AN ABSTRACT
OF THE
PROCEEDINGS OF THE SELECT COMMITTEE
OF THE
HOUSE OF COMMONS,
APPOINTED SESSION, 1849,
TO INQUIRE INTO THE CONTRACT PACKET SERVICE;
IN SO FAR AS THE SAME RELATES TO THE
PENINSULAR AND ORIENTAL STEAM
NAVIGATION COMPANY;
WITH AN
INTRODUCTORY STATEMENT AND REMARKS.

Presented to the Court of Directors.

ABSTRACTED AND PRINTED FOR THE INFORMATION OF
THE PROPRIETORS OF THE COMPANY.

November, 1849.

As the circumstances connected with the origin and progress of the Peninsular and Oriental Steam Navigation Company, and particularly with its employment in the Contract Mail Packet Service, are but imperfectly known to a great proportion of the present Proprietors; for their better information it has been deemed advisable by the Directors to authorise the printing and circulation of the following Statement and Abstract.

References, it will be found, are occasionally made to parts of the proceedings of the Select Committee of the House of Commons, which have not been printed in this pamphlet, because they would have rendered it too bulky for convenient perusal. But those who may wish to examine these proceedings at length, can procure the Parliamentary Blue Book at Hansard’s offices for the sale of Parliamentary Papers.

AN ABSTRACT,
&c., &c.

In their last Report, presented to the Proprietors at the general meeting held on the 31st of May last, the Directors stated that a Committee of the House of Commons had been appointed, “to inquire into the Contract Packet Service;” and expressed “their satisfaction that such an inquiry had been instituted, feeling, as they did, that as far as the interests of this Company were concerned, it would have a beneficial tendency, by eliciting facts connected with the origin and progress of the Company, and its employment in the Contract Mail Service, which could not fail to show the important national benefits which it has been the means of realising, and its consequent claim to public support.”

It is no doubt known to some Proprietors of the Company, that for several years past statements have been made, and circulated with untiring pertinacity, to the effect, that the Contracts made by the Government with this Company for the Mail Packet Service had been obtained through undue favouritism, or corrupt jobbing[1]—that fair competition had been denied to other parties,—and that the Company had, in consequence, obtained a much larger remuneration for the Service than ought to have been given, and were deriving enormous profits from it.

Although the Directors were aware that these misstatements had obtained some attention, even in influential quarters, they probably did not consider it was consistent with the eminent position which the Company occupies to take any legal proceedings against, or to enter into any public controversy with, the parties who had been chiefly instrumental in propagating them.

The forbearance of the Directors has led to a highly satisfactory result. The continued propagation of these misstatements at last attracted the attention of a member of the House of Commons so far as to induce that honourable gentleman to move for a Select Committee to inquire into the Contract Packet Service.

Although the Committee was moved for and appointed ostensibly to inquire into the Service generally, its principal object was, as is sufficiently obvious from its proceedings, to investigate the Contracts and transactions of the Peninsular and Oriental Company. And the earlier part of the proceedings of the Committee also show that the honourable mover and Chairman of it, actuated, no doubt, by a sense of public duty, entertained, at first, no very friendly views on the subject in reference to this Company.

The facts elicited in the course of the inquiry, and the glaring self-contradictions exhibited by the principal witness, when brought to the test of an examination before the Committee, as well as the hostile tone adopted by him towards this Company, appear, however, to have satisfied the honourable gentleman that, while induced to believe that he was prosecuting a public object, and undertaking a public duty, he had been made use of, for the mere gratification of private feeling.

And the following two first paragraphs of the Committee’s Report, which was drafted and proposed by the honourable member himself, are a sufficient refutation of the misstatements which led to the inquiry.

1. “That so far as the Committee are able to judge, from the evidence they have taken, it appears that the Mails are conveyed at a less cost by hired packets than by Her Majesty’s vessels.

2. “That some of the existing Contracts have been put up to public tender, and some arranged by private negotiation; and that a very large sum beyond what is received from postage is paid on some of the lines; but, considering that at the time these Contracts were arranged the success of these large undertakings was uncertain, your Committee see no reason to think better terms could have been obtained for the public.”

As the detached and inconsecutive form in which the evidence of the different officers of the Government departments was given to the Committee does not afford a very clear view of the history of the connexion of this Company with the Contract Packet Service—and, in particular, does not show the important public advantages which have been derived from the undertaking of these services by the Company—it is considered expedient, previously to proceeding with the abstract of the Committee’s proceedings, to give a brief consecutive statement of the circumstances under which the various branches of the Contract Packet Service were undertaken by the Company. And first,

No. I.
THE PENINSULAR MAILS.

Previous to the 4th of September, 1837, the arrangements for the Mail Packet communication with the Peninsula were as follows:—

Mails to Lisbon were conveyed by sailing Post-office Packets, which departed from Falmouth for Lisbon every week—wind and weather permitting. Their departures and arrivals were, however, extremely irregular; and it was no very infrequent occurrence for the Lisbon Mail to be three weeks’ old on its arrival at Falmouth, instead of being brought in five days, with an almost mail-coach or railway precision, as is now the case.

The communication with Cadiz and Gibraltar was only once a month by a steam packet.

The originators and original proprietors of the Peninsular Steam Company, who had, for upwards of a year previously to the time above mentioned, been running steam vessels at a considerable loss between London and the principal Peninsular ports, finding themselves in a position to effect a great improvement in the arrangements for transmitting the Mails, applied to the Government of that day on the subject, but were at first coldly received, and their suggestions disregarded. They continued, however, to prosecute their enterprise; and the celerity and regularity with which their steam packets made their passages soon began to attract the attention of the public. The merchants began to complain loudly of the inefficiency of the transmission of the Mails by sailing packets; and it was at last intimated, from an official quarter, to the Managers of the Peninsular steamers, that if they had any plan or proposals to submit for an improvement of the Peninsular Mail Service, the Government was then prepared to receive and consider the same.

In consequence of this intimation, a plan and proposal was drawn up for a weekly transmission of the Mails between Falmouth and Vigo, Oporto, Lisbon, Cadiz, and Gibraltar, by efficient steam packets, and at a cost to the public which should be less than that of the then existing inferior arrangement—namely, sailing packets to and from the Port of Lisbon, and a steam packet, once a month only, to and from Cadiz and Gibraltar.

The plan, after due examination, was considered to embrace advantages to the public far exceeding what the then existing arrangements afforded; and its adoption was consequently intimated to the authors and proposers of it; but, at the same time, they were informed that the execution of it would be put up to public competition.

Accordingly, an advertisement was soon afterwards issued, inviting tenders, from owners of steam vessels, for conveying the Mails between Falmouth and the Peninsula, in conformity with the plan submitted by the Peninsular Company; and the Contract for the Service was competed for against that Company by the proprietors of some steam vessels, who, under the designation of the British and Foreign Steam Navigation Company, had a short time previously commenced running two small steamers to the Peninsula, in opposition to the Peninsular Company’s vessels.

This British and Foreign Company, not being able to satisfy the Admiralty that they had the means of performing the proposed Service, their tender was rejected. Upon which they addressed the Admiralty, and requested that the Contract might be postponed, alleging, that if a month more were given to them, they could provide sufficient vessels. Their request was granted; and, contrary to all previous practice, after the tender of the Peninsular Company had been given in, and the amount of it, in all probability, known to their competitors, the Contract was again advertised, and a month more given for receiving tenders.

The British and Foreign Company again failed to show that they had any adequate means of performing the Service; and a private negotiation was then entered into by the Government, with the Peninsular Company, with a view to reduce the sum required by them. This sum was £30,000 per annum, being about £5,000 less than the estimated annual cost to the public of the sailing packets and steam packet previously employed in conveying the Mails. This sum was ultimately reduced to £29,600,[2] on which terms the Contract was concluded on the 22nd August, 1837, and may be considered to have formed the basis upon which one of the most extensive and successful steam enterprises yet known has been established.

These facts, it is submitted, abundantly show, that so far from any favour being shown, in regard to this Contract, to the originators of this Company, they obtained it in the face of adverse circumstances, and solely because they had, by their own enterprise, placed themselves in a position to effect an important public improvement, combined with a reduction of the public expenditure.

No. II.
Contract for an accelerated Conveyance of the India and other Mails between England and Malta, and Alexandria.

COMMENCED SEPTEMBER 1ST, 1840.

The efficiency with which the Peninsular Mail Packet Service was performed elicited from the Admiralty repeated testimonials of approbation; and, proving as it did, that that description of service could be more advantageously conducted by private enterprise, under Contract, than by Government vessels and establishments, paved the way for the subsequent extension of Contract Mail communication which took place with the West Indies, North America and the East Indies, China, &c.

Previous to the 1st of September, 1840, the arrangements for transmitting the India Mails to and from Egypt, to meet the East India Company’s steamers plying monthly between Bombay and Suez, were as follows:—

These Malls were forwarded, every fourth Saturday, by the Contract Mail steamers of the Peninsular Company to Gibraltar, and there transferred to an Admiralty steam packet, which carried them to Malta. They were there transferred to another Admiralty packet, which carried them to Alexandria. The homeward Mails were brought in a similar manner.

As the Peninsular packets had to call at Vigo, Oporto, Lisbon, and Cadiz, in their passage to and from Gibraltar, and the Government packets were of inferior power (about 140 horses) and speed, the transmission of the India Mails by this route was very tardy, occupying generally from three weeks to a month in their passage between England and Alexandria.

Imperfect as this mode of transmission was, it probably would have been continued for an indefinite period, had not some circumstances occurred to render an alteration of it imperative.

About the middle of the year 1839, the British Government effected a convention with the French Government, for transmitting letters and despatches to and from India, &c., overland, through France, viâ Marseilles, from whence a British Admiralty packet conveyed them to Malta. From thence this portion of the Mail, and the larger and heavier portion, forwarded by the Peninsular and Admiralty packets, viâ Gibraltar, were carried together to Alexandria by another Admiralty packet.

The portion of the Mails forwarded through France was despatched from the Post-office on the 4th of every month, while the main, or heavier portion, continued to be forwarded from Falmouth, by the Peninsular packets, every fourth Saturday; this arrangement was found, in the course of a few months, to work very awkwardly, inasmuch as the portion of the Mail forwarded, viâ Gibraltar, had become a fortnight or more in advance of that forwarded viâ Marseilles, and had to wait that time at Malta for the arrival of the Marseilles packet.

