1914-05-26

[Stage Direction]
Bill No. 210, for the relief of Frederick Dwight Ghesley.-Mr. Baker.

[Stage Direction]
On the Orders of the Day being called:
Mr. OLIVER:: I desire to ask the Minister of the Interior (Mr. Roche) what the position is with regard to the Hindu immigrants, who, I understand, arrived at Vancouver some days ago. I am told by the Prime Minister that the law will be enforced. What I am anxious to know is, will the clause of the immigration law which takes into the control of the Government, to the exclusion of the courts, the right to deal with immigrants, be acted upon?
Mr. ROGHiE: I have been out of the city for a couple of days. I asked this morning if anything new 'had arisen in connection with the Hindus, who, I believe, are about a mile outside the port of Vancouver and are undergoing a thorough examination by the officials of the department. The Order in Council passed some time ago prohibiting the immigration of labourers will, of course, be called into requisition .in this case, .and absolutely

acted upon and enforced. That is what the hon. gentleman refers to, is it not?


Frank Oliver: No, I am referring to the provision of the Act which was ignored in the case of the sixteen Hindus which were admitted .some weeks or months ago-the provision which sets aside the authority of the courts until the immigrants have been passed by the officials of the Department of the Interior and have been officially Landed. Is the Government going to stand on that section of the Act?


Mr. ROCHE:: The Government are first going to utilize this Order in Council. Failing that, of course, as to those whom we cannot prohibit by that Order in Council, we will call into use the regulations amended in accordance with the decision of Chief Justice Hunter. There were defects in the old Order in 'Council. This has been remedied, and I think it will hold water even against the decision of the Chief Justice. We are going to stand by the immigration law in its fullness.



LABOURERS AS ASSISTED IMMIGRANTS,

[Stage Direction]
On the Orders of the Day being called:
Mr. LEMIEUX:: I am asked by a correspondent who seems to be well informed to call the attention of the Minister of the Interior to the fact that a .large number of Hungarians and Russians have landed lately in Quebec, and instead of taking up farm work remain in the city; also that a large number of assisted immigrants are being sent to Canada by the Unemployment Committee of London, England, Is the Minister of the Interior aware of that fact?


William Roche: I am not aware of any association who :a.re bringing labourers to Canada at all. I am certain that all officials under the jurisdiction of the department, and steamship agencies a3 well, have been notified to adhere rigidly to the instructions that no immigrants coming to Canada should be encouraged except those of the agricultural class.



CLOSING OF LIBRARY AND READING ROOM ON HOLIDAYS.

[Stage Direction]
On the Orders of the Day being called:
Mr. J. J. HUGHES:: Mr. Speaker, I wish to ask you or whoever has the power to answer, under what authority the Library

and the reading room were closed from early Sunday evening until this morning- closed all day yesterday. There are a great many holidays; we had one last week, we have had one this week, and shall probably have one next week. While these holidays are no inconvenience-probably the reverse, a decided advantage- to the members who live near Ottawa, to nearly all the members from Ontario and Quebec they are a great disadvantage to the members from the far East or West who are obliged to spend the whole session in Ottawa. On the holidays we have hitherto been allowed the privilege of the reading room and Library, but on this occasion even that was taken away from us. That seems to me a strange thing, and I ask under what authority it was done.


Mr. BORDEN:: As the hon. gentleman
knows, a joint committee of the Senate and House of Commons is concerned with matters relating to the Library. I am not aware what the practice is in regard to closing the Library during the session of Parliament, but I do not suppose that any departure from the usual custom has been made. My recollection is that on public holidays the Library is always closed.


James Joseph Hughes: The reading room was
closed as well.


Robert Laird Borden: Is that a departure from what has taken place in the past?


James Joseph Hughes: So far as I recollect, it
is.


Mr. SPEAKER:: The Librarian drew my attention to the fact that yesterday was a public holiday and said that the custom was for the Library to close during public holidays, and requested me to consent to its being closed. He also mentioned that as this holiday immediately followed Sunday the great majority of the members had gone home and he did not think there would be anybody resorting to the Library, and asked permission to close it on Sunday. I said, if it was the custom, to carry out the custom. I had a request also with regard to the reading room, and was told that the custom was to 'dose it when the Library was closed. I gave instructions that the reading room was to be kept open from ten to four. I do not know by what misunderstanding it was closed.


James Joseph Hughes: It seems to me that the Liorary might be kept open. I do not think that the employees there are overworked, and two or three men would be sufficient
to keep these rooms open for the convenience of members who have to stay here during the holidays.
FRAUDULENT jREPRESENTATIONS THROUGH THE MAILS.
On the Orders of the Day being called:


Mr. McCURDY:: I wish to bring to the attention of the Postmaster General a despatch which appeared in the press under date of last Friday, to the effect that no oil stocks of the wildcat or speculative kind will be allowed to be sold in Manitoba. [DOT] The despatch says:
Winnipeg, May 23, 1914.-Judge Robson, public utilities commissioner, has refused stock brokers from Calgary permission to sell wildcat stocks in this city or province. His sole aim is to protect the public. Judge Robson will issue a certificate allowing the stock to be sold in Manitoba, only after a financial statement has shown that the proposition is on a sound basis . Any oil stock sold by corporations in Manitoba who., have not this certificate is illegally disposed of.
Members of the House will no doubt realize that in the incorporation of companies-


Thomas Simpson Sproule: I think the hon. member is out of order if he proposes to introduce anything that requires a discussion at this stage.


Fleming Blanchard McCurdy: In my opinion this matter will not require any discussion. I wish to bring the matter to the attention of the Postmaster General in order to ask that a more rigid censoring of matter which goes through the mails' should be undertaken, and I am accepting the present as an opportune time to bring the matter forward, in view of the speculative excitement which is prevailing in the vicinity of these oil field's.


Thomas Simpson Sproule: There as a provision
which the hon. member may take advantage of, whereby any matter of urgent importance may be brought to the attention of the House at such a time as this, but otherwise any question upon which there is likely to be a discussion cannot possibly be brought up on the Orders of the Day. It can, however, be taken up on motion to go into Committee of Supply.


Fleming Blanchard McCurdy: Whether or not this is an urgent question must, of course, be a matter of opinion. A person is naturally influenced in that .opinion by different occurrences.


Thomas Simpson Sproule: I must ask the hon.
gentleman to desist, because he should not at this stage take up a matter that will require discussion. If we extend the privilege to him we cannot deny it to others.


Fleming Blanchard McCurdy: Very well, I will bring the matter up on another occasion.


Mr. PELLETIER:: I may say that I will look into the matter.



CANADIAN NORTHERN RAILWAY AGREEMENT.

[Stage Direction]
Consideration in Committee of resolutions respecting the Canadian Northern railway, resumed from Wednesday, May 20, Mr. Biondin in the Chair.
1. That His Majesty on behalf of the Dominion of Canada may aid the construction, completion, equipment and betterment of the Canadian Northern system by guaranteeing payment of the principal and interest of the bonds, debentures, debenture stock and other securities, hereinafter called the guaranteed securities of the Canadian Northern, to an amount not exceeding forty-five million dollars ($45,000,000) which guaranteed securities, to the extent aforesaid, the Canadian Northern is hereby 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.
Mr. PUGSLEY:: 
Robert Laird Borden: My hon. friend is speaking of what mortgage now?


William Pugsley: The mortgage to the
British Empire Trust Company?


Robert Laird Borden: Of what date?


William Pugsley: November 19, 1913. My right hon. friend will remember that the onily security which the Government ha= is in the equity of redemption in the stock of the Canadian Northern Town Properties Company, which is mentioned in this mortgage to the British Empire Trust Company. The matter is rather complicated, but that is the result of it. As to the Solicitor General's statement with regard to the inclusion of British Columbia townsites. I have had very little opportunity of studying the mortgage, but I cannot find a single townsite in British Columbia mentioned with the exception of Port Mann. If that is so, my hon. friend, I am sure, will feel that he ought to correct the error into which he led the House and the country, because he made that statement very positively and sought to lead the committee to believe that there were very valuable securities in connection with townsites in British Columbia.
Mr. ME1GHEN: Would the hon. gentleman explain the power to release a little more fully?


William Pugsley: That is contained in the 15th section, paragraph c.


Mr. MEIGHEN:: That gives the Townsites Properties, Limited, power to release certain lands.


William Pugsley: No, it gives the Canadian Northern or Mackenzie, Mann and Company, Limited, power. ' The company ' means the Canadian Northern Railway Company. Section 15, paragraph c, is as follows:
(c) The company (which means the Canadian Northern Railway Company) shall have the right to sell or contract for the sale of the whole or any part of the mortgaged lands at any price not being less than such a sum as will together with the purchase price of all lands forming part of the mortgaged lands sold or contracted to be sold by the company subsequent to the 30th October, 1913, be equal to an average of $15 per acre for all the mortgaged lands so sold or contracted to be sold, inclusive of the land in respect of which such sum is to be paid and pending the carrying out of the provisions of clause 10 hereof, the company or Mackenzie and Mann and Company-
That is the Canadian Northern Railway Company or Mackenzie, Mann and Company, Limited.
-shall have the like right to sell or contract for the sale of the whole or any part of the properties and premises mentioned in the third schedule hereto (hereinafter referred to as the 'town properties') at any price not being less than such sum as will together with the purchase price of all town properties sold or contracted to be sold subsequent to the 30th October, 1913, be equal to an average of $150 per acre for all the town properties so sold or contracted to be sold inclusive of the town property in respect of which such sum is to be paid. The company and Mackenzie, Mann and Company as the case may require shall be entitled to convey or to have conveyed any part of the mortgaged lands and town properties so sold or contracted to be sold by it as aforesaid to the purchaser freed and discharged from the trusts of these presents upon payment to the trustees (or to the trustees for the bonds of 1899 or the bonds of 1909 or the Government of Canada where such trustees or Government have a prior right thereto) of the net purchase money therefor remaining after payment thereout of all such costs, charges and expenses as mentioned in clause 16 hereof and the trustees shall be bound to execute and do all assurances, deeds, documents and things which may be necessary for that purpose. And any of the mortgaged lands and town properties may be sold wholly or partly on credit but provided that the purchaser shall not be entitled to receive a conveyance until the net purchase money has been paid in full but any such purchaser may receive from the company a contract in evidence of his purchase. Provided always that the trustees may in their discretion allow and if necessary concur in executing a conveyance to the purchaser and accept from the purchaser a mortgagee or other security and covenant or other obligation
for the payment of the purchase money and interest (if any) or any unpaid part thereof.
(d) The trustees shall not be concerned or entitled to inquire whether the person put forward by the company of Mackenzie, Mann and Company to receive a conveyance of any part of the mortgaged lands or town properties is or is not the purchaser or otherwise the proper person to receive such conveyance and the trustees shall not be liable for having at the request of the company or Mackenzie, Mann and Company conveyed or consented to the conveyance to any person nothwithstanding that it shall at any time thereafter appear that such person was not the purchaser or otherwise the proper person to receive such conveyance.	.
My reading of that is that the company or Mackenzie, Mann and Company, that is, the Canadian Northern Railway Company, or the Mackenzie-Mann Company, Limited, shall, notwithstanding this trust mortgage, have the right to withdraw any of the farm lands on paying in $15 per acre upon the lands so to be withdrawn, or any of the lands in the townsites on paying in $150 per acre and requiring the trustees, on the receipt of that sum, less any expenses, to execute conveyances to the people to whom the Canadian Northern railway or Mackenzie, Mann and Company, have sold any of the lands. If that is so, my hon. friend, I think, will agree with me that the security which the Government have taken upon the equity of redemption in this stock of the Canadian Northerm Town Properties Company will' be of very little value and that this provision will be likely to induce the Canadian Northern railway or Mackenzie, Mann and Company to execute some conveyances which will release that privilege which they have of withdrawing lands. Take Port Mann. Supposing there are six hundred acres in that townsite. The whole property could be withdrawn under sale by Mackenzie, Mann and Company, or the Canadian Northern Railway Company, to any purchaser on payment to the trustees of $9,000; whereas the townsite, as we all know, is to-day, or was at one time, worth a great many hundreds of thousands of dollars, probably up into the millions.


Arthur Meighen: On the first question raised by the hon. gentleman, when the point came up last Tuesday or Wednesday whether Port Mann was included in the properties belonging to the Canadian Northern Town Properties, Limited, I did not profess to be familiar with every item covered in these eight or nine pages. Consequently I deferred explaining whether it was in or not. In the meantime, however, the hon. member for St. John (Mr. COMMONS
Pugsley) informed the hon. member for Humboldt (Mr. Neely) that the townsite of Port Mann was not in.


William Pugsley: I was looking at the fourth schedule.


Arthur Meighen: So that the first explanation to the House for any error that may have been committed is due from the hon. member for St. John, as the townsite of Port Mann clearly is included. In the course of my explanation, if I remember my remarks correctly, I did state that the other townsites in British Columbia were included. That I believed to be correct, and I still believe that to be correct. The hon. member for St. John must remember that Town Properties, Limited, have been in existence for some time, and any townsites that have been handled since it was formed have been handled solely as the property of Town Properties, Limited. I think I am correct in saying that any other townsites in British Columbia are included. I thought at the time that Coquitlam was in previous to the incorporation, but perhaps it was not. At all events, the effect is the same; if they have been taken by Town Properties, Limited, since incorporation, they consequently will not be included in the schedule, but they will be in the security just the same.
As to the other point, the hon. gentleman seemed to think that there is a clause in this trust deed which will weaken or detract from the value of the stock and bonds of Town Properties, Limited, in that it provides for the extraction of certain lands in acreage amounts from the mortgage on payment of so much. I do not profess to be familiar with the exact details of all these clauses, but in so far as my knowledge of such things goes, I would think the reason for this provision would be that Mackenzie, Mann and Company, Limited, and the Canadian Northern railway, found it necessary, in view of lands having been sold by them, to provide that certain acreages might be taken out from the mortgage in order that they might complete their titles. That is the way it would appear to me, that is the purpose of the clause, and they fixed the price in such a way that they would be safe in taking the land at that figure. Fifteen dollars per acre would be about the price for farm lands. The hon. member will find in the documents laid on the table that that is the average price of farm lands in the statement in which they make up a total of some $29,150,000 as the value accruing to the Canadian Northern Railway Company

from farm lands that could have been retained by Mackenzie, Mann and Company, Limited, as their individual property.
I do not know at the present time why $150 an acre has been fixed for general property, but I scarcely think that price would apply to Port Mann or any other property that can be taken by the Canadian Northern Railway Company. Whatever property isi taken by the Canadian Northern Railway Company is then owned by the Canadian Northern, and if there is any advantage in it the Canadian Northern gets that advantage, and as the assets of the Canadian Northern are mortgaged by the trust deed the Government also gets- that advantage. I venture to say, although I do [DOT]not pretend to have a detailed knowledge of this just now, that there is no provision by which advantage will accrue to Mackenzie, Mann and Company, Limited, as against Townsite Properties, Limited. The stocks and bonds of Town Properties-, Limited, represent its assets and they are held by Mackenzie, Mann and Company, Limited, subject to the pledge given under the trust deed. Consequently, we would get the equity in their stocks and bonds, we would get all that Mackenzie, Mann and Company, Limited, have in Town Properties, Limited, -and that is all we set out to get,


William Pugsley: My hon. friend seems to be very reluctant to be convinced that he is wrong. I cannot see that there is a possibility of his being right in his suggestion that Port Mann would not be included in the provisions of paragraph c. Paragraph c is expressly made applicable to all the town properties mentioned in the third schedule, and it is in the third schedule that Port Mann is included (as will be seen on page 43), and it is the only town-site in British Columbia mentioned,


Arthur Meighen: We will see about that.


William Pugsley: When my hon. friend
who has -charge of this agreement, and who has had weeks and weeks to inform himself with regard to its provisions and with regard to the security which is being taken by the Government, and whose word is intended to go to the country with a view to inducing the people to believe that this Government has taken all the security it possibly can- when my hon. friend makes the erroneous statement that there are a number of valuable townsites in British Columbia in addition to Port Mann-


Arthur Meighen: 
William Pugsley: Does my hon. friend
question my statement that he said several townsites in British Columbia were included?


Arthur Meighen: You just added the word ' valuable ' without authority-that is all.


William Pugsley: It was my hon. friend from Humboldt who used the word ' valuable.' I noticed in the Government press, in fact in all the papers both Government and Opposition, that my hon. friend had stated that there were a number of town-sites in British Columbia which were included besides Port Mann, and the hon. member for Humboldt admitted that these would be very valuable. At all events, it is the fact, so far as the papers before the House are concerned, and upon which the House is asked to vote, that the townsites in British Columbia are not included unless perhaps the townsite of Port Mann. My hon. friend says that everything belonging to the Canadian Northern passes over to the Government. My hon. friend may be right, but I do not so understand it. I understand there are a number of very valuable properties which do not pass; for instance, the railway interests in Nova Scotia, known as the Inverness Railway and Coal Company.


Arthur Meighen: That does not belong to the Canadian Northern.


William Pugsley: I venture to say it does.


Arthur Meighen: I venture to say it does not.


William Pugsley: Or to Mackenzie and Mann.


Arthur Meighen: Oh, oh! I thought we should see from whom the apology was due.


William Pugsley: My hon. friend says it belongs to Mackenzie and Mann.


Arthur Meighen: I did not say that at all.


William Pugsley: If my hon. friend had looked into the matter more carefully, he would have seen that it is of importance to the country that all the various properties owned by Mackenzie and Mann should go in as security.


Arthur Meighen: While on this point, will the hon. gentleman tell the House what is
the annual income of the Inverness Company, whether or not there has been an annual deficit, and what are the grounds for his assertion that, that railway would be a valuable asset?


William Pugsley: I am not sufficiently
familiar with it to tell my hon. friend.


Arthur Meighen: Had not the hon. gentleman better get familiar with it before he talks about -it being a valuable asset?


William Pugsley: Does my hon. friend
say it would not be a valuable asset?


Arthur Meighen: I do.


William Pugsley: My hon. friend who represents that section of Nova Scotia thinks it ought to 'be included. I venture to say that it is just as valuable an asset and earns just as much as the Halifax and Southwestern railway.


Mr. A. W. CHISHOLM:: I am surprised to hear the Solicitor General say that this road is not going to be a valuable asset. The hon. gentleman must remember that this line is serving a very important coal mine at Inverness and is also about to serve an important coal mine at Mabou. It is also destined to serve another coal mine at Port Hood, -which is temporarily closed down but will eventually be opened up. More than that, my hon. friend must remember that Mackenzie and Mann are now endeavouring to secure a very valuable property ten miles north of the present terminus of the Inverness Railway Company When Mackenzie and Mann have secured that property and extended the road to it, they will be carrying the products of four coal mines, and I am surprised to hear the Solicitor General say that this road is not destined to be -a very valuable railway. Not only that-but I believe that if Mackenzie and Mann secure -the coal property at St. Rose and Chimney Comer they will extend their road to these collieries, and in order to carry out their obligations to the county of Inverness they must construct the road to Chetieamp. One reason why -they are not extending the road, as was the intent of their agreement with the municipality of Inverness, is that they first want to get hold of the coal property at St. Rose and Chimney Corner aforesaid, situated ten miles north of their present terminus. That is my own opinion. They want this property, and being selfish they are acting the dog in the manger; they will not extend the road because that might enable the present owners of the coal property to demand a -better price for their property.

Mackenzie and Mann want to get possession of this coal mine at their own price. Going a little further, this country north of Inverness has a very great quantity of valuable minerals in the form of gypsum, copper and pyrites; the road will also go through one of the finest farming sections in Nova Scotia. A most valuable fishing industry will also be developed. If the Solicitor General will take the trouble to look into the natural assets of North Inverness, he will have no hesitation in determining that this road is destined to be one of the best paying roads in Nova Scotia. I would remind him too tliat the net earning power of the road last year was a little over $80,000.


Arthur Meighen: Does the hon. gentleman mean over operating expenses?


Alexander William Chisholm: Over operating expenses.


Arthur Meighen: But not including the
bond issue?


Alexander William Chisholm: I am not talking about the bond issue. There is a history to that into which I will not go just now. It would be well for this Government to inquire into this situation and see that this road is included in the schedule. I cannot see why Mackenzie and Mann should be opposed to it. I see every reason why the Government should come to the rescue of the people of Inverness. One reason is that by including this road in the schedule the people of Inverness will have some tribunal to which they can appeal for redress of their grievances. They have many grievances in respect to freight rates, and other matters which I cannot enumerate just now. If the placing of the Mackenzie and Mann possessions in Inverness in these schedules would bring the road under the jurisdiction of the Railway Commission it would be a great relief to the people of that county. If I were supporting a Government that would not take advantage of the present opportunity to compel Mackenzie and Mann to carry out their agreement with the county of Inverness I would withdraw my support from them, without the slightest hesitation. It is a deplorable thing that a great corporation like Mackenzie, Mann and Company, should enter into an agreement with the municipality of Inverness and should be allowed to carry out only that part of the agreement that brings the road to their own property and stops there, and get the municipal subventions for and refuse to fulfil their part of the bargain. They got the money

of the people of Inverness; they got a bonus of $1,000 a mile and a free right of way under false pretences. Mackenzie, Mann and Company took these moneys from the people of Inverness for the construction of this road to their private property at Inverness, and they are doing nothing in the world to carry out their agreement with respect to the extension of the road North to Cheticamp. It may be said that the municipality of Inverness have a recourse against them, that they should go to the courts. Well, the people of Inverness are not disposed to go into the courts on a question of this kind, with a corporation that has treated them as this company did. They are fearful of lawyers and of courts and I- do not blame them. I would invite hon. gentlemen opposite to look into that agreement between Mackenzie and Mann and the municipality of Inverness, and I believe that they will see that Mackenzie and Mann are compelled to do one of two things: either carry out their contract or refund the money which the municipality of Inverness paid them and which they accepted under false pretenses and with evident intention of disregarding their obligation with respect to that portion of the road from Inverness North. The people of Inverness, I am convinced, would accept the refund gladly, provided the Government would construct the Orangedale-Cheti-camp railroad which would be a much moTe desirable solution of the railway question in Inverness. I will have something to say on this later on, when the Railway Estimates are being considered.


Robert Laird Borden: How much did they pay?


Alexander William Chisholm: I could not tell my
right hon. friend exactly, but I know that they gave them $1,000 a mile bonus and a free right of way through for the most part rich agricultural lands under good cultivation, where this road wrought great damage to property in form of residences and buildings of various kinds, most valuable meadows and fields in a high state of cultivation. The exact amount paid for the right of way can be had from the treasurer of the county. It will be found to have been a very substantial amount.


Robert Laird Borden: Was there any date fixed within which the extension should be made?


Alexander William Chisholm: The answer to this question can be found in the Nova Scotia statutes, and even if there is no time limit in the statute the agreement between

the company and the municipality will show without a doubt what the conditions of the payment of the bonus were, and what the obligations of the company were with Tespeet to the extension of the road to Cheticamp. The Inverness Railway and Coal Company got their charter from what is known as the Inverness and Richmond Railway Company. There were dates fixed for the construction of the line to Broad Cove, now called Inverness, and on the completion of the road to Broad cove the company agreed to construct the road to Cheticamp forthwith, provided Dominion and local subsidies were available. The Dominion and local subsidies were available. My predecessor had the subsidy of $6,400 brought down, and when I took charge I had this subsidy Te-voted. Mackenzie, Mann and Company could have got the subsidies at any time, and the Legislature of Nova Scotia was ready to pay them a subsidy of $4,000 a mile. I am satisfied that Mackenzie, Mann and Company would build that road, because it is a first-class proposition, but what they want is first to get hold of all the coal in North Inverness. But while Mackenzie, Mann and Company are endeavouring to carry out their own selfish plans, endeavouring to get control of all this coal, the people of Inverness are without railway accommodation and their natural resources are left undeveloped. They will be left in this undeveloped condition until Mackenzie, Mann and Company get hold of all the coal in North Inverness at their own price, unless the Government compel them to build the read forthwith or refund the money. The Government can do this if they so desire; but my suggestion is that the Government cause Mackenzie and Mann to refund the municipality of Inverness subventions, and construct the Intercolonial Railway branch line from Orangedale to Cheticamp, which is the correct business way of solving our railway question in North Inverness. It will give us railway accommodation^ that will not be under the control of a selfish corporation like Mackenzie and Mann. An Intercolonial Railway branch line is much more likely to stimulate the development of our natural resources than a road under the control of Mackenzie and Mann. Particularly will this apply to our coal wealth at St. Rose and Chimney Corner, our fishing industry and our farming industry.


Robert Laird Borden: The difficulty, as I explained to my hon. friend (Mr. A. W. Chisholm) on Wednesday last, is that this
is partly a coal proposition and partly a railway undertaking. As far as I can understand, the coal enterprise forms the larger part of it and it seems undesirable to bring the coal enterprise . into a proposition of this kind. It did not seem to me that should be done.	For
that reason we do not propose to bring that road in at the present time, although there is provision in the Bill by which the railway part at least can be brought in hereafter. My hon. friend may be assured that we will give careful attention to what he has represented in that regard. I agree with him that there is a very great opportunity in that part of the country for an enormous development in the coal industry.
I know that a flourishing town has already been built up-the town of Inverness, tnat I had the pleasure of visiting -about four years ago, where I found prosperous communities gathered around these mines. I am not aware whether the coal mine operations are profitable or whether they are fairly self-sustaining.


Alexander William Chisholm: They have -been somewhat profitable of late years.


Robert Laird Borden: But we did not want to bring a coal-mining proposition into an arrangement of this kind. It may be possible to separate the railway part and the coal mining part of the enterprise. It is a subject that requires some consideration. My hon. friend may be assured that we will give it the best consideration we can, and I shall ibe glad to discuss the matter privately with him should it be convenient for him to do so.
Mr. PUGS'LEY: I think that my hon. friend from Inverness (Mr. A. W. Chisholm) has given a pretty good answer to the Solicitor General as regards the Inverness Railway and -Coal 'Company. Now, I w-ant to make -a reply to my hon. friend in regard to the right to withdraw the land in the townsites. The Solicitor General says that the Canadian Northern Railway Company -are to convey all their property to the Government, and this makes the Government entirely safe, or as safe as it can be made, in respect to the townsites That is not the case, because all these townsites mentioned! in the third schedule, in Manitoba, Saskatchewan and Alberta, and there are, I suppose, 200 or 300 of them, including the townsite of Port Mann in British Columbia, are declared to be owned by Mackenzie, Mann and Company, Limited, and not by the Can-


Robert Laird Borden: 
Arthur Meighen: Mr. Chair-12 noon. man-


William Pugsley: I want to hear the Postmaster General.


Arthur Meighen: The hon. gentleman may hear from the Postmaster General also. I do not think he would want me to sit down. I desire to commend the industry with which my hon. friend has dug into the trust deed of 1913 to find something which will weaken the security which the Government now takes, which weakness he says we should cure. I must regret, on behalf of the bondholders who loaned their money on the strength of this trust deed, that they had not the discretion to engage the hon. member for St. John as their counsel in the matter, to see that they got some security and that the trust deed held down the so-called buccaneers, Messrs. Mackenzie, Mann and Company, Limited.


William Pugsley: That is what the hon. member for West Peterborough (Mr. Burnham) called them.


Arthur Meighen: That is what the hon. member for Carleton (Mr. Carvell) called them. If the bondholders had engaged my hon. friend from St. John, he would have seen to it that Mackenzie, Mann and Company would not have the power to strip the bondholders of their security. But the trust deed does not give Mackenzie, Mann and Company, Limited, that power at all. It gives the power of sale to Mackenzie, Mann and Company, Limited, and to the Canadian Northern Railway Company of the lands covered by the trust deed. It fixes a minimum of $15 per acre for farm lands, and 150 per acre for town-sites; and it says that Mackenzie, Mann and Company, Limited, may sell at not less than that minimum, and that the proceeds of that sale are the property of the Canadian Northern Town Properties Company, Limited, and go to protect the bondholders. Certainly that is the case. Otherwise, it would be a beautiful trust deed! We did not draw the trust deed, but the bondholders were protected by their own counsel. Let us read clause c:
The company shall have the right to sell or contract for the sale-
The words 'bona fide' are, of course, implied-there must be a bona fide sale:
-of the whole or any part of the mortgaged lands at any price not being less than such a sum as will, together with the purchase price of all lands forming part of the mortgaged lands sold or contracted to be sold by the company subsequent to the 30th October, 1913, be equal to an average of $15 per acre for all the mortgaged land so sold or contracted to be sold, inclusive of the land in respect of which such a sum is to be paid, and pending the carrying out of the provisions of clause 10 hereof the com-

pany, or Mackenzie, Mann & Company, shall have the right to sell or contract for the sale of the whole or any part or me properties and premises mentioned in the third schedule hereto (hereinafter referred to as the ' town properties ' at any price not being less than such a sum as will, together with the purchase price of all town properties sold or contracted to he sold subsequent to the 30th October, 1913, be equal to an average of $150 per acre for all the town properties so sold or contracted to be sold inclusive of the town property in respect of which such sum is to be paid.
Tihere is no doubt as to the meaning so far; they can sell or contract for the sale of all farm lands at a price which will average on all lands since 30th of October, 1913, a minimum of $15 an acre. They can contract for the sale of town properties at such a price as will, for the , lands sold since the 30th of October, 1913, make a minimum average of $150 an acre.


William Pugsley: Who has that power?


Arthur Meighen: Mackenzie, Mann and
Company, or the Canadian Northern railway.


William Pugsley: Not the Town Properties?


Arthur Meighen: Certainly not. But of
course it must be a bona fide sale-the hon. gentleman himself would not suggest other-, wise; if they contract other than a bona fide sale they are committing a fraud and can be followed for fraud. Let us pursue it:
The company, and Mackenzie, Mann & Company, as the case may require, shall be entitled to convey or have conveyed any part of the mortgaged lands and town properties so sold-
Surely, that is plain. There must be a bona fide sale, and no sale is 'bona fide unless it is for the best price that can be obtained. If they sell at this average minimum price in either case, they can call for a conveyance of the properties from the Town Properties Limited. It is just the ordinary clause. The money must go into Town Properties Limited, and this Government gets the protection of that money by way of first mortgage. Is it necessary to read further ? There is nothing there to enable Mackenzie, Mann and Company to run away with one dollar of the purchase price without being guilty of embezzlement.
1 said a moment ago that if the Canadian Northern railway exercised its right and made some money-which they could not do as I read the clause carefully, because the money has to go into Town Properties, Limited. But even so the hon. gentleman says we should have no security of the money so made because it would be made by

the Canadian Northern Pacific. But if he had read the resolution, he would have seen that the Canadian Northern Pacific is bound to give ian agreement before they can get any of the money.


William Pugsley: I stated, but the hon.
gentleman did. not hear me, that all these town plots in the third schedule, numbering several hundred and Port Mann, are to be declared' to be the property of Mackenzie, mann and Company, Limited, not of the Canadian Northern railway. I understand that Mackenzie, Mann and Company would have the right to sell these lands and get them free from the mortgage at $150 an acre.


Arthur Meighen: They have the right to sell them at the minimum, but it must be a sale, a bona fide sale, and the proceeds go to the mortgagees. Surely, that must be clear to the hon. member. Town Properties, Limited, take the lands in this third schedule which were the property of Mackenzie, Mann and Company, but Mackenzie, Mann and Company reserve power to sell them, but they must sell so that the utmost value is realized, and they can not sell below a certain minimum. And Town Properties, Limited, are bound to give a conveyance. That is the clause.


William Pugsley: The hon. gentleman
says: ' That is the clause/ and I suppose that ends it.


Arthur Meighen: It does.


William Pugsley: It certainly does not to my mind. It may be that the hon. member is a better lawyer than I am; but this is where he has gone wrong, in my opinion. He takes it to be the same as some obligation upon Mackenzie, Mann and Company to go to the mortgagee under this mortgage. He forgets that the equity of redemption is in Town Properties, Limited.


Arthur Meighen: But does not the hon. gentleman admit that the proceeds will come to Town Properties, Limited ? It says so in so many words. Let me read it:
The company, and Mackenzie, Mann & Company, as the case may require, shall be entitled to convey or to have conveyed any part of the mortgaged lands and town properties so sold or contracted to be sold by it as aforesaid to the purchaser freed and discharged from the trusts of these presents upon payment to the trustees (or to the trustees for the bonds of 1899 or the bonds of 1909, or the Government of Canada where such trustees or Government have a prior right thereto) of the net purchase money therefor remaining after payment thereout of all such costs, charges and expenses as men-

tioned in clause 16 hereof, and the trustees shall be bound to execute and do all assurances, deeds, documents and things which may be necessary for that purpose.
It goes so far as to provide that the net proceeds must go to the mortgagee; I believe they would have to go that way any way.


William Pugsley: I think a fair reading of the trust mortgage is that Mackenzie, Mann and Company bind themselves, so far as they are concerned, and bind the trustee, so far as the trustee is concerned, for any lands they withdraw at the rate of $150 an acre. Mackenzie, Mann and Company are not Town Properties, Limited, but a different company altogether. Mackenzie, Mann and Company have made the bargain that any part of this land sold at a price of not less than $150 an acre, not by the Town Properties Company, but by Mackenzie, Mann and Company, who previously owned these town properties, they have the right to take out. And in order that the trustees may be fully protected, it is expressly provided by paragraph (b) that the trustee is not concerned, and is not obliged to bother himself as to who purchases or as to what the properties may be sold for to the third party. All they have to do is to get f 150 an acre.	They can execute a deed to
Mackenzie, Mann and Company itself, and they may sell to third parties. It is expressly provided, as I have said, that the trustee shall be under no obligation as to whether the conveyance be made to the purchaser or to the person entitled to it; the only obligation imposed upon the trustee is that if any conveyance of any of these town properties is made, it must be at the rate of at least $150 an acre. With all deference to my hon. friend, I see nothing in 'this trust deed to prevent Mackenzie and Mann from going to-morrow to the trustee and saying: here are 100 acres of land in Port Mann for which we want to pay you $150 an acre. There is nothing to prevent the trustee releasing that land and making a conveyance of it to Mackenzie and Mann at $150 an acre. The trust deed expressly exempts the trustee from liability in that regard; the only requirement is the payment of the price of $150 an acre. My non. friend has said that under the mortgage to the Government aP o property of the Canadian Northern is conveyed, and that, therefore, the Government is saEe. When I point out to him that all these properties are not owned by the Canadian Northern but are declared to be owned bv
Mackenzie, Mann and Company, and that Mackenzie, Mann and Company have the right to make these withdrawals, my hon. friend then seeks to show that they could not do this without being under some legal obligation and without being in some way responsible to the bondholders.


