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Maps, plates, charts, etc., may be filmed at different reduction ratios. Those too large to be entirely included in one exposure are filmed beginning in the upper left hand corner, left to right and top to bottom, as inany frames as required. The following diagrams illustrate the method: Les cartes, planches, tableaux, etc., peuvent dtre filmds d des taux de reduction diffdrents. Lorsque le document est trop grand pour §tre reproduit tn un seul clich6, il est film6 d partir de Tangle sup^rieur gauche, de gauche d droite, et de haut en bas, en prenant le nombre d'images n^cessaire. (.es diagrammes suivants illustrent la m^thode 1 2 3 32X 1 2 3 4 5 6 880C/8 '^?}..A^^ t5-r:)(V f IN CHANCERY. f> CAMPBELL ' vs. The northern Railway company OF Canada, ■ ■--'. AND -■/■^ \ THE HAMILTON & NORTH-WESTERN Railway Company. IfEARD BEFORE THE HON. V, C. BLAKE AT TORONTO, ON FRIDA y, igth .SEPTEMBER, iSjg. JAMES MACLENNAN, (^). C, ,t ■ Counsel for Phi nt iff. E. HLAKK, (J.C, IlLXTOR CAMKKON, Q.C, AND G. D. liOULTON, Counsel for Defendants. 1880. A. S. \V<10I)HUKN, I'KIMKR, F.I.GIN STREEI', OTTAWA. -A ^ IN CHANCERY. CAMPBELL vs. The northern railway company of canada, AND The HAMILTON & NORTH-WESTERN RAILWAY COMPANY. HEARD BEFORE THE HON, V, C. BLAKE A T TOROXTO, OiV FRJDA F, igth SEPTEMBER, iSyg. JAMES MACLENNAN, Q. C, Counsel for Plain/iff. E. BLAKE, Q.C., HECTOR CAMKkON, Q.C. AND G. D. BOULTON, Counsel for Defendants, 1880. A. S. WOODBURN, PRINTER, ELGIN STREET, OTTAWA. ^ir (Elianffn). CAMPBELL VS. NOKTIIERN RAILWAY COMPANY, AND HAMILTOJS & NORTH-WESTERN RAILWAY COMPANY. Heard before the Hen. V. C. Blake at Toronto, on Friday, 19th September, 1879. Counsel for Plaintiff—] \^\yja Maclennan, Q.C. Cotmsel for Defendants—U^^^s. E. Blake, Q.C, Hector Cam- eron, Q.C, and G. D. Boulton. BILL OF COMPLAINT OF CHARLES JAMES CAMPBELL. Between CHARI,ES JAMES CAMPBELL, on behalf of himself and all the other Shareholders of the Northern Railway Company of Canada. Plaintiff, and THE NORTHERN RAILWAY COMPANY OF CANADA AND THE HAMILTON c't NORTH- WESTERN RAILWAY COMPANY. Defendants. City- OF Toronto, | To the Honorable the Judges of the Court-of I • Chancery. The Bill of Complaint of Charles James Campbell, of the City of Toronto, in the County of York, Flstiuire, who sues as well on his own behalfas on behalf of all the Shareholders of the Northern Railway Company of Canada, Sheweth as follows : I. The defendants, the Northern Railway Company of Canada, are* a Railway Company, incorporated by the Legislature of the late Pro- vince of Canada, with power to construct, maintain, use and operate a i 21264 1 1 m h ! railway extending from the City of Toronto to the Towns of Barrie and CoHingwood, and also certain branch lines of railway. 2. In the exercise of their corporate powers and franchise, the defendants the Northern Railway Company constructed their, said rail- way, and for many years they have been running and operating tne same and for that purpose have acquired, and now possess and are using, a large (}uantity of rolling stock. 3. The defendants, the Hamilton & North-Western Railway Com- pany are a railway company incorporated by the Legislature of the Province of Ontario, with power to construct, u.stj, maintain and operate another and a different railway, extending from the city of Hamilton to the same towns of Barrie and CoHingwood, and also -ertain branch railways. 4. In the exercise of their corporate powers and franchises, the de- fendants the Hamilton & North-Western Railway Company have con- structed their said railway, and have for some time been running and operating the same, and have for that purpose acquired, and now possess and are using a large quantity of rolling stock. 5. The said two railway lines are rival and competing lines, the chief part of the traffic of both lines being derived from the same localities. 6. The plaintiff is a shareholder in the said Northern Railway Company, and he is the owner, in his own right and as trustee for other persons, of about one-fourth of all the shares of the capital stock of the said Company, and the plaintiff is also a Director of the said Company. 7. The corporators of the said Northern Railway Company consist of holders of shares of the capital stock of the said Company, and the shareholders are very numerous, and it would be impossible to make them parties to this suit. 8. The affairs of the said Northern Railway Company are managed by a Board of Directors, elected annually. 9. The corporators of the said the Hamilton & North-Western Railway Company consist of the holders of shares of the capital stock of the last mentioned Company, and its affairs are managed by a Board of Directors. 10. Negotiations have lately taken place between the said two companies for the purpose of combining the rolling stock, plant and material of the said two companies, and of working and operating both the said railway lines, and exercising the franchises thereof, under the joint management of both companies, for a period of twenty-one years, and the defendants intend immediately to enter into an agreement for that purpose, and will, unless restrained by the order and injunction of this Honorable Court, carry the said intended agreement into effect. 11. The said Company have no power to enter into the said intended agreement, and such an agreement would be illegal and ultra vires of both the said Companies. 1 2. The plaintiff is opposed to the said intended agreement, ar^ has resisted the same in every way in his power, but the defendants intend to proceed to carry the same into effect. The Plaintiff Therefore Prays as Follows: 1. That it may be declared that the said intended agree- ment between the said Companies is illegal and ultra vires. 