CHAPTER XVII

Canadian ocean mail service--Want of sympathy of British government therewith.

The progress of the Cunard line had a consequence which was neither anticipated nor welcomed by the British government. The plan of the government to concentrate its transatlantic communications on Halifax had been given a thorough trial and had proven a failure, and as the expressed wish of the Canadians to have their correspondence with the mother country exchanged at either Boston or New York coincided with the interests of the owners of the steamers, the principal port of call on this side of the Atlantic shifted through a series of arrangements from Halifax to New York.

In 1852, the contract between the British government and the Cunards provided for a direct service of weekly frequency between Liverpool and New York, with a subordinate service by slower steamers to Halifax and Boston. The subsidy had also undergone successive augmentations until, in 1852, it reached the immense sum of L173,340 a year.[296] But although the service was now to all appearances Anglo-American in character the British government assumed to regard it as Anglo-colonial, as imperial, because it provided the means for exchanging the mails between Great Britain and Canada.

In 1855, the British government set on foot one of those large colonial schemes which ought to have excited mistrust both as to its practicability and its expediency. It proposed to establish a low and uniform rate between Great Britain and all her dependencies excepting India, Cape of Good Hope, Mauritius and Van Diemen's Land. The postage was to be reduced from one shilling to sixpence per half ounce letter.[297]

Coupled with the reduction in rate was a proposal that arrangements should be made by which the maintenance of the services, which had hitherto fallen entirely upon the mother country, should be shared by the colonies having the benefit of them.

[Illustration: WILLIAM WHITE, C.M.G (_Deputy Postmaster General_ 1888-1897)]

Canada's participation in the scheme was invited, and the arrangement made by the British government with the Australian colonies was submitted to the Canadian government.[298] Under this arrangement the British government was to make the contract for the service, and the colonies should pay half the expense involved.

The proposal found no favour in Canada. The Cunard service, the expense of which Canada was expected to share, was far from being an unmixed advantage to the British North American provinces. It was indeed a most serious obstacle to the realization of plans, which Canada conceived essential to its expansion on the lines marked out by nature.

For many years the thought of Upper Canadians had turned to the advantages which were to be derived from the utilizing of the great water system extending through lake and river, from the head waters of the lake Superior to the ocean, and measures had been carried forward to overcome the obstacles caused by the falls and rapids on the course of the passage.

By 1849, the canal system was completed, which permitted the free passage of inland vessels from the upper lakes to Montreal, and it was anticipated that the greater part of the movement of immigration and freight to and from Upper Canada and the western states, would be upon Canadian waterways. Merchandise could be carried from lake Erie to Quebec at less cost than from Buffalo by the Erie Canal to New York. But in spite of these facts, trade on the Erie Canal increased largely and steadily, while the trade on the Canadian water routes increased but slowly.

The principal reason for the apparent disregard of the economic law that trade will follow the superior route was found in the fact that for a large proportion of the traffic the destination was Europe, and that the charges to the out-ports of New York and Quebec were only a part of the total charge to which the traffic were subject. If, for any reason, the conveyance across the Atlantic from New York to Europe was so much cheaper than the conveyance from Quebec, that the total charge from lake Erie to Europe was lower by way of New York than by way of Quebec, then it is obvious that the trade would not be attracted to the route which seemed to be naturally the superior one.

This was the case at that time. Owing to the large subsidies given by the British government to the steamers sailing to and from New York, vessels running to and from Quebec could not compete with those from the rival port. The assistance to the Cunard line, therefore, which the British government desired Canada to give in part, was a positive detriment to the development of the transport business of upper and lower Canada.

