1949-11-07

Mr. G. T. Fulford (Leeds):: Mr. Speaker, on a question of privilege I should like to explain to hon. members of the house that the packages of cheese which were placed on the desks in their rooms are a reminder that this is national cheese week. Throughout the week a campaign is to be carried on across Canada to acquaint our people with the many advantages of eating more cheese. It would help a great Canadian agricultural industry and at the same time improve our diet. The cheese you have received is the gift of the dairy industry. It is fine old cheddar of the type that is so much appreciated by the people of Great Britain. I cannot guarantee that it was produced in Leeds county, but I can assure you that it is almost as good as if it were.



HOUSING


[Stage Direction]
On the order for motions:
Mr. Gordon Graydon (Peel):: Mr. Speaker, I ask leave to move, seconded by the hon. member for Eglinton (Mr. Fleming), under standing order 31, the adjournment of the house to discuss a definite matter of urgent public importance, namely-


Some hon. Members:: Order.


Mr. Speaker:: Standing order 31 provides that leave to make a motion of this kind must be asked after the ordinary daily routine of business has been concluded.


Gordon Graydon: I will be in first then, anyway.
[Later: ]
On the order for introduction of bills:


Gordon Graydon: Mr. Speaker if I am now in order-


Mr. Speaker:: Order. We have not concluded the ordinary routine of business.



NEW MEMBERS

Mr. Speaker:: I have the honour to inform the house that the Clerk of the House has
received from the chief electoral officer certificates of the election and return of the following members, viz.:
Of Paul Leon Dube, Esquire, for the electoral district of Restigouche-Madawaska.
Of William Malcolm Mott, Esquire, for the electoral district of New Westminster.
Of Joseph Celestin Nadon, Esquire, for the electoral district of Gatineau.
Of Edgard Leduc, Esquire, for the electoral district of Jacques Cartier.
Of Arthur Masse, Esquire, for the electoral district of Kamouraska.



NEW MEMBERS INTRODUCED

[Stage Direction]
J. Eugene Lefrangois, Esquire, member for the electoral district of Laurier, introduced by Right Hon. L. S. St. Laurent and Hon. Edouard Rinfret.
Marcel Monette, Esquire, member for the electoral district of Mercier, introduced by Right Hon. L. S. St. Laurent and Hon. Edouard Rinfret.
Paul Leon Dube, Esquire, member for the electoral district of Restigouche-Madawaska, introduced by Mr. C. T. Richard and Mr. A. W. Stuart.
Arthur Masse, Esquire, member for the electoral district of Kamouraska, introduced by Mr. J. G. L. Langlois and Mr. Joseph Lafontaine.
Edgard Leduc, Esquire, member for the electoral district of Jacques Cartier, introduced by Mr. F. P. Whitman and Mr. J. A.
Bradette.


Mr. M. J. Coldwell (Roseiown-Biggar):: Is
it the intention of the Minister of Justice to table the report of the investigator under the Combines Investigation Act on the flour milling companies?


Hon. Stuart S. Garson (Minister of Justice):: Yes, later this afternoon.


Stuart Sinclair Garson: If we might revert to motions for a moment, Mr. Speaker, I should like to table copies, in English and in French, of the report of the commissioner of the Combines Investigation Act, on the flour milling industry.

Rent Control


Major James William Coldwell: Since the minister has tabled this report, I should like to ask him a question concerning an item appearing in the Ottawa Journal of Saturday. Mr. Donald Gordon is supposed to have said that assurances had been given, verbally and in writing, by Mr. Gordon and his officers of the wartime prices and trade board that certain privileges would be granted to the flour milling industry following decontrol measures. Will the minister table any communications of that kind which may have passed between Mr. Donald Gordon and the milling industry or any member of the staff of the wartime prices and trade board?


Stuart Sinclair Garson: Not having received notice of my hon. friend's question, I shall take it as notice.



EXPORT AND IMPORT PERMITS


Right Hon. C. D. Howe (Minister of Trade and Commerce) moved: the first reading of Bill No. 143 (from the Senate) to amend the Export and Import Permits Act.
Motion agreed to and bill read the first time.



HOUSING


[Stage Direction]
On the order for questions:
Major James William Coldwell: Mr. Speaker, before you proceed -with questions I wish to present a motion, if I may-


Gordon Graydon: Mr. Speaker, I have already been on my feet seeking the floor, and I do not think you should call questions until I have had an opportunity-


Major James William Coldwell: I ask leave to move, seconded by the hon. member for Vancouver East (Mr. Maclnnis),-


Gordon Graydon: I rise to a point of order


Major James William Coldwell: -the adjournment of the house under standing order 31-


Gordon Graydon: On a point of order, before my hon. friend proceeds-


Mr. Speaker:: Order. If this is a motion to adjourn the house on the rentals question,

it is only fair that I should hear the hon. member for Peel (Mr. Graydon), as he intimated-


Some hon. Members:: No.


Gordon Graydon: Thank you very much, Mr. Speaker. Under standing order No. 31 I ask leave, seconded by the hon. member for Eglinton (Mr. Fleming), to move the adjournment-


Some hon. Members:: Order.


Major James William Coldwell: On a point of order, Mr. Speaker, I rose to move this motion at the right time and in the right place. As an old member of the house I knew when to move it.


Mr. Speaker:: Standing order 31 reads:
Leave to make a motion for the adjournment of the house (when made for the purpose of discussing a definite matter of urgent public importance) must be asked after the ordinary daily routine of business (standing order No. 15) has been concluded and before notices of motions or orders of the day are entered upon.
My trouble is that the next order is questions and not motions.


Mr. Knowles:: Mr. Speaker,-


An hon. Member:: Don't spoil it.


Mr. Speaker:: It seems to me that we should take questions first.


Stanley Howard Knowles: Mr. Speaker, does the difficulty not arise because the house has changed the normal order of business for Monday? Does standing order 31 not make it clear that such a motion should be made after the daily routine of business, as provided for by standing order 15, has been concluded?
If you will look, sir, at standing order 15 you will see that subsection (2) reads:
(2) The ordinary daily routine of business in the house shall be as follows:
Presenting reports by standing and special committees.
Motions.
Introduction of bills.
First reading of Senate bills.
After that has been completed, I submit, is the time to move the adjournment under standing order 31. We have completed that routine, referred to as the ordinary daily routine of business. The difficulty arises because the next items are those which would follow if we were pursuing the usual routine followed on Mondays, but the house has adopted a motion under which on Mondays, questions come first after routine proceedings. It seems to me quite clear that this is the time when the motion should be moved.


Mr. Speaker:: I think that I had better go on with the questions.



QUESTIONS

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

Mr. Browne (Si. John's West):: What amount of money has been collected by the Newfoundland Railway since April 1, 1949 (a) for freight on goods transported solely within the province; (b) for freight on other goods?


Mr. Chevrier:: The Canadian National Railways advise:
From April 1 to June 30, 1949:
(a)	$767,119.
(b)	$243,475.
Figures from July 1 have not been taken out, as they are not required for the railway's purposes, and to do so would involve taking staff off regular duties or special overtime assignment.



SCHOOLS OF SOCIAL WORK


Mr. Knowles:: 1.	Is there a grant for assistance to schools of social work? If so, what is the amount of the same for the year 1949-50?
2.	Has the government received representations asking that this grant be made again for the year 1950-51 and subsequent years?
3.	If so, has consideration been given to such representations?
4.	What is the result of such consideration?


Mr. Blanchette:: 1.	Yes-$52,500.
2.	Yes.
3 and 4. The question is currently under consideration, but no decision will be finally made until the department's main estimates for 1950-51 have been considered and approved. Meetings are being held with representatives of the schools to discuss this matter on November 22-24.



MUSKRAT AND FUR FARM PROJECT, DELTA OF ATHABASCA RIVER

Mr. Dechene:: What progress has been made in the development of the great muskrat and fur farm project in the delta of the Athabasca river in the country tributary to Fort Chipewyan?


Mr. Gibson (Hamilton West):: The area which it was proposed to develop is owned partly by Canada and partly by the province. While surveys and investigations have been made, the information obtained so far is not sufficient to enable a definite plan being made which would permit an agreement being entered into with the province for the joint
Questions
development. Difficulties have been encountered in carrying out the necessary investigations and surveys owing to the high water levels. Negotiations with the province are being continued.



ELECTRIC POWER


Mr. Church:: What is the total export of power from Canada to the United States by (a) Ontario; (b) Quebec; (c) all other provinces?


Mr. Mcllraiih:: Export of power from Canada:
	From	From
	Apr. 1, 1948	Apr. 1, 1948
	to	to
	Mar. 31, 1949	Sept. 30, 1949
	K.W.H.	K.W.H.
From Ontario. .	1,122,645,883	552,027,014From Quebec. . From all other	. 649,346,632	326,072,896provinces .. . .	. 60,035,318	70,828,495Total 	. 1,832,027,833	948,928,405



NEWFOUNDLAND


Mr. Higgins:: 1.	What was the amount of Newfoundland's financial surplus set aside on deposit with the government on or after March 31, 1949?
2.	What is the amount of the Newfoundland surplus still on deposit with the government?


Mr. Belzile:: 1.	$15 million.
2.	$15 million.



QUESTIONS PASSED AS ORDERS FOR RETURNS


NEWFOUNDLAND


Mr. Browne (St. John's West):: 1.	What projects of work of a public nature dealing with harbours or rivers generally, have been undertaken in Newfoundland since April 1, 1949?
2.	Where are they located and what amount of money was allocated to each?
3.	Have any other projects been approved? If so, what are the details?



NATIONAL DEFENCE


Mr. Fraser:: 1.	How many men and women have joined each branch of the armed services since August 1, 1945?
2.	How many of these men and women have been discharged as unfit for further service?
3.	How many of those discharged are now receiving allowances or pensions?

Rent Control HOUSING



INCREASED RENTALS


Gordon Graydon: Am I now in
order to move my motion, Mr. Speaker?


Mr. Speaker:: I will hear the hon. member.


Gordon Graydon: I ask leave under standing order 31, seconded toy the hon. member for Eglinton (Mr. Fleming), to move the adjournment of the house to discuss a definite matter of urgent public importance, namely, the situation created by the government's arbitrary action in authorizing a drastic increase of rentals.
There is hardly any need for argument with respect to the urgency of this matter. I fancy the statements that have appeared in the press throughout Canada and the discussions that have taken place will indicate only too clearly to this house that nothing this session, perhaps indeed for many sessions, has agitated the people of Canada so much as the drastic announcement made by the Minister of Finance (Mr. Abbott) on Friday last.


Mr. Speaker:: Order. The hon. member has stated his motion. It is moved under standing order 31, which reads:
(1)	Leave to make a motion for the adjournment of the house (when made for the purpose of discussing a definite matter of urgent public importance) must be asked after the ordinary daily routine of business (standing order 15) has been concluded and before notices of motions or orders of the day are entered upon.
(2)	The member desiring to make such a motion rises in his place, asks leave to move the adjournment of the house for the purpose of discussing a definite matter of urgent public importance, and states the matter.
The hon. member has stated the matter.
(3)	He then hands a written statement of the matter proposed to be discussed to the Speaker-
The hon. member handed me a copy of his motion before I took the chair today, so I have the motion before me.
-who, if he thinks it in order and of urgent public importance, reads it out and asks whether the member has the leave of the house.
My difficulty in connection with this motion is that when the house rose on Friday the Minister of Public Works (Mr. Fournier), in stating the business for today, said:
On Monday we shall move to go into supply . . .
Therefore it would appear that the motion to go into supply will be made almost immediately, and as soon as the amendment now before the house is disposed of hon. members will have full opportunity to discuss the subject matter of the motion which has been presented to the house by the hon. member for Peel (Mr. Graydon). Under those circumstances, and considering the meaning of

the word "urgency" as being that it is urgent that the matter should be brought before the house as soon as possible, I think this matter is not urgent, since in a comparatively short time the house will have an opportunity to discuss it.


Gordon Graydon: May I say one word with respect to your ruling?


Some hon. Members:: No.


Mr. Speaker:: Order. I will hear the hon. member.


Gordon Graydon: I want to make only one observation. There is an amendment to the motion to go into supply. I suggest that you would have been quite right, sir, if there had not been an amendment before the house to the motion to go into supply, dealing with an entirely different matter. There may be an amendment to that amendment; the debate may go on all afternoon, and it could easily be that we would never reach this very important matter, which I think requires the attention of this house now rather than some time later on in the day.


Mr. Maclnnis:: May I respectfully suggest, Mr. Speaker, that you may have made an error as to the order of business when the house considers the motion to go into supply? Order No. 2 on today's order paper reads:
Resuming the adjouned debate on the motion of the Minister of Finance that Mr. Speaker do now leave the chair for the house to resolve itself again into committee of supply, and on the proposed amendment thereto of Mr. Knowles.
That is the first order of business, and no other business in connection with supply may take precedence over it. I am afraid, Mr. Speaker, you overlooked that point.


Mr. Speaker:: I did not entirely overlook it. It is quite true that I did not read the order in full, but as soon as the amendment is disposed of, hon. members will have every opportunity to discuss the question which has been raised by the hon. member for Peel. From the discussion that took place the other day it does not appear that the debate on the amendment will last much longer. I feel, therefore, that my first observation was correct.



MOTIONS FOR PAPERS


Stanley Howard Knowles: For a copy of any charts or diagrams in the possession of the engineering branch of the Department of Public Works, or any other branch or department of the government showing the full cross-sections of the rocky barriers at Lister's Rapids and at Grand Rapids in the Red river, between Winnipeg and Lockport.

Also a copy of any reports, dated since 1867, or correspondence, dated since January 1, 1945, with reference to the removal of the said rocky barriers.



IMMIGRATION BRANCH


Major James William Coldwell: For a copy of all correspondence, telegrams, reports, documents and papers concerning the suspension or dismissal of Anthony Mahadey of Hamilton, Ontario, by the Department of Immigration.



UNEMPLOYMENT INSURANCE


Stanley Howard Knowles: For a copy of the preliminary report in regard to sickness insurance submitted to the unemployment insurance commission by A. D. Watson, actuarial adviser of the department of insurance.



COMBINES INVESTIGATION ACT


Stanley Howard Knowles: For a copy of all communications received by any minister of the government or by the commissioner of the Combines Investigation Act, or his deputies, from the Trades and Labour Congress of Canada, the Canadian Congress of Labour, the Canadian Federation of Agriculture, the Canadian Chamber of Commerce, the Canadian Manufacturers Association; also from any flour milling companies, or any other organization or company, or from any persons on behalf of such organizations or companies, having to do with changes or suggested changes in the Combines Investigation Act and/or in the administration and/or enforcement thereof, dated at any time since January 1, 1946, and for a copy of the replies thereto.

The house resumed, from Monday, October 31, consideration of the motion of Mr. Fournier (Hull) that the house go into committee of supply, and the amendment thereto of Mr. Knowles.



INCOME TAX


Mr. Speaker:: The house may recall that before this debate was adjourned on Monday last, I invited discussion on whether or not the amendment moved by the hon. member for Winnipeg North Centre (Mr. Knowles) was in order. Since then I have had an opportunity of studying this matter further.
It is quite true that wide latitude is traditionally allowed in respect of matters discussed and amendments moved on a motion to go into supply, and that grievances may be ventilated before the granting of supply. (See Journals, House of Commons, volume 66, page 246.)
On the other hand, there are certain well-established exceptions to this proposition. In particular, citation 467 of Beauchesne's Parliamentary Rules and Forms, third edition, makes it clear that an amendment to 45781-95J
Income Tax Deductions the motion to go into supply cannot relate to any resolution to be proposed to the committee of ways and means. At the present time there is on the order paper, appearing in the name of the Minister of Finance, a resolution to amend the Income War Tax Act and the Income Tax Act which is to be proposed to the committee of ways and means, and as the amendment of the hon. member for Winnipeg North Centre also relates to the Income Tax Act, it would appear to be irregular in view of the aforementioned citation 467. Also, if the amendment is allowed to stand there would be two motions on the order paper on the same subject at the same time.
Notwithstanding what I have said, in view of the fact that such an amendment might be in order after the budget resolutions are disposed of, and also because there has been considerable debate on the proposed amendment, I feel that it would expedite the business of the house if the proposed amendment were entertained and disposed of at this time. In reaching this conclusion, I should like to emphasize that this should by no means be regarded as a precedent to be followed on future occasions.


Angus MacInnis: When we were dealing with this subject last Monday, I moved the adjournment of the debate. At that time I had no intention of resuming the debate today. I moved the adjournment of the debate solely in order to give Your Honour time to consider your ruling. In the meantime I have decided to say a few words on the amendment.
It is almost superfluous for me or anyone else to try to add to the clear statement made by the member for Winnipeg North Centre (Mr. Knowles) when he proposed the amendment. But if for no other reason than to emphasize certain points that are important in the question at issue, I shall say a few words.
Let me read to the members the amendment which is now before us. It is to be found on page 1292 of Hansard, and reads as follows:
That all the words after the word "that" to the end of the question be struck out, and the following be substituted therefor:
"this house is of the opinion that the government should give consideration to the introduction of legislation amending the Income Tax Act so as to make it possible for taxpayers to deduct trade union dues from income before computing the amount of income tax to be paid."
During the years 1945, 1946 and 1947, a member of a trade union was entitled to deduct his trade union dues from his taxable income. I say "entitled" but he was not allowed the deduction because the
1490	HOUSE OF
Income Tax Deductions rulings made by the income tax branch denied him the right the law gave him. In 1948, a Mr, Cooper, of the city of Winnipeg I believe, a trade unionist, appealed the income tax branch ruling to the exchequer court. He won his appeal. The ruling of the court was that a trade unionist was entitled to include trade union dues as a deduction from taxable income.
It is interesting to note that the government's decision to amend the act in order to overcome the court's ruling did not await the court's decision. Mr. Cooper filed his claim with the exchequer court on April 23, 1948, and a resolution to amend the Income War Tax Act was introduced into this house in May, 1948, which took away from a trade unionist the right to deduct his union dues. The amendment was passed by this house and incorporated in the new Income Tax Act.
The practical effect of the change is that doctors and lawyers still have the right to deduct their association fees, while trade unionists and teachers have not that right. This seems to me to be class legislation, class distinction of the grossest sort. I know there is a distinction made in the act as between income from fees and income from salaries, but that does not make the provisions of the act any the less class legislation. I believe that distinction was condemned by the exchequer court in the Bond and Rutherford cases. It was also mentioned in the Cooper case.
The issue that has been raised in the amendment moved by the hon. member for Winnipeg North Centre is quite clear. Let me state it again. The Income Tax Act allows deductions of payments to associations if expended for the purpose of earning an income, if the income is earned by fees. The same deductions are not allowed if the income is earned by salary or wages. Under the law as it stood in 1945, 1946 and 1947, I pointed out that trade unionists were denied the benefit of the deductions by departmental ruling. In replying to a question asked by the hon. member for Winnipeg North Centre earlier this session as to the intention of the government to allow trade union dues as a deduction from taxable income, the Minister of National Revenue (Mr. McCann) gave the following answer, which appears at page 279 of Hansard:


Hon. J. J. McCann (Minister of National Revenue) :: The judgment of the exchequer court in
the case of Cooper v. the Minister of National Revenue was in respect of the 1945 taxation year. In respect of claims by taxpayers for that year, and for the years 1946 and 1947, which are _ not statute barred, the department will make adjustments in accordance with the exchequer court decision.
{Mr. Maclnnis.]

I submit, Mr. Speaker, that that reply is sheer sophistry. No one knows better than the minister that it is more than likely that any claims that might be made by taxpayers for the years mentioned are statute barred. The claims would be statute barred if they were not made within two months of notice of assessment; and I doubt very much whether there are any cases in those two years in which notice of assessment was not received by the taxpayer more than two months ago. Even then a claim would be allowed only if it was made when filing the income tax form and denied by the department.
Trade unionists found that it was useless to put down trade union dues as a deduction from their income tax, and they stopped asking for those deductions because they found that they were not allowed. I think the government should now indicate its willingness to accept the principle in the amendment, and I think the mover should withdraw it. That would enable the government to deal fairly as between persons in the various trades and professions in this country who must belong to an association in order to earn a living. If the ministers concerned do not indicate that they are willing to do that, I suggest that here is a question with regard to which every member in this house who calls himself a Liberal should be prepared to stand up and insist that the Liberal principle of no class distinctions and no discrimination should apply in our income tax laws.


Mr. J. A. Byrne (Kootenay East):: It is not
often, Mr. Speaker, that I agree with the principles expounded by the opposition. In this matter, however, I certainly feel that the Liberal party are making a distinction they should not make when they say that because a person is in the salary or wage bracket he is not entitled to deduct the fees which he pays to his organization. I cannot see any reason for such a distinction. I must say that I agree wholeheartedly with the amendment on this principle.
There certainly is no shortage of members of the legal profession in this house, and on a number of occasions I have heard those gentlemen say that they cannot follow the argument used by the labour union to the effect that their members must belong to an organization before they are entitled to work in their particular trade. I do not know too much about the barristers' organization, but I feel that they have some such organization which calls for the payment of dues before they are allowed to practise in certain provinces. In addition, when they move from one province to another I believe they have to pay additional fees. If that is not a correct statement I should like to be corrected, but I believe it is so.

