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/'/. 
 
 CORRESPONDENCE 
 
 BKTWXCK 
 
 THE HON. WILLIAM WAPIEB, 
 
 v> 
 
 OK BEHALF OF THE 
 
 "Vi 
 
 .■\!V ■ ' i 
 
 ENGLISH SHAREHOLDERS OF THE GRAND TRUNK 
 RAILROAD COMPANY, 
 
 i. 
 
 AKD THE 
 
 HON. ¥M. CATLET, 
 
 (inspector general) 
 
 WITH 
 
 INTROOVCTORT MEMORANDUM AND EXTRACTS FROM DEBATES, 
 * &C. I 
 
 i 
 
 -. .; --. ■j^i 
 
 •:':■■ •V•^ 
 
 QCoronto: 
 
 PRINTED BY S. DERBISHIRE & G. DESBARATS, 
 
 Printer to the Queen's Most Excellent Majest 
 
 1856. 
 

 ^i^vL 
 
MEMORIAL 
 
 TO 
 
 HIS EXCELLENCY THE GOVERNOR GENERAL 
 
 IN COUNCIL, 
 
 On behalf of the Shareholders of the Grand Trunk Railway 
 Company of Canada, setting forth the Basis of the Scheme 
 of Financial Assistance, which it is proposed should be 
 granted by the Government and Legislature for the relief of 
 the Enterprise, for the re-establishment of its Commercial 
 Credit and to secure the permanent prosperity of the Pro- 
 vinces. 
 
 BY THE 
 
 HONORABLE WILLIAM NAPIER. 
 
MEMORIAL. 
 
 May it please Your Excellency. 
 
 This Memorial (on behalf of the Shareholders of the Grand Trunk 
 Railway Company of Canada, setting forth the Basis of the 
 Scheme of Financial Assistance, which it is proposed should 
 be granted by the Government and Legislature for the relief 
 of the Enterprise, for the re-establishment of its Commercial 
 Credit, and to secure the permanent prosperity of the Province) 
 Humbly Sheweth : 
 
 That the Shareholders have learnt with regret and alarm that 
 causes, which it is useless here to detail — and some of which could 
 scarcely have been foreseen — have placed the Undertaking in a 
 position so perilous, that without prompt and material aid from the 
 Province, the interest falling due on the Provincial Bonds for the 
 accruing half year, cannot be met by the Company ; and the most 
 important features of the scheme, viz : the great Victoria Bridge 
 and the extension of the Line to its western terminus cannot pos- 
 sibly be put in execution ; results, the anticipation of which alone 
 has sufficed to destroy the credit of the Enterprise by reducing the 
 market value of the shares to 50 per cent, discount, and to cast a 
 cloud over the commercial prospects of the most favored Colony of 
 Great Britain. 
 
 A serious and careful consider, <tion of the circumstances of the 
 case — not merely in view of its actual necessities, but looking to 
 the comprehensive completion and permanent re-establishment of 
 this the main artery, and also to the future subsidiary Railway 
 Enterprise of the Country ; and vuth due regard to the experience 
 of similar Undertakings in other countries, when in the same con- 
 dition, and to those means which have been successfully adopted 
 for the restoration of their financial credit — has led the Share- 
 holders to believe that the same principle of relief, if at once 
 applied by the Government and Legislature, could not possibly fail 
 to ensure results mutually advantageous to the Shareholders and 
 to the Country. 
 
6 
 
 - * 
 
 : i 
 
 BASIS OF THE SCHEME. 
 
 Tlie requirements to bo attained nre two-fold, 
 
 1st. Caj)ital sufficient for the completion of the Undertaking, 
 estimated (in the original calculations) not to exceed the sum of 
 £1,560,000. 
 
 2nd. T'lc resucitation of the market value of the Enterprise ; 
 or, in other words, the restoration of the Shares to their par value. 
 
 The attainment of the former docs not necessarily ensure the 
 accomplishment of the latter ; for the reasons, that the prospects of 
 the line in the Money Market have already been seriously dam- 
 aged, and that if left alone to its own gradual, though sure develop- 
 ment, and without any external support, looking to the magnitude 
 of the Enterprise and to the period of time which must elapse 
 until the increase of traffic to result from the completion of the 
 Victoria Bridge can be accomplished, it will probably be several 
 years before the profits shall afford a dividend on the Share Capital 
 of 5 per cent. ; and, during which time therefore, the Company's 
 Debenture and Share Capital must necessarily remain at a depre- 
 ciation which is ruinous to the Shareholders and damaging to the 
 Railway development and Commercial Credit of the Provinces. 
 
 Experience in Europe and elsewhere, particularly in Fiance, in 
 Sardinia, in Austria, in India and in Australia, has more or less 
 proved, that one measure alone is completely adequate, under such 
 circumstances, to maintain the credit of Railway undertakings in 
 the vicissitudes of their infancy, during their construction and 
 pending the gradual development of their traffic up to a certain 
 point, viz : — 
 
 The support of the State itself or in other words the practical 
 demonstration by the people of the Country, of confidence in their 
 own commercial future, which is best given by a Guarantee of a 
 minimum dividend for a term of years, on the share Capital 
 invested. 
 
 The consideration for this aid and for any possible risks of 
 temporary loss (a risk however which has not in any one previous 
 instance resulted in any loss) has been and is, the reversion of the 
 Undertaking in absolute property to the State at the expiration of 
 a term of years — a sacrifice in return for the Guarantee which is 
 cheerfully made by the individual Stockholders, and a boon of the 
 greatest magnitude to the Country, the more especially to a young 
 
state 08 Canada, the magnitude of whoso ultimate commercial 
 future it would be presumptuous to attempt to estimate. 
 
 Looking therefore to all the circumstances under which the 
 capital of the Grand Trunk Company was subscribed, and to the 
 lamentable prospects of the Undertaking, if left in its existing con- 
 dition, — the Shareholders earnestly appeal to the Government and 
 Legislature of Canada for a pledge of confidence in this great 
 national Railway Enterprise by a Guarantee of a dividend of 5 per 
 cent, on the share capital of the Undertaking, after the payment of 
 all its fixed charges ; the consideration to be, the reversion of the 
 Undertaking in absolute property and in the most efficient working 
 order, at the expiration of, say, 99 years. 
 
 Under ordinary circumstances in such Guarantees, the risk of 
 any possible loss is of course borne by the State, but in this parti- 
 cular instance, remembering the great liberality of the Province 
 towards the Enterprise and the natural disappointment of the 
 people of Canada at its present condition, and looking to their own 
 individual conviction of the ultimate realisation of all the prospects 
 originally hoped for, the Shareholders are anxious also to give a 
 strong mark of their confidence ; and propose, that should any 
 deficiency ensue during the first five years after the completion of 
 the lino to Toronto, in respect of the Guarantee, and wishing to 
 preserve intact the surplus revenues of the Provinces, they are 
 ready to agree and to give proper security, that all such annual 
 deficiency, during that time, shall be subscribed by the Company, 
 and be converted into Share Capital, under a like Guarantee by 
 the Provinces, and the amount of which shall be estimated and 
 allotted pro rata, among the holders of the Stock, at the time of 
 the granting of the Guarantee. 
 
 The advantages which would necessarily result, are as follows : — 
 
 That the Commercial Credit of the Undertaking would imme- 
 diately be re-established. 
 
 That the unissued Share and Debenture Capital would at once 
 be realised at par. 
 
 That the interest on the Provincial Debentures would be paid 
 by the Company; the completion of the Line to its western 
 terminus and the construction of the Victoria Bridge would be 
 rapidly accomplished ; and any probable deficiency diuing the first 
 five years, in respect of the Guarantee, would be provided for ; 
 
I 
 
 and all this without the Proviuco being called on to subscribe an 
 additional pound of Capital. 
 
 That the doubts now existing in the Money Market, and 
 naturally arising from the existing circumstances ; from indi- 
 vidual ignorance of the commercial prospects of Canada ; and 
 fVom the disappointment consequent on the published accounts 
 of the traffic receipts on the only section of the line hitherto open, 
 will bo completely removed ; and that the commercial credit of 
 the Province will bo re-established, the more firmly that in the 
 time of difficulty and of gloom, the Government, the Legislature, 
 and people of the Country had shewn, not only their honor in 
 respect of their national obligations, not merely their readiness to 
 share with the Stockholder the risks or profits of the great national 
 Railway enterprise ; but that adopting the commercial principles 
 established by the railway experience of Europe, they had given, 
 when appealed to, the most complete proof of confidence in their 
 resources and material progress. 
 
 It should be added that proper security for the conversion of the 
 probable deficit in respect of the Guarantee during the first five 
 years, might be given to the Government by many arrangements, 
 one of which would bo : 
 
 The Guarantee not to take effect until the probable amount of 
 the total deficit during the first five years had been agreed to 
 between the representatives of the Government and of the Com- 
 pany, and until the share capital representing that amount had 
 been subscribed, and a deposit equal to the first year's estimated 
 deficit placed in the hands of Trustees on behalf of the con- 
 tracting parties, and for the benefit of the Provinces ; and the 
 amount necessary to make good each subsequent year's estimated 
 deficit to be deposited in the like manner. 
 
 In case, after the first year, the Company should fail to make 
 such deposit as above prescribed, the deficiency to be a first charge 
 on the net profits of the Undertaking for the year. 
 
 The Government to pay 5 per cent, interest on all such deposits. 
 
 CALCULATIONS ON WHICH ARE GROUNDED THE ESTIMATES OF LOSS OR 
 GAIN IN RESPECT OF A FIVE PER CENT. GUARANTEE. 
 
 It remains now to show what is the estimated risk to the Pro- 
 vince and to the Company in respect of any probable deficiency in 
 the Guarantee during the first five years, estimated to be necessary 
 
for the development of the traffic, including the time necessary for 
 the completion of the Line to its Western Terminus and for the 
 construction of the Victoria firidgo. 
 
 But in the lirst place, the Company would engage to complete 
 the Line to the Western Terminus in one, and the Victoria Bridge 
 within three complete working seasons from the date of the granting 
 of the Guarantee, thus affurding two years for the development of 
 the through truffle, before the termination of the Company's liability 
 in respect to the estimated deficit on the Guarantee. 
 
 It is evident then that the estimated receipts of the Lino must be 
 the basis of the culcuhitions as to any deficiency or excess on the 
 Guarantee of 5 per cent, on the share capital during the first five 
 years. 
 
 The estimated receipts therefore must be as carefully ascertained 
 as circumstances will admit of. The experience of Railways in 
 America in districts similarly populated and of a like character, 
 might be fairly adopted as a guide ; but it is fortunate that in this 
 instance, actual experience in Ujincr and Lower Canada is sufficient 
 to afford data for calculations of the accuracy of which no reason- 
 able doubts can be entertained. 
 
 It will be seen on reference to the annexed estimates of traffic 
 (No. 1), during the first five years, that the average receipts are 
 calculated, on the Eastern Section at jei5 per mile per week ; on 
 the Western Section, at JS25 per mile per week ; and that assuming 
 the working expenses at 50 per cent, on the gross receipts, and 
 deducting all the fixed charges of the Provinces and of the Com- 
 pany, there remains an annual balance available for Dividend of 
 2.05 per cent, on the share capital. 
 
 The liability of the Province therefore, in respect of the 5 per 
 cent. Guarantee, would be 2.95 per cent, per annum during five 
 years, which deficit woidd be annually converted into share capital 
 under a like Guarantee of five per cent. 
 
 The following data are afforded by the actual experience of the 
 Province : 
 
 The receipts of the Eastern Section of the Grand Trunk 
 of 428 miles, averaged, during the summer months of the past 
 year jS18 per mile per week. 
 
 During the winter months of the past 
 year £12 
 
 « 
 
 <( 
 
10 
 
 Thus giving a general average 
 of. £15 per mile per week. 
 
 Without adding one pound sterling for the development of the 
 traffic reasonably to be expected during the first five years, the re- 
 ceipts on the Eastern Section are only calculated at the past 
 experience of £15 per mile per week. As regards the Western 
 Line of 500 miles, on the section from Montreal to Brockville of 
 125 miles, passing through a district which is rather under the 
 average of the whole, the receipts during the Winter from the 
 opening of the Line on the 17th Nov. last year, to the 1st April, 
 averaged ^612 per mile per week, and were for the last week of 
 that period ^618 per mile per week. On the Toronto and Hamilton 
 Line of forty miles, opened on the 19th Nov. last, the receipts for 
 Passengers alone have averaged during the Winter, £30 per mile, 
 per week ; the mean receipts therefor per mile, per week, during 
 the Winter months, on the Eastern and Western extremities of 
 the entire Western section have been £21 per mile per week. 
 The estimated average during the five years is only placed at £25 
 per mile per week, which calculation is thus subdivided. 
 
 Passengers, say £ 10 per mile, per week 
 
 Mails 3 " " 
 
 Goods 12 « " 
 
 Total, £25 
 
 These are the reasonable data on which is calculated the maxi- 
 mum annual deficit of 2.95 per cent, on the share capital during 
 the first five years, and which it is proposed for that time to con- 
 vert into share capital under a like Guarantee of 5 per cent, by the 
 Provinces. 
 
 By reference to the estimate of traffic for the second period of five 
 years, during which time the through traffic and much subsidiary 
 local traffic would be fairly developed, the receipts are modestly 
 stated for the Eastern section at an increase to £20 per mile per 
 week ; for the Western section to £35 per mile, per week ; which 
 it will be seen by the annexed estimates for the s-cond period of 
 five years (No. 2), will more than cover the Guarantee of 5 per 
 cent, on the share capital. 
 
 For the third period of five years, the receipts are placed for the 
 Easern Section at £25 per mile, per week ; for the Western Sec- 
 
11 
 
 tion at £40 per mile, per week, estimates, (No. 3), the correctness 
 of which cannot reasonably be disputed, and which leave a 
 surplus of 2.80 per cent, on the share capital. 
 
 GENERAL APPLICATION OF THE GUARANTEE PRINCIPLE. 
 
 In conclusion, the Shareholders would urge upon the Govern- 
 ment and Legislature, the application of the principles of a minimum 
 Guarantee for the same consideration, to all the subsidiary Rail- 
 way Enterprise which shall receive an especial recommendation 
 for the same, by the sanction of the Legislature, as undoubtedly 
 profitable and necessary for the local development of the Pro- 
 vinces, when not in competition with, and where constituting pro- 
 fitable feeders to the National Trunk Line. 
 
 The risk of the Guarantees on such local Railways, though as- 
 sumed by the Government, should be shared in due proportions by 
 the Municipalities of the Districts through which the Lines would 
 pass, or if as feeders to the, main Trunk Line, in due proportions 
 by the Municipalities and by the Grand Trunk Company. 
 
 It is evident that the risk on the actual amount guaranteed by 
 the Provinces on the Main Trunk, and on the subsidiary local 
 Enterprise, would not be represented by the total amount of the 
 capital invested ; for as soon as the through traflic from West to 
 East, on the Main Line, and the local trafiic shall have become 
 developed, the Guarantee on the Trunk would become merely 
 nominal, and would remain only on the subsidiary Railways, 
 which would also in time cover their own liabilities. 
 
 The examination to which each independent local Railway or 
 tributary feeder to the Grand Trunk Line, requesting such a Guar- 
 antee would be subjected by the Legislature — (the municipality or 
 the Grand Trunk Company, as the case might be , appearing in 
 evidence for or against the same,) would be sufficient protection to 
 preclude any abuse of the priviledge, while on the other hand 
 English Capital would thus be obtained to any amount for such a 
 secure investment, and an extraordinary and incalculable commer- 
 cial impetus would be given by the development of the inex- 
 haustible resources of the country in Wheat, in Timber and in 
 Minerals. 
 
 Under the system of Guarantee applied to the Main Trunk Line, 
 the Company in its own interest would not hesitate to make 
 arrangements with, and lease and work on equitable terms, local 
 
Bailways already constructed or in course of construction, and 
 which left to their own unaided support, have not hitherto proved 
 remunerative, looking even to the fact, that the profits anticipated 
 are sought from the local development of their districts, rather 
 than from any return upon the Capital invested. 
 
 FINALLY. 
 
 It will certainly be admitted on investigation of the annexed 
 Estimates of Traffic (Nos. 1, 2, 3,) that they by no means bear a 
 relative proportion in their increase, during a term of fifteen years, 
 to the increase to be anticipated in that time to the population — 
 the assessed value — the productions and Revenue of the Provinces 
 — at least, if the experience of the last fifteen years may be ac- 
 cepted as an indication of the future prosperity of the country ; 
 and if this presumption be justified, it produces a double effect in 
 favour of the Guarantee Scheme, for Avhile the probabilities of any 
 deficit on the Guarantee after the first five years would be lessened, 
 the Revenues of the Province would be the more able to bear any 
 moderate loss. 
 
 Surely also, if, as is imdoubtedly true, the branch lines of rail- 
 way now made, and proposed, are subscribed for, less as an invest- 
 ment by the resident inhabitants, than for the profit which will 
 accrue to each individual by the facilities to be afforded for traffic 
 and business, and by the increased value to be expected in the 
 whole district and in the towns and villages to be traversed by the 
 railways ; and if Municipalities are justified in raising funds for 
 such j)urpose for the benefit of the common property ; surely in 
 like manner the Provinces may reasonably afford to run some 
 trifling risk for the general good ; a risk which is undoubtedly re- 
 duced to a minimum, and even if incurred after the fifth year, 
 would certainly find its equivalent in the increased prosperity and 
 happiness of the population due to the rapid material progress 
 always induced by railway development. 
 
 These suggestions are respectfully submitted to the conside- 
 ration of His Excellency the Governor General, and of the Gov- 
 ernment, as the basis of a comprehensive and enlightened scheme 
 which in the opinion of the Shareholders would prove mutually 
 beneficial to the Grand Trunk Company and to the Provinces, 
 and which would confer lasting honor on the Ministry, who 
 should propose and on the Members of the Legislature who 
 
 
18 
 
 should put the same in execution by an Enactment, applying the 
 Guarantee principle to the Grand Trunk Railway Company, and 
 all Railways especially recommended by the Legislature. 
 
 It has thus been shewn that the effect of a minimum gua- 
 rantee of 5 per cent, dividend on the share capital of Ihe Com- 
 pany would be — 
 
 That the credit of the entreprise would be raised to par. 
 
