PUBLIC ACCOUNTS COMMITTEE. REPORT ON THE PETITION OF G.B. PARKER, TOGETHER WITH PETITION, MINUTES OF PROCEEDINGS AND EVIDENCE, AND APPENDIX.

Appendix to the Journals of the House of Representatives, 1896 Session I, I-07

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1896. NEW ZEALAND.

PUBLIC ACCOUNTS COMMITTEE. REPORT ON THE PETITION OF G.B. PARKER, TOGETHER WITH PETITION, MINUTES OF PROCEEDINGS AND EVIDENCE, AND APPENDIX.

Report brought up on the 29th September, 1896, and ordered to be printed.

ORDER OP REPERENCE. Extract from the Journals of the House of Representatives. Thursday, the 25th day op June, 1896. Ordered, " That Standing Order No. 211 be suspended, and that a Committee, consisting of sixteen members, be appointed to examine into and report upon such questions relating to the Public Accounts as they may think desirable, or that may be referred to them by the House or by the Government, and also into all matters relating to the finances of the colony whioh the Government may refer to them; five to be a quorum : the Committee to consist of Mr. Button, Mr. Guinness, Mr. Hogg, Mr. Lang, Hon. Mr. Larnach, Mr. Lewis, Mr. T. Mackenzie, Dr. Newman, Mr. Saunders, Hon. Sir R. Stout, Mr. Tanner, Hon. Mr. Ward, and the mover." —(Hon. Mr. Seddon.)

EEPORT. Petitioner prays that Parliament will consider the grievances which the debenture-holders in the New Zealand Midland Railway Company have against the Government, in respect of the seizure of the railway; and also the claim of the said debenture-holders for payment of the amount expended on the construction of the said railway. Your Committee has the honour to report that, having carefully considered the petition of the debenture-holders in the Midland Railway Company, it finds that, from the facts contained in the report of the Committee of even date with this in respect to the Midland Railway Company's petition, it has no recommendation to make. W. J. M. Larnach, 29th September, 1896. Chairman.

PETITION. (Presented 30th June, 1896.) To the Honourable the Speaker and Members of the House of Eepresentatives, in Parliament assembled. The humble petition of George Babington Parker, of 24, Ashley Place, Victoria Street, Westminster, in England, but at present temporarily residing in the City of Christchurch, in New Zealand, sheweth, — 1. That in the year one thousand eight hundred and eighty-four the Parliament of New Zealand passed "The East and West Coast (Middle Island) and Nelson Railway and Railway Construction Act, 1884." By that Act several advantages were proposed and offered by the colony to such company as should undertake the construction of the railways therein specified. By section 7 of that Act it was provided that the Governor should cause an area of Crown land, for a distance not exceeding fifteen miles on each side of the proposed line, to be withdrawn from sale. That such lands should be surveyed into rectangular blocks, and that the company, by alternate choice, should obtain land having one-half the frontage to its line. By section 8 it was provided that should there not be sufficient Crown land adjoining the line, then other land should be set aside in places which would be specially benefited by the construction of the railway; and by the same section, subsection (5), it was provided that the company should be entitled to any coal found upon the land comprised in its grants. By subsections (8) and (9) certain lands used for mining purposes, on which were known gold-workings, were excepted, and declared not to be Crown lands for the purposes of the Act. By section 9 power was given to the company from time to time to borrow, and take up at interest, such sums as might be necessary for completing the construction of the railway, and for such purpose to issue debentures under the Act. 2. A contract under the Act of 1884 was, on the seventeenth day of January, one thousand eight hundred and eighty-five, entered into between Her Majesty of the one part, and several gentlemen therein named of the other part, and was laid before the General Assembly in the session of 1885. 3. On the fourteenth day of May, one thousand eight hundred and eighty-six, this original contract was, with the consent of the Governor of the colony, assigned to the New Zealand Midland Railway Company (Limited). 4. The Amendment Act of 1886 was then passed, authorising the Governor to enter into a new contract with the company. 5 In the year one thousand eight hundred and eighty-seven "The Midland Railway Contract Act, 1887," was passed, authorising the Governor to enter into a contract with the company, and providing by statute for the provisions of such contract, and declaring that such contract should operate as a substitute for the original contract.

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6. In pursuance of the last mentioned Act a contract, dated the third day of August, one thousand eight hundred and eighty-eight, was entered into between Her Majesty the Queen and the company, and the company thereupon entered on the construction of the works referred to in the contract, and actually completed various sections of the line of railway, including the sections from Stillwater to Reefton, from Stillwater to Jackson's, the Springfield Extension of six and a half miles, and the Belgrove Extension of six miles, at an actual cost to the company in New Zealand exceeding the sum of seven hundred and fifty thousand pounds. 7. In order to enable them to pay such construction expenses, the company raised large sums of money by the issue of shares and debentures, and in particular, during the year one thousand eight hundred and eighty-nine, the directors of the said company created a series of five per cent, first mortgage debentures for the nominal amount of two million two hundred thousand pounds; and of such creation the said directors made a first issue of the said series for seven hundred and forty-five thousand pounds, and offered the same for subscription, during the year one thousand eight hundred and eighty-nine, upon the terms and conditions set forth on the prospectus of the said company, published on the twelfth day of April, one thousand eight hundred and eighty-nine; and of the debentures so offered for subscription, debentures for seven hundred and forty-three thousand eight hundred pounds and no more were actually issued. 8. The said series of debentures was secured by a trust deed, dated the second day of August, one thousand eight hundred and eighty-nine, and made between the said company and Beaumont William Lubbock, Edmund Charles Morgan, Roderick Pryor, and Sir Frederick Aloysius Weld, as trustees for the debenture-holders, whereby the said company charged with repayment to the holders for the time being of the said debentures the principal money secured by the same debentures, with interest thereon at five per cent, per annum, all and singular the undertaking, assets, and real and personal property of the company, set out in the second schedule to the said deed, until a further issue of debentures of the said series was made ; and upon such further issue the said company charged all and singular the undertaking, assets, and property of the company, with the due repayment of all principal moneys and interest payable in respect of the whole of the debentures of the said series. The said trust deed also provided that if the company should commit any breach of or incur any forfeiture or penalty under the terms of the said contract, or under the terms of the Acts of Parliament recited or referred to in the said contract, then the trustees might enter upon and take possession in their names, or in the name of a Receiver, of the railway and of lands, timber, and all the property of the company thereby charged. 9. That a further issue of eighty thousand pounds debentures of the said series was created in December, one thousand eight hundred and ninety-four, and January, one thousand eight hundred and ninety-five, which your petitioner understands was pledged in block as collateral security for a sum advanced to the said company. 10. That a further issue of ninety-three thousand one hundred and twenty-five pounds debentures of the said series was made in October, one thousand eight hundred and ninety-five, which your petitioner understands was issued to cover past, due, and accruing interest on the said first issue, in pursuance of an arrangement made some time previously. 11. That on or about the twenty-fifth day of May, one thousand eight hundred and ninety-five, the Governor, purporting to act in exercise of the powers conferred on him by "The Railway Construction and Land Act, 1881," took possession of the completed sections of the company's line, which then formed part of the mortgage security of the debenture-holders, and has ever since that date retained possession of the same, in consequence of which your petitioner is unable to obtain possession thereof. 12. The company petitioned Parliament, during the year one thousand eight hundred and ninety-two, for the appointment of a Committee to consider certain proposals made by the company for the modification of the contract of one thousand eight hundred and eighty-eight; and during that year and the two following years Committees were appointed, and took evidence with regard to the said proposals. 13. During the session of one thousand eight hundred and ninety-four, a Bill was brought down by the Premier, embodying the recommendations of the Committee of that year, modifying the original scheme and its scope, which, was rejected by your honourable House; and the company gave notice of its desire for arbitration. 14. Arbitration proceedings were commenced during the year one thousand eight hundred and ninety-five, but the debenture-holders were not represented at the same, and the said proceedings were concluded in December last, when the Hon. E. Blake, M.P., published his award, by which it was decided that the company had no claim against the Government in respect of the withdrawal of the large area of mining reserves from the area of land available for selection, or of the seizure of the line by the Government; but no question as between the debenture-holders and the Government was raised or decided. 15. Immediately the trustees of the trust deed mentioned in paragraph 7 hereof became aware of the result of the arbitration proceedings, they appointed your petitioner to be their Receiver, agent, and attorney in his own name, or in the names of the trustees, as he might think fit, to receive, take possession of, and hold, all and singular, the property and assets, both real and personal, of the company, subject to the said trust deed. As there was at this time no interest in arrear, and the company had arranged for capitalising interest in advance until one thousand eight hundred and ninety-seven, no grounds arose for the appointment of a Receiver until the said arbitrator had found that the company had committed a breach of its agreement with the Queen. 16. That, under the circumstances, your petitioner is advised that the debenture-holders have no distinct, independent, and direct redress in the ordinary course of law against «the Crown, nor have they the right to claim to proceed to arbitration ; but that any remedies which may be open to them are indirect, and only to be sort at great expense, and subject to great delay. 17. In exercise of the powers vested in him by the said trust deed, and the appointment made thereunder, your petitioner, with the consent of the company, has taken formal possession of the company's offices in London and Christchurch, and has caused formal notice of his appointment to be served on the Government, and has since taken possession in New Zealand of such of the company's property as he could so take and receive.

