1914-05-20

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PKINTKDJBY J. dk L. TACHE, PRINTER TO THE KING'S MOST EXCELLENT MAJESTY 1914

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House of Commons Debates

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Speaker : Hon. Thomas Simpson Spkoui.e.
Wednesday, May 20, 1914.

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(Questions answered orally are indicated by an asterisk.)

[Stage Direction]
iMr. BROUILLARD:
1.	Is a young man named Letendre, at present employed in the engineer's office of the Public Works Department at Rimouskr?
2.	If so, how long has he been employed and in what capacity, what is his salary and who recommended him? If not, when did he leave that service and why?
Mr. ROGERS:: 1.	Yes.
2.	In 1913, was appointed as a summer student at $75 a month on recommendation of Mr. Boulay, M.P., and on 22nd of November, 1913, was appointed as junior assistant engineer at a salary of $1,080 a year on recommendation of Hon. Mr. Pelletier.


ST. ROMUALD POST OFFICE SITE.
Mr. BOURASSA:: 1.	Is it the intention of the Government to purchase from Mr. Henri Lagueux, of St. Romua'd, a site for a post office in the parish of St. Romuald?
2.	(a) If so, where is the land situated, what will its area be and (b) what price is the Government going to pay for it?
3.	Is the Government aware that the property the said Henri Lagueux offers to the Government is said to be part of a lot of 25 acres that has recently been bought for $10,500?


Mr. ROGERS:: 1.	Yes.
2.	(a) North corner of lot 307, fronting 110 feet on Main street by a depth of 110 feet on the northeast side, and 125 feet on
the southwest side, (b) lot and building have been purchased for $6,000.
3.	No, but the department is aware that this lot and part of lot 304 were purchased for the sum of $10,500.


CARLETON AND POINTE BOURQUE MAIL SERVICE.
Mr. MARGIL:: 1.	Has a new mail contract been made for the mails between Carleton Quebec railway station, Carleton, Carleton Center and Points Bourque?
2.	Who is the contractor, and what amount is being paid?
3.	Were tenders called for? If not, why not?
4.	Was the contractor the lowest tenderer?
5.	What was the amount of his tender, and of other tenders, if any were received?


Mr. PELLETIER:: These mail services
have for some time been performed temporarily under two agreements. The department is now endeavouring to have them performed under one contract but the arrangements have not been completed.


RIGAUD POST OFFICE.
Mr. BOYER:: 1.	What amount was paid to A. E. Mont-petit for the installation of the clock and bell at the Rigaud post office building?
2.	Were any other persons paid any sums of money for the same purpose?
3.	Was any official authorized by the Government to look after that clock?
4.	If so, what is the name of that official, and the salary attached to the position?
5.	If not, who has charge of that clock at present, and what is his salary?


Mr. ROGERS:: 1.	$585 which includes the cost of the install, atioini of the clock and bell, also all carpentry and other works (required in the preparation of the tower to receive the same.
2.	No.
3.	4 and 5. G. S. Gingras, clerk of works for Quebec, had charge of the work of installation, salary $1,800 a year, and J. B. Charlebois, caretaker, takes charge of the



tower clock, for the present, without any additional salary.


MONTREAL, HARBOUR MASTERSHIP.
Mr. CARVELL:: 1.	Is any change contemplated in connection with the harbour mastership of the port of Montreal ?
2.	Is Captain Toussaint Bourassa to be promoted to that position?
3.	Has that promotion been recommended by the shipping interests?


Mr. HAZEN:: The department has no information.


SHELL-FISH COMMISSION.
Mr. J. J. HUGHES:: 1.	What did the Shell-fish Commission, appointed by the present Government to inquire into the shell-fish industry, cost, and what did each of the commissioners receive for his services?
2.	Has the work of the commission been completed?


Mr. HAZEN:: 1.	$9,213.72: S. Y. Wilson, $2,120; R. O'Leary, $2,040; J. McLean, $1,440.
2.	Yes.


JUDGE OF YUKON TERRITORY.
Mr. FOWLER:: 1.	Who is the present judge of. the Yukon
Territory ?	.
2.	When was he appointed and at what salary?
3.	What is his present salary?
4.	What is his living allowance, in addition to salary?
5.	How many vacations has he had since his appointment and what was the duration of each?
6.	Who performs the judicial duties in his absence?
7.	Does he draw both salary and living allowance during his vacations?
8.	Is he now on leave?
9.	How many superannuated judges of the Yukon are now drawing pensions?
10.	What was the length of service of each, and for what reasons were each superannuated?
11.	How much greater is the cost of living in the Yukon at the present time than in any other portion of western Canada?


Mr. C. J. DOHERTY:: 1.	Hon. C. D. Macaulay.
2.	June 28, 1902, at. $5,000.
3.	$5,000. '
4.	$5,000.
5.	Four, viz., winter of 1904-1905; September 10, 1907, March 1, 1908; September 1, 1910, June 1, 1911; winter of 1912-1913.
6.	John Black, clerk of Territorial Court.
7.	Yes.
8.	The department is not informed if he has yet returned or not.
9.	Two.	j

10.	Hon. C. A. Dugas, thirteen years; Hon. Jas. Craig, twelve years; both superannuated to reduce the number of judges from three to one.


QUEBEC AND SAGUENAY RAILWAY.
Mr. MICHAUD:: 1.	Is the Government aware that it is reported the Canadian Northern railway is going to buy the Quebec and Saguenay railway?
2.	Will the Government deduct the price to be paid for the road from tne proceeds of the $45,000,000 guaranteed?
3.	Is the Government aware of a public rumour that there is an arrangement or a promise that the Canadian Northern railway will buy the Quebec and Saguenay railway if this guarantee is given by the Government?


Mr. BORDEN:: The answer to this question. is in the negative.


NORTH RIVERSIDE POST OFFICE.
Mr. SINCLAIR:: 1. Was the post office Inspector of Nova Scotia asked to report on the proposal to remove the post office at North Riverside from Chas. McPherson's to Jas. R. McPherson's? If so, was the report favourable?


Louis-Philippe Pelletier: No, the ppst office inspector was not instructed to report. The case was one of cancellation of an appointment made by the late Government after its defeat at the general election. A report from the post office inspector was not, therefore, required.


VICTORIA DAY ADJOURNMENT.
Robert Laird Borden: That when this House adjourns on Saturday next, the 23rd instant, it stand adjourned to Tuesday next, the 26th instant.


[Stage Direction]
Motion agreed to.

[Stage Direction]
On the Orders of the Day being called:
Mr. OLIVER:: Mr. Speaker, it is understood that tnere is about to land in Vancouver a large number of proposed immigrants from India. The question in regard to how they are to be dealt with has been a matter of public consideration for some time. Would the Government inform the House as to what instructions have been issued to the officials who have to deal with this matter?


Robert Laird Borden: I am not aware of the
instructions, if any, which have been issued, nor am I aware that any special instructions have been issued, although it is quite possible that such may be the case. There is, of course, only one way to deal with the

situation, or of any similar situation, and that is to apply the law and existing regulations haying the force of law.


CARSLAKE PROPERTY EXPROPRIATION.
Sir WILFRID LAURIER:: I would like to ask if the Government have determined to purchase the property at Montreal known as the Carslake property.	[DOT]


Mr. ROGERS:: This property is being expropriated.


Wilfrid Laurier: For what purpose is the Carslake property to he used?


Robert Rogers: In 1907, on the recommendation of the officers in the Post Office Department, the Government of that day purchased a site immediately opposite the Grand Trunk station for the purpose of erecting thereon a building to provide for the distribution of the heavy mails to the different railway stations. That property was exchanged for a property on St. James street. The property on St. James street is not of sufficient area to meet the requirements. The Post Office Department have been pressing for this for some time, and expropriation proceedings have been taken in connection with the Carslake hotel property, which has been selected as the proper location for such a post office as that which is to be erected.


RAILWAY LEVEL CROSSINGS.
[Stage Direction]
Hon. J. D. REID (acting Minister of Railways and Canals) moved the third reading of Bill No. 204, to amend the Railway Act. He said:
The right hon. leader of the Opposition asked me for some information with reference to this Bill. I stated yesterday that the amount paid out up to January 1 had been about $60,000. The secretary of the commission has furnished me with a statement up to April 1, 1914. That statement is as follows:
Amount paid out from Railway Grade Crossing Fund by orders of the board to April
1, 1914.
Fiscal Year.
1909- 10	$	70 001910-	11	
6,909	181911-	12	
12,630	681912-	13	
26,152	241913-	14	
41,877	93Total	$87,640 03
The difference between the $60,000 and the $87,000, I presume, has been paid out between the 1st of January and the 1st of
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April. The secretary informs me that they have given orders for ninety-four more payments to be made. He has not the list made up, but tells me that they are all small amounts, and that he will furnish me with a list, which I will send to the right hon. leader of the Opposition, if he will allow the Bill to go through.
Wilfrid Laurier: Hear, hear.


[Stage Direction]
Motion agreed to, and Bill read the third time and passed.

[Stage Direction]
The House again in Committee on Bill No. 201, to amend the St. John and Quebec Railway Act.-Mr. Reid, Mr. Blondin in. the Chair. ,
Mr. REID:: All the clauses of this BilE were passed with the exception of the lash clause. The hon. member for Carleton (Mr. Carvell) objected to that clause and askedi that it be struck out. I am quite willing' that it should be struck out and that, I think, will make the Bill satisfactory to the member for Carleton, who appears to take a great interest in it.


Mr. MICHAUD:: We are very anxious
for the construction of these bridges as soon as possible. I do not know under what authority the construction will take place if this clause is struck out. Will it be under the authority of the provincial Government or of the Dominion Government?


John Dowsley Reid: It is the Dominion Government. The Dominion Government, according to this Bill, are to build the bridges; and, as I said the other day, the construction of these bridges will be proceeded with by the Department of Railways and Canals. That department will call for tenders, award the contracts and carry out the completion of the bridges. The Bill gives the Department of Railways and Canals authority to proceed with the work. As I explained the other day the hon. member for Carleton objects only to the last clause, No. 5. I would move that that clause be struck out.


Mr. PUGSLEY:: Before the Bill passes, I would ask my hon. friend and the Government whether or not the provisions of section 2 could not be altered. That section, in effect, provides that after fifteen years the province of New Brunswick shall be called upon to pay the interest upon the cost of the construction of these bridges. I would like to see placed in this section, after the words; ' fifteen years ' the words ' or for

such further period as the Governor in Council may determine upon.'
Fifteen years will soon pass away, and it will not be very long before the province of New Brunswick may be called upon to bear an enormous burden in connection with the construction of these bridges and of the Valley railway. As my hon. friend the Minister of Marine and Fisheries knows, the province of New Brunswick [DOT] guaranteed the bonds for the construction of the railway originally to the extent of $25,000 per mile. It has now been called upon by legislation passed last session to guarantee bonds to the extent of $10,000 per mile additional, making a total guarantee of bonds of $35,000 per mile. That is an enormous liability for the province of New Brunswick with its limited revenues to assume. It seems to me that, as the Dominion Government, by reason of the fact that the St. John Valley road may become a factor in national transportation, have undertaken the construction of these bridges, they might very well agree not to limit to fifteen years the time during which the Dominion shall pay the interest. The province of New Brunswick will be called upon to assume an obligation for 224 miles of railways to the extent of $35,000 per mile, which will amount to between seven and eight million dollars. It will require more than all the earnings of the railway to meet the obligations which the province of New Brunswick has entered upon, irrespective entirely of the cost of the construction of these bridges. This road is one of very great importance, and the fact that the province has undertaken to assume this responsibility shows that it recognizes the importance of the road. I bring the matter to the attention of my right hon. friend the Prime Minister in the hope that he will see his way to have section 2 reconsidered and to give. some power to the Governor in Council now by legislation to extend for a longer period than fifteen years the time during which the interest upon the cost of these bridges will be assumed by the Dominion Government. If the section were amended so as to read ' for fifteen years or a longer period as the Governor in Council may decide upon,' the Governor in Council would be guided to a large extent by the earnings of the road and by the conditions as they would exist at the end of fifteen years. To pass this legislation as it is will compel the province of New Brunswick to face at the	end of	fifteen years, in
addition to the liability of the interest upon seven or eight million dollars worth 
of bonds, the interest upon $3,000,000 additional for the bridges. That as a startling proposition for the people of New Brunswick to see facing them at the end of that short period of fifteen years. When the construction of the Valley road was undertaken, it was assumed, that $25,000 per mile would be amply sufficient. The company undertook to float a second issue of bonds unguaranteed, but as they were unable to do that, they came back to the province of New Brunswick and the legislature gave the provincial Government authority to guarantee a second issue of bonds. The province is assuming an enormous liability iin the construction of this road; and the Dominion Parliament, with its vast resources, might very well pass legislation which would not eompel this Government, at the termination of fifteen years, to call upon the provincial Government to assume the interest in respect to the cost of these bridges.


Robert Laird Borden: The Government have
not been unmindful of the considerations to which my hon. friend from St. John has directed the attention of the committee. He will observe that this proposal makes provision for what must be regarded in effect as a subsidy for this enterprise for fifteen years; and that subsidy, if I remember the figures correctly, will amount to $120,000 per year. We appreciate the fact that the province of New Brunswick is undertaking a very considerable obligation in connection with this enterprise, and we also realize the possiblity that the enterprise may and probably will in the future become part of a great national system of railways. My hon. friend from St. John will, however, observe in the first place that there is ample time to consider this proposal during the period of fifteen years during which the use of these bridges is to be enjoyed by the railway company without any charge; and he will observe also that, if we should undertake to accede to his proposal at the present time, it would be neecesary to go again to His Royal Highness the Governor General and to pass a new resolution through the committee, because the proposal of my hon. friend involves a possible additional charge upon the public revenues of this, country. As his suggestion at the present time cannot be carried out without going through the procedure to which I have alluded, and, further, as there will be ample time to consider his suggestion long before the

period shall have elapsed, it cannot at present be acceded to.


William Pugsley: I think I observe in my right- lion, friend's words an expression of sympathy with the position in which the province is placed in connection with this roaid; but it seems to me there is a fallacy in the suggestion of my right hon. friend that there will be ample time -in the fifteen years for the Dominion Government to consider whether or not the time will be extended during which the Dominion will bear tli- -burden of the interest. Does not my right hon. friend see that if the province of New Brunswick, -after the road has been constructed, and after the bridges have been built, asks the Government to alter the terms, if may very well he told that this is -an agreement; that the province of New Brunswick has consented to this; that the bridges have been built under this legisl-a-lation, and that therefore it is -a part of the arrangement which the province of New Brunswick has no right to ask then to have altered. Therefore, if any alteration is to be m-a-de, now is -the time for -us to make it. There will, I think, be no opposition to this legislation from either side of the House, and it will not take very long to go again to His Royal Highness, in order to get his consent to a resolution which will alter the terms in the way in which I have suggested. The matter is of great importance; it is entirely for the Government to deal with; and all I can do is to make the suggestion.
Bill reported.


CANADIAN NORTHERN RAILWAY AGREEMENT.
[Stage Direction]
Consideration in Committee of resolutions respecting the Canadian Northern railway-iMr. Borden-resumed from Tuesday, May 19; Mr. Blondin in the Chair.
Constituent companies ' means such of those companies mentioned in the first schedule to the following resolutions, and such other companies, hereafter declared by the Governor in Council to be comprised in the Canadian Northern system, as own or operate railways, terminals, bridges or other railway facilities.
Mr. A. K. MACLEAN:: May I ask the Government if they have conferred with the provincial governments as to the taking over of equities of redemption of Mackenzie, Mann and Company, Limited, in provineially chartered railways which are mortgaged by such provincial governments? I have in mind the case of the Halifax and Southwestern railway, which
is mortgaged to the government of Nova Scotia.


Robert Laird Borden: I assumed, of course,
that the provincial Governments were thoroughly aware of the nature of these proposals; up to the present time no suggestion of protest has been received from the Government of Nova Scotia in that regard. I shall be very glad, however, to address a letter to the Premier of Nova Scotia making an inquiry in the matter.


Mr. GERMAN:: 
Mr. MEIGHEN:: The Niagara, St. Catharines and Toronto railway is to be transferred to the Canadian Northern system. It occurs to me that the reason -although I am not certain of it-why it does not appear in the first part of the second schedule is that it is to be transferred to the Canadian Northern Ontario instead of to the Canadian Northern, and if it were in the first part of the second schedule it would go direct to the Canadian Northern.


William Manley German: That is not an explanation at all. If the stock of these companies is to go to the Canadian Northern, why should not the Niagara, St. Catharines and Toronto railway be put in exactly the same position as the other companies?


Arthur Meighen: I do not give the explanation with certainty, hut this railway is to be a part of the system, and if it is not to become attached to the Canadian Northern proper, it would not do to have it in the first part of the second schedule.


William Manley German: Why?


Arthur Meighen: Because it would then have to be transferred to the Canadian Northern. The reason for having it annexed to the Canadian Northern Ontario railway, if I am right in my explanation, is this: the Canadian Northern Ontario has a certain power with regard to its 4 per cent perpetual debenture bonds which the Canadian Northern itself has not, and if that additional power is the acquiring by imeans of those bonds of these roads, that is, the payment of the debt against them by means of these bonds, the Canadian Northern Ontario, not the Canadian Northern itself, would have to

purchase the Niagara, St. Catharines and Toronto road.


Wilfrid Laurier: The stocks of all the companies which go into the system are pledged as security for this $45,000,000, but the stock of the Niagara Company is not pledged. What is the reason? My hon. friend says he thinks that this stock is to go to the Canadian Northern Ontario, but I would point out that all the stock of the Canadian Northern Ontario goes to the Canadian Northern. Whether it goes to the Canadian Northern directly or indirectly, the stock of the Niagara Company ought to be pledged, and according to these resolutions it is not pledged.


Arthur Meighen: If the right hon. gentleman will let the matter stand I will promise to answer him immediately after dinner. My right hon. friend inquired yesterday as to why a distinction was necessary between subsidiary and- constituent companies. If my right hon. [DOT]friend will look at section 18 of the resolution he will find that it runs this way:
That without limiting: any power now possessed, it be enacted that any constituent company which is now or may hereafter be subject to the legislative authority of the Parliament of Canada, may, under the provisions of the Railway Act, amalgamate. .	.
And so on. The right hon. gentleman will see at a glance that it would not do to have all the companies united, (because then each of them would have power to amalgamate, and we do not want to give land companies and others, which, of necessity, should not be made part of a railway company, additional power to amalgamate under this Bill.


William Manley German: In the first part of the second schedule, the Canadian Northern Railway Company is put down as having an issue of stock of $10,000,000 and that is all the stock which can be mortgaged under these resolutions. If the Niagara, St. Catherines and Toronto railway is absorbed in the Canadian Northern Ontario, that will increase the capital stock of the latter to the extent of the stock which is issued on the Niagara, St. Catherines and Toronto.


Arthur Meighen: I will answer my hon. friend's question after lunch, and we can then discuss the matter.


Wilfrid Laurier: I observe also that the Canadian Northern Transfer Company is in the same position; it is one of the companies which comes into the agree-

ment but the stock of yvhich is not mortgaged.


Arthur Meighen: The Canadian Northern Transfer Company is and has been for some time the property of the Canadian Northern Railway Express Company; consequently, its assets come in with the assets of the Canadian Northern Railway Express Company.


Mr. MACDONALD:: I think that the Solicitor General will agree with me that this and the following clause should stand until we have more information regarding these companies, and that the clause relating to contractors should stand until he lays on the table a memorandum showing when and where this company was incorporated, its objects, the amount of its capitalization, the bonds and stocks, if any, of a preferential nature that have been issued by it and its assets and liabilities. I submit that the committee is entitled to know the whole history of the financial status of the contractors who are making these covenants with the Government.


Arthur Meighen: I have no objection to the clause standing, pending the consideration of what my hon. friend asks, a great deal of which I see no objection to bringing down.	[DOT]
Clause stands.
' Minister ' means the Minister of Railways and Canals.


[Stage Direction]
Clause agreed to.
' Guaranteed securities ' means the securities to be authorized to be guaranteed by the Act to be based upon these resolutions.
William John Macdonald: In order that there may be some definiteness about that, would the Solicitor General, for convenience sake, point out any of the securities referred to here that are in existence.


Arthur Meighen: I do not think I understood my hon. friend. This simply defines the security-	.


William John Macdonald: The forty-five millions?


Arthur Meighen: Yes.


William John Macdonald: That is all right.


[Stage Direction]
Clause agreed to.
* Mortgaged Premises ' means the undertakings, properties and assets, rights, powers and franchises from time to time mortgaged or charged for the purpose of securing the payment of the guaranteed securities.
William Manley German: Does not the Solicitor
General intend to include in this mortgage the $60,000,000 of stock that Mackenzie, Mann and Company have in tha Canadian Northern railway. It seems to me important that this matter should be fully considered before the matter is disposed of.
I can see no reason why the stock of Mackenzie, Mann and Company should not be included under the mortgage as well as other things. The Solicitor General may say all the assets of the Canadian Northern railway enterprise are mortgaged and that, in case of default, these would be taken over and the stock wiped out. That may be; but that would not prevent Mackenzie, Mann and Company from dealing in these stocks meantime, selling them on the New York market or anywhere else. In this way American speculators might get control of the whole system.


Arthur Meighen: The hon. member for
Welland made the same proposal in the course of the discussion of the motion to go into committee. But the Government did not consider that there was any object to be served in forcing under the mortgage the $60,000,000 of stock held by Mackenzie, Mann & 'Company. If the hon. mepaber will follow me, I think he will agree that there can be no possible object in this even from his own point of view. I have already argued that we have taken security on all the assets of the company, that we have fixed our mortgages on everything that the company possesses and much that they do not possess; and the hon. member has been free to admit that we have taken a mortgage on all their assets that we could get. That being the case, our mortgage, the hon. gentleman will agree, is ahead of the stock. Now, if our mortgage is illusory or insufficient, the stock would be no good, for our mortgage is ahead of the stock. If that mortgage is not illusory and insufficient, then what is the good of a mortgage on the stock? So, he will see that no purpose is to be served from that point of view. But he has a second viewpoint and contends that this mortgage should be taken if only for the purpose of preventing the parties realizing on the stock and getting the stock into the hands of the public. There is a lot that might be done in the way of tying people up hand and foot. But I do not see what object is to be served by that. This stock is already affected by the provisions of the mortgage bond, by these resolutions and the Bill to be founded upon them. The facts are being heralded all over Canada and all over the world by this debate, and any man purchasing this stock purchases it with as complete notice a3 was ever given. No right will accrue to the purchasers that does not accrue to the present holders. They cannot come to Parliament and say they have a higher status than Mackenzie and Mann. Therefore, if we adopted the hon. gentleman s suggestion we should be preventing these men from realizing on what is left of meir property without any object.


William Manley German: Does not the same contention apply to the stock of the subsidiarv companies?


Arthur Meighen: Certainly not. The
other stock is the property of the Canadian Northern railway, it is not the stock in the enterprise itself. Being the property of the Canadian Northern railway, it is bonded just like the rest of their property-just like the actual rails of the Canadian Northern railway itself. Consequently, we come down on that stock.


William Manley German: But this $60,000,000 is an asset of Mackenzie, Mann and Company, and it seems to be the purpose of the Government to leave them free of personal liability. I say they should be brought in.


Mr. CARROLL:: The fear the Solicitor
General has about taking a mortgage on this stock is that the holders of this stock would be prevented from realizing upon it. But would it not be well to keep Mackenzie, Mann and Company from handing over control to outside parties without the Government being aware? If the Government took some control of the $60,000,000 and Mackenzie, Mann and Company wanted to sell to some interest that would not be acceptable to the Dominion Government, the Government could protect itself, but if they were selling out to further the interests of the road, the Government could give a release of as much of the stock as might be necessary in order to help them out.


Arthur Meighen: As I understand the
hon. gentleman's point it is that if we place this $60,000,000 under the mortgage it would prevent the holders from selling out and so prevent the road from coming under the control of outside parties and away from Mackenzie and Mann. If I have caught the spirit of the opposition to the resolution so faT, that is exactly what would suit these
402S

hon. gentlemen. The hon. member for South Cape Breton (Mr. Carroll) appears to have gained-or perhaps has always had -a saner and better view. At present certain restrictions do apply, as I understand the law, to the disposition of this stock to prevent, let us say, an amalgamation with the Canadian Pacific railway. I do not see why the present occasion is one for adding to these restrictions, nor do I see what object could be served by such restrictions. I do not see why the stock held by Mackenzie', Mann and Company should not be their property the same as any other property they own. They are already seriously restricted by the Bill in their disposition of this stock.


William F. Carroll: In what way are they
restricted?


Arthur Meighen: Because the road by
these resolutions and the Bill to be founded upon them will be mortgaged under such drastic clauses that the stock may be very quickly and very summarily rendered valueless.


William F. Carroll: It still remains stock
and it is not mortgaged as stock.


Arthur Meighen: As stock it is not mortgaged, but what is represented by the stock is mortgaged, and their title to it and power to sell is to that extent restricted.


Wilfrid Laurier: As I understand it, we are advancing to this enterprise $45,000,000, and we take a mortgage upon the property of the parent and subsidiary companies. The point raised by my hon. friend from Welland (Mr. German) is, why not take a mortgage on the stock of the parent company? My hon. friend the Solicitor General says that we are amply secured by the mortgage which we have on the property of the company, and asks, what is the object of a mortgage upon the stock? The fallacy of my hon. friend's argument is this: The mortgage has value only when the property has earned a profit, and the profit will in the first place go to the owner of the mortgage, and after that to the owner of the stock. If profit is earned upon the stock of the subsidiary and parent companies, when the profits are distributed, the profits on the stock of the subsidiary companies will come to us, but if Mackenzie and Mann have sold their stock in the parent company, to whom will go the profits on that stock? We have no mortgage upon it?


Arthur Meighen: Even if there are no profits on that stock, our present security is ample, and far more than ample.
,Sir WILFRID LAURIER: That is to say, we are diminishing by that much the assets that we could have. It is obvious that if the property earns any profit at all, that profit will, in the first place, go to the holder of the mortgage.


Robert Laird Borden: The whole question is as to whether the security proposed to be taken by the Government in the form of a mortgage is adequate.


Wilfrid Laurier: That is the point raised by my hon. friend from Welland.


Robert Laird Borden: I have understood hon. gentlemen opposite to argue very strongly that our security is absolutely valueless, but if it is Valueless how can the stock (be valuable? My right hon. .friend says that a mortgage on the stock would give additional security to the Government, because the stock may pay a dividend and there may be profits on the enterprise. That being the case, then, as pointed out by the Solicitor General, it would be absolutely a work of supererogation to take any security upon the stock because, according to the premise upon which the right hon. gentleman proceeds, the property is valuable, and will not only satisfy all claims against :t including this, but pay dividends be sides. What advantage would there be, then, in taking security on the stock? My right hon. friend speaks of fallacy in the Solicitor General's argument. It seems to me that very much less attention directed to the right hon. gentleman's
12 noon, own arguments would disclose a greater fallacy in them. The mortgage is on the property of the Canadian Northern, and the stock can be of no value to any one unless the operation of that property is profitable. In that case there will be a dividend on the stock, but according to the premise the property will have acquired a value in excess of everything charged against it, including this charge, and therefore we should have no more protection by taking security on the stock.


