1934-06-25

CIVIL SERVICE


[Stage Direction]
Mr. J. L. BOWMAN (Dauphin) presented the fourth report of the select special committee on the Civil Service Act, as follows:
House of Commons,
Monday, June 25, 1934.
Fourth Report:
The select special committee appointed to inquire into and report upon the administration and operation of the Civil Service Act as amended, with instructions to inquire into
and report concerning the repeal or amendment of any of the provisions of the said act or the substitution therefor or addition thereto of other provisions as the committee may deem advisable, begs leave to present the following as its fourth report:
(1)	Representations have been made to your committee urging that certain temporary employees who have for long periods been occupying positions of a permanent nature should now be accorded permanent status.
Your committee find that by orders in council, P.C. 2958, dated the 16th day of December, 1920, and P.C. 3895, dated October 22, 1921, passed pursuant to the Civil Service Amendment Act, October, 1919, 4060 temporary employees who had been continuously employed in positions of a permanent character since November 10, 1919 (the date on which the Civil Service Act became law) were, during the period 1920-27, given permanent status. In 1927, however, the enabling orders in council were rescinded. The representations which have been made to your committee urge that any other temporary employees (approximately 300 in number) who were eligible to benefit under this section of the act and the said orders in council but whose permanency was not at the time effected should now be granted permanent status, in order that they may enjoy the benefits attached thereto. These benefits include the right to contribute to the Civil Service Superannuation Act, the right to receive statutory increases when these are again allowed, the right to compete for promotions when promotions are again authorized, and the right to receive retiring leave on separation from the service. A large number of the employees in question have already been permitted to contribute to the Civil Service Superannuation Act, so that the additional burden on that fund will be small, and as all statutory increases and the great majority of promotions are at present prohibited, there will be little, if any, additional^ cost in this connection nor in connection with the question of compensation, as employees will continue to receive the salaries which they are now paid.
Your committee believes that there is justification for the granting of permanent status to the employees in question, and recommends that the civil service commission be instructed to prepare the necessary regulations for submission to the governor in council to give effect thereto.
(2)	Representations have also been made to your committee that permanent status should be conferred upon the staff of the soldier settlement board, which has since 1918 been operating almost entirely on a temporary basis.
It is represented that as a result 01 reorganization the staff has now reached a permanent basis, having been reduced from a peak figure of 1,595 to a present figure of 343. The great majority of the members of the staff are returned soldiers and have been employed continuously for long periods of service-in many cases up to fifteen years. Your committee finds that in 1928 action in this respect was taken in connection with the staff of the Department of Soldiers Civil Reestablishment.	#
Your committee is of opinion that the action requested is in the public interest, and recommends that the Soldier Settlement Act be amended to provide that:
[Stage Direction]
Civil Service Committee Report
"Such members of the staff of the soldier settlement board as may be designated by the governor in council shall, notwithstanding anything contained in the Civil Service Act, be regarded as permanent employees, provided that their positions are certified' by the civil service commission, upon the recommendation of the minister based upon the report, in writing of the deputy minister, to be of indeterminate duration, and shall thereafter become subject in all respects to the Civil Service Act."
(3)	Representations have been made to your committee on behalf of employees receiving prevailing rates of pay, urging that they be allowed' to contribute to the civil service superannuation fund.
Section 2 of The Civil Service Superannuation Act limits the benefits of that act to permanent full time employees "who are in receipt of a stated annual salary of at least $600." The employees on whose behalf representations have been made could accordingly secure the benefits of the superannuation act only by having their salary r ate changed from a prevailing rate basis to a state annual salary, or by amending the provisions of the Civil Service Superannuation Act in this regard.
With respect to this and other matters relative to the application of the superannuation act the factors involved are of so complicated a nature that your committee was unable to obtain sufficiently definite or comprehensive information to warrant a recommendation.	Moreover the committee is of
opinion that the question is one that does not properly come _ within its terms of reference. In any case it is understood that these matters are under consideration by the advisory committee on the superannuation act to which body your committee suggests the representations above specified be referred.
(4) Your committee has been pleased to note that since the reorganization of the civil service commission substantial progress has been made in carrying out the recommendations of the special committee of 1932, and that action is being taken in connection with overlapping^and the reorganization of certain services. Your committee particularly urges that the progress which has already been made in absorbing surplus personnel and thus obviating the necessity of filling vacancies with new personnel, be extended to the greatest degree possible.
(5)	Attention has been drawn to recommendation No. 21 contained in the report of the civil service committee of 1932, recommending the setting up of a board to adjudicate upon complaints of civil servants.
It has been alleged that this board has not functioned due to the fact that no person has been designated to convere the board.
Your committee finds that the civil service commission has been dealing with complaints of civil servants by means of conferences with representatives of civil servant organizations and with representatives of the departments concerned.
Your committee recommends that the civil servant organization, of which the complainant is a member, should notify the civil service commission of its desire to have a complaint considered and that the commission then take the necessary steps to have such board convened.

(6)	hour committee has had placed before it numerous other representations containing much useful information regarding conditions in the public service in connection with all of which careful consideration has been given. It has not, however, been practicable to deal definitely with all the matters submitted and it is accordingly recommended that such matters appearing on the record not dealt with specifically by this report be investigated by the civil service commission so that where possible the necessary action may be taken, [DOT]"-hd rur^ermore that the commission submit a full report upon the matters involved to such select committee on civil service matters as may be set up at a subsequent session.
(7)	Your committee finds itself in sympathy with the representations made to it that the full restoration of promotions and increases and compensations in the service would be in the public interest and recommends that such steps be taken as soon as financial conditions warrant.
(8)	Your committee has been greatly
assisted by the evidence and information placed before it by the several civil servants' associations, and has been impressed *with the high efficiency and morale of the public service as indicated thereby.
A copy of the printed proceedings and evidence is submitted herewith.
All of which is respectfully submitted.
J. L. Bowman,
Acting Chairman.


[Stage Direction]
Hon. HUGH GUTHRIE (Minister of Justice) presented the first report of the special committee to which was referred Bill No. 101, respecting the franchise of electors at elections of members of the House of Commons and Bill No. 115, respecting the election of members of the House of Commons as follows *
The special committee of the house to -which ^as referred Bill No. 101, an act respecting the franchise of electors at elections of members of the House of Commons, and Bill No.
au act respecting the election of members ot the House of Commons, recommends that it .p;ive? leave to sit while the house is sitting. All of which is respectfully submitted.
H. Guthrie,
Chairman.
Mr. GUTHRIE moved that the report be concurred in.
Motion agreed to.

Mr. E. R. E. CHEVRIER (Ottawa) moved:: That Bill Q2 of the Senate for the relief of Hyman Stotland, the preamble of which has been reported not proven by the select standing committee on miscellaneous private bills, be placed' on the order paper, under standing order No HI, for consideration in committee of the whole at the next sitting of the house.

Loan Companies Act


Mr. SPEAKER:: Those in favour of the motion please say "aye."


Some hon. MEMBERS:: No.


Edgar-Rodolphe-Eugène Chevrier: Under standing order 45, as this is a private bill, no notice is required. The rule reads as follows:
Forty-eight hours' notice shall be given of a motion for leave to present a bill, resolution or address, for the appointment of any committee, or for placing a question on the order paper, but this rule shall not apply to bills after their introduction, or to private bills. . . .
Standing order No. Ill reads:
When the committee on any private bill report to the house that they have made any material change in the preamble of a bill, the reasons for making such change shall be stated in their report; and if they report that the preamble of a bill has not been proved to their satisfaction, they must also state the grounds upon which they have arrived at such a decision; and no bill, the preamble of which has been reported as not proven, shall be placed upon the orders of the day unless by special order of the house.
But I submit that under standing order 45 that does not apply.


Mr. BENNETT:: I have not had an opportunity to look into this motion. I should like it to stand in order that the government may have an opportunity to see what it involves.
Motion stands.



EXPRESS AND COMMUNICATIONS

[Stage Direction]
On the order for the introduction of bills to incorporate Canadian Railway Express Company and Canadian Communications Company!
Hon. R. J. MANION (Minister of Railways) :: Regarding these two bills, the government was asked by the two railway companies to introduce them, as they regarded it as essential that enabling legislation should be made available to expedite whatever measures for unified operation the two companies might decide jointly to adopt with respect to the two subsidiary services referred to. However, latest information intimates that no agreement has as yet been reached or is in prospect of being reached at an early date, if at all. Therefore the matter cannot be said to be one of immediate urgency. For this reason the government does not intend to proceed *with these bills.



LOAN COMPANIES ACT AMENDMENT

[Stage Direction]
Right Hon. R. B. BENNETT (Prime Minister, for the Minister of Finance) moved for leave to introduce Bill No. 123, to amend the Loan Companies Act.
Mr. MACKENZIE (Vancouver):: Explain.


Richard Bedford Bennett: It will be within the memory of the house that a few weeks ago I intimated that we would endeavour to prepare legislation which would deal with a question raised by the hon. members for Macleod (Mr. Coote) and Battle River (Mr. Spencer) respecting the charges made by these personal loan corporations. This bill proposes to deal with the matter in the only way we believe we may !be able to deal with it through federal legislation.


Ian Alistair Mackenzie: Does it apply to all companies, may I ask?


Richard Bedford Bennett: Yes, heretofore incorporated by act of this parliament or hereafter incorporated. In other words it is proposed that any legislation shall apply generally to all such corporations.
Motion agreed to and bill read the first time.



QUESTIONS

[Stage Direction]
(Questions answered orally are indicated by an asterisk).

Mr. LAFLECIIE:: 1.	What salary do the officials of the
Canadian-National Telegraphs receive?	_
2.	What salary does each such official receive?
3.	What sum is paid' for the rental of each office?
4.	What salary does each official of the Canadian-National Express Company receive?


Richard Bedford Bennett: With respect to this question it may be difficult to obtain the information requested for a very considerable length of time. It involves the securing of information from sources over which the government has no immediate control.


Pierre Édouard Blondin: Question dropped.


QUESTION PASSED AS ORDER FOR RETURN
Mr. CASGRAIN:: 1.	Is any work being done on the wharf at Tadoussac at the present time?
2.	If so, upon whose request is such work
being carried out?	[DOT]
3.	Who is the foreman in charge?
4.	What are the names of the persons employed in connection with such work?


Mr. STEWART (Leeds):: Return tabled herewith.
Privilege-Mr. Motherwell


MOTION FOR PAPERS
Mr. MERCIER (Laurier-Outremont):: For copy of all correspondence, telegrams, letters, petitions, recommendations, requests, memoranda and other documents, respecting the dismissal in 1930 or 1931 of Eugene Baulae, then returning officer of the electoral division of Laurier-Outremont, and the present incumbent of the position.
BUSINESS OF THE HOUSE inquiry as to further proposed legislation On the orders of the day:


Right Hon. W. L. MACKENZIE KING (Leader of the Opposition):: May I ask the Prime Minister if the house now has before it notice of all the legislation that is likely to be introduced at this session?


Richard Bedford Bennett: The report of the radio committee has not been received, but apart from that I think there is on the order paper notice of all the legislation except possibly an amendment to a bill that went from here to the Senate. Other than that I know of nothing further at the moment.


UNITED STATES TRADE ZONES
[Stage Direction]
On the orders of the day:
( Hon. IAN MACKENZIE (Vancouver Centre):	I should like to ask a question of
the Prime Minister (Mr. Bennett) in his capacity as Minister of External Affairs, and I regret that I did not have an opportunity of giving notice of the question. Has the right hon. gentleman been advised that the President of the United States recently signed a bill known as the Free Trade Zone Act which, according to press dispatches, purports to provide for the establishment, operation and maintenance of foreign trade zones in ports of entry for the United States, and which undertakes to expedite and encourage foreign commerce? In view of the effect this may have upon trade through Canadian ports, both on the Atlantic and the Pacific, would the right hon. gentleman make a statement m regard to the situation within the next day or two?

[Stage Direction]
On the orders of the day:
Lfon. W. R. MOTHERWELL (Melville):: On a question of privilege, Mr. Speaker, I should like to direct attention to a report appearing on page 12 of the Toronto Globe of June 21, as follows:

House is Jumpy After Elections
. .. When the marketing bill was mentioned, Hon. William R. Motherwell fired at Hon. Robert Weir, Minister of Agriculture, who has just returned from the Saskatchewan campaign, a sarcastic query as to whether the marketing bill had been a factor in that campaign.
To use an historic illustration I may say that this reporter "must have got the wrong sow by the ear", as I decidedly never did make such a statement.


Richard Bedford Bennett: I think, as a matter affecting the privileges of the house, the question was asked by the hon. member for Quebec East (Mr. Lapointe).



BANK ACT AMENDMENT


[Stage Direction]
Right Hon. R. B. BENNETT (Prime
Minister) moved the second reading of and concurrence in amendments made by the Senate to Bill No. IS, to amend the Bank Act.
He said: Mr. Speaker, the bill extending the charters of the banks has been considered by the Senate and returned to this house with certain amendments. I propose to indicate very briefly what the suggested amendments are before making any motion with respect to them. The first section is 53, in which subsection (10) was stricken out. That subsection dealt with matters that were to be covered by the return made by the banks to -the minister, and it was requested by the Commons that the return should provide for a statement being made as to the managers and assistant managers and other employees of the banks, with a statement of the salaries which they were receiving. The Senate took the view that this w-as not a proposal cognate to the other matters dealt with by the return and that, as such information was available through the statistical branch of the Department of Trade and Commerce, it was not really a necessary part of any such return. The government is of the opinion that the view of the Senate in that regard is well taken, especially that part of their contention in which they suggest that if this were to apply to the banks it should apply equally to all other corporations created by this parliament and should be general in its character rather than special. In the committee the matter was moved by the hon. member for Essex (Mr. Morand).
The next section dealt with was section 75, which deals with the business and powers of the bank. It will be within the memory of the house that when the bill was before the committee, as well as when it was before the﻿JUNE 25, 1934
Bank Act-Mr. Bennett
committee of the whole house, a discussion took place as to the limitations upon loans made to directors and the special provision that they should not be present or vote at any meeting of the board when loans or advances were made to a director or any firm or company in which he was interested. After the bill left the committee the banks pointed out that several of the Canadian institutions have branches abroad, in France particularly, for which they have separate acts of incorporation. These are known as the Bank of Montreal (France), the Banque Camadienne Nationale (France), the Royal Bank of Canada (France), and so on, and that as the directors have to deal with the position of these branches with respect to the bank as a whole it would be very improvident, to say the least, to prevent them from being able to vote when loans or advances were being made to these branches. It is proposed to amend the section by adding these words:
but this subsection shall not apply to the consideration of loans or advances to corporations controlled by the hank, the shares of which, except for qualifying shares, are owned by the bank.
Ian Alistair Mackenzie: Would
that not apply to other corporations owned by any chartered bank within the Dominion of Canada?


Richard Bedford Bennett: The bank is prohibited
from carrying on any business except the banking business.


Ian Alistair Mackenzie: But the
trust companies with which they are associated?


Richard Bedford Bennett: The banks do not own trust companies; there is no case in which a bank owns a trust company.


Ian Alistair Mackenzie: Not
directly.


Richard Bedford Bennett: 
Ian Alistair Mackenzie: I thoroughly approve of that.


Richard Bedford Bennett: That makes it unanimous The next section dealt with was section 160. It will be recalled, perhaps, that this section deals with the question of returns and matters of that kind, but no penalty was prescribed for failure to make such returns. It is therefore proposed to add the following subsection:
"(4) Every bank which neglects to transmit or deliver to the minister within the time prescribed by the treasury board a certified return showing, as to deposits by the public in Canada payable on demand and also deposits payable after notice, the number and aggregate amount of such deposits in each of the classifications by this act required, at a date to be specified by the treasury board, shall incur a penalty of fifty dollars for each and every day during which such neglect continues."
In other words, while we made a new provision for returns of this character being made no provision was made for the penalty which would follow from noncompliance with the affirmative provision of the section. The next change is to subsection 3 of the same section, where they have added the words "to the minister" after the word "deliver" in line twenty-one. That is, there was no indication, by oversight I take it, as to whom the return should be delivered. The amendment provides that it shall be transmitted or delivered to the minister, and the added words are " to the minister".
The next matter, however, may call for some extended explanation. It has to do with schedule A to the bill. Schedule A names the banks to which the act applies, namely the Bank of Montreal, the Bank of Nova Scotia, the Bank of Toronto, La Banque Provinciale du Canada, the Canadian Bank
^	COMMONS
Bank Act-Mr. Mackenzie (Vancouver)
of Commerce, The Royal Bank of Canada, The Dominion Bank. Banque Canadienne National. Imperial Bank of Canada and Barclays Bank (Canada). Now, under the provisions of the law as applied the banks which I have just named carrying om business in Quebec may utilize the equivalent of the English name for the purpose of maintaining actions, or for placing upon their cheques or otherwise. La Banque Provinciale du Canada has the power, by its charter, to use the words "Provincial Bank of Canada". When the Banque Canadienne Nationale was incorporated by this parliament there was great difficulty in securing the name. It was felt by many at that time that the effect would be to leave the impression that that was the central bank of Canada, and that therefore probably great difficulty would be experienced, or that there would be confusion in the future if a central bank were created. The matter has stood in that way since that time, but it is quite clear from reading Hansard of that day that the charter was granted and the favourable report of the committee secured on the basis of the name being what I have indicated, namely that of La Banque Canadienne Nationale. But in view of the fact that a central bank is now being established, and that all the other chartered banks are not averse to this change being made, because they are really all directly concerned-for it might be .that a wrong impression would prevail in the minds of depositors who might select such a bank as being a national bank- it is felt that there might be added to the schedule these words:
La Banque Provinciale du Canada and Banque Canadienne Nationale hereinbefore named may respectively carry on business pursuant to the provisions of this act, under the respective names "The Provincial Bank of Canada" and "National Canadian Bank."
It would not be "Canadian National Bank" but "National Canadian Bank". That constitutes the only other amendment which has been suggested.
The history of the Provincial Bank is well known, probably because it was incorporated more recently than the old Banque Canadienne Nationale. The Banque Canadienne Nationale came into existence before confederation; in fact, it came into existence in 1859. It was first called the Bank of Hoche-laga and in 1924 obtained from this parliament the right to the name Banque Canadienne Nationale. It was made clear at that time, for the reasons which I have indicated, that it should use that name and none other. But I think the changed conditions, namely the creation of the central bank, and the removal of any objections on the part of
[Mr. Bennett. 1
the other chartered banks to the same privileges accorded to the Banque Canadienne Nationale as is accorded to them in the province of Quebec, meets . the situation. Subject to the attitude of this house, the government sees no reason why the amendment should not be adopted.


Ian Alistair Mackenzie: Mr. Speaker, I still think that the
amendment moved by the other house to section 75 of the bill is dangerously vague. Subsection 3 in the bill reads as follows:
In no case shall a director of the bank be present or vote at a meeting of the board during the time when loans or advances to himself or any firm, company or corporation of which he is a partner or director are under consideration.
The proposed amendment is to add the following:
But this subsection shall not apply to the consideration of loans or advances to corporations controlled by the bank, the shares of which, except for qualifying shares, are owned by the bank.
I appreciate the situation the Prime Minister outlined which this amendment is intended to meet, but I still submit the amendment is not in accordance with the sentiment expressed before the banking and commerce committee.
The other reservation I wish to make is in regard to the last words of the Prime Minister. I submit that we should not have in the Dominion of Canada to-day any bank with the appellation "National Canadian Bank" when we are just now setting up another financial institution to be known as the Bank of Canada. I believe these two names are bound to lead to a very extensive degree of confusion in future operation. I appreciate what the Prime Minister has said, that possibly as a matter of right these organizations should be entitled to use the English equivalents of their French names, but I still say that so far as observers are concerned, when they see the title: "National Canadian Bank" they will be confused, and they will not be in a position to distinguish this bank from the Bank of Canada we are now setting up. So far as I am concerned, and speaking only for myself, I wish to make these two reservations to the amendments submitted by the Prime Minister.


Mr. PAUL MERCIER (St. Henri):: Mr. Speaker, I concur in the amendments to the bill. I can see no objection to the Banque Canadienne Nationale being called, as indicated by the Senate, the National Canadian Bank. As a matter of fact, there are several

Bank Act-Mr. Dupre
[DOT]translations of the names of Canadian banks. We have, for instance, La Banque Royale du Canada, which is the French translation of The Royal Bank of Canada. I do not see why we should refuse a similar translation, such as suggested by the Senate, to the name of La Banque Canadienne Nationale, so that it may be known as the National Canadian Bank. Then, there is the further suggestion that La Banque Provinciale du Canada be known as the Provincial Bank of Canada. That is a correct translation of the name, and one could not translate the name of that bank into English by using any other words. Those words, in English, indicate the title of the bank as it was incorporated by an act of parliament. Then, La Banque Nationale of Quebec and the Bank of Hochelaga were merged under the name La Banque Canadienne Nationale. That name does not indicate that La Banque Canadienne Nationale is the bank of the Canadian National Railways, and it does not mean that it is the Bank of Canada. The words "National Canadian Bank" are simply a translation of the words "Banque Canadienne Nationale." It certainly does not mean that this is a state bank. We are now considering a bill to create a state bank, to be known as the Bank of Canada, and which will operate as a central bank. I can see no reason why the name "National Canadian Bank" should not be granted, because it is a correct translation. I humbly suggest that the amendment by the Senate to Bill IS does not lead to confusion with the name of some other bank. I do not believe that when people deal with La Banque Canadienne Nationale or the National Canadian Bank they will think they are doing business with the Bank of Canada; absolutely not.
I humbly pray that the amendment be accepted, and I shall so vote.


Hon. MAURICE DUPRE (Solicitor General) :: Mr. Speaker, may I add a few words, in passing, in connection with the amendments made by the Senate? I quite agree with the hon. member for St. Henri (Mr. Mercier) who has just spoken. May I point out that for a long time before we had La Banque Canadienne Nationale this same bank before its amalgamation was called La Banque Nationale, which may be translated into the words "The National Bank." In my estimation that was almost as comprehensive a name as is the term Bank of Canada. For instance, at the present time we have the ringing name of the Royal Bank of Canada, and in my opinion the name of that bank is just as big and just as ringing as the name Bank of Canada. Since all the other banks, such as the 74726-269
Bank of Montreal, have translated their names -in this instance it is La Banque de Montreal -and other banks have the same right, I do not see why La Banque Canadienne N ationale should be denied that right.


Mr. C. G. POWER (Quebec South):: This controversy is by no means new. In 1924 or 1925-


Richard Bedford Bennett: 1924.


