April 16, 1920

L LIB

Emmanuel Berchmans Devlin

Laurier Liberal

Mr. DEVLIN:

How could that be if there were only two shareholders in question wTho were not entitled-

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UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

Ask the member for North Cape Breton. He tells you there is serious danger; he says that the thing is illegal. In saying that I do not' speak otherwise than respectfully of his opinion; it is quite reasonable that a lawyer of his distinction should entertain that opinion. But it is clear that there is no question of any substantial injustice to any one, and ,we say we want to protect 'the people of Canada against their being attacked with possibly successful lawsuits-the hon. gentleman thinks that that might happen- at all events, against their being subjected to attacks based upon the idea which exists to a greater or lesser' extent that there may be room for question on that ground. We want simply to put 'the people of Canada in a position where they can sit down quietly and say: We have a title that is not subject to this sort of question.

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L LIB

Emmanuel Berchmans Devlin

Laurier Liberal

Mr. DEVLIN:

If I may be allowed a further interruption. I do not mean to place myself on record as having pronounced against the contention raised by the member for North Cape Breton and Victoria (Mr. McKenzie) because L have great respect for his legal opinion. I aim now listening to both sides of the question.

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UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

I quite appreciate the judicial mind with which the hon. member approaches the question. I hope that it may be premonitory of a more universal application of those judicial qualities later on.

I pass therefore from the objections that have been taken to this ratification, to the objection that has been raised-because there is only one-suggesting a divergence between the statute as passed and the agreement as it is drawn. I am passing over the commentaries of the hon. member for Queen's and Shelburne (Mr. Fielding) upon the haste with which the Government acts in connection with this particular matter. With regard to this Bill, I have no desire to go back to the past, and the hon. gentleman himself said he saw no useful purpose in doing so. I do not know what undue haste the Government has shown up to the present time in connection with this Bill. The Bill has been introduced, and of course it is desirable that it should be promptly passed. I would think, whatever may be one's opinions about the desirability of the transactions involved in the matter, that there would be unanimity in the view that we ought to get as perfect a title as possible, and I have no doubt at all that there would also be a unanimous opinion that what is to be done 'had better

be done promptly. If this transaction is to be justified it is very largely to be justified by the fact that there is a necessity for the intervention of this Government, and that it is very much in the public interest that this road should be carried on, a condition having been reached by reason of which, without some intervention from outside, the affairs of the company could not be carried on. I ask hon. gentlemen this question: How much worse off would the country be, seeing that we have decided to acquire the Grand Trunk, if, pending delay after delay which might stretch itself out, a situation developed that rendered it impossible for the company to carry on and we had to face all the consequences that are sought to be avoided by governmental intervention? Surely it is as clear as daylight that if this matter is to be done it ought to be promptly and effectively done; and that is the only ground upon which we have sought to'take what seemed the shortest as well as the most effective way of having the transaction completed. It has been complained that there is a divergence between the agreement and the Act of last year in the clause which empowers the managing committee to borrow money.

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UNI L
UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

Yes. Power is given

to the board of management to borrow money from the Government if the Government consents. With the consent of the Government the board of management is* to have power to borrow money from the Government, and that power is invoked as being a practical introduction into the agreement of a clause which was inserted in the Bill of last year and withdrawn, authorizing the lending of money. The two things are very different. This clause in the agreement involves no obligation on the pant of the Government to lend any money at all; and, of course, not being statutory, it could not confer any power on the Government to lend money. But the purpose of that section is to determine what the functions of the board of management are to be. If hon. gentlemen will look carefully at the section they will see that it does not constitute the Board of Management the entire controlling and directing body of the corporation. The Board of Management is created for the particular purpose of insuring that the operations of the Grand Trunk railway are so carried on and adjusted as to work in with the operations of the Canadian National railways, pending the final passing of the stock. A body like that can clearly have only such powers

as are given to it by the agreement between the two parties constituting it, namely, the Government on the one hand and the company on the other. In the agreement entered into between those two parties power is conferred on the Board of Management, among other things, to borrow, with the consent of the Government, such money as the Government may lend; and there is not a tittle of obligation, as of course there could not be, on the part of this Government to lend any money. As to what may he the powers to lend money, they of course stand just wherever they would have been if that agreement had not been entered into at all. So that if the hon. gentleman will look carefully 'at the section he will perceive the error into which he has fallen in suggesting that there is an introduction into the agreement of a clause that was struck out of the statute.

