April 18, 1916

CON

John Dowsley Reid (Minister of Customs)

Conservative (1867-1942)

Mr. REID:

I have not gone into that, but it is altogether likely that we shall run a tri-weekly service. We will, at least, run a service that will be satisfactory. We have ordered cars and we are trying to get more power as soon as possible, and I think that what we have done so far and the arrangements we have made for a through service ought to be satisfactory to the House and to the country. So far as the freight for Quebec and St. John and Halifax is concerned, the hon. member knows that we have been carrying quite a large quantity of freight through to' Quebec and to St. John and to Halifax over the Transcontinental via Quebec, where we have a ferry that takes the cars over, and until the bridge is completed, of course, we must use-

3W3

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LIB

George Perry Graham

Liberal

Mr. GRAHAM:

Does not my hon. friend remember that the other day, when he was making a statement about the Intercolonial, he said that freight coming from the West was handed to the Intercolonial at Quebec, and that that was the reason of the congestion? Is it not a fact that the reason why the Intercolonial receipts are so swollen and there is so much congestion is that the freight that comes over the Transcontinental to Quebec is handed to the Intercolonial and does not continue its journey over the Transcontinental?

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CON

John Dowsley Reid (Minister of Customs)

Conservative (1867-1942)

Mr. REID:

My hon. friend, of course, understands the Railway Department better than I do, as he has had considerable experience in it. The Intercolonial railway has a first class equipment, one that could handle any quantity of freight or passengers between Quebec and Halifax and St. John over the entire system. Then the Transcontinental system was handed over and attached to the Railway Department. There was at once taken away from the Intercolonial 75 engines and a large number of cars to run on the Transcontinental. We had not a single engine or any car at all that we could put on that road between Quebec and Moncton. We could not rob the Intercolonial of any more engines or cars.

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LIB
CON

John Dowsley Reid (Minister of Customs)

Conservative (1867-1942)

Mr. REID:

No, because they were required between Winnipeg and Quebec. We had not nearly enough power to get the freight to Quebec; but by getting that freight to Quebec and overworking the Intercolonial equipment, we were able to handle that freight through. That may have been one reason for swelling the Intercolonial earnings; but the hon. member knows that, having taken every engine that we could get to work west, we could not take over any more to put on the Transcontinental. We did use a part of the Transcontinental from Levis down, using the Intercolonial engines, and if we had had cars and sufficient power to use both lines, we would have used them and we would have received earnings from them. I think that is a fair answer to give' to my hon. friend. There is no great advantage in swelling the earnings of the Intercolonial. We want to use both lines to the advantage of the public and of the Government railway system as a whole. If we get the equipment that is already ordered, there should

not be any delay of any freight between Quebec and the lower provinces when we have both lines running, and both lines will be used to ensure that the freight is carried through. The whole trouble has been that there has not been enough equipment. If we can get the passenger service and the equipment ready for the 1st of June, I think the public will be satisfied.

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LIB

William Pugsley

Liberal

Mr. PUGSLEY:

Reading the correspondence and listening to the statement of the minister as to what is on file-and I presume he has brought here everything which is of importance-I think it is very clear that the Grand Trunk Pacific are absolutely in the right in reference to the completion of the contract, in claiming that the time has not yet arrived when they c'an be callled upon to enter into a permanent lease for the operation of the road. It might be just as well to read some of the important portions of the correspondence so that they may appear upon Hansard. In this connection I wish to charge upon this Government that, in my opinion, for the purpose of in some way discrediting the late Government, of in some way making it appear, as the Solicitor General stated to the House when the matter was under discussion at the last session, that the Government had not been careful in making such an agreement with regard to the Grand Trunk Pacific which that company could be forced to live up to, and being desirous of being able to say, as they have been repeatedly saying to the people in this country that, owing to some weakness in the contract, this Government had not the power to compel the Grand Trunk Pacific to enter into a lease, and that that company had defaulted in their agreement, this Government, influenced by that desire, have deliberately asked the Grand Trunk Pacific to do what they knew that company were under no obligation to do. They have not approached the matter in a way in which a government ought to approach any important question such as this. They have not said to the company: we will perform our part of the contract and then we will expect you to perform yours. But, before this road was completed, before the contract had been finished on the part of the Government, the Minister of Railways asked the company to enter into a lease which it was not under any obligation to enter into, and which, as the president said, he could not properly ask his directors to authorize.

