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THIS PAMPHLET To be had at the Office of Messes BALLANTINE & REID, 4, Ausi'iN Friars, City, London ; or, Messrs TAUNTON & MOLYNEUX, 8, Sweeting Street, Liverpool ; or, FOSKETT S AVERY, Esq., St. Nicholas' Chambers, St. Nicholas' Street, Bristol. All communications or inquiries to be directed to Messrs Taun- ton & MoLYNBUx, 8, Sweeting Street, Liverpool. The two Petitions to the Legislative Assembly of Canada will be found at the above addresses, and all parties interested are re- quested to call and sign them. All Holders of the Original 6°/^ Debentures of the Grand Trunk Railway who have not received a Copy of this Pamphlet are re- quested to send in their names to Messrs Taunton & Molyneux. And all who have received them would greatly oblige by sending the names of any holder who they may find haa not received a copy. All parties who cannot conveniently go to any of the above places to sign the Petitions can sign the following form of Commis- sion and send it to Messrs Taunton & Molynbux, 8 Sweeting Street, Liverpool. " I hereby autlu>rise and regitcaf Messrs Taunton & Molynbux " to attach my name to the Petition about to be sent out to the Can- radian Legislature from the holders of Caruidian Securities," or ^the holders of Grand Trunk C% Debentures," as the case may be. Name. Dale, Address, CONTENTS. PAGE Advertisement, 6 Canadian Credit and Securities, The History of 462,423,700 Debentures Issued in Great Britain on Conditions Guaranteed to them by Canadian Acts of Parliament, ... ... ... ... ... ... ••• 16 Letters to the late Governor-General of Canada, and his Answer, 17 Letter to the Secretary of State for the Colonies, and hia Answer, 26 Petition from the Holders of Canadian Securities to the Legis- lative Assembly of Canada, Petition from the Holders of 6% Debentures of the Grand Trunk of Canada to the Legislative Assembly of Canada, General Instructions as to where and how these Petitions can be signed, ... ••» ••• ••• ••• ••• ••• 30 32 3C ^AiUi .-iim*4'wH !»:;«•■ ' 4: ' J. «:"t ,.-{*rr>a4'r.:V.^ . .•.•■=-^- .-rX <;; * *-;- ,>• :n,.> •r-'.*'-i!;.i*i >g«-i'» ...:i.f I'jA-. "-* rii*^*-? v !•'' /•' -J' JK*-' '"> -t » (, Us. *>s Y ^'juihr:- ^^^y •■ .'.». CANADIAN , CREDIT AND SECURITIES. OoNSiDKRABLE difficulty would be encountered in eBtiniating the amount of Capital that has been raised in England on oonditione guaranteed by Canadian Acta of Parliament. In stating that Fifty Millions have been bo raised, a sum is named, which, whilst it is believed to be considerably within the mark, will sufficiently indicate the vast interests involved ; and when we have to add some prospective estimate of what further demand for Capital that vast and flourishing Colony may require, to develope its ma- terial and commercial resources, the subject of this Pamphlet must be considered both interesting and momentoub. This vast sum has been procured ou the faith of the inviolability of Acts of the Canadian Legislature, to which the Royal Assent is given on the advice of the Governor General in Council, and if in any case that inviolability is discovered to have been tampered with, or that these conditions have been secretly repudiated or weakened, then is the foundation of the whole edifice of Canadian Credit shaken. > < There are four parties in this vast transaction — Ist, The Crown. — The advisers of the Crown, and the Privy Council, are bound to protect the honor of the Crown, and see that its Prerogative, of giving the Royal Assent, is not brought into contempt or disrepute by allowing it to be used in any scheme of repudiation or confiscation. • 2d, The Governor General of Canada. — The Governor General in Council advises Her Majesty to give her Royal Assent to Acts passed by the Canadian Legislative Assembly ; and, as the Repre- sentave of the Crown, is bound, neither to comprouufie the di^'nity of liis office, nor that of the Crown, by advising Her Majesty to give the Rojal Assent to Acts of fraud, repudiation, or con- fiscation. ( 10 ) 3d, The Government of Canada, ilie Legislature and their Fin- ancial Agents. — They are primarily reuponsible for all Acts placed before the Governor in Council ; auu with them rests the existence or destruction of Canadian Credit in this country. The ezisitence of that Credit requires that neither actively, or passively, shall they engege in legislation, altering, varying or approptiating conditions once pledged in this country in ej^ohangt^ for Capital, Without consulting those interested. fv;7i« <> *.^d» (w^. ,.,^.y4.{.,i. <.. 4th, There are the Capitalists in this country, who lend their money on the tacit uaderatandiug that conditions once deponted with them, in exchange for their money, and guaranteed to tnem by Act of the Canadian LegiUature, are inalienable, and that any alteration of them without consulting them or their interests, can be rendered in uo ether word than Coi\fi»cation. The following history of the treatment of £2,423,700 Deben- tures, issued in this oountryon conditions guaranteed by Cana- dian Acts, will create alarm in the minds of those who have hitherto imagined that Canadian Acts were rocks of security, aot mere quicksands that changed with every tide, and no holder of Canadian Securities can rely ou the good faith of that Legislature if they refuse an honorable solution of the claims that arise from it. The history is comprised in the letters of Mr Bass to the late Oovemor Gene;ral of Canada, Sir E. Head, and to the Duke of Newcastle, as S<>^ - >tary of State for the Colonies, written with the warmth of a vie ^sed Debenture Holder. His plundered compan- ions in distress, who are spread broad-cast over England, Scotland, Ireland, and Wales, at all events may congratulate themselves that they havt; amongst their number one with the habits of pa- tience, research, and ability to draw so graphic a description of the stealthy, piecemeal eonfi^catiim which is now submitted to public inspection. ■ i, • • ■■^i-rtrr^.^y -n/i .