[Stage Direction]
Section agreed to.
2. That the guaranteed securities shall be secured by a trust deed, hereinafter called the 1 new trust deed ' made to a trustee or trustees approved by the Governor in Council, hereinafter called the [DOT] trustee ' and the same shall in manner and terms satisfactory to the Governor in Council,-[DOT]
(a) Grant a first, fixed, and specific mortgage or charge upon the shares mentioned in the first part of the second schedule hereto.
Sir WILFRID LAURIER:: Permit me to
call attention to paragraph a of this section :
Grant a first, fixed and specific mortgage or charge upon, the shares mentioned in the first part of the second schedule hereto.
I called attention to the fact that the two companies mentioned in the first schedule, the Canadian Northern Transfer Company and the Niagara, St. Catharines and Toronto Railway Company, are not mentioned in the second schedule. The answer given by my hon. friend the Solicitor General was that the stock of one of these, the Niagara Company, is to be held by the Canadian Northern Ontario, that the stock of the Canadian Northern Ontario goes into the mortgage and that, therefore, by implication, the stock of the Niagara Company ought to go into the mortgage. I cannot read it that way. What are the shares mentioned in the first part of the second schedule? The Canadian Northern Ontario is mentioned, but the Niagara and St. Catharines is not; as its stock is held by the Canadian Northern Ontario, it is not part of the stock of the Canadian Northern. If it is the intention that the Niagara Company shall be included in the mortgage, it should be mentioned also, it cannot be held to be mortgaged unless it is mentioned.


Arthur Meighen: There is a measure oi correctness, I think, in what my right hon. iriend says.


Wilfrid Laurier: A full measure.


Arthur Meighen: Not altogether; as a matter of fact, I think I shall be able to convince my right hon. friend that we will have a direct mortgage on the shares of the Niagara and St. Catharines railway, al-

though not a mortgage in the way he has in mind. It is necessary, on account of the provisions of the perpetual bond mortgage of 1903, that we procure ..the Niagara and St. Catharines as part of the system by the issue of its perpetual bond's on the Canadian Northern Ontario, so that we cannot avoid that; the Niagara Company must become the property of the Canadian Northern Ontario. Consequently, we cannot include it in the first part of the second schedule, because by doing so we would compel the transfer of these shares to the Canadian Northern. But the right hon. gentleman says that by taking it out of the schedule	you	remove	it	altogether,from the mortgage of $45,000,000 which secures our guarantee. You remove it from that mortgage, except to this extent, that among the assets of the Canadian Northern are	the	stocks	of	the Canadian Northern Ontario, and the stocks of the Canadian Northern Ontario include the stocks	of the	Niagara andSt. Catharines Railway Company. That does not mean that there is a direct mortgage in	the	stocks	of	the -Niagara and St. Catharines; I quite appreciate that point, and that is the measure to which the right hon. gentleman is correct. But he must remember this: That by section 11 of the resolution the Canadian Northern Ontario itself must, in order to secure the moneys advanced to it, give a mortgage to the trustee on its own assets. There are moneys to be advanced to the Canadian Northern Ontario; consequently the Canadian Northern Ontario must give a mortgage on all its assets and among its assets are the stocks of the Niagara and St. Catharines railway. Therefore the trustees will secure directly from the Canadian Northern Ontario for the protection of ihe Canadian people a mortgage upon the stocks of the Niagara and St. Catharines railway. I am sure that that is clear to my right hon. friend.


Wilfrid Laurier: I cannot say that it is.
Mr. ME1GHEN:	I really thought that
it should be. If it is not, it is my own fault. I know that will be the result. We will not in our $45,000,000 mortgage get a direct security on the stocks of the Niagara and St. Catharines; that is quite true.


Wilfrid Laurier: Because it is already pledged.


Arthur Meighen: Because it belongs to the Canadian Northern Ontario and we do not come with that mortgage down on these stocks directly. But the Canadian Northern Ontario must itself give a mortgage to the trustees to secure the money that the Canadian Northern Ontario gets and that morta gage must come directly on the stocks of the Niagara and St. Catharines, because they form part of the assets of the Canadian Northern Ontario. In the mortgage we take from the Canadian Northern Ontario, by way, say, of collateral security, we cover the stocks of the Niagara and St. Catharines direct.
As to the stocks of the Canadian Northern Transfer Company, it would not be well, for the same reason, to include that company in the first part of the second schedule, because the Canadian Northern Transfer Company belongs to the Canadian Northern Railway Express Company and the Canadian Northern Railway Express Company is bonded for $3,000y000 and has $1,000,000 of stock. The Canadian Northern Railway Express Company owns and has owned for a number of years, I believe, all the stock of the Canadian Northern Transfer Company; consequently when we take the pledge, as we do, of the Canadian Northern Railway Express Company, we really get security on the assets of the Canadian Northern Railway Transfer Company.


Wilfrid Laurier: As I read the resolution, it is intended that we shall have a mortgage on all the subsidiary companies which are parties to this contract. The Niagara and St. Catharines Company is one of these subsidiary companies. Of the stocks which belong to this subsidiary company there are two categories, the category which to-day is free from mortgage and the category which is not free from mortgage. The first category is in the first part of the second schedule; the second is in the second part. I would imagine that the stock of the Niagara Company should go either to the one or to the other. Either it is mortgaged, or it is not mortgaged; if it is mortgaged, it belongs to the second category; if it is not mortgaged, it belongs to the first. Clause 11 is rather involved, but it means this, that not the stock but the other properties, all' the properties of these constituent and subsidiary companies, ca_n be mortgaged-


Arthur Meighen: Must be.


Wilfrid Laurier: No, may bo mortgaged only to the extent of the money realized under the trust deed, which goes into the completion of these particular roads. The Niagara company is not one of these. The Canadian Northern Ontario Railway Company is, I admit, and the Government get a mortgage upon the property of the Canadian Northern Ontario for that share of the $45,000,000 which will go into that railway. That does not include the Niagara company.
(Mr. MEIGHEN: It includes the stock.


Wilfrid Laurier: 
Arthur Meighen: I am -quite ready to take my share of the blame if the explanation is not clear. The Canadian Northern Railway Company own this road; it is one of its assets. It owns the stock of the Niagara, Toronto and St. Catharines railway, and our mortgage covers its assets; consequently it covers the stock of the Niagara, Toronto and St. Catharines railway.


Wilfrid Laurier: My hon. friend may assume the blame for the explanation not being clear, but in later days the blame will fall on other shoulders than his or mine.


Mr. CARROLL:: Since September 12 there has been in progress in the mines of the Canadian 'Collieries in British -Columbia, which are owned and controlled, I understand, iby Mackenzie and Mann, a labour strike which has not yet .been settled. I wish to bring to the attention of the Government, particularly of the Department of Labour, that that strike is still going on, and that the Canadian 'Collieries, Limited, so far have made no attempt to give the employees of that colliery a fair and equitable settlement of their grievances. It will be remembered that, in the session of 1911-12, this Government took the ground that where companies were looking for benefits from this Government, and where those companies were not treating their employees rightly, the Government w'ould come to the assistance of the employees and refuse to pass the legislation which these companies were requesting. This was done, if we are to
believe a speech of the Minister of Labour delivered in this House in this session, in connection with the Grand Trunk Railway Company. He told us at that time that the Grand Trunk Railway Company refused to take back certain of their employees after a settlement had been effected by the Labour Department of the late Government, and that, to make that settlement effective and binding, this Parliament and this Government refused to grant to the Grand Trunk Railway Company certain legislation which they were then promoting. If the Minister of Labour and the Department of Labour of this Government were successful in bringing back into the employ of the Grand Trunk Railway Company, men who had been illegally and unjustifiably debarred from their, labour on that system, then I think it is incumbent upon the Government in this present instance to do something to settle the strike in the Canadian collieries at Cumberland and Ladysmith. I believe it can be easily done. This Government have set a precedent in a matter of this kind in connection with the Grand Trunk strike. In justice to the labour men of this country, and particularly to the labour men of the Canadian collieries at Cumberland and Ladysmith, in British Columbia, they should do the same thing there. I am bringing this matter to the attention of the Government, and particularly of the Department of Labour, at this juncture, and asking them to make some attempt to bring those parties together so that they will reach a settlement; and I may say if that settlement is not forthcoming before the resolutions leave the committee, I shall move an amendment to the resolutions. My object this morning is simply to bring this matter to the attention of the Government.


Robert Laird Borden: Of course, the Government would be very glad indeed to accomplish anything within its power in regard to the strike to which my hon. friend has alluded. The collieries in which Messrs. Mackenzie and Mann, Limited, are interested are, as I believe, only a small portion of those involved in the strike which the hon. gentleman has mentioned. Further than that, none of these properties are included in the arrangement proposed by these resolutions, as the coal properties do not in any way form a part of the Canadian Northern Railway system. I shall be glad, however, to take into consideration what my hon. friend has suggested.

On subsection b of section 2, the ' new trust deed ' shall-
(b) Grant a specific mortgage or charge upon the mortgage securities and shares of stock now or from time to time hereafter deposited with and specifically mortgaged under the trust deed of the 30th day of June, 1903, hereinafter called the ' perpetual consolidated debenture stock trust deed ' those now so deposited and mortgaged being mentioned in the second part of the said second schedule.


William Pugsley: I would call attention to pages 30, 31, 32 and 33 of the report of the auditors, which the Government have * placed upon the table for the information of the House. The return as printed there professes to show the par value of the different securities and the proceeds from this sale. The securities issued by the Canadian Northern Railway system are placed at $312,818,910.42; whereas the total proceeds of these securities are given as $246,768,389.16. In other words, there is a difference of something like $70,000,000. One would be struck with the enormous difference between the value of the securities issued and the proceeds. But that statement is evidently misleading, because the securities relative to the proceeds are not so great as these figures would show. Therefore, when you come to analyse the figures, there is not so much against the financing of Messrs. Mackenzie and Mann as one would think; but it is objectionable that the information should be put before the House in that way. For instance, we have the Central Ontario Railway Company, securities issued $973,333.33. That is put in among the securities, but there is no amount put in the column for the proceeds.
My hon. friend will see how misleading it is to have the figures in the securities issued column, but no figures at all given as to the proceeds of those securities. The same remark applies to the Bay of Quinte railway and to equipment, which latter appears in the securities issued column as $23,746,000, but in the column for proceeds no figures are given at all. Perhaps the explanation is that they are to be exchanged for something else. Would my hon. friend just look at the seventeenth item on page 30, for a moment, where equipment is given as $23,746,000 securities issued, but the proceeds column is left blank. What is the reason?


Arthur Meighen: The hon. gentleman is right I think in the explanation he has in mind, but I do not think he is right in saying that there is anything misleading in the figures given or anything

omitted. The hon. gentleman will find, if he follows it up, that a clear statement is given as to what becomes of the money in all cases where there are blanks in the proceeds column, except in the case of equipment. The money does not appear in the proceeds column because the Canadian Northern railway had not the proceeds. Nothing could appear in the proceeds column unless the proceeds came to the treasury of the company, which in these cases they did not do. The proceeds were used in the retirement of prior loans or in the acquisition of prior charges, one method being adopted in one case and another method in another. That appears on the face of the return. If moneys did appear in the proceeds column that would be misleading.


William Pugsley: By having figures in tho securities issued column it would show that securities came to the Canadian Northern.


Arthur Meighen: No. The securities do not come to a company, they are issued by a company. Those are charges against the Canadian Northern railway and, consequently, you must include all of them as they are charged up against the Canadian Northern. The same remark really applies, to the equipment trust. The security da issued but the proceeds do not come in. The securities are really securities on equipment. They are charged against the road, but they simply go to the purchase of equipment. They are not like an issue of bonds, the proceeds of which are expended on the road. The proceeds of the equipment trust do not come directy into the treasury of the company, consequently, it would be misleading if it appeared so. But all the facts are brought out. The $23,000,000 is a charge against the Canadian Northern; it is a security issued and appears amongst securities issued. It went into the discharge of equipment obligations.


William Pugsley: How much was actually realized from the $23,000,000 of equipment securities?


Arthur Meighen: They are not realized
yet.


Robert Laird Borden: They issue securities to
get the cars.


William Pugsley: That may be so, but
equipment bonds are usually sold through bankers. I did not think that the makers of cars took the bonds.


Arthur Meighen: I will try to make it
clear. The Imperial Rolling Stock Company

is incorporated for the purpose of acquiring equipment for the Canadian Northern railway, the idea being to protect the equipment sc acquired against the prior charges on the road. The hon. member for St. John clearly understands why rolling stock companies are formed. A rolling stock company issues equipment trusts. The Canadian Northern, or the company purchasing, pays 25 per cent and the rolling stock company issues equipment trusts against equipment purchased. The Canadian Northern guarantees those equipment trusts which are, consequently, an obligation on the Canadian Northern railway. They undertake to pay and have to pay the equipment trusts, and as the Canadian Northern pays them they become the real owners of the equipment purchased. The Canadian Northern simply guarantees that these trusts so issued will be paid by them. The equipment trusts are issued directly by the Imperial Rolling Stock Company, and'as the Canadian Northern pays them it acquires the equipment


William Pugsley: Does not my hon. friend see that in a statement professing to show the securities issued by the Canadian Northern system and the proceeds of the different securities*, that if in one column he puts in the amount of equipment bonds, he ought to have in the other column what they realize.


Arthur Meighen: The Canadian Northern does not sell them.


William Pugsley: Why put it in in the
column of securities, then?


Arthur Meighen: They issued them. The Imperial Rolling Stock Company issues them directly, but the Canadian Northern guarantees to pay and their obligation has to appear in the list of obligations.


William Pugsley: The hon. gentleman has given a statement showing the securities and the proceeds. In one column he puts in $23,000,000 odd of bonds, but leaves the proceeds column blank. Adding up the totals of the 'securities and the proceeds, we find a difference of some $70,000,000.


Robert Laird Borden: I gave a brief explanation of that discrepancy before.


William Pugsley: I am sorry I had not
the opportunity of hearing it. I find a further anomaly. Take item 3 on page 30- 4 per cent debenture stock, securities issued, $8,030,000, and proceeds, $9,703,668.98. In other words, the proceeds are given as more than the securities by $1,000,000 odd. We 267
all know perfectly well that that 4 per cent debenture stock of Saskatchewan sells for a little below par, yet the proceeds are given as a million dollars more than the securities. Would my hon. friend explain that?


Arthur Meighen: I am afraid the hon.
gentleman has confined himself to the blue-book.


William Pugsley: I think I may properly do so.


Arthur Meighen: The blue-book does not contain all the information* that has been laid on the table. My hon. friend will observe, opposite that 4 per cent debenture stock of Saskatchewan, the letter a. That is a reference to a supporting statement which appears in the return.


William Pugsley: But is not printed.


Arthur Meighen: -not in the blue-book as it was not asked to be printed there, and I do not think the representative of the Opposition to whom, acting with me, was delegated the task of selecting what should be printed made any mistake in not asking for it. This discrepancy of excess of proceeds over securities issued is accounted for by the fact that certain other issues were united with them and the total proceeds were apportioned-I think the Finance Minister was largely responsible for the .apportionment-to meet the purposes of the Government. Thus the proceeds were apportioned between these different issues and the result is that in this case the proceeds appear to be more than the issue. That is by reason of the fact that the note issues were joined with the issues of other securities.


Mr. MACDONALD:: Is there any rolling stock covered by these equipment bonds that has been freed from the security which has been issued?


Arthur Meighen: A certain amount of the rolling stock was purchased outright and not through the instrumentality of equipment bonds. That would be free and would be the property of the company. I cannot answer now as to whether any of the equipment bonds are altogether retired or not. I know that about $27,000,000 worth out of $51,000,000 worth is paid for and the balance is not. Whether you could select any class of equipment and say that the bonds have matured and been paid, I cannot say,

42.30

but I do know that all payments that have matured have been promptly met.


William John Macdonald: Has my hon. friend procured any statement to show how the equipment trust stands?


Arthur Meighen: Yes, that is in the return.


William John Macdonald: Perhaps my hon.
friend can give us that information. It would be of consequence to know how much of the rolling stock is available free from the charge of equipment bonds.


Arthur Meighen: There is a return on the table in which, at page 31, the equipment securities are given in detail. The principal amount, the annual interest charge and the date of maturity are all set out.


William John Macdonald: That is just the list of bonds that has been issued by the Imperial Rolling Stock Company, but I would like to ascertain, if possible, how much of the rolling stock is free from the charge created by the trust. Could the Solicitor General get that?


Arthur Meighen: I can get that. I can say in advance that the rolling stock of the Canadian Northern is comparatively new. The development of the rolling stock since 1903 has been marvellous. Over one-half of the rolling stock of the Canadian Northern has been purchased since 1910 and my hon. friend will understand that there will not have been a very large proportion of it paid for. Over one-half of the ears have been purchased since 1910 and over half of tlie engines since 1908.


William Pugsley: Taking the return, pages 31, 32 and 33, the apparent difference between the securities and the proceeds is close to $70,000,000. We know that is not correct because there are some items in the securities column which are not carried out in the proceeds column. What were the actual proceeds of the total securities which are named on pages 30-32? If we have the actual total proceeds we will be able to see what was the difference between securities and the proceeds. As closely as I can tell they would be something like $27,000,000 which would be the apparent difference between the par value of the securities and the actual amount that came into the treasury of the company.


Arthur Meighen: That would mean that they sold about an average of 91.


William Pugsley: I suppose it would.
Perhaps the hon. gentleman could have these figures after luncheon.


Arthur Meighen: It can all be figured
out exactly from this table. The request of the hon. gentleman is reasonable, and I will have some one figure it out.
Mr. A1ACDONALD: What notes does the hon. gentleman (Air. Meighen) refer to as having accompanied the securities which had this unusual yield in addition to their face value?


Arthur Meighen: The notes appearing on the same page. They are the notes referred to as among the issued securities of the Canadian Northern proper.


William Pugsley: They do not appear on page 30.


Arthur Meighen: Yes, on page 30, items 14, 15 and 16 of the Canadian Northern securities.


William John Macdonald: Yes, these notes and the proceeds are shown on page 30 of the blue-book. How is it,. for instance, that No. 14, an issue of $3,500,000, does not appear to have yielded anything at all, as nothing is set down in the proceeds column?


Arthur Meighen: That just enables me to add a little to what I said a moment ago in reply to my hon. friend from St. John. These notes were united with other securities, one of which was referred to by the hon. member for St. John-the four per cent debenture stock. If my hon. friend from Piotou will look up the amounts placed opposite the letters A, B, O, D, I, J and K, he will see that in some instances at all events the proceeds exceed the face values of the securities. In the case of the notes the proceeds are very much less and in the case pointed out by my hon. friend from Piotou there appear to be no proceeds at all. The reason of that is that the whole of the amount raised was merely by way of loan and the charge against the notes and securities was apportioned against the securities. A full explanation of that appears opposite the letter E in the return.


William Pugsley: With reference to item 21, page 30, an issue of $6,424,000 of four and one-half per cent debenture stock guaranteed by the province of Alberta, appears to have realized only $4,971,000. If I remember rightly, I have seen, in some report of Lazard Freres that these bonds were offered to the public at 93. That would amount to a million dollars more than these

proceeds. How does my hon. friend get over that difficulty?


Arthur Meighen: 
William Pugsley: Does not my hon. friend think that is an extraordinary way to put in. a statement, namely, to give the proceeds of one issue at $1,700,000 above their face value, and the proceeds of another issue at $1,500,000 below ?


Arthur Meighen: It confused me until I got an explanation of it. I am not an accountant, and I do not know that there are many accountants here.


William Pugsley: But any man of common sense will consider it a careless way of making a statement.


Arthur Meighen: I do not think it is careless. I do not think the auditors found a more carefully revised set of books. Consequently I do not think I would be justified in saying that this is not the proper form in which to make the statement. The apportionment is not at the election of the company at all; it is at the election of the controlling Government, the Government that is interested in the proceeds of these securities.


William John Macdonald: Are these notes issued at the same time that the securities are attempted to be realized; that is, do they constitute simply the same indebtedness, or are they both alive, representing an indebtedness of the duplicate amount ?
267|


Arthur Meighen: As I understand it, the note issue is made immediately the money is raised for the money that is required, not for the full amount perhaps of the security pledged against the note issue. The company take their Canadian Northern Alberta security, for example, to a New York banker and they pledge with that banker a note, which is a charge itself, as I understand it, for, say $3,500,000, and they give that security as collateral to the note. The money market does not justify them in selling the security; they raise the money in that way temporarily. Later on they sell the -security, discharge the note issue and apply the proceeds for the purposes of the railway.
At one o'clock, the committee took recess.
The committee resumed at three o'clock.


William John Macdonald: I understand we are on section 2, subsection d. Some question was raised about which the Solicitor General was to give information for my hon. friend from St. John (Mr. Pugsley).


Arthur Meighen: I have given instructions for the preparation of a statement showing just what securities were united and just what proceeds were obtained. This will be tabulated and in clearer form than appears in the statements on page 30 of the blue book. I expect that statement at any moment now.


Wilfrid Laurier: In the mean- . time, I should like more explanation than we have had as to the full meaning of this subsection. It says that we arc to have a mortgage on all the .securities which are mentioned in the trust deed of the 30th of June, 1903, and those mentioned in the second part of the schedule. There are others to come hereafter, I imagine, and no indication has been given up to tilie present time what they arc. It is evident that the trust-deed of the 30th June, 1903, is a part of this agreement. It would 'be clearer if that were explained. I know it was placed on the table, and I had it for a few hours, but lent it to some friend and have not seen it since. It is evidently complicated. Perhaps the hon. Solicitor General will tell us what these are which are mentioned in the second schedule of Part II.


Arthur Meighen: The securities covered
by section b which is now under discussion, are named in Part II of the second schedule. They include chiefly bonds of

allied companies, or of subsidiary companies, and also stocks of these companies -not in all cases stocks, for reasons which I can explain in each individual case. These companies were formed for the purpose of handling certain interests that were of value to the railway company. For example, the Winnipeg Land Company handles lands in Winnipeg that are occupied for railway purposes now. These lands were acquired in the early days at very low prices. The Winnipeg Land Company, in order to assist the Canadian Northern railway to secure the money needed, in 1903 bonded its assets for the sum mentioned here. $300,000, and issued stock for $100,000. The Canadian Northern railway took these bonds and these stocks. The proceeds of the bonds went to discharge what was against the land company-the cost of the properties of the company. The stocks and the bonds became the property of the Canadian Northern railway, and all that went out of the treasury of the Canadian Northern railway except for its own purposes went to discharge what was against the Winnipeg Land Company in the cost of its properties. Now, I will follow that individual case and see what security we have in virtue of this clause. The stocks and the bonds, are brought in and become part of the mortgage under the trust deed of the 30th June, 1903, which secured the four per cent perpetual bond issue. That trust deed provides that the company shall be able to exercise its power to acquire the bonds of other companies, and for every $100 bond it shall acquire it shall have power to issue another $100 perpetual bond, secured in the same way as the first issue of four per cent perpetual debenture bonds. That is quite clear to me, and I hope I have made it equally clear to the committee. This security ranks equal with that in all respects. Consequently, the company is still able to issue four per cent perpetual debenture bonds, and no issue they have made since the first issue in any way impairs the security of the subsequent issues. Consequently we secure by this subsection a mortgage on the equity of redemption, the right, so far as the property of these companies is concerned, to go ahead of all other issues. That is to say, we secure a mortgage on all the assets of the company and put our mortgage in that form so that there will be no way of any assets escaping. And, while there is an issue against each issue of four per cent perpetual debenture stock, it is 
secured also by the further assets of the company. The purpose of the clause is to provide that the trustee of the new trust deed shall have security on all the equity that there is or that there may be.


Sir WILFRID LA DRIER:: This section
says:
Grant a specific mortgage or charge upon the mortgage securities and shares of stock now or hereafter from time to time deposited with and specifically mortgaged under the trust deed of the 30th day of June, 1903.
We have here a mortgage of all that comes into the trust deed or will come into it hereafter. Then the section says that what we now have is all the mortgages that are mentioned in the second part of schedule 2, that is to say, the Minnesota and Ontario Bridge Company, the Minnesota and Manitoba Railway Company, Lake Superior Terminals Company, Limited, Canadian Northern Telegraph Company, Winnipeg Land Company, Limited, The Canadian Northern Coal and Ore Dock Company, the St. Boniface and Western Land Company, the Edmonton and Slave Lake Railway Company, Canadian Northern Railway Express Company, Limited, Canadian Northern Steamships, Limited, Canadian Northern System Terminals, Limited. These are the securities mentioned in this section. If I interpreted the explanation of my hon. friend aright, it is this: no other companies can come in except those which are the proceeds of these companies or which may be taken in by other companies or be replaced by other securities. Am I right?


Arthur Meighen: I do not say that no
other bonds or other companies may come in; they may come in. What I said is that under our mortgage no other companies can come in ahead of us.


Wilfrid Laurier: I understand
that. The section says:
Those now so deposited and mortgaged being mentioned in the second part of the said second schedule.
But there are others which may from time to time come in. Which are they?


Arthur Meighen: There are none in contemplation now, so far as I know. That refers to such bonds as the company may think it wise to purchase for the purposes of the road.


Wilfrid Laurier: Would it not be clearer and safer to have the trust deed of 1903 made part of these resolutions.


Arthur Meighen: I do not think that any object could be served by incorporating the trust deed as part of the resolution; we ara directly interested in only one portion of it, in so far as it covers this issue. We provide that we come next after the security formed by the trust deed o_f 1903.


Frank Oliver: In respect of the fourth item on page 30 of the blue-book, the 4 per cent debenture stock guaranteed by Alberta, $6,776,000, would the Solicitor General have prepared, at as early a date as convenient, a clear statement showing the direct proceeds of this and the indirect proceeds that my hon. friend has spoken of-the proceeds being much larger than the securities issued- also the same particulars in regard to numbers 21 and 22, debenture stocks guaranteed by the province of Alberta. In the case of numbers 21 and 22, the stock and bonds guaranteed are those of the Canadian Northern Western railway, while in the case of number 4, it is the Canadian Northern railway. I am anxious for a statement which will separate these securities distinctly and completely.


Arthur Meighen: I think that can be
procured.


William John Macdonald: The mortgage upon the Canadian Northern and its properties is practically the only physical asset, outside of the securities upon certain stocks, which the country is getting as security under this agreement. From that point of view, it is very important to ascertain how much equipment is free from the equipment trust.


Arthur Meighen: I have asked for that.


William John Macdonald: I assume that only tlie equipment of the Canadian Northern railway will be covered by the mortgage.


Arthur Meighen: The mortgage will cover all the equipment that is clear and the equity of the Canadian Northern in such that may be subject to the equipment trust.


William John Macdonald: At this stage the
Solicitor General ought to take the committee into his confidence as to what further security, if any, the Government has sought to obtain from the contractors to whom this money is to be advanced. I assume that the Government would be actuated by the idea that they should obtain all the security of every kind that it is possible to obtain. Have the Government asked any of the members of the firm of Mackenzie, Mann and Company to put up any of their personal property as security? Did they ask them to give what was sought from the Canadian Pacific railway directors in 1884? Did they seek, in addition to that, to obtain any security other than what is contained in section 2?


Robert Laird Borden: What is the security to which my hon. friend alludes as having been given in 1884?


William John Macdonald: It is understood that in 1884 the men who were interested in the Canadian Pacific railway at that time pledged their own personal guarantee, if not in the formal arrangement with the Government, at least antecedent to their coming to the Government for aid. The aid that was given by the Government at that time was given only after the absorption of the personal finances of the men who were connected with the road. Hon. gentlemen who have taken part in the previous discussion of this measure have urged upon the Government the point that the personal properties and assets of these gentlemen should be given as security under this agreement. Have the Government endeavoured to obtain that?


Robert Laird Borden: I am not aware that any securities were given to the Government in 1884 by the individual shareholders or directors of the Canadian Pacific railway. It is quite possible that they may have pledged their assets to banks for the purpose of assisting the road, and I always understood, without any exact knowledge on the point, that previously to that date such was the case. As a matter of fact, I am perfectly satisfied that the liability of those who hold the shares in this railway has been pledged to a very large amount in connection with its construction. In addition to that, as my hon. friend has already observed, and as has been pointed out in the discussion, we have exacted three stipulations in connection with this arrangement which, I think, were not exacted in 1884. In the first place, we have provided by section 4 of the Bill that the current indebtedness, or floating liabilities, which run up to nearly $11,000,000, shall be reduced to the normal amount of $3,000,000; that Mackenzie and Manm, Limited, shall give security for that, and that they shall be obliged to give to the Government such other securities as the Governor in Council may require. We have also asked them to furnish satisfactory security, which must be

given before the bonds are guaranteed, that all outstanding temporary loans against which securities have been pledged shall be taken care of and that no prooeediing shall be taken against the road in respect of those loans. Thus neither the floating indebtedness nor the temporary loans will embarrass the company in the operation of the portions of the line already completed or during the construction of those that remain to be completed. Then, in addition to that, we have asked them to forego >aR claims, which we believe might have been enforced to a very large -amount, against the road for agency services and otherwise. In that regard it seems to me that we have gone much further than the -Government went in 1884 or than any government has since gone.


Wilfrid Laurier: I think there is a wide margin for difference of opinion as to the last .statement of my right hon. friend. It is a matter of record, certainly it is well known, that in 1884 the promoters of the Canadian Pacific railway, chiefly George Stephen and Donald Smith of that day, pledged their own personal credit to the fullest amount in order to carry out the enterprise. They could not get anything more from the banks that had carried the enterprise, as the banks did not feel warranted in giving any further assistance; they could not get any money to finish the enterprise and they came to the Government. There is little reason to believe that those who pledged personally their credit to the banks would not have pledged it to the Government if the Government had so required. The Government did not at that time require the personal securities of George Stephen tod Donald Smith and the ether promoters, for the sufficient reason that the company was able to give of its own securities sufficient to fully guarantee the loan of $30,000,000. The best evidence of that was that the loan was paid in due time and according to stipulation. The best justification, as I have said, was that the iloan was repaid in due time by those to whom it had been made, the company. In this case the Government has not taken, any personal pledge from Sir William Mackenzie and Sir Donald Mann, although it may be true that Mackenzie and Mann, as stated by my hon. friend, had pledged their credit to their creditors. But if Mackenzie and Mann have .pledged their personal credit to their creditors, there is no reason in the world to suppose that they would

not have done as much for the Government as they have done for their creditors, and there is every reason why the Government should have been as prudent as the other creditors of Mackenzie and Mann and should have exacted the same personal security from them. My right hon. friend says he has taken -ample securities. I do not think he can convince any man who has given the matter any .attention that the security is .at all. adequate to the amount of responsibility which we are taking. This is the reason why, as said by the hon. member for Pictou (Mr. Macdonald), we ought not to he satisfied to take only the security of the company, but should have secured also the personal security of the promoters of the company, Messrs. Mackenzie and Mann.


Robert Laird Borden: If I am not mistaken, a colleague of my right hon. friend, in 1909, in dealing with another matter, described the securities taken by the Government in 1884 as valueless at the time, as a security which could not be realized upon in any bank in the country, but as one which eventually did turn out as fully adequate for the reason that the road became a success. I think the security which we are taking at this time is fully equal to that which the Government took in 1884; and, further than that, I say that we have imposed upon the persons who are the promoters of this road very much larger obligations in connection with this guarantee than were imposed in 1884. I have already pointed them out and I need not Tepeat them. I find nothing of that kind in 1884 and I s-ay that it is beyond question, in connection with the construction of this road, that Messrs. Mackenzie and Mann have pledged their personal credit for the purpose of raising money to provide for the construction, to as -large an amount at least- as was pledged by any person associated with the Canadian Pacific railway in 1884 or previously to that time. But we have not been satisfied with that; we have asked them to take care of the obligations to which I have alluded and to take care that the floating indebtedness shall not be brought against the road and shall be reduced within, a year from $10,500,000 or $11,000,000 to $3,000,000. We have asked them to provide security that the temporary loans shall be taken care of. They will be largely taken care of, perhaps not altogether, by the securities pledged against them; but if there is any deficiency, and there might be a deficiency of a considerable amount under conceivable circumstan-

ces, they are bound to give their security that they will take care of it.


William John Macdonald: The people who
undertake to do these things are not Sir William Mackenzie and Sir Donald Mann; they are the joint stock company known as Mackenzie, Mann and Company, Limited, so that there is no personal liability involved.


Robert Laird Borden: We have been told in
this House that a very large proportion of the assets of Mackenzie and Mann are .vested in that company. If so, all those assets become liable.


William John Macdonald: The total capitalization is only $5,000,000.


Robert Laird Borden: It may be only $5,000,-
000, but whether it be large or small we are entitled, under the stipulations of this contract as embodied in the fourth and fifth sections of the Bill, to require further securities which must be to the satisfaction of the Government.