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18. That his appointment as Receiver has been confirmed by an order of the High Court of Justice of England, in an action by a debenture-holder against the said trustees and the company ; and he is now acting under instructions from the said trustees, which instructions have been personally settled and approved by Mr. Justice Kekewich, a Judge of the Chancery Division of the High Court of Justice. 19. Your petitioner desires respectfully to ask Parliament to consider the matter of the grievances which the debenture-holders have against the Government, in respect of the seizure of the line, and the injury which the debenture-holders have sustained consequent on such seizure; and also to consider the claim of the debenture-holders for payment of the amount expended on the construction of the railway. 20. Your petitioner, while submitting with all respect the subject matter of the petition to Parliament, is advised that it is necessary to state in express terms that the debenture-holders do not thereby abandon any legal rights which they have in respect of the matters above referred, in the event of a settlement of the same not being arrived at through the action of Parliament. Wherefore, your petitioner humbly prays that your honourable House will be pleased to appoint a Special Committee to consider the matter of this petition, and to report to your honourable House thereon. And your petitioner, as in duty bound, will ever pray, &c. George B. Parker.

MINUTES OF PROCEEDINGS. [Note. —The proceedings of the Committee referring to other business are omitted.] Wednesday, Bth July, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Button, Mr. Hogg, Mr. Lewis, Mr. McGowan, Mr. Millar, Mr. Montgomery, Dr. Newman, Mr. Saunders, Hon. Mr. Seddon, and Mr. Tanner. The Chairman stated that he had received a letter from Mr, George B. Parker asking to have the consideration of his petition postponed until the 22nd or 23rd instant. Resolved, on the motion of Hon. Mr. Seddon, That the consideration of the petition be postponed accordingly. Resolved, on the motion of Hon. Mr. Seddon, That the petition be printed and a copy sent to each member of the Committee. The Committee then adjourned till Wednesday next, at 11 o'clock a.m.

Wednesday, 22nd July, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Guinness, Mr. Hogg, Mr. Lang, Mr. Lewis, and Mr. Millar. The minutes of the previous meeting were read and confirmed. Resolved, on the motion of Mr. Hogg, That Petition No. 75 (G. B. Parker) be sent to the Under-Secretary for Public Works, and that he be asked to furnish a report thereon by to-morrow morning. The Committee then adjourned till 10 a.m. to-morrow.

Thursday, 23rd July, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Button, Mr. Guinness, Mr. Hogg, Mr. Lang, Mr. Lewis, Mr. T. Mackenzie, and Mr. McGowan. The minutes of the previous meeting were read and confirmed. A shorthand reporter was in attendance. Mr. Parker and his counsel (Mr. F. Chapman, of Dunedin) attended, as also did Mr. Blow, Under-Secretary for Public Works. Mr. Chapman having addressed the Committee on behalf of petitioner, the Committee adjourned till 10 a.m. to-morrow.

Friday, 24th July, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Button, Mr. Guinness, Mr. Hogg, Mr. Lewis, Mr. T. Mackenzie, Mr. McGowan, Mr. Montgomery, and Mr. Tanner. The minutes of the previous meeting were read and confirmed. A shorthand reporter was in attendance. Mr. Parker and his counsel, Mr. Blow, and Mr. Dalston attended. Mr. Parker was sworn, and gave evidence. Mr. F. H. Labatt, accountant to the debenture-holders, was sworn, and gave evidence. Mr. Blow, Under-Secretary to the Public Works Department, addressed the Committee. The Committee then adjourned till Monday next, at 10 a.m.

Monday, 27th July, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Button, Mr. Guinness, Mr. Lang, Mr. Lewis, Mr. McGowan, Mr. Millar, Mr. Montgomery, and Mr. Tanner. The minutes of the previous meeting were read and confirmed. A shorthand reporter was in attendance. Mr. Parker and counsel, Messrs. Blow, Dalston, T. Cooper, and Harris attended. Mr. E. H. Labatt gave evidence. Mr. Blow resumed his address to the Committee, and gave evidence. Mr. Chapman addressed the Committee in reply. Resolved, That Mr. Labatt be asked to produce the following returns: Amount of money raised by the company by debentures or otherwise, showing separately in schedule, —(1) Cost of

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raising, (2) premium or discount, (3) rate at which interest was arranged, and (4) security offered by company; total payments to Mr. Wilson, showing salary and commission separately, and amount on which commission was paid; interest paid to debenture-holders and mortgagees from time to time up to date; terms of contract to Messrs. McKeone, Robinson, and D'Avigdor, and terms on which said contracts were sold Or terminated. The Committee then adjourned till Wednesday, 29th July.

Wednesday, 29th July, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Button, and Mr. Lewis. There being no quorum, the Committee adjourned till Wednesday, sth August.

Wednesday, sth August, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Hogg, Mr. Lang, Mr. T. Mackenzie, and Mr. Millar. The minutes of meetings held on the 27th and 29th July were read and confirmed. Resolved, That a letter dated the 28th July, from Mr. F. Chapman to the Chairman, be printed. Resolved, To adjourn consideration of this petition sine die. The Committee then adjourned.

