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A I" 3 ?5" HI 3 '.*> ^ .-., . ^ To the Directors of Russell House, Ottawa. IJeu. 8, 1886. (Donsolibation of Tilestern Railixiays. G-ENTLKMEJS, — The negotiations with the Government of Canada in this matter which I have been carrying on in your behalf have now reached a point at which it seems desirable to place before you a connected statement of the proceedings which, have been taken up to this time. 1 have, therefore, the honor to submit to you the following review of the negotiations from the date of the passing of ouv Charter, and the other legislation upon this subject, by the Provincial Legislature. 2. Upon our arrival at Ottawa, Mr. C. A. Scott and I preserted to the Grovernment, the Memorial dated May 21, 1886, copy annexed. (Appendix A.) 3. Previous to the passing of the legislation by the Provincial Legislature, there had been long negotiations between the representatives of the Western Counties liailway Company ftnd. ourselves, as to the amicable acquisition of that Railway and the transfer of all its rights, privileges and claims to your Company so as to enable the latter to obtain the "release of claims" in respect of the \^'indsor liranch, required by Chap. 16 of the Acts of the Parliament of Canada, 1882. These negotiations resulted in an arrangement to which, as we understood, the Western Counties Directors assented, whereby the holders of A bonds outstanding were to receive 20 per cent, of the face value of these bonds in cash, out of the $100,000 providtd in our schome, and in certain cases a further 20 per cent, in bonds of the Company ranking after the guaranteed bonds, but before the prefer- ence or ordinary shares, such bonds bearing interest at 5 per cent, and to be payable, prin- cipal and interest, within 20 years. It was further provided that the municipality of Yarmouth were to receive an equal amount of common stock of the new Company in exchange for $100,000 of common stock of the Western Counties Company held by them ; and also that with a view to interest the local people i\\ the new C!ompany, the actual residents of Yarmouth should receive common stock of thjj new Company in exchange for the shares held by them in the Western Counties Company. 4. It may be as well to pause here to point out what would be, under these arrange- ments, the total cost to ycur Company aad to the Government of Nova iScotia, of the Western Counties Railway, from Yarmouth to Annapolis. This cost is made up of three components : (1.) The loans due from the We'tern Counties Company to the Government to be remitted ; (2.) Cash, bonds and stock, to be paid by the new Company to the old one ; and (3.) cash to be expended in completing and repairing the existing railway. 5. The figures are as follows : A. Loans to be remitted : Guaranteed loan of je55,000, with accrued interest $375,000 00 Subsequent loan of jeiO,000 50,000 % B. Payment to old Company : Cash out of guaranteed funds 120,000 00 Bonds of new Company 46,300 00 Shares of new Company to Township of Yarmouth #100,000 00 Others in Yarmouth 100,000 00 200,000 00 C. Expenditure by new Company : Repairs to existing railway 200,090 00 Construction of "Link" 600,000 00 1,590,300 00 or about $18,600 per mile for the ^'o miles. "'Mm.....^ i^-Ob^^l wmmmmmmmi':iSF^^^''f^i^i^^^^^!^r''^'^BmMMmM i/i 2 6 Upon arriving at Ottawa I found that the Western Coimties Directors, under circumstances oi' which 1 do not know the details, but apparently from a beliel that the Dominion (iovornmeut would help them to better terras, had witlidrawn from the understanding above described, and had lodged a protest dated May, llth, (copy annexed appendix B*) and also subsequently addressed a letter ( copy annexed, appendix C* ) to the Honorable the Secretary of State, copies of which documents wore courteously furnished to me by Mr. J. li. Kinney, M. P. lor Yarmouth. 7. I do not propose here to controvert the statements made in those documents, as a comparison of them with the letter of the statutes to which they refer will enable you to judge how far they are well founded ; but I enclose a Memorandum (appendix D) which Mr. Scott and 1 prepared and circulated to Ministers and others, replying to some points raised on behalf of the Western Counties Company. 8. About the time our Memorial was submitted, several references were made to the Consolidation Scheme in the House of Commons, for full reports of which I would refer to Hansard lor May and June, 188G, pages 1,073,-1,675 -70,-77,-8G,-96,-98,-Ut),-n6t),- 07,-68,-09,-70. liut it is necessary to draw your attention especially to the remarks of the Hon. Mr. McLelan, Minister ot Finance, on the 28th May, 1880, ( Ha.isard, paffe 1677), from which the following are extracts ; — " The hon. gentleman has forgotten to mention that about the time of Confederation a subsidy of $1,000,000 was given to continue the road from Windsor to Annapolis,! about eighty miles, and some years after Confederation the Dominion Government ottered the Windsor Branch to any Company that would complete the road from Annapolis to Yarmouth. A company was eventually formed, and having been also subsidized by the Local Government of Nova Scotia, it commenced the construction of that work, and made the connection, all but about eighteen miles. The hon. gentleman knows that the Local Grovernmeut have now made an arrangement with a company to complete those eighteen miles, and that company are expecting to receive the Windsor Branch, and they are also expecting to receive $64,000 which was ottered by the Dominion Grovernmeut two years ago. # * :i: * * » " They have the Windsor Branch which cost nearly $2,000,000, and they have a grant from the Local Government of $100,000 a year for twenty years, in addition to the $100,000 which is covered by deposit, and surely a Company so largely subsi- dised as that is, cannot fail to build the eighteen miles of road to make connection, and