June 3, 1914

CON
LIB
CON

Hugh Boulton Morphy

Conservative (1867-1942)

Mr. MORPHY:

I did not say it was a matter of law, and I did not say it was not.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
Permalink
LIB

Emmanuel Berchmans Devlin

Liberal

Mr. DEVLIN:

I want to be just as fair in this discussion as hon. gentlemen opposite, because I can understand the degree of feeling which they have upon this question, and I have given it myself as deep consideration as possible. All my sympathy went out to the depositors who had lost their savings, and I tried as hard as I could to find out, either as a matter of right or as a matter of law, why the Government should recoup the depositors. I would be very glad if the hon. member for Perth, or any other hon. gentleman, would correct me if I misstate any of the facts. But the hon. member for North Perth added, using the words of the hon. member

for Halton (Mr. Henderson), ' This country is rich enough, big enough and generous enough to recoup the depositors '; and he went on to say that, if any loss had been incurred through acts of officials of the department which entailed losses to other parties in similar cases, the Government ought to recoup them as well. I think 1 am quoting the sense of my hon. friend's words correctly. We on this side look upon this measure as being unfair, inasmuch as it singles out one particular bank for consideration, when it is well known that in the past there have been a number of banks which have failed, presumably through the dishonesty of officials connected with them; and the Government, speaking through the Minister of Finance yesterday, gave us the assurance that no consideration would be given to any other bank, because this one was a special case on account of the facts connected with the application for incorporation and the issuance of the certificate. We come then to this point, that, given the facts which have been placed before the House by the Minister of Finance, can we, as the trustees of the people's money, say that there is, on account of certain acts connected with the application for the incorporation of the Farmers Bank, a moral responsibility attaching to the people, and that therefore we would be authorized as their representatives in using $1,200,000 of their money to recoup the depositors of that bank ?

What are the facts ? The bank was incorporated in the year 1904 by 4 Edward VII, chapter 77. The applicants for the Act were James Gallagher, of the village of Teeswater, John Watson, of the town of Listowel, John Ferguson and Alexander Fraser, of the city of Toronto, and Alexander Shepherd Lown, of the village of Drayton; and they are named in the Act as the provisional directors of the bank. I call attention to the fact that these gentlemen were known to be reputable citizens of their respective communities, having every right under the law and every right under the Bank Act to make application for an Act to incorporate themselves into a bank. The bank did not begin operations under that particular Act and in 1905 another Act, 4-5 Edward VII, chapter 92, provided that the Treasury Board, notwithstanding anything contained in the Bank Act or in chapter 77 of the statutes of 1904 incorporating the Farmers Bank of Canada, might within two years from the 18th of July, 1904, give to the bank the certificate required by

section 14 of the Bank Act and it was further provided that if the bank did not obtain the certificate within that time, the rights, powers and privileges conferred on the bank by the Act of incorporation and by the Act of 1905 should thereupon cease and determine, but otherwise should remain in full force and effect notwithstanding section 16 of the Bank Act. Up. to this point the provisional directors were not able to get the fluids necessary to deposit with the Minister of Finance in order to obtain the certificate of the Treasury Board which would permit them to commence business. They came to Parliament and by another Act passed in 1906, 6 Edward VII, chapter 94, the time for obtaining the certificate of the Treasury Board was extended for six months from the 18th of July, 1906, and this Act contained a provision similar to that contained in the Act of 1905 as to the consequence of failure to obtain the certificate within that time and as to the Act remaining in force notwithstanding section 16 of the Bank Act. I desire to call attention to the fact, which was brought out in the evidence and in the debates of the House, that Mr. Fielding objected to the term of one year being allowed; he wished to have the term shortened to six months. I simply note that fact in passing, in justice to Mr. Fielding, if you will, though I consider it to be unimportant for the purposes of this discussion. We have, therefore, the bank incorporated. Section 13 of the Bank Act provides:

So soon as a sum not less than five hundred thousand dollars of the capital stock of the bank has been bona fide subscribed, and a sum not less than two hundred and fifty thousand dollars thereof has been paid to the minister, the provisional directors may, by public notice published for at least four weeks, call a meeting of the subscribers to the said stock, to be held in the place named in the Act of incor-poratioft as the chief place of business of the bank, at such time and such place therein as set forth in the said notice.

