Fish, Bankruptcy, and Confederation, 1889­1895


Melvin Baker


Having won the 1889 general election on a platform of railway construction and industrial development, the main thrust of the Whiteway government's efforts from 1889 to 1897 was extending the railway line to the west coast. In 1890 the government signed a contract with Robert G. Reid of Montreal and G.H. Middleton of Toronto to finish railway construction to Halls Bay in Notre Dame Bay. The Canadian contractors agreed to do it for $15,600 per mile, payable in government debentures. Middleton left the partnership two years later with Reid continuing the contract. In 1893 Whiteway signed a new contract with Reid whereby the railway line would be pushed on from the Exploits River to Port aux Basques. A second contract signed in what was an election year gave Reid the right to operate the Placentia branch line and the trans-island railway he was completing for a period of ten years in return for a land grant of 5,000 acres per mile operated. Hiller notes that Reid refused a longer operating period because Reid feared that "operating losses would become too onerous when they could no longer be offset by the profits of construction" (Hiller, "The Railway and Local Politics"). What must be remembered about railway building in the 1890s was that it placed a considerable strain upon the colony's finances, and probably exacerbated the other economic and fiscal problems that characterized this period.

Robert Reid

The colony's continuing fisheries disputes over the nature of French and American fishing rights in Newfoundland also dominated Whiteway's attention. By the late 1880s the issue of who had the right to carry on a lobster fishery on the Treaty Shore was now the main concern. Imperial officials had found the Thorburn government unwilling to restrict the activities of Newfoundland and other British (mainly Nova Scotians) subjects operating lobster factories on the west coast. Since the establishment in 1873 of their first factory, by 1888 British subjects had a total of 26 factories as compared to the single French factory. Although sympathetic to French protests of encroachments by Newfoundlanders in the lobster factory, the British government found itself with no statutory authority to enforce the provisions of the Treaties granting French fishing rights on the west coast, such authority having lapsed by mid-century through the non-renewal of imperial legislation on the subject.

With the election of the Whiteway government in 1889, the Colonial Office had cautiously hoped that Whiteway would be more accommodating than Thorburn in settling the Treaty Shore problem and asked him to London to discuss possible proposals for settlement. While Whiteway delayed his visit in early 1890 for local political reasons, the British government reached a modus vivendi with the French over the lobster issue before Whiteway's scheduled arrival in March to England. Whiteway had been initially consulted about discussions for a modus, but had not been involved in the final temporary agreement. Knowledge of Whiteway's involvement in the initial discussions did not become known until later in the year. Under the terms of the modus vivendi, which means "arrangement between disputants pending settlement of dispute"--the French agreed to respect the status quo concerning the establishments of lobster factories as of July 1, 1889. According to Frederick Thompson's definite study of the French Shore question, "no new concessions would be issued to French fishermen for factories on sites occupied by British subjects, and any competition which might arise between French and British fishermen would be settled on the spot by the summary joint action of naval officers..." (F.F. Thompson, The French Shore Problem in Newfoundland, Toronto, 1961, 104). While the British government considered the modus provisional only for 1890, it had hoped that, once it was accepted by all parties concerned, it could continue indefinitely and avoid the need for a permanent settlement which would not satisfy all concerned. It had also hoped Whiteway's pending arrival in London could be used to convince him to accept the modus, especially since he wanted imperial financial assistance to help complete the construction of the railway to the west coast.

The modus vivendi set off an immediate political storm in Newfoundland following its public announcement and, to forestall opposition attacks on him of being "unpatriotic"--the former Thorburn opposition had now re-styled itself the Newfoundland Patriotic Association to capitalize on public discontent with the modus--Whiteway, before he left for England, had to criticize publicly the modus, much to the consternation of the British government. Claiming that he was not consulted on the modus and arguing that the British government had conceded to the French their right to take lobsters and hence interfere with Newfoundland's territorial rights, Whiteway sent a strong protest to the Colonial Office. This protest was partly in order to head off growing public opposition to the modus being organized in St. John's and the outports by the Patriotic Association. Politically, Whiteway's efforts to deflect public criticism from his government soon received a setback, however, when it was revealed that Whiteway had been part of initial talks concerning the modus. Consequently, his response was to take a nationalistic stand on the issue as patriotic and emotional as that being espoused by the Tory Patriotic Association.

During the summer of 1890 the lobster problem worsened when Sir Baldwin Walker, the British Commodore on the Newfoundland Naval Station, closed a Newfoundland lobster factory in St. George's Bay under the terms of the modus. Since the owner, James Baird, was a prominent Tory merchant, he sued Walker to recover damages for having closed the factory, since Baird knew that Walker had no statutory authority to enforce the treaties. However, since it appeared that Baird's prosecution of Walker would probably succeed, and since Newfoundland itself would not pass the necessary legislation, in 1891 the British government introduced legislation in the House of Commons authorizing its naval officers to enforce the treaties on the colony's west coast. This legislation became known popularly as Knutsford Bill (after Lord Knutsford, the Secretary of State for the Colonies), but in Newfoundland it was derisively referred to as the "Coercion Bill."