put the whole in good order." : # * * " ^ith that arrangement, they could hardly expect the Dominion Government to step in and give a further subsidy," 9. IwouW also, draw attention to the remarks of Mr Kaulbach, M. P., on May 29, (Hamard, page 1696.) of which the following is an extract : — "When interviewing members of the Government last week, I was informed that they were impressed with the idea that the newly formed Company or syndicate, which is a mere bubble, which has no iouudation, as I believe, which is managed by a person by the name of C. A. Scott, and which is known as the Joint Stock Associa- tion, is simply intended to retain the Local Government in power. It is a sort of mushroom Company which has only sprung up within a few days, and no one knows anything about it." On the same day, Mr. Kinney, in the course of some remarks, (Hansard, page 1,698) said : — " The scheme, on its face, looks very plausible and reasonable, but when analysed is found to be simply a project of the Government of Nova Scotia to hand over to a foreign company sixty-seven miles of linished and furnisaed railway, and the Windsor Branch, which is computed to be worth $1,000,000, for the magnittcent sum of $120,000." 10. Hon. Mr. McLelan, in winding up the conversation, (Hansard, page 1,699), said, in the course of his remarks : — "The Government expressed their desire to have that completion (meaning the link between Annapolis and Digby; made years ago by the donation of the Windsor Branch for that purpose. At a late period they supplemented that gift by $3,200 a mile for the eighteen miles that are yet existing (V wanting.) * * . * it is much better that their proposition (viz., the plan of the Nova Scotia Government) shall be, if possible, carried out, it just'ce can be done to the Western Counties Kailway, and then, that being tried, I think the possibilities are that we may succeed. My hon. friend from Yarmouth thinks otherwise, that it cannot be done without doing great injustice to the municipality of Yarmouth and the Western Counties Railway." *Not reprinted. tNOTE.— This subsidy, liowever, was out ot Provincial funds. \1 Nova table 6 11. It will be observed that the Minister of Finance admitted that the Windsor Branch had been donated as an aid to railway ejitcrprise in Nova Scotia, and throughout the debates it was assumed that your Company were to re(;eive this railwav, valued by Mr. Kinney, atjll,UO(),UUU lornothing. No releren.e vvus made to the lact that this grant has been burdened by the Dominion Government itsell, with a beneliiiul lease to another company, lor 27 years to come, a lease valued by dilierent persons at *ti()0,0()O to $800,000 which must be paid lor beiore amicable acquisition o! the Jlranch can be obtained. Nor was any roiereuce made to the stipulation imposed by rarliument in 1882, under very dilierent circumstances Irom the present, that the Governmtul ol Nova Scotia beiore obtaining the lee simple ol the branch back ugaiu Irom tlie Dominion Government, should obtain Irom the Western Counties Railway Comnany a release of their claims against iho Dominion Government, ihal is, should pay tue Western Counties Company the damages which might prove to be due to them Ironi the Dominion Government, lor their iaiiuro to carry out the donation ol the Branch authorized by I'arliament in 1873. 12. It will be seen, therelore, that the real position of the Government of Scotia and ol your Company towards the grant olthe Windsor Branch, and the equital claim ol the Company lor assistance from the Dominion Government in consequence of the burdens imposed upon that grant, have never been fully placed before Parliament. 13. Finding from the proceedings in Parliament that the Government were not disposed to allow the scheme to proceed unless something were done to satisly the municipality ol Yarmouth and the Western Counties llailway Company, 1 endeavored to devise some means to meet the dilticulty. As to the municipality, they held $100,000 of common stock in the Western Counties liaiiway, which we had agreed to exchange lor au equal amount in the new company, by which the municipality would at any rate lose uotliing. They claimed to be paid 40 cents in the dollar in cash. 14. With regard to the Western Counties liaiiway Company, I found that it was scarcely contended that tae sum to be paid for the actual railway, viz., about |500,000 (,that IB about 1^376,000 due to the Nova ticotia Government, and $120,000 cash) was not as much as the selling value in me market of the road in its present condition. The real grievance was the surrender ol the claims ol ihe Company for compensation for the hnaucial ruin inflicted ou them by the failure of the Dominion Government to convey to them a good title to the VVindsor Branch. This failure again arose out of the previous action of the Dominion Government in giving away a beneiicial lease of the Branch to the Windsor and Auuapohs Uailway. 15. These were matters lor which the Dominion Government were solely responsible, and our Company were naturally entitled to look to the Dominion Govern- ment to remove the dithculties which they and their predecessors had created. We had already gone a long way to meet the Dominion Government, by agreeing to take upon ourselves the burden ol buying back from the Windsor and Annapolis Company should they establish a right to compensation, their lease of the branch. In strictness, we or any other Company completing the Kailway from Yarmouth to Annapolis, should be entitled under the Resolution of the House of Commons of May 2.3rd, 1873, to have the Windsor Branch granted to us in fee simple, clear of all incumbrance, and injustice to the i'rovince and to us, we contend that the Dominion Government ought to pay the com- pensation, if any, which may become due to the Windsor and Annapolis Railway Co. (upon the acquisition of their own Railway,^ lor their interest in the lease. Such contribution, while no more than is justly due to the Province and to our Company, would have enabled us to make more lavorabie terms with the Province, and have mater- ially lessened the capital to be raised. 