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L LIB
UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

The provision is there so that if it be necessary that money should be borrowed for the purposes stated it shall not be borrowed by the Board of Directors of the company, who are still in existence, but that the Board of Management shall have the power to borrow. It is to give them the power, if the Government will consent, to raise money to provide for the needs of operation.

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UNI L

William Stevens Fielding

Unionist (Liberal)

Mr. FIELDING:

Would the company not have the power to borrow money from any source without this at all?

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UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

Yes; but my hon. friend will see that this does not give the power to borrow to the company but to the Board of Management.

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UNI L
UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

No. The hon. gentleman will see that the Board of Management is a body which is not created to manage the entire business of the company in any sense. Perhaps we had better see just what its functions are, because-if I may say so without implying any offence-there seems to be a remarkable misapprehension as to the nature and purpose of the Board of Management.

Forthwith after the ratification of this agreement. as provided in said Act. a Committee of

Management, consisting of shall be

formed-

Now let us see what is functions are:

-to insure the operation of the Grand Trunk system, (in so far as it is possible to do so) in harmony with the Canadian National railways,

the two systems being treated, in the public interest, as nearly as possible as one system.

So that, until this property passes, the continued existence of the two systems is recognized, and a Board of Management is created for the purpose of affecting the harmonious working between the two. But there is no provision that the Board of Management is to have the whole control of the Grand Trunk railway.

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UNI L

William Stevens Fielding

Unionist (Liberal)

Mr. FIELDING:

Surely the road is to be managed under the powers granted to the Grand Trunk Railway Company, which would still remain in existence.

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UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

Yes; and the Grand Trunk Railway Company, so far as this agreement is concerned, might borrow any money it wanted. But the point that I am trying to bring home to my hon. friend is that the purpose of this section is to create in the Board of' Management a power to borrow money. The Board of Management without that would have had absolutely no power to borrow any money even though the Grand Trunk Company might have. The purpose of that was to provide that the money which could be borrowed, if the Government ever came to the position where they consented to lend, should be borrowed not by the Grand Trunk Company but by the Board of Management. The whole purpose is to empower the Board of Management, and there is clearly no room for the suggestion that the insertion of this provision in the agreement violated in any way the provisions of the Act. The hon. member for Shelburne and Queen's furthermore claims that all this might have been done at the meeting of the Grand Trunk Railway Company which he said is called for the 29th of this month. The meeting he is speaking of is a meeting of the company and it is called in the manner provided for calling a meeting of the company. If they proceed to deal with this agreement at that meeting they will be face to face with precisely the objection that is made here about notice. You have to give notice of a special meeting to deal with this specific contract.

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L LIB
UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

There is no special

length of notice prescribed in last year's statute for that particular meeting.

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L LIB
UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Mr. DOHERTY:

It is a little difficult to say offhand because a distinction is made between the meeting of the company and a meeting under section 7 of the Act of last year. I have little or no doubt that there is no real distinction between a meeting under section 7 and a meeting of the company. But the suggestion of doubt turns upon it being possible that it is a different kind of meeting. If you have another meeting called under the rules of the company without any specific notice about this and not specifically calling upon the Great Western debenture holders to attend, and who are not required to be called upon, you will not rectify it in that way. If you intend to rectify it you should call something more than a meeting of the Grand Trunk Railway Company, and you should call specifically these Great Western debenture holders who will not have any vote, who could not have anything to say and who would only have to sit down and watch themselves obtaining the guarantee that is to be granted. The method suggested by the hon. member for Shelburne and Queen's would not attain the result which we had in view.

Air. FIEL.DJNG: It would if they gave the notice. My point was that there has been abundant time to give notice and call a meet.ng.

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UNION

Charles Joseph Doherty (Minister of Justice and Attorney General of Canada)

Unionist

Air. DOHERTY:

If we had been aware that the Grand Trunk Railway were calling another meeting, but the Grand Trunk contend that it is entirely unnecessary to hold a meeting to ratify that agreement. I do not know that we have any power to compel them to hold another meeting to ratify that agreement. They say that the agreement has been ratified. In any event, why should we adopt that method, with whatever delay may be involved, when we have, without doing violence to anybody's right, this method of closing up the matter, with the additional advantage that we settle once and for all any possible technical question that may arise, because, even with the best intentions, at the next meeting some other cog may slip and we may find ourselves in the same position. The purpose of this Bill ought to meet with general approval. It is to correct these errors and the consequences of these irregularities and to do it in a way that cannot do anybody any harm.