Friday, 7th August, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Button, Mr. Hogg, Mr. Lang, Mr. Lewis, Mr. T. Mackenzie, and Mr. Millar. The minutes of the previous meeting were read and confirmed. Mr. H. W. Young, engineer, Greymouth, was sworn and examined. Messrs. Parker, Labatt, Blow, and Dalston were present. The Committee then adjourned until further notice.

.'•''. • Saturday, 19th September, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Button, Mr. Guinness, Mr. Hogg, Mr. Lang, Mr. McGowan, Mr. Montgomery, Hon. Mr. Seddon, and Hon. Mr. Ward. The minutes of the previous meeting were read and confirmed. The following notice of motion for Saturday, 26th September, was given :— Hon. Mr. Larnach to move, That the Committee, having carefully considered the petition of the debenture-holders in the Midland Railway Company, finds that, from the facts contained in the report of the Committee of even date with this in respect to the Midland Railway Company's petition, it has no recommendation to make. The Committee then adjourned till Saturday, 26th September, at 11 a.m.

Saturday, 26th September, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Button, Mr. Hogg, Mr. Lewis, Mr. T. Mackenzie, Mr. Millar, Mr. Montgomery, Dr. Newman, and Hon. Mr. Seddon. The minutes of the previous meeting were read and confirmed. In accordance with notice given, Hon. Mr. Larnach moved, That the Committee, having carefully considered the petition of the debenture-holders in the Midland Railway Company, finds that, from the facts contained in the report of the Committee of even date with this in respect to the Midland Railway Company's petition, it has no recommendation to make. Upon which Mr. T. Mackenzie moved, by way of amendment, to strike out all the words after the word " that," with a view of inserting the following words : " The Government shall proceed without delay to ascertain by some equitable process, —(1) The value at the present date to the colony of the railway-works, rolling-stock, and plant taken possession of by the colony in pursuance of the agreement made with the Midland Railway Company; (2) the total value, computed on schedule rates, of all lands granted to the said company under the said agreement; (3) all sums in excess of receipts expended by the Government on the said railway-works, rolling-stock, and plant from the date of taking possession to the present time. Thereafter from the sum arrived at in paragraph (1) there shall be deducted the sum arrived at in paragraphs (2) and (3), and the residue, if any, shall be paid to the holders of the debentures issued by the said Midland Railway Company on receipt from the said debenture-holders and the accredited representatives of the said company of an absolutely unconditional release from all future claim in regard to the said railway-works, rolling-stock, and plant." The Chairman having put Mr. Mackenzie's amendment, it was lost on the voices. Mr. Montgomery then moved to amend the motion by adding the words "at present" at the end. Upon the question being put that the words be so added, a division was called for, and the names were taken down as follow:— Ayes, 2.—Mr. Lewis, Mr. Montgomery. Noes, 6.—Mr. Button, Mr. Hogg, Hon. Mr. Larnach, Mr. T. Mackenzie, Mr. Miller, Dr. Newman. And so it passed in the negative. The Chairman then put the motion, which was carried on the voices. The Committee then adjourned till Tuesday, 29th September, at 11 a.m.

Tuesday, 29th September, 1896. Present: Hon. Mr. Larnach (Chairman), Mr. Hogg, Mr. Lang, Mr. Lewis, and Mr. T. Mackenzie. The minutes of the previous meeting were read and confirmed. The Committee then adjourned.

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MINUTES OP EVIDENCE.

Thursday, 23rd July, 1896. Mr. G. B. Parker (the Petitioner) present. 1. The Chairman.'] You are represented by counsel?— Yes. [The clerk read the report of the Public Works Department;— " Public Works Department, Wellington, 23rd July, 1896. " Sir, — Re Midland Railway : Petition of Mr. 67. B. Parker. " In reply to your memorandum of yesterday's date, asking for a report upon the abovementioned petition, I have the honour to state that the allegations contained therein, so far as the facts are within the knowledge of this department, are generally correct. " Paragraph 6 is somewhat incorrect, however, as the length of the completed section of the railway between Springfield and Paterson's Creek (called in the petition the ' Springfield Extension ') is only 5 miles and 60 chains, instead of 6-J miles, as stated; and the Belgrove Extension is only 5 miles 55 chains long, instead of 6 miles, and was not actually completed by the company at all. The company merely did the formation works upon this section, and this department is now engaged in laying the permanent way and constructing the necessary station-buildings and accommodation works. " As regards the alleged grievances which the debenture-holders have against the Government in respect of the seizure of the line (referred to in paragraph 19 of the petition), I may state that the company's contract, in its recitals, plainly sets forth that it is made under and in pursuance of ' The Railways Construction and Land Act, 1881,' which Act confers the right of seizure upon the Governor. The debenture-holders therefore advanced their money upon a security which they knew 7 , or ought to have known, was liable, under certain circumstances, to forfeiture. " Also clause 43 of the company's contract provided that if, under the provisions of the Railways Construction and Land Act, the Governor should be entitled to take possession of the railway at any time, he might, if he thought fit, exercise the right to purchase the line instead, even though the period within which it could not otherwise be purchased by the Crown had not expired. The trust deed to secure the payment of the company's debentures recites this provision of the contract, and the form of debenture issued by the company also makes reference to it, so that the debentureholders seem to have had their attention drawn to the fact that, under certain circumstances, the Governor would be entitled to take possession of the railway. " I have, &c, " H. J. H. Blow, Under-Secretary " The Chairman, Public Accounts Committee, " House of Representatives, Wellington."] Mr. F. R. Chapman present on behalf of the Petitioner. Mr. F. R. Chapman appeared for the petitioner, and said : I presume the more convenient course for me will be to state the position in which the petitioner is, and the grounds of his petition. The Chairman: I think the Committee will agree with me that, if you will state your case in your own way, that will be the most satisfactory form of getting at the substance of the petition. Mr. Chapman : The actual evidence, I may state, is mainly documentary. I appear to represent Mr. G. B. Parker, who has come to this country, having been appointed Receiver for the debenture-holders of the company, commonly and briefly referred to as the Midland Railway Company. The subject-matter of the petition is, in a general way, probably known to honourable members of the House present. It is a matter of common knowledge that at a recent date the position of the matter as between the company and the colony resulted in a submission to arbitration, and that the arbitration resulted in an award, made by the Hon. Mr. Blake, as the umpire who finally acted in the matter. His award was a finding, in effect, that the company had broken its contract with the Queen, and was not entitled to relief in respect of the matters on which it went to arbitration. Now, the parties whom I represent, that is to say, the Receiver and the trustees for the debenture-holders, were not parties in any way to that arbitration, but were interested in it, as is manifest from the circumstance that the assets of the company were really at stake. The event of the arbitration affected very largely the claim of the company, which, had the arbitration been successful, would have materially supported the securities. 2. The Chairman.'] You mean of the debenture-holders?— Yes; however, the event was the other way. It is for me now to point out to the Committee the position in which the debenture-holders find themselves, and to ask, on their behalf, that some mode of relief should be devised which would make their position more assured than it is at present. It is necessary that I should refer to matters early in the history of this company. The history of the company has been divided into several periods. But with the long period involved in the working of the company, and the construction of the line, I shall have little or nothing to do. The points to which I wish to direct the attention of the Committee are : The formation of the company, and the floating of it in London in 1886; the placing the debentures on the market in 1889 ; and then little else until a recent date, when the troubles of the company became acute. I wish to refer briefly to the history of the formation of the company, because that leads me directly to the placing of the debentures on the London market. It was formed in England in 1886, and the Government of New Zealand took a very keen interest in the formation and successful floating of the company. In support of this, I would refer to State paper I—l. 7.