16. However, having accepted for the present, this burden, the questiou remained, how to deal with the claims of the Western Counties Railway Company. I ascertained that the Dominion Government had so far recognized these claims as to pass an Order in Council, under date J une 'Jth, (appendix E) a lew days after the debate from which I have gi\eu oxtracts, promising in eliect, that if our scheme should fail to be carried out, the Dominion Government would assist the Western Counties Company to complete the line, by granting them a subsidy in the form of an annuity for the 27 years during which the Windsor and Annapolis Company claim the Branch under their lease. The order does not hx the amount of the annuity, but 1 understand that some value it at $500,000 capitalised. Less than this, indeed, would be ol little uie to ensure the construction of the line, which will cost |bOO,000. 17. I suggested to the Western Counties Railway Directors that if the above arrange ment was carried out, although the line might be built, consolidation would not be obtained »nd that their bondholders would receive little if any direct benefit. Whereas, d^^'^^'^i&ii.'.'.' mIm a considerably less sum grantod iu aid to our Company would onnblo us, besides building the lino and carrying out consolidation, to makti Homo substantial compensation, on behall' ol' the Dominion (iovornment to their bondholders. 18. Alter some discussion, 1 vibit«!d Yarmouth and su(;ceeded in efn-cting a provi- sional aiiangemenl to the loilowing dlect : 11 the Dominion GovtMnmcut would grunt us a moderate subsidy (eventually lixed at *a75,U0U) we were to buy up I lie bonds, including those deposited with the Uoveriiment of Nova 8cotia by Messrs. Mui kby, Stewart & Co. at 40 per cent ol' their lace value. We were to pay the Company itself *.j,000 to meet some Uoating debts, and we were to buy thc! stock of the Municipality at a price of 33 to 40 per cent ot its face value. The Company was to surrender the Uailway peaceably to us, and to give the release of claims ret^uired by the Dominion (Government. ly. All the Yarmouth bondholders assented to this scheme, as did other principal holders; and as by this arrangement the bondholders would have received mach more that they are likely to get in any other way, I believe all would have fallen into it eventually, except possibly Mr. Plunkett, who however holds but a small quantity of debenture stock. 20. Having obtained the assent of the Government of Nova Scotia to my proposed schemo, provided it did not infringe upon any of the provisions of our contract with them, 1 proceeded to submit it to the Uovornment of the Dominion in my letter of Aug. '21, and fhe memorandum annexed thereto Appendices F. & G.) addressed to the Honorable the Minister of liailways. The Minister of Finance had expressed in Parliament a desire that the scheme should bo carried out, provided that justice bo done to the Municipality and to the Western Counties Railway Company. It appeared that tne justice desired by these bodies consisted in the payment ot claims alleged to be due to them from the Dominion Government. If these claims were not considered by the Dominion Govern- ment well founded, then the non-recognition of them by us was not an injustice, and there was no reason on that ground tor refusing the assent of the Government to our scheme. If on the other hand the claims were well founded, the injustice would be iu the Dominion Government's refusal to se^ Je them, and this again could be no reason for refusing to assent to our scheme. 21. I showed how the Dominion Government could meet these claims, and satisfy all reasonable demands, and at the same lime ensure the completion of the link, and the consolidation of the system, at a less cost than they had already undertaken to incur tor an imperfect and mutilated scheme. I pointed out that this system of trunk railway has had no aid at all from the Dominion, except the subsidy of $04,000 voted in 1884, and the promise of the Windsor Branch, the value of which is nullified by the conditions and burdens attached to it ; and urged that, considering the scale of subsidies granted to railways iu other Provinces, and the large contributions to these subsidies furnished from the revenues of Nova ticotia, the amount of $375,000 asked for was most moderate and reasonable. 1 explained carefully that the Company only asked for an increase of the original subsidy to enable them to meet claims upon the Dominion Government itself, and not for the beueht of the Company; I showed Ministers how it was proposed to apply the increase asked for, and ottered to modify either the application ot the money or the amount asked lor, and to place the expenditure of it under the direct control of the Government if they desired it. 22. Lastly, I pointed out that we were an Anglo-Nova Scotian Company, proposing to bring in a large amount of capital from England, to be raised and spent under condi- tions of control and supervision more stringent than have ever been submitt«d to in this country ; that there was no contractor, or promotion money, that the promoters were con- teat to look solely for any remuneration to the future surplus earnings of the line, and that having shown our bona tides by the expenditure of considerable funds and two years of negotiations, we were entitled to look for some moderate encouragement from the Dominion Government. 