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FRAUD, m Mvmmm of the coi\DiTioPis of a 
 
 LOAN, BY THE GOVERNMENT OF CANADA. 
 
 GRAND TRUNK RAILWAY COMPANY OF CANADA, 
 
 In order to explain the origin of this scheme, and point out the 
 relation to the Company, in which the Government of Canada placed 
 itself, it is necessary to make known, that some years previous to 
 the i)roject being submitted to the notice of the British Public, a 
 Main Trunk Line throughout the Province was projected by the 
 Government ; and various Acts of Parliament wei-e passed, incor- 
 porating several distinct Companies, for the construction of different 
 sections of this Trunk Line. 
 
 The present scheme, had for its object, the formation of a new 
 Company, to be amalgamated with the several Companies then 
 already incorporated, the whole of the Companies, by the amalga- 
 mation, to form "one Company, under the name of the Grand 
 Trunk Railway Company of Canada;" 
 
 The capital of the new Company,was necessary for the formation 
 of additional lengths of Railway, to afford connection and continuity 
 to Uie Lines then already made, or in course of construction ; and 
 thus carry largely into effect the original design of the Government, 
 — which was to lay open the country, by a system of Railways, for 
 the development of its resources ; and by the increased facilities of 
 conmiimication at the same time thus rendered, to enable the Pro- 
 vince to maintain its connnercial position in competing with the 
 United States. 
 
 By Act of Parliament, the minimum number of Government 
 members on the Direction, was to form one third, of that, of which 
 the entire Board was to be constituted In addition to the Govern- 
 ment Mendjers on the Direction in Canada, Mess". Baring and Glyn, 
 were appointed to act, in England, as "Agents of the Province of 
 *' Canada, and Directors of the Company, on behalf of the Canadian 
 " Government." In fact, the Government originally assumed, and 
 exercised, supreme control over the conduct of the Company's affairs. 
 
 The Government undertook the supervision of the final completion 
 of the undertaking — the scheme was to be carried out, for the 
 amount stated, in all its entirety as represented, "to the satisfac- 
 " tion of the Canadian Government." This, as it will be seen, was 
 a positive engagement entered into, with the shareholders, by the 
 members of the Canadian Government, who must be held respon- 
 sible for the statements set forth in the Prospectus. 
 
^r''^^^^niMWiiaiia«MPNl||ppiiiHp|| 
 
 (( 
 
 <( 
 
 i( 
 
 (( 
 
 The total conibinetl capital, raised and to be raised, was set down 
 at £9,500,000. For this sum, the shareholders were assured, 
 they would "secure the delivery of the whole railway, fully equii)- 
 ** ped and complete in every respect, and free from any further 
 ** charges whatever." 
 
 This assurance, it was stated, the Directors were enabled to give 
 to the public, not solely from any estimate, or estimates, formed 
 of the cost of the undertaking, but from the fact, of "the cost of 
 " the Railway being actually defined by the contracts already made, 
 " whereby any apprehension of the Capital being found insufficient 
 " was removed." 
 The character of these contracts was thus described. 
 " The conditions of these contracts are for the construction of a 
 " first-class single-track railway, with the foundations of all the 
 * ' large structures sufficient for a double line, equal in permanence 
 and stability to any railway in England, including stations, 
 H'dings, workshops, ample rolling stock, and every requisite 
 essential to its perfect completion, to the satisfaction of the 
 Canadian Government." 
 
 " By means of the arrangements entered into with tlie contrac- 
 tors, the proprietors of the Grand Trnnk Line are assured that, 
 for the Capital stated, they will secure the delivery of the whole 
 *' railway, fully equipped and complete in every respect, and free 
 •' from any further charges whatever." 
 
 Upon such representations the public subscribed for the share- 
 capital. By such representations the public were defrauded. No 
 such contracts, as here described, were ever in existence. 
 
 According to the last statement issued by the directors, there 
 has already been expended, a sum, amoimting to £13,075,008, or 
 &A^\1^, 90S over and above that, for which it was represented 
 " Contracts had been made to secure the delivery of the whole 
 " railway, fully equii)ped and conqdeteiu every i'os[»ect, and fi-ee 
 ** from any further charges whatever." An application is made 
 in this statement for an additional sum of £550,000, "to provide 
 " for the much needed and indeed essential increase to thercl'ing 
 " stock and improved accommodation," This will raise tlu cost 
 to £14,231,908!!! 
 
 As £1,416,400 had already been raised on the Bonds, and 
 Shares,of the Companies previously incorporated, the actual amount 
 required by the Propectus, was the couq)lenieut to this sum of the 
 £9,500,000, or £8,083,600. Ami as interest was to be paid 
 out of Capital, on the Bonds and Shares of all the Companies amal- 
 gamated, until the completion of the works, it is necessary to 
 deduct from the above, a sum for this purpose, so as to arrive 
 approximatively at the available capital for the fictitious contracts. 
 
