THE MIDLAND RAILWAY.

Otago Witness, Issue 2309, 2 June 1898, Page 17

THE MIDLAND RAILWAY.

THE DEBENTURE-HOLDERS AND THE

GOVERNMENT,

IMPORTANT LEGAL PROCEEDINGS.

(Ebom Ode Own Cobrsspondent.) Wellington, May 20.

I learn from an authoritative source that the debenture-holders of the Midland Railway Company have executed * petition in the Supreme Court, Wellington, for the cppointment 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 .receiver appoinlid. The receiver nominated by the debenture-holders is Mr James Coatee, general manager of the National Bank of New Zealand The pet'tion will come on for hearing as soon an one of the judges is free to deal with it. It will in all probability beopp'sed by the Government, and the main question of whether or not t.h« debentureholders sre entitled to take the line lrom (he Government will doubtless be raised and probably decided. Tha Govern.reisnt, I le&rn, have made another demand upon the company for a large sum of money — about £17, 000 — for the £OBt of constructing a further portion of the line, aud have threatened that unless the amount is paid within three months they will take the railway under tbe provisions of '• The Railway Construction Act, 1881." An injunctjon'will probably be applied for to iee';ra!n the Government from taking this step, and this question, along wiih the ofcber important questions referred to, will no doubt be t*kf>n through tfce Court of Appeal to the Privy Council as promptly as possible.

The whole question resolves itself into this : Under the acfc'uf 1884 the company was authorised to borrow rnon«y upon its iailway and other property, ar.d tbe statute declares the company may for the purposes of raißit'jj this money give a first charge r.pon sll auch piop&rfcy. Upon the faith of tbit tbe English debenture-holders hare lent over £700,000, which has been employed in the construction of the railway line. The company was unable to complete the line within the specified tims, aad the Government look possession by viifcue of the powers contained in the aot; of 1881. The Government now declare that nohvifchstanding the expressed words in the statute of 1884- empowering the eoirpsny to give a first charge over their line and other property, they (the Government) may nevertheless step in and take the line, "thus defeating the rights of the mortgagees or debenture-holders who have lent fcheir money on ttfe security cf that property. Two of tbe most eminent counsel in England — one of them the celebrated Bir Swiften Edie — have advised the debentureholders 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 Hue. Other opinions have also been taken, both in England and New Zealand, which are said to support this view, and as an evidence of the reliance the debenture-holders have placed upon their legal position, I may mention that they have already made two payments of demands made by the Government amounting to £20,000 and £50,000. Unless the legal position' they «>ly on is sound they will lose this sum.

The legal proceedings now instituted will therefore resalb eibher in the debenture-holders getting possession of the railway as mortgagees or of the Government's retaining it clear of any claim the debenture-holders may have. In this latter case the Government will practically have obtained the railway for nothing. It may be urged that; they are justified in their attitude because of the grant* of land given to the company in consideration of their having constructed a certain portion of the line, but on the othar band it can be urged that these grants were merely an inducement or bonus to encourage the company to go on with the conBtrnction, and the contract itself provides that the grants were to be made as different sections of the line were completed, and, in fact, tha grants have only been made after such completed sections were ready for traffic. Even if the whole line had been completed, and all the grants of land given aa provided by the contract, the Government, it is contended, were not to get any exchange for their land except the general benefit the construction of the railway would bring to the colony. This, shortly stated, is the present position of a somewhat unique and interesting complication. Me Quick, of Wellington, is solicitor for the English debenture-holders, and has retained Sir Robert Stout *s counsel. Dr Findlay will act as solicitor and counsel for Mr Ooates, the proposed receiver. Mr Theo. Cooper, of Auckland, will also be associated with the legal gentleman mentioned should the Government contest the petition. No doubt Mr Gully will appear on their behalf

May 30.

The petition by the debenture-holders in the Midland Railway Company for relief con. sequenb upon bhe action of bhe Government in seizing bhe line and for the appointment of a receiver has been filed in the Supreme CourtThe patibioners — who nominally represent the whole body of the debsnture-hoiders — are Messrs Clement Horace, Thomas Peter Moir, and Henry Cowie, each of whom hold debentures of the value of £100. which debentures a*e part o£ the series of an issue of £745,000 first mortgage debentures of • the company. The debentures, the petitioners' stabe, were issued subject to certain provisions, one of which was thab bhe principal became payable if the company should commit any breach of or incur any penalby of forfeiture under the contract for the construction of the line, or under the terms of ••The East and West Coast (Middle. Island) and Nelson Railway and Railway CoEsti'Uotion

Act, 1884." On the 25th May, 1895, the r»ifr way was seized by the New Zealand Governments on account of an -alleged breach ot contract. . Oq the 7th of September, 1897, petitioners caused their respective debentures to be presented for paymeur., but payment was refused, and has nod since been made. On or about ths 19!>a, November. 1897, petitioners gave notice^.to tha Governor ->f the colony of their intention, int os/<e the Governor should nob within tbree Kicntbs ifter the receipt of snch notice give petitioners, under the 16fch seotion of the aefr, notice of intention to purchase or not to purchase, to apply to ,a judge of the Sapvemd Courfe for relief, and particularly fo? ax» ordes that snch part of tb> J . Nov.- Zrsfasd Midi^r.d Railway Oumpaoy's iiropp.rty »* 3s Jis&ie fiii<,eF bhe provision* :)Mbfc net for th«i payn?enl- c£ ibc princip*.! moneys aecared h.~ tin* -Sshewifti e£ shculi be wld, and for the &ppoir:'meiit of a receHw of rr.nfcs, fcioome, s.nd "profits ox snob. prop»rty. More than three months having expired «iace the service of the notice, and :h9 Governor having failed to give jwsMioiiisrs notice of his intention to puroha-er -jh ao6 to purchase, the petitioners therefore ask (I) for relief under " The East and West Coast (Middle Island) and Neiaon Railway and Railway Construction Act, 1884 ; (2) that an inquiry be ordered as to what property exists in New Zealand belonging to the company, or to which the company is entitled, and which is liable under the provisions of the said act for the payment of money intended to be secured by said debentures ; (3) that it be ordered thab such property be absolutely sold at such time or -times, and place or places, and either altogether" or in parts, and subject to such terms and conditions, as masbe directed ; (4) that in the meantime a receiver of rent*, income, and profits of such properly bt appointed ; (5) that your petitioners be granted such further or obber relief as the circumstance of the case may require.