Assemblée Législative de la Nouvelle-Écosse

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21 septembre 2017

Public Accounts Committee -- Wed., July 15, 1998

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HALIFAX, WEDNESDAY, JULY 15, 1998

STANDING COMMITTEE ON PUBLIC ACCOUNTS

10:00 A.M.

CHAIRMAN

Mr. Howard Epstein

DEPUTY CHAIRMAN

Mr. Hyland Fraser

MR. CHAIRMAN: Ladies and gentlemen, good morning. I would like to call to order this meeting of the Public Accounts Committee.

I have several preliminary and procedural matters I would like to deal with just briefly. The first has to do with scheduling for the committee. It is my hope that before we adjourn today the committee might turn to the question of how we plan to proceed with respect to the rest of the summer, whether we wish to continue to deal with the matter of the relations of the casino with the government or whether we wish to turn to other matters; if we wish to stick with the question of the casino, who we want to hear and when people are available. I would like to turn to that before we finish up today.

The second matter is one we dealt with last time. It just has to do with the general warmth in this Chamber. I pointed out last time that if people feel overly warm, they should feel free to take off their jackets and dress in a relaxed and informal manner that might help us move along.

The third matter has to do with the status of witnesses and their testimony. You will see, members of the committee, that you have been given a letter from our legal counsel, the Legislative Counsel, Mr. Hebb, and I would like to read into the record at least one paragraph of this letter. It has to do with the question of immunity of witnesses. Here is the paragraph:

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"I note that a lawyer is quoted in the press as having said that a witness is only protected if the Committee extends the protection of the House of Assembly to the witness. I can find nothing in the authorities to suggest that any act of the Committee is necessary in order that a witness be so protected and in my opinion no such act is necessary. In any event, if such act were necessary, such protection is in fact extended to all witnesses appearing before the Committee by the Committee's practice of forwarding to each witness with the invitation to appear, a copy of the May 23, 1989, letter of the Committee's then chief counsel (copy attached) setting out the protection.".

Essentially what this says is that the legal advice that this committee has is that protection from a lawsuit based on defamation does extend to all witnesses who appear before this committee. That is the understanding that we have always had and that I would like to note on the record and move on, I guess, to other matters.

We have scheduled before us today two witnesses, both lawyers, both officers of the court. Officers of the court are generally taken, when appearing before a judicial or quasi-judicial panel, to remember that they are officers of the court. Nonetheless, the proceeding will go ahead on the basis of an oath being administered. I have spoken with our first witness, Mr. Merrick, about this and I will now administer the oath to him.

John Merrick, do you swear that the evidence you shall give to the committee touching on matters pertaining to your role as legal advisor to the Nova Scotia Gaming Corporation shall be the truth, the whole truth and nothing but the truth, so help you God?

MR. JOHN MERRICK: I do.

MR. CHAIRMAN: Thank you very much. Mr. Merrick, you have an opening statement for us, I believe.

MR. MERRICK: Yes, I do. Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Fage.

MR. ERNEST FAGE: Mr. Chairman, on a point of order before we begin this morning. A couple of issues that I think are important to address before we start this morning. I was very concerned when I heard comments by you, the Chairman, in the press regarding political positions espoused by you toward our Party and others. It is my understanding that as Chairman of this committee, you would be impartial, the same as the Speaker of the House would be. I was quite disturbed when this morning, coming into the city, I heard comments from yourself on the radio espousing political positions of Parties regarding positions taken toward the Public Accounts Committee, you, as Chairman. It concerns me a great deal if you

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are starting to consider yourself as a judge instead of a Chairman and this a grand jury instead of the Public Accounts Committee for the House of Assembly of the Province of Nova Scotia. I want those remarks addressed to you and directly up front because this is a serious situation that we are dealing with in this province. We are in this committee dealing with the public interest rather than playing politics, in my view, and those comments from a Chairman were extremely disconcerting to myself and I know to my colleagues.

MR. CHAIRMAN: What you refer to, you haven't specified, and it seems to me I would like to hear details of what exactly you are finding objectionable. It also seems to me that what we ought to do at this point is proceed with the evidence from the witnesses. I am not meaning to avoid your point, I would like to hear exactly what you heard and what you found objectionable and I think we do need to thrash it through. I have no doubt that we should thrash through what this is.

MR. FAGE: They were from yourself, Mr. Chairman. They were on the radio station coming into Halifax today. They quoted you saying that the Progressive Conservative Party was trying to hold up the process of these hearings and getting to, as you termed it, the bottom of the situation or whatever. I find those comments from the Chairman inappropriate. The Chairman is here to be impartial, not to make judgements on procedure, judgements on the views of others. If the NDP, or the Chairman, has personal views on how the situation regarding any subject is proceeding here, that is one thing but as Chairman of this committee, I think you should display impartiality. You are here for decorum, for procedure, to allow witnesses fair interplay between members asking questions rather than on the public airwaves expressing political views on another Party.

I think the NDP can express the views of how they feel on the subject rather than the Chairman of the Public Accounts Committee from the NDP expressing what he thinks are the views of the PC Party, Mr. Chairman.

MR. CHAIRMAN: Now that you have directed my attention to it, it sounds fairly clear that what I was asked about, and I remember being asked about this because quite a number of journalists have asked about it, the issue that was raised was the question of the proposed schedule of the committee. On each and every occasion on which I have been asked about that, I have informed anyone who asks that I have no power as Chairman to set the schedule of hearings for this committee, nor to direct the list of witnesses, that this is entirely within the purview of the committee as a whole which can vote on it by majority vote.

I have also pointed out that it is a matter of public record that when a proposal was made to this committee to deal with the issues raised by Mr. Fiske and to deal with them more or less non-stop over a two to three week period, that six members of the committee, being the Liberal members and the PC members, voted against that proposal and said they wished to take it one step at a time and were only prepared to agree to hearing two additional witnesses at this time and that they wished to continue to the set schedule of the committee

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which was to meet more or less one week and when we got into the summer break, we would move along and decide as we moved along.

I think that has been the extent of what has been reported and what I said. It seems to me not to deal with the merits of the matter that is in front of us, it deals with procedure which is, I would have thought, what the Chair could comment on. As I said, I take your point. It may be that we should discuss this in further detail but at this point I think that covers what has been said. In any event, I would like to invite Mr. Merrick, our witness, to continue.

MR. FAGE: I hear your comments. The clip I heard on the radio in my mind was not exactly as your comments that you have just stated but clearly it would be my feeling that you as Chairman of this committee should be impartial and henceforth your role is to conduct the business of this committee.

MR. CHAIRMAN: Can I ask if the clip was a recorded clip of my statements or something the journalist said?

MR. FAGE: Your statements, Mr. Chairman.

MR. CHAIRMAN: I am interested to hear it and maybe you can direct my attention to it and I can arrange to hear it. Thank you. Mr. Merrick, please.

MR. MERRICK: Thank you, Mr. Chairman. I would like to make just a few opening comments and an opening statement. I hope that it will be of assistance to the committee members in giving you the general parameters of my involvement in the casino arbitration proceedings and allow you to have a better focus on what I may or not be able to assist you with. I was told one lawyerly thing that I should check on when I came in and that was to ask for the protection of the House but I assume that that is either granted or has been looked after. So we will move past the lawyerly details . . .

MR. CHAIRMAN: Let us be explicit then. If you are asking, it is granted.

MR. MERRICK: Thank you. I am also . . .

HON. RUSSELL MACKINNON: Mr. Chairman, on a point of order, is it not customary for the entire committee to make that decision and not the Chairman?

MR. CHAIRMAN: I had not understood that it was and I certainly had not understood that the committee had a different view. Is this a matter for discussion?

MR. MACKINNON: It is not for discussion. I just thought the general procedure is the full approbation of the committee, I support it, but . . .

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MR. CHAIRMAN: I have to say that my recollection was that we did turn our minds, I thought, as a committee early on to this question of the status of witnesses who came in front of us. My understanding was that the committee took the view that all witnesses were to be so advised that the privileges of the House would apply when they appeared as witnesses and in granting the privilege or stating the privilege for the record here, I thought I was implementing the wishes of the committee and something that we had previously discussed at our first organizational meetings but if an explicit motion is regarded as necessary, we might turn our minds to it, or perhaps what I can do is this. (Interruption) Well, let us just be clear on what the motion is.

Is the motion that all witnesses who appear before this committee shall have extended to them the privileges of the House?

MR. MACKINNON: Well, this witness at least. I cannot make an opinion on future considerations because I do not know all the details but certainly if that is the will of the committee, I am fine but I felt we were dealing with this particular witness but, again, I am at the will of the committee.

MR. CHAIRMAN: Does anyone else have any comments on this?

MR. MICHAEL BAKER: Mr. Chairman, I think the protection should be extended to all persons summonsed to appear before the committee should be extended the protection of the House.

MR. CHAIRMAN: So the motion has been expanded and, again, I ask if anyone has any comments or shall I now call for a vote.

SOME HON. MEMBERS: Question.

MR. CHAIRMAN: Would all those in favour of the motion please say Aye. Any opposed? I don't think anyone was, no.

The motion is carried. It is unanimous and it is now clearly on the record.

Mr. Merrick.

MR. MERRICK: Mr. Chairman, it is certainly not my intention to defame anybody anyway so it is probably pointless.

I want to tell you that the instructions that I have been given by the Gaming Corporation are to be as open, as candid and as forthright with you as I possibly can and to provide you with whatever information I can. So feel free to dig for whatever I can give you.

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I was retained by Mr. Carl Holm to basically conduct the arbitration that was pending between the Gaming Corporation and Sheraton concerning the adequacy of design documents and the construction completion date. My retainer took place from approximately May 6, 1977 through to, until, May 20, 1997, in essence, although I did have some peripheral dealings subsequent to that. My involvement was basically that, to prepare for and be involved in the arbitration proceedings itself and as a result of that I became quite integrally interwoven with the negotiations that arose out of those arbitration proceedings.

You should have before you a chronology of events that took place. I know that Mr. [Carl] Holm prepared one that was released publicly a week ago and it is not my intention today to go through a chronology of events. I am merely going to touch on a couple of salient points that I think may be of particular relevance. I am now going to read from my prepared statement that you have in front of you.

The essence of the allegations by Mr. Fiske, as I understand them, is that in relation to a dispute with Sheraton as to whether the construction schedule for the permanent Halifax casino should be extended, the Gaming Corporation was forced by the government of the day to make a settlement on terms which were bad for the Province of Nova Scotia. It is in relation to those allegations that I understand I have been invited to appear here today. In relation to those allegations I have two points I would like to make.

Point number one. At no time was I ever aware of anyone, on behalf of the province or the government, directing the corporation to make a settlement with Sheraton or that the corporation had to make a settlement on any specific terms. What I was aware of was the view expressed in my presence by Premier Savage, Mr. MacKay and Mr. MacKeigan, that there were advantages to settling rather than fighting, that the province would prefer that this dispute be resolved by negotiation and that, if possible, we should try to achieve a settlement. To that end, Mr. MacKeigan did act, in my view, much in the capacity as a facilitator but at no time did he instruct the corporation that it had to achieve or accept the settlement. Incidentally, I should note that Mr. MacKeigan did not suddenly appear unexpectedly in the middle of the arbitration hearing. On the evening of April 22nd, after the first half day of evidence, Mr. MacKeigan called me to ask if I had any problem with him attending at the arbitration the next day to further explore the possibility of negotiations.

Let me break there just for a second and put that in context. You will remember, according to Mr. Fiske, that on April 21st we had been summoned to the Premier's Office for a meeting that was attended by Mr. MacKay, the Premier, Mr. MacKeigan, myself and Mr. [Carl] Holm. At that meeting, there was a discussion about the advantages of settling this matter and Mr. MacKeigan, we were told, had been retained just then by Mr. MacKay to give them some independent assessment as to the merits of the arbitration proceeding. So Mr. MacKeigan had been in the picture at that point for just over a day. We then proceeded with the arbitration hearing on April 22nd, had one-half day of evidence and then had to adjourn and it was that evening that I then received the phone call from Mr. MacKeigan.

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As I say, he asked my view as to whether I had any objection to him appearing the next day at the commencement of the arbitration to explore the possibility of negotiations. I told him I had no problems with that and I am confident that I would have reported that phone call to Mr. Fiske. I know that when Mr. MacKeigan appeared prior to the commencement of the second day of arbitration, it was not unexpected. The involvement of the province is to be considered in the context of the position and role of the corporation. It is solely an agent of the province and is the mechanism whereby the policies and objectives of the province are achieved. It is ultimately for the province to determine how best the objectives of the province can be achieved.

I agree with the opinion of Mr. Spurr in his letter to Mr. Fiske dated November 27, 1995, and that is the letter that was tabled with you, I believe, last week, at the time of Mr. Fiske's testimony where he states, "The Board of Directors of the Corporation should be under no illusion that it operates independently and to the exclusion of a general supervisory power to The Minister responsible for Part I of the Act.".

It is my belief that it is proper and appropriate and, in some circumstances, necessary, for the province to indicate to its agent its preference for a negotiated settlement of a dispute and the parameters within which a settlement would be acceptable. I don't believe anyone disputes that. That is essentially what I understood Mr. MacKay and Mr. MacKeigan to be doing.

The actual terms of the settlement were negotiated by the corporation. Mr. Fiske and I, and other representatives of the corporation, spent many hours considering the various negotiating positions of Sheraton and what responses or counter proposals we should advance. On occasion, I would check with Mr. MacKeigan to ensure that any proposals we were making were within the parameters that were acceptable to the shareholder. At the end of the day, by the time of the board meeting on May 20, 1997 - that was the board meeting at which the corporation had to decide whether or not to accept the negotiated terms that had been worked out to date because we had a pending arbitration waiting for us at the World Trade Centre at that point - although the province had indicated its preference for a settlement, it was for the board to decide how to proceed.

Although neither Mr. MacKay nor Mr. MacKeigan dictated terms to the corporation, I do agree with Mr. Fiske that their involvement did cause us some difficulty in the conduct of the negotiations. Because of the presence of the shareholder, it was difficult to get the Sheraton to deal solely with us or to take what we said as being firm. On several occasions when we would state our position the Sheraton representatives would turn to Mr. MacKeigan to confirm whether that was the real position of the province. Mr. Fiske and I shared some frustration at that occurring. It was for that reason that I asked, on occasions, for Mr. MacKeigan to confirm that what we said was completely backed by the province and on one occasion to absent himself from the negotiations.

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Mr. Fiske has referred to a meeting attended by Mr. MacKay, Mr. MacKeigan, Mr. Hayes and myself at which we were discussing the possibility of a settlement. I made the comment that whether we could achieve a settlement depended on how flexible the province was. I expected that Mr. MacKay and I would discuss that between us in private. Mr. MacKay, however, volunteered a comment to the effect that the province could be as flexible as necessary. That comment did bother me because, as a lawyer and thinking in lawyerly terms, I prefer in negotiations to avoid giving the opposite party any overly hopeful expectations. I do recall telling Mr. Fiske, following that meeting, that the comment weakened our position.

But let me make this point very clearly. The difficulty in negotiating that I have referred to is not what Mr. Fiske is alleging. The difficulty in negotiating is not to be confused with the shareholder directing the corporation, nor does it mean that any settlement ultimately negotiated was not reasonable in the circumstances. That is my point number one.

Point number two. I believe that the settlement was ultimately a reasonable one, bearing in mind all the factors that from my perspective I considered relevant. First, it is to be remembered that a good settlement usually means that both parties have made compromises. A settlement does not give either party all they might prefer.

Second, in my 31 years of litigation and advocacy, I have learned that a settlement is better than a fight, particularly when it involves two parties who are in a long-term corporate relationship. Entities who are sophisticated, knowledgeable and reasonable, can and should resolve their own difficulties. Unfortunately, some unnecessary court and arbitration battles take place simply because of personality clashes or unwarranted stubbornness.

Third, this was a long-term business relationship which had, conceivably, 20 years to go. From what I observed, it appeared that within the two years that had elapsed the relationship was already acrimonious and adversarial. If that continued, there would be long-term detrimental consequences for both sides. In my view, it was simply time to stop fighting. It should be remembered that the only issue submitted to arbitration was whether the corporation had wrongfully rejected design drawings and whether the Sheraton was entitled to an extension of the construction start date for the permanent Halifax casino. It would not result in the arbitrator straightening out the very fractured relationship.

Fourth, I understood that the fundamental objective of the corporation and the province was to get the permanent Halifax casino built as originally proposed and without further delay. It seemed reasonable that the best way to achieve that was to settle the dispute and move on. While an arbitration decision might put to rest the particular dispute, it would not necessarily lead to a cooperative working relationship which was what was needed to expedite the new casino.

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Fifth, in addition to getting the permanent casino built, the settlement did provide the corporation with further improvements in the original contract, including an opportunity to improve the concept of the permanent casino and better control over its design.

