May 22, 1901

LIB

Alexander Johnston

Liberal

Mr. JOHNSTON (Lambton).

Are you endorsed by your leader in the remarks you made ? You are a prominent member of your party, are you endorsed by your leader ?

To provide for payment of award of arbitrators in connection with Eastern Extension Railway, New Brunswick, 5148.96S.75; for interest on same from July 1, 1884, to July 1, 1901, $126,623.43, and costs of reference, $5,100, $280,692.18.

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The MINISTER OF FINANCE.

I do not think the facts could be stated any more clearly than they are in the award of the abritrators, which is not a very lengthy document. This claim arises out of the construction of the Intercolonial Railway about the time of confederation. The New Brunswick government had contracted to build a piece of road which afterwards passed over to the Intercolonial Railway. The commissioners of the Intercolonial Railway-that road was then in the hands of a commission-agreed to take the road off the hands of the company at a valuation, which was supposed to bear a relation to the cost of constructing the lines of the Intercolonial Railway in the same section, near the boundary line between Nova Scotia and New Brunswick. The estimated cost of construction of the Intercolonial Railway in that region was therefore the basis of the arrangement made by the commissioners of the Intercolonial Railway. when taking over this piece of road. The local government had contributed a certain subsidy to the road. They received part of that snbsidy back at the time out of the sum then paid. But it subsequently transpired that the estimated cost of the constructipn of the Intercolonial Railway in that region was far below the actual cost. When the New Brunswick government found that the cost of constructing the new portion of the Intercolonial Railway in that region was greater than the original estimate, they came to the Dominion government and said : You based your payment for the New Brunswick section on the estimated cost of construction approved by the commissioners, but you must give us an additional amount based on the actual cost.

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CON

James Clancy

Conservative (1867-1942)

Mr. CLANCY.

Is the hon. gentleman in possession of the documents that he makes reference to ?

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The MINISTER OP FINANCE.

Yes, but I cannot tell why the document was not sooner in the hands of hon. members. There seems to have been some delay in the printing. The Dominion government years ago acknowledged the propriety of the New Brunswick government's contention. They acknowledged that the property should have been taken over at a valuation, based upon the actual cost of construction of the new work on the Intercolonial Railway, and not the estimated cost. The Dominion government paid the local government $150,000 in recognition of that claim, that being the difference between the first valuation of the road and the second. From that time the local government have been contending for the interest. The argument of the province, and it was reasonable, was that if they were entitled to that money, they were entitled to it under an arrangement [DOT]about 1809, and if it had been placed to their credit in 1869, they would have received half-yearly, as part of their annual allowance, the interest on that sum. But it was not placed to their credit till many years after. The claim that they make is that they are entitled to that interest from the time when the sum should have been placed at their credit. It was thought well not to determine this claim by the government here, but to refer it to arbitration. The arbitrators were Mr. Justice Barker, of New Brunswick: Mr. Justice Lan-gelier, of the province of Quebec ; and Mr. Duncan Coulson. general manager of the Bank of Toronto. These gentlemen investigated the matter and came to the conclusion that the claim of the New Brunswick government was a fair and reasonable one. That, in brief, is a statement of this claim. .

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CON

James Clancy

Conservative (1867-1942)

Mr. CLANCY.

It seems perfectly clear that New Brunswick had subsidized the road to the extent of $400,000. Although a settlement was made at the estimated cost and $250,000 was placed at the credit of the province to recoup it for its ex-

penditure, the claim was made for the balance of $150,000. I shall not take up time by discussing the arguments, the reasons and no reasons, put forward in support of that claim. The amount was paid by a subsequent arrangement. So where are we now? We are asked to do what the hon. member for Kingston (Mr. Britton) told us in unequivocal terms could never be considered-to give interest upon a claim that was supposed to be settled. This means, as the hon. member for South Lanark (Mr. Haggart) has pointed out. Nova Scotia has a right to demand, on the same basis as that upon which this claim is allowed, that before this parliament rises interest shall be paid upon the sum which lias just been voted to that province. There is absolutely no difference between the cases. No training, no legal Ingenuity will enable any hon. gentleman to make a distinction between them. I will not detain the committee, but I wish to enter my protest against this dangerous system. If we hope to have confederation a success, we must have honourable, upright and manly partners in it. I do not consider whether the bargain we made with the maritime provinces was a good one or a bad one ; it was a bargain and it must be carried out. But, I say that we have now opened the door to a system that will undermine the whole federal compact, unless we can put an end to it.

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The MINISTER OF RAILWAYS AND CANALS.