Charles Gavan Power: -when the old' Banque Nationale was amalgamated with the Banque d'Hochelaga, the bill permitting this amalgamation came before this house and was referred to the committee on banking and commerce. In that committee, after considerable discussion, a vote was taken and I have a very clear recollection that those who opposed granting to the new bank permission to translate the name-I think it was to be called the Canadian, National Bank; the petition was to the effect that it should be called in English the Canadian National Bank-carried the day by one vote. The chairman of the committee on banking and commerce afterwards brought the matter to the attention of the house, and I am under the impression that a vote was taken in this chamber and that once more permission was refused the bank to call itself the Canadian National Bank. At that time I opposed the request of the bank and I see no reason why I should change my attitude to-day. There is no doubt whatever in my mind that confusion may arise and that people outside Canada may come to the conclusion that this bank is in some respects a national bank and has the backing of the government of Canada. It is I think within the memory of hon. gentlemen in this house that only two or three years ago in the United states there was a bank called either the Bank of the United States or the United States Bank, which failed with rather disastrous results; and at that time it was I think conclusively shown that a large number of people, foreigners and others who were not aware of the true significance of the name of the bank, had invested moneys in it or had made deposits in the belief that the bank was in some way connected with the American government. We have in our statutes a prohibition against the use of the word "royal," and I think at one time, many years ago, the late Sir Rodolphe Forget wished to incorporate a bank called La Banque du Canada, or La Banque Nationale-


Richard Bedford Bennett: The hon. gentleman is
quite right. He did propose to call it the Bank of Canada, and that was refused.

Bank Act-Mr. Power


Charles Gavan Power: He did propose to call it
the Bank of Canada or La Banque du Canada, and that permission was refused by the House of Commons. Afterwards I believe he was permitted to use the name La Banque Nationale du Canada or something of that sort. I believe that the same reasons still exist against permitting any private bank to use a name which might in any way confuse depositors or investors and lead them to believe that the people of Canada or the government of Canada are in some way supporting any such institution.


Mr. R. B. HANSON (York-Sunbury):: With respect to the amendment made by the other house in connection with subsection 3 of section 75 I submit that this is a very proper amendment to make and one which was not visualized by the banking and commerce committee. Had our attention been directed to the necessity for such an amendment I have no doubt the amendment would have been freely granted by the committee. I see no objection whatever to the amendment and I am prepared to support it. With respect to the amendment to schedule A at page 87, granting the Banque. Canadienne Nationale, the English equivalent, I recall very well the incident brought to the attention of the house by the hon. member for Quebec South (Mr. Power). There was a good deal of difference of opinion in the banking committee and also in the House of Commons at that time in 1924. I do not recall how I voted on that occasion, but I do believe now that a very distinct mistake was made at that time. Just how you are going to remedy it at this stage I do not know, and I do not think it carries the mistake further by giving the bank the English equivalent. But that is the only justification there can be for giving the bank at the present time the English equivalent. They have the French nomenclature now and perhaps they are entitled to retain it. I doubt very much however whether this house ought ever to have given the bank the name which it then sought and obtained.


Hon. ERNEST LAPOINTE (Quebec East):: The question of the advisability of having given that name to this particular bank does not present itself to-day, I submit.


Richard Bedford Bennett: Hear, hear.


Richard Burpee Hanson: It is too late.


Ernest Lapointe: La Banque Nationale was incorporated many years ago.


Mr. CAHAN:: Before confederation.


Ernest Lapointe: Yes. When there was a fusion of La Banque Nationale and the Hochelaga bank the name was changed into La Banque Canadienne Nationale, which was no worse, if there is anything wrong about the appellation, than the first one. Now it is decided to give also the English name. Well, what is the difference? If the French name is legal, why not the English name as well? I am one of those who are not afraid of having both languages on anything in this country.


Paul Mercier: I remember quite well the discussion to which the hon. member for York-Sunbury (Mr. Hanson) has referred. I sponsored the bill in question. As regards the contention that a mistake was made in giving the bank the name which it then received, inasmuch as there is to be a central bank now I see no objection.


Mr. G. G. OOOTE (Macleod):: I certainly think this house should not agree to the Senate amendment which provides that one bank may use the name National Canadian Bank, because I am sure that name is very misleading to the general public. The name national attached to a bank conveys a wrong impression so far as our chartered banks are concerned. It is not national in any sense. I cannot see anything analogous between the use of the word royal and the use of the word national. The word national conveys in a very distinct way the idea that this is a national institution, that the nation has some financial responsibility; and in connection with a bank I think it is very improper for the House of Commons to allow this name to be used by the Banque Canadienne Nationale. I do not remember in detail the discussions that took place on this matter ten years ago, but I do remember distinctly that a majority of the House of Commons were absolutely opposed to granting to the bank the use of this term National Canadian Bank. It was pointed out that Canada would probably at some future time wish to establish a bank which would be truly national in the real sense of the word. The Bank of Canada in a sense is to be a national bank and I think the House of Commons would be ill advised to allow this change to be made.


Mr. A. E. MacLEAN (Prince):: I am glad the Senate has seen fit to amend this bill so that loans can be given to farmers to purchase fertilizer the same as they have been given heretofore to purchase seed grain and binder twine. The difficulty has been that a farmer in the maritimes who wanted to get

Bank Act-Mr. Bennett
a loan from an organization with which to buy fertilizer was compelled to mortgage his product to that organization. He was not free to sell to any one else. That may not have been a great disadvantage to him but I think the present arrangement will be better. If he can borrow from a bank he will be free to sell his product on the market and he will not be tied up to any organization and compelled to sell to them. I am glad the Prime Minister (Mr. Bennett) has indicated that the government is ready and willing to accept this amendment.


Richard Bedford Bennett: In moving that these amendments be now read a second time and concurred in I desire to make only one observation which I trust will not be misunderstood. If the government thought that there was the slightest likelihood of there being any confusion in the minds of either depositors or investors in connection with this bank and the Bank of Canada, it would take appropriate steps to provide against such confusion. I have been reminded by the hon. member for East Edmonton (Mr. Bury) of something which I saw myself- only a few years ago in the city of Dublin. There are two banks carrying on business in that city. One bank is a joint stock company and its name is the National Bank of Ireland. The other bank is the Bank of Ireland. The one institution which has been in existence for a long time is the central bank of the Free State and has fulfilled those functions as far as united Ireland is concerned the same as the Bank of England fulfilled its functions in connection with the United Kingdom before the recent treaty. This change is being made at the end of schedule A and if it is found that difficulties or confusion arises, parliament will always be in a position to deal with them. I am sure that those who are responsible for the bank will be quite reasonable in the position which they take in the matter. It must be realized that there was a Banque Nationale in this country prior to 1924. This bank and the Bank of Hochelaga united and desired to call themselves the National Bank. That was changed and the name as it now stands is Banque Canadienne Nationale, the Canadian National Bank.


Charles Gavan Power: Canadian national would be a poor translation.


Richard Bedford Bennett: That name was thought to be undesirable as it might be thought to be a branch of the railways or the steamships. What convinced me more than anything else that there would be no difficulty about this matter was the fact that those banks which had been antagonistic to the 74726-2691
proposal in 1924 because they felt that there might be misunderstanding with respect to deposits are not antagonistic at the present time. The secretary of the association communicated that fact to me when I asked him definitely about the matter.


Ian Alistair Mackenzie: Because
the new bank is known as the Bank of Canada?


Richard Bedford Bennett: Because they felt that there would be no confusion in connection with the Bank of Canada. Had there been no Bank of Canada they would not have withdrawn from their position. That is what I have been advised, and it looks quite reasonable. The question at issue now is not that of the name given to the bank in 1924. That was limited to the name in French but in view of what has transpired by the creation of the other bank, it seems to me to be unfair to say that while all other banks can use the French equivalent of their names, this bank cannot use the English equivalent of its name. The government accepts these amendments and I now move that they be read a second time and concurred in.


Mr. H. E. SPENCER (Battle River):: There is another bank called the Provincial Bank of Canada. I take it that the Bank of Canada will have branches in all the provinces in due time and I should like to know if there will not be a possibility of a misunderstanding as to the provincial branches of the Bank of Canada and the Provincial Bank of Canada.


Richard Bedford Bennett: I do not think bo.
Motion agreed to on division.



BANK OF CANADA ACT

[Stage Direction]
The house resumed from Friday, June 22, consideration in committee of Bill No. 19, to incorporate the Bank of Canada-Mr. Rhodes -Mr. Smith (Cumberland) in the chair.
On section 25-Payment in gold.
Henry Elvins Spencer: The hon. member for Wetaskiwin (Mr. Irvine) intended to move an amendment to this section which has been permitted to stand. He found it necessary to attend a committee this afternoon and has asked me to move his amendment. This section refers to the redemption of dominion notes in gold and as the hon. member and others with him do not believe in the gold basis or in having to redeem our dominion notes in gold, he has asked me to move:
That section 25 be amended by striking out subsection 1 and subsection 2.
Bank oj Canada


George Gibson Coote: I should like to say a few words in support of the amendment which has just been moved. Subsection 1 imposes upon the bank the necessity of selling gold to any person who makes a demand therefor. The bank is compelled to redeem its notes in gold, to pay to anyone who presents sufficient notes approximately four hundred ounces of fine gold. I understand that there is no intention to compel the bank to redeem its notes in gold coin, but anyone outside of Canada who is able to secure sufficient Bank of Canada notes can go to the bank and demand gold. I think we are very foolish to impose this upon the bank when the preamble states that the purpose for which the bank is being set up is to regulate credit and currency in the best interests of the economic life of the nation. If this bank is to have a chance of doing that it seems to me that we should not impose upon it the necessity of redeeming its notes in gold. The terrific depression which has been upon us for the last few years is due chiefly to the financial deflation which occurred in the gold countries. Canada, being on the gold standard, had to follow the same financial policy and deflate her financial structure. Had we not been upon the gold standard and had we had an institution capable of managing credit and currency, such as I understand this Bank of Canada is to do, in my humble opinion the depression in Canada would not have affected us to one half the extent it has. Undoubtedly certain countries that have not been on the gold standard during the past four years are in a better position and their producers are in a better position because of this. For that reason I regret very much the present measure contemplates that the bank, the moment it is set up, is going to be under the liability of redeeming its notes in gold. It is true subclause 2 gives the governor in council power from time to time to suspend this subclause. But the bill as drafted makes it almost impossible for the bank to conduct its operations because it is faced with the necessity of redeeming its notes in gold. There is a distinct difference between compelling a bank to redeem its notes in gold as provided for in subclause 1 and having a gold reserve against notes. While at this time I am not opposing very strongly this clause which imposes upon the banks the necessity of carrying 25 per cent gold reserve for its notes, I think we are very unwise to have a clause inserted in the bill compelling the bank to redeem its notes in gold, because this places our whole price structure, our whole internal economy at the mercy of 
countries which are on the gold basis and which may at any time start deflation.
In a recent article in the Christian Science Monitor I notice an article stating that the Midland Bank and Gustav Cassel, one of the leading economists of Europe, agree on gold dispensability-that is, the ability to dispense with gold as a basis for currency. I do not at the moment suggest that we should dispense entirely with gold because I do not think the house would accept such an amendment, but I think we might leave out of this measure subclauses 1 and 2 of clause 25. Under clause 20, subclause 1, the bank has power to buy and sell gold and I think that is all that is necessary. Let us leave it to the bank to sell gold at whatever price they think is in the best interests of the nation. I hope the government will consider leaving it in the hands of the bank as to when they should buy and sell gold and at what price it should be sold, because under the clause with which we are at present dealing the bank will be under the liability of redeeming its notes in gold unless the government of the day sees fit to suspend this clause. It would be far better to leave it to the bank to decide at what price they will sell gold.


Richard Bedford Bennett: I shall not trespass upon the time of the committee at any length; I shall merely point out that subclause 2 provides of course for the present status being maintained, and it is not likely that until the other nations of the world have taken a forward step, the situation in this country will be other than it now is; that is, the condition prevailing in Great Britain and the United States will prevail here. But if we are going to have any form of stability in international exchange, it is quite obvious there must be some common yardstick for measurement, and apparently the only one that has presented itself for serious consideration so far is the gold standard because it has a universal value. I shall not amplify the matter because as it has been discussed so often, it would be very unfair to do so, but the notes are not to be exchanged now in terms of coinage as they were under the existing law. For instance, I can no longer get sovereigns in London. It is within the memory of most of us that in London the sovereign was a common coin to carry in one's pocket, with which one bought and sold goods and did one's business. It is no longer so because the only redemption you could make in London before the gold standard was suspended and after Mr. Churchill passed the law providing for the resumption of the gold standard was in terms of four hundred ounce gold bars.

Bank of Canada


Ian Alistair Mackenzie: About $14,000.


Richard Bedford Bennett: Yes, you had to have $14,000 before you could get gold. That is the case in many countries in the world. It is called the bullion standard because gold coins are no longer necessary for the transaction of domestic business. You do not require $10 or $20 gold pieces to transact business in this country; it is only for external purposes that the gold standard is essential as providing a yardstick which is of universal length or a commodity which for a given quantity of it has a universal value, if I might use those words.
It will be observed that in this bill we have made some reference to the Bank for International Settlements. Canada has a small investment in that bank. It was felt that that bank might be of great service to all the countries of the world, and as a matter of fact it has been very useful. The 'president of it recently made this statement and I suppose, instead of going into this matter at length I might merely read his statement because it is put with much more authority than my observations would have. He says:
The gold standard is not an end in itself. It is a machinery and a medium for permitting facilitating and enhancing the exchange of goods, capital and services, internally and externally. Hence those who seek the reestablishment of a common standard are not seeking some fetish or intellectual abstraction, but are searching for the better economic welfare wli'ch inevitably flows from the increasing movement of goods, services and funds, which presupposes. in turn. some trustworthy menswp and medium of value and exchange to enable them to move. There should be no doubf about a general return to gold as the basis for the monetary system. The real question is whether definite steps will be adjourned for some time to come, or whether by common effort or as a result of the patent necessities disclosed by the failure of common effort an earlv attempt will be made to achieve a general settlement in the monetary and financial fields, thus leading the way to a restoration of the monetary system and to comnleting economic recovery.
The technioue of the gold standard requires and is capable of improvement in its domestic and in its international operation, particularly through the medium of continuous collaboration between the monetary authorities acting to the extent possible through a central agency. Collaboration may be an abstract noun, but it has proved in practice to he a concrete thing when central banks are faced with a specific problem in the financial or monetary field. The endeavoiir of the Bank for International Settlements shall be to contribute to the restoration of more orderly monetary and financial conditions in the international realm.
That is the position which we take in this new and young country in dealing with
problems that older countries have found can best be dealt with in the manner I have indicated. While in my judgment the gold standard is a sine qua non to the restoration of stabilized exchange, it is not an end in itself; it is merely the means by which the end is to be achieved. I trust the committee will realize, as the matter has been discussed so fully in the standing committee as well as in the house on several occasions, the summary which I have given from so eminent an authority as Mr. Fraser is much more valuable than any lengthy explanations that I might offer.


George Gibson Coote: I do not wish to delay the committee, but I think hon. members might be interested in the first two paragraphs of the article to which I referred a moment or two ago; they put the matter in a much more concise way than I could do. This article is sent from London and the first paragraph reads:
The Midland Bank, one of Britain's "big five" banking institutions, and Professor Gustav Cassel. Swedish economist, have issued here two entirely independent statements, which, when taken in conjunction with one another constitute a scathing indictment of the theory still dear to old-fashioned bankers of the indispensability of the gold standard.
The Midland Bank finds that the almost universal resort to currency devaluation since the war has so changed world monetary conditions as to have dethroned gold as a stable measure of value. The conclusion is suggested that for practical purposes a currency off the gold standard is just as capable of being reliable as one that is on.
The concluding paragraph of the article reads:
The arguments of the Midland Bank and of Professor Cassel thus click with one another. The gold standard, the one says, has become unreliable. Germany, says the other, cannot recover until it frees its currency from impossible limitations which that standard has imposed.


Richard Bedford Bennett: What year was that?


George Gibson Coote: This is very recent, it was
in the Monitor just last week. In regard to the statement the Prime Minister read from the Bank for International Settlements, I think those who manage the Bank for International Settlements are interested in continuing the gold standard, because if they cannot the bank might have to undergo a great change if it is to continue as an institution. So perhaps they have an interest to serve. I am not saying that they are not sincere, but it may be that they are influenced by their own interest in making the statement they did in regard to returning to the gold standard. At any rate I think that a
425S
Bank of Canada

young country like Canada, with very great natural resources, a producer and exporter of primary products to the extent we are, would be foolish to contemplate a return to the gold standard under which our price level and our whole internal economy would be at the mercy of those who manage the world's monetary gold reserves.


Ian Alistair Mackenzie: I wish
to make just one observation in regard to the amendment moved by my hon. friend on the left. 1 think we must differentiate between the gold standard or gold exchange basis for international settlements and for our internal currency. I think the best economic opinion in the world in recent years, confirmed by various conferences, certainly by the English Macmillan committee, is that a gold basis is not required for internal currency. I do not think that even the twenty-five per cent coverage which was advocated last year by the British Empire section of the world monetary conference-


Richard Bedford Bennett: No, by the whole conference.
Mr, MACKENZIE (Vancouver):-I do not believe it is necessary. I believe, in the words of the English Macmillan committee, quoting them just from memory, that the world should now gravitate towards a managed currency, managed by men of unchallenged independence. That in my opinion does not require a metallic basis as far as internal currency is concerned. The difficulty is to dissociate our internal currency from our credit in international transactions. Although I am personally and sentimentally in favour of the amendment moved by the hon. member for Macleod (Mr. Coote), I am afraid that the situation concerning it is just like that concerning our tariffs. I am in favour of reduced tariffs all over the world, but I recognize that it may be very difficult for us alone to reduce tariffs when all other nations are maintaining theirs.


Richard Bedford Bennett: Good! At last!


Ian Alistair Mackenzie: We are discussing this in a very frank way. So in the same way I do not believe it is feasible for Canada at the present time to get away from gold as a standard of international exchange, although I do believe it is possible for Canada to abolish any metallic coverage whatsoever for her internal currency. The Prime Minister took me to task once when I used that argument; he said it was all a matter of confidence, that if we do away with metallic coverage for our internal currency, thereby

we lessen the confidence of other nations in our external credit. I think the proper conclusion is that gold as a basis for internal currency is only justifiable so far as it may assist that mistaken confidence which seems to be associated with gold by other nations of the world. I believe that the day is coming when gold will not be so highly valued as it is to-day as coverage for international currency. I believe that the national credit far transcends gold as a basis for the security of international currency. But I am not prepared at the present time to go the length of the hon. member who moved the amendment, although I do believe that in time gold coverage for internal currency will disappear.
Mr. 'COOTE: So that there may be no misunderstanding I would like to make it clear that I do not think there is any necessity for gold backing our internal currency. I think gold should be kept for the settlement of our international balances. What we object to is that this bank is to be put under the liability of selling gold at a fixed price to any person applying. That may have the effect at any time of hampering the bank, because too many of its notes may be presented for redemption in gold. I would point out that under section 21 it is provided that:
(1) The bank may
(a) buy and sell gold, silver, nickel and bronze coin and gold and silver bullion;
They have the power to sell gold. We are going to turn over to them all the gold. I think the bank should use that gold to the best advantage for the settlement of our international balances. It should be free to do that, but it should not be compelled to sell it at a fixed price. That would have the effect of placing our whole internal price level at the mercy of the gold-holding countries. That is what I object to, and that is why we are moving this amendment. We think gold should be used for the settlement of international balances, but we do not think that anyone who may be able to secure $14,000 of Bank of Canada note should be able to come and demand from the bank gold at a certain fixed price. We think that is too great a limitation to place upon the bank, if we intend that it should carry out the ideals laid down in the preamble of the bill. It may make it impossible for them to do the very thing that the bank is set up to do, that is to control credit and currency in the best interests of the economic life of the nation. They may have to control it in such a way as to conform to the gold policy of the United States and France, or the United States, France and Great

Bank of Canada
Britain. That is something that we should avoid. If we are to learn anything from the depression I think one lesson is that we cannot afford to place our internal price structure at the mercy of the gold countries. And we do it through section 25. It is true that the government can from time to time relieve the bank from the necessity of redeeming notes at all, but I say that as the section is drawn it makes the bank liable to redeem its notes in gold the very day it is set up. It seems to me that immediately the bank is set up and commences business the government would have to pass an order in council suspending subsection 1 of this section.


Richard Bedford Bennett: Just one word, because I should not like the hon. gentleman to leave a false impression on the mind of the committee. In the first place this country is not under the gold standard. Second, this section can only apply when the country is on the gold standard. Third, it will not be on the gold standard mVil other countries in the world have taken appropriate action in the same sense. Fourth, parliament will have to deal with the question of the value to be given to gold. At the present time the value fixed by statute is $20.67 an ounce, and until such time as parliament takes other action my hon. friend need not worry. There is no chance of any country or any syndicate accumulating notes of the bank and taking away the gold reserve of this country until such time as the nations of the world have arrived at some understanding with respect to the stability of exchange. How can I put the matter more clearly than to say that if a Canadian dollar has behind it 10 cents in gold and a Dutch guilder has behind it 96 cents in gold it is difficult to talk about the free exchange of goods until some stability has been arranged between the currencies of the two countries. And that applies to all the nations of the world. In my judgment the most essential matter to be dealt with at the moment to restore the world to its former prosperity is the stabilization of exchange;- perhaps not the most important but one of the most important of matters. I mention that because it is not intended that this section shall ever become operative until such time as the nations of the world take appropriate action.


Ian Alistair Mackenzie: Is it not true, at the same time, that if I have $14,000 or the equivalent in notes of the value of gold and decide to purchase a bar of 400 ounces of fine gold, I can get such gold in Bank of Canada notes?


Richard Bedford Bennett: Quite so, in Bank of Canada notes.
Amendment lost on division.


Ian Alistair Mackenzie: Before the section carries I should like to ask another question, in regard to paragraph (c) of subsection (3) of section 25. My computation is that there will be about $63,000,000 of securities bearing interest at three per cent per annum, payable half yearly, which will be given as assets to the Bank of Canada on the day it opens for business. The section says:
to the amount of dominion notes outstanding on that day, except notes issued under the authority of the Finance Act.
I quite realize that we cannot make a computation for six months from now, but as at the present time what would be the amount of securities bearing interest at three per cent which would be given to the bank?


Richard Bedford Bennett: The hon. gentleman will recall what I said to the house the other day. The present law requires a gold coverage of twenty-five per cent on $50,000,000, which is $12,500,000 of gold. Under the statute of 1915 there were $26,000,000 of notes issued which, with the $12,500,000 totals $38,500,000.


Ian Alistair Mackenzie: That
$26,000,000 was covered by railway securities.


Richard Bedford Bennett: The hon. gentleman knows what they are. Taking the difference between $50,000,000 and $12,500,000, which is $37,500,000, with the $26,000,000, we have a total of $63,500,000 outstanding. Of course that will be increased by the enactment of the legislation I submitted to the house the other day, which contemplates an increase in the issue of dominion notes pending the coming into operation of this act.


Ian Alistair Mackenzie: Let us assume that the figure would be roughly $63,000,000 of securities bearing interest at three per cent. Roughly speaking the annual interest would amount to $1,800,000. How would that be charged? Would it be charged against the profits of the Bank of Canada or would it be paid out of the ordinary consolidated revenue fund?


Richard Bedford Bennett: Of course as a matter of bookkeeping the hon. gentleman realizes it will be paid out of the consolidated revenue fund, but will come back to the Dominion of Canada under this act.


Ian Alistair Mackenzie: But that should be charged against the bank before any dividends are paid. The taxpayer should not

Bank of Canada
be asked to pay an interest charge of $1,800,000. My own opinion is that the value of the securities will appreciate so rapidly that any charge of this kind should be a charge against the operations of the bank for that year.


