February 10, 1927

CON

George Reginald Geary

Conservative (1867-1942)

Mr. GEARY:

Is this the four per cent

debenture stock which was adjudged in the arbitration to be of no value?

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
CON

Hugh Guthrie (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. GUTHRIE:

No, no.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

No, these are debentures of the Grand Trunk Pacific.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
CON

Hugh Guthrie (Leader of the Official Opposition)

Conservative (1867-1942)

Hon. HUGH GUTHRIE (Leader of the Opposition):

My hon. friend the Minister of

Railways (Mr. Dunning) asked me if we on this side would assist in expediting the passing of this measure through the House. As it is a proposal which has many apparent advantages, both for this country and for the bondholders who hold those perpetual debentures, we on our part thought that we should do all we could to see that the measure passed through the House with as little delay as possible. I agree with my hon. friend that the passage of this measure will have the effect of setting at rest, upon a satisfactory basis, rather an awkward situation that arose some years ago and has continued to exist down to the present time between the debenture holders in Great Britain or other places and the government of Canada in respect of these debentures. The debentures were originally sold to the public to the extent of about seven million pounds. The government of Canada became the possessor of three million pounds of debentures through a transfer from the old Grand Trunk Pacific at a time when it asked the government of Canada for assistance, and gave three million pounds of those debentures by way of security. The debentures were not only a charge on the Grand Trunk Pacific, but likewise a charge on the old Grand Trunk sj'-stem, but only when the profits on the Grand Trunk system would warrant the payment of the interest on these debentures.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

After prior charges.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
CON

Hugh Guthrie (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. GUTHRIE:

After interest on prior

securities has been provided for. They were not in one aspect of the case of great value to the Dominion of Canada. However, the real value of these debentures has been a matter of a good deal of difference of opinion. Now the arrangement, as stated by the Minister of Railways, appears to me to be made upon a very satisfactory basis. We are paying two per cent annually to the holders of these debentures. We are taking up the old debentures, issuing new ones on the basis of two per cent per annum, and providing an additional two per cent to pay off the debentures, I suppose in some forty or fifty years, although the term is not stated in the resolution. I therefore think it is our duty in this House to carry through this arrangement. It appears to be fair and reasonable in all its terms and satisfactory to all parties concerned to carry it through as speedily as possible.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Hewitt Bostock (Speaker of the Senate)

Liberal

Mr. SPEAKER:

By unanimous consent

this motion is made.

Motion agreed to and the House went into committee on the resolution, Mr. Johnston in the chair.

Grand Trunk Pacific Ry. Co.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
CON

Thomas Langton Church

Conservative (1867-1942)

Mr. CHURCH:

This resolution is one of very great importance, and the minister has not given the House all the information about the particular arrangement made with the shareholders in this connection.

The arrangement is not fair to Ontario. About $122,000,000 credit and $22,000,000 cash were taken out of Ontario by the Grand Trunk and invested in the Grand Trunk Pacific. The Grand Trunk, who were the parent company, brought the government in as a quasi partner and when the Grand Trunk Pacific went to the wall a receiver was appointed. A survey was made by the government and the case heard of the holders of the common four per cent stock of the Grand Trunk Pacific company by a royal commission. The Grand Trunk Railway took all this cash and credit out of the old Grand Trunk Railway in Ontario, when the Liberal government of Sir Wilfrid Laurier sanctioned the construction of the Grand Trunk Pacific through the parent company, the Grand Trunk Railway. On whose credit? Very largely the Grand Trunk Pacific on the credit of the Grand Trunk railway in the old province of Ontario and the federal government. Ontario suffered untold ills as a result of the building of the Grand Trunk Pacific. We have invested over $2,000,000,000 in the publicly owned roads; about half of this is a frozen asset, pays no interest at all and has no sinking fund. If we are going to adopt this principle of allowing the holders of certain stock of a bankrupt road in the hands of a receiver to exchange it for new stock of which the government will guarantee interest, I say it is not in the public interest; it is tantamount to robbing one class of investors in order to pay others-that is, robbing Peter to pay Paul. The construction of the Grand Trunk Pacific impoverished the Grand Trunk Railway to such an extent that for nearly sixteen years Ontario suffered all the inconveniences incident to a very inadequate transportation service by the Grand Trunk system. There was no money for rolling stock or equipment or even for the ordinary betterment of the railway, with the result that the farmers of Ontario suffered very serious inconvenience. I sympathize with the shareholders named in the resolution, but I fail to see why they should be singled out for preferential treatment, especially when the unfortunate depositors in the Home Bank are getting what is little better than pin money. We are being over generous to this particular type of investor.