 That the Undertaking, including the extension of the Line 
 to its western terminus, and the Victoria Bridge, would be ra- 
 pidly completed. 
 
 That the Confidence of the Provinces in their commercial 
 future would be asserted and established before all the world. 
 
 And all this without calling upon the Provinces to raise one 
 shilling — resulting in a combination of mutual advantages to 
 the Provinces and to the Company, which, it is respectfully 
 submitted, no other Scheme can possibly present. 
 
 On behalf of ihe Committee Shareholders of the Grand 
 Trunk Railway Company of Canada. 
 
 WILLIAM NAPIER. 
 
 Toronto, 22nd April, 1856. 
 
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CORRESPONDENCE. 
 
 No. 1. 
 
 Inspector General's Department, 
 
 6th May, 1856. 
 Sir, 
 
 I have now the honor, in reply to your request, to furnish 
 you with a Memorandum of the terms on which after much anxious 
 consideration, the Government conceive they woukl be justified 
 in recommending to Parliament the granting of aid to the Grand 
 Trunk Rail Road. You, Sir, cannot be insensible to the many 
 difficulties which beset this question, or the differences of opinion 
 which exist as to the best mode of disposing of them ; and as the 
 further course of the Government may materially be influenced 
 by the opinion which you, as the accredited Agent of the English 
 Proprietary, may entertain of the practical result to be expected 
 from the outline of the scheme which I have sketched, I shall be 
 obliged by you favoring me with your views thereon, which I may 
 submit to His Excellency the Governor General and my Col- 
 leagues in the Government. 
 
 I have the honor to remain, 
 « yours faithfully, 
 
 W. CAYLEY. 
 To the Honorable 
 
 W. NAPIER. 
 
 No. 2. 
 
 May, 1856. 
 Proposal for relief to Grand Trunk Railway Company. 
 
 1st. The Company to be empowered to issue Preferential Bonds 
 to the amount of je2,000,000 sterling. 
 
 2d. The Bonds not to be issued until the Railway is finished 
 and in operation from St. Thomas to Stratford. 
 
 3rd. The proceeds of the £2,000,000, to be paid over to the 
 Provincial Agents in London, and released on certificate of Re- 
 ceiver General, on proof of progress of work. 
 2 
 
18 
 
 li?i" 
 
 4lh. The proceeds to be appropriated as follows, viz : 
 London to St. Mary's, Stratford and Sarnia 
 
 Branch • £450,000 
 
 Subsidiary Lines at Port Hope, Cobourg and 
 
 Prcscott 100,000 
 
 Victoria Bridge 800,000 
 
 St. Thomas and Riviere du Loup 525,000 
 
 Three Rivers' Branch 125,000 
 
 je2,000,000 
 
 5th. The St. Mary's and London Branch, and subsidiary Lines to 
 be completed by the 1st. September, 1857. 
 
 The Stratford and Sarnia 1st. September, 1858. 
 
 The Three Rivers and Arthabaska. . . . 1st. January, 1859. 
 
 The Victoria Bridge 1st. January, 1860. 
 
 The St. Thomas and Rividre du Loup 1st. January, 1860. 
 If any portion of the Roads above specified originally entitled to 
 the guarantee, be not completed at the date jn'ovidcd, the Com- 
 pany will return to the Government je3,000 sterling for every 
 mile remaining unfinished, credit being given to the Company 
 for so much in payment of the Provincial Guarantee. 
 
 REPLY 
 
 To the Letter of the Honorable William Cayley, Inspector Ge- 
 neral, to the Honorable William Napier, on behalf of the 
 Shareholders of the Grand Trunk Railway Company of Canada. 
 
 Toronto, 7th May, 1856. 
 Sir, 
 
 I have the honor to acknowledge your favor of the 6th 
 instant, enclosing " a memorandum of the terms on which after 
 " much anxious consideration the Government conceive they 
 " would be justified in recommending to Parliament the granting 
 " of aid to the Grand Trunk Railroad." 
 
 Before proceeding. Sir, to give as requested " my opinion as 
 " the accredited Agent of the English proprietary of the practical 
 " results to be expected from the outline of the Scheme sketched 
 " out," I desire notwithstanding the disappointing results now to 
 be considered, to express my great satisfaction that the Govern- 
 ment of these Provinces have, by the scheme now presented, 
 acknowledged the principle that aid or relief should be granted to 
 the euterprize in its depreciated financial condition, and I would 
 
19 
 
 rn- 
 
 ;ed, 
 
 to 
 
 bid 
 
 further observe that in respectfully submitting the following 
 remarks on such sch'^me for the information of His Excellency the 
 Governor General and of the Government, I beg leave to offer my 
 best thanks for the Statement in your communication that the fur- 
 ther course of the Government " may materially be influenced by 
 " my opinion," and it shall. Sir,' be my earnest endeavour faith- 
 fully to discharge the responsible duty assigned to me, by expres- 
 sing my opinion as to the Commercial value of the aid proposed 
 by the Government, and also by once more submitting such a 
 scheme of Relief as under the least favourable aspect would be 
 considered to be material assistance by the Shareholders. 
 
 Passing over fur tlie j)resent the 2nd and 3rd, and the 1st 
 part of the 5th paragraph of the Memorandum, I will proceed 
 in the first instance, to compare the obligations to be assumed by 
 the Company under tlic Government proposal with those yet 
 remaining to bo completed under the existing arrangements 
 between the Company and the Province. 
 
 The works to be executed after the completion of the line from 
 Brockville to Stratford are : 
 The road from Stratford to Sarnia whijh will cost the 
 
 Company say. £ 400,000 
 
 The Victoria Bridge do do.... 1,150,000 
 And the St. Thomas and Rivi6re-du-Loup Line 560,000 
 
 Making a total outlay on Works of. £2,110,000 
 
 Which with an allowance for Interest (accruing on 
 the preferential Bonds which it will be necessary to 
 issue during the completion of tlie works) and for 
 contingencies in winding up the cont'-acts, involves 
 the necessity of raising the total amount of say. . . .£2,500,000 
 
 The works to be executed luider the Government pro- 
 posal are : 
 
 The Road from St. Mary's to London which would 
 cost the Company say 
 
 The Road from Stratford to Sarnia do 
 
 The Victoria Bridge do 1 
 
 The Three Rivers Branch do 
 
 The St. Thomas and Rivi6re-du-Loup do 
 
 Subvention to the Port Hope, Cobourg and Prescott 
 Railways 
 
 and adding as before for Interest and Expences in 
 2« 
 
 176,000 
 400,000 
 ,150,000 
 240,000 
 560,000 
 
 100,000 
 
 I 
 
 I 
 
 i| 
 
 1 
 

 M' 
 
 to 
 
 * 
 
 winding up the contract 420,000 
 
 Mnking a total of. JC3,046,000 
 
 As therefore the Government proposal is only to allow 
 
 the Comimny to raise the sum of. je2,000,000 
 
 already shewn to be insufficient by 500,000 
 
 under the existing arrangements, there would re- 
 main a deficiency of. 1 ,046,000 
 
 Assuming then that the Company assent as no doubt they would 
 under proper lacilities, to tlie desire of the (Jovernnient to muko 
 the additional arrangements contcnij>lated in their Memorandum as 
 an aid to the tributaries or feeders of the Urand Trmdc Railway, 
 and which I have rea-son to believe, although forming no part of 
 the existing contracts, would nevertheless in a general jKiint of 
 view, be beneficial to the Comimny, there would yet be a defici- 
 ency of £1,046,000. 
 
 It will be acknowledged therefore that the new Capital of two mil- 
 lion which it is proposed should be raised by the Company by pre- 
 ferential Bonds, is under tlie most favorable circumstances inade- 
 quate to the requirements of the Government projwsal, by the 
 large amount of a mUlion sterling, unless indeed a portion of this 
 amount could be raised by Municipal Bonds. 
 
 Permit me Sir, now to recall your attention to the two require- 
 ments under the existing circumstances which it will be unani- 
 mously agreed are necessary to.be attained by any scheme now 
 •to be adopted viz : 
 
 First, — Funds for the completion of the enterprise, the defi- 
 ciency being principally due to the un looked fur depreciation of 
 the stock during the lust twelve mouths. . 
 
 Second, — The resuscitation of the undertaking itself. 
 It has already been shewn that the Government jjroposal does 
 not attain the first object ; 
 
 Let the capacity of the scheme as to the second, and equally, 
 if not more important requirement be carefully tested ? 
 
 This will best be done by shortly stating, that the new Capital to 
 be raised by the Company by preferential Bonds, would, by the 
 Government proposal, increase the first charge above the Company's 
 Bondholders from ^63,11 1,500 to £5,111,500, and the total debt 
 above the Shareholders from £5,266,000 to £7,266,000. 
 
 Now, it will not be controverted that the second requirement 
 above alluded to can only be attained, more or less, by some direct 
 
21 
 
 to 
 he 
 
 ibt 
 
 demonstration by the Government and Legislature of confidence 
 by the jieoplo of Canada in the ultimate prosperity of their national 
 Railway enterprise. 
 
 How, then, does the Government proposal meet this greatly-to- 
 be-desircd and, indeed, imperative object ? 
 
 Simply by asking those Shareholders, more than two-ihirds of 
 whom must, by the provisions of 18 Victoria, chap. 33, clause 7, 
 give their consent, and who alone could bo expected to subscribe 
 the £2,000,000 p'o ratO, to their respective holdings, completely to 
 forego for several years the small i)rospect of a Dividend of say 2 
 per cent, on their investment, which it bus been shewn in Table 
 No. 1 of the memorandum on the Guarantee Scheme, would 
 probably accrue over the average of the first five years from the 
 opening of the line, before Christmas next, in its whole length up 
 to Stmtford. 
 
 Rememl)ering, Sir, that it is as much for the good of the Pro- 
 vince as to the interest of the Shareholders, that this Railway 
 shoidd be brought to a rapid and successful completion, the proposal 
 of the Government to raise the debt above the Shareholder from 
 je5,266,000 to £7,266,000, is simply and in tlie plainest language 
 to inform the Capitalists and Public of Great Britain, that the 
 People of Canada have no confidence whatsoever in their greatest 
 Railway undertaking. 
 
 Sir, it has been fully demonstrated that the proposal of the 
 Government signally fails to accomplish either of the objects sought 
 to be attained for tlie relief of the enterprize. 
 
 Were there, in my opinion, the slightest chance even of its 
 acceptance by the Company, I should have deemed it incumbent 
 to have advised with the Board of Directors here before fol-warding 
 my reply, but, under the actual circumstances, I feel it is my painful 
 duty at once to communicate, for the information of His Excellency 
 the Governor General and of the CJovernment, that, even if assented 
 to, the money could not by any possibility whatever be raised by 
 the Shareholders, and the Scheme would therefore be wholly 
 inoperative. 
 
 Sir, while I feel strongly the many difliculties which, as stated 
 by you, " beset this question, and the differences of opinion which 
 exist as to th^ best mode of disposing of them," and while I 
 acknowledge, on behalf of the Committee of Shareholders, with 
 many thanks, the individual and collective kindness and courtesy 
 of the Government in the facilities aflforded me for explanation, I 
 
'ill 
 
 I 
 
 l(li'.l 
 
 
 1^ 
 
 22 
 
 regret extremely that the resiili should bo a Scheme which is 
 comj)let('ly impracticable of execution. 
 
 To refer once more, Sir, to your courteous statement, that the 
 further course of the CJovernment may nmteriully be i'iilucnced by 
 my opinion, as the accredited Agent of the Km< lish j)ro|/rietury, I 
 willingly avail myself once more of the opportunity thus afforded, 
 earnestly to point out, for the considorution uml p;rave reflection of 
 His Excellency the Governor General and the (government of 
 hese Provinces, that the decision now to bo arrived at must and 
 will prove a crisis in the Railway Jlistory of Canada and that the 
 Government proposal, which if persisted in must prove a death b' 'v 
 to the credit of the National Railway undertaking, which was re- 
 ceived in the British money market under the auspices of the Mu n 
 Government, is dealt at a moment when the Execu.iVP of the 
 older and younger states of the world are attracting U ; : ji respec- 
 tive Countries the Capital necessary for their Railway deve'oM- 
 mcnt by giving a minimum guarantee on the investment of the 
 Public, and thus pledging the Confidence ol ihoir Nations in their 
 own prosperity ; a pledge Sir, which, as has elsewhere been stated, 
 has in no one known instance resulted in any loss, in respect of the 
 guarantees, so given, amounting in France alone to tlie sum of 
 Thirty millions sterling per annum. 
 
 I adhere Sir, to my conviction that the Guarantee scheme is the 
 only remedy coiipletely adct^uate to the existing emergency, and 
 which offers tlie same advantages to all legitimate subsidiary Rail- 
 way Enterprize ; but I desire again to make the often repeated 
 statement that the Shareholders will readily assent to any scheme 
 which woald afford material relief to the Company, if on conside- 
 ration it i^hould prove to be comprehensive and final, and not mere- 
 ly one administering to the actual necessities of the moment. 
 
 This I beg leave to remind you Sir, may be largely effected by 
 the scheme proposed in the memorial presented to His Excellency 
 the Governor General by the Board uf Directors, vi:^ : by the con- 
 version of the Provincial mortgage ii\i. .Stock of the CompaMy, 
 with additional Guarantee to th' A'estu'i ection . iiie line and 
 the Victoria Bridge, and with powci to tue Company to raise the 
 funds necessary for the completion of the work by a first charge 
 on the undertaking ; and a most reasonable modification between 
 which basis and the existing arrangements of the Company's 
 Capital. I had the honor to submit to you on the 5th instant, and 
 
23 
 
 wh it'll I need Imrdly repeat appears to be the last possible compro- 
 mise capiible of affording any relief to the Company. 
 1 have tlie lionor to submit that scheme once more, viz: 
 
 iMfNt, Now Cii) il by prclorencfi Bonds ) ^o^nnnnn 
 olll f-ompauy of. \ X^,OUU,UUU 
 
 Second, Exisliii/i r'rovincial Honds I the ) CWiOO 
 
 aiiiouut of. ...... .1 r \ ' 
 
 (tlic Interest of which to bi; paid by UiO 
 tlie (Joverui nt Ibr ; years.) 
 
 Third, the exist, ic; Conijiany's 13<->nds... 2,U1.500 
 
 { Fourth, reniaiii' I rof existing Province ) ^ 
 Bonds to l)e coi, vtrted into Wtock \ \ :J,500,00A 
 and Comjiany's share Capital ' £3/^06,501 
 
 The advantage of this modific lion is, that it in no ay al. cts 
 the position of the debt no\ cxi-^tuig above the Compaii 's Boi d- 
 holders and Shareholders, who will then readily ra ise the -^f'essn y 
 Capital for the completion oft ic undertaking, while the 1 ,AV mc , 
 on the other hand, by enpi ing to pay the interest ias» *hei • 
 jB3,1 11,500 for five years, woul afford the Shareholders a iwison 
 able pros])ect of a moderate ami immediate return on their est- 
 ment, and the confidence of the Country would be exhibit, by 
 their willingness to share to the t :tent of £2,500,000 of its exi ag 
 first mortgage, in the risks or proi ^s of the imdertaking witi ae 
 present Shareholders. 
 
 In extension of the plan so sub litted, I am now prepared to 
 consider how far it may be possible *o meet the expressed desii )f 
 the Government to secure the lines o London and Three-Rive, i, 
 as well as to aid the Cobourg, Tort lope and Prescott Railways, 
 by the following proposal : 
 
 The Government to convert their entire Mortgage into Share 
 Capital ; 
 
 The Company to be authorized to issue JG3,000,000 of preferential 
 Bonds ; 
 
 And the fourth and fifth sections of your proposal to apply to this 
 intended arrangement. 
 
 I feel, Sir, that I have discharged my duty as the representative 
 of the Shareholders, in submitting, on their behalf, a proposal, 
 the moderation of which will, I am sure, be recognized and appre- 
 ciated. 
 
 In conclusion Sir, I respectfully appeal to the Governor General 
 and the Government, in the definitive settlement of this most 
 
24 
 
 li 
 
 ■I 
 
 important question, well to weigh the great responsibility attaching 
 to their decision ; for while the risk of any possible loss to the 
 Province by the modification above set forth, are reduced to 
 a minimum, the disappointment of the just expectations of the 
 Shareholders would in the words of Mr. T. M. Weguelin, the 
 Governor of the Bank of England and Chairman of the Committee 
 of Shareholders, deal an incurable blow to the undertaking, and 
 would undoubtedly re-act for years to come on the development of 
 the Railway Enterprize of Canada. 
 
 I shall have the honor to lay your communication and this reply 
 before the Board of Directors. 
 
 I have the honor to be 
 Sir 
 Your obedient servant, 
 
 WILLIAM NAPIER, 
 On behalf of the Committee of Shareholders 
 of the Grand Trunk Railway Company 
 of Canada. 
 To the Honorable 
 
 William Cayley, 
 
 Inspector General, 
 &c., &c., &c. 
 
 No. 4. 
 
 Toronto, May 12th 1856. 
 Sir, 
 
 Having observed the publication in the Daily Glebe of your 
 Letter and Memorandum of the 6th instant, to myself, and having 
 heard that an unauthorized and incorrect copy of my reply thereto 
 is being circulated in some of the Provincial Journals — it is due to 
 myself as to you Sir, to inform you that I have in no way been 
 a party directly or indirectly, to the publication of a confidential 
 and incomplete correspondence on such a grave subject, as the 
 afiairs of the Grand Trunk Company. It was my duty Sir, pur- 
 suant to my instructions to advise confidentially with certain 
 gentlemen, the Authorities of the Grand Trunk Company, upon 
 any correspondence with the Government on this subject, and it 
 was my desire to place each Member of the Executive Govern- 
 ment in possession of such correspondence in such a shape as to 
 enable the better comprehension of the difficulties under con- 
 sideration. 
 
25 
 
 I consulted my advisers and made such arrangements under 
 distinct assurances of that secrecy which is imperative in such 
 matters, and it has given me the deepest pain to witness the result, 
 which by any attempt to prejudge the intentions of the Govern- 
 ment, outlined by a sketch inviting my remarks and counter 
 suggestions, must necessarily be damaging to the interests of the 
 Railway and of the Country" which arc inseparably connected. 
 I have the honor to be, Sir, 
 Your obedient, &c. 
 