Richard Bedford Bennett: The question can only arise as a matter of bookkeeping, because unless the bank earned $225,000, which is a very small sum in view of the operations of the bank, I should think no directors would be disposed to pass the necessary resolution and no governor would be disposed to give it his approval unless the earnings were beyond the interest on the securities to which the hon. gentleman has referred. It is a matter about which we have had some discussion, but I think the hon. gentleman will realize that it would be rather difficult adequately to express the suggestion he has made in terms of a bill. I think we will have to depend largely upon the sound business sense of those in charge of the affairs of the bank who, I am sure, would not be disposed to pay four and a half per cent to the shareholders until such time as the earnings of the bank were equivalent to such sum exclusive of the matters to which my hon. friend has referred.


Ian Alistair Mackenzie: Then I have one further question. It should, perhaps, come up under section 30, but I might discuss it under paragraph (a) of subsection (3), which refers to gold held by the minister for redemption of dominion notes. Under this legislation we are transferring from the banks to the Bank of Canada $40,000,000 of gold, roughly speaking. Under section 30 there is a provision whereby the increased valuation may be given the banks in regard to an unspecified proportion of the $40,000,000 if the governor in council is satisfied that the said gold at the time of the transfer was being held by a chartered bank against liabilities elsewhere than in Canada. In such case the said profit is to belong to the chartered bank. We are taking the $40,000,000 from the chartered banks at the present valuation of $20.67 per ounce. An unstated proportion of that amount of gold will be reimbursed to the chartered banks at the present valuation if the governor in council is satisfied that this proportion is required for external obligations.
My point is this: I think it is practically an impossibility for the governor in council or any other body to determine what that percentage is going to be. I remember asking some of the bankers, in the committee on banking and commerce, if they could predetermine any definite percentage, and they said they could not do so. I think it places

a very dangerous responsibility upon any governor in council who happen to be in power to have to determine, by just one stroke of the pen, how much of the difference between $35 an ounce and $20.67 an ounce the chartered banks should receive as a result of a portion of their gold reserves being used for external obligations. I think in the interests of the governor in council, whoever they may be, this is a very far-reaching power, and the discretion might become dangerous. I do not know what the remedy is. The banks say they cannot decide; they say they need the whole $40,000,000 for external purposes. I do not agree with that for a moment, but I do submit that the Prime Minister is going to find it very difficult indeed, and possibly fraught with very grave consequences, to have to determine the amount of gold used for external obligations and the amount used for internal purposes.


Richard Bedford Bennett: When we reach section 30 I will discuss that point.


George Gibson Coote: I should like to ask a question with regard to subsections (1) and (2). When the act is declared will not this act override the order in council which now relieves the receiver general from the responsibility of redeeming notes in gold, and will a further order in council be passed immediately as provided for under subsection (2)?


Richard Bedford Bennett: Undoubtedly the hon. gentleman is quite correct. When the act is proclaimed, at the same time an order in council will be passed continuing the order in council now applying to dominion notes, under the provisions of this particular section.


[Stage Direction]
Section agreed to.
On section 26-Reserves.
Mr. REID:: I have a few remarks to make in regard to subsection (4). At this time it is not my intention to cover all the ground that has been covered already with regard to silver, but I cannot allow this subsection to pass without comment while it includes the word "never". So I have an amendment to propose. I think it was generally understood on this side of the house the other evening that once the central bank is set up the initiative will come from the bank itself and not from the government. Here, in subsection 4, we have a mandatory clause which prohibits the bank from purchasing more than 1,671,802 ounces of silver in any year. I will send a copy of my amendment across to the Prime Minister. It is interesting to draw the attention of the committee to what transpired in July, 1933, at the London mone-

tary and economic conference. The question of gold and the practical return to gold came up at that time. The lead in connection with silver was taken by the United States and, as was stated by Senator King of the United States, upon his return they were side-tracked, and their resolution was gerrymandered and split in two.
At the present time the President of the United States is in my opinion making an attempt to redistribute gold. I have for my authority the words of Sir Arthur Salter who says in effect that that might be the effect of the United States purchasing so much silver. At the present time we have in Canada no gold coverage for domestic currency. As everyone knows, we have at the present time fiat money. It is true that probably a world agreement would be necessary before we could adopt bimetalism, and at the present time I am not advocating a return to bimetalism. At the monetary conference in London Canada agreed to purchase 1,671,802 ounces per year. The United States agreed to purchase 24,000,000 ounces per year, but she has now gone farther and has agreed to purchase up to 25 per cent of her monetary reserves, which will mean probably an increased purchase of one and a half to two billion ounces of silver. In spite of the covenant with the United States in this regard we are placing in this bill a mandatory clause saying that the bank shall never purchase more than our allotment agreed to in London. Personally I think this is a slap in the face so far as the United States is concerned.
I am not asking that we should go on to bimetalism at the present time. We took a step in the right direction when we agreed to purchase over one million ounces yearly, but to prohibit the banks from purchasing more is a slap in the face so far as the United States is concerned. We are saying to that country, "You can do what you like about your monetary affairs and your plan to distribute gold." I would ask the Prime Minister this question:	How is it possible to
redistribute the present gold reserves of the world? No one can tell. No economist or financier can tel! how the stock of gold, three-quarters of the world's supply of which is held by France and the United States, can again be redistributed. It is the consensus of opinion of those who have studied the matter that President Roosevelt is at least making some effort towards this end, and it may be that through his efforts gold will again be redistributed. We could very well use silver in this country as coverage for our domestic uses. No country would stand
Bank oj Canada
to gain more than Canada by such a use of silver. We produce annually between 18,000,000 and 24,000,000 ounces of silver. In the late years the price has been too low to further the production of silver, but if it goes to sixty cents an ounce, as it shows every likelihood of doing, the industry will give employment to thousands of citizens, and especially would that be true in British Columbia.
I think the Prime Minister should consider taking out the word "never"; it should not be there. It is not fair to have that word in the act. The amendment which I have sent to you, Mr. Chairman, would make the clause read as follows:
The bank shall during the years 1935, 1936 and 1937 purchase and hold of newly-mined Canadian silver, as agreed to by Canada at the London monetary and economic conference, all such silver as the minister shall require.
I think that is a fair amendment. It is not mandatory and at least it carries out the agreement made at the conference. If the government were so minded instructions could be issued to the bank to purchase more silver.


Richard Bedford Bennett: The hon. gentleman
makes the mistake which is not unusual even to those who have given as much study as he has to this matter. He is confusing the bank with the government. The United States government is doing the purchasing of silver. There is nothing in this legislation to prevent our government from buying silver. This bill deals only with the bank. If the hon. gentleman would take the trouble to differentiate between the two he would not have made the error he has now made.
When the other day I introduced the bill dealing with the issue of dominion notes I pointed out that we proposed to buy in the year 1934 a supply of silver in the manner indicated in that measure. For the years 1935, 1936 and 1937 we have placed the responsibility for the purchase of it upon the central bank. As the bank succeeds to the custody of the gold and silver now held by the government, and I may7 point out that we have five or six years' silver now in hand for ordinary monetary purposes, we did not feel we would be fair to the bank if we required it to purchase beyond 1,671,802 fine ounces in any of the years I have indicated. If, as a matter of national policy, the government decides to buy silver, as congress has authorized the president to do, that is a matter for the future. The purchases, I should think it is only fair to say, will proceed in the United States by the government of the United States. The total
Bank of Canada

purchases under the proposals before congress would amount to something less than 1,700,000,000 ounces. But the whole situation in connection with silver turns not upon the action of the government of the United States nor of the government of Canada. India holds the key to the silver situation. This is a matter which was discussed at some length in London and the agreement arrived at was not easy of conclusion. It represents the best arrangement the nations of the world were prepared to make, having regard to the conditions with respect to silver and the very large quantities of silver held by India. Those quantities are administered, really, by one commissioner, and are tremendous. They are so great that if the price of silver were to rise, as has been suggested, the effort to sell on the part of India would be so great as inevitably to produce a very great reduction in the price.


Thomas Reid: I think I am right when I say that India has agreed to sell not more than so many million ounces.


Richard Bedford Bennett: Under this agreement;
that is the reason it is here.


Thomas Reid: She has agreed not to sell it?


Richard Bedford Bennett: Yes.


Thomas Reid: And in regard to the stocks
held in Canada, it is a matter of comment, and rather strange that we hold the smallest stock of silver. Our whole stock amounts to only 2,000,000 ounces. That is all that the stock of silver in Canada amounts to, despite the fact that we are the third largest silver producing country in the world. Yet we are holding only one year's agreement.


Richard Bedford Bennett: One what?


Thomas Reid: The information given me is
at the present time we are holding 2,254,000 ounces of silver, and that the silver we have been using during the past three years has come from worn out coins. We have taken the pure silver from the worn out coins, after melting them down, and have debased them from 900 to 800 fine. Why was the word "never" put in the clause? Why was such a restriction put in there, in order to keep the bank from purchasing more silver?


Richard Bedford Bennett: The word "never" is
probably an undesirable word to use in a statute, but it was put in this bill for a definite purpose, namely to prevent false hopes being created in the hearts of those who might be concerned. During the currency of the world's agreement it will be observed by the hon. gentleman that everything depends upon the agree-
ment being kept. And India, being the key to the situation and having agreed as she did agree, we have added these words to indicate what our position will be, because we will have more silver than we will know just what to do with. That is the position. We have
2,000,000 ounces now, and we are buying substantially about 1,700,000 ounces a year. We have transferred that obligation to the bank. That is for the reason that we cannot contemplate this bank loading itself up with that silver. The government might do it; we might pass a statute to do it, but we are not going to place the bank in that false position. It will be observed that the legislation does not contemplate the central reserve bank buying the silver; it is the government that buys it; and if this parliament in its wisdom desires at a later date to pass a statute providing for the government purchasing silver, this will not stand in the way of it. If the time ever comes when the word "never" should be removed in respect to the bank, of course it will be a simple thing to do that.
Amendment negatived, on division.


[Stage Direction]
Section agreed to.
On section 27-Reserve to be maintained by chartered banks.
George Gibson Coote: There is an important amendment in subsection 1 of section 27. As originally brought down the section, then numbered 26, provided:
Every chartered bank shall on and after the day when the bank is authorized to commence business, maintain deposits with the bank which shall always be equal to five per centum of its deposit liabilities within Canada.
Subsection 1 of section 27 now reads:
Every chartered bank shall on and after the day on which the bank is authorized to commence business maintain a reserve of not less than five per centum of its deposit liabilities within Canada ...
The words to which I wish to call attention particularly are the following, which appear in italics:
... and such reserve consist of a deposit with the bank and of notes of the bank held by such bank.
The change made would allow the five per cent to be composed partly of notes of the Bank of Canada held by the chartered banks and the balance held on deposit. It seems to me that if there is any necessity of requiring the chartered banks to hold a deposit with the Bank of Canada, the central bank, certainly five per cent is small enough, and I submit that this change that has been made in the bill is in a sense destroying the value

Bank oj Canada
of the section. It is through the operation of this subsection, or partly through it, that the central bank can control to some extent the amount of credit issued. It is one of those measures which give the central bank control.


Richard Bedford Bennett: Will the hon. member explain how the chartered banks could thus control credit?


George Gibson Coote: When the chartered banks are extending credit, because of that they increase their deposits and as their deposit liabilities increase-their own liabilities-'they must increase their deposit with the central bank. I do not know what amount of notes the banks will carry, but after their own note issue privilege is practically discontinued, after a period of years, they might carry practically the whole of the five per cent in notes of the Bank of Canada. I think the change made weakens the position of the central bank, and that the original provision which required the chartered banks to carry five per cent on deposit is not too much. In order to bring the matter properly before the committee I move that section 27 be amended by striking out subsection 1 and substituting therefor the following:
Every chartered bank shall on and after the day when the bank is authorized to commence business, maintain deposits with the bank of not less than five per centum of its deposit liabilities within Canada.
Some students with whom I have discussed the matter think that five per cent is too small, that the banks might be required to carry even more than that. I do not think the bill as it stood originally required too large a deposit from the chartered banks. The present provision is really not adequate and I think we ought to substitute for it the section contained in the original bill.


Ian Alistair Mackenzie: I
thoroughly agree with the hon. member for Macleod. He may recall that I drew the attention of the banking and commerce committee to this very section, and the protest I made was that it was moved practically at the eleventh hour of the proceedings of the committee, and without notice. We are all aware that the chartered banks were very much opposed to this provision for a five per cent deposit. It is a matter of judgment as between two principles, which are these. The first question is: Does the Bank of Canada require a five per cent deposit from the chartered banks of Canada for its proper and adequate functioning? The second question is: Will the deposit of five per cent work such an injury on any one of the chartered
banks that it cannot function or carry on? I am rather inclined to agree with the hon. member, that the Bank of Canada will need a five per cent deposit from the chartered banks to enable it to function as it should. On the other hand, my information has been that in the case of one or two of the chartered banks the section as previously worded might work a very distinct hardship, and in considering the proposed amendment it is a matter of judgment as between these two principles. Personally I am in favour of the amendment. I believe the banks can deposit their five per cent without taking into consideration notes of the Bank of Canada, which will be in the various tills of the chartered banks as they continue to operate and function.


Richard Bedford Bennett: The provisions of the
section to which the hon. member for Macleod has directed attention are of course very important. May I point out that this section compels the banks of Canada to deposit with the central bank, as the hon. gentleman says, approximately five per cent of their deposit liabilities.


Ian Alistair Mackenzie: One
hundred millions altogether.


Richard Bedford Bennett: That means that the
banks in Canada will pay into the central bank about one hundred million dollars. That money may represent in part money on which they are paying interest. They are getting nothing for it; they get no interest on this one hundred millions, which is held by the central bank as a depository for the reserve liability of the chartered banks. When the matter came under consideration by the minister, on the state of facts disclosed from an examination of the returns, it was found that the chartered banks of Canada had been maintaining large quantities of money as till money, that is, bank notes which were held in their vaults but which were not in use- their own notes which were not in use until such time as they were put across the counter. The till money of some of the banks amounted to as high as 815,000,000. The law requires the banks to hold forty per cent of whatever cash reserves they have in Dominion of Canada bills. The other day on inquiry I found that one of the chartered banks had $40,000,000 of Dominion of Canada notes; another had, if I remember correctly, $38,000,000; and-I speak subject to correction- another had $21,000,000. It has always been of the utmost importance, so far as we are concerned, that the position of the chartered banks with relation to Dominion of Canada
Bank oj Canada

notes should be such as would ensure the circulation of this form of national credit. I will put it that way. Confronted with this situation the banks say:	No other central
bank bill undertook to impose upon us an absolute percentage which we had to maintain. They contended that in this country there had been averages which indicated that five per cent was reasonable. They do not complain of that but they say: If you put us in default if we drop below five per cent for a day, it will have a very serious effect upon our general position. Therefore, we have arrived at the conclusion which is indicated in this bill by which five per cent is to be maintained by the banks in Bank of Canada notes as a reserve for their deposits, but part of that money is to be on deposit with the central bank as a working balance which they may change from day to day by additions and deductions and by deposits and cheques against the balance. This is a great convenience to the banks and it cannot be said to be detrimental to this country at the moment. It enables a condition which is new to this country to be met by a method which will not be harmful to the principle or be a serious departure from the principle that the reserves of the chartered banks shall be held in deposits in the central bank or by the notes of the central bank. The regulations will take proper care of this situation. I quite appreciate the criticism made by the hon. member for Vancouver Centre (Mr. Mackenzie) but it must not be forgotten that the banks feel that this section added to the provisions of another section treats them very cruelly. I think this is an accommodation to meet the difficulties and they will not have the same complaint as they previously had in connection with the unfair treatment accorded by this bill.


Ian Alistair Mackenzie: Does the Prime Minister feel the section as now drawn gives ample security to the Bank of Canada?


Richard Bedford Bennett: I am satisfied that for
the transition period between the old and new regime, it will be ample. I might say to the hon. gentleman who is a Scotchman that the chartered banks of England maintain about ten or ten and a half per cent but it may amaze him to know that on the average the holdings are only six per cent of Bank of England notes, the balance being on deposit with the Bank of England. It seems to me that we are meeting the situation in the way which the larger experience of Great Britain has enabled them to meet a similar situation.


Henry Elvins Spencer: The banks must hold some forty per cent of their reserve in dominion notes but I do not believe there is anything in the Bank Act to say what that reserve should be. Do I understand that the five per cent which the banks must have with the Bank of Canada or in their tills must be in Bank of Canada notes?


Richard Bedford Bennett: No. As the hon. gentleman will note from the section there will be a determination by the banks from time to time. The banks may buy notes and hold them apart from what is held in their tills, but the deposits they will have to make will be deposits in ordinary business. They must have working balances and they cannot have working balances unless there are accretions of fresh deposits to meet withdrawals. They must have working balances to meet the varied demands of business from day to day.


Ian Alistair Mackenzie: Just like deposits under the Bank Act?


Richard Bedford Bennett: Exactly, over and above the minimum. In matters of this kind it has been found in practice that the working balances and the deposits are usually well above the statutory minimum.


George Gibson Coote: Would the amount of
dominion notes now carried by the banks be more than five per cent of their deposit liabilities? If that is so we are really not compelling them to hold any greater reserve than what they hold at the present time.


Richard Bedford Bennett: The figures for April 30, 1934, show the dominion notes held by all banks a-s totalling $128,540,497 against assets of $2,831,000 000 and total deposits of about
82.000.000.000. The latter figure is not given in a separate column and it would be necessary to add the four columns.


George Gibson Coote: At any rate their holding of dominion notes is more than five per cent of the deposits?


Richard Bedford Bennett: Slightly more.


Henry Elvins Spencer: I take it that most of the Dominion notes now held by the banks are in the form of large legals which are used for settling accounts between themselves. Under this bill they will not use those but will simply give cheques on the Bank of Canada.


Richard Bedford Bennett: I thank the hon. gentleman for directing attention to that fact. A great proportion of the Dominion of Canada notes held by the banks is not a medium of circulation, it consists of counters for the purpose of making transactions between the banks through the clearing house.

Bank of Canada


Ian Alistair Mackenzie: In large denominations.


Richard Bedford Bennett: As a matter of fact they are just counters of 850,000 or 8100,000. In view of the fact that this bill contemplates the steady diminution of the power of issue by the chartered banks and the placing in circulation of increasing quantities of Bank of Canada notes, I think the hon. gentleman will see that in practice it will work out much more satisfactorily for credit purposes.


Mr. POULIOT:: I have listened with a great deal of attention to what was said by hon. members who have spoken and by the Prime Minister himself. I have received the impression that this is an academic debate on banking as everyone has spoken about the theory of banking. This section refers to the deposit liabilities of the chartered banks. If hon. members will look at the reports published monthly in the Canada Gazette they will see that the deposits in the chartered banks have been increasing since 1930. There is no lack of money, in fact there is more than there was in 1930. The trouble is the lack of circulation of that money. People who have money in the banks keep it there. They feel secure and they will not invest it in different concerns. The confidence of this country has not been restored and people are still keeping their deposits in the banks. What is needed now is the circulation of money; the people should be taught to put their money to other uses and to invest it in order to give wrnrk to people. There is a phrase used in a drama known to many hon. members to the effect that business is other people's money. I cannot find anything in this bill which will increase the circulation of money. The role of this central bank should be to activate the circulation of money. It should be like a policeman trying to get people to move on in a jammed street. I cannot find that this bill is going to do that, and I cannot see what use it will be. It is simply another complication; it is simply some more legislation, the same as the amalgamation of railways which is coming shortly. There is amalgamation of everything; everything is centralized and I do not see the use of this bill if it is not to activate the circulation of money which is deposited in huge quantities in the chartered banks of Canada. Trade can be restored and money will circulate when there is more confidence throughout this country, but as long as people are afraid to make any investments the money will stay in the banks and there will be no improvement of trade. Therefore this legislation should be considered from not only a
theoretical but a practical point of view. This is the main point. What is the use of having immense numbers, libraries, of statute books? What does this mean to tire common people? They want work and to be paid for the work they do. They want the money to go around from one to another and come to the banks in smaller deposits. When this is done it will be a great benefit to the country, but I do not see anything practical in this bill.


Ian Alistair Mackenzie: I should like to say a word with regard to one of the points brought forward by my hon. friend. I am not at all agreeing with his general statement. There is a tremendous possibility in this legislation for expansion of credit. In the first place it will take over the gold held by the Minister of Finance for redemption of dominion notes and amounting to about
870,000,000. The appreciated value of this as taken over by this legislation will amount to about $117,000,000.


Richard Bedford Bennett: Roughly S120,000,000.


Ian Alistair Mackenzie: In the
second place, we are taking over that portion of the chartered banks' gold which is not required for external obligations, and that will amount to another S60,000,000, so that provided the present value keeps up, the bank will have a gold value of about $177,000,000. Under the flexible provision of twenty-five per cent metallic coverage, one can imagine the power for expansion given thereby. We did not have any such power under the previous legislation, even under the Finance Act.


Jean-François Pouliot: I admire the learning of
the hon. member for Vancouver Centre, but it is not illuminating. I know no more now than I did before and I have been listening to him very carefully. He speaks about a tremendous value of millions of dollars and all that sort of thing. That is not the point; it is that a man should have an opportunity to be paid for some work at three, four or five dollars a day. That would mean more for him than hearing about millions of dollars. My hon. friend spoke in a very learned manner and I am always pleased to listen to him, but as I said, I know no more now than I did before he spoke.
Amendment (Mr. Coote) negatived on division.
Section agreed to on division.
Sections 28 and 29 agreed to.
Bank of Canada

On section 30-Disposition of profits from sales.


Richard Bedford Bennett: The hon. member for
Vancouver Centre has directed attention to the difficulty that will arise in making a division under this clause of profits resulting from the sale by the bank of gold coin and bullion transferred to it pursuant to the provisions of clauses 25 and 28. I do not for a single minute minimize the difficulty, but to state in this bill an exact figure would be unfair to this bank as it would be unfair to the chartered banks. Some of the banks have external liabilities that are still liabilities in terms of gold. The banks have some foreign liabilities which it is unnecessary to say to this committee have, by the action of the legislatures of those countries, no longer to be met in terms of gold. For instance, the decision of the House of Lords in one case greatly increases the liabilities as it was indicated by a decision of the court of appeal when we were discussing the matter here in the early months of the year. The question whether certain liabilities in the United States in terms of securities are to be met in a particular way or by what would be the equivalent of the value of the gold at the time is still unsettled. Then of course we do not disguise the fact that we have in this country a few questions in that regard that are not yet settled, for instance in connection with some few people who in 1933 declined to accept other payment of their bonds that fell due and demanded that they should be paid in gold. There are very few of them, but now and then we have seen such cases in the newspapers; the amount is not largo. That, however, does not touch the external side of the matter. I appreciate that this places upon the governor in council a substantial responsibility, but it is one that must be taken with respect to many of these matters. I should say, speaking antecedent to the occasion arising, it must be the subject matter of discussion, agreement and arrangement based upon such expert knowledge applied to the facts as will enable a reasonable disposition to be made of the matter in the light of the monetary value attaching to the external liabilities in terms of gold. That is all that can reasonably be said about the matter.


