HC Deb 07 February 1867 vol 185 cc89-108

, in asking for leave to introduce a Bill to make better provision for the arrangements of the affairs of Railway Companies unable to meet their engagements, said: I think the House will not be surprised that the position of the railway companies in this country should have attracted the attention of Her Majesty's Government. In point of fact, there are few questions which have been more before the public of late than the embarrassed position of some of our railway companies—especially the embarrassed position of one of them. Many important questions affecting the future position of railways and the relations of the companies and the State may, at the proper time, engage the attention of Parliament, and to these it will be right that the Government should by-and-bye draw attention; but I think that we are not at the present moment ripe for the consideration of many of these questions, because the Royal Commission which was appointed a short time since to consider the important points in our railway system is still sitting, and has not yet presented its Report. I understand, however, that it is nearly completed, and when it is presented to the House it will, of course, be the duty of the Government to take it into serious consideration, and they may think it their duty, upon the recommendations contained in that Report, to make proposals to this House, which it is now, of course, quite impossible to anticipate. I do not, then, think that this is the proper time for considering many of the questions which affect railways, and to which public attention has been directed; but there is one urgent question, of great magnitude, to which we think it is desirable the attention of Parliament should be directed, and that is the question of the arrangements that shall be made in the case of railway companies which are unfortunately unable to meet their engagements. The Government has thought it desirable to bring their proposal before the House at the commencement of the Session—partly because they wish that the House should have an early opportunity of considering the views they have to submit to it, and partly because of the actual case of certain railway companies who are now in a position of some difficulty. There is nothing in what I shall say to the House, or in the plan which I shall have to propose, which will necessarily interfere with any arrangements now pending; but it is possible that after the views of the Government have been stated upon this subject, and when the opinion of the House has been taken on the course that ought to be pursued with regard to insolvent railway companies, those views and opinions may have some bearing on the proceedings of companies which are now coming before Parliament with reference to arrangements. It is quite unnecessary that I should enlarge upon the importance to the public of an inquiry into this question; but I wish, in opening the discussion, to find some safe ground to start from, and some principle I can take as my guide on the question we have to consider. The ground I start from is this—that the matter is one of public interest, and that the principle on which we ought to proceed in any suggestions we may have to offer for the solution of the difficulties in which railway companies find, or may find themselves, should be that of an adherence to the public interest. We must look on railways as undertakings which have been specially favoured by Parliament—not for the sake of the persons who undertake to construct them—not for the sake of the shareholders, the creditors, or any other class of persons interested in them, but as undertakings to which Parliament has afforded great facilities, because they were considered to be of importance to the communication of the country, and for various public purposes, to which I need not enter into detail; and therefore Parliament has a right to say, "We will take care that these undertakings which we have encouraged, and to which we have granted such facilities, shall really be of advantage to the public," and if we perceive, in the course of the undertaking, that the circumstances of the company will not enable it to carry on its undertakings beneficially for the public and consistently with public security, then I think Parliament has a right to come forward and say, we will endeavour to remedy those evils; and whilst we are prepared to give all due attention and consideration to the rights of individuals, we have a right to demand that some arrangement shall be made for securing the rights of the public. If we start on this principle, then, I think there will be very little difficulty in applying it to the case of a railway company in such a state of financial embarrassment as to be unable to properly conduct its business. This is a matter which affects not only the public convenience but the public safety; and to these ends it is essential that railways should be in the hands of companies possessed of sufficient funds to carry them on in a proper way, to supply the proper and necessary appliances for working, to keep the permanent way in proper and substantial repair, and provide those train services and other facilities which the public have a right to expect. When, however, we find that a railway company is in a position of insolvency, and is unable to meet its engagements, Parliament is entitled to say, on behalf of the public, that this company ought, in some way or another, to give up the task which it is unable to accomplish