 WILLIAM NAPIER, 
 On behalf of the Committee of Shareholders 
 of the Grand Trunk Ry. Co. of Canada. 
 The Honorable 
 
 William Cayley, 
 
 Inspector General. 
 &c., &c., &c. 
 
 No. 5. 
 
 Toronto, 14th May, 1856. 
 Sir, 
 
 Within the next few days a proposal for the relief of the 
 Grand Trunk Railway Company will, I believe, be brought before 
 the Legislature of this Province. 
 
 As I am daily informed that the public are desirous of obtaining 
 information as to the views of the Shareholders of the Company, 
 upon the various schemes which would seem more or less avail- 
 able for the relief of the enterprize, I desire your kind permission. 
 Sir, to avail myself of the only means open to me of explaining 
 my views on the part of the Shareholders, on the question about 
 to be submitted tolhe consideration of the Legislature, by address- 
 ing you a public letter on this important subject, and which pre- 
 sents itself for solution under two heads : 
 
 First — The means of providing the funds adequate for the com- 
 pletion of the Railway ; the present deficiency being principally 
 due to the unlooked for depreciation of the Stock during the last 
 twelve months. 
 
 Second — The resuscitation of the credit of the undertaking. 
 
 Whatever may have been, Sir, the financial or other mistakes 
 on the part of the Company, you will agree that the chief object 
 now to be attained is the rapid completion of the Railway in its 
 fullest development, and which it will be allowed is as much to 
 the interest of the Province as of the Shareholders. 
 
 j:. 
 
26 
 
 Any scheme therefore which is presented, should be adequate 
 to this end, or it would necessarily fail to secure the object in 
 view, and would occasion a delay of a whole working season, at 
 least, in the prosecution of the remaining engagements of the 
 Company, after the completion of the line between St. Thomas 
 and Stratford, (exclusive of the Victoria Bridge.) 
 
 Betore proceeding, Sir, to consider what alteration of the exist- 
 ing Contract between the Company and the Trovince, would to a 
 greater or lesser extent effect the object in view, it is desirable 
 that I should give a clear statement of the existing financial 
 arrangement for providing the necessary funds. 
 The Company's Capital is constituted as follows : 
 
 No. 1. 
 
 1st. By 6 per cent. Government Bonds je3,l 11,500 
 
 2nd. " " Company's " 2,144,500 
 
 3rd. " Company's Shares 4,306,400 
 
 Total £9,562,400 
 
 On the completion in the approaching autumn 
 of the line from St. Thomas to Stratford, exclu- 
 sive of the Victoria Bridge, the expended Capital 
 of the Company will stand thus : 
 
 1st. 6 per cent. Government Bond £3,111,500 
 
 2nd. 6 per cent. Company's do 1,744,500 
 
 3rd. Share Capital 3,006,400 
 
 Total £7,862,400 
 
 The difference between £9,562,400 (No. 1) 
 
 as above, and ^ 7,862,400 
 
 Namely £1,700,000 
 
 is therefore the nominal amount of the Com- 
 pany's Capital yet available for the construction 
 of the remainder of the Contract between the 
 Company and the Province, and is composed of 
 
 Unissued B Shares (nominal value) £1,300,000 
 
 Unissued B Bonds « 400,000 
 
 Together (nominal value) £1,700,000 
 
27 
 
 Had the Company in the first instance allotted to the public the 
 B Shares and B Bonds, the sum would be available for, and would 
 complete the remainder of the original engagements between the 
 Company and the Province, less any amount of additional expen- 
 diture now seen to be necessary ; but as these Shares were not so 
 issued to the public, and as from circumstances which could 
 scarcely have been anticipated, the value of this Stock, if forced 
 upon the market, as it must be, could scarcely be named, it be- 
 comes necessary that in any scheme proposed for the relief of the 
 enterprizc, such an alteration of the existing arrangement of the 
 Company's Capital should be made as would enable the realization 
 of the necessary amount at par, instead of at 50 per cent, discount, 
 as the case will stand, if no relief be now given. 
 
 I have said that the amount under the existing arrangements to 
 be replaced at par, is JE 1,700,000, but I believe that in reality the 
 sum is much larger, and may be stated as follows : 
 
 1. For the completion of the Victoria Bridge jei,150,000 
 
 2. For the line to Sarnia 400,000 
 
 3. Provision for additional Rolling Stock and 
 
 sidings and accommodation required for the 
 development of the traffic 400,000 
 
 4. Interest on the new Capital to be created, for 
 
 the time required for the completion of the 
 
 whole line 250,000 
 
 Making the sum of £2,200,000 
 
 As against the amount as above stated of. £1,700,000 
 
 But assuming that the £400,000 of B Bonds be 
 floated or taken in payment for works at par, 
 the deficiency to be made good under any 
 scheme now to be passed into law, would be £1,800,000 
 Let it be assumed that in round numbers, £2,000,000 is the sum 
 necessary to be raised for the completion of the existing arrange- 
 ments, between the Company and the Province, and for such 
 additional Rolling Stock and accommodation as it appears will be 
 required, and including other liabilities not named. 
 
 It is evident that in the present difficulty, a step must be taken 
 by both parties towards its solution, or else nothing further could 
 be completed by the Company, than the line between St. Thomas 
 
 : 
 
28 
 
 1,;i' 
 
 and Stratford, exclusive of the Bridge, and the rest of the work 
 must inevitably remain unexecuted, until the gradual development 
 of the traffic shall have placed the Company in a position to raise 
 the necessary funds. 
 
 Meanwhile the complete isolation of the line will protract for 
 a long time, that development of the traffic which can only be 
 more rapidly obtained by the immediate execution of the re- 
 mainder of the works. 
 
 During this interval of time the Province would necessarily be 
 called upon to pay the interest upon their Bonds, amounting on 
 je3,ll 1,500 to je 186,690 per annum. 
 
 It is not for a moment assumed that if no relief be afforded to 
 the Company, and that if after the completion of the line from St. 
 Thomas to Stratford, the remainder of the works should be sus- 
 pended for want of funds, that the Province would enforce their 
 first claim, or would take any of the profits of the line, towards 
 the interest on their Bonds, until the traffic should have developed 
 so far as to give the Shareholders a reasonable return, say 5 per 
 cent, upon their investment. At such time of course the Govern- 
 ment would be fairly entitled to compel the Shareholders to raise 
 the capital necessary for the completion of the works, which, 
 however, they in their own interest would only be too glad to do, 
 when enabled by their financial circumstances. 
 
 It is then evident, if matters come to a stand still, as they must, 
 if no relief be afforded, that the Province would continue to pay 
 the sum of £186,690 per annum, being the amount of interest on 
 their Bonds, for some years to come. 
 
 If this position of affairs be assented to, it will not be difficult to 
 devise a scheme more or less valuable for the relief of the Com- 
 pany, and which will effect all the objects in view, without 
 entailing any additional sacrifice, upon the Province. 
 
 But before so doing, permit me to shew that it is the existing 
 Shareholders of this Com}mny alone, who under any circumstances- 
 can be expected to raise the additions. 1 capital required ; for which 
 purpose the 7th Clause of 18 Victoria, Cap. 33, is quoted. 
 
 " In case it should be deemed expedient by the said Grand 
 " Trunk Railway Company at any time or times hereafter to 
 " increase the Capital of the said Company, such increase may be 
 " effected by 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 special notice of the intended object j 
 
89 
 
 ral 
 t; 
 
 -" and the further Capital so authorized may be raised by mortgage 
 *" or Bond, or by the issue of new Shares of such denominations, 
 •<< and with such terms and conditions, and at such times and to 
 '** such i)ersons and in such manner as the Shareholders so present 
 •** in person or by proxy, shall by the like proportion of votes ap- 
 <* prove or direct ; Provided that no mortgage bond or issue of 
 " new Shares, under this Act, shall affect or impair the priority of 
 « the Government's claim for any Government guarantee already 
 " given, or hereafter to be given to the Grand Trunk Railway 
 " Company of Canada, or affect or impair or postpone the security, 
 " by bond or mortgage of any individual upon the said road, with- 
 '" out his consent in writing." 
 
 It is thus seen that the consent of two-thirds of the Share- 
 holders is necessary for the creation of any new capital at all, and 
 that the consent of the Company's Bondholders must be given to 
 the creation of any preferential shares affecting or postponing 
 their existing security. 
 
 Is it not also quite clear that the Shareholders who alone can 
 5be expected to subscribe the necessary £2,000,000 will only do so 
 upon good evidence that by the additional subscriptions, their 
 prospects during the next five years will be improved ? Now it has 
 been shewn by Table No. 1, of the Memorandum on the gua- 
 rantee Sheme, that even if the western extension of the line be 
 at once completed, the Shareholders cannot expect to divide more 
 than two per cent on the average of the next five years ; conse- 
 quently it is quite imperative that while calling upon them to im- 
 prove the value of their depreciated property, by an additional 
 outlay, the Scheme proposed should be calculated to improve their 
 prospects, and thus to give confidence. 
 
 When I first had tlie honor of explaining in this Country the 
 views of the Shareholders, I submitted their suggestions for com- 
 plete relief viz : " The Guarantee Scheme," a Memorandum of 
 Avhich lias already been circulated for the information of the public. 
 While thus fulfilling the first duty assigned to me, I did not fail 
 «.t the same time, to devclope any adequate or material Scheme 
 of Relief wliich might be proposed, and I have not failed to per- 
 form this duty to the utmost of my power. 
 
 The Scheme of Relief which, after much consideration during 
 the last four weeks, with persons of all opinions and of various social 
 positions, seems to me, to be the most prevalent, is the conversion 
 of the first mortgage of the Province into Stock of the Company, 
 with power to raise, by iirefcrential Shares or Bonds, upon the 
 
so 
 
 f 
 
 I 
 
 ilt 
 
 Ml 
 
 whole undertaking the sum necessary for the completion of the 
 
 Works, as follows : 
 
 No. 2. 
 
 1st. Preference Bonds of the Company £2,000,000 
 
 2nd. Company 6 per cent Bonds 2,144,500 
 
 „ , ( Government Stock £3,111,500 ) coftoinn 
 
 ^^■^* \ Company Stock 3,006,400 \ »>*''"'*"" 
 
 Such an evidence of willingness, on the part of the people of 
 Canada, to share^ with the Stockholders the risks or proiits of the 
 undertaking, would be accepted by the public in England, as such 
 a mark of confidence as would certainly justify and enable the 
 Shareholders and Bondholders in their own interest, to raise the 
 necessary sum by a first charge on the undertaking. 
 
 This proposal is the most simple, and failing the Guarantee 
 Scpcme, v/ould be the most effectual. Several propositions have 
 however been submitted for consideration, principally modifica- 
 tions between the total conversion of the mortgage of the Pro- 
 vince into Stock, and the existing arrangements of the Company's 
 Capital, as already explained ; (No. 1) ; one only, however, to 
 avoid confusion, would seem to me to be the most suitable for pre- 
 sent consideration, and which would be adecpiate to enable the 
 raising of the required funds, viss : 
 
 N(5. 3. 
 
 1st. Preferential Bonds of the Company £2,000,000 
 
 2d. C Company's 6 per cent Bonds 'j 2,144,500 
 
 Provincial Bonds (^ 3,1 1 1,000 
 
 The interest of the latter to be paid by 
 the Province for five years. 
 
 3rd. Share Capital [. £3,006,400 
 
 It is clear that, if the Provmcial Mortgage be not converted into 
 Stock of the Company, as by No. 2, the next thing is to place it on 
 a level with the Company's Bonds, (No. 3) and to apportion the pro- 
 fits of the Line to the relative claims, but to make this scheme of any 
 commercial value whatever, it is absolutely necessary that the 
 interest upon the Province Bonds should be paid for the first five 
 years, being the time remaining for the completion of the Line in 
 all its intended development ; thus allowing the Shareholders, 
 during that time, a maximum, possible profit, of say 5 per cent on 
 their investment, for if the profits are at once to bo apportioned to 
 the Province in respect of their claim, the manifest result is that 
 nothing or at any rate not one per cent would be available for 
 Dividend on the Stock. 
 
 • ■ i 
 
SI 
 
 to 
 
 At the end of five years, there can be no moral doubt that the 
 development of traftii, on the completion of the whole undertaking 
 will be such as to afford 5 per cent to the Shareholders, in addi- 
 tion to all the first charges on the undertaking, when of course the 
 apportionment of profits as above mentioned to the Province 
 would commence. 
 
 It is then upon the condition of the payment Of the interest 
 upon the Government Bonds for the first five years that the suc- 
 cess of the scheme No. 3 depends, and as it has already been as- 
 sumed tliat if no relief be afforded and the remainder of the works 
 after the completion of the line to Stratford be suspended, that the 
 Province would not foreclose their first Mortgage and would not 
 take any of the earnings of the lino until the Shareholders had 
 attained a reasonable return on their investment, and that there- 
 fore the Province would for several years be necessitcd to pay the 
 interest on their Bonds, is it not to the advantage of the Province 
 at once to engage to pay that interest for five years and thus to 
 enable the Shareholders to raise the necessary funds and rapidly 
 to execute those works, the completion of which alone can possibly 
 develope the traffic and ensure the continuance of that large in- 
 crease in the value of all property in Canada which has already 
 resulted since the commencement of the Railway system. 
 
 Believing therclbre that the Public and the Legislature desire 
 to pass such a measure into lav/ as shall be adequate to raise the 
 necessary sum of £2,000,000, the choice of measures is principally 
 limited, (failing the Guarantee scheme). 
 
 First, To a conversion of the Province Bonds into Stock of the 
 Company, being the most effectual measure. 
 
 Secondly, To the alternative of placing the Proyince Bonds 
 upon the same footing as the Company's Bonds, and agreeing to 
 pay the Interest for five years. 
 
 In each case permitting the Company to raise tli*^ j£2,000,000 
 by preference Bonds. 
 
 Thus a very simple alternative is submitted and one which will 
 readily be understood and decided upon, and I earnestly invite the 
 Public and the commercial men ol this Country to examine these 
 statements and to declare how it would be possible for the Com- 
 pany to raise the necessary £2,000,000, if placed in any worse po- 
 sition than the second alternative above submitted. 
 
 It should be distinctly understood that, the Shareholders are 
 quite willing to have any alteration of the existing engagements 
 between the Company and the Province, based upon a condition 
 
 ,1 
 f.i 
 
pi. 
 
 
 •i' 
 
 IJil '• 
 
 32 
 
 that the line from St. Tlionms to Stratford, exclusive of the Victo- 
 ria Bridge, shall be completed in the current year, and on any 
 other proper stipulations. 
 
 The adoption of the first or even of the second alternative above 
 described, by affording the Company the means of extrication from 
 their present embarrassments would avert the disastrous deprecia- 
 tion of the Company's Stock, which will neccssar'l" result from 
 a failure to obtain during the present session of the Canadian Par- 
 liament adequate or materia' relief, and would enable the rapid 
 prosecution of all the works remaining to be completed after the 
 opening of the Line from St. Thomas' to Stratford (exclusive of 
 the Victoria Bridge), any delay iu which would be most prejudicial 
 to the development of the resources of the Country. 
 
 Apologizing for the hasty and imperfect mjinner in which these 
 explanations and suggestions are necessarily submitted, 
 I have the honor to be. Sir, 
 
 Your very obedient &c., 
 
 WILLIAM NAPIER, 
 On behalf of the Committee of 
 Shareholders of the G. T. 11. C. of C. 
 To the Honorable 
 
 William Cayley, 
 
 Inspector General, 
 &c., &c., &c. 
 
 No. 6. 
 Inspector General's Office, 
 
 Toronto, May 26, 1856. 
 Sir, 
 
 I have now the honor to acknowledge the receipt of your 
 communications of the 7tli, 12th and 14lh instant, together with 
 statistical tables and calculations. 
 
 These communications would have been acknowledged at an 
 earlier period but for recent events and changes in the Govern- 
 ment, which have rendered delay un;i voidable. 
 
 I am also in receipt of your note of the 12th, in Avhich you state, 
 that it is due to me as well as to yourself, to iiiCorai me that you 
 have in no way been a party, directly or indirectly, to the publica- 
 tion of a confidential and incomplete correspondence, and that 
 mutual assurances of that secrecy which is imperative in such 
 matters, had been given by yourself and the authorities of the 
 
 1 l!sf '! 
 « 1 
 
33 
 
 e 
 en 
 1- 
 
 m 
 
 r- 
 
 lid 
 
 he 
 
 of 
 
 ial 
 
 3se 
 
 fC. 
 
 lour 
 rith 
 
 an 
 irn- 
 
 |ite, 
 
 fOU 
 
 m- 
 
 liat 
 
 ich 
 
 the 
 
 Grand Trunk Company, with whom ^t was your duty, pursuant to 
 your instructions, to advise confident, y. 
 
 On this i^oint, I beg to assure you, that no declaration on your 
 part was necessary to satisfy the Government that the proceeding 
 to which you refer, was had without your knowledge, and that 
 you did not fail to impress upon the gentlemen you consulted, the 
 irregularity of anticipating the close of your negociations as the 
 more convenient and usual period for giving publicity in matters 
 of such importance. 
 
 Referring now to your communication of the 7th May, I observe 
 in your prefatory remarks, an expressing of satisfaction that the 
 Government acknowledge the ))rinciple that aid should be granted 
 to the Grand Trunk enterprise in its depreciated financial con- 
 dition : this observation seems to call for some notice to guard 
 against misconception. 
 
 The Grand Trunk Railroad is justly regarded as an enterprise 
 of primary interest to Canada, and promising materially to develope 
 her resources when carried to completion. That the Government 
 and Legislature have entertained this feeling, is abundantly 
 shown by the provisions of the original Charter of incorporation 
 granting Provincial aid, by the modifications introduced into the 
 Railway Act in the autumn of 1854, at the desire of the Company, 
 and again in the spring of IB.'JS, by the addition of je900,000 to 
 the Provincial guarantee. 
 
 The application now made by the Company for further aid 
 arises, a? I am informed by you, from the necerjsity to make other 
 provision for funds adequate for the completion of the Railway, 
 the present deficiency being principally due to the unlooked for 
 depreciation of the Stock during the last twelve months. 
 
