April 3, 1919


The House resumed consideration in Committee of the Whole of the resolution providing for the amendment of the Dominion Lands Act, Mr. Boivin in the Chair.


UNION

Arthur Meighen (Minister of the Interior; Superintendent-General of Indian Affairs)

Unionist

Hon. Mr. MEIGHEN:

The Leader of the Opposition was asking whether the rate is now fixed. The answer is yes, it is fixed at 5 per cent. That is where the trouble comes in; it is too much below the normal commercial rate.

Topic:   DOMINION LANDS ACT AMENDMENT.
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L LIB

Daniel Duncan McKenzie (Leader of the Official Opposition)

Laurier Liberal

Mr. McKENZIE:

Does this amendment

give the hon. minister discretion 'to use his own judgment as to what the rate should be?

Topic:   DOMINION LANDS ACT AMENDMENT.
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UNION

Arthur Meighen (Minister of the Interior; Superintendent-General of Indian Affairs)

Unionist

Mr. MEIGHEN:

The resolution would indicate that, but the Bill itself fixes the rate.

Topic:   DOMINION LANDS ACT AMENDMENT.
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L LIB

Thomas Vien

Laurier Liberal

Mr. VIEN:

Will it affect deferred payments due by a debtor whose obligations were contracted with the Government before the enactment of this new law?

Topic:   DOMINION LANDS ACT AMENDMENT.
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UNION

Arthur Meighen (Minister of the Interior; Superintendent-General of Indian Affairs)

Unionist

Mr. MEIGHEN:

No, the passage of the Act will not affect any obligation that now exists either to increase or diminish such obligation; but after the rate is fixed for arrears, and the contract is already in existence, our procedure will be to notify the man that he must undertake to pay the rate fixed by statute on arrears in future, and if he does not do so then we shall have to consider whether or not it would be in the public interest to cancel his sale.

Topic:   DOMINION LANDS ACT AMENDMENT.
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L LIB

Thomas Vien

Laurier Liberal

Mr. VIEN:

I note that the resolution

says, "or other disposition of natural resources." Are there any other natural resources than Dominion lands to which this amendment will apply?

Topic:   DOMINION LANDS ACT AMENDMENT.
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UNION

Arthur Meighen (Minister of the Interior; Superintendent-General of Indian Affairs)

Unionist

Mr. MEIGHEN:

Yes, the section covers such natural resources as mining, grazing, or timber limits. There is ia general clause in the Act which refers to the disposition of other resources, and the interest rate is fixed there. This is to change the interest rate in that clause.

Topic:   DOMINION LANDS ACT AMENDMENT.
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UNION

Thomas Hay

Unionist

Mr. HAY:

Does 'this refer to homestead

lands held by the Government at the present time?

Topic:   DOMINION LANDS ACT AMENDMENT.
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UNION

Arthur Meighen (Minister of the Interior; Superintendent-General of Indian Affairs)

Unionist

Mr. MEIGHEN:

Yes, it must refer to lands that we own, but it does not enable the Government to sell anything that we have not the right now to sell. This clause is intended to cover more particularly homesteads, where men have been only too prone to allow their payments due to the Crown to run into arrear and to pay their other debts first. This allows the rate of in-

terest in future to be fixed at 6 per cent instead of 5 on deferred payments, and on arrears at 7 per cent.

Resolution reported.

Topic:   DOMINION LANDS ACT AMENDMENT.
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GRAND TRUNK PACIFIC RAILWAY COMPANY.

BILL TO APPOINT A RECEIVER


On motion of Sir Thomas White (Minister of Finance), Bill No. 28, to confirm two Orders of the Governor General in Council respecting the Grand Trunk Pacific Railway System, was read the second time, and the House went into Committee thereon, Mr. Boivin in the Chair. On section 1-Orders in Council 7th and 13th March, 1919, confirmed:


L LIB

Thomas Vien

Laurier Liberal

Mr. THOMAS VIEN (Lotbiniere):

Mr. Chairman, it is highly regrettable that this Bill, confirming the Orders in Council putting the Grand Trunk Pacific Railway System under a receivership, should be proceeded with in the absence of a decision on the part of the Government as to what our future railway policy is to be. It is also to be regretted that the Government thought it advisable to take any step which would have the effect of causing the Grand Trunk Pacific Railway Company to cease operating that portion of their system which is called the Grand Trunk Pacific. A more democratic and a more constitutional way of dealing with this matter would have been to bring it before Parliament and to examine into it carefully before taking any such important step as is now under consideration.

