History of merchant shipping and ancient commerce, Volume 4 (of 4)

by W. S. Lindsay

Their entire failure.

But the whole undertaking proved one of the most ruinous of its kind on record, the Galway steam navigation scheme not excepted. A volume might be written, and to advantage, on the mistakes committed by the directors, all of whom were business men of wealth and position, though few of them were conversant with maritime affairs, or with the difficulties they had to encounter at every stage, and with the causes which ultimately led to the loss of some of their ships. Suffice it to say that, when the company had to commence operations in March 1857, its ships were not ready, and the directors were obliged to enter into arrangements with the Royal Mail (West India) Steam Packet Company and other companies for the performance of the service; and indeed, when their own ships were ready, they either broke down or were found unfit to perform, within the specified time, the work they had undertaken.

In less than two years the whole capital of this new company was lost, but as the result has been fully described by Lord Overstone in a speech he delivered in the House of Lords on the 24th of March, 1859,[349] I prefer reproducing his statement, especially as it remains unquestioned, to offering any remarks of my own.

Speech of Lord Overstone, March 24th, 1859.

“This company,” his Lordship remarked, “originated very much through the success of some influential parties in Glasgow, who realized a large sum by chartering two screw steamers to Government during the Crimean War. These vessels were named the European and the Columbian, and the company was named the ‘European and Columbian Company.’ Soon after the close of the Russian War, Government advertised for tenders for the Australian mail service. One given in by the European and Columbian Company was preferred to a cheaper one by the Peninsular and Oriental Company, the annual subsidy for carrying the mails being 185,000l. with monthly services, the contract to endure for five years. The penalty for the non-fulfilment of the contract was heavy, increasing prodigiously with each day’s delay. In consequence of this great undertaking it was necessary to enlarge the company, and greatly to increase the number of its vessels; and, accordingly, a new company was formed on the limited principle, under the name of the ‘European and Australian Royal Mail Company (Limited)’ whom Government accepted for the contract. The nominal capital was 500,000l., but I believe not more than 420,000l. were subscribed, the balance being purposely reserved, as the promoters expected it to command a large premium. The list of proprietors is one of the best I have seen of any company, all the shareholders, eighty-four in number, being selected men, residing chiefly in Glasgow and neighbourhood, London, Liverpool, and Manchester. 400,000l. were ultimately paid up. The first meeting of the new company was held on the 3rd of September, 1856; but it was, of course, some months before their plans got developed, and time was lost in negotiation with other companies to sell their contract for a bonus, or to get some other advantage. As this was not arranged, the European and Columbian were taken over from the old company; other vessels were chartered for immediate requirements; a vessel called the Oneida, by which 60,000l. were ultimately lost, was purchased; and two other vessels contracted for at 100,000l. and 120,000l. It was soon apparent that the company had started with too small a capital, and that there was a total want of experience in the management.... After borrowing considerable sums upon the security of their vessels and otherwise, the directors found that it was necessary to make arrangements with another company to work the service, which they ultimately did with the ‘Royal Mail (West India) Company.’ An arrangement for an amalgamation of the two concerns was also very nearly completed, when the shareholders of the latter company refused to confirm the bargain made by the directors. This and the events of last autumn (1857) brought matters to a crisis, so that almost within a twelvemonth of the formation of the company, it was known that they were practically insolvent, and they have since placed themselves under the Act, and gone into voluntary liquidation. Besides the loss of 400,000l. of capital, the debts, including mortgages, appear to be about 270,000l., against which they have the steamers, subject to some disputed claims of the Royal Mail Company, in whose hands some of them are. There is some hope that the steamers may realise sufficiently to pay the debts, but, in the present state of shipping and aspect of the questions with the Royal Mail Company, this seems to be doubtful. The following appear to be the heavier items of expense and loss: Abandoning steamers, 25,000l.; placing steamers on stations, 37,000l.; loss on voyages, 70,000l.; interest, management, and depreciation, 77,000l.; loss on Oneida and expense of bringing home, 61,000l.: total 270,000l.; but there will be a further heavy loss in realising the four steamers still belonging to the company, and the plant they have at Sydney, King George’s Sound, Aden, and Point de Galle. These stand in the books at about 370,000l.”

Royal Mail Company undertakes the Australian service and fails.

When, in February 1858, the shareholders of this unfortunate undertaking were obliged to seek the protection of the Limited Liability Act under which it had been formed, the Royal Mail (West India) Company entered into arrangements with Government to carry out the service on the terms of the contract, provided it was guaranteed against loss to an extent not exceeding 6000l. per month. Differences, however, soon arose between this company and the Admiralty which resulted in a lawsuit, whereby it appeared that the West India Company had sustained a loss far in excess of 6000l. per month, and that the service had altogether cost the country close upon 260,000l. per annum during its brief existence.[350]

New tenders invited.

That of Peninsular and Oriental Company accepted, 1859.

In September 1858, Government again advertised for tenders “for the monthly conveyance of the mails between Great Britain and the Australian Colonies, with a branch between Marseilles and Malta.” Two offers were made, one by the Royal Mail (West India) Company for 250,000l. per annum, and the other by the Peninsular and Oriental Company for 180,000l. The latter was accepted, and the new service commenced in February 1859.