This irregularity, which every succeeding Mail increased, together with the suspicion that the British despatches, in their transit through France, were not altogether safe from being tampered with, rendered the Government very desirous of establishing a more accelerated means of transmission, viâ Gibraltar, for the main portion of the India Mails and the public despatches.

The Managers of the Peninsular steamers were applied to, to submit a plan for this object. They proposed to establish a line of large and powerful steamers, to run direct from England to Alexandria, and vice versa, touching at Gibraltar and Malta only, and, by such an arrangement, to transmit the Mails in a time that should not exceed by more than two to three days that occupied by the overland route through France; and undertook to execute such service, with vessels of 450-horse power, for a sum which should not exceed the cost to the public of the small and inefficient Admiralty packets then employed in the same service.

The plan was examined and adopted by the Government; but, as in the case of the Peninsular Contract, the execution of it was put up to public tender, by advertisement. And, as appears by the evidence of Mr. T. C. Croker, of the Admiralty (see his answer to question No. 2,033), no less than four competitors tendered for the Contract, viz.:—

The tender of Messrs. Willcox and Anderson who, as Managers of the Peninsular Company, had furnished the plan, was accepted, because it was the lowest. But Mr. Croker in his evidence (see Report) has made a slight error in calculation, in stating the sum at £35,200 per annum. The tender made was as follows:—

Besides this reduced sum, as compared with the demands of the other competitors, the tender of Willcox and Anderson afforded further important advantages to the public, in a reduced rate of passage-money for officers travelling on the public service, conveyance free of Admiralty packages, &c.

The vessels offered by Willcox and Anderson, were the “Oriental,” of 1,600 tons, and 450-horse power, and the “Great Liverpool,” of 1,540 tons, and 464-horse power, (originally destined for the transatlantic line of communication, but which were placed at their disposal by the Managers and Proprietors of that enterprise). They were also bound to provide a subsidiary vessel, of not less than 250-horse power, besides a vessel of 140-horse power, for the Malta and Corfu Service. The estimate made at the Admiralty (see question No. 1411) of the cost of the Government packets which performed the service, and which were superseded by this Contract, was £33,912. But as that estimate did not include any allowance for interest on their first cost, nor for sea risk, nor for depreciation, the following per centages on these accounts must be added to it, in order to present a tolerably correct view of the actual cost to the public of the service so performed.

The four vessels employed could not have cost the public less than £100,000. Upon this sum, therefore, must be calculated—

It hence appears that this Service, which cost, in the defective state of its arrangements, and as carried on by small vessels of about 140-horse power, £44,912, was undertaken, and has since been satisfactorily performed, under a greatly improved arrangement, by large vessels of 450-horse power, for £34,200, realising a financial saving of about £10,700 per annum to the country.

No. III.
Contract for conveying Mails between Suez and Aden, Ceylon, Madras, Calcutta, Penang, Singapore, and Hong Kong. COMMENCED JANUARY 1st, 1845.

For several years prior to the arrangement of the Contract with this Company, for the accelerated transmission of the India Mails to and from Alexandria, much public solicitude had been manifested for a more comprehensive system of steam communication with India than that which had been established by the Government and the East India Company. That establishment being considered, as, indeed, at its commencement it was professed to be, merely a preliminary and experimental one—intended to pave the way for a more comprehensive scheme, that should embrace all the Presidencies, and not be limited to the port of Bombay only, as the Government and East India Line was,—and which it was expected private enterprise would undertake, after the navigation of the Red Sea, and other important questions connected with such an undertaking, had been tested by the Imperial and Indian Governments.

As a proof of the importance which was attached to this extension of steam communication with British India, the following declarations of eminent persons connected with the Government of that empire may be quoted:—

The late Lord William Bentinck, then Governor-General of India, stated, in a public despatch, that so great were the advantages which it would confer, “that it would be cheaply purchased at any price.” The present Right Honourable President of the India Board, Sir John Cam Hobhouse, who then filed the same post, in speaking in the House of Commons of various ameliorations which the Government he was then connected with had in view for India, in which improved steam communication formed an item, said, that “it was calculated to benefit India to an extent beyond the power of the most ardent imagination to conceive.” And the present Lord Bishop of Calcutta, in a public address at a meeting in that city, said, that “the extension of steam navigation with India would be opening the floodgates of measureless blessings to mankind.”

Various attempts, however, under the sanction of eminent merchants, and other influential parties connected with India, to form a Company and establish the so much-desired scheme having failed, the parties who had been instrumental in establishing the Peninsular Company, and the accelerated conveyance for the India Mails to Alexandria, feeling that they had placed themselves in a position to effect this important national object, resolved to adopt it as a part of their enterprise, which they thenceforth designated “The Peninsular and Oriental Steam Navigation Company.” It was accordingly formed into a joint-stock Company, and a Charter of Incorporation from the Crown was applied for, which, after considerable opposition from other parties, was granted—but subject to the following conditions, namely, “That the Company should open an improved steam communication with India throughout, from England, within two years from the date of the Charter, or it should be null. That all steam vessels to be constructed by the Company of 400-horse power, and upwards, should be so strengthened and otherwise arranged as to carry and fire guns of the largest calibre then used in Her Majesty’s steam vessels of war. That the Government should have a power of inspection, as to their being maintained in good and efficient sea-worthy condition, and that the Company should not sell any of such vessels without giving the pre-emption of purchase to the Government.”

The Company under this Charter having obtained the necessary additional capital, and being joined also by most of the parties who had previously been endeavouring to effect this object under the designation of “The East India Steam Navigation Company,” proceeded, with all practicable speed, to fulfil the conditions, and carry out the object of their Charter of Incorporation.

On the 24th September, 1842, their first vessel destined for the India Sea service, the “Hindostan,” of 1800 tons, and 520-horse power, constructed at Liverpool, at a cost of £88,000, was despatched from Southampton for Calcutta, to open the “Comprehensive” line of communication, by plying between Calcutta, Madras, Ceylon, and Suez.

The commencement of this communication, by so large and powerful a vessel, was looked upon as a public event, and the ship was visited by members of the then Government, Directors of the Honourable East India Company, and many other eminent individuals.

It may here be necessary to advert to a circumstance which has been made the subject of much misrepresentation, and was even attempted, although without success, to be misrepresented to the Parliamentary Committee. (See evidence of Mr. Andrew Henderson in the Report, questions 2200 to 2208, and 2333, and 2334; also, correspondence between the East India Company and the Peninsular and Oriental Steam Navigation Company, in the Appendix, page 224 to 227.)

The circumstance alluded to was this:—The Directors of the East India Company, seeing that the extension of steam communication with India was at last in the hands of parties likely to place it on a practical basis, and desirous to encourage it on public grounds, voluntarily proposed to the Peninsular and Oriental Company to give them a premium of £20,000 per annum, and to continue the same for five years, on certain conditions, which, if the Company should at any time neglect or decline to fulfil, it was at the option of the East India Company to withdraw the premium or grant.

The conditions were:—

1st. That the communication with India beyond the Isthmus of Suez should be opened, and carried on by vessels of not less than 520-horse power, and 1600 tons burthen.

2nd. That a communication between Suez and Calcutta should be established the first year of the grant.

3rd. That not less than six voyages between Suez and Calcutta should be performed, in order to entitle the Peninsular and Oriental Steam Company to the second year’s grant.

4th. That a monthly communication between those places should be established, to entitle the Steam Company to the third and subsequent years’ grants.

5th. And that in case a contract should be entered into with the Steam Company for the conveyance of Mails, the grant should cease, and merge into such sum as might be paid for that service.

Such were the principal conditions of an arrangement which was attempted to be construed into a Contract, binding the Peninsular and Oriental Company to maintain a Monthly Mail Packet Service between Suez and India, with vessels of 520-horse power, for five years, for £20,000 per annum. It is, however, obvious that so far from such being the true construction, it was perfectly optional to the Peninsular and Oriental Company to discontinue the arrangement, and relinquish their claim to the grant, whenever its continuance might be incompatible with their interests.

The Company having constructed another vessel of 520-horse power and 1800 tons, the “Bentinck,” and purchased a third new vessel, of similar power and tonnage, the “Precursor,” considered that the time had arrived when they might improve the postal communication with India, upon the same principle as that upon which they had improved the Peninsular and Mediterranean Services, namely, by combining an important public improvement with a reduction of the public expenditure.

Finding, from a return which had a short time previously been made by the East India Company to the House of Commons, that the cost of conveying the India Mails between Bombay and Suez, as then performed by that Company, with steam packets of an average power of about 200 horses each, and some of which were of inferior speed, was not less than £110,000 per annum,—the Peninsular and Oriental Steam Company made a proposal to the East India Company, to relieve the latter of that Service, and to undertake it with their vessels of 520-horse power each; and thereby effect a considerable acceleration in the transit of the Mails—an improvement in the accommodation, and a reduction in the charge for passengers—a greater facility for the conveyance of light valuable goods and parcels—and a reduction of about £30,000 in the public expenditure, inasmuch as the Peninsular and Oriental Company offered to do the service for £80,000 per annum.

The then Court of Directors of the East India Company being opposed to the relinquishment of the postal service between Bombay and Suez into the hands of private enterprise this proposal was not entertained; and, the matter having engaged the attention of her Majesty’s Government, it was ultimately arranged that the East India Company should be allowed to retain the Packet Service between Bombay and Suez, and that the Peninsular and Oriental Company should submit proposals for the establishment (under Contract with the Admiralty) of a Monthly Mail Service between Suez, viâ Ceylon, and Madras and Calcutta, with vessels of 500 horse-power; and, in connection therewith, a monthly communication between Ceylon, Penang, Singapore, and Hong Kong, with vessels of 400 horse-power, thus effecting a Mail communication twice a month with India, and a Monthly Steam Packet communication with China.

After a lengthened negotiation a Contract was effected, in virtue of which the Peninsular and Oriental Company were to receive £115,000 per annum, equal to about 20s. per mile, for the Suez, Ceylon, Madras, and Calcutta Service; and £45,000 per annum, equal to about 12s. per mile, for the Ceylon, Penang, Singapore, and China Service.