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CON

John Dowsley Reid (Minister of Customs)

Conservative (1867-1942)

Mr. REID:

I may remind the- horn, member that all that is in Hansard of last year?

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LIB
CON
LIB

William Pugsley

Liberal

Mr. PUGSLEY:

As one member of the House, and representing that portion of the Dominion which feels that it is being wronged day after day by the action of this Government with respect to the Transcontinental, I feel it my duty to. put the matter again before the public and to press it upon their attention in the hope that this wrong may yet be righted. All parts of Canada are interested in having the Grand Trunk Pacific Railway Company undertake the operation of the line from the Atlantic to the Pacific. It is not a matter only for St. John, Halifax and all other important towns in the Maritime Provinces, but the city of Quebec, and a large portion of the province of Quebec and a .large part of Ontario, and indeed the whole Dominion, is vitally interested in having one operation of this system, and not ,a divided operation with the Government in control of the eastern and the company in control of the western portion.

Take the statement of the auditors, Messrs. Bell and- King, who, apparently, were appointed by the Minister of Railways to deal with this question of the cost of the road. In the letter which is contained in the return, and which is dated 23rd March, 1915, they say:

We beg to call your attention to a letter received from the Solicitor General, a copy of which is hereto attached, from which it appears that the " cost of construction " of the eastern division as completed on the 31st December, 1914, within the meaning of section 20 of the agreement scheduled to the Act of 1903, should not include expenditures made on and in respect of certain works which were still under construction. The result would be that the " cost of construction " as a basis upon which to ascertain the rental to be paid by the Grand Trunk Pacific Company at this date will be very considerably less than the actual cost upon completion of the said additional works now under way.

Here was a contract for the completion and equipment of this line from Winnipeg to Moncton. In March, 1915, the Solicitor General seeks to advise the company that the road may be operated, and therefore it must be deemed to be completed, even though most important works regarded both by the Railway Commission and by the company as necessary to the completion of the line are still under construction, in-

volving an additional cost of several millions. So, you have a clear admission that the road was still uncompleted and the work was still going on. But the question apparently was whether the rental was to be paid on the basis of the cost at that date or upon the cost with the additional works under construction. Of course they held that if a lease was to be entered into at that time it should be on the basis of the cost up to that date, leaving the cost of the works uncompleted to be arranged for later. There is a letter from the Solicitor General dated filth March, 1915, in which he admits, from the statement of the chief engineer, that the Leonard shops were not completed, nor the branch line to those shops, nor the Quebec joint terminals. How could a road be said to be completed until its joint terminals in one of the great ports of the country which it was designed to reach have been completed, I fail to understand. Yet this gentleman who occupies the important position of Solicitor General is trying to make the auditors and the chief engineer believe that the road may be completed under section 20 of the agreement, even though these important terminals which were to form an essential part of the Transcontinental line have not been completed and will cost several millions yet to complete. Nothing could he more absurd. There could be no greater evidence that the Government were simply humbugging, so far as the Grand Trunk Pacific was concerned, and seeking some excuse to proclaim to the country that they had made default to their contract, when it was this Government that had made default, not only in altering the grades but in not completing the line under the contract.