— 3 — 
 
 Tlie suiii actually paid has b' :n € 2,281 ,500. This taken from the 
 above leaves £5,802,100, as a sum available for works, Arc, &c. 
 Adopting this amount, as that included for the contracts, in the 
 £9,500,000, there has at present been paid extra to it, a sum of 
 £4,175,908 Add to which the £556,000 still applied for, and the 
 ^a;fms will amount to £4,731,908, — nearly FOUR MILLIONS 
 & THREE QUARTERS STERLING ON CONTRACTS REPRE- 
 SENTED TO BE OF A GUARANTEED CHARACTER! II 
 
 Such shows the fraudulent character of the statements set forth 
 in reference to the contracts. 
 
 Again, the rent of the Atlantic and St. Laurence Railway was 
 represented to be £60,000 per annum. It is now £73,000 per 
 annum. If a capital — £216,666 — corresponding to this increase 
 of rental, be added to the above £4,731,908, the total Capital of 
 the Companv, in excess of that required hif the Prospectus, will 
 amount to close on FIVE MILLIONS STERLING!!! 
 
 The line was to be adequate for a traffic to pay interest on the 
 debenture-debt, and 11-1/2 per cent (the promised dividend) on the 
 share-capital. As executctl, it is inadequate in accommodation, for 
 the present traffic, which doesn't yield one farthing, to either the 
 orifiinal Shareholders or Debenture-holders. 
 
 The works, as executed, are not quite identical with those 
 originally contemplated, but in extent, are said to be about equal. 
 Be that as it may, the changes were made, and imposed upon the 
 Company, by the Government of Canada. 
 
 It is very probable, that Mess". Baring & Glyn, have been, in 
 common with the other Shareholders, and Bondholders, duped, and 
 victimized, in the carrying out of this infamy; but from the position 
 which they have occupied in the Direction of the Company, the 
 public are entitled to a full and clear explanation from them, 
 respecting the false statements set forth in the Prospectus, and in 
 the Reports subsequently issued. The Fraud is of a most gigantic 
 character, occasioning wide-spread ruin. 
 
 The following letter, to the Governor-General, gives the detail, 
 of the course of procedure, pursued towards those, who advanced 
 their money, in Loan, to the Company. 
 
 Sir, 
 
 Uiio Royale, 3G, Boulogne -si ir-mer, France. 
 Jan. 27, 1860. 
 
 I beg to lay before your Excellency, the following statement of 
 facts, having reference to the Origuial loan, contracted by the 
 Grand Trunk Railway Company of Canada. 
 
 Your Excellency is aware, that some years previous to the 
 passing of the Act, amalgamating the several companies, which 
 
mm 
 
 -4- 
 
 now con5iiii,<e "one company, under tlie name ot the Grand Trunk 
 ** Railway Compjuiy of Canada," Acts of Parliament were passed, 
 authorizing the Provincial Government to advance sums, in loan, 
 to one of the incorporated companies; and that by the Amalgamt- 
 tion Act, in consequence of such advances, the Government were 
 empowered to appoint members, as Directors, on the Direction of 
 the present company. The Government, thus, having members 
 on the Direction, were not only cognizant of the nature, and 
 character, of the several measures resolved upon by the Board, 
 but were parties to the carrying of them into execution : in fact, 
 originally, the Government assumed supreme control over the 
 conduct of the Company's affairs. 
 
 In the proceedings themselves, which I here submit to the notice 
 of your Excellency, there will we found, internal evidence, of the 
 most clear, and conclusive character, that they were carried into 
 effect, not only with the concurrence, but by the co-operation, 
 direct aid, and support of the Government. 
 
 In April 1853, the Prospectus of the Company appeared. The 
 total combined-capital raised, and to be raised, " to complete" the 
 undertaking "in every respect" "and free from any further 
 •* charges whatever " according to contracts of a guaranteed 
 character then " made," " whereby any apprehension of the 
 '* capital being found insufficient was rewovcd," was set down at 
 £9,500,000. 
 
 This sum was to be composed of £4,864,800 Share-Cajntal, 
 and £4,635,200 borrowed money, or Debenture-Capital. 
 
 The subject of the present communication is in reference to this 
 latter amount : — to the means resorted to, by which the British 
 Public were induced to contribute to it tlieir (juota, and to the 
 course subsequently pursued, in violation of the conditions upon 
 which the money was advanced, until finally, these conditions were 
 formally repudiated, by an Act of Parliament 22, Vict c, 52 passed 
 by the Provincial Legislature. 
 
 The amount was called, ''the entire mortgage debt of the Com- 
 pany " and was represented to consist of the following items. 
 
 " St. Laurence and Atlantic, and Quebec and Richmond Rail- 
 ways. 
 
 " Amount already raised on Bonds 
 " Reserved in shares and debentures for the 
 *' shareholders in the St. Lawrence and Atlantic, 
 ** and Quebec and Richmond Railways, on 
 " the Amalgamation, and for the Bondholders 
 " of the Ontario Simcoe and Huron Railway Com- 
 " pany£837,600." The debenture-capital, included 
 in which, was ' (b) 279,200 
 
 {^) £ 733,000 
 
I ( 
 ( ( 
 (( 
 
 ( ( 
 
 * * Debentures of £ 100 each payable in 28 years, 
 bearings interest at 6 per cent per annum, 
 payable half yearly in London, and convertible 
 into shares on or before the first day of January, 
 1863, at the option of the holder 
 " And debentures,convertible into Bonds of the 
 Provincial Government of £100 each, payable in 
 20 years, bearing interest at 6 per cent per 
 annum, payable half yearly in London 
 
 (c) 1,811,500 
 
 (d) 1,811,500 
 
 Total as above £ 4,635,200 
 
 From an investigation which 1 have concluded, I find, that the 
 item (A) £733,000 is false and deceptive, for while it purports to 
 to be a sum raised on the Bonds of the "St. Laurence and Atlantic, 
 "Quebec and Richmond railways" there is included in the amount, a 
 sum of £400, 000, which had been advanced, in loan by the Govern- 
 ment of Canada, to the former-named of these Companies, a condi- 
 tion of the loan being, that the amount was to form a first charge 
 on the revenues- of that Company. 
 
