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(INBPSCTOR OBNIRAI.) WITH AW fotrodoctory Memorandum on the subject of the Grand Trunk Railroad of Canada. (Koronto: PRINTED BY S. DERBISHIRE k, G. DESBABATS, Printer to the Qneea'i Most Excellent Bff^eity. 1856. :v' i^iss^s^- f T ^ (,«•>! n A MEMOBIAL T» HIS EXGELLENGT THE GOYEMOE GENERAL IN COUNCIL, On behalf of the Shareholders of the OAmd Tnmk 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. B'SAI^ MEMORIAL. Mat it vlbass Your Exoellsnct. This Memorial (on behalf of the Shaveholdera of the Giand Trank Railway Company of Canada, setting forth the Basis of the Scheme of Fioancial 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 Shewbth : 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 £rom 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 po»* sibly be put in execution ; results, the anticipation of which alone has suflSced to destroy the credit of the Enterprise by reducing the market value of the shares to 50 per cent, discount, and to oast a cloud over the commercial prospects of the most fitvored Colony of Great Britain. A serious and careful cc nsidemtion 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 iUture subsidiary Railway Enterprise of the Country ; and with 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 fitU to ensure results mutually advantageous to the Shareholders and to the Country. ..*i^^i-i-^'^' ^H BASIS OF THE SCHEME. The requirements to be attained are two-fold, 1st. Capital sufficient fur the completion of the Undertaking, estimated (in the original calculations) not to exceed the sum of iBl,560,000. . 2nd. The resucitation of the market value of the Enterprise ; or, in other words, the restomtion of the Shares to their par value. The attainment of the former does not necessarily ensure the aeiaompliBhment 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- Iment, 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 irom the completion of the Victoria Bridge can be accomplished, it will probably be several yean before the profits shall affijrd 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 France, in Sardinia, in Austria, in India and in Australia, has more or less proved, that one measure alone is completely adequate, under such ciicumstanoes, to maintain the credit of Bailway undertakings ia 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 demonstiation by the people of the Country, of confidence in their own commercial ftiture, which is best given by a Guarantee of a minimum dividend for a term of yeaxs» on the share Capital inYeiBted. The consideration for this aid and for any possible risks of temporary loss (a risk however which has not in any one previous instance restdted in any loss) has been and is, the reversion of the tJndertaking in absolute property to the State at the expiration of a term of years — a sacrifice in return for the Guarantee which is cheerftdly made by the individual Stockholders, and a boon of the greatest nutgnitude to the Country, the more especially to ti young State u Canada, the mtgnitnde of whoM QltiiMte eqnwuepoiftl Aiture it would be presmnptuouB to attempt to eitimat!P« Looking therefore to all the oiroumitanoe* under vhich the capital of the Grand Trunk Company vraf suhwribedi a^ to the lamentable prospects of the Undertaking, if left in its ejdstin^ecm- dition, — ^the Shareholders earnestly appoU to the Government eoid Legislature of Canada for a pledge of confidence jm tliis gc^t national Railway Enterprise by a Guarantee of a dividend of 5 per cent, on the share capital of the Undertaking, after the |)ayment9f all its fixed charges ; the considemtion to be, the reversion of the Undertaking in absolute property and in the most efficient wprjdng order, at the expiration of, say, 99 years. Under ordinary circumstances in such Guarantees, the tiak of any possible loss is of course borne by the State, but i^ this paiti- cular instance, remembering iho great liberality of the Fnninume towards the Enterprise and the natural disappointment of tlt»a people of Canada at its present condition, and looking to their own individual conviction of the ultimate realisation of aUthepreepeots originally hoped for, the Shareholders are anxious aljio tp give a strong mark of their confidence ; and prop^, that should way deficiency ensue during the first five years ftfter th^ poinpletipi^ of the line to Toronto, in respect of the Guarantee, and wishmg 'to preserve intact the surplus revenues of (he Provinces, they are ready to agree and to give proper security, that all suoh anntial deficiency, diuing that time, shall be subscribed by the Company, and be converted into Shaie Capital, under a like Guarantee by the Provinces, and the amoimt of which shall be estiziuited and allotted pro rati, 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 Uji!i4,erta)ung would in|une- diately be re-established. That the unissued Share and Debenture Capital would ai , I ffl i( ?T : Itii 10 Thiw giving a