This Contract was not put up to public competition, and there are obvious reasons to show why to have done so would have been useless, and unjust. It would have been useless, because it was well known that there were then no vessels in existence capable of performing such an extensive service, on the plan proposed, except the vessels which had, in fulfilment of the conditions of their Charter of Incorporation, been provided by this Company expressly for the East India Steam Communication; and it would have been unjust to the Peninsular and Oriental Company, after they had been induced to embark so large an amount of capital in providing ships of a description adapted to important national objects, not to have given them the opportunity of executing the Service on reasonable terms.

That the terms concluded upon were as reasonable and advantageous to the public interests as could have been at that time obtained, is sufficiently confirmed by the Report of the Parliamentary Committee.

A few facts may, however, serve to further elucidate this point.

In giving in their proposals for these Services, the Managing Directors submitted therewith detailed estimates of the expenses and receipts, to enable the Government to see and examine the grounds upon which the sums required for the Mail Service were based. And it appears, by the evidence taken before the Committee of the House of Commons, as well as before another Committee of the House of Lords, on the Post-office Service, (Session 1847,) that this part of the question was subjected to a very close and rigid scrutiny at the Admiralty. Also, that an estimate was made to ascertain what the proposed Services could be done for by public vessels; the result of which was, that it would have cost by such means not less than 42s. 6d. per mile, (less such returns as might be obtained from the conveyance of passengers.)

Looking therefore, to this estimate, and the fact that the Bombay and Suez Service, with vessels of only about 200 horse-power, was actually costing, under the management of the East India Company, after deducting the receipts for passage-money, at the rate of 31s. 6d. per mile, namely, £110,000 for 70,000 miles, the rates received by the Peninsular and Oriental Company—being about 20s. per mile for the Suez and Calcutta Service, and 12s. per mile for the Ceylon and China Service, or if averaged for the two Services together, about 17s. 1d. per mile—it cannot be considered as exorbitant by any reasonable or unbiassed mind; but it will rather be admitted that the Company in this, as in the previous instances, are entitled to take credit for effecting a great public improvement, at a less cost than what it could otherwise have been obtained for.

The following evidence on this subject was given by Mr. Croker, of the Admiralty.

1388. Does there appear to have been any estimate made by the Admiralty of the expense of doing that service?—Yes.

1389. When was that made, or when was it sent to the Treasury?—It appears to have been sent to the India Board.

1390. At what date?—On the 20th of January, 1844; the points upon which they gave information were, “The practicability of the proposal made by the Peninsular and Oriental Steam Navigation Company respecting the mode of ‘effecting the accelerated transmission of the East India Mails and Despatches between Bombay and Suez, combining therewith, for the year 1844, a two-monthly communication with Calcutta and Madras.’ The sufficiency of the means which the Peninsular and Oriental Steam Navigation Company proposed to employ, and the propriety of their demand of £80,000 per annum for performing a service which the Admiralty understood to be that then performed by the East India Company, namely, conveying the mails by steam vessels between Suez and Bombay monthly; and, in addition to this, between Bombay and Calcutta every second month.” The estimate then goes on in detail: and “With respect to the propriety of the demand of £80,000 per annum the Admiralty forwarded a statement from the Accountant-general of the Navy, showing that the cost of building and equipment of the four steam vessels required for the service, under the naval regulations would be about £250,000, including £6,500 which the Admiralty added to the estimate of their Accountant-general to meet additional fittings for the necessary accommodation of passengers. The Admiralty, however, had every reason to believe that to this estimate of the cost, &c., of the vessels, which they considered to be absolutely necessary for the satisfactory performance of the Mail Packet Service in the Indian seas, the outlay of the Peninsular and Oriental Steam Navigation Company would be increased by an additional sum of nearly £50,000, for what may be termed the luxurious accommodation now expected by passengers. Upon this speculation the Company, of course, subjected themselves to a risk of loss, or corresponding advantage. With respect to the item of coals, which was omitted in the Accountant-general’s return, the Admiralty, in the absence of precise knowledge, estimated the cost upon the best information they could obtain, and their Lordships considered the Commissioners for the Affairs of India to be competent judges of the correctness of their assumed estimate, as well as of the assumed cost of coal depôts, coaling, and other incidental and contingent expenses. The item of oil, tallow, &c., was also assumed, as the consumption of these articles depended on the construction of the engine, both as to principle and manufacture. In explanation of the differences between the following calculations and the Accountant-general’s statement, the Admiralty observed, that the interest of the money was not taken into account in naval expenditure; and that 15 per cent. for wear and tear, and depreciation of hull and machinery, had been adopted, with six per cent. for insurance, in compliance with the suggestion of the India Board, for the purpose of maintaining a comparative uniformity with the estimate given in their Secretary’s letter of the 24th of November, founded upon the Parliamentary documents supplied by the East India Company. The investment the Admiralty were willing to admit for the first cost and equipment of three first-class and one second-class steam vessels, being £250,000; this capital, if dealt with as suggested, would require an annual expenditure, for performing the Mail Service between Bombay and Suez, in wages and victuals, of £35,000; for coals (taken at 48s. per ton,) £29,000; for oil, tallow, &c., £1,500; 15 per cent. on £250,000 for wear and tear, and depreciation of vessels and machinery, £37,000; six per cent. insurance, £15,000; four per cent. interest on capital, £10,000; making £128,300. To this sum of £128,000 must be added the expenses of coal depôts at Bombay, Aden, and Suez, and the cost of coaling the vessels at these stations, &c., which, according to the items supplied by the Parliamentary document, ordered to be printed on 3rd July, 1843, appeared to be, for coal depôts, £7,644; wages of mechanics and apprentices not attached to particular vessels, expense of receiving ships, and miscellaneous charges of the steam department, £8,594, making a total of £16,238; thus increasing the amount of annual expenditure by upwards of £20,000, as the Admiralty considered that at least £4,000 difference must exist between supplying vessels of more than double the horse power and tonnage of those of the East India Company, making an annual outlay of £148,000 per annum for performing a distance of 70,080 miles.[4] The result of this calculation, therefore, exhibited the comparative cost of the Mail Service on the line between Suez and Bombay as follows: If performed by the East India Company, in their, comparatively speaking, small vessels, as shown by their return to Parliament, after deducting passage-money, £108,000 per annum, which does not appear to include the cost of coal depôts. If performed by vessels of 500-horse power, and 1,500 tons, without deducting passage-money, £148,000 per annum. If performed by contract, by vessels of 500-horse power, and 1,500 tons, £80,000 per annum. The Admiralty, in conclusion, observed, that should a mail communication, as suggested by them, extending from Suez to Calcutta, be determined on, the increase in the item of coals (calculated at 33s. 6d. per ton) would be £15,000, and three coal depôts, with the expense of coaling, &c., might be taken at £20,000 per annum, in round numbers.”

1391. What is the date of that report you are reading from?—It is the report from the Select Committee of the House of Lords, ordered to be printed 21st June, 1847.

1392. You spoke of vessels of 1,800 tons, and vessels of 1,500 tons; do you mean to say they were of that number each, or that there were three vessels 600 tons each?—1,500 tons each, or 1,800 tons each, the larger class of vessels.

1393. If I understand you, from what you have stated from that report, the estimate of the Admiralty for the cost of their vessels, for three first-class vessels and one second-class vessel, was £148,000?—Yes, £148,000.

1394. That makes no allowance for any receipt from passengers?—It is without deducting passage-money.

1395. What was the amount of passage-money deducted from the East India Company’s account, which comes to £108,000?—That will be shown by the Parliamentary document ordered to be printed on the 3rd of July, 1843, I presume; It is not stated here.

No. IV.
Contract for conveying the Bombay Branch of the India Mails between Southampton and Alexandria.

Two Mail Communications per month with India being thus established,—viz., that by the Peninsular and Oriental Company to Calcutta, viâ Ceylon, and that by the East India Company’s packets between Suez and Bombay,—the Mails for the former being despatched viâ Southampton on the 20th, by the Peninsular and Oriental Company’s vessels, to meet the same Company’s vessels plying between Suez and India, China, &c.,—it became necessary to provide a means of conveyance for the Bombay branch of the India Mail between Southampton and Alexandria, which had hitherto been conveyed by the Peninsular and Oriental Company’s vessels, and was despatched from Southampton on the 3rd of every month. The Government required, at first, a continuous line of steam vessels, of not less than 400-horse power, to ply between Southampton and Alexandria, similar to that conveying the Calcutta branch of the India Mails; and the Peninsular and Oriental Company were called upon to submit proposals for undertaking the Service on that plan.

The Managing Directors represented that to undertake the Service upon that plan would entail a heavy expense upon the public, inasmuch as the expense of maintaining such a communication, by such vessels, would be equal to the expense of the Southampton and Alexandria communication for the Calcutta branch of the Mails, for which the public were then paying about £30,000 per annum; while the passenger traffic, viâ Bombay, would be considerably less, in consequence of the obstruction presented to the conveyance of goods, and the high charge and inadequate accommodation for passengers by the East India Company’s packets. In short, that, looking to these circumstances, £40,000 per annum would scarcely be remunerative for such an undertaking.

This plan was, therefore, abandoned; and, after some others proposed by the Government had been also abandoned, on account of the expense, or being otherwise found impracticable, the Managing Directors submitted a plan and proposal for transmitting the Bombay branch of the India Mail between Southampton and Alexandria, viâ Malta, without causing any additional expense to the public.

This plan was as follows:—They proposed to convey monthly between Southampton and Malta that branch of the India Mails, by means of steam vessels which they had recently placed for commercial traffic, to ply between Southampton, Malta, Constantinople, and ports in the Black Sea; and to provide a steam vessel to convey the Mails between Malta and Alexandria, which should run in concert with these Constantinople steamers, and the East India Company’s steamers conveying the mails between Suez and Bombay. This plan was adopted by the Government; and, after some negotiation, the remuneration for this Mail Service was fixed at £15,535 per annum, or about 4s. 3d. per mile, on an arrangement for twelve months only, as the Company wished to reserve to themselves the option of abandoning it, should it prove seriously unremunerative, or embarrass their commercial traffic. To meet the expense of this Service, it was proposed to the Government to withdraw an Admiralty packet which then formed a monthly communication between Gibraltar and Malta; inasmuch as the steamers of this Company plying to Constantinople, touched regularly both at Gibraltar and Malta, on their passages out and home, and would supply the place of that packet, by which a saving to the public would be effected of from £7,000 to £8,000 per annum. Also, that as, with the two lines of India Mail steamers per month touching at Gibraltar, besides the Peninsular Mail steamers every week, Gibraltar and the south of Spain would have no less than six Mails per month, the Peninsular Mail Service might be reduced to three times a month, or every ten days; for which the Company were willing to make an abatement of £9100 per annum from their contract-money for that Service. These suggestions were adopted, effecting a saving to the public of £16,000 to £17,000 per annum; and, consequently, the monthly conveyance of the Bombay branch of the India Mails between Southampton and Alexandria was, by this arrangement, obtained not only free of any additional expense to the public, but with a financial benefit to it by an increase of the postage revenue.