Sixth, there were risks of losing the arbitration. When I was first retained and instructed by the corporation, I understood that the key issue in the dispute was simply whether Sheraton had ever been given an extension of time for construction of the casino. Based on the documents, it seemed clear to me that the corporation had never given or agreed to an extension and that, accordingly, the corporation was in a strong legal position. I did express that view to the corporation and told them that it looked as if this was an open and shut case.

But as I reviewed more of the documentation and got a better feel for what had occurred between the parties, there was one area that concerned me. I came to the conclusion that there was evidence to support the contention that the province and the corporation had agreed with Sheraton that the original proposal for the casino was not in the best interests of the province and would not, ultimately, be built, and that the size and location would be reconsidered. Further that a scaled-down version located in the hotel was possible.

However, Mr. Fiske, subsequently advised me that the province and corporation had conclusively decided by the summer of 1996 that under no circumstances would they be prepared to consider the permanent casino being located in the Sheraton Hotel. Yet the corporation continued to indicate to Sheraton that it was prepared to receive and entertain a proposal for the casino being in the hotel. Therefore, although the corporation had gone on record as not waiving the construction schedule for the permanent casino, it was also telling Sheraton that it was prepared to consider alternate proposals, including locating in the hotel.

Sheraton could, therefore, argue that while on the one hand they were being told to maintain the construction schedule, the original casino would not ultimately be built, but they were also being urged to spend time and effort developing an alternative proposal even though, according to Mr. Fiske, the corporation had no intention of approving an alternative in the hotel. Sheraton could argue that as a result of trying to accommodate the wishes of the province, they had been put in a position where they could not meet the original construction deadline.

Of course, the "misunderstanding" may also have been merely a tactic on the part of Sheraton to try to avoid the original construction deadline, but whatever it was, it was my view that the evidence gave rise to a material risk that an arbitrator might consider that it was the Sheraton which was being unfairly treated and that, accordingly, an extension should be given. At the very least, the arbitrator might come to the conclusion that the parties had misunderstood each other, but even in that case, he might well grant an extension to accommodate the amount of time that had been wasted while the parties argued about the issue and try to bring it to arbitration. Remember, as well, that the arbitration was not

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scheduled to take place until a year after the original dispute had arisen, so, a considerable amount of time had been taken up before they had even gotten it to an arbitrator.

I discussed my concerns with Mr. Fiske prior to May 20th and also with the board at the time of its meeting on May 20th. Based on all that I knew, the motivation for the province urging a settlement was completely and adequately explained by the reasons I just listed. At no time was I ever made aware of any evidence to suggest that a settlement was desired for partisan political motives.

In summary, the view of the shareholder's desire to have a negotiated settlement were clearly and strongly expressed, but the ultimate decision was left to the corporation. The settlement itself had sufficient merit in the circumstances that at the end of the day I personally felt a reasonable resolution had been achieved and I had no difficulty in recommending its acceptance.

Mr. Chairman, that is my opening comment. I hope it gives some scope for questions. I will tell you that I have filed, with this committee, the two opinion letters that I did to the board which set out, in a little more detail, some of the information I have just described.

MR. CHAIRMAN: Thank you very much, Mr. Merrick. The two letters that Mr. Merrick refers to are dated May 20, 1997 and August 20, 1997.

We are now going to turn to the members of the committee who will ask questions. I will start with Mr. Dexter.

MR. DARRELL DEXTER: Good morning, Mr. Merrick. I guess the first question I would like to ask is also kind of a lawyerly question. Who, if anybody, did you meet with to prepare for coming before Public Accounts Committee this morning?

MR. MERRICK: I sat in at the press conference that was given last week on Tuesday. I met with Dara Gordon on a couple of occasions to discuss whether or not I should make an opening statement and I gave her, yesterday, a copy of my opening statement. I discussed the matter with Carl Holm on several occasions. I had the opportunity to review with him his chronological sequence which helped me somewhat in refreshing my memory. I had a telephone conversation, yesterday, with Robbie MacKeigan because I had told him that I would do the courtesy of giving him a copy of my opening statement if I was to make one.

MR. DEXTER: To be clear, did you say that you had a meeting, yesterday, with Dara Gordon as well?

MR. MERRICK: Yes, I did.

MR. DEXTER: Was there anyone else at that meeting?

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MR. MERRICK: No, it was just Dara and myself.

MR. DEXTER: And where did it take place?

MR. MERRICK: At her office, actually at her office and my office because the fire alarm went off in her building and we had to go over to my office. It was a moving meeting.

MR. DEXTER: I want to take us to the arbitration and the lead up to it. You indicated that you were called to a meeting at the Premier's Office. Now, that call, how did that come to you?

MR. MERRICK: I believe that I was told about that by Mr. Fiske. It did not come to me. Mr. Fiske told me that we had been summonsed to the Premier's Office and we went up together.

MR. DEXTER: What event caused that meeting to take place?

MR. MERRICK: I do not know that. All I know is that Mr. Fiske advised me that we had been asked to come up and meet with the Premier.

MR. DEXTER: Can you tell us who was actually at that meeting?

MR. MERRICK: To the best of my recollection it was the Premier, Mr. MacKay, Mr. MacKeigan, Mr. [Carl] Holm, and myself.

MR. DEXTER: Did it strike you odd that the minister responsible for the Gaming Corporation was not at the meeting?

MR. MERRICK: No, it did not.

MR. DEXTER: You said in your statement that there were advantages. Premier Savage, Mr. MacKay and Mr. MacKeigan said that there were advantages to settling. Did they say what those advantages were?

MR. MERRICK: Not at that meeting. My recollection at that point was that they wanted a briefing on the arbitration and what was happening. My impression was that they did not have much in the way of detail as to exactly what the dispute was about and what the merits of the case were. I know that Mr. MacKeigan was trying desperately to get up to speed on it because he had just been called on it. Nobody came out and said, here are five good reasons why you should settle. My only recollection is that there was a general comment that the province would prefer to have it settled.

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I know that later, in May, at the time that I had my telephone conversation with Mr. MacKeigan, prior to the May 20th board meeting, he illustrated several specific reasons by that point.

MR. DEXTER: You were not in the regular process of taking instructions from the Gaming Corporation. You had been brought in to deal with a particular set of circumstances that were leading up to the arbitration itself. Did it come to your attention how direction was to be given to the Gaming Corporation? You have referred a number of times to who the shareholder is. Did that relationship cause you any difficulty?

MR. MERRICK: No, it did not cause me difficulty. I knew from Mr. Fiske and the documentation and other information I was being given that there had been dialogue in the past. It had involved Mr. Boudreau. There had been communications and you have all of that in the chronology that has been filed. It seemed to me that whatever dialogue needed to be taking place was taking place at that point and there did not seem to be any problem.

MR. DEXTER: Well, Mr. Boudreau was the minister responsible, the Premier's Office though is a different kettle of fish. They are not in a direct supervisory capacity of the corporation.

MR. MERRICK: If you want to retain me for my for my legal opinion on that, I can give it to you, but my view at that point was, we were dealing with the province, the province it seemed to me spoke with one voice, and its ministers and its Premier were all part of that one voice. We were sitting in the Premier's Office being told it would be better to settle this than to fight about it, a message that I firmly believed in; no red flags went up in my mind as to why we were speaking to the particular people we were.

MR. DEXTER: The Act calls on the government and provides that the government can give direction, and it says very specifically, the Governor in Council can do that. It doesn't say the Premier's Office, and I don't know if this is your view or not, but it seems to me that those provisions usually mean that it is done by Order in Council, and that there is a specific policy reason for giving it a particular direction. None of that happened in this instance.

MR. MERRICK: No. I was never shown an Order in Council, but by the same token nor was I ever shown anything that said you must do such and such. All I was ever being told is, look, a settlement should be achieved if at all possible. The negotiated terms that you have managed to achieve with Sheraton are acceptable to us, if you want to know if they are within the operating parameters, take it to the board.

MR. DEXTER: Is there any doubt in your mind that this is what qualifies as the day-to-day operation of the Gaming Corporation?

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MR. MERRICK: Settlement of an arbitration?

MR. DEXTER: Yes.

MR. MERRICK: I would think that that can be a normal and routine function, but I also realize that on occasion it can become a larger issue because of broader policy considerations. There was a relationship problem that existed between the parties here, I mean by that, the corporation and Sheraton, which seemed to be a significant issue that also had to be dealt with apart from the particular issues in this particular arbitration dispute.

MR. DEXTER: I am not sure exactly what you are getting to there, Mr. Merrick. Beyond the commercial arbitration that was taking place between two commercial parties, how did you become aware of this overriding public policy issue that . . .

MR. MERRICK: The relationship problem? It was a very simple factual problem. As I became instructed on it, I became aware of the fact that there were difficulties in the communication. To begin with, I was told about the gag order that had been issued. I believe that Mr. Fiske told me that there had been some suggestions given to Sheraton that they should terminate one of their employees because of this. I became aware of the fact that the Sheraton, I thought perhaps in retaliation for that, had indicated that they didn't want to deal with Mr. Fiske. Those things surfaced as part of my factual investigation for the arbitration.

MR. DEXTER: But that is part of the commercial relationship between those two parties. What in that is a public policy issue, that you see?

MR. MERRICK: I would see that as being a broader issue, because the existence of a permanent casino in Halifax seems to strike a broad policy issue from time to time, and whether or not it was going to work successfully and profitably for the province, seemed to be me to be a broader issue.

MR. DEXTER: There was nothing in this arbitration that was going to stop the casino from being built. Is that correct?

MR. MERRICK: There was potentially a further delay in the construction of the casino.

MR. DEXTER: Well, we ended up with a delay anyway, didn't we? We ended up with an extension?

MR. MERRICK: That's right. Yes.

MR. DEXTER: In fact, what happened as a result of the arbitration is, we ended up with the worst case scenario. What Sheraton wanted, they got.

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MR. MERRICK: I don't agree with that.

MR. DEXTER: Well, then tell me why not? Did they get the extension they wanted?

MR. MERRICK: No, they didn't. Not at the time. The negotiated terms that we had hammered out on May 20th were for a construction completion date in May 1999, I believe the year was, which was earlier than Sheraton wanted. We understood, and I gave some credibility to this, that that was the earliest that they could physically, possibly, do it. We were also given an opportunity to rethink the original concept of the casino, and there had been a tremendous amount of discussion with consultants, et cetera, as to whether the original concept was really the workable one.

MR. DEXTER: There was a construction contract in place with Sheraton that called for the building of the casino. It called for the amount of money that was going to be spent on it. It called for design criteria. That was not an issue before the arbitration?

MR. MERRICK: No, the only part of that was whether or not the corporation had improperly rejected the design drawings and whether there was an extension.

MR. DEXTER: So the physical building of the new casino was not at issue, that was going to happen?

MR. MERRICK: Legally, it was required to happen. There had been a tremendous amount of discussion though as to whether or not it should happen and whether the province was agreeable to it not happening.

MR. DEXTER: Well, that may be and there is probably nobody in this province who is more familiar with that construction contract than you are, I think that is fair to say, wouldn't you? You have gone over it pretty carefully.

MR. MERRICK: I would defer to Mr. [Carl] Holm. I was retained to deal with one fire.

MR. DEXTER: You would know that the terms of that construction contract mean that it can't be amended except in writing, under terms that are agreeable to both parties. They couldn't be under any misapprehension about that?

MR. MERRICK: No, the contract was specific that way.

MR. DEXTER: In the end, what we have here and you indicate this kind of at the end of your statement when you talk about whether or not what Sheraton is aiming for is a delay. I mean what they did is, when it became time for them to submit designs that were capable

[Page 15]

of being reviewed for their architectural soundness and their fitness, they didn't submit them. Is that right?

MR. MERRICK: They resubmitted what had already been proposed, which we felt very clearly was not adequate.

MR. DEXTER: Sure, because those were concept drawings?

MR. MERRICK: That's right, but they resubmitted them at a point in time where they apparently had been told by the province that the original design was not to be built and Sheraton was arguing, validly or not, look, you have told us that you don't want the original concept as originally proposed, we now have this deadline coming up on us within a couple of weeks when we have to submit more detailed design drawings, what are we to do because you haven't told us what you do want. We are going to resubmit the originals to satisfy the technical wording of the contract and hopefully we can work through it.

MR. DEXTER: Well, my understanding from what you have said here is, in fact, that they were directed very specifically in writing that the construction deadline would be met, had to be met and they should have been under no apprehension whatsoever. I mean it is not unusual for somebody to say, look, here is the detail of your contract, you have to fulfil it. If you want to put forward some other proposal at your own risk, you go ahead and do that but you understand that you have to fulfil the terms of your contract. That wouldn't be unusual?

MR. MERRICK: No and very clearly the corporation was saying that, we are not waiving the construction completion date. What concerned me was that the corporation and the province may also have been saying to Sheraton, we agree that we will not build the permanent, we agree there should be a scaled-down one.

MR. DEXTER: Well, let's be specific about this. Who at the province was saying that? If it wasn't the Gaming Corporation, who was telling Sheraton that you may not have to build this casino?

MR. MERRICK: I was provided with newspaper clippings of interviews which were given by Mr. Boudreau and Mr. Fiske in May 1996 that said that.

MR. DEXTER: Your understanding was that as a result of press clippings, the Sheraton, which is a multinational corporation with as much legal know-how as the Gaming Corporation, certainly, was going to be misled by some press releases?

MR. MERRICK: My concern was that they might convince an arbitrator that while they were being told to meet the original construction completion date, they were also being told that the original casino was not going to be built, that everybody had agreed on that, and that a smaller, scaled-down version would be built and it would be built in the hotel and that

[Page 16]

they might get the sympathy of an arbitrator in saying, look, we are being put into a real jam here and that is what caused us to not be able to meet the construction date.

MR. DEXTER: Well, that's certainly the arguable side of that case, but the end of that would be that they would get the extension that in the event they got anyway?

MR. MERRICK: Ultimately, they got the extension that probably would have been the best they would have gotten under arbitration or the worst they would have gotten under arbitration.

MR. DEXTER: So from the Gaming Corporation's point of view, it ends up in its worst case scenario?

MR. MERRICK: Not in the worst case scenario. They also got an improved - I am told it is improved, I don't know these things - casino and they got a better control over the design of it.

MR. DEXTER: The reason why they needed to negotiate the amendment to the contract with respect to the design is because apparently, as a result of this, there wasn't sufficient regulation or sufficient wording in the clause of the contract to see to it that Sheraton was actually going to come up with the designs that the Gaming Corporation originally expected to receive?

MR. MERRICK: No, I did not say that. The original design drawings that they submitted admittedly did not meet the requirements of the contract, we felt, and I am reasonably confident of that. What they should have been required to submit, under the original terms of the contract, was a more detailed design set of drawings. What we negotiated with in this part of the settlement was an even better control, an even more detailed, ongoing, running approval basis for approval of design drawings than even the original contract had provided.

MR. DEXTER: Well, the Gaming Corporation, in the end, had the right to approve or not approve the design in any event, did it not?

MR. MERRICK: To a certain level. Only to the level that was defined in the original contract, and I forget the buzz words that they used, something like, conceptual drawings. Remember, this was a casino that ultimately was going to wind up being owned by the province. So, the province had some legitimate reason to say, we want as much control over how it will be built, what it will look like, and the quality of construction as they could get. We managed to improve on that. Now, whether that improvement was worth it in the long run, whether that improvement justified the delay and the expense, others will have to determine.

[Page 17]

MR. DEXTER: In addition to giving the extension out, the province gave up the penalty provisions that would have normally kicked in at that point in time. You had expressed your own opinion, in one of the pieces of correspondence, with respect to the whole question of what happens when you allow the amortization of the capital costs to be stretched out over a much longer period of time, and that was going to cause a net loss to the province. That was your opinion at that time, was it not?

MR. MERRICK: That is right. Now, I am not going to suggest that I understood all the financial calculations, but my instructions at that time were that if there was a delay, there would be a cost to the province. The exact amount of that cost continually kept changing somewhat as people tried to come to grips with it, but there was a cost.

MR. DEXTER: I just want to get straight, in my own mind, what the end result is. I know that my time is rapidly coming to an end here. What happened was, the Gaming Corporation ended up, as a result of this settlement, giving Sheraton the extension that it wanted, giving up the penalties that would otherwise have been received by the Province of Nova Scotia, gave up or potentially took losses because the capital costs had been pushed out over a longer period of time and, in return for all of that, received some better control over the design of the casino?

MR. MERRICK: And a better concept and, most importantly of all, in May 1997 we got the commitment that finally the permanent casino was going to go ahead, there was going to be no further bickering or fighting or anything, and we see the pillars out there today. I am not sure that those pillars would be sitting there if we had not settled the arbitration. That is speculation on my part.