general average of. f j615 per mile per week. Without addiug one pour d sterling for the development of the tra£5ic reasonably to be expected during the first five years, the re- oe^ts on the Eastern Section are only calculated at the post experience of JS15 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 diuring the Winter from the opening of the Line on the 17th Nov. last year, to the 1st April, averaged jS12 per mile per week, and were for the last week of that period £18 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 diuring the Winter, J£30 per mile, per week ; the mean receipts therefor jier 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 trafiic and much subsidiary local trafiic 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 second 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- u :i n tion at jB40 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 Guamntee for the same consideration, to all the subsidiary Rail- way Enterprise which shall receive an especial recommendation £ox the same, by the sanction of the Legislature, as undoubtedly {HTofitable 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 pro|)urtionsby 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 traffic from West to East, on the Main Line, and the local traffic 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 chus 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 II Railways 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 productioms 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 efiect in favour of the Guarantee Scheme, for while 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 undoubtedly 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 w^U accrue to each individual by i^he 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 purpose 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 Grov- 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 i 13 should put the same in execution by an Enactment, applying Ihe 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 6 per cent, dividend on the share capital of the Com- pahy would be — That the credit of the entrepiise would be raised to par. That the Undertaking, including the extension of the Line to its western terminus, and the Victoriu 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 Compaay, which, it is respectfully submitted, no other Scheme can possibly present. On behalf of ihe Committee Shareholders of the Grand Trunk Bailway Company of Canada. WILLIAM NAPIER. Toronto, 22nd April, 1856. H 14 PC S3 o «> v 0) i 09 I 9i CQ •I lit 16 I* i !i CO Mi ( ! 6 S 5 ^ o II CORKESPONDENCE. «V<*^MM>»»#W»»»*<»«<»c airivi d at must and will prove a crisis in the Railway Ulduij of Canadii and that the Government proposal, which if pr^ jiste J 'n ; ''.t prove a death blow to the credit of the Nationii' Baihv ty imdertalung, which was re- ceived in the British money niin.t ^ under tho auspices of the then Government, is dealt at m moment wheu the Executive of the older and younger states of the world are attracting to their respec- tive Countries the Capital necessary for thek Railway develop- ment by giving a minimum guarantee on the investment of the •Public, and thus pledging the Confidence of their Nations in their own prosperity ; a pledge Sir, which, as has elsewhere been stated, has i9 no one known instance resulted in any loss, in respect of the guarantees, so given, amoimting in France alone to the sum of Thirty millions sterling per annum. I adhere Sir, to my conviction that the Guarantee scheme is the only remedy completely adequate to the existing emergency, and whici: ofiers the 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 would afibrd material relief to the Company, if on conside- ration it should 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 efieoted by the scheme proposed in the memorial presented to His Excellency the Govern'.! Greixeral by the Board of Directors, viz : by ihe con- version of tlie I invincial mortsra^e into ^j took of the Company, with add '.i >m>y n -untee to ;.o Western Section of the line and the Victoria liridge, and with power to the 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 armngements of th«> Company's Capital, I had the honor to submit to you on the 5th instant, and •f: eme which is I)) IS whi«h T need har y repeat appears to be the hut poMible eompro- miae cuj mMe of uitording any relief to 'He Company. J have the huaoi 'o submit that schvi e once more, via : Second, ExJ ' in ^ Prov i ncial Bonda to th« ) a., kaa amoi^tof. I ^"'^ (the Interest ( f which i o be paid by the the Oovernm' .t for 5 years.) Third, the existing ComiMUiy's Bonds.. . 2,144,100 {Fourth, remainder of exist i <\g Province ) Bonds to be convex ud intt Stock ) . 