 This condition, in respect to the amount in question, by the 
 Act, 18 Vict. c. 33, became imposed on t'^.e revenues of the amalga- 
 mated Comi)any. 
 
 Again.the sum £i ,811 ,500, in Government bonds, to be received 
 in exchange for the "Company's convertible debentures," item (d), 
 was also to form a first charge on the revenues of the United Com- 
 panies. These two sums, making a total of £2,211,500 formed 
 a Government loan, possessing prior rights to all other monies, 
 at the (late of the issue of the Prospectus. This fact was 
 not only suppressed, but the public were told, that one o! " the 
 more prominent points" in the scheme, was the large amount of 
 Government guarantee which it received. "This great and com- 
 "prehensive scheme of railway communication, " coming "with 
 " the guarantoe {*] of the Province of Canada, which had embarked 
 " upwards of two millions sterling in the enterprise." 
 
 The debenture-debt then, in reality, was to be thus composed. 
 
 Government money having a prior lien . . , £2,211,500 
 
 Money subscribed, and to be subscribed, by private 
 individuals, forming a second mortgage .... 2,423,700 
 
 Total as before . . . . £4,635,200 
 
 Such was the true character of the debt, then about to be in- 
 creased to the amount given, while in the Prospectus, it was 
 represented, to consist of the Bonds created, and to be created of 
 
 (') Tlicre was no guarantee. 
 
IkkMM 
 
 jmrnm 
 
 — 6 — 
 
 the incorporated Companies "a fusion" of the interests of which, 
 by the Amalgamation, merged the rights of all tlie borrowed 
 monies to the same level. 
 
 The further conditions according to which the public were soli- 
 cited to contribute to the loan were. 
 
 That the amount stated, constituted *' the entire mortfjage debt 
 " of the Company.'' 
 
 That it was •'«// the capital intended to be raised by de- 
 '• bentures. " 
 
 These conditions entitled the parlies contributing to the loan, 
 to receive First-class debentures, \kA\'m^ prior riijhts of the most 
 absolute character^ or what are called Preference debentures; as 
 the loan was represented to be the first, and entire mortgage, on 
 the Amalgamated property. 
 
 The debentures issued, subsecpienlly proved to be, but second 
 class, second to the Government loans amounting to £2,2i 1,500. 
 
 The directors laid great stress on the fact, that the amount of 
 borrowed money was Umited, and in italicised passages strongly 
 pressed it on the attention of the public, the object being to show, 
 that no risk of any kind was attached to the loan ; as the profits 
 from even the sections of lines, immediately to be thrown into ope- 
 ration, might reasonably be assumed to be adequate, or very 
 nearly so, to pay the interest on the amount stated ; and that 
 therefore, no doubt could be entertained, as to the perfect security, 
 which parties lending their money to the Company woidd possess, 
 when the v;hole scheme was completed. 
 
 The following extract from the Appendix contains the represen- 
 tations made to the public on this head . 
 
 "It may be assumed that the revenue of the Company, from 
 " the sections to be completed in 1853, will not fall short, at once, 
 *• of £304,200 per annum, nett, allowing 40 per cent, for working 
 ** expenses, and deducting £G0,000 for lease of Portland line, 
 *' would leave nearly equal to the charge for the entire mortgage 
 '* debt of the Company, and thus from actual present earnings 
 *• securing to the bondholders their interest, on all the capital 
 *' intended to be raised by debentures." 
 
 In 1854, an Act of Parliament was passed, 18 Vict. c. 33. "An 
 "Act to amend the Acts relating to the C rand Trunk Railway 
 " Company of Canada. " 
 
 The seventh section of this Act, empowers the Company to in- 
 crease their capital, when such shall be deemed expedient, "and 
 " such increase may be eifected by a resolution of the directors of 
 " the said Company sanctioned and approved by two thirds at 
 " least of the votes of the shareholders present in person or by 
 '• proxy, at a general meeting convened with speciid notice of the 
 
 
vhich, 
 rowed 
 
 soli- 
 
 lonii, 
 most 
 es; as 
 ge, on 
 
 -7- 
 
 " intended object, and the further capital so authorized, may be 
 ** raised by niortgaf;e or l)ond or by the issue of new shares" 
 ** Provided, that no mortj^flfje bond or issue of new Shares under 
 '* this Act" "shall afl'ect or impair or postpone the security by bond 
 " or mortgage of any individual on the said road without his 
 '* consent in writing. " 
 
 Sections 12 & 14 i)rescril)e the course to be pursued in con- 
 vening Special General Meetings for the purposes of increasing the 
 capital: — that "the business to be transacted at such meetings shall 
 " be expressly stated," in the advertisements arid circulars giving 
 notice of the said meetings; and that such advertisements shall 
 ap[nar, and circidars be issued, "not less than forty days" before 
 the "holding of such meetings;" and also, that the advertisemenls 
 siiall ajjpear "in one or more of the daily news papers published in 
 " London in England." 
 