The question of establishing a steamship line from a St. Lawrence port had engaged the attention of the legislature of the United Provinces as early as 1851. In that year a resolution was offered to the house of assembly, setting forth the advantages of the Canadian route, and the fact that these advantages were offset by the aid given by the British government to the Cunard and Collins lines (the latter was owned by an American company), and asking that the British government be approached with a request that they grant assistance to a Canadian line similar to that given to the lines running in and out of New York.[299]

A committee of the assembly took the subject into consideration, and in the following year a contract was made with a British firm,[300] which was shortly afterwards converted into the Canadian Steam Navigation Company, for a service from Liverpool to Quebec and Montreal during the season of open navigation in the St. Lawrence, and to Portland, Maine, during the five months when the river route was not practicable. The trips were to be fortnightly to the Canadian ports and monthly to Portland; and the steamers to be employed were to be of at least 1200 tons burthen.

Twenty-four thousand pounds a year were to be paid to the company by way of subsidy--L19,000 by the government of Canada, L4000 by the Atlantic and St. Lawrence railway (later a section of the Grand Trunk railway) and L1000 by the city of Portland.

Trips were made during the winter of 1853, and throughout the summer of 1854, but there was so general a disregard of the terms of the contract, that it was terminated, and a contract was made with Hugh Allan in September 1855.[301] The new contractor entered upon his engagement with laudable energy; and at the end of the first season the postmaster general of Canada was able to make a comparison between the Canadian service and that to the port of New York.[302]

On the westbound voyages the Canadian steamers were practically a day slower than the Cunard steamers--the Allan steamers taking twelve days, twenty and a half hours, to eleven days and twenty-two hours occupied by vessels of the Cunard line. The Canadian steamers were also slower than the Collins line on these trips by four hours. But on the voyage to Great Britain, the Canadian line made the speediest trips of the three. These steamers took but eleven days two hours, while the Cunard steamers were eleven hours and the Collins thirty hours longer in reaching Liverpool.

It was with the successful inauguration of the Canadian service that the friction with the British government began. There developed immediately a clash of interests.

The first note of dissatisfaction came from Great Britain. The postmaster general communicated to the colonial secretary[303] the information that the earnings of the packet service were much reduced by the fact that the Canadian post office was sending its correspondence by the first steamer that sailed whether it was British or American, and not confining its despatches to the steamers of the Cunard line.

To the British post office, the Canadian line was an American line, and in spite of all protests and remonstrances, it insisted on treating the Allan line steamers as foreign. Ordinarily there would be no practical consequence of this wilful misunderstanding, but as letters conveyed by the Cunard line were charged eightpence the half ounce, while those carried by the American lines were made to pay fourteen pence, the hostility to the Canadian enterprise was marked.

The postmaster general did not stop at this point, and leave the public on both sides of the Atlantic to consult their own interests as to whether they would send their letters by the Canadian or British subsidized lines. Taking up the case of interests adversely affected by the discriminatory rates, he pointed out that, as many unpaid letters were sent by the American lines, recipients of these letters had to pay sixpence more than if the letters were sent by the Cunard line.

That the remedy lay in the hands of the postmaster general, of reducing the rates on letters carried by the Canadian (or American line as he persisted in calling the Allan line) was not to the point. He called upon the colonial secretary, if the secretary concurred in his views, to remonstrate with the Canadian government as to the course it has chosen without reference to the home government. These views do not seem to have been communicated to Canada. But shortly afterwards the British government submitted for the consideration of the Canadian government, the Australian scheme for a postal service to practically all the self-governing colonies of this period.

The postmaster general of Canada had doubts as to the applicability of the Australian arrangement to the Canadian service.[304] He presumed the proposition was limited to the Cunard line, and would not be extended to the equally British line running directly from Canadian ports to Liverpool. Special interests, similar to those which had induced the British government to subsidize the Cunard line, had led the Canadian government to extend assistance to the Allan line, and it seemed scarcely expedient for the Canadian government to lend aid to the British government in the maintenance of the Cunard line in the absence of any evidence of intention on the part of the British government to reciprocate with regard to the Canadian line.

It was further observed by the postmaster general of Canada that even if the Canadian government should concede the equity of the British proposition it would be impossible to determine satisfactorily the proportion of the cost which should be borne by the North American provinces, since much the larger part of the mails carried by the Cunard line was exchanged between Great Britain and the United States.