-■ ^ >i- -. * ^„.' — Mr Bass's history requires no recapitulation, but a hunied sketch, drawn on the hypothesis that our own Government, evd not that of Canada, were the prime agents, may be useful Imagine the Government of this country, detdrous of seeing completed a gre***' national work, nominating Cabinet Ministers as a controul- ing number of the Directors, in a large public company ; imagine the Government peimitting a direction so organised to issue a prospectus, io which subscription to a fixed amount of debentures is invited, and obtained, and stating that, beyond a specified amount of debentures and ahare capital, they were enablcl to pledge themselves uo mor» would be required, all the time craftily concealing the fact, (i ( 11 > that the Line was already pawhed to the Gkkveriiment f6r a yeT7 largo amount. Imagine, also, the Goyemment of this country, with these debentures partially issued, «nd diffioulty being disoorered in floa, ing the rest owing to this fact transpiring, guaranteeing to a Company bo organibed, and to debentures bo issue'*, that further than a defined amount of QoTemment Loan, as first lien, nothing should ever rank above the said debentures, without their consent in writing, and that a fixed amount of share capital was to co-ezist. with these debentures, and the Government secretly peamng an Act permitting the advance of more money from the State as a firsi lien to the concern, and permitting the entire issue of the de> beutures, without a corresponding issue of the share capitaL Whilst this act was secretly contemplated, and before and after it was passed, imagine them calling up further instahnenta on the Debentures, or permitting their agents to do so, all the time knowing that they were going to violate, or already had violated, the conditions on which the Debentures were subscribed for, such knowledge being withheld from the Debenture holders. Farther^ imagine the Qovemmeut of this country, without the know ledge, let alone the written consent of the Debenture Holders, passmg an Act, permitting their nominees to issue a sum nearly as great as the original Debentures in a 1st Preference Stock, to rank above the Debentures, Ab the same time exacting ruinous con- ditions from the said Company, and only waiving claim for interest on their loan for nve years ; next permitting the issue of a 2nd Preference without the knowledge or consent in writing of the original Debenture Holders. Imagine the Government of this Country permitting their agents to advance large sums of money to the said Company, and then to permit their agents to claim to place these loans above the said original Debentures ; and still further, passing an Act permitting Bonds to any amount to be iusued above the Debentures ; and, lastly, imagine the Govern- ment being invited to pass a further Act utterly contiscating and destroying every vestige of the original construction of the Dfebentnres. Why, no Government that this country ever had, however con ipt^ dare liave attempted it ; any Prime Minister would have been impeached for proposing it ; and no Privy Council would have allowcKi the Royal Prerogative to be degraded, or the Royal assent tc be given to such a scandal. And yet, a» will be seen, this is but a fkint outline of the crooked, and compro- miaiug transactions, in which the credit of Canada and it» Legis- lature are plunged. '^■'''' v'Sria*!.- s.^rns -r-" ' ? ~- vv ««4;^ *•, ( 13 ) Ik may be alleged that^ aa these tnuiaactiooa have become the Bubject of a claim for indemuity from the Caaadiaix Government, on the part of the original Debentiure Holders, it is prematnre and harah to describe, aa secret confisoation and repudiation, that which by a prompt, hononrable, and open-handed treatuiwit, might be bronght forward afterwards as » happy illustration of their good faith and credit ^.la^- ih fP4i i'limMUHiimMi&Ji But the interests menaced are so large, the scandal so groas^ and the course pursued so unscrupulous, that not to publish the fdotM, and protest against them, would be to condone the offence ; and in future cases, when fresh secret confiscations have beea re- vealed, the claims may be met with the statement, — "There was " nu secret about our system in these matters ; full publicity was " given to our way of doing these things in 1861, when a eimilar " claim was made upon us, and you must have known all about " it." Nor can a reluctant and accidental publication of a number of Canadian Acts in this country, with au inquisitive Bond Holder at hand to expose the nefarious transactions, always be counted upon, to enable the Holders of the fifty millions of Canadian Securities in this country to discover that so convenient a system of legislation has more illustrations than the one before us. The objects of thus publishing in thia country such full parti- culars are, to awaken all interested in Canadian prosperity and securities to a sense of the dangers that threaten them, and to enable them to obtain, by combined action in the various directions open to them, or which may be suggested by the advice of those best able to do so, some satisfactory assurances from the Canadian Government that the case in question will be honourably treated, and some safeguards devised to render the secret tampering with vested interests impossible in the future. Still further, if the Canadian Legislature and Government not only refuse an honourable solution of this claim, either by meeting it or referring it to disinterested parties, whose opinion would be above suspicion, and if they insist on consummating the whole trans- action by fi'.ther plunder and confiscation of the interests of the Debenture Holders ; at all eventJ the transactions shall be exposed to the Holders of Fifty Millions of Canadian Securities, and both Houses of Parliament. Still further, if the office of Governor General of Canada is to be degraded and compromised, by advising the Crown to give the Boyal Assent to any such schemes, at all events ignorance of >\' ( 13 ) the oiroudiataitoea oaniiot b« pleaded, and that exalted personage will be held responsible ; and if the Royal prerogative is to be used for suoh base purposes, the advisers of the Crown will do so with their eyes cpen to the merits of the case, and will be