DISCONTINUANCE OF THE ABOVE ARRANGEMENT.

This arrangement was not remunerative to the Company, inasmuch as the expense of the steam vessel, which, in consequence of it, the Company were obliged to run between Malta and Alexandria, was fully equal to the whole amount of the sum received for the conveyance of the Mails between Southampton and Alexandria, and it also subjected the Company to some additional expenses in carrying on their trade with Constantinople and the Black Sea ports.

The Directors have on former occasions publicly stated that they had, notwithstanding, no intention of breaking up the arrangement, considering it as a link in the chain of extensive postal communication, from which, as a whole, the Company were deriving a large portion of their income.

The Government, however, thought proper to discontinue it, on the alleged grounds of its being unnecessary, and that a saving of expense to the public would be effected thereby. The various memorials from Bombay, praying in urgent terms for its re-establishment, form a sufficient refutation of the first allegation. And the facts—that its discontinuance necessitated the employment, by Government, of an additional packet, to replace this Company’s vessel, which carried the Mails between Malta and Alexandria, at an expense exceeding the whole sum previously paid to the Company—and that the breaking off of an important branch of postal communication could not fail to cause some diminution in the postage revenue—are sufficient to show, that so far from the public being financially benefited by the change, it has been accompanied by a positive loss.

Termination and Renewal of the Contract of 1840, for conveying the India and China Mails between England and Alexandria.

The result of the recent proceedings of the Government, in reference to this Contract, has been of a most satisfactory character, not only as regards the interests of this Company, but the interests of other extensive enterprises employed in the Contract Packet Service.

A summary of these proceedings will be found in the evidence of Mr. T. C. Croker, in his answer to question 1306, wherein he read the following précis of them, furnished by the Admiralty, viz.:—

“On the 6th January, 1848, the Admiralty gave notice to the Peninsular and Oriental Company, for the termination of the contract, at the end of twelve months, on the 18th January, 1849. Their object in so doing was, to ascertain whether the service could not be done at a cheaper rate. There had previously been correspondence on the subject between the Admiralty, the Treasury, and the Post-office; and the Treasury, by a Minute, dated 4th February, and communicated on the 5th, requested the Admiralty to give this notice. On the 27th of March the Admiralty wrote to the Treasury, proposing that an advertisement should be issued, calling for tenders for conveyance of mails to and from Alexandria. On the 5th of April the Treasury approved. The advertisement appeared in the Gazette of the 21st of April. It was for the monthly conveyance of the Calcutta and China Mails and despatches between England and Alexandria, by way of Gibraltar and Malta, leaving England on the 20th of each month. The contract was to commence on the 8th of January, 1849, and to last at least three years. On the 18th of May two tenders were received, one from the Peninsular and Oriental Company, for the following sums: for the first year of contract, £27,500; for the second, £27,000; for the third, £26,500; for the fourth, £26,000; and so on, reducing £500 for each subsequent year that the contract remained in force, with two vessels of 450-horse power, and a reserve vessel of 250-horse power. Another tender was received from the India and Australia Company for £25,650, offering the ‘Minerva,’ of 400-horse power, 627 tons; the ‘Admiral,’ of 400-horse power, 929 tons; and one spare steam vessel, of 250-horse power. The Peninsular and Oriental Company accompanied their tender by a letter, in which, after stating the grounds upon which they considered that the Government ought not to take away the conveyance of the Mails from a Company which had embarked so much capital in the undertaking, and had performed the service satisfactorily, they propose, that if the contract is continued to them they will submit the accounts of all their transactions connected with the mail service, from time to time, to the inspection of such competent persons as the Government may appoint; and that when the financial position of the Company, with respect to such mail service, shall be such as, after making the customary allowance for the repairs, wear and tear, and sea risk of the vessels and property, a maximum dividend of 10 per cent. can be realised, any surplus of earnings over and above such maximum dividend shall be placed at the disposal of the Treasury, for the benefit of the public. On the 19th of May the Admiralty wrote, that, previous to coming to a decision upon the tender, they were anxious to ascertain whether this proposal, if adopted, might be expected to cause any deduction, and, if so, to what extent, from the account that would be paid by the public if their tenders were accepted; they therefore begged to be informed what surplus of profit beyond a dividend of 10 per cent., after deductions for repairs, wear and tear, sea risks of vessels and property, might be expected, from the calculations the Company were able to make; and whether, in case a satisfactory reply could not be given to this question, two officers deputed by the Admiralty might at once have access to the accounts, for information on that point, and previous to a decision being come to on the tenders. This latter alternative was at once adopted by the Directors of the Company, and they opened all their accounts to the inspection of Captain Ellice and Mr. Bond, who made a report on the subject, from which it appeared that the Shareholders had never received a dividend of 10 per cent., and that the balance of receipts, after payment of all expenses and charges, was not then sufficient for a dividend of that amount; the Admiralty having ascertained that no diminution of the tenders was likely to accrue from this proposal, and, considering both tenders too high, declined them both. The Admiralty then made an offer to the Peninsular and Oriental Company, founded on the mileage rate, viz., 4s. 6d. paid to them for the Lisbon and Gibraltar Line. This was not accepted—but after several interviews with the Directors of the Company, it was signified to the Admiralty that they would be willing to undertake the service for £24,000 a year, diminishing annually by £500, until the expiration of the contract, which was not in any case to cease before the 1st of January, 1853. The India and Australia Company also made an offer, which was, however, not admissible, for it required a fourteen years’ contract; it was for a mileage of 5s. 6d. a mile for the first seven years, and at 4s. 6d. a mile for the remaining seven years. They afterwards modified the offer as to the duration of the contract; and the Government, finding that there were competing offers before them, determined upon affording another opportunity for public competition; and on the 2nd of November, 1848, tenders were again sent in, in accordance with a public advertisement, from the same parties. The tender of the Peninsular and Oriental Company was higher than their offer made in pursuance of private negotiation, though the terms were the same. It was for £26,750, with a diminution of £500 after the first four years, in the event of its being continued, and £1,000 additional a year, if the port of embarkation were removed to Plymouth. The India and Australia Company tendered for £18,450, in two vessels of 400-horse power, and one reserve of 150-horse power; the same vessel being mentioned in both tenders, as in the former one. The lowest tender was directed by the Treasury to be accepted, provided they could furnish satisfactory security for the due performance of the service they were to undertake. Much inquiry and negotiation then took place, and the Company were allowed until the sailing of the last packet provided for under the expiring contract, to prove that they had capital sufficient for the undertaking,—but they failed in showing that they possessed sufficient paid-up capital, and they did not actually possess the vessels mentioned in their tender, so that on the 20th December, the Board of Admiralty closed that negotiation, and having obtained the consent of the Peninsular and Oriental Company to renew their former offer of £24,000, recommended it for the sanction of the Treasury, and it was adopted in the existing contract.”

The result of this transaction has, there is every reason to believe, satisfied the Government of the correctness of the opinions which were pressed upon its attention, on behalf of this Company, in the course of the proceedings above detailed, namely:—

1. That fully recognising, as one of the first duties of a Government, the protection of the public interests, by economising the public resources, the mode adopted for doing so, by closing at short periods and re-opening to public tender these large Contracts for the Mail Service, is neither effective for benefiting the public, nor altogether equitable as regards the interests of those private parties who had embarked capital in the formation of the extensive steam navigation enterprises, by means of which these important postal communications were first established.

2. Because experience has amply proved, that capitalists cannot be induced to embark their money in any extensive steam navigation enterprise, intended to compete with one previously established.

3. Because the very act of terminating these Contracts at short periods, and then putting them up to public competition, increases the difficulty of obtaining bonâ fide competitors, inasmuch as no capitalist of ordinary prudence will embark in an enterprise dependent for its success upon its employment in a public service of so uncertain or transient a duration.

4. Because, were it even possible to create a competing Company on so extensive a scale as would be required to perform efficiently the Contract Mail Services alluded to, the two Companies would either, one or both of them, be ruined—or, what is much more probable, for the protection of their mutual interests would coalesce, and thus establish a stronger monopoly than could ever be effected by a single Company.

5. Because it is but just that parties who have embarked so large an amount of capital in the establishment of such enterprises, and who have thereby, as has already been shown, been the means of effecting important public benefits, should have a preference of employment,[5] so long as they perform the public service efficiently, and are willing to do so on terms realising to them no more than a fair commercial profit.

6. That there is no practical difficulty in protecting the public interest, without opening these Contracts to public tender, by either of the following means:—

First, By stipulating for a diminishing scale of payments, on the plan adopted by this Company in their Contract for the Southampton and Alexandria Mail Service. The public, by this plan, derive a benefit from any increase of income which, by the progressive development of their enterprise, the Contractors may obtain from the increase of commercial traffic.

Secondly, By stipulating that, at intervening periods of the Contract, the question of reduction should be submitted to two competent arbitrators, one to be appointed by the Government, who should investigate the Contractor’s transactions, and make an award as to whether any and what reduction ought to be made in the payment for the Mail Services.

The Committee of the House of Commons seem to have recognised the eligibility of the principle of the last mode of proceeding, in the third and concluding resolution of their Report, namely—“They suggest that if it be decided to renew the existing Contracts, the most strict and searching inquiry should be instituted, by some responsible department of the Government, into the cost of the execution, into the manner in which the Service has been performed, and into the profits resulting from the several transactions to the Companies by which they have been respectively carried on.”

This suggestion, it has been shown, was anticipated by the Directors of the Peninsular and Oriental Company, in offering their books and accounts to the inspection of Government.

ABSTRACT
OF
EVIDENCE TAKEN BEFORE THE COMMITTEE.

Efficiency of Performance of the Mail Service.

Extract from Mr. T. C. Croker of the Admiralty’s evidence.

1115. Has the contract been well performed?—I can speak from a knowledge of nine years to the manner in which that contract has been performed, and it has been performed most admirably, and has given general satisfaction; in fact, the only fault which has been found with the manner in which it has been performed is, that it has been done too well.