The position taken by the Canadian government gave rise to great irritation in Great Britain. Fortunately the expression of this feeling was not communicated to the Canadian government until some years later, when the question, though by no means settled, had passed out of the irritation and friction phase.

It is fortunate, also, that the intermediaries between the two governments were men of good sense, with an appreciative understanding of the view of the colonial government. The Duke of Argyle, postmaster general, in the Palmerston government of 1855-1858, declared that the measures taken by the Canadian government afforded no relief whatever to the British government. They had, indeed, withdrawn from the British government part of the postage it was entitled to expect when it embarked on the Cunard contract. If on the expiration of the contract existing, which had still five or six years to run, the Canadian government should undertake to perform half of the effective service, it might fairly claim exemption from all share in the other half of the service, and furthermore might claim a right to apply the amount received by way of sea postage, towards defraying the cost of the Canadian packets.

But, Argyle affirmed, the British government could hardly admit the propriety of a demand made upon it for assistance to a line of steamers, which was established by the colony--a line which had no other effect than to diminish the postal revenue upon which the British government relied to meet the outlay occasioned by the contract with the Cunard company.

Labouchere, the colonial secretary, to whom the duke's views were communicated, declined to submit them in their existing shape to the colonial government. If the British government had been in no way

## parties to the agreement made by the Canadian government with Allan, the

Canadian government were equally unconsulted when the British government entered into the contract with the Cunard company; and Labouchere pointed out that the British government were without the means of enforcing its views on the Canadian government.

If the postmaster general or the treasury, which coincided in his views, were of a different opinion, Labouchere desired to know what steps they proposed to take in the highly probable case that the province declined the responsibility it was sought to impose upon it. On the whole, the colonial secretary thought the preferable course would be to allow the present arrangements to subsist until the Cunard contract had expired, and then enter upon negotiations with the Canadian government for sharing with it upon equitable terms in the general expense of the transatlantic service.

The correspondence between the departments of government in London--the tenor of which has been described--was submitted, confidentially, to the governor general of Canada for his opinion on the 17th of July, 1856. Sir Edmund Walker Head replied, confidentially, to Labouchere, and set out Canada's position with gratifying clearness. A Canadian, he observed, looked at the circumstances from a point of view rather different from that in which they had presented themselves to the postmaster general at St. Martins-le-Grand. The Canadian asked: "Why are we Canadians obliged to pay a subsidy at all for a line of steamers running into the St. Lawrence to a British port, by a route which we hold to be the most advantageous route? The merits of the route itself might make our bounty unnecessary, were it not that Her Majesty's government gives a large bounty to a line running into foreign ports."

"It might be admitted," continued the governor general, "that Canada was benefited by the rapid transmission of mails through the United States; but she was no party to an arrangement as one that could never be revoked. Canada, then, thought that she could arrange for the conveyance of her own mails to and fro by way of Quebec in summer and Portland in winter, more rapidly and advantageously than by Boston and New York. Why should Her Majesty's government discourage this new enterprise on behalf of Her Majesty's subjects and by a large subsidy drive the business to the United States ports?

"Canadians entertained the hope," the governor general further observed, "that no course would be pursued by the British government adverse to the principles of free trade, by the continuance of a large bounty to the Boston and New York lines. Leave the natural resources of the Canadian route to find their own level, and in the meantime do not use all the influence of the British post office so as to bear as hardly as possible on the first effort of the colony to open the St. Lawrence to a regular line of British steamers."

Head disclaimed the idea of giving these arguments as his own, but stated that, they expressed the opinion of many Canadians, among whom were some of the members of his council. In December, Labouchere informed the governor general that his view had prevailed, and that it was decided to leave the matter as it stood, until the Cunard contract expired, when it was hoped that an arrangement might be made more in conformity with what was regarded as an equitable consideration for the finances of the United Kingdom.

