September 22, 1903

NATIONAL TRANSCONTINENTAL RAILWAY.


House again in Committee on Bill (No. 235) to provide for the construction of a National Transcontinental Railway.-The Prime Minister. On section 7-Grand Trunk Railway Company may hold securities.


CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

Mr. Chairman, it seems to me that the government is assuming a somewhat peculiar attitude in regard to this whole undertaking. The preamble of the Bill and the recital to the agreement both point to the fact that the intentions of the government in pressing this measure upon the House were to establish an all-Canadian route and to provide for the transportation of Canadian freight at Hon. Mr. FITZPATRICK.

as cheap rates as possible. Notwithstanding that fact, we had the spectacle yesterday of the government voting down all the stipulations suggested on this side of the House which were intended to prevent the diversion of traffic, and we had the spectacle, moreover, of the members of the government sitting 'Silently in their seats without saying a word after it had been pointed -out to them over and over again from this side of the House that the danger, as far as the diversion of traffic is concerned, was to be feared from the Grand Trunk Railway Company, and not from the Grand Trunk Pacific Railway Company. Notwithstanding that, there was an absolute refusal from the treasury benches to impose on the Grand Trunk Railway Company a single one of the stipulations which are imposed on the Grand Trunk Pacific Railway Company by this contract. Not only was this the case, but the hon. Minister of Finance (Hon. Mr. Fielding) was put up by the government, in the first place, to answer the suggestions made on this side of the House, by a reference of matters to fifteen or twenty years ago. After that we had the hon. member for North Norfolk (Mi-. Charlton) put up to deliver speeches, covering, I suppose, an hour, or an hour and a half in all, in regard to grades which were absolutely irrelevant to the subject we were then discussing. We can only assume, under these circumstances, that it is the policy of my right hon. friend (Rt. Hon. Sir Wilfrid Laurier), and of his government, to permit traffic to be diverted from Canadian routes, provided it is to be done by the Grand Trunk Railway Company. Otherwise, surely, there iis no reason for failing to impose upon that railway company some of the precautions which the government have thought wise to impose on the Grand Trunk Pacific Railway Company. That is one aspect of the ease. Another aspect of the case is the one to which I am about to draw attention in connection with 'the amendment I have moved. I gave notice of a motion to this effect, as an amendment to section 7 of the Bill :

That section 7 he amended hy adding thereto the following -subsections :-

Notwithstanding anything in this Act, or in the said agrememt contained, His Majesty the King, -acting as aforesaid, shall not be hound or obliged to -perform, cary out or fulfil any of the covenants, conditions or stipulations in the said agreemnt contained on behalf of the Dominion of Canada unless and until the Grand Trunk Railway Company of Canada shall have subscribed for the common stock of the Grand Trunk Pacific Railway Company payable in cash at par to the amount of not less than $24,300,000.

I understand that the hon. Minister of Justice is willing to accept that amendment, provided I strike out from it the words ' have subscribed for,' and insert in their stead the words 'shall acquire and

take,' and provided also that I shall strike out the words ' payable in cash at par.' I will read the amendment as it is suggested by the kon. Minister of Justice, because I will have to explain to the committee the reasons why I am unable to accept the amendment which is suggested by the government. The amendment as proposed by the bon. Minister of Justice is as follows :

That section 7 be amended by adding thereto the following subsections :-

(2) Notwithstanding anything in this Act or in the said agreement contained, His Majesty the King acting in respect of the government of Canada shall not he bound or obliged to perform, carry out or fulfil any of the covenants. undertakings, conditions or stipulations in the said agreement contained on behalf of His Majesty the King acting as aforesaid, unless and until the Grand Tramt 1 tailway Company of Canada shall acquire and take the common stock of the Grand Trunk Pacific Railway Company to the amount of not less than $24,900,000.