William Pugsley: It seems to me that
there is very great objection to providing for an issue of upwards of $100,000,000 of stock, or possibly $125,000,000, by a company which admittedly to-day is bankrupt. That is the whole argument which

the Government makes, as I understand it. In asking Parliament to pass this legislation hon. gentlemen opposite argue that if the Government of Canada, which means the people of this country, do not go to the rescue of the Canadian Northern, that company must go into liquidation and a receivership. Yet Parliament to-day is declaring that this company shall have an issue of <u00,000,000 of stock, and it will be declared to the world that that stock has been fully paid up. Talk about watering stock! Our hon. friends opposite, who have been accustomed to deal, with mergers and trust companies and great corporations, cannot get away, apparently, from their love of watered stock. They are declaring to the people of the world, to the financial people of Great Britain, that this company has, or will have when this legislation goes into effect, $100,000,000 of stock which has been fully paid up. Surely that is wrong. Surely it is not taking the proper view as to what capital stock means. When an ordinary company issues stock, that stock must be bona fide paid up before it shall be so declared; but in this case, Parliament is telling a possible investor that $100,000,000 of stock, that is apparently of no value to-day, is fully paid up, and, as my hon. friend from Well'and says, Messrs. Mackenzie Mann and Oompany, Limited, are to own some $60,000,000 or $65,000,000 of this stock. Parliament has considered these securities and this property, and Parliament declares $100,000,000 of paid-up stock has a property valuation 'behind the stock to be held by the country and by Mackenzie, Mann and 'Company, Limited, respectively. I have another objection. I regret very much that I have not been able to follow the discussion because by reason of that my remarks may not be of very much value, but it does seem to me that the Government ought to have proceeded from an entirely different standpoint in respect to this undertaking. The Government today is approached by Mackenzie, Mann and Company, Limited, or by Mackenzie and Mann-hon. gentlemen anay say it is the Canadian Northern, but it is not the Canadian Northern except so far as the Canadian Northern, Mackenzie, Mann and Company, Limited, and Mackenzie and Mann, are one and the same personality under different names. The Canadian Northern means Mackenzie, Mann and Company, Limited, and it means Mackenzie and Mann; and Mackenzie, Mann and Company, Limited, means
Mackenzie and Mann. I find no fault with their having different names for their different enterprises, but we must not ignore the fact that when we speak of the Canadian Northern we are speaking of Mackenzie, Mann and Company, Limited, and when we are speaking of Mackenzie, Mann and Company, Limited, we are speaking of Mackenzie and Mann. They have been induced, for good reasons I suppose, to operate in this way for the better financing of their various undertakings, 'and I find no fault with that. But it is true that they have not issued to the public any of the stock of the Canadian Northern. The Canadian Northern stock is held by Mackenzie and Mann themselves, and in that respect it is unlike the stock of other great corporations which is -distributed. It does seem to me that instead of increasing the watered stock to the enormous sum of $100,000,000 the Government should have reduced it to what it might fairly represent in value to-day in the equity of redemption of this property. No one would say that the equity of redemption to-day was worth more than from $5,000,000 to $10,000,000 at the outset. Yet, to the investing public, this Parliament is asked to declare that this equity is represented by a hundred million dollars of stock fully paid up and non-assessable. What the Government ought to have said to Mackenzie and Mann was this:	We
realize the importance of this undertaking to the people of Canada, we realize that you have been enterprising gentlemen and you deserve consideration, but to-day your undertaking is bankrupt, you cannot pull it through without the aid of the people of Canada and to-day the equity which you have to offer to the people of Canada is not worth $10,000,000; if we help to pull you out of the hole all stock should be handed over to a trustee to be held for the security of the people of Canada. There is another view which I think ought to have been presented, and which the Government ought to have kept in mind, and it is that the opinion of the people to-day is tending towards Government ownership and operation of a railway extending from the Atlantic to the Pacific. The people of Canada own 1,800 miles in the Intercolonial railway, they are building a line nearly 500 miles in length from a point in the province of Saskatchewan to Hudson bay and it may well be that before five years go round the people will say that this system should be supplemented so as to ex-

tend all the way from the Atlantic to the Pacific. Would it not be a reasonable thing to have all the stock, not making it $100,000,000, but making it $10,000,000, which is all that it would he thought by any body in this world to be fairly worth, placed in the hands of a trustee, or of a trust company, as security to the people of Canada for the liability which they are undertaking in endorsing the bonds of the company to the extent of $45,000,000? Provided that at any time within, say, five years, the people shall, through this Government determine to take over the Canadian Northern railway, they shall have the right to take it .over at a valuation not to exceed some $5,000,000 to $10,000,000 which is the utmost that the equity of redemption is worth to-day. I do not say that in five years the people of Canada will want to take it over but they ought to have the right to take it over if they so desire. They are assuming the liability and they are making this property valuable if it can be made valuable. Without Government aid it has no value, without Government aid it would go into the hands of a receiver according to the statement which the Government has made publicly to this Parliament.


Arthur Meighen: I understand the hon. gentleman to say practically that he does not think that we should bind the people of Canada ini five or ten years to take over the undertaking but that it should be left optional?


William Pugsley: That it should be left optional. The proper thing to do would be to compel Mackenzie and Mann to give to the Government an option to take over this undertaking at what to-day would be considered by everybody to be a fair and reasonable valuation. I would have the valuation fixed by arbitration but not to exceed a certain amount and from $5,000,000 to $10,000,000 would be the utmost valuation which any body to-day would put upon the equity of redemption in the property. That is a provision which ought to have been made. I quite agree with my hon. friend from Welland as to what he said with regard to the disposition of this stock. The stock ought not to be $100,000,000. It is an utterly indefensible thing to issue this vast amount of stock and them to ask this Parliament to declare that it shall be regarded as paid-up end

non-assessable. But I agree with ray hon. friend from Welland that stock to a reasonable amount, representing a fair capitalization on the equity of redemption, should be placed in the hands of a trustee for the security which the Government gives and that, the people of Canada coming to the rescue as they are to-day for the purpose of pulling this undertaking out of a difficult position, the Government should have an option of taking over the property at a fair and reasonable valuation. That fair and reasonable valuation would be represented by the paid-up stock which ought not to exceed between $5,000,000 and $10,000,000. It is utterly indefensible to take an equity of redemption in a property which no one would pretend to say is worth more than a few million dollars and issue stock to the extent of $100,000,000 as fully paid up and non-assessable against that property.


Robert Laird Borden: My hon. friend (Mr. Pugsley) is very severe on his colleagues and upon himself, who permitted legislation under which the capitalization of this system might be fixed at not $100,000,000 but at $145,000,000 which we have now reduced to $100,000,000. As to the value of the stock security, I shall not take up the time of the committee to repeat what I said a moment ago in answer to the right hon. the leader of the Opposition and the hon. member for Welland. That security depends on the physical assets and the stock cannot give us any additional safeguard, by way of security.


William Manley German: The authorized capital
stock of the Canadian Northern Railway Company is $92,200,000.


Robert Laird Borden: I said that not the
authorized but the issued capital of the company constituting the Canadian Northern Railway system was, under legislation authorized by hon. gentlemen opposite, $145,000,000.


William Pugsley: Does my right hon.
friend say that Parliament authorized the issuing of the stock as fully paid up without a dollar of cash being paid upon it?


Robert Laird Borden: It was done under the
legislation.


William Pugsley: To be issued as fully paid up?


Robert Laird Borden: Under legislation permitted by hon. gentlemen on the other side ' of the House that was accomplished,.


William John Macdonald: In respect to what company was that done?
Mr, BORDEN: In respect to all the companies-the Canadian Northern Ontario, for example.


William Pugsley: The hon. gentleman did not answer the question I asked him. I asked him if Parliament has ever authorized a company to issue this vast quantity of stock as fully paid up. We know that Parliament will fix the capital stock of a railway company at so much per mile but that does not mean that there will be no consideration for the stock when it is issued. Is it not usually provided that there must be a deposit made at the start in a bank of so much cash before the company can begin its operations? Does it not mean that the stock must be paid up either by cash or property? In that case, of course, it does not make much difference whether it is $10,000 a mile or $60,000 a mile so long as you get the stock bona fide paid up. But, in this particular case which we have under consideration now, there has been nothing paid for the stock, as far as I understand. The stock was water stock pure and simple. This road has been built out of the proceeds of bonds and subsidies which have been granted by provincial and Dominion parliaments. Not one single dollar of cash has been paid upon this stock and yet Parliament is declaring it to be worth $100,000,000 and to be fully paid up. That is a false statement which Parliament is making, it is a statement which, if it were an ordinary railway company that was coming before this Parliament, would not be made and one which, I think, every member of this House would say that Parliament would not countenance for a single moment. Yet, in the case of this company, because, I suppose, of the magnitude of its liabilities, Parliament, or at least a majority of Parliament is prepared to state, and to state it by Act of Parliament, that this hundred million is fully paid up when Parliament knows, as every member of this House knows, that not one single dollar has been paid upon this stock


William John Macdonald: I suppose the Solicitor General would tell us when the limitation was placed by Parliament upon the capital stock of the Canadian Northern railway. When was the capital of the one company fixed?
iMr. MEIGHEN: The authorized capital of the Canadian Northern railway itself is
$92,900,000. I cannot give the year when that was authorized, but I am pretty sure it was since 1896; in fact, I know it was.
I shall undertake to say now that the greater part of the authorization, I think all of it, was made by hon. gentlemen opposite.


Wilfrid Laurier: Without a word of dissent from anybody, so far as I remember.


Arthur Meighen: We all join in regretting that the hon. member for St. John was not then in the House.
Sir WILFRID iLAURIER:	But unfortunately we have now to pay because he was not here.


William Pugsley: Would the Solicitor
General point out any words in the statute which authorize the issue of that as fully paid-up stock without any capital being put in?


Arthur Meighen: ll do not for a moment think it was authorized to be issued without anything being put in. If the hon. member had been here last night he would have heard that explained. The authority to issue it as paid up was given to them by hon. gentlemen opposite. If the company did not act in pursuance of that authority their action was illegal, but their action was never challenged.


William Pugsley: What statute gives that authority?


Arthur Meighen: The statute that
created the Canadian Northern railway and authorized the issue. _


William John Macdonald: What amendments were made since 1911?


Arthur Meighen: To the authority for that issue? There was $7,000,000 authorized to be issued as paid up in 1913. More than that, I do not think the capital stock has been affected at all by any legislation since 1911, and that $7,000,000, of course, had 'been previously authorized by hon. gentlemen opposite themselves.


William John Macdonald: Perhaps it would be as well for the minister to give us a list of the statutes affecting the Canadian Northern railway.


Robert Laird Borden: You will get that.


William Pugsley: Prior to the legislation of last session which was initiated by this Government, is there any statute which authorizes the Canadian Northern railway

to issue its stock as fully paid-up, without any payment being made upon it?
(Mr. MEIGHEN: There was no stock issued as fully paid up without' any payment being made on it.


William John Macdonald: How do you know?


Arthur Meighen: Well, because I know.


William John Macdonald: There are a good many things the hon. member knows about this that are not known to the House, and he will not tell them to the House.
Mr, MEIGHEN: If any stock was issued without anything being paid on it, it was done (under the authority of legislation in which the hon. gentleman concurred.


William Manley German: There was $70,000,000 of Canadian Northern railway stock issued to Messrs. Mackenzie and Mann that was not issued by the authority of Parliament, and was issued by the directors of the Canadian Northern Railway Company.


Arthur Meighen: Under authority of
Parliament.


William Manley German: Not on the authority of Parliament. There was no authority of Parliament to give it to Messrs. Mackenzie and Mann. It was supposed to be issued, if issued at all, for valuable considerations; but it was issued practically for nothing, never a dollar was paid for it and the hon. gentlemen are extending that to $100,000,000.


William Pugsley: And declaring it fully
paid up.
On section 1-Guarantee of $45,000,000 authorized :


Mr. GRAHAM:: This first recital is the
basis of the whole discussion. This settles the question whether or not we are going to give the $45,000,000. For myself, not only do I think we ought to have some discussion on this, but, personally, I want to vote against that clause.


William John Macdonald: authorized to create and issue; interest on the guaranteed securities to be at the rate of four per cent per annum payable half-yearly, the principal to be payable not later than a day in the year 1934.
There has been, during the discussion, some question as to the real position of the capital stock of the Canadian Northern under this agreement. We were told with great flare of trumpets in the preliminary-notices given to the country that the capital stock of the Canadian Northern was 8100,000,000. That was, as a matter of fact, a misleading statement, because out of all the mass of documents that have been laid upon the table and out of all these interminable data which have been placed before us to digest so hurriedly, we have discovered that the authorized issue of stock of the Canadian Northern Railway Company is $92,900,000, and that the total issue is only $<'7,000,000. Therefore, we are not reducing the stock of the Canadian Northern railway to $100,000,000, but are increasing it to nearly $125,000,000. For, as was stated by the Minister of Finance last year, included in that $77,000,000 of present stock was $25,000,000 of common stock which was set aside to meet the request of the holders of the convertible stock if they desired1 to make the exchange. We are supplementing this capital issue of $77,000,000 by $48,000,000, and increasing the issued capital stock by that $48,000,000. We are doing that by permitting an issue of stock in which Canada is to get $40,000,000 while $60,000,000 is left in the hands of Mackenzie and Mann, and we are creating an issue of $25,000,000 more so as to have it available should the holders of the convertible stock come along and want the exchange made. That hon. gentlemen opposite, in dealing with this question, should deem it necessary, as they did in the first place, to intimate that a certain percentage of this stock was to be put into the hands of trustees in order that some independent party might maintain the control in the event of the public interest demanding it-that they would have promoted a semi-official statement to be circulated throughout the country as they did seems to me unworthy of men who are directing the financial affairs of this country on a great question. We are told that public opinion takes this or that view of this matter. But if public opinion is to have handed out to it semi-official statements which are absolutely untrue-


Robert Laird Borden: To what statement does the hon. gentleman refer?
[Mr. Macdonald.


William John Macdonald: The statement that 15 per cent of the common stock of the Canadian Northern Railway Company was to be placed in the hands of trustees who *were to exercise their rights as the interests of the country demanded.


Robert Laird Borden: Upon what authority
does the hon. gentleman base the assertion that this statement was handed out by any member of the Government or-


William John Macdonald: Well], now, Mr. 'Speaker, if it comes to-


Robert Laird Borden: That statement was made in the House and was contradicted. The bon. gentleman now repeats it. I desire to know on what authority he makes the assertion.


William John Macdonald: I base my statement on the fact that the statement to which I have referred appears in newspaper organs in close touch with the Government.


Robert Laird Borden: What organs?


Air.   AIACDONALD@: The Ottawa Citizen, for one.	[DOT]


Some hon. MEMBERS:: Oh, oh.
AIt. AIACDONALD:	The Montreal Star,
for another.


Robert Laird Borden: I desire to tell my hon.
friend what I have -already stated in this House, that the statement he has made as to that having been handed out by the Government, or on 'behalf of the Government is absolutely without foundation, and that he has absolutely no warrant for making that assertion.


Air.   AIACDONALD@: Then, it would be a mo-st interesting thing to know what attachment the Prime Minister has provided for this Government which gives out to recognized organs of the party statements upon important matters of public policy which turn out to be in part correct and in. oiuer parts incorrect.


Robert Laird Borden: 1 wish to say that that,
statement also is without foundation.


William John Macdonald: Does the right hon.
gentleman mean to tell me that if I take up a copy of a Government organ and find i.xere a statement with regard to a matter of Government policy, outlining certain schemes-and it is not only on this question but others-that I am to regard those statements as being without foundation and! made out of whole cloth?


Robert Laird Borden: In so far as there is any distortion of the facts, they have not been handed out by the Government, or by anybody connected with the Government.


Some hon. MEMBERS:: Hear, hear.


William John Macdonald: It is very easy to
find a great many of these hon. gentlemen who have never read this agreement applauding that bombastic statement of their leader-I say, Mr. Chairman, that bombastic statement of their leader. It is as well for us to understand, then. Hereafter, if we take up a Government organ and find that on a certain question certain ideas are held, or a certain course is to be taken, or a certain policy to be followed by the Government, we are to understand that no member of the Government is responsible for that. Who were responsible, for instance, for handing out to the Government papers only last Saturday or Monday, the statement made by the Minister of Finance that the House was not misled last year in regard to the $7,000,000? Did that drop down from heaven? Or the preliminary statement in regard to the Canadian Northern railway and this fifteen per cent of stock- where did that come from? Does the Prime Minister suggest that there is some young gentleman in the press gallery whose imagination is so vivid, whose omniscience is so great that he can pierce into the minds of the members of the Government and know within a fraction of a degree what course they are going to take on a given question? That is the position, apparently, that he wants us to believe his Government is in. The attempt to form preliminary public opinion on this measure by statements such as I have indicated certainly was made. If the Prime Minister is not responsible for it, there must be some part of his party organization that is responsible. The statement was circulated all over this country that the capital stock of the Canadian Northern railway was to be reduced to $100,000,000 by this Government. That statement, I suppose, was not officially made either, and no member of the Government allowed the party organs to give that gentleman information to the public. Why, that statement has been reiterated by some hon. gentlemen on the other side who have never read this agreement, and I suppose there are some even yet, who will go out on the stump and declare that this Government has succeeded in reducing the stock of the Canadian Northern railway to $100,000,000, when as a matter of
fact, they have increased it 'by $48,000,000. That statement, I suppose, was not official, but there is not a Conservative organ from one end of the country to the other that has not reiterated it and set it forth as a wonderful feat of statemanship on the part of these hon. gentlemen. This whole proposal should be a cold-blooded business proposition with no consideration taken into account except the interest of the country. And so it. would be if the Government proceeded along the proper lines. Where was the necessity of the party organs misleading public opiniotr on this question as it has been misled? In this respect and in many other respects, these preliminary statements did not tally with the actual facts as found in this agreement. But it will take some time for the country to realize the gross errors made in the announcements given to the country. And that is why I believe we should have here and now the fullest possible investigation into this question before Parliament ratifies the principle of the proposition contained in this clause. To the proposal that there should be a full and complete investigation into this whole question, I cannot conceive what answer can pos-pibly be made from the other side. This information should be obtained through a firm of accountants who would not merely verify the prepared statements submitted to them by the auditor of the Canadian Northern, as was done by the auditors of the Railway and Finance Departments, but who would go through the books, as is done by qualified auditors in the case of commercial or industrial companies, at the conclusion of the financial year, prepare a statement and give the weight of their name to the correctness of that statement. Why should this not be done in regard to this momentous proposal in respect of which the country is putting itself behind a liability of $350,000,000 or $360,000,000? My hon. friend is asking us to pass this clause without having before us the information to which I referred a short time ago with regard to the status, financial and personal, of the contracting firm of Mackenzie, Mann and Company, Limited. Does my hon. friend mean to say that any business firm in this country would accept a guarantee from any joint stock company, I do not care where incorporated, which involved a liability of $30,000,000, or in which that amount was a very material factor, without having before them the

results of an examination into the organization of the company, its capital stock, its bonds and liabilities, and without knowing whether or not its guarantee was worth the paper on which it was written? You may get a joint stock company to put its seal and the signature of its president and its secretary to a guarantee for any amount, yet they may not have, amongst the powers which the legislature has given them, the right to make that guarantee. Supposing that the firm of Mackenzie, Mann and Company, Limited, under the charter granted by the Ontario Government, had not as a matter of law the right to make these covenants with the Government, under which they assume the liability of paying $10,000,000 of incurred indebtedness and $20,000,000 that is due the banks, would not the whole basis of the agreement fall? Supposing the capitalization of the company were of such an amount that every possible resource might be had to the stock issue and the guarantee would not be worth anything as a matter of law or as a matter of fact. Supposing the liabilities of that company to-day, as compared with the assets, are such that it is not a solvent institution; of what use is it for us to insert an enacting clause in this agreement declaring that we shall loan or guarantee $45,000,000 without possessing information to show whether or not the people who are making these covenants have any right to do so, and whether or not their company is a solvent one? I submit that before we proceed to pass this clause the committee should have that very important information, as well, as other information in regard to these matters which has not yet been given. We do not know who these contractors are, other than the fact that they are the Mackenzie and Mann Company, Limited; we do not know anything about the Mackenzie and Mann Company, Limited; we have no information about their status and how can we proceed to pass this clause, which declares that the country binds itself to make a guarantee of $45,000,000, when we know nothing about the other parties to the agreement?


William Manley German: Last session we received from the Minister of Finance and from the Prime Minister the information, given on the authority of the promoters of this enterprise, Messrs. Mackenzie and Mann, that the $15,000,000 then granted would enable the company to complete the line. I

think, that before we pass this clause we should have authentic information as to whether or not this $45,000,000 will complete the work and whether these gentlemen will be here again in the course of three or four years at the outside for further aid from the Government.


Robert Laird Borden: My hon. friend must
realize that no one can foresee with absolute accuracy conditions in the money markets of the world and no one can foretell with Absolute accuracy what the cost of a road will be. For example, an arrangement was made in 1903-04 which it was fully expected would provide for the construction of the Grand Trunk Pacific railway. Since that time two loans have been made to the company, one under the late Administration of $10,000,000, and another at the last session of Parliament of $15,000,000. It is an open secret that the cost of construction in the mountain section of that railway has been so great and has so largely exceeded the estimate made that the company have not been able to make provision with absolute certainty up to the present time for financial arrangements in connection with that part of the railroad. In 1905 the late Administration and the Grand Trunk Pacific Railway Company arrived at an estimate of what that road would cost, and, in accordance with that estimate, a certain financial provision was made which all parties believed would complete the road. It has failed to complete it, and I would like my hon. friend to remember that estimates of what will be a sufficient financial, provision for completion have failed, not only in connection with this enterprise, but in connection with many other enterprises as well. I am giving only one out of many illustrations that might be given in that regard.


Mr. PARDEE:: Then we have it in concrete form from the Prime Minister that, as a matter of fact, we are not at all sure that $45,000,000 will complete this road, and that the chances are that Mackenzie and Mann will be back to the Government for further assistance.	.


Robert Laird Borden: 1 was not alluding in my observations to that; I was replying to the hon. member for Welland, who referred to a statement made last year in connection with the subsidy then granted.


Frederick Forsyth Pardee: As I understood it, the right hon. gentleman's remarks had to do

with whether or not the $45,000,000 which is now proposed to be granted will complete the road. The Prime Minister has just said that he is not at all sure that $45,000,000 will complete the road; that it is very uncertain. I think, therefore, that a fair and logical conclusion to draw from his remarks is that the arguments of the Opposition have been amply borne out. That is to say, that nobody knows whether $45,000,000 will complete the road; that in all probability it will not nearly complete the road, and that, consequently, we ought to have further and better statements and an investigation into the matter until such time as w-e will know whether or not we are simply putting this $45,000,000 into the same old sink-hole, without the absolute assurance that, even if the Canadian Northern is completed with that amount, it will be worth possessing. When you take into account the floating indebtedness and outstanding liabilities that will have to be paid immediately, I think I am safe in saying that the $45,000,000 will simply be absorbed at once, and that we will have the Canadian Northern on our hands again in practically the same condition as now. I think that this is the crucial clause in the whole 'agreement, and I submit that the hon. member for Pictou has made the proper argument that before this step is taken there should be the most full and complete disclosure, and the most ample examination into the books of Mackenzie and Mann by competent auditors. The only statements we have now are from the auditors of Mackenzie and Mann alone. There is only one firm of auditors on the North American continent competent to examine such books as those of Mackenzie, Mann and Company, Limited; and until such a man as Price Waterhouse is turned loose on the books of Mackenzie and Mann to disclose the exact condition of the Canadian Northern railway and of Mackenzie, Mann and Company, Limited, this Parliament has no right to vote the sum of money it is being asked to do, to-day.


Robert Laird Borden: I think my hon. friend
is going a little beyond the course usually adopted in this House when he endeavours to cast discredit upon the competency of the civil servants who undertook the task of making an examination into this road. I have had some acquaintance with those men and some opportunity to judge of their work, and I take direct issue with my hon. friend. I do not think it would be possible to find 255
three more competent men, either in the Civil Service of Canada or in the service of any corporation, or of any firm of accountants in this country than the three men who were selected. We selected1 them simply for the reason that they were the best men we knew in the service. I do not know much about their political antecedents except in the case of Mr. Shannon, who has 'been in the service of the Government for a long time and who, I do know, comes from a good Conservative family in the county of Halifax. Any one who knows Mr. Shannon and the other two gentlemen knows that every one of them is actuated by a keen sense of duty, and not for any consideration would any one of them, according to my firm belief, depart in the slightest degree from their duty of making a truthful statement of what they found in the books of the company. And when my hon. friend speaks of the. unreliability of estimates what has he to say of those gentlemen he supported in 1904 who told us that the cost of the eastern division of the Transcontinental, if built up to the highest standard, would not exceed $62,000,000, and who then went on and built the road at an expenditure of over $180,000,000? Hon. gentlemen opposite are very criticial, but if they would direct their attention upon the results of some of their own enterprises they might be inclined to give more consideration to the suggestions which I made a little time ago. Undoubtedly, this road has cost more than the persons associated with it imagined four or five years ago, and I believe it has cost more than was anticipated by my hon. friends on the other side of the House when they had to deal with this road year after year; but as I have said before that is not an unusual experience, and the increased cost in respect to this road is infinitely less than that which hon. gentlemen opposite demonstrated in their own experience in regard to the National Transcontinental.


Wilfrid Laurier: All the more reason to be cautious now.


Frederick Forsyth Pardee: I had no intention of casting any aspersions on the three gentlemen. I simply said that their business did not carry them far enough to undertake such a large work as examining the books of Mackenzie, Mann and Company, Limited, and that they were not competent to do that.
At one o'clock the Committee took recess.



The Committee resumed at Three o'clock.


George Perry Graham: I remember that when we were engaged in the discussion of the Navy Bill in this House we were accused time and again of voting for the grant for the construction of three battleships to , be ' added to the British navy because we did not object strenuously to the first clause in committee and the restrictions surrounding the grant. We were all in favour of spending the money that is, this side generally were in favour of spending it in one way and the Government in another way. The most important point of the whole resolution is in the first clause, and that is one of the reasons why I am very strong in expressing my view against it. The Government cannot say that allowing this clause to go through, and attempting to remedy the details, are equivalent to our voting for the grant to this company. The principle of the guarantee has been pretty well discussed in the House. I think that I have expressed my views as strongly and forcibly as I could. I take the ground that the Government, being about to put up the money and become a partner, should have a controlling interest. I do not know that I would go so far as to say that they ought to continue to hold that control forever but they should for a time at any rate, or until the road is constructed and the money expended. I want to make another point clear. I see that the press has represented my position as being different from what it actually is. I never said that Mackenzie and Mann had never put a dollar into that project. I do not think I made that statement. I was arguing that at this particular (juncture, whether their wealth was great or small, they ought to get in behind the project. The circumstances being special, and these men being doubly interested, they ought therefore to join forces with the Government. I shall have to vote against this first clause in order to make my position on the question perfectly clear.


Arthur Meighen: Will the hon. gentleman say whether he is in favour of our controlling only the construction or controlling construction and operation pending completion of the road?


George Perry Graham: I think I would control everything in connection with the road till it is completed. It might, and probably would be, wisdom for the present men, under the control of the Government, to

keep their eye on everything and continue the construction and operation, but I think the Government should have the authority and control.


Arthur Meighen: We should control it
during construction?


George Perry Graham: Yes.


Arthur Meighen: And control the operation too?