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D.-2, 1886 : " East and West Coast Railway, and the Correspondence relating thereto." That was presented to Parliament in the year 1886. I will read some of the despatches set out in it, which show the interest taken by the Colonial ' Government in the subject. The whole of this correspondence, with numerous telegrams, covers a period of two years. Then, there is some further correspondence, and then a telegram of the Ist May. There is some interim correspondence, but the last telegrams are to the 18th March. So that these telegrams bring me to this : that there was a close communication between the Colonial Government and the Agent-General respecting this company. The company was not an ordinary company in which the parties take the property to the London market and offer it as they think fit. It was a matter which was at the time regarded as a subject of supreme interest to the colony. The floating of the stock in London was a matter in which, under the instructions of the Colonial Government, the Agent-General took keen interest. The contract with Chrystal and others, which had been made in the colony, was in due course assigned to this company, which was formed, as already referred to in these telegrams, about May, 1886, in London, for the purpose set out in these documents. Subsequently that contract was superseded by another, bringing the newly-formed company into direct relations with the Queen as represented by the Colonial Government. Money to the extent of £250,000 was obtained in London, and the company proceeded to construct a portion of the line in order to earn the grants of land to be made in accordance with the contract, and to deal with the land included in these grants. In the course of time, when the share-capital and other moneys were spent in this way, the day came for raising money by debentures. Now, it is manifest that it was contemplated all along that the necessary money would have to be raised by debentures. The whole scheme of the company, with £500,000 nominal capital, of which £250,000 was paid up, involved the raising of debentures to a very large amount for the purpose of completing the line, which was estimated to cost £2,755,000. In the State paper which I have here—D.-2b., 1886 —relating to the same subject, is set out the prospectus under which the company was floated in London, and the memorandum of association under which the company was constituted. There are one or two passages in this prospectus, and in this memorandum of association, to which I would refer. This railway would form the trunk-line connecting the East and West Coast. There is a letter in this D.-2b., from the Agent-General to the Colonial Treasurer, dated 21st April, 1886, to wdiich I wish to refer. [Letter read.] The Agent-General refers to matters which I need not set out in detail. 3. The Chairman.] What is the date?— The 21st April, 1886. 4. Mr. Button.] Is that D.-2b. still ?—Yes. Then the company was put on the market under the prospectus from which I before quoted, and the capital was readily obtained. No doubt Mr. Salt, and those gentlemen mentioned by the Agent-General, were able to bring influential people together to find the necessary money and make a start. The company then came to New Zealand, and settled here, and at a later stage the contract was entered into directly between the company and the Queen; and further legislation ensued, which it is not necessary for me to refer to in detail—not just now, at any rate. I can now pass over a period until a portion of the line was constructed, and it became necessary to obtain the debenture capital. In 1889, so close was the interest taken in the line, that it was contemplated the Agent-General should himself be the trustee for the debenture-holders : in fact, he accepted the office, although ultimately that arrangement was not carried out. I refer to a passage in the Financial Statement of 1889 (8.-6) that year [Extracts read] . The correspondence with the Agent-General upon the subject of the trusteeship is 1889, D.-2c. The necessity for a trust deed arises out of the circumstance that, ordinarily, when a large amount of debenture-stock is created, the debentures are not issued as a direct charge, but trustees are appointed and assignment is made to them, or some other form of instrument, charging the debentures on the property of the company, the company undertaking to give a mortgage over the property whenever the trustee should call on it to do so. The form of the deed I will refer to directly. This correspondence is in these terms :[" Premier to Agent-General, 15th May, 1889," read; " Agent-General to Minister of Public Works," read]. 5. The Chairman.] Sir Harry Atkinson was Treasurer then ?—Yes. 6. Mr. T. Mackenzie.] In 1889? The Chairman : Yes; from 1887 to the beginning of 1891. Mr. Chapman: For some reason, I cannot say why, Sir Francis Bell did not act as trustee. The deed was actually drawn putting his name in as trustee; his name was, lam told, in the draft prospectus, but he did not act, so far as I know. But he contemplated acting; he consented to act, and the Government of the day gave their consent to his acting; he perused the trust deed and also the prospectus. That subject was mentioned by Mr. Salt in his evidence before the arbitrator, and, it would seem, showing that any trustee would have to approve the prospectus. [Vide Arbitration Evidence, page 178, D.-4b, 1896, Questions 574 to 579.] It was also referred to in Mr. Hutchison's opening address (page 22); it does not appear to be a matter disputed. [Note. —After hearing the correspondence read which Mr. Blow produced, Mr. Chapman admitted that the Agent-General had not approved the prospectus and trust deed.] This is the most important part of the prospectus: " The present issue of debentures is made (1) to extend and equip the line to Reefton, about 40 miles, in all about 64 miles of railway." [See Exhibit B.] I call particular attention to the statement that the railway is already constructed out of the first issue of capital, including rolling-stock ; that the railway is to be equipped and constructed, according to contract, out of the proceeds of this issue, and they are specifically stated to be the security of the debenture-holders for this issue. 7. Mr. T. Mackenzie : That was approved by the Agent-General? 8. The Chairman.] That two million acres was not to be selected necessarily in alternate blocks, but might be taken anywhere ?—Anywhere within the area. 9. Mr. Button.] Was that adopted, and did it become a State paper; was it transmitted and published among the State papers of the colony ?—I understand not.

