THE MIDLAND RAILWAY.

New Zealand Times, Volume LXVII, Issue 3439, 21 May 1898, Page 3

THE MIDLAND RAILWAY.

IMPORTANT LEGAL PROCEEDINGS. T$E DEBENTURE-HOLDERS AND THe government. . The dehenture-holdere qf the Midland Railway Company executed a petition itt the Supreme Court, tor the appointment of a receiver In this colony, and an order to the effect that all the property belonging to the company, including the railway line, should be vested in the rfcelvec appointed. The receiver nominated by the debentureholders is Mr James Coates, general manager of the National Bank of New Zealand.

The petition will come on for hearing as soon as one of the Judges is free to deal with it. It will, in all probability, be opposed by the Government, and the main question of whether or not the debentureholders are entitled to take the line from the Government *lll doubtless be raised; And probably decided. It is Understood that the Government has made another demand ilpoU the company for a large stird of money—aboUt -£17,000 —for the cost Of constructing a further pottidn of the lifae And has tllfeataned that unless the Atoount is paid within three months it will take ,the rail way under the provisions of the Railway Construction Act, 1881. An injunction will pcdhabljt he applied for to Restrain the Government from taking this step; and this (Question, along with the other important questions referred to; will no doubt be taken through the Court of Appeal to tha Privy Council as promptly as possible. The whole question resolves itself into this; tJndertheAct of 1884 the company was authorised to borrow money upon its railway and other property, and the statute declares that the company may, for the purposes of raising this money, give a first charge upon all such property. On the faith of this the English debenture-holders are said to have lent over -67CJ,C .0, which has been employed in the construction of the railway line, i'he company Was uiiable to Complete the line Within the specified time, and the Government took possession by virtue of the powers contained in the Act of 1881. The Government now declares that it is entitled to step in and take the line, notwithstanding the claims of the mortgagees or debeutiire-holdata who have lent their money On the sedurity of that property-. We learn that two of the most eminent counsel in England one of them tha celebrated Sir Swiften Edie have advised the de-benture-holders that without doubt they are entitled to the charge which the statute gives them, and that this right cannot be defeated by the action of the Government in seizing the line. Other opinions have also been taken; both in England and HeW Zealand; which support this View, and as an evidence of the reliance the debenture-holders have placed upon their legal position it is claimed for the debenture - holders that they have already made two payments of demands made by the Government amounting to between -820,030 and -830,003. Unle-s the legal position they rely on is sound, they will lose this sum.

The legal proceedings now instituted will therefore result either in the debentureholders getting possession of i the railway as mortgagees or of the Government’s retaining it clear of any claim the deben-ture-holders may have. While it may be urged that the Government is justified in its attitude because of the grants of land given to the company in consideration of its having constructed a certain portion of the line, on the other hand it will be argued that these grants were merely an inducement or bonus to encourage the company to go on with the construction, and that the contract itself provides that the grants were to be made as d’fferent sections of the line were Completed, so that in fact the grants have only been made after such completed sections were ready for traffic. The contention is that even if the whole line had been completed and all the grants of land given as provided by the contract, the Government was not to get any exchange for its land except the general benefit the construction of the railway would bring to the colony. Mr Quick, of Wellington, is the solicitor for the English debenture-holders, and has retained Sir Bobert Stout as counsel. Dr Findlay will act as solicitor and counsel for Mr Coates, the proposed receiver. Mr Thee. Cooper, of Auckland, will also be associated with the legal gentlemen mentioned. Should the Government contest the petition Mr Gully will, no doubt, appear on its behalf.