to other hands who are able to so. When I use the expression that such railways should give up the task to more competent hands, I do not necessarily mean that the existing railway companies should sell their railways to some stranger or third party, because the object may be accomplished by such a re-arrangement of their affairs as would render them just as competent to carry on their undertakings as any new companies founded on a sounder basis. All I now contend for is that it is our duty to see, if a railway company cannot satisfactorily work!' its railway, that some provision should be made for placing it in the hands of those who can. Having got so far as that in the consideration of the matter which I am endeavouring to lay before the House, I find that I am met with difficulties on the side of the law. As the law stands it is not possible—at all events, in the case of unwilling companies—to force anything on them in the nature of an act of bankruptcy, and it is not possible to compel them to place their affairs in the hands of those who are able and willing to work the lines for them. Railways are expressly and deliberately excepted from the law applicable to all other companies, under which other companies may be made bankrupt when unable to meet their engagements; and although railway companies who choose to register under the provisions of the Joint Stock Companies Act may be wound up under that Act, even in that case it would be of necessity an imperfect proceeding, for there is no authority which would have power to sell the railway or to make any arrangement as is made in the case of other undertakings, or to transfer it to other hands. For that purpose it is necessary that the railway company should come to Parliament. Now, if that is the state of the law, we must look at it not only as a matter of fact, but we must look on it as being an incident of the policy on which the law is founded. It is not a mere omission on the part of the Legislature to put them on the same footing as other companies; railway companies are expressly and deliberately excepted by the Legislature on the ground that their undertakings, being of a public character, are on a different footing as regards the public from private undertakings, which are carried on for the benefit of the individuals who carry them on. If a company, for instance, carrying on a cotton-mill, should be found unable to carry on its affairs satisfactorily, it may be made bankrupt, and the mill sold; but whether the concern be carried on, or the mill pulled down, is of no direct or immediate interest to the public. But in the case of a railway company the public have a great interest in what becomes of the line; in fact, they have more interest in what becomes of the line than in what becomes of the company. Parliament, therefore, may fairly say to such a company, "When we gave you the power to make this line, we did not at the same time empower you to transfer it to whom you pleased; we allowed you to work, but not to sell it; and if your affairs go wrong and you are obliged to sell, we must have a voice in the disposal of the line." When we consider the public importance of railways, the means they afford of communication throughout the country, and the relation which one railway system bears to another, the question who is to work a railway, in whose possession it is to be, and upon what conditions it shall work—all these are points of public policy, not merely of private interest. The case, therefore, stands thus:—Although it is of importance that an insolvent railway company should be relieved from duties which it is not able to perform, and that provision should be made for the better performance of those duties, the existing law supplies no means of accomplishing such an object without, first of all, the consent of the company, and its registration and winding-up under the Joint Stock Companies Act; and, in the next place, a private Act of Parliament permitting the sale of the railway. That being the case, we have to consider in what way we are do deal with those companies which may unfortunately bring themselves into this position. The first suggestion might be that you should introduce into your legislation provisions for enabling such companies to be wound up adversely in the Court of Chancery. But, if you do that, it will be necessary to adopt provisions directing the mode in which the railway is to be disposed of, and also provisions to meet the other circumstances of the case. This must be either by some general Act applicable to every case, or the provisions may be settled by some other authority than that of Parliament. The most obvious that suggests itself is the Court of Chancery, and that that Court, or any other Court in which the company may be wound up, should have the power to prepare a scheme for the disposal of the railway and the property of the company. But if you were to give the Court of Chancery this power there is no doubt that Parliament would insist that the scheme should not be adopted and carried into effect upon the sole authority of the Court of Chancery, but should be brought before the House for its approval or disapproval of the proposed scheme. It is out of the question to suppose that Parliament will place in the Court of Chancery, or any other Court, the power of making a final arrangement of such a matter. With every respect for the Court of Chancery, I do not think the Court is competent to execute such functions. No doubt that Court, when it came