Share certificate for common stock still being traded in the 1990's. Old Time Trains Archives
The Canadian Pacific Railway was incorporated February 16, 1881 to build a main line to connect British Columbia with the rest of Canada. The charter called for a line to be built westward from near Lake Nipissing in Ontario where a connection would be made with the Canada Central from Ottawa and Perth. To reach established towns in the rest of Ontario and to the east coast exisiting railways would be acquired or new ones chartered in the interest of Canadian Pacific. One of these was the Ontario and Quebec, first incorporated April 14, 1871, it was a railway that was to spend most of its existance as a "paper" railway as a result of its perpetual lease to the CPR. It resurfaced in the 1970's when minority shareholders took the CPR to task, and court, for disposing of O&Q lands without payment to them. See below: Lawsuits
The Ontario & Quebec Railway (reincorporated in May 1881) built their mainline from Perth through Tweed, Havelock, Peterborough, Agincourt, Leaside, North Toronto to Toronto Junction (West Toronto), 199 miles, with 60-lb. rail on gravel ballast and a maximum grade of 1.1%. Twice daily passenger service began Saturday June 28, 1884 between Toronto Union Station and Peterboro. While the last spike was driven May 5,1884 a troublesome sinkhole near Kaladar prevented the start of through passenger service until August 11th. The line down the Don was not built until 1893 providing a direct line down to Union Station; prior to this time trains operated via North Toronto, Toronto Junction (West Toronto) and Parkdale.
Perth was the location of the Brockville & Ottawa yard and shops, and a connection with a 12-mile branch from Smiths Falls which had opened February 17,1859. This branch was bought by the CPR and used as a link in the building of the line from Montreal to Toronto. It had been built to the Provincial broad gauge of 5' 6" and had to be regauged to standard gauge. The B&O was built from Brockville through Smiths Falls to Almonte and Sand Point where it connected with the Canada Central. In 1878 it was amalgamated with the Canada Central which was acquired by the CPR in 1881. Smiths Falls was not part of the Trenton Division, nor was the former B&O.
About 122 miles of new line was built by the O&Q eastward from Smiths Falls to Mile End where it would connect with the Atlantic & Northwest to reach Montreal, a grand total of 339 miles, and opening it in August 1887. All of the mentioned railways had already become part of the C.P.R.
By this time much was happening as the Credit
Valley was taken over by the O&Q November 30, 1883, following
which the O&Q was taken over by the CPR in January 1884 through a
perpetual lease. A lease in perpetuity was something not recognized in
common law. It took legislation to allow a lease "forever".
The narrow gauge Toronto, Grey and Bruce was leased for 999 years by O&Q August 1,1883 after having been standard gauged in December 1881, which meant the CPR was faced with the need to handle the traffic of this Line as well. The TG&B ran from the Queen's Wharf in Toronto through Parkdale, Carleton, to Weston, Woodbridge, Bolton, Caledon, and Orangeville (1871) and beyond to Teeswater (1874) and Owen Sound (1873). It was all this expansion that caused the CPR to relocate its main facilities from Parkdale to West Toronto.
Traffic grew quickly and the need for more track capacity was soon evident. An 1898 proposal called for the double tracking of the entire Montreal-Windsor mainline! Surveys between Bathurst, just west of Glen Tay and Tweed to straighten the line and reduce grades from 1.1% to .8% at 17 locations would cover half of the total 62 miles. Instead, a separate main line was built along the Lake Shore on a much easier grade and alignment that would allow trains to run faster and to haul a lot more tonnage.
Eventually, changes came about and 60.9 miles of track was abandoned in July 1971 between Glen Tay and Tweed, forever breaking the original O&Q mainline. Years later, effective December 21, 1987 a further 28.3 miles was abandoned between Tweed and a point 3 miles east of Havelock.