It has been contended that we are not working under a free system if we must pay dues to an organization in order to work. For some time I have been in the labour movement, and on occasions have disagreed with the closed shop principle

not for the reason put forward by the lawyers, but because I have felt that it might tend to make a bit lackadaisical the leaders of the labour unions, who are responsible for going out and fighting for better conditions. That is my point of view on that particular question.
I certainly do not hesitate to say, in conformity with what has been said by the hon. member for Vancouver East (Mr. _ Maclnnis), that it is a matter of discrimination when we say that because persons are not salaried they are working in a free competitive way and are exempt from this income tax, whereas those who are compelled to pay union dues, or who pay them voluntarily, are not able to deduct them from taxable income. I support the amendment.


Mr. R. R. Knight (Saskatoon):: I want to say a word or two, Mr. Speaker, in support of the amendment moved by the hon. member for Winnipeg North Centre (Mr. Knowles) when the debate was adjourned on October 31. By virtue of the decision just given by you, sir, we have an opportunity to say a word or two upon it today.
This amendment has to do with the deductibility for income tax purposes of dues paid by union men into their respective union organizations. I am interested also in the fees paid by teachers to their professional organization.
At the outset I think I might put the amendment on the record. It appears at page 1292 of Hansard, and reads as follows:
That all the words after the word "that" to the end of the question be struck out, and that the following be substituted therefor:
"this house is of the opinion that the government should give consideration to the introduction of legislation amending the Income Tax Act so as to make it possible for taxpayers to deduct trade union dues from income before computing the amount of income tax to be paid."
I am drawn into this debate by my desire to correct the impression which I think was given by the Minister of Finance (Mr. Abbott) last Monday night, namely, that the fees paid by teachers into their professional organization were not allowed as a deductible expense for the years 1945, 1946 and 1947, contrary to the position that had been maintained by the hon. member for Winnipeg North Centre.
First of all, the facts are as follows. During 1945, 1946 and 1947 at first-and I would have you note the words "at first", Mr. Income Tax Deductions Speaker-doctors and lawyers were allowed deduction of these professional fees-but on their gross income, not on their net income-while teachers were allowed it all across the board. Afterwards, in the Bond and Rutherford decisions, it was agreed that doctors and lawyers were to have that right, even if they were on salary. At that particular point these three groups enjoyed deductibility on income across the board, but it was denied, to men in labour organizations so far as their union dues were concerned.
On page 1288 of Hansard, the hon. member for Winnipeg North Centre is reported as follows:
The act made it clear that people who laid out moneys wholly and necessarily for the purpose of earning an income could deduct those expenses from their taxable income before computing their income tax. The income tax department ruled that in the case of doctors, lawyers and teachers, that provision included the right to deduct their professional fees.
May I say, Mr. Speaker, that my colleague has made it clear, as will be seen by the paragraph above the one I have quoted, that he was talking about the years 1945, 1946 and 1947. Let us take a look at the reply of the Minister of Finance:


Mr. Abbott:: Not if they were on salary.


Stanley Howard Knowles: I beg the minister's pardon.


Douglas Charles Abbott: No.


Stanley Howard Knowles: In 1945, 1946 and 1947 they were
permitted to do so.
Referring to the argument of the hon. member for Winnipeg North Centre, in particular as it pertains to the teaching profession, sir, I should like to direct your attention to the following material. I shall quote from a letter from the Saskatchewan Teachers Federation dated September 23, 1949. This letter was written in reply to a question of mine. The letter read? as follows:
It is quite true that the income tax department withdrew the right or privilege of teachers in Saskatchewan, and I may say in other parts of Canada as well, to deduct for income tax purposes the fees paid to their professional organizations,
Note this:
The first intimation which we had that any change had been made was last spring-
Since this letter was written in September, 1949, the phrase "last spring" refers- to the spring of 1949. I continue:
-when teachers started writing in to us stating that they had been informed that S.T.F. fees were no longer deductible. Perhaps the quotation from a letter received from the Regina income tax office by a teacher in Moose Jaw may make the point clear:
"It is further to be noted for the taxation year 1948 and subsequent years, no allowance can be made with regard to Saskatchewan Teachers Federation fees. Please be advised that Saskatchewan Teachers Federation fees were only allowed as an expense against salaried income with respect to school teachers-"

Income Tax Deductions
And I draw this to the minister's attention:
[DOT][DOT]-with respect to the taxation year 1947 and prior years."
This letter was dated April 14, 1949.
That should dispose of the statement of the minister with regard to these years.


Douglas Charles Abbott: That was following the court's judgment.


Robert Ross (Roy) Knight: On behalf of the Saskatchewan Teachers Federation, inquiry was then made by the Canadian Teachers Federation of headquarters at Ottawa, and Mr. Croskery in charge of the office applied directly to the deputy minister. He received a letter from the legal division of the department which confirmed the ruling handed out by the Regina office. I quote from the letter received by him:
Prior to 1947, in those provinces where under provincial legislation it was compulsory for the teacher to belong to the provincial federation, the membership fee paid by the taxpayer was considered a deductible expense.
However, in 1948 by legislation enacted by section 3. subsection 1 of chapter 53 of the statutes of 1948, assented to 30th June and applicable to the 1948 taxation year, a new subsection was added to section 6 of the Income War Tax Act. The new subsection 6 of section 6 of the Income War Tax Act requires that in computing the income from an office or employment, no amount is deductible for a disbursement or expense laid out for the purpose of earning the income. An exception is granted in the case of certain employees of transportation companies, where, subject to the requirements described in the proviso to the subsection, certain relief is extended.
Similarly, under the Income Tax Act, applicable as from the 1st January, 1949, section 5 of this act provides that in the computation of income from an office or employment, no deduction except those specified in the act may be allowed. Membership fees paid to an organization such as the teachers federation and to similar organizations are not among the allowable deductions.
In supporting my hon. friend's amendment, that is the thing to which I object, and which I would ask this government to take into further consideration. That was the new ruling-but note that the date of application is January 1, 1949. As an instance of how government business is done, the letter goes on to say:
We-
"We" means the Saskatchewan Teachers Federation.
We were very much disturbed about it, particularly in view of the fact that we had in our February bulletin advised teachers that the fees were deductible.
That means at the beginning of that year these people did not know that the deductibility which they had enjoyed over the years was to be taken away from them. The letter goes on to say:
It seems to us that we should be given some notices of such changes.

That is the case for the Saskatchewan Teachers Federation.
Another reason I am drawn into this discussion is that the Minister of Finance, in his genial way, and what some of his political enemies sometimes call his flippant way, made some remark about farmers' salaries, just as if farmers as such might not be interested in this particular matter. I propose to quote to him editorial opinion from a well-known weekly newspaper printed in my own city of Saskatoon, which serves almost entirely a farm public. The quotation which I am about to read is taken from the Western Producer of July 7, 1949.
The editorial, which is aimed at bureaucrats, is rather long; I shall not put it all on the record, but I shall take from it as I go along such passages as I consider relevant. I quote:
The activities of the bureaucrats have been exposed many times. The other day there was an interesting example of their methods. It may be worth reviewing here. Mr. Justice Angers of the Exchequer Court of Canada ruled that Joseph A. Cooper, a Winnipeg movie projectionist, was entitled to deduct union dues before making out his income tax for 1945. This case, it should be noted, had been pending for a long time. The decision was based on the parallel provision under which professional men have been allowed to deduct dues paid to their societies.
It was obvious that this ruling would affect thousands and hundreds of thousands who, over a period of years, had accepted the revenue department's ruling that such dues were not deductible. It may be asked:	Why did they accept this in the first
place? The answer is:	How many working men
are in a position to take the matter to the exchequer court? The department, acting as judge in their own case, interpreted the law in their own favour, pretty sure that no one would have the hardihood to challenge their decision. Luckily they were wrong when Mr. Cooper came along as challenger and succeeded.
The judge's decision caused quite a flurry in the Department of National Revenue at Ottawa.
Well it might. The editorial continues- and I would point out that this is the editor's language, not mine:
However, the back-room boys of the revenue department soon recovered their self-assurance. The very next day they came up with the announcement that it was too late for any but a few union members to get refunds from past taxes. They gratuitously admitted that union members would have made savings by deducting their union dues in past years. But as it is, they blandly asserted, the only union members who will now be affected by Justice Angers' ruling are those whose tax cases back to 1945 are still open-a mere handful. The department explained that Canadians are allowed sixty days in which to appeal their assessments. If no appeal is received the case is closed and once closed cannot be reopened. There it is. The moneys wrongfully extracted from workers by the revenue department as a result of its own erroneous interpretation of the law are now safe in the federal treasury and are going to stay there. The public once again has been trimmed and the bureaucrats can breathe a sigh of relief.
A few points may be noted. They say that after sixty days a case cannot be reopened. That is not

true. A case can be reopened years and years afterwards, that is, if the officials can find any loophole whereby more taxes can be levied. True, it is closed against any discovery that the taxpayer has been overassessed as in the cases under review, but not if he is underassessed-a neat loading of dice in favour of the bureaucrats.
Another thing: the department had known for years that this matter of union dues was being disputed. They knew that there was a possibility that judgment would be handed down against them. If they were the servants of the public, as they are presumed to be, surely they should have intimated to this large class in the community that final judgment was still pending, should have kept their cases open and in the outcome, like true civil servants, should have come forward, cheerfully and apologetically with refunds to the people whom they are paid to serve and who pay them for their services.
As a last word:
The important point about all this is not the question actually involved. The important thing is the conduct of the department of revenue. It provides a working example of the new bureaucracy in action. It demonstrates that the men we thought were our servants-civil ones at that-do not themselves so interpret their position. They see themselves as masters-taskmasters-not only of the public but of the legislative and judicial arms of government.
So much for the quotation from that farm paper.


Mr. Gillis:: What farm paper is that?


Robert Ross (Roy) Knight: The Western Producer, of July 7, 1949, a weekly paper published in Saskatoon.


Mr. Speaker:: May I remind the hon. member that it is not customary to read long extracts from newspapers dealing with matters before the house.


Robert Ross (Roy) Knight: Your warning came at exactly the right time, sir, because I had just concluded the quotation.


Mr. Speaker:: I hope the hon. member will endeavour to abide by the rules in future.


Robert Ross (Roy) Knight: I shall wait until the time comes. I do take the matter seriously, and if it is against the rules to quote at such length, I shall not transgress again.
In conclusion, I want to support my colleague's plea for the deductibility of fees paid by union workers and teachers. If we support deductibility in the case of the worker, we cannot very well be opposed to it in the case of someone else. I care not whether a man works with his hands or with his brain; I plead for equality. Either let us permit the deduction of union dues, or let us not have it at all. If it is right that such fees should be deductible for one class, then they should be deductible for all.


Douglas Charles Abbott: Mr. Speaker, perhaps it might be appropriate if I were to say a word at this point. I shall
Income Tax Deductions preface what I am going to say with the statement that I do not question for one moment the fact that in some cases union dues are necessarily incurred by an employee in order that he may work in a certain plant. It is necessary that a lawyer pay his law society dues in order that he may practise, and for the same reason it is necessary for a physician to belong to a recognized medical society and pay dues thereto. I do not doubt for one moment that it is in the interests of the teaching profession that teachers should belong to recognized associations and pay dues thereto.


Major James William Coldwell: Compulsory fees.


Douglas Charles Abbott: Even if they were voluntary, I should think that the same principle would apply.
The hon. member for Winnipeg North Centre (Mr. Knowles) pointed out quite fairly that there was a distinction between gross income and net income. As I said the other day, as I have said on numerous occasions in this house and as my predecessor before me has said, the principle of our income tax has always been that salaries and wages are net income. Salaries and wages are supposed to be set at a level sufficient to enable the salary or wage earner to pay such necessary expenses as car fare to and from work, and a number of other things I could cite which are necessary in order that he may carry out his duties.
It has always been permissible for an employer to pay such things as travelling expenses. If a lawyer is on a fee basis, he is entitled to gross his fees and deduct such expenses as rental, stenographic help, bar society fees and the like. If he is on salary his employer is entitled to pay his bar society fees and charge that as an expense of his operations. That happened in my own case. When I started to practise law I received a salary of $75 a month from the firm of which I am now a partner. The partners in the firm paid my bar society fees. When I became a partner, the bar society fees of the juniors were paid by the partners and deducted from the gross legal fees as an expense of doing business. There is no discrimination.
There is a practical difficulty in accepting salaries and wages as being gross rather than net. It has been found in Great Britain and here that it would be practically impossible to administer the act and check deductions from salaries and fees. There are a great many types of deductions besides union fees which could be made. I cited car fare, the cost of transportation to and from work; and there might be the cost of lunches if a worker was unable to get home, the cost of overalls or uniforms in certain types of work. Some
1494	HOUSE OF
Income Tax Deductions employers do provide uniforms, overalls or tools, and charge them as an expense of doing business.
Those are the practical difficulties in the way. My officials have always believed, and I share that belief, that it would be practically impossible to work out a system of income tax on salaries and wages providing a scale to allow these general deductions from wages and salaries. In other words, it has always been regarded as necessary to consider them as net rather than gross,


Mr. Green:: Would there be any difficulty in allowing the deduction of union dues?


Douglas Charles Abbott: No, I should not think so; but if union dues are allowed as a deduction necessarily incurred for the purpose of carrying on business, I do not see how we could stop there. There are many other deductions that could be claimed, such as car fare to and from the place of business, which is perhaps an obvious example. These are the practical difficulties in the way. It is the view which has been taken of the matter in the United Kingdom, in the United States, and here.
There is an alternative practice which is followed in the United States and which we have considered. I am told they allow a blanket deduction of some 10 per cent from salaries or wages to cover such things as union dues, charitable donations, medical expenses and the like. It is a blanket deduction. For reasons which may have been good or bad, we have always resisted that, because we felt that the people who would be most likely to suffer would be the churches and the charities. Human nature being what it is, everyone would take the full 10 per cent deduction, but they might not make the donations which they otherwise would if they could get a tax credit by doing so and producing a receipt.
We have considered the matter, and perhaps it should be adopted. Perhaps it is something to which we will come. It is certainly administratively practical. There would be no difficulty in the department of my colleague, the Minister of National Revenue (Mr. McCann), in seeing that sort of thing was properly administered, because it would be automatic. Another objection to it of course is that people with larger incomes get a greater benefit. Taking it all in all, we have never felt it was a particularly desirable system to introduce in Canada, and that it was better to adhere to the old principle which, as I say, has been followed in the United Kingdom from the time income tax on salaries and wages was instituted, the principle that salaries and wages are net and not gross, and that the salary or wage should be sufficient to


enable the employed person to maintain these necessary things such as the payment of union dues, car fare, and so on.


Gordon Graydon: Do you follow the United Kingdom on everything?


Douglas Charles Abbott: No, we do not, but our Income Tax Act has been based in part on the practice of the United Kingdom because the principles are similar. We do not tax capital gains in Canada as they do in the United States. They do not tax them in the United Kingdom. Broadly speaking, the structure of our income tax laws has been based on that in the United Kingdom, and I think wisely so. In the United Kingdom income tax was first introduced under Pitt, and we have the benefit of long experience there with good courts to interpret the law. It has always seemed to us that we can usefully benefit from their experience.
I am putting these facts before the house because they are the facts. I have stated them on several occasions. My predecessors have stated them. They are the reasons why, up to the present time, we have felt it was not in the interests of the taxpayers as a whole to allow a general deduction from salaries and wages. There are two exceptions to that rule. I think the hon. member pointed out more than that, but there are two real exceptions. The first is in the case of railway employees. For years that was restricted to railway employees who are on what is known as a mileage basis. Then, for reasons which I need not go into, it was extended to the others. Broadly speaking, it was because it had been done by administrative decision, and once you have given something it is very hard to take it away. It - was looked upon as traditional in the railway business. The railway unions are well organized. They have a scale of expenses established, and I am told it is easy to administrate and is adhered to.
The second exception is in the case of clergymen. That was introduced at the last session.


Stanley Howard Knowles: Just a minute. I think the case of clergymen is dealt with in this year's budget resolutions. The other exception the minister has not mentioned is that of salesmen dealing with negotiable contracts.


Douglas Charles Abbott: I announced in the house last year we were going to do this for clergymen. It was introduced in March, and it is again in the budget resolutions. That is the other real exception. There is a third case which might be looked upon as an exception, but in fact is not, the case of the commercial traveller. My hon. friend cited the other day the case of those engaged in negotiating contracts. I have

forgotten the exact phrase, but that is the legal way of referring to the work of commercial travellers.
To put it simply, there is a prohibition in the law preventing an employer giving his employee a fixed per diem travelling allowance. In the case of commercial travellers it was found that just was not practical, and that, although they were on salary and could turn in actual expense accounts, it was extremely difficult and expensive for the employer. The amendment was introduced to enable the employer to pay to the employee a per diem amount for his travelling expenses, and the employer deducted it for income tax purposes.
The hon. member raised the case of private members of parliament who receive a tax-free expense allowance. Again that is an expense allowance paid by the government of Canada for expenses presumably incurred by members of parliament, and unquestionably actually incurred. Those who have been members know that very well. In effect, however, it relieves a member of parliament of the obligation of turning in vouchers to the treasury officers and obtaining repayment of these expenses. I do not consider that as a real exception to the general rule. It is simply an efficient way to enable the employer in each case to pay the actual expenses incurred for him by his employees.
On a number of occasions the government has considered the desirability of making the change requested by the hon. member, and has rejected it. There is no reason why it cannot consider it again, but I believe I should say frankly to the house that my own view, as I am at present advised, is that it is undesirable. I want to point out of course that the terms in which the amendment is drawn make it a motion of want of confidence in the government, and therefore I am bound to oppose it.


Mr. G. F. Higgins (St. John's East):: Mr. Speaker, I have listened carefully to the minister's explanation. I wish to say I am still in favour of the amendment proposed by the hon. member for Winnipeg North Centre (Mr. Knowles). I speak in a dual capacity. I am a member of the bar of Newfoundland, and I also happen to be president of a Newfoundland trade union. So far as I can see, the justification for the deduction of trade union dues is just as great as that for the deduction of bar fees. From a practical point of view I see no difference. As to one other comment the minister made, namely, the allowance of 10 per cent that is made in the United States for donations to churches and charities-is that it?
Income Tax Deductions


Douglas Charles Abbott: Charities, churches, union dues, other incidental expenses of that kind.


Gordon Francis Higgins: Before confederation we had the same principle in Newfoundland except that it only applied to churches and charities. Of course we now come under the dominion income tax rules, and these deductions are not allowable. I believe that is correct. It would appear to me that the suggestion of the minister as to the reason for not allowing the 10 per cent is that he, or possibly the Minister of National Revenue (Mr. McCann), does not trust the taxpayer in making his return. We all know what an honourable and respectable gentleman the taxpayer is in making his returns in these matters. I still feel that particular clause should be included. As I said before, I am only speaking briefly, but I entirely agree with the remarks of all hon. members who have supported the amendment. I feel it is one that might very well be agreed to by all hon. members of the house.


Clarence Gillis: Mr. Speaker, the minister just made the observation that he considers the amendment a motion of want of confidence in the government. I am not particular whether or not it is, but I am glad that the discussion has taken place. I believe the minister made the best contribution so far to justify the necessity for the amendment. He stated if union dues were to be taken into consideration for purposes of exemption, then there were a lot of other items that the average trade unionist has to pay in order to maintain his employment and earn his wages or salary. That is absolutely right. Union dues would only mean $3 or $4 a year by way of tax exemption.
This is not a new question to the house. It was discussed in 1940, and I believe every year since then until an adjustment was made. My concern is that there are two most pertinent points that should be corrected. The first is the matter of discrimination. I believe that every hon. member of the house would want to see that removed. I do not think the minister wants to discriminate against anybody. The debate is timely because the budget resolutions must come before the house, and there is opportunity yet for the minister to correct that.
The second point, and I think it is more serious than the first, is the matter of who is working for whom. According to the decision of the exchequer court, for a number of years the income tax laws provided exemption for union dues. However, the income tax people did not understand that decision, or understood too well; in any event they failed to permit the deductions.
No one in this house can say that the interpretation of the law by the income tax

Income Tax Deductions department was correct, and the committee has been shown that the department has wrongfully withheld money which should be returned to the people we are now discussing. I think the time has come in this country when members of this house have to ascertain whether they are working for the civil service or whether the civil service are working for the people of Canada and are responsible to the representatives of the people. There are thousands of very efficient, very decent civil servants in this country, but there are many who take the attitude that this House of Commons and its members are just something to be tolerated for a certain number of months, until they can get us out of here; that we are just a bunch of dumb clucks who have very little understanding of what we are talking about. I think every hon. member realizes that. A great many of the civil servants are very nice, but there are others who have no time to talk to you and do not bother with you.
When the minister comes to his budget resolutions I hope he will tell the house that in accordance with the decision of the exchequer court the government will return this money which has been illegally deducted or withheld from these people. I think he can remove that discrimination; but now that this discussion has focused attention on this matter I would suggest that in addition to deductions for union dues there are other things that should be considered. A commercial traveller gets a car allowance, and all that sort of thing. I am not going all over it again; the minister has done it and the hon. member for Winnipeg North Centre (Mr. Knowles) has done it; but I would give the example of the coal miner. Certain deductions are made from his pay every week, money he is obliged to pay. He has to make a payment as insurance that he will have a doctor in the event he becomes ill. He must make a hospital payment, or he cannot work. That mounts up to $52 a year. He has to buy all the materials he uses for blasting his coal underground. That applies to the rock miner also, and it runs into a good deal of money. The miner must pay approximately $4 a week in order to be employed underground in most of the mines in Canada. It seems to me those expenditures are as legitimately a tax deduction as the expenses of the lawyer who maintains an office, a stenographer, and so on. If the lawyer has to maintain his office and spend that money in order to earn a living he is entitled to that deduction; but I also think the trade unionist, the worker who is obliged to make these payments if he is to be employed by the company, is also entitled to a deduction.

