§ Order for Committee read.
§ Motion made and Question proposed, "That Mr. Speaker do now leave the Chair."
§ MR. LABOUCHEREsaid, that although on the second reading of the Bill he had addressed a few observations to the House, yet, as it was at a very late period of the evening, he might be allowed now to state very briefly the view he was disposed to take of the general subject, before Mr. Speaker left the chair. If this Bill was to be considered as establishing a system of railway audit, which should satisfactorily discharge that important duty, and should secure to the shareholders and the public a really efficient and independent audit of railway accounts, which should provide for the case (the only one in which it was important that an independent audit of railway accounts should exist) in which the directors withheld from the shareholders and the public the real state of the accounts, and put forth delusive statements of the affairs of the company—he was afraid that this Bill would provide no efficient remedy against that state of things. He believed that if it had passed 656 into a law some years ago, it would not have provided an effectual check against those transactions, which excited so strong a feeling throughout the country, with regard to the conduct of the directors of some railway companies. He believed that the same power which the directors exercised over the great body of the shareholders would have been also exercised over the auditors appointed by the shareholders under this Bill, and that it would give the shareholders themselves and the public at large no additional security of any importance against the recurrence of such transactions. He had been told that this might be so in past times, but that public attention was now awake to the management of railway affairs—that the public mind was enlightened on the subject—and that it was utterly impossible that events of the same kind could occur again. But he could not forgot that when the question of railway audit was discussed in that House on various occasions, before the occurrence of the events to which he had alluded, they were assured by hon. Members of that House, who were directors of various railway companies, that no additional security on the part of the public was necessary—that there was then an efficient audit of accounts—and that it was impossible that the true state of things should not be always accessible to the shareholders. He could not conceive that any system of railway audit could be efficient which was not continuous, and was not in the hands of persons independent, not only of the directors, but of that influence over the shareholders which the directors naturally and properly exercised so long as they had the confidence of the shareholders. He objected, therefore, to the very principle of the Bill, if it was meant to be considered as providing an efficient audit of railway accounts. At the same time he did not deny that there were provisions in the Bill which might be of use, and which were improvements upon the present state of the law; and as he I was not prepared to bring forward any measure for establishing an efficient railway audit, he should with an ill grace oppose the attempt of his hon. Friend the Member for Honiton (Mr. Locke) to improve the present state of things. He (Mr. Labouchere) did not bring forward such a measure as he conceived to be satisfactory on this subject, because he knew that he should not be able to carry it against the opposition of the railway interest in that 657 House; the general public being absolutely apathetic on the subject, except when aroused for a time by the discovery of great malpractices. A proper system of audit should put the auditors in such a situation that they should be really and truly independent of the directors, either directly, or through the body of shareholders. He thought that a measure of this nature should be originated by the Government. In the Bill of last Session he believed that he had reduced the interference of Government to the minimum, and he rejoiced if that interference could be done away with altogether, provided he could see the audit placed in the hands of independent parties. By the Bill now before the House, the Committee who were to elect the auditors were to have precisely the same qualification that was possessed by the directors. Was it not, therefore, clear that those gentlemen who were to elect the auditors would be very much in the situation of the directors; that they would, probably, expect to be directors some day or other, or that at all events they would be actuated by precisely the same motives and influences that would actuate the great body of shareholders? He did not say that the auditing of railway accounts ought to be placed in the hands of the Government; but he said it ought to be confided to persons whose inquiries would effectually prevent the possibility of a recurrence of those discreditable transactions on the part of railway directors, which it was well known had formerly taken place. The hon. Gentleman near him the Member for Kendal (Mr. Glyn) smiled at that statement, as if the recurrence of such transactions were impossible. Now, he was ready to bear his testimony to the fair and honourable spirit as well as to the great ability with which the hon. Gentleman presided over the management of the North Western Railway Company; and he had no hesitation in saying that if he had the good fortune of possessing shares in that company (and it so happened that he did not possess shares in any railway company), he believed he could not pursue a wiser course than to place unlimited trust in the hon. Gentleman, rather than confide in his own very inferior capacity in the management of such property. But they had then to deal with the case of directors who might wish to deceive the shareholders and the public; and the Bill before the House would provide no remedy for such a case. With 658 these views he confessed that he felt no great interest in the Bill; but as he believed that it nevertheless contained some improvements oil the present state of the law upon the subject, he should offer no opposition to the Motion that Mr. Speaker should leave the Chair.
§ MR. E. B. DENISONsaid, he was sorry that the right hon. Gentleman the President of the Board of Trade had not made his statement upon a former occasion. The right hon. Gentleman had told them emphatically that that was a Bill which could do no good. In that opinion he entirely coincided with the right hon. Gentleman; and he would further tell him, that, notwithstanding the great power of the railway interest in that House, the right hon. Gentleman would have met with more support than he seemed to expect in an attempt to pass a more efficient measure. The right hon. Gentleman had said that the Government ought to have endeavoured to deal with that question, and to have taken their chance for the adoption of a Bill really calculated to meet the existing evil. The present Bill would not at all meet the case. He had himself given notice of an Amendment in the first clause, which would tend, he believed, to improve the Bill, and he should certainly press that Amendment. He wished to have a strict auditing of railway accounts. But that Bill would not ensure that object. It would be nothing more than a putting off of the evil day. Therefore, as it was his firm belief that the Bill was worth nothing, he should feel it his duty to oppose it in every stage.
