In late March 1803, Lord Melville went down to Walmer, ostensibly on a visit to see Pitt, in order to discuss the current political situation. Henry Addington, afterwards Viscount Sidmouth, was in office, and he had been responsible for raising Melville, formerly Henry Dundas, to the peerage the previous year. Affairs on the continent were in such a precarious state that it would not be long before there was a resumption of war with France. Addington, it seems, was anxious for a rearrangement in government, and he employed Melville as his go-between in talks with Pitt.
Pitt's biographer, John Ehrman, explained the situation in the following terms:
"The leading proposition was certainly quite remarkably inept. Addington and Pitt should be Secretaries of State in a Ministry in which the First Lord of the Treasury should be Chatham [Pitt's brother]."  Although I disagree with Ehrman on the point of the arrangement being described as 'remarkably inept' simply because Lord Chatham would be First Lord of the Treasury, I think a large part of the issue at stake here was Pitt's pride. Pitt had been at the head of The Treasury and Chancellor of the Exchequer for over seventeen years, and now that he was out of office, he could not imagine returning to a position that was not at the head of State. In a conversation between Pitt and Wilberforce that took place soon after the discussions with Melville, Pitt remarked, "really...with a sly severity, and it was almost the only sharp thing I ever heard him say of any friend...I had not the curiosity to ask what I was to be."  Pitt simply would not countenance an arrangement whereby he himself was not at the helm. Furthermore, at that time Pitt expressed his wish not to take an active part in government, preferring to stay at Walmer Castle.
Melville wrote to Addington on March 22, 1803, apprising him of Pitt's decision. No doubt the letter was dictated by Pitt:
“My dear Sir,
I arrived here Sunday Morning, and found Mr. Pitt very much improved in point of health beyond what I expected. He is alone and of course I found no interruption in conversing with him on the various topics touch’d upon in my Interview with you last Friday. As [a] Matter of private Gratification, Mr. P has the reverse of any wish to return to official Situation, and if the present Administration prove themselves in the present Circumstances of the Country, competent to carry on its Government with reasonable Prospects of Success, and are determined afterwards to adhere to those leading Principles of domestic & foreign Policy, which he [Pitt] has long considered as material, his Wishes to be able to support them, out of office, are precisely the same they were at their first formation. He does not however disguise from me that many things have occurred both in their relation to his transactions with foreign Powers (so far as he has the means of judging of them) and with regard to the financial operations and Statements of the Treasury, as to have given him sincere Concern, and if it were not under the Circumstances of the present critical Moment of the Country, he doubts how far, considering the Commotion he has had for these many years with the financial Affairs of the Country, he was at liberty to keep back so long from his distinctly stating to the public the fatal Errors which he is satisfied exist in the statement made, with regard to the Amount of the Natural Revenue compared with the Charges upon it. As things now stand he is induced from all these Considerations, for the present at least, to adhere to the resolution of continuing his Residence where he is [Walmer], and refraining from taking part in the Discussions of Parliament.
I did not conceal from him the Idea you mention’d, of his returning to a share of the Government with a person of Rank & Consideration [i.e. Chatham] at the head of it, perfectly agreeable to him, and I even specified the Person you had named; but there was no room for any discussion on that part of the Subject, for he stated at once, without reserve or affectation, his feelings with regard to any Preposition founded on such a basis. The uncertain State of his Health makes him still doubt how far, on any call he could be justified in undertaking a lead in public Affairs under the difficulties now existing or impending. The Moment of a Negociation still in Suspence he thinks in every View unfit for his taking part, but in any Event nothing could induce him to come forward except an urgent Sense of Public Duty and a distinct knowledge that his Services (such as they may be) are wished and thought essential both in the highest quarter [the King], and by all those with whom (in consequence of any arrangement that might be formed on that ground) he might have to act confidentially. He is firmly of opinion that he could not on this Supposition have any Chance of answering his own Ideas of being useful to the Country in one of the great points on which he lays a principal Stress, but by returning to the Management of its finances.
Besides this Consideration, he stated not less pointedly and decidedly his Sentiments with regard to the absolute necessity there is in the Conduct of the Affairs of this Country that there should be an avowed and real Minister possessing the chief weight in the Council, and the principal place in the Confidence of the King…that Power must be in the Person generally call’d the first Minister, and that Minister ought he [Pitt] thinks to be this Person immediately at the head of the Finances. He knows to his own comparable Experience that notwithstanding the abstract truth of that general Proposition, it is no ways incompatible with the most cordial Concert and mutual Exchange of Advice and Intercourse amongst the different Members of Government, and different branches of executive departments, but state of it should some unfortunately to such a radical difference of opinion that no spirit of Consideration or Concession can reconcile, the Sentiments of the Minister must be allowed and understood to prevail leaving to other Members of Administration to act as they may conceive themselves conscientiously call’d upon to act under such Circumstances. During the last Administration such a Collision of opinion I believe scarcely ever happened or at least was not such as the parties felt themselves obliged to push to extremities, but still it is possible and the only remedy applicable to it is solely in the Principles I have explained.
In a Conversation of two Days which involved in it the discussion of such a Variety of topics it is impossible to give you more than an abstract or any general Outline of the heads of our Conversations. I have made it merely a recital, not intermixed with any Comments, opinions or Suggestions of my own. You expressed a Wish to hear from me without any delay, and I trust the Explanation I have given you is perfectly sufficient to convey to you such a View of the Subject as may enable you to draw your own Conclusions, and regulate your own deliberations.
I remain, etc. etc." 
In terms of those particular negotiations, that was that. Unfortunately, relations between Addington and Pitt were seriously diminished. An insight into Pitt's mental state can be deduced in the subscriptions he wrote at the end of his letters to Addington in April 1803. They had been friends since childhood, and Pitt usually signed off his letters with "yours affectionately." However, by mid-April 1803, he was writing "yours sincerely," and then it became merely "your faithful and obedient servant" - a mere cursory expression. 
Despite his protestations to the contrary, by the following spring Pitt would be back as First Lord of the Treasury and Chancellor of the Exchequer.
1. Ehrman, J. (1996) The Younger Pitt: The Consuming Struggle. London: Constable, p. 584.
2. Wilberforce's account of a conversation between himself and Pitt. R.I. and S. Wilberforce. Life of Wilberforce, Volume 3, p. 219; quoted in Ehrman, J. (1996) The Younger Pitt: The Consuming Struggle. London: Constable, p. 584.
3. The British Library. Dacres Adams MSS. BL Add Ms 89036/1/10, f. 93. Lord Melville to Mr. Addington, March 22, 1803 (copy).
4. Ehrman, J. (1996) The Younger Pitt: The Consuming Struggle. London: Constable, p. 589.