That is all I have to say. I think the minister is fair enough to want to see that there is no discrimination as between two classes of people in this country, and that he will take steps to remove that discrimination.


Douglas Charles Abbott: That is the principle followed in the relaxing of rent control.


Clarence Gillis: The minister lives in Montreal, which is a good Catholic city. You know, if you go to confession you are supposed to confess your sins and do penance. I do not know the minister's religion, but there are many good Catholics on that side of the house, and I suggest that they prevail upon the minister to correct what I consider a great injustice and return to these people money which has been wrongfully withheld from them.


Mr. H. W. Herridge (Kootenay West):: Mr. Speaker, I do not feel well enough to speak at length this afternoon, but I do want to express my support for this amendment. I believe it is logical, that it only gives justice to a group of people who are suffering from discrimination. I am not going to repeat the excellent arguments that were put forth by the hon. member for Winnipeg North Centre (Mr. Knowles) and the hon. member for Vancouver East (Mr. Maclnnis). I listened attentively, and I think they presented on excellent case.
I was also very interested to hear the hon. member for Kootenay East (Mr. Byrne) express support for the amendment. In so doing I know he was expressing the views of the organized labour he represents. He has been a trade union leader for a good many years, and I am sure is fully in touch with what working people are thinking about this situation. Personally I cannot understand the discrimination, and that is really what causes me to rise at this time. There would seem to be discrimination against a certain class of people in this country, that is, the wage earner. I do not see why these wage earners, teachers and some professional people should be discriminated against as compared with lawyers, engineers, dentists, doctors, surveyors, architects and others who are permitted to deduct the fees they pay for membership in the organizations to which they are required to belong in order to practise their professions. Why should they be allowed to do that while a larger group of people, earning far less on the average, and whose deductions as a matter of fact are less, are not given the same privilege?
I thought the minister's remarks this afternoon were most interesting, and in many ways I agreed with him. I do not agree with those who say we should allow travelling

expenses, we should allow hospital insurance payments, we should allow this and that. If we started on that course we would have a completely jumbled, unfair and unworkable income tax structure. In this instance, however, I do think the government is perpetuating an injustice involving a large number of working people in Canada in return for pettifogging saving, and I cannot understand why that is being done. In conclusion I would urge the minister to give further consideration to this question, and I trust that later this session there will be some amendment of his budget resolutions.


Mr. C. E. Johnston (Bow River):: I am not
going to speak at any length on this question, because the case has been very well presented by other hon. members and it is not necessary to repeat the arguments they have advanced. After having listened to the discussion, however, I am more convinced than ever that there is not a great deal of difference between the fees paid by lawyers or doctors and those dues which must be paid by union workers, teachers and others in that class. The minister mentioned some objections which I think are worthy of consideration, which would make it difficult to frame a workable income tax system in this country. On the other hand, let us consider the lawyer as a professional man. I have nothing against lawyers except the fact that they are one group who are permitted an income tax exemption in this regard. The minister said there were two classes of lawyers, that those who work on a salary were not permitted exemption for income tax purposes as far as their fees are concerned. In order to get over that the firm employing one of these lawyers pays his bar association fees and charges that payment up to the cost of doing business, and I think perhaps that is a proper thing to do. In any event a lawyer does not have to pay income tax on those dues; the firm paid it for him, and he is relieved to that extent. Doctors also are entitled to income tax exemption with respect to their dues. I am not sure whether the minister said the other day that doctors working on salary are not permitted this exemption.


Douglas Charles Abbott: That is correct; they are not allowed the deduction.


Charles Edward Johnston: The same thing would apply to them. Conditions are entirely different as between these two classes. It is possible for a lawyer or doctor to earn a larger income and thereby take care of his dues. In the case of a workingman that is not possible. He has to belong to a union; he has no alternative. He must pay his union dues in return for the right to belong to that union and work in the particular plant where he
Income Tax Deductions is engaged. I just cannot see why those fees should not be deductible for income tax
purposes.
The teachers, too, particularly in the province of Alberta, are bound to pay these dues. It is a matter of legislation. I believe the same is true of Saskatchewan. The teacher has no option but to pay these dues or else he cannot work. Nobody else pays the dues for him, as in the case of a lawyer or doctor who is working for a salary. This means that the teacher pays income tax on those payments. I cannot see any logical reason why union dues should not be deductible for income tax purposes.
The minister spoke of the method that was used in the United States, under which a blanket deduction of ten per cent is allowed. Such a practice might be commendable. I do not know enough about it to pass judgment on it. The fact is, however, that this practice is not followed in this country. If the minister believes that is feasible or practical, no doubt he will make that recommendation when his budget resolutions come before the house. Up to now, the condition has not prevailed in Canada. Personally, I am in favour of allowing these union dues as a deduction for income tax purposes.


Mr. J. W. Noseworthy (York South):: I shall take only a few moments, but I desire to place myself on record in support of the amendment now before the house. I wish to comment on the minister's reply. The minister's objection is not so much to the fact that either school teachers or trade unionists are not entitled to deductions for fees paid to their associations or trade unions, but he pointed to the difficulty of his department ascertaining what deductions should be permitted. Then, the minister continued from that point by dragging across the trail another good red herring that has nothing whatever to do with this amendment. He pointed out that, if the government granted these deductions referred to in the amendment, they would have to make deductions for streetcar tickets, for lunches and so forth. Those things are not under discussion at the moment. The amendment before the house is not concerned with them, so let us stick to the issues that are raised by the amendment.
No matter how the minister looks at that question, he cannot evade the fact that his department is perpetrating the greatest discrimination between classes of professional and industrial people.


Douglas Charles Abbott: I do not agree with that for
a moment.


Stanley Howard Knowles: That is the effect.


Douglas Charles Abbott: Oh, no.

Income Tax Deductions


Joseph William Noseworthy: The minister admitted that in the case of lawyers-


Douglas Charles Abbott: I did not admit any such thing.


Joseph William Noseworthy: -who are maintaining offices, deduction of the law society fees for income tax purposes is permitted. He went on to point out that, in the case of lawyers who were working for a salary, the employer paid the fee and was permitted to deduct it from his income tax. In the latter case, the lawyer is not only exempt from taxation, but receives exemption from his fees to the society as well.
I doubt if the department would find so much difficulty in administering the act if trade union dues were deductible. The department has an excellent staff which is rather good at tracking down any salaried individual who tries to cheat the department out of a dollar in income tax.


Douglas Charles Abbott: Glad to hear that.


Joseph William Noseworthy: They have an efficient staff which, some way or other, is able to keep track of the salaried people in this country. In the case of Ontario school teachers, their fees to their professional association are deducted by the school boards or by the department of education and paid to those organizations.


Douglas Charles Abbott: Why doesn't the school board pay it?


Joseph William Noseworthy: The minister's officials could find out exactly what any teacher in Ontario paid by way of fees to his professional association.


Douglas Charles Abbott: My hon. friend realizes that the school board could pay those fees?


Joseph William Noseworthy: That holds true in practically all the provinces. In the case of trade unions, practically every local reports to its national office the number of dues-paying members and the amount that those members pay. I am confident that these astute employees of the income tax department could easily check up on any trade unionist who was trying to slip in a dollar more than he actually paid to his union.
I do not believe those are arguments against granting exemptions either to those who pay trade union dues or to the teachers who pay professional fees. These payments are obligatory, just as a lawyer, doctor or any other professional man has to pay dues to his professional organization.


Douglas Charles Abbott: I agree; there is no difference of opinion on that.


Joseph William Noseworthy: The minister cannot evade the fact that he and his department are now

perpetrating a discrimination as between professional people on the one hand and industrial workers on the other.


Douglas Charles Abbott: No such thing.


Stanley Howard Knowles: Oh, yes.


Howard Charles Green: I should like to say a word in support of this amendment. I was interested to hear the minister's explanation this afternoon. In my judgment he did not make out a very good case for continuing his refusal to allow exemption of these union dues. It is difficult to see the difference between a young lawyer working for a salary for a law firm, and a young union man working for a salary for a company. The young lawyer does not have to pay his fees to the barristers' association because they are paid by the firm and allowed to it as expenses.


Douglas Charles Abbott: The employer could pay the union dues.


Howard Charles Green: I suggest that is drawing the line much too fine. There has been a big increase in the number of Canadians who belong to unions. Unions are of first-rank importance in the national life of this country today. I believe the time has come when these men who belong to unions should be allowed to deduct their union dues. The minister has admitted that there would be no difficulty in calculating those deductions. He tried to tie it up with several other expenses for which claims for exemption might be made but we are dealing today with only one question, and the minister has admitted there would not be any difficulty in arriving at the amount of deduction for union dues.
There is one other feature which I believe is of great importance. The exchequer court of Canada decided this year that, under the section of the act as it stood before, these dues could be deducted. The old section 6 (1) read as follows:
In computing the amount of the profits or gains to be assessed, a deduction shall not be allowed in respect of
(a) disbursements or expenses not wholly, exclusively and necessarily laid out or expended for the purpose of earning the income ...	.
That was the way the law stood. The exchequer court decided that the last part of the clause entitled members of a union to claim this deduction; in other words, it decided that union dues were "wholly, exclusively and necessarily laid out or expended for the purpose of earning the income". This case was taken to the court by a union man in 1948; and it is a strange thing-


Stanley Howard Knowles: April.


Howard Charles Green: In April, 1948; and in May, 1949, the government changed the law.


Stanley Howard Knowles: May, 1948.


Howard Charles Green: In May, 1948, the government changed the law so that, regardless of whether or not that member of a union won his case, there could be no such claim for exemption in the future.


Douglas Charles Abbott: The amendment was not made retroactive.


Mr, Knowles:: It was made retroactive to the first of January of that year.


Douglas Charles Abbott: 1949.


Howard Charles Green: I suggest that the matter should have been left with the courts.


Douglas Charles Abbott: In our country the courts do not make the law. They interpret the law; they do not make it.


Howard Charles Green: A year later, in June of this year, the exchequer court decided that those dues were deductible. In the meantime the government had stepped in, in May 1948, and changed the law so that the dues were not deductible. I suggest, Mr. Speaker, that the government might well have left the law as it stood. Personally, I propose to vote for the amendment.


Mr. Harris (Danforih):: I was paired with the hon. member for Waterloo North (Mr. Breithaupt). Had I voted, I would have
voted for the amendment.



COMBINES INVESTIGATION ACT


Clarence Decatur Howe: Mr. Speaker, this motion that you do now leave the chair permits me to say a word about the report of the commissioner of the Combines Investigation Act on Canada's flour milling industry which has been tabled today by the Minister of Justice (Mr. Garson). In my opinion the government cannot escape responsibility for any report that a minister of the government may table. The fact that the minister is required by law to table the report does not in my judgment alter the situation.
Damage to the industry concerned results from the publication of the report and, even if at a late date the courts may later absolve
1500	HOUSE OF
Combines Investigation Act the industry from guilt, the damage is not undone. Therefore, in justice to the industry, I feel that my remarks should be made concurrently with the publication of the report.
I object to the contents of the report only as they apply to the period when the industry was under the control of an administrator of the wartime prices and trade board and the decontrol period immediately thereafter. I have no comment to make about the report of the commissioner on the conduct of the industry prior to that period, or subsequent to that period, since I have no knowledge of the facts.
I do know something about government policy as it related to the control of industries during the war and immediate post-war periods. As Minister of Munitions and Supply I was responsible for the control of a number of industries including timber, steel, coal, non-ferrous metals, rubber, petroleum products and others where supply was essential to the war effort. The control of the flour milling industry was the responsibility of the Minister of Finance through the wartime prices and trade board, but as the pattern of control was the same for all industries I have some knowledge of government policy as it applied during the period in question.
Some months ago the Minister of Justice asked me to look over the report on the flour milling industry prior to its being tabled. I did so and was amazed to find that the flour milling industry was being condemned for carrying out policies that were obviously those of the wartime prices and trade board and those common to all control administrations. To make sure that my impressions were correct I consulted my deputy minister, who was a member of the wartime prices and trade board, and found that my impressions were correct.
Therefore I called the attention of the Minister of Justice to the situation and urged him not to table the report without further investigation and suggested particularly that he consult Mr. Donald Gordon and Mr. Gordon's successor, Mr. K. W. Taylor, for confirmation of the inconsistencies in the report that I had pointed out to him.
The flour milling industry is one of Canada's major export industries. Its sales are made to some fifty-four countries and it furnishes an important outlet for Canada's wheat. It would seem to me a major calamity to Canada if this industry were to be damaged unfairly by action of a government agency. I am also aware that the industry gave the government the fullest co-operation throughout the war years and willingly accepted profit control more onerous than that applied to any other industry.


I was also confronted with the fact that when an industry has been asked to act as a unit in finding a solution of wartime supply problems and in holding down domestic prices, such industries were told that the Combines Investigation Act would not be invoked for acts performed during the period of control. Certain industries asked for this assurance in writing, which was given, but others were content to accept the word of a responsible minister. It was obvious to me that the report under discussion represented a violation of that government undertaking.
Mr. McGregor is, and has been since its inception, a member of the wartime prices and trade board, and responsible with other members of the board for formulating and carrying out price policies. Mr. McGregor was also enforcement officer for all control regulations, including those of the department of munitions and supply. In these two capacities it would seem to me that it would have been his duty to draw the attention of his colleagues on the board to administrative practices which would be objectionable under the combines act. It was a shock to me to discover that, having failed to take objection at the time, he subsequently would attack the industry for its practices during the control period in his other capacity as commissioner of the Combines Investigation Act.
Let us for a moment examine the position of the flour milling industry during the control period. In November, 1941, price control was instituted and prices of most commodities were frozen at their then level. The price of wheat was then about $1.18 per bushel, and the price of flour was consistent therewith. The pi ice of flour was frozen, but the price of wheat was not frozen, and was allowed to continue to find its own level. The flour industry was asked to co-operate with the government to make this possible. Mr. C. H. G. Short was appointed flour administrator, and it was arranged that, if the price of wheat continued to rise, the government would subsidize the milling industry to the extent necessary to assure the industry of standard profits and no more. This meant that the industry must include all profits made from export sales of flour to reduce any subsidy paid by the government on account of losses on domestic sales. In short, the arrangement called for 100 per cent excess profits tax. I might point out that the peak excess profits tax required from other industries never exceeded 80 per cent.
The flour milling industry carried on its wartime operations as directed by the flour administrator. Ceiling prices were maintained on both flour and feed throughout the control period, although the wheat prices

continued to rise. All flour mills were operated to lull capacity and rendered splendid service in meeting the supply problems of Canada and her allies. When decontrol came, the industry accepted direction from the chairman of the wartime prices and trade board in returning to price levels for flour and feed that he considered reasonable. As a matter of fact, the Minister of Finance said in a public statement that, unless the industry established prices after decontrol that he considered reasonable, controls would be reimposed. It would appear that he was satisfied with the prices then established, although Mr. McGregor condemns the industry for acting as a unit in establishing prices proposed by the board. I would say that both the industry and the government could regard the period of flour control as a perfect example of cooperation between government and industry in the best interests of both the consumer and the public exchequer.
In his report the commissioner states that the industry committed a crime by not selling flour below the ceiling price in competition one unit of the industry with another. I point out that, had the industry done so, it could only have been at the expense of the public purse, since the profits of the industry would have been the same in any event. However, one unit could have dropped its price and enlarged its domestic market at the expense of its competitors had the wartime prices and trade board permitted it to do so, which I am sure they would not. The commissioner also points out the fact that the industry stopped giving away premiums with flour sales. This privilege was denied to all industries by order of the wartime prices and trade board. In other words, many of the actions of the industry complained of by the commissioner were actions directed by the wartime prices and trade board to this industry, and to all other industries.
An important legal action taken against the administration of controls has a bearing on the contention of the commissioner that a subsidized industry should continue to compete unit by unit through selling its product below the ceiling price. This was the case of Joy Oil Company which was carried to the Supreme Court of Canada. The supply situation in gasoline made it necessary to import gasoline at certain times, and where import was necessary the government paid a subsidy to meet the excess cost of such imports over the cost of gasoline supplied by Canadian refineries. The Joy Oil Company imported gasoline and sold it at less than the ceiling price, after which it claimed a subsidy from the government on the loss sustained through selling below its purchase
Combines Investigation Act price. The courts found that the government was not liable for subsidy in those circumstances, and that the gasoline should have been sold at the ceiling price. This would seem to dispose of the commissioner's contention that flour should have been sold below the ceiling price, as the circumstances are completely parallel.
So much for the circumstances of the flour industry within the period of control. Hon. members will note that the selling price of flour was fixed by a government agency, and that all actions of the industry were directed by a government administrator. Mr. McGregor was a member of the team that was responsible for administering price control, being a member of the wartime prices and trade board and its enforcement officer.
The Minister of Justice (Mr. Garson) accepted my advice and obtained the opinion of Mr. Donald Gordon which is summarized in Mr. Gordon's memorandum to the Minister of Justice, and which I think I should read at this time for the purpose of the record.


Major James William Coldwell: What is the date of it?


Clarence Decatur Howe: It was handed to me today. I am not sure when the Minister of Justice received it.


Major James William Coldwell: Is there not a date on it?


M. Howe:: No date; the date on the transmitting letter is November 4.


Major James William Coldwell: That is 1949?


Clarence Decatur Howe: 1949. The memorandum reads:
It was impossible during the wartime price control period and the post-war decontrol period to distinguish when discussion and agreements could be regarded as "industry discussions" leading to a combine as defined on page 118 of the commissioner's report or when they formed part of the general wartime supervision and control of a particular industry. For this reason, with the full knowledge of the Minister of Finance and of Mr. McGregor, I gave, as chairman of the wartime prices and trade board, orally and in writing, personal and repeated assurances that anything done in furtherance of the substance of the policy and administrative practices of the wartime prices and1 trade board would be held "privileged."
Such assurances were necessary to secure the active and willing co-operation which made the work of the board possible. It should be remembered that exhortation was the order of the day. The winning of the war justified any departure from the normal and, in any event, the public interest was protected by the fact that the wartime prices and trade board was in operation. All this was known to Mr. McGregor, who at his own request acted as enforcement administrator for wartime prices and trade board during the war period. Moreover, I had the advice of legal advisers that the wartime prices and trade board had the legal authority to give such an assurance under the powers granted to the board. In consultation with him on more than one occasion I thought I also had Mr. McGregor's positive agreement that the situation was as I have described. If Mr. McGregor had given me any reason to think otherwise I should