The people of Canada at large and this Parliament in particular have not been fully seized of all that is involved in the nationalization of the Grand Trunk Pacific and consequently, of the Grand Trunk Railway system; nor have they had opportunity of studying the matter carefully. Last year, during the session of Parliament, it was announced by the Prime Minister, in answer to a question put by this side of the House, that pourparlers or negotiations were in progress between the Government and the Grand Trunk Railway Company concerning the sale to the Government or the nationalization of the two systems. When we inquired as to the policy of the Government in this matter, the Prime Minister said that it would not be in the public interest to advise the House and the country of the nature of negotiations which were under way. Notwithstanding that, however, the Government have committed the country to a definite policy

which they have consistently carried out- because they had absolutely made up their minds at that time to expropriate the Grand Trunk and the Grand Trunk Pacific. How did they do it? First, they refused to agree to the proposal made by the two companies; they did not agree as to the amount to be paid.

We all agree that the Government should oblige the Grand Trunk Railway Company to live up to all its obligations. The Government should not allow the country to undertake all the obligations of that company. But, as I say, the Government had made up their minds to take over the Grand Trunk and the Grand Trunk Pacific, although they would not let the House know under what conditions they intended doing so.

The Acting Prime Minister gave the House the other day the first comprehensive information that we have received since the beginning of the negotiations. He read at length various letters which passed between the Government and the company. He gave the House full details of the difficulties which the Government had met in attempting to reach an agreement with the Grand Trunk Railway Company. We now know that that company, which in 1903 or 1904. had entered into an agreement with the Government for the building of the section of the Transcontinental from Winnipeg to the coast, could not live up to their obligations on account of various difficulties which had arisen between them and the Government in the carrying out of the original scheme. Under the original scheme the Government was to build the section of the Transcontinental from Moncton to Winnipeg, and the Grand Trunk Railway Company was to build the section between Winnipeg and the Pacific coast. This new undertaking was to be called the Grand Trunk Pacific Railway, its shares being entirely in the bands of the Grand Trunk.

At various stages of the operations carried on under the agreements of 1903 and 1904, difficulties arose between the Government and the Grand Trunk Railway Company and the Grand Trunk Pacific Railway Company as regards the building by the Government of the Transcontinental railway. For instance, in 1912, 1914 and 1915, the Grand Trunk Pacific Railway Company advised the Government that the changes which had been made by the Government in the construction of that section of the road which the Grand Trunk Railway Company was ultimately to lease from the Government, would render it impossible

for the company to take over the National Transcontinental, and to live up to the obligations undertaken under the agreements of 1903 and 1904. May I speak more plainly what is in my mind? Under the? agreements of 1903 and 1904, the Government was to build that section of the road which extends from Moncton to Winnipeg according to certain specifications, plans and details which had been agreed on between the Government and the company. Subsequently, particularly after 1911, when the change of Government took place, the Government took upon itself, through the Department of Railways and Canals, (because at that time the Transcontinental Railway Commission had been superseded by the Minister of Railways and Canals), to change, without the approval of the Grand Trunk Railway Company, not only the grading but the specifications and the terminals of the railway. The Government, therefore, did not live up to the agreements of 1903 and 1904, and by so doing gave to the company the right to refuse later on to take over the National Transcontinental railway.