 By the provisions of this Act, it is clear, that nothing could be 
 (lone, in the increasing of the capital of the Company, that would 
 " afl'ect or impair or postpone" the interests of the bondholders, 
 without having first sought, and obtained their "consent in 
 writing," and that the subject should be brought before a 
 Special General Meethuf of the Shareholders. 
 
 In addition to the £270,200 uf debenture-capital, "reserved" 
 there was also a sun) of £558,400 of share-capital "reserved," 
 making a total of £837,600, as shown by item (b). 
 
 This large amount was "reserved," as it was subsequently made 
 Known, not under conditions that it was to be taken up, but for the 
 extraordinary purpose, of allowing parties in Canada — contrary to 
 Act of Parliament — if the shares and Bonds could be sold at a pre- 
 
 mium. "10 claim the benefit of such reservation. 
 
 'Obvious 
 
 " causes which supervened" — that is, they could not be sold at an 
 advantage — "defeated this expectation an^ no part of the reserve 
 "so appropriated was taken up." — A deficiency in the Capital was 
 thus created, to supply which, it was arranged between the Govern- 
 ment and the directors, that a further advance, of Province Bonds, 
 should be made to the Company. 
 
 To effect this object, an Act of Parliament was passed in 1855 — 
 18 Vict. — c. 174. "An Act for granting aid by loan to the Grand 
 " Trunk Railway Company of Canada." 
 
 This Act, the provisions of which are of a permissive character, 
 em])Owers the Governor-in-Council, to authorize the issue of Pro- 
 vincial debentures, to an amount, not exceeding £900,000 — that is, 
 the (Government is authorized, to place itself in the position of an 
 ordinary lender to the Company, for a sum equal to this amount. 
 
 To receive the money, the directors were bound to proceed in 
 coiiiorinily with the i>rovisions of the Amendment Act — 18 vict. 
 
'i1 
 
 r' 
 
 :- 
 
 — 8 — 
 
 c. 33, whicli preiscribe llie course to be pursued by tlie Company 
 for increasing tiieir Canital. 
 
 In contravention of the express provisions of an Act of Parliament, 
 and in violation of the rights of individuals, the Government, in a 
 covert manner, advanced the amount <o the directors, — "who did not 
 ♦' hesitate to avail themselves of the assistance thus considerately 
 *' and opportunely atl'orded." — a condition of the loan being, that 
 the amount was to become a first charge on the revenues of the 
 Company,— f//rtf is to displace the position of the money previously 
 lent bjj private individuals — to override the ri<ihts of this money, 
 and to increase the Government prior lien to £3,411,500, It is 
 material to i tmark, that this increase took place tivo years after 
 the creation of the OrujinalLoan. as the fact will be adverted to, in 
 dealing with tlie character of two reports, dated 7th Feb. and 8lh 
 March of last year. 
 
 No notice of this transaction, between the Government, and the 
 directors, was given to the public, until the Report appeared to be 
 submitted to the Annual Ordinary Meeting, to be held at Toronto on 
 the 6th Sept., following ihe session, in which the Act was passed. 
 
 In this Report, the directors announce the fact, that the amount 
 £837,600 "reserved" had not been taken up. They .also inform 
 the shareholders, that in order to make good, the deficiency in the 
 Capital thus occasioned, they applied to theCJovernment of Canada for 
 a further advance of Province Bonds, in loan ; and acting on their 
 own responsibility, accepted the amount £900,000; accompanying 
 this statement with an expression of assurance, "that in this they 
 "would have the ready concurrence and sanction of the share- 
 " holders." The debenture-holders, whose interests solely were 
 affected by the transaction, were not even alluded to, although, 
 without their "consent in writing," the money could not be legally 
 received by the Company. The (|ucslion, however, was one, under 
 any circumstances, ultra vires of an Ordinary Meetimf. 
 
 The effect which this loan, had on the interests of the debenture 
 holders, was concealed, by false and deceptive statements. 
 
 The Report sets forth, that by the acceptance of the loan "an 
 "additional preferential charge is created to the extent of the 
 " interest upon that proportion of the amount reserved," "which 
 " if the reserve had been taken up, would have been represented 
 " in shares." 
 