Combines Investigation Act have brought to the attention of the government that a wartime suspension of the Combines Investigation Act was necessary for the price and supply control period, and I have every reason to believe that such action would have been forthcoming. I should perhaps add that in the light of the flexibility of the board's administrative procedures the assurances to which I refer above were not in every case contained in formal documents, nor could they be found always in writing. All concerned, however, realized that there was no difference in principle between oral and written assurances on this particular point.
On the general point, therefore, while I cannot undertake in this summary to debate each and every detail, my view is that the report does not demonstrate improper actions by the flour milling industry during the period to which I make reference and while they were under direction and supervision of the flour administrator and other officials of the board.
2.	Subsidies-The flour milling industry operated at the request of government for a lengthy period on the basis of a drawback or subsidy in respect of flour provided for domestic consumption. This subsidy was for the benefit of domestic consumers and was paid through the millers purely as a matter of administrative convenience. It did not benefit the millers. In fact, the subsidy was operated in such a way as to limit substantially the profits of the millers because of a "profit control" clause in the relative order in council. The special character of this subsidy meant that the full co-operation of the industry was needed to make it workable, and despite many difficulties that was readily forthcoming. It is of special importance to realize in this connection, however, that if sales to the domestic market had been made by the millers below established ceiling prices the amount of the subsidy payable out of public funds could have been increased by many millions of dollars. Consequently, the ceiling price in such circumstances would naturally become the fixed price and, such being the case, any "agreement" in respect of prices would have been meaningless. Indeed, if millers had attempted to make good fellows of themselves by reducing domestic prices habitually at the expense of the public treasury the board would have called them to account. Moreover, under such circumstances of subsidy and profit control there was no agreement in regard to price which could have yielded more profits to the millers unless they had violated price ceilings, and there is, of course, no claim that such was the case.
For the above-mentioned reasons, I am of the opinion that references throughout the report to "agreements" in respect of price during the entire period when subsidies were payable are not only incomplete but misleading unless the effect of the subsidy payment is taken into account. I suggest, therefore, that the reasoning of the commissioner is faulty as it appears in one of the sentences in the first paragraph of page 115, as follows:
"Assuming that in some instances milling companies did choose to sell at less profitable levels,
knowing that they could not retain profits above
a fixed level, the benefit still accrued to the
Canadian public in the form of lower prices."
I repeat that it was certainly not part of government policy that the subsidy be increased through millers offering prices still lower than the already heavily subsidized prices and that the millers were fully justified in preventing this happening. Indeed, I have no doubt whatever that the effect of the subsidy provision was repeatedly called to their attention by the flour administrator.
3.	As already stated, it is not possible for me to attempt comment on all of the voluminous detail provided by the commissioner, particularly since I have not before me the complete documents
fMr. Howe.]
from which so many extracts from context are submitted. Nevertheless, I call attention to a few points in regard to which I am in particular disagreement as to the facts.
Page 22-Uniform Price Ceilings:
The evidence provided here seems to be intended to suggest that improper discussions or agreements took place. The fact is, however, that during the period of price control the flour administrator and" his advisory committee (which included C.N.M.A.) frequently discussed with officers of the board proposals for establishing uniform prices. In fact they were encouraged to do so because the board found the idea of uniform prices attractive as it offered simplicity in a very complex pricing field. The fact that such discussions took place in an effort to reach agreement is not to be adduced as evidence that some sort of a combine was intended. In my opinion the point which should have been pertinent to the commissioner is that, despite the encouragement of the board and despite its willingness to use wartime powers to accomplish this purpose, no practical system of uniform prices was ever discovered and it remained in the realm of wishful thinking throughout the period of control. Nevertheless, I have no doubt that the flour administrator in collaboration with the industry did his utmost to ensure orderly conditions in the industry in the interests of maintaining supply as well as price stability.
Pages 31-35-Agreements on Tenders:
This section of the report brings out evidence as to "agreements" covering tenders, with particular reference to supplies for wartime agencies such as the Department of Munitions and Supply. It should, however, be read with the following in mind.
"Supply" in wartime was often a responsibility rather than a privilege and very often suppliers had to be required to make offers. Therefore, the generalization that there was evidence of an agreement between various sections of this industry in respect to supply and price is not pertinent until it is ascertained whether or not such an agreement was as a result of a procedure required by government controllers. To take the example of ships stores mentioned in this section, my opinion is that the quotations given merely illustrate the plan agreed upon whereby each mill was given in rotation the responsibility of supply. Ships stores were of extreme importance during the war and much organization was required to provide for unexpected demands often made in great secrecy. It was essential that each mill take its turn in the supply line, and this was done with the agreement of all concerned. including not only the industry and the flour administrator, but as well the ships stores administrator and interested departments of government. The ships stores administrator had a great many special arrangements to ensure supplies and exercised wide authority in making sure that no delays were encountered. Not only in regard to flour but, as well, in such things as meat and other food supplies special supply arrangements were worked out and the question of price settled afterwards by mutual agreement. This kind of necessary wartime arrangement must be kept in mind in reading the particular extract quoted on page 35 from a letter by W. L. MacGregor to G. H. Booth, which when properly understood does no more than reveal the agreed wartime procedure.
Furthermore, it also has to be understood that when subsidies were paid the price paid by the Department of Munitions and Supply had a real meaning as to the cost of subsidies-alternatively, if subsidies were not paid the price paid by the department could have easily upset the board's efforts to maintain orderly conditions in respect of price control. It was in explanation of this procedure that the published report of the wartime

prices and trade board covering the period April 1, 1943, to December 31, 1943, makes this comment on page 7:
"An interdepartmental committee on subsidies has been set up to clear problems concerning withholding or repayment of subsidies on goods supplied to the Department of Munitions and Supply and an agreement has been arrived at with the department as to its relation to the price ceiling and repayment of subsidies".
Pages 36 and 63; page 115 (second paragraph) - Decontrol;
The report of the commissioner under this heading does not agree with my understanding of what took place. This is of special importance because I believe the commissioner has stated that his investigation into this industry was commenced because of suspicions aroused by the fact that a uniform price increase took place in the price of mill feeds and flour on the date that price control was removed and subsidies discontinued, namely September 15, 1947. While I was not chairman of the board on that date, I had been responsible for outlining the pattern of decontrol and was closely in touch with the policy during that period. Furthermore, I have checked my recollection of events with Mr. K. W. Taylor, the present chairman of the board.
The situation was that following a long period of price control and subsidy payments everyone was apprehensive about the effect of a sudden release of the controls. Consequently, the flour administrator in collaboration with the chairman of the board reached an understanding with the industry that a flat over-all increase in price be held to an agreed amount when the controls were lifted and until such period as market conditions had settled somewhat and inventories became better balanced. It should be noted particularly that this agreement was at government request and that it dealt specifically with holding the expected increase to a maximum. It is obvious, therefore, that since this arrangement was worked out at the government's request and since it represented a limitation of an increase that would have otherwise taken place, prices would naturally rise to the maximum permitted by this agreement. It is not, however, an agreement of the kind which should excite the commissioner's attention.
On page 114 the following paragraph appears:
"The practice during the war years to which exception is taken in this report is the same practice to which exception is taken with respect to other times, that of agreements to remove competition in price. In the war years regulations established maximum levels beyond which prices could not be increased. In this period concerted efforts were made to prevent competition by securing agreement as to the prices which the members would follow. Such joint action was neither required nor sanctioned by the prices board or any other government agency. Board policy was definitely directed to the maintenance of competitive conditions with respect to prices."
For many reasons the statements made in this paragraph are too dogmatic. As I have already stated, the administration of price control was a highly flexible affair and all sorts of special circumstances had to be met and many qualifications were necessary and justifiable. My previous reference to the effect of subsidy payments and profit control is but an example. There were many other cases in which such things as "production directives", "equitable distribution controls", "allocations for special users", etc., etc., had an influence on price and where agreements were made in order to make them workable. Throughout the period of price control the board strove to maintain price ceilings against the upward thrust of wartime cost increases and severe wartime supply
Combines Investigation Act scarcities. This pressure was so severe that the possibility of selling prices below established ceilings was largely theoretical.
In connection with these and other matters I have not been able to understand why the commissioner did not discuss the facts with me so that I might have informed him of the many interlocking considerations which affected the wartime operations. He apparently did discuss aspects of the report with some officials of the wartime prices and trade board and also examined some board records. However, in view of the fact that during the price ceiling period I was responsible for the over-all co-ordination of all the activities of the board and therefore the person best equipped to inform him, I have been at a loss to understand why he did not invite me to discuss with him these points affecting wartime operations before he completed his report. Had he done so he could have formed a better judgment as to the validity of including any wartime period in his report or, alternatively, have pointed out whether or not the events described during that period were under direction of government officials with special wartime powers.
That is the end of Mr. Gordon's memorandum.
I understand that both Mr. Gordon and his successor as chairman of the wartime prices and trade board, Mr. K. W. Taylor, expressed their views of the report to Mr. McGregor. Regardless of the views of those who have shared with Mr. McGregor responsibility for directing government policies having to do with price control, the report has now been tabled in its original form.
I claim no special morality, but I regard the carrying out of an undertaking, either oral or written, as a basic responsibility. In this case of the flour milling industry, the undertaking was not given by myself, but I had given the same undertaking to those industries which were under the control of my department. I understand that Donald Gordon had given the undertaking that actions of the flour milling industry during the control period would not be considered violations of the Combines Investigation Act. I am well aware that industries to which I gave that undertaking will consider that, if the undertaking can be violated in this case, it is likely to be violated in their case.
Were this report to be tabled without comment, I would hesitate to again call on industry for the same kind of co-operation that was given freely to the government in working out and administering our system of price control. Incidentally, I consider that governments should have at least as high a standard of morality as individual members of the government, and I know that my colleagues share that view.
Many hon. members will say that Minister of Justice (Mr. Garson) was not warranted in delaying publication of the report. I do not share that view. After having doubt cast upon the validity of certain conclusions contained in the report by some of his colleagues, of

Combines Investigation Act whom I was one, the report was held from publication with the full authority of the whole cabinet for further checking and consultation. This has now taken place and confirms the objections to the report which were taken when it was presented to the cabinet in the first place. The Minister of Justice took no steps in this matter whatever, except on the fullest disclosure to his colleagues and with full authority of cabinet, which assumes responsibility for the manner in which the report was dealt with.
While the report may damage the public relations of the flour milling industry, that industry can at least know that those, like myself, who shared responsibility for directing its affairs during the control period do not share the views expressed by the commissioner.
I hope hon. members will not draw from my remarks the conclusion that I do not take the view that Canada should have a Combines Investigation Act. On the contrary, I believe that the act is a necessary part of government machinery. Indeed, there is on the order paper at the present time a bill containing amendments which the Minister of Justice is submitting, upon recommendation of the Combines Investigation Act commissioner, to strengthen the enforcement provisions of the act. To be effective the act requires an administration that is both zealous and fair. I am sure that the Minister of Justice will take prompt steps to fill the present vacancies with that thought in mind.
I sincerely hope that those who read the report that has been tabled today will read it with the correspondence tabled by the Minister of Justice, and with the Hansard record of my remarks.


Mr. J. G. Diefenbaker (Lake Centre):: Mr
Speaker, I did not expect this matter to be discussed today. It is a most unusual procedure, on a motion of one minister to go into supply, for another minister to place such a matter as this before the house and thereby prevent the motion being passed. I do not intend to deal at any length with the facts because it is impossible to refer to the evidence and to the findings on the flour milling industry, since the report was just tabled.
There are some circumstances that have not been explained by the minister. I shall read the first section of the Combines Investigation Act under which this report was made. After all, if we are to have in this country a government by laws and not men, then the laws passed by parliament should be observed, and above all by members of the cabinet. Section 27 of the Combines
Investigation Act-it is a rather lengthy section, but I believe it is necessary to have it on the record-reads as follows:
(1)	The commissioner at the conclusion of every investigation which he conducts shall make a report in writing and without delay transmit it to the minister. Such report shall set out fully the conclusions reached, the action, if any, taken, and any other material which may be required by regulation under this act.
(2)	Within thirty days following the transmission of such report to the minister the commissioner shall cause to be delivered into the custody from which they came, if not already so delivered, all books, papers, records and other documents in his possession as evidence relating to the investigation, unless with respect to particular documents the Attorney General of Canada or the attorney general of any province within which an offence is reported to have been committed certifies that such documents shall be retained by the commissioner for purposes of prosecution.
The next is a subsection dealing with the admissibility in evidence of copies, to which I do not intend to make reference. Subsections 3 and 4 read as follows:
(3)	Every special commissioner at the conclusion of the investigation which he conducts shall make a report in writing which he shall sign and transmit to the commissioner, together with the evidence taken at the investigation, certified by the special commissioner, and all documents and papers relating to the investigation remaining in his custody; and the commissioner shall without delay transmit the report to the minister.
(4)	The minister may call for an interim report at any time, and it shall be the duty of the commissioner or special commissioner, as the case may be, whenever thereunto required by the minister, to render an interim report setting out the action taken, the evidence obtained and any conclusions reached at the date thereof.
(5)	Any report of the commissioner or of a special commissioner,-
This is the particular section to which my attention will be directed.
-other than an interim report or a report of a preliminary inquiry under section thirteen of this act, shall within fifteen days after its receipt by the minister be made public, unless the commissioner states in writing to the minister that he believes the public interest would be better served by withholding publication, in which case the minister may decide whether the report, either in whole or in part, shall be made public.
Parliament has the right to expect that ministers of the crown shall live up to the provisions of statutes passed by parliament; for if these be not lived up to, parliamentary responsibility ends, and a contempt of parliament occurs which should not be permitted to pass uncensured.
The minister stated that the facts and conclusions in this report were, in his opinion, unjustified. That statement does not answer or justify the Minister of Justice (Mr. Garson) failing to discharge his obligatory responsibilities under the provisions of an act passed by parliament. Only three years ago in this house I was one of those who stated that in

my opinion-and I know there were some who criticized me for this view-we should alter the provision with regard to publishing these reports in order that no one should be found guilty before the bar of public opinion without having the opportunity of answering in the courts.
The then Minister of Justice answered me and rather ridiculed that viewpoint. Let me ask this question. If this report had been tabled or had been published in February last, what harm would have been done to the milling companies that will not result today? The explanation made by the right hon. gentleman was to all intents and purposes a smokescreen in order to avoid responsibility for failing to perform a mandatory requirement in a statute. Could he not have done the same thing in February when, under law, the Minister of Justice was required-


Stanley Howard Knowles: January.


John George Diefenbaker: In January, if you will. I make it February. Yes, it would be January.


Stanley Howard Knowles: Fifteen days from December 29 would bring it to January 13.


John George Diefenbaker: Yes. Would any greater harm have been done then than will be done today? Were there not available to the minister and to the government in the month of January the same answers and the same qualifications that are available now? This action on the part of the government, Mr. Speaker, is the most flagrant disregard of parliament that has ever been exhibited by a government that has never been too careful of parliamentary rules, regulations and proprieties. It is not a question of the guilt or innocence of these companies. There can be only one reason why that report was not published in January. That reason is that an election campaign was in the offing. There is no other.
The government's action in this matter cannot be laughed off. It strikes at the vitals of our democratic system; for if we cannot rely on ministers of the crown or on the government to do those things which, under law, they are required to do, we in the opposition, instead of being able to accept what ministers of the government say and to believe that they are carrying out their responsibilities under the law, are actually placed in a position where we must begin to wonder. I doubt whether we would have had the report yet if the commissioner had not resigned and brought the matter to a head.
I am not entering into the question raised by the right hon. gentleman as to whether or not a monopoly existed within the provisions of the Combines Investigation Act. I
Combines Investigation Act am not here to endeavour to try anyone. That is what the courts are for. I am here as a member of parliament to ask why the Minister of Justice, who stands as the embodiment of justice in our land-which means justice under law-has himself failed to carry out a provision that was placed in the law not by the opposition but by parliament. This is an extremely serious matter. I am not going into the record of this government with regard to combines prosecutions. I remember hearing the former prime minister, on election night in 1935, promising that all monopoly privilege would end. Some prosecutions have taken place since then. I think of the tobacco companies prosecution. Those interested in ascertaining what happened and how it happened should read the reports in connection with that prosecution in 1938.
Then there was the dental companies prosecution. That prosecution against eighteen defendants failed because the counsel for the government failed under instructions to prove the signatures on any of the 1,800 documents filed, or that any of the persons were authorized to write these letters. Anyone knows that when a limited company is prosecuted for a criminal offence knowledge must be brought to the directors. They failed to prove that the companies were even incorporated. Mr. Justice Barlow directed the jury to bring in a verdict of not guilty, and the jury acquitted all defendants. I asked the then Minister of Justice whether there had been a mistake in the prosecution and in effect he said that we were trying out this case to ascertain whether or not the combines act would cover such things as we failed to prove. Was it not a strange thing, Mr. Speaker, that they picked the greatest prosecution ever taken in this country to experiment with the law and with the law of evidence?


Mr. Rowe:: Champions of the poor man.


John George Diefenbaker: That is not all. In 1946 the Prime Minister (Mr. St. Laurent), then Minister of Justice, made a great speech on the subject of combines and monopoly privilege. He said, in effect, "What we have to do is to put teeth in the law". Mr. Speaker, there are enough teeth in the law; but if the teeth are not used they might just as well be false teeth. Teeth in the law! It was not a lack of teeth in the law that resulted in the outcome so far as the prosecution of the dental companies case was concerned. It is not for me to say that there would have been a verdict of guilty in any case, but at least there would have been a case to call on the defence if the ordinary rules of evidence had been followed.

Combines Investigation Act
I suggest, Mr. Speaker-and I cannot refer to the amendments to the Combines Investigation Act which are to be brought down, though they are merely minor matters-that a law is only as strong as the will of those who act for the crown. A law can be full of teeth, but if the teeth are not used to bite with the law becomes a mere sham on the statute books. Sir, believing, as I always have, that it is not for parliament to deal with the wrongdoings of anyone allegedly condemned in a report, 1 refrain from saying anything about the facts in this matter. I ask the Minister of Justice (Mr. Garson) whether in the long history of the Canadian parliament, and in the longer history of British parliaments, he can point out a case where in the past any minister has ever failed to discharge the obligatory and mandatory provisions of a statute, unless it be under order in council under emergency legislation in which case the minister appears before parliament and advises parliament that he has taken that stand and stands or falls by what parliament decides.
Sir, I will not labour it, the statute provides what shall be done. Shall there be one in our country above the law? Shall the cabinet be above the law? Is there anyone who will answer me and say yes to my question? If so, we have indeed in this country a government of men, not of laws. I know something of the record of this government. I think of the case taken under law by Mr. Oatway against the wheat board. When he appealed, as was his right under our law, the government passed an order in council to deny him the right to proceed.
At six o'clock the house took recess.


[Stage Direction]
AFTER RECESS

The house resumed at eight o'clock.
John George Diefenbaker: Mr. Speaker, at the time of adjournment I was referring to the Oatway case as an example of arbitrary action on the part of the government against an individual citizen of this country. It would appear that that order in council was passed at the direction of the Minister of Trade and Commerce (Mr. Howe). Another matter to which I might refer is the amendment of the Aeronautics Act with regard to the operation of air lines by railroad companies. That passed parliament over the protests of the opposition and was to the effect that within one year after the end of the war in Europe all railroad companies would have to dissociate themselves from ownership of air lines. A period of a year passed. When asked by the hon. member for Winnipeg North Centre (Mr. Knowles)


why this statute of parliament was changed or altered, the Minister of Trade and Commerce said that it was done under order in council. Later on, finding that there was no order in council, he stated that it was changed under a minute of the cabinet. In those instances that I have placed before you is indicated a cavalier disregard of the rights of parliament and of law as passed by parliament. That is particularly so in so far as the amendment to the Aeronautics Act is concerned.
The minister comes before us and indicates that in a large measure he under the authority of his position was responsible for the nonpublication of this report. I bring to your attention again the wording of the. statute, which is as follows:
Any report of the commissioner . . .
I am reading only the pertinent parts:
. . . shall within fifteen days after its receipt by the minister be made public, unless the commissioner states in writing to the minister that he believes the public interest would be better served by withholding publication.
There was no authority for doing what the government did in this case and their action constitutes a serious infringement of the rights of parliament. The minister gave as the reason for non-publication that injustice would be done to companies that had operated under certain arrangements between the chairman of the wartime prices and trade board and themselves. Parliament has never heard of those arrangements; parliament has never heard of the terms; parliament is entitled to more than an ex parte statement by the minister of what Mr. Gordon has said in this regard.
Apparently the ministers did not get together on their explanations. I do not blame the Minister of Justice (Mr. Garson) solely for the failure to publish the report. He was apparently pushed around in this matter. I am sure that he would not have done this as the custodian of justice in this country unless he had been ordered to do so. The Minister of Justice is the fountainhead of justice, and justice cannot be maintained except under law. Justice is not something administered according to the caprice of one cabinet minister or the cabinet as a whole. The minister had a somewhat different explanation the other day when he wrote to Mr. McGregor. In his letter of November 4 he said this:
The government decided not to publish the report or act upon it until the doubts raised had been cleared up. Moreover, in view of these doubts and of substantial increases in the difficulties of prosecuting created by the judgment of the Ontario court of appeals in the dental supplies case, we felt that if we published the report and were challenged to prosecute upon it, we might not be able to make out a case-

How often were they challenged to prosecute in regard to the optical report? As the then minister of justice said in 1946, speaking in this house, the fact that a report is made does not mean that the government has to prosecute. The minister goes on to say in his letter:
-and that such a failure, coming on top of our loss of the dental case, would certainly not enhance the prestige of the combines investigation commission or of the government.
Summarized, the minister's explanation of the reason for his failure to carry out the law was: If we did publish and were challenged to prosecute; if we did prosecute and did not succeed; if there was another debacle as there was in the dental case, it might be hard to explain. The minister goes on:
The government therefore took the responsibility of withholding publication of your report pending the amendment of the Combines Investigation Act to cure the difficulties created by the dental supplies judgment.
That was not the explanation of the Minister of Trade and Commerce. The explanation of the Minister of Justice on November 4, in his letter to Mr. McGregor, for not going ahead was that the Combines Investigation Act was to be amended and the r eport should not be published until that was done. I give the minister the opportunity to reply to this question: If the Combines Investigation Act is amended to cover the shortcomings of the dental case, does the government intend to prosecute and to use those amendments, which I expect this parliament will pass, in connection with any prosecutions that might be taken as of this date under reports that have been made by the commissioner?
There can be no justification for hiding the report, and hidden it was against the provisions of the statute, a statute that the Minister of Justice is charged with administering and upon whose shoulders is placed a mandatory responsibility. Dare the minister say that statutes of parliament can be suspended by the government because it is not considered judicious to do what a statute says shall be done? Is a time limit in a statute to be made dependent upon the wish or caprice of a minister of the crown?
Surely the Minister of Justice will not stand in his place and say that the government, which for years has on so many occasions shown a tendency to act in this autocratic manner, has arrived at a state of mind where it believes that statutes passed by parliament are to be the playthings of the cabinet just because it is considered to be injudicious to act as the statute demands?
The reason given by the Minister of Trade and Commerce was that certain representations were made to the companies by Mr. Combines Investigation Act Gordon. We do not know what they were. We do not know what Mr. Gordon said or what he wrote although that has been asked for by the hon. member for Rosetown-Biggar (Mr. Cold well). Everything that the minister has stated to have taken place could have been considered by the government in extenuation when it was determining whether or not prosecution should take place. None of the matters that he has raised, no excuse he may offer, can justify the government's departure from its bounden responsibilities under a statute.
During the days of war, by order in council the government amended and suspended statutes. It got the power to do certain things, first under the National Emergency Transitional Powers Act and then latterly after the war under the Transitional Measures Act. But even under the Transitional Measures Act there is no longer power vested in the government, or in any minister of the cabinet or in the governor in council, to alter the operation of a statute in any way. I will not read what the minister of justice said in 1946 except to summarize it in this way. The publication of a report is a deterrent and warning.
Tn the optical case grave charges were made against the optical companies. I was one of those who felt, as I said when I began my remarks this afternoon, that possibly parliament should alter this portion of the statute providing for publication of the reports before trial. The law requiring publication was brought in after a Liberal government came into power following the election of 1935. Provision for publication of these reports was introduced by a Liberal government newly in power and inspired in its determination to remove monopoly privilege from this country. Yet the first government to introduce it is now the government that say, when its operation does not suit the wishes of the government, that the statute may be evaded in the manner that suits the government of the day.
I will not say any more on this occasion. More will be said; more must be said. Parliament and the people of Canada have a right to demand that the law be administered equally to all and that no minister or ministers of the government can by their own ipse dixit say that they are above the law, and that they will act as they choose irrespective of what a statute provides.
Freedom and the maintenance of freedom depend on the foundation stone of all law, namely that, whether it be a minister of the crown or a humble individual, all are equal before the law. The fact that a person is a minister of the crown, a position of power under our system, affords no excuse for such a person placing himself, his government,

Combines Investigation Act or the cabinet, above the responsibilities that parliament in its wisdom, and at the request of the government to which he belongs, placed upon the statute books of the country. The issue is far greater than any question as to whether or not there has been wrongdoing on the part of the flour milling companies. I will not now or at any time deal with the facts of a case which may come before the courts and endeavour to pick out excerpts from a report in order to make a case against anybody. Overshadowing the question as to whether or not there was guilt or innocence, or whether Mr. Gordon did or did not make representations, transcending everything, there is what I feel, and what I believe the country as a whole will feel, is a flagrant disregard of parliament. Indeed it is a perpetuation in the days of peace of the centralization of power and authority that was vested in the government. Although such emergency powers no longer exist they have been in this instance exercised by one or more ministers in cabinet council who in their wisdom have decided that an appointee of the people of Canada, carrying out a responsibility under the law, shall not have his recommendations brought before the people because the government has decided that the facts upon which he bases his conclusions are unjustified. My parting word is this. Would parliament even know now that there was a report against the flour milling companies last December if Mr. McGregor had not finally decided that his services could no longer be given to Canada?


