CONSIDERATION. (Hansard, 29 May 1867)

§ MR. DODSON
said, that he desired to call the attention of the House to the peculiar provisions which were contained in this Private Bill. Although the Bill was unopposed, he thought it his duty as Chairman of the Committee on Private Bills to draw the attention of the House to the subject. The position of the Company was this. It had incurred an amount of expenditure, in round numbers, of £2,926,000, and it had, besides, liabilities to the amount of £168,000. The amount of share capital raised was £1,930,000, in round numbers, and the loan capital was £760,000. Therefore, there was a deficiency of over £400,000. The Company had still power to issue £378,000 additional preference shares, but in consequence of the state of the money-market it had been found impracticable to do so. The Company had further power to raise money by loan not yet exercised in round numbers of £75,000. The proposition of this Bill was to cancel the power to issue the £378,000 unissued preference shares, and to take power to issue instead £330,000 "pre-preference" shares. Now the House would observe that so far as the original shareholders of the Company were concerned, their position was quite unaffected by the proposition of the Bill—if anything it was improved—because in lieu of being liable to have £378,000 more preference shares issued over them, they were only liable to have £330,000 pre-preference shares issued over them. It was therefore simply a matter affecting the existing preference shareholders of the Company. Now the present preference shareholders of the Company who would be affected by the issue of this pre-preference stock amounted in number to 1,060, of whom 991 had given their consent to the issue of the pre-preference stock, considering it the best thing for the Company. These 991 who had consented held £1,033,000 of the existing preference stock out of £1,131,000. He should say of the existing preference stockholders who had not given their consent in writing, a large portion remained silent in expressing their opinion as to the proposed issue of pre-preference stock, Considering the 1246 peculiar nature of the Bill, he had hesitated whether he should not exercise the discretion which the Chairman of Ways and Means possessed by the rules of the House of recommending that this Bill, although unopposed, should be dealt with as though it were an opposed Bill, and that it should be referred to a Committee to be appointed by the Committee of Selection. But, after all, they could not compel people to come forward and oppose the Bill if they did not desire to do so; and therefore he felt that no object would be gained by adopting that course. He had therefore determined that, upon the whole, the Bill should be dealt with as unopposed, and accordingly it had passed through Committee as unopposed, and a Report in its favour had been made to the House; though he felt it his duty to call attention to the peculiar circumstances of it. He would only add that this creation of pre-preference shares, when there was a large number of existing shareholders consenting, was not without precedent. He found that in 1852 the Eastern Union Railway introduced into this House a Bill, which was passed, giving the Company power to convert their debt into creditors' stock, and to pay their creditors with the stock to be issued, which would take preference over all preference and other stock. This arrangement had been previously agreed upon by a meeting of four-fifths of the shareholders. And more than this, the Company had power to create after this creditors' stock, which was to take precedence of every other stock, a further sum of £77,000 pre-preference stock to follow immediately after the creditors' stock. Again, in 1855, the Manchester, Sheffield, and Lincolnshire Railway Company obtained power to create pre-preference shares to pay arrears of dividends on preference shares. In 1853 the Edinburgh, Perth, and Dundee Railway Company obtained powers to issue debentures in excess of their authorized borrowing powers in order to raise money to pay their creditors, to put their line in efficient order, and to pay their banker's debt; and it would be seen that in that case the creation of debentures was equally putting a charge over the heads of the preference shareholders, which, according to the ordinary Act of Parliament, they had no right to do. In 1851 the Caledonian Railway Company obtained powers from this House to issue excess of debentures beyond that authorized, for the purpose 1247 of paying their debts, the Company being at that time in a state of great embarrassment. But the course then adopted had the result of bringing the affairs of that company round, and it was now in a prosperous condition. He had only to add that of the debts at present owing by this company, £235,000, in round numbers, were due to their bankers; and these bankers had agreed, in the event of this scheme being sanctioned by Parliament, to grant five years for the payment of the principal, to reduce the rate of interest now paid them, and to themselves subscribe a considerable sum to the new issue. Under these circumstances the Bill had been allowed to go as unopposed, though he admitted the peculiarities of the case, and had therefore drawn the attention of the House to the subject.

§ MR. HADFIELD
said, that although in the particular instance the question seemed to be merely between different classes of preference shareholders, the principle involved, which was that of interfering with and postponing the rights of creditors by retrospective legislation, was of the highest importance, especially as by the rules of the House of Commons, shareholders could not be beard before Committees, and were therefore at the mercy of the Directors. In the House of Lords the practice was different, as there the creditors could be heard. He altogether condemned the practice adopted by Railway Directors of increasing their capital in a manner over which the shareholders had no control. He should take an early opportunity of moving for a Committee to inquire into the system.

§ MR. BOUVERIE
concurred in opinion that it was necessary, as a matter of public policy, that the question should be brought before the House. Each case must stand more or less on its own distinct merits, and it was only a sensible and rational course to pursue to allow insolvent railways to escape from their difficulties, if any proper means could be found of doing so. In this case 95 per cent of the persons interested had given their assent to the proposed arrangement, and the House, he thought, could not do better than endorse the request. The Chairman of Ways and Means had acted rightly in bringing the matter under the attention of the House.

§ MR. SAMUDA
hoped the hon. Member for Sheffield (Mr. Hadfield) would persist in his Motion. Matters had now reached a point at which railway companies no 1248 longer thought it necessary to respect the rights of mortgagees, forgetting that all attempts to defeat or postpone them involved a breach of faith with the public.

§ COLONEL WILSON PATTEN
said, the subject was one of great importance, for there could be no doubt that if this principle of creating pre-preference stock were largely sanctioned, it must destroy public confidence, and obstruct the carrying out of many useful undertakings. At the same time, having acquainted himself with the circumstances of the particular case, he thought the House would be justified in acceding to the proposition. His hon. Friend the Chairman of Committees devoted his attention so continuously and impartially to all these subjects, that he was sure the House would generally exercise a sound discretion in giving full weight to his recommendations. He thought, however, the House would do well to take the whole subject into consideration in the manner proposed by the hon. Member for Sheffield.