 This depreciation altho' deeply to be regretted, and productive 
 of financial embarrassment to the Company, of no ordinary mag- 
 nitude, arising out of the extent of the works in progress, docs not 
 in the opinion of the Govenment, constitute a claim as a matter 
 of right to further Provincial aid ; and while they appreciate the 
 efforts made by the Company to carry on their engagements 
 during a lengthened period of financial depression, and arc prepared 
 to consider any suggestions made for their relief, and to render 
 every assistance which can be legitimately afforded, they desire 
 that this point should be kept in view in the consideration of the 
 important subject under discussion. . 
 
 I have, now Sir, to make you acquainted with the views of the 
 Government upon the further details, which tho' discussed in 
 3 
 
84 
 
 i) i 
 
 conversation, have not been formally placed before you in w/iting j 
 tliese details (founded on tlie assumption that tne memorandum 
 which I had the honor to communicate to you on the 6th, and to 
 which the Government adhere, is acceptable to the Company as 
 the basis of the present negociations,) define the position in which, 
 in the opinion of the Executive, the Provincial guarantee, should 
 stand, and the mode in which provision might be made for the 
 accruing interest while the works are in jjrogress. 
 
 The Provincial guiirantcc at present stands as a first charge on 
 the road, and conseqficnlly would stand second in the event of 
 the authorized issue of preferential bonds, and woukl thus have a 
 prior claim to all i)rofits arising from the road after the Preference 
 Bonds had been provided (or until the interest was covered. This 
 position if insisted on, might lead to some misgivings in the minds 
 of the bomlholders, that their interests would be prejudiced in 
 standing behind five millions of prior clauiis. 
 
 With the view to meet any difficulty of thi. nature, and as an 
 evidence of the conviction which the Cioverament entertain that 
 the road when completed will be remunerative, they will be pre- 
 pared to recommend to the Legislature to i)luce the Province 
 claim, to dividend on the same footing with the Company's bond- 
 holders. 
 
 The second point, the payireiit of accruing interest, on the 
 Province Bonds, while thf; wor/..., are in progress, may be provided 
 for in one of two ways, either by adding it to the original 
 guarantee, and thereby increasing the Provincial lien on thj road, 
 or by the Province receiving an equivalent in share capital until 
 the works are completed, and the road in full working, and it is 
 confidently expected in paying condition— this period as it is 
 necessary to fix a limit may be taken at five years. 
 
 In adopting one or other of these two alternatives, the Govern- 
 ment would be prepared to receive your suggestions on behalf of 
 the Company. 
 
 I have now stated in substance the extent of aid which the 
 Government would feel themselves justified in recommending to 
 Parliament, and I will close this letter with a short explanation 
 with reference to the auxiliary lines referred to in my memo- 
 randum of the 6th, viz : the two projected lines, to London in the 
 West and Three-Rivers on the St. Lawrence, and those of Port 
 Hope, Cobourg and Prescott. The following extract from your 
 letter bears on this subject : 
 
35 
 
 lum 
 id to 
 
 y as 
 lich, 
 lould 
 r the 
 
 gc on 
 iwi of 
 ave a 
 rencc 
 This 
 minds 
 ced in 
 
 ns an 
 in that 
 be pre- 
 rovincc 
 J bond- 
 Ion the 
 ovidcd 
 Anginal 
 ^ road, 
 \\ until 
 Ind it is 
 it is 
 
 Jjovcm- 
 Ihalf of 
 
 Ich the 
 [ding to 
 mation 
 I memo- 
 in the 
 I of Port 
 your 
 
 " Assuming then that the Company assent, as no .^bt they 
 " would under proper facilities, to the desire of tht .. \< t»inn'nt 
 " to make the additional arrangements .contemplated in this 
 " memorandum, as an aid to the tributaries or feeders of the 
 " Grand Triinlc, and which I have! reason to believe, although 
 " forming no part of the existing contract, would nevorLheless, in 
 " a g<Mier!il point of view, be beneficial to the Comi)any." 
 
 Uiion this I have only to repeat my remark that it is in this 
 point of view alone " that these lines Avould prove benelicial to 
 the Conipuny," thiit flu! Guvernment have made; th(! suggestions 
 contained in my first nieniorauduui, it is by no nieaus their desire 
 to impose fresh obligations involving the construction of new lines 
 on the Company, l)ut it is at the same time my duty to state; that 
 it is not in contemplation to abandon any sections of the line 
 forming part of tlu* undertaking, as defined by existing engage- 
 ments. 
 
 The f.icilities to which you refer would have to be arranged 
 with third parties, the Shareholders in these several roads, the 
 action of the Government in this respect, being confined to the 
 deferring the prior claim of the Province, so as to enable th 
 Company to raise the necessary capital. 
 
 The Tliree-llivt'rs branch was first brought under my notice, it 
 I am not mistaken, by the Engineer of the Grand Trunk, as 
 calculated to form a valuable aid, and towards which the neigh- 
 bouring townshii)s were pre})ared to contribute i;7r),000. 
 
 The London branch has always been favourably received by 
 the Grand Trunk authorities, and a deputation from London 
 waited on the Directors of the Company last autumn, offering: 
 every assistance in their power towards the undertaking. 
 
 The -Prescott line is at this moment admitted to be of very 
 material assistance to the Grand Trunk, in sustaining the traffic 
 returns of the road between Brockville and Montreal ; but I 
 believe T have said enough to remove every misconception of the 
 views of the Government on this head, in proposing to authorize 
 the raising of means for all or any of these several objects. 
 
 It may be that one and all would prefer working independently 
 of each other. The stake that the Province has in the Grand 
 Trunk is, in the opinion of the Government, a sufficient ground to 
 warrant the offer to promote such arrangements, mutually bene- 
 ficial to the parties concerned, as promise to bring material aid to 
 your enterprize, developing its traffic and opening up the country. 
 3* 
 
',n 
 
 I' I 
 
 in conolusion, I bcjo; you to bolievc tlmt tho Government, und 
 not the Government only but the Province, upprceiatc the struggles 
 miulc by the Company to bring this undertiiking to ii succossliil 
 issue, unil that the iissistiincr .oHored, though falling shor*, it may 
 be, of the expi-ctation oi" the Company, is tendered in the earnest 
 hope Muit it may prove efleotual. 
 
 Thanking, you Sir, for the courteous tone of your communications, 
 I have tiie honor to be, 
 
 Your most ohcdicut servant, 
 
 (.Signed,) WM. CAYLEV, 
 
 Inspector General. 
 To the Honorable Wm. Napier. 
 
 R E r L Y 
 
 To the Letter ol' the 26th May, of the Honorable William Cavley, 
 Inspector General, by The Hohorablu William Napier, on 
 behalf of The Committee of iShareholders of the Grand Trunk 
 llailway Company of Canada. 
 
 Toronto, May 30tn, 18r)6. 
 No. 7. 
 Sir, 
 
 I have the honour to reply to your favour of the 26th instant, 
 received yesterday, acknowledging my communications of the 7th 
 and 12th and l-ith instant, and also my note of the 12th instant, 
 and. acquainting me " with the views of the Government ujwn tho 
 further details" (in respect to the proposed relief to the Grand 
 Trunk Company) *' which though discussed in conversation" have 
 not been formally placed before me in writing, and " stating in 
 .substance the extent of aid''' (to the Company) " which the Govern- 
 ment would feel themselves justified in recommending to Parlia- 
 jnent." 
 
 Before proceeding, Sir, to state, on behalf of the Shareholders, 
 my adherence to the substance of the measure of relief thus pro- 
 posed on the part of the Government, peruiit me to express my 
 best" tlianks for the obliging terms in which you have ftcknowledged 
 my note of the 12th instant, in reference to the unwarrantable 
 publication in one of the Daily Journals of your letter to me arid 
 memorandum of the 6th instant. 
 
 It is necessary likewise that I should notice a misconception 
 which has arisen from an observation in my letter of the 7th instant. 
 It was never intended to convey an expression of opinion on be- 
 
I I 
 
 i 
 
 holders, 
 Ins pro- 
 jess uiy 
 ^lodged 
 lantable 
 le aiid 
 
 Iception 
 
 linstant. 
 
 on be- 
 
 half (if the Sliareholders, that tlioy srpk for relief in thoir present 
 emhurr.isstiniir.s, as a matter of rip^ht ; I desired only to state my 
 satisfactit)!! tluit the Ciovcrnmcnt, by their projiosal, acknowledged 
 the principle that, in the unfortunate juncture of affiiirs, arising 
 from causes, many of which could never have been foreseen, it is 
 as much in the interest of the I'rovince as of the Company, to assist 
 in the development of a scheme of relief, which, by mutual con- 
 cessions and exertions, would furnish the Company with means 
 successfully to carry out an enterprise which has already, in anti- 
 cipation of its completion, contributed to an extraordinary advance 
 in the assessed value for taxation of the real and personal property 
 of the Province, as evijiced by the increase in Upper Canada alone 
 from — 
 
 £36,678,890 in 1852, 
 
 to 
 £57,142,108 in 1855, 
 and this at a time of War, when neighbouring States have suffered 
 a consitlerable depreciation. 
 
 I have now the honor, Sir, to express my great satisfaction, 
 under existing circumstances (and assuming the consent of the 
 Government to my choice of the alternatives offered respecting the 
 consideration to be received by the Province for the Interest to be 
 paid on their Bonds during five years), with the measure of 
 financial aid to the Company, which the Government are prepared 
 to recommend to Parliament during the present Session. 
 
 Assuredly, Sir, it cannot afford that complete relief which the 
 Shareholders so confidently hoped for, when they respectfully sub- 
 mitted the Guarantee scheme to the consideration of the Province, — 
 nor will it give as much confidence to the English public as would 
 have resulted from the conversion of the Provincial mortgage into 
 Company's Stock, as suggested in the Memorial of the Directors to 
 His Excellency the Governor General ; but it will, in my opinion, 
 afford very material relief, and justify and enable the subscription 
 by the Shareholders of the funds necessary for the completipn of 
 the existing engagements between the Company and the Pro- 
 vince. And remembering. Sir, as I do, the anxious negotiations on 
 this subject in the past six weeks, — the extraordinary facilities 
 which the Government have afforded me for official and private 
 explanations nnd suggestions, and the various grave difficulties 
 which have appeared to render any solution in the present Session, 
 of the embarrassments of the Company, almost impracticable, I 
 
88 
 
 desire frankly to acknowledge that, in my opinion, with the ex- 
 planations which it will be my duty to give, the proposed measure 
 will be accepted with gratitude by the Shareholders. 
 
 I now proceed to state, in figures — 
 
 First, — The order of apportionment of net profits under the 
 existing constitution of the Company's Capital ; and 
 
 Seco7idf—'T\\e new position wliich would be assumed under the 
 proposed Government measure. 
 First, — 
 
 Apportionment of net profits under existing arrangements : 
 
 1. By 6 per cent, on Provincial Bonds, to the amount of £3,1 1 1,500 
 
 2. By Atlantic and St. Lawrence Lease or £73,500 
 
 per annum 
 
 3. By 6 per cent, on Company's Bonds, to the amount of 2,14"t,500 
 
 4. By Company's Share Capital, to the amount of ... . 4,306,400 
 
 Total Capital £ 9,562,400 
 
 Second, — 
 Order of apportionment of net profits under the proposed measure : 
 
 L By 6 per cent, on Company's preferential Bonds, to 
 raise (for the completion of the Company's en- 
 gagements aud including ceVtain other permissive 
 arrangements, and also further expenditure not 
 origindly anticipated,) the sum of £2,000,000 
 
 2. Atlantic atid St. Lawrence Lease, as above 
 
 J. Apportionment of remaining profits : 
 
 To 6 per cent, on Company's Bonds. . . . £2,144,500 
 And to 6 per cent, on Provincial Bonds. 3,111,500 
 
 Company's Share Capital 
 
 5,256,000 
 3,006,400 
 
 Total Capital £10,262,400 
 
 With an undertaking by the Province to pay the interest on 
 their Bonds for five years, being the time necessary to enable the 
 completion of the Railway and the development of the through 
 traffic. 
 
 You, Sir, have pointed out two alternatives in respect of the 
 nature of the consideration to be received by the Province for 
 such pn yment of the interest on their Bj)nds, and have stated that 
 
39 
 
 the Government are prepared to consider my suggestions thereon 
 on behalf of the Company, 
 
 It is my duty, Sir, respectfully to state that if any equivalent be 
 considered absolutely necessary in the case of the Railroad, and 
 which has not been exacted by the Province under circumstances 
 exactly similar, viz, the large outlay (in proportion to the then 
 development of the country), made on roads, bridges, and other 
 works which b.avc been given up to the Public without any con- 
 sideration, then, the conversion of such interest into share capital 
 is the only course which could command confidence and which in 
 ray opinion would be .assented to by the Shareholders. 
 
 By the conversion of such five years interest into Company 
 Stock, the total Capital would be £11,189,800. 
 
 The only point. Sir, now remaining to be considered is the pro- 
 position that a portion of the je2,000,000, permitted to be raised by 
 the Company on preferential Bonds, should, at their discretion, be 
 applied to the execution and assistance of railway works other 
 than those included in the existing engagements between the 
 Company and the Province, and while I acknowledge that some 
 of the projects, such as the aid proposed to the Port Hope, Cobourg, 
 and Prescott Railway, would, from my own enquiries, prove re- 
 munerative to the Grand Trunk Company , if proper security should 
 be given for the respective loans, yet, I desire Sir, to recall your 
 attention to the statement in my letter of the 14th instant, shew- 
 ing that the sum of £2,000,000, (embracing certain allowances for 
 additionnal rolling stock and other accommodation for traffic and for 
 interest on the preferential Bonds, which were not included in the 
 calculations attached to the memorandum on the guarantee 
 scheme, these having, for convenience at the time, been made 
 on the basis of the original Capital of the Company), will, in 
 round numbers be required for the satisfactory flilfilment of the 
 engagements of the Company remaining to be completed after the 
 opening of the Line from St. Thomas to Stratford. 
 
 Looking forward however, with confideiice to brighter prospects 
 within the next two years, I venture to express an opinion that 
 the sum of £2,000,000, should be the maximum amount permitted 
 to be raised by the Company by preferential Bonds, lor all the 
 purposes of present engagements (by arrangements with and 
 under the control of the Government) and including the extra 
 expenses, and the works and assistance additionally suggested 
 by the Government, provided that the Government shall, in 
 
40 
 
 the case of the additional lines of Railway, detailed in your 
 Memorandum of the 6th instant, give to the Company, every 
 assistance in their power, with the various Municiimlities inte- 
 rested, and who shall be ready to afford their aid. 
 
 In conclusion, Sir, it will be gratifying indeed, to the Share- 
 holders, after two years of doubts and of gloom, to receive the 
 welcome assurance conveyed in your letter of " The conviction 
 " entertained by the Government that the Road when completed 
 " will be remunerative," and also of the due appreciation by the 
 Government and by the Province of the struggles made by the 
 Company during the protracted financial crisis which it is hoped 
 will be terminated by the measure of relief now to be submitted to 
 Parliament by the Government. 
 
 I have the honor, Sir, to thank you for the continued courtesy 
 and obliging facilities 1 have received at your hands from the com- 
 mencement of these negociations, now, I hope to be as succesfuUy 
 concluded, as permitted by inherent difficulties and existing cir- 
 cumstances, and I beg leave, Sir, to remain. 
 
 Your very obediently 
 and respectfully, 
 
 WILLIAM NAPIER, 
 On behalf of the Committee of Shareholders 
 of the Grand Trunk Railway Company 
 of Canada. 
 
 To the Honorable 
 
 William Cayley, 
 
 Inspector General, 
 Scc.f &c., &:c. 
 
 Note. — All figures in this communication represent the amounts in tttrling, 
 unless currency is particularly slated. 
 
 No. 8. 
 
 (Copy.) 
 
 Sir, 
 
 I have the honor to enclose the copy of a letter T have 
 received this afternoon from the Honorable John Ross, President of 
 the Grand Trunk Railway Company, and also a copy of a Minute 
 passed at a Board held this day for the purpose of receiving and 
 
41 
 
 considering yoixr letter to me of the 26th instant, and my reply of 
 the 30th instant and concurring in the views expressed therein. 
 T have the honor to be, 
 Sir, 
 Your obediently and respectfully, 
 
 WILLIAM NAPIER, 
 I On behalf of the Shareholders of 
 
 the G. T. R. Company. 
 The Honorable 
 
 William Cayley, 
 
 Inspector General. 
 
 No. 9. 
 
 (Copy.) 
 
 Toronto, 3rd June, 1856. 
 
 My dear Sir, 
 
 The Board Meeting summoned for this day in accordance 
 with the request contained in your letter to me of yesterday's 
 date was held this morning, and I have much pleasure in sending 
 you a copy of the Minutes. 
 
 The Government Members of the Board, did not of course, 
 desire to attend the meeting to pronounce an opinion in favour of 
 their own measure, but you will observe that the Directors who 
 were present, unanimously concurred in the views accepting the 
 Government proposition. 
 
 Believe me, my dear Sir, 
 Yours very truly, 
 
 (Signed) JOHN ROSS. 
 
 The Honorable 
 
 William Napier. 
 
 No. 10. 
 
 (Copy.) 
 
 A meeting of the Directors of the Grand Trunk Railway Com- 
 pany summoned by the President at the request of the Honorable 
 William Napier, representative of the Committee of English 
 
42 
 
 Ml 
 
 Shareholders, was held at the Speaker's Room of the Legislative 
 Council on Tuesday, the 3rd June, 1856. 
 
 Present : 
 
 E. P. Tache, 
 
 John Ross, 
 
 George Crawford, 
 
 W. H. Panton, 
 
 James Beaty, 
 
 G. F. Whittemore. 
 Letter from the Hoi^orable W. Napier, to the President bearing 
 date, 2nd Instant, was read. Copy of letter of Honorable W. 
 Cayley of 26th May, setting forth the details of the scheme which 
 the Government propose to recommend to Parliament to aid the 
 Grand Trunk Railway Company, and Mr. Napier's reply bearing 
 date the 30th instant, was also read, when it was unanimously 
 resolved, by the Directors present representing the Shareholders, to 
 concur in the views conveyed to Mr. Cayley by Mr. Napier in his 
 letter of the 28th instant. 
 
 (Signed,) JOHN ROSS, President. 
 And the Board adjourned. 
 