The House is now in possession of the correspondence exchanged between the Government and the company. In 1912 the president of the Grand Trunk Railway Company stated clearly to the Government that any change in the grading or in the specification of the railway would put that company in an impossible position because they would not be able to take a lease of the Transcontinental railway as per the agreement of 1903. The Government did not take any notice of this formal protest by the company, but went on changing the grading in such a manner that the Transcontinental railway would not have for the company the same usefulness. Some time after, when the Government had completed the construction of the Transcontinental railway from Moncton to Winnipeg, the Government offered to the company a lease of the Transcontinental railway. That offer was flatly refused. I have not been able to put my hand on the document by which the Grand Trunk Railway Company and the Grand Trunk Pacific Railway Company declined to take over the National Transcontinental on the conditions of the agreement of 1903, but from my recollection of that document, I think I can cite the three main reasons advanced by the company for declining to live up to the agreement.

The reasons were, first, because the cost of the railway had been greatly in excess

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Subtopic:   BILL TO APPOINT A RECEIVER
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UNION

Arthur Meighen (Minister of the Interior; Superintendent-General of Indian Affairs)

Unionist

Mr. MEIGHEN:

To what company does the hon. gentleman refer that should have been compelled to lease the National Transcontinental?

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Subtopic:   BILL TO APPOINT A RECEIVER
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L LIB

Thomas Vien

Laurier Liberal

Mr. VIEN:

According to the agreement of 1903 the Grand Trunk Pacific Railway Company should have been compelled to lease that section of the road which had been built by the Government from Monc-ten to Winnipeg. That would amount to the same thing as compelling the Grand Trunk Railway Company itself to live up to their agreement, because we know that all the shares of the Grand Trunk Pacific Railway Company are in the treasury of the Grand Trunk Railway Company. I think I am right in saying that according to the agreement of 1903 the Grand Trunk Pacific Railway Company was bound to take over under a lease that section of the road which had been built by the Govern-ment._ The Government have impliedly admitted the contentions of the Grand Trunk Pacific Railway Company. They have taken over the National Transcontinental railway from Moncton to Winnipeg; they

|Mr. Vien.]

have connected it up with the Canadian Government railway system and they are continuing to operate it as a Government railway.

What was the effect of the Government's failure to compel the Grand Trunk Pacific Railway Company to live up to the agreement of 1903? The effect was, first, impliedly to admit the company's contention that it had no further obligations in respect of the National Transcontinental. Secondly, the effect was to deprive the Grand Trunk Pacific of a very important part of its transcontinental system. The National Transcontinental and the Grand Trunk Pacific were built for the purpose of establishing a second transcontinental railway in Canada. That transcontinental system could not exist except as a whole; that is, the National Transcontinental and the Grand Trunk Pacific. The taking over of the Transcontinental left the Grand Trunk Pacific without any connecting link with its own system, which extended from Winnipeg to the Pacific coast, and naturally the Grand Trunk refused to admit any further obligations in respect of the bonds of the Grand Trunk Pacific which it had guaranteed. Then what happened? The Grand Trunk Pacific Company advised the Government that as they had been deprived of their connecting link they could not meet their obligations. Again the Government advanced money to the Grand Trunk Pacific, impliedly admitting the contention of the company that it could not continue to operate without the National Transcontinental, and admitting also that the Government had a certain responsibility in respect of the Grand Trunk Pacific. Then what happens? The Government, seeing that it would be compelled to vote money year after year to make up the deficit in the operation of the Grand Trunk Pacific, immediately opened negotiations for the expropriation of both the Grand Trunk and the Grand Trunk Pacific. The Government was in negotiation with the company last year, but would not disclose to this House or to the Canadian people the exact nature of those negotiations. When, however, it became imperative for the Government to advance further moneys to meet the interest on the bonds, the Government, after the opening of the present session, and without apprising Parliament of the condition of affairs, made up their minds to threaten the company They said to the company: "We will not

ask Parliament to vote any further advances so long as the negotiations between the company and the Government remain in

