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 185,000, 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, 400,000; 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 3000 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 3000 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 50,000 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 3000 a trip, or 78,000 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 35,000 of the 78,000 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 78,000 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 78,000 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 78,000 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 78,000 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).