 No. 11. 
 
 Toronto, June 6th 1856. 
 
 Sir, 
 
 It is. Sir, perhaps better that I should forward for your infor- 
 mation the answer which I should otherwise have had the honour 
 to address to the Honorable Col. Tache, in reply to his communi- 
 cation of this day's date, enclosing me the draft of an additional 
 clause which it is proposed to add to the Resolutions in respect of 
 the Grand Trunk Company, now to be moved by the Government 
 in the House of Assembly, and also a copy of a joint letter of the 
 22nd November, 1854, by the Honorable John Ross and Sir Cusack 
 Roney, President and Managing Director of the Company, ad- 
 dressed to J. C. Chapais, Esquire, M. P. P., and Joseph Cauchon, 
 Esquire, M. P. P. 
 
 Taking Sir, into consideration and in connection with one 
 another, the pledge and undertaking given in the above men- 
 tioned letter of the President and Managing Director of the Com- 
 pany, the observation in his communication of the Honorable the 
 Premier of the Government, viz : " that the insertion of the pro- 
 posed clause," will obviate some of the objections which have 
 been raised against the proposed extension of relief, and being 
 
4S 
 
 personally able to confirm the latter representations, I feel justified 
 in giving my adherence on the part of the Committee of Share- 
 holders to the additional clause in question. 
 
 It is satisfactory also to be in possession of evidence by which I 
 believe the proposed Line, would by good management, in a very 
 short time, pay its own working expenses, and I cannot but look 
 forward without apprehension to a more prosperous result than has 
 hitherto been contemplated when the effect on the traffic of this 
 Section, of the Resources to be anticipated and made available, 
 by the completion of the Turnpike road from Pdvi6re-du-Loup to 
 the Frontiers of the Province of New Brunswick, is remembered — 
 and keeping in view the ultimate extension of the Line to the 
 Junction with the railways of New Brunswick and Halifax. 
 I have the honour to be 
 Sir 
 Your very obediently and respectfully, 
 WILLIAM NAPIER, 
 On behalf of the Committee of 
 Shareholders of the Gd. Tk. Ry. Co. 
 of Canada. 
 To the Honorable 
 
 William Cayley, 
 
 Inspector General, 
 dec, &c., &c. 
 
 No. 12. 
 
 (Copy.) 
 
 Quebec, November 22d, 1854. 
 Dear Sirs, 
 
 We beg on behalf of the Board of the Grand Trunk Rail- 
 way Company of Canada, to give you this Pledge and Under- 
 taking that the line from St. Thomas to L'Islet will be com- 
 pleted and opened for traffic on or before the 1st January 1857, 
 and that the line from L'Islet to Riviere Quelle will be completed 
 and opened for traffic on or before the 1st January, 1859. 
 
 You are aware that under the powers of our present Bill, we 
 can only get an extension of time for the construction of any por- 
 tion of the Railway by authority of the Governor in Council, and 
 we hereby authorize you to lodge this letter with the Provincial 
 Secretary, in order that it may be a bar to the Company obtaining 
 
44 
 
 any extension of time for the portion of the Railway above men- 
 tioned beyond the times we have above indicated. 
 
 We are, Dear Sirs, 
 
 Yours faithfully, 
 (Signed), JOHN ROSS, President. 
 
 C. P. RONEY, Managing Director. 
 J. C. Chapais, Esq. M. P. P. 
 Jos. Cauchon, Esq. M. P. P. 
 
 No. 13. 
 
 m 
 
 Toronto, 12th June, 1856. 
 Sir, 
 
 I beg leave to communicate the following extract from the 
 minutes of the Board of the Grand Trunk Railway Company, and 
 the Resolutions passed this day. 
 
 The Board having had communication of the Resolutions intro- 
 duced by the Government in the House of Assembly, founded on 
 the correspondence between the Honorable the Inspector General, 
 and the Honorable William Napier acting as tli j Agent of a Com- 
 mittee of the English Shareholders — it was 
 
 Resolved to concur with Mr. Napier in approving and accepting 
 the aid thus offered. 
 
 I have th« honor to be. 
 Sir, 
 Your very obedient servant, 
 
 BENJ. HOLMES, 
 Vice President. 
 Honorable William Cayley, 
 
 Inspector General, 
 
 Sec. Sec. Sec. 
 
311- 
 
 lifi 
 
 or. 
 
 THE FOLLOWING EEMARKS 
 
 Made by tlie Inspector General in debate, on the 
 Resources of the Province, and the condition of the 
 Grand Trunk Company, are added in the hope that 
 they will assist to elucidate the facts essential to a 
 fall understanding of the position o[ the one, in 
 claiming-, and the means of the other to afford the 
 aid solicited. 
 
 Ithe 
 nd 
 
 ro- 
 on 
 •al, 
 ra- 
 ng 
 
 DEBATE ON THE FINANCES OF THE PROVINCE. 
 
 Hon. Mr. CAYLEY moved the House into Committee to consider 
 of a motion " That a Supply be granted to Her Majesty." He said 
 — In making this motion, I wish to avail myself of the opportunity, 
 and I believe it i& also in accordance with the wish of hon. members 
 on the other side, to enter at some length into the nature and pur- 
 port of the resolutions that I will have to bring down at an early 
 period in committee of Ways and Means*. Before doing so, how- 
 ever, I desire to call the attention of the House to the expenditure 
 of last year, and to compare the estimates which I had the honour 
 of laying before the house, last spring, with the actual returns of 
 ■our revenues. The first item to which I shall refer as being the 
 most prominent, both in amount, and as a guage of the import trade 
 of the country, is the return of our Customs Revenue. Hon. gentle- 
 men may probably remember that I estimated the Customs Revenue 
 for the year 1855 at £900,000. The actual revenue has been 
 £881,774. It will thus be perceived that the actual revenue for 
 1855 has fallen short of the estimate by upwards of J6 18,000. And 
 this revenue falls short by nearly 30 per cent, of the revenue of 
 the previous year 1854. In bringing this fact under the notice of 
 the House, I also wish to call the attention of the house to the 
 views expressed on both sides, and more particularly by hon. gentle- 
 meu opposite, when the Reciprocity Treaty was under considera- 
 tion, and the modification of our tariff. On that occasion we were 
 .strongly pressed to increase the proposed reduction of our duties, 
 
 i (, 
 
46 
 
 ■ ii 
 
 and hon. gentlemen opposite complained of our want of nerve, and 
 our inattention to the general demands of the country, in not coming 
 down with a larger measure of reduction. One prominent member, 
 the hon. f^entleman wh» not n7ore than two or three nights ago 
 told us we ought now to come down with lirmncssend nerve and 
 meet the present exigencies of the country by heavy imposts — that 
 very gentleman on the occasion to which I refer, not twelve months 
 ago was one of the parties who moved an amendment to reduce 
 our revenue from 30 per cent, on sugar, and molasses, to 10 per 
 cent. And he was followed by the hon. member for Montreal, who 
 proposed to reduce the cul valorem duties from 12^ to 10 per cent. 
 I wish to contrast the view taken by those gentlemen of our posi- 
 tion on that occasion with the views expressed two nights ago, 
 when we were urged to come down with a bold measure of taxation 
 on the country. 
 
 Mi-. GALT.— I never -aid that. 
 
 Hon. Mr. CAYLEY. — Well, it was to be a bold measure for fur- 
 nishing the means of going on with Railways and Canals. I 
 should be glad to know how the House can reconcile the proposi. 
 tion. made within these few months back, at the very time, too, 
 thac we had to extend an additional aid of £900,000 to the Grand 
 Trunk, that we should still further reduce our Ways and Means by 
 reducing our revenue — how they can reconcile that with the sug- 
 gestion lately made to increase our burdens, for the purpose of 
 meeting these grand schemes of railways and canals. I think that 
 either they must give up their pretentious claims to foresight and 
 prudence, or that we must find the solution in the fact, that with 
 their eyes open they wereiullowingupthe game of opposition, and 
 weire willing to risk the best interests of the country to secure a 
 party triumph. I am happy to know that the House had the firm- 
 ness to resist what is always a very attractive proceeding, the re- 
 duction of duties, because, from the statement I am now about to 
 make, it will be evident that our ways and means have been 
 reduced by. the result of last year's financial changes, while I must 
 at the same time state that the expenditure of the year, for many 
 reasons into which I shall enter more uX length on some future 
 occasion, has been largely increased. Adverting then more in 
 detail to the estimates, and comparing it with the actual revenue, I 
 will state that the Customs' and the Excise duties, estimated at 
 ^£908,000 have yeilded £901,000. The Territorial Revenue esti- 
 mated at £100,000, has yeilded £125,000.--Bank impost estimated 
 
47 
 
 at je24,000, has yielded £22,400 Public Works estimated at 
 jG 100,000, has yielded JE 100,200. Fines and forfeitures estimated 
 at £5,000, have yielded £5,800. Casual Revenue estimated at 
 £25,000 has been £55,980. But of this amount £4-3,000 is the 
 resr', jf premiums on the sale of debentures in the English Market 
 during the last year, to the amount of £351,400 sterling. The Law 
 Fee Fund estimated at £4.,500, yielded £6,717. Thus I fmd that 
 our total revenue for the year amounts to £1,217,534', instead of 
 £1,166,500. I come now to the expenditure. The intcrcstonthe. 
 public debt, estimated at £210,000, has amounted to £219,570. The 
 civil list was estimated at £73,884 ; actual expenditure £63,157. 
 Acts of Lower Canada estimated ut £5,996 ; actual expenditure, 
 £5,021. Acts of Upper Canada estimated at £5,000 ; actual ex- 
 penditure £3,688. Acts of the Province estimated at £174,000 j 
 actual expenditure £221,145. In this, however, there v/ns included 
 £21,000, which formed part of the estimates of 1855. The annual 
 estimates of 1855, were £349,261 ; the actual expenditure under 
 that head £308,966. Tlie Sinking Fund was estimated at £75,000, 
 but we have paid £85,151 under that head. The deductions 
 from revenue, for expenses of management of Public Works, &c., 
 estimated at £170,000, turned out to be £198,474. There were 
 also in the estimates of the previous years, but paid this year, sums 
 amounting to £89,799, The total expenditure, therefore, has been 
 £1,194,873 13s. 9d. The total revenue, as I stated, has been 
 £1,217,534 14s. lid. Thus it will be perceived that we have a 
 balance of somewhere about £22,000 over and above the actual 
 expenditure of last year. I by no means desire in making this 
 statement, to convey the idea to the House that i take a despond- 
 ing view of the state of our finances because the revenue of the 
 last year has fallen so far short of the revenue of the previous year. 
 In point of fact, the revenue of last year has in the aggregate over- 
 run to a trifling extent the estimate ; so that we may say that we' 
 had anticipated the result of the year's transactions. Again, though 
 our revenue has fallen oft apparently some 30 per cent, from the 
 previous year, our importations have not fallen off to that extent. 
 To show this I will read a table of the importations for the last five 
 years : 
 
 In 1851 £5,315,697 
 
 1852. 5,071,623 
 
 1853 7,995,359 
 
 1854 10,132,331 
 
 1855 , 8,973,048 
 
 (5 
 
i ', m 
 
 1 
 
 48 
 
 tt thus appears that in round figures wc have lost little more than 
 the tenth of the importations for the previous year, while in revenue 
 we have suffered a diminution of upwards of 30 percent. The diffe- 
 rence is partly due to the large addition made to the free list, the 
 effect of the Reciprocity Treaty, and the addition made to the 2^ 
 per cents on a number of raw materials. 
 
 With reference to the addition made to the free list, I will show 
 the value of free goods imported into Canada during the lust three 
 years. 
 
 In 1853 £443,997 
 
 1854 703,435 
 
 1855 3,584,618 
 
 We here see the eff'3ct of our Reciprocity arrangements with the 
 United States, that while our revenues from customs have very 
 materially diminished, our importations under the head of free 
 goods, have been most enormously incrnused.* And in referring to 
 this circumstance I may congraLuliato the house and the country 
 on an arrangement, which at a period otherwise of general depres- 
 sion, gave great impetus to certain branches of business, connected 
 with our staple products, which proved of incalculable value last 
 year. — Of this item of free goods, Montreal has had a large share. 
 There were imported of free goods into Montreal : 
 
 In 1853 £125,790 
 
 1854 321,347 
 
 1855 950,462 
 
 I have mofe particularly adverted to the trade of Montreal, be- 
 cause several memorials have been addressed from that quarter of 
 Canada ypon the subject of trade, the memorialists dwelling strongly 
 upon the discontinuance of the use of that channel for the purposes 
 of trade, and urging that by some legislative action we should 
 endeavour to restore activity and business to the port of Montreal, 
 'and one mode by which this was to be effected was, that we should 
 change the system by which we levy a portion of our duties, from 
 the specific to the ad valorem. lam prepared to discuss this question 
 at some length with Hon. Gentlemen opposite, as I look u|X)n it as 
 one of very considerable importance. I am desirous indeed of in- 
 viting discussion upon it. But I have not that confid'>nce in the 
 result of a return to the former system which some Honoi able Gen- 
 tlemen profess. On the contrary I believe that you cannot, by any 
 restrictions or by any coercive legislation, be successful in driving 
 trade out of its natural channels. I feel, however, assured that 
 
40 
 
 Montreal does not seek to agsnindize herself at the expense of other 
 partsof th( 'iimniunityjanil I am satisfied the memorialists are mis- 
 taken inbtdievinff that tlu; object they are imrsiiing will not injuri- 
 ously adeet other parts of the country, lani notdispusedto overlook 
 the interests of Lower Canada, and of Montreal, l)ut 1 seek to deal 
 equal jiistiei' to both sections oi'the I'rovincc. I tli(>refi)re jjropose 
 toconsidi-rlirstofall what are the general interests of the J*rovince, 
 and how they are best to be maintained. 1 take it to be our general 
 interest to maintain the credit of th<i Province, and tf) afford every 
 facility lor the developnuMit uf the resources of the country, its 
 natural productions and m;inu(iietiu-es, aud not to endeavour to 
 coerce trade into certain channels by special legislation, to keep 
 duties as light as is consistent with the requirenuMits of the ])ublic 
 service, and leave the merchant and the consumer free to choose 
 their own markets. In order to efli-'ct this, we should above all 
 maintain the credit of the country — we should have a safe and 
 sound and good banking system — we should oflcr every liicility for 
 keeping up the intercourse between the several sections of the 
 Province by our water communicalions, our canals, rivers, &c., — 
 not that every harbour, every canal, every railroad should be con- 
 structed with public money, but that we should lend our aid to 
 those enterprises which in extent and amount of cost are beyond 
 the reach of" private means, and ceasing to be of local value only are 
 of general importance. On the last occasion when I had the honor 
 of addressing the House on the subject of specific and ad valorem 
 duties, I quoted ti.j opinions of several members of the Imperial 
 Parliament, of Mr. Gladstone, and other Gentlemen regarded as 
 high authorities, showing their preference for the adoption of the 
 principle of levying specific rather than ad valorem duties. On that 
 occasion, I had not the opportunity of referring to the report of the 
 Committee of the House of Commons, but I have since obtained 
 the papers, and find that the substance of what is reported by the 
 Committee describes the principle of at? t;a/wrw. duties as one which 
 works badly in practice, however, commendable it may apj)ear in 
 theory. The objections to it are the impracticability of working it 
 out correctly, that it is always a subject of uneasiness, vexation, 
 favouritism, and bribery, and also its materially affecting the 
 value of the article imported. Great difficulties in the mode of 
 working the ad valorem system arise from the seizure of goods by 
 customs officers on speculation. Mr. Traverse, in his evidence, 
 stated that, during the time ad valorem duties were in existence. 
 
 
 ' <i 
 
 1| 
 
50 
 
 open iiiul riuik bribery existed. It wiis one of the most forcible 
 argiunents used to show tliut the system ought to be changed. 'J'lio 
 dillieulty ol arriving at the jirecise vahie of sugar (or the purpose of 
 iixiiig the rate of duty applies to all elasses ul" ad vn/orvm tluties — 
 the ri'turn to whii'h litrnied the j)riii('i|)al topie of discussion. 
 
 Mr. (iAF/r. — Whei) did tiial Cituiuiiltee rrport \ 
 
 lion. Mr. CAY LK v.— In 18r)2. Th.' evKhnce of Mr. IJrown 
 before the Conuuittte of the liniise showeil that it was perteetly 
 inipussibk' to lix (lie exact aniouut ol'diity to be cliarged on tea ^«/ 
 fulorcm ; he said : " we hiid 'JO pots of tea in the room with hot 
 water in thi'iu, smellinn' them and tasliug them, and saying this is 
 one kind often, and that is anotiur kind ; and at last we found that 
 wo could not continue that coiu'se, and had to put on a specific 
 duty instead." ^Ir. Hastings went on to give evidence i)recisely 
 to the same purport on the subject of sugars. 
 
 Mr. llOLTON. — Is the evidence all on one side ? 
 