Ian Alistair Mackenzie: This
places a tremendous responsibility upon the governor in council. I would suggest the insertion of some provision such as "upon report by the deputy minister" or "upon report by the inspector general," to get somebody responsible for the disposition.


Richard Bedford Bennett: No action on such a
clause as this is taken by council except on a report of the Minister of Finance, and usually it has been the custom, grown up in recent years, that the Minister of Finance makes the submission and he says that this course is recommended by-indicating, as the hon. gentleman has said, the deputy minister and sometimes others as well. I can assure the hon. member that so far as the present governor in council is concerned, the responsibility will not be lightly exercised or too readily undertaken without having clear knowledge of what is involved as a result of it.


[Stage Direction]
Section agreed to.
Sections 31 to 43 inclusive agreed to.
Schedules A, B and C agreed to.
Certificate agreed to.
On the preamble.
Richard Bedford Bennett: The preamble did not
carry; there was some discussion on it before.


Henry Elvins Spencer: Before the preamble passes I wish to move an amendment. I appreciate that the preamble as it stands is nearly allembracing, but not quite. It is drawn with considerable care but I do not think it fully covers our needs. I wish to remind the committee that since the war we have paid out, I think, about 81,900,000,000 in interest in this country; our interest burden has increased eleven times during the last twenty years. For that reason I wish to move the following amendment to the preamble:
That the preamble of Bill No. 19 be amended by inserting after the word "Canada" in the second line the words: "to make use of the national credit at cost and."
The preamble will then read as follows:
Whereas it is desirable to establish a central bank in Canada to make use of the national credit at cost and to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of the Dominion: Therefore, His Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:-
I trust the committee will give this their best consideration, as it is in the best interests of Canada.

Dominion Notes Act


Jean-François Pouliot: Mr. Chairman, before you submit this amendment, may I say that while those debts are spoken of only as liabilities, in fact they are also assets. As has already been said here, if the Dominion of Canada owes $2,500,000,000 that is its national debt, but that debt is an asset of those who hold Canadian bonds; therefore it must be considered in both aspects. When we speak of the debt we must have in mind also that the bonds representing it are assets of the people who hold them and constitute a large part of the wealth of this country. The matter must not be considered from the passive angle only, but also from the active. I shall not enlarge any further upon it; I merely wish to bring to the attention of the committee the fact that in this matter there is on one side a debtor and on the other side a creditor. Large amounts of Canadian bonds, national, provincial and municipal, are held by Canadians, and they are the wealth of those people, who live on the income derived from them. The matter must be considered from that angle as well.
Amendment (Mr. Spencer) negatived on division.
Preamble agreed to on division.
Bill reported.


Richard Bedford Bennett: If the house would agree, as the Senate meets to-morrow I should like to move the third reading.


Ian Alistair Mackenzie: I am sorry, but it is our intention to move an amendment on the third reading of this measure; I think the hon. member for Shel-burne-Yarmouth (Mr. Ralston) is to move it to-morrow.



DOMINION NOTES ACT

[Stage Direction]
Right Hon. R. B. BENNETT (Prime Minister) moved the second reading of Bill No. 110, to amend the Dominion Notes Act.
Motion agreed to, bill read the second time, and the house went into committee thereon, Mr. Smith (Cumberland) in the chair.
On section 1-Amount held as security for redemption.
Ian Alistair Mackenzie: The
second section of the bill provides for repeal of the Dominion Notes Act on a day to be proclaimed, and the first section for repeal of section 5 of the old Dominion Notes Act, which provided for a note issue of $50,000,000, and increases the amount to $120,000,-
000.	It is not necessary to add much to the
very comprehensive review of the dominion notes situation given by the Prime Minister (Mr. Bennett) the other day. Briefly, before confederation the provinces of Canada then in existence had their several note issues. These were taken over by the dominion authority in 1867. The principle underlying our dominion note issue and also those of the provinces was that there should be a partial gold coverage up to a certain amount, and beyond that limit the coverage should be ons hundred cents on the dollar. The other day the Prime Minister referred to the fact that under this legislation there would be a possible total note issue of $223,000,000 odd. I presume that was made up as follows: Total notes $120,000,000; twenty-five per cent of gold $30,000,000, and the total gold left of the $117,000,000 at the appreciated valuation, $87,000,000 odd; this would be $120,000,000 plus $87,000,000, or $207,000,000, and with the $16,000,000 odd already covered by securities makes the total of $223,000,000.
Speaking for myself, I am pleased indeed that the Prime Minister has introduced this legislation. I can only regret that it was not introduced over three years ago. Hon. gentlemen opposite may recall that at least a few of us on this side did advocate three or four years ago the introduction of precisely such legislation. They may recall that when the Dominion Notes Act was passed in the first place the amount issued was not $50,000,000 but $30,000,000, which was subsequently increased to $50,000,000 and in 1915 by a further $26,000,000. In two years there was a total increase in the note issue of Canada of $46,000,000. Now under this legislation according to the Prime Minister there is a possible increase of $52,000,000 odd, the difference between the present note issue of $171,000,000 and what he calls the possible note issue under this legislation, of $223,000,000. I do not agree exactly with the Prime Minister that this legislation is made possible by the appreciation in the value of gold. According to his own, figures, taking our present Finance Act, $69,000,000 in gold at a valuation of $20.67 an ounce would give a coverage of thirty-one per cent even for the contingent note issue of $223,000,000. In my judgment thirty-one per cent is more than ample to cover our internal note issue circulation. I think twenty-five per cent was fixed last year as a sufficient coverage. Under the increased valuation of the Finance Act, according to the figures given the other day the gold which will then be available during the transition period before the Bank of Canada commences business will be 52J per cent of this note issue of $223,000,000. My
426S
Dominion Notes Act

only complaint in that regard, Mr. Chairman, is that the increase should be far greater than it is. Instead of increasing it from $50,000,000 to 8120,000,000 I think on any scientific basis the Prime Minister or any government would be entitled to increase the note issue of Canada to-day much more than is being done at the present time. I think an increase of 8100,000,000 or more would be absolutely justified. I recall that three or four years ago the English Macmillan committee established a different scientific basis. They said it was a safe basis for any nation to issue notes to the extent of one-fifth the total bank deposits, which in Canada would result in a note issue of about $400,000,000 as against 8171,000,000 at the present time. On the other hand I think that when the Bank of Canada is constituted, with its more elastic and flexible provisions, with the appreciated gold taken from the banks and from the Finance department totalling perhaps 8177,000,000, the note issue powers of the bank are going to be simply tremendous.
I am not criticizing the details of this bill; I am criticizing two particulars of it. In the first place I am complaining because this was not done three or four years ago, and my second complaint is that the note issue is not more substantial. With regard to financing public works by the issue of credit, I am entirely in favour of that so long as that issue of credit is made on the basis of security, so long as it is not uncontrolled inflation. The Prime Minister mentioned the appreciated value of gold, and he also mentioned the resolution of the London conference of last year. In my judgment neither of these arguments is required to justify this present legislation.
Another submission I want to make to the right hon. gentleman is this: When we come to receive the appreciated value of the gold which we are taking over from the banks we should consider that an asset which belongs to the .people of Canada. It should not be used for the temporary financing of public works or anything of the kind; it should be used only for the reduction of our national debt. I am in favour of these two principles, first applying the appreciation in the value of gold to the reduction of the national debt, and second the principle of financing public works by the direct issue of currency instead of placing great interest obligations upon our shoulders for years to come. With these reservations, Mr. Chairman, I want to commend the legislation introduced by the Prime Minister.


William Richard Motherwell: I have always been greatly interested in this question of note issue or, as we sometimes call it, controlled inflation. I have never been able to get at the bottom of the difference between the advocacy of the hon. member for Vancouver Centre (Mr. Mackenzie) and that of the hon. member for Macleod (Mr. Coote), and the present attitude of the government. Until last year the hon. member for Macleod advocated inflation without the significant word " controlled " before it, according to my memory. The 'hon. member for Vancouver Centre seemed to want it about what it is in this bill-a certain measure of controlled inflation. As a beginner in these matters economic and financial I want to know why the government can do this thing now. with the apparent approval of almost everyone, when the government could not do it when we needed it so badly, three years ago.
The economic conference seems to have given its O.K. to this. What had they to do with our business? Could we not have done it without 'waiting these interminable two or three years? As a farmer I know what it meant to us two or three years ago and less in promoting low farm prices. I do not pretend to be any authority on monetary matters, but I know what hurts and what does not hurt, what helps and what does not help the farmer to get a proper price for his product. Without knowing a. quarter as much as he does I feel as the hon. member for Vancouver Centre feels, but I want to know why this measure was delayed so long and why we had to wait until the economic conference told us to go ahead. This is about the only thing they did tell us, so far as I recall, except the wheat agreement, which is not much good, if any. Why did we wait so long, and what circumstances prevail now which justify this measure to-day but which did not justify it previously? That is what I should like to get at.


George Gibson Coote: Since the hon. member for Melville (Mr. Motherwell) has mentioned my name I must say, almost as a matter of privilege, that I have never, in this house or any other place, advocated uncontrolled inflation.


William Richard Motherwell: You did not mention "uncontrolled."


George Gibson Coote: I should like to make that very plain. If the hon. gentleman doubts that he can look at any speech I have made in this house.


William Richard Motherwell: I do not want to do my hon. friend any injustice at all, because

Dominion Notes Act
I think he was the pioneer in advocating inflation. But I never detected the word "controlled" in his remarks, though last year he went out of his way to shove it right to the front. If I am wrong I should be delighted to have my hon. friend correct me.


George Gibson Coote: If the hon. gentleman would do me the honour of reading the first speech on the subject I made in this house he would see that the word "inflation" does not occur in it at all. I protested against the deflation which has taken place, and I suggested that Canada should abandon the gold standard and allow her dollar to depreciate in outside countries. In other words I suggested that we should devalue our dollar, and I should like to make that plain. I have never advocated uncontrolled inflation; I believe in controlling the economic forces that we use in our daily life. When I protest against deflation someone always reads into my remarks that I want uncontrolled inflation. Of course I have been accused of wanting to use the printing press, but I suggest that this is what the Prime Minister is going to do. He is going to print more dominion notes with practically the same amount of gold we have had in the treasury for the last few years. We might as well have had these notes printed three or four years ago; we might even have had a few more. It would not have been more dangerous then than it is now, and it would have been a great deal of help. That 840,000,000 might have been working all these years at the increased velocity suggested this afternoon by the hon. member for Temiscouata (Mr. Pouliot), because unfortunately in studying economics we find that when the quantity of money is reduced the velocity of its circulation always slows down.


Jean-François Pouliot: Since my name has been mentioned I should like to ask the hon. gentleman a question. He has said that he favours controlled inflation. Would he be good enough to tell the house what is the limit of controlled inflation?


George Gibson Coote: At the moment I was not
even advocating controlled inflation. I would suggest to the hon. member that what we are getting now is a little bit of inflation. The quantity of money which is moving about and serving the public is greatly restricted, and I congratulate the Prime Minister on taking this step to put more money into circulation. I want to congratulate the Prime Minister for using this money to construct public works in order to provide employment, instead of giving people the dole. May I say that I agree with the hon. member for Vancouver Centre when 74726-270
he says this measure is several years late. We are now in the fourth year of deflation, and we should have taken steps of this kind long ago, though it is better late than never. This is a very feeble, short step. As I remember it, speaking from memory and using approximate figures, the gold held by the government itself is in the neighbourhood of
870,000,000. Using the very basis which the Prime Minister says was suggested by the world conference as quite adequate, the twenty-five per cent gold reserve, we could issue $280,000,000 of dominion notes. That would be quite safe and quite in keeping with the canons of sound finance, whatever that may be. I understand we have about $170,000,000 in dominion notes now outstanding, so we might safely issue another $110,000,000. If we are going to issue $40,000,000, and if we have decided it is quite proper to adopt this new basis of gold coverage, I should like to suggest to the Prime Minister that he could go at least to the extent of $100,000,000. May I also point out to the house that gold now commands a much higher value. I think it is about seventy per cent higher than it is valued under our currency act. So we could increase by seventy per cent the gold basis for the issue of notes, which would bring the amount of gold at the new valuation to about $119,000,000. And if you used that as a basis for an issue with twenty-five per cent gold coverage you could issue notes up to $470,000,000, and still be financially sound.


Mr. MORAND:: How would you control
your coincident increase in credit which naturally follows from putting this much into circulation?


George Gibson Coote: Control it through the central bank. If the central bank is given adequate powers it could control the situation. As I suggested this afternoon, the reserves which the banks must carry are not sufficient. The central bank could easily control if we gave it the power to require the chartered banks to carry with it a certain percentage of their deposit liabilities, as a deposit in the central bank, give the central bank power to vary the percentage of such deposit and they can prevent too great inflation of bank credit. At the moment there is no danger of that, because there are not enough people whose credit is good who will assume the responsibility of borrowing from the bank. So we are not liable to have any inflation of bank credit from that.
I do not wish to speak at length, except to say that I believe the Prime Minister is taking a step in the right direction and that I regret

Dominion Notes Act

he has not gone farther. I suggest that he should go farther. I am not suggesting that he must go as far as is possible under the new valuation of gold, but let us have enough of these dominion notes issued to finance a worth while program of public works. Public works may be considered as an asset and not a liability, and they are a very good asset on which we could issue new money. That is, there is an asset which justifies the issue of new money, as well as having twenty-five per cent gold reserve behind it. But so far as the other seventy-five per cent is concerned, we would have useful public works behind it, and I believe that would be a very good basis on which to issue money.
I am very glad the Prime Minister has taken this step, but I should be pleased if before the legislation is finally passed he would consent to go a little farther.


William Richard Motherwell: Before the Prime Minister answers I should like to state some of my dilemmas. It was always contended two or three years ago that by issuing these additional notes with the same coverage we would have given that much more currency to put into circulation for business requirements-not for a building program, but just so that we might have it available so that any of us might get it for the ordinary running of our businesses. I never could see that. I have no brief for the Prime Minister. It was, I repeat, a matter of issuing such additional notes so that notes would be available for all and sundry businesses, when there was all kinds of money already available in the banks. It certainly was not a question of the availability of larger amounts of currency in order to do a larger business. The money was there in abundance in the bank all the time. We did not need any more currency then to do our business. It needed even less currency then because there was less business being done; therefore less currency would have been sufficient. The banks were filled with currency waiting for investment, and waiting to make loans where they could obtain what they considered proper security. Why is it needed now? Why has the conference to tell us when to do it? This is all a great mystery to me, and I am sure the Prime Minister will do some unravelling in connection with this enigma, and will throw some new light upon it. I know there is a difference between ordinary currency and an investment in public works. What this new note issue really does is to get away from going on the market and borrowing money.

It averts borrowing more money, and increasing our national debt. If we did not do this as outlined in the bill we would have to borrow money abroad; we would have to add to our national debt, an objectionable procedure just now and one which should be avoided if possible. If there is anything in the suggestion that this is just being done now before an election I must say that would be a most unworthy purpose.


Jean-François Pouliot: What is the limit of controlled inflation? No answer.


George Gibson Coote: I should like to say that
although I intended to, I did not answer the hon. member for Temiscouata (Mr. Pouliot). He asked my opinion as to where we would stop controlled inflation, or how far it should go. The determining factor in that case would be the average commodity price level in Canada. I think that is generally agreed upon by economists as being the factor which determines when the controlled inflation should stop. There should be no further inflation after we get to a certain agreed price level. That point would be agreed upon before a policy was commenced. I believe that is what the central bank may do. They should set, as their objective, a certain commodity price level. We have chosen the price level of 1926. We would take the index price of all commodities in that year, the index figure representing the average commodity price. Let us have a policy of controlled inflation or reflation-and I believe the latter is a much better word-let us raise the index figures of commodity prices to a point as near as possible to the figures obtaining in 1926. That would make it possible for producers to meet their liabilities. But while the price level is perhaps only sixty per cent of what it was when we incurred debts in 1926, we have to produce forty per cent more commodities to get the same amount of money to pay our debts. When we produce the extra forty per cent-and if we do succeed in doing so-then we drive the price level down because we have overproduced. We must have a certain price for our products, if we are going to meet our liabilities. The hon. member for Temiscouata says that our bonds are not only liabilities, that they are assets. They are assets only if those who must pay taxes out of which this interest comes, can meet their payments. If the price levels go too low, that becomes impossible for the producers, and when enough producers get into that position the interest on the bonds cannot be met, except from new borrowings, a condition which cannot go on indefinitely.

Dominion Notes Act
So I say the matter of getting a certain price level for producers is a fundamental matter for this house to determine when we are discussing monetary policies.
I think the Prime Minister will agree with me as to the importance of having a certain price level for our products, and if it is necessary for our producers it is necessary for Canada to have it so that the dominion, the provinces and the municipalities may meet their liabilities. The interest can be paid only out of production. If the price of our products goes too low the payment of interest becomes impossible-just as impossible as taking four gallons of water out of a one gallon can. It is for that reason that for the last three or four years I have urged monetary action to raise price levels.


Richard Bedford Bennett: What was the effect of
it in the United States?


George Gibson Coote: I do not think anything can be gained by discussing that point, but at the moment we are discussing the question of increasing the amount of dominion notes issued. Great Britain has obtained an increased price level from monetary action, and certainly the United States have.


Richard Bedford Bennett: To what extent?


George Gibson Coote: Not to the extent it was
hoped, and possibly nof to the extent desired.


Richard Bedford Bennett: Not any more than in
this country, or as great in many instances.


George Gibson Coote: We have it here because it
came to the United States.


Richard Bedford Bennett: I thought you would say that.


George Gibson Coote: When the United States took action to devalue their dollar in relation to the pound sterling, making the pound worth more than five dollars, the pound became worth more than five dollars in Canada, and that was the reason for most of the rise in the price of wheat and other exportable commodities. I do not think it is because of any action we have taken here up to date; rather, I think it is because of the action of the United States in revaluing gold.


Jean-François Pouliot: I had asked certain questions of the government, and the answer came from the hon. member for Macleod after he had said that he did not desire to reply to my question.


George Gibson Coote: I said that I intended to answer it but I forgot, and that is why I rose to make reply. I did not wish to interrupt (he Prime Minister.
74726-270J


Jean-François Pouliot: I am not saying that at all. What I am saying is that when I asked the question of the hon. member for Macleod he said that he was not discussing the matter at the moment, but he did not tell me that he would be good enough to rise afterwards and give a lengthy explanation of the matter. Now I am a layman; I am not a banker. I have here a dollar bill and if through inflation it were converted into a two dollar bill or a three dollar bill it would mean that instead of one dollar I should have three dollars. But if the increase were general the result would be that I would not be able to buy any more with that three dollars than I can with this dollar bill. Therefore what is the use of inflation? I remember well that last year, during a debate on the very same subject, I asked the hon. member for Macleod some questions along the same lines. I asked him: If we have normal trade what is the use of inflation? I have not the text of his answer but I remember distinctly what he said; he said that if trade were normal, if we had the same trade now that we had in 1930 there would be no necessity for inflation. He said it twice, and the third time I asked the same question and he told me that if he had said it previously it was because he had not properly understood what I had asked him before.
Now, I do not see what relation there can be between the central bank and the average figured value of goods. I do not see how the Bank of Canada can increase the price of butter from twenty cents, as it is now, to fifty or sixty cents as was promised before the election. I do not see how the Bank of Canada can do that, but if my hon. friend can explain it to me I should like him to explain it in very plain language which can be understood by a layman like myself. I am not a banker as he is. I am not a technician; but I do not believe in all this artificial, superficial, fictitious business. There must be something real; there must be something that exists not only in the imagination but in reality. Consider all that has been inspired by the economists who have written books upon books to describe their dreams. First of all, we remember Plato who lived a long time ago. He described the ideal city. Walking with other philosophers he described his dreams, and he gave them to us in books that are immortal. But the ideal city as seen by Plato in one of his dreams has never existed in reality. And now we have all sorts of economists who are preaching cures for every national trouble. They are writing books. Some of them live in England some in the United States, and others in France and Ger-
Dominion Notes Act

many; and here in this House of Commons we have listened to the opinions of Sir Arthur Salter and of Schacht, the president of the Reichsbank. All these people have beautiful theories which will make everyone rich. Well, they may be sincere, but they are not serious, and these experiments cannot be carried on on any large scale. Take a chemist like Pasteur; take a man like Claude Bernard; take Lord Lister. These men confined their experiments within a narrow field. They tried first to discover the truth by experimenting on a very small scale and then, when they saw that that limited experiment was successful, they extended it and carried it on on a larger scale. This I submit is what should be done. It is very dangerous to venture into the unknown on the word of men who, though they may be scientists or men with keen legal minds, have no practical experience. I am sure, for instance, that my hon. friend from Macleod, who I am sorry has just gone out, has more practical experience in banking than any economist who is not himself a banker. He has probably more experience than Sir Arthur Salter, and so said Sir Herbert Holt when he called the hon. gentleman one of his colleagues. "You are a banker yourself," Sir Herbert said to the hon. member. He admired the hon. gentleman's great experience in banking. But I am wondering how the central bank through inflation could increase the price of butter from twenty cents to sixty cents, how it could increase the price of cheese to twenty-five cents. How will the central bank through inflation restore the prices of commodities to what they were in 1930? And even if it did, it would not be the same, because the money would have less value; the currency would be less valuable. That is the point of view of a humble layman, a man in the street, looking at the theories put forward by hon. members in the extreme corner. They have been preaching these theories for a long time now and they may be sincere, but they are not practical; and what they tell us is a mere mirage. It is nothing but castles in the air, and it is a shame to tell the farmers that through inflation they will be richer than they are now. We must have a normal exchange of goods and we must come to that as soon as possible. In the meantime I hope that when hon. members in the far corner preach inflation they will be more convincing. I do not doubt their sincerity, but I say that they are preaching utopia, and it will make no one richer than he is now. I hope they will understand that it is much better to read the blue-
books and get acquainted with facts than to spend their nights reading the publications of economists of the old world and the United States, those dreams in books which always put one to sleep.


Richard Bedford Bennett: 
Jean-François Pouliot: I understand we are discussing clause 1 of Bill No. 110. In the last number of the Commercial Intelligence Journal, the issue of June 23, 1934, at page 1090 I see a table giving exchange quotations for
Dominion Notes Act

the weeks ending June 11 and June 18, comparing the par value of the currency of each nation with nominal quotations in Montreal
for the two weeks. I will not take both weeks, but let me take the week ending June 18, as follows:
-		Nominal quotations
Present or former	in Montreal
Country-	Unit	gold parity	week ending June 18Austria	Schilling .1407	.1872
This means that Austria is much more above par than Canada.
Belgium	 Belga	.1390	.2305
This means that the value of Belgian currency is much more in Canada than when it was at par.
Bulgaria	Lev	.0072	.0118Czechoslovakia	Krone .0296	.0411
In Denmark and Finland their currencies are a little less than par.
France	Franc .0392	.0651
This means that the franc is worth about fifty per cent more than it was before, according to what the Prime Minister said as to our money being above par, that means it must be above par in all the other countries. How, then, can he explain that the value of the French franc is now fifty per cent more than it was before?