their present unsatisfactory condition." That was a threat, designed to bring the company into such a position that it would be bound hand and foot to the Government. The company replied: " We will cease to operate that section of the road extending from Winnipeg to the Pacific coast." What did that declaration amount to? It was tantamount to saying: " We have a section of the road which does not pay, and therefore we are going to close it up." As the company had refused to take over the National Transcontinental, and as it owned the entire stock of the Grand Trunk Pacific, that section of the road from Winnipeg to the Pacific coast was simply a branch line of the Grand Trunk Railway system; there was no difference whatever between that section of the road and a branch line of the Grand Trunk system. The company therefore said to the Government: "As you will not subsidize our branch line from Winnipeg to the Pacific coast, we will close it." Now, if the Canadian Pacific Railway were to find one morning that one of its branch lines was not a paying proposition, would it not be perfectly right for it to say that it would close that branch liner I submit that the Government had absolutely no right to compel either the Grand Trunk or the Grand Trunk Pacific to operate that section of the road from Winnipeg to the Pacific coast, until the company had defaulted in paying the interest on its bonds. We know from the information laid on the Table that neither the Grand Trunk nor the Grand Trunk Pacific had defaulted in their interest payments. But when the company said to the Government: " We will cease to operate that section of the road from Winnipeg to the Pacific coast," the Government said, " Then we will put the road in the hands of a receiver, under the authority of the War Measures Act."

We all agree on the principle that Canada should not take over the liabilities of the Grand Trunk Pacific Railway Company. We all agree that the Grand Trunk itself should not be relieved of its obligation in respect of the Grand Trunk Pacific. It was the policy of the Government not to relieve either the Grand Trunk or the Grand Trunk Pacific of their obligations. Yet I contend that, at law, the Government has done exactly what it intended to avoid. I contend that the action of the Government has absolutely relieved the Grand Trunk Railway Company of its obligations in respect of the Grand Trunk Pacific. I contend that the Government's action was the last step in impliedly admitting the contentions of the company in respect of the agreement of 1903.

Let us consider the action of the Government when they were informed that the Company would cease its operation of that section of the line. Did they compel the Grand Trunk Pacific or the Grand Trunk Railway Company to meet their obligations? No. They could not do so because the companies were not in default; and under the provisions of the Winding-up Act they could take no steps for the same reason, that the company had fulfilled all its obligations. Instead, they invoked the authority of the War Measures Act and forcibly took over that section of the road extending from Winnipeg to the coast; and in order to establish that point clearly we need only read the first paragraph of the Order in Council, which says:

Re-Grand Trunk Receivership.

Provisions of Order in Council.

(1) Order recites that the continued operation of the G.T.P. System is essential in the present position of Canada resulting from the war, especially in connection with the transport of returning Canadian troops and of supplies, equipment and freight, and that the duty of continuing such operation is thrown upon the Government of Canada inasmuch as there are no effective provisions in the existing laws whereby such continued operation could be otherwise secured and that therefore immediate action is imperative.

In that first paragraph the Government admit that the company has fulfilled all its legal obligations, while the paragraph is also an admission that there was no other course open to the Government than to proceed under the War Measures Act. But I unhesitatingly say that it was never the intention when the Act was passed to allow them to forcibly take the railway, and I am of opinion that taking over that section of the road by virtue of that Act is tantamount to an expropriation of it by the Government. If, then, it is an expropriation, surely the Government is liable for compensation just as much as they would be if they took a house or a farm, or any other property for a public work. There is an Expropriation Act under which the Government could have taken over that section of the road. They did not elect to proceed under that Act. But under the terms of the Order in Council which 1 have just read, their action amounts to an expropriation, and in doing so the Government incurred the obligation to compensate the company for the forcible taking of their property. Now, I hardly think the Government could very well act more imprudently. If they did

