry into the matter and report to me whether or not in your opinion Messrs. Howard and Stephens are entitled to any, and if any, to what further compensation.

A 11..

I have, &c.,

(Sd).

ALFRED LYTTELTON.

7, CASTLE TERRACE,

COWES, ISLE OF WIGHT,

15th August, 1904.

THE UNDER SECRETARY OF STATE,

COLONIAL OFFICE.

SIR,-I have the honour to acknowledge receipt of your letter No. 27223/1904, dated the 9th instant, informing me that Mr. Secretary Lyttelton, being anxious to remove, if posible, any grievance which we may consider ourselves entitled to feel, has decided to refer the question to Sir Matthew Nathan, the newly appointed Governor of Hongkong, for enquiry whether any further compensation can justly be paid to us, having regard to all the circumstances of the case and that we will be at liberty to lay before him such further facts and documents in support of our case as we may think proper.

2. I appreciate this concession, and, all the more, for the reason that the enquiry is whether further compensation can justly be paid to us.

3. To facilitate this enquiry it may be well to call attention to the report of the proceedings of the Legislative Council on the 29th March, 1889, when Governor Des Voeux, in speaking of the discretion which he will be bound to exercise under the Ordinance, said:

"No Governor put in such a position would act on his own advice. In the first place he would ask the advice of his Council, and that would preclude personal feeling even if he were disposed to exercise it. And the Council would not be justified in coming to a conclusion without the opinion of experts."

4. In the hope that the course now proposed will lead to a satisfactory settlement, it is not necessary for me to discuss further the other points in your letter.

I have etc.,

(S.)

THOS. HOWARD.

A 12.

[C. O. D. 7689/04.]

M. J. D. STEPHENS, Esq.,

Solicitor.

COLONIAL SECRETARY'S OFFICE,

HONGKONG, 6th October, 1904.

SIR,-With reference to the conversation which you had with His Excellency the Governor on the 27th ultimo, I am directed to forward a Memorandum in which have been summarised the claims made at various times by Mr. Howard and