23. These proposals were under consideration by the Government for some weeks, but I have now received a letter dated November 30, 1886, from the Minister of Railways, (appendix H) declining to entertain the request for an increase of subsidy, and enquiring how we propose to deal with the claims ot the Western Counties liailway Company, I annex a copy of my reply to this letter (appendix K.) 24. The long delay which has occurred in giving any reply to our Memorial of May last, the present refusal to entertain a proposal for which I venture to think a strong case was made out in the memorandum of August 27th (appendix C,) and the general impression left by my interviews with Ministers, together with the apparent preference shown by the Order in Council of June 9th, to grant larger aid than we asked for to the Western Counties Railway Company for an imperfect scheme, appear to indicate a reluctance to co-operate in our scheme for the completion and con- solidation of these railways for which I am unable to otfer any explanation ; the more so that no tangible objection to the scheme has been raised by any of the Ministers in my conversations with them. 25. One point indeed was mentioned which concerns the relations between the Federal and the Local Governments rather than our Company. The Minister of Finance remarked that the Local G-overnment was asking for financial aid from the Dominion, while by this scheme they were taking additional burdens upon themselves. But so far as any burden was imposed upon the Provincial Treasury by this scheme, it is caused by the Province undertaking to buy back the lease by which a former Dominion Govern- ment alienated the Windsor Branch from the purpose for which it had been assigned. If the Dominion Government assumed this charge, and restored the original status of the Windsor Branch at its own expense, as it may be contended justice and equity require, then there would be no burden whatever, contingent or otherwise, imposed upon the Provincial Treasury. 26. It would almost seem as if the Federal Government desired to take advantage of the stipulation as to the release of claims embodied in Chap. 16 of 1882, to impose upon the Province the payment of any damages which may be found to be due from the Dominion Government to the Western Counties Company in respect of the failure of the Dominion Legislation of 1874. It is rather for the Local Government than for us to contest the fairness and justice ot such a transfer of obligation, but I may be permitted to point out that the circumstances under which Parliament laid down that stipulation were widely different from the present. Apart from other differences, the Dominion Government of that day agreed to receive from the Province a deposit of $2,000,000 at 5 per cent, interest, in perpetuity, while the present Government has only consented to allow the Province 4 per cent, for our deposit. The difference of 1 per cent, per annum on two millions of dollars, in perpetuity, capitalized at 4 per cent., is equal to a subsidy of #500,000, which, therefore, enabled the Local Government and the Company of 1882, to pay the Western Counties Railway Company a sum large enough to cover not only the commercial value of their road, but compensation for their claims as well. We have already offered to settle the whole matter for less aid than the Dominion Government granted to the scheme of 1882 under this head alone. This has been refused, but if the condition of the Legislation of 1882 is adhered to, surely the substance of the arrangement should be adhered to also. The Government of Canada, it appears, wish at the same time to withdraw the assistance given to the scheme of 1882, and still to insist on the condition attached to that assistance, which seems manifestly unfair. 27. As this matter is one that is mainly between the two Governments, I beg to suggest that you should now move the Local Government to address the Government of Canada with a view to their either settling their dispute with the Western Counties Railway Company, and so enabling the Local Government to procure from the Western Counties Railway Company a release in terms of the Act, or else that the Government of Canada should agree to recommend Parliament to withdraw the stipulation in question at the next session, so that we might purchase the Railway clear of these disputed claims which would be left to the Government of Canada to settle with the claimants amicably or in the Courts, as they may think fit. I have the honor to be, Gentlemen, Your most obedient servant, R. GERVASE ELWES, M. Inst. C. E' f 6 APPENDIX A. ^(itioi^iat To Hia Excellency the Most Hovorable Sir Henry Charles Keith Petty-Fitzmaunce, G. C. M. G., Marquis of Lansdoivne, &c., sold under the powers of the mortgage for what it will fetch, according to agreement. The Government of Nova Scotia are first iiiortgagees of the Western Division of the Western Counties Railway and have power under their agreement to sell the Railway if the Company should make defaidt. This contingency has occurred, and the Govi'rnnient of Nova Scotia havt; agreed with the Joint Stock Association that failing an anangement for anncable acquisition they will put in foice their poweis under the mortgage, but as this agreement was voluntary nnd meant to be carried out, the exercise of the powers conferred by it can hardly be a grievance. It appears to be contended that an attempt has been made, or is contemplated, to inter- fere by legislation with the rights of the Western Counties Railway Ciimjiany, if they have any, to the Wind.sor Branch. liut a reference to the Act above (pioted, and the agreement annexed thereto will shew that all that is stipulated is, that when the undertaking of the J 9 Western Counties Railway Company with nil its rights, privileges, etc., inchuiing of course any interest the Company may have in tlie Windsor Branch, has been acquired by the New Company, and when they have completed the "link" fiom Digby to Annapolis, and have acquired the Windsor and Annapolis Railway, thev. they shall become entitled to the Windsor Hranch. The rights and interests of the Western Counties Railway Company to the Windsor Branch, if any exist, are in no way altered. The actual position of the Western Counties Railway is this : The Government