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L LIB

Jean-Joseph Denis

Laurier Liberal

Mr. J. J. DENIS (Joliette):

Mr. Speaker, if anybody in this country had any doubt last year as to whether it would be profitable for the Government to acquire the

Grand Trunk Railway system, that doubt must have been confirmed, and the people who held the view that the policy of public ownership was a wise one to adopt must be greatly reduced in number since the railway budget was recently introduced into this House by the hon. the Minister of Railways and Canals. When the Bill for the acquisition of the Grand Trunk was introduced last year many reasons were given why the system should not be acquired by the country. One of the reasons given was that the country would have to bear year after year an enormous deficit on account of these railways. At that time no one could tell what the deficit would be on the administration of the railways by the State. We had secured the control and required the property of three great railways, but no one knew exactly what would be the outcome of their ownership and administration by the Government. This year we had a speech by the Alinister of Railways and Canals-a speech which was unique as it was the first utterance of its kind that was ever delivered in Parliament, namely, a speech embodying the railway budget. During that speech we learned that the Government lost last year $47,000,000 on the administration of its railways. If, this fact had been known to Parliament last year is it possible that a majority of members would have voted for the acquisition of the Grand Trunk? We may reasonably draw the conclusion that if these figures had been known last year in advance the majority would not have voted for the acquisition of that railway.

But we are confronted, according to the right hon. the Minister of Justice (Mr. Doherty) and other members on the other side of the House with this proposition: There is no use crying over spilt milk; we 'are in for the acquisition of the Grand Trunk, we have to stay in and we cannot escape. I respectfully submit that we are not bound to that extent. What was the purport and effect of the Bill which we passed last year? The Bill was improperly called a Bill for the acquisition of the Grand Trunk Railway system. It should have read for the acquisition of the Grand Trunk railway ultimately, but -the Bill that was passed last year was passed simply for the purpose, first, of submitting an agreement on the part of the Government of Canada to the Grand Trunk Company; and if the Grand Trunk accepted that agreement then the Bill would give effect to the agreement, and the Grand Trunk would become the

property of this country. Consequently, there was a proposal on the part of the Government of Canada, which proposal had to be accepted regularly and validly by the shareholders of the company.

Now in what position are we placed today? The Government comes to us and says: " The shareholders of the company did not validly, properly and regularly accept the agreement which we have offered to them." It amounts to that, because the ratification of this agreement by the shareholders is either valid or it is void. If that ratification by the shareholders is valid, then the present Bill is absolutely useless, and surely the Government does not pretend that such is the case. If, on the other hand, the ratification by the shareholders is void then the Government is no longer bound by it, nor is the country bound. If the Grand Trunk did not properly, regularly and validly accept this proposal or agreement, then they rejected it. Technically they rejected the proposal, although they might pretend that they did not. The majority might pretend that they are willing to accept the proposal, but technically they rejected the agreement. Therefore, if the agreement has once been rejected we have no business to go to the rescue of the Grand Trunk shareholders. We have no business to go and help them, and say to them: "Well, your ratification was insufficient. The bargain is not yet made, the property is not bought, but we are going to help you along and we will pass a Bill in order to make that ratification valid." We may do that, Sir, if we persist in our proposal to buy the Grand Trunk. If the majority of the members of this House still want to buy the Grand Trunk, if those members are satisfied with the railway budget presented a few days ago by the Minister of Railways, if they are satisfied to take ;the responsibilities of loading upon the shoulders of the people of Canada another twenty or twenty-five millions of dollars a year through the acquisition of the Grand Trunk, then it will be right for them to vote for the present Bill and by so doing they would say to the Grand Trunk shareholders: "Your ratification of the agreement was not valid; we were not bound by your ratification and we could reject it; we could abandon the agreement submitted to you because you have refused it, at least, technically speaking, but we want to buy your property and because we do, we will go to your rescue and we will give you the means to sell your property even when you cannot do it properly, legally and validly."