Section 14 provides that the bank shall not issue notes or commence the business of banking until it has obtained from the Treasury Board a certificate permitting it to do so, and that no application for such certificate shall be made until directors have been elected by the subscribers to the stock in the manner provided. This is section 15:

No certificate shall be given by the Treasury Board until it has been shown to the satisfaction of the board, by affidavit or otherwise, that all the requirements of this Act and of the special Act of incorporation of the bank, as to the payment required to be made to the minister, the election of directors, deposit for

security for note issue, or other preliminaries, have been complied with, and that the sum so paid is then held by the minister. No such certificate shall be given except within one year from the passing of the Act of incorporation of the bank applying for the said certificate.

It is not necessary for me to quote all the evidence. It has been stated in this debate that the deposit of $250,000 was made up in part out of a personal loan from the Toronto Trusts and Guarantee Corporation of the sum of $80,000. Mr. W. K. Travers, who was appointed general manager at a subsequent meeting of the provisional directors, gave as security for this personal loan notes of the subscribers to the extent of $100,000. $211,000 had been subscribed in cash and out of that amount, as the evidence shows, $41,000 had been paid in commissions and expenses, leaving a balance of $170,000 actually subscribed in cash. Mr. Travers then went to the Toronto Trusts and Guarantee Corporation, got the $80,000, which made, with the $170,000 remaining, the full amount required by section 13 of the Bank Act, deposited it in the Bank of Montreal, got his receipt, and that receipt he gave to the Minister of Finance. Section 15 of the Act does not require that the minister shall receive evidence by affidavit that all the requirements of the Act have been fulfilled. From a careful reading of the section it is apparent that the Treasury Board must be convinced that all the requirements of the Act have been fulfilled; they may be satisfied that these requirements have been fulfilled by the testimony of the Minister of Finance. In this ease what happened? Mr. Fielding was a very busy man, as most Ministers of Finance in this country are. Mr. Travers waited around the city of Ottawa, tried to see Mr. Fielding and could not get an interview with him until a short time before the meeting of the Treasury Board. Mr. Fielding got the opinion from the Deputy Minister of Justice that all the requirements of the Act were fulfilled and that a certificate might issue. The certificate issued in due course and the bank commenced business. I may, perhaps, be permitted to say here that the deposit of $250,000 is not, as it would seem to be understood generally, made as a security for the depositors. The giving of the deposit of $250,000 is simply an assurance that the bank will begin business. To use the words of my hon. friend the Minister of Trade and Commerce (Mr. Foster), who introduced the Bank Act of 1890, it is to prevent unscrupulous promoters from dangling a

bank charter before the eyes of the public. The only security out of the $250,000 which the public have is the $5,000 which is retained under section 17 in order to guarantee the note circulation. Section 17 of the Bank Act reads:

Upon the Issue of the certificate in manner hereinbefore provided, the minister shall forthwith pay to the bank the amount of money so deposited with him as aforesaid, without interest, after deducting therefrom, the sum of five thousand dollars required to be deposited under the provisions of this Act for the securing of the notes issued by the bank.

The $5,000 was retained by the Government as a security for the note issue. The $245,000 was returned to the banks, as in all cases it is returned. Perhaps I might be permitted to say that in 1870, by legislation enacted in this House, the banks, under the Bank Act, were required to have an amount of $200,000 of capital paid up and there was absolutely nothing left them of this deposit. In 1871 a change was effected in the law in that banks had to have a capital of $500,000 subscribed with $100,000 paid up within two years of commencing business. In 1890 the amount was raised from $100,000 and $100,000 within two years to $250,000. This change was effected by the present Minister of Trade and Commerce. At that time Mr. Blake, one of the ablest parliamentarians who ever sat in this House, and Sir Richard Cartwright warned the present Minister of Trade and Commerce that the giving of the $250,000 as it was provided under the Bank Act offered absolutely no guarantee. Mr. Foster answered that, and perhaps in justice to him I might quote that part of the debate which refers to him. It will be found in the ' Hansard ' of the session of 1890, volume 4, page 2243. During the debate upon this point Mr. Foster said:

Mr. Foster: With the exception that the payment is to be a bona fide payment.