MR. DEXTER: Well, the construction contract was in place and, as you said earlier in your testimony here, the extension that Sheraton got was probably the worst case scenario for the Gaming Corporation at arbitration anyway. That is what you said earlier.

MR. MERRICK: No, I said it wasn't the worst case. I said there were improvements that we got on it. Now, whether those improvements were a valid trade-off for the extension of time and a valid trade-off for giving up the arbitration, others can judge.

MR. DEXTER: I'm not talking about improvements in design. What I'm talking about is the extension to the beginning of construction which was extended to the degree that was of the greatest benefit to Sheraton and of least consequence to the Gaming Corporation.

MR. MERRICK: All I can tell you is that the terms that were negotiated by May 20th provided for an accelerated date for construction completion, earlier than what Sheraton wanted. What happened to those terms in the following number of months, I was not involved with and I can't speak to.

[Page 18]

MR. DEXTER: My final question has to do with the letter that you wrote on May 20, 1997. In that letter in the third last paragraph, you state, "If the shareholder then clearly expresses its desire that a course of action should be followed, it is my opinion that the Board of Directors must ultimately accede to the wish of the shareholder.". That was the position that the board found itself in at that time, is that right? Is that accurate?

MR. MERRICK: The way I stated it in my letter is accurate.

MR. CHAIRMAN: I would like to now move to Mr. Fage. He and his colleagues, 20 minutes.

MR. FAGE: Mr. Chairman, I will begin and then my colleagues can finish up the time.

Good morning, Mr. Merrick, I would like to ask a question that is pertinent to the questions Mr. Dexter was asking. During the last number of statements, you were saying, I was following my instructions. Who was giving the instructions during that phase of the talks or negotiations?

MR. MERRICK: Primarily Mr. Fiske. At one point, and my recollection is that was just toward the last couple of days before the reconvened arbitration proceeding, and in particular that weekend of, I think it was May 17th, 18th, on a couple of occasions when I would go to Mr. Fiske and say, what do we do, how do we respond to this proposal from Sheraton? He would ask me to check with Mr. MacKeigan and see what the province's response was. Invariably Mr. MacKeigan would come back and ask me, what is the corporation's response? It would then go back to Mr. Fiske.

MR. FAGE: On that particular point, when I read through your letter of May 20th, on the third page it goes through an exchange which leaves no determination of how you received an instruction or what the instruction was. When it came to the point where instead of going to arbitration you were dealing with Mr. MacKeigan straight from Mr. MacKay, was that where the instruction was coming from, that we should not go to arbitration, that we should meet and cut a deal with Sheraton?

MR. MERRICK: That weekend in May - as I said, I think it was May 17th - I recall that there had been a counter-proposal or something from Sheraton on the Friday night or Saturday morning. I remember reporting that to Mr. Fiske, he wanted me to go to Mr. MacKeigan, Mr. MacKeigan wanted to know the position of the corporation, I went back to the corporation. I then did not hear anything until at least late Sunday night or early Monday morning, and assumed that I had been out of the loop at that point.

At some point I became aware that nothing had happened, and the next development, I believe, was my telephone conversation with Mr. MacKeigan on the evening before the commencement of the arbitration when he told me that the province considered that there

[Page 19]

were - and I am not sure if he used the words, the province, but he wanted me to be sure that I was aware of the - advantages in making this settlement, and they are listed in my letter. He wanted to be sure that I would repeat those advantages to the board.

I asked him, are you directing us to accept that settlement? He very carefully said, no he wasn't, he was merely wanting for me to know that there were advantages, and he wanted to be sure that those advantages were known by the board. I conveyed those advantages to the board.

MR. FAGE: So, you were retained by the Gaming Corporation. As you stated, the period of May 6th to May 20th was your tenure. Is that correct?

MR. MERRICK: Yes. I had some peripheral dealings following May 20th, but at that point it basically shifted back to Mr. [Carl] Holm to complete the negotiations and do whatever else was done. I had some minor involvements following that, but nothing material.

MR. FAGE: If that is the sequence of events and those are the facts, that you were retained by the Gaming Corporation, were you retained for advice or for negotiation?

MR. MERRICK: I was retained to fight the arbitration. I have a feeling that Mr. Fiske wanted a very aggressive spear-chucker, and that is what I was retained to do. I also had the feeling that as I began to moderate a little bit on just how open and shut this case was, that that may have been somewhat disappointing to Mr. Fiske. But I was basically retained to fight the arbitration. Now inevitably, you then become involved in negotiations, when they start to resolve the arbitration.

MR. FAGE: It appears as I read your correspondence of May 20th, and when I read the one that you reproduced for Mr. [Carl] Holm of August 20th, that who you are taking instructions from or input from begins to evolve to the Premier's Office rather than the corporation. When one looks at the consequences of going to arbitration, whether it would have been successful or not, and the ultimate decision was made to make the deal rather than go to arbitration, that you had become an advocate during this process that the risk was too high, and that the instructions of the Premier's Office were the ones you were conveying to the corporation and Mr. Fiske as the advice given.

MR. MERRICK: No, sir. I never took instructions from the Premier's Office. I sat in on one meeting at the Premier's Office when views were expressed that I have recited to you today. I never took instructions as such from Mr. MacKeigan or from Mr. MacKay. I did on occasion go to Mr. MacKeigan and say, look, here is the status of the negotiations, here are the terms that are being proposed and counter-proposed. If we were to settle on these terms, would that be acceptable to the shareholder and I would seek his views as to whether they were or were not. Whether or not we were to go back to Sheraton and say yes or no, I always took those instructions from Mr. Fiske.

[Page 20]

Secondly, I at no time said that we were now going to lose the arbitration nor did I say that there was a big risk that we would lose it. I chose my words very carefully. There was a material risk that the arbitrator might grant equitable relief to the Sheraton. What is meant by material is that it is not a hypothetical risk, it is one that is significant enough you have got to take it into account.

MR. FAGE: A couple of moments ago though you had said to me that during that telephone conversation when you felt you were out of the loop, and you had asked the question are you instructing me, yes or no, Mr. MacKeigan, or through Mr. MacKay to Mr. MacKeigan, that he listed to you those advantages, is that not when he listed those instructions of why it should happen? That is why I am asking that question, Mr. Merrick.

MR. MERRICK: I was wanting to know, was this an instruction or was this merely a strongly-worded view as to what we should do. I asked the question point-blank are you telling us this is what we should do. He said, no, we are not telling what you should do. It is for the board to decide but he said I want to make sure that the positive side of this settlement is known to the board and he wanted to make sure I was aware of it.

The advantages of the settlement, of course, we had been kicking around for a little while at that point. I agreed that I would at least ensure that the board was fully advised as to those advantages.

MR. FAGE: During this process, it concerns me a great deal that the Premier's Office would become directly involved rather than the minister's office and the officials connected to the Premier's Office seem to have taken the lead. You have stated in here a couple times where Mr. Fiske and yourself were both disconcerned with the advantage given to Sheraton in the negotiating position by statements by those officials for Mr. MacKeigan. Does it not seem very strange that the Premier's own staff would be dealing directly with Sheraton giving away advantages from your negotiating position that the arbitration would come up? Does that not seem extremely strange in this case?

MR. MERRICK: On the point of Mr. MacKay's voluntary outburst that the province could be as flexible as needed, that bothers me because as a negotiator I like to take as hard a line as I can and to ensure that I am not giving any signals away, verbal or non-verbal, to the other side. I remember that I got a little perturbed by that and Mr. Fiske is probably right, that I went back and was perturbed about it. In the long run I do not think that it made that much difference but as an aspect of negotiating mechanisms it bothered me.

MR. FAGE: But I would suggest - and I mean we all negotiate a little bit now and then - any time that you directly verbally and telepath to the person you are negotiating with that everything is possible and you may have it by a verbal commitment with the party that is supposed to be doing the official negotiation on behalf of the province, that being the Gaming Corporation, that (a) there has to be a direct link for that to be done in the first place

[Page 21]

or it would suggest that; and (b) you have just made a misstatement as negotiator that Sheraton, we are agreeable to any terms that you would like to do. I do not think you can understate the significance, whether that was a slip or intentional, of what that has done to the negotiations and how that undermined the situation for the Province of Nova Scotia on $20 million of possible revenue to this province if other sequences or roots of negotiation had occurred.

The significance of that statement and who said it, when it was said to those negotiations possibly could have cost, as Mr. Fiske suggests, the Province of Nova Scotia $20 million in revenue. I don't think you can understate what that meant, if you are sitting across the table, and I feel that you and I both know that you can't understate that.

[11:00 a.m.]

MR. MERRICK: I know that it was not the bargaining way that I would have liked to see it go. What effect it had is a separate issue that has to be assessed. Whether it had any effect or whether it had a great effect. Let me just address the first part of your question for a second though. You indicated that Mr. MacKay's involvement perhaps was unusual at that point, remember that that meeting took place at a stage where there was an attempt being made to try to convince Sheraton that whatever the Gaming Corporation said was valid, and there had been discussions about having a meeting to bang heads together. There had been discussions about a high-level meeting with Sheraton. It was in that context that the meeting was set up with Mr. MacKay.

MR. FAGE: I think that points out though a situation, and it keeps drawing back to the same basic question, why would you establish a Gaming Corporation to regulate, protect, promote the gambling industry and primarily in this case, the casino industry if Sheraton was going to deal directly with the Premier's Office for the negotiation anyway? Why would the taxpayers of Nova Scotia be satisfied to have a Gaming Corporation that at the end of the day, didn't take part in the negotiation? That appears to be what has happened here. The negotiation was conducted, agreed upon, and the Gaming Corporation was asked to rubber stamp it when it was done.

MR. MERRICK: Let me make it very clear. The thing that Mr. MacKeigan and Mr. MacKay were doing is saying that they would prefer to see this settled, the negotiations that took place, the nuts and bolts of the deal were negotiated by Mr. Fiske, others at the Gaming Corporation, with my involvement as well. I would well imagine that if a Gaming Corporation was established to run the affairs of the province, and began to get into a tremendously acrimonious relationship with the operator, such that it was impeding the operation of the casinos for the detriment of the province, many people would say it was only proper and appropriate that the province, whoever, would step in to try to sort out the affairs.

[Page 22]

MR. FAGE: But I think those two statements clearly indicate that the Gaming Corporation is to regulate the industry, . . .

MR. MERRICK; Not regulate, manage.

MR. FAGE: . . . manage or promote the industry. I think those are critical things, because when Mr. MacKay made his statement that the government would be as flexible as possible, or very flexible on any issue, it clearly states that the negotiation is being conducted from the Premier's Office not the Gaming Corporation, and the Gaming Corporation will agree to whatever settlement comes about after that point. Because clearly that states to ITT and Sheraton that whatever you want, you may have.

MR. MERRICK: Remember when this meeting took place. There is no doubt, it upset me as a piece of negotiating tactic, but remember when the meeting took place was very late in the game. It had occurred after much of the groundwork for the terms that were ultimately negotiated upon, had already been discussed, bounced back and forth, modified somewhat, et cetera. I can't tell you from memory, how much difference there was in the negotiating position or the ultimate settlement position from what existed prior to the meeting, to measure how much flexibility there had been anyway. I don't think that there was a great deal at that point.

MR. FAGE: At this point Mr. Chairman, I would like to turn it over to my colleague.

MR. BAKER: I guess the first question is as an advocate. Is it fair to say that you were confident in the success in the arbitration proceedings, and that that was the message that you consistently sent to Mr. Fiske and others you spoke with?

MR. MERRICK: At the beginning, yes I was. In fact, I remember saying to Mr. Fiske, there is something wrong here, we should be hearing settlement overtures from the other side, because whenever you have an absolutely open-and-shut case, if the other side is a reasonable party, you expect them to come talk to you, or you begin to wonder if you really have the right grasp on it.

MR. BAKER: I guess what I am trying to explore is the fact that you were confident in your case, and even when you became aware of the press clippings, for example.

MR. MERRICK: No, I was beginning to have concerns at that point that perhaps there was some other perspective that could be put on the evidence that I had understood. It sort of developed, and exactly when I began to get seriously concerned about that, I can't pinpoint for you, but I know that by May and certainly by probably two weeks prior to the reconvening of the arbitration hearing, I had serious concerns. A watershed time for me, or a very significant point was when Mr. Fiske told me that under no circumstances was there

[Page 23]

ever going to be a casino in the hotel. I had not been aware of that at the early stage of the game, that there had been a final decision made on that.

MR. BAKER: I guess the obvious question is that given the fact that you had started out confident, you became increasingly aware, were then you telling your client - I assume you treated the Gaming Corporation as your client - we are going to lose? I am trying to get a sense of what you are conveying to your client and the sense I got from your evidence is that what you were saying to your client is that I am confident that we are going to win, even after you became aware of the press clippings and so forth, but that there is some chance that they could be successful. Is that a fair way of characterizing what the general tenor of your sentiments were at the tail end of the situation?

MR. MERRICK: I think that would be correct. I would have continued to say that I thought we had the winning side on this but we now have a material risk that I had not assessed before.

MR. BAKER: That is right. But that is not uncommon in litigation, is it, Mr. Merrick?

MR. MERRICK: No.

MR. BAKER: So that would not have caused you a tremendous amount of concern? I am sure you have had lots of cases in your experience over those many years where there has been a material risk you could be less than completely successful?

MR. MERRICK: Well, it is a significant thing because what it does is it alters your perspective as to what advice you give your client, obviously, and it certainly alters your perspective as to what may be a reasonable settlement if your views are asked.

MR. BAKER: I just want to turn very briefly to the conversation made by Mr. MacKay that indicated that you, or that the province would basically agree to anything. Let us be candid, Mr. Merrick, as an advocate does that not significantly undermine your ability to negotiate the best deal for your client?

MR. MERRICK: He did not say anything. He said we can be as flexible as necessary; but I agree with you. That is not what you want your client saying or somebody speaking with authority with your client when you are negotiating face to face with the other side. My preference would have been to say I do not think there is much flexibility left here at all and do a little table pounding, or whatever you do, and try to make the best of it.

MR. BAKER: Didn't that approach strike you as odd given that you are taking instructions from Mr. Fiske and you have characterized Mr. Fiske I guess as having a fairly aggressive view of the matter and your client is represented by Mr. Fiske as the head of the organization. Didn't those two points of view seem diametrically opposed?

[Page 24]

MR. MERRICK: No, and let me give you a little context. Through the piece, at least certainly when we began negotiations with the Sheraton, Mr. Fiske on occasion would tell me that there was political significance to this, that there had to be sensitivity to the political consequences of any settlement that might be achieved, or whether we would arbitrate or not arbitrate and this sort of thing.

I deferred to his political sensitivity or antenna on that. As a result of that I know that care was being taken to ensure that whatever settlement might be negotiated by the corporation was run by the province to ensure that it was acceptable to them, not only as shareholder but I suspect also because of the "political sensitivities", whatever they might be.

MR. BAKER: One other question before my time runs out here, subsequent did you have any dealings with the MacLellan Government with respect to the casino and, in particular, with respect to the negotiations that led to you being here today?

MR. MERRICK: The only subsequent involvement of any substance, I had some peripheral things dealing with the windup of this particular arbitration that petered out over the summer of 1997, I have been subsequently retained on a second arbitration matter that went to arbitration, was settled at arbitration by a decision. That is essentially it. I have had no dealings with the MacLellan Government. I have had no conversations with anybody other than Corporation officials.

MR. BAKER: So, I am taking it that you have not had discussions with Peter MacLellan on this matter?

MR. MERRICK: No, no, I have not.

MR. CHAIRMAN: Mr. MacKinnon now.

MR. MACKINNON: Mr. Merrick, through you, Mr. Chairman, you have indicated in your presentation that within a two year period the relationship between the Gaming Corporation and the Sheraton Group had become somewhat acrimonious and adversarial and at the same time you have indicated you took your instructions from Mr. Fiske. Am I understanding you correctly?

MR. MERRICK: Yes.

MR. MACKINNON: I am trying to rationalize this issue of interference versus interventions and fast forwarding a bit. Could you please indicate to the committee what you feel were the risks of going to arbitration, the worst-case scenario for the province and the taxpayers of Nova Scotia?

[Page 25]

MR. MERRICK: I have tried to summarize them in my opening statement and I have set them out in the two opinion letters that I gave to the board.

MR. MACKINNON: In simple language.

MR. MERRICK: The major risk I guess was that we might well go through arbitration and wind up with an extension on the construction completion date that was greater than we were able to settle for. That was the major risk. The real reason why I walked away from the board meeting and the settlement of the arbitration that day, thinking to myself that a reasonable resolution had been done, was not solely because we had avoided risks but that we had put to bed a commercial dispute between two commercial entities that was holding up a matter of considerable importance, so I understood, to the Gaming Corporation and that was full steam ahead on the permanent casino. So it was the advantages of the settlement that I think would have been more in my mind than just the risks.

