August 16, 1917

CON

Arthur Meighen (Solicitor General of Canada)

Conservative (1867-1942)

Mr. MEIGHEN:

I am willing to trust to the arbitrators, and particularly to the Government arbitrator, the Chief Justice of Ontario. But apart from that, no matter what any bank or pledgee may have loaned against the stock, that is no element in the determination of the value of the stock. But dt was,thought well that inasmuch as they had an interest in the stock, they should be made, with the owners, parties to the agreement, so that all would go before the arbitration board on an equal footing and have a right to be heard. The *pledgees may have advanced $1,000,000, $10,000,000, $20,000,000 or $100,000,000. That may have been their idea of a proper security at the time they advanced the money, but it has no relation whatever at this stage as to what the actual value of the stock may be. I agree with the horn, member for Calgary that'an agreement with the owners of the stock would be an agreement whereby we might determine the value of the stock without reference to anybody else. But it seems to me that it is a little better and a little fairer that all who are interested in this matter should become parties to this agreement, and have the opportunity of going before the Arbitration Board and presenting such evidence that is evidence, not evidence that is no evidence at all; evidence that goes to show value, not evidence that goes to show what they at one time thought they might safely loan against the stock.

The hon. member for Calgary proceeded to refer to some income convertible bonds which occupy a relationship to this company different from the other debentures held against the road.

It Is a fact, as the hon. member for Calgary says, that there exists outstanding $25,000,000 of bonds which are a charge upon the road, and that the holders of those $25,000,000 of bonds are entitled to interest on their bonds only if the earnings of the road warrant it. It is further provided in the body of the mortgage deed which secures these bonds, that the holders thereof may within a limited time exchange the bonds for common stock of the company, dollar for dollar. It is quite true that if this transaction goes through our becoming owners instead of Mackenzie and Mann does not in any way affect the position of the holders of the income convertible bonds. They occupy exactly the same relationship to the company before

this transaction, as they will occupy when the transaction is completed. Consequently, they would be entitled before the first day of January, 1919, if my hon. friend's date is correct, to go to the Canadian Northern Railway Company, which will still exist, and say: "We want shares of stock in lieu of our income convertible bonds." It may be wise to take into consideration in committee whether or not that right should be abolished. I do not consider it a very substantial right. I do not think there is the faintest possibility of their exercising it. What they have now is a bond against the railway, in preference to all the stock, and I do not think they will consider that under government ownership and operation, no matter what the Government may be, that stock is going to be of greater value than $25,000,000 of bonds before the first day of January, 1919. I do not think any man in. this country, or in any country on earth,, will before the first day of January, 1919, exchange $25,000,000 bonds of that road for $25,000,000 of the common stock.

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CON

Richard Bedford Bennett

Conservative (1867-1942)

Mr. E. B. BENNETT:

It is not $25,000,000' of bonds of the road; it is $25,000,000 of claim against income as earned.

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CON

Arthur Meighen (Solicitor General of Canada)

Conservative (1867-1942)

Mr. MEIGHEN:

But, it is secured on the assets of the road. They can only get dividends if the dividends are earned. The bonds are secured on the assets of the road in this way: If the road should ever go into liquidation, or be sold, they would be entitled to rank in their proper order against tne proceeds of the sale. That is the security' they would lose in the event of a change, so that I would regard the possibility of such an exchange within a year and a quarter as being probably non-existent.

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CON

Richard Bedford Bennett

Conservative (1867-1942)

Mr. E. B. BENNETT:

I hope my hon. friend realizes my objection was two-fold. My second point was that it makes these men partners with us in the enterprise.

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CON

Arthur Meighen (Solicitor General of Canada)

Conservative (1867-1942)

Mr. MEIGHEN:

If there were such a

possibility, it might be well for us to consider in committee the wisdom of abolishing that right, but I do not think there is any likely, or even imaginable, possibility of an exchange taking place.

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CON

William Sora Middlebro

Conservative (1867-1942)

Mr. MIDDLEBRO:

Would not that be

an element which would go to decrease the value of the stock?

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CON

Arthur Meighen (Solicitor General of Canada)

Conservative (1867-1942)

Mr. MEIGHEN:

It would be an element which would go before the board of arbitration in regard to the value of the stock. However, it seems to me there are phases worthy of much more consideration than:

the possibility of the holders of the mortgage bonds of the Canadian Northern exchanging them for common stock within the next year and four months.

My hon. friend also referred to the wisdom of giving the Crown the right to refuse to take up the award, by way of a precaution against the possibility of an award that the Crown in its wisdom, or as advised, would deem to he extortionate. I have the most profound respect for my hon. friend's legal opinion, and I understood him to say that it is a common law right of the Crown so to refuse. Whether that be so or not, I think, speaking individually, there is something in the suggestion made by the hon. member for Calgary. It may be a wise precaution that the Crown should reserve the right to refuse to take up an award, should it pro re extortionate. Of course, this is surrounded by some difficulties. At the same time, it seems to be worthy of consideration when we come to review the Bill in committee.