MR. EDWARD ELLICE, said, that if they adopted the principle that Parliament should interfere to protect the shareholders in joint-stock companies, they ought to include in this measure, not only railway, but banking and insurance companies. Within the last few years joint-stock companies, calling themselves insurance and banking companies, had been established in Scotland, and through the misdeeds of the directors had been infinitely more ruinous to their shareholders than even the most ruinous of the railway companies. In many of these companies large sums were paid up by the shareholders, the shares were issued at a profit, and then, after the directors had month after month issued the most flattering reports, the companies became bankrupt, and the shareholders not only lost all the capital they had paid up, but were actually obliged to 659 pay in more. He thought the Bill utterly inadequate to accomplish the object proposed; but if it was to go on, he should at the proper stage propose that insurance and joint-stock banking companies should be included in its operation.
§ MR. LOCKEsaid, that after four Hail-way Audit Bills had been introduced into that House within the last three years without one of them being carried, he thought it a little hard that when the railway proprietors came forward with a Bill of their own, notwithstanding the right hon. President of the Board of Trade had confessed that he had tried to legislate on the subject without success, railway directors who were Members of that House should come forward to oppose it. In consequence of certain flagrant acts committed by railway directors, the Government thought they were bound to interfere for the protection of individual shareholders, and they introduced a Bill founded on the principle of a Government audit; but it was well known that the railway shareholders were opposed to all Government interference in their concerns. The railway directors then propounded a plan of audit, but the shareholders decided that that did not go far enough, and would not accomplish the object in view; and the proprietors, of the various companies then appointed delegates, forty of whom, representing 120,000,000l. of capital, had been occupied eighteen months in preparing the present Bill, to which they had instructed him to ask the assent of the House—a Bill which he thought should not be treated in the way it had been by the hon. Members who had preceded him.
§ MR. HUMEheld that the Government ought not to interfere with any joint-stock company further than to give them facilities and powers for legally regulating their own affairs. Was there any one who objected to the plan of appointing five shareholders to act as auditors, which had been adopted by some of the best companies, and in some of the best-considered Acts of Parliament? The parish of Marylebone had a vestry under an Act of Parliament. On the day when the directors were elected, five ratepayers, not being members of the vestry, were also elected to be auditors for a year. The parishes under Sir John Hobhouse's Act were under the same system, which worked so effectually that a large portion of the vestry of Marylebone was turned out last year on the recommendation of the auditors. He hoped the Go- 660 vernment, would divest itself of the desire to centralise in such matters, and protested against any attempt on their part to interfere with joint-stock companies.
§ MR. LABOUCHEREwished to explain one point upon which his hon. Friend (Mr. Hume) had misunderstood him. He had stated distinctly that what he wished to see, if he could induce the House to pass such a Bill, would be a system of audit independent of the directors, and independent also of the influence which the directors necessarily exercise through the shareholders; but he wished that, if possible, Government should have nothing to do with it.
§ MR. STANFORDwas of opinion that the value of any Bill on the subject depended on its details. Shareholders were at present apathetic with respect to an audit of railway accounts, those who had suffered from frauds having parted with their stock; but the question still was one that ought to be dealt with. He thought they must all admit that there ought to be an efficient system of audit, and the question was, how could that be brought about? With respect to the measure before the House, the hon. Gentleman who introduced it (Mr. Locke) must have relied very much on the ignorance of hon. Members on the subject; for how otherwise could he suppose that any Member of that House, on reading the Bill, would think that it would secure the shareholders? If the Bill were really what it purported to he, and ought to be, namely, an Audit Bill, it should he confined to that question; but such was not the case, for the whole question of railway management, the election of directors, and a variety of other matters, were included in it. A measure, to be effective, should concentrate the attention of the House on the question of audit; and even if this Bill possessed the merits which the hon. Gentleman attributed to it, any railway company might call a meeting and nullify its effects. The hon. Gentleman who introduced the measure had referred to the meetings of shareholders that had taken place on this subject; but he (Mr. Stanford) must say that he took a different view from the hon. Gentleman of what had happened at those meetings. The opinion of the House would be materially influenced if it were thought that forty delegates had carefully deliberated on the present measure. He (Mr. Stamford) had been appointed a delegate to the convention of shareholders, and attended the 661 second meeting, when, instead of forty, he found that but a few were present. It might be that there was a continued accretion or aggregation of delegates. There were some at that meeting, and others at a third and fourth. There might have been forty at different times, representing 120,000,000l. Such a measure ought to emanate from one mind. Out of five delegates from the Great Western, two could not be got to agree with the others. He would most respectfully insist that one half of the railway interest, whoso capital was 120,000,000l., was not in favour of this measure. What was there in this Bill to protect the shareholders that was not to be found to exist under the present system? They could never have an independent shareholders' audit, unless they laid down a general principle, and rigorously carried it out—namely, that no director, official person, or persons professionally employed, or any person having an interest directly or indirectly, except shareholders or bondholders, should be allowed to interfere. The power of interference should be confined to the shareholders who had held their stock for a certain period, say six or twelve months; and he would also include the holders of debentures, a class of persons who could not be easily acted upon, and who would see that the audit was plain and efficient, He would supply another guard to prevent the exercise of any improper influence. He would authorise the different railway companies to elect a body of about 300 persons, who would meet together on due notice, and under certain checks, for the express purpose of electing those railway auditors, who might be either three or five in number, and who would be qualified to carry out an efficient and searching audit. He thought that such auditors should hold their offices for life, and should not be removable, unless they were guilty of gross impropriety of conduct.