MR. MACKINNON: Have you done many negotiations like this over your lifetime career?

MR. MERRICK: I am a spear-chucker I said which means that I am a litigation lawyer. I have been a litigation lawyer for 31 years. I have not been in court now for a long time. I settle 95 per cent of my cases because 95 per cent of cases have reasonable people on both sides and reasonable people on both sides can settle their own disputes much better than anybody else. Yes, I have done some negotiations.

MR. MACKINNON: This is certainly your area of expertise, I guess, one would gather. You have stated here, today, that you have encountered some difficulties during the negotiation with the Sheraton because of, I believe as you have indicated, Mr. MacKeigan's occasional presence. In spite of this here, did you negotiate the terms of the settlement or did Mr. MacKeigan negotiate the terms of the settlement?

MR. MERRICK: I was heavily involved in the negotiation of those terms. What would happen is that we would receive a proposal from Sheraton, or we would make a proposal to Sheraton, and Mr. Fiske and I, and on occasion Mr. [Carl] Holm, and on occasion other staff from the corporation, would decide how we were going to make our proposal or how we were going to respond to the counterproposal. The only thing that I did, and I have no specific recollection of this, is that if we were about to make a proposal or if we were about to consider accepting the terms that had been made to us, is that I believe on a couple of occasions I called Mr. MacKeigan and said, look, this is what we either intend to propose or this is what we intend to accept, have you got any problems with that because if you have, you better tell us now.

[Page 26]

The only thing that I would ever get back from him would be either go ahead - he never said to me here is a term that you must negotiate or here is a term that we want, he was not involved in the negotiations as such. If it were not for the fact that he was acting on behalf of Mr. MacKay, and I assume the province, he would have been acting completely in the role of a facilitator. That is exactly what he did.

The only thing it caused as difficulty is that not only was he truly a facilitator but Sheraton - and I would do the same if I were them - would tend to look at him just to make sure that he was nodding when Merrick said something.

MR. MACKINNON: So we are going to be very clear. Mr. MacKeigan was the facilitator and you were the deal maker?

MR. MERRICK: I was the lawyer who was taking the point on the negotiations, that is right.

MR. MACKINNON: From who?

MR. MERRICK: The instructions?

MR. MACKINNON: Yes.

MR. MERRICK: Mr. Fiske.

MR. MACKINNON: Mr. Fiske. Thank you. I guess in summary, there was nothing coercive or bearing to the point that it would make you feel uncomfortable. It was just normal, heavy, day-to-day negotiations. Some deals are a little tougher than others. This was a very complex and heavy deal that you used your talents.

MR. MERRICK: No, let me be candid. Mr. Fiske had a very strong view of the Sheraton's motives and what they were really up to. Whether or not his view was correct is for somebody else to judge. He was very hesitant to negotiate a settlement with them and he didn't like the idea of a settlement with them. So he was not enthusiastically endorsing everything that was going on but, as we would sit there in that hot office at the corporation and talk about what we should do, all these things had to go into the mix, including the fact that there may have been political sensitivities about this casino. I don't know that but occasionally he would refer to them.

We would look at the advantages. I would be my lawyerly self and say here are some pros and cons. Here is what happens if we lose. Here is the range of potential extensions the arbitrator may give us and all of those things would go into the soup. As a result, we got the bowl of soup that we did. It was somewhat unusual in that this was a client - Mr. Fiske, individually, was a client - who was being very hesitant about wanting to make peace on this

[Page 27]

point. I think he believed that making peace on this issue was not going to do anything, that it was a throw-away, that we would still be in the mess that we were then in. So he was reluctantly taking part in this but he took part.

MR. MACKINNON: Was that Mr. Fiske's view or is that universally shared? This fear that Mr. Fiske indicated to you, was this his . . .

MR. MERRICK: I think that it was a view that had developed at the corporation over time. I think that there were some factual circumstances that reasonably gave rise to that view. On the other hand, I think there were some reasonable circumstances that would cause an objective observer to say, wait a minute, there is also a different perspective on this.

I am going to speak now beyond my role as a narrow spear-chucker because I am more than that. It was my view that there was a reasonable possibility that these were two ships passing in the night. One was talking blue and one was talking green and they were getting really mad at each other that they weren't acknowledging that the other was seeing a slightly different colour.

MR. MACKINNON: Thank you.

MR. CHAIRMAN: Mr. Samson.

MR. MICHEL SAMSON: Mr. Merrick, going back to Mr. Baker's questioning earlier, he spoke about the material risks that you referred to in arbitration. Mr. Baker tried to kind of minimize that concern that you had but that was a serious concern that you did actually have about arbitration, wasn't it?

MR. MERRICK: I chose my words very carefully in that opinion letter. I said it was a material risk. I do not like saying you have a 43 per cent chance of winning or losing, although occasionally I do slip and say that. It was sufficiently material that I felt the client had to take it into account in evaluating a settlement term.

MR. SAMSON: In your opinion, was it better to seek a settlement and avoid arbitration?

MR. MERRICK: In this case, yes. No doubt about it.

MR. SAMSON: Did you recommend a negotiated settlement to the board of the Gaming Corporation?

[Page 28]

MR. MERRICK: Yes, I did. I did so recognizing that maybe all the things that they feared, or that Mr. Fiske also feared, may have been true and that we were merely giving the Sheraton one more thing that they wanted but ultimately, on balancing everything, I recommended it.

MR. SAMSON: Did the board accept your advice?

MR. MERRICK: I understood that they did.

MR. SAMSON: Mr. Merrick, looking back on the situation, do you still stand firm on the position that you adopted at that time?

MR. MERRICK: Yes, sir. If it could be proven that the province recommended strongly to the corporation that a settlement be entered into for partisan political motives, for example, purely hypothetically, to assist somebody in a leadership campaign, then that is wrong. If that can be proven, then it should be opened up to the public and condemned but I see no evidence of that and I was not aware of any evidence of that from my involvement in these negotiations. Today, on the basis of the evidence that I know, I am still satisfied that that was a reasonable settlement to negotiate.

MR. SAMSON: And you are still satisfied that from your personal knowledge there was none of this political interference that we have heard allegations about as far as you are concerned?

MR. MERRICK: I have seen no evidence that there was political interference for wrongful reasons. There were strong views being expressed by the shareholder.

MR. SAMSON: Is that uncommon for a shareholder in cases of negotiations to hold a strong view when you are going into such negotiations?

MR. MERRICK: If I were a Premier, or if I were a minister and I felt that for the best interests of the province to get a permanent casino built, I should step in and express my wish that the corporation try to make peace, not war, I would do it. I would feel derelict in my duty if I did not.

MR. SAMSON: Mr. Merrick, I am going to refer you to Page 22 of Hansard when Mr. Fiske appeared before us last week and I am just going to read a passage to you, the last passage on that page.

"According to the report I later received from Mr. Merrick, Bob MacKay advised Messrs. Merrick, MacKeigan, and Hayes that the Premier and Cabinet wanted the arbitration settled quickly and that the Gaming Corporation would have to do what was required to get the matter settled. I

[Page 29]

do not recall the specific words that Mr. Merrick reported to me. Knowing his thoroughness, I am sure both Mr. Merrick's notes and memory can tell you how he felt after that meeting. I do recall him coming to my office. He was in total disbelief. He said the negotiations with Sheraton were all over, that Bob MacKay had effectively given the Sheraton everything and that his comments made in the presence of Larry Hayes ensured that any remaining bargaining position we had was destroyed. I repeat, John Merrick was in disbelief that the Deputy Minister to the Premier would so blatantly instruct the Gaming Corporation lawyer, in the presence of the Sheraton lawyer, to do what had to be done to get a deal. Knowing the province's desperation for a deal, the Sheraton could now effectively write its own terms which is, by and large, exactly what happened."

Mr. Merrick, I would ask you if you could please comment on this statement made by Mr. Fiske and if it is your position that following this meeting the corporation's bargaining position was completely destroyed?

MR. MERRICK: No, I think that is putting it too strongly. I was ticked off. I was as ticked off as any lawyer would be if when sitting in negotiations, your client had said let us settle this, John, we can make peace with the other side. You want to put a bag over their head and say, quick, outside, we want to have a little talk between the two of us. So I was ticked off. I did believe that it gave a very wrong signal to Mr. Hayes, who is very astute and, hell, it was a blunt signal, and that it did not help us and that it weakened us. I was perturbed. I do not think I would say that I was in disbelief but I was perturbed.

What effect it had I do not know and at that point I am not sure how much of the final settlement had already been pretty well discussed between the parties. So I am not sure how much distance there was yet to go. The only thing I think we were basically arguing about was how far the construction completion date would be extended. My general recollection is that we tied that down to May 15th which was about as tight as I thought that we could have gotten it, period.

MR. SAMSON: Mr. Merrick, is it true that you stated to Ralph Fiske that Bob MacKay following that meeting had effectively given the Sheraton everything it wanted?

MR. MERRICK: I do not recall saying that. My recollection is that I would have said that it did not help our bargaining position. It, in effect, indicated to the Sheraton that we might have, I am being lawyerly now in my response but something to the effect, in much more direct and blunt terms, that it signalled to the Sheraton that there is more in my goody bag than I have said was in there because my approach would have been we cannot do it, we cannot do it, we cannot do it, the bag is empty. What Mr. MacKay finally said was, well, there is a little more something in the bag, Merrick. Well, that was the extent, or that was the context of my concern.

[Page 30]

MR. SAMSON: Following that meeting is it your opinion, today, that any subsequent negotiations that reached the settlement were a complete waste of time?

MR. MERRICK: No.

MR. SAMSON: Mr. Merrick, is it your opinion that you did during your negotiations on behalf of the Gaming Corporation of Nova Scotia give Sheraton everything it wanted?

MR. MERRICK: No. I am not 100 per cent sure what they really wanted but they were looking for construction completion dates going to September. They were offering to pay a little bit of money for it. My instructions were that the amount of money concerned was not material. What was very important was to get that permanent casino constructed as soon as we could. May 15th, I understood, was probably pushing them about as tight as could be done.

The other thing we were taking instructions on was whatever the original contract said and whatever terms we might negotiate, what was actually physically possible for them to do because if they could not build it any sooner than that anyway, all we would be looking at is that relatively nominal daily penalty if they missed that.

MR. SAMSON: Mr. Merrick, would it be your summation that at the time you came into the situation, relationships between the parties - as you said, it was two ships heading on a collision - that it was almost like a hostile environment, things were not going well, there was a lot of hard feelings, frustration on behalf of the parties, and that people were coming, I guess to the end of their rope. Would that be a fair statement to make?

MR. MERRICK: I don't know if they were coming to the end of their rope, but it certainly was not a cooperative working business relationship. This was basically a commercial business relationship that had to go for a number of years, and it was not at the level that it should have been. Now, I am not saying that the Sheraton was in fact misled by the province, and I am not saying that the Sheraton might have been lily-white in this, and by gosh they got misled, maybe they were lying in the weeds, as Mr. Fiske suggested. But I saw evidence that suggested that maybe they were two ships, not on a collision course, but passing each other.

MR. SAMSON: Mr. Merrick, in your legal opinion, based on your understanding of gambling under the Criminal Code of Canada, and the provisions of the Nova Scotia Gaming Corporation Act, did the presence of the shareholder during negotiations with the Sheraton represent a breach of either of those Acts?

MR. MERRICK: That is a good legal question that you are popping on me, and I am not going to give you an answer to it. I would have to take a look at that. I am using a lawyerly duck on this, I don't feel comfortable answering that.

[Page 31]

MR. SAMSON: Okay, no problem. Just a final question, Mr. Merrick.

MR. CHAIRMAN: I see nods from some of the members of the committee. I don't take that as a refusal to answer, but a statement that it would require further research and contemplation?

MR. MERRICK: That is right, I am not refusing, I just don't have an answer.

MR. SAMSON: Mr. Merrick, in your 31 years of experience as a member of the Bar, you have indicated that 95 per cent of your cases, you have settled. Is it your opinion today that as the lawyer hired by Carl Holm, on behalf of the Gaming Corporation, did you fail the taxpayers of Nova Scotia and the Nova Scotia Gaming Corporation in the deal that you negotiated?

MR. MERRICK: How do you expect me to answer that one? I will tell you that as I walked back to my office that day, I felt that we had achieved a reasonable resolution. I felt that in my inner, instinctive lawyer, individual taxpayer, Nova Scotian self. I still feel that.

MR. SAMSON: Thank you, Mr. Merrick, that is all. I will defer to Mr. Fraser here.

MR. HYLAND FRASER: Just two minutes of questions. Mr. Merrick, I am just going to go back to your initial statement, even before you read from your document here, the dates that you were under retainership by the corporation?

MR. MERRICK: I am looking for my original statement. March 6th, I think I said, up to essentially May 20th for the substantive work, and then sporadically after that.

MR. CHAIRMAN: You actually said May, but it is March 6th, is it?

MR. MERRICK: I am sorry, it should have been March 6th.

MR. FRASER: I just wanted to clarify, I believe the record will show as well that Mr. Merrick said from May 6, 1977 to May 20, 1997, so for 22 years you were at the corporation?

MR. MERRICK: That is 1997. My problem is I am too vain to get bifocals, so I struggle with . . .

MR. FRASER: You didn't at any time deal with the MacLellan Government, your retainership was gone, or you were finished your position before he was elected Leader?

MR. MERRICK: That is right. I have had one retainer with the corporation since, but solely with the corporation.

[Page 32]

MR. FRASER: Right. So, you have never received marching orders or anything from the Premier?

MR. MERRICK: No, sir, I have not.

MR. FRASER: The meeting that you held with some government officials, did you feel threatened in any way to . . .

MR. MERRICK: No, I didn't.

MR. FRASER: Okay, those are all my questions.

MR. CHAIRMAN: Mr. Samson.

MR. SAMSON: Just on that point, Mr. Merrick, just to make it clear. At any time during your negotiations, did you feel that you were under duress or under specific instructions to reach a certain settlement, which you were not doing independently in the best interests of the Gaming Corporation, but that you were doing based on specific terms that you were to reach, that had been instructed to you?

MR. MERRICK: That has a couple of components on it. There was pressure to settle. We were being told consistently, it would be better to settle this than not settle it. I have no doubt that Mr. Fiske, on May 20th, felt that he was under pressure to go along with the settlement that had been negotiated. So, there was pressure, but there were never any instructions, no directions, no threats, no inducements, nothing like that.

[11:30 a.m.]

MR. CHAIRMAN: Mr. MacKinnon, please go right ahead.

MR. MACKINNON: A short snapper. How would you define pressures? Is that normal within the negotiating process that you have related to us over the last 25 or 30 years?

MR. MERRICK: It's a little unusual in this case because the client, in a sense, was the corporation. It's like I suppose if you are negotiating a settlement with General Motors and you are taking instructions from the Chief Executive Officer but every now and then you get a letter from the shareholders saying, by the way, in my interest as a shareholder, I think we should go this way.

MR. MACKINNON: So, that is not uncommon?

MR. MERRICK: Well, a little unusual because of the structure of the parties in this case, but it is not unusual to have pressure in settlement negotiations one way or the other.

[Page 33]

Quite often, your client is being very adamant that they do not want to come to this settlement and the lawyer is working the other way around.

MR. MACKINNON: Thank you, Mr. Merrick, and thank you for your presentation.

MR. CHAIRMAN: I am told by the secretary to the committee that our next witness is not here yet, although perhaps I can ask her just to check outside yet again and see if Mr. MacKeigan has arrived. We do have then a couple of minutes. I wonder, Mr. Merrick, if you could briefly clarify something for me that I did not understand in your testimony.

You said that clearly one of the considerations in going towards a settlement was the long-term relationship between the parties who had a dispute. At one point, you characterized that as you hoped that there would be no more bickering. At the same time, I saw in the annual report of the Gaming Corporation that was released the other day, a report on another commercial arbitration that had just been held between the parties over a dispute. As I understood your evidence, it was that you conducted that arbitration on behalf of the corporation which I see you won. I am wondering if you are in any position to help us understand whether one of the results of the negotiated settlement indeed has been an improvement in the relations between the parties and no more bickering?

MR. MERRICK: I can't tell you that because I haven't been privy to the ongoing day-to-day relationships. I just can't answer that, others can more fully.

MR. CHAIRMAN: That's fine. If anything arises out of that, does anyone have, I think Mr. Fage had his hand up first.

MR. FAGE: Just one quick question, a follow-up to one from Mr. Samson. I didn't understand your answer, Mr. Merrick. You stated that your instructions were negotiation instead of arbitration, that money was immaterial, get the closest date possible for construction. Who gave those instructions that money was immaterial and the closest date possible is what counted?