2. That the Defendants may be restrained by the order and injunction of this Honorable Court from entering into said intended agreement, or any other like agreement, and from carrying the same into effect. 3. That for the purposes aforf"aid all proper directions may be given and accounts taken. 4. And that the plaintiff may have such further and other relief as to your Lordships may seem meet. And the plaintiff will ever pray. JAMES MACLENNAN. Examined, N. HOLMSTEAD, Clerk of Record and Writs. . (6) EVIDENCE FOR PLAINTIFF. ! ! C. J. Campbell, Plaintiff, having been duly sworn and examined, testified as follows : By Mr. Madennan. Q. You have been the holder of a quantity of stock of the Northern Railway for a number of years, I believe ? A. I have. Q. And you obained that from two persons — Mr. Roberts and Mr. Beatty? A. Yes. Q. Sometime in what years ? A. 1874. Q. What was the arrangement at the first with regard to the shares ? A. The arrangement was that I should have half the stock. Q. Was that subject to any condition ? A. Subject to the con- dition that within a certain time the stock had been Q. Well, at the present time, Mr. Campbell, these shares are still standing ir your own name, partly as trustee and partly in your own private right ? A. Yes. Q. What proportion of these shares is still your own private pro- perty ? A. With regard to Mr. Roberts' stock, I hold one-half of it subject to an arrangement with another party, who has a right to the one-half of my half; and with regard to Mr. Beatty's stock, I have entered into an arrangement with him by which, at the expiration of a certain time, I am still entitled to one-half of the whole of that stock. Q. Is letter marked " F " the letter by which that appears, dated 3rd March, 1879? A. Yes. Q. And did you assent to that ? A. I assented to that. Q. Is that the arrangement between you at the present moment ? A. Yes, that is the arrangement. Q. I think you have also been a Director in the Northern Railway for some time ? A. I have. Q. And in June last did anything take place with reference to some proposed agreement with any other company ? A. Yes, an agreement was brought before the Board meeting. Q. Was that in May or June ? A. That was in June. Q. Do you recollect the date ? A. I think the 7th of June ; I am not i)o.sitive. Q. The 22nd of May ai)j)ears to be the first time ? A. I thought it was in June ; I presume it was the of 22nd May ; by referrinj^ to the books." Q. Were you present at that meeting ? A. Yes, I was present at the meeting. Q. And what was brought before the meeting with reference to that agreement ? A. It was read ; I don't know that it was read in full, but the most of it was read by the Oeneral Manager. Q. Is exhibit "G" a copy of it ? A. I presume so. Q. Where did you get that ? A. I received it from the Secretary, I think ; that is the one I received from the Secretary. Q. At that meeting it was read, and by whom was it brought before the Board ? A. It was brought before the Board by the Mana- ging Director. Q. Who was that ? A. Mr. Cumberland. Q. For what purpose ? What did he propccc to do with reference to it ? A. For the purpose of getting authority to bring it before a meeting to be called— a meeting of the Company to be called to have it ratified. Q. What was intended to be done with that document at the time ? What was the purpose for which it was brought before the Board ? A. To confirm it, I presume. Q. You mean to be carried into effect by the Company, as an agreement which it was desired the Company should enter into ? A. I fancy so. Q. What was done at thatmeeting with reference to it ? Was the document adopted at that meeting ? A. I am not certain whether it was ; I don't think it was. Q. It was understood each member should have a copy to read over? A. I didn't receive my copy at the time, but it was mailed to me. Q. And you got a copy of it subsequently ? A. Yes. Q. Well, when was the next meeting .-> A. Monday, the 26th of 8 Q. Were you present at that meeting ? A. No. Q. There is a memorandum in the minute of the meeting, saying : At this meeting the Mano-^ing Director further explained the object of the agreement with the Hamilton and North-Western Railway, and the Board discussed it fully ; and the President read a letter from C. J. Campbell, objecting to the Board meeting without further consideration and without wider publicity being given to the arrangement. Had you written such a letter as that ? A I wrote a letter to the President to that affect. Q. But you were yourself not present ? A. No. Q. And at that meeting a resolution was passed adopting the agreement, as appears by the minute of the Board signed by the Chair- man ? A. Yes. Q. You recognize the Chairman's signature ? A. Yes. Mr. Maclennan here reads a number of resolutions from the minute book. Q. Were you acquainted with this buying of the Hamilton and North-Western Railway ? And are you with the line of it ? A. I have never been ovei .t ; I have a general idea of it. Q. You know the points to which it runs ? The line of communi- , cation, and so on ? A. Some of them, yes. Q. How does that railway stand with reference to the Northern Railway in point of competition ? A. I suppose it competes wiih the Northern from Biirrie. Q. Any other points ? A. From Collingwood. Q. Those are the two common points then, of the railway from which they derive their trafific ? A. Yes. Q. When the Hamilton and North-Western was jjrojected, did «;the Northern take any steps with reference to it ? A. Yes ; I believe ?.they opposed the by-laws in the several