Mr. CARVELL:: Could the hon. member tell the committee what are the assets of Mackenzie and Mann, Limited? We have heard a good deal of comment by my hon. friend and the Solicitor General as to the assurance of Mackenzie and Mann being given that these floating liabilities and also these loans from the banks would be taken care of. In answer to a question by myself, the right hon. gentleman stated that, under clauses 4 and 5, they have the power to see that other securities shall be given; and they seem to want to lead the country and the House to believe that these floating liabilities and bank loans will be taken care of. We are only repeating, we have gone over the ground; but the hon. member for Pictou and other gentlemen have pointed out that there is no personal liability here, no promise by anybody excepting Mackenzie and Mann, Limited, and we have no knowledge whether Mackenzie and Mann, Limited, own a dollar or not. The Government should be in a position to let us know whether Mackenzie and Mann, Limited, are of any financial value, or whether they are simply an organized company. They say that the stock is $5,000,000. But the stock is of no value, the question is. What property have they? I would like to know what assets they have behind the stock. Could not the minister tell us? I think he ought to take the committee into his confidence and tell us what securities or guarantees he is going to require other than the guarantee of the contractor, which
means Mackenzie and Mann, and whether Sir Wfiliam Mackenzie and Sir Donald Mann will become personally responsible.


Robert Laird Borden: It means that we shall
scrutinize very carefully whatever obligations are given to us to fulfil the conditions set forth in the fourth and fifth sections of the Bill; and we shall make ourselves and do make ourselves responsible to Parliament and to the country to see that the security is satisfactory and will fulfil the purpose for which it is designed.
As far as the assets of Mackenzie, Mann and Company, Limited, are concerned, I am not in a position to enumerate them all, and it is not necessary that I should do so, because we are not obliged to confine ourselves to the security of that company, and we do not propose to confine ourselves to that company unless we are thoroughly satisfied with it. We know that they own the stock and .bonds in the Townsites Company subject to the securities outstanding.


Frank Broadstreet Carvell: About $20,000,000 outstanding.


Robert Laird Borden: I understand there would be an equity of a very considerable amount; at least, we are so disposed to regard it on the basis of the figures I have already given to the House. Mackenzie, Mann and Company, Limited, also own the stock of the Canadian Northern railway. Outside of that I cannot say exactly what they own; they have some real estate, I understand.


Frank Broadstreet Carvell: My hon. friend has left the matter exactly where it was before he attempted to answer. If he will not give the committee any further information, we have no way of compelling him to do so. He says that they will make a very careful examination and satisfy themselves whether Mackenzie and Mann have sufficient assets to make their guarantee of any value, and then he says: We will have to take the responsibility. My right hon. friend takes the responsibility, and says that he knows these debts will be paid. But what if they are not? Why not have somebody brought ,in who we know is responsible? Sir William Mackenzie we know is responsible, and well able to pay whatever depreciation there may be in the securities put out by the different companies as against floating indebtedness and bank loans. If the Premier would say that Sir William Mackenzie and Sir Donald Mann would personally be held responsible, we would

feel the country was getting some sort oi protection. I believe I am voicing the sentiments of members on this side of the House, and I know it is the feeling of thousands and tens of thousands in this country, when I say that, for some inconceivable reason, the Government is not taking the House and the country into its confidence over this particular phase of the Bill. When these gentlemen come here for this enormous guarantee of $45,000,000, very likely to be followed by another guarantee within the next year, or so, why does the Government absolutely refuse to make Mackenzie and Mann personally liable? That is something the country cannot understand. It is all very nice for my right hon. friend to say: We take the responsibility. We appreciate that, but it is like locking the door after the horse is stolen. My right hon. friend takes the responsibility but it will be perhaps two or three years before the House and the country knows whether or not the security is sufficient to pay the debts, and if it turns out that the security is not sufficient and they come back here in another year or two for further assistance, it is poor consolation for the people to be told: We took the responsibility; it is true we had power in our hands to make Mackenzie and Mann responsible, but we thought it was hardly fair to crowd them, as they are great empire builders, magnates and all that sort of thing; it is unfortunate the securities were not sufficient. But that will not help the country. If my right hon. friend would go a little further and tell the House what additional security he proposes asking in addition to the security of Mackenzie, Mann and Company, Limited, it would be much more satisfactory to the House and the country.


Robert Laird Borden: I hope my hon. friend
does not think I am declining to take him into my confidence, for there is no reason why I should not give him the fullest possible confidence on this point. As far as the taking of security is concerned, I can assure my hon. friend that it was not based on any consideration of empire builders, but on strict business principles. The whole question will be dealt with from the standpoint that the Government under this Bill is entitled to receive, and will certainly exact, security that will be regarded as good security upon the strictest business principles. That is how we propose to deal with it. My hon. friend will realize that it is impossible to deal with such matters as the value of a security and all details

of security in a committee of this House. In such matters something must be entrusted to the executive, and we intend to carry out our duty in that regard in. the strictest possible manner.


Frank Broadstreet Carvell: I give my right hon.
friend credit for being sincere in his statement that he intends to do what is right. He has heard, though, of the old adage that the way to a certain place is paved with good intentions, and it may be that this will be another stone in the pavement. Would my hon. friend consider me impertinent if I were to ask whether,in the negotiations leading up to this, the Government really asked Mackenzie and Mann to be personally responsible for a portion of these liabilities?


Robert Laird Borden: We certainly did, otherwise we should not have got the stipulations embodied in sections 4 and 5 of the resolutions.


Frank Broadstreet Carvell: They are not personally liable.


Robert Laird Borden: Mackenzie, Mann and Company, Limited, are.


Frank Broadstreet Carvell: But not Mackenzie and Mann personally.


Robert Laird Borden: We have the power under sections 4 and 5, if we deem it necessary to exercise it, of asking Mackenzie and Mann or both to become responsible.


Frank Broadstreet Carvell: But it does not say they will, and that is just the difficulty. The country would like to know whether in these negotiations Mackenzie and Mann were asked to be personally responsible and whether they refused to become responsible under sections 4 and 5. Let my right hon. friend face the matter for a moment from the standpoint of a man on the outside. Suppose we pass sections 4 and 5 exactly as they stand. My right hon. friend investigates the securities which Mackenzie, Mann and Company, Limited, offer, and he becomes satisfied that that company have not sufficient assets to make their guarantee of any value. Then my right hon. friend asks Sir William Mackenzie and Sir Donald Mann personally to sign a guarantee. Suppose they refuse, what can my right hon. friend do? He may say: Oh, well, we will not go on with the deal then. But I want to tell my right hon. friend that he cannot refuse to go on with the deal. Mackenzie and Mann will have him in the hollow of their hands as abso-

lutely as one man ever had another, because the whole ground on which my right hon. friend asks for this legislation is the ground that the Canadian Northern railway is bankrupt; that its promoters are up against a stone wall; that they exhausted every possible means of financing their great enterprise and cannot go any further, and that the only place to which they can come for assistance is the Parliament of Canada. Suppose Parliament passes sections 4 and 5 whereby Mackenzie and Mann can be asked personally to become responsible. If Mackenzie and Mann refuse and say they will not give that guarantee, my right hon. friend has no option but to take what they will give him. That is the great objection I have to this clause. I would like to see it put in the Bill that Mackenzie and Mann are personally responsible to pay these two items. I am not arguing now that they should be made responsible for the whole 145,000,000, because these sections 4 and 5 do not refer to the $45,000,000; they are not supposed to, although they do in the end, I think. They refer to the reduction of floating liabilities and to making good certain loans outstanding against which security has been pledged as collateral. We are asking that Mackenzie and Mann should be personally liable for those items. Personally, I think they should be made responsible for the whole $45,000,000, because after all we are putting up the money to protect their property. Why should they not; we are putting up the money to protect their property? They have come to the end of their rope, they cannot go anywhere else for money, they have come to us, and to avert a national calamity we are compelled to put up the money. Why should they not become personally responsible for the whole thing? Outside of the question of principle, this is really the crucial point of this matter.


Robert Laird Borden: I know we have the right to call upon Mackenzie, Mann and Company under sections 4 and 5 of the resolutions to give the security to which my hon.
friend alludes.
Mr. CARVELL; Do I understand my right hon. friend to say that we do not have the right?


Robert Laird Borden: I say we have the right absolutely when we desire to exercise it. We are not concerned about Mackenzie and Mann giving it, we are concerned about
some person giving an absolutely sufficient safe security to the Government that these two stipulations will be carried out. If we got a security from a large bank it might be a great deal better than that which Mackenzie and Mann could give us, and we might be satisfied with that. But the main point is that the security must be satisfactory. When my hon. friend enlarges upon the importance of these gentlemen giving their own personal security, I want to recur again to 1884 when that course was not taken in regard to the shareholders and directors of the Canadian Pacific railway. When, in 1911, the late Administration guaranteed the bonds of the Canadian Northern railway to the amount of $35,000,001, no security whatever was taken outside of a mortgage upon the road. My hon. friend retorts at once that that was a first mortgage and that this is not a first mortgage. I am prepared to show, and can show, that the charge which we obtain upon the Canadian Northern railway and its allied enterprises under this resolution is very little larger per mile than that which was accepted by the late Administration in 1911, and I am also prepared to show that the road upon which we are taking security now is, at present, and for many years will be, mile for mile, a very much better security than that which was accepted in 1911. We have not stood where my hon. friend and his leader stood in 1911. We have required not only that security, but the other securities which are enumerated in the resolution, and we have required also that security aggregating more than $27,000,000 shall be given to the satisfaction of the Government, and under such stipulations that Mackenzie. Mann and Company, if necessary, can be asked to make themselves individually responsible.


Frank Broadstreet Carvell: My right hon. friend
has a wonderful faculty of delving into ancient history when he wants .to get away from an unpleasant situation. We have had very many illustrations in the last two and a half years of my right bon. friend's desire to shield himself behind what somebody else did, usually my right hon. friend the leader of the Opposition (Sir Wilfrid Laurier). Now he goes back and shields himself behind Sir John Macdonald. It ia all very well for my right hon. friend to try and get away from the real question that I have propounded to him and. which he has not answered. Of course, 1 have no means of compelling him to,
423a

answer these two questions, but the House and the committee would like to havei him answer them. The first is: Has anybody ever asked Mackenzie and Mann to become personally responsible for these liabilities? and the second question is: What is my right hon. friend going to do if later on he asks Mackenzie and Mann to be responsible under sections 4 and 5 and they refuse? Where has he anything in these resolutions upon which the Bill will be founded by which he can compel Mackenzie and Mann to come in and become personally responsible if they refuse to do so? Will he not be compelled to pay the $45,000,000 if they do refuse? This is boiling the matter down to the important point, and I think that my right hon. friend should not talk about ancient history, about what Sir John Macdonald and my right hon. friend the leader of the Opposition did, but he should tell us what he is going to do undeT these particular conditions.


Mr. BOUDEN:: The hon. gentleman was not present when ancient history was gone into on the other side of the House.


Frank Broadstreet Carvell: Oh, yes, I was.


Robert Laird Borden: We were confronted with the example of what was done in 1884-


Frank Broadstreet Carvell: I was here.


Robert Laird Borden: And that is the reason
why I alluded to it. I thought it was always safe to offer a good example to my hon. friend and therefore I also alluded to what was done in 1911, knowing that it would commend itself to his good judgment as a perfectly wise and prudent course. To-day he will not find fault with me for suggesting to him what I regard as a good example, not by way of tu quoque, but sirnpy for the sake of a valuable precedent. My hon. friend asks what we would do to-day if Mackenzie and Mann refused to carry out some of the conditions precedent to the guarantee? My hon. friend might as well ask what we would do if they refused to sign this agreement because it is a condition precedent.


Frank Broadstreet Carvell: But Mackenzie, Mann
and Company, Limited, have agreed to sign the agreement.


Robert Laird Borden: There is no stipulation
oi that kind. My hon. friend might as well ask what would we do if they refused to execute the trust deed to the satisfaction of the Government. What would we do if

they refused to carry out the stipulations of subsection c, and What would we; do if they refused to transfer to the Minister of Finance and the Receiver General the stock? All these things are conditions precedent and so, in the Bill which we propose to found upon this resolution, sections 4 and 5 will be made conditions precedent. Thus it is useless to propound an inquiry like that. My hon. friend knows that the Canadian Northern railway have come to us and asked us to give assistance under certain conditions. We have fixed what the conditions shall be and before we give that assistance these conditions must be complied with. If they refuse to comply .with these conditions we cannot give the assistance.


Frank Broadstreet Carvell: Nobody assumes that
my right hon. friend or the Government would have introduced these resolutions without having some sort of an arrangement made with Mackenzie, Mann and Company. We take it for granted that everything in regard to the resolutions has been agreed upon by Mackenzie, Mann and Company or by the Canadian Northern Railway Company. If that be not the case it is a hundred times worse than I thought it was. It is bad enough as it is and we do not want to make it any worse. I do not think that my right hon. friend can get very much comfort by arguing in that way and saying: What will happen if Mackenzie, Mann and Company refuse to hand over the securities? We take it for granted that that has been agreed upon. Now, would my tight hon. friend be equally frank and tell me whether in the negotiations they have ever asked Mackenzie and Mann to be personally responsible or whether it is their intention to ask Mackenzie and Mann to become personally responsible under sections 4 and 5 in case they are satisfied that the other security offered is not sufficient to meet the guarantee?


Robert Laird Borden: I have already explained to my hon. friend that sections 4 and 5 embrace the general scope which would authorize us to call upon Mackenzie, Mann and Company to become personally liable and, of course, my hon. friend is quite right in one sense in saying that the Canadian Northern Railway Company agreed to these conditions. Perhaps that is not precisely the best way of putting it. They did not exactly agree to them, but they ascertained they could not get any assistance

except upon the conditions set out in these resolutions.


Frank Broadstreet Carvell: That is an agreement.


Robert Laird Borden: The same thing.


William John Macdonald: No agreement has
been signed.


Robert Laird Borden: No agreement has been signed; we did not think it worth while until Parliament authorized it. But it was submitted to Mackenzie, Mann and Company, and they were told that the agreement must be signed before the securities are guaranteed. That is made a condition precedent. .


Frank Broadstreet Carvell: Was it explained that Mackenzie, Mann and Company could personally be brought under sections 4 and 5?


Robert Laird Borden: It was perfectly understood that if we should require Mackenzie, Mann and Company to be guarantors under sections 4 and 5 they would do so.


Frank Broadstreet Carvell: Is it the right hon. the Premier's intention to ask Mackenzie and Mann to become responsible personally under sections 4 and 5, in ease the other securities offered seem inadequate?


Robert Laird Borden: We shall certainly do so unless they offer us other security which is as good or better.


William John Macdonald: The condition to
which my right hon. friend refers and the action of the Government in regard to asking for other securities would only arise in the event of the $10,000,000 of current liabilities not being disposed of, or does my right hon. friend mean to say that these guarantees of a personal character would be asked for at the time of the making of the trust deed?


Robert Laird Borden: These are all conditions
precedent to the exaction of the securities in connection with which the trust deed will 'be executed. I do not know whether I gather the purport of my hon. friend's question,


William John Macdonald: My right hon. friend was referring to sections 4 and 5. Section 4 relates to the undertaking, namely, that the securities which are now pledged with the banks of the country will be made available solely for the purpose of paying off the hanks. Section 5 is the one by which the contractors undertake that the liabilities, known as current liabilities which are to be found on page 43 of the
blue-book, amounting to $10,408,000, will be retired. My right hon. friend has intimated that the Government may resort to the personal securities of Messrs. Mackenzie and Mann in order to see that that is done. Does he mean to say that that resorting will be made at the time of the signing of the trust deed, or later on at the end of the year?


Robert Laird Borden: Before we guarantee any securities at all. There are two items to which my hon. friend has alluded. One is the reduction of the current or floating indebtedness, which is nearly $8,000,000 in excess of what it should be. I understand that has run up, to some extent but not altogether, owing to the payments on rolling stock equipment. We insisted that that should be taken care of to our satisfaction, and reduced to its normal amount of $3,000,000 within one year; and that in the meantime no proceedings should be taken. We have the right to call upon Sir William Mackenzie and Sir Donald Mann to become personally responsible for that; and as I said before, we shall do so unless they offer us as good or better security. The same is true with regard to what is called the temporary loans. Here is a very considerable amount, in the vicinity of $20,000,000, which is secured by the pledge of certain securities which were not saleable at a reasonable price. These securities may probably realize the whole or the greater part of that loan; but in any event we are bound to have absolutely satisfactory security that no claim shall be made; that Sir William Mackenzie and Sir Donald Mann shall take care of it.


Mr. MICHAEL CLARK:: If I rightly understand the conversation which has just taken place between my hon. friend from Carleton (Mr. Carvell) and my right hon. friend the Prime Minister, and the assurance with which that conversation has been concluded, I should like to 4 p.m. say, in my judgment, that assurance will relieve a great deal of natural and justifiable anxiety which exists in western Canada in regard to this whole transaction. As far as I know the opinion of the West, there is no hostility to this road, I think we may trust the communications which the Prime Minister has brought before this House from the acting Premier of Saskatchewan and the Prime Minister of Alberta as being very good evidence that there is no hostility to the road, but there is wide-spread and deep-seated

distrust of the men who have been connected with the road. that distrust is founded upon the belief, very widely held amongst the people, that these men individually and personally own timber limits, real estate, coal mines, newspapers and other forms of personal property, which they can have gained, in the minds of the man in the street, only by a diversion of the moneys which should have gone into the building of the railroad. If I rightly understand my right hon. friend, he has given us the assurance that, in so far as the Government is concerned, any property which these men hold in their individual capacity will be called upon, if need be.


Frank Broadstreet Carvell: Oh, no.


Michael Clark: I understood my right hon. friend in that sense.


Frank Broadstreet Carvell: No.


Michael Clark: Then the anxiety is not
removed. That is what is troubling the people in the West. I am not a lawyer and I am not of the class to which Burns refers when he speaks about people eking out their common sense by law. But that is what I understand as a layman.


Robert Laird Borden: I think my hon.
friend is substantially right. As far as making money out of these roads is concerned, we have had a pTetty careful examination made by the most expert auditors in the Government service, and they have satisfied us that no money has been diverted. They were instructed to make a very careful and detailed examination, and further than that, they were instructed, if they found themselves incapable of dealing with the situation, that they were at liberty to employ Price, Waterhouse and Company or any other great accounting firm to assist them. We found from their report that there was no ground for suspicion that any portion of the money had been diverted. We found, however, that there was the probability of a very large claim for agency services; and we insisted that that claim should be absolutely released, not only by Mackenzie, Mann and Company, Limited, but by Sir William Mackenzie and Sir Donald Mann. In addition to that, apart from the items connected with the construction of the road which were placed before us in the first instance showing a deficiency of $42,000,000 which would require to be raised, we ascertained that there were two other items which might prove troublesome and- em-

barrassing to the project of completing the road. One of those was an item of about $8,000,000 of excess current or floating indebtedness; the other was an item of $20,000,000 and upwards which was secured by the pledge of bonds and similar securities which were not saleable at a reasonable price. We have exacted two stipulations. One is that no proceedings shall be taken against the road for any part of that sum of $8,000,000, and that it shall be cleared off in the space of one year; and we have the right under this contract to exact from Sir William Mackenzie and Sir Donald Mann their personal security in that respect, and we shall exact it unless we get as good or better security.
So far as the other item of temporary loans is concerned, we have also exacted security to the satisfaction of the Government that no claim in respect to that shall .be made; that it shall be taken care of by the securities that are pledged for it, and that, if those securities are not sufficient, the additional securities which are given to us shall take care of it. In that way and to that extent my hon. friend is quite night in the view which he has taken of the effect of the arrangement.


Frank Broadstreet Carvell: Just to have the record perfectly plain, I want to inform my hon. friend from Red Deer (Mr. Clark) that we on this side of the House would be only too happy if the Premier would extend his promise to all the liabilities and to the repayment of the $45,000,000 advanced. I am afraid that was the idea which my hon. friend from Red Deer obtained from listening to the discussion between my right hon. friend and myself. Unhappily such is not the case.


Michael Clark: I started out by stating a doubt as to my own understanding.


Frank Broadstreet Carvell: If my hon. friend will look at pages 44 and 45 of the blue-book, he will find, at page 44, that about $15,423,000 has been loaned to the Canadian Northern system, which i.s secured by collateral of certain kinds, and that the collateral appears to be very much in excess of the loan. We have grave dounte about that collateral being capable of taking care of the loans. Turning to page 45, schedule b, these, as I understand, are loans advanced by the banks amounting to $20,703,865.


Arthur Meighen: That amount includes
all the loans. I do not know what the

$15,000,000 is to -which the hon. gentleman refers.


Frank Broadstreet Carvell: Those given on page 44. Part of that list is in currency and part in sterling. Reducing the sterling to our currency I -make the total $15,423,070.


Arthur Meighen: That is not a separate debt at all. That is -a part of the whole indebtedness included in the $312,000,000. That schedule was made to show such securities as were only pledged as collateral, and not directly realized upon. If one takes the $312,000,000 and the $20,700,000, he has everything that has been raised on the strength of the securities. This amount in schedule (-a) is not an extra amount.


Frank Broadstreet Carvell: I have 'been labouring under an impression that in some way section four of the resolution provided for the payment of these loans. If not I am giving the Solicitor General credit for more than he ought to have. However, he will agree that these loans of $20,700,000 are covered by the terms of section four of the resolution.


Arthur Meighen: Yes.


Frank Broadstreet Carvell: I supposed, of course, these amounts at page 44 were covered also. It is getting worse.


Arthur Meighen: I did not say that.


Frank Broadstreet Carvell: One moment.


Arthur Meighen: The hon. gentleman is-


Frank Broadstreet Carvell: The Solicitor General
will have his turn.
Mr. MEIGHEN-arguing from a false hypothesis. However, he does not mind that.


Frank Broadstreet Carvell: The hon. gentleman will 'have full opportunity to make an answer to the point raised by my hon, friend from Red Deer (Mr. Clark). In addition there is something like $11,000,000 on current account which we are told ought to be $3,000,000, and under clause 5 of the resolution, the contractors, Messrs. Mackenzie and Mann are going to covenant that $8,000,000 of the $11,000,000 shall be paid. These aie the only amounts, as I understand, for which the Prime Minister has agreed he will hold Sir William Mackenzie and Sir Donald Mann personally liable, hut he will not hold them for the payment of the $45,000,000. If the Prime Minister will go so far as to make these gentlemen- liable
for the $45,000,000 he will relieve the minds of hon. gentlemen on this -side very much.


Wilfrid Laurier: The discussion, it seems to me, shows how this position may be completely summarized. We are not making Sir William Mackenzie and Sir Donald iManm personally parties to the agreement to refund the $45,000,000. But they must become parties to a covenant to repay the bank and -also to pay Mackenzie, Mann and Company, Limited, the -Canadian Northern Railway Company, the Canadian Northern Ontario Railway Company, the Canadian Northern Quebec Railway Company, the Quebec and Bake St. John Railway Company, the Duluth, Winnipeg and Pacific Railway Company, the Halifax and Southwestern Railway Company, the Central Ontario Railway Company, -and all these other companies; and these companies, as shown by the correspondence and resolutions are owned by the Canadian Northern railway and by Mackenzie, Mann and Company, Limited,. AH these are to be paid by Sir William Mackenzie and Sir Donald Mann personally, and the banks are to be given equal security, but the Dominion of Canada will not -look to these gentlemen- personally but to the Canadian Northern- railway and to Mackenzie, Mann and Company, Limited.


Robert Laird Borden: We -are undertaking a
contingent liability as guarantors to the extent of $45,000,000, the sum estimated as necessary to -be guaranteed in order to raise the amount of $42,000,000 or thereabouts which will be required to complete the road. In the course of our investigation we have found other liabilities aggregating about $28,000,000 which have to be taken care of in order to insure the completion of the road. We exacted security from the gentlemen to provide for this $28,000,000, So far as $20,000,000 is concerned, that also is only a contingent liability, because the securities are pledged against it. As to the $8,000,000, that is a direct and absolute liability. In taking security from these gentlemen to provide for this $28,000,000, we have gone infinitely farther than any previous Government has ever gone in an engagement of this kind. We assume a contingent liability of $45,000,000, and Sir William Mackenzie and Sir Donald Mann undertake the liability of $28,000,000 of which $20,000,000 is contingent.


William Pugsley: What do they get for it ?


Robert Laird Borden: They do not get anything for it.


William Pugsley: Does the right hon. gentleman mean to say that this will not be a charge against the system ?


Robert Laird Borden: It will not become a charge against it any more than it is today. The securities have been pledged to the extent of $20,000,000 and this is a charge against the system. But, so far as the $8,000,000 is concerned, that is not a charge upon the system so far as I am aware.


Arthur Meighen: No.


Robert Laird Borden: No, that is a direct and absolute liability.


William John Macdonald: Then, if Mackenzie, Mann and Company, Limited, are not sufficient security for the payment of the indebtedness of which he speaks, the Government intend to ask Sir William Mackenzie and Sir Donald Mann to supplement that security with their own personal guarantee.


Robert Laird Borden: We might not be satisfied with the guarantee of Sir William Mackenzie and Sir Donald Mann. What we demand is absolutely good security.


Wilfrid Laurier: That is as I have already said. The Prime Minister insists on better security for the discharge of the debt to the banks and to the companies than for the discharge of the debt to the Government itself. He undertakes that Sir William Mackenzie and Sir Donald Mann shall discharge these liabilities or shall have a delay for their reduction in the case of the companies to a normal amount. But the observation of my hon. friend from Red Deer still stands-that the Prime Minister should undertake to do for the country what he is doing for the banks and for Mackenzie, Mann and Company, Limited.


Robert Laird Borden: The undertaking to
-which I have alluded runs up to $28,000,000. The contingent liability of $20,000,000 I have already explained. As to the liability of $8,000,000, I do not know how they are going to take care of it; I know that they have got to give satisfactory security. We intend to see that that amount is taken care of, that not one dollar of it shall come against the road to embarrass construction and that the whole $42,000,000 which is to be raised upon the guarantee of the country shall be devoted to the purposes that have already been explained.


William Pugsley: I understand that the
obligations of the contractors are contained in sections 4 and 5, but they are merely liabilities either of the Canadian Northern or of the subsidiary companies. All that Mackenzie and Mann, Limited, seek to do is, in some way, to have what are called the floating liabilities reduced within one year. With regard to the liabilities that are to be paid out of the securities which are pledged for them, surely my right hon. friend gave a wrong impression -when he said that Mackenzie and Mann would take care of them, in the sense that they would assume and pay them themselves. They still remain obligations of this firm, of the Canadian Northern and of the Government of Canada. The people of Canada will owe two-fifths of them and Mackenzie, Mann and Company, Limited, will owe three-fifths. If Mackenzie, Mann and Company, Limited, have them taken care of in the meantime, they are to be paid out of the resources of the Canadian Northern railway, which is to be owned jointly by Mackenzie and Mann and the Government of Canada.


Robert Laird Borden: In the same way that the indebtedness now proposed to be created will be the primary obligation of the Canadian Northern railway and will have to be paid by that railway. The country guarantees security, and will have to make it good if the Canadian Northern is unable to pay it, so the persons whom we call upon as guarantors in respect of the $28,000,000 will have to make it good unless the Canadian Northern is able to take care of it. The situations are precisely the same.


William Pugsley: In other words, the
Government, as the owner of two-fifths of this undertaking, calls upon the people to guarantee an indebtedness of which two-fifths is now to be the debt of the people of Canada as owners of two-fifths of the capital stock. Mackenzie, Mann and Co. assume no liability upon their own part, but simply carry over the guarantee and liability of the company, which will be owed in the proportion of the country owing two-fifths and Mackenzie, Mann and Company owing three-fifths as shareholders for these amounts.


William John Macdonald: Would the Solicitor General, in order to make this matter clear, give us a succinct and clear statement as to what is the nature of the liability included in the statement set out on page 43

of the blue-book? For instance, the Canadian Northern Railway Company is said to owe $6,565,000. It is understood that that is due not to contractors or subcontractors and not for equipment or construction purposes, but for other purposes. What is it due for? What goes to make up these other items of indebtedness on the part of the subsidiary companies?


Arthur Meighen: The item of $6,565,652.61 which appears on page 43 as part of the total floating liability or permanent indebtedness of the system, is part of $10,408,128.30. The debt of $6,565,000, to whicli the hon. member for Pictou refers, has arisen and is owing, I presume, largely to the banks. It has arisen because the company has been under the necessity of paying its equipment trusts out of current revenues. In that way the floating liabilities of the company have been increased, the equipment trusts including in each case not only the principal but interest. Hon. gentlemen will remember that, in the course of a speech delivered last week, I made that statement. I made definite inquiry from the auditor since, and I find that my statement was exactly correct. Just to whom it is owing in each case, I cannot say. It is not owiing to the holders of equipment trusts, because they have been paid, but it is owing to those from whom the money was secured to pay these equipment trusts. I do not say that that comprises the whole amount; I do not know what the normal indebtedness of the Canadian Northern probably would be: I presume that it is probably somewhere in the neighbourhood of a million and a half or two million. A road can never get rid of the whole of its floating liabilities, because station agents' balances and other accounts are coming in, and at the same time the accounts for the debts it owes are in many cases not rendered. These would include, of course, the ordinary current debts that a railway company incurs in the course of its business; these ordinary current debts would, from information which I have, run up, in the case of the Canadian Northern proper, to about $1,000,000 or $1,500,000. The balance will be comprised largely of indebtedness owing to those from whom it seemed the money to pay equipment trusts.


William John Macdonald: Is any part of the amount due for equipment trust purposes included in the statement found on page
42, where it is said that there is owing on general equipment account $1,539,000?


Arthur Meighen: No; the item $1,539,863.87 appearing on page 42 as owing on general equipment is a part of the construction indebtedness of $21,262,527.26. It is owing on construction, and owing to the construction department of the road, Mackenzie and Mann, Limited, who in turn owe it to those from whom they purchased. It appears that the Canadian Northern Railway Company, as other railway companies do, find that they can purchase certain parts of their equipment more cheaply by purchasing them direct instead of having them purchased by car companies, manufactured into cars and then =old to the railway. It appears that the makers of bolsters and other such parts of railway cars will sell more cheaply to the railway companies, or to Mackenzie, Mann and Company, Limited, who buy from the railway companies, than they will sell to the car companies. I am stating only what I am informed by the Railway Department is the experience of the Intercolonial. In that way they purchase certain of the equipment direct; that equipment is turned over to the car company, is included in the cars, and becomes part of the whole equipment, being sold first to the rolling stock company and then to the railway company. This $1,539,000 represents such amount of equipment as is bought direct from the construction department, Mackenzie, Mann and -Company, Limited.


William John Macdonald: But is not included in the $6,000,000 liability of the Canadian Northern mentioned on page 43?


Arthur Meighen: No.


William John Macdonald: The Solicitor General is not clear as to what comprises this $6,000,000 of indebtedness except that it is in connection with equipment bonds.


Arthur Meighen: And the ordinary current indebtedness of the company.


William John Macdonald: Of course in that
connection the Solicitor General might indicate to the committee whether or not his information would lead him to believe that it is expected that these equipment bonds would be sold and -that an amount of money would thereby be realized which would go back into the Canadian Northern Railway treasury and reduce its indebtedness. But take some of the other items; take the Canadian Northern Railway Quebec, one and a quarter millions. I think the hon. member

for Calgary, speaking of the Bay of Quinte item contained in the $10,000,000 list, said that that was the net loss on operation for a number of years. What other item in this list contains figures which are the net losses as well as the Bay of Quinte?


Arthur Meighen: The question appears
to toe what part of the other specific items of current indebtedness represents loss on operations. I do not think there would be any possibility of giving a definite answer to that.


William John Macdonald: The Bay of Quinte one does.


Arthur Meighen: I do not think it is correct that the $173,114.58 is the aggregate of loss on operation. I heard it stated and heard the House called upon to leave the Bay of Quinte road out altogether. I do not think that the member for Pictou would be in favour of having a balloon trip over part of the line from here to Toronto. The Bay of Quinte line represents about twenty-nine miles of the Canadian Northern Railway main line between here and Toronto, so if we lift it out we would require an aeroplane line for that twenty-nine miles. That is the value of the suggestion.


William John Macdonald: The point of the hon. member for Calgary was that that was indebtedness.


Arthur Meighen: There is no doubt that there was a deficit on the Bay of Quinte road operated as an individual road and not connected. How could it be expected to succeed without being connected up and made a portion of a through line? It can be expected to succeed a great deal better when it becomes a part of a system and so gets the benefit of its proportion of a long haul instead of only a short haul. But the facts are these. The company, in acquiring the Bay of Quinte road, acquired the road and the stock at very little more than it would have cost to have built the twenty-eight and a fraction miles of that road which is now comprised in the Canadian Northern Railway line between here and Toronto; and in addition to that it secured about twenty-nine miles more running south to Deseronto, Sydenham and two or three other towns, so by this process and by standing this deficit for a few years, they have 'been able to get access to several good towns and to get practically twenty-nine miles of railway for nothing.


William John Macdonald: How do you get the one and a quarter millions in the Canadian Northern Railway Quebec?


Arthur Meighen: The Canadian Northern Railway Quebec is in much the same position. It has not 'been paying as an individual line and never was expected to pay. The purpose of the whole uniting up of the system is to make these roads pay as a system. Whether or not the one and a quarter million dollars which appear here as floating indebtedness arise in whole or in part, and of course it does arise in part, from the fact that there is a deficit in operation, the fact is that the road owes that money as current indebtedness and that debt we must assume.