MR. MERRICK: It wasn't that it was immaterial. It was that in weighing the amount of money that the Sheraton was offering, I think it was $1 million or $2 million, to give them an extension date to September, my understanding was - and I would have gotten this from Mr. Fiske and others at the corporation - that it was more important to get the permanent casino built sooner than that, rather than give them a further extension for merely, I shouldn't say merely, for $1 or $2 million. In evaluating the advantages to the province, there were significantly greater advantages to have the permanent casino opened earlier rather than some delay fee being paid.

MR. FAGE: So, Mr. Fiske would have given you that instruction, that is whom that would have come from on that statement?

[Page 34]

MR. MERRICK: I don't think it was a specific instruction as much as general discussions when we would talk about, are we going to agree to a September completion date in exchange for some money, or are we going to hold firm on an earlier construction completion date. That would have been part of the general background discussions.

MR. CHAIRMAN: If we have one or two brief questions, I guess we can go back. Mr. Dexter then Mr. Samson.

MR. DEXTER: I have two things I want to cover off. At the time that these negotiations were going on, you were obviously aware of what the financial impact on the corporation was going to be on the settlement. Is that correct?

MR. MERRICK: Not completely. My recollection is that the corporation staff were trying very hard to put a specific number to it.

MR. DEXTER: And they did that, did they not?

MR. MERRICK: I don't think that I ever had a specific number that was carved in stone, it seemed to continue to fluctuate as people would re-evaluate how they were doing it.

MR. DEXTER: Sure, but it fluctuated between $27 million and $30 million, was the cost of making the settlement.

MR. MERRICK: There was a cost to giving extensions to the construction completion date. That is right.

MR. DEXTER: And at the time that the settlement was being made, it was based on the numbers that were provided by Ms. Bustin or other financial people within the corporation?

MR. MERRICK: I can't remember what the numbers were but I know at that time there was a general idea of what the range would be.

MR. DEXTER: Okay. Is your recollection that the range would be between $27 million and $30 million?

MR. MERRICK: I don't recall that but that is . . .

MR. DEXTER: Okay, let me ask you this. Is your recollection then that it was in excess of $20 million?

[Page 35]

MR. MERRICK: I don't remember what it was. I know we were in the millions but that is all that I can recall. My concern was to have the client tell me what was important, what wasn't and what did they want me to do.

MR. DEXTER: Mr. Merrick, you have said that your instruction coming here was to be as frank and open as possible. Do you hold files in your office with respect to this matter?

MR. MERRICK: Yes, I do.

MR. DEXTER: Have you been instructed to release those files to this committee?

MR. MERRICK: No, I haven't.

MR. DEXTER: Will you undertake to table a copy of your file, in relation to this matter, with the committee?

MR. MERRICK: Now you are talking about my file on the arbitration dispute of last year?

MR. DEXTER: The arbitration and the negotiation, anything that is necessarily ancillary to that negotiation.

MR. MERRICK: I have no difficulty doing that with one exception. I have notes of my case outlines and my preparation for arbitration which I consider to be my own personal attorney's work product that I would be very loath to give to anybody for a variety of reasons. My file basically consists of correspondence and then documents and all of that I would have no difficulty in releasing.

MR. DEXTER: Well, what about notes that you have taken with respect to instructions, those would not be excluded from the file.

MR. MERRICK: No, they would appear in the file.

MR. DEXTER: And when you are talking about your case outline, you are talking about the case management plan that you have set out for arbitration process as opposed to notes or instructions that you would have gotten?

MR. MERRICK: That is right. I have very few actual notes of meetings partly because that is not my style, partly because I think Mr. [Carl] Holm was, on occasion, making notes and if somebody else is writing, I let them do the writing.

MR. DEXTER: To your knowledge, are there any other documents or files either in the possession of your firm or in the possession of others that may bear on this matter?

[Page 36]

MR. MERRICK: Not that I am aware of. Almost everything I have should be in the possession of the corporation because I would have gotten all of the documents from them and most of my correspondence would have been with them but I am prepared to turn my complete file over.

MR. DEXTER: And how long would it take you to do that?

MR. MERRICK: If I could get it back, you could have it right away. If I have to copy it so I keep something for myself, it will depend on how quickly I can get it copied.

MR. CHAIRMAN: I think we can make the technical arrangements on that through the Clerk's Office, no problem. I think Mr. Samson had another question as long as we are here. Oh, no he doesn't. Okay.

Mr. Merrick, we have kept you a fair bit of time and I thank you for appearing before us and helping us with our inquiries. We will take a five minute break while we find Mr. MacKeigan. Thank you very much.

MR. MERRICK: Thank you, Mr. Chairman.

[11:38 a.m. The committee recessed.]

[11:46 a.m. The committee reconvened.]

MR. CHAIRMAN: Now if we may, we have present with us our next witness, Mr. Robert MacKeigan. I have spoken with him during our brief break and he has requested a clarification of the position of witnesses when they testify in front of this committee and he has requested that it be made clear that this committee is specifically extending to him the protections of the House as he testifies here today. I would ask for agreement from the committee that this is the case.

Is it agreed? It is unanimously agreed.

Mr. MacKeigan, does that satisfy you for proceeding?

MR. ROBERT MACKEIGAN: Fine. Thank you.

MR. CHAIRMAN: I will now swear in the witness.

Mr. MacKeigan, do you swear that the evidence you shall give to the committee, touching on all matters having to do with our inquiries today, shall be the truth, the whole truth and nothing but the truth, so help you God?

[Page 37]

MR. MACKEIGAN: I do.

MR. CHAIRMAN: Thank you very much. Mr. MacKeigan, it is our practice to invite any witness to give us an opening statement should they care to do so. I don't know if you wish to make any introductory statement to us or is it your wish that we proceed immediately to the asking of some questions by the members of the committee?

MR. MACKEIGAN: I indicated to your coordinator yesterday that it was not my intention to come with a prepared text. Perhaps I will make some opening comments but certainly if members wish to interrupt me even as I make the opening comments, I would have no objection.

First of all, I should say, as I think everybody knows, that I am a solicitor and as such I am bound by certain confidential rules and I have received a waiver from the province indicating that I may answer, notwithstanding the confidential rule which I consider myself bound by with an exception which I believe may have been stated by the Premier in the House, that I would not be able to disclose matters of a confidential nature with respect to participants and their ability to compete. I am not aware that there is anything that I might be asked or care to answer or have knowledge of that would fall within that category with a possible exception of if I have received documents from the Gaming Corporation or from the Sheraton, it seems to me it is for the Gaming Corporation and not myself to produce. That will become apparent for reasons which may be disclosed as we go forward.

MR. CHAIRMAN: Perhaps I could just offer you a couple of comments on that point. We are very appreciative that your client has waived solicitor-client privilege and it makes our function a great deal easier. We have, however, earlier in our proceedings, received legal advice from the Legislative Counsel that the question of solicitor-client privilege, in fact, in no way applies to proceedings in front of this committee. That may be a matter for debate, if we arrive at that but it seems that given (Interruption) Let me just finish, if I may. If we don't arrive at that point, then it is not likely to be a difficulty. I understand you to have said that the solicitor-client privilege that might normally apply in other forums has, in any event, been waived by your client with one exception. I am not sure exactly what the wording of that exception might mean and it may be that it is of no consequence and we don't arrive at that. If we do arrive at that point, I hope you will assist us in identifying that point and we can have a think about it at the time.

MR. MACKEIGAN: I think you can rest assured that if I answer the question, I feel that it has been waived. I have not had the opportunity of reading the opinion to which you refer. Certainly it seems clear, I have spoken to others and I have reviewed the guidelines that apply to all solicitors and it would certainly be my initial reaction that I am not at liberty in this forum or any other forum to disclose matters involving a client without their expressed consent. But as I say, that is academic because I believe I have the expressed consent for anything that you may be wishing to ask me this morning.

[Page 38]

MR. CHAIRMAN: That's just fine. Please proceed.

MR. MACKEIGAN: Despite the fact that I indicated that I was not intending to have an opening statement, I thought it might be useful, at least, to briefly refer to when I was retained and the reason, as I see it, that I received that retention.

The committee members have received a great deal of paper over the last couple of weeks and it was not my intention to provide additional information which, for the large part, would go to corroborate some of the information which you already have. As far as the actual facts of my retention, at least the timing of mine, I can do little better than refer members of the committee to Carl Holm's letter dated July 6th, which I understand was released to the press and members of the committee last week. If I may, I have reviewed that in some detail along with my notes and records of various transactions and in response to questioning, I may wish to refer to that particular letter.

As has already been indicated before the committee, I was contacted in connection with the arbitration in question on the afternoon of April 21st, at which time I received a telephone call from Mr. Robert MacKay - or Bob MacKay - who asked me to attend a meeting at the Premier's Office later that afternoon. I had not earlier been involved and upon receiving that request I agreed, subject to further checking. I checked conflicts. I spoke to Mr. Carl Holm, the solicitor for the Gaming Corporation, to attempt as quickly as possible to find out a little bit about the nature of the dispute which I was being asked to attend at the Premier's Office.

At that point in time, I considered that I was merely being retained as an independent solicitor to give the Premier's Office and Mr. MacKay some advice, if advice was required, after or during the meeting with Mr. Fiske, Mr. Merrick and Mr. [Carl] Holm. Details of that meeting I think have already been provided to this committee.

Certainly, I discovered in my discussion with Mr. [Carl] Holm, and even more so at the meeting in the Premier's Office, that it appeared that at that point in time both the province and the Gaming Corporation were anxious to have a permanent casino built on the parcel where the casino is currently being constructed and that there was a reason that should be constructed as soon as reasonably possible.

I discovered that there was an arbitration to take place the following day, that it was scheduled to go for April 22nd and April 23rd. I received the advice that afternoon that there was no way that the arbitration would be concluded on those days and that there would be an adjournment for a number of weeks, until May or later.

We also received information, I am not certain whether it was before or during the meeting, that there had been little, if any, negotiations between the Gaming Corporation and

[Page 39]

Sheraton to see whether the issues which were in dispute before the arbitration could be resolved.

Certainly, it was my sense at that meeting that everybody present, certainly the lawyers for the Gaming Corporation, Messrs. Merrick and [Carl] Holm, were at least agreed that a settlement was preferred to an arbitrated solution. I think that is a rule that most solicitors will go along with, generally speaking, that a negotiated settlement is better than a settlement that is arrived at after lengthy, possibly protracted, litigation.

At that meeting, the Gaming Corporation agreed that they would proceed the following morning, prior to the commencement of the arbitration, to seek an adjournment of the arbitration from the Sheraton so that negotiations could take place. What I discovered later in the day, because I had gone back to my office on the previous day thinking that possibly my retainer was now at an end and that the Gaming Corporation and the Sheraton would proceed to negotiate a settlement, was that the Sheraton had declined to adjourn, that the arbitration had taken place on that morning, contrary to some reports, I was nowhere near the arbitration, but that evening I spoke to John Merrick, and asked him whether or not he felt it would be useful for me to speak to the lawyer for the Sheraton to see whether or not there was some basis for an adjournment.

It was my understanding that Mr. Merrick agreed and perhaps even encouraged that, and I spoke to Mr. Larry Hayes during the evening of April 22nd, reported the conversation to Mr. Merrick, and arrived on April 23rd before the arbitration resumed that morning, and usually in the presence of Mr. Merrick and often, generally speaking in the presence of Mr. Merrick, had discussions with the lawyers for the Sheraton, to see whether or not some arrangement could be made to have an adjournment on that day in order to permit some negotiations to take place in the afternoon.

Negotiations, as I think this committee has probably heard, there was an adjournment. The lawyers for the Gaming Corporation, and the Sheraton reported to the arbitrator that they were going to adjourn to have negotiations. They did so. Those negotiations took place in my office, or my firm's office that afternoon, at least for the balance of that afternoon, probably 2:00 p.m. to 5:00 p.m. in my presence. The reason for my presence was at the request of the parties, because I think that this was a condition of the agreement by the Sheraton to discuss matters at least that afternoon with the Gaming Corporation. They wanted my attendance at the meeting. It was difficult to determine why I might be there, because while I was quickly learning what the dispute was all about, I certainly had not been involved for a very lengthy period of time.

I indicated to them before any negotiations, that while with Mr. Merrick's consent, I would attend the meeting, I would take no part in the negotiations, and I took no part in the negotiations on that day or for the hour or so that I was present in the same boardroom the following day, Thursday, April 24th.

[Page 40]

What happened subsequent to the morning of April 24th, I think has been outlined by Mr. [Carl] Holm in his Pages 4 to 12 which is about the timing that I am somewhat familiar with due to my involvement during that period of time. But my involvement subsequent to April 24th was not one of a negotiator at any time. I left the negotiations completely to Mr. Merrick and Mr. [Carl] Holm, they were the ones that met in the days leading up to the agreement to settle matters on May 20th with the lawyers for the Sheraton. I did not participate in those discussions.

In my view, I consistently advised Mr. Merrick and Mr. [Carl] Holm that it was for the corporation to make a decision as to what was the best settlement. If they felt the matter was settled or should be settled, that it was for the corporation to make that determination, and it was not something which I was in a position to advise them what was the best settlement possible. I did, in response usually to Mr. Merrick's request, give some views from time to time on what I thought his chances of success or failure might be on the arbitration, but I did not participate or express those views at any time to a representative of the Sheraton.

One of the problems with the settlement, or with the negotiations was that the Sheraton was taking the position, and perhaps before I get into the actual settlement, the letter from Mr. [Carl] Holm summarizes the actual dispute which was before the arbitrator. The summary, I refer you to the top of Page 3 of Mr. [Carl] Holm's letter of July 6th. The dispute before the arbitrator was a very limited issue. One was whether the design documents satisfied the requirements of the casino construction contract. The Sheraton took the position, they did. If Sheraton Casino's view of that was cracked, then in all likelihood, under the terms of the contract, they would have a good argument for an extension of the construction time from April 30, 1996 until such time as the documents were actually approved.

[12:00 p.m.]

There is at least some risk discussed among, by me with Messrs. Merrick and [Carl] Holm, that there was some risk that that would be an extension, and that would not provide the province and the Gaming Corporation with a casino constructed as early as was possible. Basically, the Sheraton had advised the Gaming Corporation, if not earlier, certainly in my presence on April 23rd that the earliest they would be able to construct it would be, if given the go ahead at that point in time, would be March 31, 1999, an extension of six months.

The Gaming Corporation's position, as indicated in Mr. [Carl] Holm's reciting of what was offered on April 24th, but also in documents that are before this committee, the Gaming Corporation's position all along was that they could have that extension for $1 million. That was really what the problem was in terms of a dollar figure, when I became aware of the dispute in April 1997, and as I indicated I wasn't going to produce any additional documents,

[Page 41]

but that appears in Mr. [Carl] Holm's letter, it also appears in the documents submitted by Mr. Fiske to this committee last Friday, where at Pages 122 and 123, Mr. Fiske refers to, doesn't quite say, but he basically says that if you ever need an extension, we think an extension fee should be paid, and $1 million extension fee for six months would be acceptable. The Sheraton's position consistently in April and May was, we are entitled to a longer extension than six months, we are not going to pay you $1 million or anything for that.

In light of that, the settlement, in my opinion, was a good settlement, and even if you had gone through with the arbitration, as I started to say before, you were not going to actually get the construction of the casino at an early date, because if the Gaming Corporation was successful, to me, to a certain extent it appeared that what would happen is that the Sheraton casinos would have to go away and improve on their design documents and come back for approval. Because of that delay, they would no longer be able to get it built by March 31, 1999, and under the words of the contract, they would be entitled to a further extension, even if they were at fault, for $10,000 a day.

So in light of all of those, it seemed to me, and I did put it to Mr. Merrick and Mr. [Carl] Holm, but it was something which they were aware, that I was not fully familiar with all matters involved between the Sheraton and the Gaming Corporation, but to my mind there were some real advantages in accepting a settlement which was very close to being available in April 1997 and certainly considerable advantages in accepting the settlement that was originally arrived at on May 20, 1997.

I wish to make it clear to the committee that I did not at any time make any direction to Mr. Merrick or Mr. [Carl] Holm or the corporation, and I think that there is an abundance of evidence before this committee that I did not do so. I refer by way of example only, to Page 60 of what was submitted by Mr. Fiske on Friday, where Messrs. [Carl] Holm and Merrick indicate in their report to the board on May 20th that it was for the corporation to decide.

My involvement in the details of that settlement. It is true that I had some knowledge over, given on Saturday, May 17th and some information given on Monday, May 19th of the terms of the settlement, but I will point out to the committee here that I did not see the written terms of that settlement. The evidence of Mr. [Carl] Holm, or at least his letter indicates that he had prepared that before the meeting and gave it to Mr. Hayes. I did not receive the terms of that settlement until I received from Mr. [Carl] Holm at the end of the day, May 20th, after I asked for information as to what happened at the Gaming Corporation's meeting. When I asked for the particulars of the settlement, Mr. [Carl] Holm faxed to me the proposal for settlement, which I believe without comparing it, is basically Pages 61 to 66 of the package that was produced by Mr. Fiske last Friday.

