June 21, 1905

LIB
CON

John Graham Haggart

Conservative (1867-1942)

Mr. HAGGART.

The first to propose this policy was Mr. Gladstone

Topic:   PROVINCIAL GOVERNMENT IN THE NORTHWEST.
Permalink
LIB
CON

John Graham Haggart

Conservative (1867-1942)

Mr. HAGGART.

The party who proposed that policy in the House and advocated it again and again, were the leaders of the hon. gentlemen opposite in this House, Mr. Blake, and Mr. Mills. The policy was endorsed, was inscribed in an Act of parliament introduced by the present Postmaster General. It has always been the policy of the Reform party to adopt this principle, but it is like the other promises made and many of them made by the present government from end to end of the country, it was all talk and when they had the power to pertorm it they were led by political reasons in order to get a little political advantage, in a small manner, in one section of the country, to swallow their principles and adopt others when the opportunity offered.

Topic:   PROVINCIAL GOVERNMENT IN THE NORTHWEST.
Permalink
LIB

Archibald Campbell

Liberal

Mr. CAMPBELL.

Did you adopt it. when you divided the constituencies ?

At six o'clock, House took recess.

After Recess.

House resumed at eight o'clock.

Topic:   PROVINCIAL GOVERNMENT IN THE NORTHWEST.
Permalink

PRIVATE BILLS.

GRAND TRUNK PACIFIC RAILWAY COMPANY.

?

Mr. L. G.@

MCCARTHY moved the third reading of Bill (No. 115) respecting the Grand Trunk Pacific Railway Company.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
CON

Samuel Barker

Conservative (1867-1942)

Mr. S. BARKER (Hamilton).

I was present when this Bill was before the Railway Committee, but was not in my place the other evening when it was discussed in the Committee of the Whole. I believe that on the latter occasion some remarks were made by the Finance Minister (Mr. Fielding), l had hoped that he would be here to-night, because I wished to ask him some questions about the changes that have been made by 2491

the forms of agreement in the Bill, which, in effect, amend and alter the Acts passed last session. I do not know whether it is desirable to go on at the present moment, or whether we may expect that the Minister of Finance (Mr. Fielding) or the Minister of Justice (Mr. Fitzpatrick) will be soon in his place. But I am prepared to state the question I raised before the Railway Committee, and perhaps the right hon. leader of the government (Sir Wilfrid Laurier) will be able to tell us exactly what the effect of the change is. In the Act passed last session provision was made for the issue of interim bonds by the railway company, which bonds were to be guaranteed by the government, and, in the event of such bonds being issued, provision was made for their retirement and the substitution for them of permanent bonds. It was found-and I think very probably it was correctly found-that the interim bonds would not serve the purpose. I never thought it was a very happy expedient, and I think the company are quite right in coming to the conclusion that interim bonds would have been a mistake. But the question I raised in the Railway Committee was this : The original contract was drawn with the view to the issue of these interim bonds, which, at the conclusion of the work, would be replaced by permanent bonds ; and when that substitution should take place there would necessarily be an adjustment of the whole construction account. Therefore, the government would know, at the end, precisely the amount to which its guarantee applies. It wall be evident to any person at all acquainted with such matters that there is always some risk io issuing, on progress estimates, interim bends, as the amount may far exceed the value of the work as finally ascertained. As I say, I pointed this out in the Railway Committee to the Minister of Justice and in the presence of the counsel for the railway company. It was not disputed. I pointed out that it was almost impossible to avoid some risk in this respect, because the chief engineer of the work was absolutely dependent upon his subordinates for the progress report. A young gentleman with very little experience might have charge of ten miles of some very important portion of the work. He, of course, would send in his estimates month by month, and the chief engineer would have to make up his accounts on the basis of these reports. With every desire on the part of each person concerned to be absolutely correct and honest, errors might creep in from time to time. These, of course, would be repaired on the final adjustment. There would be no trouble in this under the Act we passed a year ago, because, whatever the interim bonds might be, the permanent bonds would not issue until the account was finally made up.

