8.—12

34

339. Generally speaking you concur, do you not, with the evidence given by Mr. Rees ?—I do. 340. Then you think that, notwithstanding the decision of the law-courts, the Standing Order will continue to be evaded ?—Yes; I feel no doubt that that will be the effect; for this reason : that if Parliament authorizes certain railways to be made, and gentlemen have banded themselves in the shape of a provisional committeee and incorporated a company, they will make the railways in some way or another; they will find the means, whatever the recent decision of the law-courts, to carry out that which Parliament has decided they can carry out. 341. Provided Parliament were to sanction an alteration of this Standing Order and allow nterest to be paid out of capital under certain circumstances, do you think that very full notice ought to be given to the public on the face of the scrip or otherwise that that was proposed to be done ? —No doubt that should be done. Your question refers to what was said about the certificates being specially marked, I think; but there is a little practical difficulty that arises there. Those certificates would have to be called in when the line was opened, because, if they were especially marked " interest paid out of capital," there are a certain class of investors who do not part with their certificates, and in their case they would be locked up in a box, and in the event of death or some other circumstances occurring the certificate remains for all time with the statement that the interest on it is paid out of capital. Undoubtedly some provision of the sort to which you refer might be necessary, but those certificates would have to be called in when the line was opened for traffic. 342. Have you anything to add to the evidence which we have already heard from those in favour of an alteration or amendment of this Standing Order ? —There are one or two practical suggestions which I should like to make with reference to the issue of stock at a discount. I am told—and I believe that it is so—that that provision does not now apply to the case of new companies; but it has been suggested that that would be a solution of the difficulty. Now, without going into the question of the extravagance of it—as to which I generally concur with Mr. Forbes, who has had more experience of that than I have—there are other considerations which should enter into it, and one is a practical one : that is to say, if a new company were to attempt to issue their shares at a discount, I venture to say that they would signally fail. Ido not think you would find any banker or broker in the City of London who would allow his name to appear on the prospectus of a new company whose shares were issued at a discount. Personally, as a banker, I should certainly decline to receive subscriptions over our counter for a new railway whose shares were issued at a discount, and I feel satisfied that our friends, Messrs. Smith, Payne, and Smiths, would do the same. We should treat the thing absolutely as having a tendency to cast discredit upon the undertaking and upon those whose names were on such a prospectus. 343. Do you think that there is a material difference between issuing capital at a discount and paying interest during construction?—l think there is that practical difficulty, undoubtedly. I will deal with the other portion of it presently. There is another point that I wanted to put before you, and that is with reference to the issuing of these shares at a discount. A man has one hundred pounds' worth of stock allotted to him, and he pays £80 for it; that is to say, it is issued at a discount of 20 per cent. When that line is opened for traffic nothing will make the transferee of that certificate believe that it is worth £100, the face value of it being £80; you will not instil into his mind the idea that it is worth £100 by any possible operation, and therefore the thing must be taken for market purposes, and for the purposes of the transferee or intending purchaser, as being of its face value of £80, and not £100. 344. Whether right or wrong, logical or illogical, what I understand you to say is how the public view these things ?—That is how the public view these things. 345. Therefore, without entering into the merits of the distinction between the two, you think that the issuing of the shares at a discount would not have the effect supposed ? —I feel certain it would not have the effect supposed. 346. Do you know anything about the practice of other countries in regard to this matter ?— There is nothing like an illustration of it. The law in the colonies I know nothing about, but here is the prospectus of a company, the chairman of which is Lord Brabourne (the deputy-chairman of the South-Eastern Eailway Company), which guarantees 6 per cent, during construction. That is issued at the Cape of Good Hope in March, 1882; it is the prospectus of the Graham's Town and Port Alfred Eailway Company; and that guarantees 6 per cent, during construction. The paragraph runs, " Interest at the rate of 6 per cent, per annum is guaranteed upon all amounts paid upon the shares during the construction of the railway." I do not know what the colonial law is in the matter, but that is the practice. 347. Could you say from your own knowledge whether this statement, made to me by a merchant of one of the largest firms in the city connected with railway enterprises, is correct; he says that "it is the universal custom in raising money for new railway enterprises, both in India, the colonies, the United States of America, Brazil, and other foreign countries, to allow subscribers interest during the construction of the works " ?—Yes; I know of my own knowledge that it was done in the Saint Paulo Eailway, and in the Minas and Eio Eailway; it is done in India; but in most of those cases, especially the Brazilian railways, which pay exceedingly well, the interest has been guaranteed by the contractor. 348. Do you know any case of a colonial railroad where the interest has not been paid during construction ? —No; I do not know one where the capital has been raised successfully without a promise of interest during construction. 349. You concur with those who believe that, notwithstanding the decision of the Courts of law, this Standing Order will continue to be evaded, greatly to the detriment of the public?—No doubt. 350. Colonel Walrond.] You agree with Mr. Bees, do you not, as regards this Standing Order ? —I have seen a copy of the alteration of the Standing Order proposed by the Chairman of Ways and Means, and I think Mr. Eees concurs with that.