ment exercising the power o£ importing all materials whether directly or through contractors without paying customs duties, so that the company will only he obliged to pay 3 per cent interest on the cost, exclusive of any customs duties.
The answer to this must necessarily depend upon the legal construction of the documents, i.e., the proposed Bill and the executed contract attached thereto. .
By paragraph 1 of the agreement, the government is defined to be His Majesty the King acting in respect of the Dominion of Canada by and through His Excellency the Governor General in Council.
By paragraph 5, the eastern division shall be constructed by and at the expense of the government, &c.
By paragraph 7, the company are specifically admitted to be interested in the economical construction of the eastern division.
By paragraph 15, the expression * cost of construction ' of the eastern division is defined, and, although a large number of specific items are set out, there is nothing that even inferentially could be held to include customs duties. There is nothing whatever said about customs duties ; hut, even if it might be argued that under the words in that paragraph ' costs and expenses occasioned by the construction of the said division whether of the same kind as or differing in kind from the clauses of expenditure specially mentioned, including interest upon the money expended customs duties might be included, this is specifically negatived by paragraph 17, which paragraph is an independent paragraph governing the whole agreement, and every clause in same, including paragraphs 15 and 16, the latter providing for what might be called betterments made from time to time aFter the completion of the said eastern division. This is further made clear by paragraph 20, which speaks of 1 cost of construction ' of the eastern division ' ascertained in the manner defined in paragraphs 15 and 16 of this agreement.'
Further, by paragraph 47 of the agreement, the company have a right to have determined by arbitration any dispute that may arise as to the manner or construction of the agreement, or amongst other things ' cost of construction ' ; and it is therefore clear this question might be raised under this paragraph.
Turning now to the Bill itself by section 2 the agreement is declared to be legally binding upon the parties thereto, i.e., His Majesty and the company ; and the result is that the company are entitled to insist upon the performance of the agreement by the government in as full a manner as the government are entitled to insist upon the performance by the company ; s) that the company have a legal right to contend that the eastern division shall be constructed by and at the expense of the government, in accordance with the paragraphs of the agreement before referred to.
Section 8 provides that the eastern division shall be constructed by or for the government.
Section 9 provides that the construction shall be under the charge and control of three commissioners, to be appointed by the Governor in Council. These commissioners, therefore, merely represent the government, so far as their duties are concerned.
This is further evidenced by section 13 of the Bill,which authorizes the commissioners to enter upon and take possession of lands, the latter Mr. OSLER.
part of the section declaring that such lands shall thereupon be vested in the Crown.
Section 18 authorizes the commissioners to let the work of constructing the said eastern division ; but the proviso in that section declares that no contract involving an expenditure of $10,000 or upwards shall be concluded by the said commissioners until it has been sanctioned by the Governor in Council ; and section 21 enacts that the Governor in Council shall have the power at any time to suspend the progress of work upon said eastern division until the then next session of parliament.
My conclusion therefore is that the eastern division is to be constructed by the government, and that the company could successfully contend that whether the road is constructed by commissioners representing the government or by contractors, to whom the contracts are let by the commissioners or Governor in Council, it is still, so far as the company are concerned, a road constructed by the government and that, therefore, the company are not obliged to take into account In the ' cost of construction ' customs duties which would add to the cost of materials or supplies for use in the road, even if these materials or supplies are imported by a representative or delegate of the government. In other words, the government having undertaken to construct this section cannot add to the cost of construction by having a representative or delegate perform the work and by then charging such representative or delegate customs duties ; the 3 per cent Would, therefore, only be on the cost of construction, less customs duties.
The second question is, what security under the contract has the government against the Grand Trunk Pacific or Grand Trunk, in case at any time the Grand Trunk Pacific or Grand Trunk refuse to operate the eastern division, or to pay the 3 per cent interest ?
In answer to this, the only security provided by the agreement is contained in paragraph 35, sub-clause (c), which is a second mortgage upon $5,000,000 of rolling stock, which is to be ear-marked for the use of the eastern division, that is to say, this is the only special security that the government have in case of default ; of course, the government would outside of this have their rights as an ordinary creditor, subject to all other preference claims.