Sir Richard Cartwright: It was to have been a bona fide payment before, although there have been cases, and not a few, in which that wholesome provision has been evaded.

Sir John A .Macdonald: It has been done by discount.

Sir Richard Cartwright: That has been done, and it is the duty of the Finance Minister. I suppose, if possible, in this Bill to see that there is no chance of that being done.

The .Minister of Trade and Commerce knew of the possibility of a discounting of notes. It was his duty in 1890, when introducing the actual disposition of the law on which, if there is any case for the Government, they must rest it, to see that that

[Mr. Devlin. 1

provision was so worded that there could not possibly be an evasion of the law. But Mr. Foster says that it is not necessary, that the giving of $250,000 is no guarantee to the depositor, absolutely no guarantee to the depositor, that the only object of the giving of the $250,000 is to ensure the commencement of business of the bank. In view of that I do not see why hon. gentlemen opposite should lay such stress on the fact that the subscription of $250,000 had been made up in part of a loan. Whether that deposit had or had not been made with the Treasury Board, if this bank had been acting upder the law prior to the requirements of a deposit, is there a man in this House who can say, in view o

I should like to go on further. In 1910-11 in the whole debate the members of the present Government and members to your right insisted on having a Royal Commission. For what purpose? The Royal Commission was asked for solely in order to establish at whose door the fault was to be laid for the failure of the Farmers Bank of Canada. I submit thaA if the Royal Commission had not been appointed and if Chief Justice Meredith had not reported, the Government would have had a much stronger case on which to base their request foT the refunding to the depositors of this lamounlt of $1,200,000 than they have to-day after the report of Chief Justice Meredith. The only question that might have been asked of the Royal Commission was: What was the cause of the suspension and failure of the hank. The Government knew all the other fadt3 in 1910 and 1911 when my right hon. friend the leader of the Opposition stated that no Royal Commission was necessary, that we had all the facts relating to the incorporation tthen before us, we had all the evidence in connection with the application for incorporation, we had all the letters which passed between Mr. Leighton McCarthy and the Government, we had the statements of Mr. Henderson, we had the statement of Sir Edmund Osier, that there was nothing else to inquire into. Hon. gentlemen opposite stated: We want a Royal Commission, because we have other evidence to bring before this commission which will prove where the fault Lies, and I quite well re-

member being in (the House at the time. Hon. gentlemen opposite who sat in the House .at the time remember that the present Minister of Trade and Commerce said: We want the commission in order to find out whose fault it was thaJt the bank failed, in order that we may place the blame where the blame properly lies. That being the case and the request for the Royal Commission being for that purpose, the Government must of necessilty accept the finding of the Royal Commission. But the Government in< the appointment of the Royal Commission went out of its way; it asked other questions: first, for an investigation into all material and relevant facts ini relation to the incorporation by Act of Parliament of the Farmers Bank of Canada, of the organization thereof, the .application for, and the giving by the Treasury Board of, a certificate prior to permitting the bank to issue notes and commence the business of banking; the conduct and operation of the business of the bank; the amount of capital stock supplied and paid up; the causes of the suspension and failure and the extent of. liabilities and the value of the assets thereof.

Counsel for the Government went even further Ithan that. It seems to me they went a little outside of the scope of their powers. At page 10 of the report they ask the commission to find:

That there was neglect of duty on the part of the Finance Department after the receipt of the letter of the 17th April, 1907, from G. Van-koughnet, manager of the hank at Milton, addressed to the Minister of Finance, exhibit 5, page 29, and informing him that promissory notes given in payment for shares were being discounted at the bank's branches and the proceeds credited to the head office, which included them in its returns as paid up capital and issued circulation accordingly.

The commissioner answered:

I am unable to find that in this there was any neglect of duty on the part of the department.