I am going to vote against this resolution in protest against the scheme of arrangement entered into with the holders of the four per cent debenture stock of the Grand Trunk

Pacific Railway. In my opinion a survey should be made of the whole system. There should be a full investigation of the Grand Trunk Railway and the other railways incorporated in the Canadian National railway system, instead of taking Sir Henry Thornton's word for this or that. It must be remembered that this is not the only company we took over; there are some fifteen or sixteen charters linked up in the one system now known as the Canadian National Railway, all with separate claims and in separate conditions. Consequently if we confirm this arrangement we may have the stockholders of some of the other constituent companies asking for preferential treatment. In my opinion the committee should have more information concerning this particular arrangement, and we should also have a declaration of policy from the Minister of Finance as to how it will affect the deficits of the National Railways and, in turn, the credit of the country. I repeat, Mr. Chairman, I am going to vote against this resolution.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Gavan Power

Liberal

Mr. POWER:

Mr. Chairman, it is not

often that I agree with my hon. friend from Toronto Northwest (Mr. Church) on any subject, but it seems to me that in this case far more information should be given to the House than is at present before us. For instance, I should like the minister to tell us just what legal right the debenture holders have to be paid on this stock; I should like also to know from him just what the arbitration board decided with reference to this matter; and generally speaking, I should like to know why we are disbursing approximately $35,000,000 on stock which apparently is worthless; and, further, I should like to know why we make a reimbursement on this particular debenture stock when there are other stocks and bonds which have been taken over by the Canadian National Railway and on which no dividends are being paid. Apparently there is no chance of ever obtaining reimbursement in those cases. I have in mind bonds subscribed by the city of Quebec and issued by the old Quebec and Lake St. John Railway. If my memory serves me right, the city of Quebec, in order to help the construction of a railway into the northern portion of Quebec, subscribed nearly $1,000,000. In return the city received bonds and also a written agreement whereby it was to be given certain favoured treatment with regard to freight rates. Since this road has been taken over by the Canadian National Railways, the management of the national system has seen fit to repudiate the obligations of the original road, and also apparently to repudiate any

Grand Trunk Pacific Ry. Co.

obligations under the agreement. No interest is being paid, and there appears to be no chance of any reimbursement. Before voting any money as public charity to people who, after all, are not citizens of this country, I would ask the minister to consider very carefully the claims of our own citizens.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Perhaps if I had been

a little more familiar with the procedure it would not have been necessary for hon. members to ask me for information, but I was under the impression when I last spoke that all that was required was a general statement sufficient to justify the House going immediately into committee on the resolution. I did not give a complete explanation of such a complicated matter at that stage, believing in my ignorance that these matters would naturally arise on the various sections of the resolution itself in the committee stage, and that on that occasion questioning would be much easier for hon. gentlemen than when the Speaker is in the chair. Perhaps I am wrong in that regard; if I am I apologize.

First, as to the rights of bondholders. The assumption on the part of the hon. member (Mr. Church) and my hon. friend from Quebec South (Mr. Power), that this proposal has some charitable aspects, is I am sure entirely wrong. These people have rights. Let us examine what they are. We want to be just but, of course, we want also to conserve the interests of our own people. My hon. friends will agree with me, I think, in that regard. These people have, not shares, not stock, but bonds of the Grand Trunk Pacific Railway Company, bonds apparently never maturing and bearing a rate of interest of four per cent per annum. These bonds are guaranteed in turn by the old Grand Trunk Railway Company of Canada. The Grand Trunk Pacific Railway Company, the original issuer of the bonds, cannot pay the interest, nor has it done so. The old Grand Trunk Railway Company has paid interest only in those years when it has earned sufficient, over and above prior obligations, to be able to pay. The last occasion on which interest was paid under the terms of the bond was in 1924, by reason of the fact that in 1923 the old Grand Trunk had earned sufficient, over and above prior obligations, to make payments of interest to holders of Grand Trunk Pacific securities.

Now, I put it to the committee merely as a business proposition-not as a charitable proposition at all-that it is desirable in the interests of Canada and of the Canadian National Railways to get these perpetual debentures into a better position, a position which will permit the termination of the receivership

IMr. Power.]

at present existing in connection with the Grand Trunk Pacific, and which will render our liability in relation to them certain rather than uncertain, as it is at present-a position, furthermore, which looks to the termination of what is at present, and will continue to be, a perpetual lien, unless something of this kind is done.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
CON

Richard Bedford Bennett

Conservative (1867-1942)

Mr. BENNETT:

When was interest last

paid?

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

In 1924, as a result of

192.3 business of the Grand Trunk Railway Company.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Gavan Power

Liberal

Mr. POWER:

Is there any cumulative feature about it?

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

No.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Gavan Power

Liberal

Mr. POWER:

So that we are not actually under any obligation until the Grand Trunk Pacific has earned enough to pay?

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Not the Grand Trunk

Pacific but the Grand Trunk Railway Company.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
CON

John Arthur Clark

Conservative (1867-1942)

Mr. CLARK:

Has the business of the

Grand Trunk Railway Company justified the payment of interest since 1924?

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Certain bondholders allege that it has; we say that it has not.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
CON

John Arthur Clark

Conservative (1867-1942)

Mr. CLARK:

Are the accounts not kept

separately? How did you arrive at the fact in 1924? Is the same system not in vogue to-day?

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink
LIB

Charles Avery Dunning (Minister of Railways and Canals)

Liberal

Mr. DUNNING:

Yes, but there is a dispute, as always is the case in such matters, as to whether the proper system is being followed. Naturally those desiring to collect interest make representations to the effect that if some other system were followed a better result would be shown. In matters of interchange of traffic, and so on, it is difficult to get absolutely accurate figures, but the same principle of accounting has been followed in either case.

Topic:   GRAND TRUNK PACIFIC RAILWAY COMPANY
Subtopic:   SUBSTITUTION OP CANADIAN NATIONAL FOR GRAND TRUNK PACIFIC SECURITIES
Permalink

February 10, 1927