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10. Have you any spare copies of it ? —We have another copy, I think. 11. The Chairman.] That emanates from the company?—lt emanates from the company. In the raising of the money by the debenture-holders we do not say the Government is a party ; but we point out that the prospectus which the company issued and the trust deed, as drafted, contained the name of the Agent-General; that it was contemplated the Agent-General should himself become trustee ; that the trust deed was approved by the Agent-General at the time ; that the Government consented to his becoming a trustee if that arrangement had been carried out; that the trust deed and the prospectus were both approved by the Agent-General; that the prospectus specifically stated what the security for the debentures was to be. 12. The Chairman : The Bill was ear-marked before the Agent-General consented? 13. Mr. McGowan.] Where is the evidence of consent by the Agent-General ? The Chairman.] You think we will be able to go into that later on ? [At this stage of the proceedings the Chairman was asked to allow Mr. Dalston to be present.] Mr. Chapman : We do not make any objection. [Mr. Dalston was admitted.] Mr. Chapman : It is in the company's prospectus, " Not in alternate blocks." Mr. T. Mackenzie : It was stated that Sir Harry Atkinson claimed the right to reserve a certain area. Mr. Blow (Under-Secretary for Public Works) : We had the right to reserve 700,000 acres where required. Mr. Chapman: Now the debenture-capital, £745,000, was raised. I must call your attention to these circumstances. The deed was settled by the Agent-General. He refers to it in this correspondence. The trust deed is dated 2nd August, 1889 ; the actual issue was of a somewhat earlier date—upon the prospectus, April, 1889. The trust deed sets out the form of debenture which has actually been issued ; so that any one perusing the draft would have seen it set out in the schedule to the draft, and would have before him the actual debenture as already issued when the deed was executed. No doubt the deed, the debenture, and the prospectus were prepared at the same time. They would, no doubt, be prepared by the company's solicitor. The second schedule to the trust deed sets out the security. That is very much in the same terms as the prospectus itself. But the'prospectus is what actually goes before those persons who ultimately subscribe the capital when taking up the debentures. It is put before intending subscribers when they put their money into the debentures ; the security is shown—namely, the portion of the line already constructed out of the share-capital, and the line to be constructed out of their capital. But that hardly conveys to the mind the whole of the transaction; taking the opinion of lawyers and financiers would show a different conclusion from that of the ordinary citizen going into the market to invest his money. He relies on the prospectus ;he sees what he deems to be sufficient security ; he hands in his money and takes his debenture, as he supposes, on the security of this prospectus. If the person who subscribes to the debenture capital had any cognizance of the history of the company, and had before him the prospectus of a company, he would be naturally led to the conclusion that this was a colonial work, a work in which the colonial Government is largely interested ; so that it is really on the faith of the prospectus, and the circumstances, the situation, and the history of the railway, that any one taking up the debentures would rely. 14. The Chairman.] What about the signatures—the names that are on the prospectus. No doubt the Committee would like to hear in respect of them how you would connect the colony with the names on the prospectus ?—The Agent-General approved the trust deed in April, a trust of which he himself contemplated being one of the trustees. The petitioners do not say there is any direct connection between the colony and these four gentlemen whose names appear. 15. You have said that the subscribers were led to invest their money by having felt that the colony was in some way liable ?—I do not make a distinct point of that. I refer back to this point only to say that if the subscribers to the debentures happened to be shareholders, and took an interest in the formation of the company, they would fall back upon their recollection of the company's prospectus and say that the colony was greatly interested in this work. But it does not follow that there was any direct connection between the debenture-holders and the shareholders ; it may be that some of them were identical, and they might point to the fact of their personal identity as showing that the prospectus and trust deed had the sanction of the Agent-General. Now the debenture-holders find themselves somewhat late in the day, disappointed, for they are told that they have not a specific security in these constructed lines, but that they have a security over what I may term the bargain between the company and the Government, and that if the bargain fails their security may be forfeited by the Government. That is not stated in the prospectus. What renders the position acute is that before the arbitration the Government, acting, no doubt, on powers contained in the statutes of the colony, took possession of this line, and they have worked it ever since; and they have now served on the company notice calling on it —also in accordance with the statutes of the colony—to pay up the sum which they have expended in the further construction of the line since they took possession. The Government in its communication —it does not communicate with the trustees, but in its communication with the company—says in effect, " There is an Act of Parliament; we have taken possession of your line and have worked it ever since ; we have obtained a vote from Parliament to construct a further portion of the line, and we have constructed that further portion; it has cost so much, we ask you to pay up; that otherwise the line will become forfeited, and the absolute property of the Government of this country." That is the line which the debenture-holders reasonably thought was an inalienable portion of their security. It is on account of their disappointment —the difference between what they thought they were getting and what they are shown to be getting —that they have petitioned Parliament. Now, referring back to the company's prospectus, Ido not think I should be overstating by terming it a somewhat sanguine, indeed, a glowing prospectus of the prospects of this line. No doubt

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16. This last prospectus is the company's prospectus ?—I am referring to the first one : the Agent-General had that prospectus before him. He himself evidently took a sanguine view of the position. And he was perfectly justified in taking a sanguine view of the position as respects the colony. I dare say that a person intimately conversant with the country through which it passes would not have adopted so sanguine a view unless he was by nature of a very sanguine temperament. But the evidence which the Agent-General had before him, and which, at that stage, the Government had before them, justified them in taking a sanguine view. They had a report on the whole subject of the railway, as projected in London ; the nature of the country through which it was to pass; its timber ; its mines and minerals; its prospective settlement; its prospective traffic generally ; and all the matters directly and indirectly connected with the formation of this proposed railway. It was embodied in the report of Mr. Blair, then Assistant Engineer-in-chief, printed in 1886 (D.-la.). As to the land, I will not refer in detail to that; but I will ask the Committee to refer to it, for I venture to say that any one who is a stranger to the district through which it was intended the railway should pass, if he took this report, he would in all probability come to the conclusion that the line was not only a justifiable line, but that it was one of those lines analagous to the railways which have been projected and carried in America through the wilderness from one group of States to another, passing through mountain-chains which had been previously regarded as impassable, and connecting one large area of country with another with a great future before it, and possessed of good markets. The whole tone of this report is suggestive of a line similar to those great works bridging immense gaps, and connecting States as yet separated by alpine ranges, whether in Europe or America—bringing together the population of one great State with that of another. From first to last, this is the report of a sanguine man, embodying a sanguine view of the prospects of the line. It is quite probable that the AgentGeneral would derive his knowledge of the position of matters from some such report as this. It is a report obtained by the Government for Government purposes — obtained to forward what was regarded at the time as a great colonial undertaking, to be accomplished by a private syndicate, and ultimately by an English company. It was, no doubt, on a report of this kind, with similar data, that this glowing prospectus was sent into the London market. It led on to the debentureholder taking up and retaining his debentures three years later; the description of forests and large areas of arable land formed a contrast with the large body of evidence called by the arbitrator at a more recent date. 17. The circumstances had changed? In what way ?—From the commencement —from the promotion of the line to the actual operation —that is, the company was in difficulties. Mr. Chapman : But the territorial circumstances had not changed; the prospects of the provinces to he united by this line had not changed (D. —la., 1886). The Agent-General knew all these circumstances, he presumably had all these things — i.e., the data supplied by the Government —at his fingers' ends. There is, at this stage, one thing that I should refer to —namely, the form of the debenture; as issued, it is not in accordance with the Act. The Act requires what all colonial Acts require in respect of local loans, —that there should appear on the face of the debenture a statement to the effect that the colony is not bound by it; stipulating that the exemption should be set out in it. It is not, in point of fact; but the promissory part of the conditions are set out in the trust deed, which was before the Agent-General, although the debentures were issued by the company. 18. The Chairman.] They are actually issued in the form shown in the trust deed? —In the schedule is set out the form of the debenture, the conditions on the back, and the coupon. Here is the section : (See East and West Coast (Middle Island) and Nelson Railway Construction Act, 1884). That is not on the debenture. I have little more to say beyond this, that the ultimate event was as I have pointed out. The debenture-holders are not connected with the subsequent history of the line. They went on receiving their interest. They could not be expected to know what went on between the company and the New Zealand Government. We know, as a matter of fact, that disputes developed between the two; negotiations of some kind went on ; the construction of the line went on ; taking-up and selling of land went on; all these matters went on ; but in respect of these things the debenture-holders were a separate party. In course of time, the whole of the money available for the purposes of construction and so forth became exhausted. Then the position was this : the company had to call together the debenture-holders and explain the state of matters to them. That was quite recently. Then the matter went to arbitration. I need not go into details respecting the arbitration. Formal complaint was lodged by the company, setting out its grievances. That was taken up before the arbitrator, and a mass of evidence was called. All that was a proceeding between the company and the Government. It resulted in the Government successfully defending itself against the company. But by this time the company was unable to go on paying the interest upon the debentures. Technically, the company has not made default on its debentures. It called together the debenture-holders : whether the proceeding was strictly legal or not I do not know, but it does not really matter for the purposes at present under consideration. When it called the debenture-holders together, it arranged with them that they should accept debentures for the then due interest and a further two years' interest; so that, at present, without paying interest the company has given debentures by way of settlement for a time. But the trust deed contains a provision that if the company breaks its contract with the Queen, then the debenture-holders are entitled to step in and take possession of the assets, whatever they may be. Now the company had broken its contract with the Queen : that, as declared by the arbitrator, was sufficient for the debenture-holders; the debenture-holders then proceeded, under the terms of the trust deed, to appoint a Receiver, and take such steps as they deemed necessary for their protection. They appointed Mr. Parker, who is the petitioner here, the Receiver. He took possession of the office of the company in London, and he has come here to see what is further