George Perry Graham: I would control everything because construction and operation might become so mixed up before the road is completed that while you might have control ostensibly of construction, if you did not have it over operation, you might not have it at all. A report emanated from somewhere and got into the press that 15 per cent of the stock was being placed in the hands of trustees in order to enable the Government to retain control of the (road. Only three or four days ago, the Ottawa Journal or one of the Conservative papers, came out in defence of the proposition on the very ground that 15 per cent was going to be placed in such a position that the Government could keep control by getting possession of the fifteen per cent. That was the whole argument which was advanced by the Conservative press in favor of this proposition. There are some good editors upon the Government staff who edit these reports, but they grow too enthusiastic in sending them out. The Solicitor General will remember that in connection with the National Transcontinental question there was a typewritten report, sent out to the papers. Where it came from I am not prepared to say, but when the official report was put on the table there was a copy of this advance sheet sent to the press placed on my desk as being explanatory of what was in the report itself. Some of the departments apparently have editors who are too efficient; they think they know all about these things, and the press takes them as being authoritative. Having some experience on both sides of this subject, I know whereof I speak. I have had a good deal of experience in the newspaper business. I know that when a typewritten document is sent to the press gallery it is taken as being more or less official because it would not be typewritten and sent out unless somebody had taken the trouble to prepare and issue that report. The Conservative press for weeks had defended this guarantee

on the one ground that the Government would retain control by means of this fifteen per cent of capital stock. Within the last two or three days this has been one of the most prominent arguments in the Conservative press in defence of this project. If that were done it would remove one of my objections to the proposition.
We will have to divide the committee on this _ first clause because we cannot accept it under the present conditions.


William Manley German: The Solicitor General
stated before luncheon that he would give some explanation as to why the Niagara, St. Catharines and Toronto Railway Company was not included in this enterprise. I would like to know if he is prepared to give that explanation now?


Arthur Meighen: I am able to confirm what I stated before luncheon. What was then my impression, I have found to be correct. In regard to the Niagara, St. Catharines and Toronto railway, it is to be part of the system in the same way as any other part, but to complete the acquisition of it, it is necessary to deal with the Canadian Northern Ontario railway. Under the trust deed securing the perpetual debenture bonds of the Canadian Northern Ontario it will only be necessary to issue perpetual bonds in lieu of the stock acquired. The same restriction does not apply to the perpetual bond issue of the Canadian Northern Ontario. Consequently the perpetual bonds of the Canadian Northern Ontario can be utilized to discharge the indebtedness incurred for the acquisition of these stocks. When this road becomes the property of the Canadian Northern Ontario that is to be done, and the property of the Canadian Northern Ontario is all mortgaged to the extent to which the Canadian Northern Ontario gets any part of the proceeds. In addition, we have the stocks of the Canadian Northern Ontario itself.


William Manley German: The Niagara, St. Catharines and Toronto Railway Company has a large stock issue?


Arthur Meighen: Yes.


William Manley German: What becomes of the stock?


Arthur Meighen: It becomes the property of the Canadian Northern Ontario, not of the Canadian Northern. If it were put in the first part of the schedule it would 255J
mean that the Canadian Northern itself would have to discharge the purchase price against it.


William Manley German: At any rate, it is included in the securities?


Arthur Meighen: Oh, yes.


William Manley German: That is the main point. I want to call the attention Gf the right hon. Prime Minister to this feature. He said before luncheon, in reference to the ultimate cost of the construction of this line, that one could not say definitely as to what the maximum cost would be by reason of the various contingencies that might arise. He instanced the fact that the Grand Trunk Pacific had cost, by reason of the fticreased price of labour and other eventualities, considerably more than was anticipated. That is true, and the Grand Trunk Pacific obtained further subvention from this Government and from the previous Government beyond what was expected originally. I want to call my right hon. friend's attention to the fact that when this agreement is completed, if it is completed on the basis outlined in this resolution, the Canadian Northern railway cannot borrow money in the open market. The Grand Trunk Pacific is not tied up in that way by reason of anything that has been done in their aid by the Parliament of Canada. But when this arrangement which is before the House at the present time is completed, the Canadian Northern railway will be absolutely debarred by reason of having no chance of placing securities on the market, from getting any money for subsequent work excepting from the Parliament of Canada. They have no securities to take into the open market, they have no securities to dispose of, everything is mortgaged to this Government-as	the Solicitor General
states. For instance, if instead of the amount which it is anticipated will put the road in a position to complete the line and make it a transcontinental railway, doing that, supposing it comes $40,000,000 short of being sufficient to complete the line, how is the line to be completed? The Canadian Northern railway will be in such a position that they cannot raise money in the open financial market, they will have to go to the Parliament of Canada; and if we are going into this thing we must go into it with our eyes wide open, knowing what the eventualities may be. One eventuality will be that the

securities which the Canadian Northern railway have to sell and which are represented in this book at $58,473,000, will not realize within $15,000,000 or $20,000,000 of that anticipation. For instance, ' The Canadian Northern Tunnel and Terminal Company, proceeds of terminal securities,' is placed at $5,995,734. I venture the statement that there is not a financier in Canada or Great Britain or any place who would to-day give $1,000,000 for these securities. Where is their value? I cannot bring myself to the position of believing that there is $1,000,000 of value in those terminal securities. Then there is ' rolling stock, 41 per cent equipment bonds. $16,496,332.'


Arthur Meighen: To what terminal securities does my hon. friend refer?


William Manley German: Canadian Northern Tunnel and Terminal Company. It is given at page 10 of the blue-book.


Arthur Meighen: The hon. gentleman is misled in some way. These are the proceeds of the bonds of the Mount Royal Tunnel and Terminal Company and the sale has been provided for at the time we speak.


William Manley German: Does the hon. gentleman tell me that the securities which are on page 10 as being securities which will realize $58,473,982 have been already disposed of and the money obtained?


Arthur Meighen: That is not what I said. I said the item he was complaining of was already decided and the proceeds of the sale arranged for. With regard to the $58,000,000, the hon. member says they could not sell them for very much. If he will look at the key statement he will find that already $29,000,000 odd are in the bank of proceeds of those securities already sold, waiting to be earned.


William Manley German: There is ' the Canadian
Northern Pacific Railway 4i debenture stock, $6,704,097,' and ' new securities, $4,854,500.' That is a perfectly good security, I apprehend. Then, there is ' Canadian Northern railway, proceeds of securities in hand and to be earned against above, $7,634,497 ' and that is a perfectly good security. Then, there is ' Canadian Northern Ontario railway, proceeds of securities in hand, subsidies to be earned, $16,788,822.' That is a perfectly good security. Then we come to ' the Canadian Northern Railway Tunnel and Terminal Company, proceeds of terminal securities, $5,995,734.'


Arthur Meighen: These securities are provided for, the sale is provided for, the arrangement is completed.


William Manley German: With whom?


Arthur Meighen: I do not know.


William Manley German: What about the 'rolling stock, 4| per cent bonds $16,000,000 ' ? They owe $23,000,000 on equipment bonds, as I can show my hon. friend. '


Arthur Meighen: I admit that that is
right.


William Manley German: Then how can you put
$16,496,332 to your credit when you owe some $23,000,000?


Arthur Meighen: The $23,000,000 are not due. These equipment bonds sell with interest and principal payable so much per year. All payments have 'been met, both of principal and interest. These aTe the maturing bonds. Certainly if new bonds are issued they get new rolling stock, that is all. Why should they not sell them? They are not in default.


William Manley German: Assuming that the whole $58,473,982 is realized-and notwithstanding the explanation, I beg leave to join issue with my hon. friend and state that that amount of money will not be realized out of these securities-there is $58,473,982, leaving a balance of $41,905,117, if the completion of the road only costs $100,000,000. Assuming that it costs, as good railwaymen say it will cost, $150,000,000 to complete and to put it at the standard of a transcontinental railway, where is the other $50,000,000 to come from ? There is no place for it to come from excepting the Parliament of Canada, because, as I say, this arrangement is tying up the Canadian Northern Railway system to such an extent that they cannot raise a dollar in the open financial market; they must come to the Parliament of Canada, and the Parliament of Canada must be prepared to go through with this thing to the bitter end, if it starts in now. That is why I say that before we vote this money at all we should know with greater exactness, with a greater degree of definiteness than we have at present, whether or not this money is going to be realized. I venture to say that the members of the Government ares no more instructed, so far as any accurate knowledge goes, than I am as to whether or not this money will complete the road. They have the statement of Messrs. Mackenzie and Mann this year, the same as they had it last year, that $15,000,000 would

enable them to finance the undertaking and complete it. It did not do it within
345.000.	000 last year, and I say that 345,000,000 will not come within 345,000,000 of completing it this year; and they will have to come back again. So we must vote this money with our eyes open to the fact that within two years or thereabouts this company will be back again to us for another
345.000.	000 or 350,000,000, and we must decide whether or not we are prepared to go on with the scheme. I think we should have more positive information than we have before we go any farther.


Robert Laird Borden: I think my hon. friend, and perhaps also my hon. friend from Lambton (Mr. Pardee), misunderstood something I said before luncheon. I was speaking of the practically certain cost of the road. At the present time it is in excess of what was contemplated originally, and I was using certain illustrations to show how that might be accounted for. It must be apparent to my hon. friend that I was not alluding to a discrepancy between the amount now estimated as necessary to complete the road and what will actually prove necessary. It is apparent, I think, from the experience of the Government in connection with the eastern division of the National Transcontinental railway, and also from the experience of the Grand Trunk Pacific with respect to construction in the West, that when a road has advanced so far towards completion as this system has advanced, it is very much easier to make an accurate computation as to what will be required to complete construction. I merely mention that in order that my remarks may not be understood quite in the sense attributed to them by my hon, friend. I do not quite see the point of my hon. friend from Welland, when he asserts that this company will be more tied up and more restricted in respect to its future efforts to raise money outside of Government aid than the Grand Trunk Pacific Railway Company will be. I am aware that the Grand Trunk Pacific came to Parliament either a year or two years ago and got power to issue further securities. Is that what my hon. friend alludes to?


William Manley German: No, what I allude to is the fact that the Government of Canada is taking a mortgage on every asset that the Canadian Northern Railway system has. The Government is tying up the whole concern, and the Canadian Northern will have nothing to offer to proposed lenders of money.


Robert Laird Borden: I am asking this only for information. Will my hon. friend tell me in what respect this road differs, so far as that is concerned, from the Grand Trunk Pacific railway? My hon. friend draws a distinction between the two. The Grand Trunk Pacific, for instance, has given a first mortgage to indemnify the Government in respect to the securities guaranteed by the Government, a second mortgage to indemnify the Grand Trunk in respect to the securities guaranteed by that company. It has given a mortgage to secure the Government against a loan of $10,000,000. It is covered, by another mortgage to secure the Government against a further loan of $15,000,000.. If I am not mistaken, it is also covered, so* far as its assets are concerned, by a mortgage to provide rolling stock. Thus, I do not quite see the difference between the situation of the Canadian Northern and the situation of the Grand Trunk Pacific in that regard. I understood that was the point my hon. friend was making.	.


William Manley German: I was making that point from this outlook of the situation that, after this proposition is completed, after this mortgage is executed and is registered against the assets of the Canadian Northern system, the Canadian Northern Railway Company will then have no further assets to place on the market. Everything will be tied up with the Government and with the prior mortgages. With what then can they go on the London market to raise money? They will have nothing. Tjhe money lenders will say: We cannot lend you any money; the Government has you tied up so that you cannot raise money here. The only way in which they can raise money will be to come to the Government.


Robert Laird Borden: That is largely a matter of opinion. It would depend upon the probable success of their enterprise; and the same conditions precisely would prevail with regard to the Grand Trunk Pacific Railway Company. It would depend upon the impression made upon the investing public in the large financial centres as to the probable results of the enterprise after it had gone into operation. So far as we are concerned, we have made the best inquiries possible under the circumstances, and we feel convinced that the $53,000,000 now available, subject to its being earned, and the proceeds of these securities, will complete the road. It is of course necessary, as my hon. friend knows, even after a road is completed in the sense of its being

taken over and opened for operation, as traffic develops to improve the road, to provide betterments, to provide more rolling stock, to perfect the permanent way, to provide sidings, and so on. I suppose two or three hundred million dollars have been spent by the Canadian Pacific Railway Company in the last ten or twelve years in that way, as its traffic has developed and as its earnings have warranted that expenditure. I suppose it will be the same with the Grand Trunk Pacific railway, although perhaps to a more limited extent, because that Toad was built to a higher standard in the first instance. Undoubtedly it will also be true, in the future, of the Canadian Northern Railway system; but as traffic develops, if the enterprise should be successful, the earnings of the company will enable it to make the necessary provision from time to time for those purposes.


William Pugsley: New Brunswick have entered into very large obligations for the St. John Valley railway with t'he expectation that the Grand Trunk Pacific would use the road to reach the harbour of St. John. But if this agreement becomes law we may say goodbye to the idea of the Grand Trunk Pacific utilizing the St. John Valley road. For this resolution gives the Canadian Northern railway the right to select the Valley railway portion of the Intercolonial railway or any other portion that may suit them best, and the Government must enter into an agreement with them under the terms of the resolution. When the Canadian Northern railway Company are the suppliants, when they are coming to the people of this country to help them out of the difficulty in which they find themselves, why should these conditions as to running rights be given them in advance? Why should they be given the first rights over the Hudson Bay railway or over the St. John Valley road or other portions of the Government railways? They might select the portion of the Intercolonial railway between St. John and Halifax, which is one of the best paying portions of that system. 'I could understand that the Government might have stipulated that they could compel the Canadian Northern railway to run trains over such portions of the Intercolonial railway as they thought right. But why people who are asking these favours should be given these rights that would only be given to a company that granted favours in return, I fail to understand.
Before recess, the hon. Solicitor General said that the late Government in fixing the capital stock at $92,000,000 gave the Canadian Northern Railway Company an opportunity to do the very thing which they have done. I have always understood that when Parliament allows a railway company or any other company to have a certain capital stock, it allows the shareholders to subscribe to the capital stock up to that amount. It does not mean that the capital stock to that amount is fully paid up without consideration; it simply means that if they can get people to subscribe for the capital stock they may issue stock certificates to that amount. Never before have I heard it suggested by anybody that when Parliament authorizes capital stock up to a certain amount, it implies the right to issue it as fully paid up and non-assessable. I only repeat what I said before: that when by the authority of Parliament stock is issued as fully paid up, that is taken in the financial
[Mr. Pugsley.J
markets of Europe as a guarantee upon the part of Parliament that there is property or value or money behind that to represent the stock which is so issued as fully paid up. If this Parliament, without any evidence,	and, as	I say,	contrary
to what every man knows to be the facts, declares this $65,000,000 of stock to be fully paid up, the people who are asked to invest in it have a right to assume that Parliament was satisfied that it is represented in value either by money actually paid by the shareholders or by property which has been actually taken over. My hon. friends know that the $65,000,000 of stock which they are asking this Parliament to declare to be fully paid up, indeed, the whole $125,000,000 which they are asking this Parliament to declare to be fully paid up, is not worth to-day ten cents on the dollar. It brings in no revenue; it may not bring in any revenue for years; even the most speculative man in Canada would not give ten cents on the dollar for it. Yet this Parliament declares in effect that it represents this vast amount, either of money or of property value. I say that this is entirely wrong, and I desire to repeat in all sincerity what I said this morning: that it seems to me that the proper way to do this as for Mackenzie and Mann to cut this capital stock down to what it properly represents in value-and no man will say that that is more than from $5,000,000 to $10,000,000-and then place it in the hands of the Government or in the hands of a trustee and give to the people of Canada, who are coming to the rescue of this undertaking and without whose assistance the Government say this enterprise will go into bankruptcy, the right, if after they are consulted at the next election they deem it desirable to do so, within five years to take over at par value that stock which is not worth more than $5,000,000 or $10,000,000. I am one of those who recognize the energy and enterprise of Messrs. Mackenzie and Mann; I would not desire to do them any injury whatever. But if Parliament were to say: In consideration of our taking hold of this bankrupt enterprise; in consideration of, in addition to giving you $15,000,000 last year to which you had no legal right-giving it to you in exchange for $7,000,000 which you ran off your printing presses without any consideration, and at a trifling expense -involving the people of Canada in this enormous liability of $45,000,000 more; if Parliament were to say that if after five years the Government of Canada should

determine to take over the road, they should give to Mackenzie and Mann somewhere between $5,000,000 and $10,000,000, it would not be treating them unfairly; it would be treating them with a degree of generosity to which their energy and enterprise might fairly entitle them. If Parliament is asked to adopt these resolutions, under which the country incurs all the risk; under which, if they be pulled through successfully, the Government and the country will be placed at a great disadvantage in acquiring the ownership of this property -doing so, as has been so strongly stated, without Mackenzie and Mann, who are the heart and soul of the Canadian Northern Railway Company, who own it out and out, putting up their own securities and their own wealth to indemnify the Government- it is asking this Parliament to do what is entirely inexcusable and for which there can be no defence.


Mr. W. T. WHITE:: The hon. gentleman who has just taken his seat has directed my attention to certain remarks made by the hon. member for Pictou during my absence. I am unacquainted with the particulars of what he said and can only surmise his remarks, which I understand related to the issue of $7,000,000 of par value fully paid stock of the Canadian Northern Railway Company to the Government of Canada last year as part of the consideration of the subsidy then paid. My hon. friend makes the personal request that I should give an explanation. I am glad to see my hon. friend back in the House; he knows that I can refuse him nothing that he asks in reason. I may say further that I am glad to have a real able lawyer before me, a real corporation lawyer, who knows the difference between fully paid and authorized capital stock, because I am not quite so sure as to the knowledge of certain of his colleagues as to the difference between the two kinds of stock.


William Pugsley: What about watered
stock?


William Thomas White: I am not sure either that some of my hon. friends know even what watered stock is; the Solicitor General will probably deal with that phase of the question a little later. I think that I can relieve my hon. friend's mind of the burden with which it appears to be oppressed with regard to this $7,000,000 of fully paid stock which he says or implies is illusory >and was supplied by the printing presses of the
Canadian Northern Railway Company. My hon. friend is, as I said, a good corporation lawyer and he knows that a company may have an authorized capital of any amount; that its issued capital is something very different from its authorized capital; that its issued capital may be of a very much less amount. A company's issued capital may not lawfully exceed its authorized capital, hut the directors of a company, up to the limit of their authorized capital, are authorized to issue stock which becomes fully paid up if paid for in cash or other valuable .consideration. The question which my hon. friend has brought to my attention turns, therefore, upon what 1 said to the .House last year with respect to the .$70,000,000 of stock. My hon. friend said that the hon. member for Pictou had stated that I had said to this House on that occasion that we were to get one-tenth of the paid-up issued stock of the company I am sure my hon. friend must have misunderstood what the hon. member for Pictou said I said, or a man of his intelligence would never have brought this forward. My hon. friend understood my hon. friend from Pi'ctou to say that we were to get one-tenth of the paid-up stock.


William Manley German: Of the issued stock.


William Thomas White: We will even say that. I would just as soon have it that way, and I will try to satisfy both gentlemen. The hon. member for Welland says that I said we were to get ond-tenth of the common stock which had been issued to Mackenzie and Mann, and the hon. member for St. John says that he understood that I said we were getting one-tenth of the paid-up issued common stock of the company. My hon. friend from Welland cannot contradict that, because he made the statement just a minute ago.


William Manley German: Whatever 'Hansard' says.


William Thomas White: I will just direct my hon. friend's attention to page 11725 of last session's 'Hansard':
Mr. Murphy: How did the number of shares come to be fixed at 70,000?
Mr. White: By legislation of this Parliament. The $70,000,000 is the authorized stock of the parent company under legislation of this Parliament, one-tenth of which the Government acquires in consideration of a subsidy which is above the ordinary.
What I said to this House was that the authorized capital of the Canadian Northern railway was $70,000,000, and that we

were to get one-tenth. As a matter of fact, when this matter was under discussion in the House, I had not made inquiry as to what the issued stock of the Canadian Northern railway was, and I said so, just three paragraphs before what I have just quoted. (Reading :)
Mr. German: Has the balance of the $70,000,000 been issued?
Mr. White: I am unable to say, but I believe the balance of the issue has been issued, it is reported as issued.
I had not looked into the matter, as there was no occasion for me to do so. "I said, therefore, that we were to 4 p.m. get one-tenth of the authorized-capital of the Canadian Northern, which was $70,000,000, and further that I was unable to say whether the balance of the $70,000,000 had been issued or not.


William Pugsley: On page 11724 my hon. friend is reported to have said:
I may say that there is $25,000,000 of common- stock of the $70,000,000 issued by the Canadian Northern railway that is held in trust to be availed of, if they so elect, by the holders of the income charge convertible debenture stock outstanding.


William Thomas White: I was interrupted at that time, and the interrupter was evidently of the opinion that the $25,000,000 was part of the $70,000,000. What I had in mind was this:	As a matter of fact, the
$25,000,000 which was held in trust for the income debenture holders of the Canadian Northern Railway Company was paid-up stock which had been placed in trust) by Mackenzie, Mann and Company as security that the debenture holders would receive that stock if they desired to exercise the option which they held. Later on, the Canadian Northern would have to issue $25,000,000 of stock because its indebted ness would be reduced to the amount of $25,000,000 when its debenture bonds were surrendered for exchange. I explained this the other night, and I am sorry my hon. friend from St. John was not present, because if he had been he would never have raised this question to-day. I gave a very full explanation then, which I am sure would have satisfied as good a corporation lawyer and as intelligent a man as my hon. friend is. My hon. friend from Welland is also a lawyer, but not so good a corporation lawyer as my hon. friend from St. John, and that is hardly damning him with faint praise. I am going to take my hon. friend from St. John a step farther.


Mr. McKENZIE:: We are children in
this thing. Perhaps the minister will explain to those of us who do not profess to be corporation lawyers-and I ask this in good faith-how does stock become paid-up by being issued in exchange for bonds?


William Thomas White: My hon. friend says, ' We are children.' I have never intimated, even by implication, that he was a child; he lacks the innocence of childhood.


Daniel Duncan McKenzie: By the time we get through the minister will understand that we are not such children on corporation law.


William Thomas White: I never suggested that my hon. friend was a child in corporation law or anything else; that suggestion came from him. My hon. friend has an open and judicial mind, and I need not say-and I say this with absolute sincerity-that my hon. friend's approach to a question is a legal and judicial approach. He has asked me how does stock become fully paid up that is issued in exchange for bonds. Let me take this case, which will, I hope, illustrate the point to the satisfaction of my hon. friend. The Canadian Northern Railway Company has debentures outstanding in the hands of the English public to the amount of $25,000,000. That, of course, represents indebtedness on the part of the Canadian Northern Railway Company to the English debenture holders. The Canadian Northern debentures holders, under the terms of the debentures which they hold, can surrender at any time those debentures for fully paid-up stock in the Canadian Northern of a like par value. Probably what perplexes my hon. friend is that he knows that the stock of the Canadian Northern is not at par to-day, and he probably cannot conceive what advantage it would be to the debenture holders to exercise that option. But the option is given on the expectation on the part of those who bought the debentures and the railway company that offered them that the stock some day might be worth par or more than par. Supposing that the stock of the company were worth above par a debenture holder with a debenture of $1,000-which is worth $1,000 and no more, because debentures do not appreciate like stock, instead of holding that $1,000 debentures could exchange it for ten $100 shares of stock, which might be worth $110, and he would thereby make $100 on the transaction. As far as the legal question is concerned, the exchange of author-

ized capital stock for issued debentures would make that stock fully paid up because the company would have received $100 for each share. Let me put it in a simpler way. Supposing the Canadian Northern Railway Company sold $25,000,000 of stock at par and put that $25,000,000 into its treasury. The stock would then be outstanding as fully paid up. Supposing, then, it took this $25,000,000 and bought in the $25,000,000 of debentures. It would then be extinguishing its debt to the extent of $25,000,000. My hon. friend is a good lawyer and I am sure I have cleared up that point.


William Pugsley: Will the hon. gentleman allow me to ask him a question ?


William Thomas White: Certainly; but I was going to anticipate. Probably the hon. gentleman has read Dickens, and he remembers Sairey Gamp's admonition:	'Don't proticipate.'


William Pugsley: Never mind about Sairey Gamp.


Some hon. MEMBERS:: Oh, oh.


William Pugsley: I would like to ask the minister whether he was mistaken when he said that the issued stock of the Canadian Northern Railway Company was $70,000,000. Is it not true that the way in which Mackenzie and Mann got that stock issued as fully paid up was that by giving contracts for construction in the name of Mackenzie, Mann and Company, Limited, they took the subsidies and proceeds of debentures and stocks in payment, and in that way the stock was issued as fully paid up. They issued this $70,000,000 of stock as fully paid up in connection with these various contracts for construction and then they utilized the printing press and issued to the Government this extra $7,000,000. Does my hon. friend recognize that that was not paid up stock at all except as this Parliament declared it to be such ?


William Thomas White: I must first of all put myself right with my hon. friend by disavowing any intention of comparing him with Sairey Gamp. When the hon. gentleman stated that the minister told the House that we got one-tenth of the issued stock he was in error, because I did not tell the House that.


William John Macdonald: $7,000,000 is onetenth of $70,000,000.


William Thomas White: I do not know whether the hon. member for Pictou (Mr. Macdonald) is as good a lawyer as the hon. member
for St. John (Mr. Pugsley), but I do not think so. His triumphs, I imagine, have been in his own native county. I would not like to get into a discussion with the hon. member for Pictou about law, although I believe I might be able to hold my own.


William John Macdonald: There is no question about that.


William Thomas White: My hon. friend came up preceded by a great reputation as a lawyer, but I must say that he has not as yet disclosed it in this House. There is a difference between authorized capital and issued capital. The hon. member for Pictou evidently is of the opinion that there is no difference between authorized and issued capital. I will refer my hon. friend to Palmer on Company law or any elementary book on corporations. My hon. friend has been a number of years in this House and he apparently does not know the difference between authorized and issued capital. A company may have an authorized capital of $100,000, and an issued capital of $5,000.


William John Macdonald: We know all about that; do not bother about the A B C of it.


William Thomas White: The hon. member said that I had stated that we were to get one-tenth of the issued capital. What I said was this-


William John Macdonald: You said one-tenth of $70,000,000.


William Thomas White: If my hon. friend will turn to ' Hansard ' of last year, page 11725, he will see that I said:
The $70,000,000 is the authorized stock of the parent company under legislation of this Parliament, one-tenth of which the Government acquires in consideration of a subsidy which is above the ordinary, but which, X believe, is justifiable.
The statement I made was that we would get one-tenth of the authorized capital.


William Manley German: But at that time they had an authorized capital of $92,000,000.


William Thomas White: I entirely agree with the hon. gentleman, and I will come to that. What my hon. friend was referring to was issued capital, and what I was referring to was authorized capital. When I said $70,000,000 of authorized capital I was in error as to the amount. I was not referring to issued capital. Then, I find on the same page of 'Hansard' of last year:
Mr. German: Has the balance of the $70,000,000 been issued?
Mr. White: I am unable to say, but I believe

the balance of the issue has been issued, it is reported as issued.
I had not looked into that question at the time to ascertain how much of this stock had been issued, and I did not mislead the House by saying that I had. I challenge any man to place such a construction on these remarks. I said that I was unable to say, but that I believed that the balance of the issue had been issued, that it was reported to have been issued.


William Pugsley: To Mackenzie and Mann?


William Thomas White: I did not say to Mackenzie and Mann. Yet the hon. member for Pictou said I misled the House.


William John Macdonald: So you did.


William Thomas White: If the hon. gentleman charges me with having misled the House, I say that he is guilty of a breach of that respect which one member owes to another. If he tells me that I deliberately misled this House, I would like to say to him what I am debarred by the rules of Parliament from saying, but what I would say to him outside of this House. The man does not sit in this House who can say that I have ever deliberately misled the House; and it lies as little in the mouth of the hon. member for Pictou as in that of any other member to suggest it. Now, I am going to argue this question on the merits.