 According to item (B) the " amount reserved " £837,600 was 
 composed of £2'/ 0,200 Deuenture-Capital, and £o58,400 Share- 
 Capital. This latter sum, was therefore, " the proportion of the 
 " amount reserved, which if the reserve liad been taken up, would 
 " have been repr sented in shares." By the acceptance of the loan, 
 according to the iieport, "an additional preferential charge" was 
 
iment, 
 
 Jt, in a 
 
 [did not 
 
 [erately 
 
 that 
 
 of the 
 'iously 
 noney, 
 It is 
 
 after 
 d to, in 
 nd 8lh 
 
 — 9 — 
 
 created, to tlie extent of the interest upon this aniounl ; or in other 
 words, the Dehenture-Dcbt, the onl\ preference char^'e,at that date, 
 of which any facts were made known to tlie puldic, in the docu- 
 ments submitted by tiic directors, was increased by a sum of 
 £o?)8, iOO. Tlie directors, made lliat statement, knowinjif at tlie 
 time, that by the Act of Parhameul under wiiich tlie money was 
 advanced, tlie whole of the £000,000, was not only to have pre- 
 ference rights to the Shave (Capital, but tliat it was to be "a lirst 
 " charge" "hypothec, and lien upon the whole of the amalgamated 
 •' (Irand Trunk Kadway Company of Canada." (*) 
 
 Thus were the creditors of the Company subjected to a second 
 act of most outrageous wrong, and in this case, in order to make 
 good a deliciency in the capital, arising out of the failure of a pro- 
 ceeding, which ought never to have had origin. 
 
 In 1850 the Legislature passed an Act— 10 & 20 Vict. Cm, 
 whereby the prior rights of the Government claims, in respect to 
 the total amount advanced to the Company, were withdrawn, and 
 the "lien of the Province placed to rank as to dividend or interest 
 " with that of the Company's bondholders." 
 
 This Act furtJier empowers the Company to issue debentures, 
 amounting to £2,000,000, having Preterence rights; in fact, to 
 take the jdace, to that extent, occupied by the government money, 
 previous to the passing of the Act. 
 
 Here then, in the creation of these debentures, was it first made 
 known, that any of the borrowed monies, possessed prior rights 
 to the rest. 
 
 This information was witheld, until all the instalments of the 
 quota to the loan, contributed bij private individuals had been 
 paid up in full. 
 
 The framers of thisv^ct, attempted to give to its provisions a 
 semblance of justice, for while the Act empowers the Conipany to 
 issue debentures, having Preference rights to tlie Original Deben- 
 tures issued, it at the same time anmds, the priority of the claims of 
 the Government, in respect to the several sums advanced, in loan, 
 to the Company. It was, however, by the suppression of the 
 existence of such prior claims, and misrepresentation in the state- 
 ments (liven to the public, that the individuals who lent their 
 money to the company ivere wrontjed. 
 
 This Act the Shareholders wore called upon "to accept" at 
 an Annual Ordinary Meetimj. 
 
 In 1857, Anict of Parliament was passed 20 \icl. c. ii. By 
 this Act, the powers of the Government to appoint members on the 
 
 K! above (vansaclion could luive 
 
 (' 
 
 I'gal 
 
 "y. 
 
 money was advaiiootl, diil'nt repeal llie Amendment Act. It is ncedh-ss, liowever, 
 to talk of law, in nlerenco to proceedings, in wliicli law and principle wire alike 
 trampled upon; and the Hoyal Assent used as an engine to rob and driVaud. 
 
— 10 — 
 
 direction of llie Company were repealed. This Act also places the 
 claims of the Governinent, i» respect to the £3,1 li, 500, in 
 abeyance, until the earnings of tiie company, shall be foimd adequate 
 to pay the interest on all tlie other borrowed monies, and a 
 dividend at the rate of 6 per cent per annum on the subscribed 
 share-capital 
 
 In 1858, An Act of Parliament was pissed 22 Vict. c. 52. 
 Thisilct formally repudiates the rights of theOriguial Loan, in con- 
 ferring powers on >he Company to raise Preference Bonds to «/»// 
 amount, upon a resolution of the directors, sanctioned and approved 
 of by two thirds, at least, of the votes of the shareholders given in 
 person or by proxy at a special general meeting called for that 
 purpose. 
 
 Tiie rights of the original creditors of the Company— of those 
 who lent thcif money upon express conditions, formally set forth^ are 
 by this ict annulled, and the shareholders, the borrowers, aie 
 empowered to raise anv further amount of money, giving to it prior 
 claims t(f the nionev which constituted THE COMPANY'S 
 ORIGINAL LOAN. 
 
 In speaking in reference to this REPrDIATlON-ACT, the Solicitor 
 General, the President of the Company, in his re|>ort dated Dec. 
 1858 says, '* that the directors cannot omit this opportunity of 
 " reminding the shareholders of the continued interest of the 
 " Provincial Legislature, in the complete and successful develop- 
 " ment of the Grand Trunk Railway, as evinced by their Act passed 
 *' la ' ssion with the view of facilitating, during a period of great 
 " iinancial depression, the operations of the Company." 
 
 To proceed to raise money under the provisions of an Act of 
 Parliament, — an Act repudiating the rights of money already 
 raised, — the directors were barred from pursuing any course, having 
 the slightest possible chance of success, that would lead to the 
 knowledge of the actual position of afl'airs. They resorted to the 
 jiublication, and issue of Reports, containing false and deceptive 
 statements. 
 
 I may here iniidentally mention, that to clx^ck proceedings of 
 this character, the British Legislature passed an Act of Parliament 
 in 1857, 20 & 21 Vict. c. 5i, commonly called "The Framlu- 
 " lent Trustees Act." 
 