Then we find Mr. Gordon Grant admits that these very important parts of the work have not yet been completed. He admits that in a letter dated March 10, 1915. We have a letter from the Solicitor General on the 6th of March, in which he refers to the statement of Mr. Woods and says'that it is to be noted that Mr. Woods appears to base his refusal-that is his refusal to sign

upon the claim that the road at present cannot he said to he completed within the meaning of section 20 of the agreement scheduled to the National Transcontinental Railway Act 1903. Mr. Woods, X presume, had in mind certain portions-

-not of certain work outside the agreement or outside the Transcontinental line, but

-certain portions of the works-

That means certain portions of the Transcontinental line.

-which at present, or rather on 31st December, 1914, the date up to which audit is being made, may be said to be under construction. I have always understood, both from yourself and from the commission, that although there are such portions that are still under construction the same are not essential, for the immediate operation of the entire line.

We may say with respect to any railway that you can operate it even without station houses. You can operate a railway without a telephone or telegraph line, if you aTe careful, if you do not run more than ten miles an hour and keep a good lookout. You can operate a railway without water tanks, if you carry portable tanks with the trains to supply the engines with water. You may operate your line with one locomotive and one train, if you are willing to run trains one way one day and hack the next. But if your contract requires station-houses every ten miles, terminals at the ports where they ought to be provided -if you are to have all the equipment which belongs to a first-class railway, then, though you might operate your railway, it cannot be said to be completed until the terms of the contract have been carried out. That is what Mr. Woods, the Chief Engineer of the Grand Trunk Pacific, stated and that is what the Solicitor General admitted-that portions of the work were still under construction. And portions of it are under construction to-day; the minister is asking in these very estimates for $1,500,000 to pay for the construction of the Transcontinental line. Yet notwithstading, these gentlemen have-may I be permitted to say-the assurance to tell the members of this Parliament and the people of this country that the Grand Trunk Pacific have made default in their contract and therefore the Government has been obliged to take oveT the operation of the Transcontinental line.

I never heard of any pretense put forward by a Government which had less foundation to rest upon than the pretense which the Government has been putting forward against the Grand Trunk Pacific Railway Company. That company has never made default'. After reading the correspondence from end to end, I say that they have never made default so far as the carrying out of their agreement is concerned; that the fault is on the part of the Government; and that the Government is treating both the Grand Trunk Pacific Company and the people of this country in a

most unfair manner when it seeks to throw the blame upon the Grand Trunk Pacific Railway Company and to make it responsible for the fact that the Government has undertaken the operation of the line. The Solicitor General-oh, what term can I get that would adequately express what' he does? Although he admits that the work of construction is still under way, he asks the Government engineer if he will be good enough to state that, in his opinion, the eastern division was, on the 31st September, 1914, completed so far as was essential to the efficient operation of the entire line at that time. Even although the specification had not been complied with, even although the work of construction was still under way, yet, in order that these gentlemen might get a little kudos for themselves, and throw some discredit upon the late Government and upon the company which the late Government, through this Parliament, created, and make the people believe that the company was in default, the Solicitor General asked the chief engineer to be good enough to state that' the road was completed, when he had before him positive evidence that the road was not completed, but that the work of construction was still under way.

Then we come to Mr. Chamberlin. We will see the ground on which he bases the refusal of the company to enter upon the lease. He says, in a letter of February 15, 1915:

Dear Mr. Cochrane,-I beg to acknowledge your communication of the 3rd instant, in regard to the provisions of the agreement of 29th July, 1903, relative to the providing of equipment for the eastern division. In reply I would call your attention to clause 20 of the agreement, which, as you will see, provides that when completed the said eastern division shall be leased to and operated by the company for a period of 50 years.

Clause 22 also indicated quite clearly that the equipment of the value of $20,000,000 to be provided, of which $5,000,000 worth is to be supplied for the operation of the eastern division, is to be the first equipment " for the completed road." I do not understand that the Government claims that the eastern division is as yet completed in accordance with the agreement, and your other letter to me of the 3rd instant bears me out in this. That being so, you will, I think, agree that it would be improvident and unwise on the part of the company to proceed to acquire under the present unfavourable conditions, equipment involving the expenditure of so large a sum, and which, pending the completion of the line, and to a very great extent, at least, not only remain idle, but materially decrease in value.