I am extremely sorry to hear my hon. friend (Mr. Clancy) take the ground he does with regard to this item. There is, in point of fact, no analogy whatever between the claim made between the New Brunswick government for interest in this case and the suppositious claim in the future which my hon. friend suggests will be made by the province of Nova Scotia for Interest on the payment that we have authorized to-night. I regret the line that has been taken by some hon. gentlemen on the other side. The only result that can flow form their observations will be to stimulate and encourage pressure to be brought to bear upon this or succeeding governments for the payment of interest upon that item. My hon. friend is deluding himself if he thinks that any other consequence is likely to flow, or if he thinks that the words that he and others have uttered will have any other results than those I have mentioned. This claim that is now before the committee is a very clear and simple matter, a matter which can be most readily understood. There are no disputed facts about it. The facts are these : Before confederation, the government in New Brunswick, like the government of Nova Scotia, was under pressure from the Imperial government to construct a line which was to become an intercolonial line. The object the Imperial government had in view Mr. CEANCY.

was that the two provincial governments should co-operate ultimately with the province of Quebec and secure the construction of a line through the maritime provinces to the city of Quebec. Yielding to the pressure that was brought upon the government of New Brunswick, they commenced the construction of the line from St. John and built it to Shediac. It then touched a point which was supposed to be most accessible to the island, and gave them connection with the province of Prince Edward Island. At the same time, and While the government of New Brunswick, at its own cost, was building this line, the province of Nova Scotia was running towards it to connect with it, building from Halifax westward, and they had built about to the Nova Scotia boundary. There was a hiatus, the connection was not complete, and in order to make that connection complete-mind you this was before confederation-the [DOT] government of New Brunswick made arrangements with Petto, Brassey & Co.-I think that was the name of the company-supposed to be a strong English concern. to take hold of it, and at the cost of New Brunswick and upon the-credit of New Brunswick, to complete that connection from Painsec to Shediac. That work was commenced before confederation, and was very nearly built at the time when the Act of confederation passed. But it was necessary of course that they should go on and build it, under the arrangements they had made it would be necessary that they should build it. It was nearly built, and I think it is now practically finished. **

When confederation occurred, or shortly after, the question naturally arose between the government of New Brunswick and the government of Canada as to whether they would take over this line. They were according to the terms of confederation under pledge and bound to construct a railway from Halifax to Quebec, having connection with St. Johns, and this would form part of that railway. The government of New Brunswick naturally expected that the Dominion government would take that road up for what they had expended upon it, complete whatever portion remained uncompleted. complete the connection with the Nova Scotia Central Railway system, and continue the work on to the city of Quebec. The province of New Brunswick, when they were endeavouring to conclude arrangements with the government of Canada for taking over this line, were confronted by an objection made by the government of Canada that they were asking too much when they asked to be recouped for their outlay upon that work. They did not ask /to be paid one dollar more than they had expended themselves out of their own exchequer for the construction of the railway as far as it had gone, but they did ask that they should be made whole of that expenditure. But the government of Canada said : You are

5945 MAY 22, 1901 5946

not entitled to be recouped the amount which you expended because you have expended too much. It has cost you more than it ought to have cost you, it has cost you more than it will cost us to build similar sections of a similar class of work. We will have our engineers make an estimate of what it will cost for the completion of a similar class of work. In fact they said : We have made contracts for the construction of other sections of a similar character with this, and instead of costing $40,000 per mile as it has cost you-I will not be tied down to the exact figures-instead of it costing us $40,000, which you have shown us this piece of railway cost you, we are getting similar pieces of railway constructed for $24,000 per mile, and we will only pay you $24,000 per mile. The government of New Brunswick protested against that treatment, but they were told : If you don't choose to take the price which we are willing to allow you, namely, $24,000 per mile, we will complete another piece of railway alongside of it, we will parallel the line that you have built, which will make your line valueless. What could the New Brunswick government do but give up at once and say : We cannot afford to stand any such

ruinous imposition, we will have to yield and let you take the railroad over and give what you choose. I am free to confess that they did then agree to hand the railway over, protesting, however, against the action of the Dominion government and claiming that they ought to have been repaid the whole amount of their outlay.