2fi(Hj OOO and Company's shi ^ Capital J £3,006 ')00 The advantage of this moditication is, that it ii. no wu afiects the position of the debt no^v xisting above the Company't^ % d- holders and Shareholders, wh will then readily i ise the nc> ,,im- ry Capital for the completion ui e undertaking, while the Pro >ui. , on the other liand, by eng: j^ing to pay the interest on ^ur dB3,l 11,500 for five years, wouli' afiurd the Shareholders a rei ^- able prospect of a moderotc. and immediate return on their inwaaS' ment, and the confidence of th« Country would be exhibited ^ their willingness to share to the i :tent of je2,500,000 of its exisftn 90 per annum, being the amoimt of interest on their Bonds, for some years to come. If this position of afiairs 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 Company alone, who under any circumstances can be expected U raise the additional 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 " efiected by Resolution of the Directors of the said Company, "sanctioned and approved by two-thirds at least of the Votes of " the Shareholders preseftt in person or by proxy, at a General " Meeting convened with special notice of the intended object ; t9 ** and the fbrther 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 persons 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 be expected to subscribe the necessary je2,000,000 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 Memomndum 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 cheir 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 the 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 which has already been circulated for the information of the public. While thus fulfilling the first duty assigned to me, I did not fail at the same time, to develope any adequate or material Scheme of Relief which 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 preferential Shares or Bonds, upon the \i ' !| 1! ^T 30 whole undertaking the sum necessary for the completion of the Works, as follovrs : No. 2. 1st. Preference Bonds of the Company jS2,000,000 . 2nd. Company 6 per cent Bonds 2,144,500 "*• l&Ts!<^r.'';.v:;::i;Jil:Srii «.*»^ Such an evidence of willingness, on the yjart of the people of Canada, to share with the Stockholders the risks or profits of the undertaking, would he accepted by the public in England, as such a mavk of confidence as would certainly justify iind 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 Scheme, would be the most efiectual. 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 adequate to enable the raising of the required funds, viz : No. 3. 1st. Preferential Bonds of the Company £2,000,000 2d. r Company's 6 per cent Bonds } 2,144 ,r)00 Provmcial Bonds i 3,111,000 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 Provincial 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, tor if the profits are at once to be apportioned to the Province in respect of their claim, tha manifest result is that nothing or at any rate not one per cent would be available for Dividend on the Stock. to Attheendof five yean, there can be no moral doubt that the development of traffic on the completion of the whole undertaking will be such as to afibrd 5 per cent to the Shareholders, in addi- tion to all the first charges on the undertaking, when of courje 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 Grovemment Bonds for the first five years that the suc- cess of the scheme No. 3 depends, and as it has already been as- sumed that 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 wotUd not take any of the earnings of the line imtil the Shareholders had attained a reasonable return on their investment, and that there- fore the Province would for several years be necessited 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 ensiue 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 therefore that the Public and the Legislature desire to pass such a measure into law as shall be adequate to raise the necessary sum of ^62,000,000, 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 Province 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 the J62,000,000 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 of this Country to examine these statements and to declare how it would be possible for the Com- pany to raise the necessary je2,000,000, 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 8S » i; i! I that the line flom St. Thomas to Stratford, exclusive of the Victo- ria Bridge, shall be completed in the current year, and on a: j other proper stipulations. The adoption of the first or even of the second alternative above described, by affording the Company the means of extrication ih>m their present embarrassments would avert the disastrous deprecia- tion of the Company's Stock, which will necessarily result ilrom a fhilnre to obtain during the present session of the Canadian Par- liament adequate or material relief, and would enable the mpid 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 in which would be most prejudicial to the development of the resources of the Country. Apologizing for the hasty and imperfect manner 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. R. C. of C. To the Honorable William