of Nova Scotia hold a first mortgage upon the Railway for the sum of £5.'),000 with about six years arrears of interest and liave power under an f.gieeinent with the Company to sell the Rail- way to recoup themselves. It is certain that if sold, it would not produce anything like the amount due to the Government. But the Government have very liberally offered to waive their lien for this large amount to enable the A debenture holders, who would otherwise get nothing, to receive r, sum of $100,000 out of funds raised under the guarantee. The new Company has offered out of its own (unds and stock to provide some further compensation to those local parties who have supplied their own money to assist the enterpri.se. These offers are conditional upon the Company agreeing to an amicable transfer of its undertaking and intere.sts. If these liberal offeis are refused neither the Goverrunent nor the new Company can be blamed if they fall back upon their strict legal rights under existing agreements. On behalf of the Halifax and Great Western Railway Company, R. GERVASE EL WES, M. Inst. (IE. C. A. SCOTT, M. Am. Soc. C.E. Ottawa, May 27, 1886. APPENDIX E. Copy of a Report of a Committee of the Honorable the Privy Council, approved by His Excellency the Governor- General in Council, on the 9th June, 1S8G. On a memorandum, dated 3rd June, 188G, from the Minister of Railways and Canals submitting an api*'«'?;« '^^^^.jj.^ ^J thS respectfully to refer to the accompanying; print,..! men.oran.inm. l''';,f^,^.* j" ,™^'Ji° increase of .subsidy is re.iuested is to assist the Con.pany in carrying on the C"n'l>tions Ui I down for the transfer of the Windsor liranch, especially the obtaining of a release of claims from the Western Counties Railway Company. I have the honour to be, Sir, your most obedient servant, R. GERVASE ELWES, M. hid. C. E. On behalf of the Halifax and Great Western Railway Company. APPENDIX G. Wuhm lailftia^s ol #ofta Scolia* MEMORANDUM ON PROPOSED CONSOLIDATION. These Railways comprise : M. The Windsor Branch 32 The Wind.sor k, Annapolis Ry 84 The Annapolis-Digby Section, not yet constructed. ... 19 The Western Counties' Ry fi7 20 2 The Windsor Branch was built out of Provincial funds before Confederation, and at Confedoiation became the property of the Dominion. The Windsor and Annapolis and the Western Counties' Railwaj's were built by private companies, aided by subsidies from Provincial revenues to the extent of $1,768,774, and some Municipal subventions. After Confederation the Dominion Government agreed to utili.se the Wind.sor Branch a.s a bonus towards the completion of a railway from Annapolis to Yarmouth. In 1871 the Windsor Branch was lea.sed to the Windsor and Annapolis Railway Company. lu 1873 the Western Counties' Railway ('ompany applied for the W^indsor Branch as a bonus and asked that possession might be given to them at once without waiting for the com- pletion of their Railway. In 1874 an Act (chap. 16) was passed authorising such transfer. In 1877 an agreement was entered into between the Government of Canada and the Western Counties' Railway Company for handing over the Branch, subject to a condition that if the Railway from Yarmouth to Annapolis was not completed by Oct. 1, 1879, the Branch should revert to the Government of Canada. In pursuance of this agreement the Branch was handed over; but the Windsor and Annapolis Company took legal procee.lings under their lea.se to recover po.ssession. The Western Counties' < 'ompany failed to complete their Railway before the date fixed, and the Imperial Privy ('ouncil declared the Windsor and Annapolis Company entitled to possession of the Branch, which was eventually restored to the latter Company. In 1882 a Charter was granted by thi3 Legislature of Nova Scotia to the " Nova Scotia Railway Company," for the purpose of accjuiring, completing and consolidating certain Rail- ways in Nova Scotia, including the Western Railways above mentioned. 12 as rn le r lie lie In 1882 an Act (Cliiip. Ifi) wns pusscd liy tlic Pniliiunonfc of Canada (to wliicli partionlnr attention i» invited) rucitinij tlio past tmnMiiftion.s in respect of tlie Wind.sor Hrancli, antlior- izing the Governor in Council to toruiinate tlie lease of tlie Branch to the Windsor iind Annapolis Railway Coinpuny, whenever tlie (iovernnient of Nova Scotia shall have exercised its reserved riglit to assume the ownership of that Railway, and providinif that the (lovernor in Council may in such case transfer the alisolute ownership of the Branch to the (iovcrii- ment of Nova Scotia, suhject to two conditions precedent. First, that the section of Railway from Diyhy to Annapolis shall liave heen previ- ously completed. Second, that the Government of Nova Scotia shall have obtained and delivered to the Governnu^nt of Canada a itdease, hy the Western Counties Railway Com- pany, of all e'iums in respect of the Windsor Branch. It is certain that if the Government of Nova Scotia exei'cised their poweis to acquire the Windsor and Annapolis Railway, tin- owners of that line would claim compensation not only for their own railway | roju r, hut lor their loss o prolit-i from the lease of the Branch. The net result is that, whoever undertakes the completion of the Railway from Yarmouth to Annapolis, instead of receiving' as was intended, the Windsor Branch j^ratis, would have first to pay the \V'indsor and Annapolis Coinpany (if they established their contention) the value of their beniHeial lease; anci .seconclly, to pay ihr Western Counties' Railway Company sufficient compensation to induce them to ^nant the release of claims retjuireil hy the! (iovern- nient of Canada which together would probably amnunl to neai'ly as much as the Ih-anch is worth, It is upon these, among other grounds, that ap[)lication is made to the Goveinment of Canada for some assistance in lieu of the value which has been subtracted from the bonus of the Windsor Branch by the above circumstances. Returning