Major James William Coldwell: Mr. Speaker, today's debate has arisen in an unprecedented fashion. I have been in the house for fourteen years, and during that time I do not remember an occasion upon which, on a motion to go into supply, a minister of the crown has aired a government grievance, because that is what we have been subjected to. I do not propose to traverse the same ground as that which has been so ably covered by the hon. member for Lake Centre (Mr. Diefenbaker). I merely want to say that I agree with him wholeheartedly when he says that no government, no minister, has any right at any time to disregard a statute adopted by parliament, and the provision in that statute for the publication of a report within fifteen days for the information of the people of Canada.
This report was made to the government on December 29, 1948. That is over ten months ago. Today the report was brought into the house at three o'clock, and not one of us had an opportunity to see it until that time. Some of us were busily engaged in the house all afternoon, and the manner in which the report is now before the house

and is being debated will preclude the possibility of its discussion at any time later this session. A debate having arisen on a particular matter, the same subject of debate cannot be raised subsequently in the same session. I know if I had the opportunity, and if it were possible to move another amendment on going into supply, I would be inclined to move a vote of censure on the government for concealing from the house and the people of Canada for ten months a report which they were obligated by statute to make public. Unfortunately, because of the procedure that has been followed, we are prevented from moving any motion whatsoever. I think this house would be justified in defeating the motion and denying the government supply, to show that the house does not intend the country and parliament to be treated in the way the government have treated us on this occasion. After all, when the Combines Investigation Act was before the house in years gone by the then prime minister, Mr. Mackenzie King, who was particularly interested in this legislation, and subsequently the minister of justice, the Right Hon. J. L. Ilsley, told the house that the one great weapon upon which the government relied to deal with monopolistic practices, price fixing and combines in this country was publicity. Publicity was the weapon; publicity was almost all that was needed, and prosecution came after publicity. In this case publicity was prevented and, as has been said by the hon. member for Lake Centre (Mr. Diefenbaker), it is altogether likely that if Mr. McGregor had not submitted his resignation this report would not have been made public today.
Who is Mr. McGregor? He has been one of the outstanding civil servants in this country. Mr. McGregor served the Right Hon. W. L. Mackenzie King years ago, when Mr. Mackenzie King was minister of labour, He served as Mr. Mackenzie King's secretary when he was engaged in the writing of "Industry and Humanity" at the time he was engaged with the Rockefeller Foundation. Mr. McGregor has made a notable contribution to the life and welfare of this country over many years, and I believe in this connection he felt that he would not be doing his public duty if he failed to bring this matter forcibly before the country by placing his resignation in the hands of the government. After all, let us bear in mind what his letter of resignation says. And let me say to the right hon. Minister of Trade and Commerce (Mr. Howe), that although this afternoon a reply to Mr. McGregor's resignation was placed upon the records of this house, when we asked that Mr. McGregor's resignation also be placed upon the record, our

request was denied. I like to see fair play in these matters, and I say that preventing the publication of Mr. McGregor's letter in Hansard while reading Mr. Donald Gordon's reply this afternoon was not fair play at all.
This inquiry was undertaken by Mr. McGregor, or so his letter indicates, with the authority and approval of the minister of justice of that day, Mr. Ilsley. Later on, according to Mr. McGregor, he understood the present minister's opinion to be that this investigation never should have been initiated, though I am prepared to believe that there may be some misunderstanding in that connection. However, it was initiated, and a report has been made. We have had no opportunity to study that report; but during the supper hour-that is, for most of the hon. members of this house; I did not go down to supper-I read this report as quickly as I could; and I say to the Minister of Trade and Commerce that he cannot conceal the practices of these milling companies by talking about the contribution they made during the war. I admit that contribution, but the matters referred to in this report arose long before the war. In 1934 and 1936 these practices of combinations and price fixing were prevalent in this country among the milling interests, and I have no doubt that the same practices are continuing at the present time. I have taken some pages from the record which was produced in this house this afternoon. The report indicates that prior to the war-never mind the war years-by their own admission, by their own memoranda, by their own minutes, by their own communications and correspondence, the milling interests were engaged in price fixing, in maintaining high prices and in trying to destroy the small milling interests of this country. That is writ large in this report from the minutes and records of the milling companies themselves.
I have reason to know that during the war they also had the support of milling interests overseas in their attempt to prevent the development of competitive milling interests in this country. I know perfectly well that the farmers of western Canada established a small co-operative mill just before the war, and that mill found it very difficult to operate during the first year or two of the war because they could not get any overseas orders. They could not sell a barrel of their flour to the British ministry of food; and it was only when the position was drawn to the attention of members of the British parliament, and indeed to the attention of the members of the British government interested in the development of co-operatives, that the condition was righted and the co-operative mill in Saskatchewan
Combines Investigation Act began to receive orders for flour from overseas. I say I know what I am talking about;
I know that is true.
Running all through the evidence submitted in this report by Mr. McGregor is an attempt on the part of the big milling interests not only to control prices, not only to continue their combination and their monopoly, but to destroy the small milling interests of this country. I have in my hand, from chapter 7 of the report, official records of price agreements and discussions. Hon. members will find this record at pages 75 and 76 of the report which was presented this afternoon. Meetings of the organizations to which reference is made were reported in the official minutes by the secretaries, but the principal admissions were found in the records obtained by Mr. McGregor after he obtained access to their memoranda relating to these meetings. Let us look at memorandum No. 28, "Report of sales managers."
The secretary reported that two of the members were exacting only 40 cents per barrel for top patent over the basic grade, instead of 50 cents, in the province of Quebec.
It was unanimously agreed to maintain the 50 cents differential throughout eastern Canada.
There is no record of that in the minutes. Then again:
The following minimum prices were established^ mills pledging themselves to adhere rigidly thereto:
Quebec, $5.75 per barrel . . .
Ontario, $5.65 per barrel . . .
Maritime provinces, $6.75 per barrel . . .
In connection with the maritime provinces, the secretary was instructed to circularize the members, calling attention to the fact that the $6.75 price is applicable only to large jobbers, as well as bakers in Halifax, Saint John and Dartmouth; smaller jobbers to be sold at the spreads indicated in the maritime jobbers' list. The price to dealers to be $7 net.
(Exhibit 577)
There is no reference to that in the minutes. That was in 1938; and on December 14 of the same year we have memorandum No. 33, "Small mill competition in western Canada."
One of the members reported on the discussion which took place in Winnipeg, December 9, at which time it was thought that whatever line of action was deemed necessary should be confined to those areas in which small mills are particularly active, and the suggestions then offered were the making of a special price in those areas and, if necessary, the introduction of a special brand. The question to receive the further consideration of western managers in meeting early in the new year. The two members engaged in the sale of flour in western Canada and not represented at the meeting were requested to communicate with their western managers.
What did the minutes say? No record in the minutes of this vital decision.
It was reported that a meeting would be held in the new year at which western sales managers would be present.

Combines Investigation Act
That is the statement in the minutes, but there is no reference to the attempt to establish a new brand to sell at a low price in order to undersell the small mills in western Canada and put them out of business. There you have at least one reason why this combination should be prosecuted by the government. Never mind the years of the war. What were they doing before the war and what have they been doing since? It is that question which hon. gentlemen should ask themselves.
In eastern Canada the same attempt was being made. Efforts were made to get the small mills to adhere to the price-fixing policy of the large mills. Those efforts are reflected in some extracts I shall read from letters passing between Mr. C. H. G. Short and Mr. J. J. Page, on August 31, 1938. We were not at war then and these companies were not performing any war service at that time. At page 91 of the report we find the following:
If McCarthy continues as he Is continuing, and I think the point should be stressed strongly to him, it will be a very short while now before the big mills are meeting his competition right in his own bailiwick, which will mean that the rest of the small mills, and the big mills themselves, are in for a protracted period of unremunerative business. Surely he has sense enough to see that with a discretion below a maintained price of the large mills he is infinitely better off than he can possibly be by setting his own price levels-which will inevitably be met, countered and possibly bettered by some of the big mills within a very short time il he persists.
This should interest some of the Ontario members. The correspondence makes it clear that the competition from the Copeland Milling Company, whose plant is located at Midland, Ontario, was regarded as of particular importance to the milling combine. Here is an extract from a memorandum of decisions reached at an executive meeting on April 5, 1939.
It was unanimously agreed to institute special price reductions at irregular intervals on the following basis:
As a trial, the reduction shall be applicable to bakers in all towns located on or south of the branch line of the C.N.R. running from Belleville west to Midland, Ontario; and the price to be applicable to jobbers in this territory on their purchases of baker-flour requirements in jute.
It is understood that the reduction will be agreed upon at irregular intervals, at the discretion of the mills.
This is cat and mouse business. Lower and raise your prices at irregular intervals, then finally destroy the small miller.
The frequency and amount of the reduction in price shall be mutually agreed upon between the mills on a majority vote of four members. The reduction to be effected, and the time of its coming into effect, shall be made known to all members as soon after the market close on a Friday as is possible.

The period of the reduction shall be from the market close on Friday agreed upon until the following Tuesday morning at the opening of the Winnipeg market, after which time no further business shall be accepted at the reduced price.
At the discretion of the mills, the reduction may apply to any or all classes of trade in any one or more of the eastern provinces.
So, we can go on with records of that kind of combination and that sort of attempt to destroy a competitor by underselling him.
Mr. J. J. Page (Western Canada) expressed himself as follows in a letter to Mr. Charles Ritz of the Robin Hood Company in Minneapolis. It is dated September 29, 1938, which is before the war.
There seems to be a sharp difference of opinion in the west as to how to combat the small mills . . .
It is true that the country mills are quite keen competitors of the larger mills, and have been giving us quite a bit of trouble, but I do not think we can do other than accept the recommendation of our western men who, with one exception, say we should maintain our present grades and our relative selling bases.
In this report you find evidence that before the war these things were being done. This afternoon the minister tried to brush off Mr. McGregor's criticism and his conclusions by talking about the war years and what Mr. McGregor learned during those war years. As a matter of fact this report is replete with references to the millers' combination and the millers' price-fixing trust in the years before the war.
Mr. McGregor said a careful examination had been made of all the evidence and memoranda. I think that is true because, after all, it is not in the minutes but in the memoranda existing in their offices that one finds the damning indictment which has been brought against these powerful milling interests. The small mills worried them all the time. We have a memorandum of an executive meeting on April 14, 1936, which reads as follows:
It was understood that the discretion of ten cents per barrel in the maritime provinces heretofore enjoyed by Messrs. Ogilvies, would be removed. Messrs. Ogilvies gave the above assurance on the understanding that their position in respect to small mill competition is quite clear, i.e., that they were not concerned here or there about the odd car of flour, but that they would take whatever steps were necessary to hold their old and established connections against the competition of small mills.
Throughout this report there is evidence of the attempt to cut out competition. I should like to ask my friends of the Liberal party how this fits with their allegiance to free competition or free enterprise, if you like. We find this government, which is pledged to maintain free enterprise in this country, has for ten months concealed a report which was a condemnation of big interests which were crushing out free competition. My hon. friend

from Winnipeg North Centre reminds me that the government was breaking the law in order to do just that.
Then there is a memorandum of the executive dated February 20, 1936, which suggests that an advance or decline in the price of feed would be governed by a vote of the majority. Then there is a memorandum, No. 5, reporting a somewhat similar meeting on June 9, 1936, just a few months later. It reads in part as follows:
It was resolved that the domestic price on feed shall be governed by the highest ruling price on the North American continent.
That is 1936, when the farmers were down and out and when their stock was almost worthless. These gentlemen get together and resolve that the domestic prices on feed shall be governed by the highest ruling price on the continent of North America.
The minutes of the meeting of Ontario sales managers dated December 14, 1938, was concerned with an understanding about much the same matter.
. . . that the secretary would consult the Montreal members each week to determine a minimum selling price for feeds, which minimum selling level would be based on export feed values.
Everywhere you look in this report- whether it be the war years or the years at which I have been looking, particularly, because I do not intend to deal with the war years tonight-you find the same thing: maintain the highest possible price, get rid of your competitors, and discipline any member of the milling interests that will not agree with you.
On July 21, 1939, they made some price changes: Exhibit 441.
"Price Changes:
Present prices are taken as being promulgated on No. 2 northern cash wheat 50 cents per bushel, and shall advance 15 cents per barrel for each 2 cents per bushel advance up to 60 cents; and shall be reduced 10 cents per barrel for each 3 cents per bushel decline in the market; always making allowance for millfeed changes."
The reason for this change is outlined in a letter of July 24, 1939, from C. H. G. Short (Lake of the Woods) -
I think he was mentioned this afternoon;
I think he was the gentleman who was in charge of this particular field under the wartime prices and trade board during the war.
-to G. H. Booth of the Winnipeg office:
"I also managed to sneak a gentle suggestion over, which was adopted-that with every 2 cents upward movement until the No. 2 wheat reached the 60 cent price the price should be advanced 15 cents and that price should be reduced 10 cents per barrel only on decline of 3 cents per bushel. This arrangement, I hope, will mean that with movement in the market we will get in an even better position than the $3.30 price legislated."


Stanley Howard Knowles: Quite a sneak.
Combines Investigation Act


Major James William Coldwell: There again you have the type of thing that was done by these powerful companies.
I cannot go into all the matters because there are several other things I want to say; but whether they were dealing with the bakers, with government institutions, or the Department of Justice purchasing for the penitentiaries before the war, or whether they were provisioning Canadian government ships, they all got together, and they decided what they would do about it together. In other words, they acted as a combination; they controlled prices; they set prices; and this report is replete with evidence in that regard. Then we are told that this report was unsatisfactory to the government, that it was not the kind of report which should be made public, and the commissioner resigned because he was determined that the people of Canada should know what was going on.
During the 1930's, when the province from which I come was the victim of the most unprecedented drought in our history, we find indeed the first letter which Mr. McGregor says is evidence of this price fixing, of September 15, 1936, from D. P. Noel to
J.	Sangster (Western Canada) Winnipeg. He says:
"I confirm my telephone conversation with you this afternoon during which I indicated I had received confirmation from all mills-
I would call attention to those words "all mills."
-that the municipality at Frontier would be quoted on the basis of $6.10 per barrel for a carlot of first patent flour in cottons, sight draft attached to bill of lading."
Those of us who know where Frontier is know that that flour went down into an area which was one of the worst drought-stricken areas in Saskatchewan.
The same thing applied to millfeeds. When millfeeds were being sent into British Columbia, evidently some of the people who sold millfeeds in that province were not maintaining the prices laid down. In 1944, as you will find throughout the war years, complaints were made that the price ceiling was not observed. Bear this in mind, and let us be clear about it. The price ceiling as laid down during the war was a ceiling, never a floor and was never intended to be a floor. This is the reference I am going to make to those war years. You will find that throughout the war years these milling interests insisted on maintaining the highest prices permitted by the government, with a few notable exceptions. They kept at the ceiling and all kept the same price; and
1512	HOUSE OF
Combines Investigation Act when one of them broke away, then of course there was a good deal of criticism of that one by the rest of the combine.
A special system of quotation was adopted at Vancouver which illustrates exactly what I mean. The proposed procedure at Vancouver-and this is a wartime matter-was outlined in a letter of June 8, 1944, from Mr. J. Clark, Vancouver, secretary of the Vancouver group, to Mr. Noel in which he said this:
''Following receipt of the directive issued by you on the subject of tenders of the Department of Munitions and Supply, a meeting of the Vancouver members was held to discuss and draw up a plan to give effect to the suggestion therein contained. As a result the following was agreed upon,-
I may say that I am not going to read the story on the previous page, but they were having trouble with a Vancouver group, the name of which I have forgotten at the moment, which was offering flour and so on at a lower price than they had agreed upon. The letter continues:
That any special price should apply only to Vancouver, Nanaimo and Esquimalt tenders: that all members should complete tenders regardless of prices used, as it was felt that failure to do so might lead to some questioning. The members also agreed that a maximum price discretion of 20 cents per barrel would be enough to start with; this of course could be increased later if found necessary.
The procedure agreed upon was that each month three members should use price differentials of 10, 15 and 20 cents per barrel, that the balance of the members use the regular list. This would be alternated each month when three other members would follow the same procedure, the rest using the list.
The first three members authorized to use the special price basis were selected by lot and these were:	The Brackman-Ker Milling Co. Ltd., Lake
of the Woods Milling Co. Ltd., and Maple Leaf Milling Co. Ltd. It was understood that on the present tenders they would quote as follows:
B & K
Vancouver	
Nanaimo	
Esquimalt	
Lake of the Woods
Vancouver	
Nanaimo	
Esquimalt	
20c
15c
20c
15c
10c
20c
Maple Leaf
Vancouver	
Nanaimo	
Esquimalt	
10c
20c
15c
the members to leave the flour prices open when sending their tenders to the secretary, who would then complete this portion of the tender.
Members agreed that the secretary be authorized to select the name of the three members using the price differential on all future tenders and the figures at which the tenders are to be priced. Members would be advised of the prices quoted only after all tenders had been completed and sent in to the Department of Munitions and Supply.


Angus MacInnis: Whom were they tendering
for?


Major James William Coldwell: For the government.


Angus MacInnis: The Department of Munitions and Supply.


Major James William Coldwell: The letter continues:
"Our tenders for the month of July requirements do not have to be submitted until June 20 so if there are any criticisms or suggestions that you would like to make regarding the above arrangements will you kindly advise us in time so that these may be followed out."
There you have the story. I am not going to comment upon it-because I think comment is quite unnecessary-in order to draw the conclusion.
Before I conclude I wish to say that I have read very carefully the correspondence between the minister and Mr. McGregor. On page 2 of his letter Mr. McGregor points out:
There is greater need now for strong action under the combines act than there has been at any time in the past twenty-five years. To an alarming degree price-fixing activities such as we reported in the flour milling industry have been developing in the post-war years; some of them originated in the war period; and some were started, as in the flour milling industry, even in the pre-war years.
What I have sought to do tonight, Mr. Speaker, is to show to the house that no matter what may be said of what was done during the war toy the milling companies, or under whose direction they were operating up to September 15, 1947, they were guilty of malpractices, guilty of breaking the spirit of the Combines Investigation Act, and they should toe prosecuted, and the people of Canada should know what is in this report, and be able to read it for themselves.
Someone has said that Canada is probably the most monopoly-ridden country in the world. I do not know whether that is true or not, but I do know that there are great monopolies that have operated in this country prior to the war and subsequent to the war. I have not forgotten that in 1943 I rose in my place and exposed one of these great monopolies, namely, the aluminum monopoly. When the report was made on what I had to say regarding it, it was said that none of my statements had been proven by the facts, and yet two years later on substantially the same data, with exactly the same charges, the Supreme Court of the United States convicted the Aluminum Company of America, indeed in reality Aluminium Limited of Canada, of monopolistic practices of the type that I had reported to this house.
There is one thing more in the minister's letter to Mr. McGregor that I want to ask about, and it appears at the top of page 2, as follows:
What still worries me is why, in the preparation of your report, you did not ascertain these disputed facts from Mr. Gordon which could have been done quite simply by asking him about them. It appeared from the disclosures in my office the

other morning that you couldn't get these facts from anyone else because they were not in the possession of anyone else.
Only Mr. Gordon had these facts. Not even the minister or the government had these facts, and not even the milling companies had them. As I say, I had given the most careful reading to this report that I could give in two short hours, and nowhere in it do I find that any member, speaking on behalf of the milling industry, at any time said that they were acting on the advice, or with the consent, of Mr. Gordon or Mr. Taylor. Nowhere in the report can I find it. Let me say that if they were acting on the advice of Mr. Gordon or of Mr. Taylor subsequent to September 15, 1947, they were not acting on the advice of Mr. Gordon prior to September, 1939, nor do I believe that they have been acting on the advice of Mr. Gordon or Mr. Taylor since 1947. If they were acting on the advice of Mr. Gordon or Mr. Taylor I would like to know under what authority either Mr. Gordon or Mr. Taylor was acting and giving them advice. I want to know what the authority was. Apparently not even the minister knew that there were certain facts that were known only to Mr. Gordon. Consequently I say, Mr. Speaker, it is unfortunate that this debate was initiated in the way in which it was because it prevents this house from taking action on the report and on the government's neglect to place this report before the people of Canada as they were by statute obligated to do. Through the method that has been adopted today in bringing discussion of this report to the floor of the house, I will not say whether designedly or not, it in effect stifles this parliament and prevents any disciplinary action on its part.


