HL Deb 21 July 1868 vol 193 cc1543-9

Commons' Reasons for disagreeing to One of the Amendments made by the Lords considered (according to Order).


regretted that he felt obliged to ask their Lordships to insist on the omission of Clause 88, which they had struck out from the Bill, but which the Commons had re-inserted. The Commons, in their Reasons, said that the clause in question did not affect the interests of the public, but only those of the holders of stock in the South Eastern Company. They said, in effect, that the Companies ought to be left to regulate their capital in their own way. That argument, however, if it were admitted, would go towards putting an end to all restrictions whatever by Parliament on the financial operations of Railway Companies. It was desirable that there should be as little diversity of interest as possible in Railway Companies; but in this case there was a large amount of ordinary stock which it was proposed to divide—one-half into preferred, and the other half into what was called deferred stock—thus creating at once two separate interests in the ordinary capital of the Company. He had no hesitation in saying that the main object for which it was desired to effect that separation was for stock-jobbing purposes. Having one stock fixed at a high rate of interest, and another at a fluctuating rate, this enabled persons, by manœuvring the dividend on the fluctuating stock, to raise its character, and he had no doubt that this was the motive for the alteration which had been made in the Bill. As the subject was one with which many of their Lordships might not be very well acquainted, he had stated his reasons for the course he was taking in a Memorandum which had been distributed for the information of their Lordships. He knew that in these cases the promoters of Bills often canvassed their Lordships and tried to impress them in favour of their own views, and he was anxious that their Lordships should understand the real merits of the question. The matter was a serious one in connection with railway legislation, and he trusted their Lordships would insist on striking out this clause.

Moved, "To insist upon the Amendment made by the Lords to which the Commons have disagreed."—(The Chairman of Committees.)


said, he could not agree either with the course which the Chairman of Committees advised the House to adopt or with the reasons on which that advice was founded. The noble Lord had taken the extraordinary step of circulating a Memorandum among their Lordships, stating his views on a subject which was to be discussed by them in relation to a Private Bill. The noble Lord said, indeed, that be had done that in order to impart knowledge to those noble Lords who did not understand the question; but such noble Lords would do far better to look into the matter for themselves than be led by the nose by his noble Friend. He had listened attentively to his noble Friend; but the only reason he bad heard advanced for objecting; to the clause was because, as he elegantly termed it, they were brought forward for stock-jobbing purposes. He could not agree with him in his view of the question. He thought the tendency of Parliament of late years had been not to interfere with the financial arrangements of these companies; providing, of course, that Parliament saw that no injustice was done to mortgagees, or other parties who might be injuriously affected by legislation. For that purpose the Joint-Stock Companies Act was amended last Session; and he also had the honour of conducting through that House the Railway Companies Act, by which certain restrictions were put upon the issue of shares at a discount; and the limitation of the interest on debenture stock. Moreover, the course proposed by his noble Friend was entirely opposed to the recommendations of the Railway Commission, which went very fully and carefully into the question, and gave it as their opinion that it was the more judicious course for Parliament to relieve itself from interference in the financial affairs of Railway Companies, that it should limit itself to the questions of the construction of the lines, the relations between the public and the companies, and the requiring from them of guarantees for the due performance of the conditions on the faith of which their powers were granted. The clause to which the noble Lord objected referred only to the shareholders themselves, who need not come into the proposed arrangement unless they pleased. Instead of proving injurious to the proper management of the Company, he believed the proposed subdivison of the capital would tend to give all the parties concerned an additional interest in seeing that the Directors did their duty, and in putting the undertaking into a better state. On these grounds, he hoped their Lordships would acquiesce in the Commons' Amendment.


remarked that this was the first attempt to apply the principle of division to paid-up stock. It was true that in a few instances companies had been allowed, when they otherwise would have been unable to get out a portion of their unpaid-up stock, except at a discount, to issue it as preference stock. He objected to the creation of a diversity of interests, the object of these divisions being to apply the deferred stock to jobbing purposes, unfounded statements being circulated as to the dividend forthcoming upon it. The promoters expected to obtain a great advantage in this way; but the limitation with regard to 3 per cent was an admission that the process might be disadvantageous under particular circumstances, and he believed it would be injurious both to the companies and to the principles of railway legislation.