§ MR. W. WILLIAMSthought the Government was most reprehensible in not having taken up this case. It was one of the greatest importance, for the amount of property invested in railways was equal to one-third of the national debt. The Bill of his hon. Friend (Mr. Locke) was opposed by railway directors, because they wanted to keep to themselves a knowledge of the real position of railway property; and railway property was much less in value than property of other descriptions, because the public had no confidence in the accounts 662 presented, or in the present system of audit. Though this Bill would not establish a perfectly efficient system of audit, it would still be a great improvement on the present one; and if the Government did not give them some hope that they would introduce a more efficient measure, he would support the Bill of the hon. Member for Honiton.
§ MR. CHAPLINsaid, that if this had been a simple Audit Bill, he should not have said a word on the subject; but it went further than that, and would place considerable power in the hands of irresponsible persons. It was a fact worth mentioning that not a single petition had come to that House in favour of the Bill from any one of the holders of railway property, although that was stated to be upwards of 200,000,000l. in value. Let them look to their past legislation with respect to railway companies, and what advantage had it produced? They had passed a law that third-class passengers should be carried at the rate of one penny a mile; but if they had not interfered, the railway directors might have found from experience that they could convoy this class of passengers at a lower price than was inflicted upon them by the legislation of that House. He thought that if they left the matter to the directors, they would obtain more experience on the subject, and public opinion would keep matters right. He was of opinion that, even at present, the accounts were tolerably well audited; and where, he asked, was the director who would stand up and refuse a fair and proper audit to the shareholders? He begged to call attention to the imperfect nature of the clause in the Bill with respect to the accounts to be audited. Every one knew that the largest outlay consisted of the expenditure for the purchase of land, for locomotion, and for engineering; but the clause merely referred to salaries, repairs of permanent way, stations, and buildings, so that if they had any other works going forward, there was nothing in the Bill to authorise the audit of the expenses of such undertakings. He should move that the Bill be committed that day six months.
§ Amendment proposed, to leave out from the word "That" to the end of the Question, in order to add the words, "this House will upon this day six months resolve itself into the said Committee," instead thereof.
§ MR. EWARTsaid, the hon. Member for Salisbury (Mr. Chaplin) had not objected to the principle of the Bill, bat only 663 to details, which would he better argued in Committee. As he (Mr. Ewart) considered that the Bill would give to shareholders a degree of supremacy over directors which they had not hitherto possessed, he would give his vote in its favour. He thought a Government Bill to regulate commercial affairs was the thing most to be deprecated in a commercial country like England. The Bill of the hon. Member for Reading (Mr. Stanford) had been rejected almost unanimously by the railway delegates. But the Bill of the hon. Member for Honiton (Mr. Locke) had this advantage, that it introduced the representative system, and excluded persons interested in the management of railways.
§ MR. HEALDobjected to the measure on the ground that while it professed to be an Audit Bill it dealt largely with other matters, and would be a direct attack on the interests of shareholders. In his opinion the best way to serve the railway interest was to cease to legislate about it. The attention of shareholders was now sufficiently directed to their own interests, at the general meetings and elsewhere, to secure them against injury.
CAPTAIN HARRISconsidered it to be the duty of the Government to take up the question; and their not doing so was another instance of their weakness and inefficiency. It was because the railway interest was a now interest, which people did not yet well understand, that an independent audit was necessary. As to the Bill before the House, he would allow it to go into Committee, that he might then judge of the value of its various Clauses
§ MR. LABOUCHEREbegged to inform the hon. and gallant Gentleman who had spoken of the weakness of the Government as their reason for not introducing an Audit Bill, that Gentlemen approached a subject of that kind with a total indifference to party feeling. He never knew Gentlemen, where their interest was concerned, inquire whether the proposal came from the Ministerial or the Opposition side of the House. They were swayed on such occasions by motives more powerful than mere party motives; and with respect to such measures, whether a Government was weak or strong, made no difference whatever. When he (Mr. Labouchcre) had endeavoured to introduce a proper S3rstem of railway audit, he had received quite as much opposition from his own friends as from the hon. Gentlemen oppo- 664 site. An hon. Gentleman had expressed his intention to take the sense of the House on the Motion "That the Speaker do leave the chair," and although he (Mr. Labouchere) had not sanguine expectations of any material improvement being effected by this Bill, he would not, so far as his vote was concerned, oppose the proposition for going into Committee.