Certainly if it is suggested that I directed somebody to make a settlement, it was a settlement that I did not have full particulars of, Mr. Chairman. I could go into significant

[Page 42]

detail about other events but I am sure that maybe members of the committee will have some questions with respect to some of the matters that I have raised, or have been raised by other witnesses. Thank you.

MR. CHAIRMAN: Mr. MacKeigan, thank you very much for assisting us along. Our practice is to turn now to members of the committee to invite them to ask questions. We have about an hour or so. I will ask Mr. Dexter to start. Mr. MacKeigan, if you feel more comfortable in this warm Chamber taking off your jacket, do not hesitate to do so. You can see the rest of us are doing that.

MR. MACKEIGAN: Thank you, Mr. Chairman. I am fine for the moment.

MR. CHAIRMAN: Okay, go right ahead.

MR. DEXTER: Mr. MacKeigan, can you just tell us who, if anybody, you met with prior to coming here today to prepare for this hearing?

MR. MACKEIGAN: I met with a lawyer from another law firm to receive some information and advice with respect to the waiver of privilege and related matters on Monday. Last evening I did meet with Margaret Murphy from the Premier's Office to find out a little bit more about the procedure that was followed before this committee. Since receiving the request of the committee, I do not think I have had any other face to face meetings. Yesterday afternoon I had a brief discussion with John Merrick and he sent to me a draft of his opening remarks today. With respect to a couple of those matters, I had at least one, and there may have been more than one, discussion with Carl Holm yesterday. There is no question that I think perhaps on one or two other occasions I had had discussions with Carl Holm but I would not classify them in the area of preparation for today's meeting.

MR. DEXTER: Just by way of your background, Mr. MacKeigan, how would you describe the majority of work that you do and can you tell us is it with respect to building contracts, mechanic's lien and construction industry type work?

MR. MACKEIGAN: My practice, and I have been practising since 1970, is primarily a general commercial practice with a heavy emphasis on contractual matters of all kind, a heavy emphasis on banking transactions. Some people would say that one of my areas, where I have had significant experience is insolvency and banking and bankruptcy, but I have had a fairly general practice from various times over those almost 28 years.

MR. DEXTER: Do you do arbitrations?

MR. MACKEIGAN: Do I do arbitrations? I have in the past. I have not done a great deal of arbitration work in recent years. I have other commitments that prevent me from doing so. I will disclose that one of my difficulties on April 21st is that I had agreed with the

[Page 43]

former solicitors for the Gaming Corporation to make myself available to act as an arbitrator on matters in dispute between the Sheraton and the casino which were not directly related to this one, but I think are related to some of the other matters which were settled at the same time. Certainly, yes, I have done arbitrations and continue to do them from time to time but I would not consider it to be an extensive part of my practice, very small.

MR. DEXTER: Can I take it from that that the interpretation of building contracts and construction contracts is not a usual part of your practice either?

MR. MACKEIGAN: I am not sure that I would agree with you on that.

MR. DEXTER: I am just asking.

MR. MACKEIGAN: No, certainly a review of construction contracts and contracts of all kinds would certainly be part of my practice including the drafting of contracts.

MR. DEXTER: You had mentioned earlier the narrow scope of the arbitration that was coming forward and you mentioned, in particular, the whole question of the casino putting forward its design plans and what amounts to design plans as set out in the contract in a great deal of detail. It includes, preliminary renderings, layouts, drawings, plans, specifications, or a narrative that describes or otherwise relates to the aspect of construction, which shall be sufficient to demonstrate the intended layout design, servicing, FF & E which is, as I understand, furnishings and equipment. I mean they are fairly detailed documents, wouldn't you agree?

MR. MACKEIGAN: I have not looked at the definition for some considerable period of time or, indeed, this particular contract. The first time I had the full contract was, to the best of my knowledge, I may be mistaken and may find that it's wrong, but I don't believe I had it until it was produced by the Gaming Corporation last week. I was not heavily involved, as I have already indicated. I was not involved in the negotiations to the extent where, if I was involved in negotiations I would have to wade into and seek a great deal more detail than I had with respect to the contract and the dealings.

MR. DEXTER: What you are retained here for is to work, apparently, maybe I should ask this question first. Who did you consider to be your client?

MR. MACKEIGAN: I considered that my client was the Province of Nova Scotia. I took instructions from Mr. Robert MacKay.

MR. DEXTER: So, you did not consider your retainer to be the Premier's Office?

MR. MACKEIGAN: Mr. MacKay was, I believe at the time - I'm not sure what his title is, perhaps others in the room know better than I do, he worked in the same building -

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he was the Deputy Minister to the Premier and perhaps Deputy Minister of the Priorities and Planning Secretariat.

MR. DEXTER: Well, let me ask this question. This all goes to the groundwork that I guess must have been done in order for you to do your job. Did you review the regulations pursuant to the Act in order to figure out what the lines of authority were?

MR. MACKEIGAN: At the time I was retained, I reviewed the Act to some extent, yes.

MR. DEXTER: Did you ever deal with the minister who was responsible for the Gaming Corporation?

MR. MACKEIGAN: I do not believe I ever had discussions with the Minister of Finance, who I believe had the assigned responsibilities. No, I did not.

MR. DEXTER: Let me ask you this question. Did you ever prepare or file with the Premier's Office, or any other member of the Cabinet or of government, an opinion with respect to the merits of the dispute and the chances of winning or losing?

MR. MACKEIGAN: No.

MR. DEXTER: So, in your view, on what matters were you giving opinions to the Premier or the Premier's Office on?

MR. MACKEIGAN: My role may have changed a little bit between April 21st, when I met with the Premier, until I received a further phone call sometime the following day or evening. On April 22nd and early April 23rd, I considered my role was solely to assist Mr. Merrick and the Gaming Corporation to see whether it was possible for them to sit down and negotiate to see whether or not a settlement, which was acceptable and considered by the Gaming Corporation to be appropriate, whether that kind of a settlement could be entered into because there had not been any settlement discussions until I was retained, as far as I could tell.

MR. DEXTER: In the course of this, you take no instructions from the Premier's Office?

MR. MACKEIGAN: I had significant telephone discussions with Mr. Bob MacKay to report to him during that period of time until late May sometime shortly after the settlement was made, on May 20th.

MR. DEXTER: Did you make notes of these phone calls?

[Page 45]

MR. MACKEIGAN: In some cases.

MR. DEXTER: I am just going to move on to the next question in this regard, and this comes in part to the question of the waiver of privilege. I appreciate the fact that you said that you do not reproduce documents that have already been produced. One of the things that this committee has asked for and, in fact, has insisted on from the witnesses who have come forward is that they table, with the committee, any information that they have in their possession that may bear on the matter that is before the committee. I would ask, Mr. MacKeigan, if you are prepared to table with us, the contents of your file in relation to this matter?

MR. MACKEIGAN: I would have to review the file and seek instructions from my client. With respect to certain of my notes, in some cases those are generally my private notes and I would have to take advice on that. I would be reluctant, in some cases, to produce notes. In many other cases, what I have in my file relates solely to exhibits that Mr. Merrick intended to submit to the arbitrator and submissions that were being put forward by the Gaming Corporation and the Sheraton to the arbitrator. I had always considered that those were given to me for a very limited purpose and I would want to take advice or seek their consent to the release of many of those kinds of documents.

MR. DEXTER: Just so I am clear on this, you have not, as of yet, received a direction from the Premier's Office to release your files to the committee.

MR. MACKEIGAN: I have received direction from the Premier's Office to waive the general rule of, as I indicated, as indeed I have a duty to do so before I started to testify, I have received a waiver of the normal rule of solicitor-client confidentiality and solicitor-client privilege with a small exception. The documents which I received, and I am repeating myself, that consist of most of what - the file material that I have in my possession exclusively relates to information which I received from either the solicitor for the Gaming Corporation or from the solicitor for the Sheraton. I am not certain that the waiver from the Premier goes so far as to allow me to disclose that information which is private matters between the Gaming Corporation and the Sheraton. Some of it has already been released by Mr. Fiske.

MR. CHAIRMAN: I think that point is clear. Could I just interrupt. We have a request to raise a point of order.

MR. MACKINNON: Mr. Chairman, I stand to be corrected but I want to make sure that we are all on the same wavelength here in terms of tabling documents. As I understand from last Thursday's testimony with Mr. Fiske, the conclusion that was arrived at, was that the committee had generally agreed that Mr. Fiske was to table any relevant documents which he quoted from or referred to. Now if we are varying from that - as I understood - motion to be all-inclusive as my honourable colleague who has just spoken before me refers, then I think

[Page 46]

it would only be in order that we include that instruction to Mr. Fiske who has indicated publicly that he has a series of documents in his possession related to this very matter.

MR. CHAIRMAN: Mr. MacKinnon is correct. There was no general determination; what there was, I think, in Mr. Dexter's question, not a completely accurate statement of what we have done. What we have done is we have requested, just this morning, I think, with Mr. Merrick and he specifically was requesting you again or asking whether you are prepared to let us have access to your file material. Anyway, please proceed.

MR. DEXTER: On the point of order, my understanding was that there had been a general direction made from the government of the province that these documents, documents that bore on this matter that were in the control of the province or agents of the province, would be released to the committee. That is my understanding of it.

MR. CHAIRMAN: The question is, from what do you conclude that?

MR. DEXTER: . . . from statements made by the Premier.

MR. MACKINNON: Where?

MR. DEXTER: In public, in this Chamber. (Interruption) In any event, we can explore this further but I am just . . .

MR. CHAIRMAN: I think the record will show.

MR. DEXTER: . . . going to put on the record at this point, my request that your file, including your file notes, be tabled with this committee so that part of the very important questions that arise here arise as a result of the process by which the Premier's Office gave instructions and how that bore on the overall negotiations. So I am making that request and I understand from what you have said already, that you will take that under advisement and to seek advice on it.

MR. CHAIRMAN: Mr. Leefe had some comments to help us along.

MR. JOHN LEEFE: Mr. Chairman, in fact this morning I went to Hansard and I would refer members to Pages 1662 and 1663, Tuesday, June 23, 1998, in which the Premier responds to a question raised by Dr. Hamm respecting the waiver of solicitor-client privilege before the Premier's statement, and I think it is worthy of recording in our own minutes because it is germane to the point raised, "THE PREMIER: Mr. Speaker, there is no question that Mr. MacKeigan will be allowed to do that.", that is, transgressed, waive solicitor-client privilege. Again, back to the Premier, "He will have that instruction from me and my government. I think that we have to, of course, be careful, when we talk about documents and testimony by Mr. MacKeigan - and he will be able to judge that and identify those things

[Page 47]

before the committee - is that nothing be stated which would be of a confidential nature with respect to the participants and their ability to compete. I think that has to be stated, because I think that is only fair to consider that.". That is what the Premier said.

MR. CHAIRMAN: Thank you. That helps us refresh our memories. I wonder, on that basis, if we can try and proceed. I don't know if this is still outstanding in your mind, Mr. MacKeigan. Now you have heard what it was that was said in the Legislature. Perhaps you can check with your client and if it helps you at all to understand what occurred this morning in our dealings with Mr. Merrick is that he, essentially, agreed to make his file available to us. Again, the exception he noted was his personal notes for the conduct of his case, not notes that would reflect phone calls or instructions that he received and, as I understood your comments, you felt that there might be exceptions along those lines and you also pointed, I think, to a commercial exception as well.

MR. MACKEIGAN: I would want to review my notes but yes, I would want to take a look at that. With respect to the other matters confidential with respect to the participants, I am repeating myself, but most of my file material are ones which were given to me on a confidential basis by the solicitor to the Gaming Corporation or by the solicitor to the Sheraton. I may be able to identify the nature of those but I may not be in a position to release those documents.

MR. CHAIRMAN: I think the solicitor for the Gaming Corporation has essentially offered us their file.

MR. MACKEIGAN: That is why I am saying, as I said before, it is for the solicitor to the Gaming Corporation likely, not myself, to release matters which were given to me on a confidential basis.

MR. CHAIRMAN: All right. I think we will try to proceed. We will take it on the basis that there will be an honest effort to release as much as is possible and if anything is in dispute, this committee can reconvene to discuss it. Please continue.

MS. ROSEMARY GODIN: Mr. MacKeigan, did you take any role, whatsoever, either professionally or personally in the Liberal leadership campaign?

MR. MACKEIGAN: No.

MS. GODIN: Thank you.

MR. MACKEIGAN: May I clarify that I believe I did vote at the leadership convention, by telephone, that I did have a vote and was able to do so.

MR. CHAIRMAN: Thank you. Mr. Fage.

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MR. FAGE: Good morning, Mr. MacKeigan.

MR. MACKEIGAN: Good morning.

MR. FAGE: Mr. MacKeigan, I have a few questions and inquiries. For the record, who retained you, Mr. MacKeigan?

MR. MACKEIGAN: I was retained as a result of a telephone call or calls from Mr. Robert MacKay.

MR. FAGE: Okay, so his retention of you is on the instruction of the Premier?

MR. MACKEIGAN: That is my understanding because as I have already indicated, my first job was to attend a meeting with the Premier, Mr. MacKay and Messrs. Fiske, Merrick and [Carl] Holm on April 21st.

MR. FAGE: Throughout your opening statement, you were saying, in the majority of cases, that you were an observer of negotiations between the corporation and the Sheraton. Is that an accurate statement, that you spent most of your time with this as being an observer?

MR. MACKEIGAN: The only time that I was present during any negotiations was during the afternoon of Wednesday, April 23rd and for an hour on the morning of Thursday, April 24th. On both of those occasions, I took no active part in the negotiations.

MR. FAGE: Were you during that time being supplied advice on the Premier's position through Mr. MacKay?

MR. MACKEIGAN: The only advice which I was receiving at that point in time to the best of my recollection is the conclusion that was arrived at with the representatives of the Gaming Corporation on the Monday that it was appropriate to see if the Gaming Corporation could enter into a settlement that was acceptable to the corporation.

MR. FAGE: Your relationship during the leadership, one question there, and the present Premier, Peter MacLellan, did you have any contact with Peter MacLellan through the process once Russell MacLellan became the Premier of the province and this negotiation?

MR. MACKEIGAN: With respect to this negotiation?

MR. FAGE: Yes, after the leadership was complete?

MR. MACKEIGAN: I have never talked to either, to the best of my recollection, I have never on any occasion spoken to either Russell MacLellan or Peter MacLellan

[Page 49]

concerning matters involving the Gaming Corporation, either during May of 1997 or at any time after that.

MR. FAGE: During, you said the 23rd, those meetings, why do you feel that it was in the interests that you attended those meetings that you were instructed to by Mr. Merrick; or was it Mr. Merrick or Mr. [Carl] Holm that asked you to attend or instructed you to attend?

MR. MACKEIGAN: What transpired in the morning of April 23rd was an effort by Mr. Merrick and myself to see whether there was a basis under which negotiations and discussions could be carried on between the Gaming Corporation and the Sheraton. It is my recollection that the Sheraton did not wish to, and it may be in other material before this committee, negotiate with the then Chairman of the Gaming Corporation and there were various proposals put forward as to how settlement discussions might take place.

The solution which was arrived at was that the Gaming Corporation's lawyers and the Sheraton's lawyers would sit in the same room and negotiate. With a great deal of reluctance, because I had other commitments that afternoon, I agreed to sit quietly in the room and watch the negotiations. For the most part that was my role for that Wednesday afternoon.

MR. FAGE: If that is the case, why would you be requested on the 23rd to sit reluctantly and quietly and listen to the negotiations and on the 24th be asked to be excluded from the room?

MR. MACKEIGAN: It was felt at a meeting at the Gaming Corporation's Offices that has been referred to I think in Mr. [Carl] Holm's letter, it was felt at the conclusion of that, when Mr. Merrick was given instructions to put forward a settlement proposal, which I think Mr. [Carl] Holm has indicated a settlement proposal was supposed to be put forward by Mr. [Carl] Holm. The consensus was, or at least I agreed with Mr. Merrick, that it would be advisable or appropriate for me not to be present in the room. So while the meeting took place in the offices of my law firm, I was not present in the boardroom when the meeting resumed that afternoon.

MR. FAGE: Is there a big difference in what would be discussed between Wednesday and Thursday, that one afternoon you were requested to be there, the second afternoon in your own office requested to be absent?

MR. MACKEIGAN: You would have to ask Mr. Merrick those kinds of questions. It is clear that the negotiations, if I recall correctly, ceased within about five minutes of the meeting starting up again on the Thursday afternoon without me being present.

MR. FAGE: During any time through this process did you offer advice or direction to Mr. Fiske on how to proceed?

[Page 50]

MR. MACKEIGAN: Directly to Mr. Fiske?

MR. FAGE: Yes.