But, Sir, is that the case? Is it true that the majority of the members will be satisfied to place on the shoulders of the Canadian people an added burden of twenty to twenty-five million dollars a year? If this is true then I say this Grand Trunk transaction is nothing short of a tragedy. After this country has been through a terrible war, after Canada has gone into debt to the extent of over two billions of dollars, when the Minister of Finance finds it impossible to provide the necessary means in order to avoid borrowing and borrowing, when the country is on the verge of ruin, when the majority of the members of this House do not represent the opinion of the Canadian people, I say it is nothing short of a tragedy to see the same majority staying here and carrying on, as they will for two or three years to come, and loading the nation with such a heavy burden. I can quite understand that it would not be very agreeable for certain hon. gentlemen opposite to vote down this Bill. A man always likes-it is according to human nature, it is in accordance with the pride inherent in human beings- to stand by what he has done; and no hon. gentleman would very much like to defeat this year a measure that he had helped to pass last year. But, Sir, are we going to admit that when we come to a question of this size and importance that members of the House are not high-minded, and broadminded enough, and big enough men, to rise in their places here and say: "Last year we voted in good faith for the acquisition of this road, but now that we know these railroads are going to bankrupt the country, now that it is time to stop the country drifting to ruin, we will vote down the acquisition of the Grand Trunk in the same spirit of good faith that influenced us when last year we voted for its acquisition." Sir, if I met any member of the House who would take such a stand I would raise my hat and bow to him, and I would ask his electors and the people of the country at large to accord him that deference, because such a man would be a mighty example of good citizenship to all Canada, as well as to the members of this House. May I say that if, in my own opinion, I had made a mistake in voting down this Bill last year I would be very glad to get up here and say: "I made a mistake; and I would not feel ashamed. I have gleaned new light as to the facts within the past year or within the past few months and now that I see more clearly into this matter I am ready to reverse my judgment." Sir, I believe in the integrity, and in the good faith of the members of this

House. I believe that each and every one of them is here to serve his country faithfully. If such be the case we have a right to appeal to them again, to speak to them as one would address a jury, and to say: " Will you not consider the condition into which this country has been thrown, first by the war, and secondly by this nefarious scheme of securing all, or practically all, of the railroads in Canada?" We have a right ' to come to them and ask them to fairly and squarely consider this question once more; and if it be true that the ratification by the shareholders of the Grand Trunk cannot be valid until it has been validated by a vote of this House, in my opinion it would be only wise, and right and proper for us to say to those shareholders: " Since you did not think fit to give proper and valid ratification to the scheme which we had placed before you, we will drop it." That would be simply a business proposition. No shame to any hon. member would be involved by such a procedure, and furthermore the Grand Trunk Company would not lose anything by it. Is this a question of pride, or is it a question of business? The Grand Trunk Company would not lose a dollar if Parliament should not pass the present Bill and should not help the Grand Trunk shareholders to ratify the agreement which they did not themselves ratify validly.

I do not intend to discuss at length the merits of the Bill as submitted to the House. The Minister of Justice very clearly, and very forcefully, gave his side of the case. To me the whole thing can be stated in two words: Either the transaction is valid or it is not valid. No one can contend that the transaction is valid when the Government themselves say that it is not valid, that there are serious doubts as to the regularity of the meeting of the Grand Trunk shareholders, and that the transaction must be validated by this House.

It may be assumed that if the action of the Grand Trunk meeting was not valid, Parliament is not bound by the agreement, and all we have to do is to withdraw from it and say to the Grand Trunk: "Keep your property; we have made you an offer-a very profitable offer-an offer that was not in the interests of this country." I am willing to admit even that the offer was made with that intention, but the fact is that this agreement will never be of benefit to our people. Therefore we have a right to say to the Grand Trunk shareholders: " We, as the representatives of the people of this country, submitted to you this agreement; you did not think' fit to accept it regularly and validly; consequently we are not bound by

its terms, and we now withdraw, you keeping your property and we keeping our $500,000,000 that we were willing to pay you for this property which is not worth half that money to the Dominion."

