THIRD READING. (Hansard, 1 August 1867)

§ LORD OVERSTONE
presented a Petition from Preferential Shareholders in the Company against the clause introduced into the Bill by the Select Committee. The company, finding itself in difficulties, had submitted to Parliament a Bill which proposed to raise further capital as pre-preferential stock; but the Select Committee to which that Bill was referred, acting in consistency with principles of wisdom and justice, at once rejected the proposition. A watchful and astute counsel, however, presented the same pro-position in a new and disguised form, and persuaded the Committee afterwards to pass a clause in direct contravention of the principle they had previously sanctioned, and which, if carried into law, would involve injustice to the bondholders and preferential shareholders, as it would increase their responsibilities without extending their security. The clause would enable the company to set aside the rights of bondholders and preference shareholders, not only without their concurrence, but without any notice to them. He would not undertake to say how far it might be possible now to suspend further proceeding with the Bill in the form which it had now assumed; but he wished to express his concurrence with the Petitioners in their emphatic protest against the principle involved in this clause, and his hope that, as the Bill would have to go back to the House of Commons for further consideration, the clause might there be so modified as to remove the objections to which, in its present form, it is exposed, or, at all events, that this might not be made into a precedent for future legislation.

§ THE DUKE OF CLEVELAND
, as Chairman of the Committee, said, he should be the last person to advocate the establishment of the principle of pre-preferential shares, which was one that ought not to be adopted except under the stress of special difficulty; but in this case, there was an absolute necessity for some arrangement such as that which the Committee had sanctioned, as it seemed to be the only means of extricating the company from its embarrassments. The case of the North British Railway was a most unfortunate one. The original share capital amounted 524 to £5,000,000; there were £8,000,000 of preferential shares; and beyond this and the large debenture debt there had been incurred a debt of £1,843,000. The Committee were placed in a position of great difficulty, and in considering this very complicated case had to take into account the interests of the public as well as of the parties before them; and in the decision they came to after due consideration they were supported by the precedents of the Great Eastern Railway Company last year, and of the Cambrian Railway Company this year. If sufficient capital could have been raised by means of original shares to meet the difficulty that would have been the proper course to pursue; but it was calculated that in the depreciated position of the original stock, the additional issue required would not have been less than £4,000,000. No injustice had been done to the preferential shareholders; and it was only because a difficulty was found in raising money without throwing the burthen on the shareholders that the Committee resorted to this expedient. They found the revenue to be improving, and that there was every prospect that the state of difficulty would only be temporary. Under these circumstances, he trusted their Lordships would not take the very unusual course of reversing the decision of the Committee.

THE DUKE OF MONTROSE
thought their Lordships would not be justified in reversing the decision of the Committee in consideration of a petition containing only two signatures, one of the names being that of an attorney, who he believed had a very small interest in the concern. The preference shareholders had assented to the measure as the only way of extricating the company from its difficulties. If a ship were stranded and required repairs in order to go to sea again, the requisite money might be raised on a pre-preference mortgage over-riding the existing mortgages on the ship or its merchandize, and this railway was in precisely the same position. Under such circumstances, it would be a very unusual course to reverse the decision of the Committee.

§ LORD REDESDALE
said, that no one had less preference for pre-preference shares than he had; but this Bill stood in a particular position; and, besides, had been very much improved since it came up from the other House of Parliament. Both preference and debenture holders had 525 agreed to a clause to be presented on the third reading, which clause he held in his hand. The noble Lord then handed in the clause, which was to the effect that until the capital authorized to be raised had been raised the debentures to be granted under this Bill should be postponed, in order that existing priorities might be preserved. Under these circumstances, he thought their Lordships ought to read the Bill a third time.