 Hon. Mr. CAYLKY, — In this rejtort it is. It all tends to show 
 the impracticability of working out the <ul va/orcm system. 13ut wo 
 have some experience on the subject ourselves, and 1 Avill state a 
 case which is probably in the knowledge of the meiubir from 
 Montreal — a case which was called the McFarlane case. The 
 McFarlane case was this : A quantity of brvndy was imported into 
 Montreal in October in IS.')-!-, on which the imi)orter proposed to 
 pay the duty as coming from Charente. The customs oiiicers con- 
 tended that it was from (Glasgow. It was French brandy, and the 
 only tpiestion raised was whether it canu; from Charente direct, or 
 via Glasgow. The importer contended that it came from Cha- 
 rente, but that his agent at (rlasgowhaviiigajpiantity of Chareiiln 
 brandy in his vaults might jMis.sibly have tilled a portion of the order 
 in that way. However, the br.indy was seized, heavy bonds were 
 given, and the case has only \>vvn closed within the last few weeks 
 by the payment of a i».>rfeitnri . The question then turned solely on 
 this poiiit : was the brandy iwiported direct from Charente or from 
 Glasgow ? Should the duty be charged on the value at Charente 
 or on tht vrUu' ni Britain. Now the actual value of the brandy 
 was no JiigluT coming by one way than by the other, and my 
 opinion is tha! the iluty should be the same; and that the importer 
 was placed at a very great disadvantage through the princijjle that 
 waa acted on. The next case to which I will refer is connected 
 with the gras work> of this town. A nnmber of castings were en- 
 tered by Mr. Brick at a valuation of $40,000 ; and they were seized 
 
51 
 
 for a suppospcl iindrrvuluatiDn to thenmount of 'jC2,000. On ii close 
 exiiminiition, it was not only found tlmt the valuation was (.mjuuI to 
 tfiat placi'il on similar articles in the Cities of'Cincbcc and Montreal, 
 but. was ac'tuiilly liiiilicr. The seizure had heeii based on ii juenio- 
 ratidum <tl' three (ientlemen enirajfed in this eily in llie Imrdwaro 
 trade, two of whom, on a more carofid examination ul' the case, 
 saw fit to modify tlieir statement with regard to the value of tlio 
 eastiiiiTs imported by Mr. Brick, aial they were accordingly released. 
 Now, here is a case ot' hardship under tlu? ad ni/orrni system. Mr. 
 JJrick Jictually entered these articles at a hi^dier viiluation than 
 they bear in the Cities of (.Juel)ec, Hamilton and Toronto, and yet 
 in consequence of the dillifidty of determinin*^ the exact rat(j at 
 which they shouM be entered, they were seizcnl, the importer com- 
 pelled to •>ive heiivy bonds, and subjected to much hardship and 
 vexation. 1 took the trouble somi* time since to have a tidile pre- 
 ])ared showini;:; the value of imjjortations of tea at all the ports in 
 Upi)er anil Lower Caniida, and I desire to call the attcMition of 
 llt)norable (Jenllemi-n opposite to somi; of the fiffures of this table. 
 First of all, 1 find that the number of piamds of tea imported into 
 Lower Canada for three-fourths of the year, was within a fraction 
 of the amount imported into U])per Canada — thenumbi^r of ponnds 
 imported into Lower Canada being 731, 329 against 734',292 im- 
 ported into Upper Canada, bi-ing barely a difference of 2000 ponnds ; 
 but the valu(.' of the tea imi»orted into Lower Canada was only 
 jet2,09(), while the value imported into Upper Canada was £66,- 
 Of)!, being a difference of nearly 50 percent. I now direct attention 
 to the entries of some cargoes of ti'a from the seaboard, and from 
 China direct, and through the Unit»>d States. A cargo of tea, im- 
 ported direct from f 'hina in May 1855, was entered at 9 2-5d per lb., 
 and another cargo imported fi'om China direct was entered at 
 11 'jd per lb. I find that the average price of teas at (Quebec and 
 Montreal was Is. l|d. per lb., and that the average price of teas at 
 Hamilton and Toronto was Is. lO^d. per lb; the average duty paid 
 on teas at Montreal and (.Quebec, entered under the late tariff, 
 was 25d ; and the average rate of duty at Toronto and Hamilton 
 was 3|d. This was the penalty paid by Upper Canada for importing 
 by other channels than that which is favoured by the member for 
 Montreal (Mr. Young.) Now, it will be perceived that by reduc- 
 ing the duty on tea to a fixed duty of 2d. per lb., that in no case 
 has the duty in Lower Canada arrived at the duty it paid before 
 this alteration was made. For instance, under the last entry of 
 
 ( 
 
 
 W'i 
 
62 
 
 tea the importation from China direct in 185f^, 9 2-5d. per lb., the 
 duty amounted to 2 l-5d. per lb., and the duty in 1853 on tea im- 
 ported from China was 2jd., consequently the ad valorem duty 
 under the old system was higher at Quebec and Montreal than it 
 is under the fixed duty of 2d. par lb. The consumer, therefore, 
 gets his tea at a reduced rate of duty compared with that which he 
 formerly paid. But under the old tstrifl' Upper Canada had to pay 
 3|d against 2d. under the new titrilf; consequently the whole dif- 
 ference was thrown against the consumer in Upper Canada, who 
 under the old tariff had to pay nearly 2d. more than the consumer 
 in Lower Canada. T contend, therefore, that it would be wrong to 
 return to a system which ])rcssed hard on one part of the Province, 
 and which cannot be shown to have conferred any L>oneiit on the 
 other. As bearing on this subject I shall quote from a table I hold 
 in my hand which shows the value of different commodities entered 
 last year, and compared with the entries this year, showing the per 
 centage of increase or decrease; for instance, I find in the article of 
 cofiee there is an increase of i2i })ereent. in quantity, while the in- 
 crease of value given is 23^ per cent., or nearly double. On sugars, I 
 find that the increase in quantity is 7 per cent., but the increase 
 in value is 33 per cent. In molasses the increase of quantity 
 is 2^ per cent., and the increase of value is 44i per cent. In the 
 article of tea, I find that — although I have been informed by one 
 ■of the first houses engaged in the trade that tea was worth actually 
 less in the market in 1855 than it was in 1854 — the returns show 
 an increase in the value of the quantity imported of 17 per cent., 
 while the quantity has only increased 10 per cent. The inference 
 I draw from this fact is, that when you take away all inducement 
 for people to conceal the real value of their goods with a view to 
 enter them at a lower rate of duty, you get rid of a great tempta- 
 tion to fraud, and obtain a statement of the true value of the 
 goods imported. It is well known that one of the great grounds of 
 seizure, is the under valuation of goods ; and I look on this as a 
 most conclusive argument against the ad valorem system. rerhaj)s 
 it will not be without weight with Hon. Gentlemen ojiposite, I 
 allude particularly to the Hon. member; for 8herbrooke and Mon- 
 treal, as the friends of a Gentleman who stood high in the estim- 
 ation of this House, that he had seen reasons very materially to 
 modify his views on the subject of ad valorem and specific duties. 
 It is well known that I was always an advocate for specific duties — 
 and on the return of Mr. Hincks to office in 1847, he restored in a 
 
53 
 
 great measure the ad valorem ; it will be remembered that in the 
 speech from the throne in 1854, dictated no doubt so far as that 
 portion of it was concerned by Mr. Hincks, the intention to modify 
 the tariff was there distinctly stated. I then requested him 
 to furnish me with a sketch of his plan, and I found that 
 its most marked feature was an abandonment of the mixed 
 system of ad valorem and specific duties, in favour of specific 
 duties. I mention this, because I claim now the support of 
 those Gentlemen who regard Mr. Hincks as a good judge — 
 And I believe that I shall be supported in the remark, that Mr. 
 Hincks had made i formal announcement of his change of opinions 
 on the subject. Under these circumstances, I see no reason 
 for returning to the old system. I do not propose therefore 
 to abandon any of our specific duties, for I see no reason 
 why we should revert to a system which however well it may 
 appear in theory is injurious in practice, hurtful to the morals of 
 tlie country, harassing and vexatious to the importer, and which 
 opens the way to abuses on the part of the officers. I do not know 
 that I need go back upon an argument on which I have already 
 dwelt at some length, but I may make this remark. The direct 
 importers of teas fi-om China have always claimed an exemption 
 from payment of duty on what is called the export duty in China ; 
 but the merchant who imports from New York has to pay an ad- 
 ditional rate. I will su[)pose that the value of tea in China is 6d per 
 lb — the merchant who imports direct i)ays the duty on 6d, but the 
 merchant who imports from New York, and demands that he 
 should be entitled to enter it at Gd. is told, '' No, you cannot enter 
 it at 6d ; you must pay the duty on the export duty of China, you 
 must pay duty on the freight from China to New York, and you 
 must i)ay duty on the charges at New York, and even on the com- 
 mission and profits of the New York importer." Now, I view the 
 matter in this light : we will be most happy to afford every facility 
 to trade, and to enable the consumer to enter the cheapest market 
 for the purchase of those commodities which he may require ; but 
 we must not lend ourselves to any project for blocking up our 
 neighbour's gateway. 1 ctmnot lend myself to such a principle ; 
 and therefore I say that in calculating all the difficulties with which 
 we are surrounded, and the best way of avoiding them, whatever 
 changes we think necessary, and whatever, under the exigencies 
 of our position, i may be compelled to come down to this House 
 and ask for aid to enable me to carry out, I will not propose any 
 
 ! 
 
 'I ( 
 
 111 
 
 I 
 
64 
 
 •i 
 
 pi < 
 pi; 
 
 iU 
 
 return to a^ valorem duties, but continue the present systen" , The 
 remarks I have made have been confined to the expenditure and 
 the revenue of last year. I now turn my attention to a subject of 
 great importance — one closely connected with the welfare and the 
 best interests of the country. I need not observe that the commu- 
 nications which were published in the papers a few days ago, were 
 received almost like a thunderbolt — I refer to the letters addressed 
 by Mr. Brassey to the President of the Grand Trunk Company in 
 Canada. Whatever may have been the information possessed by 
 certain honorable gentlemen on that side of the House, in regard to 
 the position of that work, we, on this side, were by no means pre- 
 pared for the views expressed in those letters, the propositions sug- 
 gested, or the demand made. The subject is one of great diffi- 
 culty, and I am almost afraid that I cannot approach it without ex- 
 citing some feeling in the House. Indeed, we have on both sides 
 of the House indulged in so much political fervor in our debates, 
 that I can hardly expect this to bo an exception to the rule. But 
 I do not wish to give the slightest occasion for painful feeling, and 
 shall, therefore, confine myself solely to the matter before us. 1 
 will not go back beyond the period when we first accepted office — 
 about 18 months ago. On that occasion, it will be remembered, 
 one of the very first measures we Ijroughtdown to this House was 
 a proposition to spread our guarantee which up to that time was 
 confined to the sections East of Toronto, over the sections west, 
 that the Company might draw a benefit from the use of the gua- 
 rantee in anticipation of the execution of those lines. This was 
 acceded to by the House, and from je400,000 to je500,000 were re- 
 leased by this action. The next demand, made upon the House 
 last session, was for an addition of jE 900, 000, which raised the total 
 guarantee to 50 per cent, upon the estimated cost from Stratford to 
 St. Thomas. That was also agreed to. At that period, when the 
 bill was passed granting this additional aid, a clause was introduced 
 into the Act, authorizing the Government, with the consent of the 
 Governor in Council to appoint " skilled engineers" to examine 
 the road and take care that the guarantee was not released to a 
 greater extent than the company were entitled to obtain it under 
 the new arrangements. At the time those arrangements were 
 made, it was estimated that £1,800,000 would finish the work 
 from St. Thomas to Stratford, and the House relied upon the Govern- 
 ment taking such precautions, in releasing this guarantee, that the 
 work should be proceeded with so as to correspond with the amount 
 
55 
 
 of the guarantee released. Two montlis ago the unfinished works 
 between those two points was estimated at a sum under je400,000, 
 and the debentures we have at this moment unreleased, amount to 
 ^£500,000, consequently the Government have on hand as a gua- 
 rantee against all contingencies, j^n amount apparently exceeding 
 the estimate cost of the work remaining to be done. I have not 
 yet had an opportunity of examining the report of the engineers 
 appointed by the (Government to examine the line ; but it is in the 
 hands of my honorable friend the Attorney General West, who 
 may take an opportunity of remarking upon it. But I understand 
 that they c jncur in every particular with the estimates furnished 
 by the engineers of the Grand Trunk Railway Company as to the 
 progress of the work. We have now in hand a larger amount 
 than will be sufficient to finish the work. I think, therefore, the 
 House should not be under any apprehension that come what may, 
 the contractors will not be in a position to go on with their engage- 
 ments. I regret that some doubts exist as to the power of the 
 company and the contractors to carry on their work beyond the 
 two limits of Stratford to the West and St. Thomas to the East. 
 I hope these expectations will bo disappoinied. I hope the pros- 
 pect of peace and the restoration of the balance of trade will greatly 
 ease the money market, and enable the company to carry on their 
 work with increased vigour. But I regret, at the same time, that I 
 am bound to admit, that according to their own showing, they 
 feel the pressure of the times, and their position to a certain extent 
 may be considered critical. They have not the same prospect 
 before them of relief that other parties may have in regard to their 
 transactions in the money market, because their position as Con- 
 tractors is a mixed one, they are not only Contractors for the road 
 but are Shareholders as well. It will be remembered, that at the 
 organisation of the Company one half of the capital stock was reserved 
 from sale and placed at the option of the holders of the A shares* 
 to take or hand them over before the expiration of the year, to the 
 Contractors. The value of these shares having fallen, the option 
 of the company was not to take them, and consequently they were 
 left in the hands of the Contractors. From that period the stock 
 has continued to fall, until it has arrived at a very depressed state. 
 In consequence of the line being commenced in parts altogether 
 unconnected with the great trade of the country, it has been less 
 productive than we have any reason to believe will be the case 
 when the works are finished. The Contractors then, who are 
 
 'M 
 
 
56 
 
 driven to find resources, not only as contractors, but as part of the 
 company, to carry on the great work, which thoir two-fold position 
 has rendered doubly hard, have submitted the proposition con- 
 tained in Mr. Brassey's letter. That proposition is one of an 
 unusual character. It propose,! that the Government — for the 
 benefits to be derived by Canada from the comj^letion of this 
 line of railway — should guarantee a minimum dividend of 5 per 
 cent, upon the share capital. Such a guarantee on the part of the 
 Province would necessarily embrace the interes. on any new loan 
 required to finish the works, as well as the interest on all the ex- 
 isting liabilities of the Company, in iiict the interest on a sum not 
 less than ten millions of pounds sterling. It is true that at he 
 end of ninety-nine years the whole of the work would revert to the 
 country. The total amount of our annual liability under such' 
 a guarantee would be little short of £000,000 st(.'rling. But 
 it may be contended — and with some force too — that we shall 
 not be called upon to pay the whole of this amount, because what- 
 ever accrued as profit from the working of the line, will go to 
 make up part of that guarantee. I do not look upon this as a 
 hopeless enterprise, on the contrary, I look forward with the 
 strongest hopes to the results of the Grand Trunk, when in opera- 
 tion — that it will meet the expectation of Hon. Gentlemen — not 
 the fullest expectations, perhaps, but that it will yet reach a point 
 highly remunerative to the stockholders in England. But it is 
 one thing to entertain bright hopes that the line would pay, and 
 another thing to become guarantee that it will pay. We have, 
 no right, I contend, to enter upon a guarantee of that magnitude, 
 when we must be dependent upon the realization of our expec- 
 tations for the means to fulfil our engagements. I will now for a 
 moment refer to our financial position, for the purpose of showing 
 that we should not be justified in bringing down a proposition of this 
 kind, however strong our desire to afford relief.— I will refer to 
 the surplus revenues of the Province. I find our surplus revenue 
 for the several past years was as follows : in 184'2 we had a surplus 
 of £6000, over and above the expenditure; in 1843, a surplus of 
 £36,000 ; in 1844-, a surplus of £67,000 ; in 1845, a surplus of 
 £900; in 1846, a surplus of £7,700 ; in 1847, a surplus of £48,000 j 
 and in 1848, there was a deficiency of £94,000. In 1849, there 
 was a surplus of £62,000 ; in 1850, a surplus of £172,000 ; in 1851, 
 a surplus of £207,000; in 1852, a surplus of £83,000 ; in 1853, a 
 surplus of £450,000 ; in 1854, a surplus of £479,000 ; and in 1855, 
 
67 
 
 j622,000. It will be perceived that except the two last years, we 
 have had no surplus revenue on which we could rely in entering 
 upon so stupendous an undertaking as the one involved in the cor- 
 respondence between Mr. Bntssey and the President of the Grand 
 Trunk. But I may also observe, in regard to those last two years, 
 the imports were extensive, and the past history of the Province 
 shows that a year of large importations was generally followed 
 by a year of reduced importations. I find that the largest amount 
 of customs revenue prior to 1850, was in IS-i-i. It was then £429,- 
 000. It was not however sustained at that, but fell in 1848 to 
 £304,000. In 1849, it rose to £412,000, thus taking from 1844, to 
 1849 to recover the ground it had lost. In the session of 1849, the 
 customs duties were increased. In 18r)0 the customs revenue rose 
 to £538,000 ; in 1852, it was £703,000 ; in 1853, £986,000 ; in 1854, 
 £1,168,000 net revenue ; in 1855, a gross revenue of £881,000. 
 From these figures then it will be seen that however deeply the 
 Government may feel for the situation of the Grand Trunk Com- 
 pany and the Contractors, it is totally out of their power to enter- 
 tain the projK)sition put forth by Mr. Brassey's communication. 
 But, sir, we have a duty to perform. We are under certain pledges, 
 not to the Grand Trunk Company, nor the contractors, but to the 
 public, and these pledges, whatever may be the result to the Grand 
 Trunk Company, I trust the House will strain every nerve to 
 maintain. Within these few hours, I have received a communi- 
 cation from the Vice President of the Grand Trunk Company. He 
 writes, " I have the honor of transmitting a resolution passed at a 
 meeting of the Directors of the Grand Trunk Railway Company, 
 held on the 10th of April, having reference to the present em- 
 barassment of the Company's affairs, and begging that the interest 
 past due, and the interest coming due ou bonds issued by the 
 Government to this Company, may be provided for by the London 
 Agent of the Province." He adds, " I have earnestly to beg that 
 you will at the earliest practicable moment submit the communi- 
 cation to the Executive Council, so that action may immediately be 
 taken and the necessary order forwarded to them." That commu- 
 nication tells us that it is no longer a matter of doubt that the 
 Company have been unable to meet the dividend upon their secu- 
 rities, the amount of which is £3,111,500. 
 
 Mr. GALT.— Am I to understand that the interest has not been 
 met upon the Provincial Bonds 1 
 
 
 li 
 
 
 111 
 
U :i 
 
 m 
 
 iM 
 
 .,,..,Jir. 
 
 ii 
 
 58 
 
 Mr. CAYLEY. — T will read tlu! resolution. 
 
 Resolved, — That inasmuch as the embarrassed position of the 
 Company's financial ailliirs compelled the necessity, on the 1st of 
 January last, of seeking advances from its hankers, to sustain the 
 credit hoth of the Province and of the Company, by the prompt 
 payment of the interest due upon the Provincial Bonds, and in 
 lew also of its continued inability to meet these future paynumts, 
 J .til the completion of the whole line, including the Victoria 
 Bridge, it is ordered that the Vice-President address a communi- 
 cation to the Hon. Inspector General, begging that instructions be 
 forwarded to the London Agent of the Province, to provide for 'he 
 interest for the half year due last January, and for the present 
 haL year coming due in July next, on the debentures issued by 
 the Province on behalf of this Com])any, and amounting in the 
 whole to £3,111,500. 
 