William John Macdonald: Reverting to the
original question, the sum total is that the banks have in their possession $24,324,000 of securities against which there has been advanced $20,303,000. That is the banks; have a margin of $3,000,000 over and above the loans which have been made. That is what the Premier calls a contingent liability which the Government may ask Messrs. Mackenzie and Mann to see carried through. The liability cannot be a very serious one for the reason that it seems\ to be conceded that the banks in this country, for the last two or three years, have been pursuing a very conservative policy with regard to loans and have a margin of $3,000,000 on the advances which they have made in respect to those securities. Bo that so far as asking Messrs. Mackenzie and Mann individually to assume any contingent liability with regard to that bank debt, I should answer that no one who takes an optimistic view of the condition or has any hope that this enterprise will eventually go through, would say that we are asking Messrs. Mackenzie and Mann to assume anything very serious in the way of a liability, as the banks are already fully secured for that debt. 1 understood the hon. gentleman to say that there are equipment bonds which have been paid out of current revenues of the Canadian Northern railway. If that is so, it is only a question of their being able to sell these equipment bonds and out of the proceeds recoup the Canadian Northern Railway treasury and so reduce the indebtedness down to a normal amount.


Arthur Meighen: The rolling stock company sells the equipment bonds and pays for the equipment outright. All the Canadian Northern railway does is to agree to pay them. They cannot, by selling new bonds, recoup themselves for that amount.


William John Macdonald: Where is the $6,000,000 to come from? Is there any security against it Out of which the railway company can realize?


Arthur Meighen: No, as I understand
the floating indebtedness must be reduced out of current revenue and it may be-although here I speak with some hesitation- that the amount paid on capital will be recouped from the capital fund and in that way the indebtedness will be reduced, although I cannot speak positively.


William John Macdonald: What I would apprehend in regard to this discussion is that the revenues of the Canadian Northern railway were used to take up the equipment company bonds in order to find the money to pay the equipment men who are providing the goods, and that they were held in such a way that the Canadian Northern railway, upon a proper market, would be able to have these disposed of and to re-,' coup themselves until such time as the matter could be worked out under the usual provisions of an equipment trust. Is that not the position?


Arthur Meighen: Not as I understand it. What I have understood and what I intended to convey to the House is that annual payments on equipment trusts fell due and the company had; to make these annual payments. As a consequence of making these annual payments on equipment trust bonds, the floating indebtedness rose. There were no other sources from which to make the payment. Whatever the money was paid from it had the effect of raising the floating indebtedness of the company.


William John Macdonald: In other words, thej revenue of the company was devoted to a greater degree than it should have been in particular years to paying off equipment bonds.


Arthur Meighen: That is exactly it.


William John Macdonald: Then naturally 1
assume that we ought to look for morei equipment than is included in this security, and I apprehend from what my hon. friend has said that he has no particular data to give us as to the amount of equipment that goes with the roadbed and the franchises and the right of the different companies in addition to that. I wanted to get clear exactly where this alleged liability of Messrs. Mackenzie and Mann was to be asserted on the part of the Govern-268	; .jJt/'lP



REVISED

[Stage Direction]
ment. I have pointed out that this asking them to assume a sort of collateral security) to the $20,000,000 owing to the banks is not a very onerous proposition; the liability is one which is more imaginary than real, because, the banks have taken good care to see that they are amply secured. It is unfortunate for the purpose of enabling us to ascertain the real value of this security that we have not been furnished with the information we asked for last week as to the assets of Mackenzie, Mann and Company, Limited. We should have such a statement as being very material to the consideration of the value of this security. My right hon. friend says:	These people
owe, under the conditions we have just been discussing, $10,000,000 for equipment and other items. That must be reduced to $3,000,000. The joint stock company of Mackenzie, Mann and Company, Limited, have undertaken that they will give covenants and undertakings that that $7,000,000 reduction will be paid. If Mackenzie, Mann and Company, Limited, have a large amount of assets which can be readily liquidated, of course their guarantee will be very substantial and I apprehend that that condition must exist because they are being put forward all through this proposition from beginning to end as being the responsible people; and it is only in the event of the joint stock company of Mackenzie, Mann and Company, Limited, not being able to give guarantees which are satisfactory to the Government or in the event of that company not having assets which can be liquidated in order to bring down the indebtedness that the Prime Minister will ask for a guarantee from Mackenzie and Mann individually. That seems to be the situation in which we stand. .
Frank Broadstreet Carvell: When my hon. friend
from Pictou was asking the Solicitor General some questions about that $6,000,000, my hon. friend stated that his understanding was that that amount was created largely by the payment of equipment bonds as they matured, which means, I suppose, that these bonds are redeemed so many each year. As I understand it, Mackenzie and Mann not having the necessary funds to pay these bonds as they came due took the ordinary money in their possession to meet them and so got into debt. My hon. friend from Pictou has asked the Solicitor General whether there was any security out of which they could be recouped. I understand of course that they could not sell those bonds over again because they have been already



EDITION

[Stage Direction]
taken up. My hon. friend the Solicitor General says that they may be recouped out of capital. Would my hon. friend explain what that means. The $100,000,000 of stock is all paid up; $60,000,000 goes to Mackenzie, Mann, and Company7, Limited, .and $40,000,000 to the Government, and I do not see any capital in sight except the $45,000,000^which we are now guaranteeing. Did my hon. friend mean to infer that the $6,000,000 might be paid out of the guarantee now before the House. If not, where are the fund® coming from? Perhaps he did not mean to convey that impression.
Arthur Meighen: I certainly did not. I do not think they can in any way be recouped out of the funds now provided. The point I intended to make was this, and no more: that the equipment bonds falling due each month faster than the equipment depreciated brought upon Mackenzie and Mann an extraordinary drain in the way of providing for those equipment trusts, and in that way added to their floating indebtedness. I do not know at the present time that there is any method of reducing that other than out of the revenues of the company, which they have every reason to believe will be increased with the linking up of the system; but if I can explain more fully later on, I will be glad to do so.


Frank Broadstreet Carvell: That seems to be a fair answer. What has been bothering us on this side of the House is where the money is to come from to pay this $8,000,000. My hon. friend says that as far as the $6,500,000 is concerned, it is largely for the redemption of equipment trust bonds, and he does not see any way of recouping unless somebody digs down into his pocket.
Mr. MEIGHEN; Except out of revenue, which there is every anticipation will increase.


Frank Broadstreet Carvell: My hon. friend has great faith in believing that they will be able to pay the $6,500,000 out of revenue. That brings me down to another question. I was not here on Wednesday last, and if I ask any questions that have already been answered my hon. friend need not cover the ground again, as I shall be able to look them up in ' Hansard.' I want to refer now to the $16,000,000 odd of equipment bonds mentioned on page 10 of the blue-book. Does that mean that the $16,000,000 has been created by reason of the fact that they have been taking up equipment bonds faster than the rolling stock has depreciated, and that they now

intend to issue new bonds on the partly worn out rolling stock?


Arthur Meighen: The $16,000,000 on
page 10 represents equipment bonds that are still issuable and out of which these moneys will be obtained.


William John Macdonald: That is, there is equipment in existence against which these bonds may be issued?


Arthur Meighen: Yes. It is put in this column because the $27,441,086 of equipment required to complete is put in the other column.


Frank Broadstreet Carvell: That is, they expect to buy more equipment and issue bonds against it. As I understand it, there are $7,000,000 of debt due on rolling stock. They are going to buy $20,000,000 of new rolling stock, and against that issue $16,000,000 of equipment bonds. Am I right in assuming that my hon. friend does not include any equity which might now exist by reason of the fact that the rolling stock has not depreciated as rapidly as it has been paid for ?


Arthur Meighen: I cannot answer the latter part of my hon. friend's question, because I did not catch it, but in regard to the first part I may say that the method adopted is to pay twenty-five per cent cash on rolling stock. The company requires $20,000,000 of rolling stock, which is included in the $27,441,086 in the anticipated requirements to complete, on page 10. As against that $20,000,000 there is $16,496,332 of equipment bonds still issuable.


William John Macdonald: Have they new stock there to represent it ?


Arthur Meighen: About seventy-five per cent. They require about $20,000,000 of rolling stock and they have to pay twenty-five per cent cash and issue equipment bonds for the balance. The $20,000,000 is what they require, and against that they will have the proceeds of $16,496,332 equipment bonds. It is simply a matter of bookkeeping, and the result is that they require in cash the difference between $16,000,000 and $20,000,000, which is what the statement shows.


Frank Broadstreet Carvell: One more question along that line. I have not the item before me, but I noticed somewhere that there was a debt of $7,000,000 on equipment. Am I right?


Arthur Meighen: The items are given.


Frank Broadstreet Carvell: I recollect very well that there is $7,000,000 owing on equipment and

they want $20,000,000 more for new equipment. My hon. friend says they have to pay twenty-five per cent of that in cash. That will be about $5,000,000 down. Do I understand that that $5,000,000 as well as the $7,000,000 of debt comes out of the $45,000,000 now being guaranteed ?


Arthur Meighen: They will both come
out of the $100,000,000 that will be available when this guarantee is given.


Frank Broadstreet Carvell: My hon. friend is hardly explicit enough. Will it come out of the $45,000,000 guarantee?


Arthur Meighen: It cannot be said that it will come out of one or the other, but it will come out Ojf the funds raised by the two together. It will come out of the $100,000,000 and it is immaterial whether it comes out of the $58,000,000 or the $42,000,000.


Frank Broadstreet Carvell: I would like to have an answer because I am afraid that if the liabilities go on piling up .so fast this $45,000,000 will all be used and they will be wanting another $45,000,000. It is admitted that $21,000,000 has to be paid. That is set out on page 42. That surely has to be paid out of the $45,000,000. Then there is $7,000,000 to be paid to liquidate debts due on equipment. That makes $28,000,000 or practically $29,000,000. If you add to that $5,000,000 more, as cash down on the new rolling stock, it is getting pretty near to the $45,000,000, and I would like to know what they are going to complete the road with.


Arthur Meighen: In addition to the $45,000,000, there is $58,000,000. If the hon. gentleman will look at page 10 of the blue-book he will see that the $100,000,000 is made up of various items spread over six different headings. That $100,000,000 includes the $21,262,527.26. Against that we have the $58,000,000 and we will have the proceeds of the $45,000,000 of securities now being guaranteed which will make up the $100,000,000. There is no apportionment between the $45,000,000 and the $58,000,000 at present. The money has to be expended for the purposes set out in the photograph copies that are on the table.


Frank Broadstreet Carvell: I have not had the opportunity of discussing this matter with the owners to the extent my hon. friend has. Perhaps my head is a little dense, but I 2684
cannot see where the urgent money is coming from. Figure it out. There is $21,000,000	to	be	paid	at once;$7,000,000	is	due	on	equipment.
To complete the road you have to take $23,000,000 for the Canadian Northern Pacific end of it. I only see $10,000,000 or $11,000 -000 here and that makes about $12,000,000 more than you need on the Pacific end,-: $35,000,000 plus $12,000,000 makes $43,000,000; For the Canadian Northern main line you need $15,000,000, and I see only $7,000,000 against that. That is $7,000,000 more. Your $45,000,000 is gone and you want $15,000,000 besides that.


Arthur Meighen: Page 10 will show it.


Frank Broadstreet Carvell: I have page 10 before
me. It appears to me that the Canadian Northern will not have money enough this year, although in the future it may be worked out. It seems to me that there is at least $50,000,000 or $55,000,000 required immediately in order to pay these debts, to pay for equipment over and above the securities issuable and to complete the road and they have not the money to do that with. I cannot see more than $41,000 -000 or $42,000,000 with which to meet obligations amounting to $55,000,000.


Robert Laird Borden: If my hon. friend will look at page 10 he will see that the items to which he alluded are included in the sum of $27,441,086. That includes rolling stock to the amount of about $20,000,000 and an amount still to be paid for rolling stock already .acquired. My hon. friend will bear in mind that the amount of $21,252,577.26, set forth on page 42, being the total of accounts outstanding on construction, is included in the $100,000,000 estimated as necessary to complete the road. When all this is taken into account it is misleading to add the $21,000,000 to the $100,000,000. It is included in. the larger amount. We tried to make a very careful investigation for the purpose of .ascertaining whether or not the securities now proposed to be issued will complete the road. The investigation which we have made satisfies us that they will be quite ample for that purpose.


Mr. PARDEE:: May I ask the Solicitor General to look at page 34. There I find a table showing capital stock authorized and issued from which the following appears :

Canadian Northern railway:
Authorized	$92,900,000
Issued	 77,000,000
Held by Mackenzie, Mann and
Company and associates		70,000,000
May I ask who Mackenzie, Mann and Company and associates are?


Arthur Meighen: I believe the whole
$70,000,000 is in the name of Mackenzie, Mann and Company, Limited. I presume it is put down there as being held by Mackenzie, Mann and Company and associates for the reason that it is likely that it appears in that way in the books of the company. I cannot say who the associates are but, if I may venture a reason, it is that Mackenzie, Mann and Company may Slave understandings with others that in certain events they are to receive a portion of this stock for services rendered. I am sight in saying that the whole of the stock is in the name of Mackenzie, Mann and Company, Limited.


William John Macdonald: The Minister of Finance stated last year that he had heard of several shares of the stock of the Canadian Northern Railway Company that had been disposed of. I think he referred to the price. That will indicate that there must be some outstanding stock in the hands of some persons other than Mackenzie, Mann and Company. It is generally understood that a certain portion of this stock is held by outside parties. Has the Solicitor General looked into the stock book to ascertain how the stock appears?


Arthur Meighen: Yes, it has been investigated by the auditors and it has been found that $70,000,000 of the stock stands in the name of Mackenzie, Mann and Company. I do not remember the Minister of Finance making the statement which the hon. gentleman alluded to but, if so, it likely arose in this way, that a former manager procured a certain part of the stock as part remuneration and sold it but it has been purchased back since.


William John Macdonald: Has the Solicitor
(General looked into the question as regards -the value of the subsidiary companies, when they were purchased, how much wa3 paid for them by Mackenzie, Mann and Company, whether stock in these subsidiary (companies is held in the name of a joint stock company or of an individual, or *whether or not the funds necessary to purchase control of a great many of these subsidiary companies came out of the moneys that were earned by way of profit in the
JMr. Pardee. 1
construction of other roads? What information has the Solicitor General about that?


Arthur Meighen: The stocks appearing,
first, as being held by or in trust for the Canadian Northern railway and, next, as being held by Mackenzie, Mann and Company and associates, are held by Mackenzie, Mann and Company, Limited. That applies to both columns on page 34 in toto. The next part of my hon. friend's question is: Where did they get the money to get hold of the stock of the subsidiary companies? Well, I can answer that, first of all, by saying that none of the money came out of the Canadian Northern railway. In the next place it was not, for the most part, money that secured control. For example, Mackenzie, Mann and Company, Limited, financed the construction of the Canadian Northern Ontario. They undertook the financing required and they gave their services as construction experts to the road and they took the stock of the road for it the same as any one else would do and the same as has been done in many instances that my hon. friends are familiar with. I do not know who else would be entitled to the stock. In the case of the Halifax and Southwestern, there is $1,000,000 of stock and that $1,000,000 of stock came to Mackenzie, Mann and Company by arrangement with the present Government of Nova Scotia. Mackenzie, Mann and Company, in 1902, entered into an arrangement to build railways in Nova Scotia on the basis of twelve and one-half per cent of profit on the expenditure, which is the general rate. The roads were built and Mackenzie, Mann and Company built them on this basis. The Halifax and Southwestern was incorporated and a settlement was made with the Nova Scotia Government a year or two ago, whereby, instead of getting twelve and one-half per cent in lieu of expenditures they had made in acquiring and building these roads, a general settlement was arrived at whereby they took $1,000,030 of stock in the Halifax and Southwestern. The explanation that I have given in regard to the Canadian Northern Ontario applies in the main throughout. We have traced individual subsidiary companies in order to see that the Canadian Northern did not pay moneys out by way of profit to Mackenzie, Mann and Company, Limited, and we find that they did not.


William John Macdonald: What about the Canadian Northern Saskatchewan?


Arthur Meighen: I see there is a million dollars' worth of stock held in the Canadian Northern Saskatchewan. I have no special information as regards that railway. I presume that they have been allotted the stock by the directors of the company, in lieu of their expenditures.


William Pugsley: If what my hon. friend says is correct, namely, that this is stock given to Mackenzie, Mann and Company, in satisfaction of their services in financing these various roads, how does it come that on page 34 of the blue-book submitted for the information of the House, this stock is alleged to be held in trust for the Canadian Northern? If it belongs to Mackenzie, Mann and Company, having been received by them for their services, and if they have got nothing else for their services, how is it held in trust for the Canadian Northern?
Take the Canadian Northern Alberta, authorized stock, $3,000,000; issued, $3,000,000; $3,000,000 held by or in trust for the Canadian Northern railway, or for Mackenzie, Mann and Company, Limited. Take the Canadian Northwestern railway, authorized stock, $6,000,000; issued, $2,000,000; $2,000,000 held in trust for the Canadian Northern railway. Take the Canadian Northern Saskatchewan, authorized stock, $5,000,000; issued, $1,000,000;	$1,000,000
held in trust for the Canadian Northern railway. Take the Canadian Northern Pacific, the stock issue of which is $25,000,000, which is all alleged here to be held in trust for the Canadian Northern railway. Take the Duluth, Winnipeg and Pacific railway, the stock issue of which is $6,000,000. Of that $3,060,000 is held in trust for the Canadian Northern railway, and $2,940,000 is held by Mackenzie, Mann and Company and associates. Take the Canadian Northern Ontario, of which my hon. friend has just said that Mackenzie, Miann and Company, Limited, have given all their services in financing the road and in securing its construction. The total capital issue is $10,000,000, all of which is alleged to be held in trust for the Canadian Northern railway. Take the Halifax and Southwestern railway. The issued capital is $1,000,000, all of which is alleged to be held in trust for the Canadian Northern railway. According to this statement, $45,000,000 of the stock of these subsidiary companies is alleged to belong to the Canadian Northern, not to Mackenzie, Mann and Company, Limited, at all. If that is so, I would like to know how the hon.
gentleman can say that this stock was issued to Mackenzie, Mann and Company in payment for their services in connection with these various companies.


Arthur Meighen: This point has been
raised in the House before, and 5 p.m. it naturally arises toy reason of the headings in this statement. No objection can toe taken at all to the point being raised, nor to any one wfho goes no further than to ask for the information before erecting a- very large fabric of denunciation upon it.


William Pugsley: I did not do that.


Arthur Meighen: My reference is not to
the hon. member for St. John. Permit me to say this, that what I said first was correct. The stock is issued to Mackenzie, Mann and Company, Limited, for their services in construction. That in the main applies, although there may have been other things done as well; but in connection with the roads . in respect of which the stock issues said to be held in trust for the Canadian Northern railway, amounting to about $45,000,000 in all, the Canadian Northern Railway Company has itself rendered services in the way of guarantee of *bonds. Take, for example, the Halifax and Southwestern railway. The Canadian Northern Railway Company has guaranteed its bonds. Take the Canadian Northern Ontario. The Canadian Northern Railway Company has stood between the Government of Canada and loss in that respect. The same applies to the Canadian Northern Pacific. I have a list here and would read it through, if it were necessary; but whenever the Canadian Northern Railway Company itself came in and interested itself in a road, then the stock passed into a mother column, and the trusteeship only goes to this extent that it binds Mackenzie, Mann and Company, Limited, who are still the beneficial owners, not to divert those stocks elsewhere, but to take in lieu of them stock in the Canadian Northern Railway Company. Wherever that connection has arisen up to date between the Canadian Northern Railway Company and the subsidiary companies, then the stock appears to toe held untrammelled in the list of stocks owned by Mackenzie, Mann and Company, Limited, but if the Canadian Northern Railway Company has interposed with its security or guarantee in any way, then the stocks are put in another column and, for convenience only, it is headed 'held in trust'. There is no specific declaration of trust. The stocks

are simply placed there on the tacit understanding that Mackenzie, Mann and Company will take in lieu of them stock in the Canadian Northern Railway Company.


William Pugsley: With regard to the Canadian Northwestern Railway Company, those securities are guaranteed by the Alberta Government?


Arthur Meighen: That is correct, but there are other securities not guaranteed.


William Pugsley: In addition to the bonds of the Canadian Northwestern railway guaranteed by the Government of Alberta, are there any other outstanding securities which are guaranteed by the Canadian Northern?


Arthur Meighen: My information is that there are, but I cannot give the exact amount. That would be why the stock was placed in this column instead of in the other.


William Pugsley: I would like to get that amount.


Arthur Meighen: I will try to get it.


William Pugsley: The same with the
Canadian Northern Alberta. Take the Canadian Northern Pacific railway. I understand the British. Columbia Government guaranteed their bonds to the enormous sum of $45,000 a mile. In addition to those bonds guaranteed by the province, are there any other securities of the Canadian Northern Pacific which are guaranteed independently of the Government by the Canadian Northern, and what are they?


Arthur Meighen: In the first place, the hon. gentleman must remember that, even though the securities are guaranteed by the Alberta Government and by the British Columbia Government respectively, the Canadian Northern Railway Company in each case guarantees the Alberta Government and the British Columbia Government against loss, and in that way renders service in relation to these roads, and in that way justifies their being placed in the agreement as being held in trust. So far as the second part of my hon. friend's observations are concerned, if the hon. gentleman will look at numbers 21 and 22 of what I call the key statement, at page 30 of the blue book, he will see the division there. 41 per cent debenture stock (Alberta)-that means guaranteed by Alberta -$6,424,000. 4 per cent .bonds not guaranteed by Alberta, $2,800,000. That, I

believe, is the correct division. That, at all events, is what appears on the auditors' statement.


Mr. A. K. MACLEAN:: Will the Government recognize the guarantees made by the Canadian Government as a liability against the Canadian Northern prior to the lien for the $45,000,000 now asked to be guaranteed?


Arthur Meighen: Has the hon. gentleman reference to the guarantee on the Canadian Northern Ontario?


Alexander Kenneth Maclean: Take the case of the
Halifax and Southwestern-there the liability is guaranteed to the Government of Nova Scotia by the Canadian Northern railway, I understand. Will the Government recognize that guarantee as a lien on the Canadian Northern railway as preceding the one which the Government will acquire by virtue of the proposed guarantee?


Arthur Meighen: I do not understand
that the Canadian Northern railway guarantees in that case, or in any other so far as I recall, has the effect of making a lien on this road; it is simply the individual guarantee of the company.


Alexander Kenneth Maclean: Unless the knowledge
the Government now have of that lien might have some legal effect upon their position as a later creditor, as it were. I merely wanted to know how the Government looked at it.


William John Macdonald: On page 30 there is the list of securities issued by these different companies and totalling $312,000,000. On page 45 there is .a list of a total of $24,000,000 of securities of the Canadian Northern railway and allied companies pledged. Is this amount of $24,000,000 in addition to the $312,000,000?


Arthur Meighen: The smaller amount is included in the larger. I was going to amplify my statement to the hon. member for Carleton, N.B. The discussion may possibly have led to the idea that the $24,000,000 of securities was in addition to the $312,000,000, but that is not the case.


William John Macdonald: 
Arthur Meighen: These are simply collateral and represent no indebtedness beyond the $312,000,000.


William John Macdonald: In regard to the
issuing of contemplated securities generally for the Government, $45,000,000, apparently there are other securities to the amount of $58,000,000 referred to at page 10, forming the credit side of the account of the financing of the road. Has the Government entered into any understanding with the Canadian Northern Kailway Company by which these two lots of securities are 'to be financed together, or is it the intention of the Government to handle the financing of the $45,000,000 alone?


Robert Laird Borden: It will be observed that
the $58,000,000 is made up in part of subsidies which will be available as soon as they are earned. So far as the proceeds of the securities sold are concerned they also are eliminated. So far as the rolling stock is concerned, the hon. gentleman understands that has not yet been issued.


William John Macdonald: But do I understand that these securities for $58,000,000 on the credit side of the account have been disposed of?


Robert Laird Borden: Sonne of them have been disposed of and the proceeds are available as soon as they are earned, like the subsidies. The hon. gentleman will observe that this list is not made up altogether of securities but in part of subsidies. The first item of $6,704,097 is 'Canadian Northern Pacific Railway 44 per cent Debenture Stock and Subsidy.' Then the third item ' Canadian Northern Ontario Railway; proceeds of securities in hand and subsidy to be earned, $16,788,822.' The ' Canadian Northern, Pacific new securities, $4,854,500 ' have not been sold according to the latest information I have. I think that in all cases these are placed at the realised or realizable amount.


William John Macdonald: Will the securities
to be guaranteed be disposed of by this Government or by the company?


Robert Laird Borden: The securities are disposed of in such cases with the approval of the Government by arrangement with the Minister of Finance. The trust deed in such cases makes express provision.


Frank Oliver: 
Arthur Meighen: The hon. gentleman's question is: has the money been raised to the full face value of the note?


Frank Oliver: Yes, and the money expended?


Arthur Meighen: All except the charges has been raised. It does not follow that it has been spent, nor does it follow that it is in the hands of the railway company to spend. It is in the hands of the Receiver General or treasurer of the province, because against that guaranteed bonds of Albeiita have been placed; The money will be in the hands of the treasurer of the province of Alberta, and can only^ earned in accordance with the provisions of their statute.


Frank Oliver: That is what I want to vet at, but I want to get at it a little more definitely. If the amount stated to have been raised on the secured gold note is money for expenditure, why is it raised on the secured note instead of on the sale of the bonds?


Arthur Meighen: There are two reasons. In the first place, the time might be inopportune for the sale of the bonds, and so it pays the company to raise the money temporarily on notes, placing the bonds as security, and as the market grows more favourable they make the sale outright and recoup the holder of the notes. Another reason is that the company may not need all the money at once, and it pays it better to issue notes for a part and place a part of the guaranteed bonds as collateral. Both reasons apply.


Frank Oliver: Does my hon. friend think that if the company raises only a part of the money that can be raised out of these guarantee bonds, that money is placed to the credit of the provincial treasurer and paid out only on the authority of the provincial treasurer?


Arthur Meighen: Yes, that is the fact.


Frank Oliver: My impression would be that under this system of finance the necessity of complying with that condition might be avoided.


Mr MEIGHEN:: The auditors check the balance to the credit of the provincial treasurer in each ease and ascertain that there has 'been no deviation from the terms of the statute in that regard.


Frank Oliver: The terms of the statute do not contemplate a transaction of this character.


Arthur Meighen: I think so. It may not do so in so many words, but the moment you pledge the bonds guaranteed by the Al'berta Government, the terms of the statute apply to anything and everything raised by that pledge.


Robert Laird Borden: I know that is the case so far as this Government is concerned, because I had occasion to make direct inquiry from the Minister of Finance, and was informed by him that bonds guaranteed by this Government may be used by way of pledge only with the consent of the Government and the money must be deposited to the credit of the Minister of Finance or the Receiver General.


William Pugsley: I find on pages 30, 31, 32 and 33 of the blue-book the par value of the securities and also the proceeds and the actual withdrawals. On page 33, the actual withdrawals from the proceeds of the securities mentioned on pages 30-33 are set down at $217,729,310.35. Of these total withdrawals the amount used on construction is $164,422,303.78, leaving a balance of other withdrawals, $52,617,006.57. Has my hon. friend a statement-I do not mean in detail, but under different heads- of what that $52,000,000 was withdrawn for?


Arthur Meighen: The details, of course, are given in the statement, but it does not show just where the money went.


William Pugsley: It seems a good deal of money to~ be used outside of construction.i


Arthur Meighen: The facts are these.
The $164,422,303.78 under the head 'withdrawals on construction1 represents the amount withdrawn from the proceeds of securities and used by Mackenzie, Mann and Company, Limited, on construction. The total amount that passed through the books of Mackenzie, Mann and Company, Limited, arising out of the proceeds of securities is $164,422,303.78. The remainder, $52,617,006.57, represents the proceeds of se-

curities used on construction but not used through Mackenzie, Mann and Company, Limited, the construction department of the Canadian Northern. The method is this: Mackenzie, Mann and Company, Limited, do the construction proper, but after the road is in a position to be taken off the hands of the contractors there is a great deal of work still to be done and that is done by the Canadian Northern direct, not through the construction department, and is done usually after the road is being oper-* ated. This $52,000,000 is comprised largely of betterments. It represents the whole amount of the proceeds of securities that have been applied to the road, but not through Mackenzie, Mann and Company, Limited. The details are given on page 29 of the blue-book, where the hon. gentleman will see that the total amount expended is not $52,617,006.57, but $61,183,662.82. According to 'the details given on page 29, this money was applied to reduction of equipment trusts, direct purchase of equipment, direct purchase of equipment for allied lines, betterments, acquired securities, advance to railway companies allied to the Canadian Northern railway, and so on, making a total of $61,183,662.82. But that $61,000,000 is comprised not only of the proceeds of securities, but also of other moneys that were similarly expended and which arose not from securities but from land funds and sundry accounts. Reference to the other side of the ta,ble shows that the $52,000,000 is made up of the $48,815,516.92, proceeds of unguaranteed securities and $3,801,489.65, proceeds of guaranteed securities. These are the moneys expended by the Canadian Northern for the purposes set out under expenditure on page 29.


William Pugsley: I understand, then, that the $52,000,000 mentioned on page 32, together with other withdrawals, is included [DOT] in and forms part of the $61,000,000 on page 29?


Arthur Meighen: And comprises the
first two items for the proceeds of securities as distinguished from the proceeds of land funds and sundry accounts.


William John Macdonald: When the contract
was let to the Mackenzie and Mann Construction Company by the Canadian Northern railway, were tenders called for and was the contract awarded to the lowest tenderer?


Arthur Meighen: The hon. gentleman is under a misapprehension if he assumes that the contracts were let to Mackenzie, Mann and Company, Limited. The contracts were not let to Mackenzie, Mann and Company, Limited; Mackenzie, Mann and Company, Limited, simply acted for the Canadian Northern and let contracts themselves. They simply acted, as I have very often said, as the construction department. Mackenzie, Mann and Company, Limited, where they found that it could be done advantageously, did advertise for tenders. Particularly did they do so in connection with the very piece of line in respect of \hich an engineer wrote to an hon. member of this House saying that if they had advertised they could have built the line at 40 per cent less. Tenders were asked for and many tenders were received for that piece of line.


William Pugsley: What is the name of the company that h^s done most of the construction work?


Arthur Meighen: I could not say as to
most of the construction work; I presume my hon. friend is right when he implies that one company did most of the work. The name is the Northern Construction Company, Limited.


William Pugsley: Who is the president of that company?


Arthur Meighen: I do not know who the president is, but I do know from the investigation we have made that neither Sir William Mackenzie nor Sir Donald Mann or any one interested in the Canadian Northern has any interest whatever in that company.


Mr. BRISTOL:: The Prime Minister filed an affidavit showing who were the officers of this construction company, from which it appears that neither Sir William Mackenzie nor Sir Donald Mann is directly interested.


William Pugsley: Would the hon. gentleman inform us who the members of the company are ?


Edmund James Bristol: I have forgotten the
names of the parties, but I remember the Prime Minister filing that paper.


William Pugsley: I have an impression that a Mr. Mackenzie is the general manager of the Northern Construction Company.


Edmund James Bristol: But he is no relation of Sir William, according to the affidavit.


William Pugsley: Is the hon. gentleman quite sure ?


William John Macdonald: Who made the affidavit ?


Robert Laird Borden: It is made by three men: the president, the vice-president, and a director.


William John Macdonald: Were the affidavits filed here sworn before Mr. Z. A. Lash ?


Robert Laird Borden: Yes.


William John Macdonald: In the East an affidavit sworn before a person as directly interested as Mr. Lash is in this affair would not be accepted in any court of law; but possibly this high court of Parliament is not hound by the rules applied to other courts.


Edmund James Bristol: In a non-contentious matter in Ontario an affidavit taken in that way would be accepted.


Frank Oliver: 
Arthur Meighen: If the hon. gentleman will read down the same column he will see.


Frank Oliver: Do the five items following apply to this ?


Arthur Meighen: 
Frank Oliver: I suppose these are short term notes.


Arthur Meighen: There is a table filed showing when they mature. These are short-term notes, some six months, some a year, some more.


Frank Oliver: We will assume that money has been raised to the face value of the notes and has been expended, and the notes become due and the market conditions are still as they were, or worse; what happens then ?


Arthur Meighen: There would be several courses. The note might be renewed, the mortgage might be taken at whatever it was worth and the proceeds sold, or they might raise on other notes the amount required to retire these two notes.


Frank Oliver: Suppose that the worst
should happen and that these debentures would have to be forced on the market and sold at a sacrifice; they would not realize

the amount for which they were collateral. Who suffers in that case?


Arthur Meighen: When the collaterals
are pledged they are pledged on certain specific terms giving power of sale to the pledgee, and to those terms the Government interested must be a party. If these have been pledged the Government of Alberta must have been a party to the terms of the pledge, and although the market may fall, although there may be a sacrifice, the Government of Alberta has been a consenting party to that eventuality. The loss of course, will fall on the railroad. The proceeds would be just that much less.


Robert Laird Borden: Whoever borrowed the
money would be liable for the balance.


Frank Oliver: That is what I am trying to get at. If the railway company borrows the money on the guarantee of the province would the province have to implement the guarantee or has the province no interest in the matter beyond the guarantee?


Robert Laird Borden: It has an interest in seeing that as large an amount is secured as possible from the loans guaranteed by it. The securities would be sold, they would stand as securities for which the credit of the province was pledged. The province would have to meet them when they fell due in the future. But ,if the securities were not sold for a sufficient amount to meet the debt for which they were pledged, then the lender of the money, the holder of the securities, would have a legitimate claim against persons or corporations who effected the loan for any balance that might still remain due.


Frank Oliver: That would be a contract between the Tailway company that borrowed the money and the lenders of the money. Supposing the money had been expended, the province would have already received the benefit.