Mr. THOMAS W. CALDWELL (Victoria and Garleton, N.B.): Mr. Speaker, I was

very much interested in the explanation of the right hon. the Minister of Justice of the technical difficulty into which this railroad matter has apparently drifted, but I was somewhat disappointed to find that he was hardly sure whether the matter had really drifted into this difficulty or not. The first part of his speech I did not hear distinctly, but it seemed to me that

5 p.m. he was contending that the holders of the debenture stock of the Grand Trunk railway, who, as I understood, were not at the meeting, would not have had any right to vote if they had been there. Therefore there could be no technical difficulty. But later he seemed to come around to the view that there was a technical difficulty. However, I do not want to discuss the technical part of this trouble at all, although I would rather have heard the minister quite distinctly so that I might be a little more clear on that point.

I was more interested perhaps in the criticism by the hon. members for North Cape Breton (Mr. McKenzie) and Shelburne and Queen's (Mr. Fielding) of the whole Grand Trunk scheme, and they reminded me somewhat of the old legend about the quarrel between the pot and the kettle, which were not made of aluminum but wer i of the old black iron variety, and probably they were not very clean either. At any rate, the legend states that one called the other black. I would just like to take the House back to the time when the Grand Trunk Pacific was built, because I do not consider the matter of government acquisition of railroads is so important as the manner in which they are acquired. I would like to point out that we have acquired railroads before, perhaps in a worse manner than we are now proposing to acquire the Grand Trunk railroad, although I think that would be needless because the Grand Trunk proposition to my mind is certainly bad enough, and I think the people of Canada also entertain the same view. As my authority I would quote the report prepared on the Grand Trunk Railway system as well as other transportation systems, by a Royal Commission composed of the present Minister of Finance (Sir Henry Drayton) and Mr. W. M. Acworth. In part two of that report, referring to the

building of the National Transcontinental, I find the following:

The Grand Trunk scheme, first put forward in 1903 under two Acts of Parliament, both dated October 24, 1903, was for a main line right across the continent from Moncton to Prince Rupert. The portion of the line east of Winnipeg was to be built by the Government and leased to the Grand Trunk Pacific Company for fifty years certain, with a possibility of renewal. The portion west of Winnipeg was to be built by the Grand Trunk Pacific Company, with large government assistance. The Grand Trunk Pacific was to build any necessary branches of the system both east and west, and was to operate the whole. The Grand Trunk was to hold, and in fact always has held, the entire share capital of the Grand Trunk Pacific. And the Grand Trunk has had full control of the undertaking throughout.

In fairness to the Grand Trunk it should be observed that the responsibility for the construction of the line from Moncton to Winnipeg, now known as the National Transcontinental, does not primarily rest on them. The proposal of the company, as originally formulated and submitted to the Government, was for a line from the Pacific through Winnipeg as far as North Bay. Government action was responsible for the line being carried eastward all the way to Quebec. And the further prolongation from Quebec to Moncton was added during the passage of the Bill through Parliament.

But though the Grand Trunk did not originate the National Transcontinental, it accepted full liability for it. The agreement between the Grand Trunk Pacific and the Dominion Government provided as follows: " In order to insure, for the protection of the company as lessees of the Eastern Division of the said railway, the economical construction thereof in such a manner that it can be operated to the best advantage, it is hereby agreed that the specifications for the construction of the Eastern Division shall be submitted to and approved of by the company before the commencement of the work, and the said work shall be done according to the said specifications, and shall be subject to the joint supervision, inspection and acceptance of the chief engineer of the company."

Upon this provision the Grand Trunk Pacific Company, in an official publication, " The Grand Trunk Pacific; Canada's National Transcontinental Railway; 10th edition, January. 1912," comments as follows :-

" Since the rental payable by the company to the Government for the use of the Eastern Division is a percentage on the cost of construction, it will be observed that it is a matter of great importance to the company that this item ' cost of construction ' shall be determined on the most economical basis consistent with a well-built railway, in which respect the foregoing provision contained in the agreement fully protects the company."

The company, then, appreciated that " cost of construction " was to it a matter of great importance, and considered that It was lully protected by the terms of the agreement. But as, in spite of the right of the company to approve specifications and the right of the company's chief engineer to supervise and '.nfpcct the work,-

Now, thi3 is what I wish particularly to direct the attention of hon. members to:

-the cost of construction of the National Transcontinental, which had been estimated at $61,415,000, was permitted to reach $159,881,197,-

being $98,466,197 more than the estimate.

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April 16, 1920