My hon. friend from Calgary proceeded to discuss the whole question of value as it would come before the board of arbitrators, and he seemed to feel that in the determination of value which will come before the board, the principles that will obtain before the tribunal to enable them to fix the value are such that there is grave possibility of a disproportionately large amount being allowed under the exceptional conditions existing at this time. He argues that the two principles upon which they can act are as stated by Professor Swain in his report,

. first, the actual cost of the property to he taken, less the liabilities against it, and, secondly, its reproduction cost, less what may be the liability against it. My hon. friend goes on to show that the reproduction of the physical properties of the company to-day would cost from 50 per cent to 100 per cent more than they cost before the war, and more than they would cost in normal times, and that if that principle is followed we are going to be condemned to a disproportionate price under the submission to arbitration. He also says that if the cost is to be taken it would be unfair to the country, because the cost of the road as built might far transcend what we ought to pay. I want to draw the attention of the hon. member for Calgary to the fact that we are not expropriating this road at all-let me repeat that-we are not expropriating the road. If we were expropriating it, as recommended by the hon. member for St. John, and as urged upon

[Mr. Meighen.I

us by the hon. member for Welland a few days ago-I do not know whether he has changed his opinion since-if we were to expropriate this road, in my judgment the hon. member for Calgary would be quite right, and we would be bound by the principles laid down by Professor Swain in his report. That, however, is just the course we are not pursuing. We are taking the common stock of the company. Would my hon. friend from Calgary say, if the first principle is applied, that the Government of Canada or the people of Canada have anything to fear?

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CON

Richard Bedford Bennett

Conservative (1867-1942)

Mr. B. B. BENNETT:

Since my hon. friend has asked me, I say, yes. The stock having no value as a commercial enterprise, we must have reference back to the physical assets it represents, and I fear the trouble to which I directed attention will arise.

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CON

Arthur Meighen (Solicitor General of Canada)

Conservative (1867-1942)

Mr. MEIGHEN:

My hon. friend sees the point now. We are taking the stock. We are not taking the physical assets of the company at all. If the first principle, namely, that what is paid for that stock is one of the determining principles of value, then of all the hon. gentlemen in this House, the hon. member for Calgary should be the last to fear, because he assured the House three years ago that these gentlemen paid nothing at all for the stock. If that principle is to prevail, we will get the stock for nothing, and the Government will be in possession of the. $60,000,000 of stock free and without price.

Let us proceed to the second principle, the application of which he fears-that the reproduction cost, less liabilities, ought to be a determining factor. That principle has little or no application, when we are expropriating no physical property. No matter what may have been its application in regard to physical property it can have no direct application at all in relation to the common stock. That is why we take the common stock, and that is why we do not expropriate as recommended by the hon. member for St. John (Mr. Pugsley) and the hon. member for Welland (Mr. German).

If we were to proceed in that way, as I think was countenanced in some measure by the hon. member for Calgary (Mr. It. B. Bennett) himself, in his Jater remarks, then these very principles would redound against us and would result in a tremendous payment by this country over and above what there is any possibility of our paying by the method pursued. What the hon.

member for Calgary argued is a forcible and destructive argument against the whole principle of expropriation as advocated by certain hon. gentlemen opposite. It closes the door against following any such course as they adopt, and it shows plainly to the House that the proper course is to take the stock and not the physical assets, because the value of the stock is determined by other factors altogether, outside and above the factors which the hon. member for Calgary has explained this afternoon. It may be, as I am just reminded by the hon. member for Calgary, that in determining the value of the stock, the reproduction value of the road may be considered, that the value of the road as it stands to-day or as it would cost to reproduce it to-day, may be an element that may be of assistance to the arbitration board. No one would suggest that that should be a determining element or that the value that we should pay for that stock should be what it would cost to reproduce the Canadian Northern Railway, less the liabilities against it. Why, there are companies in Canada to-day, as there have always been, and as there are in every country, who have a surplus of assets over liabilities in huge amounts, but who, by virtue of conditions which confront them, cannot pay a dividend on their stock, and could not sell their stock for anything at all. If we expropriate the stock we expropriate the stock, and every element of value and everything that goes to reduce the value of that stock must be considered by the arbitration board that is to determine what we shall pay.