Joseph Pope of Toronto brought the O&Q out of obscurity from the 19th century and into the limelight of the 20th century. Pope was the only proprietor (single owner of a stockbrokerage firm) in Canada and the only one unincorporated - the other being the giant Richardson Securities of Canada, in Winnipeg. Pope had acquired some of the shares of the Ontario & Quebec and took note of the fact it was a dormant company with which the Canadian Pacific Railway was doing as it pleased, something he felt was not right since there were other shareholders that were being ignored and mistreated. What got Pope going was the fact that the CPR was selling off valuable real estate in Toronto and keeping all of the proceeds for itself. Pope was of the opinion, based upon the lease given the CPR, that all shareholders should be receiving theri fair share of these proceeds. For years he tried to negotiate with the CPR but, they were having none of it. Finally, it all came to a head in 1973 when a proposed $40 million office and housing development at the long-closed North Toronto station was proposed.
Realizing it had not been conducting its affairs properly in connection with its lease of O&Q, in April 1973 five independant directors were appointed and paid a $2,000 annual retainer. They were also sold 20 shares each at $72 a share. This new board agreed to sell lands to Marathon Reality and in accordance with the1881 Act to apply these funds to improvements to O&Q's line. This was to approved at the O&Q annual meeting September 11, 1973. Shareholders were not given the appraisals. The legality of the transaction was objected to by minority shareholders Joseph Pope and the pension fund for the T.Eaton department store employees.
Eaton Retirement Annuity Fund started a lawsuit on behalf of itself and all minority shareholders for $125 million on October 5, 1973 against Canadian Pacific Limited (renamed in 1971) alleging misuse of assets over the North Toronto development. The lawsuit contended proceeds from the sale of O&Q land should go directly to shareholders and not into maintenance of the O&Q. The fund had since 1949 held 698 shares of O&Q and since 1960, 777 shares. There were a further 2000 shares held by other minority shareholders with the CPR having the remaining 80%. These shares $100 par value unlisted shares were selling at $72 around the time. They paid 6% interest per annum as required by the lease. They immediately took off, in days going from $300 to $450, to $650!
The shares went to $1,150 the following year when Pope & Co. started a second suit for $422 million over land sold by the CPR. Everything in Toronto and elsewhere in southern Ontario belonged to the O&Q not the CPR. Toronto property that became surplus to the railways needs and was sold off through Marathon Realty included the King Street Shed area where a new concert hall was built and named Roy Thomson Hall. There was no land more valueable.
O&Q had leased to CP 10,375.17 acres of land and had sold 2,060.82 acres of this land. In total the CPR had disposed of 956 parcels of land, 741 of which came from O&Q lands themselves, 179 from lands TG&B leased to CP through O&Q and 36 from lands which came into the system from WOP.
In addition, CPR had abandoned two sections of what used to be Ontario and Quebec's main line between Glen Tay and Havelock and disposed of them. There was also the abandonment in 1932 and sale of some 19 miles of the TG&B main line that had been leased by O&Q.
Trial got underway on September 19, 1977 in the Ontario Supreme Court, lasting 45 days. In the beginning, six CP lawyers spent four hours denying abuse of its trusteeship of the O&Q. Testimony included that of CP President Frederick S. Burbidge. Judgement was handed down on October 17, 1978 ruling that the CPR had acted illegally in abandoning two stretches of rail line it had obtained on lease. The O&Q shareholders meeting in September 1973 which approved sale of O&Q lands to Marathon Realty Co. Ltd. a subsidiary of Canadian Pacific Investments Ltd., which itself was, until 1968, a wholly-owned subsidiary of Canadian Pacific, without compensation to O&Q, was declared illegal. Furthermore, the judge declared the lease invalid and ordered an accounting of land sales over the years, payment of this money along with 5% interest from date of sale, some going back to 1884, and return of certain property. The lease required the CPR to "efficiently work, maintain and keep in good order and repair, the said railway and the rolling stock and appurtances ... and all the property hereby demised." Failure to do so invalidated the lease. It was estimated this could costs the CPR between $1 and 3 billion! Shares took off from $800 to $2500! CPR stock closed down 38 cents at $23.38.