to prepare a scheme, would contrive in some way to do that which it considered best for all parties interested in the railway, and as between shareholders and debenture-holders and other creditors, would be able to prepare as just and equitable a scheme as could be devised; but when it became necessary to introduce provisions for the interests of the public, then, I think, a Court of Law would not be the best instrument for framing such a scheme. Again, the idea of introducing into a general Act of Parliament all the clauses and provisions necessary to meet the case of railways in embarrassed circumstances is out of the question. The provisions contained in any such Act must be extremely elaborate to meet every possible variety of case that can be conceived, and must be accompanied with guards and checks of every conceivable description, and upon every one of those provisions questions would arise which would lead to doubts, disputes, and differences. I hardly think it possible that such a Bill could be carried through Parliament; and even if it were, I think it is almost certain that when it came to be worked, many cases would be found to have been omitted, and new cases would constantly arise for which no provision had been, or could possibly have been, made. We must therefore dismiss the idea either of dealing with the matter through the Court of Chancery, or of embodying provisions in a general Act of Parliament which should be satisfactory. Various suggestions have been made at different times, and there is one class of suggestions to which I think I must refer, because great prominence has been given to it. It has been said by certain persons interested, and by some of very great authority, that the matter ought really to be dealt with with reference especially, if not exclusively, to the rights and claims of the debenture-holders; that, in point of fact, they ought to be regarded as the mortgagees of the line, and that when a railway company is unable to pay the interest on its debenture debt, or to meet the claim of its debenture-holders for principal and interest, that they ought to have the right to foreclose, as it were, and take the line into their own hands. Now, looking to the public interest, I do not think any such arrangement can be sanctioned. The question of whether debenture-holders do or do not possess the rights of mortgagees over a railway is a question which has been more or less debated, and was up to a certain time doubtful; but the recent decision of Lord Justice Cairns, about ten days ago, has determined that debenture-holders are not in the position of mortgagees, that they have no power to take precedence of other creditors or to foreclose upon the land and take the whole concern. Therefore, I do not think that the claim of the debenture-holders has been established to such a point as to render it incumbent on Parliament, in making arrangements for the affairs of embarrassed companies, to treat theirs as the one great interest to be considered to the exclusion of all others, and to give them, as a matter of right, at whatever cost of public convenience, the management of concerns of such magnitude. We are not to look upon the question as a case in which the debenture-holders have a right to seize the line when it does not pay; but we are free to look upon it from the public point of view, and consider what arrangements will be most expedient for the public interest. We must, in the first instance, regard these concerns, which have been sanctioned by Parliament for public purposes, as a whole, and look to the public interest first; and then we must endeavour to deal with the different classes engaged in the undertaking, in one shape or another, with reference to the rights of those parties. Those rights are so important that it is desirable that they should be ascertained by proper tribunals; and in any arrangement we make we should give due weight to them. But looking at this as a matter of public interest, when we see a concern which cannot be carried on as we expected it should be when we sanctioned it, we have a right to see how the management of the line can be so rearranged that the undertaking can be carried on in a proper manner. Now, one can hardly conceive a more unsatisfactory way of carrying on a line than by putting it into the hands of a body of debenture-holders. They confessedly are a class who are not qualified for the management of commercial transactions. I do not speak of every debenture-holder, but of the body. They are a class of men, and not unfrequently women, who do not desire to undertake the responsibility of the management of a great undertaking, who will not be well qualified to elect Directors, or to keep them in check by attending meetings; but who, having money to invest, desire to lend it on what they believe to be good security. Now if you suddenly throw on a class of persons like this the management of the railway which others much better qualified had been unable to manage successfully, you are more likely to add to the inefficiency of the conduct of the line than to restore it to efficiency. I therefore set aside all question of allowing the debenture-holders to take the management themselves. Then there is another proposal. Supposing the case that the debenture-holders are allowed to step in and take the management and control, it is thought by some that they should not be allowed to do so uncontrolled, but that the Government should assist them in the management. Two proposals have been