municipalities. Q. For what purpose ? A. For the purpose of preventing the Hamilton and North-Western ge'.ting those bonuses to build their read. Q. For the purpose of preventing its being constructed ? A. I presume so. Q. Since the time you have been a Director, how 'las the Hamil- ton and North-Western been looked upon by your Company ? A. As an opponent to the Northern. Q. And has it been so in your opinion ? A. Undoubtedly it was • an opponent to the Northern. A. enl wi unl shj vail re>^l yoi dej *— ' *™"" l" ^' .M.. the from g the read. A. I it was • Cro$s-Examined by Mr. Blake, Q. Did you mention this stock 10 and you know pretty well what their notions were. Now did they think it had any value ? A. They thqflght that up to that time they had been inii)roperly treated by the Railway Company, and that if the road had been properly and economically managed, the stock wDuld have been of value, and they hoped that through my instrumentality it might be made valuable. Q. Well, there was a line of operations to be undertaken by you then as a condition of getting this stock ? A. No, there was no line of operations. Q. But you prol)ably had some conversations as well as the letters ? A. Yes, with Mr. Roberts. Q. And you probably represented that you would make an effort to make the stock valuable ? A. Very likely. Q. How, pray ? A. Well, I can't remember that I expressed any opinion as to how it was to be done. Q. Was it by firing a shot in Chancery or Parliament, or by making yourself generally uncomfortable and embarrassing to the bond- holders ? Let us get to the bottom of it ? A. By legislation, probably. Q. What kind of legislation ? A. In a legitimate way. Q. What kind of legislation ? A. I cannot express any kind. Q. Legislation putting up the stock, and putting down the bonds? or legislation under which you might become a director ? A. No I never adopted that line of Q. Well, what kind of legislation then ? A. Well the most recent legislation. Q. No, but what kind of legislation was spoken of between your despondent stockholders by which this stoi r^, which had no value at that time, might become a sort of gold mine all at once ? .\. I don't know that any particular line of legislation was spoken of. » Q. Well, what line of legislation was thought of ? What did you think you could do in or:Ier to make this stock valuable ? A. What they thought I cannot say. ; Q. Why — you ? A. What 1 thought was that it was placed in my hands, and I was allowed to adopt such a policy as I thought was best. Q. And when you got hold of it in lliis way — partly in trust, and partly for your own benefit, not paying anything, and not undertaking '..! . tt to do anything in particular - you still had some vague notion that yoU would do something to make it wortli something ? A. Yes. Q. And what was it you were going to do ? A. Sometime after I got possession of the stock, Mr. Roberts thought it would be an advantage to him, and probably to myself if I got a seat upon the Board. Q. I am speaking of at the time ? A. I don*t know that Mr. Roberts Q. I am not talking about what Mr. Roberts said. I am asking about yourself, and what you thought ? A. I had no i)arti"cular Q. No scheme or })lan of ojieration in view, but you thought if you got hold of forty-two thousand odd {)ounds sterling of stock some- thing or other could be done to give it a value ? A. Certainly. Q. But what that was, you didn't know . You were in point of fiict waiting for something to turn up ? .\. Not at that particlar time. Q. Well did something turn up pretty soon afterwards, — was there a bill in chancery filed, or had it been filed before? You recol- lect the bill against Mr. Cumberland, charging him with all sorts of enormities Him and the Board, and everybody else? A. I was not a party to that bill Q. You recollect that then ? A. Yes. Q. Was that one of the modes by which you thought somfhing could be accomplished giving the stock a value ? A. Probably. 1 cannot say. ^ Q. But you think it might have been one of the modes ? A. It might have been. . Q. To fire a shot in Chancery ? A. Yes. , "'' Q. Well then, what kind of legislation had you thought of ? A. The legislation that we attempted, was to get greater strength at the Board. ,■ ,■' ^^ . Q. That was tke only legislation you ever attemi)ted ? A. Well, that was the principal legislation. ' ' s "■■-■■■■"■■■■■-'''■ '^ "^ Q. There was some other then, was chere? A. I c;in't remember at the moment what the legislation was that we were seeking for, but I believe there was some other. Q. But what you can't remember? A. No, 12 Q. But there was- not any very definite and accurate plan of opera- tions then at this time? \. Perhaps not. Q. I know " perhaps not," but it is so, isn't it ? A. It may be so, yes. Q, It is so ? A. Yes, Q. Was it more to legislation or to the Court of Chancery that you were trusting to give it value when you brought over this forty-two thou- sand pounds of property ? A. Can't say which it was; I took no action in Chancery. Q. I didn't say you did. Was it legislation more than the Court of Chancery then ? A. If the action of those ])arties who filed the bill in Chancery had been successful, we might have been benefited by it. Q. You thought you might have at the time ? A. Yes. Q. In fact, you were not opposing that proceeding very strongly? A. No; I don't know that I did o])i)Ose it very strongly. Q. Or at all ? A. Yes, I did ; I op|)Osed the filing the bill. Q. You thought legislation, then, was the proper mode? A. I didn't ; I don't know that I did at that time, but I opposed the filing the bill ; at all events, I didn't concur in the filing the bill ; I was a party to the preparation of a bill, but I never finally gave my consent. Q. You were a party to the preparation of a bill in Chancery, but you never finally gave your consent to the filing of it ? A. No. Q. Possibly you thought it was too strong, or perhaps too weak ? A. Perhaps. Q. Which was it? Did you think the bill too strong or too weak ? A. I may have thought it was too strong. Q. So you would not go (juile that far ? A. Yes. Q. And then you placed your dependence in Parliament? A. Yes, that was the result. ^ ' . Q. So that without the Parliamentary action which should give you greater strc,'ngth at the Hoard or enable you to control the road, you thought yourself the stock would be of no value ? .