STANDING ORDER, No. 185—THE "WHARNCLIFFE"ORDER. (Hansard, 24 June 1852)

The MARQUESS of CLANRICARDE
called attention to the Standing Order, No. 185, sect. I, with a view to the modification of the provisions thereof, in respect of Bills to be brought into Parliament in any future Session. [This Order requires the assent of four-fifths of the proprietors of a railway to any Bill for proposed amalgamation with another Company.] His Lordship said, that the Order as it stood at present inflicted great hardship upon Railway Companies, by enabling a small minority of railway shareholders to pass a veto on a proposition for the consideration of Parliament of any change in the arrangements relating to the railway. He would submit that in making this Standing Order the House had overleaped the mark, and given opportunity to large companies, by purchasing shares in undertakings that might compete with their own, to prevent Parliament from considering the propriety of allowing such competition. He had been informed that besides the case which was before the House last Monday week—the Birmingham, Shrewsbury and Chester Railways—there was a similar case in the north of England, where a large railway company were again purchasing shares 1260 in order to stop competition. The effect of the order was practically to give to large and powerful companies a complete power of extinguishing their small rivals, and preventing that competition which it was so desirable for the public interest should be secured. It had been suggested as a check against these proceedings, that no holders of shares should be allowed to vote at meetings held under the "Wharncliffe Order," unless they were possessed of them for a certain period before such a meeting was convened. He did not think that the suggestion, although no doubt a good one in many respects, would obviate the evils to which he had referred. He would, therefore, move that the Order No. 185 be referred to the Standing Orders Committee, for the purpose of considering what alterations may be made in it, with a view of affording more complete protection to the interests of the public.

§ LORD REDESDALE
stated, that the object of the Standing Order in question was to afford protection to shareholders against their directors, and its importance in this respect could not be overrated. If it had been found oppressive, there would have been more than one or two cases in which difficulty or grievance would have arisen. But he knew of none except those which were before the House last week—the Shrewsbury and Chester, and Shrewsbury and Birmingham; and in one of those cases the shareholders were protected by the proportion required being now not three-fifths, but four-fifths. In the instance of one of the companies the shareholders last year were in favour of an alliance with the North-Western; but the directors were in favour of the Great Western, and by management they so increased their number of votes that at the meeting a few months ago they would have carried their point if the proportion had been only three-fifths. In the other case the directors split shares, preparing the transfer and retransfer with the money of the company. Directors had powers, too, which they could exercise, with regard to delay in giving a list of shareholders, and giving it only up to the time of the application. They had enormous powers, and the House would do well to be cautious, and inquire, before altering this order. It was suggested that no parties except those who had held shares for a certain time be allowed to vote; and that was, upon the whole, a valuable suggestion. He thought the Standing Orders Committee was not 1261 the best tribunal to which this question could be referred. In his opinion it ought to be referred to a Select Committee less numerous than the Standing Orders Committee, by whom it might be fairly and temporately discussed.

§ LORD HATHERTON
said, that he had for a long period endeavoured to obtain the establishment of a rival communication in the county of Stafford, which he consider ed, in common with the iron-masters and the great body of the manufacturers of that county, would be of great advantage. The effects of this particular order had been hitherto to prevent the accomplishment of this desirable object, and he should therefore be most happy to see some alteration made in the proportion of assenting shareholders at present required in conformity with the order.

The EARL of STRADBROKE
was understood to say that he thought a proportion of three-fifths, instead of four-fifths as at present required, would afford ample security to shareholders against the acts of the directors.

§ The EARL of HARROWBY
thought the Order ought to be maintained, because it would prevent shareholders from being dragged into greater liabilities than they wished. If their Lordships wished to protect the interests of shareholders against the jobbing of directors, they should take care not to enable a small minority of shareholders to obstruct propositions for amalgamation. In this particular case the Order might have prevented competition, but it might promote it in another. Those considerations were totally alien to the question.