1116. Will you explain what you mean by being done too well?—The vessels arrived sooner than it was calculated they should have done, which was made matter of public complaint.

1176. At our last meeting we had brought your examination down to the period at which the alteration took place in the arrangements between the Peninsular Company and the Government?—Yes.

1177. The Committee then understood from you that up to that period the contract had been carried on, as far as you were aware, in a satisfactory manner?—Highly so; here are the testimonials of the Admiralty as to the satisfactory manner in which the contract was carried on.

1606. With reference to the Indian part of it, is it within your knowledge how far that contract has been performed?—It has been well performed.

1607. Throughout?—Yes.

No Breaches of Contract committed.

Mr. Croker further examined—

1152. Would not the Admiralty agent on board those packets be cognizant of any breach of contract which had occurred?—Certainly.

1153. Do not they make reports to the Admiralty through the officers conducting the packet service at Southampton?—Certainly.

1154. Would not any breach of contract come immediately to the knowledge of the Admiralty, through the report of the Admiralty agent?—Certainly.

1155. Therefore the absence of any such report is direct proof that the contract has not been broken, provided the Admiralty agent does his duty?—Certainly.

Complaints made to the Admiralty against the Company.

1974. At your last examination you carried down a statement of any complaints, or in the absence of any complaints, to a certain date, with respect to the performance of the contracts of which we were then inquiring, of the vessels of the Oriental Company; have you furnished yourself since with any further particulars upon that subject?—This is a précis of the correspondence respecting complaints of the manner in which the contract mail service in the Indian and China Seas has been performed.

1975. At what date does that précis commence?—The 23rd of August, 1846.

1976. Does that précis come down to the present time?—It does.

1977. Who is responsible for that being a correct statement of what has taken place?—Mr. Worth, the head of the packet department.

1978. Have you sufficiently examined that précis to be able to give to the Committee a statement of the number of complaints which are contained in it?—I should say there were three or four complaints; I have read it through.

1979. Were any of those complaints on examination found to be just?—I think the last complaint is at present undergoing investigation.

1980. What is the date of the last complaint?—October, 1848.

1981. Will you state the general grounds of the complaints; were the complaints of the state of accommodation and the conduct of the officers on board, or of the time that the vessels occupied upon the voyage, whether beyond the limited time or not?—The first complaint states that “Lady Mary Wood” was much out of repair.

1982. What is the date of that?—The 23rd of August, 1846.

1983. From whom is that complaint?—Captain Ellice, the superintendent of the packet service at Southampton.

1984. He is a Government officer?—Yes; the complaint was that in consequence she exceeded the contract time by nineteen hours.

1985. By nineteen hours on the whole voyage, or between England and Suez?—The statement is, that in her last voyage from Hong Kong to Ceylon she exceeded the contract time by nineteen hours.

1986. How is it that the Government agent at Southampton makes a report of the state of a vessel in the Indian Seas; did he transmit a complaint from somebody else?—He transmitted a letter from the Admiralty agent on board.

1987. What was the result of that complaint?—“The contractor was acquainted that the Board of Admiralty had been informed that the ‘Lady Mary Wood’ was getting exceedingly out of repair, and requested to be informed when a vessel, such as is required by the contract, will be substituted for her. The contractors stated in reply that the information furnished to the Admiralty was exaggerated; this vessel had no defects but what could be made good on her return to Hong Kong, defects mostly caused by the severity of the passage from that port to Point de Galle; and they inclosed a copy of the carpenter’s report, and extract of the commander’s letter. They further stated, that (as the Admiralty is, no doubt, aware) in consequence of the recent demand in engineering and shipwright work, the builders have not possibly been able to fulfil their contracts in point of time; and the result is, that of six steam ships of 450-horse power building for them, not one is yet completed, though contracted to be delivered within the last year. They fully expect to be able to despatch one of those vessels in substitution of the ‘Lady Mary Wood,’ in November next, and a second of the same class and power about three months after, in substitution of the ‘Braganza.’”

1988. What is the date of that letter?—The 28th of August.

1989. What is the date of the complaint?—The 23rd of August.

1990. What is the date of the complaint transmitted?—That does not appear from the précis. The Admiralty agent employed on the voyage from Hong Kong to Ceylon writes this complaint, which reaches Captain Ellice about the 23rd August, 1846.

1991. What would be the ordinary length of communication between Ceylon and Southampton?—That is arranged by the contract; as I have had very little to do with the contracts in the Indian Seas, I am not prepared to say.

1992. Is it not about five months?[6]—Yes.

1993. Taking it at five months preceding this date of the complaint, they say that another vessel will be ready by November of the same year?—Yes.

1994. What was the result of the complaint as to the want of punctuality in the time?—The contractors were acquainted, on the 23rd of August, with this complaint, and what I have read is their explanation.

1995. The explanation which you have read is with reference to the non-repair of the vessel, it is not with reference to the time at all. Is there any letter from the Admiralty, either admitting the excuse to be satisfactory or otherwise?—The Admiralty seem to have admitted the excuse, for they minute the letter, acknowledging the receipt of it.

1996. Did the Admiralty officer on board the ship report anything respecting the improper state of the ship before leaving Hong Kong?—He stated that the “Lady Mary Wood” was much out of repair in her last voyage from Hong Kong to Ceylon.

1997. It was after his arrival in Ceylon that he made that report?—Yes.

1998. But he does not appear to have made any statement of that sort previous to the commencement of the voyage from Hong Kong?—There is nothing in the précis to show that he did.

1999. What is the next complaint?—“On the 28th of September of the same year, Captain Ellice sent a copy of a letter from the Admiralty agent on board the ‘Lady Mary Wood,’ reporting that vessel having grounded on a bank of sand or mud off the town of Penang, and reporting the deficiency of night-signals on board her; and he states that the vessel was got off on the following day, in a fit state to proceed with the mails, and, it was supposed, would proceed with the mails to China.”

2000. What is the next complaint?—The next complaint is transmitted by Captain Ellice, who sends a report of the survey on the “Braganza,” held at Hong Kong; he sent this on the 21st of June, 1847.

2001. What is the result of the survey?—“A copy was sent to the contractors, and the contractors stated, in reply, that they had transmitted orders, some time ago, to their agent at Bombay, to have this vessel docked on the first opportunity, and had reason to believe that this had been done. They also stated that their new steamships ‘Pekin,’ of 1,200 tons and 430-horse power, and ‘Pottinger,’ of 1,400 tons and 450-horse power, are now stationed on the line between Point de Galle and China, in performance of the mail contract service.”

2002. What is the next complaint?—“On the 2nd of October, Captain Ellice transmitted an extract of a letter from the Admiralty agent on board the ‘Pekin,’ reporting the unfitness of that vessel for the mail service.” This forms a part of Lieutenant Waghorn’s complaint, and is already before the Committee.

2003. What was the result of that; was the complaint decided to be well-founded or not?—I think not.

2004. Was Lieutenant Waghorn a passenger on board that vessel?—I put in his letter on the last occasion.

2005. Will you proceed to the next complaint?—“On the 2nd of June, 1848, the Postmaster-general transmitted an extract of a letter from the post-office agent at Suez, stating that the ‘Haddington’ was detained at that port, waiting for the arrival of cargo, until one o’clock A.M. on the 11th ultimo, although the mails were put on board at ten minutes past five o’clock on the previous morning; and, further, that some of the packages forming the cargo were of an unnecessarily cumbersome size.”

2006. What was the result of that?—The contractors were called upon to state whether they can account for this delay; and in reply they state that they are not aware of this delay, but will call upon the agent at Suez for explanation; that the mails being transmitted by land from Alexandria to Suez, there is seldom any variation in the time of their transit, whilst the passengers and baggage, at the period of low Nile (May and June), are frequently retarded in getting the steamers round the bends of the river; and they apprehend that the Admiralty must have been misinformed as to the size of the packages, the weight of which are, by their regulation, limited to under 100 lbs., four of such packages forming a camel load for the desert passage.

2007. Is there any thing further upon that complaint, because the Company seem to doubt the fact?—Nothing further appears upon the subject of the complaint.

2008. Is there any subsequent report from the Company?—No subsequent report from the Company appears to have been received.

2009. Is there any subsequent complaint?—“On the 3rd of October, 1848, another complaint is made: The Indian and Australian Mail Steam Packet Company complain that the Peninsular and Oriental Steam Packet Company do not employ steam vessels of the size required by the contract, between Suez and Calcutta, and between Ceylon and Hong Kong, and offer to do the service at less expense.”

2010. What is the result of that?—“They were acquainted that they had omitted to state in what particulars they considered the contract with this Company is now infringed, that the Admiralty were not aware that any requirements of that contract are not now observed, excepting that the ‘Haddington,’ temporarily employed in the place of another vessel, is 442-horse power instead of 500-horse power.”

2011. Have you any other complaint?—There is no other complaint, but there is another communication from the Indian and Australian Steam Packet Company. They “enter into further explanation and remarks, and hope the contract with the Peninsular and Oriental Steam Packet Companies may be forthwith dissolved.” That is marked as “read.”

2012. With reference to the complaint to which your attention was called the last time you were examined, from Admiral Collier, what is the result of that?—I have here a paper endorsed, “Complaint of irregularities in the performance of the East India and China contract, in the case of the ‘Achilles.’”

2013. Is that the complaint referred to by Admiral Collier?—It is.

2014. Was there a letter or memorial of the merchants of Hong Kong transmitted by Admiral Collier to the Admiralty?—There was.

2015. What was the subject of that memorial or letter?—The merchants represented to Sir Francis Collier the serious inconvenience which they, “and, in particular, the Canton community, have suffered, and continue to suffer, by the frequent late arrival of the steamers conveying her Majesty’s mails. The delay seems to have arisen from the steamers being generally unable to keep the time contracted for by the Admiralty, for the performance of the several distances, as will be seen, we believe, by the reports sent home by the Admiralty agents, appointed to the several steamers. The time slowed is very ample, rendering it seldom necessary to exceed a speed of eight miles per hour; and had the steamers been the superior class of vessels contracted for by the Admiralty, and ‘keeping pace with the advanced state of science,’ no difficulty in performing the passages within the specified time ought ever to be experienced. An improvement has lately taken place in the class of boats, by the arrival of other steamers; but the system adopted, and particularly, of late, of overloading them, and to such an extent as to render it necessary to carry a large quantity of coal on deck, tends to perpetrate the evil, and to create even greater detention than before, while it greatly endangers the lives of her Majesty’s subjects, and the safety of her Majesty’s mails. It is our opinion, that on several occasions it may solely be attributed to unforeseen and fortunate circumstances that the steamers have been enabled to reach their destination. Considering the large sum given by her Majesty’s Government for the purpose of carrying the mails, and also that thereby the Peninsular and Oriental Company are enabled to have a monopoly of the traffic on this side of Egypt, we think the mercantile community have reason to expect that, at all events, the contract shall be faithfully adhered to, and that the steamers shall not be allowed to carry beyond a certain and safe amount of cargo;” and they request Sir Francis Collier to call the attention of the Lords of the Admiralty to the subject.