\. Well, I may say that a bill was agreed on between myself and other parties, and opi)osed by the Northern Railway represented by Mr. Cumberland, and we went t(» Ottawa with that bill, and if that bill ha!jstructive attempt at legislation and bills in Chancery, and so forth, might render it worth their while you un- derstand ? A. I understand perfectly well, yes. Q. Well, answer it ? A. I thought, and have always thought, that it would be no difficult matter for the Northern Railway to make such an jvrangement with the shareholders as would bring their stock into some of the classes, or give sonic sort of security, which in the end would . 23 . I ing our id it in un- >uld pay some interest upon it, and make it of some value ; I didn't expect that they would put us on the same rank with the first preference bonds, but that we might be placed in such a position that after a while the road would be able to pay interest upon a certain kind of security. Q. That was your thought as to why the war was being carried on ? A. Certainly, to make the stock valuable. Q. By the Northern Railway agreeing to put it up ? You didn't want to be put up in the top story, but a reasonable distance above ground ? A. To give what I really believe they could do if they chose to make the security bear interest in some shaj)e, or in some position. Q. And that is what you want ? A. Yes. Q. And that is the real meaning of all these bills ahd legislation ? A. Certainly. Q. They are levers to that end ? A. Yes, certainly. Q. They are the means by which you hope to persuade the Com- pany into recognizing the stock, more than they do now ? A. Certainly, and I would like to say that Mr. Roberts felt himself very much ag- grieved for many years with regard to his position in the stock. That he paid dollar for dollar for it, and that he had always been treated unfairly. By Mr. Cameron. Q. Did you ever object, Mr. Campbell, while you have been on the Board, n any formal way, lo the extravagance you complained of so n-^uch ? A. I didn't. Q. How long have you been on the Board ? A. I can't say how long exactly. Q. Four or five years ? A. About that time. Q. Have you attended pretty regularly ? A. Yes, pretty regularly. Q. And without ever entering any protest or objection to the ex- travagance you complained of? A. I never made any protest. Q. Have you used or attempted to use legislation as one of the levers Mr. Blake has referred to ? A. I attempted last session to get a bill passed. Q. For the same purpo!*e? A. For the purpose of getting in- creased strength on the Board. Q, To purchase your stock ? A. I don't say that. Q. Weil, for what purpose was it done ? A. For the purpose of gHu n H ting such assistance on the Board as we could to get more economical management, and make the stock valuable. Q. Did the other party to whom you had given a half of this Roberts stock co-operate with you in that attempted legislation ? A. He did. Q. And in the same way is he co-o]Derating in this litigation ? A. He took an active part in the other. Q. He has taken a more active part in the legislation than he has in this litigation ? A. He took an active part. Q. Was there any offer made at that tin^ to withdraw the at- tempted legislation for certain pecuniary considerations ? A. Not that I am aware of. Q. Not made by you ? A. No. Q. Nor with your knowledge or authority ? A. No. Q. Did you take part in the former litigation in this Court with reference to the affairs of the Company ? A. No. Q. Did your colleague do so ? A. Not that I am aware of. Q. I suppose you are aware with reference to the increase of ex- penses, the General Manager has no power to expend any money without the consent of the joint committee ? A. Yes. Q. Why did you think there would be such an increase in the expense of the management ? — an increase under the new arrangement ? A. Because they have power under that arrangement to do so. Q. You meant that the joint committee have ? A. Yes. Q. You mean the joint committee will be weaker to restrain the supposed extravagance of the (General Manager than the Northern Railway Board now is ? A. No, I don't think it would be any weaker. Q. If not r;o, why would the expense be increased ? A. Cumber- land appoints the Executive Committee which controls the Board, and I suppose he does as he pleases. Q. I thought it was the two Boards who appointed the Executive Committee ? A. Each Board appoints its own Executive Committee. Q. How does Mr. Cumberland appoiht them ? A. He appoints every time his own Executive Committee. Q. Do the two Boards mean Mr. Cumberland ? A, The two Boards, I fancy, in reality mean Mr. Cumberland. St 111 tive tee. ints two «5 Q. It is your fancy that the two Boards mean Mr. Cumberland that leads you to object to this new arrangement ? A. No, it is not my fancy, it is the power that is conferred upon this committee by this instrument — this agreement and my fear that under that in some way or other, the expenses will be increased, and it is to be seen whether they will or will not be. Q. With prudent management they would be diminished by this joint arrangement ? A. They would be diminished. Q. Bui /^rii/ia flick, one wijuld suppose that the expenses would be diminished ? A. 