held accountable to the country for the results. At the same time the agents in this country used in such transactions will hftve to bear in mind that they have been warned that to be so associated will sully credit however biiUiant, and affect reputation however exalted ; and that precedent is not wanting for the statement that public indignation, guided by a free and independent press, has driven into contemptuous retirement and obscarity iudividuab whose names once boasted as great t^ reputation and credit as their own. f )'< ' In conclusion, this is neither a mere question of the expediency of extending or withholding aid to a great national enterprise, nor yet in it a question alone affecting the credit of Canada. A much greater interest is affected, and a much wider question is broached. The incalculable capital that is invested all the world over on the security of conditions guaranteed by Colonial Acta demands an explanation from the Government of this country on the subject. That so important and necessary an agent in developing the wealth and resources of the Colonial Empire of Great Britain has a right to demand uniform protection and good Mtix at the hand of the servants of the Crown cannot be disputed^ and no doubt the Government will see the necessity of considering the subject. '-" It so happens that at this instant the Canadian Government is soliciting a subsidy from this country to enable * them to complete a vast scheme of intercolonial Railway. It is to be hoped that a sense of public duty on the pait of the Government, and the awakened alertness of both Houses, will not permit these two subjects to be separated when considered. If when the Acts oi 1866, 1866, 1867, and 1868 were placed before the late Governor General of Canada, with a request to advise Her Majesty to give her Royal Assent, he had then firmly said, " My first duty is to protect the honor and dignity of the " Crown, my next to protect my own honor and that of my office, " and to see that the vested interests of Her Majesty's subjects aie " not tampered with. In this case you propose to give powers " that should not exist without the written permission of the "holders of a large amount of Debentures; that condition you " guaranteed to them only last year ; when you have obtained that " permission I will then advise the Crbl^n, but I won't bo a party ' I '; ■ 1 t. ( 14 ) *< to this secraot confisoation, be the consequences what they may." It is not too much to say that Canadian Credit would have been greatly streni!:thened by such a ctep, the Governor General would have commanded and won the respect of every loyal and open-hearted CanadiMi, and this country saved a public scandal. Such being the case, general and stringent instructions from the Grovemment to all Gk>vem3rs of Colonies that they are bound to protect the vested interests of English cajatal spent in their respective Colonies, and that they must see that no condition once pledged in England is tampered with, without the clearest evidence being produced that those interested are cognisant of, and are parties to the transaction, would certainly have a most assuring effect ; and if combined with an honorable a4ju8tment of the present scandal, would again restore confidence in Canadian Credit. ,ji»ir«< •■,y.-.u- ; . , , . ■tiM- ipi'^r*' vr i4- , si!»y,.*» -.u;iiuT .-if .C::^(jt.v«d; .A n^te :•■ V.-. ^ri'^l/n . wise. H *'•<:/. Jo :H. ■n#ji .((it-KiMi^-v/; CJ •«J I'UiHJ vl-.Vj.j'.ULj.i^' t>»,'..-v .ITf' I -rt. -in'tt-. .>•!•> YiiitH ^■■''Ttf-.r^. •jel. t!iT if.'i; r J. '-I -f. ■?'-^-' l*I> '.'ilj. »lj .i- r.'tf'f'^ ■,*»\7 h'hi: t» ■'.rij ]:.lifi ■i»\ ' -J.); -«.'<*■?«.«?»«!■;•; 'I'M ■'■-; 'i*;*:-? ♦■.»t<*f. . ^i.r- Jk.! V ■ - '^>.ts ■^'■t t.ftffl ..),■!.-•*.' ■ Ji«. i, » - »i-| ' w ;^.-\i -♦«>»* Vi'J :,t; ituni . i . ;;r',f ^.■■x.C .tii^ Jji; i'iVf... ■1i'.,'-.m.Sj» :S"i';-' ' -il *-■> ST. i>fi« ^it.i\i'ii ic Wr^ I * > *t V THE HISTORY OF £2,423,700 DEBENTURES, 2i*nT «i wsqt j^r^j;^^) IN GREAT BRITAIN, ON THE SECURITY OP CONDITIONS GUARANTEED TO THI^^ '■f^ BY THE CANADIAN GOVERNMENT AND LEGISLATIVE .; -, .numa .,^>:;j. a uytia. ^<:Wv ASSEMBLY, -^inummm^ :*m. HJi-i:'AJ!^^u^.l, a&: iv i>avemment undertook the supervision of the final completion of the vndertaking — the scheme was to be carried out, fw the amount stated, in all its entirety as represented, 'to the satisfaction of the Canadian ' Qovemment.' This, as it will be seen, was a positive engagement entered into with the shareholders, by the members of the Canadian Qovemment, who must be held responsible for the statements set forth in the Pros- pectus. The tot&l combined capital, raised and to be raised, was set down at £9,600,000. For this sum, the shareholders were assured they would ' secure the delivery of the whole railway, fully equipped and complete in ' every respect^ and free from any further charges whatever.' This assurance, it was stated, the Dii actors were enabled to give to the public, not solely from any eitimate 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 contnu^ 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, sidings, workshops, ample rolling ' stock, and every requisite essential to its peHect completion, to the satia- ' faction of the Canadian Government.' 