Robert Laird Borden: The province would not
lose anything directly. It would indirectly lose in this way, that the railway companies, having less money available for the purpose of carrying out the enterprise, would not be in as good a position to proceed with it.


William Pugsley: My hon. friend from
Toronto (Mr. Bristol) was good enough to send to me the ' Hansard ' of May 13, in which there is an affidavit stating that

the officers of the Northern Construction Company are A. R. Mann, Archibald Mackenzie and C. 'Cummings. My hon. friend *was of the impression, and so stated to the committee, that that affidavit showed that the shareholders of the Northern Construction Company, which I understand did most of the construction work under Mackenzie, Manni and Company, Limited, -were in no way related to Mackenzie, Mann and Company. My hon. friend said that the affidavit showed that. I have read the affidavit carefully but it states no such thing. What it says is this:
We, Alexander Robert Mann, of the city of Vancouver, in the province of British Columbia, and Archibald Mackenzie, and Charles Cummings, both of the city of Winnipeg, in the province of Manitoba, do and each of us doth hereby declare :
1.	That we are President, Vice-President and Secretary-Treasurer respectively of the Northern Construction Company, Limited.
2.	That we have a full knowledge of all the affairs of said company. [DOT]
3.	That neither1 Mackenzie, Mann and Company, Limited, nor any shareholder or director in such company, nor Sir William Mackenzie, nor Sir Donald Mann, have any interest of any kind whatsoever, directly or indirectly, in the Northern Construction Company, Limited, or in its capital stock, or in its property or assets of any description, or in any profits or earnings resulting from the company's operations, contracts, or works.
But it does not state that they are in no way related to Sir William Mackenzie or Sir Donald Mann.


Edmund James Bristol: My point was that
neither Sir William Mackenzie nor Sir Donald Mann were directly or indirectly connected with the Northern Construction Company. I have heard from another source that Sir William Mackenzie is in no way related, to the Archibald Mackenzie of the Northern Construction Company. I believe, however, that Sir Donald Mann is a brother of Alexander Mann mentioned in the affidavit.


William Pugsley: My hon. friend stated that the affidavit showed that they were in no way related.


Edmund James Bristol: I did not mean to say that; what I meant to say was that Messrs. Mackenzie and Mann were not connected either directly or indirectly with the Northern Construction Company.


Robert Laird Borden: I am informed that the Mr. MacKenzie mentioned in the affidavit is in no way related to Sir William

Mackenzie, bu>t that the Alexander Mann is a brother of Sir Donald Mann.


William John Macdonald: This section says:
Grant a specific mortgage or charge upon the mortgage securities and shares of stock now or from time to time hereafter deposited with and specifically mortgaged under the trust deed of the 30th day of June, 1903.
Is that the deed under which the convertible stock was created?


Arthur Meighen: No, this refers to the
4 per cent perpetual.


William John Macdonald: Is not this the deed which gives the holders the right to exchange convertible for common stock?


Arthur Meighen: My recollection is that the date of that deed is 1910.


William John Macdonald: The point I want to make is this: This does not permit the creation of any securities which become convertible so as to increase the common stock?


Arthur Meighen: No.


[Stage Direction]
Clause agreed to.
On clause e: ' New Trust Deed' to
Grant fixed, specific and floating mortgages or charges upon the undertaking of the Canadian Northern and its properties, assets, rents and revenues, and its rights, powers and franchises, present and future.
William John Macdonald: I would like the
Solicitor General to state how much of equipment there is to which the mortgage will attach, and how- that mortgage will stand as regard priority.


Arthur Meighen: I asked before dinner
that a table be provided showing the value of the equipment that was clear from encumbrances; tha't is, what equipment trusts had been paid off. That will require a collection to be made from a very large number of papers, but I will present it to the House as soon as ready. I have been informed that the information I gave the House this morning is correct, that there was a considerable amount of equipment clear of encumbrances, not only equipment purchased direct but also through equipment trusts. This clause will have the effect of giving the Government security against an equity of about $27,000,000 in the equipment already purchased under equipment trusts. That is the amount that has been paid off and the equity would be that amount less depreciation.


Frank Broadstreet Carvell: What would be the depreciation?


Arthur Meighen: My information is that they have been keeping up their depreciation and that the equity in the equipment would represent practically the whole $27,000,000. The company's own car works are for the purpose of preventing depreciation as far as possible.


Frank Broadstreet Carvell: I cannot believe my hon. friend to be sincere in saying that there would be no depreciation in the rolling stock of the company, because all he has to do is to travel along the right of way of any road and see the cars that are switched off on the sidings and which have practically become useless. There must certainly be depreciation in that case.


Arthur Meighen: These are replaced by other cars that are not charged to capital but to revenue.


Frank Broadstreet Carvell: If that be so, they would probably be able to keep them up. Now, I want to know whether any statement has been given to the committee showing what mortgages or liabilities exist prior to the mortgage which is going to be given as provided for by subsection 3 of this clause. We might work it out. We know that the Dominion Government have a mortgage on the Canadian Northern Ontario, which, I believe, is a first mortgage. Then we have some sort of a security on the remainder of the Canadian Northern system. British Columbia has a first mortgage upon the British Columbia end, and the same would be true of the different provinces. I would like the hon. gentleman to state in a concise form the exact liabilities that exist prior to the mortgage we are taking. I understand from the discussion that in some cases this would be a fourth mortgage, and I am of opinion that it would, in some other cases, be a fifth mortgage.


Arthur Meighen: I cannot in any way amplify the statement that appears on page 30 of the blue-book. That gives all the charges against the Canadian Northern railway, bu/t of course it cannot be held that the Canadian Northern is alone liable for all of these eighteen charges that appear there. There are many charges there that are on other properties; for instance, the land charge. The notes, of course, cannot be said to be a separate charge. They are the instruments that represent the loan. We can eliminate the notes, the land, the equipment, and the terminals and the rest of the eighteen items appearing on page 30 would be charges

against the road. The income bonds are not charges against the road except to the extent to which the income may be earned. If there is no dividend declared, then they cannot get a dividend and they have no claim against the road.


Frank Broadstreet Carvell: My hon. friend has hardly caught the idea that I have. On pages 30, 32 and 33 we have a statement to the effect that there are outstanding charges of $312,818,910.42.


Arthur Meighen: I do not mean all the items, but just the first eighteen.


Frank Broadstreet Carvell: That would be about $193,000,000 of charges which take priority.


Arthur Meighen: Except the notes, the terminals, the land and mortgages on the equipment.


Frank Broadstreet Carvell: Do we not get a mortgage upon the land subject to whatever liabilities exist upon it at present and also on the terminals?


Arthur Meighen: Yes, but you cannot say that because there is a mortgage on the land it is prior to us as to the railway.


Frank Broadstreet Carvell: If there is a mortgage upon the land now, it is prior to us.


Arthur Meighen: On the land.


Frank Broadstreet Carvell: It is prior to us. Anyway, I think I am safe in saying that there are $312,000,000 of securities against this undertaking prior to our $45,000,000 mortgage. I think I am right in making that statement.


Arthur Meighen: Upon the whole undertaking, including all the allied companies the land and equipment, there is a mortgage of $312,000,000.


Frank Broadstreet Carvell: There are prior mortgages then of $312,000,000 and ours comes in second to them.


Robert Laird Borden: No, not second to them.


Frank Broadstreet Carvell: Well, second, or third,
or fourth, or whatever it may be. We come in after these mortgages amounting to $312,000,000. ,


Arthur Meighen: These are not all against the Canadian Northern railway.


Frank Broadstreet Carvell: I am talking about the undertaking.


Robert Laird Borden: Our mortgage is on the
Canadian Northern.


Frank Broadstreet Carvell: We only get a mortgage on the Canadian Northern. Well, that has mortgages amounting to $193,932,000 against it.


Arthur Meighen: No.


Frank Broadstreet Carvell: Against the Canadian
Northern property but not all against the Canadian Northern railway itself. Some of it is against land and some against equipment.


Robert Laird Borden: It is all against the Canadian Northern system.


Arthur Meighen: Against the Canadian
Northern and its assets.


Frank Broadstreet Carvell: Then there will be prior liabilities of about $191,000,000 or $192,000,-000-I make it $193,000,000-against the Canadian Northern and its assets.


Arthur Meighen: And its assets.


Frank Broadstreet Carvell: And we are coming in
second to that. Could my hon. friend give us a statement showing how the securities prior to our mortgage rank? There would be a first mortgage on the property to the extent of $191,000,000 or $192,000,000 and we would come second or third after that. Of course, it would be interesting if we had a statement setting forth all these securities.


Arthur Meighen: In some cases one mortgage would be first and in other cases an-otaer would be first. On the land there are two land grant mortgages amounting to about $6,000,000 and then a $17,000,000 loan and then we come next as far as the land is concerned..


Frank Broadstreet Carvell: That would be $23,000,000 -against the land altogether?


Arthur Meighen: Against the land and
townsites leaving us -an equity of about $12,000,000. Then against the equipment we come next after a charge of about $23,000,000. I may not be quite right there. As against the property in Alberta the first charge. would (be $6,776,000 as against the Canadian Northern railway in Alberta. That is not against the Canadian Northern Alberta ibut the Canadian Northern proper in Alberta. Then there would be the perpetual debenture -stock mortgage. I do not think the hon. gentleman himself will have any trouble in taking the papers that are on file and working out these results. Of course, I am quite prepared to 'have it done for him and to show in each ease the order of tire various mortgages. The dates are given in the papers filed.
[Mr. Meighen.l


Frank Broadstreet Carvell: I would like to have
that and also the due dates of the different securities.


Arthur Meighen: They are already filed. Mr. CARVELL:	In the statement?


Arthur Meighen: There has been a statement prepared and filed of the due dates of the various securities.


William John Macdonald: If that was included in a statement and put on 'Hansard ' it would 'be very much more valuable.


Frank Broadstreet Carvell: I have gone through the papers laid on the table of the House, and I do not find that information. I find a statement of which pages 30, 31 and 32 are copies, but I do not find anything in the statement other than what I find in the blue-book. I may have overlooked something. It would be interesting if the House had a tabulated statement showing the priority of these different securities and their due dates, so that we would have some idea of what liabilities this company ie going to be called upon in the future to assume. On this side of the House we are naturally somewhat skeptical and ratheT afraid that the country is going to be called upon to assume very heavy liabilities because of becoming a partner, or a minority stockholder, if my hon. friend likes that term better. Although we are about to become a minority stockholder, we are the only stockholder who has any money, and, when the debt matures, we shall be the people to be called upon to pay it.


Arthur Meighen: If my hon. friend will look at the statement under the heading 'Canadian Northern Railway system, dates of payment, principal and interest'-it may not .appear in the blue-book, but is filed on the table of the House under that heading-he will find every issue, the date of maturity and the date of the payment of the interest.


William John Macdonald: If you look at page 30 of the blue-book, you will find at least nine items of debenture stocks that have been issued. There are debenture stock items numbers 4, 5, 6, 7 and 9 under provincial guarantees. In regard to tuese securities, I assume that there are trust deeds in existence by which the undertaking of the Canadian Northern in each particular province and all of its assets are mortgaged to secure the guarantee of these -securities by the provincial Government.
The provincial governments, I apprehend, as is usual under these circumstances, retain for themselves the right to control the question of location and various other details in connection with the construction of the road. After we have declared these railways to be for the general advantage of Canada, what is the status of the provinces in this regard? Is the Dominion to recognize their right to control the question of location in regard to the various portions of the road that may not be completed? Each provincial government, having performed its executive and legislative acts within the realm over which it is supreme, has certain rights which permits it to take possession. Having regard to the various provincial mortgages, I ask: Where does the Dominion come in under this assumed declaration that these railways are for the general advantage of Canada?
At six o'clock the committee took recess.
The committee resumed at eight o'clock.


Robert Laird Borden: The hon. member for
Pictou (Mr. Macdonald) made inquiries regarding the effect of the declaration contained in the fifteenth paragraph of the resolutions? The inquiry, as I understood it, related to railways the construction of which is provided for out of the securities guaranteed by the provinces but to which no portion of the aid provided by these resolutions will be applied. The particular question was as to the routing or location, was it not?


William John Macdonald: How far would the terms of this agreement interfere with the provisions of trust deeds executed by the provinces relating to portions of this system within those provinces? Would those roads receive aid if this Act went through? I pointed out that we propose to grant a supplementary aid which may conflict with the terms of the provincial arrangements under their several trust deeds. The question is how far this Act would interfere with the jurisdiction of the provincial governments in carrying out the terms of trust deeds guaranteeing securities.


Robert Laird Borden: So far as the disposition of the money is concerned, I understand that we should not interfere with that in the slightest degree; the absolute control remains with the provincial Government.


William John Macdonald: And the terms of the trust deed would apply?


Robert Laird Borden: I understand so. But I will give consideration to the matter and when we come to section 15 I will be prepared to deal with it further if desired.


William John Macdonald: The reason I asked at this juncture was that we were dealing with a mortgage to be given to the Canadian Northern railway under subsection c, and turning to that I find that there are outstanding debenture stocks which had been issued under security of the guarantee of the Saskatchewan, Alberta and Manitoba governments.


Robert Laird Borden: 
William John Macdonald: Are there any charges against these properties except those mentioned in this trust deed?


Arthur Meighen: No, there is no other
charge.


Wilfrid Laurier: I renew the
observation. I made this morning that the stocks referred to ought to be included in the resolution, for the obvious (reason that if one year or ten years from now anybody turns to the statute he will not find the trust deeds which are made a part of the agreement and which must be referred to in order to understand them. I do not insist upon this to-day, but I think the hon. gentleman should take it into consideration.


Arthur Meighen: I am under the impression now that the trust deed referred to here was set out in .another ratifying statute, in which ease any one would have

easy access to it; if not, the suggestion of my right hon. friend might well be considered.


Wilfrid Laurier: But even if
it is in another statute, one might be at a loss to find it. One naturally turns to this statute to find what he wants to know.


Robert Laird Borden: We will take that into
consideration.


Frank Oliver: I have not yet 'been able to follow the moneys mentioned in this subsection. For the purpose of my present-inquiry I will not trouble about that. It is agreed that there shall be granted -a specific charge upon the equity of redemption of Mackenzie, Mann, and Company in certain capital stock and debenture stock of the Canadian Northern Town Properties, Limited. Has any means been taken to find out what the equity of redemption in these properties is worth?


Arthur Meighen: Yes, I have stated that to the House. A table is filed giving an estimate and I understand that it is very moderate and below the actual value, and it shows the equity of redemption to be worth between $11,000,000 and $12,000,000.


Mr OLIVER:: That is a large amount of money, and I would be much interested in knowing on what basis that estimate is made.


Arthur Meighen: The document filed
shows that.


Frank Oliver: Has my hon. friend the details with regard to the townsite of War-man, which is an important junction point on the Canadian Northern railway?


Arthur Meighen: No, but I will read a statement in that regard; it is very short. We have not the particulars as to any individual townsite. My hon. friend will note, by reference to the trust deed, that the mere naming of the townsite occupies seven long pages. The land grants and the townsites are in together, and this provision takes the equity that we have in those lands. The statement says that the number of townsites owned in full is 344, 67,500 acres. One-half interest in 172 other towns, total estimated' value $10,500,000. The amount payable in respect of land sold on which instalments are payable within eighteen months is $885,834, and within three years, $2,065,000. The total value, plus the amounts receivable, is $13,450,834. In respect of land grants, the value of unsold

land, over 800,000 acres, is estimated at $12,000,000. The hon. gentleman will ses that this is a very low estimate, because on the 'basis on which lands are selling now, they would be worth considerably more than that. There are 857,000 instead of 800,000 acres so to be valued. There is payable by instalments on lands sold on which at least the first payment has been made, $6,852,445, and there is in the hands of trustees for the payment of prior mortgages and charges, $2,424,451, making a total of $21,276,896. Adding this to the town-sites, we have $34,727,730, against which the total securities amount to $27,288,200, leaving an equity of $11,439,930.


Frank Oliver: 1 would not care to discuss the valuation of what might be called the farm lands, hut in regard to the town-sites it strikes me that there is apt to be a very' serious over-valuation in the statement which has been made. My hon. friend says that the names of the townsites cover six pages. That means, of course, that every station on all the lines of these companies an the four western provinces is a townsite, and the acreage of each townsite would run anywhere from 160 to 640 acres, or perhaps more. Everybody who has had western experience knows that when a railway is built and the townsite is put on the market, what is practically the cream of the townsite is taken then and there and what remains of it is, in 95 cases out of 100, not an asset but a liability. As soon as the town is incorporated, if it is incorporated, at once taxes are levied and the owners of the small acreage that has been sold proceed1 as a matter of religious duty to levy taxes having in view the large acreage that remains unsold. Under the single tax system which very properly prevails in the West, I venture to say that 95 per cent of those townsites that have already been exploited, as, I think under the able and enterprising management of our friend Colonel A. D. Davidson, they have been, is a liability in respect of taxation' and not an asset with regard to sale value. While I do not attach any importance in connection with this agreement to the so-called securities that aTe taken, I merely want to point out what to my mind is ia glaring case in which what is presented to the public as a security is really a liability; it is no security at all. So far as these townsites aTe concerned, the alleged valuation that is given to them is merely an evidence of the vivid' imagination of the talented gentlemen who have to
deal with them and they really should have no standing in the consideration of this measure by Parliament.


Arthur Meighen: The hon. gentleman
will, of course, admit that if we had by any chance left them out of the securities, they would have been very valuable. We did not have a valuation of each townsite made; I do not think it will be suggested that we should have, but by comparing the acreage the hon. gentleman can see that they are taken at an acreage value of $125 an acre, and it will scarcely be suggested that, taken all in all, that is a high valuation.


Frank Oliver: I would certainly say that under the present conditions of the real estate market and having in view the fact that all these towns were milked to a finish when they were first established, if they were so established, $150 an acre is a high price for the remainder of the so-called townsite area. I am not saying anything about the exceptional towns; five per cent may have some value, but ninetydive per cent, I would say, is surely a liability, not an asset.


William John Macdonald: Have the Government had a valuation made of the properties which are to enter into the Canadian Northern system, showing the estimated value per mile, the cost and value of terminals and other equipment, so as to be able to take each system separatively and arrive at some idea of their actual cost and the charges against them?


Robert Laird Borden: I understand that the
railway company have made a valuation; I do not think that we made any. Considering the fact that portions of the road were built when labour and material were much cheaper than they are now and that terminals and property of that kind have greatly increased in value, it is thought that the value of the road is very considerably in excess, of the amount that has been expended on it.


William John Macdonald: The Government are not in a position to submit to the committee any figures showing the estimated value of each system?


Robert Laird Borden: I do not know whether a physical valuation of the whole system would be of any service; at any rate, it would take a very long time to get it.


Frank Oliver: There is no doubt that a large proportion of the prairie roads represent a very low valuation; it is only reason-

able that they should. A purely branch line, built for purely branch line purposes, cannot be expected to be built and maintained at the high standard of a through line. That must be taken for granted. As a matter of fact a large proportion of their mileage in the West is at a very low physical valuation.


William Pugsley: Would the Solicitor
General state if he was in error in stating that the townsites of British Columbia besides Port Mann were included?


Arthur Meighen: No, I cannot state the condition precisely.
Om section 3, subsections a and b:
That before a guarantee is given the following conditions shall be complied with:
(a)	The agreement a draft whereof is set forth in the third schedule hereto (hereinafter called the ' agreement '), shall be duly executed by the parties thereto, and the Governor in Council is hereby authorized to execute the same.
(b)	There shall be transferred to and vested in the trustee as part of the mortgaged premises the shares of stock mentioned in sub-clause (a) of section 2 of these resolutions free from prior charges thereon, such shares to become and to remain the property of the Canadian Northern, subject to the charges created by and to the terms of the new trust deed. Provided that the necessary shares to qualify the directors and preserve the corporate entities of the respective companies may remain in the name of such directors and other necessary parties, but the share certificates ready for transfer shall be delivered to and held by or for the trustee of the new trust deed.


William Pugsley: Do I understand that this provision is intended to compel Mackenzie, Mann and Company to transfer over to the Canadian Northern railway all shares of these subsidiary companies that are now held by Mackenzie, Mann and Company, Limited?


Arthur Meighen: All the shares mentioned in subsection a of section 2; that is, the shares mentioned in the first part of the second schedule.


Frank Broadstreet Carvell: Would it not be better to amend that clause to read ' such share certificates ' in place of ' these share certificates?'


Robert Laird Borden: The certificates have not been mentioned before.


Frank Broadstreet Carvell: The shares are mentioned.


Wilfrid Laurier: We have
reached what I think is a very serious consideration in regard to the stock of

all these companies. The stock of all these companies, according to the blue-book placed before us, is $158,611,000. That is the stock enumerated as issued. Then there is the Canadian Northern Manitoba Railway Company with stock authorized of $1,000,000, which has not yet been issued. There is also the Mount Royal Tunnel and Terminal Company, with $5,000,000 stock * authorized and not yet issued, making a total of $158,000,000. From this is to be deducted $77,000,000, the stock of the parent company, leaving $81,611,000. What becomes of this stock? My hon. friend has just stated that it is handed over to the Canadian Northern railway, who become the owners of it from the passing of this Bill. But that stock is not extinguished. As I understand, the owners of the stock still have power to dispose of it. I cannot understand the resolution otherwise. If I am wrong in this, I would be glad to hear my hon. friend correct me. As I read the resolution, the $81,000,000 stock of the subsidiary companies becomes the property of the parent company, the Canadian Northern railway. This stock, as I understood, was intended to be mobilized in the hands of the Canadian Northern railway and not to be disposed of, that it was tp remain dormant in their hands. I understood the speech of my hon. friend to mean this; but as I read the resolution it certainly conveys to my mind the impression that the stock goes into the hands and possession of the Canadian Northern railway, and can he disposed of by them. The only statement which we have on this is in clause b, which we have just read. The words ' to remain ' are the only words which it seems to me are intended to convey the impression which was given to us by the Solicitor General the other day, that they were to be mobilized in the hands of the Canadian Northern railway and to remain there. If that is the intention, it seems to me that these words are hardly strong enough to make that dis- -position beyond peradventure. Turning to the contract, it seems to confirm my first impression. The contract is in these words-clause 2 paragraph a:
That the contractors will forthwith, upon the execution hereof, transfer or cause to be transferred to the trustee all the shares of capital stock of the constituent and subsidiary companies mentioned in the first and second parts of the schedule hereto, and the said shares'shall form part of the mortgaged premises . . .
The absolute ownership of all the shares mentioned in the first part of the said schedule shall he vested in the Canadian Northern, sub-

ject only to the charge thereon created hy and to the terms of the new trust deed; and the beneficial ownership of all the shares mentioned in the second part of the said schedule shall be vested in the Canadian Northern, subject only to the rights now or hereafter possessed by the National Trust Company, Limited, and the British Empire Trust Company, Limited, under the trust deed of the 80th of June, 1903, securing the perpetual consolidated debenture stock of the Canadian Northern, and to the charge thereon created by and to the terms of the new trust deed.
It seems very plain that the terms of the contract confer on the Canadian Northern the ownership of these shares with only one qualification; that is, the mortgages secured by the trust deed. In other respects their ownership of the shares is unimpaired; they have all the rights of the owner and can sell their equity in the shares to anybody they please. That is one view of the case. Another view is this: This stock ie not in any way extinguished, it remains absolutely as it is. The Canadian Northern will have $100,000,000 of stock of the parent company and they will also be owners of $81,000,000 of the stock of the subsidiary companies. Therefore, the Canadian Northern will have in their own hands $100,000,000 of the stock of the parent company, with the exception of the $40,000,000 that is to be given to Canada and the $81,000,000 of the subsidiary companies, so that there will be against this enterprise $181,000,000 of stock. Suppose the enterprise is profitable, will dividends have to be paid on all this $181,000,000? I understood that the intention of the Government was to limit the stock of the parent and subsidiary companies to $100,000,000, thereby ensuring that dividends would be paid on only $100,000,000 of stockl But, in my judgment, the resolution as framed is susceptible of quite a different interpretation, and it is only fair that we should know exactly what is the intention of the Government and whether they are satisfied with the present drafting of the resolution.	-'~


Arthur Meighen: The first point raised
by the right hon. gentleman is that the clause is not strong enough to prevent the Canadian Northern dealing with these shares. He draws attention to the fact, which is true, that the shares of these subsidiary companies pass into the Canadian Northern impressed only with the charge for the $45,000,000 mortgage. Passing so to the Canadian Northern, they become the property of the Canadian Northern, and 269
being the property of the Canadian Northern, my right hon. friend's argument is that they might transfer them elsewhere, and he doubts whether the words ' and to remain ' will be sufficient td retain the stock in the treasury of the Canadian Northern. I would think that with those word ' and to remain ' in the clause no court could possibly sanction the passing out of the stocks. .'If they pass out they do not remain. But, supposing the words 'and to remain' were not there at all: it would be a practical impossibility for the Canadian Northern ever to dispose of those stocks. Why? They come in impressed as they come with the charge for the $45,000,000 mortgage. That is clear. That is the only thing against them as they reach the treasury of the Canadian Northern, but the moment they become the property of the Canadian Northern, they, like every other portion of its property, become subject to all the charges against the Canadian Northern road. My right hon. friend will readily see that stocks in the treasury of the Canadian Northern, subject first of all to our $45,000,000 mortgage, and then subject to all the other charges against the assets of the Canadian Northern, could never be disposed of by the Canadian Northern.


Wilfrid Laurier: Legally, but not profitably.


Arthur Meighen: Not practicably. No one would purchase those shares because they would be subject to about $360,000,000 of liabilities; so that even if the words 'and to remain' were not there, I do not think it would be a business possibility for tne Canadian Northern to dispose of the stock. The words are inserted to make it doubly clear that the intention is to compel the rest of those stocks into the treasury of the Canadian Northern as their property. The second point raised by my right hon. friend is that the total of the capitalization of the parent and subsidiary companies is going to be $181,000,000. I take issue with him there. My right hon. friend will remember that, speaking across the floor of the House to myself about four or five days ago, he made the statement that I had assured the House that the stocks of these subsidiary companies were to be wiped out, and that I had made the statement again and again. II did not think that I had been under any obsession when I addressed the House, so I went oveT my speech carefully, and I find that I made no
revised edition

such assertion or anything that could be interpreted as such. I stated very clearly that nobody for a moment suggested that the stocks were to be wiped out in any way. The stocks will exist intact, and the entities of the companies will exist intact when the stock of the subsidiary companies becomes the property of the parent company, just as the railroad of the parent company is its property. The effect of that is to reduce the capitalization that can call for dividends. Hereafter, all the stocks are the property of the parent company whose capitalization is fixed at $100,000,000, and the only person or the only corporation that can come before the Railway Commission or the Government and people of Canada and say: We have a right to dividends, is the Canadian Northern Railway Company. They own everything, and when they come they must say: Our stock is $100,000,000, and no more. Consequently, we have reduced the capitalization to $100,000,000 and only $100,000,000, and not one dollar more, can carry with it the right to call for dividends.


Alexander Kenneth Maclean: Is there any method by which the Government, if it so desire, can receive representation on the board of directors of any subsidiary company ? The voting power would be with the Canadian Northern, I suppose, because they would have the majority.


Arthur Meighen: If I caught the point rightly, the answer is that we have power to appoint a director to the board of any subsidiary company.


Alexander Kenneth Maclean: Taken specifically ?


Arthur Meighen: Taken specifically.


Frank Oliver: It seems to me the explanation given by the Solicitor General in regard to the stocks of the subsidiary companies would be correct if there had been an amalgamation of those companies with the Canadian Northern; but, inasmuch as there is no amalgamation, as the companies are still separate entities, I certainly cannot appreciate his argument that the right to participate in dividends on the stock is in any way militated against by the fact that the Canadian Northern owns it. It makes no difference whether the Canadian Northern or I own the stock. Each company has a separate entity and has so many shares out, and is entitled to earn dividends on those shares. Who is to say that it is not so entitled ? The fact that those shares are owned by the Canadian Northern and that the Canadian Northern is under a cer-
[Jir. Meighen.]
tain agreement with this Government has no more to do with the case than if I owned the shares. I repeat, my hon. friend's argument would be sound if those companies were merged in the Canadian Northern, but' my hon. friend has, by these resolutions, carefully provided that the subsidiary companies shall not be merged with the Canadian Northern but that they shall retain their separate entities in every particular. Therefore, I maintain that their shares still will have a perfect right to earn dividends.


Arthur Meighen: My view is exactly the opposite. I maintain that if there had been an amalgamation my explanation would be utterly false. The stocks would then be wiped out entirely. There has not been an amalgamation, but in so far as capitalization is concerned, as a power to call for dividends, exactly the same results have been achieved. My hon. friend says that the Canadian Northern Ontario may come and say: We want dividends on this $10,000,000. How can the Canadian Northern Ontario come? The only people that can come are the owners of the stock. Who are the owners of the stock? The Canadian Northern Railway Company. The Canadian Northern Railway Company come and say: We want dividends. Very well, we answer the Canadian Northern Railway Company:	You
exchanged your stock for Canadian Northern Ontario stock and paid for it by giving this stock; you gave $23,000,000 of stock for this $68,000,000 in the other company and there is only $100,000,000 of stock that has now the right to call for dividends. If they say: We want dividends on this stock as well, the answer is immediate:	You are
asking for dividends on the $68,000,000 and on the $23,000,000 as well that you gave for it. The $100,000,000 is all that can call for dividends because the $100,000,000 is the total capitalization of the company.


Wilfrid Laurier: The argument of my hon. friend does not show that he has much faith in the success of the enterprise because he always argues as if the enterprise were to be a failure and that the company would not be able to discharge its liabilities out of the funds at its disposal. The argument of the hon. gentleman against my proposition is certainly that the words which are used in this clause are quite sufficient to protect the public against the demands of the stockholders. He said- and it is a part of the argument itself-

that the company cannot selil the stock of the subsidiary companies because nobody would buy it; it would go into the treasury of the company not only for the $45,000,000 of a mortgage that we are creating but for the $331,000,000 of liabilities already existing. Very true, but suppose the enterprise is profitable, that the Canadian Northern railway discharge not only the mortgage we 'axe taking now of $45,000,000 but discharge the previous mortgage of $312,000,000, what is to prevent them from selling that stock? What have you to say against it? The Government may say that because the Government are interested they have it in their power to prevent it but suppose the securities have been discharged what would be the situation? Then the company have it in their power to sell that stock and put it as a charge against the road. Who is going to prevent it suppose the enterprise proves profitable? My hon. friend ought to look into that matter and see that it is made clear that the company cannot dispose of that stock in any way whatever. My hon. friend said that the stock would be wiped away. That was the interpretation he gave to it because if he did not pretend that the stock would be wiped away certainly he conveyed the impression that the stock would be concentrated in the hands of the owners and would remain there for no purpose whatever either good or bad. If that stock remains there and if the entorprse ie successful what is there to prevent the road from being charged with the $81,000,000 that this stock represents?


Arthur Meighen: The point of my right hon. friend is that in the event of the paying off of the liabilities the sale of the stock would be a business possibility And there is nothing to prevent it. There is no way in tire world of paying tbA=e liabilities except by refunding of mortgages. Railway liabilities do not diminish as a rule with an increase of business, even with successful railways. The road may be a success and yet its indebtedness may increase. A refunding mortgagee would undoubtedly call for all these securities and for .all these stocks of this and the other roads. He would not likely advance enough to pay off the total indebtedness and leave some of the securities out. But in the next place even if he did, we have an interest in this transaction because we are becoming stockholders to the extent of two-fifths of the enterprise and 269*
we will have an interest in any refunding operations and the paying off of old debts. We will be in a position to call upon the courts to enforce that clause and that clause says what the Canadian Northern shall have in its treasury. If those stocks remain there they do not pass out of the treasury. I see no practical likelihood of danger arising in this connection and it would appear that the words are sufficient.


