Volume 100 Number 3, 2007 Issue #426

In 1933, responsible government in Newfoundland ceased, partly because of massive debts from World War One and the railway. The war was an international event and beyond the control of anyone in Newfoundland but the railway was a different matter. The government owned the right of way but didn’t operate the railway until the 1920s when it found itself being dragged somewhat reluctantly into outright ownership. Through a series of short-term arrangements with the operator, the Reid Newfoundland Company, the Newfoundland Government owned the railway outright by 1923. This paper will explore why.

In the early 1920s, debate revolved around the Reid Company’s obligations to maintain and run the railway, and about the Newfoundland Government’s rights and duties if the company failed to live up to these obligation. The 1901 allowed the company to operate the railway for 50 years, while the government owned the right of way in “fee simple.” Clause 38 stated that the contractor, if “found or adjudged by competent authority” to be liable to the government for any failure in the contract, or if the contractor ceased “to efficiently operate the said railway or any portion thereof,” then the railway would be forfeited to government. Arbitration was to settle any matters arising from the contract.

The contributing factors leading to public ownership of the railway are almost Byzantine in their complexity, but ultimately government had no choice if it wanted to keep what was becoming a necessary service running across Newfoundland. The Reid Newfoundland Company, short of money and bound by contracts signed with the government to operate the railway, only escaped when its major partner in the Humber development of 1923, the British company Armstrong-Whitworth, balked at becoming involved in any railway dispute and threatened to back away from a project desperately needed by the government to alleviate unemployment. There was no interest from anyone else in running a railway that had been a money-loser from the beginning, even with subsidies. The government didn’t want to operate the railway either, because of the costs involved. It didn’t help that the administration was headed by Sir Richard Squires, who hated the Reids and took little active part in railway matters. The Opposition was equally hostile to the railway operators without offering any constructive solution. In the post-war economic slump all of these factors forced railway matters to the forefront of political debate and ultimately led the Government to buy out the Reids and assume ownership of the railway. 

Locomotive No. 8 about 1895. Notice the initials N.F.R.R. on the tender.

Newfoundland’s situation was different from what was happening in the two most-cited comparable cases: the United States and Canada. Both the Reid family and government were well aware of what was going on in these two countries and referred to them frequently to find arguments for and against their respective positions. In the United States, the government took over operation of the railways partly in answer to war demands but also because it could afford the massive changes that would be needed to keep the railways there in good shape (the final bill would be close to $1.4 billion).The cost of those changes helped keep the Newfoundland government hesitant to take the railway from the Reids.

In Canada, the cost of building new railroads was the flashpoint for government takeover, but there was also a strong tradition of close government involvement in railway construction. Canadian Prime Minister Robert Borden had been at least a nominal supporter of government ownership of railways since he was an opposition member in 1904. His desire to see a second transcontinental line across Canada, to be owned “entirely by the people of Canada,” with controlled rates and the ability to transport Canadian goods entirely in Canada, was an idea he decided to make reality after he became Prime Minister. He offered money to the cash-starved railways but moved to weave the government inextricably into the troubled railways’ operations, arguing that if government was giving the railways money, they should take over the lines. As in the American case, the war helped Borden’s cause. In 1919, the government used a threatened shutdown by the owners of the Grand Trunk to invoke the War Measures Act and make the takeover of the railroads, to all intents and purposes, complete.

In Newfoundland there was little support for an ideology of public ownership, and the Government did not move against the railways during the war. Wartime travel contributed to the railway’s problems, as traffic that normally went by sea was shifted onto the rails. There was not enough rolling stock; locomotives were mostly old and light and the steep grades and curves on the narrow gauge system meant trains could be only a short length. In 1918, there were 91 accidents on the railway and safety was a growing issue. During the 1919 session, Squires, sitting in Opposition at the time, was among those who complained about the railway’s poor condition. “It is difficult to travel from St. John’s to Port-aux-Basques without making that particular gymnastic stunt of toppling over.”

The Government was not alone in either its concerns about the railway or its hostility toward the railway’s operators. The Opposition Liberal-Progressive Party complained about the railway’s condition but also balked at any support for the Reids, who may have contributed to the party’s defeat in the 1919 election. The Reids were also unpopular with the general public, an attitude apparent since at least 1900 when the 1898 contract brought down the government that signed it.The inability of the Reids to pay for much-needed repairs and improvements was resented and became a catalyst for later problems.

