The Colony of Vancouver Island might not have been created if it wasn't for a struggle for territory between Canada and the United States. The slogan "Fifty Four Forty or Fight" was the cry from US settlers penetrating the Oregon Territory (what is now the states of Washington and Oregon).

Then U.S. President James K. Polk encouraged missionaries, and over 3,000 settlers and their family to the area, feeling the territory was unquestionably American. The U.S. had further ambitions of claiming all of the Pacific Northwest, from Alaska (latitude 54 degrees, 40 minutes) to California.

The old Hudson's Bay Company headquarters at Fort Vancouver on the Columbia River, found itself stranded deep into US territory. Britain feared that American settlers might sweep into Vancouver Island, weakening their claims to that territory. At this time, almost every European living on Vancouver Island was connected with the Hudson's Bay Company, so it seemed sensible to use it to set up a British colony.

So in 1849, a "Royal Grant" gave Vancouver Island and the Hudson's Bay Company permission to create Fort Victoria and colonize the Island. The company dismantled its headquarters at Fort Vancouver, and moved them and Chief Factor Douglas to Fort Victoria.

England ordered the colony was to create a government, which would have authority over the Hudson's Bay Company. This would create problems over the years, because the Royal Grant gave a lot of the responsibility for managing the colony to the Hudson's Bay Company.

The Company hoped that by having James Douglas appointed governor, they would have more control. But England considered having a company official as Governor to be a conflict of interest, so Richard Blanshard, a British lawyer, was appointed instead. Later on, when Blanshard resigned after a short time as Governor, Douglas was appointed Governor after cutting his ties with the Hudson's Bay Company.