My proposal is that the Grand Trunk Railway Company shall subscribe for the stock at par, and shall incur all liabilities incident to such subscription, hut the amendment which the Minister of Justice is willing to accept does not require the Grand Trunk to incur the liability entailed by subscribing for the stock, and it carefully eliminates the words ' payable in cash at par.' It is, therefore, carefully designed to permit the Grand Trunk Company to acquire $24,900,000 of stock for any normal consideration that the two companies, different in name, though in reality the same, may agree upon between themselves. I am unable to accept the amendment which the government suggests, because it so emasculates my amendment that it takes from it everything of value, and enables the Grand Trunk to obtain the complete control of this railway, without putting more than a few dollars into it. If that is the policy of the government, let us understand It. The policy of the government, as suggested by the alteration handed to me by the Minister of Justice, is, that no matter what comes of this contract, the Grand Trunk Company must have liberty to acquire nearly $25,000,000 of this stock at any consideration that may be arranged between these two companies, which, according to the statement made from the treasury benches over and over again, though different in name, are the same in reality. And after all, the company which is obtaining the benefit of this contract with the government is the Grand Trunk Company of Canada. So far as I could gather from the attitude of the government to-day and yesterday, it intends to establish a so-called National Transcontinental Railway, and to place the line absolutely under the control of a railway which has its chief terminal and its only winter terminal, not in the Dominion of Canada, but in the United States of America. That is the first part of the policy of |

the government, and the second part of their policy is to deliberately permit the Grand Trunk Railway Company to divert to any extent which they desire Canadian traffic from Canadian routes and from Canadian ports. That is perfectly plain, because I got no answer from the treasury benches when I repeatedly asked, what reason there was for not imposing upon the .Grand Trunk Railway Company the same restrictions as to the diversion of traffic which are imposed upon jthe Grand Trunk Pacific Company. I challenge the ministry to give any answer now. I ask my right hon. friend to give one single reason which is not applicable to the Grand Trunk Railway Company with greater force in that regard than it is applicable to the Grand Trunk Pacific. I pointed out yesterday that the danger of diversion of traffic was not through the Grand Trunk Pacific, but through the Grand Trunk at North Bay, at Gravenhurst, at Winnipeg, and even at Quebec and Montreal. The Minister of Trade and Commerce recognized this danger, but the only answer I got was from the Minister of Finance who was put up to talk about dispute under contracts of fifteen or twenty years ago, and from the hon. member for Norfolk (Mr. Charlton) who was put up to talk about grades. Another feature of the policy of the government seems to be to deliberately frame the present Bill and contract so that the Grand Trunk may he enabled to construct a line in the great North-west of Canada at no cost to itself, except the guaranteeing of bonds representing one-fourth the cost of construction. The Grand Trunk obtains the absolute control of that road in the North-west ; it guarantees the issue of bonds to the extent of one-quarter the cost, but it enters into no other covenant or stipulation with the government in return for that great privilege. The fourth feature of the government's policy is to create $25,000,000 of common stock in order that $24,900,000, of that stock may be obtained by the Grand Trunk Railway for a mere nominal consideration to be arranged between the two companies which, according to the declaration of more than one member of the government, are, after all, in effect, only one company. That is what the gentlemen on the treasury benches call making the Grand Trunk Railway Company . * In ' and ' of ' this contract. Well, it is ' in ' and ' of ' this contract in a very peculiar sense. It makes no stipulation with the government; it is at liberty to divert traffic as it sees fit ; it is at liberty to use its own terminals at Portland, and it is at liberty to acquire the controlling interest in the Grand Trunk Pacific for a mere nominal consideration. In return for all that, the Grand Trunk guarantees the issue of bonds to the extent of one-fourth of the cost. We have been told that, from the standpoint of the country's interest, this

is one of the most magnificent and praiseworthy enterprises that any government ever entered into. At an early stage of this debate, the Minister of the Interior pointed out that as regards the western division of this railway there is absolutely no possibility of failure. He spoke of the 50,000,000 acres that are to be opened for settlement in the North-west; he spoke of hundreds of thousands of immigrants pouring into that country ; he declared that the conditions which faced the Canadian Pacific Railway when they built theii road on the prairies were far more unfavourable than those which to-day confront the Grand Trunk Pacific. He demonstrated conclusively that the building of this railway through that western country was one of the best business propositions that had ever been undertaken by anj company. The Grand Trunk is to have-placed at its disposal that splendid business proposition ; it is to have a road built through the North-west at no cost or risk to itself, except the guaranteeing of the bonds for one-quarter of the cost, and in return for that, what does the Grand Trunk give ? It gives no stipulation to the government that it will not divert traffic to American channels. Is the government willing to impose upon it any restriction or condition in that regard ? The government is not willing. It is to acquire a controlling interest in the Grand Trunk Pacific Railway Company. Is the government ready to say that that interest must be purchased for a substantial consideration ? The government is not willing, because we are now dealing with an amendment which seeks to impose on the Grand Trunk Railway Company an obligation to subscribe for that stock at par. The government say they are willing to accept the amendment in this emasculated form, by which it will still be left open to these two companies, in reality one company, to arrange the terms between themselves by which that stock shall be acquired by the Grand Trunk Railway Company. Under these circumstances, in view of this attitude of the government, I am not prepared to accept for one moment this amendment in the form in which it has been handed to me by my hon. friend the Minister of Justice, and I propose to take the sense of the committee on the amendment in the form in which I first submitted it. [DOT]

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The MINISTER OF JUSTICE.