My remarks or. those of any hon. member in this regard will in no way bind the tribunal. I apprehend that, at all events, the Government representative on that tribunal will know the principles by which he will be bound, without dictation from us. But it would seem very apparent to me that while what is suggested by the hon. member for Calgary (Mr. R. B. Bennett) may be taken into account, there must also be taken into account the fact that there is no earning power in this stock, at the present time at least, and that when stock is - put on the market it is the earning power that counts rather than the surplus of assets over liabilities. Furthermore, I should expect that the board of arbitration would take into account the fact that considerable financial difficulties are likely to surround this company before the stock can have an earning power, and while no doubt it

would appear that the prospective earning power would be a factor, the present earning power would be the great factor in determining the value. Indeed everything would be a factor which would be in the mind of an ordinarily shrewd investor who himself desired to buy the stock. Everything that would weigh in the market as to the value of the stock would weigh in the minds of the arbitrators in determining what the country should pay.

If there is one principle which is common to all arbitrations, if there is one principle that, better than another, expresses what is before an arbitration board or an expropriation tribunal, it is that the value of what is to be condemned is the value of that property in a fair and normal market. Consequently the proper way to approach this thing is for us to establish a tribunal which will stake the value, not of the physical assets and deduct from that the liabilities, as would be the case in expropriation, but to take the stock itself and to decide what, in a fair and normal market, all things considered the potential earning power, the present earning power, the assets behind the road, the liabilities behind the road,' all things considered, would be fair and reasonable for this country to pay. That is the course we are pursuing at the present time.

It appears to me that if we were to take the very course recommended by the hon. member for Calgary (Mr. R. B. Bennett) at the close of his address, then the arguments that he urges against this Bill, which are entirely ineffective as applied to it, would come back on his own programme with an utterly destructive force, and would put it completely out of consideration.

The chief contention against this measure on the part of some hon. gentlemen opposite is that we are not following the legislation of 1-914, and that if we pursued and followed that legislation, we should now simply extinguish the equity of redemption by our own arbitrary act and come into the possession of the road. I propose to address myself to that contention for a moment. In the first place, it is generally conceded that we must deal with the stock or deal with the equity of redemption. It is very generally conceded that we cam not permit liquidation at this time, and I do not want to labour that point any longer. It is further conceded, although, in this ' some hon. members opposite do not concur, that we should not continue the giving out of loans as we did in previous yeaTS. I am

certainly interested to hear the hon. members, especially the member for Edmonton (Mr. Oliver), at this stage. He has never been known to agree with the Government on any course whatsoever. No matter what course we pursue he is always able to come immediately to the conclusion that it is the worse possible course to adopt; not only that, but that it is the most outrageous which we ever adopted in the whole course of our history, and each one is worse than the one before. That superlative language he applies to this Bill, and he says that, speaking for himself, he would not take over this company but would continue the loans that we made last year. He would do with the Canadian Northern railway to-day exactly what we are doing with the Grand Trunk Pacific, namely make another loan. It was only a year ago, the last time that we pursued the course to which he now has reverted, that he told us it was the diametrically wrong course to take, that we were throwing $23,000,000 at what he called broken backed companies, and that the time had come then to take over the road .and for the Government to come into possession.

What is to 'be done in the face of an opposition that converts its policy, on a few days' or weeks' or months' notice, simply to be opposed to1 whatever may be the policy of the Government at

the time?

I was amused also at the hon. member for St. John (Mr. Pugsley). It was shown to him that only three years ago there was moved by the right hon. leader of the Opposition (Sir 'Wilfrid Laurier), and seconded by himself, a resolution that the proper course to take then, before we gave any aid whatever, was to make it a condition that we might take this stock and arbitrate on its value, and that there should be a maximum of $30,000,000 fixed. When that was brought home to him in direct contradiction to the policy he advocated to-day he said; Yes, but three or four days before that, on the second reading, I moved something else altogether; I moved a long amendment to the second reading providing for a great many conditions, and this motion on the third reading should be read in the light of the motion on the second reading. And the reason he gave for the change in the motion as moved by the leader of the Opposition and seconded by himself was that it had to be changed in order to comply with the rules of Parliament; in a word, that he could not move

the old amendment to the third reading as it would be ruled out of order, and the reason they changed their policy was that they had to change it to keep straight with the rules of the House. That is the newest argument I ever heard, and I commend the ingenuity of the hon. member for St. John. I invite him to apply to all these changing attitudes on the part of the Opposition, the explanation that they have to change their policy in order to comply with the rules of the House of Commons.