§ COLONEL SIBTHORPsaid, he should like to see a clause introduced into this and all Railway Bills that came before the House, which should compel the directors to give compensation to the surviving families of persons whose lives were sacrificed by travelling on railroads, and to persons who were thereby maimed or injured. He held that the whole system of railroads had been prejudicial to the rights of private property, and in the highest degree dangerous to human life. As far as he was concerned he should ever prefer travelling by the stage-coach or coach and pair than by these railways.
§ MR. J. L. RICARDOsaid, that whatever might be the opinions of hon. Members with regard to this Bill, there could he no doubt that a complete system of railway audit was most desirable. He was one of those who thought there were many things in the measure before them that were objectionable; but believing that the hon. Member (Mr. Locke) would, in Committee, show every disposition to listen to any objections against its provisions, he hoped the hon. Member for Salisbury (Mr. Chaplin) would withdraw his somewhat unusual Amendment—an Amendment of which he had given the House no notice whatever.
§ MR. PACKEsaid, he must confess his ignorance as to how to give his vote on the question, after the observations of the right hon. Gentleman (Mr. Labouchcre), who had said that he did not think this Bill would make any improvement in railway matters, and yet added, that he would vote for going into Committee upon it.
§ MR. W. EVANS, although opposed to the measure generally, would vote for the original Motion, thinking it possible that the Bill might be advantageously altered in Committee.
§ Question put, "That the words proposed to be left out stand part of the Question."
§ The House divided:—Ayes 72; Noes 49: Majority 23.
| List of the AYES. | |
| Anderson, A. | Kershaw, J. |
| Armstrong, R. B. | King, hon. P. J. L. |
| Baird, J. | Labouchere, rt. hon. H. |
| Bell, J. | Lawless, hon. C. |
| Bright, J. | Lewis, G. C. |
| Brotherton, J. | Lockhart, W. |
| Brown, H. | MacTaggart, Sir J. |
| Carter, J. B. | Matheson, Sir J. |
| Charteris, hon. F. | Maule, rt. hon. F. |
| Clay, J. | Miles, W. |
| Clements, hon. C. S. | Milner, W. M. E. |
| Cowan, C. | Moncrieff, J. |
| Craig, Sir W. G. | Mowatt, F. |
| Dalrymple, J. | Mundy, W. |
| Davie, Sir H. R. F. | O'Connell, M. J. |
| Duncan, Visct. | Patten, J. W. |
| Duncan, G. | Pilkington, J. |
| Evans, J. | Prime, R. |
| Ferguson, Sir R. A. | Ricardo, J. L. |
| Fox, W. J. | Romilly, Col. |
| Freestun, Col. | Seymour, H. D. |
| Gibson, rt. hon. T. M. | Shafto, R. D. |
| Glyn, G. C. | Stanton, W. H. |
| Goold, W. | Strickland, Sir G. |
| Granger, T. C. | Tenison, E. K. |
| Greene, J. | Thicknesse, R. A. |
| Greene, T. | Thompson, Col. |
| Harris, R. | Thornely, T. |
| Hastie, A. | Verney, Sir H. |
| Hatchell, rt. hon. J. | Vivian, J. H. |
| Headlam, T. E. | Watkins, Col. L. |
| Herries, rt. hon. J. C. | Wawn, J. T. |
| Heywood, J. | Williams, J. |
| Higgins, G. G. O. | Williams, W. |
| Horsman, E. | |
| Hume, J. | TELLERS. |
| Hutchins, E. J. | Locke, J. |
| Inglis, Sir R. H. | Ewart, W. |
| List of the NOES. | |
| Baillie, H. J. | Heald, J. |
| Baldock, E. H. | Heneage, G. H. W. |
| Barrington, Visct. | Hornby, J. |
| Barrow, W. H. | Lacy, H. C. |
| Bennet, P. | Long, W. |
| Beresford, W. | Mackenzie, W. F. |
| Boldero, H. G. | Mahon, Visct. |
| Cochrane, A. D.R.W.B. | Manners, Lord C. S. |
| Denison, E. | Nicholl, rt. hon. J. |
| Dod, J. W. | Packe, C. W. |
| Drumlanrig, Visct. | Perfect, R. |
| Drummond, H. H. | Powell, Col. |
| Dundas, G. | Reid, Col. |
| Du Pre, C. G. | Renton, J. C. |
| Ellice, E. | Scott, hon. F. |
| Emlyn, Visct. | Smith, J. B. |
| Evans, W. | Smollett, A. |
| Farrer, J. | Spooner, R. |
| Forbes, W. | Stafford, A. |
| Forester, hon. G. C. W. | Taylor, T. E. |
| Freshfield, J. W. | Tyler, Sir G. |
| Frewen, C. H. | Waddington D. |
| Gore, W. R. O. | Willyams, H. |
| Grenfell, C. W. | TELLERS. |
| Hallyburton, Lrd. J. F. G. | Chaplin, W. J. |
| Hastie, A. | Grenfell, C.P. |
§ Main Question put and agreed to.