made with regard to the action of the Government in the matter, and I desire to say a few words upon this point, because rumours, as if from authority, have got afloat pointing to courses which the Government would never think of following. One of these suggestions is that the Government should come forward, leaving all other matters exactly as they are, and take the debentures of involved railways on itself, that it should undertake to pay off the debenture-holders and become creditors of the companies in their place. As to such a proposal, or anything in that nature, I venture to say it is one that Parliament could not contemplate for a moment. I do not elaborate this point as it has been elaborated in the public press and elsewhere; but it seems to me that the result of all such propositions is that the Government is to constitute itself into a great Finance Company, to undertake on the strength of its credit to come forward and help those whose credit is not so good as their own; and it is said that the Government being able probably to borrow at the rate of 3½ per cent for the purpose of lending at 5 or 6 per cent, might realize a large profit. Against all such proposals I venture to enter my protest. I am satisfied that it would be an unwise and improvident thing on the part of the State to lend itself to any operation of that kind. We have got enough to do with the management of our own Debt, without undertaking to add largely to it by paying off the debts of other persons with a view to reap the benefit of such profit as may be represented by the difference of the credit of the railway companies and that of the State. A proposal a little less objectionable would be for the Government to take all the debentures of all the companies, and not only those of the bad ones. This would be rather better than that it should take up the bad bargains only. But I think this also is out of the question. Then there is a proposal of a much larger character—that the Government should not only undertake the debenture debt, but also take the railways themselves; and for this undoubtedly there is more to be said—because, to take the debenture debt without the railways would be to take an obligation on ourselves without taking power to interfere with the management of the railways, and we should so run great risks without the power of protecting ourselves; but to take the railways themselves would be a different matter, because we should have the control, and might be able to conduct them with profit. But this is not the moment to consider that question—it is before the Royal Commission on Railways, and whatever their Report may be—of which I am quite ignorant—it will receive due attention. I must however say, that if it should point to any such conclusion as that we should take the railways, that matter would require the most serious and careful consideration before it could be even entertained. I do not say for a moment it should be entertained; but I wish to distinguish it from the mere taking the debentures, which would certainly be most objectionable. Setting this aside, and setting aside any proposal in the nature of working a line by Government interference, I ask, how are we to deal with the difficulty we have to meet? I have endeavoured to show, in the first place, that in the interest of the public, some means should be found of transferring railways from insolvent to solvent management; that this cannot be done solely by the intervention of the Court of Chancery; that the necessary provisions cannot be made by any general Act of Parliament; and I have indicated that it is not desirable for the State to take the railways or their debts on itself. I have also endeavoured to show that Parliament would not be disposed to allow the arrangements of our railway companies to go entirely out of its control. Therefore, as provision cannot be made by a general Act, there must be a special Act of Parliament in each individual case, framed according to the circumstances. Hon. Members will perhaps say that the end of all this long statement is, that things are to go on as they are—that at present Private Bills are to be introduced to meet each case as it arises. That is not exactly our proposal. The difficulty of proceeding by Private Bills on the present footing is that a Private Bill can only be promoted, or only is promoted, by the company itself; and there is no means of compelling a company that is unwilling to do so to wind up its affairs. Moreover, in the case of Private Bills only certain persons have such an interest as gives them a locus standi before the Committee, and the interest which the general public has, although very great, would hardly entitle it to be represented. Then in Private Bill legislation we have much uncertainty to deal with, because the decisions of the Committees in one Session are often overruled by those who succeed them in the next, and there is the possibility of the rules laid down by one House of Parliament being disregarded by the other. All these difficulties have induced Her Majesty's Government to try if we cannot find a better mode of dealing with these questions. I think there may be. I think that by calling in the aid of the Executive Government for certain purposes you may provide a better mode of meeting these cases. We propose, then, that the Executive Government—through that Department of it which is more particularly concerned, the Board of Trade—should, in the first instance, prepare the schemes which shall be laid before