'I'hey should be. By Mr. Madennan. Q. Did I understand you to say thnt the shareholders have only one Director on the Hoard ? A. Only one Director on the Hoard. Q. Since when ? A. 1 can't say since when ; there is an Act of Parliament passed. Q. And then main- years ago Parliament gave the bondholders voting powers ? A. Voting powers. Q. As they exceeded the slvireholders in number they swamped them ? A. Of course. Q. So that the management has been in the hands of the bond- holders ? A. Entirely. Q. And this war that you speak of was that between the shnre- holders and the bondholders ? A. Between the shareholders and the bondholders. Q. The interest of the bondholders is just that of creditors ? \. Yes. Q. Do you know if their interest has been pain regularly ? A. I believe it has. Although 1 am told that the interest has nf)t been paid on the third class bonds. I think Mr. Cameron made that statement in Parliament before the railway committee. Q. Hut you understood differently, did you ? A. I tUjji't under stand differently. 1 understood that there had been some difficulty in raising the money t(j pay it, and that they had to fmance to do so. Q. Hut the interest has been piiid all along, hasn't it, upon all the bonds ? A. The interest has been paid all along upon the bonds. Q. Until a late period ? A. I think till lately. Q. And yet these same bondholders have been man;igin|^ the company ? A. Yes, k^-^.,..4^Myife&iMM 26 Q. And what view did the shareholders take of the management, the nianagenient appointed, in fiict, by the bondholders ? For whose interest was it managed ? A. In the interest of bondholders. Q. To the detriment of the shareholders ? A. Yes. Q. And as the holder of these shares, wliat attitude have you taken with reference to that ciuestion ? A. 1 have tried to get increas- ed influence at the Board. Q. You have endeavored to get increased influence at the Board in order to give the shareholders a greater share in the management ? A. Yes. Q. As matters stand, the iiondholders and directors elected by them have had no interest whatever, except as to j)ayment of their interest in the management of the road ? .V. It is their interest Q. They have no interest whatever in endeavoring to make a dividend for the shares ? A. None whatever. The above and the preceding i)ages contain the evidence of the Plaintiff herein, as it purports to : (Signed,) JAMES I. PARKES, Oficial Shorthand Repoi fa: Toronto, September 22nd, 1879. I t, 5e tf )U IS- rd t? by L'ir : a be er. JUDGMENT OF THE COURT. ■ DELIVERED BY VICE-CHANCELLOR BLAKE. It was urj^^ed by i\[r, Maclennan, that the power of the Northern Railway (.!oini)any to deal with other lines of Railways was controlled by the second section of 41 Vic, c. 26, which he contended should be read as restricting the rij^hts of the defendants not only as to the arrangements dealt with by this Act, but as to all matters passed upon by earlier enactments. 'I'hi^ argument is ijascd on the clause " Pro- vided also that the power hereby granted shall not extend to the right of making suc-h agreements with resjject to any <:ompeting lines of railways." 1 think, however, it is perfectly clear that the restriction here found cannot be extended beyond the power granted by the Act, and if outside of this statute the railway has the power which it is con- tended has been given to i^ this clause does not deprive it of the right to exercise it. 'This is made the more apparent wh.n we consider that certain powers are awarded to the Company by this clause, not thereto- fore possessed by it, as 10 tramways and as to purch.ise, in resped of which the restriction may be intended, and thus force may be given to this limitation of jjower without depriving the Company of i)Owers which it enjoyed when this Act was passed. It is only by imj)lication that this clause could be hold to operate as contended for by the plaintiff, and it is plain upon the authorities that the language of the Act is not wide enough to operate as a rej)eal of the statutes on which the defend- ants depend as a warrant for the agreement which the bill attacks. — Maxwell on statutes, j). 143, et seij ; lUrkenhead v. Laird, 4 Def M. & (i., 742. An argument m.iy, however, be baseil on this enactment, that, as here, the jiower granted shall not extend to any comj)eting lines of railway, is esj)ecially mentioned in these enactments, where this restrilant and material of the said two companies, and of working and operating both the said railway lines, and exercising the franchises thereof under the joint mAriagement of both companies for a period of twenty-one years ; and the defendants intend immediately to enter into an agreement for that purpose, and will, unless restrained by the order and injunction of the Honorable Court, carry the said intended agree- ment into effect."