§ House in Committee; Mr. Bernal in the chair.
666§ Clause 1.
§
MR. E. B. DENISON moved, as an Amendment—
To leave out all the words from the word 'That,' in Clause 1, to the end of the clause, in order to add the words, 'notwithstanding anything contained to the contrary in any Act relating to a particular railway company, or to railway companies in general, it shall be lawful for any railway company, in extraordinary general meeting assembled, to determine from time to time the method of selecting auditors of the accounts of that company, and the qualification of such auditors, their remuneration, and their duration in office; and also from time to time to determine the method of auditing the accounts of that company; and whether any and what persons shall he employed for the purpose of investigating the said accounts in aid of the auditors of that company; and whether the audit thereof shall be continuous or occasional; and what publicity shall be given to the said accounts; and what access shall be allowed to all or any of the books in which the same are contained, or to the registers of proprietors and of transfers; and whether copies of all or any of such documents or abstracts thereof shall be periodically or occasionally circulated amongst the shareholders.
At present, railway companies were subject to the control of the Companies' Clauses Act, which compelled them to elect auditors, to publish their accounts, and to conform to various other regulations; and he thought it desirable to leave the audit of railway accounts in the hands of the shareholders, where it was at present. Unless there was to be an independent audit—on which he should not say one word, because this Bill did not contemplate such a thing—he was thoroughly convinced that House would interfere with the present working of railway concerns, and that it would be better for the public and railway shareholders to leave the matter as it stood at present rather than legislate in the manner proposed by the hon. Member for Honiton (Mr. Locke). He (Mr. E. B. Denison) did not say the existing system of audit was perfect. On the contrary, he did not think the public was properly protected by it; but he only objected to the Bill of the hon. Member (Mr. Locke), because it provided an inefficient remedy.
The CHAIRMANthought an Amendment such as the hon. Member (Mr. E. B. Denison) proposed, which went to strike out every part of a clause excepting the initiatory word "That," for the purpose of substituting an entirely new provision, was irregular. The Amendment proposed, in fact, to substitute a new clause for the first clause, retaining only the enacting word "that;" and it would be for the Committee to determine whether they 667 would consent to such a course, which he thought was inconvenient.
§ MR. HUMEsuggested that the hon. Member (Mr. E. B. Denison) should endeavour to embody his Amendment in a new clause at the end of the Bill.
§ MR. W. MILESsaid, the clause in the Bill had reference to a system of keeping railway accounts, and he thought it would prove a most useful clause; but the Amendment of the hon. Member (Mr. E. B. Denison) had nothing whatever to do with keeping accounts, and was to all intents and purposes a new clause.
§ MR. E. B. DENISONwould candidly state that he thought by stopping the Bill at its outset, he would be saving the time and trouble of the Committee in a consideration of the subsequent clauses, which he thought exceedingly objectionable. He was, however, in the hands of the Committee, and would be guided by them.
§ MR. LOCKEwould put it to the Committee whether it was treating this Bill with the consideration to which it was entitled, to endeavour to stifle discussion upon it at its very opening?
§ MR. STANFORDsaid, that the attempt to regulate and control the financial proceeding's of all the railway companies in the country by compelling them to frame their accounts according to one prescribed schedule, was simply absurd. The thing-was impossible; and, what was more, it was not necessary. Would it not be much better to select experienced and competent men to act as railway auditors, and leave them to frame the accounts in each case as they should think lit, rather than treat them as children, and pin them down to a certain prescribed formula, from which they should not on any account depart?
§ MR. H. BROWNsaid, that if the Amendment were carried, the hon. Member for Honiton (Mr. Locke) would be obliged to withdraw the Bill altogether; and the consequence would be that, in order to obtain the same end, the Government would be compelled to put in operation what he was sure would be found to be a most offensive interference with railway property.
§ MR. E. B. DENISONsaid, he would withdraw his Amendment, and propose instead that the first clause should be negatived.
MR. EDWARD ELLICEopposed the clause. He deprecated the attempt on the part of the hon. Member for Honiton (Mr. Locke) to undo the whole system of 668 railway accounts. Every railway company was now keeping its accounts on its own system, and the attempt to reduce the mode of keeping those accounts to one uniform plan, was utterly impracticable. If they were to have an audit of railway accounts, he much preferred the plan of the right hon. President of the Board of Trade to that of the hon. Member for Honiton. He thought the manner in which the clause would operate would throw railway property into that confusion and danger from which it was only now escaping. The shareholders had at present sufficient powers to secure to them a good audit, so that, even if legislation were wanted, it was for the buyer in order to make him acquainted with the value of what he was about to buy. Being of opinion that the schedules in the clause would lead to confusion, and, also, that the shareholders had sufficient powers of audit, he should vote against the clause.