Parliament in the form of Bills, and should take charge of them as Public Bills, and carry them through Parliament. The proposal is that when a company is in a state of financial embarrassment, when it is unable to pay the interest or principal of its debentures, when there is an execution issued against it and there are no funds to satisfy the demands of its creditors, or when the traffic is suspended and it is not able to carry on its business—contingencies which are fully set forth in the Bill—it shall be lawful for a certain number of the creditors or shareholders of the company to present a petition to the Board of Trade praying that the Board will order an investigation into the circumstances of the company. On that a communication will be made to the Directors of the company, and a certain limited time allowed them in which to offer objections to that course of proceeding; after which the Board of Trade, if satisfied that there is a primâ facie case for inquiry, will appoint one or more inspectors. These are to be persons competent from their financial and legal ability to investigate the whole position of the company, and will be armed with the power to call witnesses and collect evidence, so as to effect a complete and satisfactory investigation. They will then prepare a scheme for the settlement of the company's affairs, for which the Board of Trade will make itself responsible, and which it will introduce into Parliament. Next comes the question how the Bill shall be dealt with by the Legislature; and it being one great object of the plan to insure as far as possible uniformity of decision and a reduction of expense, it is proposed that instead of such a Bill being separately considered by Committees of each House of Parliament, it shall be introduced simultaneously into both Houses, and that after passing a second reading in each it shall, in the event of opposition from interested parties, be referred to a Joint Committee, appointed by the two Houses, under Standing Orders to be framed for that purpose. That Committee will deal with it in the same way that Private Bills are now dealt with, and the Bill being introduced by the President of the Board of Trade, will be carried through by him upon public grounds—so that he will be interested in raising questions before the Committee which the promoters or opponents of Private Bills are not necessarily interested in considering. A means will thus be provided for dealing with each special case upon its own particular circumstances, through a careful examination of its merits by persons who, selected in the first instance for their competency, will, in process of time, acquire a great deal of experience, and who will not be hampered by formal rules of evidence from obtaining information in the freest possible mariner. With regard to the Joint Committee, I venture, though with some diffidence, to suggest that the Standing Orders should secure its appointment upon a very careful footing, and that the two Houses should be empowered, if they think fit, to associate with the Committee some of the Referees to whom Private Bills were now referred. This, however, is a matter of detail, and is not essential to the scheme, that which is essential being a joint inquiry by both Houses, with a view to avoid expense and uncertainty. I think Parliament may be satisfied with this—and, indeed, I am inclined to think that it would be a great improvement on the mode of conducting Private Business were the principle of Joint Committees carried still further. I do not wish, however, to travel beyond the limits of the present measure, and therefore only suggest that course as advisable in the case with which we now have to deal. In the event of the inspectors finding that the requisite arrangement is within the terms of an existing Act of Parliament, there is a clause providing that they may, with the assent of three-fifths of the shareholders, debenture-holders, and other persons interested, prepare a scheme and submit it to Her Majesty for confirmation by an Order in Council. I have now stated the leading features of the Bill, which will be in the hands of hon. Members in a day or two, and I trust that at no distant period it may be considered by the House, the Committee upon it being deferred, if thought desirable, for a longer time than usual, in order that the details of the scheme may be fully examined. I hope that the proposal will be found to obviate some of the difficulties now experienced owing to the present state of the law, which renders companies, practically insolvent, unable to come to any arrangement, and drives them to seek relief in all directions, each class standing upon its exclusive rights, and the assets being wasted in internal disputes. I believe that the plan which I have sketched out will not only provide a simple and effective method of dealing with these difficulties as they arise, but will, to some extent, prevent their occurrence, because the knowledge that the intervention of the Board of Trade may be invoked will act as a check upon Directors, and also as an encouragement to shareholders to take an interest in the arrangement. Vexatious and frequent appeals are, of course, to be deprecated. This is the proposal of Her Majesty's Government, which I now ask leave to present in the shape of a Bill.

Moved, "That leave be given to bring in a Bill to make better provision for the arrangement of the affairs of Railway Companies unable to meet their engagements."—(Sir Stafford Northcote.)