to the past history of these Rati ways, it appears tluit in 1.S7!) the Western Counties' Railway Co., being in ditfieidties, entered into an agreement with the Nova .Seotia Government, whereby the latter guaranteed interest on a loan of £55,000, taking as si'cnrity certain bonds and also a first mortgage of the Railway, with a provision that if default were made in the interest, the pi'incipal should liecome payable, ami the GovernuuMit should have power to sell the railway, and the bonds, to protect themselves. Default has beeii made from the first and there is now due to the Goverinnent of Nova Scotia, including arrears of interest, about 8:575,000. The promoters of the "Nova Scotia Railway Coinpany" of 1882 failed to float their scheme, and in 1884 the Government of Nova Scotia issued advertisenients inviting proposals for the completion ami consolidation of the Western Railways. The Govein lent of Nova Scotia had powers to ac(iuire the Windsor aiul Ainia|)olis Railway undei- the (Charter of that Companj', poweis to sell the Western • bounties Railway under the mortgage above montioiifd, and a claim to the transfer of the Windsor Branch under the Act l(j of 1882, atoicsaii The Government proposed to place these interests at the disposal of the persons who>-e offer might be accepted. Proposals were receive'! from many sources, including the Windsor and Annapolis Com- pany, the Western (bounties' Compnny, and .Mr. E. W. Plunkett. After long negotiations, extcndiii"' to December, 1885, an ofi'er from the Joint Stock Association, Limiteil, of London, was provisionally accepted, and an agreement was signed by the Government of Nova Scotia with the Association, May 4, 188(i, of which the following is an abstract: — The Association undertook to organize a Company and to raise the capital reipiired, under a penalty of £5,000, deposited at the signing of the agreement, The principal obligations imposed upon the Company were : — (a) To acquire the Windsor and Annapolis and Western Counties' Railways. (b) To build the "rni.ssing link" from Digby to Annapolis. (c) To place the whole of the lines in a thorough state of efficiency and work them as a consolidated undertaking. 13 (d) To repay to the aovornmont of Novii Scotia $1,350,000 on account of subsidies previously granted l)y tliat Government to those Railways. The principal obligations undertaken by the Uoverniuent of Nova Scotia wore :— (a) If culled u|)on to do so, to exercise its powers for the acquisition of the Windsor anil Annapolis and Western Counties' Uailways. (b) To grant the Company the land subsidies promised to the Western Counties' Company. (c) To give up its rights to the Windsoi Branch. (d) To guarantee a minimum net revenue of £40,000 per annum for twenty years. (e) To refund to the Company any balance of the fund of Sl,;i50,000 not expended in meeting the guarantee. Cf) To indemnify the Company against any claims ir. respect of the £.55,000 of guar- anteed bonds of the Western Counties' Railway Company. The obligations undertaken by the Company are conditional upon the granting of the following concessions by the CJovernment of Canada : — (a) Running powers over the Intercolonial Railway from Wind.sor Junction to Halifaxron terms not less favorable than those now enjoyed by the Windsor and Annapolis Company. (h) The subsidy of ?e4,000 granted by Chapter 8 of the Acts of the Parliament of Canada, 1884. (c) A lease of the vVindsor Branch from the date of acquiring the Wind.sor and Annapolis Railway to the completion of the Digby-Annapolis link, on terms not loss favorable than those of the present lease. (d) A binding agreement for the absolute transfer in fee simple of the Windsor Branch upon the completion of the " missing link." By an Order-in-Council of Jan. 15, 1880, communicated to the Government of Nova Scotia in the Hon. Mr. Chapleau's letter of Jan. 19th, and in a de.spatch from the Hon. Minister of Railways, dated March Hist, the Government of C'anada expressed their willing- ness to grant those concessions, under certain conditions, especially the release of claims to be obtained from tij,'ranteil no aid except the small subsidy of Iiffi4,()0() before mentioned ; and that the value of the bonus offered in the shape of tho VViiulsor l^ranch is almost nullified by the conditions of purchase from tho two Companies annexed thereto. Fourthly, that this is a trunk line forminf,' the main Railway communication for tho Western half of Nova Scotia, and that there is scarcely any other llailway of equal import- ance, or any equally larjre body of pcpulation, which lias not received some assistance in subsidies from the Dominion Government, except where the Railways were constructed before Confederation. Fifthly, that the (company is pioposini^ to rni-e in Knjjland a sum of about four million dollars tor railway purposes in Canada, and that they may reasonably look to the (lovernment of Canada for some moderate oncouragcnient to introduce a larjje capital into this country. Tho financial plan of the Company is as follows : — It is proposed to issue perpetual debenture stock, carryintj the ^uarantcte of the Govern- ment of Nova Scotia to the extent of £40,000 per annum for 20 years. This should produce somewhat more than 84,000,000. Takinf( that amount as a minimum tho distribution will probably be as follows : — Purchase of Windsor and Annapolis and Western Counties' Railway (exclusive of claims of the latter as to Windsor Branch) say $1,400,000 Construction of section Digby to Annapolis (i00,000 Repairs to Western Counties Railway 200,000 Repairs to Windsor and Annapolis Railway and VVind.sor BiHiich .... 