I beg leave to move that the following be substituted for the amendment

2. Notwithstanding anything in this Act or in the said agreement contained, His Majesty the King a-ctimg in res-pect of -the government of Canada shall not be bound or obliged to perform, carry out or fulfl-l any of the covenants, undertakings, conditions or stipulations in the said agreement contained on behalf of His Majesty the King acting as aforesaid unless and until -the Grand Trunk Railway Company of

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

Canada sha-ll -have entered into an agreement with His Majesty -the King acting as aforesaid by which the said Grand Trunk Railway Company shall covenant and agree to acquire and take the -common stock of -the Grand Trunk Pacific Railway Company to the amount of not less than $24,900,000 as in clause 27 -of said agreement provided.

3. T.he Grand Trunk Railway Company of Canada shall hold ith-e -said common stock -to the amount aforesaid so acquired and taken as aforesaid during the entire -term of the lease mentioned in -clause 20 of the said agreement, and -so long as any of the bonds guaranteed by the government under the terms of the said agreement shall remain outstanding and unpaid, and no pledge, transfer or conveyance of any part of -the said stock -during the said period shall be valid or effectual.

My bon. friend, in moving bis amendment, said yesterday in the course of the debate that no answer bad been made to the contention of the opposition that the policy of the government was to allow the diversion of traffic to American ports. I hope my bon. friend will not suppose that if we did not answer bis argument more fully, it was because we did not regard it as serious ; but we recognized that all these matters bad been fully and repeatedly discussed before we went into committee on the Bill. We do not consider that the policy of the government is calculated to in any way allow the diversion of traffic to American ports to go on; but this Bill was framed and this contract entered into for the express purpose of preventing that diversion which has been going on heretofore under the railway policy adopted in past years. We think the effect of this Bill will be to prevent that diversion from Port Arthur to Buffalo and New York, and from Montreal to Portland and Boston ; and we submit that the policy of the opposition, as proposed by the leader in bis scheme, would have had the effect of confirming that diversion, which would necessarily have taken place. The original Grand Trunk scheme would have had the same effect, and of this scheme the opposition approved. The scheme of the government on the contrary, is to have a line of railway extending from Winnipeg to Quebec and from Quebec to Moncton, which will have the effect, if geographical conditions count for anything, of carrying the trade to the ports of the maritime provinces. Nothing that we can say in answer to the contention of the hon. leader of the opposition can be stronger than the terms of the contract itself. By the terms of this contract the Grand Trunk Pacific Railway Company are to construct this road from Winnipeg to the Pacific ocean ; and in order to prevent the Grand Trunk Railway Company, as a result of its control over the Grand Trunk Pacific, diverting the trade to American ports, the government are to own the road from Winnipeg eastward, and to fix the conditions under which it shall be operated. The condition under which this aid is given to the Grand Trunk Pacific

Company is that it shall carry its trade through Canadian channels to Quebec and Moncton. That is provided in the agreement, and the company entered into this agreement and accepted aid on this condition. Any government in this country that would fail to see that the spirit and the letter of that contract are complied with would fail in the performance of its duty to the people of Canada. The Grand Trunk Pacific Company concur in the preamble of this contract, which states that the very object of this measure is to have a Canadian road on Canadian territory to develop trade through Canadian ports. Then, you have that clause in the agreement which says that the condition on which we grant this assistance is that the company shall carry the freight to Canadian ports. Surely the government of Canada is strong enough to see that these conditions shall be carried out. So long as this government is in power, these conditions shall be carried out ; and if hon. gentlemen opposite should come into power, the duty and responsibility would rest upon them, and we have a right to assume, in view of all their contentions in this debate, that they will see that they are carried out. The hon. gentleman says that the Grand Trunk Company is going to construct the railway in the North-west from Winnipeg to the Pacific for its own benefit and at no expense to itself. It seems to me that we have rehearsed the terms of this contract often enough to understand what the true conditions are.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

My hon. friend is not stating it quite correctly. I said that the road to be built in the North-west would be absolutely controlled by the Grand Trunk Company, which would incur no obligation for its construction, except the guarantee of one-fourth of the bonds.