William John Macdonald: Hear, hear.


William Thomas White: I am unable to say, but I believe the balance of the issue has been issued, it is reported as issued.
Is there anything misleading about that?
I told the House I could not say.
Mr. German: And for what consideration and to whom?
Mr. White: I am unable to say. I shall deal with that in a few moments. The general report is that the balance of the stock of the Canadian Northern railway has been issued to the contracting firm of Mackenzie, Mann and Company in consideration of their agreeing to building the line for that and other considerations, and I suppose for financing the enterprise to its present degree.
Anything misleading about that? I ask you if there could be a more candid statement to the House? I was asked a question in the midst of my speech. I said: I am unable to answer the question, but current report says so and so; I do not know. The hon. member for Welland (Mr. German) says that I named issued ..
stock instead of authorized stock. But let us assume that was the case. It is a year ago, and I can only give what is stated in ' Hansard,' and, as recorded- there, authorized stock is what I said. As a matter of fact, the authorized stock was greater than $70,000,000, but I did not know whether it was or not. I was asked a question in the midst of my discourse, and I answered it to the best of my information at the time. If the $70,000,000 had been issued, as I now believe it had been issued, $7,000,000 was one-tenth of the $70,000,000 which had been issued. But if you add $7,000,000 to the $70,000,000, that would make it $77,000,000, and the Government would own one-eleventh of the $77,000,000 instead of one-tenth of the $70,000,000. I said to the hon. member for Pictou the other night that if hereafter he comes as close to facts in statements that he makes to this House as I did in that particular statement, which is as close to the fact as a fraction of one one-hundred-and-tenth, he will much surpass his ordinary performance in this House. I come now to what I dealt with the other night. The hon. member from St. John is a good lawyer; that is, he is a good lawyer when he wants to be. I was dealing with this matter on Monday night, the hon. member for St. John being absent. I then read the two sections of the Subsidy Act of last session by which we granted $15,000,000 of subsidy to the Canadian Northern railway and received the $7,000,000 as part consideration. There was absolutely no attempt to deceive the House. The sections are as follows:
8. No subsidy shall be granted under this Act unless and until there shall have been issued and transferred upon the books of the Canadian Northern Railway Company to the Minister ot Finance and Receiver General of Canada, in trust for His Majesty, shares in the common stock of the Canadian Northern Railway Company of the par value of $7,000,000, which said stock and all rights appurtenant thereto shall ho held for the benefit of His Majesty absolutely, and shall be deemed to be fully paid up, non-assessable and not subject to calls; provided that the said stock or any part thereof may be disposed of under the authority of Parliament upon such terms and conditions as it may determine and the proceeds of the sale thereof paid into the Consolidated Revenue Fund of Canada.
I would call the attention of the hon. member for St. John to section 9, which clenches the matter, which affirms that this stock is absolutely paid up and non-assessable under the authority of this Parliament which has jurisdiction in the matter of railways and, moreover, the precise con-

sdderation for which it was issued and which made it fully paid:
9. The Canadian Northern Railway Company is hereby authorized and empowered to issue and transfer to the Minister of Finance and Receiver General of Canada, in trust as aforesaid, from and out of the authorized capital shares of its common stock of the par value of seven million dollars fully paid up and nonassessable and not subject to calls as aforesaid, upon the consideration of the Governor in Coun-cilv undertaking to grant to the Canadian Northern Ontario Railway Company and the Canadian Northern Alberta Railway Company the subsidies referred to in section 2 of this Act upon the terms aforesaid, and such stock when so issued and transferred shall be deemed fully paid without further or other consideration.
We must be fair in this matter, even to Tailway companies. It i& stated, in the face of this statute, which was before the House and the sections of which have been under consideration of every member of the House, including the hon. member for St. John and the hon. member for Pictou, that the railway company has created illusory stock and issued false certificates in respect of that stock, and handed them over to the Government. I ask the hon. member for Saint John as a lawyer, and as a good corporation lawyer, and I ask any man in this House who knows anything about law, to tell me what section 9 [means, and particularly the concluding part, if it does not mean that the Parliament of Canada affirmed that this stock 'should be fully paid up, non-assessable, not subject to call and issued in part consideration of subsidies of $15,000,000 granted to the Canadian Northern. Railway system. It is absolutely unquestionable, there is no getting away from it. I have pointed out the very language in section 9. It is charged that the Canadian Northern railway issued illusory stock, and yet the legislation of this Parliament is in these express terms:
^ The Canadian Northern Railway Company is hereby authorized and empowered to-
You cannot get stronger words than these.
-issue and transfer to the Minister of Finance and Receiver General of Canada, from and out of its authorized capital.
Not out of its issued capital, or paid-up capital, but out of its authorized capital-
[DOT]-shares of its common stock of the par value of $7,000,000 fully paid up, non assessable and not subject to call.
I am sorry I was out of the House when the hon. member for Pictou was speaking. That was not his fault nor was it mine. Cast year when I was dealing with this
matter in this House I stated that the authorized capital of the Canadian Northern railway was $70,000,000. As a matter of fact the authorized capital of the Canadian Northern railway at the time was in excess of $70,000,000. I was asked a question by Mr. German, and I was not aware that the authorized stock of the company was in excess of that amount. I stated in the most explicit terms that I was unable to say how much of that stock had been issued as fully paid-up. I had not made any inquiry about it. I said that current report was to the effect that it had been issued and that Messrs. Mackenzie and Mann, as contractors, had received either the whole or the greater part of it. I say further that the Canadian Northern Railway Company issued that stock certificate to the Minister of Finance and the Receiver General of Canada in accordance with the explicit and express terms of the statute in two sections of which I have read to this House. They issued it in pursuance of the power which was given: them by Parliar ment of which both the gentlemen to whom I am particularly addressing my remarks were members. They issued it, as I say, under the express authority conferred upon them by this Parliament to issue it; and they issued it as fully paid under authority of this Parliament, as part consideration for the subsidy which the Government of Canada was then voting to the Canadian Northern Railway system. Let us see whether there was anything to make that stock fully .paid-up. We granted to the Canadian Northern Railway system $15,000,000 in subsidy. The Canadian Northern railway is the parent company of the system. It issued
70,000	.shares, of a par value of $7,000,000 of authorized capital, in pursuance of the statute, as part consideration for the $15,000,000, the balance being subsidy. I ask my hon. friend from St. John if those 70,000 shares had '.been paid, for in cash by the .subscribers he mentioned in speaking of the paying out of the capital of a joint-stock company or railway company, by $7,000,000 in cash, whether any question would have arisen as to it having been paid up. And yet the Government of Canada gave $15,000,000, more than double the amount of the $7,000,000 of stock which the Canadian Northern railway was authorized and empowered to issue to the Government of Canada, representing part of the value received from the subsidy.


William Pugsley: The hon. gentleman then suggests that the Government bought the stock at $20 a share.


William Thomas White: No, I did not suggest that. He explained at the time the subsidies were being put through that the Government had demanded that 70,000 shares of the par value of $7,000,000, of the stock of the Canadian Northern railway, be issued to them, under the terms of the statute to which I have referred, as part consideration for the aid then received. I want to say this to my hon. friend from Pictou, because I do not believe he would charge anybody with wilfully attempting to mislead the House, there is a very great difference between misleading the House-


William Pugsley: We do not want to mislead the people outside.


William Thomas White: When I am outside I usually get along better with my hon. friend than I do in this House. [DOT]
Mr. GEO. E. FOSTER: Both of you are afraid.


William Thomas White: There is a very great difference between misleading the House and making an erroneous statement in the course of one's remarks as to the authorized capital of a company. I think it is entirely unnecessary that I should say anything more on that point.


Daniel Duncan McKenzie: The hon. member for
Pictou did not say ' intentionally.'


William Thomas White: If he did not mean intentionally, probably some of my remarks will not be relevant. I did not have the opportunity of being present when my hon. friend from Pictou was speaking. I was not referring so much to the fact that I had made the remarks to the House, because they are explained by Hansard'; but I do not believe that my hon. friend from Pictou or my hon. friend from St. John wants to do any injustice to a third party who at all events did not mislead the House. The Canadian Northern Railway Company did not mislead the Government or the House as to the stock that was to be issued in part consideration of the subsidy. The Canadian Northern Railway Company acted under the authority of this legislation representing the will of Parliament, and issued its stock certificates for value received, in the express terms and under the authority of the statute.
My hon. friend from St. John has referred to fully paid-up stock. That will be dealt

with, I think, by the hon. Solicitor General, because he has had more particular charge of that matter than I have. But my hon. friend from St. John would scarcely put forward the view in connection with the general Companies Act that the Government of Canada is absolutely responsible to all purchasers of stock that $100 in actual cash has been received for every share. If my hon. friend will turn up the leading cases on the subject, he will find that shares can be fully paid up by other consideration as well as by cash, and that once shares are issued as fully paid up, in consideration of property or service or otherwise, apart from fraud, they will not be declared by the court to be not fully paid up, even at the instance of a liquidator.


William John Macdonald: If I were to drop into poetry, as my hon. friend does sometimes, and improvise a little, I might be tempted to say that I think the Minister .of Finance doth protest too much. I regret that he was not here this morning when I emphasized what I said the other night in jiis presence. The statement which I made .the other night I made this morning, and I make it again. I submit that my hon. friend, instead of making any explanation that will satisfy the House in regard to his .statement of last year when this question was last before us, has only shown that he has got himself into the mire deeper than he was before.
This was the situation last year: My hon. friend is the watchdog of the treasury of this country, metaphorically speaking. He was instructed by this Government to purchase from the Canadian Northern railway $7,000,000 worth of stock, and to give to the Canadian Northern railway, in consideration therefor, $15,000,000. The Minister of Finance, in the course of carrying out those negotiations, never took the trouble to find out what the authorized capital stock or the issued capital stock of the Canadian Northern Railway Company was. My hon. friend came before Parliament and submitted' this governmental measure to the House in certain terms; and when he explained the meaning of that measure he led the House to believe that what he was purchasing from the Canadian Northern Railway Company was one-tenth of $70,000,000 worth of their stock, although he did not know whether it was the issued or the authorized stock.


William Thomas White: 'What fraction did I purchase, to put it in the terms of my hon. friend?


William John Macdonald: We are dealing with what my hon. friend did last year. My hon. friend came to the House as the sole repository of information in regard to this (matter. Hon. members on this side insisted that, before this measure was passed through the House, we should have a full and ample statement from the proper authorities as to the capital stock and the position of the Canadian Northern Railway Company. :My hon. friend the Minister of Finance undertook to make that statement to the House.


William Thomas White: What statement?


William John Macdonald: The statement as
to what the capital and the position of the Canadian Northern Railway Company were in relation to their stock.


William Thomas White: The hon. member for
Welland (Mr. German) asked me:
Has the balance of the stock been issued?
Mr. White: I am unable to say.
What does that mean?


William John Macdonald: Are we to believe
that the minister who was asked to negotiate the matter did not know anything about the stock which he was purchasing?


William Thomas White: Why did not you ask me at the time?


William John Macdonald: Whaf was the good of asking my hon. friend, who did not know anything about the matter, whether the stock was authorized or issued? My hon. friend was talking blindly in regard to the proposition. No other Minister of Finance who ever before asked Parliament to ratify an agreement in regard to purchasing stock of any company, was in the position that my hon. friend was in of not knowing what he was buying. That was the position in which my hon. friend was, to put it in the most generous form possible. He is going to ask Parliament in a couple of days to vote a large sum of money for the depositors in the Farmers bank, because, as he says, there has been an error of judgment on the part of his predecessor. If the predecessor of my hon. friend has been guilty of an error of judgment, my hon. friend is guilty of the most positive negligence in dealing with the Canadian Northern, because he should have known whether or not that $70,000,000 was the total issue
of the capital stock of the Canadian Northern or not. When my hon. friend stated that $70,000,000 was the authorized stock of the Canadian Northern Railway Company, one-tenth of which the Government acquired, he was mistaken. He knows that. I am surprised that my hon. friend should have manifested so much heat because I have charged him with having misled the House. I am not saying that my hon. friend deliberately misled the House. I say that my hon. friend was guilty /of absolute negligence in his dealings with the Canadian Northern Railway Company last year; that he did mislead the House because he was negligent in regard to the matter and did not know what he was speak:ng about; and that when he told the House that $70,000,000 was the authorized issue of the Canadian Northern Railway Company he was stating what was incorrect and untrue. If my hon. friend did not know at the time that it was untrue, he could not have deliberately misled the House. If my hon. friend was stating that which was incorrect in regard to the very vital question of the value of the stock he was purchasing, then my hon. friend did mislead the House. My hon. friend, not once or twice, but three or four times, in the course of that debate last year, stated to the House that what the country was getting in exchange for the $15,000,000 was one-tenth of $70,000,000. That is the statement I made the other night; and I reiterate the statement to-day, that that is what my hon. friend said.


William Thomas White: That is what we did get. We got one-tenth of $70,000,000.


William John Macdonald: My hon. friend is
more than a Gawyer; he is a hair-<splitter. My hon. friend was speaking about getting one-tenth of $70,000,000. Does he want to take the position now that, what he was leading the House to believe, was that there was $70,000,000 issued, although he said it was authorized, and that the company were going to issue $7,000,000 more and that that $7,000,000 that he was going to get was to be one-tenth of $70,000,000, just as a matter of arithmetic? My hon. friend cannot escape on that point. That is not what he said. In regard to that he said:	.
The Government has made a greater forward advance upon any policy in the past by reason of the fact that it has acquired, in respect of the larger subsidies 70,000 shares or one-tenth of the capital stock of the Canadian Northern Railway Company.
What does that mean? (Reading):

Whether the stock is valuable or not, I think it is of considerable value. The Government has obtained one-tenth of the stock.


William Thomas White: How much did it obtain ?


William John Macdonald: My hon. friend got $7,000,000.


William Thomas White: How much would that be ? What fraction ?


William John Macdonald: One does not need to be a lawyer to make that proposition. My hon. friend knows very well, and he might as well be frank enough to the House to say so, because every line of his address last year left it quite certain, that he was leading the House to believe that the Canadian Northern had issued only $70,000,000 worth of stock, and that the country was getting $7,000,000 of that issue. I say that the individual members of this House were led to believe that by my hon. friend quite unconsciously, because the whole record here shows that my hon. friend was asking Parliament to ratify a bargain with the company in regard to the purchase of the stock, when he did not know in whose hands it was; how much was issued and how much was authorized. My hon. friend should be fiank enough to say that this is the position he was in last year when he came to ask Parliament to ratify that oargain. It was not until the hon. member for Calgary (Mr. Bennett), in the Railway Committee this year elicited, by cross-examination of the solicitor for the Canadian Northern, the truth of this matter in regard to the stock issue, that we got the information that this additional $7,000,000 worth of stock had been issued. Why did not my hon. friend last year, when hi was asking Parliament to give this $15,000,000, respond to the demand of the Opposition at that time that he should give Parliament the fullest information in regard to the status of the company ?' In the expiring hours of the session, my hon. friend and his Government pushed that legislation through the House, although the Minister of Finance did not know what he was getting- did not know how much stock there was in the company with which he was negotiating, and did not give Parliament any information with regard to the subject.
Another matter which I mentioned this morning I will mention again while my hon. friend' is here. I showed this morning that the statement had been given out to the country that this Government had accomplished the enormous feat of reducing the capitalization of the Canadian

Northern railway to $100,000,000. Now, apart from a feature to which I propose to allude, a cursory glance at the agreement shows that the statement is absolutely incorrect-that the capitalization of the Canadian Northern railway under this agreement is $125,000,000. Not only that, but though it has been stated that Mackenzie and Mann are permitted to have $60,000,000 of stock against the Government's $40,000,000, the fact of the $25,000,000 outstanding was altogether suppressed, so far as the Government's organs were concerned. The authorized stock issue has been increased from $92,500,000 to $125,000,000; the issued stock has been increased from $77,000,000 to $125,000,000. And, in the next place, instead of Mackenzie and Mann being compelled to give up any stock they hold- they are stated, to have in their possession $70,000,000-the Finance Minister told the House last year unequivocally, as shown by the record, that there was issued out of that $70,000,000 an amount of $25,000,000 which they gave to redeem the perpetual debenture stock. So, instead of Mackenzie and Mann holding $70,000,000, they only held $45,000,000 of stock. The Minister of Finance will find his statement at page 11724 of last year's ' Hansard.'


Arthur Meighen: Did not they hold what was set aside?


William John Macdonald: I am speaking of the statement of the Minister of Finance. What they did or did not do makes no difference so far as this House is concerned. But as soon as we begin to discuss this matter, my hon. friend digs out of the back of his brain some piece of information of which he is the sole custodian-


Arthur Meighen: That is the place to keep it.


William John Macdonald: Oh, well, my hon.
friend need not fancy that his head is going to be the repository of all the interests of 'this country.


Arthur Meighen: The hon. gentleman
evidently did not understand me. He thought I said ' know.' What I said was 'hold.' Did not they hold it?


William John Macdonald: Here is what they
held according to the statement of the Finance Minister:
I may say there is $25,000,000 of common stock of the $70,000,000 issued by the Canadian Northern railway that is held in trust to be availed of, if they so elect by the holders of the income charge convertible debenture stock outstanding.

These are the words of the Minister of Finance*-$25,000,000 of the $70,000,000 was not in the possession of Mackenzie and Mann, but was held in trust.


Arthur Meighen: But it was owned by
Mackenzie and Mann.


William John Macdonald: It does not say so.


Arthur Meighen: But they were. That is a fair implication from the words the hon. gentleman has quoted.


William John Macdonald: No implication about it. This was set aside in the hands of a trustee.


William Thomas White: It was in the hands of a trustee.


William John Macdonald: It did not belong to Mackenzie and Mann.


William Thomas White: It could be subrogated,
and they would have the right to get the $25,000,000.


William John Macdonald: Now, my hon. friend resorts to the mysteries of legal technicalities in the discussion of these things. Is he going to discuss the law of subrogation in order to get away from the statement he made that there were $25,000,000 in the hands of the trustees and not in the hands of Mackenzie and Mann?


William Thomas White: They were in the hands of the trustees, as I have said.


William John Macdonald: Then they were not in the hands of Mackenzie and Mann.


William Thomas White: I did not say they were.


William John Macdonald: I am dealing with the hon. gentleman's position last year and with the statements in the Government organs this year, that some marvellous feat has been accomplished of compelling Mackenzie and Mann to disgorge so much stock. But instead of them being compelled to disgorge stock, the result of this arrangement is that though they have right and title to own the $45,000,000, they are given $15,000,000, and are now to be the possessors of $60,000,000. Now, however, the Solicitor General proposes to make a casuistical argument to get away from the statement of the Minister of Finance, a statement which is as plain English and as easily interpreted as could well be desired. That statement led this House to believe that the country was getting $7,000,000 out of the $70,000,000 of stock that then existed. The House had no idea so far as this explanation was 256
concerned that the $7,000,000 coming to the country was in addition to the $70,000,000. I say that according to the statement of the Minister of Finance last year Mackenzie and Mann had title to $45,000,000 of stock, and under this arrangement are to be made a present of $15,000,000 more.	,


William Manley German: I think the hon. gentleman could go one step farther. The Finance Minister said last year that the $7,000,000 handed over to the Government last year was to come out of the $70,000,000 [DOT]-it was to be one-tenth of the $70,000,000. Now, according to the statement of the Minister of Finance, last year $25,000,000 was in trust. That, of course, should be deducted. That would leave in the hands of Mackenzie and Mann $45,000,000 of stock, out of which $7,000,000 would be handed over to the Government, leaving to Mackenzie and Mann $38,000,000 of the stock of the Canadian Northern Railway Company. No argument that the Minister of Finance can put up will controvert that contention. $7,000,000 was to be handed over to the Government out of the $70,000,000; of the $70,000,000, $25,000,000 was held in trust for the debenture holders, to toe redeemed if they saw fit to redeem it, leaving in the hands of Mackenzie and Mann $38,000,000 of stock; and the Government is now, under this arrangement, making a present to Mackenzie and Mann of $22,000,000 over and above the stock, which they held a year ago.


Mr. PROULX:: There is a common
rumour that an understanding exists between the Canadian Northern Railway Company and the hon. member for Charlevoix and Montmorency (Sir Rodolphe Forget), that the Quebec and Saguenay railway is to be taken over toy the Canadian Northern. I think it would be just as well for the people to know now from the Government whether or not there is any such understanding. Under the following definition of constituent companies the Quebec and Saguenay railway could be taken over by the Canadian Northern:
' Constituent companies ' means such of those companies mentioned in the first schedule to the following resolution, and such other companies-


Arthur Meighen: We know nothing about such an understanding.


Edmond Proulx: Will my hon. friend the *Solicitor General admit that it is possible



that the Quebec and Saguenay railway will be taken over by the Canadian Northern?


Arthur Meighen: I know nothing about it.


Edmond Proulx: When the hon. member
for Calgary (Mr. R. B. Bennett) was addressing the House I saw the hon. member for Charlevoix and Montmorency applauding him, and I thought that he was going to vote'as the hon. member for Calgary did. When the vote came last night, however, he lined up behind the Government.


Mr. BOIVIN:: The hon. Solicitor General will remember that when I was speaking upon this resolution a few days ago I made the statement that the $21,262,000 for construction, equipment, terminals, branch lines, etc., which was due on December 31, 1913, and which is mentioned on page 43 oi the blue-book, was not included in the $100,000,000 required to complete the line. I was contradicted by the hon. Solicitor General and the same evening he was good enough to show me that this $21,000,000 is included in the $100,000,000. It is not shown in this blue-book that the $21,000,000 forms part of the $100,000,000, but the hon. Solicitor General told me privately that the $21,000,000 was divided among the six different items which formed the $100,379,099. Since my humble address in this House a great many other speakers have discussed the matter pro and con and some have asked how this $21,000,000 will be paid. The answer from the Government benches has always been that part of the $21,000,000 will be paid out of the $45,000,000 which we are providing and that the other part of it will be paid out of the $58,000,000, the proceeds of the securities which will be issued in respect of the expenditures mentioned and the cash in trust accounts for construction. In other words, before this $58,000,000 can be earned the Canadian Northern must have the $45,000,000 which we are providing for them and the $21,000,000 will he paid out of the $100,000,000. The hon. Solicitor General admitted to me privately-and I do not think that he will consider it any breach of confidence if I say this in Committee- that the heading on page 10 of the blue-book is misleading. Page 10 shows $100,000,000 under the heading ' Requirements to Complete,' whereas in reality that $100,000,000 is not merely requirements to complete but requirements to complete and to pay $21,000,000 of debt. Clause 1 of the resolutions is also misleading. It says:	.
That His Majesty, on behalf of the Dominion of Canada, may aid the construction, comple-

tion, equipment and betterment of the Canadian Northern system hv guaranteeing payment of $45,000,000.
As a matter of fact, this $45,000,000 is not only to aid the construction, completion, equipment and betterment of the Canadian Northern system, but is also to pay $21,262,000 worth of old debts. The members of the committee on this side of the House would like to know-and I think that we are entitled to a statement from the Government before this clause is adopted-how much of this $45,000,000 is for new work and how much of it is to pay old debts.


Arthur Meighen: The hon. member is
quite right in saying that the item $100,379,099 appearing on a page of the blue-book and in the return as well, does include $21,262,000 of unpaid deb+s on construction, and that the $21,262,000 is spread over the six items that appear on that page. I did say to the hon. member for Shefford that although the heading was scarcely a complete heading, there is no reason for being misled in connection with it. If hon. gentlemen will read in conjunction with it the supporting statements that appear in the return, four copies of which were filed and laid on the table, they cannot be misled by the statement referred to by the hon. member for Shefford. They show how much of the $21,262,000 is included in each of the separate lines, and how much in the case of each of the separate lines is required still to be put into the road to complete it. No fuller statement could possibly be called for. The question, however, of the hon. gentleman is this: How much of this $45,000,000 is to be used to pay that $21,262,000 and how much is for the rest. Quite obviously, if the $21,262,000 is paid out of the $45,000,000, just	that much will be paid	out
and the rest will be for other use.
But what I think the hon. gentleman wants to know is this: can the Government give an assurance that the $21,262,000 will be paid before the $45,000,000 goes to the company? I am glad to say that I am in a position to give that assurance. I did not feel that I could go so far as to say, in answer to the question of the hon. member for Pictou, that the Government was to so control the expenditure of $45,000,000 as to take care of every single item of the $21,262,000; but I do say this: that the $21,262,000 will be paid before the $45,000,000 is paid out. If the necessity arises I am in a position to say that the Government can see to it that the $21,262,000 is paid.

Hon. gentlemen should keep in mind that the right to file a claim in respect of any portion of that unpaid balance jalready exists. There is a statute under which a claim may be filed, and though the character of the claim may not be distinctly w'ithin the purview of the statute, if it is filed and there is no bona fide dispute, the claim will be taken care of.


Georges Henri Boivin: As I understand the Solicitor General, this $21,262,000 will all be taken care of out of the $45,000,000.


Arthur Meighen: I did not say that. 1 said that the $21,262,000 will have to be paid before the $45,000,000 is paid out. I do not suppose any person cares whether it comes out of the $45,000,000 or the $58,000,000; all the creditors want is to get their money, and an understanding can be given that before the $45,000,000 is paid out this $21,262,000 shall be paid. Whether it comes out of the $45,000,000 or the $58,000,000 makes no difference.


Georges Henri Boivin: I can understand that the contractors want their money, and that it makes little difference to them whether they are paid out of the $58,000,000 or the $45,000,000; but the people of Canada are putting up the $45,000,000, and I think it does make a difference to them to know whether that $45,000,000 is to be used in paying off old debts or in new construction. I think the committee is entitled to know what portion of this $45,000,000 is to be used in paying off	the	debt	of	$21,262,000.The Solicitor General, in 5 p.m. answering me a moment ago, said,	quite	obviously, thatthis amount of $21,262,000 owing to contractors would require $21,262,000 to pay it off. I quite understand that, but if the $21,262,000 is to be taken out of the $45,000,000,	that	leaves	only	$23,000,000
odd for new work; and when you deduct the cost of financing this $45,000,000 loan only about $20,000,000 is left for new construction.


Arthur Meighen: The	hon.	gentleman
admits that from the point of view of the creditor it makes no difference whether this $21,000,000 odd comes out of the $45,000,000 or the $58,000,000; and he looks at it from the point of view of the public. Let him reflect for a moment. If it all comes out of the $45,000,000, there is that much more left for the same purpose in the $58,000,000, and if it all comes out of the $58,000,000, there is that much more left in the $45,000,000. If a part of it 256i
comes out of one and a part of it out of the other, that is just as broad as in either of the other events.


Georges Henri Boivin: If the Solicitor Generali can assure us that the $58,000,000 can be^ raised with as much certainty as the $45,000,000, his argument is good; but I claim that the first clause of this resolution-and consequently of the Bill-and the heading in the blue-book are misleading, because they tend to show that this-$45,000,000 is going to be used for new work when really it is going to be used in, paying off old debts.