2016. Was that transmitted by Admiral Collier?—It was transmitted to the Admiralty by Admiral Collier.

2017. What was Sir Francis Collier’s remark or observation when he transmitted that memorial?—Sir Francis Collier’s letter does not appear to be in this correspondence, but I presume it can be produced.

2018. What was done in consequence of the transmission of that memorial?—“A letter appears to have been written on the 11th of April, 1849, by the Secretary of the Admiralty to the Peninsular and Oriental Steam Navigation Company, enclosing a copy of the memorial which had been received from Sir Francis Collier, and the Company were acquainted that the Board of Admiralty trusted that they had already taken steps to prevent the recurrence of the delays complained of.”

2019. Will you read any previous letter on the same subject which was laid before the Admiralty by the Peninsular and Oriental Steam Packet Company?—“Admiralty, 6th March, 1849.” (This is from the Secretary of the Admiralty to the Peninsular and Oriental Steam Packet Company.) “Gentlemen, it having been represented to my Lords Commissioners of the Admiralty that the contract steam packet, ‘Achilles,’ was delayed in her voyage from Point de Galle to Hong Kong, in November last, she having sailed from the former place on the 29th of that month, and not arriving at Hong Kong until the 23rd of December; thus being 175 hours beyond the time allowed by the contract; I am commanded by my Lords Commissioners of the Admiralty to call your attention to the circumstance, and to acquaint you that it appears that the place intended for coals on board the ‘Achilles’ was occupied by opium chests, and the coals placed on deck, and the vessel overloaded; and that my Lords are informed that her arrival at Hong Kong, 175 hours after she was due, was owing to the excess of cargo, and to the negligent and lazy manner in which the vessel was coaled at Singapore.”

2020. What was the result of that letter?—The secretary of the Company answered it on the 10th of March, 1849—“I have the honour to acknowledge the receipt of your letter, dated 6th instant, calling the attention of the Directors of the Company to a representation which has been made to the Lords Commissioners of the Admiralty, that the Company’s contract steamer, ‘Achilles,’ was considerably delayed upon her voyage from Point de Galle to Hong Kong, in November last, and that such delay was owing to the excess of cargo, and to negligence in the coaling at Singapore. In reply, I am instructed to express the great regret with which the Directors have received this communication, and to acquaint you, for the information of their Lordships, that a rumour having already reached them that some representations of the kind had been addressed to their Lordships, the Directors, by the mail of the 24th of February, wrote to the Company’s superintendent at Bombay, calling upon him for full and immediate explanation of the circumstances. Until the receipt of his report it will be impossible for the Directors to say how far the allegations in question are well founded; but, in the meantime, they are anxious to state that their standing instructions to all the agents and officers of the Company are, that the punctual performance of the mail service is to be ever regarded by them as paramount to every other consideration, and that any departure from that principle will be visited by the Directors with the utmost severity. The Directors take this opportunity of acquainting you, for the information of their Lordships, that having found by experience that no commercial house, however high its respectability, can represent the Company so efficiently at foreign stations as an officer of their own, they, by the last steamer, despatched Captain Sparkes, lately the Company’s superintendent at Southampton, to relieve the firm at present acting as the Company’s agents at Singapore, in the superintendence of the Company’s affairs at that port, and they feel every confidence that he will actively and zealously discharge his duties at that station. The Directors also think it right to state, that from such information as they are at present in possession of, they have reason to consider that the representation which has been made to their Lordships is exaggerated, both as regards the extent of the delay of the ‘Achilles,’ and the alleged causes thereof.”

2021. This letter is of the date of the 10th of March, 1849; what is the date of the memorial of the merchants of Canton?—The 29th of December, 1848.

2022. Was there any corresponding complaint or representation from the Admiralty officer on board the vessel to the Lords of the Admiralty?—I cannot state.

2023. Was not the first letter which you read in consequence of the official representations made to the Admiralty, through their officer, as to the delay of the “Achilles,” previous to the reception of the memorial from Hong Kong?—I have no doubt it was.

2024. The Company say, in the letter of the 10th of March, that they can give no answer to the complaint made of misfeasance in the contract between Ceylon and China, til they shall receive a report from their agent at Bombay?—They state that they wrote to their superintendent at Bombay, calling upon him for an immediate explanation of the circumstances.

2025. Do you know that the service is now performed from Ceylon to China by a vessel that starts from Bombay, and picks up the mail there?—I believe it is so.

2026. What was the result of those communications; did the Admiralty come to any decision upon them?—On the 12th of March, the Admiralty acquainted the Company that they “were gratified to learn that they had despatched an officer of their own to act as superintendent at Singapore, and who may be able to prevent the recurrence of the delay complained of.”

2027. Nothing was done by the Admiralty but to express their satisfaction that the Company had sent out an agent to Singapore, as an answer to that complaint of the Company overloading their vessels, and being out of time?—The Admiralty subsequently sent forward the letter I have read from the merchants, stating, “that their Lordships trust you have already taken steps to prevent the recurrence of the delays complained of.” The Admiralty appear to have done nothing more; the matter is still in the course of investigation; it is not yet closed; the explanation has not yet been received from the Company.[7]

2028. Have you any other complaints?—No.

Charge of corrupt Jobbing, and Favouritism by the Admiralty towards the Peninsular and Oriental Company.

Examination of Mr. Andrew Henderson—

2138. Am I to understand that you make two complaints: first, that there was no opportunity for tendering; and, secondly, that the price was too high?—Yes.

2139. Were you during the period, from the beginning, in 1844, to the time at which the contract was finally signed, in constant communication with the Admiralty?—I used to go to the Contract Packet Office, which was the only place I could go to; I could get no answer to my letter.

2140. Did it come before the Board?—It appears not; Mr. Sidney Herbert told me that he had never heard of it.

2141. On the 8th of August Mr. Sidney Herbert told you it was open to you to send in any contract that you wished?—Yes.

2142. Did you send in a contract, offering to do the service with efficient vessels for £60,000?—No; I gave this proof that it could be done; but I made no tender for it, because I had no vessel for it.

2143. Your opinion was, that £60,000 was an adequate price, and that the public in general, and you in particular, ought to have an opportunity of making a tender; did you tender to do the service at that price?—In reply to that question I may state, that early in December the representative of the “Precursor,” Sir George Larpent, and myself, waited upon the President of the Board of Control, and asked him to take care that our interests should be considered, and we received an assurance that they should be considered; and in the scheme for the mails it is particularly stated that those two vessels were ready, and it was suggested that they should take alternately the mails with the other two vessels.

2144. I ask you whether you did or did not offer to do the service for £60,000?—I can hardly say whether you can call it an offer, but I submitted a scheme by which it was shown that it could be done for £60,000; contracts were not advertised for, and therefore we were not in a position to send in contracts.

2145. You placed in the hands of Mr. Crofton Croker a lithographic statement, from which you considered the inference might be drawn that £60,000 would be sufficient for that service?—Yes.

2146. Was that statement anonymous, or was it guaranteed by any name?—It was guaranteed by my own name; and the same thing was stated in the plan submitted to Government; and that plan has, every bit of it, been carried out since.

2147. My only object is to come to an accurate understanding of the facts; I understand your grievance to be, that the more expensive tender, from the Peninsular and Oriental Steam Packet Company, was accepted by the Admiralty, when a cheaper contract might have been had from other parties, and that, in your judgment, £60,000 a year would have been ample for that service; is that so?—My complaint is, that the proposal of the Peninsular and Oriental Steam Packet Company to undertake the Bombay mails was not accepted, but that they were allowed to adopt all my plans, and I was refused all participation in it. It could not be called a contract, it was not the time for a contract; contracts were never asked for; but there was clear evidence given that, if we were allowed to take it, it could be done for £60,000.

2148. You complain that an unfair advantage was allowed to be taken of you, by the Peninsular and Oriental Steam Packet Company?—Certainly; I complain that they were allowed to take advantage of my plans and to adopt them, and that I was not allowed to compete for the contract.

2149. In your plan, you said it could be done for £60,000?—Yes.

2150. Your general plan has been adopted by the Peninsular and Oriental Steam Packet Company?—Yes; my plan was distinctly opposed to theirs. Their plan was this: the vessels which were bound to go every month to Bengal, they purposed that those vessels should go to Bombay, and that once in every two months those vessels should go to Calcutta. That was, in point of fact, reducing the present communication, from a separate mail to Bombay and Calcutta, to one mail to Bombay.

2151. Your complaint was, that you were excluded from the opportunity of competing for the contract?—Yes; and that my plans were adopted.

2152. You have put it on record, that on the 6th of August the Chancellor of the Exchequer stated to you, that he had given no authority for the conclusion of the contract?—Yes, he said that he had nothing to do with it.

2153. On the 8th of August, two days afterwards, you have put it on record that the Secretary to the Admiralty told you that it was quite open to you to send in any tender you pleased?—Yes.

2154. And it was therefore open to the public in general, and to you in particular, to put in a tender thereupon?—I sent in a distinct tender for the China mail.

2155. But we were speaking of the service for which you say £60,000 was ample; viz. the Suez and Calcutta service. Confining yourself at present to that, you were told by the Chancellor of the Exchequer, on the 6th of August, that the contract was not concluded, and you were told by the Secretary of the Admiralty, on the 8th of August, that it was open to you, in particular, to send in any tender for the conveyance of the mail from Suez to Calcutta?—I was engaged in the other one at the time.

2156. Then is there any grievance at all as regards your being deprived of the mail from Suez to Calcutta?—Certainly, a very great grievance.

2157. Be as good as to explain what that grievance is?—The grievance is, that the “India” and the “Precursor” were not allowed to participate in the advantage.