To prevent its passage in the British Parliament, the Newfoundland government sent an all-party delegation from the legislature to England to argue Newfoundland's position. Eventually, Whiteway agreed to compromise on the matter: Newfoundland would pass a temporary enforcement bill for the enforcement of the treaties up to the end of 1893 in return for the withdrawal of the Coercion Bill from Parliament. While Britain would over the remainder of the decade press Newfoundland for more permanent legislation, Newfoundland responded to such requests through a series of temporary enforcement bills until the French Shore problem was eventually resolved in 1904 by France and Britain to Newfoundland's satisfaction. In short, this compromise represented, the historian F.F. Thompson has observed, "a compromise between the Knutsford Bill of 1891 and the defiance of the colony" (The French Shore Problem in Newfoundland, 149), or as the historian J.K. Hiller has noted, a compromise between the "dictates of imperial obligation and local nationalism" (Hiller, A History of Newfoundland, 1874­1901, 264).

The strains of imperial obligation and local nationalism also vied for supremacy in 1890­1891 when Colonial Secretary Robert Bond unsuccessfully attempted to secure a reciprocal agreement between Newfoundland and the United States. Believing that Bond would have little chance of negotiating such an agreement, in early 1890 the British government gave him permission to do so. And, if he were to have success, then Britain hoped to have Canada included in any possible deal. Consequently, the British Ambassador to the United States, Julian Pauncefote, was informed to go slow with the Newfoundland-United States talks, which Bond would carry out in his presence. Pauncefote was to ascertain also if Canada could be made part of any such agreement. The American Secretary of State, James G. Blaine, replied that Canada would have to negotiate its own separate trade arrangement; therefore, Pauncefote allowed both the Newfoundland and the Canadian talks with the Americans to proceed simultaneously.

Robert Bond

However, when Canada saw the draft terms of a proposed Newfoundland-American convention, it protested vigorously to the British government, which in December 1890 ordered Pauncefote to suspend immediately the Bond-Blaine talks, until Canadian interests that might be affected by such a convention were fully considered by Canada. Thinking that Bond only wished to say goodbye to Blaine before departing for Newfoundland from Washington, the Ambassador allowed Bond to visit Blaine in his absence. Much to Pauncefote's chagrin and embarrassment, Bond over the next day negotiated a final commercial agreement with Blaine acceptable to both sides. Under the so-called Bond-Blaine Convention of 1890, American vessels would be permitted to buy bait on the same terms in Newfoundland as local fishermen and to trade at all Newfoundland ports. In return, the United States would admit duty-free all Newfoundland fish, including lobsters, and crude mineral ores. Satisfied with this deal, Bond immediately sought ratification from the British government for his deal with the Americans.

Such approval was not forthcoming because of Canadian objections to the deal to the British government. Since Canada had failed to reach its own agreement with the Americans, it did not want any reciprocity between Newfoundland and the United States because such a commercial agreement would foster jealousies and political discontent in the Maritime Provinces of Canada. The result was a serious deterioration in 1891 in Newfoundland-Canada relations. In that year Newfoundland refused bait licenses to Canadian fishermen in the hope that this action would force Canada to drop its objections to the Convention. Canada, in turn, appealed to the Colonial Office that the Bait Act did not give the Newfoundland government the right to discriminate against British subjects, but Newfoundland ignored such protests. This Newfoundland action sparked off a tariff war between the two colonies, Newfoundland slapping a high tariff on imported Canadian flour and Canada placing a prohibitive tariff on Newfoundland fish. This situation continued for over a year until the two governments agreed to a conference in Halifax in November 1892 to discuss fisheries problems. The outcome of such a meeting did little to resolve their mutual difficulties, especially since Canada strenuously objected to Bond's determined appeals to the Colonial Office for ratification of the 1890 Convention. As for the bait question, a recent ruling by the Imperial government that Newfoundland could not deny Canadian fishermen bait licenses effectively denied Newfoundland the use of bait as a lever in diplomatic relations with Canada. As J.K. Hiller has pointed out in his Ph.D. Thesis, A History of Newfoundland, 1874­1901, that within the British Empire, Newfoundland had a subordinate position in relation to that of Canada. While both Newfoundland and Canada each were responsible government colonies and, in theory, were equal in the same rights and privileges, in any confrontation between the two colonies Britain would have to choose Canada over Newfoundland because of the former's greater stature and influence.

