24

£.—l2

should satisfy some tribunal, either the Board of Trade or the Committee before which the Bill came, that their capital was not unduly inflated. 201. Your view is that the law of the land is against this practice of which we are speaking? —Yes, I think so. That is the decision of the Master of the Eolls, as I understand it. 202. Mr. Brand.'] You have stated what happened in the case of the Brighton Company fifteen years ago. The whole Board has been entirely rechanged and reconstituted since that time, has it not ?—Yes. That led to a revolution in the company, in which the old Board were turned out and a new one came in. 203. And at that time there was a strong feeling, was there not, amongst the shareholders against the course taken, and some talk of proceedings being instituted?— Yes; in fact, it brought the Brighton Company to ruin; and there, no doubt, what I call the clergyman and widow aspect of the case did apply a great deal; because a great many people, who were not speculators or fools, did invest in the Brighton Company under the idea that it was paying 6 per cent., and they suffered very heavily when the collapse came. That is one argument against the proposal. If you gave the privilege to new companies I do not see how you could refuse to give it to existing companies. Mr. Thomas Henry Fabbeb examined. 204. The Chairman.] The Committee would be glad if you would give them your view of this Standing Order 167. Do you think it should be permitted to stand as it is now, or that it should be altered, or that it should be repealed ? —I think that an Order which is so constantly evaded as this Order is now, ought not to stand as it is. 205. Then you agree with those who tell us that it has been systematically evaded in the past ? —They have brought instances to us to show that it has been; and it appears to me that there can be no possible difficulty in evading it. 206. Then you do not concur with those who think that the recent decisions of the Courts of law will put an end to these evasions?—l do not, and for this reason :In that Hull and Barnsley case the promoters of the undertaking acted very straightforwardly, and explained exactly what they intended to do, and the Master of the Eolls had the whole case before him ; but if, instead of acting as they did in that case, they had made a contract with the contractor, under which he was to be paid a larger capital sum for the whole undertaking, he undertaking at the same time to take shares and at whatever discount you please, the object of the Order would have been evaded, and no one would have known anything about it. 207. Then, in your view, do you go as far as to say that you do not think it is possible for Parliament by any such Standing Order as that, or any substitute for it, to prevent the practice of paying interest out of capital ?—I do not say that they may not prevent the paying of interest out of capital, but they will not prevent the doing of that which is worse than paying interest out of capital— namely, making arrangements with the contractor by which he shall take the shares, and take them at a very great loss to the undertaking. 208. But that comes to the same thing, does it not ?—lt comes to the same thing. 209. And you think that that evil is worse than the other ?—-I do. 210. And that it will continue to prevail, notwithstanding the recent decisions of the Courts of law ? —I think probably, if the Hull and Barnsley people had to make that arrangement over again, they would make an arrangement with the contractor which the Courts of law would not be able to get at. 211. Are you in favour of the total repeal of this Standing Order?— That is a difficult question, because it is so much entwined with the whole practice of Parliament, and with the Companies Clauses Act, as well as with the practice of Parliament. The Companies Clauses Act, which was passed in 1845, I think obviously contemplates that dividends shall not be paid out of capital. It has a clause which practically authorizes dividends or interest to be paid on capital which is not called, and therefore impliedly prevents its being paid on capital which is called; and I think it would be a question, if you had no Standing Order of this kind and did not aher the Companies Act, whether the Courts of law would not, upon the Companies Act as it stands, and the ordinary principles of law, prevent the payment of interest out of capital—at any rate, unless specially sanctioned by the special Act. 212. Then you rather take Mr. Laing's view, that it is against the common law?—l am not lawyer enough to give an opinion upon that. 213. But it may be so ?—lt may be so. But I should like to point out that at the time when this Order was adopted and the Companies Clauses Act was passed, very different views obtained with regard to the general policy of dealing with joint-stock companies' undertakings from those that have prevailed since. When the Joint-Stock Companies Acts of 1856 and 1857 and the subsequent Act, the Companies Act of 1862, were passed, it was then thought that, in undertakings which did not require parliamentary sanction, the companies should be left to frame their own financial arrangements as they pleased. There is in the Schedule to the Act of 1862 a table of regulations which the companies may adopt if they please, and in that table is a regulation that dividends are not to be paid out of capital; but it is entirely at the option of each company to accept that table of regulations or not, and, consequently, every joint-stock company which does not come for parliamentary powers may do what it pleases in thart respect. That, I think, shows that a very considerable change had come over public opinion between the time when these parliamentary regulations were framed and the time when the Joint-Stock Companies Act was passed. 214. Then your evidence would rather go, would it not, to a revision of the whole system, dealing not only with this Standing Order, but with the Companies Act and the general law ? —The principle on which my evidence is founded wouH do so; but that, of course, is a much larger