2158. Then, whether the sum paid for the service was £60,000 or £170,000, your grievance is, that the “India” and the “Precursor” did not come in for a share of it?—That is one point; but, on public grounds, I maintain that the sum given was a great deal too large, and that that sum was not given to merchants and shipowners in India, but to a London company.

2159. To whomever it was given, £60,000 would have been the sum for which shipowners would have been ready to do the service?—Yes.

2160. You had a knowledge of the fact, at the time the tender was open to you, that it could be done for £60,000?—I had not money enough to do it.

2161. Were you not in communication with all the principal shipowners who signed the petition?—Yes.

2162. Did you get up the petition which was presented on the 8th of August?—I did.

2163. Are those parties whose names were signed to it parties who had capital to compete for a good contract, if it was to be had?—Certainly.

2164. Did they, or any of them, send in a tender to the Board of Admiralty to do this service for £60,000?—No; they stated their belief that it was of no use to send in a tender, as it would not be attended to; that the contract would be sure to be given to the Peninsular and Oriental Company, whatever they chose to ask.

2165. Did you tell Mr. Green, and all the other parties who signed the petition, that Mr. Sidney Herbert had told you that it was open to you to send in a tender?—My impression is that it was known to them, but Mr. Green said, “No, let them alone; they are too strong for us.”

2166. Then it was known to Mr. Green, and all the other parties who petitioned, that they had an opportunity to make a tender?—The expression they used was, that it was taken out of their hands, and that it was of no use their doing it; but I do not know that I saw Mr. Green after that time.

2167. Do you mean to represent that the principal shipowners having information that the Secretary of the Admiralty had stated that the contract was open, were nevertheless of opinion, that if they offered to do the service for £60,000, the Board of Admiralty would still give the contract to a party who required a much larger sum?—I hardly know how to answer that question. I cannot say that I saw Mr. Green after the petition, but his impression was that it was of no use to compete with that powerful Company.

2168. Do you mean to represent to the Committee your opinion that while the Board of Admiralty told you that you might compete if you pleased, they had in point of fact made up their minds to give the contract to the Peninsular and Oriental Steam Packet Company at a much higher price?—That was our firm belief, that they had made up their minds to give it to them. This I know as a fact, that when the matter was handed over from the East India Company, and the East India Company had nothing to do with it, the Peninsular and Oriental Company asked £170,000, and they had it all their own way; but the East India Company said that they would not pay more than a certain amount annually; they were to pay a certain proportion, but they said, “We will do nothing of the kind; you may do as you like: we will have nothing to do with it beyond paying a certain amount.”

2169. Did it occur to you that if so scandalous a spirit of jobbing as you describe had actuated the Board of Admiralty, you might have put them completely in the wrong by offering a contract from parties competent to perform the service for £60,000, which you laid down as the proper sum?—I can answer the question in this way: it is all very well to say, “Why did you not send in a contract?” but it is a contract that required a large capital and great arrangements. It is impossible to make all those great arrangements in two days; the Peninsular Company, by obtaining under false pretences £20,000 for the Calcutta mail, had put all other parties out; and if you say, “Will you make a contract in a couple of days now for £60,000?” it is impossible; it requires a large fleet and great capital. Mr. Green has a large fleet, but they are employed in other parts; and his expression was, “It is of no use competing with the Peninsular Company, for they are too powerful for us; their influence is so great.”

2170. You mean to represent that all the shipowners in London acquiesced in the opinion that public money to a large amount was going to be given from favouritism to the Peninsular and Oriental Steam Packet Company; but that it was of no use, on account of the secret influence which the Peninsular and Oriental Steam Packet Company had got at the Admiralty, to contend with them?—That was my own individual belief, and the petitioners, I think, agreed in that.

2171. Did you lend a large share in the drawing up of this petition?—I did.

2172. Is it your composition?—I do not know that it is.

2173. In the petition you object not to one contract in particular, but to the system of contracts altogether?—We object not to the whole system of contracts, but to the system under which it has been carried on; in the first place, there are put into the contracts conditions which are never acted upon; that I consider extremely wrong; it keeps all honest men away.

2174. The stringent conditions put into the contracts keep all honest men away?—That is going too far; I mean to say that you are asked to agree to very strict conditions, which a man cannot honestly say, “I agree to.” If the condition says that if I am half an hour behind time I shall forfeit £500, a man naturally asks himself, “Shall I enter into the contract? for if those clauses are inserted, I am a ruined man, and therefore I cannot guarantee that.”

2175. If you and your friends had tendered this service for £60,000, you would have required more reasonable conditions?—I should have no objection to being bound to all reasonable conditions. The late contract for the mail to the Brazils is as it ought to be; there is no kind of trap of so many hours; the condition is simply this, the ships are to be efficient vessels.

2176. No honest man, in your opinion, would have undertaken such a contract as that which the Peninsular and Oriental Company undertook, for £60,000?—What I mean is this, that no honest man would undertake a thing which he was not competent to perform; for instance, he would not undertake that the passage shall be a certain number of hours; and putting in those strict conditions would prevent an honest man from taking part in it.

2177. I understood you to say, that no honest man would undertake, and therefore I presume you would not have recommended anybody to undertake, so strict a condition as that of which we are speaking?—I am afraid you are putting a wrong construction upon what I said; I say, no honest man would undertake a condition which he could not honestly say he could perform. If I bound myself to go in a certain number of hours between certain points, an honest man would say, if that was a great speed, “I cannot bind myself to accomplish that.”

2178. That would prevent an honest man from complying with the conditions imposed upon the Peninsular and Oriental Steam Packet Company?—That is putting it in the other way; I am certain that I would have taken the contract, because I know that Government would not exact the penalty.

2179. You would have taken it, though an honest man would not have taken it?—I am afraid you are misinterpreting me; you use the words “honest man” in a different sense from that in which I use them. I mean to say that an honest man could not honestly undertake to do a thing which was almost impracticable; but, as I know the Government would not have exacted the penalty, I would have taken the contract if I had had an opportunity; but I had no opportunity.

2180. You would have taken the contract?—Yes, anybody would take the contract for £170,000 a year; nobody would have refused it.

2181. You were under the impression that the Peninsular and Oriental Company were so strong that nobody could compete with them?—Yes, and that is the impression now.

2182. That was your impression at the time you lent your aid to the drawing up of that petition?—Yes, it was.

2183. It was the impression, you believe, of the parties who signed the petition?—Yes.

2184. Is that, in point of fact, one of the allegations of the petition?—I do not know.

2185. Are not the allegations of the petition totally of a different effect; are they not against contracts in general?—Certainly not against contracts in general; they are against contracts being given without fair competition; they are not against contracts generally, for contracts must be had somehow, but they should be fair and open.

2186. The prayer of the petition is “that public money granted for the purposes of steam navigation shall be applied, not for the exclusive advantage of any companies or individuals, but so that all engaged in shipping may fairly participate therein, or equally compete; therefore affording to your petitioners the opportunity of showing to your Honourable House the truth (if doubted) as to facts and principles of all the statements of this their humble petition.” If you were under the impression that the Admiralty were actuated by so corrupt a spirit that it was not of any use for solvent parties to send in tenders, will you explain to the Committee why it was that you left that out, as one of the allegations of the petition which you drew up at the time?—I do not understand the question.

2187. Your grievance was, that you were shut out from fair competition by a corrupt predetermination at the Admiralty to exclude you, and to give the contract, at all hazards, to the other Company?—In answer to that, I state the fact that I was not allowed to compete with them in any way.

2188. You have told me that you did not send in a tender to the Admiralty, and that you prepared a petition which you presented to Parliament; that petition contains no allegation of such a corrupt predetermination on the part of the Admiralty; having, therefore, such a feeling in your mind at the time, you neither put it to the test by sending in a tender to the Admiralty, nor did you venture to state that in the petition to the House of Commons?—The petition will speak for itself; it is there.

2189. There is no such allegation in the petition. What information has come to your knowledge, since you petitioned Parliament, which justifies you now in making such an improbable statement here, viz., that there was that corrupt predetermination at the Board of Admiralty?—I did not use the word “corrupt.”

2190. Have you learnt anything since you presented the petition, which justifies you in making a charge now, which you would not have been equally justified in making then: it appears that the petition presented on the 8th August, 1844, contains no such charge of favouritism against the Board of Admiralty; what information have you received since that time, which you think justifies you in making the charge now?—I think it is self*-evident that there most have been favouritism, or the public would have been admitted, and also from the way in which the contract has been carried out. The Peninsular Company have several times broken their contract, and no penalties have been exacted. There was one distinct case of favouritism, which was this: one of the reasons assigned to me why the China contract was given to them was, that the Peninsular and Oriental Company had offered to do it with vessels of 400-horse power for £45,000 a year; apparently at the same price as our tender. but ours was to be reduced the third year, and theirs was to continue at the same rate; but their condition was, that they were to find vessels, from the 1st July, 1846, of 400-horse power, and they failed to do so; and in consequence of their not providing those vessels, the vessels were overworked, and the mails were delayed; but yet the penalty has not been exacted, and that arises from favouritism.

2191. Is your impression that it is one part of the duty of the Admiralty to take care that the parties tendering are in the possession of efficient vessels, and are men of sufficient property and respectability to afford a security that the contract will be performed?—My opinion is, that a contract of that kind is a matter which ought not to be left to the Admiralty; it is a matter more concerning the Board of Trade than the Admiralty; and it is all a mistake for one department of the Board of Admiralty to have the management of it.

2192. Be so good as to inform me whether you think the Government, in making a contract, are bound to foresee, as far as may be possible, whether the parties will really be able to fulfil it. You have stated that the Peninsular and Oriental Company have repeatedly broken or not performed their contract. Do the Committee understand you to mean that it is one part of the duty of Government to take precautions beforehand, that the parties who make a contract shall be capable to perform the contract?—It is their duty, but I believe in that instance they neglected it.

2193. Do you think that if they had selected the owners of the steamer “India,” they would have selected people more competent to perform the contract?—To perform the China line; and I may state as the reason, that we gave them a distinct account of the number of ships at work there; the expense of the ships, and also a description of the seas; and the very letter which I wrote to them, as to the necessity of having a peculiar kind of vessel for the China seas, has turned out perfectly true; and the protest, of which we heard at the last meeting of the Committee, was in consequence of that. The letter sent in to the Admiralty stated that the Calcutta Company were in a better position to do that local service than the Peninsular and Oriental Company, who have so many interests to look after.