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The MINISTER OF JUSTICE.

I accept that statement. What are the conditions for the construction of the road from Winnipeg to the Pacific coast ? The conditions are that the road shall be built by the Grand Trunk Pacific, that to aid in the construction of that road the government of Canada agree to guarantee a first issue of bonds to the extent of 75 per cent of the cost of construction, provided the cost of construction ishall not exceed in the prairie section $13,000 and in the mountain section $30,000 a mile, and that the Grand Trunk Railway Company, not for its benefit, but for the greater security of the government, shall guarantee all the second issue of bonds to an amount sufficient to complete the construction of the road. That provision, it seems to me, was intended or designed to, and in effect will, protect the government in this first issue of bonds. The guarantee of the government in so far as this first issue of bonds is concerned is in this position, that if default is made with respect to any of the obligations on which

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this first guarantee is given the effect will be necessarily that the road will pass into the hands of the government. That is we become owners of that road to the construction of which we have contributed seventy-five per cent of the cost. And what is the result of the second issue of bonds ? The second issue of bonds then will be absolutely of no value in the hands of the holders, whoever they may be, except in so far as the Grand Trunk Railway Company may make them of some value. Therefore the result is that the Grand Trunk Railway must make that road a success, must see to the performance of all' the conditions under the contract, because, otherwise, they will be responsible for the entire value of that second issue of bonds. In addition to that our first issue of bonds is guaranteed by a mortgage, not only upon the road-which for the sake of argument vve will assume will cost $100,000,000-not only upon the $75,000,000 contributed by the government, but upon the entire $100,000,000 which the road will cost for construction and also upon the $20,000,000 of equipment supplied by the Grand Trunk Pacific. Thus we will contribute $75,000,000, and in case of default the whole road and equipment of a total value of $120,000,000, will fall into our hands ; that is the contract and that is not disputed. I ask is it in the interests of the government or of the Grand Trunk Railway that this provision is made ? Is it in the interest of the government that we should have the Grand Trunk Railway as guarantor of the second issue of bonds, and that the Grand Trunk Railway should be placed in the position that, in the event of default of the first issue, the whole second issue should go by the board ; we take the road with the total equipment, the Grand Trunk Railway take the obligation to pay the second issue of bonds.

With respect to the extension of the road from Winnipeg eastward, the road is to be built by the government, and when it is completed the Grand Trunk Pacific Railway Company will lease it for the period mentioned in the agreement. If the road had been built, owned and operated by the Grand Trunk Pacific, that company being under the control of the Grand Trunk Company, as hon. gentlemen on the other side of the House assume, what would have happened ? That road would have been built by the Grand Trunk Pacific Company only so far as it suited their purpose and as would enable them to divert their trade to North Bay and to Montreal and Portland. What is going on now would have continued and hon. gentlemen opposite wanted that to go on ; they asked for it, and approved of that policy. We on the other hand, say to them: We shall construct a road from Winnipeg to Quebec and from Quebec to Moncton, and will make it a condition of granting aid towards the construction of the western end

that the eastern end is operated. They have to operate it and in default of operating it they forfeit $5,000,000 worth of equipment. And if they are obliged to operate that road are they not obliged to see that it pays. They have not only to pay the cost of maintenance and operation of the road, but also three per cent on the cost of construction. If the Grand Trunk Pacific is in reality another name for the Grand Trunk, as hon. gentlemen oppoisite state, are the Grand Trunk Company not under an obligation to see that that road is operated in such a way that they may derive a revenue sufficient to maintain and operate it and also to pay the three per cent interest ? If they are to do all these things they must get traffic for the road. If they are going to divert the traffic to Portland and United States ports what are they to do with the eastern end of their line ? Where are they to get the traffic which will- enable them to fulfil all the obligations under the agreement ? It seems to me-and I do not say this with any desire to be discourteous to my hon. friends -that we have gone over this ground so frequently that nothing can now be said that will not be idle reiteration. I take it that we must stand by this agreement. Hon, gentlemen opposite put one construction on the agreement, and I wish to say, speaking not in a parliamentary sense, that I believe my hon. friends would not speak as they do if they did not believe in the correctness of the interpretation they put upon the contract. They conceive the agreement to mean what they say it means, and we interpret it to mean what we say ; the country must decide between us. We must stand by this agreement and abide by it.

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CON

Thomas Simpson Sproule

Conservative (1867-1942)

Mr. SPROULE.

If we must stand by the agreement which the government has made, why does the Minister of Justice himself propose amending it ?