People knew the railway was in bad shape, but they forged ahead with petitions for lines from Gambo to Carmanville, from Stephenville Crossing to Port-a-Port and Hall’s Bay.  An extension of the Trepassey branch to St. Mary’s was requested as well as a line from Heart’s Content to Lead Cove.Members argued the “untold benefit,” of more branch lines, and Joseph Downey, the member for St. George’s, boldly claimed that the railway’s main line would never pay without branches “leading therefrom to promising industrial centres.”

In May 1919, in the last months of a wartime Union government, Michael Cashin, in a short stint as Prime Minister, presented the country’s budget. There had been surpluses since at least 1916 and the public debt was expected to be about $43,000,000, with the war loan taking up $7,453,000. Nevertheless, government reassured the public that with better times ahead, there was no need for concern.The major expense involving the railway was $449,507 owed to the Bank of Montreal for a temporary loan the government had issued to the Reids to allow them to buy rolling stock, perform construction work, especially on the branch lines, and money in lieu of land grants in 1918.

R.G. Reid and construction workers at Camp #3, Southern Harbour, c. 1892.

The company’s operating statement for the year ending June 30, 1918 showed revenues at just over $1.25 million. General operating expenses stood at around $636,000, while operating expenses were nearly $600,000. Coal for locomotives was the biggest operating expense at over $365,000. The wage bill and repairs and snow clearing made up the bulk of the remainder.Things were about to get worse, however, as costs continued to rise and revenues dipped further.

On April 25, the government engineer, Thomas Hall, filed a confidential report with Colonial Secretary William Halfyard, which warned of needed upgrades on the railway. Lighter engines and rolling stock could compensate for operational problems but that meant running more trains, not fewer, and the engines would be worthless by 1951, when the railway contract expired. Hall suggested laying 80-pound rail with the Reids paying for the 50-pound portion but he was unsure whether they could be forced to do so. He also recommended government pay for ballast and roadbed work. Ten new locomotives, 60 new flatcars and 110 boxcars were needed. He complained that he was often ignored and maintained that there should be more government control. He recommended that an executive councillor be appointed to the company’s board of directors. Hall estimated the cost of upgrades to the rails and railbed at over $5.5 million.

In November 1919, allied with Sir William Coaker and the Fishermen’s Protective Union, the Liberals, led by Squires, won the colony’s first general election since 1913.It has been difficult to determine just why Squires hated the Reids. Perhaps he just saw them as a political target, and, with his newspaper the Daily Star, chose to alternately ride and whip up public sentiment against them for his own benefit. Whatever the reason, he spent the next four years taking every chance to he could to attack them, calling their railway operations hopeless and inefficient. In 1921, he told Harry Crowe, a developer interested in a new railway scheme, that none of the Reid’s directors had any railroad experience, or a financier “of any importance or experience.”

The Reids were aware of their public image and understood that the line was in need of extensive upgrades. Improvements would cost a lot of money; money they didn’t have.On March 10, Charles Conroy, the Reid Company lawyer, passed on a tip he had received from Opposition member John Crosbie. The latter warned Conroy that the government was planning some sort of commission to look at the railway and its problems. Conroy thought this was unlikely, but wanted the company to be prepared for anything that happened.

The Reids were fortunate to have an ally in William Coaker. Not only had he supported their plans for industrial development, he was also on side with regard to railway repairs, telling Harry Reid that he thought government should pay for them.Reid had told Conroy that in order to keep Coaker and the public on side, they would have to be seen to be doing something like building a planned hotel in St. John’s, or a fish plant. He rightly added that, “if we can get a pulp mill or two arranged for, it will put us in a better position to deal with the government.”

There are two more interesting points in this correspondence. Conroy thought it a good idea to gather all the information the company could about railway operations in Canada and the U.S. Perhaps anticipating future developments, he noted that “(t)he policy adopted by the United States Government in dealing with the privately owned railroads when handing them back to the owners ought to throw some light on the situation.”

Conroy also told Reid that if the disputes about the railway operation went to arbitration and they were judged in default of the contract, a judge might not feel compelled to limit the damages the government sought. For the moment then, negotiations with government would be necessary to keep legal arguments at bay.

Locomotive No. 191 with train crew, c. 1920s.