William Manley German: The Solicitor General says the $21,262,000 is included in the statement of ' Requirements to complete.' If that is so, this is the most peculiar statement that I ever saw placed before a deliberative body. On pages 26 and 27 of the blue-book will be found a statement of receipts available for construction, betterments, equipments, etc. That statement shows what has been expended by Mackenzie and Mann on their lines up to date; a total of $305,853,832.06. Another statement on the same page shows what they have received in cash subsidies from the Dominion and provincial Governments, from municipalities, and in the way of securities guaranteed and otherwise; a total of $223,407,641.98. At the top of the next page it is stated that the expenditure for construction and equipment is $244,670,169.24, less a balance due to Mackenzie and Mann for past work of $21,262,527.26. I will ask the Solicitor General why, if this $21,262,000 is due contractors as he claims, it is put down as being due to Mackenzie, Mann and Company, although I suppose that they being the principal contractors the amount is principally dde them, and from them to the sub-contractors. On page 10 of the blue-book there is a statement headed 'Requirements to Complete,' showing that the Canadian Northern Pacific railway requires $23,647,492; the Canadian Northern, $15,042,896; the Canadian Northern Ontario railway, $18,251,991; Canadian Northern Tunnel and Terminal Company, $5,995,734-the Solicitor General says they have bonds covering that-rolling stock, equipment for transcontinental, and maturing equipment notes, $27,441,086; betterments, $10,000,000. None of that money is required to pay for past work. The money is wanted for work to be done in the future. The amount totals up to $100,379,099, and for the life of me I cannot

see how the Solicitor General can inject into that total his $21,262,000 which is due for work already completed.


Arthur Meighen: The hon. gentleman refers to pages 26 and 27 of the bine-hook, and says that the money expended through Mackenzie and Mann is $305,853,832.06. That is his first error. The statement on page 26, as will appear from the heading, is a statement of receipts available for construction, betterments, equipments, etc., and the $305,000,000 odd represents the total expenditure for those purposes. But the whole of that expenditure was not made through the agency of Mackenzie, Mann and Company, Limited- the construction department of the road. If the hon. gentleman will follow it a little further, he will see that about $61,000,000 was made directly by the Canadian Northern over the heads of its construction department; that $'61,000,000 being after the road was taken over, and representing equipments and, chiefly, betterments. His next error is this: he says that the $21,262,527.26 appearing at the head of page 27 appears there as due Mackenzie, Mann and Company, Limited. That is how it appears in the books of the Canadian Northern railway. Why? Because Mackenzie, Mann and Company, Limited, appear on those books as the construction department of the road, and the money has passed through their hands, except the $61,000,000 for purposes of construction. But in actuality the money is not owing to Mackenzie, Mann and Company, Limited. Legally dt is coming to them, but the money is owing to the contractors who did the work, and Mackenzie, Mann and Company, Limited, only appear as an agency to get the work done. The money is owing to the men who did the work-the contractors- and to banks who loaned the money to contractors to enable them to do the work. It does not appear from page 10 of the blue-book that this $21,262000 is included in the $100,379,099. But if the hon. member for Welland will take up the return on the table and relad the next page of it he will see the full explanation. It gives the amount in connection with the British Columbia lines as already found to be $10,141,780, and it divides that $10,141,780 among the five branches in British Columbia. The following pages do the same thing for the other lines, so that the apportionment of that $41,000,000 amongst the various items,

makes up the $100,000,000 as complete. The hon. gentleman says that these are no requirements to complete at all. Of course they are. The road is not considered completed until it is in a position to be taken eff the hands of the contractors and into the hands of the company. You cannot take the road off the hands of the conti actors until the contractors' debts are paid; consequently, it is not complete unless they are paid.


Wilfrid Laurier: Will the Solicitor General explain the statement on page 15 of the amount required to complete the \road? The statement is made up of the following items:
Montreal terminals	$ 5,595,734
Construction	as	above	
41,987,565Amount due	on	construction . . . .	14,954,714Rolling stock	
27,441,086Betterments	
10,000,000
This is stated to be the whole of the $100,000,090 of expenditure necessary to complete the road with the exception of $14,954,714 due to contractors. I cannot see why there should be this discrepancy between the $14,000,000 and the $21,000,000.


Arthur Meighen: If I get the right hon. gentleman's point, it is that the $14,954,714 appearing on page 15 is not the same as the amount of $21,262,000. That is his point, is it not?


Wilfrid Laurier: No, my point is this: You give an amount of $100,000,000, which it is stated is all that is necessary to complete the road, with the exception of $14,000,000 of accounts due to contractors. I had understood that in that amount of $100,000,000 was included the $21,000,000 referred to by my hon. friend from Shefford (Mr. Boivin). If that is correct, I cannot understand how the statement here is given as only $14,000,000.


Arthur Meighen: That is the point I was trying to answer. My mind encountered the same point not very long ago. Apparently from that statement, which reaches the very same total, these debts are only $14,000,000, whereas in the other statement they appear to be $21,000,000. The explanation given by the auditors, subject to further inquiry on their part, and they have not corrected it since, is that the $14,954,714 does not really represent all the accounts outstanding. The $21,000,000 odd is the correct figure. It is to be found in the other items, chiefly in the $41,987,565. If that

explanation, on consideration, is found incorrect and not clear, I will undertake to make it clear later on.


Wilfrid Laurier: That is a very indefinite statement. I have always understood that the $41,000,000 was required for construction. We have proceeded on the assumption that the only liabilities which are due now are the $14,000,000 in regard to construction. Now it appears that $21,000,000 is due, and my hon. friends cannot say what it is for.


Arthur Meighen: Yes, I know that the
$21,000,000 is right.


Wilfrid Laurier: But if the
$21,000,000 is right, then the amount of $100,000,000 cannot be correct, because it is increased by $7,000,000.


Arthur Meighen: No, it means perhaps that each statement was made up as of a certain date, one statement being as of a date different from the other, but it would ultimately amount to the same thing, because such an amount as would still be owing would mean that there would be that much less work to do. In the end it would come to the amount of $41,000,000, and there would be no difference in the total of $100,000,000.


Wilfrid Laurier: That cannot
be because the statements were both made upon the same date. There is a confusion in this; I do not say that my hon. friend is responsible for it but the auditors are, and the result is that we have two contradictory statements. First, you have the statement that $100,000,000 is required; then in one statement you say that you must deduct $21,000,000 and in another you say that you must deduct $14,000,000. There is a discrepancy of $7,000,000 which has not been explained.


Arthur Meighen: It can be explained all right. I do not think there are two contradictory statements. There must be some reconciliation between these two statements, although it .may not be quite clear. I do not think they were made on exactly the same date, but the amount required to complete the payment of the debts is the .same.


Wilfrid Laurier: My hon. friend has asked for $45,000,000 to complete this road. It is important to know whether or not the figures upon which he calculated are accurate or inaccurate. These statements may be susceptible of reconciliation,
but the reconciliation has not been presented to us as yet. It is important to know the facts before we pass this section. Is it $21,000,000 that has to come out of the $100,000,000, or the $41,000,000? My hon. friend says there are two items and that the difference may be reconciled.


Robert Laird Borden: I do not think there is
any very great difficulty about it.


Wilfrid Laurier: Let us have
it, then.


Robert Laird Borden: My hon. friend sees right there before him:
Sub-contractors' accounts, etc., not in above.
Apparently they had included some of the sub-contractors' accounts ini the $41,000,000 because the work had been done, the construction had been accomplished. They may have included all of them in regard to. the work which has been done or the construction accomplished. But some of them they did not put in. Therefore they say:
Sub-contractors' accounts, etc., not in above,, see accompanying statement.


Wilfrid Laurier: What is the
accompanying statement?
Western lines	$ 8,348,290
Eastern lines	 6,606,424


Robert Laird Borden: Certainly, these contractors' accounts, $8,000,000 in one case and $6,000,000 in the other, had not been included in the $41,000,000 above.


Wilfrid Laurier: But from the $100,000,000 it is stated that $14,000,000 is deducted, leaving for construction $100,000,000, less $14,000,000, or about $86,000,000. The Solicitor General says:	I cannot explain it to-day, but I will do it later on.


Arthur Meighen: I am fortunate again in being able to assure the right hon. gentleman that the explanation I gave is the correct one. I have consulted with the auditor since, and he has confirmed what I stated supplemented by what my right hon. friend the Prime Minister has said. The $21,262,000 is the amount owing on construction as of the 31st of December. That all does not appear in the $14,954,714, but that $14,954,714 is as it is said to be on the very face of the return, ' sub-contractors ' accounts not in above.' In the ' above requirements to complete ' are

included some of the sub-contractors' accounts. The $41,987,565 and the $27,441,086 include the balance of the amount of $21,-
262,000	not included in the item of $14,954,714.


Georges Henri Boivin: Does not the Solicitor
General consider it would have been a great deal better if all of the sub-contractors' accounts had been included in the same item, so that we would have known where we were at?


Arthur Meighen: It might have been -clearer, but the information is all here; there is nothing left out. There are some contractors' peculiarities of accounting that I am not any more familiar with than is the *hon. gentleman.
Mr. PUGSLEY; Does the Solicitor General assure the committee that the difference between the $14,000,000 and the $21,000,000 he speaks of is not due to Mackenzie, Mann and Company, Limited, as the principal contractors?


Arthur Meighen: They are not, in the ordinary sense, contractors at all. They simply act as a construction department of the road. They are contractors in the sense that they incur contractors' obligations, raise money during construction, pending returns from subsidies and proceeds of bonds; but they are not contractors in the sense that they themselves contract with the Canadian Northern railway, by any written documents or by any understanding, to do the work at a fixed price. They simply get the work done as cheaply and as well as possible, and the Canadian Northern railway pays the accounts.


William Pugsley: How do they get that
stock issued as fully paid up if they do not get the work done as contractors?


Arthur Meighen: The hon. gentleman would scarcely deny that if they did no more than I have named in my second last sentence, that is raise the money, themselves becoming responsible and financing $244,000,000 of construction, they would be entitled to some remuneration for that? If paid in stock, depending on the success of the enterprise, would they not be entitled to some very considerable remuneration? I do not know what percentage the hon. gentleman would think fair.


William Pugsley: I am sure that the hon. gentleman would not attempt to assure the committee that Messrs. Mackenzie and

Mann have not become very wealthy out of this railroad construction.


Arthur Meighen: If the hon. gentleman will read the return he will see that the Government auditors an whom he has confidence and has, through years, expressed and preserved his confidence, have reported that on this construction Mackenzie, Mann and Company have not made anything except the common stock that they have, and that common stock represents a great deal more than merely their services as construction agents for the Canadian Northern railway.


William Pugsley: Do they report what
the assets of Mackenzie, Mann and Company, Limited, are worth?


Arthur Meighen: No, they do not. Is the hon. gentleman very anxious to find out?


William Pugsley: Not at all. I think myself that if Mackenzie, Mann and Company, Limited, are worth a great many millions of dollars, as reported, it would not be unreasonable, as they are really in truth and in fact the Canadian Northern Railway Company, that they should put up those assets as a security to the people of this country for their guarantee of this enormous amount of $45,000,000.


Arthur Meighen: Why did you not have them put it up when you gave them a subsidy?


William Pugsley: It is a very different
proposition to-day; they are coming now in a very different position, they are asking us, in addition to making them a present last year of the enormous sum of $15,000,000, to give them a guarantee or endorsement of $45,000,000 more. If it is true, as I say it is, and as the people of this country know it is, that Messrs. Mackenzie, Mann and Company, Limited, are the Canadian Northern Railway Company, that they are the same persons under a different corporate name, they own all the stock of the Canadian Northern railway, they are the Canadian Northern railway.


Arthur Meighen: They will not be if you allow this Bill to pass.


William Pugsley: Well they will be partners at all events, they will be the controlling partner and, more than that, they will be able to go to the financial people in the old world and say: the Government is our junior partner, it owns $40,000,000 of the paid-up stock and it cannot see us go down; it will have to stand at our

backs and make this stock valuable, and you will be perfectly safe in investing in this common stock. What I say is that tdie Government seem to have thought it important to ascertain how much profit Messrs. Mackenzie and Mann, Company, Limited, have made out of construction. Why did they not go a little farther and find out what were their assets, because their assets would be accumulated either out of construction or out of financial operations in connection with the Canadian Northern railway; and money could be made out of financing hundreds of millions of securities for the Canadian Northern railway just as well as out of construction. Does my hon. friend see that? I do think, if they are in reality the Canadian Northern railway as everybody knows they are, it would be reasonable that these assets should be put up as a security for the obligation which the people of Canada are assuming.
Mr. ME1GHEN: The hon. gentleman says that our investigation into their Profits 0 construction was not sufficient, tha we should have investigated whether or not they made any money by way of rake-o on the sale of securities.


William Pugsley: I did not use the word rake-off. I said profit from financing.


Arthur Meighen: Profit from financing; it may be more euphonious but it means the same thing. We now know that Mackenzie, Mann and Company, Limited, did act as construction agents of the Canadian Northern railway. Therefore, we felt it was our duty to see whether they had in any way absorbed these moneys that- .should have gone into the railroad. We did not know and do not know now that they acted as agents for the sale of the bonds of the 'Canadian Northern railway.


William Pugsley: Did not the hon. member a few moments ago, say that they had done financing for the Canadian Northern railway?


Arthur Meighen: They did incur financial obligations, raising money for the purpose of building the road.


William Pugsley: Yes, out of bonds guaranteed by the Dominion of Canada, by the province of British Columbia, by the province of Manitoba, by the province of Saskatchewan and by the province of Nova Scotia.


Arthur Meighen: Not at all.


William Pugsley: Is it not just as important-


Arthur Meighen: They did not do that.


William Pugsley: Oh, yes.


Arthur Meighen: No, they did not.


William Pugsley: Is my hon. friend sure of that ?


Arthur Meighen: Sure, yes.


William Pugsley: Does he suggest that they raised the money without security ?


Arthur Meighen: They raised it on their
own assets.


William Pugsley: Mackenzie and Mann; and what do their assets consist of ?


Arthur Meighen: That is not our business.


William Pugsley: Does not my hon. friend see that if it is important to ascertain how much money Mackenzie, Mann and Company, Limited, have made out of construction, it is equally important to see how much money they made out of the Canadian Northern railway by financing for them and selling their bonds, selling the various securities which were guaranteed by the Governments of Canada and of the various provinces? They may have made millions out of this, and it would detract just as much from the resources of the Canadian Northern railway as if they had made it out of construction.


Arthur Meighen: The hon. gentleman is wrong at both ends; I shall start, though, with the end he was at first. Mackenzie, Mann and Company, Limited, financed the construction of the road; but they financed it not out of funds the proceeds of securities guaranteed by the Dominion or by anybody else; they financed it on their own resources in so far as their operations were concerned. They raised the money in advance of receipt of these securities, and they raised it on their own resources. Then as the proceeds came in they were recouped the moneys they paid out. For a gentleman having such a knowledge of railroad construction as the hon. member for St. John, I am surprised that my hon. friend does not appreciate the fact that construction has to go on and be done as far as it goes before a dollar of proceeds of guaranteed securities can be obtained. How is the money to be raised to do that ? Somebody has to do it. Messrs. Mackenzie and Mann put up the money for the Canadian Northern railway. They were afterwards recouped out of the proceeds of the

bond guarantee and of other bonds to a total of some $323,000,000, but they have expended some $224,000,000, leaving $21,000,000 owing to those who did work for which Messrs. Mackenzie, Mann and Company, Limited, have never received money from the Canadian Northern railway to pay. We knew that they had that association with the road and we made it our business to investigate. We rose to a sense of duty w'hich the hon. gentleman never rose to when he came to the assistance of the Canadian Northern railway or by Mackenzie and Mann.


William Pugsley: You rose to a sense of only half duty.


Arthur Meighen: Better half duty than
none at all. But we did not know, and we do not know yet that, in the sale of Canadian Northern bonds, Mackenzie, Mann and Company acted in any capacity whatever. My information is that they did not; that the Canadian Northern sold their own bonds, and that the auditors of this Government have traced the whole proceeds of those bonds right into the road itself. I am surprised' that, when Mackenzie, Mann and Company, under the guise of the Canadian Northern Ontario, came to the hon. member for St, John in 1911 and said:	We cannot build the Canadian Northern Ontario unless you come to our aid; you will have to do something for us as the Government of Canada; we cannot do it without your help, that my hon. friend did not say: Where are your stocks, your other assets, that you did not make out of the Canadian Northern at all, that you made in speculations elsewhere? Put that down before we give you a dollar's worth of bond guarantee from this Government. That is what my hon. friend should have done, seeing that he takes this position now. As long as Mackenzie, Mann and Company do not absorb out of the Canadian Northern Railway Company anything that is intended to go into the assets of that company, we have not any business with Mackenzie, Mann and Company. But inasmuch as the townsite company derived value from the fact that the Canadian Northern railway itself went through where the townsites are or into their neighbourhood, we felt that they should put that in as security, and they have done so. Those are their own assets according to law. They have placed in security $10,000,000 worth of stock and $10,000,000 worth of bonds against the guarantee of this Government. That is something the hon. gentleman never thought

of before when he was giving a guarantee in 1911, or was giving subsidies many years before.


William John Macdonald: He was not taking third mortgages.


Arthur Meighen: As the townsite company derived value from that fact, and because of the fact that it was available, we felt that it was not asking too much that they should pledge that as their security. We have discussed all this; we have gone by all this position, and I do not think I ought to delay the committee and I do not think the hon. member for St. John ought to delay the committee in discussing something that has been discussed threadbare already.


William Pugsley: I am very sorry indeed if I am delaying the committee. I would not like to have my hon. friend think that I am seeking to do so. It was my misfortune that I was not able to hear the discussion; and if, by reason of that, I am dealing with something that has already been thrashed out, I trust that the committee will pardon me; but I think that my hon. friend is not doing justice to himself in seeking to make the committee believe that the position of affairs to-day is the same as it was when the previous Government guaranteed the bonds. At that time, the Canadian Northern had a good financial standing.


Arthur Meighen: Why did you not make them go to the markets and get the money?


William Pugsley: What that Government did was to guarantee first mortgage bonds.


Arthur Meighen: Why did they come to you at all?


William Pugsley: Because, by reason of having the Government guarantee, they would be able to get the money a little cheaper.


Arthur Meighen: Was that the explanation you gave at the time?


William Pugsley: But they come to the Government to-day and say: If you do not come to our assistance, we shall have to go into bankruptcy. They are in an unfortunate position. I suppose perhaps that this position may result somewhat from the terrible depression which has spread' over the country west during the last two years.


Arthur Meighen: If they only came for their own advantage to get money a little cheaper, where is the difference? Why did

not the hon. gentleman say to them: You have lots of assets of your own; put them in; get the money more cheaply that way; why do you come to us? Is not the point just the same, no matter in what capacity they come?


William Pugsley: I claim that the company is in a very different position to-day in respect to this $45,000,000 from what it was in in respect to the guarantee which they asked for from the previous Government.


Arthur Meighen: You do not answer the question.


William Pugsley: They came then with a good security-a first mortgage. They were proposing to link up the system so as to connect Montreal w'ith the base of the Rocky mountains. There "was evidence that it would be an exceedingly good system, and that it would be a safe proposition to guarantee the first mortgage bonds. To-day they are coming to the Government and they say: Every bit of 'property which we have is mortgaged; we cannot raise any more money on it in the markets of the world, and, unless the Government comes to our assistance, we shall be obliged to go under. In these circumstances, the Government has felt it to be its duty to find out whether Mackenzie, Mann and Company, Limited, have made any money out of the construction of the railway; but, knowing, as they must, as the whole country knows, that Mackenzie, Mann and Company have assets of enormous value, they do not go into the whole matter; knowing as they do that Mackenzie, Mann and Company financed for the Canadian Northern'-financed for themselves under the name of the Canadian Northern -they do not seek, through their auditors, to ascertain what money Mackenzie, Mann and Company made out of the financing, out of the commissions, but they simply limit their auditors to find out what they made out of the construction of the railway. iSurely, if there were $10,000,000 worth of bonds which Mackenzie, Mann and Company financed, and for which they only turned into the Canadian Northern 80 per cent-


Arthur Meighen: They turned in all. The auditors so found.


William Pugsley: I have not seen any report to that effect.


Arthur Meighen: Then, you have not read it.


William Pugsley: I have not seen any report that they have turned in the par value of the bonds.


Arthur Meighen: They did not sell at
par.


William Pugsley: Does the hon. gentleman pretend to say that the securities guaranteed by the Dominion and the different provinces and sold four or five years ago, did not sell at par?


Arthur Meighen: Wherever they sold at par or above par the whole proceeds are traced by our auditors and found to be planted in the road. The auditors traced the full amount at which the bonds sold and followed it into the road itself.


William Pugsley: Where is the report of
that?


Arthur Meighen: It is on the table.


William Pugsley: Then, why is it that my hon. friend cannot say whether or not Mackenzie, Mann and Company, Limited, charged commission to the Canadian Northern railway?


Arthur Meighen: I know they did not because they did not act as agents on the sale.


William Pugsley: Does he say that Mackenzie, Mann and Company, Limited, got no profit either out of financing for the Canadian Northern railway or out of construction?


Arthur Meighen: I am able to assure the House of that on the authority of the auditors of this Government.


William Pugsley: I will accept that assurance of my hon. friend if he knows it. But I will say that it is entirely contrary to my own information. Not very long ago I had information from a very high financial authority, an officer of a financial institution who would be in a position to speak as to the circumstances that Mackenzie, Mann and Company, Limited, were rich beyond the dreams of avarice. They have been connected entirely with the construction ot roads belonging to the Canadian Northern Railway system. I would like to ask, then, how they made this enormous wealth unless it was out of railway construction or out of financing for the Canadian Northern railway?

One other thing. The hon. gentleman says that roads must be constructed before the bonds are issued. I defy him to point to a single road of importance constructed by the Canadian Northern railway for which there was not legislation providing either for subsidies or for the guarantee of bonds before a single mile of the road was constructed. And when Mackenzie, Mann and Company, Limited, or Sir William Mackenzie or Sir Donald Mann would go to the financiers of the world they would be able to point to legislation providing for the guarantee of the bonds; and I venture to say that not a dollar would be advanced by the financiers except by the bonds being pledged to be delivered over to them when actually issued under the authority of Parliament or the legislature of the province concerned.
I am not making objection now to Mackenzie, Mann and Company, Limited, making millions-if they did make them- out of financing the road. What I am arguing is that the position of Mackenzie, Mann and Company, Limited, is practically the same as if it were the Canadian Northern Railway Company that had in its vaults the assets that Mackenzie, Mann and Company, Limited, have. So far as their assets are concerned, as I have said, they are in effect the Canadian Northern railway. Now, why should not they put up their assets? If through the action of the Government this undertaking is pulled through, they stand to make. If the stock which the Government is taking is worth anything-and hon. gentlemen are trying to make the country believe that it is a most valuable asset, or may be in the future -Mackenzie, Mann and Company, Limited, will have $60,000,000 with the stock at par. If it becomes worth only fifty cents on the dollar they stand to make $30,000,000. Why, then, should not they stand behind the Government to the extent of their assets? Can the Government make any answer to that? If Mackenzie, Mann and Company, Limited, were not really the Canadian Northern railway, if they did not hold this stock of the company there would be no point to my argument. But they hold all the stock except the $7,000,000 given over to the Government last year. But the Government is going to pledge the credit of the people to this enormous amount as a result of which these gentlemen, if the operation proves successful, will be immensely rich, yet nothing of theirs is pledged. The Government auditors were

void: Do not look into the assets of Mackenzie, Mann and Company, Limited, but only report whether they made money out of construction; as to what they are worth, as to the stocks they have in their treasury, be careful not to report to Parliament or give information on that subject.


Robert Laird Borden: The Government gave no such instructions, but gave instructions to inquire whether every dollar derived from the proceeds of these securities had gone into the road or was available in the bank. The auditors have reported accordingly that that was the case. The hon. gentleman is speaking absolutely without warrant, and must know it, when he assumes that the Government gave any such instructions as those to which he has alluded. He is taking the point that the assets of Mackenzie, Mann and Company, Limited, derived altogether from ventures outside of this railway, should be brought in. I would ask him a question:	Did he consider the securities which he guaranteed as a member of the late Administration of 1911 marketable without the guarantee of the Government?


William Pugsley: The first mortgage
bonds? I say, frankly, the matter was not in my department, and I gave no thought to the question.


Robert Laird Borden: The difference between
the late Administration and this is just there-we did give thought to the question. The hon. member has not been in his place during the debate, and therefore did not hear the observations of the hon. member for South Renfrew (Mr. Graham), who stated that the mere fact that these securities were brought here and the Government was asked to endorse them was an indication that they could not be saleable without that guarantee, and therefore the security they afforded was absolutely inadequate. I do not think I am misstating his argument. Precisely the same argument applied to the securities which were guaranteed in 1911, would lead to the conclusion that the security then offered was also valueless. Whether that be the case or not, I think it can be demonstrated to the satisfaction of any reasonable man that the security offered in respect to this guarantee is a better security than that which the late Government took in 1911 in respect of the Canadian Northern Ontario.


William Pugsley: That is, the right hon. gentleman believes that a second mortgage is better than a first.


Robert Laird Borden: No, I do not think a second mortgage is better than a first. But I think that a first mortgage of $35,000 a mile upon a particular piece of line may be a more dangerous risk to the country than a third mortgage if the prior charges together with the charge created by the third mortgage amount to the same sum and are secured upon a very much better piece of line; thus, I think that my right hon. friend from St. John-


William Pugsley: Not ' right hon.'


Robert Laird Borden: I am glad to have referred to the hon. gentleman in that way, and trust it may be only a presage of what may come in the future. We will not quarrel about that. Now, the security which the late Government guaranteed in 1911 was $35,000 a mile upon the Canadian Northern Ontario, and according to the hon. member for South Renfrew, that security could not be regarded as marketable without the guarantee of the Government. The hon. member for St. John has not controverted that statement, but said that he had not given thought or consideration to that question. But assuming that he had given thought and consideration to it, I assume he would have insisted on Mackenzie, Mann and Company, Limited, at that time utilizing these enormous private resources to which he has alluded. Would he deny that?


William Pugsley: If on consideration I had thought the security was not a good one, I should have insisted that Mackenzie, Mann and Company, Limited, should put up their private resources. I think that would be reasonable. As I have said, that was a first mortgage, and this is a third mortgage, I understand.


Robert Laird Borden: Taking the hon. gentleman's contention, it is a great pity that he had not begun thinking of this matter three years ago instead of now, because if he had done so then, according to his present statement, the country would have had security which he thinks now should have been brought in.


William Pugsley: It is not too late.


Robert Laird Borden: It is not too late, if it is necessary or desirable, or if any good reason could be put forward for it. But we
do not attach great importance to arguments of that kind put forward by hon. gentlemen opposite who did not regard the matter as worthy of thought when they had to deal with it. Therefore, we must be guided largely by our own views in that respect, because it is rather late in the day for my hon. friend to awaken to a necessity upon which, according to his statement, he did not bestow any consideration three years ago.


Wilfrid Laurier: My right hon. friend's remarks in regard to his own conduct in this respect justify the argument of the hon. member for the city of St. John. The hon. gentleman said that in 1911 we took a first mortgage upon the line of railway which was subsidized, that is to say, from Port Arthur to Montreal. At that time the company were in good standing and we thought that the subsidies then given would enable them to finance the enterprise. When my right hon. friend came into office, the same company came to him for assistance, as they had come to us, and he gave a guarantee upon the line from St. Albert to the boundary of British Columbia to the extent of $35,000 a mile, taking a first mortgage upon the road, just as we had done. The reasons for giving assistance in 1912 were the same as they were in 1911, but everybody supposed, and rightly so, that the assistance which was then given would be sufficient to carry on the enterprise. My hon. friend says that conditions have altered and that the company says to the Government: We are in poor standing to-day; we are not in as good standing as we were in 1911; we cannot raise any money on our own securities and can do no more than we have done. Therefore we come to you; you are the only recourse we have to enable us to carry the enterprise to a conclusion. My hon. friend says: You cannot deal with this matter as dt was dealt with in 1911 and in 1912; the conditions are such that the promoters of this enterprise should be asked to give much more than was given formerly. Formerly, he says, we were content to take a mortgage upon the enterprise and the resources of the company; now, we should go beyond that and take in also the resources of the individual promoters. What objection has my hon. friend the Solicitor General to that? He says that Mackenzie and Mann never got a dollar out of this enterprise. Nobody is supposed to work for nothing in this world; everybody for his work is entitled to a legitimate remuneration, but my hon. friend says that
4UIH

these men who, in carrying on this work would be supposed to have human motives, were working for philanthropy and that they have gained nothing at all through the carrying on of this enterprise.