§ MR. MOWATTwas surprised to find that any man, not merely one who had had to do with railways, but any one who had observed—and who had not?—the ruinous results which had befallen railway property in consequence of the manner in which shareholders had been bamboozled, if not defrauded, by the loose system of keeping accounts which had hitherto prevailed—he was surprised, he said, to find any one, and least of all the hon. Member for St. Andrews (Mr. E. Ellice), maintaining that the present system of keeping accounts was anything like satisfactory, and that an improvement was not desirable. That the system proposed by the present Bill was the best that could be devised, he would not say, though he should himself support it until a better was suggested; but he was bound to suppose that there was nothing very faulty about it, otherwise he should have heard a substitute proposed. The hon. Member for St. Andrews said that the shareholders had already the power of protecting themselves. He knew that, theoretically, this was the case; but every person at all conversant with the practical working of railway affairs, knew that the directors had the power of passing any resolution they might think fit.
MR. EDWARD ELLICEsaid, that so far from having maintained that the present system of keeping railway accounts was in a satisfactory state, he had said that railway property was just emerging from the chaos into which it had been plunged by improper management within the last 669 few years. Neither did he deny that improvement was desirable; but what he objected to in the clause was this, that as at present no two railway companies kept their accounts on the same system, it would create immense confusion to make them all conform in future to one absolute rule.
§ MR. HUMEsaid, that all they would affirm by agreeing to this clause would be this—that there shall be one set of accounts kept by all these railways. It should be recollected that this schedule had been prepared by two able accountants who wore selected by the delegates of forty companies. They had brought this forward as the means of settling a most important question. It now appeared extraordinary to say, that if the matter were left to these companies they would object to it. He hoped that the Committee would affirm the necessity of keeping these accounts.
§ MR. HEYWORTHsaid, that there was great loss of property sustained from the want of these accounts; for the evils produced in this country in respect to these railways would have been detected long ago, if we had had a proper system of accounts kept. The real sources of the loss were the numberless competing lines to convey the traffic to and from the same places. He would certainly give his vote in favour of the clause.
§ MR. SPOONERwas quite sure that the Bill could not pass through Committee, because it was evident that it would be a complete waste of time to make it work. The object of the clause was to lay down a specific plan by which one system of accounts only should be observed in respect to railway property embracing about 120,000,000l. He believed it utterly impossible to carry out such a system, and he had no hesitation in saying that it would prove an utter failure. He was of opinion that it was idle to attempt any such legislation, and he warned the Committee that if they went on with the Bill they would find several clauses so objectionable that they would at length see it was but a waste of time to have considered the matter at all.
§ MR. J. L. RICARDOwanted to know how the hon. Member for Honiton (Mr. Locke) proposed to deal with a case where there was a railway and a canal working together?
§ MR. LOCKEhad no objection to answer the hon. Member's inquiry at once. 670 This clause did not prevent them altering the schedule according to the circumstances of the case. It was, therefore, idle to raise objections to the measure simply because there might be a canal in connexion with a railway. The object of the Bill was not only to protect the buyers but also to protect the property of all who were connected with these railways, and to prevent them from being defrauded. If there was anything more than another of which the shareholders complained, it was the irregular and complicated manner in which their accounts were generally kept. He was a shareholder in many of the railways, and he felt it impossible to get a true account of many of the items. So long as they allowed the existing system to continue, so long would the shareholders be prevented from exercising any control over their own property. He believed that the schedule in his Bill was similar to the one adopted by the London and North-Western Railway Company.
§ MR. J. L. RICARDOsaid, the main end and object of this clause was to have the same form of accounts for all railways. This he did not believe to be possible, and the hon. Gentleman himself had introduced a provision that the form of accounts should be as near his form of accounts as the circumstances of each case would admit. When this was the mainspring of the clause, the Committee was entitled to explanation, because no uniform state of accounts could be got. His object was the same as that of the hon. Gentleman (Mr. Locke), but he did not think the hon. Gentleman's clause would meet the difficulty, and he would therefore oppose it.
§ MR. D. WADDINGTONthought that parties would avail themselves of this clause to defeat the very object which the hon. Gentleman (Mr. Locke) had in view. The desire was, that railway proprietors should know their working expenses one half year as compared with another; and this result could only be obtained by comparing the same system of accounts. He called on the House to judge for itself, and not to follow the views of the railway delegates, among whom there had existed considerable differences of opinion. The Bill would fail to give satisfaction to the railway proprietary. The real way of getting an audit was to have auditors appointed by the shareholders independently of the board of directors, and giving them the power to call in a public accountant.
§ MR. LABOUCHEREentertained a strong impression that the Committee could not lay down any uniform system of accounts without, also, giving a general power to vary the mode of keeping the accounts according to circumstances. If they were to act on this principle, it was essential that the auditors should be entirely independent of the directors. He was not in favour of tying the companies down too exclusively to any particular form of accounts; he believed that the public at large had a deep interest in the management and condition of railways generally, and that they had a right to see that the accounts were properly kept. He would be unwilling to vote against the clause, because, if it were rejected by the Committee, the effect would be to destroy the Bill altogether, at the same time he thought that some provision ought to be introduced, giving a certain latitude. The clause as it stood was defective. The audit of accounts was not merely a matter between shareholders and directors, but one in which he held the public had a very great interest. He believed they had a right to interfere, and see that a proper audit of railway accounts was kept. As there was no substitute for this clause, he should support it, for the Bill would be useless without it; but if a proper clause was introduced, he would willingly vote against that now before the Committee.