'By means of the arrangements entered into with the contractors, ' the proprietors of the Grand Trvmk 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 what- ' ever. share- Upon such representations the public subscribed for the capital. By such representations the public were defrauded. According to the last statement issued by the directors, there has already been expended a sum amounting to £13,675,908, or £4,175,908 over and above that for which it was represented ' Contracts had been made ' to secure the delivery of the whole railway, fully equipped and complete ' in every respect, and free from any further char>;es whatever.' An appli- cation is made in this statement for an additional sum of £566,000, ' to ' provide for the much needed and indeed essential increase to the rolling 'stock and improved accommouation.' This will raise the cost to £14,231,908 ! ! t As £1,416,400 had already been raised on the Bonds and Shares of the Companies previously incorporated, the actual amount required by the Prospectus was the complement to this sum of the £9,600,000, or £8,083,600. And as interest was to be paid out of Capital, on the Bonds • > ( n ) and Shares n{ all the Companies amalgamated, until the completion of the' works, it is necessary to deduct from the above a sum for this purpose, bo as to arrive approximatively at the available capital for the lictitious con- tracts. The sum actually paid has been £2,281,500. This taken from the above leaves £6,802,100, as a sum available for works, &o., Ac. Adopting this amount as that included for the contracts, in the £9,500,000, there has at presen* ' -n. paul extra to it, a turn of £4,176,908. Add to which the £556,000 still applied for, and the Extras will amount to £4,731,908,— nearly Four Millions and Three Quarters Sterling on Contracts Represented to be of a Guaranteed Character ! ! ! Such shows the fraudulent character of the fitatomcnts set forth iu reference to the contracts. Agaiu, the rent of the Atlantic and St. Lawrence Railway was represented to be £60,000 per annum. It is now £75,000 per annum. If a capital — £216,066 — corresponding to this increase of rental, be added t» the above £4,731,908, the total Capital of the Comiwny, in exoeis of that required hy the Prospectus, will amount to close on Five Millions Sterling ! ! t The line was to be adequate for a traffic to pay interest on the debenture-debt, and Hi per cent, (the promised dividend) on the share- capital. As executed, it is inadequate in accommodation for the present traffic, which doesn't yield one faHhing, to either the original Shareholders, or Debenture-holders. The works, as executed, are not identical with those originally contemplated. Be that as it may, the changes were made, and imposed upon the Company, hy the Government of Canada. It is very probable that Messrs Baring & Glyn have been, in common with the other Shareholders and Bondholders, duped and victimized in the carrying out of this i^fr^my ; but from the position which they have occu- pied 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 lo the Qovemor-GJeneral gives the detail of the tiovirae of procedure pursued towards those who advanced their money in Loan to the Company. SiH, Rub Royale, 46, Boulogne-sur-Mer, Francb, .Ian. 27, 1800. , .... , ■'U I beg to lay before your Excellency the following statement of facta, having reference to the Original Loan contracted by the Grand Trunk Railway Company of Canada. Your Excellency is aware that, some years previ«nw to the passing of the Act amalgamating the several companies which now constitute 'on* c t7l ( 18 ) '-I i ;'■«: , ^company, under the name of the Qnmd Trunk Railway Company of 'Canada,' Acts of Parliament were paaaed, authorising the Provincial Government to advance sums, in loan, to one of the incorporated companies ; and that by the Amalgamation Act^ in consequence of such advances, the Qovemmeut we^-e empowered to appoint members, as Directors, on the Direction of the preseui. company. The Qovemment thus having members on the Direction, were not only cognisant of the nature and character of the sererd measures resolved upon by the Board, but were parties to the carrying of them into execution : in fact, originally, the Oovemment 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 be found internal evidence of the most clear and conclusive character tliat 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 under- taking '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 insi^cient was removed,' was set down at £9,500,000. This sum was to be composed of £4,864,800 Share-Capital, and J&1,685,200 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 quota> 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 Company,' and was represented to consist of the following items. ' St. Lawrence and Atlantic, and Quebec and Richmond Railways. . 'Amount abready raised on Bonds (a) £733,000 ' Reserved in shares and debentures for the share- ' holders 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 * Company, £837,600.' The debenture-capital, included in which, was (b) 279,200 ' Debentures of £100 each payable in 25 years, bearing ' 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 (c) 1,811,500 'And debpntores, convertible into Bonds of the Pro- vincial Government of £100 each, payable in 20 years. U > ( 1» ) ' bearing interwt at 6 per cent, per annum, payable half ' yearly in London (d) 1,811,500 '" ' ' Total as above £4,636,200 From an investigation which I have concluded, I find, that the item (a) £733,000 ia false and deceptive, for while it purports to be »> sum raised on the bonds of the ' St. Lawrence 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 Qovemment of Canada to the former-named of these Companies, a condition of the loan being, that the amount waa to form a first charge on the revenues of that Company. This coLdition, in respect to the amount in question, by the Act 18 Vict. c. 33, became impoaed oi^ the revenues of the amalgamated Company. .-• ^^ Again, the sum £1,811,500, in Oovemment 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 Companies. These two sums, making a total of £2,211,500, formed a Government loan, possessing prior rights to all other monies, at the date of the iuue of the Prospectus. This fact waa not only suppressed, but the public were told that one of ' the more prcHninent p■ - v—' •' ( 20 ) ;.| eharaeter, or what are called Preference Debenture* ; aa the luan v/aa represented to be the iir«t, and entire mortgage, on the Amalgamated property. i.^ ,1 > • -'lij u. ^j.i'-iii/i. mj ■*•■.■ ^ '-i . The debentures issued subsequently proved to be but second class, second to the Government loans amounting *to £2,211,500. The directors laid great stress on the fact that the amoimt of borrowed money was limited, 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 operation, might reasonably be assumed to be adequate, or veiy 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 would possess, when the whole scheme was completed. The following extract from the Appendix contains the represen- tations mode to the public on this head. ' It may be assumed that the revenue of the Company, from the ' sections to bo completed in 1853, will not fall short, at once, of ' .