March 20, 1919

L LIB

Daniel Duncan McKenzie (Leader of the Official Opposition)

Laurier Liberal

Mr. McKENZIE (Cape Breton North and Victoria) :

Is it the intention of the Govern-

ment to assume all the liabilities of this road?

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

The position of the Government is that of receiver. The Government is not assuming the responsibilities of the Grand Trunk Pacific. Application will be made by the Government to the Exchequer Court for the issue of a receiver's certificate to meet any deficit in operating expenses, and the Government will, of course, be obliged to meet the interest upon Grand Trunk Pacific securities which it has guaranteed. 'But with regard to other securities, its position is merely that of receiver.

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L LIB

Daniel Duncan McKenzie (Leader of the Official Opposition)

Laurier Liberal

Mr. McKENZIE:

When the Government took over the Canadian Northern they took also all its liabilities and paid for the equity of redemption, some 110,000,000. I cannot see much difference between the Canadian Northern Railway Company then and the Grand Trunk Pacific Railway Company in this case. In the former case the Government established a certain precedent, and I wanted to know whether the Government intended to follow that precedent in this case.

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

What I understood my hon. friend to suggest was that the Dominion Government, instead of being merely receiver, should assume all the liabilities of the Grand Trunk Pacific, and relieve the Grand Trunk Railway Company of them entirely.

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L LIB

Daniel Duncan McKenzie (Leader of the Official Opposition)

Laurier Liberal

Mr. McKENZIE:

Oh, no. When the Government takes possession of this property nolens volens unless they get clear of it by an Act of Parliament they are responsible, as a matter of law, to the owner of these securities.

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

I do not concur in my hon. friend's view. The Dominion Government is receiver under an Order in Council which has the effect of a statute or an order of the court; and a receiver is not responsible for the liabilities of a company. The position of receiver appointed by a court is that of a custodian to continue the operation of a business subject to and pending further orders of the court from time to time. This legislation makes the Minister of Railways the receiver in this case, with the duties and the powers attaching to that office. The resolution defines the position of the Government in respect of the system in express terms, indicates the duties and powers of the receiver and expressly states that the Dominion Government is not liable to the Grand Trunk Railway Company or to any other

creditor. When this Order in Council is approved by Parliament it will become of the validity of an Act of Parliament, and its effect will be determined in accordance with its provisions, and not otherwise.

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L LIB

Daniel Duncan McKenzie (Leader of the Official Opposition)

Laurier Liberal

Mr. McKENZIE:

I quite understand the minister now. The position which I take, speaking for myself alone and not for any party, is this: I do not for one moment admit that the Government have any jurisdiction to do what they have done in this matter, unless we validate their action by Act of Parliament. The Government are simply mortgagees in possession and are in exactly the same position as a mortgagee in possession would be in without foreclosure.

If the third, fourth, or fifth, or even the first, mortgagee goes into possession without foreclosure he assumes all the encumbrances on the property. Every lawyer sitting around the Minister will admit that that is good law and unless we validate by Act of Parliament the action of the Government, I am afraid that any judge would say they had assumed the responsibility when they took over the property. For a creditor of the Company might say: Tf you had let the Company go on it would have paid off my liability, hut as you have prevented that you must pay the money that is owing to me. Of couse if there is to be legislation whereby we put ourselves in the place of a receiver and take all our instructions fiom the judge, that is a different matter. If the Government are going to put the road up to auction and will only pay what the-road brings at auction that puts it in a different light entirely. But the Minister did not in his very excellent speech this afternoon tell us that that was going to be done. If the Minister will tell this House that all the steps that a receiver would take under the orders of a court of this country are to be taken by the Minister of Railways and Canals, and that the country will only pay for this road what it brings at auction, I have no fault to find. But I do feel we had no business to step in and take hold of this property and make ourselves liable for $200,000,000 when, as hon. gentlemen have frequently told us, the property is not worth it. With the liabilities away above what the property is worth we are certainly not making any bargain.

