8.—12

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merit of railways. Previous to 1868 several companies had paid dividends which were not legitimate ; their stock had assumed a fictitious value, and the investor w 7as injured, and Parliament adopted more stringent measures. The Eailways Eegulations Act was passed, by which a form of account is prescribed. The chairman and the accountant or secretary are required by that Act to sign the accounts; the engineers are required to give certificates ; and, if any of the parties concerned make any declarations which are not correct, they are liable to fine and imprisonment. Nothing has been of more use to railway companies than the making of them stable by these Acts ; the old railway companies have been removed from what I would call the region of speculation, and the effect has been good for the companies and beneficial for the public. The effect on the companies has been that their stock has stood better in the market, they have been enabled to raise money on easier terms, and by having to pay less interest for their money they have had a surplus revenue with which they could do one of two things—either reduce the rates, fares, and charges; or extend railways in districts that were not of themselves remunerative. 410. We were considering the question of these evasions; you admit, as I understand, that the Standing Order has been evaded recently, but you think that the decision of the Master of the Eolls will finally put a stop to violations of that kind?—l do not say finally put a stop to them, but I say that the decision of the Master of the Eolls as to the illegality will exercise an influence on many men, at all events, against perpetrating similar evasions; and I think that in all probability other actions will follow, and that in the case of railways, as in the case of anything else, the parties who disobey the law will be made to take the consequences. On this question I saw a report in the Times the other day in connection with the Alexandra Palace, where the directors were required to refund money which had been paid to preference shareholders contrary to law. What I think is this: that if the law is good, as I think it is, it should be left to the Courts of law to administer ; and the mere fact that the law is evaded is no reason whatever for its repeal. 411. But the Master of the Eolls said that the law was bad, did he not ?—I think that that stage of the case was not reached. I have noticed that Judges often enter into little by-conversa-tions with learned counsel, and I have read what the Master of the Eolls said. Ido not think that there was any judgment given at all ; but I have quite confidence myself in the Master of the Eolls that, if it was put to him whether, seeing that Parliament had intended to protect the public from the payment of interest out of capital, he would approve of the law, the Master of the Eolls would not give a judgment in favour of anything that was calculated to mislead the public. 412. But, as I understand the words of the Master of the Eolls, they are very plain. He indicated that, in his opinion, although it was a distinct evasion of the law, the law was an unwise law? —That was not in his judgment. There were one or two very casual observations made, for I read it all through, and that was not in his judgment. 413. Have you anything to add to what you have stated to the Committee ? —A question, I think, was raised as to whether the Standing Order interfered with the construction of legitimate railways. Ido not think that it would interfere with bond fide undertakings. But lam not sure what meaning to attach to the term " bond fide undertaking." A bond fide undertaking, in my view, is one where there is some prospect of the payment of a reasonable dividend. A bond fide application in our sense merely implies that there is sincerity in the application. Mr. Eees referred to the Central Northumberland Eailway, and included it in his list. I happen to know something about the Central Northumberland Eailway, because it is in our own district. He said that it emanated from a great meeting of landowners—as no doubt it did ; but what the landowners desired, and what they endeavoured to do, was to induce the railway company of which I am manager to invest about a million of money in making a railway through an agricultural district which we said would not pay. In our answer we admitted that, having the command of the district, we ought to aid in the further development of railways in any district where railways did not exist; but we said we were not prepared to undertake so large a scheme. But, we said, if you will undertake to raise half the capital, and take your interest or dividends out of the earnings.of the undertaking, we will recommend our shareholders to supply the other half. We went even a little further, because we gave them an ultimate guarantee on the capital which we suggested they should raise. But they turned upon the North-Eastern Company with something approaching to scorn at the idea that they should be expected to take steps towards raising any money themselves. We decided that, having offered to raise about half the capital, we would come to Parliament for a Bill to fill up that part of the district which we thought really required railway accommodation, at an expenditure of about £400,000. The other party —the independent party —came to Parliament for an extended scheme. The case was submitted to a Committee, and before the Committee the promoters had no plan whatever for raising the money. They had raised none themselves ; and the Committee came to the conclusion that that which the North-Eastern Company proposed should at all events be passed, and they gave to the Central Northumberland Company a portion of their undertaking. But the Committee coupled the decision with this recommendation. They say " that the financial statement regarding it" —that is, the part of the new line—" is not all that could be desired, but that the North-Eastern Eailway Company, having offered, under conditions, to make this line, and being in possession of the adjoining country, are to a certain extent bound to provide for the requirements of the district, and that it would be well, in the case of the Central Northumberland Company being unable to carry out the scheme, that the North-Eastern Eailway Company should undertake it." Of course the Central Northumberland scheme was practically a scheme got up without any means whatever of raising the money; but if a prospectus had been issued, with those respectable names upon it which Mr. Eees placed before the Committee, with the high-sounding phrases which are commonly put in prospectuses, coupled with what would be regarded by inexperienced people as the practical guarantee of Sir Charles Trevelyan, Sir John Swinburne, and others, that they should have 5 per cent, for a period of five years, I am quite sure of this: that whilst the people in Northumberland would not have raised the money, it is quite possible that people—say, in Cornwall