The political system of the late 19th century had also been described by political scientist S.J.R. Noel as "between merchants and lawyers and lawyers and merchants." Noel has observed that "party localities were as uncertain as they were fierce, and support was generally something a prime minister had to purchase, or reinforce, by the judicious use of patronage, whether political, personal, or purely commercial" (Noel, Politics in Newfoundland, p. 19). A more contemporary situation is that described to Canadians by Newfoundland police chief J.F. Morris Fawcett in 1895 as "merely a matter of `ins' and `outs'. The mercantile party is called `Tory' by its opponents, who take to themselves the name of `Liberal'. The so-called Liberal Party in the House of Assembly consists principally of lawyers." The press was critical to the success of political parties and copies of newspapers were distributed free by the post office to the outports where the only news was often that provided by the partisan press. During the 1893 general election, the Liberal Evening Telegram satirized in verse the problems the opposition leaders, St. John's merchants Moses Monroe and Baine Grieve, had in writing a manifesto and in their desperation having to call on Tory Bonavista MHA, Alfred B. Morine.

"Mun! fill up your glass and pass the wine;

'Twill brighten us up. Oh! look at the time!

We must telephone down for that cad Morine,

To write the manifesto.

I hate the beggar. 'Tis against the grain

I send for him now; but he's got the brain,

And he'll do the job, which we've have tried in vain,

Of writing the manifesto.

All right, said Monroe, I hate him, too;

He's the bossest liar that ever I knew;

But 'tis lies we want, and 'tis lies will do:

He shall write the manifesto.

Born in Nova Scotia, Morine came to Newfoundland in 1883 to work for the St. John's Evening Mercury, which supported Premier Whiteway. In 1886 he won a byelection for Bonavista district as a Whiteway supporter, but by 1889 was ousted from the Whiteway party by Robert Bond who objected to Morine's efforts to interest Whiteway in supporting Confederation. A political strategist, Morine was active in local politics until the 1920s and was frequently not far from the centre of controversy (see Robert Cuff, "Alfred Bishop Morine," Encyclopedia of Newfoundland and Labrador, vol. 3).

During the early 1890s Newfoundland also experienced serious domestic political and financial problems that brought the colony to the verge of financial bankruptcy and nearly led to union in 1895 with Canada. Re-elected in the 1893 general election, in January 1894 the Whiteway government found itself the victim of a carefully planned strategy devised by Morine. On January 6, a number of Tories filed petitions in the Supreme Court under the 1889 Corrupt Practices Act charging 17 government members with the illegal use of public funds during the campaign. The first case, heard in February by former Tory politician and now Judge James Winter, found against two government members representing the District of Bay de Verde. Disturbed by this verdict, Premier Whiteway feared that the other 15 defendants as well would receive a similar fate and would be unseated from the House of Assembly. Rather than risk defeat in the House through this means, through the loss of his 13-seat majority he received in the recent election, he asked Governor O'Brien for approval to have legislation enacted repealing the 1889 Corrupt Practices Act and make it retroactive to legalize the actions against which the petitions had been filed.

O'Brien refused to sanction Whiteway's request for this legislation, since he believed this would have the effect of stopping the trials and casting him in a partisan light. Ironically, by not acceding to his Premier's request, O'Brien was in fact acting in a very partisan manner. For, under the responsible system of government, the governor was to accept the advice of his ministers and be above reproach for doing so. In the end, the Colonial Office provided O'Brien with a compromise solution: Whiteway could repeal the legislation but not be given an act of dissolution. If he resigned for not getting his demand for a dissolution, then O'Brien was to call upon the opposition to form a government. Consequently, Whiteway decided not to press the repeal issue, but instead asked O'Brien for an immediate dissolution and a general election, a request denied by O'Brien on the grounds that it was his job to uphold the law and not evade it which he would be doing if he granted the dissolution. In turn, Whiteway threatened to resign if he never got the dissolution; he threatened also not to pass supply and revenue bills and prevent any minority government from doing so. On April 11 he tendered his resignation, despite having a majority in the House, but it was one which was dwindling because of the guilty verdicts being rendered by the Supreme Court against members of his government.

At O'Brien's request, the Tory Leader of the Opposition, A.F. Goodridge, formed a minority government and asked the governor for a prorogation until he had a majority of members in the Assembly through the unseating of a sufficient number of sitting Liberals. He met the House on April 14 and announced its prorogation until April 23. A subsequent Liberal vote of non-confidence failed to carry in the House, despite the Liberal majority, because the motion was not permitted on constitutional technicalities. While Goodridge succeeded in convincing the governor to keep the House closed passed the April 23 date for another month, his government did not remove Whiteway and his former cabinet colleagues from their positions as directors of the government Savings Bank. Consequently, Whiteway supporters unsuccessfully attempted to use their influence as bank directors to create a commercial crisis in the colony and force the re-opening of the Assembly before they actually lost their majority in the Assembly through being unseated. However, by the end of July, Goodridge had finally gotten his majority and had the Assembly convened to pass the necessary supply and revenue legislation for the 1894­1895 fiscal year. The Assembly then closed to await the results of the byelections to fill the seats left vacant by the unseated Liberals. Despite the appointments of Tories to road boards and the use of the government steamer for campaigning--Judge James Winter had conveniently returned early from his circuit for this purpose--the government only took one seat from the Liberals, thus being placed back in a minority position once more when the Assembly re-convened. Goodridge showed no rush to surrender the reins of power to the Liberals, claiming the right to stay in office until defeated in the Assembly. Having a personal dislike for the Liberals, Governor O'Brien did not force the issue with Goodridge.

