The following is a re-print of a past column by former Advertiser columnist Stephen Thorning, who passed away on Feb. 23, 2015.
Some text has been updated to reflect changes since the original publication and any images used may not be the same as those that accompanied the original publication.
A few weeks ago a regular reader of this column stopped by with a bundle of old documents. I found one item of particular interest. It is dated December 1880, and confirms the payment by E.B. Osler and George Stephen to a local landowner for land sold to the railway.
I have written in detail about the Credit Valley Railway’s Elora branch, which was later the Canadian Pacific branch and which now is the route of the Elora Cataract Trail. It was the shaky financial state of the company that led directly to this document.
The Credit Valley Railway was a dream of George Laidlaw, an ambitious promoter of the 1860s and 1870s. Laidlaw’s compulsion was to be a railway baron. His problem was that he had no money. During 1870 Laidlaw spent much of his time in the Parliamentary saloon, buying drinks and lobbying for a railway charter, which he secured early in 1871.
The Credit Valley Railway was authorized to build a line from Toronto to Orangeville, with a branch to Galt. A number of Toronto’s businessmen purchased nominal blocks of stock and made small payments on them. They were willing to lend their names to the project, but little of their money.
The only director with a strong desire to see the line built was W.J. Gooderham, who owned a large flour mill in Streetsville. His other interests included the Gooderham and Worts distillery and a large investment in the Bank of Toronto. Laidlaw expected the Bank of Toronto to back him, but Gooderham refused to risk the bank on Laidlaw.
Actual investments by the shareholders paid for less than two miles of track. Instead, Laidlaw relied on bonuses (either grants or bond purchases) by the municipalities along the route. There was also a government grant, to be paid on the completion of each mile of track.
In 1872 Laidlaw was able to get the charter altered to allow the Elora branch. He spent a great deal of time over the rest of the decade pushing his scheme to reluctant councils. When he was turned away he showed up again after the next election. When a referendum on financial aid was turned down by voters, he came back with a slightly different proposal. When he received a hostile reception, he threatened legal action.
Eventually Laidlaw got his way. He negotiated a right-of-way with farmers along the projected route in 1874. The flow of money permitted much grading work to be done on the Elora branch in the fall of 1874 and in 1875.
Progress ground to a halt in 1876 when the flow of money dried up. No one was interested in Laidlaw’s debentures. As yet the railway had no cash flow, and no useable assets. Late in 1876 some of the municipalities along the route, beginning with Milton, began to sue Laidlaw because his railway was not operating.
It was all water to a duck’s back to Laidlaw. He pressed on as if nothing was amiss. Some municipalities still had not supported the railway, and Laidlaw continued to pressure and threaten them.
Eventually, support from the City of Toronto allowed work to resume in 1879. The first revenue appeared on the ledger sheets when trains began to roll between Toronto and Campbellville in September of that year. Several hundred men swarmed along the Elora branch, finishing the grading and laying track. Local contractors were at work constructing station buildings in Fergus and Elora.
Laidlaw’s bravado disguised the fact that the company was in serious trouble. The workers went on strike in the summer of 1879: they had not been paid for three months. Unpaid bills continued to pile up, and the major creditors began to meet to plot their actions.
The Elora branch was completed on Dec. 20, 1879, but service did not begin for four weeks. The car builders would not hand over the rolling stock until they had some cash in their hands.
Still, Laidlaw thought he could pull himself out of the fire by stalling creditors, even though financial results for the first months of 1880 were most discouraging. The line was not even meeting the operating costs, let alone paying any of the unpaid accounts.
The railway stopped operating in July 1880 when the workers struck for unpaid wages. The vultures began circling. Major creditors put the Credit Valley Railway in chancery court in October 1880. Debts totalled over $600,000, equivalent to 80 or 100 times that amount in 1997 dollars.
One group of creditors had been largely overlooked: the farmers who sold the land for the right-of-way. Most had sold their land in 1874, but none had yet been paid a cent for it. A few even resorted to building fences across the railway in an attempt to reclaim their land.
Two of Canada’s most prominent capitalists saw a good opportunity here. These were George Stephen of Montreal and E.B. Osler of Toronto. An expert at financial manipulation, Stephen began his career as a dry goods importer. He invested his profits in textile factories in the Eastern ownships and elsewhere. By 1880 he was president of the Bank of Montreal, then by far the largest financial institution in Canada. Osler was a pioneer in stock trading and the floating of bond issues in Toronto. Together, Stephen and Osler hired agents who negotiated agreements with farmers to sell their claims against the Credit Valley Railway to Stephen and Osler. Most were happy to do so.
Instead of a dispersed scattering of disorganized farmers, Laidlaw now had to deal with two of the major capitalists in Canada – his tracks and trains were on their land.
At the same time, Stephen bought up the claims of the majority of creditors, and placed the railway in receivership. By the end of 1880, George Stephen, not George Laidlaw, was in control of the Credit Valley Railway.
I have run across stories of these agreements many times when researching old property titles, but have never seen the actual document before this one. It is a form printed exclusively for such transactions. I do not know whether Stephen and Osler paid the original negotiated prices for the land, or something less. The latter is probably the case: George Stephen abhorred having to pay full price for anything.
Also, I do not know whether all affected land owners entered into the agreement. The vast majority did, at least those on the Elora branch. Undoubtedly, there are many copies of this agreement still in existence among family papers.
Students of Canadian history will recognize George Stephen as the same man who put together the Canadian Pacific Railway consortium in the spring of 1881, only months after he secured control of the Credit Valley Railway.
The conventional view, supported by the statements of Stephen himself, is that he had to be persuaded by John A. Macdonald and various railway men to get involved in the CPR, against his own desires. His actions with the Credit Valley, and with several other railways in Ontario at the same time, suggest otherwise. He recognized that an extensive branch network in Ontario would be necessary to supply the cash flow until the transcontinental line could be built and put in operation.
There are, in fact, references to the Pacific railway in letters he wrote as early as 1877. This document shows that the “National Dream” really began here, when George Stephen ousted George Laidlaw from the Credit Valley Railway.
*This column was originally published in the Fergus-Elora News Express on Oct. 8, 1997.