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necessary to be done. He has, under advice, presented this petition, in order to bring the matter before Parliament at the earliest date. The debenture-holders have no other redress than such as Parliament can give them. They are not parties to the contract. They have not the right of suit, or the right to go to arbitration. The whole situation seems involved in such complexity that it is almost necessarily a matter which should be dealt with by Parliament, or by Government under the sanction of Parliament. From the debenture-holders' point of view, as they see the matter at present, they had no course open to them but to come here and ask for such relief as Parliament would think fit to award. They had no quarrel with the Government; they have no quarrel with the company. They have not been parties to the long pending dispute between the company and the Government. They come here with this prospectus and trust deed in their hands. They say that it was on the faith of these, so far as the ordinary subscription was concerned, it was on faith of the conditions upon the face of the prospectus that they subscribed their money, and they ask that some relief should be awarded to them. They point to this fact : that they subscribed their money on the face of a statement which, undoubtedly, would have created a belief in the mind of any person tendering money for these debentures that he was to receive as his security the railway constructed and to be constructed. The position of a debentureholder is not exactly the same as that of a shareholder, who to some extent speculates in the venture into which he puts his money. The debenture-holder does not do anything of that sort: he invests his money upon a specific security. I have pointed out that the Government claim the right, under the contract between them and the company, under the statutes of the colony, to forfeit this line unless a sum for construction is paid within three months. The debenture-holders have instructed their Receiver to come here on their behalf, and he points to the solid fact that this large sum of money, found by persons not at all concerned in the colony, is actually invested in this line. It is in respect of this that they ask for relief. It would be difficult to say specifically what relief is asked; for this is not like an action in which a specific statement of claim is formulated. They submit their position to the consideration of Parliament, in all the circumstances to which I have alluded. I submit, in view of the circumstances, that, practically speaking, no other relief is open to them than that which Parliament alone can afford them. I put it thus: that in some shape or other Parliament is bound to do justice to these persons who have subscribed their money in this way. It is not to be supposed that the Crown intends to forfeit the line ;or that power is given to it for that purpose, seeing that the money which paid for it has been found by others. No doubt, in adjusting the matter, whatever course Parliament takes, that course will be an equitable one. The debenture-holders do not come here as cormorants to grab all they can get. They come here putting the whole of the circumstances before the Committee, asking the Committee to make such recommendation as will do justice in all the circumstances. It is stated in the petition that the debenture-holders do not abandon their legal rights. That is a matter scarcely to be considered. This is not to be treated as an action against the Government. If the debentureholders have any legal rights they reserve them formally by their petition ; the position in respect of that matter has not been considered ; what they state is set out in the nineteenth paragraph of the petition. They ask this Committee to make such recommendation as will result, so far as is possible, in these persons receiving the fruit of their money, so far as it is invested in the solid railway line now worked by the Government. 19. The Chairman.] Your attitude here, Mr. Chapman, is based rather on a sense of right: an equitable sense, and not a strictly legal one ?—Yes ; no doubt. 20. Are you aware whether the Agent-General's attention was drawn to the form of the debenture in the trust deed ? —We find that he did peruse the deed; the debenture is set out in the trust deed. 20a. Have you any other evidence ?—lt is a question what the Committee requires. We have alleged the cost of construction. Does the Committee require proof as to that ? 21. If you have finished, I would like to put it to the Committee what evidence it thinks necessary ? —I have finished my opening. I may have something further to say on any points which the Committee desire to raise. I should like to have the evidence of Mr. Parker. The Chairman : Mr. Blow, the Under-Secretary for Public Works is here. He may have some evidence to give. [The Committee deliberated. Mr. Blow, in reply to a question by the Chairman, said he would prefer to give evidence at the next sitting.] 22. Mr. T. Mackenzie.] Have you any idea, Mr. Chapman, what profit the Government made —after allowing for land given to company—to themselves by taking over the line, and depriving the debenture-holders of their property?— Property; in what sense, the value of the line? 23. What was the value of the line to the Government ?—I do not know whether that is separated from the cost of construction—we know what is the cost of construction —that is set out in the petition. Here is the account, £763,958 16s. 6d ; that is the cost of construction—in the colony. 24. That is the property the Government has taken over in addition to the reserves ?—No; not the reserves. That is what they have taken over ; that includes such compensation as the company had to pay for the land on which the line is. 25. What outlay was the Government at, as a set-off against this ?—The outlay of the Government in the same connection would be the land. 26. You do not know the area ?—Here is the value, in which it is computed at £245,845. 27. Mr. Button.] That is the value of the land received? —Yes. 28. And disposed of?—-That includes what is not disposed of. There would have to be a further deduction of £20,000 for existing rights of selection; so that your figures would come to something more like £500,000. 29. They have received that ?—Yes.