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L LIB

James Alexander Robb (Chief Government Whip)

Laurier Liberal

Mr. ROBB:

This afternoon I drew the

minister's attention to a statement he made . with regard to branch lines, as to whether the provinces had prior rights over the Dominion. The minister promised to clear the point up and let the House know where we

should stand in regard to branch lines that are a part of this system. I think he forgot to mention that this evening.

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

The position of

the Minister of Railways is receiver for the Grand Trunk Pacific Railway Company, including the branch lines. His position is not different from that of a statutory receiver, and the rights of all parties are preserved. The rights of the provinces as guarantors are preserved and remain under the several instruments or trust mortgages under which they can claim. The receiver must take his orders from the Exchequer Court. Just as the rights of all other parties are preserved, so are the rights of the Dominion Government preserved. It is open to the Dominion Government to enforce, by permission of the courts, any rights which it has as creditor, or as guarantor, or as mortgagee under the first mortgage or afterwards. There is no question as to the Receiver's position. His duty is to conserve, operate, and act under the orders of the Court. My hon. friend the leader of the Opposition this afternoon called attention to the Winding-Up Act. The Winding-Up Act concerns the liquidator. It is the duty of a liquidator to bring a business to a termination and to sell, but the duty of a receiver is to conserve, operate, and carry on.

If hon. gentlemen will observe the terms of this resolution, they will find the jurisdiction of the Exchequer Court is really-enlarged, the intention being that the operation of this railway system, being, as it is, in the national interest, shall be continued under the orders of the Court, and that in all orders which the Court shall make it shall have regard not only to property rights but to paramount national interest.

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L LIB

James Alexander Robb (Chief Government Whip)

Laurier Liberal

Mr. ROBB:

Perhaps I did not make myself clear. Is there anything to prevent the provinces which have priority rights on branch lines from foreclosing and selling the branch lines to others, thereby leaving the Grand Trunk Pacific without feeders?

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

If default occurred under the terms of the mortgages securing the issues which they have guaranteed, the provinces could make application to the Exchequer Court, of which application they would have to give written notice to the minister, who would appear by counsel at the hearing. The Court in determining what should be done would take into consideration, under the terms

of this order, which will be validated by our legislation, not only the property rights involved, but the national interest. The intention of this order was to ensure the continued operation in the public interest of the Grand Trunk Pacific Railway system, and it was not possible to accomplish that in any other way than the one we have taken.

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L LIB

Thomas Vien

Laurier Liberal

Mr. VIEN:

There is some further information required to complete the minister's statement. When the Grand Trunk failed to accept that portion of the line which was constructed by the Government from Moncton to Winnipeg, was any written agreement made between the Government and the Grand Trunk or the Grand Trunk Pacific?

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

No.

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L LIB

Thomas Vien

Laurier Liberal

Mr. VIEN:

Then was the company put in default?

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

The Government claim they are in default, but the company set up various grounds on which they consider themselves not liable. In reality, the cost was so great that the objection was really on that ground. The interest at three per cent on $170,000,000 amounted to about $5,000,000 a year on a line which does not meet its operating expenses.

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L LIB

Thomas Vien

Laurier Liberal

Mr. VIEN:

Was any agreement made at the time of default between the Government and the Grand Trunk or the Grand Trunk Pacific?

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

No. The Government stepped in because it had built the line. The title was in the Government. The Grand Trunk Pacific having declined to execute the lease which under the original agreement we claim they were bound to execute, the Government had to provide for the operation of the line, and has been in possession since.

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L LIB

Thomas Vien

Laurier Liberal

Mr. VIEN:

But as the Government did not put the company in default when they failed to take up their obligations it may have given up its right under the agreement to compel the company to do so.

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UNION

William Thomas White (Minister of Finance and Receiver General)

Unionist

Sir THOMAS WHITE:

I think all rights are preserved.

Resolution reported, read the first and second time, and concurred in.

Sir THOMAS WHITE thereupon moved . for leave to introduce Bill No. 28, to confirm an order of the Governor General in Council respecting the Grand Trunk Pacific Railway system.

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Motion agreed to, and Bill read the first time. On motion of Sir Thomas White, the House adjourned at 11 p.m. Friday, March 21, 1919.


March 20, 1919