said, he wished to say a few words, being acquainted with the opinion of railway men on this subject. He had hoped to hear the noble Lord (the Chairman of Committees), on rising a second time, withdraw the insinuations he had made against the Gentlemen who promoted this Bill. On a former occasion the noble Lord had no other mode of resisting a proposal to give certain powers to the Board of Trade than by insinuating that that Board was under the influence of the Railway Companies; and he now charged the promoters of this Bill with the intention of spreading reports about dividends and jobbing with the shares in the stock-market. He thought the noble Lord should make his attacks on private character in a place where he could be answered, and not under cover of the privilege of this House. Last year, indeed, the noble Lord was a little bolder and ventured into print; but the result of that experiment was so unsatisfactory that it was doubtful whether he would repeat it. Now, he protested against the noble Lord's assumption that any person whose policy was different from his own was influenced by sordid and corrupt motives. Where the public interests were concerned it, no doubt, behoved Parliament to be very vigilant; but in this case the question was merely whether a shareholder should be allowed to make his property more valuable by dividing it into two parts, one having a fixed and the other a variable dividend. Why should the owner of railway more than of any other property be debarred from making the best use of it, or from putting it into the most marketable form? The landed interest was strong in this House, while the railway interest was weak; but, if the reverse were the case, would it not be thought an intolerable grievance if, because some railway manager had theories about landed property, and was attached to certain narrow formulas, the House were to prohibit the division of estates as their owners pleased, and insist that all farms should be of equal size? He hoped their Lordships would adhere to the golden rule of doing as they would be done by. He could not express the aversion and dread with which he saw the extent to which the great powers of the House were used in a manner which must not only be injurious to the interests, but offensive to the sense of justice of a large portion of the people. These shareholders were the best managers of their own affairs. [Lord RFDESDALE: They have not proved themselves so.] He attributed the present condition of railway property to the petty and narrow formulas which had induced Parliament to prevent companies from managing their property to the best advantage. If their Lordships thought this property should be dealt with differently from all other property he had not a word to say; but he would entreat them not to place their whole powers in the hands of one man, and not to believe that because he had studied the question more than most of them that he was necessarily correct. He had the greatest respect for the ability and good intentions of the noble Lord the Chairman of Committees; but he was satisfied of the evil effects which his mode of legislation had worked upon a largo portion of the property of the nation.


said, he thought their Lordships ought to feel very much indebted to his noble Friend the Chairman of Committees for the anxiety he invariably evinced that legislation in these matters should be founded on sound principles. He (the Lord Chancellor) was the more entitled to say this, as he did not agree in the conclusion at which his noble Friend had arrived in this instance. He thought that just in proportion as their Lordships exercised a vigilant supervision over the dealings of Railway Companies with the public, so should they abstain from meddling with the companies' internal affairs. Now, the proposal was that a person having £10,000 of railway stock should be at liberty to divide it into two sections, and that until the dividend reached a certain amount it should be confined to £5,000, in lieu of being spread over the whole £10,000. In other words, it was proposed to create out of this £10,000 a preferential stock of £5,000, which would be much more disposable in the market, and to retain the rest for the chance of dividends after the first dividend was paid. He wanted to know why a man, should not be allowed to do that? What was the reason assigned by the noble Lord? He said that it would be very inconvenient, and very much against the interest of the Railway Companies, that there should be a variety of stocks. But supposing that were true, why should their Lordships consider what was for the interest of the Railway Companies? Were not the Railway Companies the best judge of their own interest? He spoke with some experience with regard to the legal questions which had arisen in those cases in which it had been found that Railway Companies had been mismanaged. His observation was this—that whenever there was an improper management with regard to the earnings of the company the circumstance which had always led to its detection was this, that there had been conflicting interests—that there had been two classes of stockholders in the company. If therefore their Lordships wished to make it unlikely that mismanagement should be detected, they would allow only one kind of stock in the company; but if they wished that mismanagement should be detected and exposed, then they would not prevent the creation of different kinds of stock.


said, that if the public were not affected he should not be inclined to insist upon the Amendment. Did anybody believe that if the Railway Company retained all the £10,000 railway stock they were childish enough to prefer 5 per cent on £5,000 and nothing on the remaining £5,000 to 2½ per cent on £10,000? What it really would effect was to enable the Railway Companies to sell the half which was worth nothing for a substantial value. It was accomplished by what was called "rigging the market" which was by fictitious transactions and representations to give to shares worth nothing a temporary value in the market. It might be said that only foolish people would be induced to buy such shares and also that the Railway Companies would not avail themselves of this power. But laws are made to protect foolish people and Parliament was bound not to give powers to persons who might abuse them, in the belief that they would not do so. Bodies of gentlemen are frequently found to do collectively for a company what no one of them would do for himself individually. For the last three or four years his time had been almost wholly taken up with investigating cases in which companies had made false representations to individuals, and thus induced them to take shares. He had therefore come to the conclusion that the effect of this measure should be that Bail way Companies would be able to give an appearance of advantage to a class of worthless shares, and so induce the public to trust them in a way the state of their funds did not warrant, and that their Lordships would be doing a great evil if they consented to do so.

On Question? their Lordships divided:—Contents 11; Not-Contents 30: Majority 19.

Resolved in the Negative.

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