We had first, three years ago, a motion by the hon. gentleman from Middlesex to wait until the following session, though he admitted that that meant liquidation. Next we had a motion to refer it to arbitration. Then, immediately this Bill was brought down in this House, we had the pronouncement by three or four hon. gentlemen opposite that it should be dealt with by expropriation before the Exchequer Court, and we now have the amendment by the hon. gentleman from Renfrew (Mr. Graham) that we should abandon the firs?, second and third propositions, and resort to confiscation. First, procrastination, then, arbitration, then expropriation, and lastly confiscation. Such have been the policies of the hon. gentlemen opposite with regard to this railway: We did not provide for confiscation in 1914, and I hope the Parliament of Canada will never provide for confiscation, so long as Canada is a country. We provided in 1914, as one condition of the assistance we gave to the Canadian Northern, that they should place themselves within the power of this Parliament, and should submit their equity of redemption to the disposition of this Parliament. The clearly expressed meaning of section 24 of this Bill is that the equity of redemption, by consent of the company, is disposable by the Parliament of Canada, on such terms and conditions as Parliament should see fit. Now, we have to determine what these terms and conditions shall be.

It is true we have power to confiscate, but I ask, what principle should govern this Government? I answer that the principles that should govern us in disposing of the equity of redemption are the clear principles of equity and honour, and not the principle of confiscation.

It has been argued that, by the legislation of 1914, as interpreted on behalf of the Government in this House, automatically, upon default, the equity of redemption vanished by Order in Council. Where is such a provision to be found in that legislation, and who said it on the floor of the House? Certainly I never said it. I invite hon.

gentlemen, and particularly the hon. member from Pictou (Mr. Macdonald), to point to any sentence I uttered on that occasion which, by any possibility, could be so interpreted.

We took no such power. We made no contract to automatically extinguish the equity of redemption. Is that done in ordinary life? When payment on a mortgage is in default, is the mortgagee given power to say that the equity of redemption is 'at an end, and that he can extinguish it or appropriate it to himself? Is that Common Law? No, the mortgagee is compelled, by the courts and legislation of our country, to determine the value of the equity of redemption, and to see that the mortgagor gets that value. How is the value determined? It is determined by compelling the mortgagee to put the equity of redemption up for public auction, and the highest bidder becomes the owner of the equity of redemption. In ordinary life that is determined in a fair and reasonable way, by so disposing of the equity of redemption. Is that method available to us to-day? Should we (have applied the method ordinarily applied in disposing of real and personal property? Will anybody 'suggest that we should have done it? It might have been done, and if it were what would be the result? Who in all probability would have been the highest bidder for this stock, which represents the equity of redemption of this company, if the Government had put it up for sale at public auction in the open markets of the world, even under conditions such as the present? I do not hear any answer, but I know what is in the back of the head of the hon. gentleman from Pictou (Mr. Macdonald). The answer would be: the 'Canadian Pacific Railway. And why? Because the Canadian Pacific has more to gain by the purchase of that stock and the stock would have been worth more to them than to any other individual or company upon earth. The fair and inevitable presumption is that a resort to the method suggested would have landed that stock in the possession of the Canadian Pacific Railway. Could thiis Government ever have pursued that course? Would that have been in the interest of Canada? Do hon. gentlemen opposite think that should have been done? We had the power to dispose of that stock and equity of redemption as we liked by the legislation of 1914. That course was closed to us by the ordinary principles of national prudence, because this country

would not now be a party to the amalgamation of the Canadian Northern with the Canadian Pacific. Consequently, some other method had to be adopted, and I appeal to the fairness of hon. gentlemen everywhere in this House and out of it, and I ask would it have been right, or decent, or honest, for this country to have stood between the holders of that stock and the purchasers of that stock, denied them a sale, and said to them: Your stock is

of no value and we will appropriate it. That is confiscation, and that is the policy-and I hope the last policy-of hon. gentlemen opposite. "Oh," they say, "you have a commission, and that commission says the value of the stock is non-existant." That is the Drayton-Acworth Commission, which was appointed to investigate the whole of the affairs of three railways in this country, and to recommend to the Government what they deemed to be the better course to pursue in regard to those roads. It was not a commission appointed to determine the value of anything for purposes of appropriation. It was not a commission before whom the owners of that stock could be heard. Who ever heard, in any Parlia-unent in any country on earth, of the value of property being determined without the owners being heard at all? Who ever heard of resorting to the report of an ex parte commission to determine the value of property in this or any other land? But the hon. gentleman from Renfrew (Mr. Graham) is in a most remarkable position. Hesays:

I do not care whether this Drayton-Acworth report is right or wrong; it is contended by the Canadian Northern-and that has been referred to by tne Minister of Finance-that there are errors in the estimation of the assets and of the liabilities of the company, but I do not know whether the Canadian Northern is right or wrong, or whether the Drayton-Acworth report is false or true. He says furthermore: I do

not care, because the amendment which I have moved does not depend on the truth or falsity of the Drayton-Acworth report. But the fact is that his amendment asks this House to decide that because the Drayton-Acworth report declares the equity non-existent, therefore it has no value, and we should confiscate it. So the hon. gentleman from Renfrew is in the position before this House and the country of saying, "On the face of that report, which may be true or false-and I do not care which-I ask this country to confiscate the property, and, without compensating them in any

way, make it the property of this Government."