The lack of cordiality displayed by the government of the mother country towards the ocean transport enterprise of her colony in its initial stages yielded to no warmer feeling with the progress of the scheme. The Allan service was performed during 1856 and 1857, as the postmaster general stated, with meritorious punctuality.[305]

In the beginning of 1858 the Quebec-Portland service attracted the attention of the British post office, which intimated a desire to utilize it for the conveyance of mails between Great Britain and the United States during the period of the year when the Allan steamers made Portland their port of arrival and departure.[306]

Sidney Smith, the postmaster general of Canada, was of the opinion that the Canadian line would be found the preferable one during all seasons,

## particularly for those parts of the United States bordering on the Great

Lakes, as they were brought into direct connection with the ocean at Quebec by means of the Grand Trunk railway.

As an additional attraction to use the Canadian line, Smith offered to reduce the charge for sea postage, that is, the portion of the total postage between Great Britain and North America, which was allocated to the ocean conveyance, from eightpence to fourpence a letter. This would enable the public on both sides of the Atlantic to send their letters for eightpence instead of twelvepence.

On consideration of this proposition by the governments of Great Britain and the United States, it was found open to the objection that the postage of letters carried by the Cunard line must remain at one shilling, owing to the sea postage claimed by the British government on letters carried by that line. Until arrangements could be made between the British government and that of the United States by which the charge on letters passing between the two countries by the Cunard line could be reduced from one shilling to eightpence, it was deemed inadmissible to accept the Canadian proposition.

That seemed a reasonable decision, and it would have been supposed that until the Canadian proposition could be accepted the amount of sea postage paid for the Cunard service would be applied to the Canadian service.

The British post office took no such view. It maintained that the Canadian post office was entitled to no more than the rate which it offered to accept, viz., fourpence, and as this rate added to the land postage in Great Britain and the United States, would only call for an eightpenny postage, it proposed that the difference between the eightpence and the shilling, which the public were actually charged, should be divided equally between the post offices of Great Britain, the United States and Canada.

Smith protested that his proposition was part of the scheme to reduce the postage from a shilling to eightpence sea postage, and that until the reduction of the postage between Canada and Great Britain to eightpence was affected, the Canadian government were entitled to eightpence sea postage as much as the British government were for the letters carried by the Cunards.

Alexander Tulloch Galt, inspector general of Canada, who was in London at the time, laid the whole case before the colonial secretary, pointing out that the attitude of Great Britain, in attempting to make the United States a party to the scheme to force Canada to take one-half the amount for sea postage that was claimed by and conceded to the United States and Great Britain in respect to their subsidized lines, was the more objectionable, as there was no reason for believing that the United States had attached any such stipulation to their consent to use the Canadian line.

Galt's remonstrance had the effect of inducing the British government to withdraw from its untenable position in this instance. In the course of his communication Galt mentioned the disappointment with which it was learned in Canada that the Cunard contract, which would not have expired until January, 1862, had been renewed in June 1858.

This action on the part of the British government, Galt insisted, did not seem consistent with the assurance given by the colonial secretary to the governor general in December 1856, when he wrote that the lords of the treasury had apprised him "that the existing arrangements with respect to the Canadian mail service will continue until the expiration of the Cunard contract, when they hope arrangements may be affected more in conformity with what they would regard as an equitable consideration for the finances of this country."

The Canadian legislature on the first opportunity, voted an address to the queen, expostulating strongly against the course of proceedings so injurious to the interests of Canada.

The action of the British government in prolonging the arrangements with the Cunards was set in a strong light by a review of several circumstances connected with it.[307] The application of the Cunard company, for an extension of their contract, was made in October 1857, only nine months after the discussion with the Canadian government. It was referred by the treasury to the admiralty and to the postmaster general.

The treasury recommended that it be granted, while the postmaster general deprecated an extension, for reasons not connected with the Canadian representations. On March 2, the treasury decided that it was premature to discuss either an extension or a renewal of the contract, though they expressed their readiness to consider favourably, any application that Cunard might make when the contract had advanced nearer to its termination.