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30. Above the value ceded to the company, then, I suppose, the debenture-holders and the shareholders of the company would take a joint interest in that?— The debenture-holders have the first charge ; there is no dispute between them and the shareholders on the subject. 31. Mr. T. Mackenzie.] In respect to that £700,000 odd : there ought to be a security on that in their favour of £500,000 ?—There ought to be. 32. The Government has taken that; it stands in the light of profit ? —Yes. 33. Have the debenture-holders received any benefit from this £245,000, beyond their interest ? —They have some land on hand. 34. The debenture-holders?— Yes, it is there; the company have it. The debenture-holders have first charge upon it; we do not understand that the Government claim to forfeit the land granted, they claim to take possession of and work the line and forfeit that. 35. Mr. Button.] Land set apart which has not been appropriated?— Only the line. 36. The unappropriated land ? —They have not said that they claim land, other than railwayland. We do not say that the Government have taken possession of the land, other than the railway-land ; the land on which it stands, they have not claimed to assert a right over that. 37. But there was a large area that would have accrued to them had they completed their contract?— That follows ; they do not claim to forfeit the land in respect of which titles are issued; not to the back land which the arbitrator considered the company was entitled; they claim to forfeit all other rights of selection. 38. Mr. T Mackenzie.] Do you consider that the Government is, to a certain extent, responsible to the debenture-holders, inasmuch as the Agent-General approved of the prospectus ; and he did not see the important omission provided for in the Act of 1884, was it not so ?—I do not wish to say anything implying the least imputation on the Agent-General, what I pointed out was this :he approved of the trust deed; the debenture is set out in the trust deed. The trust deed refers to a specific security over the railway constructed and to be constructed. This does not say you are getting a lien on the company's bargain, but on the company's railway : there is all the difference, coupled with the circumstance that the asset is there, as you say, to profit. 39. You said it was rather a glowing prospectus?—l was speaking of the share prospectus. 30a: Let us come to the debenture prospectus—to the timber, valued at £7 an acre ?—I think the item " timber " has gone ; I do not think it has turned out a source of profit. 40. To that extent the prospectus was too glowing? —I should not rely too much on a subject like that, which is local, and necessarily speculative. 41. Mr. Button.] In regard to the Agent-General, your argument comes to this : that he may be said to have assented to the prospectus in the way the proposers took it, to set out that such debenture-holders were excluded from making a prior claim in the event of the contract not being carried out ?—They would rely on the prospectus. 42. You say the Government was a party to blinding their eyes?— They appeal to the statement that it was a specific security. 43. Because he saw the draft, and was walling to be trustee. The Government did not see the draft? —No; only the Agent-General. 44. If there was any neglect attaching to the Agent-General, for not pointing out the defective statements, that would equally attach to the gentlemen who signed the prospectus ?—No doubt; but others who signed the prospectus were actually parties interested in the company. 45. It was not on the faith of what the Agent-General had done : it was not in consequence of any action of the public ; the public did not see the draft ?—The Agent-General saw the debenture in the trust deed, which he had perused and approved. What the public saw was the prospectus put forward by the promoters or directors. To the general public they would perhaps be unknown, considering the way they were taken up. They are usually taken up through parties. It would almost certainly be known that the prospectus would come through the office of the AgentGeneral. 46. The debenture-holders knew nothing of the dispute between the company and the Government ?—They must have known it at a later stage ; they would know it through the public ; you must remember these persons were in England. It is very likely the debenture-holders would have known of it when it came to be actual stock; but so long as the company were engaged in constructing the line, and money was still in hand for the purposes of construction, it is very unlikely that the majority would hear anything of what was going on, for some were either directors or connected with them in some way. 47. They would know something about the Act attempted to be passed last year?—By that time they might have heard of it. They would probably know something, or somebody connected with those gentlemen. I saw a letter from the Chief Justice of the Bahamas, or some functionary similarly situated.. He would not be likely to know much of what was going on in this matter. 48. But he would consider what the position was, in taking up these debentures ? —lf he lived in the Bahamas, he might or might not have heard of it. 49. You speak of the proceeds of these debentures being a charge, and the Government having the benefit, that the cost was £753,978 —the cost of construction. Is it not the fact that this cost of construction would represent a larger amount through delay, for want of funds?— Personally, lam unable to say that, and I do not know that the Receiver is in a better position; that is what we pointed out: that the debenture-holders have not been cognisant of these matters. 50. Mr. Hogg.] Am Ito understand that you mainly relied on the overtures that were made to the Agent-General to become a trustee, to connect the Government indirectly with the issue of these debentures ?—That, and the fact that the Agent-General officially approved of the trust deed and the prospectus. 51. Is there any proof that this prospectus was the one he approved?—l refer to Mr. Salt's evidence before the arbitrator. It is scarcely conceivable that he would go to London intending to

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become a trustee if he did not approve the deed, or that he would have approved the deed without knowing the contents. Even without Mr. Salt's evidence it would be almost a certain inference. 52. Is there any reason to assume that any of these debentures were disposed of on account of the alleged action of the Agent-General ?—Yes; I think so. 53. You think that the purchasers of debentures, or some of them, at all events, were influenced by being informed that the Agent-General contemplated becoming trustee ? —I think that is certain. 54. Would it not occur to them as something strange that, having approved of the prospectus, his name should be omitted ?—The directors of the company were aware of the fact; they were anxious that the Agent-General should be a trustee. They held among them a hundred thousand pounds' worth of debentures. 55. Assuming that intending purchasers were aware of the fact that the Agent-General approved of this prospectus—that he had been asked, and intended to become trustee; would it not occur to them as something strange that the name of the Agent-General did not appear in the prospectus ?—That is an abstract question of human nature. It is a matter for argument. Some people would no doubt reason in that way, others would not. 56. But there is nothing in this prospectus to indicate that the Agent-General sanctioned or approved of its issue in any shape or form ?—lt is not stated in the prospectus. 57. I am asking your opinion on this matter. Do you not think that any capitalist, having been made aware that the Agent-General contemplated being a trustee, and afterwards finding the prospectus without his name upon it, would think it somewhat strange ? —I hardly think that would be the course the history of the matter would take : people who wish for an investment for their money usually go to brokers or agents, who are of various kinds ; at the same time brokers and agents are employed in putting out debentures of this description, they would show the prospectus to any one, attaching importance to the circumstance of the Agent-General having approved of it. If he knew that, he would be likely to mention it, as one of the inducements to subscribe; he would not say so much as that it had been approved in the office of the AgentGeneral, or that he represented the New Zealand Company. ' 58. Do you not think it reasonable to assume that if he had intended to become a trustee, and that his name did not appear in the prospectus, that it would occur to an intending investor as something strange that his name did not appear there ; would it not be likely to create a difficulty ?— No; when this prospectus was issued there was no question of the Agent-General being a trustee; not at that date when it was actually issued; the project of making him a trustee was then at an end. 59. What I want to know is, whether the omission of the name would or would not have a damaging effect, if it had been previously known that he had been asked to become a trustee, and that afterwards his name was found not to be in the prospectus? —If a previous prospectus had been issued, and stated that he was to be the attorney, and if any new prospectus appeared without his name, then it might have appeared to be curious :it might have a damaging effect. It is not so much what has happened, in so far as people knew anything about it; what happened was, probably, that people may have talked about it, that it did not eventuate. I am not in a position to say positively that any one did subscribe on the faith of his having contemplated becoming a trustee. It might be the other way. But he might well subscribe with knowledge of the fact that both the prospectus and the trust deed had passed through the Agent-General's office, and that they had been officially approved. What you say is perfectly correct, that if the Agent-General was going to be trustee —at all events, he had not —the important fact is not so much that he should have contemplated becoming trustee as that he had approved the prospectus and the trust deed : that is the fact that leads up to the consequences—the approval of the documents. 60. He did not become trustee ?—No ; he did not. 61. Have the debenture-holders no claim against the company?—No doubt they have; but the company points to the line ; it says : " You have your remedy against us ; that is, a remedy against the assets; take the line." The company's capital is all paid up; it is not attempting to deprive the debenture-holders of anything they have a right to. It says to the debenture-holders, " You have a first charge on the assets, take possession of the line ;" but the debenture-holders are met by the fact that the Government are in possession ; and they have issued a notice that in three months the line will be forfeit in virtue of the Act, which enables them absolutely to forfeit, and makes it the property of New Zealand ; that notice was given to the company from the 13th July, and would in due time make the railway the property of the colony. 62. I presume that, in that case, the debenture-holders would simply lose their money ?—That is so. 63. But up to the present the debenture-holders have not exhausted their remedy against the company ?—Surely, Mr. Hogg ; what is left for them ? The company is impersonal, " They say there is the asset, assert your right over it;" but the company being an " impersonal " thing how is that to be enforced ? It has nothing but these assets, which it gives up. 64. The question is asked about "the bargain" the Government would make supposing the line is forfeited. Have you any data to prove that, if you take into consideration the land subsidy accrued and sold, the cost of seizure, and the cost of arbitration and other procedure, the State will be a gainer? —"Bargain" is hardly the term for it. It appears to me that the document I have handed to the Committee, taking the construction and measure of value, shows that there is still a margin of half a million, or something like a half a million. 65. Mr. Lewis.] I think I understand you to say that the agreement between the company and the debenture-holders provided that if the company failed to carry out their contract the debenture-holders could step in ?—Yes, the prospectus refers to the railway constructed or to be constructed.