£304,200 per ammm, uett, allowing 40 per cent, for working expeuacj ' and deducting £60,000 for lease o^ Portland line, would leave nearly I equal to the charge for the entire mortgage debt of the Company, and ' thui from actual present earnings securing to the bondholders their in- ' terest, mi all the capital 'ntended to be raised by debentures' V ' In 1854, an Act of Parliament was passed, 18 Vict. c. 33, ' An ' Act to amend the Acts relating to the Grand Trunk Railway Com- ' pany 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 effected 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 meet ' ing convened with special notice of the intended object, and the further ' capital so authorized may be raised by mortgage or bond or by the ' issue of new shares,' * Provided that no mortgage bond or issue of new ' Shares under this Act' ' shall afifect or impair or postpone the security ' by bond or mt)rtgage of any individual on the said road without his ' consent in writing.' Sections 12 and 14 prescribe the course to be pursued in convening 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 and circulars giving notice of the said meetings ; and that such advertisements shall appear, and circulars be issued, ' not less than forty days' before the * holding of such meetings : and also, thiit the aer- veued' — that is, they could not be sold at an advant:ige — 'defeated tiiis * expectation and no part of the reserve so appropriated was token up.' — A deficiency in the capital was thug created, to supply which it was arranged between the Government and the directors, that a further advance of Pr»)vinco Hunds should be made to the Company. To effect this object an Act of Parliament woa passed in 1855 — 18 Vict, 0. 174, 'An Act for granting aid by loan to the Qrand Trunk ' Railway Company of Canada.' This Act, the provisions of which are of a permissive cbaractei-, empowers the Qovernor-in-Council to authorize the issue of Provincial debentures to an amount not exceeding £900,000 — that is, the Oovem- ment is authorized to place itself in the position of an oixlinary lender to the Company, fo~ a sum equal to this amount. To receive thb money, the directors were bound to proceed in con- formity with the provisions of the Amendment Act — 18 Vict., c. 33, which prescribe the course to be pursued by the Company for increasing theii- Capital. 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 to the directors, — ' who did not hesitate to 'avail themselves of the assistance thus considerately and opportunely 'afforded,' — a condition of the loan being, that the amount was to become a first charge on the revenues of the Company, — t/iat ia to displace the po- sition of the money previomly lent by private individuals — to override the rights of this money, and to increase the Oovemment prior Iwi to £3,111,500. It is material to remark, that this increase took place two years after the creation of tine Original Loan, as the fact will be adverted to in dealing with tiie character of two reports, datetl 7th Feb. and 8th March of last year. No notice of this transaction between the 'Government and the directors was given to the public, imtil the Report appeared to be submit- i m \\ \ ( 82 ) ted to the Annual Ordinary Meeting, to be held at Toronto on the 6th 8ept., folli)wing the session in which the Act was passed. In this Report the directors nnnounoe the fact that the amount £887,600 ' reserved' had not been taken up. They also inform the share- holders, that in order to lualie good the deficiency in the Capital thus occasioned, they applied to the Oovetnment 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 concur- 'rence and sanction of the shareholdora.' The debenture-holders, whose interests solely were atfected by the transaction, were not even alluded to, although, without their 'consent in writing,' the money oould not be legally received by the Company. The question, however, was one, under any circumstances, ultra virai of an Ordinary Meeting. The effect which this loan had on the interests of the debenturo- 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 ujion * that proportion of the amount reserved,' ' wliich if the reserve had been ' taken up, would have been represented in shares.' According to item (B) the 'amount reserved' £8^7,600 was com- posed of £279,200 Debenture-Capital, and £558,400 Share-Capital. This latter sum, was therefore, ' the proportion of the amount reserved, which ' if the reserve had been taken up, would have been represented in shares. By the acceptance of tne loan, according to the Report, ' an additional ' preferential charge' was created, to the extent of the interest upon thia amount ; or in other words, the Debenture-Debt, the only preference charge, at that dat^, of widch any facts were made known to the public, in the documents submitted by the directors, was increased by a sum of £658,400. The directors made that statement, knowing at the time that by the Act of Parliament under which the money was advanced, the whole of the £900,000 was not only to Imve preference rights to the Share Capital, but that it was to be a ' first charge' ' hypothec, and lien upon tho ' whole of the amalgamated Orand Trunk Railway Company of Canada.' (*) Thtis 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 de- ficiency in the capital arising out of the failure of a proceeding, which ought never to have had origin. In 1850 the Legislature passed an Act — 19 and 20 Vict., o. 8, where- by the prior rights of the Oovemment claims, in respect to the total ii^ (*) Tlie above transaction could have no legal validity^ as the Act under which the luonoy was advanced, didn't repeal tho Amendment Act, It is needless, however, to talk of law, in roforenoo to proceedings, in which law and principle wore alike trampled upon ; and the Royal Assent used as an engine to rob and defraud. Bl 1 w ( « ) amount