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No. 28. The Hon. J. Vogel and the Hon. W. H. Reynolds to the Hon. the Colonial Secretaby, New South Wales. Sic, — Sydney, 22nd February, 1873. We have tbe honor to acknowledge the receipt of your letter of this day's date, in which you explain why you have not hitherto replied to our letter of the 30th January, on the subject of the Californian Service, in which you state what you understand our offer to have been, and why you are unable to accept it—and in which you complain of the course taken by the New Zealand delegates at the late Conference, and you hold out the hope of some future united action between the Colonies with respect to the Californian Mail Service. 2. In reply, we have to state that, at the interviews you have been so good as to accord to us, we understood the reason of your not previously answering our letter; and we also understood that you contemplated making an answer entirely differeut from that now under consideration. So late as yesterday you informed us, in the presence of other members of the Ministry, that the Government had decided to write to us, to the effect that they were willing, in concert with New Zealand, to arrange the details of a Californian Mail Service, leaving on one side the question whether or not the service known as " Webb's" could be made use of for the purpose ; and you further informed us that your letter would contain a statement of the views of the Government as to the details of the service. Our verbal reply to you was, that we should be willing to arrange with your Government the details of a service in the way you proposed, on the understanding that, in doing so, wo were not repudiating the liability of New Zealand under the existing contract. In that proposition you acquiesced. We refer to this interview, not for the purpose of complaining of your having changed your intention, but with the hope that you may see your way to revert to your previous decision. 3. In the third paragraph of your letter you fall into an error which is slight, but is important, since it seems to colour your subsequent opinions. Tou state that our offer of the 30th January was made " subject to the conditions that the Government of New South Wales shall abstain from entering into a separate contract for a Californian Service, and agree with the New Zealand Government in obtaining, or endeavouring to obtain, an Imperial subsidy of twenty thousand pounds." If you will examine the letter from which you quote, you will see that we did not lay down any conditions of the kind. We stated that our object in making the offer was " to induce your Government to refrain from entering into a separate contract for a Californian Service." It may be said that this inaccuracy is not important, for that if the fir^t of the conditions was not expressed, it was implied ; but of more importance is the latter part of the statement—that we made it a condition you should " agree with the New Zealand Government in obtaining, or endeavouring to obtain, an Imperial subsidy." We did not lav down such a condition, nor did we oven ask New South Wales to join in the application. We merely expressed the opinion that, if New South Wales and New Zealand agreed as to the nature of a service suitable to both, an Imperial subsidy would be at once granted. Our offer was no doubt based on the contingency of an Imperial subsidy being obtained ; but we explained in our letter that we desired "to prevent such an opposition as would necessarily cause the Imperial Government to refrain from subsidizing either of the lines to the amount they otherwise would do." The distinction is of some importance, since you, in a subsequent part of your letter, endeavour to make out that we invited New South Wales to enter into a bargain unfair to the Imperial Government. 4. In the fourth paragraph of your letter you raise the objection that the " vessels of this service" have not hitherto performed the voyages within periods which would meet the stipulations you would require to be inserted in a contract to which you were a party. In reply to this we have to point out lhat in our letter we admitted that the contract had not hitherto been satisfactorily performed, and stated that, " in the new contract we would take care that there should be ample provision for securing the use of a sufficient number of proper boats, and for compelling a satisfactory substitution to be made in case any of the boats employed should become unfit for the efficient performance of the service." Our contract provides for the vessels running at a speed of over ten knots per hour ; and the Nebraska lately performed the through voyage from San Francisco to Auckland at an average speed of eleven knots. If you bear in mind those facts, you will, we think, recognize that, unless at the cost of an enormous subsidy, a more rapid service could not be obtained. We are aware that offers have been sent from New York to Sydney to perform a more rapid service ; but the information we have received by cable leads us to conclude that there is no probability of that offer being carried out. In a subsequent part of your letter, you state that nothing will be satisfactory to your Colony unless the English and Australian mails are delivered within forty-five days. If, instead of negotiating with us for the service proposed in our letter, you were willing to pay what would be required for making the connections at the Navigator Islands, instead of at Auckland, we are under the impression that New South Wales could be secured a service of twenty-eight days and a half between Sydney and San Francisco, which would, under ordinary circumstances, give to New South Wales a delivery in the time specified by you, and in a shorter time when the direct railway is completed (as it soon will be) which will connect Halifax with Chicago. 5. You further state, in the fourth paragraph of your letter, that you feel constrained to decline the offer we have made you, " on the grounds which do not admit of considering the value of its alleged advantages." Those grounds, as stated in the fourth and fifth paragraphs of your letter, appear to be, that you consider New Zealand is offering you a service upon very liberal terms, in order to induce you to assist in obtaining from the Imperial Government a subsidy for the line, which that Government ought not to pay. We cannot but lament that you should do yourself and us the injustice of supposing that we could make to you an offer which you could not honorably accept. Tb» process of reasoning by which you arrive at your conclusion is not very clear ; but that is not strange, since it has cost you so much time to work it out; for your letter of this day's date conveys the first intimation of au objection of that nature. Such an objection was not even hinted at in Conference by any member; though I think that not one member of the Conference would have listened for a moment to a proposal which, by any legitimate process of reasoning, might be open to the implication of dishonor. I think that your error arises from your failing to see that we do not propose to ask

No. 24ofthia series.