Robert Laird Borden: My right hon. friend alludes to what was done in 1912. It may be that at that time we had in view the bad example which has been offered to us by hon. gentlemen on the other side, but as soon as we had time for reflection we brought about a very different order of things. My right hon. friend, endeavouring to be sarcastic, alludes to these gentlemen as philanthropists. I do not think that anything of that kind was suggested by hon. gentlemen on this side. I suppose that Mackenzie and Mann went into the business of constructing railways in the first instance for the purpose of making a fortune for themselves, but I do believe that afterwards they got the idea of bringing about the consummation of a great transcontinental railway, and it seems to me that some of the instances which have been alluded to show that they were content to put aside for a moment the gains which might have been theirs and to put certain assets which they might properly have claimed under the laws of the road into the project of constructing this national transcontinental railway. I do not think that they were philanthropists; I do think that they were animated by a desire to make money; but they were animated also by a desire to bring about the construction of a third transcontinental railway. I am willing to concede that they are quite as selfish as the ordinary run of humanity; perhaps they may be more so; I do not know about that. But under the legislation carried out under the administration of hon. gentlemen opposite, partly in this Parliament and partly in provincial legislatures, but largely in this Parliament, it was possible for these men not only to secure as their own the common stock about which so much has been said in this debate, but also so to carry on their affairs that, in addition to that they would have a claim against the Canadian Northern railway and the allied companies for many millions of. dollars. Perhaps $20,000,000 or $25,000,000, and that claim, in the event of the success of this road, would have 'been a collectable claim. I say that my right hon. friend did not take the pains in 1911 or at any other time to investigate the affairs of the Canadian Northern RailfSir Wilfrid Laurier.]
way Company and its allied companies for the purpose of ascertaining these conditions and that therefore, when they gave this guarantee the conditions may be described in this way:	In the first place, according
to the assertion of the hon. member for St. John city, they did not give even any thought or consideration to bringing in any of these assets about which so much has been said in this debate. In the second place, they did not investigate the affairs of the Canadian Northern railway for the purpose of determining whether it could be successfully carried through as a national enterprise; they took the word of the promoters for it. In the third place, they did not investigate the affairs of the company for the purpose of determining whether or not the promoters had made any profits out of construction; they did not think that was worth while. In the fourth place, they did not make any such investigation as was necessary for the purpose of ascertaining that in addition to the common stock there was on the part of Mackenzie and Mann, iLimited, that enormous claim involving perhaps $25,000,000. We did not go about this business in that way. We sent on two occasions the best men that we could find in the service of the Government for the purpose of making a thorough inquiry into all such matters as they could usefully investigate. Of course, they could not investigate the ultimate cost of the construction of the road, as they were not experts in that regard. They satisfied us that in addition to the common stock held by Mackenzie and Mann there was this claim impending against the Canadian Northern railway and its allied companies of many millions of dollars. What did we do in that regard? We said, in the first place: You must put into this security all assets of the Mackenzie and Mann Company, Limited, in so fair as they have relation to the carrying out of this enterprise; for example, the townsite properties. In the second place, we said: You must take care of that floating indebtedness amounting to $8,000,000, in excess of what it ought to be. In the third place, we said: You, Mackenzie and Mann, must take care of these temporary loans in so far as they will not be taken care of by the securities which have been pledged against them. In the fourth place, we said: You, Mackenzie and Mann, have very large holdings of common stock in this company and you have very large claims which may amount

to many millions of dollars against this company; we require you, if the country is to come to your assistance at the present juncture, in the first place, to hand over two-fifths of that stock in order that this country, if the enterprise is canned to a successful conclusion, shall participate in [DOT]some reasonable way in the advantages which result from the aid now afforded. And, further, we said: Inasmuch as you have a claim, which might be asserted in the future, to the extent of $20,000,000 or $25,000,000 against the Canadian Northern and its allied companies, we are requiring you, Mackenzie, Mann and Company, Limited, and you, Sir William Mackenzie and Sir Donald Mann, to absolutely release every ddllar of that claim, and it must be released before you get one dollar of the proceeds of these securities. Under these circumstances, if hon. gentlemen desire to contrast the course taken by the late Administration in 1911 with the course taken by the Administration of to-day, I am perfectly happy and willing and contented that they should do so.
Sir WilLFRID LAURIER: I will venture to contrast the attitude of the two Governments in regard to the Canadian Northern railway, and I am pleased to do it. My right hon. friend is taking precautions now, when the company is in a state of collapse, but he did not take any such precautions in 1912, when the company was in a good financial condition. When the company came to him in 1912 he assisted them by a guarantee of $35,000 a mile on the 116 miles from St. Albeit to the Rocky mountains, but he took no security at all. He never held an investigation into their books, nor did he inquire into the financial condition of the company. The following year they came again to Parliament for assistance, and what did my right hon. friend do? Did he ascertain their financial condition by an accounting? Far from it. In the year 1912 he had come to the assistance of the company to the extent of a guarantee of $35,000 a mile on the 116 miles from St. Albert to the Rocky mountains, and in the following year, 1913, he gave to the railway running through that very same territory a cash subsidy of $12,000 a mile without a word about any security. It was simply taking money from the treasury and giving it to Mackenzie and Mann. Not content with that, we had given assistance by guaranteeing the bonds of the company to the
extent of $35,000 a mile for the road between Port Arthur and Montreal. They came again last year, and, after they had already been granted a guarantee of their bonds, my right hon. friend gave them a cash subsidy of $12,000 a mile. So that last year my hon. friend gave to that same company, without any inquiry into their books, and without any investigation, a cash subsidy of $14,000,000. And what did he get for it? $7,000,000 of watered stock. That is the financing of my right hon. friend, and I am happy to contrast his system with ours.


William Pugsley: I think my right hon. friend has overlooked another point. It was not until last year that the claims of Mackenzie, Mann and Company, Limited, against the Canadian Northern were important enough to be considered. Then for the first time the Government began to deal in the common stock of the Canadian Northern railway. My right hon. friend knows that any debts of the Canadian Northern to Mackenzie, Mann and Company, Limited, would come ahead of common stock. When the late G^ernment aided the Canadian Northern by a guarantee of bonds, it was simply guaranteeing something which stood ahead of claims of every kind and description.


Arthur Meighen: The hon. gentleman
means that even if Mackenzie, Mann and Company, Limited, had robbed the road, we would still assist them?


William Pugsley: There is no suggestion that Mackenzie, Mann and Company, have robbed the road except from my hon. friend. He is the first one to suggest such a thing.


Arthur Meighen: We are glad of that
assurance.


William Pugsley: Surely it is not necessary for me to repeat that any claim of Mackenzie, Mann and Company, Limited, while it would stand ahead of the $7,000,000 of stock which the Government took last year and of the $45,000,000 now proposed, it would not stand ahead of the first mortgage debentures which the Government guaranteed when my right hon. leader (Sir Wilfrid Laurier) was in office. Therefore, it did not become necessary to look into the claims of the Mackenzie, Mann and Company, Limited, on the Canadian Northern, because the security which the Government was guaranteeing would stand ahead of any claims of that character.


Arthur Meighen: Does not ours stand
ahead of it?


William Pugsley: No, your $40,000,000 of stock would not stand ahead of their claims.


Arthur Meighen: That is not our security. Our security is the guaranteed securities that are given to secure the $45,000,000 Does that not stand ahead of the claims of Mackenzie, Mann and Company, Limited, the same as yours did?


William Pugsley: My hon. friend knows
perfectly well that to-day that security is not worth a snap of the finger.


Arthur Meighen: I do not know, and if my hon. friend has an open mind I will be able to show him that dollar for dollar our security is worth twice, and more, the money they are getting.


William Pugsley: I can assure my hon.
friend that I have a very open mind.
At six o'clock, the Committee took recess.
The Committee resumed at eight o'clock, Mr. Blondin in the Chair.


William Pugsley: 
Arthur Meighen: I did not say that.


William Pugsley: I think that is what was stated-that the auditors were instructed to look into the question of what assets Mackenzie and Mann Company, Limited, had derived from the construction of lines of railways or from financing the different systems.


Arthur Meighen: To look into the disposition of all the moneys raised on the securities of the road or raised in any way.


William Pugsley: That, in effect, is telling the auditors to make no report with regard to the other assets, or as to the wealth of Mackenzie and Mann Company, Limited. Therefore the Government are not prepared to give to the House any information as to whether the report is true that Messrs. Mackenzie and Mann Company, Limited, are possessed of very large wealth, indeed, enormous wealth, because that is the rumour. It has been argued on this side of the House, and it can be argued with the greatest confidence before the people, that before we are committed to this enormous liability Messrs. Mackenzie and Mann Company should put up their assets behind the guarantee as a further security for the guarantee which the Government is to be called upon to give. The Solicitor General made a statement that for a reason which he thought satisfactory Messrs. Mackenzie and Mann Company, Limited, were called upon to put up the security of townsites. Would my hon. friend be good enough to tell me what these are?


Arthur Meighen: It would take a long time. They represent a great many assets, all the townsites acquired in connection with the lines in western Canada by Messrs. Mackenzie and Mann Company, Limited, and all the agreements of sale and sums realized thereon.


William Pugsley: Can the Solicitor General tell me in the name of what company these are held?


Arthur Meighen: The Canadian Northern Town Properties, Limited.


William Pugsley: Does that include the most valuable of all, the townsite at Montreal?


Arthur Meighen: I do not understand that Messrs. Mackenzie, Mann and Company, Limited, own the site at Montreal.


William Pugsley: Who does own it?


Arthur Meighen: I have no information to give the House on that point.


William Pugsley: I may say that I do
not think the Solicitor General ought to shut his eyes to knowledge which everybody else has.


Arthur Meighen: I do not shut my eyes.


William Pugsley: The Canadian Northern Railway townsite, which is upon the northern side of Mount Royal, was stated by the newspapers at the time to have been acquired by the Canadian Northern Railway Company or Mackenzie and Mann. It was handled by their officials, by the firm of Davidson, McRae and Company, who handle all the land of the Canadian Northern railway, and was recognized and known by everybody to be the Canadian Northern Railway townsite. I venture to say that town-site is worth more than all the other town-sites of the Canadian Northern railway put together, that is a townsite from which they will derive millions of dollars.


Arthur Meighen: If the hon. gentleman
will show to the House that they own the townsite, I will undertake, on behalf of the Government, that it will be put in.


William Pugsley: It is not for members
on this side of the House to show that. Let me ask my hon. friend if he has made inquiry as to who bought the land for that townsite, who laid it out, who placed it on the market. Has he made inquiry as to that? If he has not I may tell him that the land was acquired by the gentlemen who do the land business for the Canadian Northern Railway Company. It was laid out by their engineers, it was put upon the market by their agents, and it is known to the people of Montreal to be the townsite of the Canadian Northern Railway Company. I do not care under what name they have actually handled it, whether it is the Canadian Northern Townsite Company-


Arthur Meighen: Under any name at all.


William Pugsley: Or the Canadian Northern Land Company.


Arthur Meighen: Show that they own it in any way whatever.


Mr. LEMIEUX:: Have you asked them?


William Pugsley: It is another evidence
that the Solicitor General has taken whatever that eminent lawyer Mr. Lash, who received that commendation, from the Fin-
ance Minister, has chosen to give to him and he has been very careful to pick out a vast number of properties of comparatively little value and to retain to these gentlemen the properties which are of very great value.


Arthur Meighen: What does the hon.
gentleman consider comparatively little value?


William Pugsley: I would regard most of these townsites; as of very little value as compared with the townsite at Montreal which has been excepted from the securities handed over to the Government as a further security for the guarantee which they are called upon to enter into. I feel that in entering into this guarantee and entering into this liability the Government has certainly not proceeded with that reasonable caution which they should have adopted. I believe that they ought to have taken every security. I do not think they are entitled to any great credit for doing what they have done. They have received a good deal of praise in the Government press, and I understand that they gave themselves a good deal of praise and credit for what is said to be the very able way in which the Solicitor General has safeguarded the interests of the Dominion. What, Sir, has he done? He has simply drafted here a resolution which provides that the equity in these different properties which form a part of the Canadian Northern Railway system shall be handed over to the Government as a security for the guarantee of this $45,000, 000. I do not think that is such a wonderful feat, and more particularly would I hesitate to call it a wonderful feat when I find that some, at all events, of the very best securities which could have been given, those of the very greatest value, have been excepted from the securities which have been given to the Government.


Frederick Forsyth Pardee: In the few remarks I made to the House the other evening, I spoke regarding the Halifax and Southwestern railway. My information is that this railway collects all the freight and passenger rates to which it is entitled, but that it has failed to pay anything for the use of the terminal facilities of the Intercolonial at Halifax. I am speaking only from information given to me, and I cannot absolutely assert what I am saying. My information, however, is that this has been going on for many years, and that, in consequence, there is a very large deficit, and that the Halifax and Southwestern railway owes the Intercolonial railway a very large

amount of money, which in some way has been transposed on the books of the company so as not to show a deficit. I should like the Solicitor General to let me know in what position the Halifax and Southwestern railway stands in regard to the amount which it owes for the use of the terminal facilities of the Intercolonial at Halifax.
The other night I endeavoured to lay what stress I could on the fact that the personal securities of Mackenzie and Mann had not been put up so ias to show the faith they had in this enterprise, for which they are at present endeavouring to get $45,000,000 from the people of this country. As I stated the other night, I understand that, besides railways, they own the Dunsmuir coal mines, large timber areas in British Columbia, and large fishing interests, from which, I am told, they have, either this year or the year before, received dividends to the extent of 60 per cent. I thoroughly believe in all that the hon. member for St. John (Mr. Pugsley) has said, namely, that you may call them Mackenzie and Mann, Limited, you may call them Mackenzie, Mann and Company, you may say Canadian Northern, but when you come down to the last analysis, the concern is William Mackenzie and Donald Mann. Therefore, when these men ask this enormous sum from this Parliament and this country, taking into consideration all that they have received already from this country, if they have personal securities, I want to put it as forcibly as I can that these men should be asked to show the faith that they have in their own enterprise, in the enterprise that the people of Canada have built from start to finish until to-day they have hundreds of millions of dollars invested in it, by putting these personal securities into this enterprise. It is not the duty of the Government to say: We shall ask them to do this, if you can show us so and so and so and so. The Government are here, whether they like it or not, as trustees for the people of Canada. The hon, member for St. John has pointed out that Mackenzie and Mann own the Model City at Montreal, which they have exploited; and every one in the Dominion knows that Mackenzie and Mann -I do not care what name you call them- have made millions of dollars out of that investment. If the Government are put on their guard and are told, as they have been told, that Mackenzie and Mann own this Model City, the duty of the Government, as 257
trustees for the people of Canada, is to protect the people by seeing that these assets are put in this agreement. As the Government have been put on their guard, from the speeches made in this House and from the information given them, I ask why these personal assets of Mackenzie and Mann are 'eft out, and why Mackenzie and Mann are allowed to saddle this huge burden on to the people of Canada, seeing that they themselves are allowed, by reason of limited companies, with their stocks paid up and no further liabilities against them, to go free. I have little to say in regard to these limited companies, except that the paid-up stock has been paid up in a most remarkable manner. Again, I ask, why it is that the Government of the Dominion of Canada, having had due notice of what Mackenzie and Mann's interests are in a personal way, should not, instead of saying to the Opposition, show me, themselves say, we have had notice, and, if Mackenzie and Mann, or Mackenzie and Mann. Limited, own these securities, then we shall see that, for the protection of the people of Canada, these securities are put into this agreement.


Arthur Meighen: The hon. member for
West Lambton asks if we have any information as to a rumour which he has heard that there is an outstanding account against the Halifax and Southwestern railway for the use of the Intercolonial railway. I know of no such account. All I know in that relation is that, on the statement of floating liabilities of the company, there appears an item of $191,261.16, as attributable to the Halifax and Southwest-lern railway. That is their share of the floating liabilities. Beyond that I can give no further information.


Frederick Forsyth Pardee: Is that unpaid interest
on bonds?


Arthur Meighen: No, it is current liabilities. For the information of the hon. gentleman, or rather that he may not be turned aside from the truth by the very reckless statements that have been made in this House, there is no unpaid interest on bonds in any of these companies. There is no receivership due either to-night or at any other time. The interest on all the bonds has been paid, and is being paid right along.
The rest of the discourse of the hon. member for West Lambton was largely on the same old subject; and, mindful of the fact that explanations made heretofore

407u

seem to have been of no avail, but simply bring back the same retorts with a little more emphasis when they come from the iron, member for West Lambton, I do not think 1 would be justified in traversing the same old ground again. The hon. member, however, towards the end of his remarks, said that in view of the fact that stock had been allotted as paid up was in reality not paid up at all, we should have lassoed under the mortgage the private assets of Mackenzie and Mann, if they had not been lassoed before. Is the hon. gentleman Teally himself convinced that the stock of the Canadian Northern, as originally allotted to Mackenzie, Mann and Company, was not honestly paid up?


William Manley German: How could that be?


Frederick Forsyth Pardee: When two men own every dollar of the common stock of a railway, a thing almost unknown in the railway world, can the hon. member tell the country and this House that these men are in the first place entitled to a large amount of money in commission for financing their own proposition?
And does he further wish to say-he may say it, but I wish to tell him the people of the country will not believe it-that these people were to receive large land grants for the building of the road, but that the proceeds of those land grants should not belong to the Canadian Northern railway and the proceeds of them should not go into the road ?


Arthur Meighen: I would suggest that the hon.. member fight that out with the hon. member for St. John.


Frederick Forsyth Pardee: I would rather fight it out with the Solicitor General. The Solicitor General says that no one knows whether they have paid for the stock or not. Everybody knows that they have $70,000,000 of the stock of the Canadian Northern railway which is to be reduced to $60,000,000. But the hon. gentleman in his own blue-book shows that Mackenzie and Mann paid nothing for that stock. For they paid, or agreed to pay, $244,670,168 on the construction and equipment of this road. They have received in subsidies from the Dominion Government, from provincial governments, municipalities, securities and guaranteed securities, $223,407,641, leaving a balance due of $21,262,527. This is to be paid out of this $45,000,000. They have got the stock, they have got all the money that is paid out of the $244,000,000 less the $21,000,000. Therefore, they have got the
[Mr. Meig-hen.l
stock for nothing. What is the use of discussing in this House whether they paid a dollar for the stock or not ?


Arthur Meighen: I do not know what the $21,000,000 has to do with the stock. That is paid to the Canadian Northern railway on construction.


Frederick Forsyth Pardee: What did they pay for their stock ?


Arthur Meighen: Suppose we admit for the moment that they paid nothing for the stock, I am going to inquire while I am on my feet who the culprits are. The Canadian Northern Railway Company was an amalgamation of two companies, one of which was an amalgamation of two others. So the Canadian Northern Railway Company was formed, and by the authority of this Parliament the stock was issued to the promoters fully paid.


William Manley German: No.


Arthur Meighen: Unfortunately for the
hon. gentleman I have the statute before me. He thought he could rely on the hon, member foe 'St. John (Mr. Pugsley); I should have thought he would have learned better before now. This is described as chapter 56 of 62-63 Victoria. ' An Act respecting the Canadian Northern railway.' It was enacted that an amalgamation agreement, which is given as a schedule of the statute, between the Winnipeg Great Northern Railway Company-an amalgamation of two original companies-and the Lake Manitoba Railway and Canal Company, should be ratified and that the new company should be known as the Canadian Northern Railway Company. And it was enacted that the following clause of the agreement should be ratified and confirmed by the Parliament of Canada-this being under the Liberal regime of the right hon. gentleman:
6. Each shareholder in the Winnipeg Company shall be entitled to receive and there shall be issued to him by the amalgamated company, one share in the capital stock of the amalgamated company, issued as fully paid up and free from calls and other liability, for every one hundred dollars paid upon the shares held by him in the capital of the Winnipeg Company.


William Pugsley: That is an exchange of stock.


Arthur Meighen: That is ratified by the Government supported by the hon. member for St. John. What is this but an exchange of stock?

7. Each shareholder in the Lake Manitoba Company shall be entitled to receive, and there shall be issued to him by the amalgamated company, two shares in the capital stock of the amalgamated company, issued as fully paid up and free from calls and other liability, for every one hundred dollars of fully paid-up stock held by him in the capital of the Lake Manitoba Company.
Under the authority of that statute, Messrs. Mackenzie and Mann got the basic stock of the Canadian Northern railway as fully paid up.


Mr. NEELY:: What was the amount?


Arthur Meighen: I do not know, but it "was the whole original stock of the Canadian Northern railway. And every stock authority for which was given by Parliament was given by the Government of the present leader of the Opposition. The original stock, the large amount that was first allotted to these men, was allotted by the Parliament of Canada in 1899 as fully paid up. Now, we shall expect to hear the hon. member for St. John say as we have heard him say so often before, that he was not a member of the House at that time, and that if he had been we should have seen nothing but the blue sky of good government and a complete absence of such enactments as this.


William Pugsley: Did not I say this afternoon that the hon. gentleman could not find anywhere a statute declaring the original stock of the company to be fully paid up? That was the statement I made, and the statute which the hon. gentleman reads is entirely in accordance with that statement, because it was simply an exchange of stock by an amalgamated company for shares in the two companies absorbed by the amalgamated company.


Arthur Meighen: This is the original
stock of the Canadian Northern railway. The only difference between this enactment and this is that the hon. gentleman's Government gave two shares for one in the original company, and we are giving one share for two in the original company.


David Bradley Neely: I do not think the Solicitor General has helped his case by his reference to the capital stock of this company. Though he is able to quote statutes as to how the original stock of the Canadian Northern railway was paid up, he did not tell us what the amount of the stock was.


Arthur Meighen: They never paid anything.


David Bradley Neely: So far as the two original companies that merged into the Canadian Northern railway was concerned, we have no information that the stock which they exchanged in the Canadian Northern railway was not fully paid up stock-


Arthur Meighen: But they never paid a
dollar.


David Bradley Neely: The statute the hon gentleman has quoted from does not show that.


Arthur Meighen: That is what hon. gentlemen opposite say-they have been saying that for days and weeks.
Mr. NiEELY: The point is that so far as the original stock is concerned this amount may be so small as to be hardly worth considering. The Solicitor General should have the faets for us. So far as the balance of the present Canadian Northern Railway system is concerned, there is not one bit of evidence that the balance of the stock, apart from the original stock that entered into the Canadian Northern Railway system, ever cost Mackenzie and Mann one single dollar of their own money. The hon. gentleman has not cleared up that point.
The section which we are considering is, I understand, the important part' of the resolution, because it is the section which gives this Government authority to guarantee the bonds of the Canadian Northern to the extent of $45,000,000. It is remarkable that the know-it-all of this agreement, the Solicitor General, is so innocent of the private affairs of Mackenzie and Mann. He does not know, for instance, whether Mackenzie, Mann and Company, Limited, have any interest in the town of Mount Royal at the entrance of the tunnel on the outskirts of the city of Montreal? I wonder if the Solicitor General can tell us anything about the townsite of Port Mann on the Pacific coast, near Vancouver. Does he know whether Mackenzie and Mann have any interest in the townsite of Port Mann, and will he please tell us whether it is included in the Canadian Northern Town Properties Company? Will the hon. Solicitor General answer that, yes or no?


Arthur Meighen: I will inquire while you are on your feet.


David Bradley Neely: Do you know whether it is or not?


Arthur Meighen: I am inquiring now; proceed with your speech.


David Bradley Neely: Then I will stand on my feet until the inquiry is completed. If

the Solicitor General has not that information, he ought to have it.


Some hon. MEMBERS:: Carried.


David Bradley Neely: No; I ask the Solicitor General again whether or not the townsite of Port Mann is included in the Canadian Northern Town Properties Company? I have a right to an answer to that question, and I am going to get it.


Mr. G. E. FOSTER:: The hon. gentleman is off his base.


Frank Oliver: I think the hon. gentleman's request is entitled to some consideration.


David Bradley Neely: The hon. Minister of Trade and Commerce does not do credit to his long parliamentary experience by making any such remark as he has just made.


George Eulas Foster: I merely asserted what was a fact: that as the hon. gentleman was standing on his fe'et he was off his base.


David Bradley Neely: Mr. Chairman, I have not had as long a parliamentary experience as my hon. friend the Minister of Trade and Commerce, but if it is my privilege to spend as many years in this Parliament as he has, I hope it will not be recorded against me that I have been off my base as many times as the hon. Minister of Trade and Commerce has been. I am waiting for the information for which I have asked.


Arthur Meighen: When the hon. gentleman is through speaking, I purpose answering his question.


David Bradley Neely: I am asking a straight
question, and I should like to have the answer.
Mr.	MEIGHEN:	Town Properties,
Limited, was formed when the last issue of $17,000,000 of land grant bonds was made. That was, I think, in the year 1910. The trust deed, which is on the table of the House, filed by the Government in this connection, gives, if I remember correctly, all the assets that were within the town properties of Mackenzie, Mann and Company, Limited. All those assets go into that trust deed and are now included in this agreement. I am pretty sure the trust deed will tell the hon. gentleman whether or not Port Mann is included; I cannot offhand do so.


William Pugsley: Does not my hon. friend the Solicitor General think that he ought to be able before this resolution passes to
CMr. Neely.]
give that information? It certainly does seem to me to be an extraordinary thing that of the two great townsites of the Canadian Northern Railway Company, one at Mount Royal, the eastern terminus at the city of Montreal, has been excluded from the agreement, as my hon. friend himself admits. As to Port Mann, which is the only other great terminal of the Canadian Northern system, my hon. friend is not able to give the committee information as to whether or not it is included.


Arthur Meighen: If the hon. gentleman had understood me rightly, he would have seen that the information is already given and on the table of the House. The amount of data asked for has been so great and the amount given that has not been asked for is so much greater still, that I think the man would be more than human who could remember every little detail of that data.


William Pugsley: Port Mann is not a little detail; Port Mann is the great terminal of the Canadian Northern Railway system. Surely my hon. friend, who is promoting this legislation and asking the committee to adopt it, ought to be able to tell us whether or not Port Man:, is included.


Arthur Meighen: I shall be glad to look it up and see.