That is not the course that tells in the end for the advantage of a nation. We are to be a borrowing country for years to come. We will require to borrow immediately after the war, and from the present time until the war ends. Are we going to make thi$ a borrowing country by confiscating property? This property is not all held by Mackenzie and Mann, and never was, so far as I know. I am not on record as ever saying that Mackenzie and Mann owned all this stock at any time. I do not know exactly what they owned in 1914, nor exactly what they own now, but in 1914 they controlled the stock, and they control the stock to-day. They have, I understand, approximately 51 per cent of the stock, and the Government of Canada has 40 per cent of the stock, so that approximately 9 per cent of the stock is held outside. In many cases considerable sums were paid for the stock; I do not know what has been paid for it. I do know, however, that a substantial portion of the nine per cent is held overseas; is held by persons over whom Mackenzie and Mann have no control whatever. Are we, in view of the report of a commission before whom neither Mackenzie and Mann nor any of these stockholders were heard as to the value; before whom these men overseas never appeared and never could appear; are we ruthlessly to gather in their property and make it our own without paying a dollar for it? That is the amendment to which the leader of the Opposition, I suppose, presumes to commit his party. 1 do not know what he will have to say for himself in the presence of the people of Canada. Did he ever in the course of his administration-to his honour, be it said, he never did- on the report of any ex parte commission, confiscate the property of any man? Why does he offer to do so to-day? I will tell you, Mr. Speaker, what is really at the bottom of this resolution. Illogical it is; confiscatory it is; damaging it is to this country; utterly indefensible it is from every point of view. It is introduced into this House simply because a certain convention in the city of Winnipeg-a convention by no means of happy memory; a convention that many hon. gentlemen in this House will have reason to be glad to forget-in the haste of the moment decided that this was the course to take; that this was one of the ways to line the convention up against the Government. That is why this amendment is intro-[Mr. Meighen.J

duced and this Parliament solemnly asked to vote for it. I should like to see the communications that passed between the hon. member for Edmonton (Mr. Oliver) and the leader of the Opposition with regard to this matter-perhaps they would account for the remarkable attitude of the member for Edmonton in respect to this amendment. A year ago he said: We ought to take over the property; to-day he says that we ought to continue to make loans, that we ought not to take over the property at all. Now he is going to vote for an amendment which says: We must take over the property and confiscate the value of the shares. Three positions in twelve months, in order to get in line with this historic convention that has done dishonour to the part of Canada from which I come. Certain hon. gentlemen opposite will be sorry that they ever were within the four walls of that convention hall.

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LIB

Wilfrid Laurier (Leader of the Official Opposition)

Liberal

Sir WILFRID LAURIER:

I assert here, upon my word, that not a communication passed between the member for Edmonton and myself during that convention, except what was published in the papers.

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CON

Arthur Meighen (Solicitor General of Canada)

Conservative (1867-1942)

Mr. MEIGHEN:

Except the famous telegram?

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LIB

Wilfrid Laurier (Leader of the Official Opposition)

Liberal

Sir WILFRID LAURIER:

Except that.

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?

Some hon. MEMBERS:

Hear, hear.

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CON

Arthur Meighen (Solicitor General of Canada)

Conservative (1867-1942)

Mr. MEIGHEN:

Did the right hon. gentleman's telegram, which expressed the view that the resolutions were highly satisfactory, cover this resolution with regard to the Canadian Northern Railway stock?

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LIB

Wilfrid Laurier (Leader of the Official Opposition)

Liberal

Sir WILFRID LAURIER:

I had not seen the resolution at that time; I must say. It referred not to that resolution, but to another.

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CON

Arthur Meighen (Solicitor General of Canada)

Conservative (1867-1942)

Mr. MEIGHEN:

I have been in doubt whether the words "highly satisfactory" referred to that illustrious war resolution, or whether they had general application. However, that point is cleared up at last. As there has been no request from the hon. member for Edmonton or from that convention that the leader of the Opposition depart from the principles of his own political life; that he depart from all the many policies that he has enunciated with regard to the Canadian Northern and resort at last to confiscation as the policy of his party, I hope that he himself will be found voting against this amendment. If it is not found in party necessity, certainly there is no reason for the amendment, either in justice or in common sense.