Mr. Solon E. Low (Peace River):: Mr. Speaker, I do not wish to detain the house too long on this subject, although I might say that, if my own desires were to be realized, this report of the commissioner of combines on the flour milling industry would occupy the house for several hours in detailed discussion. On behalf of the group that I represent in this house I want to add my voice to the protests that have been made against the action of the government in what I consider to be the most reprehensible withholding of a report of a responsible officer so that people would not know what it contained.
We join in protesting against the clever way in which this debate was started today. If it was not designed it was certainly a very happy accident for the government.


An hon. Member:: Providential.


Solon Earl Low: Providential is right. Certainly a matter of the first-rate importance of this 45781-961
Combines Investigation Act report should have received the attention of this house in the fullest possible measure. On the basis of the facts that are known thus far, the only conclusion that hon. members can reach is that the government had something to hide. Either that, or the government had something to lose in the election that was imminent.
I was not able to be here this afternoon, but from what I could judge as a result of reading the correspondence, and my own experience covering a number of years back in connection with the Combines Investigation Act, I can reach only one conclusion, namely, that either the government had something to hide and cover up or they deliberately withheld this report because they were afraid to take action under it, or to make it public because they had something to lose in the ballot or in the support of the companies which are named in the report. If these things are not true, then I want some member of the government to rise in his place and say that they are not.
I have not had time to read the report. I just got it in my hands after eight o'clock tonight; but you can turn anywhere in it and find illustration after illustration of much the same kind of thing as the hon. member for Rosetown-Biggar (Mr. Coldwell) has drawn to the attention of the house. Let me refer briefly to pages 91 and 92 of the report to show how the C.N.M.A. dealt with competitors who did belong to their organization and had dropped out, and the way in which they dealt with bakers who were purchasing their supplies of baking flour from small mills. Mr. McGregor said:
The correspondence makes it clear that the competition from the Copeland Milling Company, whose plant is located at Midland, Ontario, was regarded as of particular importance. The Copeland Company had severed its connection with the C.N.M.A. in 1934. Reference is made to Midland in the next quotation, which illustrates another method of dealing with such competition. It is an extract from a memorandum of decisions reached at an executive meeting on April 5, 1939.
"It was unanimously agreed to institute special price reductions at irregular intervals on the following basis:
As a trial, the reduction should be applicable to bakers in all towns located on or south of the branch line of the C.N.R. running from Belleville west to Midland, Ontario; and the price to be applicable to jobbers in this territory on their purchases of baker-flour requirements in jute.
It is understood that the reduction will be agreed upon at irregular intervals, at the discretion of the mills."
That gave them the right to depart from their agreement reached as a result of their meetings.
"The frequency and amount of the reduction in price shall be mutually agreed upon-"



PROVINCIAL LIBRARY VICTORIA. B. C. HOUSE OF COMMONS

[Stage Direction]
Combines Investigation Act If that is not a combine in restraint of trade, then heaven knows what would be. I repeat:
"The frequency and amount of the reduction in price shall be mutually agreed upon between the mills on a majority vote of four (4) members. The reduction to be effected, and the time of its coming into effect, shall be made known to all members as soon after the market close on a Friday as is possible."
That memorandum was dated April 5, 1939. Then the report continues:
A few months later agreement was reached among members of C.N.M.A. that reduced or "open" prices could be quoted to particular accounts known to be customers of small mills. For instance, in memorandum No. 38 of executive meeting of July 21, 1939, the following is reported:
"To the following bakers in the province of Ontario, all mills shall quote 40 cents per barrel under the lowest Ontario bakers' basis:
Dempster
Weston
Henderson
To the following bakers in the province of Ontario, Robin Hood and Quaker shall quote 40 cents per barrel under the lowest Ontario bakers' basis, and all other mills shall quote 30 cents per barrel under the lowest Ontario bakers' basis:
Barker-Bredin
Wright
Dietrich
Hill
Atlantic and Pacific McCuteheon
Parnell (London) Mara
Christie-Brown
Phillpott
Frances"
When one reads things like that he is reminded of the committee on prices of this house. I distinctly recall certain investigations that were made of bakers' prices, but I do not recall any of this ever having been brought out in that investigation so that the public could see and understand and use their moral influence so that no combine for the restraint of trade might exist in this country. What good was that prices committee anyway? I think it was a washout and there is no one more responsible for it-
['No, I am not in a position to make a definite statement. The Secretary of State for External Affairs (Mr. Pearson) is trying to arrange the work of the political committee of the United Nations in such a way as to allow him to be here for two or three days to deal with the debate in this house. I believe he hoped that could be arranged for the sixteenth and seventeenth of November, but I have not had confirmation from him. As soon as I receive that I shall inform the house.\nProgress reported.']
An hon. Member:: Than the government.


Solon Earl Low: Certainly, the government, and some of the employees of the government. One could go on for some time to give different illustrations. I only wish we had time to digest this report more thoroughly so that it could be discussed fully.
This whole business revives in my mind the memory of the relationship which we in Alberta had with Mr. McGregor some years ago in connection with an alleged combine in restraint of the tobacco trade. I was a member of the Alberta government at the time and I recall a visit I made to Ottawa early in 1938 when I had a discussion with Mr. McGregor. He urged us in the strongest possible way to take action in the province of Alberta, we being one of the provinces

where it was patently clear that a combine did exist, in order to bring the whole matter to the attention of the Canadian people.
I do not think I am breaking any confidence when I say that at that time Mr. McGregor told me how difficult it was to get any encouragement from high places to institute these prosecutions, even where inquiry showed that there was a combine. As a result of Mr. McGregor's report on the alleged combine in the distribution of tobacco products which was issued on August 31, 1938, the province of Alberta took action. They prepared well and long and spent over $50,000 in an effort to obtain convictions under the Combines Investigation Act. However, that act made it absolutely impossible to get convictions even though there was every evidence in the opinion of many legal persons in the province that it was an open and shut case.
We found Mr. McGregor to be, not only a faithful but a courageous public servant, a man who took his duties seriously. We respected him and his judgment and his advice. It seems too bad that his career should end in the way it has. Ever since the resignation of Mr. McGregor last week I have been wondering whether he has not been retained by this government since 1939 more as a gesture toward public opinion than for any other reason.
I think that this whole business raises the question whether or not the wartime prices and trade board practices during the war did lead to price-fixing arrangements between large companies that should have been competitors. I feel practically certain that if we were to have a full-dress debate on this report such a thing would be brought to light. I fully believe that that is the case.
I just want to join with what the hon. member for Lake Centre (Mr. Diefenbaker) said since I came into the house at eight o'clock, and also with what the hon. member for Rosetown-Biggar (Mr. Coldwell) has said, and to protest in the strongest possible way against the manner in which the government has handled this whole business. I feel satisfied that the government stands to be condemned at the bar of public judgment.


Angus MacInnis: Mr. Speaker, I do not think there is much that needs to be said in addition to what has been already said so well by the three hon. members on this side of the house who have taken part in this debate. I would not rise at this moment to speak, an action that might be considered an anticlimax following the magnificent speeches that have been made, if it were not for the fact that I feel that I have

had one put over on me in connection with this matter. I do not like having something put over on me because I never try to put something over on someone else.
On September 21 I sent a note to the Minister of Justice (Mr. Garson) stating that on the orders of the day that afternoon I intended to ask whether a report on the milling industry in Canada had been made and, if such a report had been made, would it be tabled? The Minister of Justice called me on the telephone just before three o'clock and said he would like to see me. I told him I would be in my room and he came up to my room. He said that he did not want to suggest that I should not ask the question, but that he wanted to give me some facts before I would ask it. The facts that he gave me were that the government had a bill to amend the Combines Investigation Act ready and did not want to make any report public before that bill was passed.
I am not a member of the official opposition, but I am on the opposition side of the house. I never considered that it was my duty to use every opportunity I could get to embarrass the government. I considered that it was my duty, so far as possible, to help the government give good government to Canada. I did not want to ask the Minister of Justice (Mr. Garson) anything in my office that I would not ask him on the floor of the house. Therefore I did not even ask him if there was a report. I asked him-and remember this was on the 21st of September-when the bill would be introduced. He said, in ten days or two weeks. I said, "All right; I will not ask my question today, nor will I ask it at any time without giving you notice."
The next time I brought up the matter was when the hon. member for Lake Centre (Mr. Diefenbaker) asked a question about the flour milling report. I asked then when the bill would be introduced. I do not know what date that was, but it is about three weeks ago. The Minister of Justice said at that time that it would be introduced in a very few days. I want to tell you, Mr. Speaker, that the way the government has acted in this matter since the 29th of December last is positive proof to me that they arranged it in order to get Mr. McGregor's resignation. If that is the way the government regards faithful service, such as Mr. McGregor has given to the government and to the country, then it is not worth while for an honest man to enter into the service of the government. I just think it is something really funny to hear the Minister of Trade and Commerce (Mr. Howe) lecturing Mr. McGregor on moral values. After the way this faithful servant
Combines Investigation Act has been treated, I am amazed that any minister should come into the house and talk about moral values.


Stanley Howard Knowles: After he has helped to break the law.


John George Diefenbaker: Being dogmatic.


Angus MacInnis: After he has helped to break the law, and perhaps, so far as I know, insisted that the law be broken. Remember that King Charles lost his head because he thought he was not bound by the laws of the country. The government took good care that they had a large majority in the house before they let the people of Canada know that there was a report of this kind. They have not only put something over on this house; they have also put something over on all the people of Canada.
For the last four years a great majority of the people of Canada have been striving to keep their heads above water, striving to get along in the face of the ever-increasing cost of living, and when a report is made by a man who is experienced in making such reports, who is experienced in taking evidence, it is kept under cover. I should like to ask the Minister of Justice this question. I should like to ask the Minister of Trade and Commerce this question, since he appears to be running the Department of Justice as well as the Department of Trade and Commerce. If it was necessary to get Donald Gordon's advice before the report could be made public, why did you have to wait until October 22, 1949, to get his advice or permission to publish the report that was in your possession since December 29, 1948?
From what has been said in this connection, and from what the hon. member for Rosetown-Biggar (Mr. Coldwell) has already put on the record from the report, as to how these large companies not only controlled but manipulated prices, and shuffled them like cards in a poker game, I should like to know who was in charge of controls in this country, and who is in charge now. As it was refused last Friday, I am now going to put Mr. McGregor's letter of resignation on the record. May I say here that I never saw anything more shabby than the refusal of the Minister of Trade and Commerce to allow Mr. McGregor's letter of resignation and the statement accompanying it to go into Hansard last Friday, and then to read into the record-[DOT]


Stanley Howard Knowles: That is morality.


Angus MacInnis: -Donald Gordon's statement, a statement that did not even carry a date. No one knows when it was made. My friend from Winnipeg North Centre says it is

Combines Investigation Act a brand of morality. It is a brand of morality to which we are unfortunately becoming too much accustomed in this house. Mr. McGregor's letter is dated October 29, 1949, and reads:
Room 122, Justice Building, October 29, 1949
Hon. Stuart S. Garson,
Minister of Justice,
Ottawa.
Dear Mr. Garson:
I should appreciate it if I could be relieved of my duties as commissioner of the Combines Investigation Act at an early date. I hope my resignation can be effective not later than December 31 next,
I hope that within the next few weeks X can complete the two reports which are now in draft form. But if an earlier date would be more satisfactory to you, I shall of course be prepared to retire at whatever time you say.
It is a keen disappointment to me to feel obliged to withdraw, before my time, from work which I am convinced can be made of great service to the public of Canada, work which has been my chief interest during the past twenty-four years and in which I have had the whole-hearted co-operation of a group of very competent and public-spirited associates.
The occasion for my taking this step is briefly indicated in the attached memorandum.
I hope, Mr. Speaker, you will allow me the privilege of reading the memorandum, since it is a part of the case in the same way as the memorandum prepared by Mr. Donald Gordon which was read in the house this afternoon. The memorandum is dated October 29, 1949, and reads:
Memorandum to
The Minister of Justice:
The principal circumstances which have led me to submit my resignation as commissioner of the Combines Investigation Act can be stated briefly.
First and foremost is my deep concern about certain tendencies that have been apparent in recent months which in my opinion seriously threaten the usefulness of this legislation.
One of the principal remedial measures provided by the Combines Investigation Act is the publication of reports of investigations. The withholding for so many months of publication of a report which the act requires shall be made public as soon as possible after its receipt (this is the only instance of the kind in my experience) is one illustration of the tendencies I have in mind.
Closely related to this are the differences of opinion on basic policy that have been revealed in our recent discussions relating to the flour investigation and report. I am not raising any question of your obvious right and the right of anyone to point out errors in any work I have done. The criticisms made, however, have not been directed particularly to any error of fact in my report but primarily to the policy that was followed. You have expressed the opinion that the inquiry should never have been started. I am satisfied in my own mind that the facts disclosed in the report more than justify the investigation.
May I just stop there to ask who, having listened even to the few facts placed on record this evening by the hon. member for Rosetown-Biggar (Mr. Coldwell), will dare
[Mr. Maclnnis.l
rise in his place in this house and say that the facts already disclosed do not justify the investigation and report.
It was instituted and conducted, as our other inquiries have been, in keeping with the letter and spirit of the act. The conclusions reached, I am convinced, are completely justified and are in keeping with the many judicial interpretations of the statute in other cases. The investigation was started with the knowledge and approval of the then Minister of Justice, Right Hon. J. L. Ilsley. The action we took was in accord with the basic purposes of the act and with my understanding of the government's expressly stated policy of preventing restrictive practices which deprive the public of the benefit of reasonably free competitive conditions.
Just at this point may I refer to the letter of December 29, 1948, which accompanied the report, in which Mr. McGregor said:
Mr. John G. Ahem, K.C., of Montreal, who was appointed by the Minister of Justice to act as counsel in the investigation, conducted the examination of witnesses throughout the hearings, and I wish to acknowledge the able services which he has rendered.
Here is a government that helped the combines investigator make an investigation; then, after he presents his report, they bury it. Now I continue with the memorandum:
I recognize fully that the making of policy is not the responsibility of a civil servant, but as a civil servant I would prefer not to carry on under conditions of uncertainty and conflicting tendencies such as I have experienced recently.
Evidently he did not know under which minister he was supposed to be working.
There is greater need now for strong action under the combines act than there has been at any time in the past twenty-five years. To an alarming degree price fixing activities such as we reported in the flour milling industry have been developing in the post-war years; some of them originated in the war period; and some were started, as in the flour milling industry, even in the pre-war years. To meet the situation, to prevent these practices which are designed to limit or eliminate the public safeguard of price competition, there is every reason why the powers of the combines act should be strengthened. Council accepted in the present bill our proposals of three amendments, including a very important amendment designed to meet the difficulties of the dental judgment, but the only suggestions from council which you called on me to consider seriously were provisions which would have had the result of limiting the effectiveness of the legislation.
I wonder if there is any relation between that phrase and Mr. McGregor's resignation.
I have in mind such proposals as those to eliminate the commissioner's initiative in launching inquiries, to place serious limitations on the requirement that reports be made public, and to provide for exemption, after prior approval, of certain types of agreements to restrict production or eliminate price competition. These suggestions have not been included in the present bill, but my understanding from you is that consideration of them has been merely postponed pending a proposed "overhauling" of the act. Overhauling of the act could serve many useful purposes. I am apprehensive, however, particularly in view of the nature of the changes which have been suggested

for consideration, of the ultimate result of any revision of the statute which would include changes along these or similar lines.
My hope is that my successor, in carrying out responsibilities which have many quasi-judicial aspects and call for a substantial measure of independent action and judgment, will have the support of an even stronger statute than the act in its present form, and a clear statement of government policy with respect to its enforcement.
I do not believe there is much more I can usefully add; but I want to tell members of this house, wherever they sit, that this is a matter which comes before loyalty to the government. It concerns loyalty to the people of Canada. If by your silence or otherwise you approve the policy the government followed in this instance, then I can tell the people of this country that their interests have very little safeguard if that safeguard lies with the present government.


Stuart Sinclair Garson: Mr. Speaker, after the excellent and eloquent speeches to which we have listened by the hon. member for Lake Centre (Mr. Diefen-baker), the hon. member for Rosetown-Biggar (Mr. Cold well), the hon. member for Peace River (Mr. Low) and the hon. member for Vancouver East (Mr. Maclnnis) I feel that I have a very difficult task cut out for me in replying to all the arguments which have been advanced, within the period of forty minutes which is allowed to me by the rules. However, I shall take up the various points as rapidly as possible.
First I should like to deal with what I must regard as the rather extraordinary and unworthy argument put forth by the hon. member for Lake Centre in which he either stated or clearly implied that the government-and this would include the combines act administration itself-over the years had been guilty of not effectively using the teeth that were in the law; that if they had done so they would not be under the necessity of coming to the house at the present time to secure amendments to the act. In other words he suggested that in certain cases which he instanced, the dental supplies case and the tobacco case, to which I shall make further reference in a moment, the crown's case was presented in a rather bungling fashion with the idea, as I inferred, that under the show of a great amount of prosecuting zeal the case was handled in such a way that no conviction was obtained. I think I should reply to that, in fairness to Mr. McGregor and his associates, who in spite of differences of opinion which have arisen are clearly entitled, in many ways, to the admiration and respect of the government, which in fact they have. Mr. McGregor and we have differed on a matter of principle. I believe it is only fair that,
Combines Investigation Act during the course of this debate, there should be put upon the record a list of the successful prosecutions which have been launched by him and his associates, acting under the authority of the government which he has served-for the most part governments of the Liberal party.
I should like to list the cases that have been undertaken. First of all, there are the prosecutions by the provincial attorneys general under this act, based upon material supplied by the combines investigation branch. There is Rex v. A. B. C. Plumbers, conviction and fine; Rex v. Famous Players, an acquittal; Rex v. Alexander, the electrical contractors' case, a conviction and fine and the appeal dismissed; Rex v. Chapman, fruit basket case, a fine and no appeal; Rex v. Canadian Import, the Quebec anthracite coal case, a fine and the appeal dismissed; Rex v. Hartt and Adair, a fine and the appeal dismissed; Rex v. Staples, Western Fruit case, acquittal and no appeal taken. Then, there is Rex v. Imperial Tobacco Company, which my hon. friend the member for Lake Centre singled out for criticism as being one of the examples of this practice to which he was referring.
Now, sir, in that case prosecution was commenced by the provincial attorney general. It was a case taken under provincial auspices in which the crown case was handled by a prominent Calgary lawyer and his assistants, and in this case efforts were made to introduce documentary evidence. The trial judge refused to admit it, with the result that the prosecutor had no alternative, so I am advised by Mr. McGregor, but to ask for a stay of prosecution. There was, therefore, no conviction in those proceedings.
The provincial attorney general was not disposed to proceed further with the case. After a year, he was finally induced by the dominion government to institute new proceedings under the Combines Investigation Act. The first proceedings had been taken under the criminal code. We provided the services of eminent counsel, Mr. J. C. McRuer,
K.C., now the chief justice of Ontario and H. M. Brown and I. M. MacKiegan of the combines investigation commission staff. Surely all of these gentlemen, including the Calgary counsel in the first case, should not be subjected to the criticism that in acting under their retainer they were going to go through the forms of prosecution but not with sufficient skill or zeal to produce any results.
At any rate, in the second proceedings, under counsel instructed by this government in 1941, the defendants were convicted. Fines were levied amounting to $221,500. An appeal was taken and the conviction was quashed

Combines Investigation Act upon the grounds that, since the accused had been placed in jeopardy in the first proceedings in which the stay was entered, they could not be placed in jeopardy a second time. I believe my hon. Mend will search in vain in the record of those proceedings for any support for the argument he advanced. In that case, it was through the efforts of counsel appointed by this government that the accused were brought to justice. It was only because of the stay of proceedings having been entered in the previous case that they were able to successfully plead autrefois acquit.


John George Diefenbaker: Did they plead autrefois acquit in that case?


Stuart Sinclair Garson: Yes.


John George Diefenbaker: No, they did not. You have not read it.


Stuart Sinclair Garson: My hon. friend will not deny that there was a stay of proceedings entered in the first place?


John George Diefenbaker: That is right.


