The Water Lily was built in Rutherglen, Lanarkshire, and first registered at Liverpool. It was later registered at Manchester for use as an excursion steamer carrying up to 100 passengers.
In 1896 the Western Australian Steam Packet & Transport Company Limited bought the Water Lily and two other steamers, the St Mawes Castle and the Manx Fairy. The three steamers sailed for Fremantle in company. The Water Lily was rigged as a two-masted schooner because its coal bunkers were small. The steamers were struck by severe weather off the west coast of Africa and the Water Lily diverted to Bahia, Brazil, for extensive repairs. It arrived at Fremantle on 4 November 1897.
The Water Lily’s masts and rigging were removed and it was immediately employed in the passenger trade on the Swan River. It was reported that the comfortable forecabin was used by ladies and there were plans to convert the aft cabin into a smoking saloon for gentlemen.
On 11 May 1898 the Water Lily was sold to Zebina Lane (48 shares) and Frank Wilson (16 shares). It was first registered in Western Australia on 19 May 1898 (No. 6/1898); Lane and Wilson were shown as the owners. The Water Lily was then re-sold for £1,276 only eight days later to MC Davies for use as a tug at Hamelin and Flinders bays.