The terms of the agreement which will follow this measure will be entirely within the jurisdiction of and may be dictated by the Government; the shareholders, if they do not adhere to the terms stipulated in the agreement, will have to submit to the other alternative. Under the agreement the Government and the people of Canada will become, in effect, the owners of some 9,500 miles of railway and of about twenty-nine different companies operating various national utilities in every part of Canada. In proportion to our population, we become I think, the owners and operators of the largest system in any country in the world. We are .entering upon a tremendous undertaking, an undertaking that will demand the energy, the co-operation and the strength of the Canadian people; an undertaking that will be difficult, but which, if it fairly succeeds, will redound to the honour of this country. I know that there are objections to government ownership and to government operation. I believe that those objections are largely removed by retaining the corporate entity instead of providing for direct government ownership and operation. That is a fundamental requirement of the Drayton-Acworth report and of the Smith report; and that is why in the main, we adopt this method of disposing of the equity of redemption. If we followed specifically the Act of 1914, the Canadian Northern Railway Company would still continue to exist but it would not own the Canadian Northern Railway; that would be owned directly by the Government of Canada and would require to be operated by the Government or be subjected to the control of a new company created for the purpose. The method we follow under this Bill is in principle and in substantial effect the method devised and outlined by section 24 of the legislation of 1914. If we followed it literally rather than in this parallel way, we would for all practical purposes abolish the company; we would become directly the owners of the road. Furthermore, if in disposing of the equity in that way we had resort to arbitration, it would be the physical value that would count; we would not get the advantage that we get by bringing the matter before an arbitration board in the form of stock rather than in the form of an equity. We get an advantage by taking the stock instead of taking the physical road. Therefore, while in principle and in effect we follow precisely the line of section 24 of the Act of 1914, we do not follow it literally. [DOT] In this way we meet

the fundamentally important and essential condition laid down by the Drayton-Acworth report and we avoid the disasters pictured this afternoon (by the member for Calgary (Mr. Bennett).

I invite the House, therefore, to the consideration of this Bill as it is, and to the adoption of the motion for the second reading. When we get into committee the subjects brought to our attention by the member for Calgary can be fully and in detail considered. In my humble judgment, we are indebted to him for directing our attention to some of the points to which he referred, which may well receive favourable consideration at the hands of the committee. In the main, however, the principle of this Bill is sound. It is better to take this step rather than to continue making advances to the road. There will be disadvantages, but rather than continue as we have been doing we had better take this step. The public, I believe, demand that we do so. The public have a right to say whether we should allow the private management to continue, or whether we should enter upon public ownership of this road. That is what the second reading of this Bill means.

The passing of this Bill will mark a tremendous advance in the domestic affairs of Canada. It will put this country in a position of advance, perhaps, of any other country in the world, outside of Germany, in respect of government ownership of utilities. It will enable us to show, once and for all, whether government ownership of a tremendous enterprise like this is or is not a sound principle

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CON

William Folger Nickle

Conservative (1867-1942)

Mr. W. F. NICKLE (Kingston):

Mr. Speaker, my views on the principle of the Bill before the House aTe so well known that probably little would be gained by my taking up the time of the House this afternoon in enlarging upon them. As I realize that it is desired that a vote should be taken before six o'clock, I shall occupy the attention of the House for only a few minutes.

In 1914 I directed some attention to the subject now under discussion, as to whether or not it was advisable that Canada should take a first step in the acquisition of her railroads, or whether it was advisable that we Should go on as we have been doing for many years, that is, subsidizing the railroads in this country. At the time I spoke in 1914, I had given some consideration and research to the problem of public ownership of railways in Canada,

and I was not unaware of ithe divergence of viewis there had been in the .past as to whether or not government ownership was a wise thing in this country. I quite appreciate the fact that, in the early days, Papineau, the great French leader, was opposed to public ownership. I realize also what a struggle there was in the 50's .and 60's in Canada as to whether the Government should themselves construct or whether they should permit private capital to construct those great new highways of steam that were coming into existence. Any one who has read the history of Nova Scotia cannoit be blind to the fact that Joseph Howe, that brilliant statesman, put up a magnificent fight that the railroads should belong to the people; that they should control those highways, and he felt that otherwise, in the days to come, they would be a source of corruption and irregularities in the public life of Canada. Sir Francis Hincks, the Inspector General of Upper Canada, seems to have held very divergent views on the subject. In the early days he was in favour of public ownership of railroads, but after coming into contact with .a great contracting firm in England, he seems to have changed his views, and when the project of the Grand Trunk railway wias launched in Upper Canada he leaned to the view that it should be constructed by private enterprise rather than by the Government. It is, however, of very little avail to discuss to-day the question as to which of those men were right or wrong. When one compares the history of the 60's with that of 1917, one must be impressed by the fact thiat the men of the former generation had exactly the same problems to face that confront u-s here to-day. Subsequently to the construction of the Grand Trunk railway, Canada was confronted with the problem whether she should take over the railroad or whether she should give aid. She guaranteed bonds; she gave subsidies; she assisted in every way possible the needs of the railway, but the lessons of those days seem to have been forgotten in the later period of our history, and we havte plunged into an orgy of giving cash subsidies and guaranteeing bonds that has brought us for solution the problem which the men of the sixties had to face.