William Manley German: The Solicitor General
said a few moments ago that in 1899 the Government authorized the issue by the Canadian Northern Railway Company of its capital stock fully paid up and nonassessable. I knew at the time that the hon. gentleman was mistaken. Here is what the statute of 1899 says in reference to the Canadian Northern:
The Winnipeg Company and the Manitoba Company hereby agree to amalgamate and do hereby amalgamate and form one company upon the terms and conditions hereinafter set out. The name of the amalgamated company shall be the Canadian Northern Railway Company.
That was the first time the Canadian Northern Railway Company appeared on the scene.- (Reading):
The amount of the capital stock of the amalgamated company shall be $16,000,000-*
Not $70,000,000; not $92,000,000, but $16,000,000. (Reading):
-divided into 160,000 shares of $100 each. The head office of the amalgamated company shall be at the city of Toronto or at such other place as the board of directors may from time to time by by-law prescribe.
Each shareholder in the Winnipeg Company shall be entitled to receive and there shall be

issued to him by the amalgamated company one share in the capital stock of the amalgamated company, issued as fully paid up and free from calls and liability for every $100 paid up upon the shares held by him in the capital of the Winnipeg Company.
Each shareholder in the Lake Manitoba company shall be entitled to receive, and there shall be issued to him by the amalgamated company, two shares in the capital stock of the amalgamated company, issued as fully paid up and free from calls and other liability, for every $100 of fully paid up stock held by him.
There was no authorization of an issue of stock for nothing. Every share of stock that was fully paid up was handed over, and how can the hon. gentleman stand up here and say that the former Government authorized the issue of $77,000,000 of fully paid-up stock of the Canadian Northern when the capital stock of this company was only $16,000,000. Every dollar's worth of stock had to be paid for, and no stock was issued until it was paid for; so the statement of the Solicitor General is inaccurate, as is all the information that has been received from Mackenzie and Mann in connection with this whole transaction. The Government does not know at this minute whether $45,000,000 is sufficient to complete the road; they have not definite knowledge about the matter. I believe that I have better information myself than the Government has. Hon. gentlemen may smile, but let me say that the Government got its information from Mackenzie and Mann whereas I got mine from men who are absolutely independent of this Parliament, of this Government, and of the Liberal party-railroad men, who know the situation of the Canadian Northern, and who say that instead of $100,000,000 it will take not less than $150,000,000 to complete the road. So this company will have to come back here within two or three years at the outside for $45,000,000 or $50,000,000 more. I just rose to correct the statement of the Solicitor General that the former Government authorized the issue of paid-up capital stock by the Canadian Northern under the Act of 1899.


Arthur Meighen: All I can say is that the hon. gentleman has made a very poor attempt to correct me. I read exactly what was in the Act.


William Manley German: So did I.


Arthur Meighen: The hon. gentleman is now endeavouring to say that because all that was done by the first clause was to grant a fully paid-up share of the Canadian Northern for a fully paid-up share in the Winnipeg company, that therefore the paidup share in the Winnipeg company was paid up in cash. Is that his argument?


William Manley German: I do not know whether it was paid in cash or not.


Arthur Meighen: I did not think he would say it was paid up in cash.
Mr. GERMaN : Mackenzie and Mann put in no cash; they were not the original men in this concern.


Arthur Meighen: They were.
9 p.m. Mr. GERMAN. No, they were not.


Arthur Meighen: Mackenzie and Mann
were the incorporators of the Canadian Northern railway.


William Manley German: Certainly.


Arthur Meighen: And they were the men who were in the Winnipeg and Southeastern railway, and in the Winnipeg and Hudson Bay railway, and in the Lake Manitoba Railway and Canal Company. They brought these three companies together, and a certain amount of stock was issued to them as fully paid up in lieu of their services.


William Manley German: But not authorized by Parliament.


Arthur Meighen: It must have been
authorized by Parliament, or it could not have been issued.


William Pugsley: It was not authorized as paid up.


Arthur Meighen: Now I have the point of hon. gentlemen opposite. Though they had this stock in the Lake Manitoba Railway and Canal Company in their possession, it was not issued by 'the authority of Parliament. Then why did the Government give them two shares in the new company for every share they held in the Lake Manitoba Company? Oh, such water! Did you ever hear the Lite? They pour in one hundred per cent of water, and the hon. member for St. John holds the spout.


William Pugsley: I think the Solicitor
General would be employed to greater advantage to the people of this country, if he would give this committee the information 'they are entitled to as to whether or not he has made an investigation as to the Canadian Northern Mount Royal townsite, at Montreal, and the Port Mann town-site, the other great townsite of the Canadian Northern on the Pacific coast. My hon. friend has entirely misquoted

me in regard to paid-up stock. I stated this afternoon that there were two ways in which stock might be paid up, one is by a payment of cash; and the other by delivering over property or performing services of value. My hon. friend the Minister of Finance agreed with me in that. There must always be a reasonable consideration for the fully paid-up stock, and in this particular case we all know-the public know because the public are not fools-that Mackenzie, Mann and Company, Limited, have from the outset of this great enterprise, made it a point to secure subsidies and guarantees of bonds for the construction of the different parts of their system. It is true that the stock has been issued and delivered to the contractors, but to say that cash has been paid for this stock is to say what nobody believes to be the case. Legally, it may be paid up in that way.


Arthur Meighen: And rightfully so.


William Pugsley: I am not sure about that. I am not sure that it is exactly right for contractors who own all the stock in a company, who own the board of directors, who are building a railway and who receive the proceeds of bonds and cash subsidies for every dollar that the road will cost, I repeat I am not sure that it is the right thing for these stock-holders to get their own board of directors, probably their own employees, to issue that stock to them as fully paid up when it represents no cash paid, and no services rendered. But still it can be done legally, I admit that. I have no doubt that legally this stock is issued as non-assessable stock for services rendered by the contractors. The point I was making this afternoon-and I am sorry my hon. friend seems to delight in misquoting me, although it does not do me any harm, and I do not think it does him any good-was that this Parliament is doing to-day what the courts in Great Britain would declare to be a crime if done by a board of directors; that is, to declare as fully paid up
5100,000,000 of stock which this Parliament knows has not been paid up. At the last session of Parliament the very most that could have been paid up was 570,000,000, as the hon. member for Pictou pointed out this afternoon, somewhat to the discomfiture of, and a source of irritation to, the hon. Minister of Finance, who is generally so calm and genial. The Minister of Finance stated at the last session of Parliament that of that stock the Government was to get one-tenth, or $7,000,000. That was the extent to which any pretense was made that the stock was
[Mr. Pugsley.l
paid up, but to-day Parliament is declaring to the public that the whole $100,000,000, and possibly $125,000,000, is to be regarded as fully paid up and non-assessable, and that is doing what the courts in England would declare to be a crime if done by a board of directors, because there they require that all the stock shall be paid up in cash. And will any gentleman of business experience, no matter how strong may be his Conservative proclivities, say that this $100,000,000 of stock, even as a matter of speculation, is worth more than $5,000,000 or $10,000,000 ? This Parliament is not doing what it ought to do in declaring that this $100,000,000, and possibly $125,000,000, of stock is fully paid up and non-assessable. Surely, as this whole thing is to be carried through by the people of Canada, Parliament ought to shave down the stock instead of increasing it from $77,000,000 to $125,000,000. Parliament ought to cut it down to what any one, in th.e wildest dream of imagination, would say that the equity of redemption was worth namely, from $5,000,000 to $10,000,000 and put it in some ;aafe place as a security for the people of Canada until this railway has been carried through. Why does my hon. friend seek to misrepresent my position? Why does he go back to the statutes of 1899 and vainly try to show that I have made some statements which are not in accordance with the facts? The quotation from the statute does not at all alter the correctness of the statement which I made nor does it alter the correctness of the statement made by my hon. friend from Welland.


Arthur Meighen: The hon. gentleman
said something about my misrepresenting him. I simply stated what he had said and I read the statute against him. He seems to have a great deal of doubt about the moral rectitude of getting stock by anything except by the payment of hard cash and he thinks that we ought to have shaved down this stock to $5,000,000 or $10,000,000. He believes there is no justification in the world", because it was not got by hard cash originally, in leaving it at a greater amount than $5,000,000 or $10,000,000. I have shown that the Government that he supported authorized a capitalization for this company of $16,000,000. Now I have procured out of the Library the statutes of 1901 and I find that in 1901 the Ontario and Rainy River Railway Company was amalgamated also with the Canadian Northern Railway Company and the whole was called the Can-

Adian Northern Railway Company by authority of the late Government. By reference to section 4 of the agreement which was ratified, chapter 52, of the Canadian Northern Railway Act, 1901, the following words aire found:
The amount of the capital stock of the amalgamated company shall be twenty-four million seven hundred and fifty thousand dollars ($24,750, COO) being the total of the capitals of the two companies parties hereto; the said capital shall be divided into shares of one hundred dollars each.
Then, clause 7:
Each shareholder in the Canadian Northern Railway Company shall be entitled to receive and there shall be issued to him by the amalgamated company one share in the capital stock of the amalgamated company issued as fu ly paid up and free from calls and other liability, for every hundred dollars .paid up upon the shares held by him, or to which under any contract with the Canadian Northern Company, he may be or become entitled in the capital of the Canadian Northern Company.
Any contract that Mackenzie, Mann and Company had with the Canadian Northern Railway Company for shares was ratified with the imprimatur of the late Government in that clause.
Clause 8:
Each shareholder in the Rainy River Company shall be entitled to receive and there shall be issued to him by the amalgamated company, one share in the capital stock of the amalgamated company issued as fully paid up and free from calls and other liability for every hundred dollars paid up upon the shares held by him or to which under any contract with the Rainy River Company he may become entitled in the capital stock of the Rainy River Company.
The late Government, in 1901, again raised the capital to $24,750,000 and in so raising it ratified any contract that Mackenzie, Mann and Company had with these two companies to receive stock in lieu of services. Yet my hon. friend has very grave doubts now about the moral rectitude of paying anything for stock except hard cash. Why did not the hon. gentleman shave it down to what the wildest imagination would say it was worth in 1901? The hon. gentleman says there is going to be $125,000,000 of stock in this company, all water, and not worth more than $5,000,000 or $10,000,000. If there is going to be $125,000,000 of this stock, $25,000,000 of it will be paid for in hard cash, our stock amounting to $40,000,000 will be worth par on the market and this country will be $40,000,000 ahead on the deal. Does the hon. gentleman dispute that?


William Pugsley: I dispute that the country will be $40,000,000 ahead.


Arthur Meighen: The holders of the $25,000,000 of bonds have to elect to take the stock for their $25,000,000 of bonds before there can be $125,000,000 of stock in this company. Are there any people outside of a lunatic asylum who are going to take $100 stock for a $100 bond unless they are assured that that stock is worth $100? They will have to pay $25,000,000 cash for $25,000,000 of stock and yet the hon. gentleman says that there will be $125,000,000 of stock which will be worth from $5,000,000 to $10,000,000.
We sell $25,000,000 of stock for $25,000,000 cash and pay off $25,000,000 debt with the money. That is what happens when the holders of the convertible bonds surrender their bonds and take stock instead. We will hold, not forty per, cent but 40/125ths, but our 40/125ths is worth as much money after conversion as our forty per cent was worth before. The hon. member says that this stock should not be issued except for hard cash. Will the hon. gentleman be frank enough to admit that a bond guarantee itself is a good consideration for stock in a company? In guaranteeing the bonds of the Canadian Northern and taking $40,000,000 of stock fully paid up is there anything reflecting upon our moral rectitude? Will not that stock be considered, and rightly so, as being fully paid up?


William Pugsley: If the hon. gentleman would take my advice I would advise him not to speculate in Canadian Northern stock.


Arthur Meighen: The hon. gentleman
would advise us to get out of office, and let him get in, but the country would not agree with his advice. I am asking him if he believes that a bond guarantee is a good consideration for an issue of stock fully paid up?


William Pugsley: I said there were two or three considerations; there might be cash, there might be property, or there might be services rendered.


Arthur Meighen: And a bond guarantee would be a service rendered?


William Pugsley: A contract, I think would be.


Arthur Meighen: Then our $40,000,000 is fully paid up, and should be issued to us. This House fully realizes, and the hon. gentleman was good enough to admit, that he was wrong to-night in saying that only

hard cash would do. The reason he had to admit that was that he himself, in 1903, voted the Grand Trunk Railway Company the whole of the common stock. of the Grand Trunk Pacific in consideration of their bond guarantee, and agreed to issue it to them fully paid up. That is why [DOT]he was compelled to admit that a bond guarantee was a very good consideration for fully paid stock.
iMr. PUGSLEY: What I stated was that in this country cash, or the transfer of property, or services rendered, might be a good consideration for paid-up stock. I said that in England they have a different law, and that they will not allow stock to be paid for except by cash.


Arthur Meighen: That it would be a crime to do otherwise.


Robert Laird Borden: Does my hon. friend say that in England they are not allowed to issue stock for considerations other than
cash?


William Pugsley: I think not now.


Robert Laird Borden: Then that is very recent, because I know that in England it was perfectly permissible, except that the nature of the property, or other consideration, had to be fully stated and no misrepresentation [DOT]made about it. In hundreds of cases in Great Britain, within the past fifteen or twenty years, I know that has been done. Any man who examines the English reports will know that has been done, and that questions as to misrepresentation in respect to the consideration have been frequently adjudicated upon by the courts. If my hon. friend says that there has been any recent change in the statute, I am not aware of it. The statute must 'be very recent if that is the case.


William Pugsley: Does not my right hon. friend know that the way they had of getting around the law in England was to enter the value of the property in the books and make it appear as a cash payment? In the last few years the English Companies Act has been altered, and now all stock must be paid for in cash. I may be wrong; if my right hon. friend expresses douibt about that I would think that he would be in the right, but that is my impression.


Robert Laird Borden: I ha/ve not examined the question recently, but I know that was the English Act for long years while I was in active practice.


David Bradley Neely: The Solicitor General has not been able to discover whether the properties of the Townsite Company of Port Mann are to be included in this security of the Canadian Northern Railway Company. It seems to me very strange that this committee is not to get any more definite information with reference to the value of some of these securities that we are taking as a protection against this $45,000,000 bond guarantee to the Canadian Northern Railway Company.


William Pugsley: I think I could give the information which the Solicitor General has hesitated to give. I have here a copy of the trust deed made between the Canadian Northern Railway Company, the British Empire Trust Company and the National Trust Company. That is the one, as I understand, that is incorporated in the agreement. By the schedule that appears to be limited entirely to lands in the provinces of Manitoba, Saskatchewan and Alberta, and would not include the town-site at Port Mann. The fourth schedule speaks of land in the provinces of Manitoba, Saskatchewan and Alberta, in respect of the construction of lines subsidized by the Statutes of Canada, and also of other lands in the said provinces. That will be the three provinces of Manitoba, Saskatchewan and Alberta. If that is the only schedule bearing on it, then it would appear that not only Port Mann but that all other townsites in British Columbia will be excluded. If I find any others I shall call my hon. friend's attention to it.


David Bradley Neely: 
Arthur Meighen: Does the hon. gentleman think it is of much value?


David Bradley Neely: 
Arthur Meighen: I did not think the
occasion was a suitable one for the hon. gentleman to criticise me too severely, because I exercised some care to thank the hon. member for St. John (Mr. Pugsley) for toeing ready to furnish my hon. friend with the information that I was not able to supply. Before I give information to the House, I endeavour to be certain that I know what I am speaking about, even to the details. The hon. member for St. John ventured the information to the hon. member for Humboldt; and on that information my hon. friend based a very eloquent appeal. He has asserted to the House that this Port Mann townsite is a very valuable site, as valuable as all the rest that we did include; that it .should have been included, and particularly that these new townsites in British Columbia, as a matter of gross carelessness, were not included. I think I shall be able to show the hon. gentleman that I am the person he ought to thank and not the hon. member for St. John. The hon. member for St.

John has misinformed him. The townsite of Port Mann is included.


David Bradley Neely: I object to the Solicitor
General putting into my mouth words that I did not use. I did not say that the town-site of Port Mann was a valuable piece of property. I said that it was probably on a par with other townsites along the Canadian Northern.


Arthur Meighen: I thought the value
would go down right away. I expected a drop in the value.


David Bradley Neely: 'Hansard' will show what I said.


Arthur Meighen: I was saying that the hon. member for St. John had misinformed my hon. friend from Humboldt. This document has been on the table for days. It has been the property of every hon. member. It is a long document; but I find in the third schedule that the townsite of Port Mann is included.


William Pugsley: Is that in the trust deed?


Arthur Meighen: There are several here anyway. I do not know just how many -in the document which the hon. gentleman is reading, at page 43-the third schedule, part 1. A reference to page 7 will show that it is included in the mortgage :	i
All the right, title, estate and interest of the company in the properties and premises mentioned in the said, third schedule, but subject as to such of the properties and premises as have been sold or agreed to be sold to the agreements entered into for the sale or disposition thereof.


William Pugsley: What is my hon. friend reading from?


Arthur Meighen: I am reading from the trust deed of the 19th of November, 1913.
The hon. gentleman from Humboldt says that the townsite of Port Mann and others have been milked, all but these new ones in British Columbia. I am in a position to inform the hon. gentleman, that the proceeds of the townsites, that came in before Canadian Northern Town Properties, Limited, was formed, were reinvested in further townsites; and as a result, those proceeds form part of the assets of Town Properties, Limited, and come in under this mortgage.


David Bradley Neely: In what further townsites were they invested?


Arthur Meighen: They are all named in this document. There are a number of pages of townsites alone. Pages 38, 39, 40,

41, 42, 43, 44, 45 and half of page 46 are all names of townsites included in the assets of Towns Properties, Limited.
The hon. gentleman repeated also an alleged argument that I heard very recklessly advanced the other day, namely, that, because they had been made subject to the 4 per cent perpetual bond mortgage of 1903, consequently there could not be any equity in them; there could not be any benefit in taking a subsequent mortgage.


William Pugsley: Will my hon. friend
state under what clause in the resolution Port Mann is included?


Arthur Meighen: Under sub-clause (d) of clause 1. It is a part of Town Properties, Limited.


William Pugsley: But the Canadian Northern Town Properties, Limited, includes only the equity of redemption of Mackenzie and Mann in the $10,000,000 of capita! stock and the $10,000,000 of debenture stock mentioned in the trust deed.


Arthur Meighen: Certainly, and those
$10,000,000 of capital stock and the $10,000,000 of debenture stock represent all the assets of Town Properties, Limited. What else could represent them?


William Pugsley: My hon. friend is mistaken in that. Those $10,000,000 of stock and $10,000,000 of debenture stock are owned by Mackenzie, Mann and Company, Limited; and it is only on that stock, the common stock and the debenture stock, that a charge is created by this agreement. That stock is subject to an outstanding mortgage to the British Empire Trust Company for $17,500,000. It does not take in Port Mann at all.


Arthur Meighen: I do not know how to explain so obvious a fallacy.


William Pugsley: Let me read this.


Arthur Meighen: Yes, that will be better.


William Pugsley: 
Arthur Meighen: The eighth clause? [DOT]


William Pugsley: No, the reference to it. My hon. friend will see that in the agreement between the Government and the company its reference is to the subsidiary companies mentioned in the eighth clause of the trust deed. That does not show what company that is. I should have grave doubts of the statement of my hon. friend that it includes Port Mann.


Arthur Meighen: The hon. gentleman
surely sees that Port Mann is in the same position as the other townsites.


William Pugsley: No, it is not. Clause
9 of the trust mortgage mentions specifically mortgaged lands in the fourth schedule. It would require a Philadelphia lawyer to tell what it means.


Arthur Meighen: We will trust the hon. member for St. John to learn what it means. I am a little in doubt whether the hon. member is trying to create the impression that he was not in error before or whether he does not understand this agreement.


William Pugsley: I do not think the hon. gentleman himself understands it.


Arthur Meighen: I understand it most
thoroughly. Naturally, in the trust deed [DOT]there would be different clauses speaking of different classes of property. Some property is owned by Mackenzie, Mann and Company, Limited; some is not owned entirely by them, because, as the hon. gentleman surely knows, frequently the townsite company will procure from the owner of the land a conveyance of the land under agreement to give back to the owner every other lot or the agreement that shall issue covering every other lot. There is another class of property that has already been sold. So, there are different schedules. But all are added together and become the assets of Town Properties, Limited, and then stock and bonds are issued to Mackenzie and Mann. One schedule refers to these assets that belongs to Mackenzie and Mann. Another schedule speaks of Mackenzie and Mann's interest. Now, the stock and bonds are pledged to secure the $17,500,000 perpetual bond issue, along with the stock and bonds of other companies and along with the assets of the Canadian Northern railway as well. There is, in addition, the equity in the land grant and on the basis of the sales of the lands themselves -because nearly all the land is sold-there is more than enough money coming out of the land to pay the whole land grant bond issue, and the equity is fixed in that laud grant bond mortgage at between $11,000,000 and $12,000,000 as I told the House when I spoke of these resolutions. The hon. gentleman charged me because, as he said, we had made no estimate of the equity in this property. We made an estimate, and that estimate has been given to the House but the hon. gentleman has forgotten it. He is asking, as others have asked, very carelessly, if there is any equity here seeing that the mortgage is perpetual. As I am on my feet, let me answer that. The fact that there is a perpetual mortgage against the property does not argue that there is no equity against the property. Suppose that you, Mr. Chairman, .are the owner of a farm valued at $10,000 against which there is .a perpetual mortgage of $2,000. You still have an equity of $8,000. It is true you are not allowed to pay off the mortgage and must pay interest, say, $100 a year. But who would say that there was no value in the second mortgage on that property? The second mortgagee becomes entitled to all

the rents and profits ever and above the annual charge of over $100. In the same way, we become entitled to all the rents and profits over and above the land grant bond issue on all the properties that went in to secure the perpetual bond mortgage. The fact that the mortgage is perpetual does not affect the value of the equity of redemption.


Mr. A. W. CHISHOLM:: I desire to get some information with regard to properties in the county of Inverness belonging to the Inverness railway and Coal Company. Is that included?


Arthur Meighen: No.


Alexander William Chisholm: Why is this very valuable property not included? I may enumerate the properties there. There is sixty miles of well equipped railway extending from the strait of Can so to Mackenzie and Mann's coal property in Inverness. There is a coal mine there which has been operated for eight or nine years with very substantial output. It is estimated that this coal property contains about 40,000,000 tons of coal. This coal company also owns another coal property further north, and also a very large amount of real estate in. the town of Inverness, assessed, I think, in the vicinity of $200,000-a low estimate, of course. I am anxious to see this asset included for two reasons. The first, a selfish one, perhaps is that if this railway were included in the schedule it would come under authority of the Railway Commission. This is important for the people of Inverness, for we have many grievances there with respect to freight, etc. If we had these properties ini-eluded in the schedule we would have an opportunity to appeal to the board that would have the power to give us relief. Another matter of even greater importance is that this road is really an unfinished road. I expected to find it enumerated in the list on page 10 of the documents. The Inverness and Richmond Railway Company sold their charter to Mackenzie and Mann or to what is known as the Inverness Railway and Coal 'Company. This company undertook to construct a road from the strait of Canso to Cheticamp. They built as far as Inverness, that is as far as their own property. Besides getting a double subsidy of $6,400 a mile from the Dominion, they got a subsidy of $4,000 a mile from the local Government and also got a bonus of

$1,000 a mile and free right of way from the municipality of Inverness. Here is the important point.
In chapter 107 of the Nova Scotia statutes of 1898 will be found the agreement which was signed by Mackenzie and Mann for the Inverness Railway and Coal Company, under which they agreed after getting the free right of way and the bonus oi $1,000 a mile for the completion of the road to Inverness, to complete the road to Cheticamp, provided that the Dominion and local subsidies were available. The Dominion and local subsidies have been available every year since the road to Inverness was finished. I ask the Government to insist that Mackenzie and Mann carry out that agreement with the municipality of Inverness. If they refuse to do so, I say that the least they should do is to refund the moneys they have received by way of bonus and free right of way to the town of Inverness. It is certain that the taxpayers of Inverness would never have agreed to pay these men a dollar if they had understood that the road was not to he completed to Cheticamp. I am afraid that the free right of way and the bonus of $1,000 a mile were obtained from the taxpayers of Inverness under false pretenses, because from the very day that Mackenzie and Mann got the money they never made any attempt to show the people of Inverness that their promise to complete the road as far as Cheticamp was made in good faith. This is a very important matter to the people of North Inverness, and I should like to know what is the view of the Government in the matter.


Robert Laird Borden: The particular enterprise to which my hon. friend refers is more largely, as I understand it, a coal mining enterprise than a railway enterprise. It is probable that any considerable amount of capital required to be invested in the enterprise in the early future, except in respect of the extension to which the hon. gentleman alludes, would be an investment of capital in the coal mining part of the proposition and that hardly seems to be within the purview of what Parliament is proposing to do at this moment. Moreover, it is a part of the company's property that is somewhat distant from their main lines. The same is true, to some extent, of the Halifax and Southwestern railway, although that does connect more directly with the Intercolonial and in that way is more directly connected with the main lines than the one to which my hon. friend refers. I am not aware of the difficulty which has

arisen between the company and the municipality of Inverness. I have sent for the statute, however; I will look over it and give my best consideration to what my hon. friend has said.	[DOT]


William F. Carroll: I wish to ask the right bon. Prime Minister if when these resolutions were under consideration between the Government and the agents of the Canadian Northern railway, the question of terminals for Sydney harbour and of making Sydney harbour a port of call for the Canadian Northern Atlantic liners was under consideration?


Robert Laird Borden: I cannot say that it was specially under consideration.


William F. Carroll: I hold in my hand a
telegram which I feel in duty bound to! place before the Government and on * Hansard as it was sent to mer by the secretary of the Board of Trade of Sydney. It is dated April 7, and is as follows:
The following resolution was passed by the Sydney Board of Trade to-day, and it is desired that a resolution along this line be introduced in the provincial legislature.
Whereas Sydney is looking for deep-water terminals, which, it is hoped, will be shortly installed here, and whereas the Canadian Northern Railway Company is now asking the Dominion Government to guarantee a new bond issue, and whereas the Government is now considering this request; therefore resolved that the Government be memorialized that before the granting of this assistance the Canadian Northern Railway Company be required to guarantee that as soon as adequate docking facilities are provided at Sydney their incoming and outgoing boats make this a port of call, cutting out the Belle Isle route entirely during the open season; and further resolved that a copy of this resolution be sent to the right hon. Premier Borden, to the Premier of Nova Scotia and to the representatives of this county at Ottawa and at Halifax.
Ross O. Evans,
Secretary. I
I do not know what gave rise to the report which I have heard that the matter was discussed between the Canadian Northern authorities and the Government. I had a letter from a gentleman-and I desire to say that he is in no way connected, so far as I know, with the Canadian Northern railway, with Mackenzie and Mann, or with the firm of Mackenzie, Mann and Company, Limited-suggesting to me that it would be in my interests not to oppose this legislation, in view of the fact that the city of Sydney would be very materially assisted by the establishment of dry-docks or of shipping and harbour facilities there which would accommodate the ocean liners
of Mackenzie and Mann. I may say that I did not pay very much attention to that document; what I want to find out from the Government is whether the matter was discussed-it has apparently been brought to the attention of the Prime Minister- and whether it is the intention of the Government to afford facilities in the harbour of Sydney by way of accommodating the liners of Mackenzie and Mann. So far as I am personally concerned, anything that would make for the betterment of Sydney harbour or for the constituency which I have the honour to represent would receive my very hearty support, but at the same time I do not think' I would go so far as to say that because Sydney harbour would be somewhat benefited by this legislation, I .would be in honour bound to vote for resolutions which would not otherwise, perhaps, receive my support.
The resolutions before you, Mr. Chairman, are very important. I do not pretend to have given the matter very serious consideration; I have left that to minds that are more able to grasp such matters than mine. But a few things have been bothering me considerably in connection with these resolutions. Mackenzie and Mann have asked this Government to guarantee a bond issue of $45,000,000. That in itself, in connection with a transcontinental line, would not be such a very serious matter, but when we consider that this concern has received many millions-and hundreds of millions-of dollars in the shape of properties and money from the people of Canada and that they are now asking for the guarantee of an additional $45,000,000 of stock, it does become a serious matter. I am not going to charge the Government with not having given this matter the very serious consideration which it requires.
I believe that an investigation should be held into Mackenzie and Mann's dealings in railway matters right from the start of their career as railway promoters. One thing that struck me as being very peculiar was that a gentleman should send an affidavit to this Government swearing that to the best of his knowledge Messrs. Mackenzie and Mann never received a dollar by way of profits or otherwise from the Canadian Northern railway. Why should not Mackenzie and Mann do the manly thing and swear to this affidavit themselves? Surely they have more knowledge of what benefits have accrued to them through their railway promotions in this country than has any clerk or private secretary connected with the firm. I would like to see an investiga-

4oat:
tion held to find out exactly what Mackenzie and Mann have taken out of their railway enterprises in this country. I am not in a position to state that they have made a single dollar, but I think they are not dealing with the Government in the proper way when they get a clerk-perhaps I should not say a clerk, because he may be a very important official in that company-to make an affidavit which would have come with far better grace from themselves. That was one of the things that first raised a suspicion in my mind that their dealings with the Government were not altogether above board. I am not one of those who believe that the Canadian Northern transcontinental should be refused assistance where assistance is necessary and be allowed to die, so to speak. I believe that this undertaking, having had the approval of the people of Canada in the impress of a statute, so to speak, should not be allowed to go down. While the people of this country should not throw that road aside, I do not think there would be that crisis which has been predicted if the bonds were not guaranteed to the full extent of the $45,000,000. I read the other day an article from the Financial Post of Montreal which is, I presume, well acquainted with financial matters in this country, or at least it pretends to be. While they approve of the Government of Canada coming to the assistance of Mackenzie and Mann, they admit in an editorial that if assistance were not given to the full extent proposed, nothing like a great financial crisis would arise in this country. Instead of the Government introducing this legislation in the dying days of the session, would it not be better to come to the assistance of the Canadian Northern railway and Mackenzie and Mann by helping them to keep their heads above water until a full investigation has been held ? I would like to see the contractors and the workmen who have built roads for Mackenzie and Mann get paid as quickly as possible, but I take the ground that the most this Government should do at this session of Parliament is to give the Canadian Northern railway and Mackenzie, Mann and Company, Limited, just a sufficient amount to keep them floating until they have been examined under oath as to their dealings in railway matters in this country since 1896. That is what commends itself to me, but I am only speaking for myself.
In regard to the matter which I have
TMr. Carroll ]
brought to the attention of the right hon. Premier, I may say that the feeling in the eastern section of the province of Nova Scotia has been accentuated by the impression that the Canadian Northern Railway Company may get running rights over the Intercolonial. I am not one of those who think that the granting to a transcontinental railway of running .rights over the government system of railways is naturally a bad thing, because it may develop into a very good thing. I can only say that if the time comes when Mackenzie and Mann will have running rights over the Intercolonial and railway facilities in the city of Sydney, any legislation introduced by this Government to provide adequate docking facilities in that harbour will have my own personal support. I could not do otherwise, representing, as I do, the city of Sydney.