Stuart Sinclair Garson: The hon. member will not deny that there was a conviction in the second case and that there was a fine of $221,500? Then, after that, there was an appeal and the conviction was quashed.
There was Rex v. Simington, the Western Fruit case, a conviction and fine of $200,000. No appeal was taken. There was Rex v. Bennett-Wright, A.B.C. Plumbers, conviction and fine of $26,500; Rex v. Singer, A.B.C. Plumbers case, conviction and fine, appeal dismissed; Rex v. Belyea and Weinraub, A.B.C. Plumbers case, conviction and fine, conviction confirmed by Supreme Court of Canada; Rex v. Container Materials, the shipping container case, $156,500 in fines, appeal dismissed by court of appeal, and by Supreme Court of Canada; Rex v. Wilson Boxes Limited, the new trial of one accused in Rex v. Container Materials, conviction and no appeal taken; Rex v. Badden et al., shipping containers, fines and no appeal taken; finally Rex v. Ash-Temple, the dental supplies case, in which there was an acquittal, which has come under the criticism of my hon. friend from Lake Centre.
I believe that those cases I have recited indicate that, in matters of very great complexity and difficulty, the batting average of this department and of this government in connection with these prosecutions has been unusually high.


Major James William Coldwell: And of Mr. McGregor.


Stuart Sinclair Garson: Yes, indeed.


Mr. Brooks:: Why did you not go ahead with this case, then?


Stuart Sinclair Garson: My hon. friend's interjection is fortunate in that it leads up to a point I wanted to make. My hon. friend, the member for Lake Centre, suggests that this government conspired to instruct counsel in such a way that the case would be bungled and the accused freed. I should like to place on record the fact that, in connection with the instructions to counsel in the Ash-Temple case, the dental supplies case, ever since I came into the department I have been under the impression-I confirmed it an hour ago with Mr. McGregor-that Mr. McGregor had a free hand in recommending the selection of counsel. This was true in most of these cases. As a matter of fact, the man who was selected was recommended to him, and through him to the government, by Mr. Peter White of Toronto, an eminent and able man himself. He suggested we should have as counsel Mr. D. L. McCarthy, K.C., one of the outstanding counsel in Canada.
I notice my hon. friend nods his head in agreement.


John George Diefenbaker: Will the minister permit one question? In the other cases in which prosecution was successful, were the documents put in without proof of names and without proof of authority?


Stuart Sinclair Garson: That is an extremely ingenious question. My hon. friend says, in relation to over fifteen cases I have listed, and the details of which neither he nor I have ever seen, could I tell him whether, in my opinion, this or that or the other was proven? I can tell him I have not the faintest idea.
That brings me to this dental supplies case which has an important bearing upon the matter which is now before this house. After having been sworn in on November 15, I was faced with the necessity of securing a seat in a by-election, so I did not come to Ottawa to carry on the duties of minister until the early part of January, this year. One of a number of matters which I found upon my desk at that time was the report of the combines investigation commissioner in connection with the flour milling industry. I should like to lay before you, Mr. Speaker, and through you, before the members of the house, the situation as I then found it. I took this report which was upon my desk- a report which had not been delivered to me in person because I was not here to receive it, upon a matter about which I had no more personal information than I have about the present state of affairs in Siam- I took this report to cabinet for discussion with my colleagues and I hope I can discuss this matter without breaking any cabinet secrets. When I took it in for discussion with my colleagues, I was at once confronted with

the viewpoint that, with regard to the war years, the tenor of this report was quite contrary to the understanding upon which the wartime prices and trade board had operated. Not having been in the government during the period of price control, who was I to question that viewpoint of my colleagues? And I would never have questioned it in any event.


John George Diefenbaker: Whom were you confronted by?


Stanley Howard Knowles: You could have read the act.


Stuart Sinclair Garson: But that was not all. We had this sincere difference of opinion, which has been so sincere upon the part of one of the parties that he has resigned his position as a result of it and which is just as sincere, may I say, on the part of those who hold the opposite view. But in the carrying out of my duties as Minister of Justice I was not only confronted with this basic difference of opinion on some of the most important facts with which the report dealt, but I was also confronted at the same time with a great state of uncertainty with regard to the law that was to be applicable to those facts.
The dental supplies case had been heard by Mr. Justice Barlow with a jury on March 18, 1948. In that case, upon the ground that the documents were alleged to have been found in the possession of the employees and agencies of the corporate accused and were tendered in evidence upon that basis, and upon the basis that incriminating documents found in the possession of the accused are binding on the accused, the trial judge in the early stages of the trial permitted these documents to be entered as evidence. Later he withdrew the case from the jury upon the ground that there was not sufficient evidence upon which a jury could render a verdict. That was in March, 1948.
This group of counsel whom my friend the hon. member for Lake Centre (Mr. Diefenbaker) accuses of being derelict, fumbling and neglectful-


John George Diefenbaker: I rise to a question of privilege, Mr. Speaker. I never said that the counsel were derelict. I said that the government departed from the regular principles of proving ordinary documents in the ordinary way, and directed these counsel to act as they did.


Stuart Sinclair Garson: Having a little while ago
given me credit for being a mind-reader, the hon. member now shows great propensities in that direction himself.


John George Diefenbaker: I never gave the minister credit for being a mind-reader or anything else.
Combines Investigation Act


Stuart Sinclair Garson: My hon. friend knows perfectly well, as a leading counsel himself, that counsel who is in charge of a case of this kind is the man who determines what evidence he is going to put in; and no clients, least of all experienced clients like Mr. McGregor and his associates in the combines investigation department, would ever think of instructing their lawyer as to the legal methods of proof. They take advice from him as to what evidence the lawyers wish them to adduce. What my hon. friend is doing, although he may want to take away from it now, is this-


John George Diefenbaker: He does not want to take away anything.


Stuart Sinclair Garson: What it amounts to is this. He is accusing counsel in that case of gross neglect of duty and gross carelessness in the presentation of their case. I say on behalf of the government that we accepted, as we had in previous instances, the recommendation of the combines investigation department as to the identity of counsel. Unlike my hon. friend, we have no great complaint as regards counsel. Our complaint is with regard to the judgment which was given, and which we are now attempting to correct in the bill which is on the order paper.
At any rate, in March, 1948, the trial judge withdrew the case from the jury and said that there was no evidence to go before the jjry. From that judgment our counsel appealed. The appeal came on and was discussed before the court of appeal from September 27 to October 13,	1948. The
argument on the appeal took that length of time because of the fact that hundreds of exhibits were presented and complex legal issues were brought before the court by both sides of the argument on appeal. Following the hearing or argument, the court of appeal reserved judgment.
Thus in the early part of January, when I came here as Minister of Justice, I had on my desk a report in respect of which on some of the most basic facts there was a strong difference of opinion amongst highly intelligent and sincere people. I was also confronted with a state of the law which, if it was to be considered to be as it was held to be in the trial court judgment delivered in March, 1948, or as set out in the argument on behalf of the accused in the appeal court hearing in September and October, 1948, would leave us in an extremely difficult position in proving our case, quite regardless of this difference of opinion as to the facts.
It was not until February 28, the last day of February, 1949, that the appeal court of Ontario which had heard this case in September and October of 1948, delivered
4578]-97

Combines Investigation Act their judgment. We have never disguised- and certainly I have never disguised-or made any attempt to disguise the fact that that judgment is a body blow against the administration of the Combines Investigation Act. When the hon. member for Lake Centre says that the bill we are bringing forward now to undo the effects of that judgment just deals with a trifling little matter, he is showing a much smaller knowledge of the law than I should have thought he possessed.
While I do not want to anticipate my own legislation in any way, I think it is essential that I should say a few words about the issue which was raised in this case, because it is impossible to understand the position in which the government has been placed unless one understands the effect of the dental supplies judgment upon the very issue of the flour-milling report that we are discussing this evening.
We have two other sections in this bill, but the real necessity for introducing this amending legislation at the present time is because of the uncertainty of the law, a situation which has been created by this decision of the Ontario court of appeal of February, 1949. Following that decision the first thing we did -and this took considerable time-was to obtain the legal opinion from Mr. D. L. McCarthy, K.C., our leading counsel, concerning the judgment in question, so that we might on the basis of such opinion, and in further consultation with him, draft an amendment which would offset the effect of this judgment. I think the first draft of the amendment was made on April 7, 1949. As hon. members who were in the former parliament know that was at a time when there certainly was no prospect of securing any amendment to the Combines Investigation Act in that session of parliament. The amendment we are now submitting has been reached only after several drafts have been made since this first one. In the course of making those drafts we have dealt with a number of suggestions coming from Mr. McGregor and his associates. As he correctly enough says in his letter that the hon. member for Vancouver East (Mr. Maclnnis) read into the record tonight, we also dealt with certain suggestions which came from the cabinet. Under the act Mr. McGregor has extremely wide powers. I do not think there is any other civil servant in Canada who has much wider powers than Mr. McGregor has under the act. He has the power to initiate all inquiries without any reference to any minister at all. In most cases he carried on a preliminary investigation. I believe that the ratio of cases in which final report is made to the total of the preliminary investigations is

about 10 per cent. In other words it is only in the more serious cases that he conducts a complete inquiry and files a report.
Mr. McGregor refers to my predecessor, the Right Hon. Mr. Ilsley, as having authorized these proceedings to go forward, but Mr. Ilsley's giving authority had nothing but academic significance, because his authority was not required. The commissioner himself has complete authority to go forward without authority from the minister. To charge the government that places in the hands of one of its civil servants that measure of authority with neglect in this matter seems to me to be somewhat unreasonable.
But, sir, notwithstanding this very great authority which the commissioner has, we in the cabinet like to feel that we have a small residue of responsibility, if I may speak jocularly, for matters of policy.


Major James William Coldwell: Get the authority from parliament then to have that responsibility.


Stuart Sinclair Garson: Yes, that is right.


Major James William Coldwell: You should do that.


Stuart Sinclair Garson: What I meant was we have some responsibility to initiate ideas, to have ideas.


Douglas Charles Abbott: The hon. member may not like that.


Major James William Coldwell: I was talking about withholding the report.


Stuart Sinclair Garson: No; I meant to have ideas.


Major James William Coldwell: We are glad to know you have them.


Stuart Sinclair Garson: We had a number of ideas from Mr. McGregor and his associates, in respect to the formation of which he was under no restrictions whatever. Any good ideas that occurred to them they put down and sent to me and I took them into cabinet. There were no restrictions whatever. Well, we had a few ideas ourselves, and we, with some timidity in view of the great powers that the commissioner had, ventured to put these forward, and he turned every one of them down. These are the ones he refers to in his letter.
I want to say, Mr. Speaker, that in the legislation which is now before the house there is not one syllable but what came from Mr. McGregor and his associates.


Major James William Coldwell: He says so.


Stuart Sinclair Garson: Yes, that is right. But more than that, to every single one of those ideas that we had he said, "I object to them". We said, "All right, Mr. McGregor, we won't press them". And that is the way the matter stood.


Mr. Smith (Calgary West):: Surely not.


Stuart Sinclair Garson: The main section of the bill deals with this difficulty that had arisen in the dental supplies case. In that case, as in all of these cases, I think it requires no great amount of imagination on the part of hon. members to realize, if they stop to think about the matter at all, that when you send the mounted police into a man's business and pick up the documents that he might regard as having some potential embarrassment to him, and take them away and make them the basis of a prosecution, the prospect of getting him or his associates or employees to testify on behalf of the crown or to co-operate with any great amount of enthusiasm or zeal is not very great. Therefore when you get down to the practical job of proving your case you have to rely pretty heavily upon the principle of law which is known as the possessory principle which is that if a man is charged with conspiracy, any documents of an incriminating nature which may be found in his possession are evidence against him. We have applied that principle, which applies to individuals also, to accused corporations. I want to enter a reservation here, Mr. Speaker, as a lawyer. I am giving a very oversimplified application of the law in order to make myself more thoroughly understood. In all of these cases we have attempted, and in several of them successfully, to apply to corporations the possessory principle which certainly is not disputed at all as regards individuals. We did that in cases which I have here. Rex v. Simington, 1926, 43 C.C.C. 249 was one of them. Rex v. Container Materials Limited et al., 1940, 4 D.L.R. 293, was another. We were successful in these cases in producing the documents and filing them as exhibits and contending that because they were found in the corporate possession of the accused corporation therefore they were evidence against that corporation. It was in very large measure upon the basis of that evidence that we were able to secure a conviction.


John George Diefenbaker: Is that case reported?


Stuart Sinclair Garson: Yes, I shall be glad to give it to my hon. friend. When we did the same thing in the dental supplies case the court, both the trial court and the court of appeal, rejected that evidence. They rejected it upon the basis of a principle which we contend is newly enunciated, and which we think should be cured by the amendments which we are now proposing if we are ever to have an enforceable act.


John George Diefenbaker: Why did the minister not go to the Supreme Court of Canada with that case?
45781-97J
Combines Investigation Act


Stuart Sinclair Garson: If my hon. friend will just permit me to finish a rather complicated subject without interrupting me with questions I should appreciate it.
What Chief Justice Robertson of Ontario said in that case was this:
The proof required, however, in the case of a company differs somewhat from that required in the case of an individual. If the act relied on is that of an officer, servant or agent of the company, there must be evidence that he had authority from the company to perform the act. Mere possession of a document by the company, in the sense that the document was on its premises, or even in the company's files, may not, without more, afford ground for an inference that its contents had come to the knowledge of its board of directors, or of someone having authority from the company to deal with the matters to which the document relates.
At a later point in the same judgment His Lordship said:
There is, however, one objection common to all the letters. There is no evidence that the writing of any of them was authorized by any of the accused companies, nor is there evidence that anyone having authority to bind the company had any knowledge of the sending of any of the letters or of their receipt or of their contents.
These combines investigation cases usually are based largely upon documents picked up by the mounted police or by other agents of the combines investigation commission from the possession of the various alleged accused. One, two, three or a dozen of the documents in themselves may not spell out the nature of the offence; but all of a large number when put together like a complicated jigsaw puzzle so that they all fit in can build up a case. But if in relation to each one of the documents we had to prove that the board of directors had a meeting and authorized the document to be written, or that some person in the company having authority had authorized that to be done which was set out in the document, we would have an extremely difficult time to ever prove a case at all where offences of this nature had been committed.
Hon. members can understand that where you are dealing with a trade association made up of all the firms in one industry, you are dealing with an entity that is not incorporated and which cannot be joined as a party defendant. You may not want to prosecute the underlings who have the actual handling of association matters. Unless you can rely upon the possessory principle as regards the corporate accused it would be extremely difficult in some cases to secure a conviction.
That is why we are bringing forward this amendment. That is one reason why we wished not to act upon the flour report or to publish it until we had our legislation in shape.

Combines Investigation Act
The hon. member for Lake Centre (Mr. Diefenbaker) says that that is inconsistent with the statement made by the Minister of Trade and Commerce (Mr. Howe). I suppose it is, but he is not the Minister of Justice; he has not my responsibility.


Some hon. Members:: Oh, oh.


Stuart Sinclair Garson: If mere consistency was our aim, it would be a simple matter, as the hon. member for Lake Centre will agree, he being a lawyer of some note, to have had all the evidence and all the witnesses agree exactly with mathematical certainty. But the fact is that the Minister of Trade and Commerce had an opinion in relation to this matter based upon his viewpoint as Minister of Trade and Commerce and his experience during the war which I could not possibly share because I was in another activity altogether at that time. I have my own viewpoint in relation to this matter which largely centred around this question.
How were we going to deal with this report that was on my desk in a way that would bring a reasonable amount of credit to or how were we going to avoid bringing discredit to the combines investigation administration and the government? If with these differences of opinion as to the basic facts, with this uncertainty as to the condition of the law, we had published the report and if the counsel of the flour milling companies had shown one-quarter the capacity or had adopted one-quarter of the shrewd tactics of the defence lawyers in the dental supplies case, they would have said, "All right, go ahead and prosecute; we challenge you to prosecute." Then on the condition of the facts and on the condition of the law we would have had what the hon. member for Lake Centre referred to as another debacle on our hands. Then he would have got up and waggled his finger at us and denounced us for having- he did it today without any cause whatever- in effect conspired with counsel whom we had instructed to so conduct the prosecutions that we would never get convictions. We do not do business in that way.


John George Diefenbaker: You just hide the report.


Stuart Sinclair Garson: My hon. friend asks whether this report would have ever seen the light of day if Mr. McGregor had not resigned. What kind of morons does he take us for in this house? Does he think that any government would have a report of this sort and attempt to stifle it permanently?


An hon. Member:: Yes.


Stuart Sinclair Garson: Surely not. Our position is a simple one. We had this report. I do not mind saying that a responsible journalist of
'Mr Garson.]

this city came to me in a friendly way and told me that he did not know whether we had the report or not, but that if we had it and published it, from what he had heard the minute that was done we would be challenged to prosecute. I did not need to be told that.


John George Diefenbaker: When was that that the minister was so informed?


Stuart Sinclair Garson: That would be some time in the spring of 1949.


Stanley Howard Knowles: Just before the election.


Stuart Sinclair Garson: Yes, it was before; that is right. But not just before, and I do not know the political persuasion of that journalist.


John George Diefenbaker: We can suspect.


Mr. Fleming:: Give us his name and we will tell you.


Stuart Sinclair Garson: Looking at the matter in retrospect I do not think that the action taken has been contrary to the public interest.


John George Diefenbaker: Just the statute.


Stuart Sinclair Garson: If we get our amendment we will certainly be in a far better position as regards this or any other report than we are in now. I am going to base my request for support of the amendment on the position that I would not take the responsibility of prosecuting on any report unless we have this amendment. It would be a matter of grave difficulty. When I say that, I hope the hon. member for Lake Centre will get up and give us some support and not describe this amendment as he did today as being a matter of no consequence, just a trifling matter we are dealing with.


Mr. Speaker:: I must inform the minister that his time has expired.


Some hon. Members:: Go ahead.


Mr. Speaker:: With the unanimous consent of the house.


Stuart Sinclair Garson: I have a number of arguments to meet, but I shall try to bring my remarks to a quick conclusion.


Stanley Howard Knowles: Do not forget to answer the three speeches from down here.


Stuart Sinclair Garson: I shall try to do that without offending too greatly against the rules of the house. I do not intend to deal with the report because I assume that all hon. members are literate and can read it themselves. The report speaks for itself.


John George Diefenbaker: Before the minister goes on to deal with the other speeches may I ask him just one question?


Stuart Sinclair Garson: If my hon. friend will ask his question after I have dealt with the other matters, it would be better. If I am not careful I shall not have any time left.


John George Diefenbaker: The minister is going on to other matters. My simple question is this: What justification in law or otherwise does the minister have for departing from the mandatory responsibility placed upon him by the statute?


Stuart Sinclair Garson: I thought I had attempted during the course of the past few minutes to answer the very question my hon. friend has asked, but if I have not answered it to his satisfaction I shall not make any further effort to do so. As I say, I do not want to deal with the report because I think it speaks for itself, but there are one or two points that have not been brought out which I think deserve to be mentioned.
First of all, there is no allegation in the report of any breach of the act at all after decontrol came into effect. The evidence indicates that the occasion for the investigation being started in the first place was that upon decontrol Mr. McGregor, who is a very diligent and conscientious man in the discharging of his duty, saw that-it was in September, 1947, if I remember correctly- there was a uniform price rise in flour and mill feed put into effect at the same time by all the main milling companies. As I think is quite proper, he formed the hypothesis that this might be some indication of a breach of the act. He went to Mr. Taylor, who was then chairman of the wartime prices and trade board, to find out why these prices had gone up uniformly in this way. This is a rather condensed version, but what he was told was this. Mr. Taylor said that the government, greatly concerned with the large increase in the price of flour, and particularly in the price of mill feed, in the United States, was as anxious as they could be to avoid a similar increase in Canada. Although their legal powers under the wartime prices and trade board had expired with decontrol, Mr. Taylor was instructed to go to Mr. Short, the flour controller, and tell him that the government would look with extreme disfavour on any undue increase in the price of flour and mill feed upon decontrol, and that it was desired that the inevitable increase which would take place at that time should be kept to a minimum.
With that in view Mr. Taylor went to Mr. Short, and Mr. Short was prevailed upon ;o get his own company, the Lake of the Woods Milling Company, to increase the price of flour and of mill feed by a considerably smaller figure than he was disposed to, very
Combines Investigation Act much smaller than some of the other companies were disposed to, and to a very, very much smaller price than then prevailed in the United States. The suggestion was that, although the legal powers to enforce these arrangements had expired, if there were not reasonable co-operation in the matter the government would have to consider taking powers again to achieve that result.
This request was accepted under protest. Mr. Taylor told me that he even had a man call him up from Montreal and say, "What is the matter with you men? You are not satisfied with pushing us around all through the war; when the war is over and all your legal powers have expired you still have that zeal to push us around and threaten us with the renewal of controls you have just taken off." After considerable remonstrance and discussion the millers accepted $4.05 for flour and a price of $10 for mill feed, the desire being that the price of flour should not be held down at the cost of having mill feed rise too high. The reference in Mr. McGregor's letter to my having said that the inquiry should never have been started was based on that episode, and upon the information given to me by Mr. Taylor in the presence of Mr. McGregor and Mr. Gordon in my office. I said that what Mr. Taylor had told me, as he had told Mr. McGregor in September, 1947, seemed to me, in the absence of some other evidence of an improper agreement, a pretty reasonable explanation which would account for the uniform increase in the price of flour and mill feed. If it be taken, as I think it is reasonable that it should be, that this increase in price of September, 1947, was a price increase initiated and directed by the government through Mr. Taylor with a view to holding down the inevitable increase upon decontrol to a reasonable figure, then that was not an agreement at all let alone an improper one. Since that time, according to the report there has not been any evidence whatever of any breach of the act.
So far as the wartime period is concerned,
I wonder whether there is a general understanding as to the nature of the arrangements that were made with the milling industry in connection with the operations of the wartime prices and trade board. At the risk of belabouring a point that has already been touched upon, perhaps I might be permitted to attempt to oversimplify it in these terms. When a price ceiling was put on all products there was one notable exception, and that was the price of wheat. The price of wheat was permitted to rise at the same time that the price of flour was under a price ceiling. Of course if you increase the cost of your raw material and do not increase the price of your

Combines Investigation Act finished product, the people engaged in turning out the finished product are bound to be squeezed against the ceiling. The millers' suggestion was a fine one. They said: We have no objection to the price of wheat rising, but let the price of flour go up along with it and we will be perfectly satisfied. Of course, apart from all other considerations, that could not be entertained for the reason that a break in the price of flour would have broken the whole price ceiling.
In order to deal with the situation created by a rising cost for wheat and a fixed ceiling for flour, the government stepped in and said: We will pay a subsidy in respect of the cost of wheat to the milling companies upon the condition, however, that the milling industry must accept a limitation of profit clause in this arrangement under which they will be permitted only their standard profits in the pre-war period which, as it happened, were rather low. As the Minister of Trade and Commerce (Mr. Howe) said this afternoon, the milling companies had a full 100 per cent excess profits tax under that arrangement. They did not even get the 20 per cent rebate as other industries did. The result of all that was, as long as that arrangement was in effect, if the milling companies sold their flour for less money to the consumer, say 50 cents a bag, the 50 cents came right out of the federal treasury.