- The objection here taken is to the "combining the rolling stock, plant, &c," and to the " working and operating both the said .ailway lines and exercising the functions thereof, under ihe joint management of both companies." By clause one of this agreement it is agreed that " the working of the railways shall be carried on upon the terms and conditions, and according to the tenor of this agreement, JO f' under the direction and superintendence of the joint Executive Com- mittee, for the appointment of which provision is hereinafter made, and according to such rules, regulations p.nd resolutions as shall from time to time be made by the Executive Committee, and shall be confirmed by the Board of Directors of both Companies, or not disallowed by the Board of Directors of either company, or in case of disallowance by the Board of Directors of one only of the companies shall be confirm- ed on reference to a referee as hereinafter provided." By clause two it is further agreed that " for the purposes of such working as aforesaid, all the locomotives and other rolling stock, vessels, equipment, and plant, and all the stoves, tools and other moveable property of the Northern Company, and of the North- Western Company, shall through- out the said term be used by both companies, and shall accordingl)- on the date hereinafter fixed for the coming into operation of this agree- ment be placed, and throughout the said term shall remain at the disposition of the two companies and subject to the control of the Executive Committee as hereinafter provided." The agreement then proceeds to provide for an inventory being made of the rolling stock, etc., and as to the dealing with the same, and as to the stations, sidings, etc., and as to the payment of working expenses, etc., and that working expenses shall include (a) all rates, taxes, insurance and com- pensation for accidents, losses and damages. It provides • further for the percentage of net earnings to be received by each company, and for the appointment of the Executive Committee by the Board of each of the railways. Clause 13 thus defines the power of the Executive Committee, '* The Executive Committee for the time being shall have power to make by-laws, not inconsistent with the provisions of this agreement for the regulation of their meetings and business, including the appoint- ment of sub-committees, the fixing the quorum necessary for the transaction of business, the mode of giving notices, and all other matters which may be necessary or expedient for the due and conveni- ent conduct of their business ; but all such business shall, before becoming operative, require to be confirmed by the Board of Directors of the companies respectively, or in case of difference between the Boards by the referee, as herein provided, with reference to rules, regulations or resolutions of the Executive Committee." Clause 19 further provides that "The Executive Committee shall have and exercise all powers and functions which shall be required for p? enabling them effectually to work in accordance with rules, regulations and resolutions to be from time to time made by them, the railways and properties submitted under the provisions of this agreement to their control, and for the purposes aforesaid, shall be entitled and are author- ized to act as agents for and in the name of the companies respectively, and may as occasion requires, or as may be expedient, treat the said railways and properties as being worked or used by either or both of the said companies. Provided always, that no rule, regulation, or resolution of the Executive Committee shall be deemed to be of any validity, or shall be acted upon unless and until the same shall be con- firmed by the Board of Directors of each of the companies, or unless or until with reference to each of the companies a minute of such rule, regulation or resolution shall have been given or forwarded to the Secretary or other proper officer, and ten days shall have elapsed from tlie day on which the same was so given or forwarded without such rule, regulation or resolution being disallowed by the Board of Direct- ors of such company, in which case the rule, regulation or resolution shall have been received and have been confirmed by such Board of Directors, or, unless and until in case of disallowance by the Board of Directors of one only of the companies the rule, regulation or resolution disallowed, shall have been referred to and confirmed by the Referee hereinafter provided for * * * * Provided also that all engagements and liabilities entered into or incurred by the Executive Committee in the performance of the powers and functions hereby intrusted to them, or by reason of the working shall, as between the Northern Company and the North-Western Company and without pre- judice to their being provided for out of the gross earnings be deemed and taken to be joint engagements and liabilities of both companies for the performance and satisfaction of which both companies shall be equally answerable, but save as aforesaid nothing in this agreement shall extend to make either of the companies responsible or liable for any of the present ar future debts or liabilities of the other of them." By clause 20 the Executive Committee shall direct and control all receipts and disbursements in respect of the working arranged for by this agreement. Provision is made for the appointment of a referee to decide any matters referred by the Board of Directors of either of the companies, or other differences or disputes which may arise, whose decision is to be final and conclusive. The last clause provides the v. ii / .. i calling of meetings to ratify the agreement in pursuance of the statutes in that behalf, failing which the agreement was to he of no effect. The " traffic arrangements " clause of the railway act is very wide. It applies to " any railway company," it permits the railway companies to make agreements and arrangements for the regulation and inter- change of traffic passing to and from the railways and for the working of the traffic over the said railways respectively, or for either of these objects separately, and for the division and appointment of tolls, rates and charges in respect of such traffic and generally in relation to the management