§ MR. MOWATTdid not understand that the Bill tied down the directors in any way from giving any items 'they considered necessary by way of explanation or otherwise. The Bill merely provided that certain loading items should be requisite from all companies. The railway world and the public were greatly indebted to the hon. Member for Honiton for his Bill.
§ MR. SPOONERthought, that if the auditors were to be tied down strictly, no schedule would remedy the evil, or in all cases give the shareholders the information they had a right to.
§ MR. E. B. DENISONwas of opinion that the Committee had not sufficient experience to lay down a rule as to the form of railway accounts which should be binding on all railways. He was convinced that the measure was not right in principle or detail; and he hoped the right hon. President of the Board of Trade, who, he believed, supported this Bill only be- 672 cause he was anxious to have an Audit Bill, would turn his attention to the subject, and bring in a measure on the authority of Government.
§ MR. LABOUCHEREsaid, that in Lord Stanley's Audit Bill there was a schedule laying down a form of account, but there was also a clause giving a discretion to make such alterations as circumstances might render necessary; and such a discretionary power as he had said must be introduced into this Bill to make it a practical measure for its purpose.
§ MR. E. B. DENISONconsidered that the right hon. Gentleman had admitted the whole principle for which he contended.
§ Motion made, and Question put, "That the said clause stand part of the Bill."
§ The Committee divided:—Ayes 81; Noes 60: Majority 21.
§ Clause agreed to; as were Clauses 2 to 5.
§ Clause 6, which disqualifies directors and auditors from voting.
§ MR. J. L. RICARDOsaid, that it would be very hard not to permit the directors a vote in the election. The effect of this clause would be to deprive them of this advantage. He considered that the words in the clause except "in his own right," would prevent a director from using powers which shareholders in all parts of the country were in the habit of sending to directors in whom they placed confidence; and he proposed that those words should be omitted.
§ MR. J. EVANSsaid, the evil arose from noisy and ill-conditioned persons driving away all the quiet and peaceable ones, who were thus obliged to send up their proxies. He begged to ask the hon. Member for Honiton whether he intended to prevent the directors using such proxies?
§ MR. LOCKEsaid, the clause had nothing to do with the proxies of other shareholders, it only prevented directors from voting upon the shares that belonged to the company.
§ Words struck out. Clause agreed to; as was also Clause 7.
§ Clause 8.
§ MR. H. BROWNmoved to add, in this clause, an Amendment of which he had given notice.
§
Amendment proposed—
In p. 4,1. 40, after the word 'line,' to insert the words ' and also that such auditors shall require to be produced to them, once at least in every year, all bills of costs for charges in law, equity, conveyancing, and Parliament, and that the said auditors shall have full power and authority, if they shall think fit, to employ some competent person or persons to examine and report to them upon the charges in such bills of costs, and also to tax the same before the proper authorities,'
§ MR. SPOONERobjected to give so much power into the hands of the auditors without being controlled by the shareholders. This would, in many cases, impose a heavy charge upon the shareholders, which they might think altogether unnecessary, but against which they could have no remedy if this Amendment were agreed to. He thought such a power should be vested in the hands only of the directors and shareholders.
§ MR. LOCKEagreed with the sentiments of the hon. Member for North Warwickshire (Mr. Spooner), and recommended the hon. Member for Tewkesbury (Mr. H. Brown) to withdraw his Amendment.
§ MR. LABOUCHEREwas in favour of the Amendment, for he believed legal charges had been made the cover for more improper expenses than any other, and required to be more peculiarly watched. He should therefore support this Amendment if it went to a division.
§ MR. E. B. DENISONsaid, the solicitor on the Great Northern line had at all times been willing to have his charges sent for taxation.
§ MR. H. BROWNsaid, that on one railway board with which he was connected, the solicitor sent in his bill, charging 20,679l. 5s. 9d., and as the company had not the money to pay it, the chairman proposed to give the solicitor their note of hand, bearing interest at 5 per cent. He (Mr. H. Brown) proposed that it should be sent to the taxing-master, which was done, and the bill was reduced from 20,679l. 5s. 9d. down to 8,337l. 15s. 7d., and even of that sum only 15⅞ per cent was for outlay of money.
§ MR. J. L. RICARDOsaid, the Amendment would rather have the effect of perpetuating these abuses, as the directors would no longer tax the legal bills, as he knew most boards were now in the habit of doing, and with very beneficial effect.