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The MINISTER OP JUSTICE.

I propose to amend it myself, with respect to two provisions of the agreement, and I will give my reasons for doing so. One clause provides that the Grand Trunk Pacific Railway Company shall secure from the Grand Trunk Railway Company the guarantee of the second issue of the bonds; another clause provides that the Grand Trunk Railway Company shall acquire the common stock of the Grand Trunk Pacific Railway Company to the extent of $25,000,000. Hon. gentlemen opposite say that the Grand Trunk Railway Company not being parties to the agreement, are not bound by these two stipulations, and on the qther hand, we argue that while these two provisions are not binding on the Grand Trunk Company, as tbe contract stands in law, in effect they are binding upon them because these two conditions are conditions precedent to our obligation to guarantee the bonds. That is to say that unless the Grand Trunk Railway

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LIB

Charles Fitzpatrick (Minister of Justice and Attorney General of Canada)

Liberal

Hon. Mr. FITZPATRICK.

Company take the $25,000,000 of common stock and guarantee the second issue of bonds we are not obliged to do anything under the agreement. My hon. friend the leader of the opposition says that this does not result from the wording of the agreement. He says that it should be made clear. Now I have some regard for the leader of the opposition-I speak with all deference, using these words in his presence-I have some regard for him, and when he expresses doubt as to a contract, I want to set that doubt at rest. He has expressed a doubt as to this contract, and I want to eliminate that doubt and to make it absolutely clear, as we intended it should be, that the Grand Trunk Railway Company should do two things, first, take stock to the extent of $25,000,000, and second, undertake to guarantee the second issue of bonds. That is our intention; that was the intention of the parties to the agreement; I want to make that clear and that is the object of my amendment. I do not consider that by accepting such an amendment I am doing anything that is not praiseworthy. On the contrary, I think it is a complete answer to my hon. friends who say that we bring an iron-clad agreement to this House and will not accept any amendment. We bring the contract here to get such assistance in perfecting it as we can get; the leader of the opposition and the hon. member for Hamilton (Mr. Barker) say that there is room for doubt on this point, and we want to set that doubt at rest. That is the object in accepting the amendment.

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CON

Thomas Simpson Sproule

Conservative (1867-1942)

Mr. SPROULE.

Why not accept the exact provisions of the amendment ?

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The MINISTER OF JUSTICE.

We do not agree as to the length we should go.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

My hon. friend the Minister of Justice will acquit me from any desire to be guilty of tiresome reiteration and if I do reiterate sometimes in this discussion it is because I doubt if I make myself clear to hon. gentlemen opposite, for when they rise to answer statements I have made they usually answer something which I never said at all, and I will take one or two minutes for the purpose of making my meaning clear. I pointed out that when the Grand Trunk Pacific Railway brings freight in the winter from the Northwest to Quebec or to Montreal it can carry that freight 297 miles from Montreal to Portland or 318 miles from Quebec to Portland, and it will be carrying that freight over its own lines and will be earning the entire tolls that will be charged for that distance. In lieu of that you will have the project of carrying that freight to the city of St. John or the city of Halifax in the maritime provinces. If you accept the extreme limit that has been put forward by tile Minister of Finance as to the saving of distance by the new line, you have a dis-

tauce of between 460 miles and 489 miles from Quebec to the city of St. John, and a distance of 586 miles from Quebec to the city of Halifax. Now, will it not be more in the interest of the Grand Trunk Railway that that freight shall be carried over its own line for that short distance to Portland than that it shall be carried partly over the lines of the Grand Trunk Pacific Railway and partly over the line of the Intercolonial Railway to Halifax or St. John ? That is a plain question for the consideration of any business man in this House. Where do the interests of the Grand Trunk Railway in that regard lie ? Will any hon. gentleman on the other side of the House venture so far as to rise in his place and say that it will not be in the interests of the Grand Trunk Railway Company that that freight shall go to Portland ?

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The PRIME MINISTER.

What is the distance between Quebec and Portland by way of the Grand Trunk Railway ?

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

The distance, as I understand it by way of the Grand Trunk Railway, is 318 miles.

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The PRIME MINISTER.

From Quebec ?

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

From Quebec. Does the right hon. gentleman controvert that ?

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The PRIME MINISTER.

Yes, I do.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

What is the distance ?

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The PRIME MINISTER.

The distance between Portland and Montreal is 300 miles, and the distance between Quebec and Richmond is 100 miles, so that the distance between Quebec and Portland must be about 400 miles.

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September 22, 1903