Catley, Inspector General, &c., &c., tec. Sir, No. 6. Inspector General's Office, Toronto, May 26, 1856. I have now the honor to acknowledge the receipt of yotir communications of the 7th, 12th and 14th instant, together with statistical tables and calcul&tions. These communications would have been acknowledged at an earlier period but for recent events and changes in the Govern-' ment, which have rendered delay unavoidable. I am also in receipt of your note of the 12th,in which you state, that it is due to me as well as to yp^self, to inform 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 Giaiid Tnink Companyi with whom it wai your duty, pomamt to your instractions, to advise confidentially. On this point, I beg to assure you, that no declaration on your part was necessary to satisfy the Grovenunent that the pnMeeding to which you refer, was had without your knowledge, and that you did not fiul 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 miatters of such importance. Refening now to your communication of the 7th May, I observe in your pre&tory remarks, an expressing of satisfiustion that the Government acluiowledge the principle 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 ji^itly 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 incariMiation 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 1855, by the addition of £900,000 to the Provincial guarantee. The application now made by the Company for fhrther aid arises, as I am informed by you, from the necessity to make other provision for fUnds adequate for the completion of the Railway, the present deficiency being principally due to the unlocked 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^xtent of the works in progress, does not in the opinion of the Govenment, constitute a claim as a matter of right to further Provincial aid ; and while they appreciate the efibrtamade by the Company to carry on their engagements during a lengthened period of financial depression, and are prepared to consider any suggestions made for their relief, and to render every assistance which can be legitimately afibrded, 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 .1 'III ,; ■^ irf hi 84 eonvenatioii^have not been formally placed before yon in writinf | these details (founded on the assumption that the memorandum which I had the honor to communicate to yon 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 tl e mode in which provision might be made for the accruing interest while the works are in progress. The Provincial guarantee at present stands as a first charge on the road, and consequently would stand second in the event of the authorized issue of prefei-ential bonds, and would thus have a prior claim to all profits aris'rg from the rood after the Preference Bonds had been provided fov ^mtil the interest was covered. This position if insisted on, might lead to some misgivings in the minds of the bondholders, that tbeir interests would be prejudiced in standing behind five millions of prior claims. With the view to meet any difficulty of this native, and as an evidence of the conviction which the Grovernment entertain that the road when completed will be remunerative, they will be pre- pared to rectimmead to the Legislature to place the Province claim, to dir iuend on the same footing with the Company's bond- holdors. The second point, the payment of accruing interest, on the Province Bonds, while the works 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 the road, or by the Province receiving on 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 muggestions 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 reijf^rred 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 : M ** Aamuning the» that the Company assent, as no douL the^ " would under proper facilities, to the desire of the Government " to make the additional arrangements contemplated in this ** memorandum, as an aid to the tributaries or feeders of the ** Grand Trunk, and which I have reason to believe, although " forming no part of the existing contract, would nevertheless, in « a general point of view, be beneficial to the Company." Upon this I have only to repeat my remark that it is in this point of view aJone " that these lines would prove beneficial to the Company," that the Grovemment have made the suggestions contained in my first memorandum, it is by no means their desire to impose firesh obligations involving the construction of new lines on the Company, but it is at the same tim'^ my duty to state that it is not in contemplation to abandon any sections of the line forming part of the undertaking, as defined by existing engage- ments. The facilities to which you refer would have to be arranged with third parties, the Shareholders in these several roads, th« action of the Grovemment in this respect, being confined to the deferring the prior claim of the Province, so as to enable the Company to raise the necessary capital. The Three-Rivers branch was first brought under my notice^ if I am not mistaken, by the Engineer of the Grand Trunk, as calculated to form a valuable aid, and towards which the neigh- boiuing townships were prepared to contribute d675,000. 