Richard Bedford Bennett: I did not say that.
What I said was in reference to New York. That is what I spoke of, and the French franc is still on the gold standard.
Country-
Germany
This means an increase of about twelve cents for each mark, a formidable increase compared with the one and a fraction per cent of the Canadian dollar. It means that
Holland


Jean-François Pouliot: That is all right. It
means that the nations that are standing by the gold standard have currencies that are worth much more than those of the nations that have left the gold standard. That is common sense and everyone knows it. It is superfluous of the Prime Minister to teach me that, because it is a matter that is known by the man in the street. But let us take the other nations:
Nominal quotations in Montreal week ending June 18 .3758
the German mark is worth about fifty per cent more in our own money. In Greece the drachma is lower.
Guilder	.4020	.6685
Present or former Unit	gold parity
.. ..Reichsmark .2382
This is also an increase of over fifty per cent for the Holland guilder.
Hungary	Pengo	.1749	.2956
Much above Canadian money. Canadian money is much below par.
Italy	Lira	.0526	.0849
Also a great increase over par.
Jugoslavia	Dinar	.0176	.0224
Also an increase. In Norway there is a small decrease. In Portugal there is a small increase over par.
Roumania	Leu	.0060	.0100

Income War Tax Act
An increase of about forty per cent. In Sweden there is a small decrease and also in Spain there is a small decrease.
Nominal quotations Present or former	in Montreal
Country-	'	Unit	gold parity	week ending June 18Switzerland	Franc .1930	.3204
An increase of about fifty per cent.
United States
Dollar
1.0000
.9850
This means a decrease. What is meant by that inflation? It is not that Canadian money is above par but that Canadian money is a little less inflated than United States money;
that is all, but Canadian money is much lower than par. It is the same thing with regard to the currencies of Egypt and South Africa.
Great Britain
Pound 4.8066
4.9740
It means, sir, that Canadian money is not above par. We speak of it so but it is not in accordance with the facts; Canadian money is below par. When you go to England or most of the other countries of the world you see the depreciation of our currency. Therefore there is no reason to rejoice. If you go to France you need $150 to buy $100 worth of francs at the value they had before depreciation started. I put these figures on record in order to show the real value of our currency in the currency of other countries. The Commercial Intelligence Journal is published by the Department of Trade and Commerce and the figures it contains cannot be denied by the government.
With regard to the favourable balance of trade of which the Prime Minister spoke, let me tell him that the balance of trade now cannot be compared with the amount of trade in 1930. I wrote to the bureau of statistics to ask them for a comparison with the years 1930 and 1931. The comparison supplied is made between the years 1932 and 1933. It is most unfair, because the comparison should be made between 1930 and 1931 and the other years. If the comparison is made between 1933 and 1932 the showing is not so bad, but the government cannot say that it is better than before, because the point of comparison must be the year 1930, the year that the leader of the government and his ministers found so bad. It was the last year of the Mackenzie King government, therefore the comparison should be with that year. In comparison with that year we see that the decrease of trade is something fearful. Our external trade is only one-third of what it was in 1930.


[Stage Direction]
Section agreed to.
Section 2 agreed to.
Bill reported.

[Stage Direction]
The house resumed from Wednesday, June 20, consideration in committee of Bill No. 99, to amend the Income War Tax Act-Mr. Rhodes-Mr. Smith (Cumberland) in the chair.
Richard Bedford Bennett: The hon. member for Shelburne-Yarmouth (Mr. Ralston) brought to the attention of the committee subsection 6 of section 8. A deputation representing the various institutions that are holders of trusts met with the representative of the income branch of the Department of National Revenue and myself and they arrived at the conclusion that the present tax of five per cent is undoubtedly applicable against this, and that this section should be stricken out. I therefore move:
That the house proceed to reconsideration of section 8 of the bill.
The committee will recall that section 6 was passed.


[Stage Direction]
Motion agreed to.
Richard Bedford Bennett: I now move:
That subsection 6 of section 8 of the bill be stricken out.


[Stage Direction]
Motion agreed to.
Richard Bedford Bennett: In section 5 of the bill it is proposed to meet the five per cent tax by the following amendment:
That section 5 of Bill No. 99 be amended by adding thereto the following paragraph:
"(d) All income for any taxation period received from any Canadian estate or trust, which income shall be deemed to include all income accruing to the credit of non-resident beneficiaries whether received by them or not during such taxation period. The tax payable by virtue of this paragraph shall be deducted by the trustee from the amount paid or credited to such beneficiary at the time of paying or crediting and shall be remitted to the Receiver General of Canada."
Income War Tax Act

That provides for the taxation of the income from the trusts but prevents double taxation and imposes only the tax of five per cent. I think that is the effect of it; that is what I am advised. At any rate it prevents double taxation and meets the difficulty to which the hon. member referred.


Mr. RALSTON:: Does the Prime Minister think that it applies to anything more than the income derived from Canadian sources "from any Canadian estate or trust"?


Richard Bedford Bennett: The idea of designating it as a Canadian estate or trust is that it is a trust set up in this country, as I tried to explain the other day. If the benefits accrue to an estate set up in this country I think it is only fair they should contribute to the revenues of the country. But I agree with what was said the other day that it should not be double taxation. The representatives of the institutions that hold these trusts, both in Toronto and in Montreal, were agreed that the beneficiaries should make a contribution, and I think this section covers that clearly. I wish the hon. gentleman would look at it and see if he thinks it does.


James Layton Ralston: My only thought was that there might be a Canadian estate or trust in the sense of one established in Canada which would hold not only Canadian but foreign securities. I thought it was intended that the tax should apply to the portion of income derived from Canadian sources only. The Prime Minister's point the other day was that if money was earned under our Canadian institutions, even though that money went to non-residents it should be taxed. I am wondering if this goes further and really brings the whole income of the estate, whether from Canadian or foreign sources, under the purview of the tax.


Richard Bedford Bennett: I think if the hon. gentleman will look at it he will see that any income disbursed to a beneficiary from a Canadian trust is taxable.


James Layton Ralston: That would include income from foreign securities?


Richard Bedford Bennett: Beyond question I think, that was the intention and that is my understanding. That would be the amendment to section 5 which takes the place of subsection 6 of section 8.


[Stage Direction]
Amendment agreed to.
Section as amended agreed to.
Richard Bedford Bennett: That was the only section that was allowed to stand, unless the hon. gentleman has any observations to make with respect to any of the other sections. I think they have all been passed.


James Layton Ralston: An inquiry came to one of my colleagues with regard to section 10. I think there is no doubt about the answer to the inquiry which was made; that is, as I understand it, section 10, which is a reenactment of section 19 of the Income War Tax Act, applies only from the date of assent and is not made retroactive. That was the information I got. I looked over the bill as passed and there did not seem to be any provision making that particular section retroactive.


Mr. STEWART (Edmonton):: It is not mentioned in section 18.


Richard Bedford Bennett: As the hon. gentleman knows, I am only here by reason of the absence of the minister, who put through these sections. As a matter of fact I was not in the house, but according to my understanding that section was not to be retroactive. I will just look at it now, if the hon. gentleman will pardon me. I do not think there is any question that it is not retroactive.


The CHAIRMAN (Mr. Smith, Cumberland) :: Mr. Bennett moves that section 19 be stricken out and the following substituted therefor:
19. Subsection 6 of section 9B of the said act is repealed.


[Stage Direction]
Amendment agreed to.
James Layton Ralston: There is just one thing more. On the second reading of the bill the Minister of Finance made some reference to section 10, which reenacts section 19. I do not know whether the Prime Minister was in the house at the time, but I thought the minister rather left the impression that legislation had been passed in 1930 which widened the position of the taxpayer and made him less liable than before to pay taxes. As I understand it section 19, as enacted in 1930, provided for the taxation of the accumulated income on the winding uip, discontinuance or reorganization of a business, and that was passed for the purpose of restricting the rights of the taxpayer. Though those funds were not taxable at all previously, they became taxable as from January 1, 1930. I looked up the debates of that time and I find that on May 24, 1930, at page 2505 of Hansard, the

Income War Tax Act
hon. member for York-Sunbury (Mr. Hanson)
said:
But the present act provides that dividends paid to an incorporated company by a company incorporated in Canada, the profits of which have been taxed under the act, are not liable to taxation.
Then the hon. gentleman went on to point out that this provision made them liable to taxation; he took some objection to the act being made retroactive to January 1, 1930, and suggested that the act should be made to apply only from July 1, 1930. Then at page 2506 he said:
It may be said that by that method the shareholders of the selling company escape payment of income tax on undistributed and earned surplus or income; but it is_ a perfectly legal transaction, and to make this provision that we are now dealing with retroactive is,
I submit, wholly unfair. _ _
I can say for the minister's benefit and assistance that I have taken occasion to discuss this matter with the income tax authorities, and while they admit that it bears the construction which I have indicated, they say that it was not the intention of the department to go that far, but to go back only to the 1st day of January. 1930. But unless the bill is properly worded, to provide against the contingency I have mentioned, there will be very grave injustice done.
Further on he said:
Even to go back to the beginning of 1930 is, in my opinion, not quite fair because that too has this retroactive feature. I would suggest to the minister that instead of making this retroactive to the beginning of the 1930 taxation period, he provide in the bill that it take effect from the beginning of the next taxation period, the beginning of the 1931 period, or the end of the 1930 taxation period. In that way the government and the department will not be open to the charge of passing retroactive legislation, which on principle is always bad, and which may bear hardly in a given case.
I am not objecting to the principle of the amendment to the act, because in principle an undistributed income has as much right to pay taxation as distributed income, but it has not been made taxable in the past and' it has been perfectly legal to do what I have indicated has been done. ...
I refer to that only in order that there may be no doubt on this point, that in 1930 the act which was the predecessor of this section now being amended, was passed, whereby a distinct advance was made in the way of taxation; undistributed income was taxed which had not been taxed previously, and that provision was made applicable back to January 1, 1930.


Richard Bedford Bennett: I think the hon. gentleman has not before him the statute as it was passed. The statute is chapter 24 of the statutes of 1930 assented to on May 30. It
exempted first of all dividends paid by one incorporated company to another. Then it dealt with cooperative companies and associations; it amended subsection 1 of section 5 by adding a description of dependent relatives ; it exempted ten per cent of the net taxable income in regard to donations and also exempted $5,000 of an annuity. Then, on page 233, section 19 was repealed and the following substituted:
19. (1) On the winding-up, discontinuance or reorganization of the business of any incorporated company, the distribution in any form of the property of the company shall be deemed to be the payment of a dividend to the extent that the company has on hand undistributed income earned in the taxation period 1930 and subsequent periods.
What happened? Just as soon as this was passed they proceeded to distribute all the income earned prior to that time. That was the joker in the whole statute; it applied only to 1930 and subsequent periods, and they proceeded immediately to distribute the income earned prior to 1930. Many members of the house thought that was not what the statute meant at all, but that was what it did mean in practice. That was the situation dealt with by the amendment passed last year, which is being further dealt with here. If the hon. gentleman will look at the language he will see how that construction could be put upon it. As a matter of fact the hon. member for York-Sunbury was arguing that there should be no payment of income tax on the distribution of undistributed profits. That should apply to the payment of a dividend to the extent that the company has on hand undistributed income earned in the taxation period 1930 and subsequent periods. The ones antecedent to 1930 got off free, and it is certain they took advantage of that provision.


James Layton Ralston: All hon. members in the house at the time agreed that this legislation was imposing am extra burden on the taxpayer. It may have been that in practice someone ingeniously worked out the other situation. But everybody had his eyes open when the act was passed. It certainly did impose taxes which were not imposed before, and imposed them back to January 1, 1930, instead of, as the hon. member for York-Sunbury mentioned, July 1, 1930. The hon. member said:
I do not see that it can make very much difference to the department in the matter of taxation. You are establishing a new principle that for thirty years has not been resorted to. You are foregoing all the unearned and undistributed incomes of companies of this character

Foreign Insurance-Mr. Ralston
down to the first day of January. Why not go a little further and make it the first of Juiy or the thirtieth of June, 1930? I do not see any reason in the objection urged by the minister that you cannot have a broken period. The amount of tax can be ascertained.


Richard Bedford Bennett: It is unnecessary to say that the hon. gentleman is not the interpreter of the statute; he did not interpret the statute. Here is the form in which it passed.


James Layton Ralston: The only objection was that it went back too far.


Richard Bedford Bennett: But it was for another reason altogether.


James Layton Ralston: The objection was that it went back too far, and taxed funds which up to that time had not been taxable.


Richard Bedford Bennett: But as I say now, in practice what happened was it enabled those who had accumulated vast surpluses which they had not distributed, to escape taxation. It began to operate for the 1930 period and thereafter, but not antecedently to it. Large accumulations had taken place prior to that time. The statute which passed freed from taxation all moneys accumulated as surplus, and not distributed to shareholders prior to January 1, 1930, and thereafter.
Bill reported, read the third time and passed.



FOREIGN INSURANCE COMPANIES

[Stage Direction]
Right Hon. R. B. BENNETT (Prime Minister) moved the third reading of Bill No. 50, to amend the Foreign Insurance Companies Act.
James Layton Ralston: Mr. Speaker, I wish to direct the
attention of the house to one clause of this bill which, it seems to me, should not pass. The Prime Minister (Mr. Bennett) has had his attention directed to it-I refer to that clause making one provision of the legislation retroactive. I shall state frankly that my attention was drawn to it by the solicitor of a party to an action now pending in the supreme court. I refer to section 6 of the bill which reenacts section 9 of the original legislation but with a very important amendment. Section 9 as reenacted provides for certain proceedings in the case of companies proposing to register where their names conflict or are liable to be objectionable on account of conflict with the names of companies already registered.
Section 9 of the old legislation provided that if the name of any company applying to be registered was in the opinion of the 	;	| |
superintendent objectionable on the ground that the name of the company was that of a company registered under this act, or a name liable to be confounded with the name of any such company, then the superintendent might refuse to register. The amendment provides that the superintendent may refuse to register mot only if the name of the company is in conflict with the name of another company registered under this act, but also if the name is one which conflicts with that of a company registered under the Canadian and British Insurance Companies Act, 1932. The objectionable feature is that by subsection 6 of section 9 it is provided:
(6) This section shall be deemed to have come into force, and shall be construed and applied as if it had come into force, on the twenty-sixth day of May, 1932; and any appeal to the Exchequer Court of Canada which any company has since the said date taken from the refusal of the minister to grant the application of the company for registry under this act on the ground of an objection to the name of the company, whether finally disposed of or not, shall be reconsidered and determined on the merits under and in accordance with the provisions of this section."
There is only one case in point, but it raises a question of principle concerning which I have spoken before in this house, and in connection with which I have very definite ideas. My general position is that retroactive legislation is objectionable, and I submit that retroactive legislation which interferes with legal proceedings now pending is doubly objectionable. The situation in this particular case is that the Continental Assurance Company incorporated in Illinois applied two years ago to be registered in this country.


Richard Bedford Bennett: It is the Continental
Life Insurance Company.


James Layton Ralston: No, I believe it is the
Continental Assurance Company. It applied to be registered, and the superintendent of insurance refused registration. After discussions lasting about two years the solicitor took the matter to the Exchequer Court of Canada, to which court there is an appeal from the superintendent, with the result that His Lordship the President of the Exchequer Court of Canada allowed the registration, and that is the situation at the present time. The appeal to the exchequer court was allowed on February 22, 1934.
The crown was a party to that litigation. The Continental Life Insurance Company, a company in Canada, were the respondents in the case, and the crown intervened. Judgment was given allowing registration of the Continental Assurance Company in Canada. Costs were reserved. There was no appeal

Foreign Insurance-Mr. Ralston
by the Canadian company, but the crown appealed. The appeal by the crown from that judgment is now pending before the Supreme Court of Canada. As I understand the circumstances of the case, there is no suggestion that the Continental Assurance Company is not eminently worthy of registration in Canada. It has been said that the judge of the exchequer court suggested that perhaps retroactive legislation might be passed. I understand that suggestion is denied. Only a few days ago in a letter from the solicitor of the Continental Assurance Company I was referred to the fact that the judgment of the learned exchequer court judge as published in the reports and as it appears officially contains no reference whatever to retroactive legislation.


Richard Bedford Bennett: That is hardly correct.


James Layton Ralston: My argument is that even if the court had suggested retroactive legislation it would have been quite outside its jurisdiction and quite outside its functions, because after all the question as to the advisability or otherwise of legislation is for the government and this House of Commons. The second point is that there are hundreds of cases in which decisions of courts have been given on statutes. I submit that if, after a decision has been given on a statute in a certain form, we attempt to pass legislation amending the statute and providing that the amendment shall be retroactive, we are creating a very dangerous precedent indeed, and I do not think that there is anyone who will more quickly agree with that on general principles than the Prime Minister himself.
In the second place, the suggestion was that counsel had offered to waive the statute and to try the matter as if the statute had been amended. As counsel pointed out, he may have offered long before the litigation started at all to have the matter dealt with on the merits, but the department refused absolutely to take that position. It refused to have the statute amended but preferred to go to the exchequer court and have the matter decided on the statute as it stood. Now decision has been given against the crown and it is proposed that this house shall amend the statute and take away from the Continental Assurance Company the fruits of its litigation. I say, first, on the ground that the matter is sub judice, that we should not pass subsection 6 but that the appeal should be allowed to take its course in the Supreme Court of Canada to which it has been taken-by whom? by the crown itself-and, secondly, I say that retroactive legislation is highly objectionable.
The government has decided to appeal to the courts and the litigants have accepted the courts as the tribunal before whom that appeal is to be heard. The crown even intervened in this action to get into the case, and now, having intervened and got into the case, it has appealed to the Supreme Court of Canada; but instead of going on with the appeal it comes to this house now and asks the house to amend the legislation in order that the litigant may be robbed of the fruits of his success. This section changes the law and it makes this change govern a case which has already been disposed of by the established institutions of the country, and it sends the litigant back to the exchequer court under a law entirely different from the law as it stood when he began his litigation. It is bad enough for a private litigant to ask parliament to amend a law while litigation is in progress, but it is a good deal worse when the crown does so. If there is any party that should abide by the decisions of the courts of the country it is the crown and those representing the crown by whom the king's judges are appointed in the first instance. I think this will appeal to hon. members of this house who believe in fair play. The game has been played, and the crown has lost; and what is now proposed is this. The crown says, "True, we have lost the game, but we propose now to revise the rules and have the game played over again."
I need hardly say that I have not the slightest interest in this matter except that 1 have had a good deal of correspondence from Mr. Gray w'ho was representing the Continental Assurance Company, and I told him I would bring the matter to the attention of the house. I am doing so in view of that promise, but I am doing it also because I believe that it is a sound principle that we should not interfere with litigation, and particularly should we not put in an act a provision which gives the crowm a right which it had not, a right which will defeat the objects of the litigation and rob the litigant of the fruits of his success, sending him back to the exchequer court.
What about the merits?-because after all the house is interested in that question. This Continental Assurance Company which is applying for registration in Canada is incorporated under the law of Illinois. It is licensed in thirty-five states and has been doing business since 1911. As a matter of fact it is much larger in assets and business than the Continental Life Insurance Company, which is the Canadian concern. It is, I understand, a reputable and substantial
Foreign Insurance-Mr. Geary

company. Mr. Gray offered, I believe, to add the words "of Illinois" to the name of the company to make sure that there would be no possible conflict, or to add the words "Head office in Chicago, Illinois," or something of that sort to distinguish it clearly from the Continental Life Insurance Company; and the assurance was given further to employ no agent associated with the other company. These offers were not accepted; they were delayed two years in registration, and what do we find now in connection with the registration of insurance companies in this country? There are a number of companies with very similar names. For instance, you have the Mutual Life Insurance Company of Canada and the Mutual Life Insurance Company of New York, as well as the Mutual Life and Citizens Insurance Company, Limited, all registered; the Union Assurance Society Limited and the Union Insurance Society of Canton, both registered; The Phoenix Assurance Company Limited and the Phoenix Insurance Company, the Prudential Assurance Company Limited and the Prudential Insurance Company of America; the Imperial Assurance Company and the Imperial Insurance Office, all registered under acts of Canada. Yet refusal is given when application is made to register the Continental Assurance Company because there is another company called the Continental Life Insurance Company, notwithstanding that the Continental Assurance Company offers to have itself known as the Continental Assurance Company of Illinois, so that there may be no question about it.
I do not know what the real reason is why the suggestion was not accepted that the act should be amended, but evidently it was not accepted and we are here attempting to reverse the decision made by the exchequer court by a judge appointed by the crown, and we are proposing to pass this legislation at the instance of the crown. It offends against the rules of fair play, and I say that on the merits there does not seem to be reason for it. We should pass this act, amend it for the future, but allow the litigation to take its course and the crown should carry its appeal to the supreme court and abide by the result.
I move therefore, seconded by the hon. member for Quebec East (Mr. Lapointe):
That Bill B of the Senate, being Bill No. 50 of this house, be not now read a third time, blit that same be referred back to the committee of the whole house with direction to amend said bill by striking out subsection 6 of section 6 of said bill.

Some days ago I laid on the table of the house a petition addressed by the Continental Assurance Company to this house, setting out the facts in more detail than I have given them, and dated May 31, 1934. To that petition I would refer hon. members.
Mr. G. It. GEARY (South Toronto): I have some slight knowledge of this matter though perhaps not full or accurate enough to enable me to add very much to the discussion. The decision of the exchequer court has been on a technicality and in no wise on the merits. All parties, including the applicants, were willing to have the application treated as an application on the merits of the proposal. That has not been dealt with in the judgment of the exchequer court. As a matter of fact what happened was this. By reason of a fault in the statute, conceded by all parties, the judge of the exchequer court was unable to hear the application on and did not go into the merits, and the Continental Assurance Company is not prejudiced in the slightest. It has been willing, and is willing now I should imagine, that the matter should be discussed on the merits. If the statute is amended the road will be clear for that discussion. I am not dealing with that phase because I know nothing about it; but this is not a case of retroactive legislation in the sense in which that term is usually used. Nothing has been done under the act; the company has never done business in Canada; and while its road is clear to some extent under the judgment of the exchequer court, it will have got no further on its way by reason of that judgment, nor will it be prejudiced by reason of what has occurred up to the moment if the bill is passed and the parties present the case on the merits.


Richard Bedford Bennett: Mr. Speaker, I was placed in charge
of this bill when it came from the Senate. It was read the second time in this house, the house went into committee thereon and the bill was passed without any objection. Later the hon. member for Shelburne-Yar-mouth (Mr. Ralston) intimated that Mr. Gray desired to be heard. He filed a petition which has been laid on the table of the house. The statements which the hon. gentleman has just made were the statements presented to the government in Mr. Gray's brief. However, even as Mr. Gray failed to make the matter clear upon the facts in his petition to the government, so has he not quite accurately stated the matter to the hon. gentleman. In order that there may be no misunderstanding and that the position

Foreign Insurance-Mr. Bennett
of the government be made perfectly clear,
I propose to quote from the judgment of the president of the exchequer court. What has been said by the hon. member for South Toronto (Mr. 'Geary) indicates clearly that this is not retroactive legislation in the ordinary sense; it is merely legislation to put the parties in the position in which it was always intended they should be and in which Mr. Gray himself asked on more than one occasion that they be put in until after he got judgment from the exchequer court.