But, finding it inconvenient to issue interim bonds, the solicitors drawing these forms agreed that permanent bonds

should be issued forthwith. Therefore, the bonds issued from time to time on these progress estimates become an absolute obligation upon the government of Canada ; and there might be some difficulty in the final adjustment. I asked the counsel for the company, Hr. Chrysler-who was very fair and, so far as I ean see, desired to give every information to the committee-what protection was provided in this contract to the public against error which might creep iu in the progress estimates. I asked him also whether, under this contract, there was a reservation or drawback of a certain percentage on the estimates - for which bonds would not be issued. People who are acquainted with such contracts know that this is a very common provision-that 15 or 20 per cent of the progress estimate is often reserved for final adjustment. Hr. Chrysler answered that there was no such provision. But he also said that the government had the matter in his own hands, and it would only guarantee the amount of bonds that it considered would be safe. But I asked him if there was anything in the contract that would entitle the government, if, for instance, $100,000 was certified on the progress estimates, to issue only $80,000. His answer was: No ; I take it that the government will do just what it thinks necessary in that case. And he went on to say that Hr. Schreiber, Chief Engineer of Government Railways, or whoever happened to occupy his position, would take care to certify for only such an amount as would allow full protection to the government. But, as I pointed out, Hr. Schreiber, on the face of the contract, has no right to do anything of that kind. That there was no provision in this contract for the reservation of any percentage until the final adjustment of the account; and if the government did reserve part, they would be doing something that no private contractor would have a right to do.

They would be breaking the contract, but Mr. Chrysler said the government is not like an ordinary contractor for they can do as they please. But that did not seem to me a very satisfactory explanation. He went on to say that Mr. Sehreiber-he only used Mr. Schreiber's name because he was there before us-the chief engineer of the government, in issuing his progress certificates, would take care to be within the mark. To that I pointed out that the chief engineer is absolutely at the mercy of his subordinates. We need not speak of any subordinate as dishonest. All of us know the young gentlemen who superintend the construction of sections of eight and ten miles of railway. These young gentlemen are very anxious to do right but they make a great many mistakes. Mistakes are frequently made for many thousands of dollars on a small section, and the chief engineer is absolutely dependent on those young gentlemen for the bulk certificates he issues as the maximum amount to cover them all. It did seem to me that some provision should have been made, either in the agreement or the mortgages or the Act, to enable the government, as a matter of legal contract not as a matter of arbitrary conduct-to reserve 15 to 20 per cent as a safeguard, so that at the end of the contract the final adjustment would find the government on the right side of the account. My hon. friend, the Minister of Justice, took a note of the remarks that I made. Mr. Chrysler was unable to give any explanation except that he supposed the government would always take care of themselves. I would point out to the right hon. the First Minister that that is not business. What is not business for an ordinary railway company cannot possibly be business for a government, unless the government are going to assume that they will do arbit-trarily what no company would be allowed to do. I do not think that would be a proper position to take. There may be ample protection in these contracts. The day we met in the Railway Committee to discuss this Bill, it was placed in our hands for the first time. We had an Act of about two or three pages and schedules of over 100 pages of a printed contract, and we were asked as a committee, taking care of the interests of the country, to act to the best of our ability in criticising that Act. I have not the slightest fault to find with the conduct of any gentleman on that occasion. I believe that Mr. Chrysler endeavoured to give the fullest and clearest explanation in his power. I am quite sure the Minister of Justice wished to have every protection, but it was patent to everybody in the committee that he was not fully advised. I do not think he could possibly have acted personally in the matter. It had been entrusted to Mr. Shepley, of Toronto, a very-able legal gentleman, who gave a written report, in very general terms, that the contract was settled satisfactorily, but I do not think his report dealt with these particular questions. He wasv satisfied at large with the terms of the contract: but it occurred to me, in the short discussion we had in the committee, that the government, having since last year, when parliament agreed upon the terms of the contract, iu effect altered its terms by providing that instead of interim bonds, which could be recalled, the company were at once to issue and put upon the market final permanent bonds, the effect of that change might not have been sufficiently considered. No gentleman on the committee could have pretended to criticise the contract in that respect. I speak for myself quite frankly when I say I do not think the Minister of Justice on that occasion at all professed to answer, of his own knowledge. that everything was satisfactory. I am quite sure he decided to have it satis-

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
CON

Samuel Barker

Conservative (1867-1942)

Mr. BARKER.