Well, they continued pressing the demand from that moment on. I think the reference shows that scarcely a year passed from that period down that they did not urge this payment upon the government at Ottawa. But it was a great while after the arrangement was concluded and the railway was taken over from them, before the Dominion government ascertained that their anticipations as to what they could get the same class of railway constructed for, were entirely below the mark. They found out that the line of railway was costing them more. It did cost them more than it cost the government of New Brunswick for this Eastern Extension which they built. When that fact transpired, the government of New Brunswick felt that they had an unanswerable case to be recouped this sum. The matter was referred to Mr. Frank Shanly, who was deputed by the government of Canada, ultimately, to make an inquiry into the matter. He made an inquiry and presented a report, and it is of record that he acknowledged that when the Dominion government insisted upon New Brunswick giving up its railway and accepting as its value the estimated amount which they named, that that sum was far below what they ought to have allowed, that their estimate was entirely erroneous, and that the cost of this other section upon which they were

basing their estimate as to what ought to have been the cost of the New Brunswick road, was many thousands of dollars beyond [DOT]the actual sum it had cost the government of New Brunswick. In fact it cost the Dominion government more to build this section than it had cost the government of that province. Ultimately, in 1884, the government of Canada came to the conclusion that they were in duty bound to pay this amount, that is to say, the $150,000 which remained of the $400,000 coming to the province of New Brunswick. They paid the amount then. At that time the claim before them was not only a claim for the $150,000, but it was also a claim for interest which had been withheld on semiannual payments and which then amounted to a considerable sum. The government at that time said in parliament, through the Minister of Railways and Canals, when he was asked whether the interest was going to be paid, said Interest was not included. that that would have to be a matter for future consideration. There was a distinct understanding that interest would be exacted. The records show that interest had been demanded, but all the government was willing to pay was $150,000, and they paid it without any stipulation whatever. It was not paid by the Dominion government upon condition that it should be accepted in full, it was not received by the government of New Brunswick upon the condition that it was a payment in full; it was simply a payment on account, as. I think, will appear to any one who refers to the ' Hansard ' of that time.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

The hon. gentleman refers to the ' Hansard.' Can he say what was stated by the minister who had charge of the item ?

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The MINISTER OF RAILWAYS AND CANALS.

My recollection is that it was Mr. Weldon who asked the question, and the minister replied that interest was not included in this, owing to the understanding that it was not decided they woidd pay the interest, and it was not decided that they would not pay it. That is the language which, I think, was used by the minister at that time. At all events, there were no conditions. The records will show that the amount paid to the government of New Brunswick was not paid upon any such condition, nor was it received on any such condition. The claim for this sum has been pressed upon the attention of the government from that time down to the present. From time to time we were receiving encouragement from tin1 government that the matter would be dealt with. Payment was not, as I recollect the facts, distinctly refused ; in fact, the Minister of Railways, to my own personal knowledge, and to myself, when I came up to Ottawa on one occasion in reference to it, stated that he recognized the claim as a legitimate one.

and he authorized the Governor, who was then Sir Leonard Tilley,' to make the announcement to the provincial legislature that the amount would be included in the estimates for that year. The announcement was made by the Governor that hn had such authorization, but some difficulties occurred during the session, and the amount was not inserted in the appropriation. But, the Minister of Railways himself, Sir Charles Tapper, expressed then, as he will express to-day, his clear and decided opinion that it was a proper claim to pay, and if it had rested with him, if there had been no difficulties raised in other quarters of a nature which were not at all pertinent to the question of the merits of the claim, but which arose outside altogether of that consideration, there can be no doubt as to what would have been the result. The matter has been held over from that time down to the present, but the gentlemen who took the evidence, who examined I he witnesses and the records, and who made this report, have arrived at the conclusion that the claim is a legitimate and proper one and ought to be paid.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

I merely want to ascertain if I understand the matter correctly. This $150,000, which is referred to, represents tlio excess of the cost of this road through the province of New Brunswick, over and above what was paid to the province by the government of Canada ?

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The MINISTER OF RAILWAYS AND CANALS.

There was $894,000 paid by the government of Canada to these contractors. There was admittedly $400,000 paid on account of that road by the provincial government. The Dominion government, according to their estimate of the probable cost of tire work, admitted the amount which justified and enabled them to pay the contractors the sum of $894,000, and paid $250,000 to the New Brunswick government on account of the $400,000 which they had paid, leaving $150,000 which was not settled until 18S4, some fifteen years after the amount was due.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

I think I am right in my idea ; in other words, the road had cost the province of New Brunswick $150,000 more than they received from the government of Canada. That is the position, Is it ?

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The MINISTER OF RAILWAYS AND CANALS.

Yes, that is right.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

And the amount fixed was by reason of the fact that the province of New Brunswick was compelled to accept payment on the basis of certain contracts which the government had outstanding at the time ?

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The MINISTER OF RAILWAYS AND CANALS.

Yes.

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LIB
CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

And it was afterwards ascertained that the estimates were too low ?

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The MINISTER OF RAILWAYS AND CANALS.

Yes.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

And when the readjustment was made the government paid the province of New Brunswick $150,000 ?

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The MINISTER OF RAILWAYS AND CANALS.

Y'es.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

And the contention of the province of New Brunswick is that that amount was not accepted in full of interest ?

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May 22, 1901