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. 36 lft"r'" H In oonolnsion, I beg you to bolieve that the Govcnimeftt« and not the Government only but the Provincei appreciate theBtruygles made by the Company to bring thia undertaking to a succeasAil iMue, and that the aMistanco ofiered, though falling shor*, it may he, of the expectation of the Comiiany, is tendered in the earnest hope that it may prove effectual . Thanking, you Sir, for the courteous tone of your communications, I have the honor to be, Your most obedient servant, (Signed,) WM. CAYLEY, Inspector General. 1*0 the Honorable Wm. Napier. REPLY To the Letter of the 26th May, of the Honorable William CArLir, Inspector General, by The Honorable William Napier, on behalf of The Committee of Shareholders of the Grand Trunk Railway Company of Canada. Toronto, May 30th, 1856. No. 7. Sn, I have the honour to reply to your fkvour of the 26th instant, received yesterday, acknowledging my communications of the 7th and 12th and 14tli instant, and also my note of the 12th instant, and acquainting me " with the views of the Government upon the further details" (in respect to the proposed relief to the Grand Trunk Company) " which though discussed in conversation'* harve not been formally placed before me in writing, and "stating in aubstance the extent of aid" (to the Company) " which the Grovern- inent would feel themselves justified in recommending to Parlia- ment." Before proceeding. Sir, to state, on behalf of the Sharehdldem, my adherence to the substance of the measure of relief thus jtfo- poeed on the part of the Grovernment, permit me to express my best thanks for the obliging terms in which yoh have aeknowledgied my note of the 12th instant, in reference to the unwarrantable publication in one of the Daily Journals of your letter to me atid memorandum of the 6th instant. It is necessary likewise that I should notice a misconeeptioh which has arisen from an observation in my letter of the 7th inMuit. It was never intended to convey an expression of opinion on be- 87 half of the Shoreholden, that they seek for relief in their preMnt emb«rraaunent8, as a matter of right ; I desired only to state my satisfiiction that the Government, by their proposal, acknowledged the principle that, in the unfortunate juncture of afiairs, arising fiom causes, many of which could never have been fomseen, it ia as much in the interest of the Province as of the Company, to OMist in the development of a schemo of relief, which, by mutual con- cessions and exertions, would Airnish the Company with means successAilly to carry out an enterprise which has already, in anti- cipation of its completion, contributed to an extraordinary advanco in the assessed value for taxation of the real and person^ property of the Province, as oviuuod by the increase in Upper Canada aloaa from— je36,678,890 in 1852, to £57,142,108 in 1855, and this at a time of War, wh-sn neighbourisg States have suffered a considerable depreciation. I have now the honor, Sir, to express my great satisfaoiion, under existing circumstances (and aasuniiug the consent of the Government to my choico 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 meaaure of financial aid to the Company, which the Government are prepared to recommend to Parliament diuing the present Session. Assuredly, Sir, it cannot afibrd that complete relief which the Shareholders so confidently hoped for, when they reapeotfullf 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, afibrd very material relief, and justify and enable the subscription by the Shareholders of the funds necessary for the completion 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 extracMrdinuy fiioilities which the Government have afi!brded me for official ud pvivato explanations and suggestions, and the various grave difficulties which have appeared to render any solution in the present SessioUi of the embarrassmeuts of the Company, almost impraotieablei I ss , A^ thirt in my opinion, with the ex. i^ f»nk-- to f^^ *^Cgi«, the proposed ».««.e -^nr^^^Si^stf ^;^- , ,, .,, ^at, nnae, the Vo^'Govenunentme»»«. ^ Appoitionn.entof'^P B„„a,,totheamo»ntof«3.1".» 1. By 6 pet oent. on ^^^^^ee Lease or tflifiOO 2. By AUant.0 «rd St Law^ ^^.^ per annum. . • • -",, Bonds, to the amount of 2,1»^ 4. By Compauj ^ 9,562,400 Total Capital JB2,000,000 S«^- . pntofnet profits imder the proposed measure: Order of apportionmentof^tpr^^^^^^^^^^^^ ,^ 1 Tiv 6 per cent, on Coinpany s j company's en- '' ^;!se^(for t^«;rSS'-^a!i%Lr^^^^ , gage«^«-\^'^"S further expenditure not a„aagements, .^^ ^Tlvg gum of *' origi»allvrrC-ce Lease, as above '•Te per cent, on Company s^^^^^ 3^,,^500 Andto6percent.onProvmcx __ ^^^qqqq j^ 3,006,400 ......i^iJJS^ , 4. Company's Share Capital... . ''^* '''';:" ' ' Total Capital. ^ • «^ to Tiftv the interest on ■ With «. undertaWng hy the ^'ZeleSLry to enable the ^?