The commissioner went further. He said he had been asked to find out the causes of suspension and failure and that he had proceeded to inquire into those causes. The Government had asked the commissioner: Was the failure not possibly due to the action of the Treasury Board in issuing the certificate. In effect the commissioner said: No, the most I can charge against the Treasury Board is an error of judgment. Now what is the error of judgment based upon? Is it based upon the fact 298

that the $250,000 was made up in part of notes discounted, or is it based upon the fact that the members of the Treasury Board should have known of the dishonesty of Travers? It must be based upon either one or the other. It is not to be presumed that the error of judgment could possibly be based upon the fact that the Treasury Board should have known of the dishonesty of Travers, and it must therefore, be the fact that the Treasury Board should have found out in some way or other whether the amount of $250,000 was partly made up of discounted notes. In introducing the Act Mr. Foster said that the deposit was absolutely no guarantee to the depositors, that it was simply an assurance that the bank would begin business, and that had there been no deposit of $250,000 at all with the Treasury Board the bank might have begun business just the same. Would anybody in this House maintain that the depositors have a right to come before this Government and ask to be recouped because forsooth there was a moral responsibility attaching to the Government on account of $80,000 having been borrowed by Travers from the Toronto Trust and Guarantee Company in order to make the deposit up to the full amount of $250,000! I do not want to unnecessarily delay the House in repeating statements or evidence that are already on <-e record. Chief Justice Meredith was appointed a Royal Commissioner to inquire into the conduct and operation of the business of the bank, the amount of capital subscribed and paid for, the causes of the suspension and failure, the extent of the liabilities and the value of the assets of this bank, and he makes this emphatic answer:

Notwithstanding the irregularities on the part of Travers and his misconduct in connection with the application for the certificate, which I have mentioned, the evidence satisfies me that if the bank had been prudently and honestly managed there is no reason why it should not have succeeded. The promissory notes that had been given to subscribers were for the most part good and were subsequently paid, and while it is true that if the certificate of the Treasury Board had not been granted the money of the shareholders and depositors would not have been lost, the efficient cause of that loss was the recklessness and fraud of those entrusted with the management of the bank, and not the granting of the certificate.

Let me ask my right hon. friend was he or was he not serious when he asked that a commissioner be appointed for the purpose of inquiring into the causes of the sus-

pension and failure of the Farmers Bank? Had he faith in his commissioner and was he going to be bound by his finding? If he is, the efficient cause of this loss to the depositors, according to the commissioner, was recklessness and fraud on the part of those entrusted with the management of the bank, and not the granting of the certificate. What is the efficient cause? The efficient cause is the cause which produced the failure of the bank. That being so, I ask hon. gentlemen opposite whether we can in fairness to the people of this country hold them responsible for the dishonesty of Travers and the officials of the bank. If we do it in this case, shall we not have to do it in the case of every bank that fails in this country? Hon. gentlemen say that if a certificate had not been issued there would have been no bank, and consequently no loss to the depositors. The Minister of Finance made that statement. Whilst listening to him, there was running in my head the thought of the recent calamity which has affected the whole Canadian nation, the sinking of the Empress of Ireland. I asked myself whether the Minister of Finance would use the same argument in connection with that disaster. Would he claim that the builders of the Empress of Ireland should be responsible for the loss of life in that disaster, for the reason that they had built the ship and set it afloat? It seems to me the two cases are exactly on a par, and I cannot see any more reason why he should hold the people of this country responsible in the case of the Farmers Bank than that he should hold the builders of the Empress of Ireland responsible for the loss of life incurred in the Empress disaster.

After studying this case as I have studied it, I see absolutely no reason in the argument that there is any more responsibility attaching to the Government for the loss of the sum of $1,200,000 incurred by the depositors in the failure of the Farmers Bank.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
Permalink
CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Hon. T. W. CROTHERS (Minister of Labour):

In the session of 1910 and 1911, on a motion made by my hon. friend from Halton (Mr. Henderson) for the appointment of a Royal Commission to inquire into the affairs of the Farmers Bank, I expressed the conviction that Parliament should do something for the depositors whose moneys had been misappropriated and squandered by the manager of that bank. On further consideration I reached the conclusion that relief should be given to the full extent of

their loss, and I have had no reason since then to warrant a change of mind in that respect. I desire now to say a few words, and only a few, in support of that conclusion, and in justification of the Bill now before us providing for that full measure of relief. I regret very much that the exMinister of Finance will not have an opportunity of presenting his views before the House in regard to this Bill.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
Permalink
LIB

Rodolphe Lemieux

Liberal

Mr. LEMIEUX:

He presented his views before the commissioner.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
Permalink
CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Mr. CROTHERS:

That does not interfere with my regrets that he will not have an opportunity of expressing his views in this House, and in answer to what may be said from this side of the House. I apprehend, however, that his absence does not warrant our witholding from this House and the people of the country the facts of the case fairly and moderately expressed. As the manager of the Farmers Bank. Travers was in substance the Farmers Bank, and the Finance Minister was in substance the Treasury Board, I may refer to these two officials rather than to the respective bodies which they represented. I do not propose to delay the House by going into all the evidence upon which my argument later on will rest, because my hon. colleague the Minister of Finance and my hon. friend from North Perth (Mr. Morphy) have already gone into the facts very fully. L will therefore call the attention of this House to one or two points which I think perhaps have been overlooked. The foundation of this claim, as it strikes me, is the dishonesty of the manager of the Farmers Bank. I propose to contend that it was his dishonesty that caused the loss to the depositors, and that it was a breach of trust on the part of the Finance Minister to allow a man whom he knew to be dishonest to become manager of that bank, and that his granting of the certificate to a dishonest man and placing him in control of trust funds was the real cause of the losses which the depositors have sustained.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
Permalink
LIB
CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Mr. CROTHERS:

I do not think so, but I do not think it makes any difference. At the top of page 8, the learned commissioner, the Chief Justice of the Court of Appeal for the province of Ontario, whose name carries with it large capacity, admirable in-

dustry, and unimpeachable integrity finds as follows:

My conclusion on this branch of the inquiry is that the Treasury Board was induced to give its certificate by false and fraudulent representations on the part of Travers, and that if the facts I have mentioned as to the way in which the $250,000 was made up had been disclosed, the certificate of the Treasury Board would not have been given.

I would like hon. gentlemen to bear in mind that the commissioner finds Travers guilty of false and fraudulent representations, and he might have added ' perjury ' because as every hon. member who has taken sufficient interest in this case to read the affidavit which Travers made to the Department of Finance knows, Travers made a false statement in almost every paragraph of that affidavit. Bear in mind then that at the very outset you have Travers proved to have been guilty of fraud, perjury and deceit. The next paragraph on the same page is as follows:

It is plain from the letter of the Finance Minister to Travers, of 30th November, 1906, that the minister understood that section 13 of the Bank Act would not have been complied with if the $250,000 was made up wholly or in part of money raised on promissory notes given by subscribers for shares to the provisional directors and that he would have felt It his duty to recommend that the certificate should not be granted if he had known that part of the money had been raised in that way.

That that information had been given to the minister before the certificate was - issued appears from the testimony of Sir Edmund Osier and Mr. David Henderson.

And in the next paragraph the commissioner says:

That the verbal information I have mentioned was conveyed to Mr. Fielding was not denied.

It is established therefore by the finding of the commissioner that the Finance Minister had received information from Sir Edmund Osier and, from my hon. friend from Halton that the $250,000 had not been paid in in cash. It is not necessary, therefore, for me to read any portion of the evidence of the two hon. gentlemen of this House who gave that information to Mr. Fielding. The commissioner finds that these two gentlemen of standing, whose word would be accepted by every one who knows them, informed Mr. Fielding of the fact that the $250,000 had not been paid in in cash. In addition to the warning given by these' -two gentlemen, there is the letter of Mr. Leighton McCarthy which has already been read two or three times. Who was Leighton McCarthy? He was a gentleman who had sat in this House for many 298t

years as a supporter of the Liberal party, a man of integrity and standing. On the 8th October, he wrote a letter to Mr. Fielding which has already been quoted several times. But I will repeat it again:

I have been consulted on behalf of a number of subscribers to the shares of the Farmers Bank, and from the instructions I have received a number of subscribers will dispute the bona fide character of the subscriptions. I have not time to-night to give a full statement of the grounds of this request to you,-

In the next phrase he states something, not as hearsay, but as a fact:

-but I beg to assure you that grave conditions have arisen which will require careful consideration before the Treasury Board would grant any certificate for the organization of this bank.

He makes that statement upon his own lesponsibility. He is a man well-known to the ex-Minister of Finance, a reputable member of this House and a distinguished member of the legal profession. We shall see, before I sit down, whether those grave considerations did receive that careful consideration to which they were entitled. So urgent and so important did this matter appear to Mr. Leighton McCarthy that he wired the Minister of Finance on the 11th day of October:

Please wire me assurance in reference to stay of certificate of Treasury Board mentioned in my letter of Monday night.