Robert Laird Borden: I know that some persons who have a very great interest in the development of the harbour at Sydney did bring this subject during the last few weeks to the attention of Mackenzie, Mann and Company, Limited, and the Canadian Northern railway. I think Sir William Mackenzie himself was seen on the subject. I was also spoken to by the same gentlemen, but as a great many matters had to be dealt with in connection with the subject now under discussion, we did not feel that there was time or opportunity to take up that other matter just at this time. Furthermore, my hon. friend will realize that it will be practically impossible to make an arrangement of that kind with only one line of steamships engaged in carrying the mails. I do not think it would be wise to deal with the subject in that piecemeal way. For these reasons we have not been able to give the subject that consideration which it undoubtedly deserves.


William F. Carroll: If at any time the Government considers this proposal, I would commend to the Prime Minister and the members of the Government certain reports that were made some years ago concerning Sydney harbour as .a port of call for mails. A test was made in 1906 of carrying the mails from Sydney to Montreal, and if I remember rightly it was shown that the mails would reach Montreal much more quickly when taken off at Sydney than if taken off at St. John or Halifax. I think the report will be very useful when this, subject comes up for consideration.


Robert Laird Borden: I remember the occasion fo which my hon. friend alludes.


Frank Oliver: In connection with the expenditure of this money, has a detailed statement been made of the liabilities that have to be met ?


Robert Laird Borden: Of the persons ?


Frank Oliver: Yes.


Robert Laird Borden: I do not think a detailed statement has been given of them. I am quite sure that we have one, but I did not think it was desirable to place it on the table of the House. If my hon. friend desires to look at it, I shall not have the slightest objection.


Frank Oliver: Not at the moment.


Robert Laird Borden: If at any time he desires to examine it there will be no objection whatever.


Frank Oliver: I wanted to know it there was such a statement available as to the actual places for which money was to be provided.


Robert Laird Borden: Subject to correction, I
think the Solicitor General, who has been called away to Toronto to-night, showed me a list of the various persons'to whom these moneys are owing.


Frank Oliver: I am sorry that the Solicitor General has had to leave because the question that I wished to ask, I am afraid, will require an answer from him. I wanted to know if a detailed statement had been prepared or presented to the House of the expenditures that would be made in completion and betterments of the western lines.


Robert Laird Borden: Yes.


Frank Oliver: There is a general statement, but I was anxious to know if there was a detailed statement and if so, whether it would be available?


Robert Laird Borden: Yes it has been laid on the table of the House.


Frank Oliver: That was the feature ot
the case that I wanted to draw attention to. Until I have seen the statement I do not know how far my argument will be borne out by it, but I want to draw attention to the fact that the list of enterprises which are to be benefited by the expenditure of the money to be provided does not include the Canadian Northern Western, or the Canadian Northern Saskatchewan companies. The Saskatchewan company is chartered by the provincial Government, it is not under Dominion charter, but I do
not know whether the Alberta company is under Dominion charter or not.


Robert Laird Borden: The Canadian Northern Alberta is under Dominion charter.


Frank Oliver: The Canadian Northern
Western is the name of the company under which the Canadian Northern operates in Alberta aside from the Canadian Northern Alberta.


David Bradley Neely: It is a provincial company.


Frank Oliver: I was not sure whether
it had been incorporated under a Dominion charter. Well, I will assume that these two companies are both provineially chartered companies. Their bonds are guaranteed by the provincial governments for the purpose of securing the construction of certain lines. They do not appear in the list of companies upon whose lines any portion of this expenditure is to be made At the same time I notice in the resolution that they are brought under Dominion jurisdiction by being declared to be railways for the general advantage of Canada, and I notice further that in the covenant between the company and the Government the stock of both these companies is transferred to the Canadian Northern Railway Company.


Robert Laird Borden: What page is that?


Frank Oliver: On page 15 which gives
a schedule of the companies whose stock is transferred to the Canadian Northern and in which these two companies appear. These companies are left entirely dependent upon the provincial Government for their construction, but they are taken under the authority, control and jurisdiction of the Dominion Government and their stock is made a part of the property of the Canadian Northern Railway Company. That is all made subject to the blanket mortgage that the Government propose to take.


Robert Laird Borden: The stock would be but
not the physical assets. The physical assets of any of these roads will only become subject to the mortgage in case of any portion of the moneys provided by these guaranteed securities is expended either in construction, or completion, or betterment, and to the extent to which the moneys are so expended. As far as the stock is concerned, that is different, of course.


Frank Oliver: These two companies are left to their own resources, they are left to the provincial governments tor their com-

plete construction and in so far as they are dealt with under this arrangement, it is an impediment, if not an actual bar, to the raising of further moneys on the open market for the purpose of completing these enterprises.


Robert Laird Borden: In -what way?


Frank Oliver: I shall be very glad to show that. So far as they are brought under the terms of this general mortgage-if very little, then the effect will be very little; if largely the effect will be large-the effect of the blanket mortgage will be- to act as either an impediment or as an actual bar to the raising of further money upon the securities of these lines.


Robert Laird Borden: If there is any detriment to any of these companies we shall be glad indeed to make any modifications to meet the views of my hon. friend. There is no desire to hinder or impede these companies in raising the money necessary to complete their road. If any portion of the money raised by the guaranteed securities should be applied in assisting the construction of the roads to which the hon. member alluded, or in providing betterments, then, of course, under the terms of the guarantee, the physical assets of the roadi will be made subject to the mortgage ito that extent. But if, on the other hand, as he suggests, no portion of these moneys is proposed to be expended upon those roads, then nothing would stand in the way of making a further charge on the physical assets because the physical assets in that case wouldi not become subject in any way to the provision of this mortgage. The control of the company by means of the disposition of its stock is a different thing; that would be transferred to the Canadian Northern railway. But, as my hon. friend knows, that would not result in an actual change in the management of the road, because it would continue to be managed by the same interests as before. That is the way I look at the situation, and if my hon. friend has a criticism upon that or any further suggestions to offer I can assure him I shall be very glad to consider them.


Frank Oliver: At the moment I am only looking for information, and I am not able to arrive altogether at what I want unless I see the actual proposition of the Government before the House.


Robert Laird Borden: I am anxious to get my hon. friend's point of view.


Frank Oliver: My hon. friend says that these roads will not be prejudiced in the raising of further money on the security of their physical assets unless money is expended upon them, when a security will be taken. If there is an expenditure upon the roads for the purpose of securing furtherance of betterment or completion, a mortgage is taken for that. That, of course, will certainly have the effect of prejudicing any attempt that may be made to raise further money to carry these roads further on. The mortgage that has been taken, let it be large or small, will be a detriment to the subsequent mortgage that will require to be taken. On the other hand, if there is no expenditure there will be no mortgage, there will be no impediment so far as that is concerned; but there will be this condition, that the road has been made subject not only to the jurisdiction of the Board of Railway Commissioners but, in case of default, to the jurisdiction of the Government, and to that extent there is a possibility of prejudice against the success of the attempt to raise further moneys in order to push the road farther forward.


Robert Laird Borden: Would my hon. friend suggest to me why making the road subject to the Board of Railway Commissioners for Canada would prejudice any attempt to raise further money?


Frank Oliver: That is not what creates the prejudice. The prejudice is not in the condition that the road continues to exist and to be operated, but the prejudice is that in case of default a change of conditions and authority takes place, and there is no assurance that after that default takes place that particular branch, and it would be a branch of the system, would be operated a3 a part of the system. As the Solicitor General said the other night, the very reason an amalgamation has not taken place is so that in case of default, or even, I think he said, without default, it would be possible for the Government, by foregoing their security on any section, to discharge themselves from obligation and leave it on its own resources. Everybody knows that you cannot operate a single short line of railway at a profit. The experience of the Maritime provinces in connection with the Intercolonial railway shows that. The provinces have guaranteed these lines for the purpose of their being operated in connection with a general system. Unless they are to be operated in connection with that general system, there is going to be an unexpected burden upon the provincial

guarantors. If the Government is coming before Parliament to say: We will take the responsibility of seeing that these branch lines are carried to completion, that they are brought to a proper stage of construction for successful operation, there is no difficulty in the matter. But if the Government say, as they do say: We are not going to take any part of this money to extend or improve these particular branch lines, and they are to be left to the provinces to be done with as they may be able to do with them, my theory is that the position of the provinces is going to be seriously prejudiced; and my desire in asking to know where the expenditure is to be made is to-find out how far the Government propose to go in carrying out necessary extensions and betterments of the system as it stands at present. There is much in support of the suggestion that once the blanket mortgage is put on the system it will not be possible-certainly it will not be possible for the Canadian Northern railway-to go on the money market and raise additional moneys for the further extension or betterment of their property. I think that will be conceded, that once the further mortgage has been placed upon the properties, these properties will be shut out of the money markets of the world. That being the case, it is absolutely important that there should be a thorough understanding before that mortgage is put on, before this agreement is ratified, as to just exactly how far	it is intended to carry
the work of railway extension and development in these two prairie provinces. To my mind that is the most important and most serious feature of the arrangement. Not to delay the House, but just to repeat the condition that exists in the constituency that I represent, I may say that we have a large settlement in the Peace River country on Grande Prairie. Eight or ten townships there are under occupation. People have gone in there during the last two or three years, and they are going in there now. That settlement is 300 miles from Edmonton; the country is very difficult to traverse, and the settlement there can be reached only under very great difficulties. The Canadian Northern have a charter from Edmonton to Grande Prairie. They have a guarantee from the provincial Government for a hundred miles of the line. Some forty miles of line have been ironed, and the balance of the hundred miles has been partly graded. That leaves 200 miles of intervening territory where no grant has 258
been given by the province or by the Dominion and where no work has been done. I am anxious first of all to know whether that hundred miles is going to be completed, and then I am anxious to know what is going to happen in regard to the remaining 200 miles necessary to reach the settlement now in occupation of that territory. It is a matter that is vital to the development of western Canada. We have alienated the greater part of the pTairie of the West. The Peace River is the country of the future, the country to which people are going, and it is to the settlement of that country that we must look for the future . increase in the development of the western country. If this aid means that that road, for instance, is to be carried to completion, then to that, extent good work is being done; but if it means that the further carrying forward of that enterprise is to be stopped, that is a very serious question, and certainly I would think that the country, instead of being benefited, would be prejudiced to a very great degree.
What exists in a northwesterly direction from Edmonton exists in almost similar degree northeast of it. There are settlements there for a distance of one hundred and fifty miles along and north of the Saskatchewan river, from sixty, eighty to one hundred imiles from a railway. The Canadian Northern line is chartered to run through that country. The provincial government has guaranteed bonds for one hundred miles, of which some fifteen or twenty miles have been graded, but nothing has been done to the balance. We want to know if, under this aid, those one hundred miles are to be completed, and what is1 to happen to the people living beyond the end of the one hundred miles. It is veTy desirable, no doubt, to carry the Canadian Northern enterprise forward; but unless, in carrying that enterprise forward, we are going to protect the development of the country, which, after all, is the soul and heart of the Canadian Northern, we are certainly not meeting the requirements of the case. What alarms me is that the arguments that have been put before the House and the country have all pointed to the purpose of this aid as being to relieve the financial situation of the Canadian Northern Railway Company by providing for the completion of its main line. For the past two years we have seen money being poured out by the Canadian Northern Railway Company in building in British Columbia, in building between Port Arthur and Ottawa, while the lines in the prairie west have been



standing still, where the development of the country has been retarded, where people have been disappointed because of the failure to construct, as it was expected would be done. It is a great thing to have a third transcontinental line; it is a great thing to do something to avert unfortunate financial conditions; but if we are going to use money to build railroads where there are no people and to leave the country where the people are without railroads, and generally to tie up the situation so that they are not going to get railroads in the near future, we are going to do the Dominion of Canada a great deal more harm than good. This is a very large amount of money to be raised on the credit of the people of the Dominion, and I assume that we cannot keep <jn doing this every year. If we tie ourselves up this year for a guarantee of $45,000,000, we shall not be in a position next year to meet the requirements if they are not met under the present arrangement. I think it is most important that the application of this arrangement to the railway development of the two western provinces should have more full consideration in the arrangement and in the discussion than it has yet received.
Just in line with what I have said, I read in the Ottawa Journal this evening an editorial. The Evening Journal is a paper very strongly supporting the Government and very strongly supporting this arrangement, and, it is to be presumed, in the confidence of the Government so far as its policy is concerned. The editorial is headed, ' No Confiscation Policy.' I do not want to read the whole editorial, but the last paragraph is as follows:
Mackenzie and Mann have secured from provincial governments of Canada considerable cash and land and a vast amount of bond guarantees. The provinces are getting value in railway expenditures and railway operation. The fact that they did not in other respects look out for their own security does not call on the Borden Government to exterminate Mackenzie and Mann and steal what the provinces gave them. I
I do not know how far the writer of that article understood the situation. I do not know how far he is in the confidence of the Government or how far he expresses the Government ideas; but the connection of the Canadian Northern Railway system with the two western provinces which have largely become financially responsible for the undertaking is not a matter of secondary interest. It is a matter of primary interest to the welfare of this country, and should certainly have, not second, but first con- [DOT]

slderation at the hands of the Government in dealing with this railroad problem.


Robert Laird Borden: I entirely agree with my hon. friend in his appreciation of the importance of the matter to which he has alluded. I do not know whether I can make the situation clear to him as it appears to me; but in the first place let me say that there is not any blanket mortgage on the whole Canadian Northern system proposed by these resolutions. There is a mortgage proposed upon the physical assets of the Canadian Northern railway, with the further proviso that, if any of these moneys should be paid out by the Canadian Northern railway to any of the allied companies, then a mortgage upon the physical assets of that particular company shall be taken for the amount so paid out and expended in constructing or completing such railway or in betterments upon it. Therefore, as I said before, I do not think that the raising of money upon the physical assets of any of the branch line railways is in any way prejudiced by the resolutions now proposed.
I am perfectly aware that the provincial Governments of Alberta and Saskatchewan have given a guarantee of bonds in respect of several branch lines of the Canadian Northern railway under different charters and under different names. Now, my hon. friend points out that in respect to certain of these lines in the province of Alberta, it is not, apparently, intended by the Canadian Northern railway that any portion of the sums raised shall be expended on these lines. That is the point.


Frank Oliver: To start with.


Robert Laird Borden: As I understand the matter the construction of these particular lines, so far as arrangements have been made, is provided for by the securities guaranteed by the provincial government. And if I am not mistaken it is rather desired by one of the provincial Governments at least that the construction shall be left in that way. The question arises then as to a declaration that these particular lines are works for the general advantage of Canada, and there is possibly some force in the suggestion that until these roads are completed at least, they should remain under the control of the provincial Governments. I do not know whether my hon. friend was alluding to that feature.


Frank Oliver: That is included, although that is not the main thing.


Robert Laird Borden: No, the point is as to whether or not any portion of this money is to be used to extend these lines. As far as that feature is concerned, we were asked to give certain assistance for the purpose of completing the Canadian Northern system. We understood that so far as these provincial lines are concerned, adequate provision would be made under the provincial guarantees. At all events, we asked the company to give us a statement of what requirements were necessary ' for the completion of the system as submitted to us. That statement, as made to us, involved the provision of about $42,000,000 more than seemed to be available at the present time, and so we have brought down these resolutions. What effect will that have upon the development of the branch lines in the provinces of Alberta and Saskatchewan? At least it will have this effect, that if the Canadian Northern Railway system as a system were allowed to collapse and no aid at all were forthcoming at the present juncture, the construction of any lines which have been undertaken as branch lines of that system would, it seems to me, be very greatly delayed. Therefore, so far as that is concerned, we believe that by coming to the aid of the system at the present time and by the endeavour, which we believe will be successful, to place the whole system on a sound financial basis, we shall give a very practical assurance of the extension at an earlier day than otherwise would be possible of the lines to which the hon. gentleman alludes. I am not aware that any application has been made to us for aid out of this sum now proposed to be raised to extend thet particular lines to which he alludes, because, as I understood, the provincial Governments were prepared to implement their guarantees to a further extent for the development of these branch lines. The main line, I think, has been regarded by both the late Administration and the present Administration as a read which should be assisted with federal aid, with the exception of the line through the province of British Columbia, which was initiated by arrangement made with the Government of the province of British Columbia. So far as that was concerned, recognizing, as we did that the system had acquired the status of a transcontinental line and as the development of branch lines throughout the territories would probably he expedited and assisted by putting the main line on the 2581
basis of a transcontinental system, we did assist the line in the province of British Columbia. I do not know whether I have covered all the points which the hon. gentleman brought to my attention, but if there is anything further he wishes me to refer to, I shall be glad to do so.


Frank Oliver: The other point that I would like the Prime Minister to elaborate a little more is as to the possible effect of the measurable amalgamation that has taken place upon the raising money upon these provincial lines after a general mortgage has been placed.


Robert Laird Borden: I do not know whether I can add very much of value to what I have already said on that point. Let us take one of these lines-my hon. friend mentioned several. Will he recall the name of one?


Frank Oliver: The Canadian Northern
Western.


Robert Laird Borden: Let us take the Canadian Northern Western line. It has been partially built and remains to be completed for a certain distance, I think my hon. friend said about a hundred miles, through the moneys derived from securities guaranteed by the provincial government. Let us assume that the proceeds of the securities so guaranteed would be sufficient for the completion of these one hundred miles of railway. Let us suppose further that no portion of the aid now proposed is devoted to the completion or any betterments. The physical assets of that line, then, would remain free from this mortgage and would not be affected by it. But as it is included in the list ot roads whose stock is to be transferred to the Canadian Northern railway, then the stock, instead of being vested in Mackenzie and Mann, will .be vested in the Canadian Northern railway and will be subject to the mortgage. That really means that the Canadian Northern railway would own the stock and would control, in the future as in the past, the management and operation of the road. But in case of default and of the vesting of the mortgaged premises either in the Government or in some corporation appointed for the purpose, the management would be changed. I think it will be apparent to my hon. friend-it is apparent to me-that if such a thing were brought about the road would still continue to be part of the great transcontinental system, that is a branch line directly connected with the transcontinental system, a feeder of that system, and, so far as one can foresee, the position of the people of the

province of Alberta whose interests are more *directly concerned in this road would not be in any way prejudiced; because if default were brought about and it were necessary to reorganize the system or if it should pass to the people of Canada for operation as a state-owned railway, or for *operation under lease granted by the Government of Canada to some corporation constituted for the purpose, the branch railway would at least maintain as advantageous a status as that which it has to-day. If my hon. friend has any suggestions to make, I shall be only too glad to receive them.


Frank Oliver: Unfortunately I am not a *corporation lawyer, and I am rather at a loss in attempting to argue this question. My theory is that, in the first place, the fact that the stock is not available for the purposes of the company will prejudice the financial position of the company in the case of more money being desired to be raised. In the second place, the possibility of change of ownership in case of default would prejudice the possibility of raising money upon the security of the road. If in this legislation the Government specifically provided that in case of default and the taking over of the road by the Government, they would assume the responsibility of the obligations in that regard, then the position would be good. But so long as that question is left in uncertainty, we are legislating here in the face of a possible change of ownership without providing any guarantee as to what shall take place when that change of ownership occurs. My theory, therefoire, is that there is to that extent a prejudice against the road being able to raise further money that may be required in order to carry it forward to completion. My suggestion is that this condition could be remedied by the legislation specifically providing what shall be done if default should occur.


Robert Laird Borden: I do not think that these roads are in any different position from any other portion of the system in that respect. The railway is the modern highway of the world; persons who undertake to build a railway have a certain obligation to operate it, and it would be appropriate to enforce that operation through effective means, by legislation or otherwise, if the persons entrusted with the duty of operating the line did not operate it. If such an obligation rests upon a corporation organized for the purpose of operating a railway, I am sure that my hon. friend will realize that it rests in still greater fMr. Borden.]
measure upon a government, whether of the Dominion or of a province, which by reason of its guarantee and foreclosure of the mortgage securing the bonds so guaranteed, has to take over a road. My hon. friend says that possible change of ownership may prejudice this road. Well, there would be a possibility of change of ownership under the bonds guaranteed by the provincial government, and there would be a possibility of change of ownership of the same character with respect to every road that is enumerated in the list set out in the resolution.


Frank Oliver: The provincial government is furnishing the money to build these roads, but the ownership of the roads is going to rest in the Canadian Northern Railway Company, or ultimately in the Dominion Government. That is not as good for the province which has provided the money to build the road as if the ownership rested in the Canadian Northern with a reversion to the provincial government. The provincial government, if it had a reversionary interest in the ownership of the road, might he in a position to dispose of the property to some other system, but it is debarred from doing this under these resolutions, where the ownership of the stock, and, therefore, the ultimate ownership of the road, rests in the Canadian Northern, or, in case of default, in the Dominion Government. I submit that the interests of the province are prejudiced to that extent.


Robert Laird Borden: I can hardly agree with my hon. friend that they are prejudiced to any extent whatever by the fact that the road might ultimately come into the ownership of the people of Canada and become part of a great transcontinental system. I cannot see, with all deference to my hon. friend, that that would prejudice the interests of Alberta. So far as stock is concerned, the road itself is still in the same ownership as before. The only difference is that formerly Mackenzie and Mann, Limited, owned the stock, and now the Canadian Northern railway own the stock. The road is there as an entity, and the corporation which owns it is there as an entity, the same as before. The mere fact that the stock will pass out of the ownership of Mackenzie and Mann into the ownership of the Canadian Northern railway cannot, according to my humble comprehension, and with all due deference to my hon. friend, in the slightest degree

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affect the possibility of raising money for the extension or betterment of the road. I cannot see that there is any possible reason why there should be any such prejudice as my hon. friend suggests.


Frank Oliver: The province pays, and the Dominion owns and controls; that cannot be as sound a position for the province as if the province, doing the paying, also controlled, and, under certain circumstances, might own. It looks to me like a ease in which the province is, in the slang of the day, left holding the bag, while the Canadian Northern and the Dominion obtain whatever benefit there is from the transaction.


Robert Laird Borden: I think that if the position of the road is affected at all, it is affected for the better, because it can only be taken over by the Government in case of default in the way that I have mentioned, as part of a great transcontinental system. Why that should be regarded as prejudicing it. I cannot understand. Of course, the Government taking it over in that way would have to assume all obligations in connection with it.


Frank Oliver: That is the suggestion I made, but it is not made a part of the resolution.


Robert Laird Borden: But it is the practical effect of it, because the Government can only take it over subject to existing obligations, and that is specifically provided in the resolutions. The only persons who are being eliminated in the cases suggested are Mackenzie and Mann. The province is not being eliminated; the province can not be eliminated, because its rights are secured by an outstanding mortgage which protects it. If the Government of Canada ever takes over that road or any of these roads, it must take them over subject to all the existing outstanding obligations upon them.


Frank Oliver: I quite understand that,
but the Dominion Government does not need to take them over unless it wants to. The Solicitor General in his explanation the other night said that we could cut off any branch lines that we did not wish to take over. That would leave the provinces at a loss with what under other circumstances would be a profitable enterprise. When the Dominion Government is taking the responsibility of putting these roads under the Dominion Railway Act, and is taking the control and ownership of the stock, the circumstances call for the Government s putting in actual legislation what the right hon. gentleman has said would follow in the natural course of events; that is, that the Dominion Government in case of default will take over the branch lines and become responsible for them. If they put that on the face of the document the road is in a position to go to the money markets, and to get further money if it is required, but without that assurance on the face of the document, without a specific clause in the Bill, they could not as readily get further and necessary aid from the money markets.
Mr.	BORDEN:	My	hon. friendstarts,	I think,	from a premise
that is not strictly accurate. We are not taking over the control of the road; we are leaving the control and management of the road practically where it is at the present time until default comes. If default comes we must take over these roads undoubtedly, as one transcontinental system. But in the meantime the purpose of this arrangement is to get the stock of all these companies under one management, and to bring about an amalgamation so far as it is practicable at the present time. However, I am ready to consider my hon. friend's suggestion.


Frank Oliver: What I object to is that
the Government in case of default takes control, and yet does not take upon itself the specific obligation of operation and control of the road.


Robert Laird Borden: It takes a good deal more than control; it takes ownership.


Frank Oliver: If it likes.


Robert Laird Borden: You might say that of
any road in the system, but as a matter of fact all these roads form one transcontinental system and will have to be operated as such. It would be utterly impossible for this line from Montreal to the Pacific to be operated without branch lines, and even if a branch were not imme-
11 p.m. diately profitable I think any person having the slightest knowledge of railway and business affairs in this country would say that any government would be very foolish indeed to let go a branch line for that reason. All the great railways in this country construct or acquire branch lines-perhaps not so rapidly as they are sometimes desired-which are not immediately profitable, but are indirectly profitable even at first, perhaps, and in the end exceedingly profitable with the growth and development of the country. I

think my hon. friend need not have any cause for alarm in that regard. However, I will take his suggestion into consideration.


Frank Oliver: I am only bringing it up now that it may be considered when the Bill comes down.
Progress reported.
On motion of Mr. Borden, the House adjourned at 11 p.m.
Friday, May 22, 1914,