In a letter to Squires that spring, Reid asserted that if the people wanted conditions “more in keeping with the advancement and development of the trade of the country, that duty and responsibility rests with the Government and people who own the road.”  He claimed that the company had laid heavier rail than the original construction contract called for and had improved passenger cars over and above the contract stipulations. Then Reid argued that costs had become prohibitive. Coal had jumped in 1919 to three times its 1915 price, the payroll had increased three and a half times to $1,249, 937, and the loss, $645,549, was three and a half times that of 1914.

When the House opened in April opinion remained divided but it seemed increasingly clear that if the railway was to be improved, government would have to pay.In June, a bill was introduced to raise a loan of $1.5 million: $1 million to go to the railway and $500,000 to develop a promising coal seam on the west coast that, if successful, would help the Reids lower their fuel costs. The loan, Squires asserted, was only a provisional measure.The Government was clearly unprepared to make long-term commitments. Instead of  public ownership, still judged undesirable, it announced plans for a temporary joint commission of government and company officials to oversee railway operations. The Opposition, too, was ambivalent. Cashin attacked Squires for giving money to a company whose board of directors in the premier openly criticized.However another prominent Opposition member, William Higgins, maintained “it is just as well to make up our minds that we are started on the first step of relieving the Reids of any responsibility.”

In the Legislative Council P.T. McGrath compared the situation in Newfoundland to Canada where, he said, the contractors for the Canadian Northern had been given money by the government but both they and the Grand Trunk “went to smash” just as the Reids were doing. But the bill passed and by August, with Squires out of the country, talks to form a railway commission, based partly on Hall’s recommendations, began. There would be three members each from government and the Reid Newfoundland Company. The Reids would repair the roadbed at their own expense and be responsible for losses up to $100,000. The government would buy six new locomotives, 50 new flat cars, and 50 boxcars and charge the cost to the Reids at six per cent interest, plus the cost of raising the money for the purchases. In what appears to have been a snap decision, Harry Reid suggested on August 12 that steamships be included, which was agreed to the next day. On Aug. 17, the Executive Council approved the deal, while the commission, with Coaker elected chairman, had started work the previous day on hopeful notes of reform, harmony and honesty.The next two months saw a flurry of activity as the commission decided to raise fares one cent per mile, ordered Hall to discuss the new locomotive designs with representatives of Baldwin Locomotive Works, abandoned the incomplete Fortune Bay branch and approved Argentia as the new terminus for the Placentia branch, because the harbour at Argentia was better protected than Placentia’s.But by December things had slowed, as Coaker turned his attention elsewhere, and the Reids spun their holdings off into four different companies: their land, the light and power company, the drydock and the railway.

Squires seemed to lack much interest in the railway issue, apart from his desire to find someone other than the Reids to operate the railroad. In October 1920, the Daily Star reported with “keen interest” that developer Harry Crowe was proposing a new line from Bishop’s Falls to St. Alban’s, cutting the railway trip, avoiding the snow-plagued Gaff Topsails and using electricity from Crowe’s water holdings in the Baie d’Espoir area to electrify the railway.In January, 1921 Squires asked Sir Edward Morris to make some discreet enquiries about whether the Anglo-Newfoundland Development Company might be interested in the railway.

The Reids were increasingly incapable of doing much to improve railroad operations. They were desperately short of cash and constantly argued with the government commissioners over who owned what, from a new rotary plow to screws and nails.David Kerr, an auditor for the company, arrived in early 1921 from Montreal and spent the spring harassing Hall, Coaker, and the government auditor, Berteau, for the money government was supposed to pay in regular installments. He called the commission “a nuisance,” and complained that he, “certainly did not expect to go begging for money for the Reid Company.”He pegged the projected loss on the railway at $1.75 million by June 30, and argued that the government should assume the total loss for 1921-22. By July 15, he was getting increasingly worried over the Reid finances: “All cash is currently required.”He counseled that the Reids should keep their claims before the government “to occasionally refresh their memory” but condescendingly concluded that a new railway deal would take time. “One cannot expect the Newfoundland people to have everything in such good order as is found in some other countries nor can we make them to act so quickly.”