- Sir have pointed out t- alternatives^ ^^/t^ the ex. I measure Lnder the amder the ants: 53,111,500 ■ 2,144,500 4,306,400 jB 9,562,400 ied measure : o 1- ire ot .. je2,000,000 00 00 "" 5,256,000 .. 3,006,400 ..jei0,262,400 le interest on r to enable the f the through . respect of the Province for Bive stated that 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 imder circumstances exactly similar, viz, the large outlay (in proportion to the then development of the country), made on roads, bridges, and other works which have 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 my 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 j£2,000,000, permitted to be raised by the Company on preferential Bonds, should, at their discretion, be applied to the execution and assistance of railway works o^er 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 JS2,000,000, (embracing certain allowances for additionnal rolling stock and other accommodation for trafiic 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 fulfilment of the engagements of the Company remaining to be completed after the opening of tlie Line from St. Thomas to Stratford. 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 additionally suggested by the Grovenunent, provided that 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 inte- rested, and who shall be ready to afibrd 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 cf the struggles made by the Company during the protracted financial crisis which it is hoped will be terminated by the measure cf 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 I have received at your hands firom the com- mencement of these negociations, now, I hope to be as succesfully 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 iShareholdors of the Grand Trimk Railway Company of Canada. To the Honorable WiuiAM Caylet, Inspector General, &c., &c., &c. consideiinj the 30th in The Hon< Wtti (Copy.) My DBA Th< with th date wa you a o The desire 1 their o' were ] Goveri NoTX.— All figures in this communication represent the amounts in $UrUng, unless currmqf is particularly stated. No. 8. ^ (Copy.) Sir, I have the honor to enclose the cojpy of a letter T have received this afternoon firom the Honorable John Ross, President of the Grand Trunk Railway Company, and also a copy of a Minnte passed at a Boaid held this day for the purpose of receiving and Tliel (Cop A, pani Wil 41 considering your letter to me of the 2Sth instant, and my reply of the 30th instant and concurring in the views expressed therein. I have the honor to be, Sir, Your obediently and respectfully, WILLIAM NAPIEE, On behalf of the Shareholders of the 6. T. E. Company. The Honorable WuLiAM Catlet, Inspector General. No. 9. (Copy.) Toronto, Srd Junk, 1856. Mr 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 fiivour of their owu measure, but you will observe that the Directors who were present, imanimously concurred in the views accepting the Government proposition. Believe me, my dear Sir, Yours very truly, (Signed) JOHN KOSS. The Honorable WiLUAM Napier. No. 10. (Copy.) , . ^ A. meeting of the Directors of the Grand Tmnk Railway Com- pany summoned by the President at the request of the Honorable William Napier, representative of the Committee of English i ill 4t Shareholden, was held at the Speaker's Boom of the Legislative Council on Tuesday, the Srd June, 1856. Prisbkt : E. P. Tachk, John Boss, GsoROB Crawford, W. H. Panton, Jamcs Bkatt, G. F. Whittkmorb. Letter from the Honorable W. Napier, to the President bearing date, 2nd Instant, was read. Copy of letter of Honomble 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 Bailway 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 tiie 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. Tach6, 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 S2nd November, 1854, by the Honorable John Boss and Sir Cusack Boney, 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 Imve been raised against the proposed extension of relief, and being persoi ingi^ holde It) belie short forw hith Sed byt the and Jul ^ P^^^S ^^ ^Snal clause in q^^****"' .^^idence by wWchl boldeis to the add^t^ ^ ^ ^^^ l^wnent, iu a very It is «*i«^^i:Sed Line, would by 8°^"^Unot but look Relieve the I«oP°?^*^ ^oxldng expense., and x c ^^^ ^^ «Koxttime, Tpay »^r^^^i,^toa «^««P'^^;^y^fflcofthi. forward Wxthout^PP^^,, ted when the effectontn ^^^^^^ hitherto been ^^^^^J^^tobe •^'^^^^J^^J^^Ri^Are^u-LouP »« Section, of *f ,.^„^'Tthe Turnpike road f^°^. ^'"^ ,emembered- ^^*"; ^S^^meCiuceofl^ew the Frontiers oi in ultimate extenw^ ^^^ Junction with the rau^ ^^^ ^^^^^ to be ^ Sir jave we »w— - .ourve'^'obedient^^S^!^^^, On behalf of tbeCommitte TotbeHonomWe &c., &C'' &c. No. 12- and opened for tramo ^^^ F^®'! °\ °^truetion of any por- Secretary, iuoid«'"'* 44 •nyexteniioA of time for the portion of the Railway above meB" tioaed beyond tbe timea v^e ha^e above in