§ Report from the Select Committee considered.
§ THE LORD CHANCELLOR (Lord HERSCHELL)
, on rising to move that Standing Order 128, which provided that no interest out of capital should be paid on calls under Railway Bills be vacated, and that a new Standing Order recommended by the Select Committee be adopted in lieu thereof, said, it would be in their Lordships' recollection that a short time ago a Select Committee was appointed to inquire into the Standing Orders of that House with regard to Railway Bills, prohibiting the payment of interest or dividend out of capital during the construction of works. That Committee was appointed to consider whether any alterations ought to be made in the Standing Order of their Lordships' House, having in view the fact that the Standing Order of the House of Commons, which was formerly the same as that of their Lordships' House, had been two years ago altered very materially, and also seeing that on more than one occasion their Lordships had thought fit to dispense with their Standing Order in its existing form. The Select Committee took the matter into their consideration, and were unanimous in the Report which they presented to their Lordships' House, although certain differences of opinion were no doubt entertained by Members of the Committee as to the extent to which it was expedient or justifiable that a Bill should, authorize the execution of railway or other works and sanction the payment of interest out of capital during construction. But it was felt that the matter could not be left in its present very unsatisfactory position, because while the House of Commons allowed, under certain somewhat stringent regulations, the insertion of a clause sanctioning such payment of interest out of capital during construction, their Lordships' House, by Standing Order 128, absolutely prohibited it. The result of this was that a measure containing such a clause could pass through the other House; and in one case, at least, their Lordships suspended their Standing Order, and permitted the insertion of the clause as sanctioned by the House of Commons. The Select Com- 153 mittee had thought it better to recommend that substantially the Standing Order of their Lordships' House should be the same as that of the House of Commons; and therefore they had recommended only certain verbal alterations in that Standing Order, which, in their opinion, made its object and purpose somewhat more clear in an important particular, and also one or two alterations in form rather than substance, which were necessary to bring it more into conformity with the proceedings in their Lordships' House. Substantially, what he asked them to adopt was the Standing Order, which two years ago was adopted by the House of Commons. Everyone must be agreed that where an undertaking was secured by statute with the permission to those who were to execute the works to pay interest during the time of construction out of capital and not out of earnings, it was extremely important that those who were induced to invest their money in the undertaking should have clear and distinct notice of what was being done; and, provided that they had such notice, he thought it would not probably be considered necessary, at all events in all cases, that the care of the Legislature over them should go further than that. The Standing Order of the House of Commons was stringent with regard to the interest to be allowed, the time during which it was to be allowed, when it was to begin, and the conditions of subscription of capital under which a loan was to be allowed. In the Standing Order now recommended to their Lordships it was made perfectly clear that the notice of a Company having power so to pay interest must be given in every prospectus, advertisement, or other document of the Company inviting subscriptions for shares and in every certificate of shares. The Select Committee were unanimous in the conclusion at which they arrived that a provision of that sort might be recommended to their Lordships' House with a substantial feeling of security against any injustice or wrong being done. Of course, to a very great extent, people must take care of and protect themselves; but when an Act of Parliament was required it might reasonably be maintained that some further protection might be inserted for the benefit of the unwary and those who were wanting in 154 caution. He thought that if they secured that in every case the document which invited them to part with their money should at the same time make known to them exactly what was being done in the matter of paying interest out of capital during construction, beyond that people might be left to take care of themselves. The Select Committee were satisfied that there was substantial ground for altering the Standing Order of their Lordships' House, inasmuch as it was thought by most of the Members that unless a provision of this sort were adopted undertakings of a perfectly substantial and legitimate character would not, and could not, be carried out, because money which would be subscribed with such a provision would not be subscribed without it. A provision of this sort was not required to bolster up unsound and speculative concerns, but might be legitimately introduced in the case of sound and substantial ones. It was most undesirable upon a matter of this kind, unless there was some extremely strong reason for it, that there should be a difference between the Standing Order of their Lordships' House and the Standing Order of the House of Commons. It did occur to the Committee that in some respects, perhaps, changes might be desirable; but they thought it would be better in the meantime to pass the Standing Order in the form in which the House of Commons adopted it, and, should further amendment prove desirable, the matter should be made the subject of a communication between their Lordships' House and the House of Commons, so that the Standing Orders of both Houses upon this matter might ultimately be the same.
Moved, "That Standing Order No. 128 be vacated, and that the following Standing Order he adopted in lieu thereof:
A clause shall be inserted in every Railway Bill prohibiting the payment of any interest or dividend out of any capital which the Company have been or may be authorised to raise, either by means of calls, or of any power of borrowing, to any shareholder on the amount of the calls made in respect of the shares held by him, except such interest on money advanced by any shareholder beyond the amount of the calls actually made as is in conformity with the Companies Clauses Consolidation Act, 1845, or the Companies Clauses Consolidation (Scotland) Act, 1845, as the case may be; and except such interest (if any) as the Committee on the Bill may, according to the circumstances of the case, think fit to allow, subject always to the following conditions:—
If in any case the Committee on the Bill do not think fit to allow any such interest, then there shall be inserted in the Bill provisions making liable to penalties, recoverable summarily, any director or officer of the Company who shall, directly or indirectly, pay or procure to be paid any interest or dividend prohibited as aforesaid, and making illegal and void any contract entered into by the Company, or the directors thereof, or any of them, under which payment of any interest or dividend prohibited as aforesaid shall be, directly or indirectly, provided for.
No Railway Bill authorising the payment of interest out of capital shall be read a second time until a report thereon from the Board of Trade has been laid upon the Table of the House."—(The Lord Chancellor.)
§ THE EARL OF SELBORNE
said, he had always been of opinion that the principle of their Lordships' Standing Order was a very sound one. He felt the force, however, of what was said by the noble and learned Lord on the Woolsack as to the great necessity for something like unanimity of action upon this subject between the two Houses of Parliament. He would not oppose the Motion, although he continued to think 156 that the Standing Order of their Lordships' House was better than that of the other House.
§ Motion agreed to; and resolved accordingly.
§ The said Standing Order to be printed. (No. 126.)