735S

factory in every respect ; but this Bill is ot such vast importance, so many millions are involved in it, that unless some explanation has been given the House since the meeting of the committee, beyond what took place in that committee, I do not think, we should pass this Bill as it is. I do not mean to say that there is anything wrong in it : but in a matter involving so many millions, and especially ns we are not going to close tins session for a week or two, it would be well, unless the right hon. gentleman has satisfied himself on those points, not to pass this Bill too hurriedly.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
?

Mr. L. G.@

McCarthy. The question raised by my hon. friend from Hamilton (Mr. Barker) was in a measure discussed in the committee on Monday last and was answered by the Minister of Finance, who quoted from a printed report of Mr. Shepley, who acted on behalf of the government in the preparation of these documents. Mr. Shepley did not pass this over in general terms at ail as the hon. gentleman suggests, but devoted a large portion of his report at page 4 to the subject of these interim bonds. He said :

(a) The guarantee of interim bonds during the period of construction to be compulsorily convertible into the .guaranteed permanent bonds on the completion of the work of construction, which was the scheme for interim aid contemplated by the agreement of 1903. During the negotiations it was found impracticable to devise a workable scheme on the precise lines of the agreement, and there were found to be formidable market objections to bonds issued on the terms contemplated. The method adopted in the mortgage submitted is to provide for the immediate issue of permanent bonds, adding to the fifty-year period of currency of such per mauent bonds, which period was under the agreement to begin on the completion of the division, the seven years limited by the agreement of 19

So tue hon. gentleman will see that Mr. Shepley did discuss these bonds-I refer him now particularly to page 15 of the Bui, articles 3 and 4, which X think must have escaped the hon. gentleman in considering this question, because he will there find it is provided that these bonds are to be sold but are not to be handed over to the purchasers until it is certified that they have paid to the credit of the Minister of Finance and the Receiver General the full amount of these bonds to be held by him in trust and to be paid out only on the certificate of the [DOT] chief engineer that the money has been properly earned. That apparently is wliat Mr. Sheplev referred to in the words I have just read namelv, that the mortgage proceeds, as they are marketed from time to time, are

to be placed at the credit of the Minister of Finance and Receiver General in approved banks and paid out from time to time with certain safeguards, as they are earned by construction work. The safeguards are provided in articles three and four of the mortgage, whereby the engineer is protected and so is the government. The schedule goes on :

During the period of construction the interest * paid upon these bonds is added to and forms part of the cost of construction. During such period of construction, therefore, being presumably the seven years limited by the agreement of i994. the permanent bonds now provided for perform the identical functions which the interim bonds would have performed under the original scheme.

When the work of construction is completed, these bonds inherently ripen into the fifty year permanent bonds contemplated by the agreement of 1903, and from that date all the provisions of the two agreements relating to- permanent bonds begin to operate upon them. The difference is in my opinion merely formal, and does not in any degree alter the substance of the rights and obligations of the parties.

Consequently, I think that the objection which the hon. gentleman makes is met by ill1. Shepley's report and is met by the articles that I have referred to on page 15 of the Bill. This question was discussed in Committee of the Whole and answered partially in the way which I have answered it. What took place before the committee, I am sorry to say, I do not know as ^1 was not present, but if this is the only objection 1 would ask that the Bill be allowed to pass to-uiglit. It was held up on Monday night simply for the purpose of allowing the hon. gentleman to discuss this point, and I ant not complaining at all, but I am informed bv the railway company that they are very anxious to get their Bill through owing to the necessity of completing the financial arrangements which are in contemplation.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
?

Mr BARKER.

I certainly would be verv glad to facilitate the passage of the Bill. I have no desire to obstruct it in any way whatever.

ill1 X. G. McCarthy. I do not mean ! to suggest that the hon. gentleman desires I to obstruct the Bill.