The Minister of Finance received that letter and that telegram, as appears from a letter written over his own signature that very day in these words:

My dear Mr. McCarthy:

I have your letter of the 8th instant, and your telegram to-day on the subject of the Farmers Bank.

Therefore there is no question about his having received that letter and that telegram. He received both of them. Then we have Mr. McCarthy, on the 9th of October, sending to the Minister of Finance a copy of the writ to be issued and a copy of the special endorsement upon that writ, which have been read by my hon. friend from North Perth (Mr. Morphy) and by my hon. colleague the Minister of Finance (Mr. White). I do not intend to go into those particulars again. I want, however, to add a little to what has already appeared. When this writ was issned, a motion was made for an injunction to restrain these people from further negotiating the promissory notes or from acting any further in the matter. Upon that motion was an affidavit made by William Laidlaw, K.C., of

Toronto, one of the most distinguished lawyers in. that city, in which he corroborated Itbe charges of fraud endorsed upon that writ. When that motion came before the judge in Toronto, what happened? It transpired in the meantime that these men, who were charged with fraud, had gone to the county of Halton by night and returned to the plaintiffs the notes they had given and the money they had advanced. When the matter came up before the judge, the counsel for the defendant informed him that the plaintiffs were out of court; that they had no further complaint to make, and that their notes and the money they had advanced had been returned to them. Therefore that motion fell to the ground.

At one o'clock the House took recess.

The House resumed at three o'clock.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
Permalink
CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Mr. CROTHERS:

When the House rose

at one o'clock I was about to read a few paragraphs from the affidavit made by Wm. Laidlaw, K.C., of Toronto, verifying the charges set forth in the endorsement on the writ of summons referred to by other speakers during this debate. The affidavit lias the same title as the writ of summon' '

I Wm Laidlaw, of the city of Toronto, in the' county of York, the solicitor for the plaintiffs, make oath and say :;

1. This action is brought by the plaintiffs on their own behalf and on behalf of all other alleged shareholders of the Farmers Bank of Canada who may desire to be joined as plaintiffs. And the plaintiffs' claim is:

(1) For the rescission of alleged contracts to take shares of the capital stock of the Farmers Bank of Canada; (2) For an accounting for the money an promissory notes received-or alleged to have been received-in the name and on behalf of the provisional directors of the hank; (3) for an injunction; (4) for a receiver.

I do not propose to read the whole of this affidavit, which contains some twenty rather lengthy paragraphs. I will only read a few of them, commencing with subclause 1 of paragraph 8:

That the agents and solicitors in procuring subscriptions for shares falsely reported that persons had subscribed for a larger number of shares than they had in fact subscribed for, and the following are examples of such false representations, namely: (a) that Robert Noble whose name is entered in the prospectus as one of those who had consented to be a director, had subscribed for shares to the amount of $10,000, whereas he had in fact only subscribed for shares to the amount of $3,000; (b) that John Sproat had subscribed for shares to the amount of $10,000, whereas he had in fact only intended to subscribe for shares to the amount of $1,000, and that he was induced to sign an application in the belief that it was filled up for $1,000 and that

the general manager afterwards claimed that it was a subscription for $10,000, and the said John Sproat then repudiated the entire subscription ; (d) that James Murray had subscribed for shares to the amount of $10,000, whereas he had in fact only subscribed for shares to the amount of $1,000 ; (e) that Dr.

Stewart was subscribing for shares to the amount of $10,000, whereas he was not in fact subscribing for any shares; and other false representations of a similar character in reference to alleged subscriptions of other persons.

(2) That Major Thomas Beattie, represented by the prospectus to have consented to act as a director, had not subscribed to any shares, and refused to he a director, and refused to allow his name to be used in any way in connection with the bank; and the plaintiffs allege that the names of other persons were represented by the prospectus to have consented to act as directors had not subscribed to any shares or given any authority for any such publication.