Now, is that not a reasonable letter? Is that not just such a letter as any prudent official, having charge of the interests of

the railway company, would write to the Government'. He says:

I do not understand that the Government claims that the eastern division is as yet completed in accordance with the agreement and your other letter to me of the 3rd instant hears me out in this.

This letter of the 3rd I shall read later on. Mr. Chamberlin here positively states that Mr. Cochrane had written to him on the 3rd of February, 1915, a letter in which he admitted that the road was not completed in accordance with the terms of the contract. I find here another letter from Mr. Grant to the Solicitor General, under date of February 15. In it he says, among other things:

I enclose herewith Mr. Woods' letter to me, of the 11th instant, refusing to sign the acceptance and refusing to acknowledge the line as completed.

Surely nothing could be clearer than the ground upon which the company ie putting its refusal, namely, that it is the Goyern-ment that is in default, that it is the Government that has not completed the line but always intimating that, when the Government carries out its part of the agreement, the Grand Trunk Pacific Company will be prepared to carry out its part in *good faith, and to enter'upon the agreement. But, Sir, can you blame a company, can you blame the president of a company, whose duty it is to guard the interests of his shareholders, when he refuses, before the road is completed and before it could be operated in such a way as to earn to the fullest capacity which a completed line would be able to earn, to enter into a lease under which, within a certain period after the lease was signed, the rental must necessarily be paid, and which would involve large obligations upon the company? It was his duty to stand out until the contract was completed upon the part of the Government. He would have been negligent in his duty towards the shareholders, he would have been guilty of a gross breach of duty towards the shareholders whom he represented, if he had departed from the original agreement and bound the shareholders prior to the time when the agreement provided that they should be bound. *On the 11th of February, 1915, Mr. Woods, the chief engineer, writes to Mr. Gordon Grant a letter in which he says:

This is the first intimation I have ever received that even the Government considered ..the line fully completed.

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CON
LIB

William Pugsley

Liberal

Mr. PUGSLEY:

Surely. How can you have a line completed if it is not fully completed? If it is not fully completed, it is only partially completed, is it not? If it is not fully completed, it is partially completed, and yet my hon. friend says: Oh, no, the line is not fully completed, yet it is completed. I think it would require a Philadelphia lawyer, ten Philadelphia lawyers, to explain what the minister means by the distinction between a line being completed and being fully completed. I am unable to discover any difference. This line is either completed or it is not completed. If it is completed, then it is fully completed. If it is not fully completed, it is only partially completed. I can see now what is the trouble with these gentlemen. They have been of the impression that the line might be completed even although it was only partially completed, and, this line being partially completed, they thought they had a right to call upon the Grand Trunk Pacific Railway Company to enter into the lease. Well, I am sorry for the minister if he has been led away by this definition, which must have been given to him by the Solicitor General.

Here is the letter of the Hon. Mr. Cochrane, dated the 3rd of February, 1915. This is a most interesting letter as showing what perhaps he meant by partial completion as distinguished from completion:

3rd February, 1915.

Dear Mr. Chamberlain,-With further reference to my letter of 23rd January in which I enclose a statement of the cost of construction of the eastern division of the National Transcontinental railway, I beg to point out that it is not intended that the item therein inserted as necessary to cover the completion of certain works shall be included at the present time in the amount on which interest should now be calculated.

What may be incomplete is not at the present time an essential portion of the National Transcontinental railway, and it is only upon the cost of the work as completed that it is proposed to calculate the Interest.

