May 30, 1921

UNI L

John Flaws Reid

Unionist (Liberal)

Hon. Mr. REID:

It does not make any

difference.

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L LIB

Jean-Joseph Denis

Laurier Liberal

Mr. DENIS:

It makes all the difference.

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UNI L

John Flaws Reid

Unionist (Liberal)

Hon. Mr. REID:

Suppose the hon. gentleman purchased a farm, and he put it in the name of the company of which he owned all the stock, if there was a liability against that farm would he not think it would be well, if he has other interests, that any loans he makes in the operation of that farm would not be placed against it; or would he rather charge it up to himself and pay it out of his own pocket?

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L LIB

John Howard Sinclair

Laurier Liberal

Mr. SINCLAIR (Guysborough) :

There is sometlvng very bewildering about my hon. friend's statement. He tells us that this liability of $22,000,000 is before the arbitrators, and that he expects to collect it from the Grand Trunk, or to reduce the value of the stock of the Grand Trunk by that amount. Surely my hon. friend does not want to be paid twice?

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UNI L

John Flaws Reid

Unionist (Liberal)

Hon. Mr. REID:

I will be satisfied with once. I wish I could get the money now.

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?

Some hon. MEMBERS:

Question.

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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

We are not ready for the question. The Minister of Railways cannot blow hot and cold. He tells us that he has put evidence before the Board of Arbitrators of the existence of 12 m. this indebtedness of $22,000,000, but I am not so sure that he can tell us who testified as to this claim before the Arbitration Board. But he says that is being considered by the board and he expects them to do justice in regard to it, and to cut down the value of the Grand Trunk stock to that extent. If that is so, what are we taking a mortgage for? But the real fact of the case is thait if after this goes through the Government attempted to argue before the board that this $22,000,000 is still a liability against

the old company, the company's lawyer would claim that the old obligation of $22,000,000 is paid by this new mortgage and the fid company is not responsible at all. That is the situation, whether hon. gentlemen opposite understand it or not.

If a man has a note outstanding, and he gives a new note, that pays off the old one although no money passes. In this case there was an old liability of the Grand Trunk by way of guarantee. Now they have given a mortgage for that old liability. Is that not equivalent to paying that liability? If not, does it mean anything at all? I should like to hear from the minister whom he sent down to Montreal to testify as to our claims against the Grand Trunk Pacific, and in what shape the evidence was put before the arbitrators. It would be interesting to get a copy of his testimony.

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UNI L

John Flaws Reid

Unionist (Liberal)

Hon. Mr. REID:

The hon. member would not expect me to have that evidence here this evening. But in discussing the matter with counsel for the Government there was no question about the Grand Trunk admitting their liability. The solicitors never took issue on the liability of the company in regard to the guaranteeing of the bonds of the Grand Trunk Pacific. They did take issue, of course, as was stated in the House, as to the Grand Trunk assuming the operation of the Transcontinental, although rhat is one of the claims of the Government that will be put before the arbitrators as well as the liabilities in respect of the Grand Trunk Pacific and other subsidiary companies.

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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

Does the minister say, then, that he has no confidence in the arbitrators, that he does not believe they will give us credit for these amounts? If he does, why not leave the matter with them? I shall be satisfied if he says that the board will give us credit for these amounts; that it will take them into consideration in arriving at the award. If the Government is assured that the board will do that, there is no sense in taking this mortgage, we have no business to take it.

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UNI L

John Flaws Reid

Unionist (Liberal)

Hon. Mr. REID:

I have every confidence in the arbitrators; they will take this into consideration. The only difference between the hon. member and myself is as to whether we should let our security remain as against thte subsidiary company or hold it against the Grand Trunk itself. We say that the parent company, which is liable for this debt through its guarantee, should now furnish the security.

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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

If we are satisfied that this sum will be included in the judgment, why should we take a mortgage? I assume that enough money will be found to be due to the company to cover these liabiliities. By proceeding in this way we are simply jeopardizing our position. We should hold on to the original security. We are simply cancelling the old security and taking this new one; one wipes the other out. We are endangering our position, if we ever had anything but a dangerous position in this matter. If our old security was any good we are simply destroying it by taking this new security on our own property. We have the old claim or guarantee clearly and indisputably against the old company, but with this new security the officers of the company have nothing to do. They will say to us: You can pile mortgages on your own property as high as the tower of Babel; we don't care anything about it; we are not affected in the slightest degree. If the minister is satisfied in regard to the manner in which the matter will be dealt with in the arbitration, then I think he should leave it as it is.

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L LIB

John Howard Sinclair

Laurier Liberal

Mr. SINCLAIR (Guysborough) :

There is only one source from which we can get one dollar out of these liabilities, and that is the stock of the Grand Trunk. The shareholders are not liable; the road is our own; the only course we can draw from is the stock itself. If the debt of $22,000,000 as against that stock is recognized by the arbitrators, we do not need any mortgage, because we shall have that much less to pay for the stock. The minister has not satisfied me that we are going to gain anything by what he proposes to do. It is quite clear that if we make our own property liable for this debt before the artbitrators have made their decision we are only complicating matters and probably destroying any claim that we have.

