THIRD READING. (Hansard, 16 July 1857)

§ LORD ST. LEONARDS
said, he wished to refer to the circumstances under which this measure came before the House. The object of the Bill was, to settle from what fund the losses sustained by this company through the frauds committed by Leopold Redpath, lately one of its own officers, should be made up, and the proposal was, to throw upon the preference shareholders in the company the liability for a portion of the losses occasioned by the Redpath frauds. There could be no doubt that the directors of the company were well acquainted with the antecedents of Redpath, and aware of his extravagant habits; to such an extent was his extravagance carried, that, although he was only a clerk at a salary of £200 a year, he lived in most affluent style, and thought proper, at the Paris Exhibition, to compete with the Emperor himself for the possession of a work of art, which he succeeded in obtaining at a cost of 700 guineas. Yet this person was allowed to commit frauds to the extent of 1537 a quarter of a million of money—and those frauds were vast in number, and spread over several years; and during all that time the directors shut their eyes, and did not take even ordinary pains to inquire into and ascertain the state of their share list. What was a railway company but a large partnership? and what would be said of a partnership, the members of which did not know who were their partners, or to whom the dividends of profits were payable? The shares which Redpath had forged, it had been thought prudent by the company to acknowledge; but, as yet, he had not heard any argument to show that, in point of law, those shares were to be created at the cost of the preference shareholders. The chairman of the company was a gentleman of great respectability, whom he had the pleasure of knowing; and he (Lord St. Leonards) had impeached the conduct of that gentleman as a public director of the company in connection with his co-directors without the use of unseemly language; but that gentleman had acted otherwise, and in bringing his (Lord St. Leonards') name prominently forward at a recent meeting of the shareholders had spoken of him, though certainly much to the distate of the meeting, in a most disrespectful manner. He actually stated, although he had an accurate report before him of what he (Lord St. Leonards) had said, that he (Lord St. Leonards) had himself advised the repudiation of the stock. Now, he begged to say, that he had never uttered a word of the sort. What he did say was, that as the company were not legally bound, it was merely a question of policy as regarded the Stock Exchange, whether the forged shares should be acknowledged or not. The question then arose, how these frauds should be met. The directors at first proposed to capitalize the amount of the loss, making it represent so much additional capital. He (Lord St. Leonards) had been charged with speaking from interest on this subject, but he had directed the whole of his interest in the company to be sold, and it was only because a small portion of it would not fetch near its value that it alone remained unsold. He was willing to sustain a loss rather than be exposed to this charge. No man, indeed, who valued his property, would choose to leave any portion of it under such a direction. His noble Friend the Chairman of Committees (Lord Redesdale) thought that, as there had been great neglect on the part of the directors, the 1538 proper way would be to withhold all dividends upon the stock which they held by way of qualification until the loss was made up. But the directors now proposed to meet the loss by appropriating the whole of the half year's dividend, amounting to nearly £250,000, to the extinction of the forged capital, by buying up so much of it as would reduce the capital of the company to the amount at which it stood before the forgeries took place. But, if such a proceeding could be equitably taken, the loss might have been thrown over several half-years, since there were many persons, including women, whose whole dependence was upon the dividends of this company; and the loss and inconvenience to such persons from cutting off an entire half-year's income could scarcely be overrated. The arrangement which the Bill proposed to carry into effect would, no doubt, operate very well upon the Stock Exchange, but it dealt with the interests of the preference shareholders in a manner which he trusted their Lordships would not sanction. He, for one, was prepared to maintain that, according to the correct view of the obligations into which the directors had entered with those shareholders, they were entitled to receive payment before the other shareholders, and he apprehended that no reasonable doubt could be raised by anybody as to the justice of the opinion that the Act of Parliament provided, that each year should be made to answer its own particular engagements. If that were the case, then the loss occasioned to the company by the frauds which had been committed ought, at all events, instead of being thrown over one-half, to be extended over the whole of the current year. He must warn their Lordships that, if they were to strike at the interests of the preferential shareholders by passing the Bill as it stood, they would, while conferring a benefit upon certain parties, do much damage to the railway interest in general. Upon public grounds, therefore, he should call upon their Lordships not to take that course. The Bill, as it came up to them from the House of Commons, simply provided, that the money in the hands of the company should be devoted to making good the defalcations which had taken place; but the interests of the preferential shareholders were left untouched—at least there was nothing in the Bill to negative them; but the Committee of their Lordships' House, to whom the Bill had been referred, instead of allowing 1539 the clause which had been framed with that object to continue as it stood, had added to it certain words to the effect that the payment should be actually binding and conclusive on all the shareholders. Now, the effect of that proposition, if carried out, would be, that no preference shareholder, whatever his right at law might be, would be in a position to prosecute that right either against the directors or against the company generally. Nothing, therefore, he should maintain, could be more unjust than the adoption of the recommendation of the Committee. The preference shareholders, in acceding to the Bill as it had been brought up from the other House of Parliament, considered that they were submitting to what was a very grievous burden; and their Lordships must bear in mind that, at the last meeting of the shareholders, a majority, although a small one, of those who were present were opposed to the measure as it stood. It must also be taken into account, that the number of ordinary was much greater than the number of preference shareholders, so that, of course, the latter were completely overruled by the former. As for the proxies, there was very little reliance to be placed upon them, inasmuch as those who had signed them had been told that they would not receive a dividend at all if the Bill did not pass. The subject was one in reference to which he had had a great number of letters addressed to him, and it had excited great public interest; and he could only say, in conclusion, that if their Lordships were to pass the Bill in its present shape, the infliction of a great hardship upon the preference shareholders would be the result. The promoters of the Bill, it was true, had the opinion of the Attorney General in their favour; but he had the opinion of other counsel to the effect that the preference shareholders were entitled to a full year's interest. Under these circumstances he should move that the words added by the Committee of their Lordships' House, and to which he had referred—namely, "And therefore the said sum of £243,923 5s. 8d. shall be considered to have been duly divided among all classes of the shareholders of the company," be omitted, and the Bill thus allowed to stand in the position in which it was when it had come up from the House of Commons.