and working of the railways. ** and appoint " a joint committee or committees for the better carrying into effect any such agreement or arrangement with such powers and functions as may be considered necessary or expedient. The clauses in the Act incorporat- ing the debentures and the amendments thereto enable them to enter into any arrangement with any other railway company or companies for the working of their railways and for the leasing and hiring any locomo- tives and generally to make any agreement or agreements with any ether company touching the use of the railway and rolling stock of another railway, and touching any other service to be rendered, and the compensation therefor. It was argued by the learned counsel for the plaintiff that these clauses did not in so many words sanction in all its details the arrange- ment made between the companies, and that on this ground it was invalid. In Winch v. Birkenhead, 5 I). & G. and v. 579, much relied on by the plaintiffs, the Vice-Chancellor granted the injunction on the following conclusion at which he had arrived. " It appears to mc, although the Birkenhead Company are not at all bonnd to be carriers, that what is called working the line is a duty that is imposed by the Act of Parliament upon them ; and it appears to me, therefore, that the agreement is that they shall part with certain statutory powers which they have no authority to part with, and moreover, that they are to part with them to a body, who by their constitution cannot accept them." The case of Hare v. The London & N. W. Railway Company, 2 I. & W. 80, in some respects closely resembles the present. Then there was an arrangement between two main lines of railway, the one called the West Coast, the other the East Coast, both starting at Lon- 33 don and terminating at Edinburgh. There, as here, on the argument, it was urged that " it is imjjossible to read the agreement without seeing that it constitutes a (juasi partnershij), and is not a mere arrange- ment for through traffic, such as is authorized by the Railway Art." " Through traffic means only traffic carried along a series of lines in continuation of one another ; it follows, therefore, that the agreement • is ultra vires and illegal. The East route and the West route have not a mile of railway in conimon It is the same thing to buy off a com|)eting rail\va\- ; and thai is what this agreement is de- signed to du." l*\)r the defence it was there as here argued : " Railway companies are carriers, luul :ire at liberty to conduct their business as other carriers ma)', except so far as they ire subjected to e\i)ress pro- hibition by the Legislature. There is nothing in any of the Acts to say that a Mailway C'om|)an\' may not make .such arrangements as they consider most advantageous, to enable them to make profits in their own pro])er business as carriers, and this is all that has been done. . 'I'he true priiuii)le is, that a Company may conduct its business as it pleases, subject only to any prohibition imposed by the Leifislature.'' In that case, as here, the railways entering into the agreement were not lines in continuation the one of the other, but the\' ran side by side, and the Vice-Chancellor first dis]joses of this ])oint, using the following language : — " With regard to the argument against the vaHdity of the agreement, I ma)- clear the ground of one objection by sa^'ing that 1 see nothing in the alleged injury to the public arising from the {)revenlion of com])etiti()n. I find no indication in the course taken by the Eegislature of an intention to make com])etition by authorizing various lines It is a mistaken notion that the public is benefited by pitting two railway companies against each other till one is ruined, the result being at last to raise the fares to the highest pos- sible standard I must, therefore, dismiss from consider- ation the arguments founded on the notion that the Companies were under any obligation to carry on their traffic with a view to keep up competition, and proceed to the real question on which the legaHt) of this agreement depends. It maybe briefly stated thus: There are two lines of connected railways, one forming the West coast route, the other the East coast route ; and the question is, how far the Corni)anies owning these distinct groups of lines are justified in coming to an arrangement by which, having calculated the probable amount of traffic J^EBBaaaGSOSB-rwa-SiKsir, fi 34 which would, in the ordinary course, flow over one or the other route, they agree for a certain period of years to take this calculated i)ropor- tion as the basis of their arrangement, and provide that accounts shall be ke])t on this footing, and. that if the actual earnings of either set of lines shall differ from the estimate the difference shall be made good, after allowing for working exjienses, by payments from one set of Com- jjanies to the other." The Vice-Chancellor proceeds to (luote, with a|)ijroval, the following passage from the judgment of Lord Justice Turner in the Shrewsbury case : " In determining fjuestions of this nature. Courts of Justice, rs I apjjrehend, are bound to consider not what in their judgment may be best for the interest of the public, but wliat was the sco])e and object of the law which was said to be infringed or attempted to be infringed." He proceeded further : "A good under- standing between the different Com|)anies conducting this traffic, though it may not in one sense be for the immeiliate atlvantage of the public, in- asmuch as it may tend to raise fares, is, nevertheless, in the end beneficial, b) jHcyenting the ultimate raising of fares as the conseq ncQ of ruinous comjjetition, and