James Layton Ralston: That was before the litigation.


Richard Bedford Bennett: I quote:
Maclean, J.:
Judgment rendered February 22, 1934.
The Continental Assurance Company, which for the sake of brevity and clarity will hereafter be referred to as the applicant, made application in October, 1932, to the superintendent of insurance, for its registration under the Foreign Insurance Companies Act, 1932. The applicant is a United States corporation, incorporated under the laws of the state of Illinois, and has carried on a life insurance business in a substantial wray in that country since 1911, and presently is licensed to carry on such business in thirty-five different states. The applicant, it is said, is associated, through share ownership with the Continental Casualty Company which is licensed to carry on business in Canada, and in fact does so, but that does not appear to have any relevancy to the issue to be determined here.
The applicant complied with all the requirements of the statute, and of the Department of Insurance, in its application for registration. After a hearing by the Superintendent of Insurance at which the applicant, and the Continental Life Insurance Company as an objecting party, appeared, the superintendent made a report to the Minister of Finance recommending that the registration of the applicant be refused on the ground that its name was liable to be confounded with the name of the Continental Life Insurance Company. a Canadian corporation licensed to carry on the business cf life insurance in Canada under the Canadian and British Insurance Companies Act, 1932, and thus "on public grounds objectionable"; thereupon the minister accordingly refused to register the applicant.
From the report of the Superintendent of Insurance and the refusal of the minister, the applicant appealed, and the right of appeal being questioned by the Superintendent of Insurance, the applicant applied to Angers, J. for an order requiring the Superintendent of Insurance to deliver to the applicant a certificate in writing setting forth his ruling in the matter of the applicant's application for registration and the reasons therefor, with which order the Superintendent of Insurance in due course complied. In the facts of this case, I think, there was the right of appeal under the statute.	.
Coming now to the real question for decision in this matter. The issue seems to me to be one of the interpretations of a statutory provision, and that is section 9 of the Foreign Insurance Companies Act, 1932, and it reads thus:
" If the name of any company applying to be registered is that of any company registered under this act, or, in the opinion of the superintendent, any name liable to be confounded therewith, or otherwise on public grounds objectionable, the superintendent shall so report to the minister, and the minister may refuse to register the company."
"(2) Such report, if based upon the objection that the name of the company applying to be registered is that of any company registered under this act or any name liable to be confounded therewith, shall be deemed to be a ruling of the superintendent from which an appeal shall lie under and subject to the provisions of section thirty-four of this act."
The Superintendent of Insurance, and the applicant, agree that the language of section 9 (1) is defective and through inadvertance does not express fully what was intended, that is to say, it was never intended by the legislature to limit the application of this statutory provision to companies registered under the Foreign Insurance Companies Act but should have included companies registered under the Canadian and British Insurance Companies Act. The applicant, it is said, through the appropriate avenue, requested that this defect be cured by amending legislation. All parties to the controversy therefore agreed that something was omitted from the section of the act.
I direct the attention of the house to this:
Mr. Gray, for the applicant, agreed that I might construe this section of the act as if the omission had been supplied, and that I might deal with the appeal upon the merits if I felt inclined to do so. He, however, urged that upon a fair construction of the section as it stands the ruling of the Superintendent of Insurance was in error.
There can be no doubt, I think, as to the construction to be put on section 9. It means that a registration may be refused if the name of the applicant company is so similar to the name of a company already registered under the same act, as to cause confusion. The first clause of the section enables the superintendent to report adversely to an application of a foreign company for registration under the Foreign Insurance Companies Act on account of the similarity of its name to another foreign company already registered under the same act.
To attempt to sustain the refusal to register the applicant under the words "or otherwise on public grounds objectionable" is untenable, in my opinion. These words have no reference to the situation produced by an applicant company seeking registration under a name so similar to a name already registered as to be calculated to cause confusion. The words "or otherwise on public grounds objectionable," as here used, mean something other than the question of confusion arising out of the similarity of names and in such a case there is no appeal from the report or decision of the superintendent of insurance, while in the other case there is an appeal and an applicant is entitled to a judicial decision as to whether its name is liable to be confounded with another name. The words " or otherwise on public grounds objectionable " exclude an objection grounded on a possible confusion of names.
Foreign Insurance-Mr. Bennett

These are the important paragraphs:
Mr. Gray for the applicant, as I have already stated, expressed his willingness that I dispose of the appeal upon the merits if I so cared to do, and that I might assume that the alleged missing words were supplied in section 9 of the act in question. I do not think this is a case where the court would be justified in reading into the section the words said to have been inadvertently omitted. I think I am bound to assume that the legislature meant precisely what it said notwithstanding counsel for the applicant, and the superintendent of insurance, believe it to be a causes omissus. This is not a case where the imperfect wording of a section of a statute creates some doubt as to its meaning but where the intent of the legislature may be resolved with confidence from other provisions found in the same statute.
It seems to me that the appeal should be allowed and it should be declared that the applicant is entitled to registration. The statute, as it stands, authorizes a refusal of registration of a foreign insurance company under the act in question here when its name is liable to be confounded with the name of another foreign company already on the registry,-
This is not a foreign company already on the registry; that is really the gist of it. The judgment continues:
-and any attempt to base the refusal upon the words "otherwise on public grounds objectionable," does not appear tenable to me.
The hon. member for Shelburne-Yarmouth is quite correct in saying that the following paragraph does not appear in the supreme court and exchequer court reports. It does not appear because it has nothing to do with the reasons in the case; it has reference only to this particular case and, therefore, is not important. In the certified case before the court this paragraph was included, as it should be, at page 57. It reads:
I cannot see any useful purpose now to be served in a discussion of the appeal upon the merits of the case. If the legislature amends the statute, the matter may, if desired by the parties interested, be brought before the court upon the merits upon the present record and without further argument; and, if I may properly do so. that aspect of the appeal is for the present reserved as is also the question of the costs of this appeal.
That is as clear a statement of this case as it is possible to conceive. That paragraph is not in the published law reports of the country because it has reference to this particular company and not to jurisprudence. But in the formal order settled by the court which can be changed only by the appeal are these words:
In the Exchequer Court of Canada Thursday, the 22nd day of February, A.D. 1934.
Present:
The Honourable the President
Then it recites the case and the name.

The appeal of the above named applicant coming on for hearing at the city of Ottawa, on the twenty-first day of November, A.D. 1933, before this court, in the presence of counsel for the applicant, for the Attorney General of Canada and for The Continental Life Insurance Company, intervenant, whereupon and upon hearing what was alleged by counsel aforesaid this court was pleased to direct that this appeal should stand over for judgment and the same coming on this day for judgment.
1.	This court doth order that the appeal from the ruling of the superintendent of insurance be allowed.
2.	And this court doth make no order as to costs of this appeal, but reserves this question-
The word "to" is left out.
-be dealt with upon the further proceedings, if any, in this court.
If that is not a clear indication and almost invitation to pass tlhis legislation I cannot conceive of anything clearer. What is more, in the formal judgment of the court provision is made for it. So, when this statute is enacted, the merits of the case will then be considered in accordance with the recommendations made by the learned judge as well in his reason for judgment as in the order which is based on those reasons. I cannot under the circumstances think the hon. gentleman is correct in describing this as retroactive legislation. It is legislation which counsel for the parties contemplate might be passed.


James Layton Ralston: Not after litigation.


Richard Bedford Bennett: I am only reading from the judgment of the judge who says that counsel said to him: Give us judgment as though you were on the merits. He said: I cannot do that, but if the legislature intervenes, I. will do it. The legislature is now going to intervene.


James Layton Ralston: He has to give two judgments.


Richard Bedford Bennett: The judge said: I will not give judgment on the merits because it is clear I cannot read into the statute, even by consent, something that is not there. In other words, jurisprudence cannot be determined by a private arrangement. That being so, the learned judge contemplated that the statute would be passed. When it is passed, what happens? Have we taken away any man's rights? What we have done is to say to him: Let us hear the case on the merits, it not having been heard on the merits because the statute contemplated confusion with respect to another foreign company and not a domestic company and the domestic company is urging the confusion with respect to its position. For instance, in the daily papers the other evening it was reported that another

Foreign Insurance-Mr. Lapointe
continental insurance company had gone into the hands of the receiver. I asked my hon. friend if he knew anything about it. I did not know about it so I made inquiries and it was a company of a somewhat similar name in another state in the United States. That has nothing to do with this particular question which is purely and simply whether all parties having agreed during the trial that there should be a decision in the merits, this statute affords an opportunity for that decision to be made upon the merits of the case.


Ernest Lapointe: I believe with the hon. member for Shel-burne-Yarmouth (Mr. Ralston) that this bill contains a provision which is certainly unprecedented and the like of which cannot be found in any statute of this country. Let me read subclause 6 of clause 6 of this bill:
This section shall be deemed to have come into force, and shall be construed and applied as if it had come into force, on the twenty-sixth day of May, 1932; and any appeal to the Exchequer Court of Canada which any company has since the said date taken from the refusal of the minister to grant the application of the company for registry under this act on the ground of an objection to the name of the company, whether finally disposed of or not, shall be reconsidered and determined on the merits under and in accordance with the provisions of this section.
This is retroactive in two features; it is retroactive with regard to paragraph (a) of subclause 1 of clause 6 in which it is stated:
If the name of any company applying to be registered is in the opinion of the superintendent objectionable on the grounds that the name of the company is either-
(a) that of any company registered under this act or of any corporation registered under the Canadian and British Insurance Companies Act, 1932.
The act of 1932 said:
If the name of any company applying to be registered is that of any company registered under this act, or, in the opinion of the superintendent, any name liable to be confounded therewith.
By paragraph (a), this is added:
Or of any corporation registered under the Canadian and British Insurance Companies Act, 1932.
This widens the scope of this provision, making it applicable to something which was not in the act of 1932. Then subclause 5 provides that there shall be an appeal to the Supreme Court of Canada from any judgment of the exchequer court under this measure. This was not in the act of 1932 and it comes after there has been litigation. There has been a legal action which has been decided by the exchequer court and which
is actually pending before the Supreme Court of Canada. The Prime Minister quoted the notes of judgment of the justice of the exchequer court and he admitted that the last two sentences, which are the most important to support his side of the present debate, are not in the official reports. Not only are they not in the official reports, but those sentences have been struck out from the official record. After inquiry was made in the office of the exchequer court it was found that the learned judge of that court had removed from the official record those two sentences.


Richard Bedford Bennett: Would the hon. gentleman be good enough to read that?-because I should be glad to know of a judge doing so.


Ernest Lapointe: Is it not in the official report?


Richard Bedford Bennett: No, this is the certified
copy.


Ernest Lapointe: I am advised by the
representatives of the Continental Assurance Company that after inquiring at the office of the exchequer court they found out that those words had been removed there too.


Richard Bedford Bennett: That makes the situation worse.


Ernest Lapointe: It makes it worse for
the case of my right hon. friend.


Richard Bedford Bennett: Does the former Minister of Justice say that a judge of a court, after a case has been passed for review in the supreme court, has changed his judgment?


Ernest Lapointe: Those are merely notes.


Richard Bedford Bennett: I gave the formal judgment, as certified.


Ernest Lapointe: Those are reasons for
judgment. I am merely asserting what my information is; I have not seen it myself, but the solicitor for the company informed me that what I have stated is so. Does it not, however, look extraordinary that such a clause should be in this bill and that there is no provision for costs or anything in it?


Richard Bedford Bennett: But the judgment has
reserved costs.


Ernest Lapointe: They will have to go
there and apply for them. By this bill if it becomes law the parties are put out of court altogether; they have no case left. They have been awarded judgment under the statute of 1932, and in 1934 we are enacting
Supply-Justice-Penitentiaries

a law which says that this clause of the bill shall be deemed to have been in force since 1932; it is retroactive. This is certainly a vicious principle, however you look at it, and I shall support the amendment of the hon. member for Shelburne-Yarmouth (Mr. Ralston).
Amendment negatived on division.
Motion agreed to and bill read the third time and passed.



DEPARTMENT OF JUSTICE

[Stage Direction]
The house in committee of supply, Mr. Gobeil in the chair.
Penitentiaries-Amount required to carry out agreement between His Majesty and the municipality of the village of St. Vincent de Paul for extension of the present water and sewer system connected with St. Vincent de Paul penitentiary, $3,000.
Thomas Reid: The Minister of Justice stated that when the estimates came up again he would have a report in connection with the hours of labour worked in the penitentiaries. I wonder if he has the statement now.


Hon. HUGH GUTHRIE (Minister of Justice) :: Yes, I have a memorandum in regard to the hours of labour of guards.
Under the present arrangement in all penitentiaries there are three shifts of guards of two as formerly. The time of the various shifts is as follows: The first shift is on from 7 a.m. to 6.15 p.m. Another shift comes on in the afternoon at 4.30 p.m. and remains on until 1 a.m. The third shift comes on at 12 midnight and remains on duty until 8.30 a.m. These are now known under present penitentiary regulations as the night watch, the morning watch, and day duty. It will be observed that day duty, from 7 a.m. to 6.15 p.m. is the long shift.


Thomas Reid: Has that been put into effect
in all the penitentiaries, and if so how many extra men have been put on the payroll?


Hugh Guthrie: It is now in effect in
British Columbia, in Saskatchewan, at the Kingston penitentiaries and at Dorchester; and arrangements are now being made for Stoney Mountain and St. Vincent de Paul.


Thomas Reid: Did it necessitate the addition of any further employees?


Hugh Guthrie: Throughout all penitentiaries it will require sixty-six additional guards.


Paul Mercier: Would the
minister give some particulars regarding this item of $3,000?


Hugh Guthrie: This item is for the purpose of enabling us to construct an extension of a water main in the village of St. Vincent de Paul in connection with the penitentiary there. Part of the village of St. Vincent de Paul is on the penitentiary reserve. For a considerable number of years residents of that village have under agreement been entitled to take water from the water mains, paying a reasonable rental for the service. Now it is proposed to extend that water main along another street in the village, and an agreement has been entered into that the residents on that street shall pay a rental for the water. The cost of the work is $3,000, and the rental to be received will make it a reasonably good investment.


Thomas Reid: Has the minister any information regarding Piers island, how many Doukhobors are there now and what it costs?


Hugh Guthrie: The total cost of the
Piers island penitentiary was:
For the year 1932-33	$170,783 82
For the year 1933-34	 170.461 78
The number of prisoners confined in this prison at the present time is 570.


Mr. MacINNIS:: Referring again to the
hours of work in the penitentiaries, if I heard the minister aright he said they are now having three shifts instead of two, but I notice that the day shift is still eleven hours and fifteen minutes. Could the minister tell us why the day shift is so long in view of the fact that they have three shifts?


Hugh Guthrie: There are more guards
on the day shift than on the night shift. The reason for that is that the men are out at work and the guards have to be with them in the various departments, and then they have to be there at seven in the morning for the opening of the cells and the serving of breakfast, and are kept on until supper has been served in the evening and the cells finally locked for the night. The shift that comes on at 4.30 in the afternoon assists the day shift until 6.15 and continues on until 1 a.m. So far the arrangement has proved very satisfactory from every standpoint, and I believe the guards themselves approve of it.


Angus MacInnis: I wonder if the minister could say if the full day staff works the eleven hour shift.

Supply-Justice-Penitentiaries


Hugh Guthrie: All on the day shift are supposed to work all day, and all on the other shifts are supposed to be on duty during the hours I have mentioned. There is supposed to be work for all.


Angus MacInnis: I was wondering whether, because of the overlapping of some of the staffs, it might be possible that they were not all working, that some of them might get off earlier.


Miss MACPHAIL:: I would ask the minister if he would care to give the house a statement concerning the death of Sam Behan. I should like to know if convict Behan, who died recently, was paddled a few days previous to his death. I should like to know whether he was suffering from a heart condition and was under the doctor's care, and whether he had been given stimulants for some ten days before his death.


Hugh Guthrie: The late convict Behan was a life prisoner who had a very long criminal record. Originally he was confined in -the St. Vincent de Paul penitentiary; he was considered of that class of prisoners who are rather dangerous, and that prison was not considered strong enough to restrain him if he made an attempt to escape. Consequently he was transferred to Kingston in the summer or spring of 1932. In the beginning of May- if my memory serves me, on May 3 last^-he created a disturbance in his cell in Kingston penitentiary of rather a noisy character. He smashed all the furniture in his cell, including his wash basin, dishes and the like, and turned on the water, flooding the cell. Some days later he was tried at the warden's court and awarded punishment, to consist of twenty strokes with a leather strap. On May 14 the punishment was carried out in the presence of the doctor, the warden and other officials, but only four strokes of the strap were administered. He asked to be relieved of the other strokes, and the warden granted his request. He thanked the warden and said that was the only good break he had ever had since coming to the institution. The other sixteen strokes were suspended; in that case they would not be adminstered unless the conduct of the prisoner in the future warranted it.
On May 26, early in the morning, it was reported in the office by one of the guards that Behan was complaining of being sick; that would be some time between six and seven o'clock in the morning. To keep myself accurate perhaps I might read some of the
statement made at an inquest which was held into the death of convict Behan. The first statement I will read is that of keeper Robinson, who was questioned by the crown attorney. He said:
Q. I understand you were on duty this morning when your attention was attracted to this prisoner?
A. Yes, sir.
Q. What hour would that be?
A. I would judge it would be between 6.30 and-
Q. Between six and seven o'clock?
A. Yes, sir.
Q. How long had you been on duty there?
A. From 12.30 in the evening.
Q. How was your attention attracted to the prisoner?
A. By the grating of a cup by one of the other inmates confined in the cells.
Q. Where were you at that time?
A. I was directly above, in the keepers' hall.
Q. Were you alone?
A. No, sir.
Q. What connection, if any, is there between the keepers' hall and the cells in which this man was confined?
A. If I can explain it in this way. Here is the keepers' hall, and the cells are directly beneath the keepers' hall.
Q. How are they reached?
A. There is a door at this end. You go down for four or five stairs, and then turn to your left, and down to the cells.
Q. What kind of door guards the exit from the keepers' hall when you step out of it?
A. The keepers' hall door is a steel barrier, sir.
Q. There is a steel barrier separating the keepers' hall from the outer world, through which you had to pass in going down to these cells?
A. Yes, sir.
Q. When you went out of the keepers' hall you passed through this steel barrier?
A. Yes, sir.
Q. Then you descended four or five steps?
A. Yes, sir.
Q. Then you turned to your left, and walked along-[DOT]
A. You turn to your left, and go down three or four steps.
Q. Then what do you do?
A. Then there is a light wooden door.
Q. What is the name of those cells?
A. They are generally spoken of as P.C., keepers' hall. Punishment cells.
Q. Then we are to understand that there is a light wooden door leading to the punishment cells below the keepers' hall?
A. Yes, sir.
Q. Was that door closed when you reached there?
A. Yes, sir.
Q. And was there any other door except that wooden door on the punishment cells?
A. Inside, as you go through the wooden door, there is a barrier which screens this block off.
Q. What do you mean by a barrier?
A. A steel gate, sir.
Q. So that we have a wooden door, and beyond the wooden door there is a steel gate?
A, Yes, sir.



Supply-Justice-Penitentiaries
Q. And your attention was attracted, as you told us, by some noise that you heard. Was that first thing?
A. Yes, sir.	_
Q. Had you heard any previous noise?
A. No, sir.
Q. What did you do upon hearing that noise?
A. I immediately inspected, sir.
Q. What did you do?	_
A. I left the keepers' hall. Perhaps I might explain, sir. On taking charge at 12.30, it is customary for the keeper and the officer in charge, the assistant officer, to make alternate visits to the P.C. for safety, and as regards the welfare of the inmates, the last night, if I am not mistaken, we made nine visits from 12.30 to seven o'clock.
Q. What visits did you make yourself?
A. I was down and visited the P.C. at 12.40, 1.35, 2.15 and 6.30.
Q. The 6.30 visit, I surmise, being the one you made on hearing this noise?
A. No, sir. On my visit at 6.30 I was talking to convict Behan. He said, "Good morning, Keeper Robinson." I said, "Good morning, Behan." I said, "It's a little warmer this morning" and he said 'Yes, it is," and that's all that was said.
Q. And where were you when you were talking to him?	_
A. Directly in front of his cell.
Q. When you went in there, did you open this wooden door?
A. Yes, sir.
Q. Did you open the steel gate?
A. Yes, sir.
Q. And you went along the corridor?
A. Yes, sir.
Q. And when you say you were standing in front of the cell that Behan was in, where was that?
A. As we go through the steel gate, we go right down to the end of the corridor where the cells are, and there is an electric clock. There are five cells in that corridor, and the electric clock is down at the end. Behan was in the third cell as I went in through the door.
Q. Was he in the left hand tier of cells?
A. On the west side. That would be my right hand.
Q. He was in the third cell from the door that you entered?
A. The steel gate.
Q. And there were five on each side?
A. There were five on this particular side.
Q. So that he was in the middle cell?
A. Yes, sir.	_
Q. And you say that when you went in and were talking to him, where were you?
A. Directly in front of his cell.
Q. Was he at that time lying down?
A. Yes sir, he was in bed.
Q. Was there any further conversation that occurred?
A. No, sir.
Q. And you fix that time as being 6.30?
A. I would say between 6.30 and 6.35.
Q. Did you have to punch any time clock?
A. Yes, sir.
Q. Did you consult the clock since to find the time that you were there, to check up your time?
A. The idea is this. The time that is registered there, or any time clock throughout the prison, goes on a sheet.
[Mr. Guthrie.3
Q. Do you mean to say that when you punched the clock there, it would not be recorded there but would be recorded some place else?	_	_
A. It is recorded on the clock, and likewise recorded on a sheet.
Q. Then did you examine the record on that clock to find out whether it was 6.30, or do you fix the time from your own recollection?
A. No, sir. I make it my business to go down there between 6.30 and 6.35 every morning, before I leave.
Q. But I am asking you, did you check the time against the clock, or did you not?
A. No, sir, I am positive.	_
Q. I don't understand you. Are you positive that you did not check the time, or are you positive that it was 6.30, or what are you positive of?
A. I am positive that it was between 6.30 and 6.35 that I was in the hall downstairs.
Q. That is not based upon an inspection of the record, but it is based upon your recollection of the hour?
A. Yes, sir.
Q. Will you continue, please. You were last telling us of this conversation. Then where did you go?
A. After the conversation I went back to the keepers' hall.
Q. And I suppose in doing so you locked the steel gate and closed the outer door?
A. Yes, sir.	.
Q. And would you then be alone in the keepers' hall?
A. No, sir.
Q. Who else was there?
A. Keeper Donoghue, and, if I am not mistaken, keeper Nolan was there.
Q. You think they would be there when you returned from this visit to the cells?
A. Yes, sir.
Q. So that there were three of you there?
A. Yes, sir.
Q. Then how long after you heard this grating on the cup on the bars did you go back?
A. I went immediately, sir.
Q. About what time had elapsed since you had made your last visit?
A. I think it was about ten minutes from the time I had made my final visit until this grating was heard.
Q. And how long did it take you to go down to the cells?
A. A matter of a minute, sir.
Q. So you had been there ten minutes before?
A. Yes, sir.
Q. What did you find when you entered the
cells this time?
A. As I entered the wooden door, one of the convicts said that Behan was sick.
Q. We are to understand that Behan was not the sole occupant of the cells?
A. No, there were three others on the east side.	.
Q. Was Behan the only one on the west side?
A. Yes, sir.
Q. And then you started to tell us that when you went in the door one of these-do you know which one it was?
A. No, sir, I couldn't say for sure.
Q. What did he say?
A. That Behan was sick. They could hear him moaning.
Q. He said that Behan was sick, and he also said they could hear him moaning?
A. Yes, sir.