 In calling atteniion to the date 1855, at which the ("overmnent 
 loans, were increased from £2,211,500 to £ 3,111,500 by the 
 irregular issue, and improper acceplance of £ 900,000, in bonds of 
 the Province, I adverted to two I'eports, dated 7th Vch and 8tli 
 March of last year. 
 
 In the former of these documents, prefixed to which is a notii-e 
 for a Special Genoral Meeting to be held at Toronto on the 23rd 
 
fes the 
 )0, 
 
 m 
 
 jquate 
 land a 
 
 bribed 
 
 55. 
 
 coii- 
 aiuj 
 \rom\ 
 yen ill 
 that 
 
 — 11 - 
 
 March, "for the purpose of approving a resolution of the directors 
 ** for increasing the capital of the Company by the sum of 
 •' £1,111,500, and for raising that sum by Preferential Bonds," 
 the following paragraph appears. 
 
 " The amount of Capital proposed to be created at this meeting 
 "is f' 1,1 11, 500. This, with the two millions of preference 
 " cai)ital created in 1856, is equal to the amount of the deben- 
 *' "lures issued to the Company by the Province of Canada, or 
 "£3,111,500. This amount "originally formed the first charge 
 " on the undertaking, but as the shareholders are aware, the 
 *' (iovernment and Legislature of Canada have sanctioned the post- 
 " ponement of the payment by the Company of any interest upon 
 *' this £3,111,500 until a dividend at the rate of fi per cent per 
 " annum shall have been paid upon all the consolidated Ntock of the 
 "Company. By the creation, therefore, and issue of additional 
 •' preferential Cajutal to the extent of £1,111,500, which it is 
 '* proposed shall rank next in priority after the two millions above 
 " referred to, the position of the ordinary debentures of the Com- 
 ' ' pany w ill not be in any respect affected or altered from that 
 *' which these securities occupied at tlie time of their original issue, 
 " when the interest on the Provincial debentures formed the linU 
 " charge on the revenues of the Company." 
 
 " The position" of the first debentures issued, or as they are 
 called in the foregoing extract "the ordinary debentures," as repre- 
 ser.ted by the directors, when they solicited, and obtained the 
 money for these "securities," wa^, ns shown by the items and 
 extracts given from the Prospectus, that of constituting a portion of 
 the Amalgamated Company's debenture-debt — "the entire mortgage 
 " debt of the Company'' "all the Capital that was intented to be 
 " raised by debentures." — A position giving to them prior rights 
 of the most, absolute character. 
 
 The actual "position" which these "securities" occupied, and 
 which was secured to them by the Act — 18vict. c. 33, — was that 
 of being a second mortgage to the Government loans, amounting to 
 £2,211,500. This amount was increased to the £3,111,500 by 
 the iniproi)er and illegal proceedings on the part of the Government, 
 in advancing 7o the directors, in a covert and clandestine manner, 
 900,000, ill 1855,— tnat is two years after the creation of the 
 original debenture debt of the Company. 
 
 In the face of these facts, the directors here deliberately state, 
 that a sum of £3,111,500 "originally formed the first charge 
 " on the undertaking" — the object of the misrepresentation being, 
 as is evident, to deceive the public into the belief, that their 
 measure for raising the additional Capital, was a just and equitable 
 one. 
 
I 
 
 § 
 
 — 12 — 
 
 They make tliat statement, to use the words of the Report in 
 question, after "liaving anxiously considered the various metliods 
 " which sugcjested themselves for ohtainint? the above amoimtol' 
 "Capital."" 
 
 And they further state, in the sul)se(iuent Report dated Stii 
 March, in speaking with reference to the proposed issue of these 
 new Bonds, that they "feel" that they have adopted "the best and 
 " most equitable mode for raisint? the necessary funds by the pro- 
 " posed new issue of 1,H 1,500 Second Preference debentures, 
 " which, with the 2,000,000 of First Preference already issued, 
 " assume the position oric;inally occupied by the Provincial deben - 
 " tures of £3,111,500.'' 
 
 I have here traced the course of procedure pursued by the 
 Government, and the directors, in reference to THE ORIGINAL 
 LOAN contracted by the Grand Trunk Railway Company of Canada, 
 and have established by docuujentary evidence of the most incon- 
 trovertible character, a case to which it would be dillicult to lind a 
 parallel — a case conuncncinii; with misrepresentation, and after a 
 series of proceeding's, in which no rei^ard liasl)eeij had, for truthful 
 statement, Legislative enactment, or the principles of luiblic faith, 
 finally ending in Repudiation — making it manifest, thai money lent 
 to public uniiertakings, in the Province, possesses in reality no 
 security. 
 
 As one, of many, whose interests have been prejudiced by these 
 proceedings, I place them here in detail under the notice of your 
 Excellency. 
 
 The Government are in possession of the several documents to 
 which reference has been made, there can be no didicully, therefore, 
 in testing and verifying, the accuracy of the extracts given. 
 
 I have the honor, ivc, &c., &c. 
 
 (Signed) John IJASS. 
 
 To His Kvoollcncy llio Right Hon. 
 SirEuMiM* WALKEtt HEAD, IJai'., 
 Governor General of Canada, 
 &c., &c., &o. 
 