MR. MACKEIGAN: No. There were discussions on the morning of April 23rd with Mr. Merrick and Mr. [Carl] Holm where Mr. Fiske was present in the venue of where the arbitration was to take place that day. No, I did not give any advice or direction to Mr. Fiske.

MR. FAGE: In that regard, if there was no instruction given to Mr. Fiske, your relationship with Mr. Bob MacKay, did Bob MacKay ever relay to you instructions about Mr. Fiske's dealings or directions that he should be moving in?

[12:30 p.m.]

MR. MACKEIGAN: I expressed the view to Mr. MacKay that it appeared that this matter was something which was available for settlement, and I think that Mr. MacKay shared the view that a settlement might be possible to avoid the arbitration and to move forward with the construction of a permanent casino. He never gave me instructions to tell the corporation that they must settle the matter. That was something which was, at all times, communicated to Messrs. Merrick and [Carl] Holm that it was for the corporation to make a recommendation to the province as to whether it should be settled and, if so, on what terms.

MR. FAGE: Then if information was to be relayed, or concerns expressed, then it happened directly between Mr. MacKay, or the Premier directly to Mr. Fiske or Mr. Merrick or Mr. [Carl] Holm?

MR. MACKEIGAN: I am not aware that Mr. MacKay had direct communications between April 23rd and May 20th, I don't recall an occasion that I was aware. There have been some communications but I don't recall the nature of those communications. Most communications were left solely, as I understood it, between myself and Mr. Merrick or between myself and Mr. [Carl] Holm.

MR. FAGE: So, then there was direction supplied from you to Mr. Merrick?

MR. MACKEIGAN: No direction.

MR. FAGE: So, advisement or instructions?

MR. MACKEIGAN: Mr. Merrick, from time to time, kept me advised of where matters stood with respect to his efforts to renew the discussions after they broke off on April 24th. There were various efforts by Mr. Fiske and Mr. Merrick to engage in further settlement discussions with representatives of the Sheraton. For example, I reported to Mr. MacKay on May 9th that Mr. Merrick was attempting to reach Larry Hayes to see whether a meeting

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could be arrived at between him and Mr. Hayes, attended by a senior officer of the Sheraton from the United States and perhaps attended by Mr. Fiske and Dara Gordon. They were information items only. There was no direction. I was communicating to Mr. MacKay the status, as I understood it, of the settlement efforts by the corporation.

MR. FAGE: That flow of information from Mr. MacKay to yourself to Mr. Merrick, there were no directives, but there was a flow of information obviously coming from Mr. MacKay to Mr. Merrick as well?

MR. MACKEIGAN: I'm sorry. Perhaps I lost you on the question. As to whether there was a flow of information to . . .

MR. FAGE: Well, you have just told me that the information you were supplying to Bob MacKay, from discussions with Mr. Merrick or Mr. [Carl] Holm, you had advised Bob MacKay. I assume that Bob MacKay would have comments or his feelings - and we will just do away with the word directive - but the information flow would come from Bob MacKay the opposite way. It wouldn't be a one-way flow of information.

MR. MACKEIGAN: No, if there was a view being expressed by Bob MacKay, I would have passed that on, subject to instructions, to Mr. Merrick, yes.

MR. FAGE: With Carl Holm, the same as Mr. Merrick, you would supply the information to Bob MacKay from Mr. [Carl] Holm and vice versa?

MR. MACKEIGAN: Since I was acting for the province through Mr. MacKay, any information I gathered from either Mr. [Carl] Holm or Mr. Merrick, I would pass on to Mr. MacKay. If it was appropriate, I would be indicating to Mr. Merrick and Mr. [Carl] Holm anything that I was instructed to advise them. I don't recall any specific advice at the moment other than, on a few occasions, where I repeated the view and my instructions that it was for the corporation to decide as to whether or not a settlement was to be entered into and if so, on what terms.

With, as I started to say, one exception, which has already been related both by Carl Holm and John Merrick, where I did pass on to John Merrick, on at least one occasion, what I saw as some benefits of the settlement proposal that was before the corporation.

MR. FAGE: I would like to turn it over to my colleague.

MR. CHAIRMAN: Mr. Baker.

MR. BAKER: My first question, Mr. MacKeigan, revolves around your discussions with Mr. MacKay. Mr. MacKay was, in fact, the person who retained you, although your retainer is from the province, he was the person who retained you. When you were having

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discussions with Mr. MacKay during the central area, shortly after you were retained and had the meeting with the Premier, how often would you have had discussions with Mr. MacKay? On how many occasions?

MR. MACKEIGAN: I would have to review them but there certainly were a number of occasions that I would have had discussions with Mr. MacKay.

MR. BAKER: Would they have been daily?

MR. MACKEIGAN: I was not working on the file daily, no, but most days that I worked on the file I suspect that I would have been reporting to Mr. MacKay.

MR. BAKER: Did Mr. MacKay ever express to you his opinion concerning Mr. Fiske's handling of the Gaming Corporation, Mr. Fiske's attitude towards the Sheraton Casino or other matters dealing with the problems between the casino and the Gaming Corporation?

MR. MACKEIGAN: Certainly he would have expressed the comment as I had expressed to him that there appeared to be ill feeling between the corporation and the Sheraton. That was obvious. Because I think one of the main reasons why they couldn't get an adjournment on April 22nd was that they were not prepared to negotiate with Mr. Fiske. That became apparent, as well, on April 23rd.

MR. BAKER: Did Mr. MacKay in his conversations with you appear to blame or hold the responsibility for that on Mr. Fiske or on the Sheraton? Presumably you were talking about these things, this is a fairly candid discussion between, effectively a solicitor and a client, so there must be some discussion about what the purpose of your retainer is and what the nature of the problem is.

MR. MACKEIGAN: The nature of the problem that I was being asked to ensure was a continued discussion between the Gaming Corporation and the representatives of the Sheraton to see whether they could obtain a settlement that would, hopefully, put matters back into a situation where the Gaming Corporation with Mr. Fiske as Chairman could continue to have an agreeable, productive relationship for a large number of years with the Sheraton Casinos.

MR. BAKER: I guess my question though, I will try to ask it one last time, is did Mr. MacKay ever express his views about why that relationship had broken down at that point?

MR. MACKEIGAN: He may have but if so, I don't recall the exact expression of those views. That was not an issue that I was concerned about and certainly didn't consider it to be my mandate, because the mandate which I was attempting - and I am repeating myself - to follow through was to see whether or not there was a corporation-Sheraton settlement

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possible, which admittedly would have the benefit of repairing what appeared to be some damaged feelings between the two parties.

MR. BAKER: Is it fair to say, though, that Mr. MacKay felt that it was very, very important that the Sheraton and the Gaming Corporation be on good terms?

MR. MACKEIGAN: I think that both Mr. MacKay and the Premier felt, as indeed did Mr. Fiske, that it was important that there be a casino built, free-standing in the location where it is currently being constructed. I think that I shared Mr. MacKay's view that it would be difficult to do that on a timely basis or work things out unless relations were better than they appeared to be at that point in time, especially when, I believe at the conclusion of the April 24th meeting there was some change in the method of communications between the Sheraton Casino and the Gaming Corporation. It has been referred to in some testimony as a gag order, but there was an indication that until the conclusion of the arbitration there would be a certain method of communication to the Sheraton Casinos.

MR. BAKER: Were there any discussions between you and Mr. MacKay about the issue of what would happen in the event the arbitration hearings went to the ultimate conclusion and the amount of money that might be owing to the province as a result of that? Were there any discussions about what amount of money might be owing to the Province of Nova Scotia, if the Gaming Corporation were successful in the arbitration hearings?

MR. MACKEIGAN: Yes, there would have been.

MR. BAKER: What was the amount of money that was discussed?

MR. MACKEIGAN: In April and early May 1997 the extension that would appear to have been possible or appropriate was a six month extension. The Gaming Corporation had always been prepared to give that six month extension for $1 million. The contract provided that if the Sheraton needed it, they could get the six month extension for $10,000 a day. At that point in time during the discussions of the settlement, what we were dealing with was whether or not the Sheraton would be requested to pay $1 million for a six month extension. That the was the offer that Mr. Merrick was authorized by the Gaming Corporation to put to the Sheraton on Thursday, April 24th in my presence, and that information is in Mr. [Carl] Holm's letter that is before you.

So the amount of money, as to what amount the Gaming Corporation was to receive from the Sheraton casinos would be either $1 million or $10,000 a day for the extension.

MR. BAKER: Of course $10,000 a day, I haven't done my math, but $10,000 a day would not calculate out to a $1 million, if you are talking about six months.

MR. MACKEIGAN: I think it would calculate to approximately $1 million.

[Page 54]

MR. BAKER: Yes, that is right.

MR. MACKEIGAN: 180 days.

MR. BAKER: Exactly. Was there any discussion of the importance of the casino construction project to Purdy's Wharf developments or the general, other commercial buildings in that area, where the casino is being constructed?

MR. MACKEIGAN: Was there any discussion . . .

MR. BAKER: About the importance of having the casino built free standing next to the Purdy's Wharf Development, what the impact on the Purdy's Wharf development would be, in your presence?

MR. MACKEIGAN: Not in my presence. What I discovered, I think even on the first day was that the Gaming Corporation had retained a consultant to consider those issues during the latter part of 1996 when things were at a standstill, and that the consultants recommended to the Gaming Corporation that they should proceed with the free-standing project on what is referred to in some evidence as Parcel P, or in some documents, if I recall correctly, where it is currently being constructed.

MR. CHAIRMAN: Mr. Baker, are you almost finished?

MR. BAKER: One last question actually. My last question Mr. MacKeigan is, you have already discussed the difficulties you have had whereby you were made to attend the meeting between Mr. Hayes and Mr. Merrick. Would it be reasonable to characterize, from your perspective as you understood your reason for being there, as because the casino developer felt that you might be a friendlier ear than Mr. Fiske and Mr. Merrick?

MR. MACKEIGAN: I cannot answer for what was in the minds of the (Interruption) Sheraton. The lawyer for the Sheraton expressed the view that he would not, if I recall correctly, negotiate with Mr. Merrick, if Mr. Fiske was in the same room.

MR. BAKER: Thank you.

MR. MACKEIGAN: That it was to be a discussion among lawyers only with a view to determining whether or not matters could be settled without proceeding with the arbitration. I would only be speculating as to the reason why the Sheraton might want my presence there.

MR. BAKER: You would have been speculating. Did it not cross your mind why, I mean you said it would be speculation, but I would be interested in seeing, when you turned your mind to that speculation, what your speculation was?

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MR. MACKEIGAN: The Sheraton lawyers indicated that they wished to have a representative of the province present in the room when the negotiations were taking place.

MR. BAKER: Thank you.

MR. CHAIRMAN: I don't mean to cut you off, please finish.

MR. MACKEIGAN: No, I don't have anything further. That is fine, thank you.

MR. CHAIRMAN: That is it. Thank you. Mr. MacKinnon.

MR. MACKINNON: Mr. Chairman, I guess, Mr. MacKeigan, I want to cut right to the chase. Political interference. Did you deliver any marching orders or directives to the Gaming Corporation or to Mr. Merrick at any point in time through your commission by the province?

MR. MACKEIGAN: I didn't hear the latter part of the question.

MR. MACKINNON: At any point in time, did you issue any directives or marching orders to Mr. Merrick or to the Gaming Corporation with regards to a settlement.

MR. MACKEIGAN: No, I . . .

MR. MACKINNON: In other words, did you politically interfere? The suggestion has been made on a previous day by a previous witness, as I understand, to that effect. I would like some clarification from your point of view.

MR. MACKEIGAN: I gave no direction to Mr. Merrick, Mr. [Carl] Holm or any other representative of the Gaming Corporation as to what they should do with respect to any proposals that they may have received from the Sheraton.

MR. MACKINNON: Now Mr. MacKeigan, through you Mr. Chairman, Mr. Fiske has alleged that this deal has cost the province between $20 million and $30 million by settling with the Sheraton. Do you agree with that? If not, could you give your reasons why?

MR. MACKEIGAN: What this settlement did initially was it allowed the Sheraton to have an extension until March 31, 1999 without the $1 million that the corporation was wishing to receive. The corporation was receiving a fair bit, in my opinion the corporation was receiving considerable benefit in return for refraining from requesting that $1 million or $10,000 a day. In that sense, I don't think it is fair to say that it cost the taxpayers of this province any amount, but at the very most, we are talking about $1 million.

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MR. MACKINNON: So you are saying that in the big picture, this deal, given its ups and downs, and through the negotiation process and so on, it really didn't cost the taxpayers five cents.

MR. MACKEIGAN: From my understanding of the discussions with the lawyers for the Gaming Corporation, the settlement that would have allowed a casino to be built by May 15, 1999 was designed to save considerable dollars.

MR. MACKINNON: Thank you.

MR. CHAIRMAN: Mr. Samson.

MR. SAMSON: Mr. MacKeigan, just for clarification, could you in your own words as you saw it, describe for us, what was your role in all of this? And I guess, what were your instructions as part of your retainer?

MR. MACKEIGAN: The word that I have heard used for me was a facilitator. I cannot disagree with that. My role and my instructions, initially on April 22nd, was to see whether on April 23rd - before further arbitration hearings and before there was an adjournment to an unknown length of time - the two parties could get together to have some meaningful negotiation discussions which had not taken place up until that point in time. That continued to be my role to the extent that I was involved during the month of May, to continue to see whether or not they could continue with those meaningful discussions.

MR. SAMSON: Mr. MacKeigan, in your opinion, was is appropriate that there was a settlement reached here, rather than go to arbitration?

MR. MACKEIGAN: Assuming that the decision which I understood was made, that the Gaming Corporation and the province wanted a permanent casino, in my view it was very appropriate for there to be a settlement. The arbitration, in my view, was not going to give a permanent casino at an early date.

MR. SAMSON: Just finally, Mr. MacKeigan, looking back on this, is it your opinion today that the settlement reached was a fair and good settlement for the taxpayers of Nova Scotia?

MR. MACKEIGAN: Certainly based upon the amount of information that I had on May 20th, I have no reason to believe otherwise. I am hedging it that way a little bit, because I have to hasten to add, I have never been retained to look into the details of the actual settlement. My role was to facilitate negotiations and I did not ever provide an opinion as to what was a good deal or a bad deal. I would have wanted to be privy to much more information than I was.

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MR. SAMSON: Thank you, Mr. MacKeigan.

MR. CHAIRMAN: Mr. Fraser.

MR. FRASER: Just a couple of questions, Mr. MacKeigan. You were retained by the province to facilitate - if that is the word you like to use - the process. When you were retained, where were the negotiations at that point in time? Were they at the stalemate then or was there still some progress being made?

MR. MACKEIGAN: As I recall, we were advised at the Premier's Office on April 21st, and I believe this is confirmed in Mr. Merrick's testimony, that there were no negotiations with respect to a settlement of these particular issues. If there had been discussions with a view to settlement, neither Mr. Merrick nor I, to the best of my recollection, were aware of those having taken place when we met on April 21st.

MR. FRASER: You say that you never took instructions from the Premier's Office to get a deal done to push the province's way in their negotiations with the Sheraton or towards the Gaming Corporation to get something done here that . . .

MR. MACKEIGAN: I certainly had instructions to encourage the parties to see whether there was a settlement that was appropriate for the Gaming Corporation and the province but certainly not instructions to go away and get a settlement, full stop. It had to be one that was acceptable and considered by the Gaming Corporation and its advisors to be an appropriate one.

MR. FRASER: Okay, that is all. Thank you.

MR. CHAIRMAN: Mr. Fraser, thank you very much.

Mr. MacKeigan, I have just one question that maybe you could help me by clarifying the point. You have told us a couple of times that when you looked at the dollar value involved in what was being discussed in the matters at issue between the Gaming Corporation and the ITT Sheraton, that it had a price tag of $1 million, maybe at the most $1.8 million but there were tradeoffs. When, last month, Mr. Fiske testified here and suggested that there was the sum of about $20 million involved, was this the first time you had heard that anyone involved in the piece had suggested that the consequences of what was involved was much higher than $1 million or $1.8 million? Was his testimony a big surprise to you?

MR. MACKEIGAN: On reflection, it is not the first time that I heard a figure in that kind of a range but it wasn't a figure which was going to be delved into or awarded in the course of the arbitration. There was some discussion that the sooner the permanent casino could be built, the sooner the province and the Gaming Corporation would commence to receive revenues and they would be higher revenues the earlier the casino was built.

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Various figures were used, including at the time that I was involved but the arbitration which was being looked at was a very limited one, as I have indicated. It was casino design documents and what relief under the contract was Sheraton entitled to if the design documents were in accordance with the contract. Well, the relief that they were entitled to was a year's extension. There was no question in my view that the arbitrator did not have any instructions to nor was he being asked to award any money in favour of the Gaming Corporation other than the potential for an extension being granted on terms of $10,000 per day or more likely the offered $1 million.