Both sides went to Canada looking for information and advice. Early in 1921, the government went to the CPR and asked its vice-president, Sir George Bury, to investigate the railway situation. Bury recommended that government enter into an agreement with the Reids to let the latter operate the railway, but “with the utmost economy, consistent with safety and reasonable service.”No money was to be paid to the company unless first obtaining and written approval from the government and the endorsement of the government engineer. Laying the heavier rail should be deferred, as lighter rail, better secured, should suffice. He called for snowsheds and coal handling facilities and ended by saying that if government and the Reids could not reach an agreement, then the only option was government operation. But he correctly concluded that, “In view of the unfortunate results which have come from operation of railways in Canada, the United States, Great Britain and elsewhere, I imagine you would prefer to go to some lengths before embarking upon such an undertaking.”He thought the Reids would need another $1.5 million.

Baldwin Locomotive, engine #6. Built in 1893.

The government also had its own report, filed by Coaker and Hall in June. They noted that the existing freight and passenger rates were about 52 per cent of the CNR ‘s, which ran at a deficit.Newfoundland conditions, they argued, were even less conducive to breaking even, but they did offer some suggestions for improvement. The coal bill had ballooned to $980,000, but the new locomotives were expected to use up to 25 per cent less coal and other rolling stock was on the way. The cost of keeping the branch railways open in the winter didn’t justify their operation, with wage bills alone costing $170,000.The railway’s net loss had jumped in nine months to $1.196 million by March 31 (by June 30, when the commission wound up, the loss would be over $1.3 million).Hall and Coaker wanted to keep speculation on their observations about the railway’s future out of the public eye,concluding that without “great retrenchments in expenditure”and a rise in fares,the following year would be worse.

On March 20 the House opened what would be one of the stormiest sessions in Newfoundland history. The primary target was Coaker. Cashin claimed the same thing was happening with the railway as Coaker’s attempt at fish regulations, which had just failed.The new Argentia branch was being called a sop to the people of that area in return for Coaker having a spur built to Port Union.William Higgins called the joint commission “a corrupt bargain” with all parties wanting their backs scratched.Archibald said the branch railways were the cause of the downfall: “their continuance is farcical and ridiculous.” When Bury’s report was presented, they had a field day, attacking the report every way they could think of, but the most damning aspect seems that he had been unable to spell Port-aux-Basques properly.

The budget released in May showed a $2.18 million deficit but government floated a $6 million loan, $2.5 million of which belonged to the railway.There was some positive news. The Reids were negotiating with the British industrial firm Armstrong-Whitworth to develop their lands and build a paper mill at Humbermouth. Kerr reported that the deal was explained to Squires in private and that the latter was “quite satisfied with the idea.”Government also acted on Bury’s advice, scrapping the commission and giving railway management back to the Reids.Squires said if a good general manger could be found, “substantial progress could be found to put the railroad back on “a good footing.” The Opposition wanted a local man, but that meant a Reid man because they were the only people in Newfoundland who knew anything about railroad operations.

Therefore, after 4 July the Reids resumed full management of the railway, with the government as a source of cash. They agreed to pay the Reids up to $1.5 million to cover their losses: $1 million in semi-monthly payments to December and $500,000 to June 30, 1922. To Cashin, it looked again as if Squires, the Reids’ supposed enemy, was one again bailing them out.In September the Reids hired another CPR man, Richard Morgan, as general manager for the railway.The government was slow in making its payments to the Reids and Kerr wrote to Reid that the company had to “get all possible cash in order to liquidate its indebtedness.”Money from other sources was coming in and the company had to be careful with it.

In 1922, events conspired to start the final process of government takeover, and the Reids came perilously close to losing their assets. The Bank of Montreal had held a $1,056,000 overdraft on the Reid Newfoundland Company account since April 1920and another $200,000 in a demand note from September 1919.They had stood by the company and negotiated with the Reids and even held some Reid company bonds, but in mid-January the bank came looking for a missed $25,000 monthly payment they believed the Reids were due to make. When the Reids balked, the bank sent demands for payment to all the Reid companies and gave them a June 30 deadline.They suggested that the Reids sell their railway and ships to the government for $1.25 million with each side dropping all claims against the other.The bank had also contacted Squires, who expressed interest in a railway deal and promised to try to convert some hostile cabinet ministers to the idea.The bank backed off in May when the Reids promised that a deal was forthcoming with both the government and Armstrong-Whitworth, but warned that negotiations must progress speedily.At the same time the bank was pressing the Reids, Richard Morgan presented another railway report to government. He made six recommendations based on information regarding rates and conditions of major American railroads and the CPR.He advised laying the still-delayed heavier rail, closing the branch lines and unprofitable stations, more government subsidies for mail and postal service, reducing the competition between the steamships and the railway for the same traffic, disclosing all railway and steamship earnings, and allowing the Reids to continue operating dining and sleeping car service under contract with a split in the revenue between them and the government.