 Jan 
 wh 
 
 Hy tlio fr;ni(lul(!iit roiirs • of procedure licrc (k'liiilcii, ii sum of ,C3,1 1 1 •'<^<^ l""-* 
 already hwii placed, liaviiif; Preftjreno; rictlds to tlit; (Iri^iiial Loan. Uii ii2,0(>(l,noo oflli^ 
 aiiioiiiil tlie iiKorest was paid on Uio liOlli June, leavirif,' no re!j.idne to pay the 
 inteiestun the Original Loan. 
 
(port in 
 
 )iint of' 
 
 M Hill 
 these 
 fst and 
 \n'0" 
 Itures, 
 ^sued, 
 leben- 
 
 — 13 
 
 
 Siu, 
 
 Spencer Wood, yutbuc. 
 I'eb. IS, 18C0. 
 
 I have this evening liad the honor of receiving your letter of 
 January 27 relating to the affairs of the Grand Trunk Railway, 
 which I liasten to acknowledge. 
 
 Yours obed'. serv'. 
 J. Bass, Esq'". 
 
 Edmund W. HEAD. 
 
 Hue Royale, 30, Boulogne-sur -mer. 
 
 Feb. 6, 1880. 
 Mv Loud Duke, 
 
 Herewith I beg to forward to your Grace, a copy of a letter which 
 I addressed to His Excellency the Governor General of Canada. 
 
 The case to which it refers, is one of great public importance, 
 not solely on account of the large interests at stake, but the prin- 
 ciples involved in the proceedings themselves, are such, as to be, 
 not only wholly incompatible with the relations of- the two coun- 
 tries, but totally destructive of all security. 
 
 Tlie necessity for the adoption of some measures, to prevent the 
 recurrence of a public wrong of a similar character, will not fail to 
 suggest itself to your Grace, as it woidd be a most abnormal state 
 of things, if parties contracting Loans in Englai.d, upon express con- 
 ditions formally set forth, could obtains Acts of Parhament from a 
 Colonial Assembly, annulling these conditions — Repudiation-Acts. 
 
 In the instance of the Grand Trunk Railway Company of Canada, 
 the interests of British liolders, of Bonds I'epresenting nearly two 
 n)il lions of money, have already been largely i)rejudiced by the 
 proceedings detailed in my letter ; and would have been still more 
 seriously aflected, had it not been for the unfavorable state o*" the 
 money market, which rendered abortive, an attempt made last year, 
 by the directors, to raise, under the provisions of the Repudiation, — 
 Act, — 22vict., c. 52. — a further Sum, in loan, giving to it Prefe- 
 rence rights to the Comi)any'5 Original Loan. 
 
 In my letter to His Excellency, I have given, in detail, the course 
 of procedure pursued by the directors on that occasion, by which 
 th(3y have rendered themselves amenable to the provisions of the 
 Fraudident Trustees Act ; as I presume, the provisions of that Act, 
 ap[ily to all cases of false statements, published, and issued, in 
 England. 
 
 I iiave the honor, &:c. 
 
 To nis Grace the Duke of Newcastle, 
 Secretary i>f Slate for ihc Colonics. 
 
 &c. 
 (Signed) 
 
 John BASS 
 
14 — 
 
 It 
 
 II 
 
 
 Sir, 
 
 Downing Street. 
 Mlh February 1860. 
 
 I am directed by the Duke of Newcastle to acknowledge the 
 receipt of your letter of the 6th instant, enclosing a copy of one 
 which you have addressed to the Governor of Canada on the sub- 
 ject of'the affairs of the Grand Trunk Railway of that Province. 
 
 I am, &c., &c. 
 John Bass, Esq". 
 
 C. FORTESCUE. 
 
 ' y, Montpelier Street, Brompton. 
 
 21 June 1800. 
 My Loiu) Duke, 
 
 I had the honor of addressing a letter to Your Grace, on the 
 6th Feb. referring to an enclosure then forwarded — a cojjy of a 
 letter, which I wrote to His Excellency, the Governor-General of 
 Canada, having reference to the course of procedure pursued by 
 the Canadian Government, in raising the capital, for the construc- 
 tion of the Grand Tiinik Railway of Canada. 
 
 From the great importance of the case. Your Grace, will no 
 doubt, have had an inquiry instituted into the allegations contained 
 in my letter to the Governor General. 
 
 In my letter to Your Grace, 1 adverted to an attempt made by 
 the directors, in the early part of last year — and which then 
 proved abortive — to issue a second series of Preference Bonds, 
 which would have had the effect of further prejudicing the interests 
 of those, who originally advanced money in loan, to the Comi>any; 
 on the faith of the statements, set forth in the Prospectus, by 
 nien)bers of the Canadian Government, and the other directors. 
 These Bonds amounting to£l,lH,SOO have been created, and 
 recently sold by tender ; increasing the loss of those who contributed 
 to the original Loan — by depreciating the value of the original 
 Bonds — to a sum, little short of a million of nmney. They were 
 created under the provisions of the Repudiation-Act, and the assent 
 for their creation, was obtained, by false and deceptive statements, 
 set forth in Reports, issued by the directors ; copies of which are 
 here forwarded. 
 