2.")0,0()0 Wharves, addiiional rolling stock and margin for contingei.cies 200,000 Payable to Government of Nova Scotia 1,350,000 $4,000,000 With regard to the risks incurred by the Qovernment of Nova Scotia, a meinorandum will be found at page 137 of the Nova Scotia Blue Book, " Western Railway Consolidation," 1X8G, upon the probable traffic earnings and working of ihe guarantee, in which it is shewn that taking the very small annual increase of 2 per cent, upon existing traffic and liberal allowance for working expenses, the fund of $1,350,000 repaid to the Government will yield if invested at 4 per cent., sufficient to meet the guarantee for twenty years, and leave a surplus of $353,497 at the end of the term. Reasons are given in the .same paper for anticipating a much larger rate of increase, and the promoters of the undertaking look for their profits to tlie surplus revenue arising in the future, after payment of the interest on the debenture .stock. In conclusion, it is desired to point out that this matter is one which has oecupied the attention of successive Governments, both of the Dominion and of Nova Scotia, for manj" years past as an urgent public want. The Western Counties' Railway Company has failed to complete its line, and has sunk into a financial condition of embarrassment, 3'early increasing, which is now hopeless of amendment. The Windsor and Annapolis Company, after negotiations, has failed to make any propo.sals which the Local Government were able to accept ; and the present scheme is the outcome of long enquiry by the Local Government in every probable quarter as the most piactical and favorable offer. It pas.sed both Houses of the Local Legislature unanimou.sly, and now only requires a moderate enccuragcnnent from the Government of the Dominion to be carried to success. The Directors hope that such encouragement will not be refused, and that they will be enabled to settle this long vexed question in a manner .satisfactory to all parties and advan- tageous to the public interest. Respectfully submittec.. On behalf of the Halifax and Great Western Railway Company. R. GERVASE ELWES, M. ivM. a J)iuk(;tous.n 15 fiJoTE,— Tlio following (mittonn am those incuiiit'iiitiii \>y tliu Cliurtei : — /.J, W. .lOllNS, M. I'., London. H. J. IMUCK, |{iuiisti!r-Rt-Iiaw R 1)K C. NIXON, K. T. IMOOOTT, Hiinistiir-ivt-Law, \V. KCKKIISLKV, M. Inst. (',. K.. 11. II. I'TLliKll, MiTi'lmiit, Halifax. \V. KSSON, M.Tclmnt, ADA.M inillNS, M.icliant, \llON. li. K. MAKKK, Sliipowm-r, Yiuinoiith. (!. VVKLLS OWKN, .M. Inst. C. K., Luiuloii. A. VV. WATSON, Mcieliiint, H. (1. Kl.WKS, M. Inst. C. E., .).\i OH lUNOAV, Sliipownor, Yinnionth. .lOll.N S. MACLKAN, Mnclmnt, Mulifax. KDWAHI) KAKKKLL, M. D., C. A. Sl.'O'lT. M. K.. Quebec. Ottaw\, AuK'UHt 27tli, IHKd. APPENDIX H. ffory.] i}^]iatJ|itt(ftl at* ^aifftiayss Sc Canals, Ottawa. Nov. 30, 18SG. S/r.— Tim Minlstfv of this Dcpivit incut cliiccts nin to inform yo" thnt he has hail under con- siiluration the piMjiosition inaiK' liy \'oii on holialf of the Halifax and (ircat Wi'stci'ii Railwaj" t'onipany fincorporntucl \>y an Act of the Province of Nova Scotia in IMfsli), havinj,' in view the consolidation of railway lines in Nova Scotia, the assipnjition by the Company named of the Windsoi' Fii'anch Railway as assij;nees of the Nova Scotia Government, the completion by them of the road beiweeri Oii^by anil Annap')lis. and the olitaiiunif of innnini; powers from the Dominion t)ov(!rnment over the Intercolonial llailway between W'indsni- .Fuiu-tion and Halifa.x. The scheme contemplating,' a subsidy of S;J7o,()0(), to be irrunted by Parliiiment for the purpose i.f aidin;^ the constrnction of the nntinislied jiortioii of the road, such subsidy to he in place of the siibsidj- of 8()4,0()() i,'r;inted in 18.H4. The ('om])Hny underlakin>r to obtain the release of all claims of the Western Counties Railway Company provided for in Chap. l(i of the Dominion Acts of 1882. In reply I am to say, that at the very outset of the matter, the Minister is met by a feature of your proposition to which it is not practicable for him to rrivt' aciiiiieseence, namely, the condition that J'ailiam ?nt should be asked to increase the subsidy 'or the untiiuslied jiart of this road fiom !?(14,000 to S;l7o,0()0. If it be essential to your schemo that this incrtiase be allowed it is, I am to say, usele.ss to discuss the matter further. Should the Companj', however, decide to content themselves with the amount of the subsidy already authorised, the Ministei' will be ulad to discu.ss such fiuthei- details of the pioposition as yon may clesii-e to submit. He would, at the same time, be j,'lad to asceitain froiu you how it is proposed by your Company to deal with the claims of the Western tJoun- tiis Railway Company in the present aspect of affairs, so as to obtain that settleuient to which your pioposal looks forward. I am, sir, Your obedient servant, (Signed,) A. P. BRADLEY, Secretary. i 16 APPENDIX K. The lloNouAiiLK J. II. I'oi'i:, Mininler of liaUwuya und (JanaU SiK, UlTSHKM, Ildt^HK, Ottawa, I)(!c. 4, I.SHU. Wedern lisire of the Gove-rnment that our scheme for consolidation should \n\ carried out, proviiled that Justice bo done to the Western Counties' (.'oiiipany and to the Municipality of Yai'inouth. It appeartMl on eni]uiry that no serious complaint was made of the arrangeiiieiits for the purchase of the existing railway under our scheme, so far as the actual eommercial value of tln' undertaking itseli was coricerned, tint that the justice demiuuled by the Western (I'ouiities' Railway Company was in fact the payment liy the Dominion (ioveriinient of compensation for the losses entailed upon them liy the failure of that (loverninent to convey to them a good title to the Windsor Hiuncli. 