2194. The reason you did not compete with the Peninsular and Oriental Company between Suez and Calcutta, was the impression that you had that there was a determination at the Board of Admiralty to favour them. Did you make any attempt to compete with them between Ceylon and Hong Kong?—As to Suez and Calcutta contract, it is like asking a man who has his hands tied behind his back, to swim; as to Ceylon and Hong Kong contract, the answer is plain enough on record, that we sent a tender and got no answer.

2195. Am I right in understanding you to say, that you abstained from competing with regard to the service between Suez and Calcutta, because you thought the Peninsular and Oriental Company too strong for you?—That was one reason expressed by many persons; but if you ask my reason for not competing, it was this: when I proposed to tender, the “Precursor” party were in possession of the “Precursor,” but in the interim the Peninsular and Oriental Company very advantageously obtained possession of the “Precursor,” and we had no large vessels, and it was of no use tendering without them.

2196. The reasons for not tendering for the contract between Suez and Calcutta were two-fold; first, because there was favouritism at the Admiralty, and secondly, you had not the means of making the tender?—If the tenders were reasonable, I ought to have had the means, because we ought to have been allowed to build vessels; when they had bought the “Precursor,” we were not in so good a position as we had been in before.

2197. If it was an object with the Government to make the contract immediately, you would not be in a condition to make a tender?—There was no necessity for a new contract; there was no necessity for any change then, but it was got up by the Peninsular and Oriental Company, by political agitation.

2198. I understand you to say, that if there was to be a contract immediately, you were not in a condition to tender for it, as far as regards Suez and Calcutta?—I was in a position to tender for it, if reasonable tenders had been allowed.

2199. By reasonable tenders you mean that the Government, instead of taking for the service ships that were then ready to do it, should have waited eighteen months, in order that you might be put in the same position?—There was no necessity to wait, as the ships were bound to carry the mails, whether there was a new contract or not.

2200. Your opinion is, that there was no necessity for a new contract?—No, not for five years.

2201. In your opinion there ought to have been no contract at all?—Not for the Bengal and Suez line, for five years.

2202. What ships were bound to carry the mails?—The three ships which were bound to do the service were bound to maintain a monthly communication.

2203. By what engagement?—By an engagement with the East India Company they were bound to make a monthly communication for £20,000 a year.

2204. Was there any such arrangement with the East India Company?—Yes. I had ascertained that there was that arrangement by correspondence, which is the usual way with great companies.

2205. Did you ever read the correspondence which passed?—No; I know that certain deputations went; when I came home from India, I found among the papers of the East Indian Steam Company a document proving the terms upon which they were to undertake it.

2206. Was it not an offer of the East India Company to give £20,000 a year upon certain conditions?—Certainly not; there was no offer of the East India Company.

2207. Your impression of the correspondence that you saw was, that it was a distinct engagement on the part of the East India Company to give that sum, and a distinct engagement on the part of the Peninsular and Oriental Steam Packet Company, at all hazards, to perform the service?—Yes; but I should go farther than that, in explanation.

2208. Your impression is, that it was an engagement binding upon both parties; that the East India Company were bound to pay that sum, and that the other parties were bound to perform the service, whether they liked it or not?—My answer to that is, that this £20,000 a year originated in an amalgamation, or at least a pretended amalgamation, between the East Indian Steam Company and the Peninsular and Oriental Steam Packet Company, in 1841. But inasmuch as on 14th October, 1839, the East India Company had replied to the East Indian Steam Company in London, and again in Calcutta, on the 27th of May, 1840, to the inhabitants of Calcutta generally, “that to any well-devised measures, by which the established means of communication might be extended, the Court would be ready to afford due encouragement; but in the present state of circumstances they are unwilling now to enter into any arrangement affecting the measures in progress regarding the communication between Suez and Bombay;” that letter and publication was considered as an engagement on the part of the East India Company to support the extension of a line between Calcutta and Suez. The consequence of that was, that the “Precursor” built for, and the “India” was employed upon that line, under the supposition that they would, when they had adopted this measure, be remunerated. A junction was proposed between the small section of the London shareholders of the East Indian Steam Company and the Peninsular and Oriental Company; and what I say is, that they communicated, either by deputation or by letter, with the East India Company, and proposed that they should give them a grant of £20,000 a year, holding forth that the three parties were to be united. This was a long time in abeyance, but some time in July, as it appears to me, the proposal of the Peninsular and Oriental Company was accepted by the East India Company; but at the time it was accepted, it was accepted upon the recorded opinion that the interests of the “India” and the “Precursor” party were likely to be amalgamated with those of the Peninsular and Oriental Company who had made the offer, and that upon certain terms which are there stated; they were granted the 20,000 a year provided they made four voyages the first year, six voyages the second year, and maintained a monthly communication the third, fourth, and fifth year, with vessels of 500-horse power, between Calcutta and Suez.

2209. Am I to understand you to state that the proposal or contract to which you referred the other day, that the steamers should be 500-horse power, originated with the East India Company?—No, it originated with the Peninsular and Oriental Steam Packet Company.

2210. Then that excluded the “India?”—Yes; the conditions are already in evidence, in answer to question 1819.

2211. What was the date of that condition which required vessels of 1,600 tons and 500-horse power?—It was a proposal made originally by the Peninsular and Oriental Company, early in the year. I believe it was accepted about the middle of July, 1841; but I was not in this country at the time.

2212. From that time to the present, the “India” was excluded from the benefit of the arrangement?—She was excluded in this way——

2213. Was she of the requisite horse power?—I was going to state how it was proved that she was not.

2214. That arrangement was made in the year 1841?—Yes; the arrangement was made by the Court of Directors in July 1841.

2215. Then the “India” was from that time excluded from the benefit of the arrangement?—Under the clause requiring 500-horse power, the “India” was excluded; but the Peninsular and Oriental Company proposed to purchase her, and after a good deal of squabbling they offered us £23,000——

2216. We do not want to go into that matter; but I understood you to say that by the original conditions imposed by the East India Company, in 1841, the steamer “India” was excluded from the benefit of the arrangement?—She was excluded, but the Peninsular and Oriental Company asked them to accept her.

2217. In your former examination, in answer to question 1835, you stated, “The 500-horse power was put in purposely to exclude all but the Peninsular Company’s vessels.” Will you state upon what grounds you attribute to the Admiralty, in 1844, a condition which appears to have been in force against you, by the orders of the East India Company, as early as 1841?—I had intended to commence the examination by referring to my statement with respect to that very case. It is so put here that I really cannot understand it myself, and I must request to be allowed to make the explanation of horse power; if you will allow me to make the explanation of what I mean by horse power, I shall be able to make my answers intelligible.

2218. Are you a person of experience in nautical matters?—I profess to know all that a man who has devoted his life to the subject can know of the building and working of ships.

2219. And not only sailing ships, but steam vessels?—Yes.

2220. Are there two meanings to the term “horse power!”—No; “horse power” has no meaning at all; if you will allow me to give an explanation I can state what it is.

2221. Before you give your explanation, allow me to ask this question, whether you mean to say that the term “horse power” has no meaning?—It has no meaning as to the capacity of ships for carrying the mails; that I assert.

2222. Then when the East India Company, in 1841, put in a clause that no vessel employed in carrying the mails should be less than 500-horse power, they put in a clause which had no meaning at all?—The East India Company never put in the clause at all; it was put in by the Peninsular and Oriental Company, with the very object of excluding us.

2223. Whoever put it in, it had no meaning?—No, it has not, to my knowledge.

2224. Then, having no meaning, it had no operation or effect?—It had the effect of excluding any other vessels but their own, so long as it was allowed to remain.

2225. How did it have that effect?—The Peninsular and Oriental Company having vessels of 500-horse power, which no others had got, they of course obtained the contract.

2226. You came here, on the previous day, charging the Admiralty with having, in 1844, made a certain condition for the purpose of excluding you, and you have now stated that that condition was in force under the arrangement made by the East India Company as early as 1841. Will you have the goodness to explain to the Committee how it is that you attribute that to the Admiralty in 1844, which appears to have originated with the East India Company in 1841?—I was mistaken if I said it originated with the East India Company; it originated with the Peninsular and Oriental Steam Packet Company. The horse power of a vessel gives no means of knowing what the efficiency of the vessel is. There is a good deal of the evidence of the former day which is of no use, unless you allow me to explain what horse power is. Those answers, as they stand, I cannot understand myself.

2227. Do you mean to say, that unless you are to be allowed to show that the ordinary words “horse power,” when introduced into a contract, render that contract unintelligible, you cannot explain your case?—I never said that. May I be allowed to state what I do mean; it takes a little time and a little trouble to explain the meaning of “horse power.” The putting in the “horse power” had no reference to the efficiency of the steam vessels.

2228. Whatever the horse power meant in 1841, it meant in 1844?—Yes; but you are mistaken in supposing that I attribute it to the East India Company putting in that condition; I attributed it to the Peninsular and Oriental Company.

2229. We have here a contract made in 1844, by the Admiralty on one side, and the Peninsular and Oriental Company on the other; and you charge the Admiralty with having introduced a certain condition for the purpose of excluding you, and of favouring the Peninsular and Oriental Company?—No; I said that the Peninsular and Oriental Company introduced the condition as to the 400-horse power.

2230. How did they introduce it?—Because they proposed it.

2231. Do you find fault with a competitor for having proposed vessels of a higher horse power than yourself?—I do; because they did it to keep all other Companies out.

2232. What would you have had the Admiralty do?—I would have had the Admiralty go and ascertain what the vessels were, and not go upon the nominal horse power.

2233. You complain of the Admiralty going upon the individual horse power?—-I do; it is a wrong system.

2234. Why do you complain of the Admiralty having done that in 1844, which we find was part of the existing arrangement between the East India Company and the Peninsular and Oriental Company in 1841?—The question of horse power began with the Peninsular and Oriental Company in 1840.

2235. And I to understand from you, that in your opinion the Admiralty should have laid down no general condition about horse power, but should have inquired into the capabilities of each particular ship; is that your view?—Certainly, that is one view; But as you said, just now, I had stated that the Peninsular and Oriental Company had originated that condition about horse power; that is the hinge upon which all the mischief has turned; and I will now, if I may be allowed, explain how it occurred.

2236. The hinge upon which all the mischief has turned, has been that condition about horse power?—Yes.