9. That I attended meetings of the alleged subscribers for shares and have met the plaintiffs-or almost all the plaintiffs-in consultation, and they have stated to me, and I verily believe:

(1) That the agents and solicitors in the course of soliciting subscriptions had falsely reported that other persons who lived in the same district of country, and who were known to he prosperous men, had subscribed for a larger number of shares than they had in fact subscribed for.

10. That I have also consulted with Major Thomas Beattie, one of the persons named as consenting to be a director, and he stated to me, and I verily believe, that he refused to subscribe for shares-that he refused to he a director-and refused to allow his name to he used in any way in connection with the bank; and although I have no positive information I have grave doubt, whether the persons professing to act in the name of the bank had authority from the other persons whose names are mentioned in the prospectus as consenting to become directors.

11. The list which is now produced and marked ' B ' is a copy of a list of subscribers for shares which I received from Robert Noble, one of the persons named in the prospectus, and who is at present absent from the province, and almost all these persons reside in the county of Halton.

15. I have been informed by alleged subscribers and from other sources, and verily believe, that sums of money amounting to one hundred and fifty thousand dollars, more or less, have been paid by alleged subscribers, and that promissory notes for large amounts have been signed by them, and that the persons acting in the name and under the professed authority of the Act of incorporation have been endeavouring to discount or procure a loan by the transfer of the said notes.

I intended to state a little earlier that the Farmers Bank was incorporated by a special Act in the year 1904. That incorporation was good for but one year, unless in the meantime the bank became organized and a certificate from the Treasury Board issued. Not having secured that certificate during the year, application was made in 1905 for a renewal of the charter for another year.

Again, in July, 1906, the certificate not having been secured in the meantime, another application was made for a further extension of a year. The Minister of Finance objected to any further extension, and finally a compromise was effected, and an extension was allowed or given for six months. The Finance Minister, in discussing this matter in the House in March, 1911, was good enough to tell us why he objected to any further extension of the charter. These are his words, at page 5308 of 'Hansard' of March 15 of that year:

My view was that the fact that they had not been able to organize promptly, indicated that they were having difficulty.

They obtained their charter in 1904, and after two years they were unable to get the subscriptions required by section 13 of the Act, or the cash payment of $250,000. And at that time the Minister of Finance expressed his suspicion of the business capacity of the men behind the Farmers Bank, and gives that as a reason why the charter hould not be extended any further.

It is true that these papers were returned to Mr. McCarthy on the 2nd November, 1906. Mr. McCarthy wrote the Finance Minister in these words:

Dear Sir,-Referring to my letters of the 8th and 9th instant with reference to the application for a certificate made on behalf of the Farmers Bank, I am advised by those who are instructing me that the claims made by them in the action brought have been settled by their subscriptions being taken up by some parties interested in the bank and refunding the money paid by the individuals or returning the notes which had been given. The objections which I made on their behalf to the issue of the certificates are therefore withdrawn. Would you mind, therefore, returning to me the papers which I forwarded to you.

On November 7 the deputy Minister of Finance wrote Mr. McCarthy in these words:

Referring to your letter of the 2nd instant, in the matter of an application of the Farmers Bank of Canada for a certificate to commence business, I beg to enclose herewith the papers forwarded with your letter of the 19th October.

On the 7th of November the Finance Department returned to Mr. McCarthy the copy of the writ of summons and endorsement thereon and the affidavit of William Laidlaw, K.C., verifying the charges of fraud set forth in the endorsement on the writ of summons, which charged eighteen different frauds. These papers were never submitted to the Treasury Board, because the Treasury Board did not meet to consider the matter until November 30, while

on November 7 these very important documents were sent back to Toronto by the Finance Department.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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LIB

Edmond Proulx

Liberal

Mr. PROULX:

Had not the action been withdrawn at the time of the meeting of the Treasury Board ?