What did force the issue in December 1894 was the collapse of the colony's two commercial banks. On the one hand, the political problems of the past year had had the effect of seriously undermining the confidence of foreign investors and bankers in the colony's economy. Indeed, the government's railway contractor, Robert G. Reid had had problems trying to sell his railway debentures in Britain, while the prices of outstanding government debentures of all issues had dropped greatly. And, while this was happening outside Newfoundland, locally the Whiteway Liberals were attempting to encourage a run on the Commercial and Union Banks by telling people not to accept their banknotes.

On the other hand, the commercial crisis had resulted from the past borrowing practices of the banks' directors. There had been bad fisheries since the late 1880s and the directors had made large loans to themselves to maintain their businesses and thus overextended themselves. They also drew credit upon the funds of their depositors as well as the funds of the government Savings Bank deposited in the commercial institutions. For instance, in 1882 the firm of E.J. Duder began business with a capital supply of $128,000, but by 1894, it owed the Commercial Bank a total indebtedness of $668,000. Thus, by 1894 the two banks had made a total of $5.1 million in outstanding loans--of which $2.1 million went to their directors--but had only $4.8 million in deposits on hand and there was little possibility that such loans could be repaid in the foreseeable future. This situation had been allowed to develop with the financial affairs of the two banks because of the falsifying by the bank directors of their annual reports to government. Such reports did not show the real amount of loans outstanding in relation to assets on hand.

In December 1894 financial chaos ensued when the London and Westminster Bank refused to honour any further banknotes from the two local banks or any form of their commercial exchange. The occasion for this action was the death of an English commission merchant who represented several prominent St. John's merchants. The trustees of his estate demanded an immediate cash payment from the St. John's merchants to settle their debts, which the Commercial Bank was unable to meet. Accordingly, on December 10--"Black Monday"--the Commercial was forced to suspend payment, its closure being followed by that of the Union Bank the same day. Several large firms also closed their doors and stopped doing business and financial panic followed, as crowds filled the streets looking for exchange for their worthless banknotes. Since the Savings Bank had its assets tied up in unsaleable colonial debentures and notes of the two failed banks, its position was also precarious and the government faced bankruptcy. When the Goodridge government failed to secure financial assistance from the Imperial government it resigned on December 12 in favour of a Liberal ministry led by St. John's lawyer D.J. Greene (Whiteway having been unseated in the election trials). Financial stability was restored in part through the establishment of Canadian branch banks in the colony and the legalization of Canadian currency as a medium of exchange. Moreover, Greene passed legislation guaranteeing Union Bank notes at 80 cents on the dollar and those of the Commercial Bank at 20 cents. The Bank of Montreal now became the colony's financial agent, acquiring the position by loaning the government $400,000 to enable it to meet the half-yearly interest owing on its bonds and debentures due on January 1, 1895. The government's credit was further strengthened in May 1895 when the Colonial Secretary, Robert Bond, managed to raise $2.5 million from London bankers in return for a government policy of stringent economy in government expenditures; in the short-run, Bond got a limited loan on behalf of the government by pledging his own personal credit. Bond's success came only after the colony failed to obtain financial assistance from the Imperial and Canadian governments. In particular, negotiations over financial assistance from Canada proceeded as part of discussions in April between the Newfoundland and Canadian governments over possible terms of union between the two colonies.

In March 1895 the anti-confederate Bond had led a government delegation to Ottawa to negotiate terms of union, so desperate had Newfoundland's financial situation become. The Colonial Office had been willing to provide financial assistance only if Newfoundland were to agree to a Royal Commission to investigate its financial and constitutional situation with the implication that responsible government could be suspended. Confederation now appeared the lesser of two evils. Negotiations commenced on April 4 and ended twelve days later with the Canadians offering less than what the Newfoundlanders were prepared to accept and the British unwilling to provide any assistance to bridge the financial differences between the two parties. Newfoundland would not seriously contemplate Confederation again until 1947.

Source: Melvin Baker, "History 3120 Manual: Newfoundland History, 1815-1972", Division of Continuing Studies, Memorial University, 1994, revision of 1986 edition)