On the 20th of the same month, Cunard made another application on the same general grounds; and this time the treasury, without further light on the subject, yielded, and directed the extension, requesting the postmaster general to communicate his views as to any modifications that might be introduced into the contract, without materially affecting the basis of the existing agreement.

The postmaster general, in reply, pointed out that the rate of payment made to Cunard was considerably higher than that for any other packet service, also that he had before him another offer for the conveyance of the transatlantic mails for an amount much less than was paid to Cunard. The new offer was from Inman, agent for the Liverpool, New York and Philadelphia line, whose vessels made their voyages at a speed not much inferior to Cunard's, and who agreed to convey the mails for the amount of the sea postage.

The offer had been received on the 1st of March, nineteen days before the application of Cunard; and as the postmaster general had had occasion to correspond with the postmaster general of the United States respecting Inman's offer, he had not thought it necessary to communicate this proposal to the treasury, nor did the treasury consider that their duty required them to make any further investigation before awarding the contract for L173,340 a year.

These facts are taken from the report of a select committee appointed by the house of commons in 1860, to inquire into the manner in which contracts have been made for the conveyance of mails by sea. The committee found that, in the making of these contracts, there was an extraordinary division of duty and consequent responsibility, between several departments of government.

The parties by whom these contracts were actually entered into, were the lords of the admiralty, but the authority for making them rested with the treasury, who prescribed their terms and conditions. The treasury before coming to the decisions which they communicated to the admiralty, consulted with the postmaster general, the colonial secretary, and with the admiralty themselves, in reference to the postal, colonial and nautical questions involved.

Theoretically, the arrangements were scarcely open to criticism. It was proper that the information necessary for a decision, respecting, in the first place, whether a service was required at all, and, in the next place, what the terms and conditions should be, on which the service should be performed, should be concentrated somewhere, and there seemed no place more fitting as a focal point than the lords of the treasury, who were responsible for obtaining and spending the money required for the maintenance of all the services called for by the government.

But the fault lay not in the organization. It was to be found in the lack of co-ordination among the contributory departments. Several instances are given of the results of the failure of the departments to co-operate with one another. One which has a certain piquancy is the provision for the mail service to Australia.

It will be remembered that the first jarring note in the relations between Great Britain and Canada concerning mail services arose when Canada declined to fall in with the proposition that the British government should arrange for the conveyance of the mails across the Atlantic, and that Canada should pay its share of the resulting outlay.

The colonial secretary submitted, as the model arrangement, one which had been made between the governments of Great Britain and the Australian colonies, under which each government should pay half the cost of the service. The contract was to be arranged for entirely by Great Britain, and the colonies were assured that such care should be exercised in the arrangements that they could depend on their interests being safeguarded.

How the government acquitted itself of the trust it assumed on the behalf of Australia, the parliamentary report shall relate. "That contract involved a yearly subsidy of L185,000, of which one-half was to be paid by the Australian colonies, who had no opportunities of being consulted in the framing of the contract; so that special circumspection was required. The tender accepted was that of a new company without experience, and who had no ships fit for the work.

"One of their vessels," continues the report of the committee, "the 'Oneida' which was reported against, by the professional officer of the admiralty, and had not the horse power or tonnage required by the contract, broke down on her first voyage. Time was not kept, and though the colonies complained, it appears that no steps were taken to ensure the fulfilment of the contract with suitable vessels."

"The company," added the report of 1860, "in one year lost their capital, L400,000; the service proved a complete failure, and great risk of an interruption in postal communication was incurred. This contract had been entirely arranged by the then financial secretary, whose acts in these matters do not appear to have received confirmation by any other authority."

It is not perhaps surprising, with the Australian venture in mind, that an explanation involving the same sort of incompetence on the part of the departments of government should be made regarding the Cunard contract.

The explanation of the Cunard contract was that when the decision of the treasury granting the renewal was made, the then financial secretary, who had only entered office with the change of ministry in the month of March immediately preceding, was not aware of the existence of the correspondence between the home government and that of Canada in 1856; nor, though that correspondence was among the records of the treasury, and the authority on which the colonial secretary had written his despatch of December 3, 1856, was a minute of the treasury, did the proceedings appear to have been known to any of the officers of the department charged with this branch of the business.