advanced to tho Company, wera withdrawn, and tho ' lien of tlto ' Province placed to rank as to dividend or interest with that of the Com- ' pnny'H bondholderB.' Tliiii Act further empowem the Company to imue debentures, amounting to £2,000,000, having Preference rights ; in fact, to take the place, to that extent, oooapied by the government money, previous to tho l)a8fiing of the Act. Here then, in the creation of these debentures, was at first mode known, that any of the borrowed monies, possessed prior rights to tho rest. This information was withheld, until all the inttahntnti of the quota to the loan, contributed by private individualt had been paid up in full. The framers of this Act attempted to give to its provisions a sem- blance of justice, for while the Act empowers the Company to issue debentures, havini; Preference rights to the Original Debentures issued, it at the same time annuls the priority of the claims of the Qovemraent, in respect to the several sums advanced, in loan, to the Company. It was, however, by the mppmtion of the emitenee of tueh prior elainu, and mivrepre- aentation in the itatemente given to the public, that the indtviduaU who lent their money to the company were wronged. This Act the Shareholders were called upon ' to accept' at am Annual Ordinary Meeting. In 1857, an Act of Parliament was passed, 20 Vict., c. 2. By this Act, the powers of the Government to appoint members on the direction of the Company were repealed. The Act also places the claims of the Oovemment in respect to the £3,111,600 in abeyance, until the earnings of the company shall be found adequate to pay the interest on all the other borrowed monies, and a dividend at the rate of 6 per cent, per an- num cm the subscribed share-capital. In 1858, an Act of Parliament was passed, 22 Vict., c. 62. This Act formally repudiate* the rights of the Original Loan, in conferring powers on the Company to raise Preference Bonds to any amount, upon a resolu- tion 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. The rights of the original creditors of the Company— of those who lent their money upon express conditions, formally set forth, are by tiiis Act annulled, and the shareholders, the borrowers, are empowered to raise any further amount of money, giving to it prior claims to the money which constituted the Compan3r's Original Loan. In speaking in reference to this Repudiation-Act, the Solicitor Oenerol, the President of the Company, in his report dated Dec. 1853, says, 'that the directors cannot omit this opportunity of reminding the ' shareholders of the continued interest of the Proviuoi»1 Legislature, in ' the complete and successful development of the Orand Trunk Railway, as I> I*. ( ^ ) V I ' !l ' evinced by their Act paused Inst (Mnsion with the view of facilitating 'during a period of great financial depression, the operations of the • Company.' To proceed to raise money under the provisions of an Act of Parlia- ment, — an Act repudiating the rigl of money already raised, — the directors were barred from pursuing ?»ny course, having the slightest possible chance of success, that would lead to the knowledge of the actual position of affairs. They resorted to the publication, and issue of Reports containing false and deceptive statements, I may here incidentally mention, that to check proceedings of this character, the British Legislature pascted an Act of Parliament in 1857, 20 and 21 Vict., c. 54, commonly called ' The Fraudulent Trustees Act.' In calling attention to the date 1855, at which the Government loans were increased from ^2,211.500 to £8,111,600 by the irregular issue, and improper acceptance of £900,000, in bonds of the i*rovince, I adverted to two reports, dated 7th Feb. and 8th March of l.'ist year. In the former of these documeats, prefixed to which is a notice for a Special General Meeting to be held at Toronto on the 23d March, ' for the 'purjKise of approving a resolution of the directors for increasing the 'capital of the Company by the sum of £1,111,600, and for raising that ' sum by Preferential Bonds,' the following paragraph appears : ' The amount of Capital proposed to be created at this meeting is '£1,111,500. This, with the two millions of preference capital created in ' 1856, is equal to the amount of the debentures 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 Government and Legislature of Canada have sanctione 2 the postpone- 'ment of the payment by the Company of any interest upon this ' £3,111,500 until a dividend at the rate of 6 per cent, per annum shall •have been paid upon all the consolidated stock of the Company, By the 'creation, therefore, and issue of mlditional preferential Capital 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 Company vill not be in any respect affected or altered from that ' which these securities occupied at the time of their original issue, when ' the interest on the Provincial debentures formed the first 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 represented by the directors, lehen they solicited and obtained the money for these ' securities,' was, as Hhown by the iteais 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 intend- 'td to be raised by cUbetitures.' — A position giving to them prior rights of- the most absolute character. . ( «B ) The actual * poaitiou' which these ' securities' occupied, and which was secured to them by the Act. 18 Vict., c. 33, was that of being a sacond mortgage to the Government loans, amounting to £2,211,000. This amount was increasevl to the £8,111,600 by the imprcper and illegal pro- ceedings on the part of the Goverr.ment, in advancing to the directon, in a covert and clandestine manner, £900,000 in 1865, — that it t%oo yeoav after the creation of the original debenture debt of the Company. In the face of these facts, the directors here deliberately state, that a «ura of £3,111,600 '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 wan a just and equitable one. They make that statement, to use the words of the Report in ques- tion, after ' having anxiously considered the various methods which sug- ' gested themselves for