William Pugsley: Jt seems to me that the hon. Solicitor General is not looking ahead sufficiently with a view to protecting the public interest. We know very well that circumstances change rapidly in a new and growing country like Canada and the time may come when the Canadian Northern railway would wish to have a refunding or consolidation of their securities. They might be able to wipe off the existing securities by issuing new ones. We know that the rate of interest changes. It was only a few years ago the Government of New Brunswick made an issue of bonds bearing only three per cent interest and received 96 net for them. To-day the Canadian Government, with all its resources, is unable to sell its four per cent debentures at more than par. In a few year's money may be more plentiful and it may be desirable to refund these securities at a lower rate. The time may come when it would be to the advantage of the Canadian Northern Railway Company to dispose of the stock of the subsidiary and constituent companies which they are to hold in the treasury amounting to $681,000,000. The resolution ought to be amended so as to provide for all time that the stocks should remain in the treasury of the Canadian Northern Railway Company, that they should not be disposed of and that neither in respect to the tolls which they can take out of the people nor for any other purpose should they have a value except as is represented by the issued stock of the Canadian Northern Railway Company. It would be very easy to frame an amendment that would cover that and the public would know that the total capitalization of the Canadian Northern, including the capitalization of the constituent companies, will not exceed the capitalization of the Canadian Northern as it may be fixed by Parliament. But the Solicitor General says that If application should be made to the Board of Railway Commissioners and if they should be asked to consider the stock of the subsidiary companies, the Board of Railway Commissioners would say:	You

cannot do that because the stock of the Canadian Northern was issued in consideration of the stock of these constituent companies. There is the difficulty. It was not. Last year $7,000,000 of stock was issued and paid up, the Minister of Finance says, and that was issued in consideration of the payment to the company of a bonus of $15,000,000 or $16,000,000. Therefore, the company might very well say to the Board of Railway Commissioners, that $7,000,000 belongs to the Government and the Government might very well s"ay it too because consideration. was given for it. As to the increase now that is proposed of the sum of $23,000,000, and indeed of the sum of $43,000,000; because $25,000,000 of stock is being provided for in order to take the place of the controvertible income debentures,- the company would say: There is a perfect consideration because that was the arrangement we made with the Government when they guaranteed our bonds under which arrangement Mackenzie, Mann and Company were to have $60,000,000 and the Government were to have $40,000,000.
They may say that was issued for a different consideration altogether from these stocks of the constituent companies. If these stocks are to become the property of the Canadian Northern Railway Company, surely the Canadian Northern can dispose of. their own property, as the board of directors may deem desirable. They could encumber it; they could encumber the equity of redemption in it; they could give a second mortgage on it next year, the same as they are giving a second, third and fourth mortgage now upon many of the assets of the Canadian Northern. There is nothing in the question of a second, third or fourth mortgage that would prevent Mackenzie and Mann from getting money in the money markets of the world. The very fact that this stock, amounting to $81,000,000, was encumbered by a mortgage of $45,000,000, would not prevent Mackenzie, Mann and Company from going to the money markets of the world and floating a second mortgage. Supposing this mortgage is wiped out and another mortgage placed on the assets of the company which would not cover the stock of the constituent companies, what would prevent the Canadian Northern from disposing of this $81,000,000 worth of stock? The important point to the people of this country is that the total capitalized stock that is to be considered at any time should not exceed the capitalization of the Canadian North-
QMr. Pugsley.]
ern railway. If my hon. friend the Solicitor General and the Government really believe that this should be so, why not amend section 3 by adding at the end of paragraph b the following words:
It shall not be lawful for the Canadian Northern to transfer the equity of redemption in said shares of stock or any of them during the pendency of said mortgage, nor at any time thereafter, to transfer the said shares of stock or any of them. All such shares of stock, as well as the physical property of said companies shall be deemed to be represented by the issued capital stock of the Canadian Northern, and the said shares shall not at any time or for any purpose be deemed to have a value apart from or beyond their value as represented by and included in the issued capital stock of the Canadian Northern.
If my hon. friend will amend the section in that way, he 'will avoid all possible question. I am greatly impressed ,by what my right hon. friend the leader of the Opposition has said. It is open to that construction; and there is a very great danger in the future that, in justifying the charging of high tolls the company may be able to say to the Railway Commissioners: You have to take the capitalization of all these constituent companies, a matter of $81,000,000, and the capitalization of the Canadian Northern, representing $100,000,000 more. That makes a total capitalization of $181,000,000, upon which it may well be argued that the Canadian Northern will be entitled to earn dividends, and so justify higher tolls upon the road. I would think, if the Government is sincere, as I believe they are-I have no reason to question their sincerity-they will consent to make it so clear that the man who runs may read, and that there will be no opportunity for lawyers to argue about it. I will send the amendment to my right hon. friend if he is disposed to consider it.


Robert Laird Borden: I must say that the result which my hon. friend desires to provide by the amendment he proposes is already achieved by the language of the section, as follows:
Such shares to become and to remain the property of the Canadian Northern.


William Pugsley: As Mackenzie, Mann
and Company's property is going into the Canadian Northern, is not that as 'between Mackenzie, Mann and Company, Limited, and the Canadian Northern? Between the two, it is to he the property and to remain the property of the Canadian Northern.


Robert Laird Borden: I really cannot see it just in that way. The words ' to remain ' must

have a certain office. The office they fulfil, as I understand it, is exactly that described by the Solicitor General. I think that the language is quite sufficient as it is. If my hon. friend will allow this clause to pass, I will undertake to come back to it at any time, and in the meantime I will consider his amendment. .


Frank Broadstreet Carvell: Will the Solicitor General explain why the item of $2,940,000 of stock held by Mackenzie, Mann and Company and associates in the Duluth, Winnipeg and Pacific Railway Company, as set forth on page 34 of the blue-book, is not included in this schedule? All the rest of the stock set forth on this page of the blue-book is included in the schedule.


Arthur Meighen: The reason is this. This is a road in the United States, and it is in the interest of the Canadian Northern to control it. Mackenzie, Mann and Company have been at very considerable expense to purchase this stock, and at present money is owed by them to acquire the stock. If we take it, we shall have to discharge that indebtedness, and we did not feel that a sufficient object was to be served as would warrant so great an outlay at the present time.


Frank Broadstreet Carvell: Then why did you take $3,060,000 of the stock?


Arthur Meighen: That is the controlling interest.


Frank Broadstreet Carvell: I am not able to follow my hon. friend. He says that he takes the controlling interest, but he does not take the whole of it for fear that we may be called upon to pay the 9 p.m. liabilities. If my hon. friend's reasoning is good, we are going far enough to compel the Government to assume the liabilities, and yet we leave practically one-half of the assets in the hands of Mackenzie, Mann and Company.


Arthur Meighen: My hon. friend has
misunderstood me. This road is a feeder for the Canadian Northern, and it is in the interest of the Canadian Northern to control the road. Consequently we acquire a controlling interest in it, which is represented by the $3,060,000, or about 51 per cent. The other stock has since been purchased by Mackenzie, Mann and Company with their own resources; and as I understand it, the money is owing, the stock being pledged as security for it, and we, of course, would have to pay that amount to get the rest of that stock. We did not feel
that a sufficient object was to be served to warrant the cash outlay at the present time. We have control without it.


Frank Broadstreet Carvell: Does my hon. friend
mean to say that, while Mackenzie, Mann and Company ostensibly have ownership of $2,940,000 worth of stock, yet they owe the money for it and somebody else has a lien upon the stock? It does not say so here. If it did, it would be some little-evidence that Mackenzie, Mann and Company were giving something to the Government of Canada in the way of security. The mere fact that they may happen to owe some money on it does not seem to be any reason why the people of Canada have not the assets, whatever they may be.


Arthur Meighen: We could not get the stock as security until we discharged the liability. It will be discharged when Mackenzie and Mann pay for it. We did not feel that a sufficient object would be served in getting the minority stock to warrant the cash outlay, because we have the control of the road without it. We felt that, especially as the road was in the United States.


Frank Broadstreet Carvell: The blue-book says that this road is held by Mackenzie, Mann and associates.


Arthur Meighen: They are the beneficial owners.


Frank Broadstreet Carvell: My hon. friend says
that that is not true; that they have only some sort of a right in it, and that the stock is subject to a lien to somebody else. Does the Solicitor General say that Mackenzie, Mann and Company now own it; or do they hold it subject to a lien, and have we to pay the lien to get it?


Arthur Meighen: I know they are the
beneficial owners-; and I can assure my hon. friend, with practically no reservation, that they do owe a large amount against it, if not the purchase price. Aside from that, whether they owed it or not, we would have to pay what they paid for it. The Canadian Northern railway could not ask for it otherwise than to pay what they had paid to secure the debt. We did not feel the cash value was warranted inasmuch as we have control of the road and fifty-one per cent without it.


Frank Broadstreet Carvell: What about the question of rates? Would not the minority of the stockholders have something to say about the rates we must charge?


Arthur Meighen: That is in the United States.


Frank Broadstreet Carvell: Not the whole of it.


Arthur Meighen: Yes. It runs to Fort Francis. I have not been there except going through on the train, but I think the American border comes right to the river at Fort Francis, and this road runs from Duluth to Virginia in Minnesota and from Virginia to Fort Francis.
Subsection b agreed to.
On section 3, subsection c:
(c)	There shall be conveyed to the trustees as part of the specifically first mortgaged premises, by the purchaser at court sale thereof, the railway and undertaking mentioned in the third part of the second schedule hereto, the said railway and undertaking to be free from all bonds or other indebtedness thereon, the same to become the property of the Canadian Northern subject to the mortgage or charge created by the new trust deed, and to be operated by the Canadian Northern as part of its system.


William John Macdonald: That is the transfer absolutely of the railway?


Arthur Meighen: That is the Brockville and Westport.
Subsection c agreed to.
On section 3, subsection d:
(d)	There shall be transferred to the Minister of Finance and Receiver General of Canada in trust for the Government of Canada, three hundred and thirty thousand fully paid shares of the par value of $100 each of the capital stock of the Canadian Northern and such shares shall be the absolute property of His Majesty in right of the Dominion of Canada. The said shares 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. Pending the disposal of the said shares and of the shares issued to the Minister of Finance and Receiver General of Canada, pursuant to section 8 of chapter 10 of the statutes of 1913, all voting and other rights under the said shares shall be exercisable by the minister or by whomsoever he may from time to time appoint.


Frank Oliver: This clause raises the question of partnership. The Minister of Finance' objects to the assertion that a partnership is involved. At the same time he claims a great deal of credit for the Government for making an arrangement by which the country will have a forty per cent	interest	in
the profits of this enterprise. Now, I am not concerned whether it is called a partnership or shareholding, but what concerns me is how far the holding of this forty per

cent supposedly of the shares of this company will carry the Government in responsibility for the enterprise. Are they going to take this position-that having only a minority of the shares they have no responsibility for the conduct of the enterprise -or are they going to assume the position that having forty per cent of the shares and the dominant right in the enterprise as the principal creditor they will assume the general responsibility for its conduct and result?


Arthur Meighen: I can only say, we are not going to assume general responsibility for its conduct and result. We are simply shareholders to t'he extent of forty per cent of its stock.


Frank Oliver: The Government, then, is assuming the position of silent partner, and paying partner in this company and disclaims any responsibility for the conduct of the enterprise but only the right of putting up the money.


Robert Laird Borden: Of course the Government is not assuming the management of the road. If we assumed that we should have to go into the question of government operation. The arrangement which we have made is based, in the first place, upon the view expressed by many hon. gentlemen on the other side that we could not allow this railway, a railway to which so much support has been given not only by the federal Parliament but by the provincial parliaments, to collapse and remain uncompleted. I need not discuss that now for it has been discussed at length already. That being the case, it was necessary to consider on what basis the assistance should be given. We thought the various roads of the system should be amalgamated as far as was possible iin view of their varied financial arrangements. That has been accomplished so far as we thought it possible to accomplish it by the transfer of the stock to which I have alluded. In the next place we thought the capitalization of the road should be reduced to a sum not exceeding $100,000,000. That also has been accomplished in the way I pointed out. We thought that if the country came to the assistance of the road at this time to secure its completion, it was proper that the country should participate in a reasonable way in the advantages of the enterprise, should it in the end prove successful, as we all hope, and most of us believe. Therefore, we insisted on the transfer of

$33,000,000 of stock to the Government, in order that the country may obtain that advantage. Had we acquired the majority of the stock we should have had to assume the management of the enterprise. It did not seem desirable to do that.
iMr. OLIVER: The essential point is, aside from the little transaction of last year, it changes the position from that of debtor and creditor to that of partner and creditor. That is a very radical change in status-and there is no doubt about it, because it has been reiterated by members on the other slide from the Finance Minister and the Prime Minister himself down-that the Government is henceforward to have an interest in the success of the enterprise altogether aside from the ordinary interest of a government representing the whole people. I am merely asking what effect the change has in the relative position of the Government and the company as changing the relation from that of debtor and creditor to that olf junior partner and creditor. And what effect will that change have upon the general relationship of the Government to the enterprise?


Robert Laird Borden: I do not know that it
will mean any particular change in the relationship. The country through the Government had a very pronounced interest in the enterprise; if the undertaking were successful, the Government, having expended certain moneys by way of subsidies in the construction of the road and having also guaranteed bonds for a considerable amount, naturally would have a marked financial interest in the success of the road, apart altogether from the advantage which must accrue to the country if the road be carried on successfully as a transcontinental railway. The only difference now resulting is this: that apart from the financial aspect to which I have just alluded, the people will have a certain share in the success of the road, if it proves successful, by reason of their interest in the stock issue.


William Pugsley: Do I understand my right hon. friend to say that by getting two-flfths of the stock of this enterprise the Government do not impose upon themselves as the trustees of the people of Canada the duty of looking after this company, of being represented at its meetings and of voting in the selection of directors? Does he say that the trustees of the people may
abstain from any part in the direction of the affairs of the company?


Robert Laird Borden: I say that the Government are not undertaking the management of the road. The road is left under the management of the Canadian Northern Railway Company, as before.


William Pugsley: If anything in these
resolutions is objectionable-and a good many things are-this provision is the most objectionable of all.


Robert Laird Borden: Which one?


William Pugsley: The provision that the Government shall become the owner of two-fifths of the stock of the Canadian Northern Railway Company. Call it what you like, the effect is that the Government enters into partnership with Mackenzie, Mann and Company, Limited, in this enterprise; Mackenzie, Mann and Company, Limited, are to own three-fifths of the stock and the Government are to own two-fifths. If two people join together in promoting an undertaking of this kind, one man taking three-fifths of the stock and the other man taking two-fifths, they became partners in the undertaking; the fact that it is a joint stock company does not alter the position at all. If this legislation passes, the Government of Canada commit the people of this country to a voic^ in the management of the affairs of this company; they impose upon themselves as trustees of the people the duty of being represented at the meetings, the duty of voting for the choice of directors, the duty of taking a part in the management of the company. If anything goes wrong, the Government cannot say that they were in the minority and that they therefore abstained from taking any part in the management of the company. It is their duty, just as it would be the duty of any trustee holding two-fifths of the capital stock of a company, to take a part in the management in order to see that the interests of those, for whom they are acting are properly safeguarded.


Mr. BURNHAM:: May I ask the hon. gentleman if he will cite some work on partnership in jwhiioh at is stated that if the senior or majority partner does not make the thing pay, he has to collapse in favour of the junior partner?


William Pugsley: The question which my hon. friend puts is marked by the wisdom which is usually displayed in every

question he puts to the House or to the committee, but it does not seem to be apropos of the point which I wish to make; therefore my hon. friend will pardon me if I do not take the time to answer him.
What a farce it was last year that the Government, when they gave the bonus to the Canadian Northern Railway Company took $7,000,000 of the company's capital stock and made the people of Canada the owners of stock to that extent. Last year the Minister of Finance took a great deal of credit to himself for taking that stock, the cost of which was simply the cost of the paper and the time of the printer in striking off stock certificates representing that amount. It was argued from this side of the House, that that was a worthless security and what has taken place during this session shows how absolutely worthless was the stock which the Minister of Finance took at that time. At the present time, with the $7,000,000 taken last year, the capital stock of the company is $77,000,000. Out of that amount there are to be reserved $25,000,000 which the holders of convertible income debenture stock may exchange for their stock. That would leave the difference between $25,000,000 and $77,000,000 as the actually issued capital stock to-day, some $52,000,000. It is now proposed to increase the capital stock to $100,000,000; to make an increase of $48,000,000 of watered stock in this company, and it is proposed to give the Government of Canada $33,000,000 of this watered stock and to make their holdings $40,000,000 in all. I submit that if it is in the interests of the1 sections of the country through which this1 system passes and in the interests of Canada as a whole that the Candian Northern Railway Company should be aided a,t the present time, let the application stand upon its own merits; let aid be given in the interests of the country, but do not let the Government go into the speculation of taking this common stock. The country does not want it. If the country wants to aid this enterprise, it will do it because it is desirable to secure competition; because it is desirable to have this transcontinental! railway completed. But the gentlemen upon the other side are really putting forward the contention that they axe doing this because for one reason they are getting $33,000,000 of stock which they are going to lay away in the treasury in the hope that in 25 or perhaps 50 years the stock may be of some 
value. I say that the action of the Government should be influenced by one consideration only, and that is the desirability of completing this transcontinental system in the interests of the various communities to be served and in the interests of the whole of the people of Canada. Yet, as a consideration for doing this, the Government is to take $33,000,000 of additional stock which is to be laid away, as I have said, in the hope that the people will ultimately get some consideration for having aided this railway company. I submit that that is an entirely erroneous principle. This Government is going into partnership with Mackenzie, Mann and Company, Limited, and they cannot escape responsibility for the management of this company's affairs. When Mackenzie, Mann and Company, Limited, hereafter go into the markets of the world to finance further this enterprise they will be able to say with the utmost truth to financial men, when they are asked who owns the Canadian Northern railway: His Majesty the King and we own it; we own three-fifths of it; His Majesty the King, as represented by the Government of Canada, owns two-fifths of it. On behalf of His Majesty and on behalf of themselves they will ask the financiers of the world to deal with them in respect of this enterprise. The very moment the Government of Canada become interested as holders of the common stock of this company, that moment they engage as partners in this enterprise, that moment they pledge themselves to the people of Canada and the financial people of the world who are interested in [DOT] the railway to do their part in securing an efficient and proper management of this railway; and they, the Government of Canada, will be just as responsible for the proper and efficient management of this road as Mackenzie, Mann and Company will be. The Prime Minister has left it to be understood that we are to have nothing to do with the management because it is to be in the hands of Mackenzie, Mann and Company. But by this very paragraph it is provided that all voting and other rights attaching to the shares shall be exercised by the Minister of Finance and the Receiver General, or by whomsoever he may from time to time appoint. Does that not mean that they will take part, be represented at meetings, that they are to exercise influence on the Board of Directors, and that as shareholders, as trustees for the people of Canada and as having a right to vote for

directors they are to exercise diligence and care and judgment in the management of the affairs of this company? From the moment they become, as trustees for the people of Canada, interested to the extent of two-fifths of the capital stock, I say they cannot escape the duty of taking part in its management and cannot escape responsibility to the financial world or to the people of Canada for the way in which that railroad is managed. I desire to give notice that after this resolution leaves the committee and when it comes up on concurrence, I shall move that instead of taking this stock, the capital stock shall be reduced and not increased by watered stock to the extent of forty odd million dollars; that it shall be reduced to what anybody would say is a fair value of the equity of redemption in this property. When I spoke the other day I said from $5,000,000 to $10,000,000 would be ample; but by reason of the fact that there is a call for $25,000,000, and it is necessary that the stock should be more than that, I am willing to make it $30,000,000. But that will reduce it bv $70,000,000. That will wipe out, if my views be acceded to, $70,000,000 of this common stock upon which the people of the country who are to send their traffic over this railway, may have to pay the interest in the way of increased tolls. I reduce it down to $30,000,000, at the same time leaving provision for the exchange of the income debenture stock to the extent of the $25 000 000 which is referred to in the resolution.' I would provide that that $30,000,000 of stock as so reduced should be placed in the hands of the Receiver General and held by him for the period of five years. That will give, ample time to test whether or not this enterprise can be successfully carried through. I would leave in the hands of the nominee of Mackenzie, Mann and Company sufficient stock to qualify the directors that may be chosen. I would provide that, in case no default is made by the company m the payment of interest, and in ease the conditions of the resolution and agreement shall be carried out for the period of five years, and in case His Majesty shall not exercise the option which my amendment provides for, the stock shall be handed back to Mackenzie, Mann and Company, Limited, or their nominees. Then I would provide that at any time within the period of five years the Governor in Council would have the right to acquire the absolute ownership of- the stock of the Canadian Northern and of all the constituent and subsidiary companies, thus vesting the entire ownership in His Majesty, subject to existing encumbrances and the right of the holders of debenture stock to receive their $25,000,000. I would allow in the meantime the control to be in Mackenzie, Mann and Company, Limited. If that were done it would simply place the Government in the position in which they ought to be placed, giving them security upon this stock as the holders for five years. If during that time there should be no default, then the stock would be handed1 back unless His Majesty chose to exercise the option of taking the road over. But I think now is the time, when the Canadian Northern, railway is coming to the Government and asking for this enormous .aid-, when they recognize that they cannot get through their financial difficulties unless aid is given, now is the time for the Government to secure an option upon the entire stock of this road. Hon. gentlemen may say that there is no need of making that provision. I say that there is, because the feeling of the people of Canada to-day is, I think, rapidly growing in favour of having a Government-owned railway system extending across this continent. The Government are operating the Intercolonial railway, and, while it is the fashion with many of the people of this -country to disparage the Government operation of that road, I say its operation is very successful indeed. While there is some complaint, yet, upon the whole, the Intercolonial railway is managed in such a w.ay as to give general satisfaction to the people. I shall not speak of the exceptional circumstances which have occurred recently under the administration of affairs by the present Minister of Railways and the present manager of the Intercolonial railway; but, speaking generally as to all the years since the Intercolonial railway was constructed, its operation has been very beneficial to the people of the country and 'such as to give general satisfaction. The Government own that system, extending from the eastern part of Nova Scotia -and from the southern part of New Brunswick through to the city of Montreal, and also extending over a large portion of Prince Edward Island. It is a system of about 1,800 miles in length. In the West the Government is carrying out the policy of the late Administration in constructing the Hudson Bay railway. Why might it not be that the people would approve of making an extension of this system so as

to take in the Canadian Northern railway? I would not bind the 'Government to do it to-day, but I would give to the Government the option of doing it if the people of the country, at any time within five years, should declare it to be their judgment that the road should be taken over. As to whether that would be just to Mackenzie, Mann and Company, Limited, or not, I submit it would be. If the Government should exercise its option and take the road ovct at any time before the end of five years at a price to be fixed by arbitration but not exceeding $30,000,000, I think that would be treating them as fairly and with as great a degree of justice as they could reasonably ask for. If the Government should decide not to take it over, the stock would be handed back to Mackenzie, Mann and Company, Limited, or their nominees. The proposition which I make is, of course, entirely different from the proposal which the Government are putting forward. The Government are becoming a junior partner in this undertaking, they are becoming the absolute owners of two-fifths of the common stock, leaving outstanding $50,000,000 -of stock, three-fifths in the hands of Mackenzie, Mann and Company, Limited. If the enterprise is successful by reason of the aid which the Government are now giving, that stock before five years have rolled away may have a very considerable value. It may or it may not, but at all events it may get into the hands of third parties. The stock may be so widely scattered that it will be impossible to secure it except by expropriation and it might be exceedingly difficult for the Government to acquire ownership of the system. Under the plan which I suggest, the Government could take an option upon this stock and hold it for five years. If Mackenzie, Mann and Company, pull the enterprise through, the stock is handed back to them unless the Government choose to take over the road under the provisions of the option for which this amendment would provide.
I have listened to all that has been said with regard to the present proposition, and the more I think of it the more objectionable it seems. I have heard' from business men in different parts of Canada and I do not believe you will find a business or railway man in the country, outside of those who are specially interested in the Canadian Northern, who approves of the proposition of this Country becoming a partner with Mackenzie and Mann in this enterprise and taking over its stock. On the other hand, there is a general disposition

that the enterprise, although it ought to be aided and not allowed to go down, should be aided in the way of guaranteeing the securities and in the way of .having the stock held as security until the enterprise has been made a success.


Arthur Meighen: We are always glad to have any suggestions from the hon. member for St. John and particularly glad to have a new railway policy enunciated by him on behalf, I presume, of the Liberal party in the House of Commons. I presume this is in succession to and in substitution of the policy of the leader of the Opposition.


William Pugsley: At the present time I am speaking for myself.


Arthur Meighen: And it is supposed, I presume, to be an improvement on the policy of the hon. member for South Renfrew, the ex-Minister of Railways. However suggestions were asked for when the resolution to go into committee was moved, and are thankfully received, and if there is any new policy from the Opposition the sooner it comes forward the better. In relation to what my hon. friend suggests that this proposal should embody the stipulation that the stocks shall be put in the hands of the Receiver General, in trust, so that in the event of success Canada will be able to exercise the option of purchase, the hon. member is sufficient a lawyer to know that we have no such power in this House except by the consent of the parties interested, because we have no control of civil rights. We could make it a condition of aid, but the hon. gentleman has also business judgment enough to know that to suggest it to the parties interested would be simply received as a joke. The policy of my hon. friend means nothing more than allowing this system to go into the hands of a receiver just as rapidly as it will, and the Dominion of Canada and the provinces being called on to make good their guarantees after the road is in the hands of a receiver. This policy is the direct opposite of the policy of the leader of the Opposition, who says that we must not allow this road to go into the hands of a receiver, and directly the opposite of the policy of the hon. member for South Renfrew, who agrees with the leader of the Opposition that we must not allow the road to go into the hands of a receiver. Let me repeat that such a proposal to the owners of the stock of the Canadian Northern and of the subsidiary companies would appeal to them as it

would appeal to anybody else, as being perfectly absurd.


William Pugsley: Why?


Arthur Meighen: For such a multitude of reasons that the night is too short to enumerate them. As if Sir William Mackenzie and Sir Donald Mann would undertake the responsibility of taking hold of the Canadian Northern and financing it to success, and give to the people of Canada the option of taking the road over if it is a success and reducing their stock to about one-fifth of what has been declared to be fully paid up by a Parliament of this country! Parliament comes along year by year, and by its steps declares that certain stock of this company is paid up, and rightly paid up, or Parliament would not so declare it; and Parliament by its statutes vests that stock in a certain place. Now the hon. gentleman asks us to propose to these men, who have acquired this stock under the sanction of Parliament, that it should be reduced to one-fifth, and that if they make the road pay at all Canada shall have the option of taking the stock from them, and that in the meantime they shall incur the risks of operating the road. I do not know what all the effects of that policy are, but I understand enough of it to know that it means the steady march of this system to a receivership and all the consequences that follow.


Frank Oliver: I think this is a very remarkable statement.	\Y e have been
able to get mord'information from my hon. friend in the last five minutes than in the last five days, although he was not able to give my hon. friend from St. John a plain answer to a plain question.


Arthur Meighen: Which policy of all the four that have been advanced does my hon. friend from Edmonton support?


Frank Oliver: I am supporting a policy whereby Mackenzie, Mann and the Government shall maintain their relationship of debtor and creditor; whereby the Government of Canada shall not make itself responsible for the management of the Canadian Northern enterprise unless and until it takes over the ownership of the eji-terprise. Why should it be said that the acceptance by the House of the suggestion of my hon. friend from St. John would mean a receivership for the Canadian Northern? Is it because Mackenzie and Mann would refuse the offer couched in
the terms that have been placed before the House? If that is the reason, we shall have to adjust out point of view all along the line. If they would consider it as a joke, then I think we had better reconsider the proposal that the Government have placed before the House. For my part, I do not consider it a joke at all. If this country is going to stand behind Mackenzie and Mann to the extent of $45,000,000, this country is entitled to have some say as to the terms under which Mackenzie and Mann shall receive that aid-terms that shall hot be dictated by Z. A. Lash nor by Mackenzie and Mann themselves, but by the people of this Dominion.


Arthur Meighen: Who said there was
any dictation? All I said was that we could not compel such an arrangement inasmuch as we have no control over civil rights. If Mackenzie and Mann prefer the other course thejy have the right to so elect, and in my humble judgment they would so elect.


Frank Oliver: They would have a perfect right to so elect.


Arthur Meighen: That is not dictation.


Frank Oliver: They would have the perfect right to treat this proposition as a joke. I think that is what my hon. friend suggested they would do. If that is their attitude, if they think this country has nothing else to do with $45,000,000 than to hand it over to them on their terms, I think the joke is on the Government.


Arthur Meighen: I did not say that at all.


Frank Oliver: What is there wrong in making terms with Mackenzie and Mann? If we are to supply the money why should we not dictate the terms. This Government is going into partnership with Mackenzie and Mann and while we take two-fifths they get three-fifths; we are allowing them the earning rights on $60,000,000 of common stock while we take the earning rights on $40,000,000. What is there so jocular about saying to Mackenzie and Mann: You can take the whole earning rights on $30,000,000 of common stock, and you are doing well if you get that out of this enterprise, because all the evidence that has been put betfore the House during this discussion goes to 6how that Mackenzie and

Mann, up to date, have not put one solitaxy red cent into the enterprise. I think $30,000,000 would be a very ample reward to these gentlemen, giving them credit for all the enterprise and all the ability that our friends on the other side have asserted them to have.


Arthur Meighen: The hon. member for South Renfrew (Mr. Graham) does not say that. He '(distinctly repudiated the suggestion that they had put no money into it.


Frank Oliver: We have had this discussion going on for several days and there has been no evidence offered to this House that Mackenzie, Mann and Company ever put a cent into it, and not only that, but when the suggestion has been made that they should put money into it, the Government has been careful to protect them from that suggestion. I do not think, giving these gentlemen credit for all the ability they have shown, that they are entitled to everything. The country is entitled to something for this money and particularly this Parliament is here to make such terms with Mackenzie and Mann, or anybody else who has to deal with it, as shall be in the public interest; and it is not in the public interest that, in' the case of an enterprise such as this which has been constructed by the contributions and the credit, in a large majority, of the people of Canada, there should be $100,000,000 of common stock outstanding upon which dividends should be>
earned.
I was .anxious, before my hon. friend (Mr. Pugsley) gave notice of his resolution, to get from the Government a statement of their policy having regard to the interest which they propose to take in the enterprise. I want to ask them now, in the matter of the regulation of railway rates: Are they going to treat that question as having a financial interest in the maintenance of high rates on the system, or are they going to, as a matter of policy, ignore the interest that as partners in the enterprise they would have and treat the question outside of that altogether? This is a matter of fundamental importance to the people of the country. The papers of Canada are full of the assertion that, now that the Government are going into partnership with this great railway system, the railway companies are thereby protected from the reduction of their rates because it will be the interest of the Government to keep up the rates in oeder to kep up the irevenue.

Again, I am anxious to know what the Government's policy is in regard to the ex-' tension of branch lines in the prairie provinces. For two years construction on these branch lines has been practically at a standstill. The provincial governments have undertaken immense responsibilities. The Alberta Government has given a guarantee, I believe, to the amount of about $20,000,000 to this company for the construction of branch lines in connection with its system. These lines are not constructed. Hundreds of miles which have been guaranteed are untouched to-day. The outstanding guarantees are not sufficient, I am credibly informed, to complete these lines. I want to know if the Government, as partners with Mackenzie, Mann and Company, are going to see that these lines are completed. Are they going to see to the further extension of these lines which is absolutely called for? At the present time Mackenzie and Mann, enterprising railroaders though they are, have started a number of railway lines all radiating from Edmonton. They have occupied the territory near Edmonton but it is the country farther beyond that needs and demands accommodation. Are these enterprises to be allowed to remain where they are, practically holding up the development of the country farther on, or are the Government, as partners in this enterprise, going to take the responsibility of pushing these branches out to the people who need railway communication so much? In reference to the matters of railway rates and railway extension wd want to know what the policy of the Government is going to be as partners in this enterprise? What interest are they going to take in these two important matters? It is necessary that we .should know what their policy is going to be. My view is that the Government should not be partners in the enterprise, that they should occupy the position of creditor as against the company's position of debtor so long as there is a reasonable probability of the debtor being able to carry this enterprise through and then, if he fails in carrying this enterprise through, having been given the assistance that might reasonably be given, this Government must assume the responsibility for the enterprise altogether and take it up as a Government project. It should either belong to the company or it should belong to the Government; there should be no partnership as between the company and the Government.

On section 4:
That covenants or undertakings to the satisfaction of the Governor in Council shall be given that all outstanding temporary loans to the Canadian Northern or any of its constituent or subsidiary companies secured by the deposit or pledge of securities, will be paid out of the proceeds of such deposited or pledged securities when the same shall be sold or disposed of, and that no proceedings against the Canadian Northern or any of said other companies will meanwhile be taken for the collection of such temporary loans.


Robert Laird Borden: The Bill is going to make that a condition precedent. It does not stand that way in the resolution. Therefore, I would move to amend the clause by striking out the word ' four ' and substituting the letter ' e.'


Wilfrid Laurier: Has the Solicitor General anything to say upon this?


Robert Laird Borden: The purport of it is merely to make these covenants a condition precedent to the guarantee.


Wilfrid Laurier: This and the other section have been discussed in anticipation. By the two clauses the contractors undertake to give the Government a satisfactory covenant that their creditors, whether they be the banks or other companies, shall not press them for payment and that they will reduce their indebtedness to what is admitted to be the current amount of liability between railway company and railway company. In the next place, they undertake to obtain from the contractors a covenant that the banks will be satisfied to wait, if they have to wait, for a certain period of time. At the present time the banks are secured by pledges in their hands amounting to $24,000,000 covering a liability of $21,000,000. Any covenant that these parties give must satisfy the Government but it may not satisfy the banks. If, however, they can satisfy the banks what reason have they to come to the Government?
At the present time the ibanks -are well secured with the guarantees which they have in hand; but as I understand it, the securities will not be and cannot be liquidated at present, perhaps on account of the condition of the m-arket, and they would therefore, have to stand over. In that case, what covenant can Mackenzie and Mann give to the Government which will satisfy the Government if they cannot satisfy the banks?


Robert Laird Borden: They can give security in many different forms. They can give us the security of a bank, of a guarantee company, or of a bond.


Wilfrid Laurier: Exactly. They can give all that to the bank. If they can satisfy the bank, certainly they can satisfy the Government; but if they cannot satisfy the bank, how are they to satisfy the Government?


Robert Laird Borden: I am not sure that the bank is not satisfied at the present time.


Wilfrid Laurier: If it is, there is no reason for Mackenzie and Mann to come here.


Robert Laird Borden: I am not sure of that.
There are certain securities, and there is a certain indebtedness. The securities may meet that indebtedness or they may not meet it. What we desire to guard against is that there shall be no embarrassment to the company; that there shall be no action against the company in respect of any of these loans; that they shall be taken care of, and that we shall be satisfied that they shall be taken care of.


Wilfrid Laurier: I understand all that. Of course, if the bank is satisfied, there will be no action. If the bank is not paid, but is given satisfactory security, there will be no action. In other words, if the bank is satisfied, nothing will be done; but the puzzle to me is what covenant Mackenzie and Mann can give to the Government which will satisfy the Government, if they cannot satisfy the bank. In reply to this I have not received any answer.


Robert Laird Borden: Suppose they come to us with the guarantee of a company worth $100,000,000 as security that there should be no proceedings upon that -debt, and that it -should he paid out of these s-e-curities or paid otherwise; should we not accept that security, satisfied that the guarantor was perfectly good for it?