said, he did not intend to oppose the introduction of the measure, but he should have desired to have the Bill before them, because it was very difficult to judge of its operation by the essay they had just heard from the right hon. Baronet. He submitted, however, that though there was a case for legislation of some kind, the right hon. Baronet had not made out a case for the introduction of the measure which he proposed. The right hon. Gentleman had stated that Parliament ought not to interfere with the concerns of these joint-stock companies except in the interest of the public, and that interest, his argument led them to infer, consisted in the facility and safety of locomotion; but he had not adduced a single case in which even the unsound companies had failed to carry on the traffic. He therefore ventured to think that the matter might be left to the ordinary common sense and self-interest of the persons interested in these concerns, and that there was no need of the intervention of Parliament by general measures. The cases were exceptional, and called for exceptional legislation, each case upon its own merits. General legislation was not needed and to propose it would create doubt and distrust, and needlessly damage the credit of sound companies which, under general measures, would be classed with the unsound. The right hon. Baronet promised, at the close of last Session, to lay before the House an explanation of the financial collapse of last spring. Now, it was admitted that one cause of the suffering then experienced was the sanction given by Parliament during the last three or four years to various wasteful schemes for the expenditure of the national capital. These unsound undertakings, it should be remembered, had been authorized by Parliament; and though, no doubt, it was not the province of the Legislature to prevent people from throwing away their money—though, no doubt, a man was at liberty to pull down his house and make it a heap of rubbish, or, provided he did not insure it, to scuttle his ship—Parliament surely ought not to facilitate such operations. The expenditure of a large amount of labour, and the consequent wasting of the national resources in unremunerative schemes, was a loss to the nation, though the capital belonged in the separate sense to individuals. £450,000,000 had been invested in railways in the United Kingdom; but the total amount of capital invested in these unsound undertakings—the first being in the South of Ireland, next some in Wales, and lastly the London, Chatham, and Dover—did not comprise more than a tithe of that total. By these failures the public had not been so far damaged; and he (Mr. Watkin) said that Parliament should leave to the promoters of the undertakings themselves to present schemes for managing their own affairs, in their own way, according to the dictates of their own common sense. He (Mr. Watkin) feared that if this Bill were carried it would be the beginning of a departure from the useful principle that the persons who went into these undertakings ought to be allowed to manage their own affairs. It would probably be found that the management of the Board of Trade would not be so good as that of the worst managed of these railways. He feared that the Bill of the right hon. Gentleman would only create a false security in the creditors and debenture-holders. Instead of each man inquiring for and relying upon himself, he would be looking on the Board of Trade as an emblem of safety, and relying on it as a surety against loss. The pith of the whole question was to be found in this—what was at the moment required was not the interference of the Board of Trade, but merely a short provision in a general Act of Parliament for the inviolability and perfect security of railway debentures—the keystone of that railway system which, with all its shortcomings, had done so much for the well-being and prosperity of the country. What was the present position of the question? The right hon. Gentleman said that a recent legal decision had rendered it doubtful whether a debenture was a mortgage, whether a debenture-holder had a right to sell; and then the right hon. Gentleman enunciated a most dangerous principle in stating that the railway mortgagee ought not to be allowed to sell the security on which his money had been advanced. Such a principle would sap the foundation of the whole mortgage property of the country, and the feeling of doubt and insecurity created would raise the rate of interest upon all mortgages. There never was a more dangerous principle laid down by a Minister in this country than to say that the mortgagee should not be able to sell the security on which his money had been obtained in his mortgage. In Transatlantic countries the railway debenture was a mortgage, not on the tolls only, but on the engines, plant, and the whole property of the undertaking. What was wanted was to make a railway debenture really a mortgage. If that were done, he believed there would be found in the most rotten of these concerns a core of soundness which would pull the enterprize at last through in the interest of the public. A very short, simple measure to make the debenture inviolable would be safe and useful. The Bill of the Government would be useless and mischievous.


said, he would be sorry to give any off-hand opinion on the scheme of the right hon. Gentleman, which was somewhat complicated, and must contain many details which they could not usefully discuss until they had the Bill before them. But he had heard with great pleasure that one part of his plan was to refer any Railway winding up Bill, brought in as proposed under the auspices of the Board of Trade, to a Joint Committee of both Houses of Parliament. They had a Joint Commit tee two or three Sessions ago on Metropolitan Railways, and their experience on that occasion justified Parliament in carrying the principle of these Com- mittees still further. The double inquiry-had been a source of constant complaint, and it had been felt that the evidence on Railway Bills might be given once for both Houses, and that one inquiry would serve all the purposes of legislation. The Committee on Private Bill Legislation, which sat two or three years ago, were of opinion that this system of Joint Committees might be adopted generally for all cases of Railway and Private Bills. Perhaps that would be going too far at present; but, at any rate, he was glad to find that the right hon. Gentleman proposed to carry the principle a step further. With regard to the scheme itself, what struck his mind most was that the Board of Trade would be called upon to exercise most important judicial functions. Under the proposed scheme creditors might come forward and petition the Board of Trade that a certain company should be wound up. The Board of Trade would of course hear the parties who objected to the company being wound up and made bankrupt. That was a most important function to be committed to a public Department; but it appeared more difficult still when they considered that the Board would have to decide upon the equitable rights of the debenture-holders, the preference stock holders, and the ordinary creditors. These were judicial operations well suited for the Court of Chancery; but unless performed under very competent and proper advice, they were not suited to a Department like the Board of Trade. He would not, however, speak unfavourably of any part of the scheme until he knew more of it; but he could not sit down without saying that he thought the right hon. Gentleman had undertaken a most useful task in endeavouring, so far as he could, to enable persons to get out of their unfortunate difficulties in connection with railways. He certainly agreed that the public had a primary interest beyond all other interests, and it was that of enabling the railway communications of the country to be kept open. The public interest was, in fact, that the traffic in passengers and goods should be carried on with safety and punctuality; but the public had no direct interest in the question whether debenture-holders got their full interest or shareholders their dividends, though Parliament was bound to provide a mode by which all claims on a railway company can be equitably arranged, and, at the same time, securing that the railways themselves should not be liable to be stopped in their use to the public. Debentures and shares were matters of speculation on the part of debenture-holders when they lent their money, and of shareholders when they embarked their capital; but, undoubtedly, he agreed with the right hon. Gentleman that the Government and the public had a direct interest in seeing that railways, which had become the high roads of the country, should be kept open, and that the traffic upon them should be conducted with safety and regularity.