obtaining the above amount of Capital.' And they further state, in the aubsequent Report dated 8th March, in speaking with reference to the propoaed issue of these new Bonds, that they ' feel' that they have adopted ' the best and most equitable mode for 'raising the necessary funds by the proposed n^w issue of 1,111,600 ' Second Preference debentures, which, with the 2,000,000 of Firat Prefer- ' ence already issued, assume the position originally occupied by the Pro- ' vincial debentures of £3,111,600.' I have here traced th-? course of procedure pursued by the Govern- ment and the directors, in reference to the Original Loan contracted by the Grand Trunk Railway Company of Canada, and have established by documentary evidence of the most incontrovertible character, a case to which it would be difficult to find a parallel — a case commencing with mia- represen^Ation, and after a series of proceedings, in which no regard has been had for truthful statement, Legislative enactment, or the principles of public faith, finally ending in Repudiation — making it manifert, that money lent to public undert^.kings in the Province, possesses in reality no security. As one, of many, whose intei-ests have been prejudiced by these proceedings, I place them here in detail under the notice of your E ".clleucy. The Government are in possession of the several documents to which reference has been made, there can be no difficulty, therefore, in testing and verifying the accuracy of the extracts given. I have the honour, &c., Ac, &c. (Signed) JOHN lUSS. To His Excellency the Right Hon. Sir Edmund Walker Head, Bart., Governor General of Cuada, &c., &o., &c. By the frnudulent cou.se of procedure here detailed, a sum of £8,111,600 has already been placed, having Preference rights to the Origin- al Loan. On £2,000,000 of t' at amount the interest was pjid on 30th June, leaving no residue to pay the intPicat on the Original Luau. ( as ) Spkncgr Wood, Qukbeo, Feb. 15, 1860. V? |. Sir, I have this evening had the honovir of receiving your letter of January 27, relating to the affairs of the Grand Trunk Bailway, which 1 hasten to acknowledge. Your obedt. lervt. EDMUl^D W. HEAD. J. Bass, Esare. »;ii:i^.t- ^r.^cl v.:tcK Rub Rotale, 36, Bouloone-sur-mer, Feb. 6, 1860. Mt Lord D'JKB, - •' • Herewith I beg to forward to your Qrace, a copy of a letter which I addressed to His Excellency the Qovemor Qeneral of Canada. The case to which it refers ia ftne of gireat public importaiice, not solely on account of the large interests at stake, but the principles in- Tolved in the proceedings themselves, are such, as to be not only wholly incompatible with the relations of the two countries, but totally destruc- tiye of all security. The necessity for the adoption of some measures, to prevent the re- currence of a public wrong of a similar character, will not fail to sug- gest itself to your Grace, as it would be a most abnormal state of things, if parties contracting Loans in England, upon express conditions formally set forth, could obtain Acts of Parliament from a Colonial Assembly, annulling these conditions — Repudiation-Acts. In the instance of the Qrand Trunk Railway Company of Canada* the interests of Eritish holders of Bonds representing nearly two millions of money, have already been largely prejudiced by the proceedings detciled in my letter ; and would have been still more seriously affected, had it not been for the unfavourable state of the money market, which rendered abortive an attempt made last year, by the directors, to raise, under the provisions of the Repudiation, — Act, — 22 Vic, c. 52. — a further Sum, in loan, giving to it Preference rights to the Company's 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 they have rendered themselves amenable to the provisions of the Fraudulent Trustees Act; as I presume, the provisions of that Act apply to all cases of false statements published and issued in England. I have the honour, &c., ftc. (Signed) JOHN BASS. To His Qrace the DcKK or Newoastlb, "* Secretary of State for the Colonies. - ^-^ , * ■ ' '■• ■ >. -, ,- -^t^^ • ■ », n Kl ( 27 ) DowMiMa Stbbkt, 17th February, 1860. Sib, 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 Gk>vercor of Canada on the subject of the affaim of the Orr^nd Trunk Railway of that Province. I am, &c., tie. Jl „ C. FORTESCUEL John Bass, Esqte. 9, MoNTPELiEB Street, Bkompton, -^ 21 June, 1860. ■t-.r. Mt Lobd D»:::e, I had the honour of addressing a letter to Your Grace, on the 6th Feb., referring to an enclosiore tLen forwarded — a copy of a letter, which I wrote to His Excellency, the Ctovemor-Qeneral of Canada, having rer ference to the course of procedure pursued by the Canadian Govcnt ment, in raising the capital for the construction of the Grand Trunjk Railway of Canada. From the great importance of the case, Yoiu- Grace Mill no doub): have had an inquiry instituted into the allegations contained in my letter to the Governor General. In my letter to Your Grace, I 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 whg originally advanced money in loan to the Company, on the faith of the statements set forth in the Prospectus by members of the Canadian Government and the other directors. These Bonds amounting to £1,111,600 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 siim little short of a million of money. They were created imder the provisions of the Repudiation- Act, and the assent for their creation was obtained by false and de- ceptive statements, set forth in Reports, issued by the directors ; copies of which are here forwarded. The falfle 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 reference to the Company'a Amendment Act — 18 Vict., c. 33, s. 20. By that Act the Government Loans were then limited to £2,211,500, including £400,000, advanced tif the St. Lawrence and Atlantic Railway Company, one of the Gompaniea Amalgamated. But that even such an amount, or that any amount, should ^—iii ( as ) ill' ' A have hod a prior lien, was a ifaud upon those who leut their niouey to tha Grand Trunk Company, for the fact was not only suppreaaed, but the total borrowed money — ' the entire