The History of the Post Office in British North America

by William Smith

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.