§ LORD WENSLEYDALE
said, that, like his noble and learned Friend, he unfortunately 1540 was a preference shareholder in this company, but not to a considerable extent. When he understood what the measure was which had been, introduced into the House of Commons, he and the other preference shareholders petitioned against it. Their petition was not successful. When the measure came on for a second reading in this House, he thought he had a right, as a Member of Parliament, to express an opinion that the loss ought to come out of the annual profits. The effect of the measure as it now stood was unjust. He wished not to be precluded from any rights he might have at law by any decision of their Lordships.

§ THE MARQUESS OF WESTMINSTER
said, the point they had before them at that moment was, whether they should consult the views and interests of the preferential shareholders, or the interest of the shareholders in general. The Attorney General had given his approval of the Bill, and it was then placed before the Committee of the House of Commons, and received their unanimous sanction. The noble and learned Lord opposite talked of the hardship of depriving the preferential shareholders of their dividends; but was it not also a hardship to deprive the ordinary shareholders of their dividends? And this ought also to be considered, that by the arrangement proposed by the noble and learned Lord, the preferential shareholders would receive the whole and the others get nothing; whereas, by the Bill as it stood, the preferential shareholders would not suffer as much as the ordinary shareholders, but would not receive the full amount of their interest. The Committee of the House of Commons and the Committee of their Lordships' House had come to the unanimous conclusion that this course ought to be followed, and he trusted it would receive their Lordships' support.

THE EARL OF STRADBROKE
was understood to support the Bill as it stood. If the proposition of his noble and learned Friend was carried, the preferential shareholders would altogether escape from the loss.

§ LORD ST. LEONARDS
said, that he had not argued in favour of the preference shareholders; his only object was to restore the Bill to the state in which it came from the House of Commons.

§ LORD REDESDALE
said, that when the first Bill was introduced upon this subject, it was proposed to capitalize the amount with which the company had been 1541 fraudulently charged. He conceived that that was a principle of a most dangerous character, and he added to his disapproval of this measure the expression of his Opinion, that the directors were greatly to blame, and that if Parliament were applied to to permit the loss to be carried over a length of time, it would be very proper that the dividends payable on the directors' qualifications should be suspended during that time, and applied as part of the funds to make good this loss. As concerned the Bill as it now stood, he confessed he was disposed to adhere to the decision of the proprietors, who had come to the conclusion that the loss should be paid out of the dividend of a single half-year. The preference shareholders were by no means an unimportant minority of the proprietary, and, as this decision had been come to, he was not disposed to interfere with it.

§ LORD STANLEY OF ALDERLEY
said, he was inclined to concur in what had been said by his noble Friend, and to regard these words as merely explanatory of what was the view taken by the House of Commons. A preference shareholder had no right to be relieved from his share of any burden imposed upon his brother proprietors, over whom he had no advantage except as to the priority of title to dividend when the receipts were not sufficient to satisfy the claims of all shareholders. The object of this Bill, which was approved by a large majority at a meeting of proprietors, at which the preference shareholders were well represented, was to prevent further litigation, and he therefore thought that their Lordships would do greater justice to all parties by allowing the Bill to remain as it had been altered by the Committee than by omitting these phrases, which were only supplemental words put in to carry Out the intention of the other House of Parliament.

CONTENTS.
Newcastle, D.	Chichester, E.
	Cowper, E.
Breadalbane, M.	Essex, E.
Westminster, M. [Teller.]	Fortescue, E.
	Glengall, E.
	Granville, E.
Airlie, E.	Harrowby, E.
Beauchamp, E.	Lucan, E.

Romney, E.	Dacre, L.
Stradbroke, E.	De Mauley, L.
	De Tabley, L.
Bolingbroke and St.	Foley, L. [Teller.]
John, V.	Minster, L. (M. Conyngham.)
Falmouth, V.
Melville, V.	Mostyn, L.
Sydney, V.	Oriel, L. (V. Massereene.)
Torrington, V.
	Panmure, L.
Ripon, Bp.	Ponsonby, L. (E. Bessborough.)
A veland, L.	Redesdale, L.
Bagot, L.	Rivers, L.
Broughton, L.	Saye and Sele, L.
Byron, L.	Stanley of Alderley, L.
Camoys, L.
Churchill, L.	Sundridge, L. (D. Argyll.)
Clandeboye, L. (L. Dufferin and Claneboye.)
	Wrottesley, L.

NOT-CONTENTS.
Manchester. D. [Teller.]	Congleton, L.
	Saint Leonards, L.
Graham, E. (D. Montrose.)	Wensleydale, L.
Dungannon, V. [Teller.]	Wynford, L.