When the House opened in march of 1922 the throne speech stated that another loan would have to be raised for “certain railway improvements,” and because government had assumed “certain losses” while operating the railway, “the charge on public finance was again serious.”The speech added that negotiations for “establishing a definite and permanent solution” to the railway problem were underway.”

The crunch came the following month. In April, the Reids, with the bank breathing down their necks, argued that their losses, actual and projected, were higher than the government auditor, Berteau, and Hall both said. On April 13, Berteau told Squires he had figures showing the government had overpaid the Reids by $50,000. Squires ordered payments to the Reids stopped. When Harry Reid wrote to press the matter, Squires replied that no further payments would be made until the Reids could prove they had lost more than the $1.2 million the government accounts showed. On May 11, Reid informed Squires that without the money, the company could not meet its upcoming payroll. By May 15 Squires still refused to budge and the Company told employees that they were “unable to pay them owing to monies due us by the government not having been received.” The following day, the majority of engineers failed to report for work, hardly any trains were running and Reid again wrote Squires, saying “a complete tie-up of the railway appears inevitable” and the company was now planning to seek arbitration under the 1901 contract.Reid also suggested that government give the total $1.5 million and promised that any amount left over by July 1 would be returned to the colony.

The railway, as the second-largest employer on the island behind the government, could not be shut down. On May 15, Squires rose in the House to address the problem. “I am convinced that it is not in the interests of this country that the people of the country should practically finance railroad operations when they have no practical control over the efficient and economical management of transportation operations.”  The government had reasonably accurate information on railway operations and a capable manager in Morgan. He felt sure that the Reids could no longer be allowed to spend $1.5 million every year and the railway should not be allowed to become a public utility, operated either directly or indirectly by government. The two sides had agreed that the Company would continue to operate the railway until June 12. In the meantime, government sought legal advice on its options.In the House, Higgins warned that government was on thin ice with the Reids since the latter had been receiving continual legal advice since 1893.

After a short break debate resumed in June. Squires announced that talks were underway to have government operate the railway until the fall and proposed that the House adjourn. Cashin argued against this idea, saying Squires would try to sneak through some money for himself, and the people would know nothing of important matters.However, when Squires asked for a joint committee of the House to look at the problem, Cashin replied, “We’ll see you in Hell first.From June 12 despite the ongoing disputes both within the House and outside, the railway became a government-run operation. Morgan and new company Robert Reid, however, still had to agree to any operational changes because Warren wanted to avoid further legal complications.Government provided all the money necessary to meet the company’s payroll for May and June, and paid $70,000 for the company’s liabilities other than those to the Bank of Montreal. All railway supplies on hand and accounts payable were to be valued and credited to the accounts set up in 1921. The agreement was supposed to be in effect until November 15 but as things turned out, lasted into 1923, though not without more disagreements about accounting.Harry Reid, nevertheless, assured a representative of Armstrong-Whitworth that it was “an amicable settlement.”

While the Reids, government and Armstrong-Whitworth hashed out details of the Humber development during the summer in London, the legal opinions about the railway from three British lawyers arrived between August and October. The replies were remarkably similar, varying only in length and explanation. The Reid Newfoundland Company was not entitled to the full $1.5 million because the wording of the 1921 agreement made it clear that government was only willing to cover losses up to that amount. The company was also clearly in breach of its obligations by shutting the railway down. One lawyer, Barrington Ward, stated “cessation of operation” was such a vital matter “that I have no hesitation at all in saying that it amounts to entire repudiation.”

The government could deal with the situation in a number of ways. It could act as if “these difficult and sometimes obscure contracts,” especially the 1901 contract still existed and use them as a mechanism to determine an agreement; or government could act as if they did not apply anymore and seek redress through the courts.There was nothing to prevent it from seizing the entire railway but the steamship and express operations, which were not in default, complicated matters. The lawyers then cautioned that they had only the government’s version of events. If the dispute went to court, “litigation…will be protracted and expensive” and there was no guarantee the government would win. Settlement, therefore, would be “very desirable in the public interest.”