 I desire strongly to impress upon the House that tliis is no 
 longer a question of aid to the Grand Trunk Company. It is a 
 question of fulfilling our own engagements — our own pledges to 
 the public which we are bound — come weal come woe, to maintain 
 inviolate. The total amount of liability involved is £225,000, and 
 it is perfectly clear that from any surplus revenue past or expectant, 
 we have not the means of meeting the engagemei i of the Pro- 
 vince — not with the Company — because these debentures have 
 fallen into the hands of parties who have no connexion with the 
 Company, and who look to Canada and Canada alone for i)ayment 
 of the interest and the fulfillment of her engagements. 1 have 
 dwelt thus strongly upon this subject desiring to imj)ress the view 
 we must take of it. We must moreover deal promptly — we can- 
 not shut our eyes to the position of afliiirs. I am not })reparcd to 
 shrink from, nor am I indisposed to face all the consequences of 
 our position. I am prepared to deal with it in good faith to the 
 Province, and in a way in which I hope to be sustained. The 
 Government are prepared to do so, and we hope we shall be sus- 
 tained by the House. There are three ways by which the unex- 
 pected defalcation may be met ; first, by direct taxation ; second, 
 by the issue of debentures ; and third, by increasing our Customs 
 Revenue. In reference to the first, I have no hesitation in express- 
 ing my opinion that it would be very distasteful to the country and 
 most dilatory ixi its operation. As regards the second, the scheme 
 of issuing debentures for payment of interest, is one which I 
 think should be resorted to only in the last extremity. (Hear, 
 
59 
 
 hear.) It would be putting ofTthe evil from day to day, at the ex- 
 pense of our reputation, and thef accumulation of our embarrass- 
 ments. The third, I think, is the only^alternative ;— the increase 
 of our customs to such an amount as will enable us to fulfil our 
 engagements to the country. If our estimated revenue is, say in 
 round figures ii 900,000, and I am not prepared lo estimate it at 
 more, because we liave within ' the last year by the operation of 
 reciprocity, and the free list, made {)crmanent reductions upon our 
 former revenues, to an extentj not to be replaced for a while at 
 least by ordinary importations. As there/ore we derive our re- 
 venue from importations, I look forward to no sufficient increase, 
 unless Ave take steps to effect it by direct^legislation. It appears 
 to me that it will require an amoimt noteless than something like 
 an addition of twenty-five jier cent, upon the customs of last year 
 to arm us with sufficient me- i^ to meet our engagements for the 
 current year. It would be nardly][safe to calculate that if we 
 raise the duties 25 per cent we will get an addition of 25 per cent 
 to the entire revenue — because all experience is against such an 
 expectation — but 20 per cent may^be realized. If by this means 
 we add £225,000 to our revenue, this would be something less by 
 10,000^. than the demand made upon us to cover all the exigen- 
 •cies of the Grand Trunk. It will be therefore my duty to bring 
 down at an early day, resolutions in conformity with the sketch I 
 have thrown out : and I trust that as I^have confined myself solely 
 to the question of meeting these engagements, which, were volun- 
 tarily assumed, and for which we have now of necessity to pro- 
 vide, and which I may add, the co.tiitry in the first instance con- 
 sented to. — [No, no, from several of the opposition.] — I need not 
 repeat the remark, but will endeavor to confine myself to the 
 proposition I have laid before you. I have just been reminded 
 that I should also state to the House that the Grand Trunk is not 
 the only liability we have to meet. The Northern Railroad has 
 been unable to meet their January dividend — and which the Pro- 
 vince has conse(piently to pay. I may remark also, that the Mu- 
 nicipal Loan Fund is in arrear, and^that I have reason to expect 
 that we shall not escape the consequences sometimes attendant 
 upon becoming surety. (Hear, hear.) we shall be called upon, I 
 fear, from time to time to make good the deficiencies of the Loan 
 Fund — but beyond the meeting of the interest upon these loans 
 temporarily when it falls due, I have no reason to believe we will 
 be required to go. 
 
 ■>■ 
 
 ' ::' ( 
 
It 
 
 ii 
 
 60 
 
 Debate o?i tht Grand Trunk Company resumed on the motion to 
 
 go into Comjnittee. 
 
 Hon. Mr.CAYLEYmoveil that the House go into Committee of 
 Whole on the following resolutions : — 
 
 Rrr-olved, — 1. That for the jmrpose of enabling the Gnmcrrrunk 
 Railway Company of Canada to complete their undertaking, it is 
 expedient to authorize the Governor in Council to carry into effect 
 an arrangement provisionally entered into between the Ciovern- 
 ment of Canada and the said Company, based upon the following 
 terms, viz : — 
 
 That the Railway Comi)any shall be allowed to issue Preferential 
 Bonds to tlie extent of two millions sterling. The holders of such 
 bonds to have priority of claim therefor over the jireseut first lien 
 of the Province. 
 
 That such issue shall not take place until the Railway from St. 
 Thomas, Lower Canada, to Stratford, Upper Canada, shall have 
 been finished and in oj)eration. 
 
 That the proceeds of the said Bonds shall be j)aid over to the 
 Provincial Agents in London, and released on the certificates of 
 the Receiver General, upon proof of progress of the work. 
 
 That the said proceeds shall be appropriated to the aid or 
 construction of the following works, and in the proportion 
 hereinaflcr mentioned : 
 
 The Pvailway from St. Mary's to London and Sarnia, £450,000 
 The Railway from St. Thomas, L. C, to Riviere- 
 
 du-Loup 525,000 
 
 Victoria Bridge 800,000 
 
 Three Rivers and Arthabaska 125,000 
 
 To enable the Grand Trunk to assist subsidiary lines, 
 
 such as the Port Hope, Cobourg and Prescott 100,000 
 
 :e2,000,000 
 That the St. Mary's and London branch and 
 
 subsidiary lines shall be completed by the... 1st Sept. 1857. 
 
 Stratford and Sarnia 1st Sept. 1858. 
 
 Arthabaska and Three Rivers 1st Sept. 1859. 
 
 The Victoria Bridge 1st Jan. 1860. 
 
 St. Thomas and Rivi^re-du-loup line as follows : 
 
 From St. Thomas to Riviere Quelle, 1st Jan. 1859. 
 
 From Rividre Quelle to Riviere-du-Loup. , .... 1st Jan. 1860. 
 
 |i)! 
 
61 
 
 9. 
 0. 
 
 That in order to restore to the Trois Pistoles Road, the 
 guarantee diverted i'roni it by the Act of 1854 and exp{;nded on 
 tli«! Toronto iind Stratford section, there sliall be reserved from the 
 proceeds of the Preferential Bonds, as they are paid over to the 
 Provincial Agents, such a j)()rtion for the section of tlie Road from 
 St. Thomas to RiviC're-du-Loup, as shall ensure its progress equally 
 with the other works above mentioned. 
 
 Thiit the interest accruing on the Provincial bonds during the 
 period of five years, being the time necessary fur the conijilotion of 
 the works and for the development of the through traffic, shall be 
 advanced by the Province, and such advances as they are made 
 shall be repnid to the Province in share capital of the Company. 
 
 That the lien of the Province, subject to the preceding condition, 
 shall rank, as to dividend or interest, with that of the Company's 
 bond-holders." 
 
 Hon. Mr. CAYLEY then proceeded to address the House, 
 and said, the Grand Trunk Railway, opening Canada through 
 its entire length from Sarnia in the West to St. Thomas in the 
 East, and Ibrming a most important channel of communication lor 
 the development of the trade and traffic and resources of the 
 country, must be looked upon as second to no enterprise which 
 Canada could encourage. I was anxious therefore to bring 
 forward these resolutions, not with the view of meeting this or 
 that interest, as had been said, or of putting down this or that 
 opposition, but in the interests of Canada as a whole. It was well 
 known that the Grand Trunk Company had most emphatically 
 declared their inability to go on with the line, without some aid. 
 The resolutions I hold in my hand fall short of the aid which the 
 Company had asked but whatever might be the desire of the 
 Government and of the House to offer aid, I feel that the country 
 is not in a position to offer the entire aid sought for by the 
 Company — viz., the assumption on its own resi)onsibility of the 
 engagements of the Company, and a guarantee of a minimum 
 dividend on the share capital. These engagements consisted of 
 Provincial bonds to the amount of je3,l 11,500, Company's bonds, 
 JE2,14.5,000, and share capital to the extent of about £4.,000,000 
 more, besides the new aid contemplated of about £2, 000,000, so 
 that the total amount expected to be guaranteed by the Province 
 would be about Ten Millions of money. Now, whatever might 
 be the prospective advantages looked for from the construction of 
 the Grand Trunk, it was clear that for a young country like Canada, 
 
 11 
 ,1' 
 
 ^(1 
 
 \ 
 
68 
 
 iff 
 
 i 1 S 
 
 with a revenue varying frumjE800,000 to jG 1,200 ,000, in prosperous 
 years, to undertake from lliis jieriod the puynu'nt ol' interest on 10 
 milUons of money, amounting to je600,000 per annum ; or one half 
 of the whole revenue of the country in the most prosperous years, 
 would be an undertaking littk'^ short of the must extravagant 
 rashness, that any Legislature co\dd ho guilty of. I look fur- 
 ward with ihe greatest confidence to the line being ultimately 
 valuable and productive ; but I feel that the aid to be olii'red to the 
 Company must he kept within reusouuhle hounds iind nut as would 
 be justideduna full and iinpiirtial iiivestigiitiun of their position iind 
 claims. If we undertook to grunt nil the jiid sought, we wouUl be 
 chargingCanadawitha very large additional hiirdi'U, and hon. gen- 
 tlemen knew the diflicullies which would stand in the way of this 
 from having witnessed the manner in which the prupusiliou tu in- 
 crease the Customs duties 20 per cent, was met the other da y . The 
 Province, however, had already assumed the responsibility for a 
 certain amount of bonds, which had passed out of their hands, and 
 were held now we do not know by whom. They had passed 
 from hand to hand as securities of the I'ruvince, for which it 
 was liable, whatever might bo the fate of the (irand Trunk. 
 For these engagements the country had made provision, and I 
 have no doubt the resources of the country were ample enough to 
 meet them all in time to come. The aid now proposed to be given 
 was little more, if strictly examined, thaa the permission to raise 
 money on the security of the work itself. T propose in the first 
 instance to secure the re-payment of that interest, which in tlie 
 moantiino, must be met on the bonds the Province hnd issued, by 
 taking share capital from the Company — (opposition cheers) —each 
 half year or each year, as we paid the interest, so that we 
 would hold in hand an amount of share capital, rejiresenting the 
 amount of interest advanced on behalf of the company. If I 
 understood the cheers on the other side of the House, hon. 
 gentlemen opposite were disposed to regard this share capital as 
 a very imperfect representative of the money to be paid out 
 by the Province. I am not prepared to debate that, and it is 
 unnecessary that I should do so, because we were bound to pay 
 the interest by our own voluntary engagement, and the question 
 was, were we not taking the best security the Company could 
 offer for the re-payment of that interest ? The question was not, 
 whether it was an entire security, but whether we were not 
 taking the best security the company could give. It would 
 
G3 
 
 depend on the profitable character of the road whctlier it was 
 worth aiiythinj; or not, but when we took the share ca[)ital, we 
 would at the sauuj tiuu! secure a representative of the money 
 advanc(Hl, and give conlidence to capitalists at home, by shewing 
 that tlie Province lookc(l upon the stock as a valuable security, 
 (opposition ironical cheers) and I believe that that expression of 
 conlidence wouM give it a vahu^ in tht- market, and enable the 
 Province, if it saw lit, to dispose of that stock, ami reidi/e ifnot tho 
 whole amount at par, yet a vi-ry considerable amount upon it. If 
 we were to sell it, it would probably r(>present 70 or HO or 90 per 
 cent u])on the amount advanceil. At the? time when tho propo- 
 sition was first entertained in England that Canada should aid the 
 (trand Tnuik Company to tho full extent of its luicd, the stock 
 rose from the nominal Vidue of £1 or £7 10s. to £IC) on £22 10s. 
 paid up, so that the value of the stock inexi)ectation ofaiil from tho 
 country, rose U) between (iO and 70 per cent. Assuming its value 
 , then at 70 per cent, the total loss would be £300,000, if tho 
 Province took a million of share capital in exchange lor advances 
 of interest. If then by this course conlidence was restored in the 
 stock to the shareholders and the English share market, we at 
 the sanu) time lessened the risk to ourselves, by giving aid in 
 that shape. The next point was the position in which we 
 propose to ]»lace their guarantee. It was proposed to authorize 
 the (irand Trunk Railway to ])lace a first charge of two millions 
 of money on the road, on the condition that those two millions 
 should be laid out on certain sections of the road, and to that extent 
 the charge or claim of the Province was postponed. The object 
 of this arrangement was that, while they declined increasing the 
 engagements of the Province, they would not stand in the way of 
 the Company's raising funds for those sections of the road which 
 would make it a paying concern. But in enabling the Com] any 
 to raise those two millions, by making them a first charge, it was 
 necessary to consider the position of the Company's bondholders. 
 In addition to the £3,1 ] 1,;')00 of bonds which the Company had 
 received from the Province of Canada, they had borrowed in 
 England £2,145,000, on what were called the Company's bonds, 
 which formed a second charge. If then the Province where to 
 maintain its position still in advance ofthe Company's bondholders, 
 it might appear to those bondholders that they were placed at a great 
 disadvantage. With the view, therefore, of preventing any 
 difficulty of that nature from becoming, berhaps, an insuperable 
 
64 
 
 obstiicU; ft) raising monoy on th«< (Iriuitl Trunk property, it was 
 proposed niter the Company had raised tho two millions, and 
 completed the lino from Strutfonl to St. Thomas, and mado 
 provision (or the payment of interest on the Provincial ^fiiaraiitco 
 for live years, that afli-r that |)erio(l tlu; IVovinee shonid stand on 
 anetjiial lootiuj;- with the Company's hondholders, siiaring with 
 them in sneli dividends as the road would Curiiish when iu full 
 workinj^ order. It was clear that if, at the end of five years, when 
 the roiul was (inished anil in full workin;^ order, it was unalile to 
 pay the interest on its eiu^aL'^euuMits, then the Provincial security 
 Avould he of little vuliu-, unless they used it to foreclos(^ tho 
 mort!Taa;e and cut out other parties, who had advanced their money 
 towards the eonstrnetion of this great enterprise. 1 should bo 
 extremely loath to see the Province of Canada at any future day 
 placed in this ]H)sition. 
 
 Mr. BROWN.— Iliar ! hear ! 
 
 Mr. CAYLEY said, I was goini^ on to remark that I should he 
 sorry that Canada should look forward at any period to foreclosing 
 a mortgage like this, for the pur[H)se of cutting out other parties 
 who had advanced the capital from wliich Canada was to derive a 
 permanent benefit. The Province had laid out five millions of 
 money on other public works in Canada, on the Welland Canal, 
 the St. Lawrence Canals, iVc., and I would ask whether all these 
 Canals were not constructed with the public money with the full 
 knowledge that they would not repay six per cent, of interest, but 
 that they would repay the money tenfold by the opening of our 
 channels of communication, so as to enable us to carry our products 
 to the seaboard, and to impttrt direct from foreign countries. I 
 view the (irand Trunk Railway of Canada, as standing in precisely 
 the same im[)ortaiit and valuable position in regard to our communi- 
 cations, and of the same value to Canada, as the canals, being in some 
 respects superior to them. If, within the last few weeks, even when 
 we felt severely the pressure of pecuniary demands, it had been 
 urged by men of high commercial reputation, that we should go 
 on further with the Canal system, the same arguments which were 
 then used, were applicable with double force to this Grand Trunk 
 Railway scheme, and they should not shut their eyes to the fact, 
 that the Grand Trunk was one of the chief sources of strength on 
 which Canada was to rely for the devclopement of her material 
 wealth. It was a matter of less moment whether Canada got her 
 last pound of flesh, her cent, per cent, of interest in the shape of 
 
65 
 
 money, if only she got a Railway of this imjKJrtance completed, 
 and the nocessury runiificalion.s curried back into tlui interior 
 to enlarge our trudo, and ciiahlo us to carry our staple products to 
 market. I have observed, as every one must have done who Jias 
 heard this subject discussed within the last four ur five weeks, tho 
 strange arguments urgcid in op|H)sition to the construction of the lino 
 through that part of the country whic-h we are told will be wholly 
 unprofitable, that is to say the line of road east of (^Ufbec. Hut I 
 must call the attention of the house to the fiict, that the present 
 Government did not hold itself responsible (or the selection of the 
 line either on the north or tiie south side of the St. Lawrence, 
 although the present (lovernmcnt did hold itself responsible that 
 all engagements entered into in good faith, should be executed in 
 good faith ; and I hold . note in my hand written by the President 
 and Manager of the Grand Trunk Company, to the rej)resentatives 
 in Parliament of that section of tht country through which the lino 
 east of Quebec waslo run, . .^cogni:';ig thee' 'igatjuti of the Company 
 to build that very section of road whu the Government were 
 charged with having proposed (brthe pi : rp ^se of purchasing su])port. 
 When in 1854, an application wo tnadc to Parliair iit to advance tho 
 guarantee to lines of the Grant! Trmkwest of Toronto, an arrange- 
 ment had to be made by the comj)any, with the parties who had 
 claims for the construction of a line cast of Quebec to forego their 
 claim on the guarantee for a while. It must be in the recollection 
 of this house, that the Provincial guarantee of j£3,000perniile,was 
 promised on the line of road fiom Quebec to Trois-Pistoles, and 
 secured by law. To obtain, then, the consent of those parties who 
 had an interest in that part of the country, — to a diversion of this 
 guarantee to a part <»f the road which had no claim to it — it became 
 necessary that the Grand Trunk Company should renew their en- 
 gagements with these gentlemen, and give assurances that while 
 they postponed fo'- : !,rae the construction of the road from Quebec, 
 eastward , they wouid not abandon it altogether. 
 They, therefore, wrote this letter, dated 
 
 Quebec, November 22, 1854. 
 Dear Sir.s, — We beg on behalf of tho Board of the Grand Trunk 
 Railway Company of Canada, to give you this Pledge and Under- 
 taking that the line from St. Thomas to L'Islet will be completed 
 and opened for traffic on or before the 1st January, 1857, and that 
 the line from L'Islet to Riviere Quelle will be completed and opened 
 for traffic on or before the 1st January, 1859. 
 