not desire to advance any further moneys for the purposes of the Grand Trunk Pacific Railway Company-which might be an advisable and even a commendable policy- they should at least have waited until the Grand Trunk Railway or the Grand Trunk Pacific Railway was in default. Had they done so, the Government would then have had a legal right to wind up the company and put it into receivership. They did not do so, but from the very beginning of their negotiations with the company the Government have impliedly admitted the contention of the company that they had no further obligations in respect of the Grand Trunk Pacific Railway Company, and have virtually relieved them of all such obligations. I believe that the Grand Trunk Railway Company and the Grand Trunk Pacific Railway Company have a good case at law and can meet the contentions of the Government and repudiate their obligations by the argument, that the Grand Trunk Pacific Railway Company having been forcibly expropriated under the War Measures Act, they are now relieved of any responsibility in connection with that railway. The Government should they decide to forcibly take not only the Grand Trunk Pacific Railway but also the parent company, will be obliged to pay a compensation to the Grand Trunk Railway Company which will be calculated, without taking into account its obligations in respect of the Grand Trunk Pacific Railway Company. 1 want to be clear on thait point. At law the Grand Trunk Railway Company will contend that it is relieved of its obligations in respect of the Grand Trunk Pacific Railway Company; and the Government if they take over the Grand Trunk Railway Company will have to pay the price. And in calculating the assets they will not be able to put by way of set-off the obligations of the Grand Trunk Railway Company in respect of the Grand Trunk Pacific Railway Company.

I think it is a matter for very much regret that the Government did not see its way clear to take Parliament into its confidence, particularly when Parliament was in session, before taking an important step that will undoubtedly mean a heavy responsibility, financial and otherwise, on the shoulders of the people of this country. It is regrettable that they did not consult Parliament in the matter, and that they did not wait until the Grand Trunk Railway Company were in default before relieving it, as they have virtually done by their Order in Council, of all obligations in respect of the Grand Trunk Pacific Railway Company.

It is true that the Government says in its Order in Council that it takes over that railway without incurring any resppnsibil-ity in connection with its operation, but surely, Sir, regard must be paid to the general underlying principle that we cannot forcibly take over a property without first justly and fairly indemnifying the owner. Whatever the Government might say in its Order in Council as to declining to assume any responsibility due to the forcible taking over of the Grand Trunk Pacific Railway, surely in accordance with common law and the dictates of common sense, it will have to indemnify the Grand Trunk Pacific and the Grand Trunk Railway Companies for the property so forcibly taken. Moreover, the Grand Trunk Railway Company can now say: You have taken one of our branch lines. In so doing you have undertaken all the obligations of operating this branch line, and we are relieved of our obligations in respect of it. I say, Sir, I would be very much surprised indeed if the law courts, and the highest legal tribunals, did not maintain such a contention. Therefore I say that before committing the country to suoh an important policy as the forcible taking over of the Grand Trunk Pacific Railway Company, Parliament should have been consulted, and the Government should have made a careful study of the subject in consultation with it. It would have been a more democratic and constitutional way of dealing with the question.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Subtopic:   BILL TO APPOINT A RECEIVER
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UNION

Robert Lorne Richardson

Unionist

Mr. R. L. RICHARDSON (Springfield):

It is not my intention to attempt any reply to the points that my hon. friend from Lot-biniere has attempted to make in connection with this question. The members of the Government will be able to make that answer, and I think they "will not find it an exceedingly difficult task.

I wish to say at the outset that if the opinion which the hon. gentleman has expressed on railway questions, and particularly in reference to the Grand Trunk Pacific, and the Grand Trunk, is shared by his friends who sit on that side of the House, and by any very large number of the people of Canada, God help the country. If there is one question-

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Subtopic:   BILL TO APPOINT A RECEIVER
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L LIB

Frank S. Cahill

Laurier Liberal

Mr. CAHILL:

Might I ask the hon. member if he is in favour of relieving the Grand Trunk of their obligations in respect of the Grand Trunk Pacific Railway? That is the point the hon. member for Lot-biniere was making.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Subtopic:   BILL TO APPOINT A RECEIVER
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UNION

Robert Lorne Richardson

Unionist

Mr. RICHARDSON:

The hon. member for Lotbiniere was blaming the Govern-

ment for insisting that the Grand Trunk should live up to its obligations.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY.
Subtopic:   BILL TO APPOINT A RECEIVER
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L LIB

April 3, 1919