§ The MARQUESS of LANSDOWNE
thought that one point had not been sufficiently brought out in the discussion, namely, the right which the public had to be heard in cases of this kind. Great questions which affected the public ought to be brought under the consideration of their Lordships in a manner wholly free and unfettered; and their Lordships ought not to tie themselves in a way which would on any occasion prevent them doing that which would be manifestly for the interest of the public. With respect to a question of amalgamation, could there be a subject on which it was more important that their 1262 Lordships should be able to pronounce an unfettered opinion on the merits of each case, and that it should not be left to be decided by particular majorities in the various companies which it might be proposed to amalgamate, liable as they were to be influenced in a number of ways through all the office-holders, clerks, and persons interested in the continuance of those companies? It had been proved again that railways were administered more for the advantage of the public by great companies than by small ones; and when a question of amalgamation arose between two companies, their Lordships should look at the question on public principle, and sec whether such amalgamation would be likely to meet the wants of the public service. It was not to be tolerated that their Lordships should be debarred from entering on the consideration of a great line of public intercourse, because minorities in smaller companies, availing themselves of an order of their Lordships' House, chose to step in and say that their Lordships should not and could not sanction that great line of public intercourse.

§ EARL GRANVILLE
was understood to say, that he thought it would be advisable to restore the Order to its original form, requiring the assent of only three-fifths of the shareholders to a proposed amalgamation.

LORD BROUGHAM
was quite of opinion that their Lordships should do now what they ought to have done years ago—refer the question to a Committee for consideration.

§ LORD LYNDHURST
said, that the whole of our legislation on the subject of railways was in a most confused and unsatisfactory state, and required some very material amendments, founded upon long consideration, and framed with great care and caution. There could he no doubt in the mind of any person who considered for a moment the position of the railway in question, that it was one of great importance to the public at large; and it was quite monstrous that the interests of the public should he defeated by a combination such as that which was practised in the course of the proceedings in regard to that railway. He admitted that the decision of the Standing Orders Committee (namely, that they saw no reason to recommend the suspension of the Standing Order) was perfectly correct, because no sufficient evidence had been laid before them for the purpose of proving the charges which were 1263 alleged against the North-Western Company on the particular occasion. But he begged to remind their Lordships of one circumstance. It appeared in evidence before the Standing Orders Committee, that, previous to the meeting for the purpose of confirming the agreement with regard to the amalgamation, shares were purchased by the company in the name of their servants for the purpose of defeating the agreement. And, if such a contrivance was resorted to on that occasion, what reason had their Lordships to believe that the same contrivance was not resorted to upon the second occasion, although there was not sufficient evidence to enable them to trace it, in consequence of the machinery which was made use of? Their Lordships, therefore, ought to adopt some means to prevent a repetition of that contrivance; and this could be done, he thought, by reducing the proportion of votes necessary to approve of an amalgamation from four-fifths to three-fifths, as it stood at the time the original order was made.

§ The EARL of DERBY
hoped their Lordships would not adopt the proposition of the noble and learned Lord (Lord Lyndhurst). The notice given by the noble Marquess opposite (the Marquess of Clanricarde) was, that he would call attention to the Standing Order in question, with a view to its modification in respect to Bills to be brought in in any future Session. The noble Marquess did not give any notice whatever as to the mode in which that Standing Order should be amended. He (the Earl of Derby) said that it would be unprecedented if on a discussion of that kind—which he thought had turned too much on the merits of a particular railway—they should amend the order in question without any notice having been given of an intention so to do. He thought that would be a more imprudent and precipitate course than that which was complained of as having been adopted in 1850. He was of opinion that there was another and more important question, well worthy their Lordships' consideration, which had been mentioned in the course of the discussion, namely, whether it should be considered necessary in all cases of this kind, that the shares of all persons intending to vote should have been held for a certain period before they were allowed to vote. He thought that would be a proper subject for inquiry by the Committee. He repeated, that he hoped the House would not adopt the somewhat hasty proposition of the 1264 noble and learned Lord (Lord Lyndhurst), but would rather take the more prudent course of referring this matter to the deliberate investigation of a Select Committee.

§ LORD LYNDHURST
reiterated his former statement, that it had been proved before the Standing Orders Committee, that, previous to the meeting for ratifying the agreement entered into- by the directors, clerks and other officers of the North-Western Company had purchased a great number of shares for the purpose of influencing the proceedings.