To give the House some idea of the progress Government ownership and operation of railroads Las made, I might direct the attention of the House to the fact that in 1880 there were in the world only 10,000

miles of railways under Government operation and ownership, whereas at the present time there are 225,000 miles of railways under Government operation and ownership. Sweden, Germany, Italy-practically all-in all 55-the great countries of the world now own or operate their railways. I would be wrong if I were to say that they all do, because I would leave out the two great countries of the world that have not yet adopted a policy of government ownership. I refer to Great Britain and the United States, and yet the trend in that direction is so strong that it was but a year ago, when I was at a lunch given, by Sir John 'Hadfield'e firm to certain visiting parliamentary delegates in England, that I heard Sir John Hadfield say that, if England were to maintain her position in the industrial world after the termination of this war, it was absolutely necessary that she should control and operate her railroads. The war has demonstrated that this is practical and possible, because when the war broke out and England realized that she must control [DOT] her transportation, she took over and put under the control of the managers of the railways, representative business men and representatives of the War Office, the entire railway undertaking of Great Britain, and I do not believe any man will deny that that course has worked satisfactorily and well. The United States still maintains a system of private ownership and operation. That system is well entrenched there, and the railway interests have a great hold on the legislative bodies of the United States. I cannot say how soon that hold will be loosened. My good friend from Calgary (Mr. R. B. Bennett) this afternoon drew the attention of the House to the fact that many of the American railroads had gone through the hands of the receivers, and that would seem to indicate that private ownership in the United States has not been the success that might be desired for it. We in Canada, in taking over this railway, are taking a great step forward, and if I understand aright the purport of the Bill, there are two great principles in it. The first is that Canada should assume the ownership of this rail-wtay, and indirectly, through a board of directors, operate it, the object being to have the advantage of public ownership without the disadvantages, to free the railroad as far as possible from political influence or interference. The other great underlying principle of the Bill is that, if the stock has any value, the men who own the stock should be paid for their property.

As to the first principle, I think I have made it abundantly clear that I approve it, and as to the second principle, I wish to take the same position as I took in this House an 1914, and that is, if Mackenzie and Mann-I do not think there is any gentleman here who is carried away with the belief that I have any serious love for them-can prove that this stock has any value, they should be paid for it. That is my position here this afternoon.

I am opposed to the amendment as offered by the Opposition, because I think it enunciates the principle that, because a tribunal, on ex parte evidence that did not represent the views of all interested, reached the conclusion that a man's property was worth nothing, the State, by the inherent power that it has, should deprive that man of his property, without a hearing and an opportunity to prove its value. That is not sound, and it is not a wise doctrine to promulgate in this country. Whether this matter should be referred to the Exchequer Court or whether the value of this road should 'be determined by arbitration is a question on which much might be said on either side. That is a matter of detail. But if a tribunal is properly constituted-'and that is indicated by the fact that Sir William Meredith is to represent the Government on it-the matter will be fairly investigated and a fair price reached for the stock of the Canadian Northern railway.

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Subtopic:   'COMMONS
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LIB

Edmond Proulx

Liberal

Mt. PROULX:

May I ask , a question?

'Mr. NICKLE: If my hon. friend will allow me to proceed, I'will answer questions after I have finished my remarks. My hon. friend from Calgary (Mr. R. B. Bennett) stated that we should not enter upon .the project of acquiring shares by the method mentioned in the Bill which, involved the introduction into the transaction of third parties, pledgees of stock. His point does not impress me, and I am not influenced by the same fear with which he is seized. The mere fact of making the pledgees parties to the agreement in no way enunciates the principle that, because the pledgees have advanced money on a stock, ipso facto that stock has a value. In my judgment, it makes no difference in the world as to the value of a stock whether, if it is handed over to me as collateral security, I advance 75 per cent on it, or whether I advance 10 per cent. If the stock is to be taken over by arbitration, the inherent value of the stock, not the amount of money I advanced on it, is the determining factor, and if I understand aright the principle of the Bill, that is what the Minister of Finance understands by the second paragraph of section 4. In fairness to the pledgees, he further says: if you wish to appear before the tribunal and be heard, that is your privilege. You have advanced money on this security and you have certain rights. I do not purpose taking those rights away from you arbitrarily and without your being heard, hut the value of the stock is in no way determined or influenced by what you advanced, its value is what it is worth to-day in the markets of the world as a stock.