What work? The work of building the Transcontinental railway, and that part of the work of building the Transcontinental railway which is not yet completed is, he says, in his judgment, not essential to the operation of the line. As I have said, the same remark might be made with regard to the station houses, the houses of the section men, the water tanks, the telegraph and telephone lines and other things which enter into the equipment of a first-class line of railway. The statement is made by the Minister of Railways and (Canals (Mr. APRIL 19, 1916

Cochrane) that the works which are not yet completed form part of the work of construction of the Transcontinental railway. They were included in the specifications, and form a part of the railway, and he admits that they are not yet completed. My hon. friend from South Renfrew (Mr. Graham) calls my attention to the fact that on a reference to the workshops at Trans-cona and at Quebec he found that both formed an essential part of the Transcontinental railway.

I would like to know what is really underneath this business. It certainly strikes me as a most singular thing that when the Minister of Railways merely acknowledged receipt of the letter sent by the president of the railway company, as long ago as April 15th, setting forth the grounds, which in 'his mind are sufficient, for not entering upon the lease, showing that the road has not 'been completed, that the specifications have not been lived up to, and calling attention to the excessive cost of the road, based, of course, on the report of the two commissioners who were appointed by the Government. We have no evidence of any negotiations; no evidence of any attempt to meet the views of the Grand Trunk Pacific Company in any Way; no evidence of a desire to leave the question to arbitration. Without anything further being said on the subject, this Government makes arrangements to operate the Transcontinental railway itself. That is what the correspondence shows, and it looks to me as if Mr. Gutelius, the general manager, who has the ambition to extend Government operation all the way to Winnipeg, and who may look toward Government operation all the way to the Pacific coast, was the influence behind the Minister of Railways. Or it may be that the Minister of Railways himself is wedded to Government operation, and would like to get rid of the Grand Trunk Pacific and assume charge of this road from east to west. Whatever the reason was, it strikes me as a most extraordinary thing that, without making any reply to that letter, and without attempting any negotiations with reference to it, the Government assumes the operation of this road.

In the remarks which I have made I have felt it my duty to find fault with the Government for the way in which they have treated the Grand Trunk Pacific in regard to these important letters. Let me ask the Minister of Railways if it is not possible to impress upon the Government the desirability of making arrangements to enable

the Grand Trunk Pacific to enter upon the operation of this line If there are any questions still to be settled, let them be taken up and settled. If It will take six months or a year to finish the line so that the Grand Trunk Pacific may enter upon operation, let arrangements be made as I think they could easily be made, to go on and complete the line. Let it be arranged that the seven year period will begin to run from the time the road is completed, so that no injustice will be done to the Grand Trunk Pacific in that regard. Let some arrangement be made under which the Grand Trunk Pacific Railway Company will undertake and carry on the operation of this Transcontinental line all the way from Winnipeg to the Pacific ocean. That is the only way in which we can have a proper service. We do not want divided operation in Canada; divided operation is contrary to the spirit and to the letter of the agreement which was entered into when the contract for the Transcontinental railway was executed. We know that there were many people in this country who thought that the Transcontinental line should have its eastern terminus at North Bay. There were many people who thought it would not be of any great advantage to extend the line east of North Bay, that being the point at which the Grand Trunk' Railway system would join the Transcontinental railway. But those of us who are interested in the development of Canadian ports, both in summer and in winter, and in having the traffic of Canada carried through Canadian channels, took the ground-and to that view my right hon. friend who then was leader of the Government (Sir Wilfrid Laurier) was strongly wedded-that it should be an essential feature in connection with the new Transcontinental line that, as far as possible, all Canadian traffic should be carried through Canadian channels and pass through Canadian ports to and from the markets of the old world.

