E.—3

8

My complaint has throughout been that you have not used the boats you agreed to use, or others of the same class, for the through voyage. Had the " Dakota " and the " Santiago de Cuba" been put into order immediately after tho signing of the contract, the result as to the reputation of the line would have been far more satisfactory,-and I believe that you, as contractors, would have been much better paid. A prolonged correspondency on the subject would be fruitless. lam glad to think that you intend at once to put the service upon a proper footing. I cannot agree with several of the statements made as to the causes of the steamers being delayed ; but a correspondence about them would be useless. I would suggest that you should so instruct and empower your agents in the Colony that they may be able to make such representations on the subject at the proper time as they may consider desirable ; for, as you are aware, the contract provides that once a year there shall be an adjustment of accounts between tho Government and the contractors. As to the " Nevada," the apparent damage to her shaft was sufficiently brought under the notice of the Government to compel some action ; and the action taken was that which the Government considered necessary and right. Now that the vessel has proceeded on to San Francisco, I hope that you will exercise the most careful judgment as to whether it is desirable to fit her with a new shaft. lam quite willing to assure you that I have confidence in your desire to make and to keep your vessel efficient, and that I recognize the difficulties with which you have to contend, owing to the insufficient number of vessels you have hitherto had at your command. I have, &c, W. H. Webb, Esq., and Ben Holladay, Esq., San Francisco. Julius Vogel.

No. 7. Mr W. H. Webb to the Hon. J. Vogel. Sic, — San Francisco, 10th September, 1872. I have the honor to acknowledge both your communications dated Wellington, 6th July, 1872, and take due notice of the same. I beg now to reply to the one which more particularly refers to the contract made with yourself and the Postmaster-General of Victoria jointly. It appears that at the date of your writing you were without official information as to the course the Victorian Government intended to adopt respecting the contract, but you had reason to think it very doubtful whether the contract would be ratified by that Government. Official information reached mo here on the 4th instant, by telegraph, to the effect that the " Legislative Assembly of Victoria decline, by a largo majority, to ratify provisional postal contract;" —the first and only official communication received from that Government on the subject since we executed the contract in Melbourne, 13 th March last, and only at about the date when, according to the terms of the contract, the new service was to be commenced. However, this telegram enables me to write advisedly in reply to your letter. You further say, that in event of the Victorian Government declining, as you anticipated it would, to ratify the contract, it would become necessary for me to decide what course I would adopt. Governed by the reliable information that reached me from other than official sources, I arrived, though reluctantly, to the same conclusion as yourself, and after waiting fully the proper time in which it was absolutely necessary I should have had official notice respecting the decision of the Victorian Government, I proceeded to act on the assumption that the contract would not be ratified, and, therefore, elected to proceed under the original contract made with the New Zealand Government on the 7th March, 1871, and am now proceeding in accordance therewith. With regard to the several propositions you make for future service, I beg most respectfully to decline to proceed under the joint contract, receiving only the share of the subsidy (£27,500) which New Zealand agreed to pay. Regarding the next proposition, I beg to refer you to my preceding remarks, where I say I have elected to proceed under the original contract of 7th March, 1871, for my answer to that. Regarding the third proposition, I beg also to say that I am quite willing and ready to enter upon negotiations for an alteration or modification of the original contract, or the making of a new one; and have, in accordance with your suggestion, given to Mr. Henry Driver, of Dunodin, full and ample powers in the premises which go forward by this mail, together with my instructions upon the whole subject. I have, &c, The Hon. Julius Vogel, Postmaster-Genera 1, Wellington. W. 11. Webb.

E. No. 2, 1872, Nos. 37 and 38. E. No. 2, 1872, No. 38.

E. No. 4, 1871, Enclosure 1 in No. 90.

No. 8. Mr. W. G-bay to Mr. W. H. Webb. Sic,— General Post Office, Wellington, 23rd November, 1872. I have been directed to acknowledge the receipt of your letter of the 10th September last, and, in reply, to state that, with reference to the concluding paragraph, Mr. Driver has already placed himself in communication with the Government on the matter referred to. I have, &c, W. Gray, W. H. Webb, Esq., San Francisco. (for the Secretary).