§ MR. SPOONERsaid, what he had before said must have been misunderstood. He did not object to solicitors' bills being taxed, 674 but he did object, after the whole responsibility had been taken out of the hands of the directors, that the auditors should have the power of subjecting a bill to a second taxation. The auditors' power ought not to extend beyond the right of sending back the bill to the shareholders to be re-examined by them. If the clause passed, he believed it would be difficult to find respectable solicitors willing to act for railway companies. He did not believe any respectable solicitor had any objection to having his accounts sent to the taxing-master of the House, Mr. May, because he was vested with a discretionary power, and could judge of the circumstances under which the expenses were incurred; but that would not be the case with the taxing-masters to whom the accounts would be referred under this Amendment.
§ Amendment proposed to the said proposed Amendment, to leave out the words "and also to tax the same before the proper authorities."
§ MR. FRESHFIELDwished to call the attention of the Committee to the consequence of carrying this Amendment. At present the solicitor to a railway company was often called upon to act on his own responsibility, and the directors, knowing the circumstances under which he acted, made allowances accordingly; but if this Amendment were carried, and the solicitor's charges were to go before a taxing-master, the solicitor, rather than have his accounts taxed in this manner, would come before the directors and require their express sanction for everything he did, and the express sum which they were willing to pay for it. Such a course, he thought, would be fraught with inconvenience to the directors themselves.
§ MR. GLYNhoped the Committee would attend to what had been said by the hon. and learned Member for Boston (Mr. Freshfield). It often occurred that a solicitor received general instructions to engage the best counsel they could find, either at the Common Law or the Chancery bar, and it sometimes happened that a fee of 2,000l. was given in such a case; but it might happen that a taxing-master would refuse to admit such a fee, and in that case the expense would be thrown upon the directors. He thought this was a position in which the directors of a company ought not to be placed.
§ Question put, "That the words proposed to be left out stand part of the said proposed Amendment."
675§ The Committee divided:—Ayes 57; Noes 57.
§ And the numbers being equal, the Chairman declared himself with the Ayes.
§ Amendment agreed to.
§ MR. J. L. RICARDOobjected to the whole tenor of the clause, as placing auditors over directors, and suggested limiting the power of the former to the examination of the accounts, by leaving out the words, "any other matter or thing they, or any or either of them, may think fit."
§ MR. LOCKEdid not see what would be gained by leaving out those words. It was not intended that the auditors should interfere with the policy of directors; and if the hon. Gentleman had read the clause with sufficient care, he would have seen that, as it stood, it would not bear that interpretation.
§ MR. J. L. RICARDOsaid, that the hon. Member (Mr. Locke) had not recollected sufficiently the clause itself, which said that the auditors might bring up a special report upon the accounts, the balance sheet, the scheme of dividend, or any other matter or thing they, or any or either of them, might think fit; and if that would not give the auditors power over matters not within their province, he (Mr. Ricardo) confessed he was perfectly incompetent to read the clause of any Act of Parliament.
§ MR. HUMEthought that the addition of the words "relating thereto," after the words "matter or thing," which would confine their report to the accounts, the balance sheet, and the scheme of dividend, and would not extend to the policy of the company, would meet the difficulty.
§ MR. J. L. RICARDOthought that would not meet the object in view, as there were other words which required considerable alteration, and therefore he moved that the Chairman report progress.
MR. EDWARD ELLICEconsidered the whole Bill would mix up the duties of auditor with the duties of directors. He could not consent to the clause as it stood; whether it could he amended or not required consideration. He reminded the Committee that it was impossible to arrange the clause satisfactorily over the table; the amendments ought to be maturely weighed and submitted to counsel, and therefore he must positively decline acceding to any alteration.
§ MR. LABOUCHEREwould not say whether or not some amendments might not be made, but he ventured to caution 676 the Committee if they really desired an effective audit, how they limited the powers of the auditors to examine papers and accounts, for, without very large powers, it would be impossible that auditors could discover transactions, perhaps of the very worst description. He would instance a supposable case: there might be dealings with the capital of a railway company in some materials, as wood or iron, carried on by directors, or the chairman of directors. He only mentioned the supposition for the sake of illustration. Unless the auditors had powers of looking not only into the mere accounts, but into transactions connected with those accounts, it would be impossible to expose transactions of that description. While he agreed with the principle that auditors ought not to interfere in the policy of directors, or relieve directors of the responsibility which properly attached to them, he thought it important that the audit should be efficient, and not merely nominal; and that they should be careful how they limited the scope of the powers given for the purpose. At the same time, he admitted the objection to the words of the clause.
§ MR. E. B. DENISONunderstood from the clause, that auditors were intended to usurp the direction of the affairs of railway companies, and his conviction was, that if adopted, then farewell to the discretion of directors.
§ MR. LOCKEwould agree to the suggestion of the hon. Member for Montrose (Mr. Hume) to introduce the words "relating thereto;" but he considered it hard that railway gentlemen should be the persons to take exception to the clauses of the Bill; and after its having been in their hands for a considerable period, yet be unprepared to supply amendments.
§ House resumed.
§ Committee report progress; to sit again on Wednesday, the 28th May.
§ The House adjourned at two minutes before Six o'clock.