Wilfrid Laurier: If they went to the bank with a security of $100,000,000, the bank would say:	All right. There
would be no trouble at all.


Robert Laird Borden: If they came to us, we would also say: All right.


William John Macdonald: Why is it that my hon. friend frames the phraseology of sec-tiojn 4 with regard to covenants or undertakings differently from the phraseology of

section 5, where he specially provides that the contractor shall be one of the guarantors? Under section 4 the thing is made general without any reference to the contractors. For the proper understanding of the value of this section and of the position of the securities, I think the Solicitor General, w'ho has intimated to the House that he has in his brief a statement as to when these loans from the bank fall due, should give us that statement now. The items are not so very numerous.


Arthur Meighen: I can give it.


William John Macdonald: In the meantime, in regard to the other point, is there any reason why the contractors are excluded from section 4 and included in section 5?


Robert Laird Borden: If they would give to us satisfactory security under section 4, it would not make any great difference whether they were liable or not. It is necessary that Mackenzie and Mann, Limited, acting as the construction department of the Canadian Northern railway, should have a certain line of credit. My hon. friend will appreciate1 that. It would not be in the interest of completing the enterprise that their credit should be unduly hampered.


William Pugsley: Will my right hon.
friend tell me why Sir William Mackenzie and Sir Donald Mann are called the contractors in the agreement, and yet are not called the contractors in the resolution? According to the agreement the parties of the fourth part are Mackenzie, Mann and Company, Limited, Sir William Mackenzie and Sir Donald D. Mann, thereinafter called the contractors.


Robert Laird Borden: They were added in the agreement, as has already been explained, for the reason that we thought it desirable in the agreement that we should have their individual and personal release of the claims.


Arthur Meighen: 
William John Macdonald: That is 10 p.m. the date of the mortgage.


Arthur Meighen: The table does not give the due date. I will get it.
On section 5:
That covenants or undertakings of the contractors and such other covenants or undertakings as may be required by the Governor in Council shall be given that the current indebtedness of the Canadian Northern and of the said constituent and subsidiary companies will within one year from the passing of the Act to be based upon these resolutions be reduced to the normal or usual current amount to be determined by the minister and that meanwhile all such current indebtedness other than such as may be the subject of bona fide dispute, will be either paid or arranged in such a manner that no proceedings for the enforcement of payment thereof will be taken or pressed.


Wilfrid Laurier: Will this also become part of section 3 ?


Robert Laird Borden: Yes, I desire to strike out the number ' 5 ' and substitute ' f.'


William John Macdonald: The explanation why my right hon. friend gave for excluding the contractors from section 4 does not seem to me altogether sound, because there is no provision for placing the onus on some particular party that the guarantee shall be given. It is true it is made a provision of the agreement. Unless my hon. friend says that, as a matter of drafting, he does not want to repeat the obligation as resting upon the contractors, I can see no reason why he should not include it in this, just as he has done in the other one, because whose duty is it to give the guarantee except the contractors ? Is the Canadian Northern to do it ?


Robert Laird Borden: I think my hon. friend is right, that they must look after it in some way or other. They have preferred it in this form, and I do not see any objection to it, because we can call upon them under section 4, if we desire to do so; but there is some point in the suggestion made on their behalf that, if they are going to provide capital for, what I have called for the purpose of convenience, construction work for the completion of the road, they must have some credit with the bank, and they think this is the better form to adopt.


William John Macdonald: Apparently these
securities were pledged to the bank by the Canadian Northern railway, and not by Mackenzie, Mann and Company, Limited. Therefore it would be the duty of the Can-

adian Northern Railway Company to give the guarantees, not Mackenzie and Mann.


Robert Laird Borden: Yes, I think my hon. friend is right as to that.


Wilfrid Laurier: These liabilities in section 5 are all the liabilities which are to be found on page 43, namely, Canadian Northern Railway Company; Canadian Northern Ontario railway; Canadian Northern Quebec railway; Quebec and Lake St. John railway; Duluth, Winnipeg and Pacific railway; Halifax and Southwestern Railway Company; Central Ontario railway; Bay of Quinte railway; Irondale, Bancroft and Ottawa railway; Brockville, Westport and Northwestern railway.
These are the companies whose floating liabilities are to be reduced to what is understood to be the ordinary liabilities of such companies. What is to be the amount of current liabilities assumed as normal? I understood the Prime Minister spoke of $2,000,000 or 33,000,000.


Robert Laird Borden: My right hon. friend will observe that the normal amount is to be determined by the Minister of Finance. 1 have already said, I think, it has been represented to us by the officials of the department that the normal or usual current liability of a system such as this would be about $3,000,000.


William John Macdonald: I would like the Solicitor General to give us the information, if he has it, in brief. Otherwise it would be out of place in the record.


Robert Laird Borden: Perhaps we might go on to another section, and give it afterwards, if the hon. gentleman has no objection?
On section 6:
That the kind of securities to be guaranteed hereunder, and the forms thereof, and the forms and terms of the new trust deed, and the times and manner of the issue of the guaranteed securities, and the disposition of the moneys to be raised thereon by sale, pledge or otherwise, and the forms and manner of guarantee or guarantees shall be such as the Governor in Council approves, and such terms, provisions and conditions as the Governor in Council may consider expedient or necessary shall he included in the new trust deed.


Frank Oliver: I draw attention to the words ' disposition of the moneys to be raised thereon.' I think it is in order here for me to ask how far the Canadian Northern Railway branch lines in Alberta and Saskatchewan are to be benefited by this guarantee. I take it that the Government assumes responsibility for ' the disposition of the moneys to be raised thereon.'
If I am wrong in my interpretation, of course I shall be glad to be set right; but I ask whether the Government, under section 6, assumes responsibility for the moneys raised under the guarantee? If that is the case, I am anxious to know to what extent the various branch lines in the two larger prairie provinces are intended to participate in the benefit of this expenditure.


Arthur Meighen: The answer to that
would be very long if I were to give it from my place. But I may say that from the statements of 'requirements to complete* which appear in the documents filed and printed, it is shown that the Canadian Northern Alberta is to receive for the purpose of completion $523,959, the Canadian Northern Western, $310,088, the Canadian Northern railway proper $5,402,712, and the Canadian Northern Saskatchewan $457,847. Then, as to exactly what portions' these moneys are to be applied to, and also as to the division of the moneys between the various elements of railway building,- ballasting, rails, right of way, betterments, etc.-these all appear in the supporting statements which follow and which are on the table but are not printed in the blue-book. These are given in the fullest possible detail especially in relation to the Canadian Northern, in the third supporting statement.


Frank Oliver: I do not know that any
great amount of detail is necessary in order to bring out what I want to know. If the Solicitor General would look at page 19 of the blue-book he would see that there is a measurably detailed statement of the requirements. In that statement, of course, is included a statement in regard to the Canadian Northern Western railway, which is one of those the hon. gentleman has mentioned. The line from Warden to Bra-zeau calls for $310,088 to complete and $45,000 for betterments. This is apparently the only expenditure to be made upon the Canadian Northern Western lines out of this sum.


Arthur Meighen: Of course that by no
means comprises all the lines of the Canadian Northern Railway system in Alberta, Saskatchewan and Manitoba.


Frank Oliver: I quite understand that. I simply want it understood that on the Canadian Northern Western line in Alberta, it is proposed that there shall be expended out of this $45,000,000 of guarantee a matter of only $355,000. That expenditure is made

on the Warden-Brazeau line of which 157 miles of track have been laid and 17 miles are graded but no track laid. Now, the Canadian Northern Western lines in Alberta under provincial guarantee amount to 663 miles, and the guarantees' amount to $10,722,250. All this means, as I understand it, that so far as the Canadian Northern' Western is concerned with its 663 miles of lines, it gets $355,000 out of this fund and the balance will have to be supplied on the provincial Government's guarantee.
The provincial Government has guaranteed different branches of this system at from $13,000 to $25,000 a mile. A $25,000 a mile guarantee has been absorbed in this Brazeau-Warden line, which has been practically completed. The remainder of the lines are in the $13,000, $15,000 and $20,000 a mile guarantee class. According to the statement I have here, on about 300 miles of the lines of this system nothing has been' clone, although the lines have been guaranteed, and on about 160 miles some grading has been done. As I work the figures out, on the mileage of this system yet to be completed there remains *of the provincial Government's guarantee not yet expended about $14,000 a mile, not sufficient to build the lines. I would like to know if, in the contingency that the proceeds of the provincial Government guarantees upon those lines are not sufficient to complete them, this Government will, out of the moneys raised under this guarantee, take any responsibility with regard to the completion of those lines.


Arthur Meighen: Will the hon. gentleman tell me the mileage of the Canadian Northwestern guaranteed by the province of Alberta?


Frank Oliver: From Onoway to Pine Pass, 100 males, $20,000 a mile. On that section track has been laid on 32 miles, 46 miles have been partially graded, and on 22 miles nothing has been done. From Oliver station to St. Paul de Metis, 100 miles, $13,000 a mile. From Bruderheim towards Vermilion, 30 miles, $13,000 a mile. From Calgary, northeast, 100 miles, $13,000 a mile; from Camrose to Alsask, 80 miles, $13,000 a mile; from Stratheona, southwesterly, 20 miles, $15,000 a mile, and from Blackfalls to Goose Lake line, 63 miles, the guarantee is $13,000 a mile.


Arthur Meighen: While it appears from the statement of requirements to com- [DOT] plete that the amount that is to go from the funds available on the issue of these

securities to the Canadian Northwestern railway is limited to some $355,000, still it must be remembered first of all that the expenditure of the money on the other western lines, and on eastern lines as well, is of direct advantage to the very district served by the Canadian Northwestern. It is of the utmost importance to the residents along the Canadian Northwestern line that the road be completed to the Pacific coast and that the benefit of the rails leading west from that district to Vancouver be obtained and be brought to bear upon the residents of that district. The hon. gentleman will admit at once that the benefit goes directly and more largely to the residents of Alberta and Saskatchewan under the expenditure on the main lines of road, but in addition this consideration must be kept in mind: provision is made by these resolutions which will leave a great deal of scope for the extension of the branch lines of the Canadian Northern. By the trust deed of June 30, 1903, it is provided that there may be issued, under the authority of and secured by that trust deed, bonds not exceeding $10,000 a mile for any new line constructed. That $10,000 a mile is subject to $15,000 a mile prior charge, provided the $15,000 is guaranteed by the Dominion or by a province, and to $10,000 a mile if it is not so guaranteed. So that in the case of such lines as are guaranteed by the province of Alberta the Canadian Northern Railway Company may . issue bonds up to a total of $25,000 a mile, provided the guaranteed bonds reach $15,000 and that $25,000 a mile I think the hon. gentleman will admit will take care of construction in Alberta. So that as there is left unimpaired the authority to issue securities ahead of the $45,000,000 security, to that extent reasonable encouragement is given and reasonable means are preserved whereby branch lines may be built and all necessary extensions made from time to time.


Frank Oliver: The Canadian Northern is allowed to issue securities to the amount of $10,000 a mile which will have priority over the security that is given for the $45,000,000.


Arthur Meighen: More than that.


Frank Oliver: Well, up to $25,000, but
those securities will have priority over and will not be subsequent to the $45,000,000.


Robert Laird Borden: If the hon. gentleman
will look at subsection 2 of section 2 of the resolution he will see that that point is covered.


Frank Oliver: That settles the point
that I had in mind, namely that if the Canadian Northern were limited in its issue of further securities by the mortgage now being given, they would be practically prohibited from issuing securities and there would be no means of raising the money that would enable these lines to be completed. But if they have already the prior right and that right is not interfered with, I presume that their position is not prejudiced. While it is quite proper to say that a benefit would naturally result to the residents along a branch line in the prairie provinces from the completion of the main line of the Canadian Northern either east or west or both, the advantage of the completion of the main line is slight as compared with the primary necessity of getting railroad communication at all. To the man who is in the woods 20 or 30 miles from a railroad, the railroad which will enable him to get to his market 'town is the first necessity; whether that railroad has connection with the Atlantic or with the Pacific is of secondary importance to him.


Arthur Meighen: It is important to him to have at least one exit.


Frank Oliver: The Canadian Northern
have built up a system of some four or five thousand miles in the prairie provinces without a connection either east or west, and that four or five thousand miles has been of immense advantage to the business of the people and the settlemeet of the country. Thus the completion of the main iline, while we admit it is an advantage, is not of the same primary necessity that the( actual construction of branch lines, which have been guaranteed by the provinces, is to the people settled in that part of the country.


Frederick William Borden: Of course, there is the consideration that preventing the road going into the hands of a receiver and Strengthening its position would strengthen also the position of branch lines connected with it, and would be more likely to conduce to their extension.


Frank Oliver: Undoubtedly unless such a condition were created as made the extension of branch lines impossible.
On section 10:
That in so far as the Canadian Northern and the constituent and subsidiary companies may be subject to the legislative Jurisdiction of the
Parliament of Canada, every such company shall have full power to do all and every of the things authorized by the Act based upon these resolutions, or provided for in the agreement, and shall have full power, and be bound to make, do and execute from time to time, all such acts, deeds, matters and things as may be necessary or expedient for carrying into effect the full intent and meaning of the Act based upon these resolutions and of the agreement, and the Board of Railway Commissioners for Canada is hereby empowered to do what may be necessary on its part in the carrying out of the provisions of said agreement.


Frank Oliver: I would like to fully understand the effect of the words.
And be bound to make, do and execute from time to time, all such acts, deeds, matters and things.
How doe3 that declaration 'affect the authority of the provinces which have chartered railways which railway companies have been brought under the jurisdiction of" this Parliament by the declaration that they are for the general advantage of Canada?


Robert Laird Borden: The words are limited, of course, to the scope of the Act and of the agreement.


Frank Oliver: For instance, the Canadian Northern Railway Pacific has a very special agreement with the Government of that province. The nature of the agreement was considered essential by the Government of that province. The agreement delegated to the Government of the province of British Columbia a certain authority over the operations of that road within the province and denied authority to the Government of Canada to set aside the provincial authority. iDo I understand that this section is for the purpose of absolutely limiting the effect of that agreement? what is the effect of it in regard to that special agreement?


Arthur Meighen: I would say it is no relation at all to that special agreement. The purpose of the clause was simply to give a general enabling power to the various companies comprised in and covered by the resolutions to do what the resolutions provide. The effect of declaring the Canadian Northern Pacific or any other company to be for the general advantage of Canada is defined by the British Nortn America Act, and further defined by section 6 of the Railway Act. The effect in a word is this: that in so far as the provisions of any special Act incorporating a provincial company conflict with the general Railway Act, the provisions of that special Act no



longer apply, but are superseded by the provisions of the General Railway Act of the province of British Columbia or any other province as the case may be. That is the effect of the declaration, but the effect of this clause does not in the least degree add to the control of the Parliament of Canada or to the effect of the Railway Act upon the provincial line. The only control we have is by virtue of the declaration. This clause gives no further control at all. There is nothing within the four corners of the resolution which is antagonistic or in any way conflicts with that agreement in British Columbia or with any other road, except such as are done away with by the mere declaration that the road is for the general advantage of Canada. I repeat that this clause in no way adds to the powers of the Dominion Parliament or to the operation of the Railway Act upon a provincial company further than is already done by the mere declaration.


Frank Oliver: My hon. friend speaks of enabling the provincial company to do thus and so, but this clause is compulsory. They are bound to do thus and so.


Arthur Meighen: When they accept these resolutions they are bound to carry out the provisions. They are bound to do what these resolutions look forward to their doing.


Wilfrid Laurier: That is leaving it gloriously indefinite.


Arthur Meighen: No, it is made specific and definite. These resolutions say that each and every company on acceptance of these resolutions are bound to do thus and so.


Frank Oliver: They do not have the acceptance of them. They are legislated out of one position and into another.


Arthur Meighen: We cannot legislate
them into it at all. They accept these resolutions, and when the Bill comes down that will be more clearly seen. Perhaps I should have given the wording of the Bill. Subclause a of clause 3 of these resolutions oreads:
The agreement a draft whereof is set forth in the third schedule hereto, hereinafter called the ' agreement ' shall he duly executed by the parties thereto and the Governor in Council is hereby authorized to execute the same.
In the Bill it reads this way:
The agreement a draft whereof Is set forth in the third schedule hereto, hereinafter called the

' agreement ' shall be executed by the parties thereto when duly authorized so to do by appropriate by-laws or resolutions passed by each of the companies parties thereto accepting the provisions of this Act, and the Governor in Council is hereby authorized to execute the same.
It has been thought wise to have each of the companies accept that. We do not legislate that they must accept it, but we say that before the guarantee is given they must specifically accept this Act, and by due authority of resolution sign the agreement.


Mr. McKENZIE:: Does the Solicitor General say that any of these local companies can do anything by way of accepting the agreement if that power has not been' granted in its charter. I understand the law to be that a local company, in fact any company, must keep within the powers of its charter, and that it cannot pass any resolution that would surpass the power that is given to it by the authority creating the company, so if those local companies had not within then acts of incorporation power to pass such resolutions as the solicitor General mentions, would the passing of resolutions which were beyond their jurisdiction have any effect merely because we say that they shall have that authority. I rather think we have no power to confer such authority upon these companies if it is not granted in their acts of incorporation.


Arthur Meighen: It must be remembered that this Act is passed first, the resolutions come next, and the agreement is then signed. Immediately this Act is passed those companies become Dominion companies. They come under Dominion jurisdiction and our Railway Act, and I take it -I do not think it will be disputed-that any company under the Dominion Government has power to accept an Act passed in relation to it by the Dominion Parliament itself.


Daniel Duncan McKenzie: I quite understand
that, but I do not understand that we have power to lift out of their status as local companies half a dozen or so of small companies created by provincial jurisdiction, and bring them under Dominion jurisdiction without any act on their part and without the consent of the legislature creating them. I am not satisfied that we have power to create them Dominion corporations.


Arthur Meighen: I think so.


William John Macdonald: I think that brings us to the question I discussed with the ri^ht hon. Premier before dinner as to the relationship between the Company and the provincial governments. There are provisions in these resolutions, on account of the wide powers that are given to the Governor in Council in connection with the drawing up of the trust deed, which may, and in all probability will, conflict with the provisions securing the stock guaranteed by the provincial governments. If I apprehend the meaning of these resolutions, it is something like this: Any of these companies that desires to take advantage of the provisions contained in the resolutions may accept those provisions preliminary to anything being done; and if an the terms of the new trust deed that is executed to secure the advances that are made, provisions are inserted which override and destroy the rights of the provincial governments under their deeds, then the federal terms will be supreme. That would seem to be the effect.


Robert Laird Borden: So far as I am aware
there has never been any objection to the jurisdiction of Parliament over the whole system, except possibly during the period of construction of those roads in Alberta and Saskatchewan. Is that what my hon. friend is alluding to?


William John Macdonald: That is one of the things.


Robert Laird Borden: I do not see that there
would be any interference that would be prejudicial, for the reason that the provincial Government notwithstanding any legislation that we pass in this form would still 'have control over the expenditure of money. I think I mentioned that to my hon. friend before. We do not purpose to interfere with that nor do we interfere with it so far as I am aware.


William John Macdonald: It may be interfered with under the provisions of the trust deed.


Robert Laird Borden: If my hon. friend would point out in what respect, I would be very glad to consider it.	,


William John Macdonald: We will come to section 11 which provides for trust deeds being given by each one of the subsidiary companies to secure the advances which are made out of the $45,000,000. These trust deeds will contain provisions which, 1 assume, will be suitable to the views of the federal Government. The question is 2701	,	; I 1
whether this general enabling and conditional clause does not give the federal Government power to include in these trust deeds provisions which will materially interfere with the securities of the provincial governments. All doubts could be set at rest by proposing to the appropriate clause, or inserting in the proper place, an amendment which would save the rights of the provincial governments in respect to these particular securities and afford such remedies as they would require.


Wilfrid Laurier: The question is raised by my hon. friend from Edmonton (Mr. Oliver) as to what would be the effect of this section. Under it the company are not only enabled, but compelled, to do certain things because there is power compelling them to do what is intended by this agreement. The answer of the Solicitor General was, and I think he was right, that we assume power over these companies by the fact that we declare them to be works for the general advantage of Canada. This brings me to the question raised by my hon. friend, from Cape Breton (Mr. McKenzie). In my estimation all these roads which have been established by local charters come under the jurisdiction of this Parliament and we have control over them notwithstanding the fact that they were created by local charters. Section 92 of the British North America Act seems to make this point very clear. Section 92 declares what shall be under the jurisdiction of the provincial legislatures. That section places under the control of the Dominion Parliament:
Such works as, although wholly situate within the province, are before or after their execution declared by the Parliament of Canada to be for the general advantage of Canada or for the advantage of two or more of the provinces.
These words seem to be very clear. The provincial legislature has control over works which are only situate in their province unless they are taken possession of by the Dominion Parliament by the declaration that they are works for the general advantage of Canada. Whether the works are constructed before or after the legislation is a matter of significance. If they are declared to be works for the general advantage of Canada before their execution, it is very clear that they are at once brought under the control of this Parliament; but if they have been executed under the provincial law, then, the moment they are declared to be for the general advan-

tage of Canada, the authority under which they are administered comes under the jurisdiction of this Parliament. By this resolution we take power over these companies and we take not only an enabling power, but a compelling power to compel them to do what we want them to do.


Arthur Meighen: To the extent of complying with anything called for by this resolution.


Wilfrid Laurier: To the extent of compelling the company to perform their contract even if it is not in accordance with their charter. This Parliament becomes supreme and this company can be compelled to do anything for the purpose of fulfilling this contract whether they will or not because they become subject to this Parliament. The provincial charter that has created the company is practically defunct now because the charter becomes a Dominion charter and we have power to amend that charter and to impose new conditions.


Robert Laird Borden: The powers of the company remain as before until the Dominion Parliament proceeds to amend them. After the declaration the Dominion Parliament is the sole authority that has the right to amend them. Asi far as that is concerned provision is made that those companies may give a mortgage to secure the amounte of any moneys that may be expended on their respective roads out of the aid now provided. If they had no power before, the companies, under the appropriate sections, would have the power by reason of these resolutions and the Bill to be founded upon them. But that mortgage would not interfere in any way with any previous security created under provincial legislation. I cannot see that we would be interfering with such security by the proposed declaration.


Mr.   MAODONALD@: Suppose there was a conflict about location, suppose the trust deed provided that the amount to be advanced would only be advanced upon the federal government approving of a certain location, and you have some other provision under the provincial trust deed, under this section the federal Government would be bound to control.


Robert Laird Borden: I think that is correct, but the provincial Government would be able to control the situation by reason of their control over the moneys to be expended upon the road. I would not apprehend the slightest danger of any friction in regard to that. If there be any danger the

provincial Government have control over the situation because they might decline to have their money expended unless the road was located in a particular place.


Wilfrid Laurier: That is perfectly true. I do not suppose that this Government would oppose its will to the will of the local authorities in a matter of this kind but we have declared that these works are for the general advantage of Canada and having made that declaration this Parliament will determine what, according to its will, is proper to be done.


Robert Laird Borden: I appreciate what my
right Iron, friend says, but I would still be inclined to maintain that the provincial Government having control of these moneys, which are to be expended and are raised against provincial security, would have very ample control as far as location is concerned.


Wilfrid Laurier: I am quite sure that under any power of this Parliament we will not take money from the provincial treasury.


Mr. MURPHY:: We are declaring these works, under this resolution, to be for the general advantage of Canada and we are doing so, it seems to me, in direct violation, as far as one of these companies is concerned, of the legislation passed by the British Columbia Legislature in 1910. In that year there was an Act passed ratifying an agreement between the province of British Columbia, the Canadian Northern and the Canadian Northern Pacific Railway Company. In that agreement there is the following section:
The Northern Company agrees that the Pacific Company will agree that the Pacific Company shall not, and the Northern Company agrees that it will not, at any time apply to be declared a work for the general advantage of Canada.
One of the companies mentioned in that section of the British Columbia Act is the Canadian Northern Pacific railway which, by this resolution, is declared to be a work for the general advantage of Canada. Is not that declaration made in violation of the terms of this statute?


Arthur Meighen: Not as I would read it. The statute binds the Canadian Northern Pacific not to apply to come under the jurisdiction of the Parliament of Canada. The Canadian Northern Pacific has not applied; but the Government under the circumstances feels that it cannot come to the assistance of the Canadian Northern Pacific,

in the way of doing it on its own motion, without declaring the Canadian Northern Pacific to be for the general advantage of Canada. There has certainly been no application.


Wilfrid Laurier: There has been no application, but the Canadian Northern Pacific has been brought under the jurisdiction of the Board of Railway Commissioners. As I stated on a previous occasion, there is an agreement with the province of British Columbia which takes the railway away from our jurisdiction. In fact there is an agreement somewhere in the resolution that all existing agreements shall he respected; and so far as the legislative authority is concerned, the Canadian Northern bound itself that at would not apply, and that it would not consent to the jurisdiction of the Board of Railway Commissioners. Still, the moment we declare it a work for the general advantage of Canada, I think that it cannot avoid that jurisdiction.


Robert Laird Borden: In so far as the position of the British Columbia -Government is concerned, it did -undertake to assist within the limits of that province a road which is necessarily part of a great transcontinental system. There was the agreement to which my hon. friend from Russell (Mr. Murphy) has alluded. We recognize that; it is on the face of the statutes, but it seems to me that the situation which presents itself to Parliament at the present time is this: If that road is to become, not only practically and naturally, hut legally a part of this great transcontinental system, the Board of Railway Commissioners	for Canada	must have
jurisdiction over it. Obviously the board must have jurisdiction over it in respect of through rates; and I think it would be most inconvenient and undesirable that the Board of Railway Commissioners for Canada should - have jurisdiction over it in respect of through rates -and not in respect of local rates as well. Therefore as far as I am concerned, I would not feel disposed to come to Parliament and propose this guarantee, out of which a very large measure of aid must go to the Canadian Northern Pacific Railway Company, unless the Parliament of Canada were in the future to have control through its Board of Railway Commissioners over the rates on that road. That is the way I have felt about it, and I cannot see that any other policy is possible. It must be remembered after all that, when this aid is
voted for the Canadian Northern Pacific Railway Company, to ensure the completion of that road, the position of the company itself and the position of the province of British Columbia, as guarantor for a very large amount of that company s bonds, are 'materially strengthened. There can be no doubt about that. It is perfectly true that the agreement, to which my hon. friend the member for Russell has called 'attention, was made in connection with the guarantee of the company's bonds; but inasmuch as the situation of that company is strengthened and the position of the province of British Columbia is materially improved by the proposal to ensure the completion of that line, it does not seem to me that there was any other reasonable course to pursue than the one which we are now pursuing. We might have the alternative of proposing aid upon the condition that no portion thereof should be expended upon the line within the province of British Columbia until it has been declared a work for the general advantage of 'Canada. If we had brought down the aid in that way, I am sure that the province of British Columbia would have been very glad to consent. In fact, I think they would be very foolish not to consent in order to get the advantage of the aid. We propose to make that portion of the line part of this great transcontinental system. If there is any alternative that hon. gentlemen opposite can suggest. I shall be very glad to consider it. We do not for * one moment desire to interfere in this matter in such way as to prejudice contractual rights created between the province of British Columbia and the company; but we feel that, if we are now called upon to come to the aid of the road as a whole and seeing that a very considerable portion of that aid is to be applied to the line within the province of British Columbia, we have the right to insist and we do insist that that whole line from the Atlan-
11 p.m. tic to the Pacific shall be made subject to the control of the Board of Railway Commissioners for Canada.


Charles Murphy: Have any representations been made by the Government of British Columbia as to the ousting of their jurisdiction?


Robert Laird Borden: Yes, they have made
representations to us and we have told them exactly what I have told my hon. friend from Russell. I shall be very glad

indeed to lay the correspondence upon the table of the House. I have told them, in so many words, that we do not feel disposed to guarantee the bonds and to bring this aid, a very considerable portion of which is to be devoted to the line within the province of British Columbia, unless the whole line from the Atlantic to the Pacific, including the line within the province of British Columbia, is made subject to the jursd'iction and control of the Board of Railway Commissioners for Canada. That is the position which I am bound to maintain and which I intend to maintain; and it is a position which I think, in view of all I have said, in view of the whole situation, is a reasonable one, and one which in the end must work out, not only to the advantage of the railway company but to the marked advantage of the province of British Columbia itself as guarantor.


Charles Murphy: Has the Government of British Columbia ascquiesced in the position taken by my right hon. friend?


Robert Laird Borden: I understand the Government to acquiesce eventually in that view.


Wilfrid Laurier: Under compulsion, because I doubt very much if nr right hon. friend could have got such an agreement if he could not have obtained the consent of the province of British Columbia and unless he could have control not only over the road in British Columbia, but over every inch of the road from the Atlantic to the Pacific ocean. But I think my right hon. friend would have -been better advised if he had had those scruples of conscience, which he now maintains; two years ago when he gave a subsidy of $12,000 a mile to British Columbia for that very road. British -Columbia now has the subsidy; the road is being built; and unless I mistake my friend1 Sir Richard- McBride, I do not think he is disposed to abate' a single jot of what he has- insisted upon in his legislation which has been quoted by my hon. friend from Russell, namely; that the Canadian Northern shall not under any circumstances allow the jurisdiction of the Board of Railway Commissioners of Canada over the portion of the road which is in British Columbia. By this declaration, however, that the road is to 'be for the general advantage of Canada, I think that Sir Richard McBride must give way. I am not sure yet. We shall come to that later on. I have alluded to that on a former occasion.
I am not sure that the control is just as efficient as my hon. friend has stated, be-
cause there is somewhere in this resolution a provision to the effect that these agreements shall remain in force. When we came to that section, we may see how far it goes; but the intention to have the control of the rates everywhere must of course be paramount in this matter.


Robert Laird Borden: I have the correspondence here and I shall be perfectly willing to read it now, if I shall not be unduly taking up the time of the committee.
The correspondence begins by a telegram of the 8th of May, 1914, to myself, as follows:
Victoria, B.C., May 8, 1914. Right Hon. R. I,. Borden,
Ottawa, Ont.
Have before me copy resolutions Canadian Northern Pacific with regard to rates over line in British Columbia. See provincial statutes nineteen hundred and ten ajnd nineteen hundred and fourteen. Respectfully submit provision be made in federal Act in order adequately recognize position of province with regard -to agreement.
Richard McBride.
To which I replied -on the 9th of Mav, as follows:
Ottawa, Ont., 9th May, 1914. Hon. Sir Richard McBride,
Victoria, B.C.
Referring to your telegram eighth Dominion aid principally justified by fact that Canadian Northern is a great national transcontinental line. It would be practically impossible to assist unless entire line from Atlantic to Pacific became subject to control of federal Parliament and federal Railway Board. . We believe that you fully realize this while we also realize our duty to give every consideration that is possible to arrangements made by Pacific Company with your province. Have you any suggestions as to any suitable proviso by way of safeguard. British Columbia statutes, 1914, not available.
R. L. Borden.
The remainder of the correspondence is as follows:
Victoria, B.C., May 14, 1914. Right Hon. R. L. Borden,
Prime Minister,
Ottawa, Ont.
With reference to your telegram of May 9, am sending you herewith draft of a section which, while not interfering with declaring Canadian Northern railway for general advantage of Canada, would protect province as to agreement of January 18, 1910, paragraph 8, regarding freight and passenger rate, and section six, chapter 3 of 1910 confirming agreement. If British Columbia called upon to pay either principal or interest on our guaranteed bonds, by this last paragraph, we are subrogated as against the companies to all the rights and privileges of the original holders of the bonds if road declared for general advantage of Canada than were province to attempt to put in a receiver owing to our having paid bonds or

interest on same. Railway Commission could interfere and our receiver could only then receive any profits arising after administration of road under Railway Commisison so that principal assets of province by way of taking possession of the system in this province would be wiped out. There is a precedent for putting in proviso suggested in the legislation passed by the federal Parliament amending Esquimau and Nanaimo Railway Act in 1905. Am mailing you copies Canadian Northern Pacific Railway Extension Act and Aid Act, 1914. Suggested proviso as follows:
Provided always that so long as the Crown in right of province of British Columbia remains under any liability as guarantor for payment principal or interest in respect of any securities issued by the Canadian Northern Pacific Railway Company and until the Crown is reimbursed in full in respect of all payments which may be made by the said province by reason of such liability, nothing in this Act shall be deemed or held to in any way supercede, amend or vary the provisions of section 6 of chapter 3 of the statutes of British Columbia, 1910, either as enacted in s<tiu chapter 3 or as extended and applied by section 6 of chapter 32 of the statutes of British Columbia, 1912, or supercede, amend or vary the provisions of section 9 of chapter 57 of the statutes of British Columbia, 1913, either as enacted in said chapter 57 or as extended and applied by section 4 of chapter 61 of the statutes of British Columbia, 1914, or supersede, amend or vary the provisions of chapter 59 of the statutes of British Columbia, 1913, or the deed of trust bearing date the 7th day of July, 1913, enacted in pursuance thereof or to affect the respective right and liabilities of the province of British Columbia. The Canadian Northern railway or the Canadian Northern Pacific Railway Company thereunder and the Board of Railway Commissioners for Canada in fixing, amending or approving tolls in respect of Canadian Northern railway shall in as far as relates to traffic over the lines of railway and works comprised within the terms of the British Columbia statutes relating to the Canadian Northern Railway Company, adopt and use only the rates and tolls which may from time to time be fixed under and by virtue of paragraph 8 of the agreement scheduled to the said chapter 3 of the statutes of British Columbia, 1910, and said paragraph 8 shall so long as the Crown in right of the province of British Columbia remains under any liability and until reimbursed in full for all payments by reason thereof as aforesaid, have the same force and effect as and be binding upon the Board of Railway Commissioners for Canada to the same extent as if the said paragraph were incorporated as a provision in the Railway Act of Canada, covering the fixing of rates and tolls over the lines of railway and works comprised within the terms of the British Columbia statutes relating to the Canadian Northern Railway Companj'.
R. McBride.
Ottawa, Out., May 16, 1914. Hon. Sir Richard McBride,
Victoria, B.C.
We feel unable to press legislation unless entire system from Atlantic to Pacific declared work for general advantage of Canada. In our view this declaration coupled with the aid proposed cannot prejudice, but on the other hand
materially strengthens position of bond-holders and of province as guarantor. Canadian Northern Pacific, under our legislation, becomes part of a great transcontinental system and legislative jurisdiction must be fixed accordingly. Regret that we cannot accept proposed amendment as it practically excludes from control federal Railway Board an important portion or system on which a large part of proposed aid will be expended.
R. L. Borden.
Victoria, B.C., May 18, 1914. Right Hon. R. L. Borden,
Prime Minister,
Ottawa, Ont.
Your telegram sixteenth. Object provincial control rates to secure British Columbia fair rates and an opportunity compete for trade in prairie provinces. If in opinion federal Government essential place Canadian Northern Pacific under control Railway Commission would submit some proviso be included in legislation contemplated giving special recognition province with regard rates over this line, otherwise that Dominion take over provincial guarantee.
R. McBride.
Ottawa, May 25, 1914.
Sir Richard McBride,
Victoria, B.C.
Your telegram of 18th carefully considered. Regret that we regard both proposals as impracticable. It is manifest that the position of all provinces which have guaranteed bonds for extension of system is materially strengthened by the proposals now under consideration by Parliament. As a large part of proposed aid must be expended in completion of Canadian Northern Pacific that portion of system should obviously be declared a work for general advantage of Canada. Unless such a declaration is made no part of the proposed aid could be so expended.
R. L. Borden.