At this point resurrection of the Ontario and Quebec was forseen. It would stretch from Ottawa and Quebec City to Montreal through Toronto to Windsor and would cut the CPR off from parts of its system segregating the entire east coast.
John C. Turner, a Toronto real estate financier, not the politician, heading a small group which had acquired around 55% of all O&Q's outstanding debt of L4 million sterling in the form of 5% permenent debenture stock, which was non-callable and secured by a first charge on all of the real estate, rolling stock, bridges, etc. On November 14, 1978 they claimed control of O&Q over CPR. On November 25, 1980 Turner launched court action to have a receiver and manager appointed for O&Q claiming he owned 60% of the L4 million debenture stock which entitled him to one vote for each 20 pounds sterling and therefore had control of O&Q, not CPR!
January 23, 1979 saw O&Q shares reach $9, 500 and on February 7, 1979 it was asking $14,000! At this point, Ian D. Sinclair, CP's chairman, himself a lawyer, warned against speculation in the shares stating there was nothing in the court's finding that warrented these prices.
At this same time Pope had come across yet another CPR leased railway, the tiny 34 mile long Massawippi Valley Railway Company in Quebec running to the Vermont border. The CPR had around 93% of the shares, what they didn't have hit $420 as Pope contemplated matters.
April 7, 1981 the case goes before the Ontario Court of Appeal.
September 10, 1981 at the O&Q annual meeting John Turner announces a $125 million lawsuit against Canadian Pacific Limited accusing them of fradulently selling locomotives and freight cars worth $93.8 million to Maryland based Merchantile Safe Deposit and Trust Company in June.
December 22, 1981 in a 2 to 1 decision the Ontario Court of appeal ruled that Canadian Pacific Limited did have power of sale but was not entitled to keep the proceeds or spend them on improvements to the railway, and must account to Ontario and Quebec. The court also unanimously held that CP Ltd. had to pay only the O&Q's reversionary interest, which was described as "a very small proportion" of the market value. It also ruled in favour of CP on other matters as well. The next day shares plunge $9,000 from $10,700 to only $1,700. CP Ltd. shares rose 25 cents to $41.62 on the TSE. It could have cost about $524 million and reduced its profit by about $7 per share, before taxes.
The stakes were high, back in 1971 it was worth $8,356 a share, by this time it had reached $650 million, or $175,000 per share! Shares could go to $200,000. People who had bought near par of $100 stood to make a fortune, all of it tax free! It went to the Supreme Court of Canada for a final decision. April 2, 1985 the court, which normally spends only one day hearing arguments in an appeal, set aside an entire week for this case!
Interestingly, no minority shareholders of the Toronto, Grey and Bruce ever came forward, efforts by Canadian Pacific to locate them were fruitless even in light of the publicity resulting from the lawsuit which was well covered in the daily press in Toronto where the proceedings took place. It was felt these shareholders were no longer alive and further that the common shares had been long ago thought worthless. There were however, a number of bond holders involved. These were bearer bonds with a face value of $100 and were said to sometimes be traded in the Channel Islands, a well-known tax haven. Regular bond coupons for interest were redeemed. The engraved certificates were also collectors items.
Two years later on June 25, 1987 a decision was handed down entirely in favour of Canadian Pacific. Costs were awarded 50/50 against Pope and Eaton. It was finally over with. Or, was it?
It still wasn't over more than a decade later. The matter was resurrected by Canadian Pacific when on April 28, 1998 it proposed to amalgamate subsidiaries St.Lawrence and Hudson Railway Company a wholly-owned subsidiary, Ontario & Quebec and Toronto, Grey and Bruce. It offered minority shareholders $650 a share for O&Q stock and $100 to TG&B bondholders.
Pope wasn't selling! The offer was quickly increased to $800. Still not selling. Pope then went to court to block the amalgamation. July 17th the offer went to $2,300 a share! September 26th this offer was accepted. Nearly quadruple the original offer and a big premium over the $100 par value.
October 1, 1998 CPR announced the Ontario Court (General Division) had granted final approval for the proposed amalgamation. October 13th. the CPR announced completion of the merger. Finally, it was over!