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Q. Did you make any reply to that?
A. No, sir. I immediately went to Behan's cell.
Q. What did you find on arriving there?
A. Just as I have already stated, Behan was in bed, moaning, and he asked to see the doctor.
Q. What did you do?
A. I immediately returned to the keepers' hall, and in this time the deputy warden had arrived. I would judge it would be about 6.50. I reported the same to the deputy warden.
Q. What about the other men that were in the keepers' hall before the deputy warden?
A. They were still there.
Q. Didn't you see them before you saw the deputy warden-A. Yes, sir.
Q. Did you have any conversation with them?
A. I was speaking to them before I went down.
Q. What were you saying to them?
A. In connection with what, sir?
Q. In connection with what you saw downstairs?
A. I hadn't been down, sir. You misunderstand me.
Q. When you found Behan was in this condition in his cell, you told this jury that you came back to the keepers' hall?-A. I did.
Q. Who did you find there?
A. The deputy warden had arrived in the keepers' hall.
Q. The intelligent answer would be that the deputy warden was there, together with the men whom you left there, wouldn't it?
A. Yes, sir.
Q. You found the deputy warden in addition to the guards in the keepers' hall when you returned?
A. Yes, sir.
Q. Then what happened?
A. I reported it to the deputy warden.
0. What followed that?
A. The deputy warden asked to have the hospital overseer notified, and to report to the keepers' hall immediately.
Q. Was that done?
A. Yes, sir.
Q. Who came?
A. Overseer McConnell.
Q. Where was he summoned from, do vou know ?
A. From the prison hospital.
Q. That would be another wing of the same building?
( A. After you go through the main dome in "A" corridor, it is on the west side of the main dome.
Q. It is all enclosed under the one roof, isn't it?
A. Practically, sir.
Q. Did the hospital attendant McConnell arrive on the scene?
A. Yes, sir.
Q. What followed that?
A. I was waiting for him at the main barrier leading from the keepers' hall into the main dome. I escorted him downstairs to Behan's cell, and I opened Behan's cell to admit the hospital overseer. He examined Convict Behan, and stated that the case was too serious for him, and to have the doctor notified.
Q. Did you hear any conversation between Behan and McConnell?
A. No. sir.
Q. What followed that?
A. I immediately returned to the keepers' hall and had the doctor notified.
Q. Was that Dr. Platt?
A. Yes, sir.
Q. I suppose he came from his home, did he?
res, sir.
Q. How long after that did he arrive?
A. I think he was at the prison at about 7.10.
Q. Did you accompany the doctor down to the cell?
A. No, sir.
Q. That is the end of your connection with it?
A. Yes.
Perhaps from that point I should give the doctor's statement.
I find the following in the evidence of Doctor G. A. Platt:
Q. Have you got the hospital record of this man?
A. He has never been a hospital patient, so there is no hospital file.
Q. Has he been receiving any medical attention at your hands?
A. Yes, he has.
Q. I am speaking of the last month?
A. Yes.
Q. What was it?
A. He complained' of being unable to sleep. Said he was nervous, and wasn't sleeping well.
Q. When would this be?
A. This was particularly in the last seven or eight days-the last ten days. I have taken him over myself a tablet of veronal dissolved in w'ater.
Q. Would it be correct to say that you saw him yesterday?
A. Yes. I was with him sixteen minutes.
Q. What time would that be?
A. When I came out from speaking to him it was 7.20 by the clock in the keepers' hall.
Q. Morning or evening?
A. In the evening.
Q. So that you saw him last before you were called this morning was about 7.20 last evening?
A. Yes.
Q. Did you prescribe for him then?
A. Yes, the same thing.
Q. How did you happen to go there this morning?
A. I was called from the prison.
Q. About what time?
A. Seven o'clock.
Q. And you arrived there approximately-
A. I think it was thirteen minutes after seven, or twelve, when I arrived.
Q. Did you go at once to see him?
A. Yes.
Q. Will you describe to the jury in what condition you found him?
A. He was lying on the bed in his cell. I picked up his wrist and could feel no pulse. I then asked him what was the matter. He made no answer. I couldn't feel any pulse. I looked at his eyes, tried to listen to his heart. There was no heart action audible, and he had no reflexes in his eyes. He did breathe twice in the next minute or two. I suppose it was just the last action of the blood and the respiratory centres and then he was dead.

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Q. The man was practically dead when you reached there?
A. Yes, he was.
Q. In your daily treatment and visits to him, had you any knowledge of any heart affliction?
A. None.	.
Q. Was there anything indicative of it?
A. No, no symptom to suggest heart trouble, nor was there any heart trouble that I could detect by stethoscope. I have used that many times.
Q. When?
A. I think I spent more time with him than with any convict in the institution. In the last week I had no occasion to examine his heart at all.
Q. When did you last examine his heart?
A. I think the last time would be a little over two weeks ago.
Q. As the result of complaints received from him ?
A. No. Part of my professional duty.
Q. Just in the ordinary course of duty?
A. Yes, it was in the course of duty.
Then there is the evidence of Doctor Hay, assistant professor of pathology at Queen's university, who performed the autopsy. Without reading all his evidence I shall read the following:
I examined the body of Samuel Behan. He was a man about forty-nine years of age, well developed and well nourished. There were no marks on his body of recent occurrence, but he had some old scars, on the cheek, on his chin, one on each knee, and some tattoo marks on each forearm. There were no recent marks of any kind whatever. I then examined the body internally. I found the right lung showed some evidences of slight tuberculosis, well healed now. His left lung was free of any previous disease. The heart was about normal in size. The right side was filled with blood. The left side was more or less contracted. I found that the artery which supplies the left side of the heart, one of the most important arteries, was rather badly diseased, a condition which we know as atheroma. In common language you speak of hardening of the arteries. The artery supplying the left side of the heart is extremely important, and if it be plugged by disease a blood clot may form, which cuts off the nourishment of the left side of the heart, that is the muscle itself, and this interferes with the working of the heart, and frequently brings about immediate death. I found this artery in very bad condition indeed.
Coroner: Doctor, is there any physical way of diagnosing it during life? Might that have happened to a private individual in ordinary life without him even having suspected it or consulting a doctor?
A. Coronary thrombosis is in many cases an extremely difficult condition to diagnose previous to death, previous to an inspection of the body. In some cases it is almost impossible. The heart sounds may be normal. If anything does show, it sometimes shows by a little difference in the rhythm, the regularity of the heart, but a doctor might examine a man's pulse for quite a long tune and not notice it. In some, cases it is detected by a delicate electrical instrument, but even that might fail. I have known cases where a man died very suddenly, and he had been sick before, and it

could not be detected. In some of the more chronic types they do complain of pain-that is angina pectoris. But sometimes they die very suddenly without complaining at all.
Q. Would it have been possible, by any chance, for any treatment to have saved him?
A. Nothing can be done whatever to change the condition of this artery. We are absolutely helpless.
Q. You mentioned a clot, doctor, I think?
A. Yes, perhaps I might explain. When the inside of the artery becomes diseased a clot of blood is very apt to form on the surface of this diseased area. It is liable to form more especially at night, when a man is resting, and as soon as he is disturbed in the morning he is liable to break this clot up, and it plugs a small branch of this artery, and that means the end. If the artery is very fine he has what we call a heart attack, and takes care of himself, but if it is a big one then, of course the attack is severe enough that it kills him immediately.
The other guards who were there give practically the same evidence as Robinson. After hearing the evidence the jury brought in this verdict:
We find that convict Samuel Behan came to his death from natural causes, namely, coronary thrombosis, a condition which it is not possible to previously detect, and that nothing further could have been done, in the opinion of the jury, to save his life.
That was the finding on the evidence taken at the coroners inquest which was held in connection with the death of this convict.


Agnes Campbell Macphail: I want to be sure of the dates. The paddling of Behan took place on May 4?


Hugh Guthrie: No, May 14.


Agnes Campbell Macphail: And when did he die?


Hugh Guthrie: May 26.


Agnes Campbell Macphail: Is it usual for wardens to be so lenient? After they have pronounced sentence of twenty strokes, is it usual for the paddling to cease after the fourth stroke?


Hugh Guthrie: Yes. I have known a great many instances that have come before me where, after two, three, four or five strokes the remaining strokes have been held in suspense, and as a rule they are not given afterwards because good behaviour usually fol-lowsj In this instance it was at the end of the fourth stroke.


Agnes Campbell Macphail: According to the new regulations, commented upon very favourably by the minister the last time we were debating this question, paddling is no longer allowed on command of the warden but only after consultation with the Department of Justice. Was convict Behan paddled before or after consultation with Ottawa?

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Hugh Guthrie: After. All cases are now submitted to headquarters before paddling or strapping can take place. The evidence is also submitted.


Agnes Campbell Macphail: After May 15 and until May 26, the day on which he died, was he confined to the isolation cell in which he slept on the floor or was he in his own cell?


Hugh Guthrie: He was in the punishment cell under the keeper's hall.


Agnes Campbell Macphail: That was between those two dates. Had he been in the punishment cell prior to the fifteenth?


Hugh Guthrie: From the night of the third he was in there.


Agnes Campbell Macphail: I am sure the minister must have felt the death of Sam Behan under the circumstances. The report is elaborate but it does not convince me that Sam Behan was known to be a perfectly healthy man. We know all about the clergymen who went through the penitentiary and said that everything was all right; but the conduct of the penitentiary since that time has shown clearly that everything was not all right so that the jury's report does not mean as much as it might have meant before that occurrence. In the judgment of Judge Deroche in the case of Rex versus Kirkland, Behan was spoken of rather well in connection with the riot. On page 7 we find the following:
Two men, Garceau and Behan, addressed the crowd and told them to do no violence or injury to property.
That was brought out at least twice. It may be that Behan's death came unexpectedly and that nothing could have been done to save him, but as a member of this house I do not feel comfortable about it, when we know that he was paddled very shortly before his death, that he was in an isolation cell at the time of his death and that he did not have attendance, which might of course have happened to anyone. Coming as it does after the very real difficulty in both Kingston and St. Vincent de Paul, it seems to me to be one more strong argument in favour of a careful and impartial investigation into the conduct of our penitentiaries.
There were several other things I wanted to ask the minister. I understand that a very large number of men, thirty-six, I believe, were paddled just after the visit of the governor general to Kingston. There was some sort of demonstration in the penitentiary, a flooding of the whole ground floor, due I believe to an incident within the penitentiary; but possibly the official mind, which works in a peculiar way, may have associated
this with the official visit. From the information I have I should judge that the visit of His Excellency had nothing to do with it, but afterwards thirty-six men were paddled. Things may have gone very badly at the penitentiary, discipline may have broken down entirely, but I am not at all convinced that the paddling of thirty-six men, wholesale punishment in this way, will accomplish very much. Did consent for the paddling of these thirty-six men come from Ottawa or was it done on the warden's initiative?


Hugh Guthrie: On the date in question
the governor general happened to be at the military college in Kingston, and word in some way was received amongst the prisoners that His Excellency was in Kingston and a communication was passed around, a copy of which was obtained, informing certain of the prisoners that this would be a good day to put on a demonstration. On the evening of that particular day, which I believe was the beginning of May or the end of April, a very noisy outbreak took place. It started with the rattling of trays or aluminum dishes and the flooding of as many cells as they could possibly flood in certain tiers of the building. It was a very noisy demonstration indeed. I do not want to give the names of the various prisoners, but twenty-two were awarded corporal punishment. The doctor pronounced two of them unfit and the rest were sentenced to various numbers of strokes. The first one was sentenced to twenty strokes and eleven were administered; the second was sentenced to twenty strokes and twelve were administered; the third was sentenced to twenty strokes and twelve were administered. The next was sentenced to twenty, twelve strokes administered; the next to twenty; fifteen strokes administered; the next to twenty, seven strokes administered; the next to twenty, fourteen strokes administered; two were pronounced medically unfit; the next to twenty, six strokes administered; the next to twenty, twelve strokes administered; the next to twenty, nine administered; the next to twenty, five administered; the next to twenty,	twelve	administered;	the	next	totwenty, eight administered; the next to twenty,	twelve	administered;	the	next	totwenty,	fifteen	administered;	the	hext	totwenty,	twelve	administered,	and	the next
to twenty, fifteen administered. That concludes the list, but I notice there were five pronounced medically unfit and the strokes were not administered.


Agnes Campbell Macphail: Was the department in Ottawa consulted?
4290	COMMONS
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Hugh Guthrie: Yes, and the evidence was submitted before the administration of the strokes.


Agnes Campbell Macphail: I read in the daily press, I think it was the Toronto Daily Star, of an incident which occurred a week or two ago and which seemed to me to be rather absurd. This article stated that the Reverend Major W. E. Kidd, the Protestant chaplain, had been protected with guards while preaching to the convicts. That struck me as being very peculiar. I cannot conceive of anyone preaching the gospel of love under the protection of armed guards. I cannot see that that would do the prisoners much good, I cannot see that it would do the preacher any good and it causes a lot of trouble for the guards. I was wondering if we could not do something about it, either not have a sermon or else have one preached by a man who believes in love to the extent that he is willing to stand upon the power of love without any other protection. I do not know how much of this report is true, and perhaps the minister would like to make a statement. I was very much interested in reading that the Reverend Father Kingsley refused similar protection. A sermon by such a man might do the men some good, but unless we intend to make our penitentiaries simply whipping institutions and places of vengeance, we should try to get these things in harmony. It is not possible to bring people to an understanding of the gospel or philosophy of love at the point of a gun. If a minister preaching the gospel of love believes in it he will not need any protection; if he needs protection as badly as that, he had better not be exposed to danger.


Hugh Guthrie: I think I am correct in stating that from time immemorial in the penitentiaries of Canada, Great Britain and the United States guards have been present in the chapels at both the Protestant and Roman Catholic services. They are very necessary. No one should go away with the idea that we just have a crowd of children and innocents in these places. There are two opinions in connection with attendance at chapel. Many prominent people, including ministers of the gospel, have written to me that they think the religious'services in the penitentiaries might well be dispensed with. Some suggest that at all events attendance should be optional. At the present time attendance at chapel is compulsory and there is no doubt that many of the prisoners resent this. As one divine told me, they must accept it as part of the punishment. There is an element of danger in the

chapel. It is about the only time the prisoners congregate in large numbers. Many of the disturbances which have occurred in penitentiaries in Great Britain and the United States and some that have occurred in Canada have been hatched or concocted in the chapels. You have five or six hundred men, many of whom are desperate characters, congregated together with thirty or forty guards. It would not be a very hard thing for such a number of men suddenly to overpower the guards. Reverend Mr. Kidd is a returned man. He is an estimable chaplain and one of the outstanding men in the service. He is a fearless man; he was decorated in the war and I do not think for one moment that the guards were placed there at his request. The guards are there whether or not he likes them, for the protection of the institution.


Agnes Campbell Macphail: Was there not a particular instance recently?


Hugh Guthrie: Not that I am aware of.


Agnes Campbell Macphail: Is it not true that part of the wall between the chapel and the room adjoining was broken down and a heavy guard put behind this opening, quite observable by everyone in the room? I am given to understand that that is true.


Hugh Guthrie: There was an extra number of guards placed at that particular point on May 11. This was the time when we were anticipating trouble which unfortunately came.


Agnes Campbell Macphail: I should like the minister to say something about the fire and the resignation of Warden Megloughlin.


Hugh Guthrie: The fire at Kingston
penitentiary took place on May 15. It was discovered between 4.35 and 5 o'clock, at the closing of the prison. An incipient fire had been discovered in the kitchen three days before, but it did not amount to much. When discovered it was easily put out. Punk had been ignited and placed in oiled paper and put away at five o'clock, but it was discovered in time and no real damage occurred. On May 15 a fire occurred in the change room. This is part of the prison where the men's wearing apparel and extra clothing is kept. The fire broke out between 4.40 and 4.50 in the afternoon. At the same time another fire broke out in the carpenter shop, some distance, about seventy or seventy-five feet away from the change room. The fire in the carpenter shop was discovered by one of the guards and without any very great difficulty and with an extinguisher was put out. The fire in the change room had become a serious blaze before

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it was discovered. The men had been marched out of the change room about twenty minutes before the fire was actually discovered; the door had been locked and the men marched out to their cells. When this fire was noticed through the smoke occasioned by it, the door was opened and there was a great conflagration in the room at that time.
Unfortunately, at that hour of the day, five o'clock, when the men are returned to their cells, it would be a natural thing for them to wash, but the effect of that on the water supply was very serious, reducing the supply to about fifty per cent of the normal pressure and interfering very greatly with the extinguishing of the fire. That may have been a coincidence. If you take one thousand faucets and start them all running at the same time you may seriously reduce the water pressure; at all events, the water pressure was seriously reduced. It became necessary to send for the Kingston fire brigade which came to the scene as rapidly as possible and after a considerable amount of difficulty the fire was extinguished. The loss on this occasion has been serious. The loss in the riot of two years ago which was looked upon as a serious one was only about $3,000. I regret to say that the loss by fire has reached about $35,284 including loss of machinery and of buildings, but the largest item is the loss of clothing and equipment for prisoners.
A very full investigation was held, but according to the report that has been placed before me, the inspector who conducted the investigation is unable to say who started the fires. He has reported that the fires were of an incendiary nature. They started at approximately the same time in the two buildings just as the men had been marched from the different buildings to t'heir cells. It is supposed that the fires were started either by mechanical cigarette lighters called "punk" lighters or what the prisoners refer to as "the works," operating with a bit of flint and a bit of punk, or else by a piece of candle which may have been stolen from the chapel and which could have been placed under the tables at the end of the change room and well concealed and which probably in fifteen or twenty minutes would result in a blaze. But there is no conclusive evidence so far as to who actually set fire to those premises. The damage, as I say, is considerable, but we have not been able to fix guilt on the culprit.


Agnes Campbell Macphail: The minister has not answered my second question:	Why did
Warden Megloughlin resign?


Hugh Guthrie: Well, he resigned. Perhaps we might find out more if we asked him.


Ernest Lapointe: Coincidence.


Hugh Guthrie: I shall, however, State the case quite frankly. Warden Megloughlin was appointed temporary warden at the time of the riot in the institution in October, 1932. There is power in the Penitentiary Act in an emergency to appoint a temporary warden, and he was appointed temporary warden by the superintendent. Subsequently his position as warden was confirmed and he was formally appointed by the civil service commission. He has now served in the institution from October, 1932, to the fifteenth of the present month of June and I must say that he has had a rather desperate experience in that penitentiary. He has had a very difficult crowd of convicts to deal with: insurrections and riots have from time to time been planned; some of them to a small extent have been carried out and I do not believe during all that period there was a moment of time when he could say that he was safe or that his life was not in actual danger. But he is a fearless man and probably did his best to conduct that institution according to the rules and regulations and to run it as a prison or penitentiary should be run. But after an experience of, say eighteen months, I am sorry to say that the condition was not satisfactory; quiet had not been restored; outbreaks or threatened outbreaks became of almost monthly occurrence. Letters and communications were intercepted occasionally showing the plans that were to be undertaken, naming some outside sympathizers as ready to applaud another insurrection and stating that some of the newspapers were behind them.
According to the best estimate we can form there are not more than one hundred insurrectionary spirits, pretty desperate men, in that institution; from the reports I gather, out of the 1,000 in the institution, about one hundred may be considered dangerous insurrectionists. There is still quite a proportion who live in fear and trembling and who are willing to join in any insurrection, who are afraid to stay out. There have been assaults of a very vicious kind on some of the prisoners who had not thrown in their lot with the more noisy and dangerous element, but by far the largest proportion are peaceable, well-meaning prisoners and the situation for those people is very inconvenient, very unpleasant and, to some extent, perhaps dangerous also. Those prisoners must be controlled and there is an element there which will not obey. If they are

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ordered to do work of certain kinds; ordered to any kind of duty, they positively refuse. Their language is bad, disgraceful, but their refusal to obey orders must be attended to.
In the last analysis there is only one course you can take and that is the application of physical force, otherwise your penitentiary is out of control. I am sorry to say that since the first of January prisoners who had been accorded in the last two years very many favours as compared with those enjoyed in the penitentiary for forty or fifty years, continued to demand more and more, and the noisy or the dangerous element continued to make plans to have another rebellion or insurrection of some kind. A year and a half, or nearly two years ago, we gave them certain liberties which they had not theretofore enjoyed; one of them was outdoor exercise. This developed into baseball, handball. It developed into Sunday games; schedules were arranged for games for prisoners' teams to take place on Sunday afternoon. This spring the matter was greatly to the annoyance of certain residents in the neighbourhood of the penitentiary, and complaints were made.


Ernest Lapointe: What sort of complaints?


Hugh Guthrie: Of the noise on the Lord's day when church service was going on. Baseball was being played, and the people did not know it was baseball; the noise and the shouting were so great that they thought it was another riot. Smoking was another privilege not originally given in 1932 but extended in regard to the smoking of cigarettes. But there is a very positive regulation that no smoking shall be allowed in any place where there is any combustible material. That regulation I found was being very largely disregarded by the prisoners. It has been suggested that perhaps some of the fires may have been started by cigarettes, but I do not know what the truth is in regard to that. But smoking in the shops where there was combustible material was becoming very prevalent, and it became apparent to me and to others who reported to me that the prisoners were rapidly getting out of control. Under these circumstances I sent for the warden and had considerable discussion with him on the morning of the fourteenth instant. I explained to him the situation. I cannot say that I could blame him very much under the circumstances, because as I said he has had a very trying experience there for eighteen months.


Mr. SANDERSON:: Did the minister ask for his resignation?


Hugh Guthrie: I suggested to him that I was determined upon making a change. He immediately said that he would like to consider the question of tendering his resignation. "Well," I said, "you must understand that I am determined to make the change." He asked for two or three hours to consult friends in the city, and he came back at half past three and said that he had thought the matter over and discussed it with his friends and had decided that he would tender his resignation. But I had intimated to him in the morning that I was determined to make a change.


Ian Alistair Mackenzie: Has he asked for an investigation since then?


Hugh Guthrie: No, there has been no request for an investigation. He discussed that question with me briefly, and I received a letter from him yesterday intimating that perhaps some investigation should be held, but he is to see me again to-morrow or some time when I can conveniently see him and discuss the matter further.


Frederick George Sanderson: Before the warden came to see the minister at his request was there a report from the superintendent in regard to the warden?


Hugh Guthrie: Yes, and from others.


Frederick George Sanderson: Did the superintendent recommend his resignation?


Hugh Guthrie: The superintendent made no recommendation, only a statement of facts. The chief complaint was the failure to enforce the regulations of the penitentiary. I could name a good many instances in which that failure took place. I do not know that it was a very easy task for anyone, or that anyone could have performed it. In the meantime I have placed in temporary charge of that prison a man who has had considerable prison experience, the warden of Collins Bay.


