The secretary in his reply, gave away the whole case of the government. He admitted that for himself he had never concealed his opinion that the arrangement proposed by the Canadian government would have been a desirable one, but insisted that he had not used Palmerston's name beyond that. He had ascertained Palmerston's views as to the importance of meeting the wishes of Canada, sufficiently to warrant him, not in concluding negotiations, but in advancing them to the point where a definite proposal might be made to the government. The ground on which the treasury based refusal of assent to the agreement made between the Lever Company and the Canadian government, was that the contract contemplated the grant of L78,000 a year for a fortnightly service from Galway, in addition to the other ocean services which were then in operation, while the transfer of the Lever contract to the Allan's would have the effect of merely substituting one contract for another, leaving the service just where it stood before--with an additional charge of L78,000 a year against the government. There was another consideration and an extraordinary one. The government had suffered severe condemnation at the hands of the committee of the house of commons for their disregard of the pledge given, that, before a contract was awarded it would be put up for public competition. Their action in awarding the contract to the Lever Company without tender was an undeniable injury to the interests of Canada, and now this censure was made the cover for another blow at those same interests. The secretary of the treasury observed that the pledge formerly given and unfortunately overlooked had acquired much notoriety and must in any contingency afterwards arising be treated with rigour. "If the Galway contract be considered binding," he concluded, "the government cannot be accused of breaking this pledge as long as they simply continue to pay the subsidy for the same services and to the same parties." But the case became different if they sanctioned a new arrangement involving material modifications, particularly when the arrangement transferred the contract to a party of undoubted, from one of questioned, solvency. Smith next addressed Palmerston, and his letter shows clearly the incomprehensible and provoking course pursued by that statesman. At every step in the negotiations the treasury was consulted, and its approval gained. The solicitor of the Galway Company was also in frequent communication with the treasury, and he actually altered the form of the deed of transfer upon the suggestion of the secretary.