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UNI L

John Flaws Reid

Unionist (Liberal)

Hon. Mr. REID:

We are not destroying any claim. Our legal advisers think this is the way we should proceed. The Grand Trunk itself is liable for these amounts and we want to have them responsible, because they are the ones from whom we should collect if necessary. Hon. members may laugh, but I want .to say that if it was not for the liabilities of the Grand Trunk Pacific the Grand Trunk Railway would not be for sale to-day. That is where the trouble is, and we want to have this claim against the parent company.

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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

How is it then, that the Grand Trunk, quite apart from the THon. Mr. Reid.]

Grand Trunk Pacific, is hopelessly and helplessly insolvent? We were told a moment ago that $69,000,000 was the deficit on their road, in addition to the $25,000,000 announced by the minister in his statement made earlier in the session. In other words, The Grand Trunk was $60,000,000 or $70,000,000 in default last year, entirely apart from the Grand Trunk Pacific.

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L LIB

John Howard Sinclair

Laurier Liberal

Mr. SINCLAIR (Guysborough) :

The

minister has told us that the operating deficit on the Grand Trunk for the current year was about $7,000,000. When he forced Parliament to take over the Grand Trunk he told us that it was going to be a paying venture; that it would be the one part of the whole system that would make the other parts solvent; that if we had the Grand Trunk with its terminal facilities and all its other advantages we would be in a position to make the other roads pay. That was the statement on which he secured the vote of the House to take over the Grand Trunk. It did not take us long to find that the statement was incorrect. He comes now before Parliament and tells us that the Grand Trunk itself has a deficit in operation this year of $7,000,000. How in the face of that can the minister say that it is the Grand Trunk Pacific which has been pulling down the Grand Trunk?

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UNI L

John Flaws Reid

Unionist (Liberal)

Hon. Mr. REID:

I said that the Grand Trunk had lost some $6,000,000 or $7,000,000, but when I made that statement I was not referring to operating expenses. The Grand Trunk outside of its Grand Trunk Pacific made its operating charges and two or three or four millions on the fixed charges last year. It failed by $6,000,000 or $7,000,000 to earn sufficient to pay its fixed charges. The reason for the deficit on operation last year was that between the first of May and the first of September last year they had to meet this back pay and they had no chance to make larger earnings, owing to the fact that the freight rates had not been increased. This year the Grand Trunk itself will earn its operating expenses and part at least, perhaps all, of the amount necessary to pay fixed charges. Of course, it may fall short on account of abnormal conditions-the high cost of fuel and of materials. That is the position of the Grand Trunk.

It is not a deficit, as the hon. member stated a few minutes ago. The other amounts are not deficits; they are amounts that should have been borrowed from time to time as charges against the railway.

But the Grand Trunk for the last two or three years, while all these litigation troubles were going on, could not borrow money, and these amounts had to stand and be borrowed temporarily, as was done. I said then, and I repeat now that I have no doubt that the old Grand Trunk Railway company will meet its fixed charges; I go further; I feel satisfied that the Canadian Northern Railway system will also earn its fixed charges within a few years. I am not at all pessimistic about the situation. I feel that we have a great asset in this railway system if it is allowed to continue in operation for a few years.

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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

In a statement made

earlier this session the minister told us that in the year 1921-22 he would likely have a deficit of $100,000,000. He will find that in his statement he said that the deficit last year was $48,000,000; this year it was $70,000,000, and he told us he would rot be surprised if in all it would reach $100,000,000 for the ensuing year. If the amount of $100,000,000 is correct, will he tell us how he divides that between the different railway systems, and how much, it is anticipated, would fall to the Grand Trunk?

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UNI L

John Flaws Reid

Unionist (Liberal)

Hon. Mr. REID:

I have not the figures

just at hand; but if I remember rightly, when I made that statement, the deficit on what we call the present Canadian National Railway system, that would be the Canadian Northern, Intercolonial, Transcontinental, what we are operating now, was estimated at about $60,000,000; then the deficit on the Grand Trunk Pacific was estimated at some $20,000,000, and as regards the Grand Trunk, I think the estimate was about $6,000,000 or $7,000,000. As far as I can remember, that would be the estimated loss during the fiscal year, January 1, 1921, to December 31, 1921.

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L LIB

Daniel Duncan McKenzie

Laurier Liberal

Mr. McKENZIE:

Since we took over

the road on February 1, 1920, we are liable for the operation in all its details. Why do we not pay that debt as we pay a debt in connection with the Intercolonial, without going through the circumlocution of borrowing money in the name of the Grand Trunk, giving it to somebody in the name of the Grand Trunk and paying our money out in that way? When we go into the money markets in the name of any company to borrow money, we do not get the same rate that we would get if we were borrowing directly. I had no end of fun with the Minister of Finance (Sir Henry Drayton) on the Budget in connection with his borrowings. Some of the bonds of this

company, after we took it over, were selling at 91 point something-that was the lowest, 91 point something for another issue, and 96.20 was the highest.

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L LIB

John Howard Sinclair

Laurier Liberal

Mr. SINCLAIR:

What rate of interest?

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May 30, 1921