The committee observed that they had not received any satisfactory explanation of the circumstance that a matter so recent, and of such importance, should have been lost sight of.

But the painful story of the relations between the government of the mother country and that of her North American colony with respect to the ocean transport enterprise set on foot by Canada, does not end here. In the autumn of 1858, an Irish company known as the Lever or Galway Company, which had a contract with the Newfoundland government for a mail service between Galway and St. Johns, proposed to the British government to establish a service with fortnightly frequency between Galway and America.

This scheme excited considerable interest, particularly in Ireland; and several representations were made to the government, by deputations and by memorials from chambers of commerce, setting forth their sense of the advantages which it would confer on the trade of that country. The publicity given this project brought into the field the two applicants who had been disappointed when the Cunard contract had been extended in 1857.

Inman on October 15 protested against the granting of a subsidy to a new line, and expressed the hope that, if it should be decided to give assistance to a line from Galway, the proposed service should be put up to public competition. The treasury replied to Inman, informing him that when a new service was about to be established by the government it was their practice to invite tenders by public advertisement, thereby affording to all parties the opportunity of tendering therefor. Inman heard no more from the government on the subject before the contract with Lever was concluded.

The Canadian government, also, advanced its claims for consideration. Galt wrote to the colonial secretary on November 11, 1858, and the London agent of the Canadian line on January 18, 1859, submitted an application to the treasury. He pointed out that the effects of this subsidized line would be disastrous to the prospects of his company, and expressed the trust of his principals "that before interfering to crush a provincial company of such magnitude, your lordships will at least afford the company we represent an opportunity of being heard."

This appeal was so far successful, that it obtained for the company the honour of an interview at the treasury. They were promised that their representations would be considered; but no further notice was taken of their application.

On the same day on which the Canadian company's letter was dated, viz., January 18, the Lever company submitted an offer for the conveyance of the mails from Galway to Portland, Boston and New York, calling at Newfoundland for L3000 a voyage. The treasury, following the practice laid down for their guidance, asked the postmaster general for his opinion on the proposal.

The postmaster general reported adversely, observing that it was not expedient to enter into any contract for the service, which would bind the government to a heavy annual payment. He was also of the opinion that the vast mercantile traffic between the two countries afforded abundant opportunities to secure additional service that might be desired on favourable terms.

Here then were three strong reasons to call for the government staying their hands from entering into a contract with Lever: the remonstrance of Inman, coupled with the intimation from the treasury that in the event of their deciding to establish the service, they would put it to public tender; the expostulation of Galt on November 11, 1858, and the appeal of the Canadian company for an opportunity to be heard on January 18; and the unfavourable report of the selected adviser of the treasury.

Yet, in the face of all these circumstances, the treasury on February 22, authorized a contract to be made for a fortnightly service to Galway and New York, and Galway and Boston, alternately, at the rate of L3000 a voyage. The parliamentary committee in seeking an explanation for this extraordinary course, examined Lord Derby, the chancellor of the exchequer, as to the reasons which moved him to authorize this service.

Derby stated that he was influenced mainly by the consideration of the social and commercial advantages which this service would confer on Ireland, and of the preference due to the Lever Company on account of its enterprize, in first establishing a line of steamers from Galway.

Derby stated, however, that when he authorized the service he had not before him some materials, nor had he in view some considerations, which, the committee believed, should have been held essential elements in the determination of the question. He had no knowledge of the correspondence which had passed between the home government and that of Canada, and between the treasury and Inman.

Consequently then, in the words of the committee of the house of commons, Derby's decision was given "in ignorance of the strong feeling in Canada as to the injury done to their interests by the system of subsidizing what they deemed rival lines; of the assurance given in 1856, on which the Canadian government relied, as a pledge that they would have an opportunity of being heard before that system was renewed or extended; and of the surprise and dissatisfaction already occasioned by the renewal, without hearing them, of the Cunard contract; and in ignorance, also, of the implied pledge given to Mr. Inman, that the new service would be thrown open to public competition.