MR. CHAIRMAN: You are telling us that the limited scope of the arbitration would involve directly $1 million or $1.8 million but that there might be other financial consequences that would flow from that but you don't really know what the details of that might be. Is that a fair summary?

MR. MACKEIGAN: I don't have the actual information at hand in order to properly explain it. It may be that I had some better understanding at that point in time but it was not an issue that was before it. The issue that was before the arbitrator was, as I have indicated, very limited. Even that wasn't going to get, necessarily, the casino built by March 31, 1999. It might help but it wasn't going to. For that price tag, we were talking of $1 million or $1.8 million. All the other items which were on the table had nothing to do with any figure approaching $20 million. The Sheraton decided that they wished to deal with a number of other matters which might have gone on to some other arbitration but those items, I had been advised, that they were both of no financial consequence and most of them would become irrelevant if a decision was made to proceed with a permanent casino where it is now being constructed.

MR. CHAIRMAN: Did it strike you that this matter was getting a lot of attention from the Premier's Office for a $1 million arbitration?

MR. MACKEIGAN: It was very important to the revenues, as I understood it, it was very important that the casino be built and that it was appropriate for there to be a fair bit of attention in order to ensure the casino be built. But the arbitration wasn't dealing with large figures other than it was stopping the construction of the casino. In that sense, it may have been dealing with more significant figures than we could ever deal with as part of the arbitration settlement.

MR. CHAIRMAN: Okay, if there is anything that flows directly out of this, again, we will go back through. Mr. Dexter.

MR. DEXTER: It comes back to the point that was made earlier. This arbitration had to do, as you rightly point out, with very narrow points. Mr. Merrick came to a conclusion, and if you look on the plain face of the contract, the description of the design documents, what was delivered by Sheraton apparently comes nowhere near what is described as the

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design documents in the contract. You had concept drawings produced. You did not have the kind of detail in design that was required under the contract. That was the matter that was being arbitrated. If it is determined that the interpretation that the Sheraton places on this is wrong, then the default, under the contract, happens somewhere down the road, the fact that they can't comply with the construction at an appropriate date, that breach takes when they are not in the ground on the date that they are supposed to be in the ground. What happens from there is whatever that cost the Gaming Corporation then becomes a matter at issue. Wouldn't that be correct?

MR. MACKEIGAN: The remedy provided for under the contract, if you have read the contract, as explained to me, was that the Sheraton casinos would be entitled to an extended completion date at the rate of $10,000 per day or, alternatively, the $1 million which was always offered, including in the correspondence I referred to earlier today, by the Gaming Corporation of the six month extension at $1 million. The contract did not provide for any other damages or penalty, if I recall correctly, other than the $10,000 per day for failure to complete.

MR. CHAIRMAN: Mr. Leefe.

MR. LEEFE: An observation, Mr. Chairman, and Mr. MacKeigan may or may not wish to respond. I leave that to him. We are all familiar with the expression, the medium is the message. In this instance, it strikes me very much that it was the messenger who was the message. The messenger was Mr. MacKeigan and the message was that the corporation and those working on its behalf did not have the confidence of the government and, as a consequence of that, the presence, if not the words, of the solicitor for the province was sent to convey that very message. I can draw no other conclusion. Mr. MacKeigan may have a view on that, I don't know.

MR. CHAIRMAN: Mr. MacKeigan, although that is phrased as an observation, I think you are invited to reply if you want to help us with this.

MR. MACKEIGAN: I think it is an unfair representation of my testimony. My appearance . . .

MR. CHAIRMAN: I don't think he is talking about your testimony. He drew a conclusion based on what he has heard.

MR. MACKEIGAN: My appearance and the commencement of my involvement - if you wish to call it that - in the negotiations was done after a decision had been made by the Gaming Corporation that it was appropriate and proper and in the best interests of the Gaming Corporation for there to be settlement negotiations take place. The Gaming Corporation attempted to do that. For one reason or another, it failed to do that on April 22nd. I offered my services to Mr. Merrick in the evening of April 22nd to see whether or not

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he felt it would be useful for me to speak to the Sheraton representatives to see whether they would be prepared to negotiate, not negotiate with me but to negotiate with Mr. Merrick. That was my mandate from the province. That continued to be my mandate right straight throughout until after the conclusion of the settlement on May 20th.

[1:00 p.m.]

MR. LEEFE: It is a pretty substantial message I would suggest.

MR. CHAIRMAN: Any final follow-up here? If not, Mr. MacKeigan, thank you very much for having attended in front of us today. That was very helpful to us in our deliberations.

Before we adjourn, I had a request from Mr. Samson to raise a point and if his point is not our scheduling and how we proceed from here. I had suggested earlier that we should turn our minds to scheduling and how we proceed from here at the opening of our session today. So Mr. Samson.

MR. SAMSON: Mr. Chairman, before we proceed any further today I would like to present a motion for the consideration of committee members. During our last meeting we heard of some very serious allegations. A great deal of press coverage has resulted from those very allegations. As elected officials and committee members I believe it is our duty to ask questions and investigate matters dealing with the Public Accounts of this province and not to accept allegations on their face value without further probing.

Mr. Chairman, last week during my questioning at no time did you rule me out of order, find that my questions were not appropriate, or of a mischievous nature. In fact, you ruled in my favour on several points of order raised by other members. Yet your Leader saw fit to refer to me and my honourable colleague, the Minister of Labour, as attack dogs in the local press. I took personal offence to this petty name-calling and feel it is just one more example for Nova Scotians to see the class act that Robert Chisholm really is.

Mr. Chairman, I am very concerned that we are only hearing one side of this story. We were provided with edited documents by Mr. Fiske that left us asking why they were edited. It is essential that Nova Scotians hear the whole negotiating history between the Nova Scotia Gaming Corporation and the Sheraton so that they may render their own fair judgement. In order to do so it is essential that this committee review the entire minutes of the Gaming Corporation.

Mr. Chairman, there has also been the suggestion that this committee move away from this issue. It is my position, and that of my two honourable colleagues, that this would be political opportunism of the grossest form. Very serious allegations have been made which have questioned the integrity of several individuals who served this province well. We would

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be failing the people of Nova Scotia if we did not allow those affected persons the opportunity to appear before us and to give their side of the story.

Mr. Chairman, the government members of this committee oppose any motion that this committee shut down or move to another issue. It is clear that the Opposition is not getting the press out of this issue that they would like. We, as members of the Government of Nova Scotia, are prepared to provide this committee with the entire side of the story which we ourselves are committed to hearing on our own. It is our duty, as members of this committee, to ensure that all sides of this issue have been exposed. As a result of that, I hereby move the following two motions:

The first motion is that the Committee on Public Accounts of Nova Scotia call as our next witnesses Carl Holm and Dara Gordon and that they be specifically asked to bring with them the minutes of the Nova Scotia Gaming Corporation and that these minutes be granted the privilege of the House and the protection of the Canada Evidence Act.

My second motion is that on behalf of the government members of the Public Accounts Committee we move that following the testimony of Carl Holm and Dara Gordon we ask that this committee call upon Mr. Bob MacKay and Mr. David Thompson to appear before this committee. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you. We have two motions before us and I guess we will deal with them one at a time. Clearly they relate to the order of business in front of the committee and the order in which we proceed. There are, of course, several issues that are interwoven here. Although the motions deal directly and on their face only with the next witnesses to be called, clearly they have an implication as to the nature of the business that we will pursue which is let us continue to deal with what it is that Mr. Fiske raised with us last month.

The motions do not actually say anything about dates for meeting again and there is a practical difficulty. You may recall that when this was first raised, I think by Mr. Dexter, a few weeks ago about how we were to proceed, his motion at the time was not adopted. I think people have probably made vacation and other plans since then, but I'll hear now from committee members. I should ask, is there a suggestion as to dates for meeting?

MR. SAMSON: I guess just as a point of clarification on the motion brought in, I suggest that this committee continue to meet on a weekly basis, on Wednesdays of each week, and that we proceed unless there is a holiday that interferes with that that this committee continue to proceed meeting once a week on Wednesdays.

MR. CHAIRMAN: All right, that gives us a context within which to work. I will start with Mr. Dexter.

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MR. DEXTER: I agree in the sense that I think the work of the committee should go on, and should go in a timely fashion. However, I do think it has to be based on the availability of the members to be able to do that. We tried to have it, in fact, done earlier on my motion so we would be through this by now, but that failed for whatever reason.

I would suggest that in terms of availability, if we are going to proceed, we should not be proceeding at all until the Gaming Corporation fulfils its responsibility in releasing all of the documents.

MR. SAMSON: Call them.

MR. DEXTER: No, we don't call them. They have been written, they have promised to produce the documents, they have not produced them. If we are going to proceed with those witnesses, we ought to have the documents before us before we proceed with them.

My second point is that if we are going to proceed, in my view, Mr. MacKay and Mr. Thompson certainly would be high on the list of people who should come next.

MR. CHAIRMAN: I might be able to add some information that might help committee members in their deliberations. For one, I did receive yesterday a letter by fax from Dara Gordon in which she specifically requested to be called as a witness at the first available opportunity. The second was, she invited me to attend a meeting with herself and Carl Holm in which we could discuss some mechanism for release of the documents in the hands of the Gaming Corporation. We have tentatively set a meeting sometime tomorrow and, if it is acceptable to the committee, I would propose to attend the meeting and see what concerns, if any, they have about that. So, I hope this might help. I have next Mr. Leefe.

MR. LEEFE: Mr. Chairman, with respect to the . . .

MR. CHAIRMAN: Oh, sorry, might I just add one other thing. It's that in terms of overall time constraints, there are other committees that are meeting and I am informed by the Clerk of the Committee that as we look ahead to Wednesdays over the next number of weeks, that July 29th and August 5th are dates on which all of the committee staff are otherwise spoken for, meaning I believe it's the special committee on workers' compensation that is calling for all of them. So, there is a combination of leaves and other committees that are going on. So, there might be a problem with respect to those two dates. Again, I haven't heard any members say they are not available on July 22nd, next Wednesday, but I know that others have made some vacation plans, but presumably we can find substitutes or people can come in.

In any event, sorry, Mr. Leefe, I interrupted you. You were about to say?

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MR. LEEFE: First, Mr. Chairman, with respect to your meeting with Ms. Gordon and Mr. [Carl] Holm, I would urge you to go there to listen and then to come back to the committee to share with the committee what you heard and to seek direction from the committee . . .

MR. CHAIRMAN: Absolutely.

MR. LEEFE: . . . not to make any commitments on the committee's behalf.

MR. CHAIRMAN: That was fully my intention.

MR. LEEFE: Yes, I'm sure. Secondly, we certainly would look forward to hearing both Mr. [Carl] Holm and Ms. Gordon and Mr. MacKay and Mr. Thompson. I think there is a valid question with respect to the receipt of documentation in advance of hearing Ms. Gordon. I am rather more anxious as a consequence of what we heard this morning to hear Mr. [Carl] Holm. He is much more directly involved with respect to the evidence that has been brought to us this morning, vis-à-vis a letter that Mr. [Carl] Holm himself provided us.

With respect to meeting next Wednesday, that does not pose a difficulty with us. I believe Mr. Fage is going to be away on parliamentary business. We will endeavour to find a substitute. If in fact there is none available, then two of us will be here.

MR. CHAIRMAN: This seems to me quite sensible. It sounds as if we are moving towards agreement to meet next week and to call, if they are available, as our next two witnesses, Mr. [Carl] Holm and Ms. Gordon. I will try to report immediately on what they are proposing with respect to documents. Mr. Samson, back to you.

MR. SAMSON: Just a point of clarification and my colleague here, Mr. Dexter, continues to want to cloud this issue. The fact is, requesting documents from the Gaming Corporation is not a cut and dried issue and you, Mr. Chairman, know that very well, which is why you will be attending a meeting to see how we can go about getting the production of those documents into this House in a manner which would protect the interests of the people of Nova Scotia, and that we not subject ourselves to pending lawsuits as a result of that. Now, that's being careful. That is being responsible to the people of Nova Scotia.

What Mr. Dexter is trying to do is make it look like we are hiding stuff, the Gaming Corporation doesn't want to give up stuff, and that is ignorance on his matter to do that, and try to confuse Nova Scotians on that issue.

I think we must make it clear here that - and we have made it clear in my statement - we want these documents in here, but let us do it in the right way, let us do it in the way that protects the people of Nova Scotia, and by that, let us bring in Dara Gordon, bring in Carl

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Holm, and ask them to bring in those documents, and that those documents be given the protection of this House.

MR. CHAIRMAN: Mr. Leefe.

MR. LEEFE: It is very clear that it is absolutely wrong for any member to impute motives to another member which Mr. Samson has just done. I think he should apologize to Mr. Dexter.

MR. CHAIRMAN: I will leave it in his good discretion as to whether he considers it necessary to apologize. I don't know if it was a useful intervention. However, if I may try to sum up where we are. I take it there is agreement of the committee that we will meet again on July 22nd, that we will, subject to their availability, call as witnesses, Mr. [Carl] Holm and Ms. Gordon, and we will perhaps consider from there when we could meet again. As I said, there is the problem about July 29th and August 5th. It may be that we won't be able to meet again until August 12th, the next dates would be August 12th, 19th, and 26th. (Interruption)

Indeed, I was about to note that I will be out of town on August 12th and 19th both, and so will the Clerk of the Committee, but again there is a Vice-Chair of the Committee and there are people available to do it. I guess all I can do at this point is lay out the parameters and the possible constraints and ask all members of the committee to consider them.

I take it we do have agreement, we will meet again next Wednesday. We will call those two as witnesses. Can I just ask, if they are not available, should we move to inviting Mr. MacKay and Mr. Thompson? Is that agreed? Failing those two, is that agreed? All right. So if I have summed up correctly, then that is how we will proceed. I think Mr. Samson had his hand up and then Mr. Fage.

MR. SAMSON: Just a point Mr. Chairman. I will take this opportunity to apologize to Mr. Dexter, unlike his Leader, I don't want to get into a name-calling thing. I am just concerned that people are getting confused here, and especially with all this legal talk. I am sure you will agree that some of us were shaking our heads as to where this was going, and we just want to make sure that people understand that we want these documents to be out. We just want to make sure we do it in a responsible manner.

MR. CHAIRMAN: Thank you very much. Mr. Fage.

MR. FAGE: One question in regard to Mr. Thompson and Mr. MacKay, would they be appearing separately or jointly when they appear? (Interruptions)

MR. CHAIRMAN: Well, I hear some members saying separately. Separately.

MR. FAGE: Same day, separately.

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MR. CHAIRMAN: Now just one final point . . .

MR. FAGE: I want to rise on a point of order.

MR. CHAIRMAN: Well, one final point then just before we get off this question of scheduling, how many hours during July 22nd are we prepared to meet? Again, three hours or longer, 10:00 a.m. to 1:00 p.m? Is that comfortable? All right, with maybe a little leeway at the end as we can see.

All in favour of the two motions, subject to how we have summed up?

All in favour, Aye. That is unanimous.

Mr. Fage on a point of order.

MR. FAGE: Mr. Chairman, earlier this morning I raised a very serious issue in regard that I feel that your chairmanship is lacking fairness, balance and especially when you report to the press. You said that you would like to have your own words. Well, Mr. Chairman I would like to read into the official record of this committee, your own words, and here they are for you.

MR. CHAIRMAN: What is this from please?

MR. FAGE: Voice actuality of Howard Epstein airing across Nova Scotia on morning radio newscasts: "It was the PC members of the committee who said they were in no rush and that it was unusual for the committee and they had no other plans this summer and all that sort of stuff and they didn't want to put the time into it - so this is the cause - they may change their minds - but they haven't yet - I regard it as laziness on their part.".

Well Mr. Chairman, I regarded that as blatant political games on behalf of the chairman of an impartial committee of this House. If that is the type of decorum, if that is the type of reaction we are going to receive and the politics that is going to be played from the chair of this committee, I am extremely concerned what we are doing here, and what the chairman's concerns are.

MR. CHAIRMAN: I think all I can do is note your objection. I am happy to have you table what you have just tabled. Thank you. There is no power in the committee, I think, to remove the chair if that is what you are suggestion, if that is what your suggestion is, and as . . . .

MR. FAGE: My suggestion is that the chair act like a chair.

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MR. CHAIRMAN: Well, I will consider what you have had to say. It seems to me that what you have read into the record, with the one exception of the comment about whether the position taken . . .

MR. FAGE: It was played this morning.

MR. CHAIRMAN: I am not denying that I said it and I am not denying that it is my opinion. What I am saying is that so far as I can tell every bit of it is completely accurate and neutral. The conclusion might have overstepped the bounds and I will take your suggestion from your senior years in the House to help me. Thank you very much. I think we stand adjourned.

[The committee adjourned at 1:17p.m.]