Mr. Hatfield:: No, no.


Stuart Sinclair Garson: Yes, yes.


Heber Harold Hatfield: Out of the taxpayers' pockets.


Stuart Sinclair Garson: That is right. I accept the correction with excellent grace. It is not a bad idea to remember the taxpayers once in a while. It came right out of the taxpayers' pockets. The iniquities charged against the milling companies during this period of control are that they did not sell at prices below the ceiling. If they had done so, every time they had sold below the ceiling price it would have meant an increase in the subsidy they got out of the public treasury or, as my hon. friend says, from the taxpayers. So while there may be accusations that the milling companies charged the ceiling price during that period, and so on, I have never been able to get through my head what purpose there would be behind such alleged irregularities. They could not make a five-cent piece by charging any more for their flour or feed, since the more they charged the less they received in subsidies. If they charged less they would get more subsidies paid by the taxpayers. The milling companies were just a conduit through which benefits flowed or did not flow to the consumer from the treasury or if you like, the taxpayers. The

milling companies themselves could not make or lose anything at all under this arrangement made by the wartime prices and trade board.
My hon. friend asks, what about the period before the war. In that respect the report speaks for itself, but I would point out that this is now a matter of some ten years. If you look up the Criminal Code you will see that even a charge of treason against His Majesty is subject to a three-year limitation. In other words if a man has committed treason previous to that three-year period, nothing can be done about it. So I rather think it is going pretty far back to take proceedings in respect of something done ten years ago. That is quite apart from a point which all the lawyers present will appreciate, that the further back you go in a prosecution, the greater becomes the difficulty of securing evidence and proving your case. I think any person who has had any practical experience in prosecutions knows that.
Now, Mr. Speaker, I am afraid I have trespassed greatly upon the time of the house, but I should like to conclude my remarks by saying this. Notwithstanding the eloquent and able arguments that have been put up by members of the opposition I do not admit that the government has been guilty of an error of judgment in this matter. In the light of the facts and the position of the law, which position will remain until we cure it by the amendments now before the house, it seems to me that the course we followed was not by any means a wholly imprudent one. But if as our opponents argue it was an error in judgment it was a judgment which was reached after the most careful and heart-searching consideration, and on a perfectly honest basis.


Stanley Howard Knowles: Will the minister tell the house on what authority the government relied when it made the decision to violate the provisions of section 27(5) of the act?


Stuart Sinclair Garson: Well, Mr. Speaker, it relied upon the fact that any democratic government is answerable to the people of the country for its acts.


Stanley Howard Knowles: And it kept its action from the people until after the election.


Stuart Sinclair Garson: I am going to answer my hon. friend's question, if he will give me a chance. It is perfectly clear that if an election were held tomorrow, as there will be an election in due course, we would have to go before the free people of this country and answer for our actions. I have no doubt my hon. friend would get up and anathematize us.


Stanley Howard Knowles: Hear, hear; more than that.


Stuart Sinclair Garson: And we would have to answer; then the people would decide. As long as that condition exists I do not think we need worry very much.


Stanley Howard Knowles: The violation was made before the last election, but it was kept secret from the people of Canada.


Right Hon. L. S. St. Laurent (Prime Minister):: Mr. Speaker, I think it is only fair to the Minister of Justice (Mr. Garson) that I should go a little further than he has gone. He has valiantly undertaken to accept full responsibility for what was done in this matter. I must say that at various times since the hon. gentleman became Minister of Justice he discussed with me the matters he has placed before the house this evening, the difficulties that arose out of the pending judgment of the Ontario court of appeals in the dental supply case, and the fact that if he published this report he would be challenged to institute prosecution at once. He also discussed with me the general terms of the report, and the fact that the matters which appeared to be most serious had occurred before the war period, before the establishment of controls.
I have had some experience in the administration of the Combines Investigation Act. I was connected with one case the Minister of Justice did not cite. That was the case against the coal industry, Rex v. Canadian Import Company. I conducted that prosecution for Mr. McGregor, and from my own experience in that case I can testify that I was the one who determined the evidence to be brought before the court, and that there was no attempt by Mr. McGregor or anyone else to direct me in the kind of case I should make before the court.
I was of opinion that unless there was a continuation of the facts which were more than two years old, section 1141 of the code would apply. I think that section is worthy of being quoted:
No action, suit or information shall be brought or laid for any penalty or forfeiture under any act, except within two years after the cause of action arises or after the offence for which such penalty or forfeiture is imposed is committed, unless the time is otherwise limited by any act or by-law.
The time for prosecution under section 498 of the Criminal Code or under the Combines Investigation Act is not limited. In the case of corporations it is a prosecution for a penalty, because both the Criminal Code and the Combines Investigation Act provide that in the case of a corporation there is nothing but a penalty.
This matter arose and was discussed in the coal cases. There it was proved that the series of facts upon which we relied had
Combines Investigation Act commenced more than two years before the prosecution, but had continued right up to the time of the prosecution. The objection was urged, nevertheless, that the prosecutions were outlawed, but that objection was dismissed on the ground stated in the headnote:
It having been established that there was continuity in the acts charged of combining together with a view to unduly restricting the coal industry by lessening competition and fixing a common price, section 1141 of the Criminal Code does not apply to bar the action in question.
That is the headnote to the judgment of the Quebec court of appeals in the case of Rex v. Canadian Import Company and others, reported at 62 Canadian Criminal Cases, page 342. That followed a decision of the Ontario court of appeals in the case of Rex v. Elliott, reported at 9 Canadian Criminal Cases, page 505. Since 1906 it has become article 1141. Lawyers know this provision. It goes back to the time when the united Canada's statute was passed by the parliament of that province. The preamble stated that it was desirable to grant immunity to His Majesty's subjects being brought before the court to face allegations of long-past offences. It was stated that there should be a general limitation, which was enacted at that time and which has been continued. As I say, in 1906 it was article 930 of the Criminal Code but is now article 1141.
Even if code section 930, which limits certain proceedings to two years after the offence could be held to apply to a prosecution by indictment,_
. That is a prosecution of an individual by indictment where the individual was susceptible to punishment by imprisonment. Even if it could be held to apply to that,
-it did not apply to bar this prosecution for the offence was a continuing one.
The reason for the dismissal of this objection, and which was urged against me in the coal prosecution, was the continuity of the acts establishing the conspiracy. It was my view that the controls during the war period had put an end to what had gone on before, and that prices from that time onwards had been under the control of the flour controller, acting for the wartime prices and trade board.
I had this advantage over the Minister of Justice, that I had some knowledge of what had taken place during the period when Canadian industries were under control. It was my opinion that, if the controllers had been satisfied at the time that their directions were being carried out during that period when, for the security of this country and for the security of this parliament we had to have the co-operation of Canadian industries, it would not be proper for us to say that what they had done under the impression that they were serving this Canadian nation in

Supply
a patriotic fashion should afterward be made the subject of prosecution before the courts after the war was over.
For that reason, I concurred in this view that we should not attempt to prosecute for things that were more than two years old if we were not prepared to prosecute for what had happened during the period when those industries were under the constant direction of our controllers. Unless there were facts that were subsequent to the existence of the controls, it would not be in the public interest to have the prosecutions instituted. There were a whole series of things which interfered with the ordinary administration of the Combines Investigation Act. I was not convinced that the judgment in the dental supplies case should be pressed as far as Mr. McGregor felt it could be extended. Nevertheless, it was there and it said, in effect, that when dealing with corporations you had to prove not only that the officials of the corporation had those documents in their possession, but that the documents had been authorized by the board of directors or by someone in authority.
We were not in a position to make that proof or to meet the challenge, if the report had been published, that prosecutions be instituted. I felt that the officers and directors of those companies were entitled to the opinion that, during the period of control when they were carrying out the instructions of the controllers, they were acting in a manner that would not get them into trouble. And I now feel it is only fair to the Minister of Justice that I should inform the house that he had discussed these matters with me, and I had concurred in the line of conduct he was adopting. I should bear, therefore, a portion of the responsibility, if there is responsibility, for attempting to carry out the implied or expressed undertaking given to Canadian industry that if they did their best to help us win the war, they were not going to be pilloried afterwards under the Combines Investigation Act.


Mr. Speaker:: Shall the motion carry?


Gordon Graydon: On division.
Motion agreed to on division and the house went into committee of supply, Mr. Dion in the chair.



[Stage Direction]
51. Departmental administration, $2,170,510.
Item stands.
Mr. Fournier (Hull):: Mr. Chairman, last Friday I announced that we would call the one department. National health and welfare has not yet been called, and since we are having difficulty getting the minister back

from New York to attend in the house, this afternoon I spoke to the acting leader of the opposition who said they would not object if we brought in national health and welfare and allowed the item to stand. I hope we can secure the concurrence of the other groups.


Stanley Howard Knowles: Are there any departments not yet opened?


Alphonse Fournier: There are three departments that have not been called, finance, the Prime Minister's office and legislation.


[Stage Direction]
252. Departmental administration, $806,605.
Item stands.
Gordon Graydon: May I ask the minister if he is in a position to indicate to the house when we may expect the national health and welfare items to be called?


Alphonse Fournier: I could not give a definite answer tonight, but I shall inquire and let my hon. friend know when the minister can be here to deal with the general items. I shall have an answer within twenty-four hours.


Gordon Graydon: Is the Prime Minister in a position to indicate when we will deal with the administration item for external affairs?


Louis Stephen St-Laurent: No, I am not in a position to make a definite statement. The Secretary of State for External Affairs (Mr. Pearson) is trying to arrange the work of the political committee of the United Nations in such a way as to allow him to be here for two or three days to deal with the debate in this house. I believe he hoped that could be arranged for the sixteenth and seventeenth of November, but I have not had confirmation from him. As soon as I receive that I shall inform the house.
Progress reported.



ANIMAL CONTAGIOUS DISEASES ACT


Right Hon. J. G. Gardiner (Minister of Agriculture) moved: the second reading of Bill No. 147, to amend the Animal Contagious Diseases Act.


Mr. J. A. Charlton (Brant-Wentworth):: It
is plain now to all of us, Mr. Speaker, after reading this bill, that the government is not going to pay an increased compensation for all reactors but is simply going to pay beef price for reactors which go to the tank. The other night I said something about statements

that had been made inside and outside the house with regard to the fact that the government was intending to pay an increased compensation for reactors. I should like to quote from page 2737 of Hansard of April 29, 1949, where that question was asked by Mr. Daniel of Oxford. I quote the question in order that the answer given by the parliamentary assistant (Mr. McCubbin) will be plain. It is as follows:
I should like to address a question to the parliamentary assistant to the Minister of Agriculture. In view of the statements made by the Minister of Agriculture (Mr. Gardiner), as reported on page 2239 of Hansard, concerning increases in the compensation paid farmers who have lost cattle under the area T.B. tests, is the minister's parliamentary assistant prepared to say that these payments will be made this year?
Here is the answer of the parliamentary assistant to the Minister of Agriculture (Mr. McCubbin):
I should like to thank the member for giving me notice of his question. In reply may I say that it might not be possible to reach some of the things we should like to reach before the end of this session, but I can assure the member that it is the intention of the government to increase the compensation paid to T.B. reactors, and also to make it retroactive. If it is not done before the end of this session, it will be one of the first things done by this government after the election.
If it was not the intention of the government to pay increased compensation for all reactors, the impression was most certainly left with delegations coming to Ottawa, with people outside the house, and with members within the house that this was to be done.
For a moment or two, Mr. Speaker, I should like to say something about reactors. In the true sense of the word all cattle that react to the tuberculin tests for T.B. are reactors. In the quotation I just read from Hansard it was quite plain that the compensation was to be increased for T.B. reactors. That is the parliamentary assistant's statement. Now the government come along and say that, by the fact that they pay an increased compensation for reactors which go to the tank, they are doing what they said they would do and are fulfilling the promises made to delegations and to people across the country. I think that is a narrow margin on which the government are basing the facts.
As reported at page 2239 of Hansard of April 1, 1949, the Minister of Agriculture (Mr. Gardiner) made this statement:


James Garfield Gardiner: A final decision has not been made and for that reason I am not able to say exactly what it will be. I am able to state that those who are concerned with the matter have been in to see us and they did not ask for any more than we were considering giving, so I think it likely there will be satisfaction when an announcement is finally made.
Animal Contagious Diseases Act
I would direct attention to the words "they did not ask for any more than we were considering giving." They may have considered it, but they are certainly not doing it.
As I said on Friday night, the compensation paid back in 1903 was identical with the compensation which is being paid today. Does it sound reasonable to you, Mr. Speaker, or to any other hon. member of this House of Commons, that the compensation to be paid in 1949 should be the same as that which was paid in 1903? In 1918 it was thought advisable to increase the compensation by a considerable amount; and as I stated on Friday, the compensation was increased to $80 for grade cattle and to $250 for purebred cattle. That would mean that, if paid on the two-thirds basis, the farmers at that time would receive $53.33 for grades and $166.66 for purebreds. On September 23 the Minister of Agriculture, as reported at page 223 of Hansard, made this statement:
Mr. Chairman, the answer today is the same as it was a year ago. About ten per cent of the cattle that are reactors go into the tank. The increased price of cattle does not hurt the man who is being paid compensation unless there is a large proportion of the animal infected because it is only then that it goes into the tank. If an animal is worth $200 this year and it was worth only $50 ten years ago, the compensation is on the same basis, but the remainder of the animal is sold and the individual gets the return. If his return is based on the $200 price he may get the greater part of the $200 and he gets the compensation as well.
Then here is the particular sentence I wish to stress:
It is not correct to say that because the price had gone up on cattle the compensation ought to go up. The compensation is not the whole thing.
The compensation is not the whole thing, Mr. Speaker, but the compensation is the greater part of the thing for those people who lose cattle in the T.B. test. As I said on Friday night, nobody that I know of- and I have asked various people who should know-has kicked about the amount of money received for reactors that went to the tank. The farmers were satisfied to take their losses on those tankers. What they are kicking about is the amount of money they get for reactors that do not go to the tank; and there are a great many more of those than there are those which are tankers. The delegations asked for an increase in the compensation for all reactors, not just those which went to the tanks.
In that same statement the Minister of Agriculture said that he brought in this bill last year. I think probably he erred slightly there, because I do not remember its coming in last year. I have checked up the records and cannot find any place where it was brought in.

Animal Contagious Diseases Act


James Garfield Gardiner: I agree with my hon. friend. I was mistaken in saying it was brought in last year. It was drafted but not brought in.


John Alpheus Charlton: I reiterate, Mr. Speaker, that what the people across the country expected, in view of the speeches made previous to the election, was that an increase would be made in the compensation paid for all reactors. I reiterate that statement. After taking a considerable beating in the 1940's, in view of the fact that cattle prices had increased considerably-I will say that they are probably three times what they were in 1903-it is not fair to expect people to accept now the same compensation that they accepted in 1903. I say that especially in view of the fact that the government of the day in 1918 thought it advisable to increase the compensation. If there was reason in 1918 to increase the compensation there is a far greater reason today to increase the compensation for T.B. reactors. I again ask the government and the Minister of Agriculture to reconsider the matter and increase the compensation to the value placed on the animal in the act, and not to take it down to two-thirds of the value. That would simply mean changing the figures in the act. That was what happened in 1922. The government of that day tried to reduce it from $250 to $150. There was such a strong case put up in the House of Commons that the figure was reduced only to $200.
I repeat that if there was just reason in 1918 to increase it, there is certainly a far greater reason to increase the compensation today. I hope the government will see fit to change their opinion and make the value as it is in the act today, namely, the total value, the compensation value without the two-thirds being taken off.


Mr. H. O. White (Middlesex East):: Mr. Speaker, I, too, wish to say a word on this matter on second reading. This afternoon the hon. member for Leeds (Mr. Fulford) mentioned national cheese week. If we are to have cheese to export to pay for other products that we wish to import we shall have to give some consideration to the men who produce it. Now is a good time and this is a good place for the government to exhibit that interest in the production of food and wealth which means so much to this country.
On Friday last I mentioned unemployment insurance, and similar things which were designed to tide people over difficult times. We are in perfect accord with unemployment insurance and with the assistance given to veterans. I could also mention the Prairie Farm Assistance Act. When they have difficult times and dried-out years in the west, Ontario farmers and others do not object to 
nor protest against the payments which are made to farmers in lieu of crops. When expropriation proceedings are taken the parties interested do not expect the arbitration boards to pay as little as they can get away with. They expect the arbitration boards to award a fair price for whatever real estate or property is expropriated. I could also mention the national health program. As far as national health is concerned, I think a lot more could be done to improve the nutritional value of certain foods that may be produced.
For a moment or two I am going to refer to some of the things that were said in days gone by by other people in dealing with this same measure. On April 16, 1918, the Hon. Mr. Crerar then minister of agriculture had this to say as reported at page 801 of Hansard:
I think a word of explanation will suffice for this resolution. At the time this act was originally passed the values upon which compensation was based for the slaughter of condemned animals were fixed by statute, in the case of cattle $60 per head and for pigs and sheep $15 per head, and the compensation allowed when animals were condemned and slaughtered was two-thirds of the value set by statute. Owing to the increased value of these animals at the present time, the compensation allowed when they are ordered to be destroyed does not adequately compensate their owners. The intention of the act when originally drafted, as I understand it, was to encourage the reporting to the proper authorities of animals which might be affected by some contagious disease, so that they could be properly examined, and if found a menace, destroyed. I think it is only proper that now, when the value of these animals has increased, and in some cases doubled, beyond what it was at the time the act was originally passed, the limit upon which compensation can be fixed should be raised, and that is the purpose of the resolution.
Conditions in April, 1918, and today are comparable. All I can say with respect to the action of the government is that it is similar to many other actions taken during the war and after. I could sum it up in five words, "Too little and too late."
On April 20, 1923, the Hon. Mr. Motherwell, also speaking in this house as minister of agriculture, said, as reported at page 2047 of Hansard:
This is the usual resolution which precedes a money bill and while it was discussed incidentally a few weeks ago I think it is well to go into it further at this time. The main feature of the resolution proposes to reduce the indemnity for slaughtered animals, that is purebreds, from $200 for each head to $150. Our reason for doing that is to conform to the general reduction of values in live stock, both commercial and purebred.
The government of that day was quite prone to reduce compensation when the prices of animals were down, but they are very hesitant today about bringing them up when prices are high. As I said on Friday last, the farmers are going to be bitterly disappointed. I hold in my hand a copy of a

presentation which was made to the government earlier this year. I intend to quote two or three paragraphs from it.


James Garfield Gardiner: What is the date of it?
On motion of Mr. White (Middlesex East) the debate was adjourned.



BUSINESS OF THE HOUSE

Alphonse Fournier: Tomorrow we will conclude Bill No. 147, to amend the Animal Contagious Diseases Act. Then we shall take up Bill No. 142, to amend the National Housing Act, 1944; Bill No. 120, respecting the Incorporation of Pure-Bred Live Stock Record
Business of the House
Associations; Bill No. 144, to amend the Combines Investigation Act; Bill No. 64, to amend the Royal Canadian Mounted Police Act; Bill No. 133, respecting the Application of a National Trade Mark to Commodities and respecting the True Description of Commodities.


Donald Methuen Fleming: In that order?


Alphonse Fournier: To please my hon. friend, the housing bill will be the second order. After that I would not give a definite undertaking.


[Stage Direction]
At eleven o'clock the house adjourned, without question put, pursuant to standing order.
[Stage Direction]
Tuesday, November 8, 1949