"It was likewise given," the committee added, "without any consideration of the question, whether, assuming the interests of Ireland warranted the establishment of the service from Galway, that object might not have been secured by an arrangement which would, at the same time, have provided for the wants, and satisfied the just claims of Canada."

The round condemnation by a committee of the house of commons, of the course pursued by the government, gave Smith, the postmaster general of Canada, a handle of which he was not slow to make full use. The report of the committee was laid before the house of commons on May 22, and on the 30th of the same month, Smith again approached the government on the subject, setting forth the grounds of his appeal to the British government, and concluding by asking that the government should aid the Canadian line by a subsidy of L50,000 a year. He pledged the Canadian government to give a like amount for the same purpose.

The application was refused, and Smith, whose resources seemed endless, approached the subject from another angle.[308] The contract which was made with the Lever Company called for a fortnightly service, the consideration being L3000 a trip, or L78,000 a year. The Lever Company was in no position to fulfil the terms of its contract, and Smith opened negotiations with the company to take over their contract, stipulating to allow the company L35,000 of the L78,000 which the contract would bring, as the consideration for the assignment.

An agreement was concluded on these terms, and the deeds were signed on July 6, 1860. The only condition now was the consent of the British government to the arrangement, which was required by the contract, but which under the circumstances was regarded as purely formal. The terms being laid before the secretary of the treasury and the postmaster general, secured the approval of both those authorities; and on the 11th of July, the sailing arrangements under the contract were settled between Smith and the official in charge of the post office packet service. Success seemed now assured, but before the day was over, the situation had undergone an entire change, for the British government had refused its assent to the assignment of the contract.

No reason was given for the refusal of the British government to sanction the transfer of the Lever contract to the Canadian line. Smith wrote to the secretary of the treasury for an explanation. He pointed out that the negotiations were made with the assent of Lord Palmerston and the treasury, that the arrangements had all been made on the secretary's assurance, and that in view of the strong feeling already existing in Canada on account of the treatment meted out to Canada in regard to its ocean mail service, he would be wanting in respect to the imperial authorities if he accepted the secretary's intimation literally, and in its full significance.

The secretary in his reply, gave away the whole case of the government. He admitted that for himself he had never concealed his opinion that the arrangement proposed by the Canadian government would have been a desirable one, but insisted that he had not used Palmerston's name beyond that. He had ascertained Palmerston's views as to the importance of meeting the wishes of Canada, sufficiently to warrant him, not in concluding negotiations, but in advancing them to the point where a definite proposal might be made to the government.

The ground on which the treasury based refusal of assent to the agreement made between the Lever Company and the Canadian government, was that the contract contemplated the grant of L78,000 a year for a fortnightly service from Galway, in addition to the other ocean services which were then in operation, while the transfer of the Lever contract to the Allan's would have the effect of merely substituting one contract for another, leaving the service just where it stood before--with an additional charge of L78,000 a year against the government.

There was another consideration and an extraordinary one. The government had suffered severe condemnation at the hands of the committee of the house of commons for their disregard of the pledge given, that, before a contract was awarded it would be put up for public competition. Their

## action in awarding the contract to the Lever Company without tender was

an undeniable injury to the interests of Canada, and now this censure was made the cover for another blow at those same interests.

The secretary of the treasury observed that the pledge formerly given and unfortunately overlooked had acquired much notoriety and must in any contingency afterwards arising be treated with rigour. "If the Galway contract be considered binding," he concluded, "the government cannot be accused of breaking this pledge as long as they simply continue to pay the subsidy for the same services and to the same parties." But the case became different if they sanctioned a new arrangement involving material modifications, particularly when the arrangement transferred the contract to a party of undoubted, from one of questioned, solvency.

