In 1894, mail from Canada to England must have gone via various routes including from New York City. One of the main railroad routes went down the Champlain Valley on the New York side of Lake Champlain.
In December 1894, one of the trains went off the tracks just south of Port Henry (Essex County). A few cars including the mail car ended up in the water. The mail clerk was killed in the wreck and the mail car inundated. The stamps on this letter from Montréal to London were washed off.
I assume that the USPOD applied the red rubberstamped explanation. The letter was marked PAID when it reached England.
added by USPOD
front of envelope showing where the stamps were originally
reverse of envelope