mortgage Debt of the Company,' wa« repre- sented to conBiat of moniea raised, and to be raised, on the Bonda of iks Companies Amah/amated ; as ahown in my letter tti the Governor General. The above amount was increaaed to the £3,lii,600 in 1855, by the improper proceedings of the Government— violatiiug their obligations formally contracted, and contravening the expresa 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 Grand ' Trunk Railway Company of Canada' — that is to override the rights of niouey contributed, in loan, two years before, by lyrivate individuals — Sec. VII. of the Ajnendment Act provides that nothing shall be done in the increasing of the Capital of the Company to ' affect or impair or poatpoue the secmity ' by bond or ;nortgage of any individjial upon the aaid roKd without his ' consent in writing.' The Canadian Government having had no respect for the principles of integrity, would not allow themselves to be barred in their 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 respectfully submit to Your Grace, that the parties 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 than any to be found on record ; when the means employed to give to them effect are taken into consideration— in the carrying of them into execution, even tlie Royal Assent has been trailed into the infamy of Repudiation. Yov the Government of Canada to have constructed the line of railway to develope the resources of the Province, would have been a legitimate undertaking — to place the project as it was put before the British public, was a flagi ancy of the most gigantic proportions. It is the fudt instance, I believe, of one of the colonies deliberately de- frauding the mother country, and ita gravity is enhanced by the fact, that Canada enjoys so large an amount of public confidence, and public credit in this country, while the Canadian Government have shown themselves wholly unworthy of trust — the profligate course of procedure, which they have pursued, making manifest as flagrant a disregard for the principles of public faith as haw ever been exhibited. I have the honor, &c., &c., (Signed) JOHN BASS, To His Giiifc the Dcke of Newlastle. Sccrelaiy of State for the Colonics. ftc, &L-., &c. li ( « ) Sir, DowmNo Strkkt, 7 July, 1860. I (uu directed by the Duke of Newcastle to acknowledge the receipt of your letter of the 27 June, alleging certain grievaucea in connection with the affairs of the Company of the Grand Trunk Bailway in Canada. The subject is not one in which Her Majesty's Government are con- cerned, or on which they can cxprebj an opinion— -your letter has therefore been forwarded for the information of the Governor of Canada. I am, &e., &c., T. F. ELLIOT. John Bass, Esq. It has not been made known what steps the Governor General has taken in this matter The Bondholders, however, hare a clear case ; there should be no compromise on their part. TJie money was received for a Loan, the conditiont o/ which, at repretented, cmild not co-exitt with the then actual state of things. t >■ .-^-1/ ■ i^.-t' -- 'r^'i-'^t.^f.^ ■ V :.ifi*; ( 30 ) To THE LaoisLATivB AssKMBtT OF TUB Pboyincb ov Camaiu, in Parliament aaaenUtled, the hwnbU Petition of the underngnedy Holders of SeexuriHeM itaved in Great Britain on the $eewriiy of conditions gitaranteed to them by Acta of the Canadian Legislature. {ICICBLT ShBWKTH, That your Pstitioners view with alann and regret the grounds of a claim made against the Canadian Government by Holders of original 6% Debentures of the Grand Trunk Railway of Canada, issued in this country. Tour Petitioners respectfully appeal to your Honourable House for redress against a system of Legislation ruinous to the value of all Securities issued under Acts of your Honourable House. Tour Petitioners have discovered with dismay that, to induce subscription to those Debentures in this country, a most assur- ing condition was guaranteed to them, that further than a fixed amount of Government Loan, no Bond or Mortgage should ever be issued over them without their written permission ; and this conditiou, confirmed by an Act of your Honourable House, was pledged by a Direction, of whom a controuling element, (consisting of members of the Gk>vemment and Legislative Council,) was nomin- ated by the Canadian Government, and the money obtained through their Financial Agents in this country, who were, also the Govern- ment Directors in England. In utter disregaid of this condition, the Government of Canada, on the petition of their nominees and agents, without the written permission of the Debenture Holders, and without their knowledge, subsequently applied to your Honourable House for power to issue a large further sum of Government Loan to rank over the said Debentures, and by piecemeal legislation, (entirely without the knowledge of the Debenture Holders,) almost every condition pledged to the said Debenture Holders have been annulled, often to the advantage of the Government. Your Petitioners discover that the Goveiiiment of Canada issued in this country, through their agents, a Prospectus inviting subscription to these Debentures, in which the fact that the Railway was already pawned to the said Government for a large Provincial Loan was deliberately suppressed ; and a considerable amount was subscribed without any knowledge of the fact, and that both Prospec- tus and subsequent reports issued by the Government Directors prove to have been at variance with the facts as they existed. : our Petitioners being aware that the history of the whole tr.T ' action has been published, and laid before your Honourable ( 31 ) House, it ia unneoMsary for them to recapitulate under multiplied heads the whole ii^uries done. They respeotfuUy submit that in the &ce of such revelations, unless pixtmpt remedial measures be adopted, it is evident their capital can have no real basis of security, and Canadian Oredit must be annihilated. Tour Petitioners therefore humbly pray your Honorable House that a prompt and equitable treatment of this vast subject may remove the existing distrust, distress, paralysis, and ruia which this system of Legislation has produced. -^ ■