 : (, 
 
66 
 
 You arc aware that under the powers of our present Bill, we can 
 only get an extension of time for the construction of any portion of 
 the Railway by authority of the Governor in Council, and we 
 hereby authorize you to lodge this letter with the Provincial Secre- 
 tary, in order that it may be a bar to the Company obtaining any 
 extension of time for the portion of the Railway above mentioned 
 beyond the times we have above indicated. 
 
 We are, Dear Sirs, 
 
 Yours, fuitlifully, 
 
 (Signed) JOHN ROSS, 
 
 President. 
 C. P. RONEY, 
 
 Managing Director. 
 
 J. C. Chapais, Esq., M.P.P. 
 
 Jos. Cauchon, Esq., M.P.P. 
 
 Now, here is a distinct pledge that the Company would not ask 
 for an extension of time beyond 1st Jan., 1857 ; to complete the 
 line from St. Thomas to L'Islet, nor beyond 1st Jan. 1859, to com- 
 plete the road to Riviere Ouelle, and it was lodged in the hands of 
 the Provincial Secretary as a bar to any future application for and 
 on the part of the Company. I would ask with what face could the 
 Government now come down and ask for aid to the Company, unless 
 it brought under consideration this pledge, given in the most solemn 
 manner, to carry out the contract entered into to complete the road 
 to Trois-Pistoles. 
 
 Hon. J. S. McDonald — You concealed that from Parliament, 
 when you asked for the £900,000. 
 
 Hon. Mr. CAYLEY replied, that letter was put in my hands 
 no long time back, and certainly not so far back as 1854 or 1855. It 
 brought under the notice of the Government, in the most distinct 
 manner, the claim of that part of the Province for the completion of 
 the engagements entered into by the Company, and it would have 
 been a breach of good faith to ask Parliament for aid and an ex- 
 tension of time if, at the same time, the engagements of the com- 
 pany were not carried out in the clearest and most prompt manner. 
 It is not necessary for me to point out what part of the road 
 would be profitable or unprofitable where distinct engagements had 
 been entered into. No part of it can be profitable till the road be 
 completed, and the trade and resources of the country have had 
 time to become developed. So much for that section of the line 
 east of St. Thomas. With regard to the line in the west, from 
 
67 
 
 Stratford to Sarnia, I do not believe that it will be necessary 
 for mc to go so much into detail. There was no doubt that in making- 
 the line to Sarnia, a communication would be secured which was 
 likely to prove extremely profitable to the company, and in giving^ 
 aid to the company to render the line a profitable one, a promise 
 was given that the expenditure incurred by this country would be 
 redeemed. There were five other lines of road mentioned in the 
 resolutions, and I would state that the Government in inserting 
 those lines, conveyed nothing more than a permission to enable 
 the Grand Trunk Company to aid those lines, if they could come to 
 an arrangement with the parties on whose hands they were. 
 And I would mention that when in London last year, I had an 
 opportunity of meeting several gentlemen who were favourable to 
 a scheme lor the connection of London with St. Mary's by Rail- 
 road, and subsequently a deputation had come down to confer with 
 the Grand Trunk Board here, and ascertain if the Grand Trunk 
 Company would entertain a project for the construction of that line, 
 and they held out their assurances of hearty co-operation, and the 
 certainty that it would be a profitable undertaking. I conceived 
 it to be the duty of the Government to authorize the com- 
 pany to raise money for the construction of any line which would 
 have the effect of making the whole work profitable, for it was the 
 interest of Canada to make the line a paying one. An objection 
 had been raised by the Great Western Company to this connection 
 between London and St. Mary's. And why ? because that com- 
 pany feared that the effect of that connection would be to draw a 
 considerable trade to the Grand Trunk. But if the Grand Trunk 
 was in a position to make that connection, and had a right to do 
 so without a breach of faith, that was the very best argument that 
 could be used to authorize the Grand Trunk to make it. But I 
 do not wish to be misunderstood. I do not believe that the 
 Grand Trunk Company were bound by any engagement with the 
 Great Western. An engagement had been projected in London, but 
 it had been broken off' here ; and no such engagement now existed. 
 I do not propose that the company should have power to break 
 any engagement which really existed olr was supposed to exist, nor to 
 compel it to construct any of the five lines which I have last re- 
 ferred to. I propose merely to grant them permission to raise 
 money for the completion of their actual engagements, or for such 
 other works as might be deemed profitable. Now, with regard to 
 the lines from Cobourg to Petiirboro, from Port Hope to Lindsay, 
 
 and from Prescott to Ottawa, Mr. Napier expressely desired to 
 5# 
 
 
68 
 
 M 
 
 ii ' J 
 
 confer with the gentlemen representing the sections of the country 
 traversed by those lines, and, at his invitation, eighteen of those 
 gentlemen, taken from both sides of the house, met Mr. Napier at 
 his office, and they explained their views as to what step should 
 be taken to put the various lines in good workingorder in connec- 
 tion with the Grand Trunk. . Mr. Napier said that the Company 
 was now lifeless ; that it expected aid from ( nada to revive its 
 energies and give it new life, and if it cr aid be resuscitated it 
 would willingly work in harmony with those lines ; and he asked 
 for some statistics showing the number of miles in working order, 
 the number of miles of country opened up by those roads, and the 
 population, and I believe that those statistics had been furnished 
 to Mr. Napier, but I have not seen them. I am free to admit 
 that the (jlovernmcnt has not met the wishes or expectations of 
 any of the gentlemen connected with those lines, for they expected 
 that if aid was given it would be in a different shape. But the 
 Government considered that it was for the interest of Canada, and 
 of the company, that they should bring forward such a proposition as 
 I now submit to the house. The extent to which I feel my- 
 self warranted in going is solely to give a permissive power to 
 the company to raise money for the purposes I have mentioned. 
 I cannot promise that the company will undertake to form an 
 amalgamation with those lines, though they might look on them 
 with great favour as aids and tributaries. For instance, a very 
 material portion of the profitable returns from the road between 
 Montreal and Brockville arose from the tributary traffic on the 
 Prescott and Ottawa road. With regard to the extension of the road 
 from Arthabaska to Three-Rivers, the first intimation I had that a 
 road in that neighbourhood would be desirable was from Mr. Ross, 
 the Compiany's engineer, who informed me that such a line would 
 be a very valuable aid, as it would take all the country north of the 
 St. Lawrence, and yield a large return ; that the neighbouring 
 townships would contribute je75,000 towards its construction, and 
 for that reason the aid of £125,000 was projwsed. It was because 
 I had every reason to believe, from the information that I had 
 received, that that road would be a source of profit, that I had 
 inserted it in this resolution ; and I would say further, that I had 
 not been urged to do so by a single member of the house. The largest 
 sum proposed to be given to any one work by these resolutions^ 
 was the sum of £800,000 to aid in the construction of the Victoria 
 Bridge. The cost had been estimated at £1,400,000, and £300,000 
 
69 
 
 had been hiid out already. The contractors had agreed to take 
 the unissued series of Bonds in part payment, and tlie rest of the 
 cost would 1)0 defrayed by this £800,000. For myself, I would 
 say, that T am by no means disposed to undervalue the impor- 
 tance of that bridge to complete the line of communication between 
 the sections on the northern side of the river and those on the 
 southern side leading to the seaboard. At present the communi- 
 cation between Montreal and the southern side of the river was 
 exposed to interruptions from ice and frost. At certain seasons of 
 the year that communication was interrupted altogether, and I do 
 not attempt to conceal from myself the great importance of having 
 a certain instead of an uncertain and insecure means of communi- 
 cation establislied. Some allusion had been made by the hon. 
 member for Lambton to his having warned us of this result. I 
 might remind that hon. member that I have stated, that had the 
 demand been made in the first instance, for the Grand Trunk as it 
 was for the Great Western and the Northern P^ailway Companies, 
 it would be to the interest of Canada to accede to the demand, 
 and I say so yet. I say that if Canada could obtain the construc- 
 tion of this line at the cost of half its value, it would be a most 
 profitable expenditure of money. I might also say that looking 
 back on the past, I have nothing to regret in that expression of 
 opinion. I do not yet know why a distinction to the prejudice of 
 the Grand Trunk, had been made between the aid given to it and 
 to the Great Western and Northern Railway Companies. I think 
 a line that traversed the whole extent of Canada was the one 
 best entitled to aid from the Province. Probably in the course of 
 the debate enquiries would be made, and questions put. which 
 might render it necessary for me to address the house again ; and 
 I would now move that the Speaker do leave the chair, and that 
 the house resolve itself into committee to take into consideration 
 certain resolutions to give aid to the Grand Trunk. 
 
 On going into Committee on Grand Trunk Railway. 
 
 Mr. CAYLEY entered at considerable length into the origin and 
 progress of the Grand Trunk, its amalgamation with the various 
 lines then in progress, and the formation of the company contem- 
 plating the completion of works involving an outlay of £9,500,000, 
 comprising share capital to the extent of £4,864,800 ; Bonds of the 
 Company, £2,223,700, and Provincial Bonds, £2,211,500. The 
 original application of this capital was on the St. Lawrence and At- 
 
70 
 
 \M 
 
 i i:l 
 
 it' 
 
 lantic Road,— 14.2 miles at £8,500 per mile, £ 1 ,258,000— Quebec and 
 Richmond, 100 miles, at £6,500 per mile, £650,000 ; Extension to 
 ditto, £50,000, in all £700,000 ; Montreal to Toronto, 345 miles. 
 £3,000,000 ; Trois Pistoles, 153 miles, of which 43 miles, from 
 St. Thomas to Quebec, had been built, £375,000 ; Toronto to Strat- 
 ford, £1,040,000; Victoria Bridge, £1,400,000 ; and contingencies, 
 £142,000. — This was the original scheme. The lion, gentleman 
 then reierred to the arguments used last session to induce the Legis- 
 lature io grant an additional aid of £900,000. From that period to 
 the pr' sent the Company had proceeded with their works. The road 
 was opened to Guelph and Brockville, and there was every [)rospect 
 of its being opened to Stratford in a few weeks, and then the sole 
 portion of the line tc be opened under the arrangements, would be 
 from Brockville to Toronto. By the estimate made to the 1st ol April 
 the cost of completing the road under contract was £316,000 ster- 
 ling. All the unfinished work on the 1st of April was estimated at 
 £316,000. On the aid being granted in the spring of 1855 the 
 government were called upon to take every precaution that no larger 
 amount should be released to the Company than 75 per cent upon 
 the work as it progressed, and care was taken to carry out that pre- 
 caution. • It had been made a cause of complaint against the Gov- 
 ernment and against himself specially, that he had kept too much 
 back. The cost of the work when completed would amount to 
 £7,862,400, while its estimated cost was only £6,677,000, shewing 
 a lossof £1,184,576. This excess of expenditure over the estimated 
 cost of the line was attributable to two causes, first the large amount 
 of interest paid by the Company during the progress of the work 
 and before any returns of traffic could be realized, and secondly to 
 the large disbursements made by the Company on the roads re- 
 ceived over by them, namely, the St. Lawrence and Atlantic and 
 the Atlantic and St. Lawrence to place them in working order, 
 that expenditure is stated in the correspondence of the 30th Jan- 
 uary, 1855, between Sir M( rton Peto and the Directors of the 
 Company at £800,000, and to that extent the fund relied on for 
 caTying on the works under contract was deficient. The hon. 
 member for Lambton stated in the course of his remarks that the 
 shareholders were entitled to sympathy. (Mr. Brown — T said some 
 of them, those who were the. victims of misrepresentation.) 
 
 Mr. CAYLEY. — I adopt the qualification, those who were the 
 victims of misrepresentation — and who were they ? Those who 
 had been dazzled by the brilliant prospects held out in the pros- 
 
 i^^ •■ 
 
71 
 
 pectus — eleven and a half per cent dividend, the minimum rate of 
 profit to be realized from the road. (Mr. Brown and Mr. Holton — 
 And who are responsible for that statement ?) Mr. Cayley — Not 
 the Shareholders who knew nothing of Canada, not the Provincial 
 Agents, Mr. Baring and Mr. Glyn, whose knowledge was derived 
 from others, not Mr.Hincks who was not in England at the time. — 
 (Question, who then ?) Mr. Cayley — Ask the honorable member 
 for Shcrl)rookc. I desire to impute blame to no one, but cer- 
 tainly the shareholders were entitled to sympathy. Who could have 
 advised tlxe purchase of the St. Lawrence and Atlantic section at 
 some humlied and thirty per cent, when the stock was actually 
 worth but forty-five '? Great blame had been attsiched to the 
 scheme of withholding half the stock from sale when the shares 
 were first placed in the market, but who would now say what 
 would have been the result had the stock been all placed in the 
 market at once. Perhaps the whole scheme involving the outlay 
 of nine and a half millions would have fiillen to the ground. One 
 thing however was clear that after the announcement in the Pros- 
 pectus that one half of the stock would be reserved from sale, it 
 was not competent for the Provisional Directors to extend the sales 
 upon the plea that buyers were to be found for the whole slock. 
 As for the English contractors, the correspondence and the several 
 modifications of the contracts between them and tlio Company 
 clearly shewed that they had at all times been ready to fulfill their 
 part of the engagements, and that it was th.3 Company and not the 
 Contractors who had from time to time sought tiiose modifications, 
 driven to that course by the absorption of their means through the 
 causes already referred to. According to the returns which I 
 have obtained, I find that the Company had on hand " B " shares 
 unsaleable to the amount of jE 1,300,000, and " B " Bonds of 
 je4-00,000 worth about 85 p3r cent. It appeared that the Company 
 had been obliged from time to time to ask to modify their engage- 
 ments with the Contractors, so as to enable them to meet their en- 
 gagements. The Company had been obliged to apply their capital to 
 roads in which the English Contractors had no interest, and had 
 been thus deprived of the meanstomeettheir engagements with the 
 Contractors, and consequently had to ask them to make their terms 
 more easy to enable the Company to meet them. At the pre- 
 sent time the Company were imable to meet their interest on the 
 Provincial Bonds> A communication had just been received from 
 the English Contractors, tendering to surrender to the Company all 
 
12 
 
 I 
 
 m 
 
 their contracts upon condition that the Company paid for the work 
 done, the price which might be put upon it by fair vahiation of com- 
 petent engineers. They wished to give up all connection with the 
 Canadian work upon the value being ascertained, and the amount 
 which their work was worth, paid tln.ju, 
 
 Mr. BROWN inquired who woul 1 puy them I 
 
 Mr. CaYLEY replied, the ComjiMuy. f'hey say fcv the Com- 
 pany, " You tell us that our works ace tuo expensive — vv are will- 
 ing to be released from tbt'm upcu jxiyiricnt vi tb'. ir .estimated 
 value." It appears tliou that all tiie i >, )ney to be recidvcd from the 
 guarantee would be ubsorbed in finishing the road from Stratford to 
 St. Thomas. AH the amounts due to the Company on share ca- 
 pital, every instalment bein<r paid, would b=> altsijrbed, and the 
 Company threw themselvos upon the GovernuienV. The proposi- 
 tion of the Government was, to outhorize the . mpany to raise, by 
 preferential bonds, a sum oi' money n- cessary to complete the 
 Vvorks in progress. To enable the Company to raise money, the 
 " B " shaies undisposed would he received on account of interest 
 by the Province, for it appears t»i me that one great cause of the 
 deprecijition of those shares arose from the fact that the works 
 were unfinished, there was no tortninus in the West, no bridge at 
 Montreal, and no link from Toronto to Brockville, and therefore 
 the line was totally unproductive. The hon. gentleman then re- 
 ferred to several great works which had been undertaken by pri- 
 vate capital, which had all proved ruinous to their projectors, but 
 ultimately when national aid was given, had provi^d most profita- 
 ble works. The New River Canal to sujjply London with water, 
 was imdertaken by Sir Hugh Middleton, who was ruined in the 
 enterprise. The Bridgwater Canal, now one of the most profitable 
 works in England, absorbed the whole of the large fortune of the 
 Earl of Bridgwater and the attempt of Mr. Roscoe to drain the ex- 
 tensive marshes between Liverpool and Manchester, also proved 
 ruinous until taken in hand by another Company. These enter- 
 prizes were all too extensive to be undertaken by private capital* 
 so in like manner had this Grand Trunk enterprise been undertaken 
 by private Capitalists in Canada only, it would in all probability 
 have ruined all who took part in it. How then did they stand in rela- 
 tion to it ? Were they to be indifferent to its completion ? Was 
 it a matter of no moment to them whether ii was finished or noti 
 They could not be indiflferent to it, because it afifected the interests 
 of Canada most materially to have this work completed at almost 
 
73 
 
 any cost. It was worth a struggle to secure the completion of a 
 road which would pay ten times the amount which Canada had 
 been called upon to pay in opening up its extreme length from 
 East to West. The hon. member here referred at some length to 
 the remarks of the hon. member for Glengarry, and the hon. mem,- 
 ber for Lambton, when the question was under consideration a few 
 days before. He contended that the money formerly entrusted to 
 the Government by this House to be applied to this work had been 
 carefully husbanded, and that was the best pledge which they 
 could give that if more money was entrusted to them it would 
 be equally well taken care of. He concluded by quoting the 
 following from the correspondence of the hon. Wm. Napier, the 
 agent of the English shareholders. " Looking forward, however, 
 with confidence to brighter prospects within the next two years, I 
 venture to express an opinion that the sum of £2,000,000 should be 
 the maximum amount permitted to be raised by the Company by 
 preferential Bonds, for all the purposes of present engagements (by 
 arrangements with and under the control of the Government) and 
 including the extra expenses, and the works and assistance addi- 
 tionnally suggested by the Government shall, in the case of the 
 additional Lines of Railway detailed in your memorandum of the 
 6th instant, give to the company every assistance in their power, 
 with the various Municipalities interested, and who shall be ready 
 to afford their aid." 
 
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 TORONTO :— PRINTED BY S. DERBISHIRE & G. DESBARATS, 
 Printer to the dueen's Most Excellent Majesty.