I am not so confident, however, as to whether or not the hon. member for Calgary is not right in his second position, namely, that the cost of reconstruction is not something that might well be directed to the attention of the arbitrators in determining the value. You will observe, Sir, that subsection 2 of paragraph 4 says:

The said arbitrators shall determine thle value of the said six hundred thousand shares as of the date of the said agreement, and the said arbitrators shall proceed in a summary way and may apply their own judgment in determining such value, and may receive witn respect thereto such reports and statements authenticated in such way as they may decide and such evidence as they may deem necessary or helpful, examine witnesses under oath and hear parties by counsel or representatives, and the unanimous determination of the arbitrators shall be final.

It seems to me it might be advocated before the arbitrators on the part of the company that this stock has a potential value, that it has ajpotential earning power; and that, as the great bulk of the money that had gone into the undertaking had gone into it when the materials were less valuable than they are to-day, in determining the value of the stock, the present value of the physical assets as such should be considered as well as the potentialities of the road. It seems to me, therefore, that that is a matter that might have the attention of the Solicitor General and the Minister of Finance, so that when the measure comes before the House in committee they might be in a position to advise us as to what the best legal advisors of the Government think in reference to this contention.

The five minutes that I promised to take have more than run, but I would again like to aver that my vote shall be cast in favour of the Bill, because I think it declares for a very long step in the advancement of Canada's policy in reference to her railway construction, maintenance and operation.

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Subtopic:   'COMMONS
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LIB

Edmond Proulx

Liberal

Mr. PROULX:

Would not the hon. gentleman have as much confidence in a judge of the Exchequer Court as in Sir William Meredith?

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Subtopic:   'COMMONS
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CON

William Folger Nickle

Conservative (1867-1942)

Mr. NICKLE:

I think each man is first-class, and it is a matter of indifference to me which is appointed.

The House divided on the amendment of Mr. Graham.

The amendment moved by Mr. Graham was declared lost on the following division:

TEAS. Messieurs:

Boivin,

Bourassa,

Brouillard,

Buchanan,

Bureau,

Cardin,

Copp,

Delisle,

Demers,

Douglas,

Ethier,

Fortier,

Gauthier

(St. Hyacinthe), Gauvreau,

Graham,

Guthrie,

Kay,

Lachance,

Lapointe

(Kamouraska),

Lapointe

(Montreal, St. James),

Laurier (Sir Wilfrid), Lemieux,

Macdonald,

Maclean (Halifax), McCoig,

McCrea,

McKenzie,

Marcil (Bonaventure), Marcile (Bagot), Michaud,

Murphy,

Oliver,

Pacaud,

Papineau,

Pardee,

Proulx,

Ross,

Seguin,

Tobin,

Turgeon,

Verville.-41.

NAYS. Messieurs:

Ames (Sir Herbert), Armstrong (Lambton), Armstrong (York, O.), Ball,

Bellemare,

Bennett (Calgary), Bennett (Simcoe),

Best,

Borden (Sir Robert), Bowman,

Boys,

Brabazon,

Burnham,

Burrell,

Carrick,

Champagne,

Clark (Bruce),

Clarke (Wellington), Cochrane,

Crothers,

Currie,

Doherty,

Donaldson,

Elliot,

Fripp,

Girard,

Glass,

Green,

Hanna,

Hughes (Sir Sam), Lalor,

Lewis,

McLean

(Queens, P.E.I.),

Meighen,

, Munson,

Nickle,

Nicholson,

Merner,

Middlebro,

Morphy,

Paquet,

Morris,

Paul,

Rainville,

Robidoux,

Roche,

Rogers,

Schaffner,

Scott,

Sevigny,

Shepherd,

Smith,

Stanfield,

Steele,

Stevens,

Stewart (Hamilton), Stewart (Lunenburg), Sutherland,

Thoburn,

Thompson (Yukon), Thornton,

Walker,

Wallace,

Webster,

Weichel,

White (Sir Thomas), Wright.-67.

PAIRS:

Ministerial.

Arthurs,

Bradbury,

Boulay,

Barnard,

Boyce,

Cockshutt,

Chabot,

Clements,

Davidson,

Descarries,

Foster,

Forget,

Henderson,

Hazen,

Jameson,

Kemp,

Marshall,

Morrison,

McLeod,

Northrup,

Reid,

Sexsmith,

Wilson,

White (Renfrew), Hartt,

Taylor,

Tremain.

Opposition.

Truax,

Cruise,

Boyer,

Achim,

Devlin,

Charlton,

Beland,

Knowles,

Carroll,

Lanctot,

Loggie,

Bickerdike,

Nesbitt,

Pugsley,

Kyte,

Robb,

Neely,

Molloy,

Carvell,

German,

Sinclair,

Power,

Wilson,

Gordon,

Thomson,

Mondou,

Chisholm,

Topic:   WESTERN COAL SUPPLY.
Subtopic:   'COMMONS
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August 16, 1917