In the contract it is provided that all tiaffio which is not otherwise -routed shall be carried through Canadian channels. I do not believe that the people of Canada would ever have thought of engaging in this great enterprise if that had not been an essential feature of the scheme. What is this Government doing now? It is proposing, I believe; it is hoping, I believe, that the Grand Trunk Pacific Railway Company will not enter upon the operation oif the eastern division. If that hope is

realized, the Grand Trunk Pacific Railway Company, closely allied as it is with the Grand Trunk Railway Company, will have every possible interest to carry its traffic, not through Canadian ports, but through American ports, and the grand patriotic idea which was at the bottom of this vast undertaking will he wholly defeated. Hon. gentlemen ought not to forget that the Grand Trunk Rsilway Company have a line running all the way from North Bay in the province of Ontario, 'through Ontario into Quebec to the city of Montreal, and from Montreal east to the port of Portland in the state of Maine. They have large terminals there, they have made great developments at that port, and it would be very convenient for them, and, from many aspects, very desirable for them to carry Canadian traffic to the port of Portland in the state of Maine. That is why, as I have said, the late Government determined that they would have the line constructed, not simply from Winnipeg to North Bay, but from North Bay to Moncton, passing through the city of Quebec, and that there should he imposed upon the Grand Trunk operating the eastern division as part of and in connection with the Transcontinental system, so that they would be interested in carrying their traffic through [DOT] Canadian channels .and Canadian ports.

Now, to come back to this Government, I hope they will realise the importance of this question, that they will take it up and endeavour to solve it as speedily as possible. It will be infinitely better for the country, even at some sacrifice, even if they have to make an effort to meet the views of the Grand Trunk Pacific, that the Government and the country should come together and that at the very earliest possible day the Grand Trunk Pacific Railway Company should operate this whole line from the ports of St. John and Halifax through Quebec and all the way to the Pacific ocean. My hon. friend knows very well that there are advantages in many other respects in having only the one system of management, only the one transportation company to deal with, and only one operation between the two oceans. What would the Canadian Pacific have been, in so far as the development of Canadian trade is concerned, if they had stopped at Winnipeg and some other company had operated the line between Winnipeg and the ports of the Atlantic ocean? It would not have been, even to the very slightest degree, the wonderful

factor in Canadian development which that transcontinental railway has been in the past. I believe that the same remark will apply to the Grand Trunk Pacific Railway Company. Get them to engage at once in the operation of the line; make an arrangement with them, a reasonable arangement, such as I know it will be possible to make, for this operation; let them become interested in the development of traffic along the line; and you will have a growth and a prosperity infinitely greater than you will have if you continue this operation by the Government, an operation which for a number of years must necessarily be temporary, because no one can say but what, if this road is completed under the terms of the contract, the Grand Trunk Pacific will then be in a position to take over the road or enter into a lease, and the Government will be ousted from the operation of the line. Therefore my hon. friend must see that the operation by the Government must be of a temporary character, and neither the Government nor its general manager will be interested in developing traffic along the line, in encouraging the establishment of industries and in giving a good service as the company will be interested, because whatever traffic and development there may be in the immediate future will inure in the end to the benefit of the company, which, when the Toad has been completed, will demand that a lease be made and will enter upon the operation of the line.

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CON

John Dowsley Reid (Minister of Customs)

Conservative (1867-1942)

Mr. REID:

I do not like to interrupt the hon. gentleman, but as it is six o'clock, and as there is an arrangement that we shall adjourn until Tuesday next, I would ask the hon. gentleman if he would leave the balance of his remarks until Tuesday, and; I would also ask the leader of the Opposition if he would concur in one item passing now and allowing the other items to remain until 'Tuesday.

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LIB

William Pugsley

Liberal

Mr. PUGSLEY:

If the minister will say to this committee that the Government will take up with the Grand Trunk Pacific Company the question of settling the basis on which the company shall operate the road I will have no more to say; I will not take any more of the time of the House on this question. But if the hon. gentleman will not do that I will not promise just how long a time I am going to take up, because it is of great importance. My hon. friend knows very well how important it is to the people of eastern Canada and the Mara time Provinces.

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CON

John Dowsley Reid (Minister of Customs)

Conservative (1867-1942)

Mr. REID:

I always enjoy the remarks of my hon. friend, and I would do anything to encourage him.

Progress reported.

On motion of Mr. Reid, the House adjourned at 6 p.m. .

Tuesday, April 25, 1916.

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April 18, 1916