 The false character of the statement, that the £3,111,500 
 advanced by the Government, in loan, to the Company "originally 
 *' formed the first charge on the undertaking" will be seen by re- 
 ference to the Company's amendment Act— 18 Vict, c. 33, s. 20. 
 
 incll 
 waf 
 sue] 
 wa| 
 Coj 
 ro\ 
 
 lid 
 
 thJ 
 
 £'^ 
 
 m< 
 
 ve 
 
 ad 
 
 a 
 
 cl 
 
I reel. 
 1860. 
 
 ?dge the 
 |.y of Ofje 
 |tlje siib- 
 
 vime. 
 
 — 15 - 
 
 Uv tliat Act llie (iovernnieiU Loans were llien limited to £4,411 .fUio 
 including £400, 000,advaiireil to llieSl, Laurence and Atlantic Rail- 
 way Company, one of the Companies Amalgamated. But that even 
 such an amount, or that any amount, should have had a i^r/or lien, 
 was a fraud upon those, who lent their money to the Grand Trunk 
 Company, for the fact was not only suppressed, but the total bor- 
 rowed money — ''the entire mortgage debt of the Company," was 
 represented \o consist of monies raised, and to be raised, on the 
 Bonds of the Companies amalgamated; as shown in roy letter to 
 the Governor General. The above amount was increased to the 
 £3,111,500 in 1855, by the improper proceedings of the Govern- 
 ment — violating fheir obligations formally contracted, and contra- 
 vening the express provisions of the Act just referred to, by 
 advancing, in a covert manner, to the Directors, a sum of £900,000; 
 a condition of the loan being, that the amount was to form "a first 
 charge hypothec and lien" "upon the whole of the Amalgamated 
 " (Jrand Trunk Railway-Company of Canada" — that is to override 
 the rights of money contributed, in loan, two years before, by 
 private imlividuals — Sec YH of the Amendment Act, provides that 
 nothing shall be done in the increasing of the Capital of the Com- 
 pany to "affect or impair or postpone the security by bond or mort- 
 " gage of any individual upon llie said road without his consent in 
 " writing." ' The Canadian (iovernment having had no respect for 
 I he principles of integrity, would not allow themselves to be barred 
 in th(M> course by legislative enactment. 
 
 The case has now become one of so serious a character — the 
 public having been defrauded out of millions of money — that I 
 I'espectfully submit to Your Grace, that the parlies aggrieved are 
 entitled to the intervention of Her Majesty's Government, to obtain 
 a reparation of the wrongs to which they have been subjected. The 
 entire proceedings, both as regards the raising of the share-capital,, 
 and borrowed money, present a worse case, tlian ariv to be found on 
 record ; when the means employed to give to them eifect are taken 
 into consideration—in the carrying of them into execution, even the 
 Royal Assent, has been iraileif inlo the infamy of Ur.PrOTATlON. 
 
 For the Government of Canada, to have constructed the line of 
 Railway to develope the resources of the Province, would have 
 been a legitimate imdcrtaJ^ing — to place the project a? it was put 
 before the Rritish public, was a flagrancy of the most gigantic 
 proportions. 
 
 It is the first instance, I believe, of one of the colonies dehbc- 
 ralely defrauding the mother country, and its gravity is enhanced 
 by the fact, that Canada enjoys so large an amount of public confi- 
 dence, and public credit in this country, while the Canadian Govern- 
 ment liave shown themselves wholly unworthy of trust — the pro- 
 
Hi 
 
 -16 — > ■■ ■ *^ .^-■■ 
 
 tligate course of procedure, whicli they liave pursued, uiaking 
 manifest, as flagrant a disregard for tlie principles of public faith 
 as has ever been exhibited. 
 
 I have the honor, &c., dtc. 
 
 To His Grace the Duke of Newcastle, 
 Secretary of State for Ibc Colonics, 
 &c., &c., &c. 
 
 (Signed) John BASS. 
 
 •■i-Jry 
 
 Sm, 
 
 Downing Street, 
 7 My 1860. 
 
 I am directed by the Duke of Newcastle to acknowledge the 
 receipt of your letter of the 27 June, alleging certain grievances in 
 connection with the affairs of the Company of the Grand Trunk 
 Railway in Canada. 
 
 The subject is not one in which Her Majesty's Government are 
 concerned, or on which they can express an opinion — your letter 
 has therefore been forwarded for the information of the Governor 
 of Canada. 
 
 I am, &c., &c. 
 John Bass, Esq. 
 
 T. F. ELLIOT. 
 
 It hus not been made known, what steps tlie Governor General has taken in 
 this matter. 
 
 The Hondiiolders, however, liive a clear case ; there should be no compromise 
 on ti.eir part The money was recehfd for a Loan, the coudUiotis of which, as represented, 
 cotiW not CO- exist with the ttien actual state of things. 
 
 Tlie Sliaroholders and liundholders sliould unite, and appoint a Committee 
 of Inquiry. 
 
 rf r' 
 
 "^ ': 1-. 'i*"'/: i'C"' ;:;;3^i*?*'*i^r' 
 
 BOULOGNE. — PR. BY II. UEL&UOODE. 
 
'"i 'I