! Mr BARXvER. I do not think the hon. gentleman imputes that. I repeat I would be verv glad to facilitate the passing of the Bill, but there is not a word in this report and there is not a statement of the hon. gentleman who has just spoken that adds anything whatever to what appeared at .the Itailwav Committee. lliis report ot Mr. Shenlev had been in the hands of the Minister of' Justice-. It had also been in the hands of Mr. Chrysler before the meeting of the Railway Committee, but neither the Minister of Justice nor Mr. Chrysler was able to give an answer to tbe question I nut Mr. Chrysler admitted frankly and verv properlv" that there was nothing ii>

tlie contract enabling the government to reserve any portion of the progress estimates until the final completion of the work. The Grand Trunk Pacific Railway Company are entitled, under the contract, to call for a progess estimate of all the work they have done. There is not a word from beginning to end of any reservation of any percentage for the final adjustment. Mr. Chrysler admitted that. I do not think my hon. friend who has just spoken will say there is one word in the schedules, Mr. Shepley's report, or in the Bill before the House inconsistent with that statement. I am quite sure if there had been anything to the contrary, Mr. Chrysler, who is thoroughly informed on the subject and who is, I believe, a very able lawyer, would have at once met the point I made and told me there was every protection to the government. There is no question whatever that in the original contract the government agreed to guarantee interim bonds, which bonds would ultimately be exchanged for permanent bonds on a'final settlement of account. But, from beginning to end there is not one word to show that the interim bonds were to be issued for anything less than the full amount of the progress estimates.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
IND

Leighton Goldie McCarthy

Independent

Mr. L. G. MCCARTHY.

I have been trying to look it up, but I have not been able to find it; perhaps the hon. gentleman could tell me from recollection or from having looked it up : Did the original contract between the Grand Trunk Pacific Railway Company and 'the government provide for the retention of any percentage before the issuing of the interim bonds 5

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
CON

Samuel Barker

Conservative (1867-1942)

Mr. BARKER.

Mr. Chrysler says expressly not. As I said before, X do not profess, with all the other things we have here, to have read through 108 pages of contracts in addition to the two Acts we already have on the statute-books with all their schedules for the purpose of searching out all the details. But, I asked the question of Mr. Chrysler : Is there any provision in the contract whereby ' a certain percentage of the progress estimates is reserved until the completion of the work. He said : No. I therefore pointed out, that, while in the original contract, the government might have been willing and might safely have issued an interim bond which was subject to adjustment and would have to lie taken up before it got into the hands of the public, it would be"a very different thing to at once issue instead of that interim bond a permanent bond that went on the market and bore the guarantee of the government. Mr. Chrysler met that in only one way. He said : I assume that the government will not issue more than they feel safe in issuing. But, that is not the contract.

of Finance and the Receiver General when they issue it.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
CON

Samuel Barker

Conservative (1867-1942)

Mr. BARKER.

The hon. gentleman may wish to deal with the proceeds of the bond; I am dealing with the liability of the government after the bond gets into the hands of the bank or somebody else.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
IND

Leighton Goldie McCarthy

Independent

Mr. L. G. MCCARTHY.

If the government has the proceeds of the bonds that are outstanding they have the proceeds to meet the bonds so that there is no difficulty there. If the proceeds are not paid out improperly, if the engineer does his duty and if the proceeds of the bonds are in the hands of the Receiver General or the Minister of Finance in trust no harm can come to any one.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
CON

Samuel Barker

Conservative (1867-1942)

Mr. BARKER.

I think the hon. gentleman does not quite understand my point. U hen the chief engineer issues certificates amounting to, say, $1,000,000, the company calls upon the government to guarantee bonds for $1,900,000. These bonds go out on the market, pass into the hands of the bank or some one else who will pay for them a certain amount of money, say. $1,000,000 less the bank discount. But these bonds are in the bands of the public and the government has undertaken to pay $1,000,000.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
IND

Leighton Goldie McCarthy

Independent

Mr. L. G. MCCARTHY.

The money does not go into the hands of the company. It goes into the hands of the Receiver General.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
CON

Samuel Barker

Conservative (1867-1942)

Mr. BARKER.

Y'ou do get the cash for the $1,000,000 worth of bonds, but you apply the cash in payment of the progress certificates.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink
IND

Leighton Goldie McCarthy

Independent

Mr. L. G. MCCARTHY.

The government has got the cash and the bank the bonds.

Topic:   PRIVATE BILLS.
Subtopic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Permalink

June 21, 1905