Smith next addressed Palmerston, and his letter shows clearly the incomprehensible and provoking course pursued by that statesman. At every step in the negotiations the treasury was consulted, and its approval gained. The solicitor of the Galway Company was also in frequent communication with the treasury, and he actually altered the form of the deed of transfer upon the suggestion of the secretary.

The resolution of the Galway Company, accepting the proposal of the Canadian government, was adopted, and on the same day the treasury was informed of the fact. A week later--on July 5, 1860--Smith and Galt, the Canadian minister of finance, waited on the secretary of the treasury, who informed them that Palmerston was much gratified that the arrangements had been made, and on the strength of these assurances Smith executed the assignment of the contract, and provided securities for the purchase money, of all of which Palmerston expressed his high approval.

The matter was regarded as so far concluded that on July 9 a meeting took place between the Canadian representatives and the officials of the treasury and post office, the details of the scheme were reduced to writing, and the secretary of the post office received the approval of a communication to the postmaster general of the United States informing him of the arrangement, and that thereafter the Canadian ships would be considered as British and not as United States packets.

Considering the arrangements as completed, Smith and Galt decided to return to Canada, and on the 11th they called on Palmerston for the purpose of taking their leave, when, to their utter stupefaction, they were informed that the government peremptorily refused to sanction the transfer.

The reasons put forward for this unusual action on the part of the government lacked even the merit of plausibility. It was first argued that the Lever contract contemplated the grant of L78,000 a year for a fortnightly service from Galway, in addition to all the ocean service which might be existing, while the transfer would have the effect of substituting the Galway service for one of the existing services, and thus continuing the charge of L78,000 a year with a positive diminution of public accommodation.

Smith had a conclusive reply to this argument. He pointed out that at the time the Galway contract was entered into, that is on May 21, 1859, the Canadian service was only fortnightly; and the arrangement for which the sanction of the government was sought would have given exactly the accommodation contemplated when the contract was given--a weekly service between Ireland and America.

As for the modifications in the contract, which formed part of the ground of the government's refusal to sanction it, the first was that "the arrangement transferred the contract to a party of undoubted, from one of questioned, solvency." Smith's only comment on this was to complete the sentence by adding "or in other words would ensure its performance efficiently."

The only other important modification sought by Canada in the terms of the contract was the substitution of Canadian for United States terminal ports in America. Apart from the slight to Canadian interests involved in putting forward such a reason, it must be clear that the Cunard line, in which the British government did not conceal its interest, would have been benefited and not injured by the withdrawal of a line running to United States ports. Smith concluded his protest by pointing out the distinction which the Canadian people could not fail to draw in comparing Palmerston's refusal, with that of previous governments.

The grants to the Cunard and Galway lines were stated to have been made in ignorance of the Canadian interests, and the inability of the government to remedy these and other evils was deplored. In the case under consideration the British government, Smith pointed out, deliberately opposed themselves to that which would have benefited Canada, and had determined that the competition of which they complained should be maintained. The protest was quite without avail. The Galway Company entered on the performance of its contract, but its service was marked with so much irregularity, that the postmaster general was compelled to cancel it.

FOOTNOTES:

[296] First report of select committee on packet and telegraphic contracts, May 1860 (_Br. Parl. Papers_, No. 328).

[297] Report of P.M.G. of United Kingdom, 1855.

[298] _Sess. Papers_, Canada, 1859, No. 26.

[299] _Journals of Assembly_, 1851, p. 85.

[300] Report of commissioner of public works, 1852-1853.

[301] Report of P.M.G. to council, December 7, 1863 (_Sess. Papers_, 1864, No. 28).

[302] Annual report of P.M.G., 1856.

[303] _Br. Parl. Pap._, 1859, XXII.

[304] _Br. Parl. Pap._, 1859, XXII.

[305] Report of P.M.G., 1857.

[306] _Sess. Papers_, Canada, 1859, No. 26

[307] First report of the select committee on packet and telegraphic contracts May 1860 (_Br. Parl. Papers_, No. 328).

[308] _Sess. Papers_, Canada, 1861, No. 21.

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