Ernest Lapointe: Who is in charge now?


Hugh Guthrie: Mr. Allan, the warden at Collins Bay, has been transferred to Kingston.


Mr. WOODSWORTH:: Would the minister make a statement regarding the assertion made at the trial at Toronto that Tim Buck was shot at while in his cell?


Hugh Guthrie: I think I can absolutely deny that Tim Buck was shot at. But I must admit that a number of shots were fired in his cell. That occurred during what we called the great riot of October, 1932, at a time when there was general confusion in the institution,

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when the military had been called in for the purpose of quelling it, when the larger number of prisoners amongst whom was Tim Buck, had been marched to their cells. The guards were armed and the military were armed. The situation was exceedingly serious, and Tim Buck was one of those who were encouraging the disorder. At the door of his cell he was making speeches and encouraging the rioters, and for the purpose of frightening him, I suppose, or cowing him, certain guards fired into the ceiling in his cell. There can be no doubt that if any man had wanted to shoot Tim Buck he could have done so. The very fact that ten or eleven shots were fired and there was no harm to Tim Buck shows that they were not trying to hit him. He was there for anybody to shoot. But he was one of those who were encouraging the riot and aiding and abetting the rioters, and was one of those who were convicted for it by the county court judge when he was tried at Kingston. He was not injured by any shots, but shots were fired into his cell, and the reason for it was that he was taking an active part in encouraging the rioters.


James Shaver Woodsworth: The hon. member for Southeast Grey (Miss Macphail) has made an appeal that there should be an independent and very impartial investigation. It seems to me that that is a reasonable request. I think that people from all sections of Ontario and from outside of Ontario have felt that the time has come when a departmental investigation is not sufficient. I myself have no personal knowledge of conditions in Kingston penitentiary, but there was sent to me a few months ago a copy of the Chronicle-Telegraph of Quebec of July 17, 1933, in which I find a report of a sermon preached from the pulpit of St. Matthew's church by the Venerable F. G. Scott, C.M.G., D.S.O., archdeacon of Quebec, in which he called earnestly upon the federal government to name a royal commission to investigate Canadian prison methods and particularly the conditions which recently provoked rioting in Kingston penitentiary. He declared in the course of his sermon that the brand of shame rests upon the Department of Justice, and because of this he had been forced to raise his voice from his pulpit against this public scandal. According to the report, much of the archdeacon's sermon consisted of the reading of a letter written by Major.W. M. Nickle, of Kingston, Ontario, who was defence counsel for one of the rioters at Kingston, in which startling allegations of ill treatment were made. The report includes the text of the letter written
by Major Nickle of Nickle and Farrell, barristers, of Kingston, Ontario. This firm had undertaken the defence of Murray Kirkland, accused of rioting in the penitentiary last October.
I understand that certain minor changes have been made since that time, but I am informed that no fundamental changes have been made. So it does seem to me that it is obligatory upon the Department of Justice to make a categorical denial, if such can be made, of any of these charges of Major Nickle. In any case the obligation rests upon the department to show reason why there should not be a thorough-going investigation by an impartial commission.
This is the letter, which I should like to read:
Kingston, July 12, 1933. My Dear Colonel Scott:
I remember meeting you on a number of occasions in London after my appointment in March, 1918, as private secretary to our mutual friend. Sir Richard Turner.
I was associated with my father in the trial of Rex v. Murray Kirkland who was charged with rioting in the Kingston penitentiary, October, 1932. The trial judge was His Honour George E. Desroche of Belleville. The trial lasted nine days, when the whole history of the Kingston penitentiary was thoroughly gone into to ascertain the cause of the disturbance of October 17, 1932. Having read your article in the Toronto Star, a copy of which is enclosed' herewith for your information, I thought you might be interested in getting a little further information about the Kingston penitentiary.
At the Kirkland trial we proved, on behalf of the defence, and our allegations were not contradicted by anyone, the following facts:
(1)	Underneath the keepers' hall at the Kingston penitentiary below the level of the ground there is what is called the "hole." a little place with eight cells where at certain periods men have their hands raised above their heads and are shackled to the bars, and are confined for seven or fourteen days and fed on bread and water. Outside of each cell gate is a heavy wooden door with four or five holes for air about the size of your thumb. When these doors are shut there is no other ventilation. As there are no proper sanitary arrangements, it follows without detailed comment that the air is foul to a degree. The time that men are shackled to the bars is 8 a.m. to 11.45 a.m. and from 1 p.m. to 4.30 p.m.
Let me pause for a moment to say that these are very definite charges made by a reputable man who has intimate knowledge of the facts whereof he speaks.
(2)	For the most trivial offences, such as talking in the cell range men were paddled or spanked with a leather strap 34 feet long, 3 inches wide, i inch thick, and in the strap there were 30 holes. If you were not particularly liked by any guard, the custom was to soak the strap in water over night and theD

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paddle the man in the morning. The man's ankles before being paddled were shackled to a table, like a kitchen table, after his feet had been strapped apart, and his ankles made fast with straps. The inmate was then bent over the table, his arms stretched out, his clothes removed and he was blindfolded. The soft flesh would go in the holes in the strap, and if the strap was pulled the least little bit, bits of the flesh would be torn out of the body and when the strapper had finished his work, the inmate still bleeding, would be sent to the "hole," sometimes to be shackled to the bars, and sometimes just to be fed on bread and water. Inmates gave evidence and showed scars on their body from paddling which took place months ago.
To-night we have heard that this punishment is still in. vogue, that men were sentenced to twenty strokes of the paddle, with some of them receiving as high as fifteen strokes. We also heard that one of the reasons for paddling, for this form of cruelty-I think we call it nothing else-was simply disobedience to certain discipline, with no great moral crime involved. I quite recognize that it may be necessary to have discipline in any institution, but I do submit that cruelty of this kind savours more of medieval inquisition days than it does of modern life.
(3)	Syphilitic inmates with running sores and other such patients are admitted to the hospital. These dangerous cases and all other patients bathe in the same wash tub, the same tub being also used to wash the dishes of the patients in the hospital three times a day.


Mr. MULLINS:: That is not correct. I looked into that very carefully, and the hon. member has no right to read that.


James Shaver Woodsworth: I submit that, however estimable my good friend from Marquette may be, the writer of this letter knows the conditions in Kingston penitentiary a great deal better than he does.


Henry Alfred Mullins: For your information I may say that I spent some time there with a prominent clergyman from the city of Toronto, who went with me. There was no window dressing: I looked into all those conditions which the hon. member is taking up the time of the house reading about, and what he says is absolutely untrue.


James Shaver Woodsworth: Perhaps my hon.
friend will permit me to finish reading this letter, which I say came from Major Nickle, who was present at the time of this trial. I take it that he knows the conditions whereof he speaks.
Can you imagine anything more disgusting and shocking?
(4)	Two or three boys who were sent to penitentiary at the age of fifteen for three to seven years were put to work with "lifers," in other words, men who had been charged

with murder or some other very serious offence and had been given life imprisonment. We can imagine the result of such contact upon the character of the boys.
(5)	It was proved conclusively that there are only three shops that are any good at all at the Kingston penitentiary from the point of view of teaching an inmate a trade-the machine, engineering and carpentry. These three shops can only look after 125 men, there are over 900 inmates in the penitentiary. The result is that about 800 men are doing time and not learning a trade. At the end of their sentence, they are turned loose in society, and find themselves as many years backward as they were in the Kingston penitentiary. The inevitable happens and they go back to the penitentiary.
There is an inmate by the name of John O'Brien who was suspected of conspiring to escape on the poor allegation of a letter sent by one inmate to a warden, implicating O'Brien. O'Brien has been in solitary confinement in the prison of isolation since August, 1931, and' has never been charged or tried on the charge of conspiracy to escape.
I pause for a moment, Mr. Chairman. It seems almost inconceivable that such a situation could develop, with this man O'Brien in solitary confinement in the prison, isolated, since August, 1932, yet he has never been charged or tried on a charge of conspiracy to escape.
O'Brien had on each side of him two raving inmates, one completely crazy and the other a drug addict. I subpoenaed the crazy man to try to show to the court what was going on, but the Department of Justice got rid of him three or four days before the trial.


Mr. CANTLEY:: I rise to a point of
order. I have always understood that it was contrary to the rules of the house to read extensively from newspapers.


James Shaver Woodsworth: There is nothing in the rules to prevent my reading some facts.


Mr. DONNELLY:: Would the hon. member say what he is reading from?


James Shaver Woodsworth: The Quebec Chronicle-Telegraph of July 17, 1933. This is not newspaper comment.


Hugh Guthrie: Let him go on; go
ahead.


James Shaver Woodsworth: I continue to read:
When I became interested in the convict trials, I realized that every man was entitled to a fair trial. I attach a clipping from the Whig-Standard which will prove to you conclusively that the Department of Justice did not want a fair trial, and certainly did not want the disclosures made public which have since come to light.	[DOT]
Prior to October 17, there was a silent rule for convicts which read as follows: "Every convict shall observe silence and shall not hold communication with another convict. He shall not look at a visitor or speak to him. He shall

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only hold communication with the officer in charge of him 'on matters connected with his work'." Let me say here, while it occurs to me, that the inmates were only given 20 minutes' exercise a day, walking in a circle round the bull ring. All the complaints, brutality and treatment complained of in the Kirkland trial were made known to the authorities at Ottawa in September last year. No action was taken until after the disturbance. This is what has happened since. The men are allowed to speak to one another. They are allowed to play baseball and laugh for half an hour a day. They are given cigarette papers for their tobacco instead of using makeshifts. No man is shackled to the bars now and no man is paddled without the approval of Ottawa. The hospital conditions remain the same.
John O'Brien is still in solitary confinement and has not yet been tried.
I went to the war as a private in 19X5. I happened to come back a major. I was wounded three times. I had several operations as the result of wounds. I fought for the best tradition of the British Empire and I am frank to say to you that, within one mile of this office is the dominion penal institution known as the "Kingston penitentiary." It reeks with [DOT]discontent and rottenness. It is an institution that is a disgrace to this country and I am glad that citizens like yourself are beginning to realize that the inmate of to-day is the citizen of to-morrow and entitled to be treated as a human being.
Christ is not a living power in the life of the inmate at the Kingston penitentiary today. What is needed is a royal commission to investigate the hideous cruelty suffered by the helpless individual, a ward of this country, confined behind the silent walls of the Kingston penitentiary. The authorities, as far as I can learn, are taking no action to better these conditions. What is needed on the commission are outstanding Canadians of a broad mind and a courageous character to look into the situation which has stirred up decent thinking Canadians as a result of the shocking disclosures.
In closing let me say that, in my judgment, it is ridiculous to try men for what they did and punish them further when you take into consideration the fact that things after the disturbance, to a small degree, from the point of view of privileges were made better.
The people who should be prosecuted are those in authority.
I have written you at great length; I trust you will find time to read this letter, and I hope that you will raise your voice to see if something cannot be done for the inmates of our penal institutions. Because I realize that, if you do speak, the men of the Canadian corps, the soldiers of yesterday, the citizens of to-day, will take heed of your words, and perhaps something will come of your efforts.
Believe me,
Yours sincerely,
(Sgd.) W. M. Nickle.
Some- hon. gentlemen seek to interrupt by banging their desks and calling "carried."


Mr. DUPUIS:: Why do you not impose the penalty of the paddle?


James Shaver Woodsworth: Some seem to think that this matter is a great joke.


Thomas Cantley: It is an outrage.


James Shaver Woodsworth: I submit that this situation as it exists to-day is, as the hon. member for Pictou has said, an outrage.


Thomas Cantley: It is, on your part.


James Shaver Woodsworth: I say that when a man of the standing of Mr. Nickle writes in this way-


An hon. MEMBER:: Sorehead.


James Shaver Woodsworth: -and when his letter is read during the course of a sermon in St. Matthew's church by a man respected by all Canadians, The Venerable Archdeacon Scott, and when it is published in a newspaper with the standing of the Chronicle-Telegraph of Quebec, it is time that the situation came before the House of Commons. I have not much further to say, but I could not do better than to continue the plea made by Archdeacon Scott. He states:
At the end of September, 1930, we had 11,223 persons in prison in various jails and penitentiaries. On September 30, 1931, we had 12,441 prisoners, an increase of 1,218 persons in one year. The numbers since have gone up and are still going up.
If we look upon crime as a moral disease, we must feel that there is some centre of evil in our national life which has to be seriously attacked, and if possible eradicated. If a bodily disease breaks out among our people, all best medical minds and skill that the nation can command are called upon to combat it. Whence has come the failure in our fight against the moral disease of crime?
And one further sentence only:
Broken lives, immortal souls, whom the church has failed to reach, are broken further and humiliated, in their last chance given them for reform.
I have said that I have no personal knowledge of the conditions in Kingston penitentiary. The great majority of the public cannot have any personal knowledge, but I do believe that the general public is entitled to have firsthand knowledge from a competent and impartial board of investigation. The fact that we have had these troubles, as the minister himself has admitted, extending over yearn, and that within recent months there have been very serious troubles, are evidence sufficient to warrant our asking for an impartial investigation. Further than that, I think we must admit when we have so many of these men coming back again and again to the penitentiaries that there is something wrong in the treatment which we are giving them.


An hon. MEMBER:: They must like it

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James Shaver Woodsworth: And so I simply
pass on the appeal by Archdeacon Scott, one which I know is echoed by a great many Canadians throughout this country, asking that the government give us this impartial investigation.


Mr. ROSS:: I am not so much interested in. the particular matters to which the hon. member (Mr. Woodsworth) has just referred. I regret that I missed the opportunity some time ago to continue my remarks, which were cut short by my engagement in the election campaign of the last two weeks. I must thank the Prime Minister (Mr. Bennett) for the opportunity to complete what I began on a former date. On that occasion I spent most of the time in showing that the reforms which had been obtained were obtained through outside interference. That was principally in answer to newspapers who had been decrying the matter of outside interference in penitentiary affairs. It was also an answer to the selected visitors who had gone through the penitentiaries, and had made favourable reports. I am not very much concerned with the internal administration, because I think the department should be able to obtain a man who would bring order out of what the minister has now described as a state of great disorder. In the face of a certain amount of criticism opposed to a certain amount of whitewash we get nowhere. The remarks which have been made through the medium of the press and by visitors to the effect that those of us who have some criticism of the system, and not particularly against the administration by this or that official, are preaching leniency does not in any way affect me. I am for punishment and I am also for control of these institutions.
I should like to deal with basic conditions, the conditions which lie at the bottom and foundation of our penal system. The Prime Minister has well described the functions of the penitentiary as being threefold, first that they have to do with detention, for the safety of the state; secondly, detention to deter crime in others and, third, for reformation. These are the three concise and concrete functions outlined by the Prime Minister, and I believe they express adequately what should be the functions of penitentiaries. If those are the functions, I can conclude only this, that the system is ancient, that it is antique and bewhiskered with age. I say that it has failed in this threefold function. It is quite true that we have detention, there is no doubt about that. But as to the features of deterrence from crime and reformation, the system has failed absolutely.

I should like to draw the attention of hon. members to some statistics, because in matters of importance we have to go .outside the reports. I believe the last report was about the poorest one which has been made by a superintendent. My figures are those for the year 1933, and I should like the house for a few moments to take note of what the system has accomplished. We find that of the 4,800 prisoners the first offenders amount to 37 per cent, second offenders 21 per cent, third offenders 14 per cent and those with four or more offences 22 per cent. In other words, the oftener a man goes to .penitentiary the greater is the likelihood that he will continue going, and to my way of thinking if that is the conclusion which must be drawn after all these years of administration the system has failed. The superintendent states that there have been ten years of maladministration, and I leave that to the former and the present Minister of Justice- to explain. I think however it is a pretty hard crack to say that there -have been ten years of maladministration and inefficiency. I would point this out, however. When you analyze the population of the penitentiary and find that only thirty-seven per cent of that population are first offenders and that twenty-two per cent are fourth commitments, then I say that the system is not showing results. It has been said that those who go to the penitentiaries are the unemployed. Again, I have not time to take you into statistics, but you will find that even that criticism is not borne out.


Paul Mercier: If it is a failure, what do you suggest?


Arthur Edward Ross: If the hon. member will listen long enough I will come to my suggestion; let him be a little patient. The unemployed are not by any means the great mass of the population of the penitentiaries, because most of these men have been in employment of some kind or other. Then we come to the boys and the youth. There are about 109 boys in the penitentiaries, and 44 per cent of these are first offenders. Of boys between the ages of 18 and 21 there are 730, and about 40 per cent are first offenders. It has been claimed that the boys in there come from homes. Again, the statistics do not bear that out. The smallest percentage of these boys in the penitentiaries are from foster homes, and the great percentage are from homes where there are father and mother. The conclusion I leave to hon. gentlemen.
My hon. friend asks what I propose. I will ask the committee to bear with me patiently

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in this matter. I speak only for myself but I am speaking after years of close study of the penitentiaries. In the first place, for years the superintendent's report has suggested that there should be segregation, and that suggestion has been ridden to death. But there are one or two respects in which there should undoubtedly be segregation, and the minister's statement to-night will lead us to a few conclusions in this matter. First of all, there should be segregation of mental cases. The one official who is absolutely necessary to this system is the psychiatrist, but when you read down this list of officials you will find that the two important ones .are left out. There are superintendents, wardens, inspectors, chaplains, but there is no psychiatrist at all in connection with these institutions. The study of the mental condition should begin away back in these cases. Boys are taken there without examination, and after the last trial a very vigorous campaign was put on to weed out a lot of the mental cases. The situation in regard to mental cases has been a very bad one for years. Whenever a crisis occurred cases would be examined and they would be sent over to the provincial asylums. Now, the provincial asylums are not prepared to deal with the mental criminal, and as a result he very often escaped and was at large. But I want it to be understood that a large percentage of the population, of the penitentiaries to-day is attributable to the mental condition of the inmates, and there has been no scientific, no advanced method of dealing with them. The man who should be able to take charge in this respect and make recommendations cannot be found on the staff.
Let me pass on to the second phase of this matter, and that is in regard to the boys. I have been engaged on this for some time. I think it is a crime that a boy should be in a penitentiary, and yet if you study the law as it stands you will fail to understand why it is that white men should have on their statute books any law which permits the incarceration of boys. I am opposed to the incarceration of the boy if it can be prevented, as I think it can, and I will make a suggestion or two in that regard before I am through; because when the boy is released from the institution, no matter whether it be a reformatory or a penitentiary or a prison, there is no place for him in society. There is no way in which he can obtain a position and be restored to a place in society. I leave that statement to the house and the public and ask whether there is any way in which the boy, once he is marked by incarceration, can be returned to society. Visitors have gone through the penitentiaries and made reports
on the food and on the conditions, but they fail to tell you of the food that the boy is feeding on in these institutions. I will give you an example without mentioning any names-convict No. so and so, an inmate of Kingston penitentiary. This man was sentenced for life to that institution for assaulting a little girl of nine, and when he could not accomplish his purpose he tied the girl and then cut her. That man was in the institution, and was paroled after nine years, and he is back to-day on a similar charge. Imagine a boy sitting beside this kind of animal, feeding. on the sort of food that is given to him by moral perverts. I could give you similar cases. How can that boy, after years of such confinement, find a place in society? Since I took this matter up in regard to the incarceration of boys in these institutions, I must say that within the last year we have made some advance.- The Minister of Public Welfare in Ontario has stated that the age should certainly be raised from sixteen to eighteen. With that we cannot agree. A boy of eighteen has yet to be defined from the point of view of mental condition; he may be a boy of ten years mentality, whereas a boy of thirteen or fourteen might have the matured mentality of a man of twenty-five. I have been in correspondence with many magistrates on this phase of the subject, discussing this difficulty. Listen to some of the statements made by some of these magistrates:
As I have often pointed out to you, a boy under sixteen is met with the arbitrary provisions of the prison and reformatory act.
You will see, Mr. Chairman, that this matter is complicated. It is not only a federal but a provincial matter. I am trying to get down to basic facts and arrive at something of a corrective nature with regard to these institutions. The letter continues:
If section 30 of this act means what it says, the magistrate is at times faced with the heartbreaking alternative of sending a boy of tender years to the penitentiary or of ignoring the act and sending the culprit to some other institution.
The law as it stands to-day is that a boy under sixteen years who commits certain crimes must necessarily be sent to the penitentiary, while if he is over sixteen years of age the magistrate has the alternative of sending him to the reformatory. Is that law one which we want to stay upon our statutes? Since this matter was last up the magistrates now have another alternative and they may send the boys to the reformatory. The letter continues:
This is the age of the automobile with all the opportunities for pleasure and the resulting temptation never before experienced. He

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himself is like a high powered car with unbounded energy and a not too great sense of responsibility. Like the auto he has unbounded opportunities for good if properly controlled but unlimited opportunities for evil if not controlled. When the magistrate has to act he is like a surgeon who has to perform a delicate operation with inadequate instruments. The problem is very great and I am afraid I cannot see the advantage of raising the juvenile age from sixteen to eighteen. In the first place, an increase in the age would not affect the duty of the magistrate to try them of any age for indictable offences if he were so charged. When the institution for the juvenile is the industrial school and you have children as young as eleven and eighteen year boys together, the evil influence on the tender boy by the older and more experienced one would be anything but good for the former.
He concludes with this important suggestion:
There is no doubt that all criminals should be classified and every criminal should be subject to careful physical and mental examination and should be dealt with in accordance with those. I am sorry that magistrates are not allowed wider discretion in the use of the strap. I cannot understand why the perforated paddle with its possibilities for serious injury should be allowed.
A boy may be committed for six months to a reformatory or industrial school. If he runs away, as most boys will, the arbitrary sentence is two years in the penitentiary. We have to-day in Kingston boys who have served six years for a six months' commitment. I think the boy should be treated provincially and by his own institution; he should not be incarcerated in a penitentiary for running away. When a boy had done two years you would think that that was sufficient punishment, but he is returned through the gaol to the reformatory to complete his six months' commitment. This is a serious matter. Since I have taken up this problem I have had the most interesting correspondence with many magistrates. I heard from one who had dealt with thirty-two cases concerning boys and of those thirty-two cases, sixteen were for offences under the highway traffic act. The magistrates have been following the letter of the law and these boys are in the penitentiary at the present time. They are in touch with murderers, moral perverts and other prisoners of the type to which I have referred already. The only result is injury to the boys. Last year I referred to a boy named Bill who had been committed when only fifteen years of age. He knew nothing about law breaking and he was not a bad boy in the sense of the word. However, as a result of being once committed to the penitentiary he is now serving his seventh commitment in that institution. I am opposed to boys being sent to the penitentiary. I may be asked what I am

going to do with these boys. Last year the former Minister of Justice (Mr. Lapointe) said that they were very bad boys, but as a. result of the system and the treatment they have received they have become much worse. Many of these boys become recidivists even although their parents stuck to them during their confinement. My suggestion is that the boys should not be placed in the institution. This problem became serious in England and they took many of these boys and put them in the navy. The result was that many of them came out very fine men.
Progress reported.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
Tuesday, June 26, 1934