4. It has been taken for granted that the Dominion (joveinment would natuially grant any reasonable facilities to a .scheme which has so long been one of the chief wants of the Province ; and also that they would not desire to throw upon the Province the p.ayment of damages for a failure in legislation of a previous Dominion ( Joveiniiient, wdiich again arose out of the inadveitent alienation by a former Dominion liovernment of the valuable aid agreed at Confe leration and subsetiuently resolved Viy Parliament to be given, or rather restored, to tlu- Province for the completion of her railway sy.stem. 5. Further, it was considered, that as the aid contemplated by the Or«"'l •" '"y letter to your ad.ireroAuVu't ^nt\ last, we have not at present been favored with any reply. WesttnrounfLTRi-lw*''n™*""'''^" "^["'^ '* '*» proposed to deal with the claims of the fhrnS XI' Railway Company, as the method proposed by us for settlinut the very contingency against which the Local Government desired to guard by their application of Dec. 15, 1885, has happened. In their letter to your address of that date the deputation from the Qovernment of Nova Scotia remarked : — " The Government of Nova Scotia are now acting in concert with the Western Counties "Railway Company, and fully expect that the Company will concur in any scheme which " may be devised. Nevertheless, it is not expedient that the enterprise shou]< inflicted upon innocent persons who had embarked money in the enterprise. These losses having been caused by the action, however bona fide and well intended, of the Dominion Government, that Government, if any one, is respon.sible for them. A fresh Company is now prepared to buy up and complete the unfinished work of the former Company upon the same terms as its predecessor, viz., the grant of the fee simple of the Wind.sor Branch, but with an important exception, viz., that the new Company has agreed to take, instead of the unencumbered Railway offered to its predeces.sor, the same Railway burdened with a beneficial lea.se to another Company, by which its value is diminished by at least three-fourths. 16. If; under these circumstances, the Government of Canada now, for the first time, suggested that the new Company .should, in adtlition to the burden of the lease, agree to pay toils predecessor the damages due fiom the Dominion Government, the injustice of such a requisition would, my Directors think, bo too obvious to require comment: it woulil, in their view, be simply, in popular parlance, " robbing Peter to pay Paul." But they have to meet the fact that such a condition was accepted by the Nova Scotia Railway Company of 1882, and embodied in an Act of Parliament. It is therefore necessary to examine the circumstances under which that Act was pa.ssed. 17. The Act referred to, Chap. 16, of 1882, was passed in pursuance of an arrangement entered into between the Local Government and the Nova Scotia Railway Company, whereby inter alia that Company was to buy tiie Western Counties' Railway. But assistance was granted to that scheme hy the Dominion Government wiiich has not been extended to the present scheme. Among other things, the Dominion Government agreed to accept from the Provincial Government, in connection with that scheme, a deposit of $2,000,000 at 5 per cent, intensst in perpetuity, being 1 per cent, more than the Provincial Government could have obtained otherwi.se. This annuity of 820,000 representing a capital value of 8-500,000, was in eftect a subsidy to the Local Government which enabled them, wiliiout cost to the Province, to grant corresponding advantages to the Company, which in its turn was enabled to otter and tlid otter to the Western Counties Railway Company a sum much in excess of its then com- meicial value, a sum practically including compensation for the claims under discu.ssion, and sufficient to induce that Company to grant the release required 18. It appears, therefore, that while imposing this obligation upon the Province, and through the Province, upon the Company of LSS2, the Dominion Government .simultaneously provided the means of meeting it, as was only fair and right, considering the nature of tin; claims. Had this bargain been embodieil in an a(,/eement only, when the railway scheme of 1882 fell through the proviso would have lapsed with the rest of the arrangement of which it formed part. TJufortunately having beencryntallised in an Act of Parliament, it remains as a survival of a compact, of which the substance has ceased. 10. If the Dominion Government were now willing to continue the assistance to whicii this condition was annexed, and which formed the consideiation for the liargain, it would not bo unreasonable to adhere to the qwid im^ quo. But the Dominion Government have .■'<.-^"6 1 1 ^ declined to grant the smaller subsidy of $373,000 asked for by this Company, and therefore to insist on the condition attached to the former aid, while withdrawing the aid itself, would be, the Piiectois represent, manifestly unfair. 20. For these reasons the Directors desire to urge upon the Government of Canada the justice and expediency of their agreeing to recommend Parliament at its next session to amend Act 16 of 1882, by cancelling the proviso as to a release of claims, unless the Govern- ment of Canada are willing now to settle these claims directly with the Western Counties Company so as to enable the Local Government to obtain a release of claims in terms of the Act, proformo. 21. The Directors are unwilling to weary the Government with reiterating the general arguments which have already been brought forward, and which have not been controverted, in support of their claim to the encouragement and assistance of the Dominion Government for this enterprise, and would therefore refer to the printed memorandum of August 27th, 1886, submitted to you with a letter from the undersigned of the .same date. As the present application amounts to no more than a i-equest that the Dominis82 by striking out that portion of the proviso annexed to clause 2, which relates to the release of claims. 23. As the negotiations with the Dominion Government have already occupied many months, and the Directors are anxious to proceed with the other arrangements incidental to the scheme, I am desired to solicit the early attention of the Government to this matter. I have the honor to be. Sir, Your obedient servant, R. GERVASE ELWES, M. Inst, C. E. /J mmm&:i