said, he quite agreed with his right hon. Friend (Mr. Milner Gibson) that it was premature to express an opinion on the measure itself; but he could not think it premature to express an opinion with respect to the principle upon which it was said to be based. Having a most acute sense of the extreme importance and urgency of the question, he had heard the statement of the President of the Board of Trade with feelings of the most profound disappointment. The measure appeared to him to be necessarily inadequate to deal with the real evil, and based upon principles wholly insufficient to meet the actual difficulties of the case. It was very true that the public had an important interest in the maintenance of these great lines of communication; but he could not but express his entire dissent from the view—if it were the view—of the right hon. Gentleman that Parliament had no duty to discharge with regard to the private interests, especially of the creditors, of these great concerns. [Sir STAFFORD NORTHCOTE was understood to intimate his dissent.] He did not imagine that the right hon. Gentleman had said so; but, at all events, the Bill did not take that broad and general view of the rights of creditors and the proper mode of providing for their payment which seemed to be imperatively required, and which could not possibly be provided for by this sort of special piecemeal legislation through the Board of Trade and both Houses of Parliament in each particular case. There should be a general law securing to the creditors of a railway and all other companies the payment of their debts to the extent of the means of the company on settled principles to be administered by the Courts of Law. He did say that the state of things lately disclosed in that respect was scandalous. He could not agree with the right hon. Gentleman that, under the existing Acts of Parliament, railway companies, either by registering themselves or otherwise, could be wound up. This, however, was quite certain—that judgment creditors might pull to pieces by private and separate executions all that was absolutely necessary to enable the company to go on—because no tolls could be earned, no profits could be derived, and the public traffic could not be provided for without the rolling stock. At the present moment, if a company were insolvent, each individual judgment creditor, going for his own separate interest, might pull to pieces the plant and rolling stock of the concern. That was an imminent practical danger; and then what would happen? In all other cases of winding-up or bankruptcy, the available assets were distributed rateably among the creditors—but no such machinery was applicable to this particular case; and with regard to the unfortunate debenture-holders, whom Parliament had certainly led to suppose that they had got security under Acts of the Legislature, it had been lately determined—and, no doubt, correctly—that they had no mortgage on the permanent way or on the rolling stock; that they had no power, and that nobody had power, to supersede the management of the company; and that their sole right, if there were profits, was to get their interest paid out of those profits. But unless a railway could be carried on, and the general interests of the creditors were provided for by an administration for their common benefit, in the special case of insolvency which the Bill proposed to deal with, it was utterly impossible there could be any profits whatever; and the enormous amount of property involved in railway debentures in the kingdom would be exposed to daily and hourly risk. Let him suppose that the procedure proposed by the right hon. Gentleman opposite was adopted, that a company was in this state, and that people went to the Board of Trade to settle a scheme. As his right hon. Friend (Mr. Milner Gibson) had justly said, if the Board of Trade was to settle a scheme for the re-constitution of a company, so as to provide for the different rights of the different classes of creditors, he did not see how it could possibly do that except by the exercise of judicial functions. Take the case of the unfortunate company, the state of whose affairs had led to these questions—the London, Chatham, and Dover Company. That Company had, by their legislation—they must never forget that—been cut up into a great number of sections, and arcelled out among different classes of creditors and persons who had been induced to lend their money. It was in utter confusion. Was the Board of Trade to disentangle that mass of complication and confusion; or, if not to disentangle it, could it propose new legislation with due security for the proper maintenance of the rights of all those various classes of creditors? It seemed to him to be totally impossible for the Board of Trade to do that. Judicial machinery was absolutely necessary for the purpose; and the present judicial machinery was confessedly inadequate to accomplish it. He ventured to think, if he understood the right hon. Baronet's explanation, that his proposal in that respect would be a most inexpedient one; for, whatever else might be desirable, they wanted a Bill that should give to the Courts of Justice that large and comprehensive power of doing justice to all the creditors of these companies in case of insolvency, which the Court of Chancery and Court of Bankruptcy had in regard to any other joint-stock company.