The final chapter of the story was being written. In February, Squires called a surprise election on the pretext of obtaining public support for the Humber deal, a project clearly welcomed by both sides of the House.Throughout the campaign, the Daily Mail, which had taken over where the defunct Daily Star left off, insisted that a railway purchase was not part of any deal involving the Humber. This assertion was repeated by Squires who further prevaricated that: “Arrangements in connection with the railway… are being made with a group of wealthy English capitalists who will entirely displace the Reids in Newfoundland transportation matters”

On June 7, shortly after winning 23 of the 36 seats in the May election, the Liberals introduced the bill to develop the Humber. By this time Armstrong-Whitworth had clearly indicated that they wanted a permanent resolution to the railway deal before proceeding with development of the Humber. D.C. Jennings of Armstrong-Whitworth had written a letter to Colonial Secretary Arthur Mews saying: “My company has always had in mind that, if they become participants of the Scheme, with the railway dispute outstanding, they would be allying themselves with interests antagonistic to the government, and this could only lead to loss and difficulty in the conduct of business.” He demanded a resolution by June 30.Harry Reid was also well aware of this position and reminded Squires that his company, which controlled land vital to the project, also required a railway deal before it would agree to the Humber development.  If government did not ratify the contract by the deadline, then neither the Reids nor Armstrong-Whitworth were bound to develop anything.

The government’s reasons for buckling were stated in the contract. It declared that the administration had made the deal because “it is desirable in the interests of the Colony, and particularly having regard to labour conditions existing at the present time,” and because any litigations or arbitration “would be uncertain, protracted and expensive,” and would stop the Humber development.Government would take over all the Reid’s transportation operations for $2 million, payable in 20-year, five per cent government bonds, on a railway valued at just over $6.5 million. Each party would drop all claims against the other and the government would give the Reids water rights in Tor’s Cove in exchange for providing power to the railway station and dockyard in St. John’s. Squires added that “for the immediate present and probably for the next two or three months, the railroad will be operated by the government, but all that is humanly possible will be done to get it out of government control.” He did note that the new Canadian National Railway’s figures looked promising and must have liked the comment in a Montreal newspaper that alleged the Canadian Northern’s contractors “threw reason to the winds.”He suggested that Armstrong-Whitworth “might possibly be interested in the supplying of railway equipment and the development of our railway enterprise.”but government was “making no pronouncement on what will happen.”

Opposition members were outraged. Higgins was aghast that the government had not entered into negotiations with anyone to take over the railway but Squires argued that they couldn’t negotiate with anyone “until we had something with which to negotiate.”. Cashin suddenly recalled that while he had been Minister of Finance during the war, the government had agreed to reimburse the Reids “for their overwork during wartime.” If true, the Legislative Council worried it would give the Reids an added boost for any claims they had,but even if there was a record outside Cashin’s memory, it would not have mattered by this stage. The Opposition was unsuccessful in having the two deals separated and the railway passed into government hands on July 6.On July 9, in the Legislative Council, it was generally agreed that it was “not desirable that the transportation services of Newfoundland should be a government enterprise,” By this time, however, the pit-prop and liquor department scandals were brewing and in an ironic twist, just days after finally taking the railway from the Reid Newfoundland Company, Squires began his fall from grace.

After the government took over the railway, the Daily Mail interviewed Harry Reid on what the Reid Newfoundland Company was going to do, now that they were out of the transportation business. Reid replied “The Reid Newfoundland Company will now proceed quietly with the development of their lands, water powers and minerals as quickly as the different propositions can be prepared. We have great faith in the natural resources of the interior and look forward to many developments in the near future.”No foreign operators came forward, even though after the deal was signed, Squires remained adamant government was still looking.In 1924, another loan was raised, with $1.275 million to go to structural improvements and to finally begin laying 131 miles of 80-pound rail,four years after it was first recommended. Between 1920 and 1933, the railway cost the government nearly $19 million.The Amulree report put total railway debt at between $34 million and $39 million.

 In 1931, in a court case involving the Reid Newfoundland Company and a government led again by Richard Squires, the now-former Reid company lawyer, Charles Conroy, testified to the Supreme Court that the Reids had split their property in 1920 simply to separate the railway from the more profitable assets. “I would not say that it was in serious financial difficulties but the situation was getting worse every year,” he explained.The railway, in other words, had never been impossible to operate, just very expensive. The people of Newfoundland, in whose name the railway was now operating, would find that out the hard way.