Frank Oliver: I am the member who raised the trouble-


Robert Laird Borden: That is not unusual.


Frank Oliver: -and I only want to explain what my view was, seeing that I was in error. My idea was that the declaration that provincial roads were works for the general advantage of Canada brought them under specific jurisdiction, and thought that this section 10 was for the purpose of completely establishing the jurisdiction of the Dominion over these provincial roads. I find I was incorrect, that the declaration there 'for the general advantage of Canada' absolutely establishes them as Dominion works. That being the case, my supposition in regard to this provision of section 10 falls to the ground, and I have not yet found out what the purport of the provision is.
On section 11:
That repayment of any portion of the proceeds of the guaranteed securities expended upon
42S4

or for the purpose of any company (other than the Canadian Northern) included in the Canadian Northern system with interest at four per cent per annum shall be by the respective companies upon whose undertaking or for whose purpose the same may be expended, secured by trust deeds in manner and terms satisfactory iu the Governor in Council which trust deeds shall grant fixed, specific and floating mortgages or charges satisfactory to the Governor in Council upon the undertaking of such company, and its property and assets, real and personal, present and future, and its rights, powers and franchises, tolls, incomes and revenues, said fixed and specific and floating mortgages or charges to be subject to and to rank next after the mortgages and charges heretofore created and the securities heretofore or hereafter created or issued under the existing trust deeds or mortgages securing the same, and under the power of issuing securities having priority therein reserved and contained. Such trust deeds shall be made to the trustee of the new trust deed and shall form part of the mortgaged premises thereunder. Each trust deed shall be executed before any advances secured thereby are made, and shall cover future advances out of the proceeds of the guaranteed securities.
Sir WILFRID LAURlIER: That is a very important section and requires some explanation.
Mr. M!EIGHEN: It is an important section, but I have inflicted one explanation on the committee already, and I gave that explanation in my main address in the House. The section simply provides that, as respects the moneys and the trait deeds at guaranteed securities that are not under the present Canadian Northern railway, these moneys shall be secured by the individual eompanies on whose property they are expended by mortgages on their properties, assets, incomes and revenues payable to the trustee of the new trust deed as additional security. The mortgages will be made payable at the new date of the new trust deed. The interest will be made payable along with the interest provided for in the new trust deed. The intention is simply to secure a charge upon the assets of these individual companies before that company shall receive any of the moneys the proceeds of these guaranteed securities. The mortgage to be taken shall be an open mortage, and taken before any money is expended on the road, and is to cover all moneys the proceeds of these securities to be expended on the road. In that way, no future encumbrance can come upon them to the prejudice or impairment of our security.
Sir'WILFRID LAURIER: I understand that, but the objection which at once arises in my mind has not been touched by my hon. friend. We become guarantors of a

loan of $45,000,000, and by section 3 we have taken a mortgage upon the undertaking of the Canadian Northern railway, its properties, revenues, etc., for every cent of that money. Now, any part of that money that is to go to the betterment of those companies is to create a special mortgage upon the assets of thoise companies. We have conceived the whole enterprise was one. If there is default in the securities, how are the proceeds to be divided? If we have one company and one only, one guarantee and one only, the proceeds of the moneys as they come from the treasury of the main company may be applied so much in Alberta, so much in Saskatchewan, so much in British Columbia, so much in Ontario, so much in Quebec. Upon this we take a special mortgage, in one place $1,000,000, in another place $500,000, in another place $3,000,000. I would have supposed that our mortgage would cover everything, not only the parent company, but the subsidiary company as well; that they should be all pooled, so to speak, and that no one portion of the money should go to one part and another portion to another part. Apparently it is proposed to proceed differently, and the reason has not been supplied by my hon. friend.


Arthur Meighen: I think I have the objection which the right hon. gentleman raises; it is that we should have a mortgage for the whole amount, covering all the assets of all the companies. The first objection to that is that no company, no entity whatever, can possibly give such a mortgage. A company can give a mortgage only on its own assets; no company can give a mortgage on the assets of other companies. It could be done, of course, if amalgamation were possible; then the amalgamated company could mortgage all its physical assets. But amalgamation is impossible, for the reasons that I myself gave, supplemented by other reasons since given by other hon. gentlemen. So long as we keep the companies separate, all belonging, of course, to the parent company, but remaining separate entities in the meantime, as we are bound to do, so long we can only get a mortgage on the assets of those companies from the directors of those companies themselves. We will take the case of the Canadian Northern Ontario. . Suppose it received $15,000,000 as the proceeds of these moneys. It gives a mortgage for $15,000,000; does my right hon. friend argue that it should give a mortgage for $45,000,000? In

the first place, no object could be served. We have our $45,000,000 mortgage on the assets of the Canadian Northern, not only on the physical assets of the road but on the terminals and so on; we have it' on the stocks of the individual company and in that way the stocks of all the companies are pledged for the whole amount. But when we come below the stocks and down on the physical assets of the individual companies, we take a pledge in each case for the amount of money that went into those physical assets, which, I think, is the equitable .and fair thing to do. I do not think that our securities would be one whit better if we acted on the other principle and took a mortgage for $45,000,000 from each of the individual subsidiary companies, even though those companies get only a very small portion of the $45,000,000. It must be remembered that we have a mortgage on their stocks for the whole amount.
On section 12:
That the capital stock of the Canadian Northern be fixed at the sum of one hundred million dollars subject to increase only by the Parliament of Canada:
Provided that for the purpose of exchange of income charge convertible debenture stock, secured by trust deed made to the British Empire Trust Company, Limited, and the National Trust Company, Limited, dated 6th May, 1910, jnot exceeding twenty-five million dollars in all, there may, during the period of the option of exchange given by said trust deed to the holders of said debenture stock, viz:-the years from January 1, 1916, to January 1, 1919, inclusive, and during any extension of that period, be issued to such holders who may exercise said option, such amounts of capital stock, over and above one hundred million dollars as may be required for the purposes of such exchange, not exceeding $100 of capital stock for $100 of debenture stock and not exceeding in all twenty-five million dollars.
Provided that the Canadian Northern may extend the period of said option from time to time. The said additional twenty-five million dollars of capital stock is hereby authorized and shall be set apart for the sole purpose of such exchange and any fully paid stock deposited with the trustees of said trust deed for such purpose may be returned to the depositors thereof; provided, also that no further issue of said income charge convertible debenture stock shall be made under said trust deed.


Frank Oliver: I have .already said that in my judgment $100,000,000 of common stock is an unreasonable amount to issue in the case of an enterprise whose total cost was $400,000,000, and of which total cost the major part was provided by the people of Canada, either through the federal Government or through the various provincial governments. I still hold that view, and take this opportunity of emphasizing it.


William Pugsley: Let this be clearly understood; the capital stock, instead of being reduced, is being increased by watered stock. At the present time, even with the $7,000,000 which was issued under the legislation passed at the last session of Parliament, the capital stock stands .at $77,000,000. Out of that amount $25,000,000 is to come in case the holders of the income charge convertible debenture stock should like to take common stock. That would make the actual issued stock $52,000,000. That $52,000,000 is being increased to $100,000,000; the capital stock is practically being doubled by this legislation. It is entirely water; there is nothing to represent it; it is created simply by the printing press. This goes to show that there has been an attempt-shall I say an innocent attempt, made without full realization of what it means ?-to induce the country to believe that the capital stock has been reduced, whereas it has in reality been practically doubled.


William John Macdonald: On what principle was the capital stock of this company fixed at $100,000,000 ? How is the amount arrived at, and why?


Arthur Meighen: I have so often risen on this point that I feel rather .ashamed to rise again. However, that feeling does not seem to possess the hon. member for the city of St. John. I shall not attempt to say whether or not he deceives himself by his repeated reiteration of the myth that we have increased the capital stock, but I will attempt to say that he does not deceive anybody else. This Parliament and the late Government authorized a capital stock issue of $92,900,000.


William Pugsley: Not of paid-up capital.


Arthur Meighen: And this Parliament,
under the late Government, .authorized the issue of paid-up capital.


William John Macdonald: $70,000,000; where
do you get the other $30,000,000?


Arthur Meighen: After the $70,000,000
was declared to be paid up, and right fully paid up and issued a3 such, this company became the owners of twenty-eight companies; and as these companies are themselves capitalized at figures authorized by the Parliament of this country in very many cases .and by the provincial legislatures in other cases, it could hardly be argued that the assets of the company have not increased. The stock issue of the companies that are brought in amount to about $68,000,000. That $68,000,000, together with the

$77,000,000 already authorized .as paid up by the Parliament of Canada, is reduced to $100,000,000, as the hon. member for St. John understands as clearly as .anybody else and as clearly as he understands anything else in the world.


William Pugsley: Where have you got the
$68,000,000?


William John Macdonald: The other securities are not worth anything.


Arthur Meighen: It is remarkable how
anxious hon. gentlemen opposite are that these stocks should not go in .and that other stocks, in a worse position by far, should go in.


William John Macdonald: You say they are
worth something. You ought to have taken everything, as we say.


Arthur Meighen: Does the hon. gentleman say that the stock of the Canadian Northern Ontario is not worth anything?


William John Macdonald: It may not be.


Arthur Meighen: Does he say it is not?


William John Macdonald: It w.as only $250,000 a year ago.


Arthur Meighen: Will he say it is not
worth anything now?


William John Macdonald: There w.as $250,000
of Canadian Northern Ontario stock two years ago. My hon. friend may have pumped some water ipto it in the meantime.


Arthur Meighen: Does the hon. member adhere to it that it is not worth anything?


William John Macdonald: I am telling you the stock was $250,000 a year ago.


Arthur Meighen: Does my hon. friend
adhere to the statement?


William John Macdonald: My hon. friend will have to take my answer in my own way.


Arthur Meighen: I am willing to take it in any way, provided it is an answer. The hon. member refuses to state whether he abides by his statement that the Canadian Northern Railway Ontario stock is worth nothing. That is a company bonded by this Government upon which the late Government has been boasting that they have a first mortgage ampile, and as good as gold. What has he to say if they have a mortgage as good as gold-


William John Macdonald: What has the stock to do with bonds?


Arthur Meighen: If a first mortgage is
as good as gold in the case of a company with one thousand miles of road, how could the stock be worth nothing?


William Pugsley: It might be.


Arthur Meighen: Bonds of $35,000,000
guaranteed by this Government, good as gold-and the stock above those bonds worth nothing?


William Pugsley: That might be.


Arthur Meighen: That is absurd and my hon. friend knows it. He knows that $10,000,000, while it has ibeen reduced in toto, is of itself, relatively speaking, a very moderate capitalization for a company bonded at $35,000,000.


William Pugsley: Does not the return
show that the $10,000,000 of stock of the Canadian Northern Ontario now belongs to the Canadian Northern railway? Then how do you say you are acquiring that under this legislation?


Arthur Meighen: It says it is held in
trust for the Canadian Northern railway. Does he, as a lawyer, say that means it belongs to the Canadian Northern railway?


William John Macdonald: Certainly.


Arthur Meighen: If the trust is absolute, it belongs to it but there are trusts that are not absolute, and I direct his attention to the fact that that trust is not absolute. The effect of the trust is merely to bind Mackenzie, Mann and Company, Limited, the owners of the stock, not to divert it, just to accept stock in the Canadian Northern railway itself for the Canadian Northern Ontario stock. That is the extent of the trust. They have never received anything for it, but as soon as the Canadian Northern railway render the service of guaranteeing their bonds they were placed for convenience in this column as being held to that extent that the owners of the stock, Messrs. Mackenzie, Mann and Company, would not divert it elsewhere. The stock of the Canadian Northern Ontario remains the property of Mackenzie, Mann and Company subject to that limited trusteeship.


William Pugsley: Certainly the return does not show it.
On section 13:
That the difference between the present issued paid up capital stock of the Canadian Northern,

namely, seventy-seven million dollars, and the said one hundred million dollars, namely, twenty-three million dollars, may in pursuance of the provisions of the agreement be issued as fully paid in consideration of the transfer of the shares mentioned in the first part of the second schedule hereto, such twenty-three million dollars of stock to be issued to the parties transferring said shares, or to their nominees as provided in the agreement.


William John Macdonald: Why do you not make that clause with reference to the parties transferring the shares more definite? Do you know who they are?


Arthur Meighen: I do not know what
object would be served by it. The certificates are issued to the parties who transfer the shares from their names. They are the parties who must receive the stock.


William John Macdonald: The statement given to the country was that that goes to Mackenzie and Mann. If it does not we would like to know to whom it does go.


Arthur Meighen: Mackenzie, Mann and Company were the holders of the stock at the time the deed was made, and I presume are yet.


William John Macdonald: Why not say given to them?


Arthur Meighen: It might belong to
somebody else at the time the transfer is made.


William John Macdonald: The stock is to be transferred to the Canadian Northern railway, is it not? If we are going to give stock, part of the $100,000,000 to people other than the Canadian Northern railway or Mackenzie and Mann, we should know to whom it is to be given.


Arthur Meighen: The hon. gentleman
refers to clause 13. That $23,000,000 is issued to the parties who transfer to the Canadian Northern railway or to their nominees some $68,000,000 odd of stock in the subsidiary companies.


William John Macdonald: Supposing they did not transfer the stock?


Arthur Meighen: Then they would not
get the $23,000,000 and no guarantee would be given.


William John Macdonald: Does page 34 state who holds the stock which is to be transferred ?


Arthur Meighen: Yes. It contains the
statement of those who owned the stock
at the time the document was drawn up and who, no doubt, own the stock still.


William John Macdonald: Page 34 show's that $7,550,000 of the stock of the Canadian Northern Quebec railway is held by others. Who owns that. large block of stock, because whoever owns it controls that road ?


Arthur Meighen: If the hon. gentleman will look at the referencei he will find it explained in detail but I can give him the information pretty closely. This $7,550,000 is held as follows:	$5,144,600 by
the Northern Consolidated Holding Company of whose stock Mackenzie, Mann and Company own 71-9 per cent, that is Mackenzie, Mann and Company owa 71-9 per cent of $5,144,600 of the stock of the Canadian Northern Quebec railway. Mackenzie, Mann and Company, therefore control the Northern Consolidated Holding Company that has control of $5,144,600 of the $7,550,000 that is outstanding, so the hon. gentleman will see that by controlling the Northern Consolidated Holding Company, Mackenzie, Mann and Company, by that act alone have control of the Canadian Northern Quebec Company railway. In addition to that, they have $2,000,000 of stock direct in the Canadian Northern.


William John Macdonald: Mackenzie, Mann
and Company, will transfer their holdings in the Canadian Northern Quebec Railway Company but the other people will not ?


Arthur Meighen: Exactly.


William John Macdonald: Was not an application made not very long ago, to put the Northern Consolidated Holding Company in liquidation?


Arthur Meighen: Yes, I made inquiries
about that and found that a gentleman had applied to the; courts to have the company declared" insolvent. According to my information, this gentleman is a shareholder of the company, but does not claim to be a creditor. I understand that the company owes nothing at all to anybody except Mackenzie^ Mann and Company, who are asking for the money; so I do not think this gentleman can have any very serious hopes for the sucess of his action.


William John Macdonald: I only saw it mentioned in the press. I also see on page 34 that $521,200 of the stock of the Quebec and Lake St. John railway is held by others. Are you going to get that and also the $3,000 item (the last on the list) ?


Arthur Meighen: No. As the hon. gentleman will see by reference to the first part of the second schedule those shares are not to be transferred. Only the stock held by Mackenzie and Mann is transferred.


William John Macdonald: Why do you not
put Mackenzie and Mann in this agreement then?


Arthur Meighen: We know that they will and must get themselves into a position to transfer these shares but we do not know that they can procure this other stock; in fact, so far as they know they cannot procure it.


William John Macdonald: Why do you not
make the issue of the $23,000,000 to them direct.


Arthur Meighen: I do not know that it
would injure the Bill at all to put Mackenzie, Mann and Company, Limited, in instead of ' parties transferring said shares.' It would mean the very same thing, unless in the meantime they might possibly transfer a part of the stock on the understanding that the party to whom they transferred it would comply with the provisions of this agreement and retransfer it to the Canadian Northern.


William John Macdonald: For all practical
purposes we might have Mackenzie, Mann and Company, Limited, inserted instead of the words 'parties transferring said shares.'


Arthur Meighen: I think so.


William John Macdonald: Could the Solicitor
General answer my question now about the bank matter?


Arthur Meighen: I have made inquiries. My information is that these are for the most part six months' notes. To get the due dates inquiries will have to be made at Toronto. While the auditors have not reported specifically on each one, they find that they are all short term notes.


William John Macdonald: I suppose they may be short term notes renewed from time to time.


Arthur Meighen: I understand none of them are overdue.


Frank Oliver: I would like to understand for what reason this $23,000,000 of stock of the Canadian Northern is being created to be handed over to Mackenzie and Mann.


Arthur Meighen: I am afraid I cannot explain that if it is not already clear. They turn in to the Canadian Northern $68,000,-

000 of stock issued under authority of this Parliament. They divest themselves of that and make the Canadian Northern the owners of it, and in lieu they get $23,000,000 of stock, or a reduction of $45,000,000. They do that in addition to the many other things which they are bound to do under these provisions, in addition to releasing the many million dollars of claims against the Canadian Northern railway; in addition to transferring their securities in the townsites; and in addition to transferring to the Government $40,000,000 of stock.


Frank Oliver: Mackenzie and Mann are the Canadian Northern, and in consideration of their transferring the stock in these subsidiary companies that they themselves hold to the Canadian Northern that they themselves hold, they are given $23,000,000 more stock of the Canadian Northern, while at the same time the Government is announcing to the country that it has reduced the stock of the company.


Arthur Meighen: The hon. gentleman
knows that is not correct at all.


Frank Oliver: I must insist, with all
due deference, that it is absolutely correct; there is no question about it; the record says so. No possible justification has yet been given of this creation of $23,000,000 of stock of the Canadian Northern to be handed over to Mackenzie and Mann because Mackenzie and Mann have given as security for a loan they are getting certain stocks that they hold.


Arthur Meighen: They have not done
that.


Frank Oliver: That is what they are
represented to be doing.


Arthur Meighen: It is not a pledge. They have divested themselves of the stock utterly, and made it the property of the Canadian Northern Railway Company of
n:ch this Government is a two-fifths owner. That does not say Mackenzie and Mann own it still.


Frank Oliver: They certainly own three-fifths, but that is not the point I am getting at. What is the reason for this $23,000,000 issue of stock? If it is necessary for this Government to have an interest in the Canadian Northern, why should the stock be swollen to that amount? If the Government is to hold two-fifths and the company three-fifths, the total capitalization might just as well be $50,000,000 as

$100,000,000, and there would be that much less stock outstanding to earn dividends on the operation of the road. The Government has seen fit, without just cause or provocation, without sense of reason, to add $23,000,000 to the burden of stock issue against the Canadian Northern which will he a burden upon the earnings of the road in case of its ultimate prosperity. That is my point.


Arthur Meighen: There is an increase
of $23,000,000 and there is a decrease of


Frank Oliver: No there is not.


Arthur Meighen: If the hon. gentleman will shut his eyes to that, all I can say is that none are so blind as those who will not see. There is to-day $145,000,000 of stock in all these companies.


Frank Oliver: In what companies?


Arthur Meighen: In the subsidiary and parent companies.


Frank Oliver: Let us talk about either the subsidiary companies or the parent company; let us have them segregated, so to speak.


Arthur Meighen: I will segregate them now. There is $68,000,000 of an issue against the subsidiary companies, there is $77,000,000 against the parent company; that makes $145,000,000 that now is entitled to dividends if any stock is entitled to dividends. Of this $145,000,000 the Government own $7,000,000 and $138,000,000 is owned by Mackenzie, Mann and Company. When this Bill goes into effect there will not be $145,000,000 of stock entitled to dividends in any sense whatever, there will be $100,000,000, no more and no less. How can it be said that stock owned by the Canadian Northern is entitled to dividends and that the Canadian Northern stock too is entitled to dividends? Absurdity certainly could not go farther. The Canadian Northern stock, which represents the ownership by the Canadian Northern of the assets, may be entitled to dividends but nothing more can be. You have $145,000,000 entitled to dividends to-day; pass this Bill and you have $100,000,000 entitled to dividends. Is that a reduction or an increase?


Frank Oliver: $100,000,000 is less than $145,000,000.


Arthur Meighen: You have $145,000,000 entitled to dividends to-day if any stock is entitled to dividends. Pass this Bill and
you have $100,000,000 entitled to dividends and $100,000,000 is $45,000,000 less than $145,000,000. Remember too that two-fifths of those dividends come back to the people of Canada, and remember too that the stock of Mackenzie, Mann and Company is reduced from $138,000,000 to $60,000,000. Yet hon. gentlemen will get up and say that we have increased the stock, and one hon. gentleman will say that we have doubled it. I presume that if we wiped it out altogether he would say that we had multiplied it a thousand times.


Frank Oliver: My hon. friend has not yet shown in all the arguments he has put forward where there is a word or a line in these resolutions that deprives this stock in the subsidiary companies of the right to obtain dividends.


Arthur Meighen: The very result of the deal deprives it of that right.


Frank Oliver: My hon. friend says that is so but there is not a word in the resolution that says so.


Arthur Meighen: My hon. friend must
agree that the stock cannot obtain dividends and the owners obtain dividends on the same stock. Imagine a railway company going to any sane tribunal and saying: We are capitalized for $100,000,000- but we own a lot of other stock and we want dividends on our capital stock and we want dividends on our own stock. The claim would be absurdity itself. It is the logical result of the arrangement that there can be only that $100,000,000 of stock that is being issued upon which they can claim to earn dividends.


Frank Oliver: My hon. friend has said
that and he has repeated and repeated and repeated it several times to-day.


Arthur Meighen: For the reason that
otherwise it would be earning dividends twice.


Frank Oliver: But he not only does not put any form of words that carries that meaning in the; resolution but he declares that any such form of words as would convey that meaning cannot be embodied in the resolution. The subsidiary companies are subsidiary companies, they are individual entities, they are capable; of borrowing money and giving mortgages upon -their property. They have got to earn the interest on these mortgages, and by what process of reasoning does my hon. friend suppose that they are not entitled

to earn dividends on this stock just the same? It is true that the Canadian Northern will own that stock. If I owned it would that be a bar to their earning dividends upon it? Because the Canadian Northern owns the stock is that a bar to dividends being earned upon it? If the hon. gentleman wants to have it as be says it is, let him say so in the resolution. He believes it is that way now. He has been well instructed on that point but he has not made himself definite to the satisfaction of myself, or to the satisfaction of a number of other gentlemen in this House whose opinion on a legal matter is entitled to consideration.


Arthur Meighen: Would the hon. gentleman suggest a clause to the effect that $100,000,000 would be entitled to earn dividends? We do not recognize that $100,000,000 as necessarily entitled to earn dividends but we say that no other stock shall be issued or shall have a claim to earn dividends. The company is not entitled to dividends. The\ owner of the stock may be entitled to dividends. The owner of the $100,000,000 of stock is the Canadian Northern Railway Company. If there was an amalgamation the Canadian Northern would be the owner of these roads. The roads would still exist. They will be worth just as much as if there was no amalgamation. Instead of the Canadian Northern owning them directly it owns them through this stock. How can you say that because it owns them through this stock instead of owning them directly it is entitled to an increased revenue?


Frank Oliver: How can my hon. friend
say that because the Canadian Northern owns the subsidiary companies through the stock of the subsidiary companies the stock does not exist?


Arthur Meighen: I do not say that it
does not exist, but I say that you cannot count it twice in asking for dividends and you do count it twice when you say the Canadian Northern can ask for dividends on its own stock and also on the stock of the individual companies.


Frank Oliver: The subsidiary company is a separate entity and my hon. friend proposes to take a specific mortgage upon this separate entity.


Arthur Meighen: It is a separate entity.


Frank Oliver: Powers are separately
granted to the subsidiary companies in order that they may pay the interest upon these mortgages; therefore the stock is entitled to earn dividends. The existence of the Canadian Northern Railway Company's stock has nothing to do with that because it does not affect the situation in any degree. On what principle is the Canadian Northern stock swollen by the handing over of $23,000,000 worth of it to Mackenzie, Mann and Company? My hon. friend has given half a dozen reasons. Amongst others he says Mackenzie, Mann and Company have given up a large amount of the claim that they have against the company, that they have rendered great services in the promotion of the company and that the Government is taking a part of the property of the Canadian Northern Railway Company. None of these reasons bear on the point at all. The Government are claiming that they are reducing the stock of the Canadian Northern when they are creating $23,000,000 worth of stock for the purpose of handing it over to Mackenzie,) :Marm 'and .Company. What right have Mackenziei, Mann and Company to $23,000,000 of stock except by putting up as security the stock of certain companies which they .hold as security for the loan that they are about to receive?


Arthur Meighen: They do not do that at all. They do not put up the stock as security.


Frank Oliver: Well, my hon. friend and I cannot come to an agreement. As I understand the reading of the resolution, it makes certain and positive statements, and I believe I understand the English language as well as my hon. friend does. My hon. friend says there is a certain meaning and effect in these resolutions. I say that meaning is not contained in the resolutions, although it may be in his mind. I do not think we can come any closer together than that, if we argue here all night. Again I say, however, that he has no good and sufficient reason, no reason that will appeal to any man's sense of justice or fair play or public interest for the increase of the capital stock of the Canadian Northern by $23,000,000, and the handing of that $23,000,000 over to Mackenzie and Mann.


William John Macdonald: Nine out of every
ten of these companies mentioned in the

second schedule, whose stock is referred to here, are in the position that their stock is absolutely water. The roade were built under bonds guaranteed by the provincial governments or by bond issues made by the companies themselves; and the stock, which in one case is $25,000,000, might as well be '$50,000,000, so far as any money put into the construction on the part of the persons in whose name the stock stands is concerned. Thus my hon. friend, when he complains about all this water being turned in, in return for $23,000,000 worth of water in the Canadian Northern, has an absolute ground of complaint. You are creating in the parent company securities which, if this enterprise eventually become a successful one, will require interest to be produced on that extra $23,000,000 that has been added to the stock in return for what is absolutely water.


Arthur Meighen: Which stocks are water, in the opinion of the hon. gentleman?


William John Macdonald: My hon. friend comes here, after having had the opportunity of being coached for three months, and, after consulting railway experts, special counsel, auditors and so on; and when hon. gentlemen on this side attempt to make a suggestion in regard to matters of importance, he assumes the role of interrogator.
He is in a false position. The hon. gentleman ought to give all the information at his command, but it has been impossible to extract from him any information. On three occasions I have asked my hon. friend to give me information on important matters; and after fumbling amongst his papers, he has told us that he cannot get it. Last week I asked my hon. friend to give me a statement of the financial position of Mackenzie, Mann and Company, Limited. He told me he would get it.


Arthur Meighen: I did not do so.


William John Macdonald: ' Hansard ' will show. My hon. friend stated that he would get that statement as to their assets and liabilities. Earlier in the day-I had to remind my hon. friend in regard to this bank indebtedness, concerning which he was going to give us information. A few moments ago he told the committee that he could not give us any information except that they were on six months' notes. When I make the general statement, that if the estimation of most business men in this country is correct, namely, that these stocks are
all water, my hon. friend, who knows all about this undertaking and who has all the information at his command, declines to tell the committee what he knows about it and to answer questions put on this side of the House.


Arthur Meighen: I hope that I shall be sufficiently chastened by the lecture I have received from the hon. member for Pictou. He starts out by .asserting that nine out of ten or a larger proportion of these stocks turned in are nothing but water, and he demands that I answer him. When I ask him what the companies are whose stocks are water, he says:	What business have
you to ask me that?


William John Macdonald: You know.


Arthur Meighen: I know? I do not know that any of the stocks are water.


William John Macdonald: Do you not know
that they are all water?


Arthur Meighen: I do not believe that
they are. But before I answer the hon. gentleman as to his assertion that a certain stock is water. I want to know what that stock is. I think it is a fairly reasonable question to ask what stock he says is water, before I say whether it is or not.


William John Macdonald: You should tell us whether they are or not. Take the whole of them.


Arthur Meighen: As to the whole of them, in my opinion, they are not water; and in my opinion, I have established that to the satisfaction of any reasonable person.


William John Macdonald: Have you got any auditor's report as to that ?


Arthur Meighen: My hon. friend says that I said I would give him a statement of the assets and liabilities of Mackenzie, Mann and Company, Limited. I ask him to turn up 1 Hansard ' and show me where I told him that I would give him any such thing.


William Pugsley: Do you not think you ought to give it ?


Arthur Meighen: I do not think I ought to.


William Pugsley: You are putting them in here as contractors ?


Arthur Meighen: You ask me to put in all the assets and liabilities of men who act as contractors. I am not impressed by the reasoning that the hon. gentleman adduces.


William Pugsley: And from whom the Government is taking this guar-
12 m. antee.	.


Arthur Meighen: The hon. gentleman (Mr. Macdonald) says he seeks information in vain. If he will only say what information he wants, I will make every endeavour to get it, if I cannot get it now. I thought that I had answered him sufficiently, and that he had expressed satisfaction when f said that the auditors had found that the notes were all short-date notes and for the most part six months' notes. I do not know what object would be served by giving further data; but if he says it is important to get it, I will get the exact date and hour.


William John Macdonald: Has my hon. friend any authentic data as to how much actual money is represented in any of these items contained in the first Dart of the second schedule ?


Arthur Meighen: I do not think we need rehearse the debate we have gone through, in this House two or three times. It is not money for the most part that is represented in these stocks. If a company undertakes the construction of a line of railway; constructs that railway, raises the money during construction, the parties who do are surely entitled at least to stock in the enterprise for their services. The courts of this country have held that they are entitled to remuneration for such services. They have performed the services; and I submit to the hon. member for Pictou, as a reasonable man:	Is
$10,000,000 worth of stock in an enterprise, in respect of which $35,000,000 or more *have been expended a reasonable amount of stock in return for services in financing and in the construction of that road? There is a case in the courts of Canada where it has been held that twelve and one-half per cent of the expenditure is a reasonable profit that could be sued for and recovered in cash. If accepted in the form of stock, it would naturally be more. In the face of that and in the face of the fact that the $1,000,000, in the case of the Halifax and Southwestern, represents the only return at all for the services of the contractors in the building of that road guaranteed them by the Government of Nova Scotia, it would hardly be said that they gave nothing at all for that million dollars' worth of stock. The same and similar explanations apply throughout.


Frank Oliver: There used to be an idea- of course, it has. been exploded long ago- that when people went into any constructive enterprise, they provided the money by way of stock. That idea seems to be discarded, and now apparently we do not expect any person to put up real money of his own. We start gigantic enterprises costing hundreds of millions of dollars, and we do not expect the enterprising gentlemen who start them to put up a dollar of their own money. It is nowadays expected that they make their money out of the enterprises instead of putting their money into them, as used to be the case in the old-fashioned days. Of course, the world moves, and we now are in a new age.
As to those stocks that are mentioned in the schedule and in regard to which the question arises how much is water, I noticed that the Canadian Northern Pacific is listed at $25,000,000. Now, the Canadian Northern Pacific, as I understand on the authority of the Premier of British Columbia, will cost $50,000,000. So, our enterprising friends are not taking 12J per cent of cost in stock, but 50 per cent of cost in stock. I do not know how much of that my hon. friend would consider to be water.


Frank Oliver: I desire to give notice of an amendment to the next section, section 15:	'
Provided that in the cases of the Canadian Northern Western and the Canadian Northern Saskatchewan Railway Companies the foregoing shall only apply to the parts of the lines of these companies now or hereafter operated by the Canadian Northern Railway Company or so long as they are operated by that company.
Progress reported.
On motion of Mr. Borden, the House adjourned at 12.05 a.m. Wednesday.
Wednesday, May 27, 1914.