, in reply, said, he had to apologize to the House, and confess that when he undertook to bring in this Bill he had some doubts as to his own power of fully explaining its nature. He agreed in the remark which had been made by the hon. and learned Gentleman the Member for Richmond, that there were disadvantages in discussing Bills before they were in the hands of Members, because the only impression which the House could possibly derive of their provisions must be gathered from the explanation—often a very imperfect one—of the Member bringing them in, who, being naturally hampered by his desire not to trespass too long on the time of the House, sometimes omitted points which ought to be mentioned. If, however, the hon. and learned Gentleman (Sir Roundell Palmer) had had the Bill in his hands he would have seen that it was not quite open to the objections which, upon the imperfect statement he had given of its provisions, might fairly be taken to it. He quite admitted that it would be extremely difficult for the Board of Trade to exercise the functions which the Bill proposed to vest in it. There would, no doubt, be many judicial questions raised which the Board of Trade would not be competent to settle for itself. But it was intended to insert in the measure a clause giving power to the inspectors of the Board of Trade to refer questions of a delicate legal character to the Courts of Law, to be decided by an issue which would be properly tried with regard to the rights of particular classes of creditors. That was a point on which he felt himself incompetent to speak, because it was one of a technical nature; but he had drawn the attention of the gentleman who had charge of the framing of the Bill to it, and desired him to prepare a clause, or clauses, to meet that difficulty, and enable judicial decisions to be taken in those cases in which they might be absolutely necessary. He could not, of course, say whether these clauses would be satisfactory. He would only observe that the point was one which had not been overlooked, and when the hon. and learned Member had the Bill before him, it would be seen whether the clauses were sufficient for the purpose. The hon. and learned Gentleman had said, Very truly, that what they had to do was to protect a company against the suspension of its operations. It was proposed to introduce a clause into the Bill which would prevent the seizure of the rolling stock, or any proceeding that would interfere with the carrying on of the railway. The hon. and learned Gentleman, having graphically described the state of confusion which existed in the case of the London, Chatham, and Dover Railway Company, asked whether the Board of Trade would find its way through all that labyrinth? Certainly, he was not going to say that it would be able to do that or absolutely to settle all those questions; but it would be a great improvement in the present state of things, when all these various classes of persons were fighting together and wasting their time and money without any mediator or arbitrator at all between them—it would be of great advantage if they provided an arbitrator who might be competent, and whose decision, if he were not competent, would not be final, but would have to come before Parliament. The hon. Member for Stockport (Mr. Watkin) said all that was wanted was that they should protect debentures. He did not think that was all they had to do; but he would not enter into that controversy, neither would he discuss the bearings of that question Upon the commercial distress of last year. He would only ask the House kindly to allow him to introduce the Bill, and to suspend its judgment upon its details until it had seen them.

Motion agreed to.

Bill to make better provision for the arrangement of the affairs of Railway Companies unable to meet their engagements; ordered to be brought in by Sir STAFFORD NORTHCOTE, Mr. CAVE, and Mr. ATTORNEY GENERAL.

Bill presented, and read the first time. [Bill 4.]