also by ])romoiiiig the convenience of trflvellers. . . If one Comi)any agree with another not to carry between particular places in consideration of having the forwarding of all the traffic beyond these limits, I see nothing objectionable in that In the first place let me consider what the shareholder's position is. ' His in- terest is to gain the largest ])ossible amount of profit as between him and the Directors. If the Directors find that (without entering into any foreign speculation) the largest amount of profit is to be made by granting to other ('ompanies a certain projwrtion of their traffic, and securing corresponding advantages to their own Company, it is not very obvious that the shareholder is injured. It would be difficult; no doubt, to find in the letter of the law any express authority for such an arrange- ment, because the Company is onlj- authorized to construct its own line, to carry upon it, and to enter into contracts for through booking. There is no specific enactment to enable such an arrangement as I have mentioned to be carried out. Still, the question is whether the general powers of doing what may be necessary to carry on the traffic of the line do not cover the case, and I confess that but for the author- ities on the subject I should feel much difficulty in saying that there is in such a course anythingwhich a shareholder is entitled to treat as a wrong to himself." The Vice-Chancellor then considers the authorities, as to which he says there is in them " an unfortunate amount of conflicting 35 opinion," and following the decision of the four judges of the Court of Queen's Bench, who decided that the contract in the Shrewsbury case was legal, he upholds the arrangement made in the case before him, — The Midland Railway Company v. The Great Western Railway Com- pany, 8 ch. Ap. 41 1. The Master of the Rolls, relying upon Winch v. Birkenhead Railway Company, and Beman v. Bufford, concluded the agreement was illegal. As stated by the Master of the Rolls, the position of the Railways there was, " The Hertford Company having given up the entire control of their railways, the plaintiffs are to have the stations, to fix the fares, to have their own clerks, their own officers ; nay, lore, under the jirovisions of this agreement it is clear that the Hereford Comjian}-, though it may reserve the power, will not in. truth reseiv'.' to themselves the real working of the line, or any part of it, or anything upon it. They will have no carriages, receieve no fares, retain no stations, hire no servants.'' In appeal in Chancery this decree was reversed. In that case the arrangement as to fares and the compensa- tion 10 be awarded to each Company was much more open to objection th ;n the present case. It is thus dealt with by the Court: — " It is said that this agreement enables the Midland Company to fix their fares, that is to say, the remunerati(jn of the Hereford Company is to be dependent upon what the Midland themselves will get for the use of the line. I cannot find anything in the Act of Parliament which is to prevent a Company from fixing its remuneration in that wr •, I can see nothing that amounts to a delegation of authority. . . .It seems to me the only mode in which it can be done conveniently for both Companies is that there should be a division, one of the Com- ])anies having the carriage of the through traffic, that one of them should fix the whole price from terminus to terminus, and then that the Company on whose line the train is going should receive a certain proportion of the whole in accordance with the mileage. It is said that is not a toll. I do not know why it is not a toll. I do not know why a sum, fixed with reference to the gross receipts is not as much a toll as if it were fixed in any other way." In the fol- lowing language Sir William James shews that an arrangement can be made as to the discharge of claims for compensation made against the companies, or either of them. " Then again it is said there is some- thing in the clause with reference to the claims for compensation which is in some way against the policy of the law. I aiu unable to see anything objectionable in that. , It provides that the claims foi; cqm 36 pcnsation shall be satisfied by the company deriving the profit from the traffic, that is the Midland Company with regard to the through traffic and the claims for compensation arising from the local traffic, which belongs to the Hereford are to be settled by arbitration between them, having regard to the respective ])rofits they were getting from it. I cannot conceive how it can be in any way against any j)rinci|)le or policy of the law that there should l)e that mode of arrangcn>ent for ihe payment of persons who have claims for com])ensation between two companies who are jointly interested and who are in some way or other mixed up in the cause of the injury."' There are some passages in the c'ase of A. (\. v. (Ircnt Eastern Railway Company, L. R. ch : Div. 11,449, which show the inclination of t^ •.' Court^ is not to extend die doctrine of i/Ura vires in cases such as the present. In that case the Master of the Rolls says, 457, "of course you may take a luni]) sum, even if it is a contract with reference to the payment of toll, because it still would be a toll, a lump sum would be as much a toll as a sej)ar;ite sum taken on the passing of every carriage." In reference to a section of the Act which it was sought to limit, as it has been sought to limit the section here, Sir William James says, p. 463 : " M}' impression at j)resent is, that I cannot see any limit to the t4th section." On the (|Uest;ion of ultra vires, the same judge continues, p. 4