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Mr. CROTHERS:

Yes. It is said that because Mr. McCarthy withdrew any objections that he had to the issuing of the certificate, the statement made by him in the writ of summons should have no further consideration. If hon. gentlemen will refer to the letter written by Mr. McCarthy, in which he asked for the return of these papers, they will see that the matter was settled by the subscriptions being taken up by some parties interested in the bank, the refunding of the money paid by individuals and the returning of the notes which had been given. As was stated yesterday, the facts are that some of the defendants went out to Halton at night, paid to the plaintiffs the money that they had paid in and returned to them the notes. In that way the action was settled. But that does not help the ex-Minister of Finance; it is the very strongest evidence that the charges of fraud were not empty charges. Eighteen charges of fraud were set forth in the writ of summons and verified by the affidavit of one of the leading lawyers in the city of Toronto. If the hon. member for Prescott were charged with eighteen different frauds, the document containing which charges was on the public files of the court in the city of Toronto or in any other city, would he, being innocent of those charges, go and settle with the men who made them ? No; not if he had a particle of self-respect. No man-having any regard for his own reputation, would settle a case in which he was charged with eighteen separate and distinct frauds, if he were innocent of the charge. He would say: There is nothing in the charges; I will have the judgment of the court exonerate me; I will have the libel filed against me in the courts of this country set aside by judgment of the court. So that that letter, instead of inducing the Finance Minister to drop the whole matter, should have induced him to pursue it still further. If these men were innocent, why did they give back these notes and pay back this money ? That circumstance is the strongest evidence that those who were charged with these frauds were guilty. And what does the Finance Minister do ? That is set forth in Mr. Boville's letter to Mr. Clouston, dated December 3, 1906. After mentioning the fact that the Finance Minister had an

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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LIB

John Howard Sinclair

Liberal

Mr. SINCLAIR:

I find, from an answer that was placed on the table this morning, that within six days from the time that the administration of which the Minister of Labour is a member came into office, they issued a license to the International Bank, and I also find that the Treasury Board of the Liberal Government left a memorandum for the incoming Government containing the statement that the application required further consideration. I understand that this bank has also come to trouble since it was licensed. I would like the Minister of Labour to state to the House what investigation the Government of which he is a member made in regard to the application of the International Bank for a license.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Mr. CROTHERS:

I am bound to admit that I am not familiar with the matter to which my hon. friend refers; it has nothing whatever to do with the question before the House.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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LIB

Rodolphe Lemieux

Liberal

Mr. LEMIEUX:

Did not the Minister

of Labour promise at a meeting at Kirwood, Ontario, during the last campaign, that not only the depositors would be reimbursed but the shareholders as well, and interest would be paid to them.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Mr. CROTHERS:

In 1911, I expressed the conviction in this House that Parliament

should do something towards the relief of the depositors, and afterwards, and on further consideration, I reached the conclusion that that relief should extend to the full extent of their loss.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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LIB
CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Mr. CROTHERS:

I did not say that; I am speaking about the depositors. Speaking to my constituents I told them very distinctly what my views were, and I promised them very definitely that if reelected I would do all in my power to secure that their losses should be paid in full, I made that statement without saying anything about what anybody else's views were on the matter. I was charged afterwards in certain sections of the _press of this country with having undertaken to pledge my party. I never did anything of the kind. I know very well that it was reported that I had said at one or two meetings which .1 had attended something which seemed to indicate that I was speaking for the party, but that is not so. I spoke for myself only and every one who heard me understood I was speuking for myself only. Every member in this House can quite understand that the report of a speech continuing over an hour and a half, boiled down to three or four inches in a newspaper, does not convey, four times out of five, the meaning that the speaker intended to convey. I may say here that when this same section of the press to which I have referred made an attack on me after we came into power, I received, unsolicited, a letter from a leading Liberal who attended one of these meetings where I was reported to have pledged my party, and he said in that letter: I have always voted against

you and I voted against you the last time, but I like fair play; I am one of the victims of the Farmers Bank; I attended that meeting; I attended purposely to see what you might have to say about it; you pledged yourself only and you said nothing about any one else, and on my way home I said to a friend who was with me: we did not get much help from him; he simply promised what he himself would do. I am stating this because there has been some reference made to the matter here and in other places.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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LIB

John Howard Sinclair

Liberal

Mr. SINCLAIR:

The statement which

the hon. gentleman has jusit miade to the House does not correspond to the statement made to the House by the Prime Minister in the session of 1912.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
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CON

Thomas Wilson Crothers (Minister of Labour)

Conservative (1867-1942)

Mr. CROTHERS:

Yes it does exactly,

read it.

Topic:   QUESTIONS.
Subtopic:   THE FARMERS BANK.
Permalink

June 3, 1914