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66. And did such a provision appear in the form of debenture which was embodied in the trustdeed which was submitted to and approved by the Agent-General on behalf of the colony ? —Yes. 67. Mr. Button.] I would like to hear what you have to say about this clause in the prospectus. You pointed out specifically that "1,2,3, 4 " are part of the security. Here is the clause :— " The security for the present issue will be-— £ "1. Railway already constructed out of first issue of share-capital, including rolling-stock, surveys, &c. ... ... ... 220,000 " 2. Railway to be constructed and equipped, according to contract, out of the proceeds of this issue ... ... ... ... 545,000 "3. Land, about 300,000 acres, to be granted to the company in consideration of above expenditure, and taken at waste land value of 10s. per acre ... ... ... ... ... 150,000 " 4. Timber on only 91,000 acres in the immediate neighbourhood of the line now to be constructed, separately valued at ... 635,000 " Total value of security ... ... £1,550,000 " I want to know whether this is true; whether you are prepared to say that it is not true—namely: " The Government have subsidised the company by a free grant of 2,000,000 acres " ? Did you get that subsidy ? Was it included in the conditions ? Would you say that the view taken of the action of the Agent-General in passing this prospectus and trust deed led the debenture-holders to suppose that Government had given this free grant ?—lt is a statement; but it must be read in conjunction with the specific security mentioned in the debenture. 68. Do you rely on that statement as being misleading to the debenture-holders?— What I rely on is 69. You do not rely on that?— Not exactly on that, for that is not a statement of the specific security. 70.' I Want to know whether you rely on that ? —Not specifically on that; we rely on the statement summed up in the four items of security. 71. You say that the company was incorporated ; here we have a direct statement: it was incorporated for the construction of the railway under a contract, in accordance with Acts of the New Zealand Parliament; glowing references are made to the benefits to accrue from the railway ; but here is a direct statement; I want to know whether you rely on this direct statement ?—Not specifically on that; it does appear as a coloured statement, no doubt. The specific security is that referred to in the debenture, it is summed up as £1,550,000 ; that, no doubt, makes the company look much wealthier in itself. 72. The Chairman.] When the Agent-General did not appear among the trustees ultimately, did the directors of the company give notice to the debenture-holders who supposed he was to be a trustee that his name was omitted ?—I do not know ; I do not know whether they had given any notice that he was to be trustee ; all they knew was the fact that it was so contemplated. Sir Frederick Weld was suggested as replacing him. 73. I want to know whether there is any evidence to show that the debenture-holders then, or the debenture-holders in posse, were, or were not, led to believe that any one connected with the colony was to be trustee ? —We do not know anything of that; but we point to the fact of its being known in April that the Agent-General had officially approved of the prospectus and the trust deed.

Friday, 24th July, 1896. George B. Parker examined. 1. Witness, (in reply to Mr. Chapman) : I hold my appointment here as Receiver for the deben-ture-holders of the Midland Railway. That appointment has been recognised by the Chancery Division of the High Court of Justice in England. 2. Mr. Chapman.] And you have come out under instructions from the trustees, confirmed by a Judge of that division ?—Yes. 3. A question was raised yesterday as to the way in which the debentures were held. Do you know, generally, how and by whom they are held?—l have a list of the debenture-holders, but, of course, they do not tell the amount. But I know, from personal knowledge and information that I have received, that a large quantity of them is held by the directors of the Midland Railway and people who are connected with them. There is also a large amount that is held by people who are ordinary holders of debentures, and who have nothing to do with them. 4. Subscribed just on the market?— Yes. 5. You have been through the country and inspected the line, I understand?— Yes, I have. 6. Mr. Montgomery.] I would like to ask you what is the exact amount on which you claim that the debenture-holders have any claim against the colony ?—I take it that at this moment we are throwing ourselves on the mercy of the colony. That is the form of our petition. 7. Yes, it is true ; but you say that you reserve your legal rights. What legal rights do you suppose there are ?—1 should think that is more a question for one's lawyer than for oneself; but I am advised that we have legal rights, our money having been expended on those works for which we are supposed to hold security from the company. 8. You have legal rights against the colony ?—I do not say so, but lam advised there is a case against the colony.

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9. What are the debenture-holders having done, as against the company ?—When it became known in England that the arbitration was against them, under the trust deed they took formal possession of everything of the company's in London. 10. What did that consist of ? —Books, offices, cash, and so on—not very much cash. 11. Then, do the debenture-holders consider themselves as occupying the position of the company now ? —lt is such a very complicated case that I cannot understand it. I sometimes think that they do, and sometimes that they do not. 12. Would the debenture-holders be willing to take up the company's contract ? —I do not think they consider that their business. They are people who have invested money in debentures for an investment, without any idea of carrying on a great work like that. I should think not. I have no instructions on the matter. 13. You have been over the line. Would you tell me if you think it would be worth the debenture-holders' while to take up the contract ? Cutting out the part from Reefton to Nelson, would it be worth their while to take up the contract?—l really cannot give an opinion on that. 14. Then, I understand that the debenture-holders have no intention of taking the position of the Midland Railway Company so far as carrying on the work is concerned? —Not to my knowledge. 15. You have no power to negotiate on this basis? —No. 16. But only that you want the Government to pay what money they will ?—Yes ; in return for the work that has been executed, and which is very good work. 17. And they would not be content with taking the work?—We do not want the work; we would rather have the money. 18. You say it is very good work, and that is what you wish to take the money in return for. Why would not the work do ? —Speaking individually, for I have no instructions on this subject, it seems to me it is hardly debenture-holders' business to carry on a railway. 19. So the debentures are mostly held by the directors ?—No; only a portion. Possibly, out of the £740,000 odd perhaps £100,000, or £120,000, may be held by them, and the balance by various other public bodies, and by the ordinary people who invest in debentures. 20.- The- Chairman.] Had you no negotiations whatever with the debenture-holders, whom you represent, before coming out as to making any proposal to the colony?— No. You must remember that Ido not represent the debenture-holders directly. I represent the trustees for the debentureholders. My instructions came from them, and, as servant of the trustees, lam under the direction of the Court of Chancery in England, who have tied me down very tightly indeed as to what I am to do. lamto do nothing without consulting the Court. 21. True, but was it not considered in any way that some alternative proposal might be made to the colony—l do not wish you to answer this if it is in any way giving away a secret?— Not to my knowledge. 22. Mr. Montgomery.] What has been the cost of the construction of the line ?■—Roughly speaking, about £760,000, actual money spent. Frederick Hubert Labatt examined. 23. Witness (in reply to Mr. Chapman) : I am accountant to the Receiver for the trustees on behalf of the debenture-holders of the Midland Railway Company. 24. Mr. Chapman.] You have made up a statement showing the Construction Account, also the Land Account, and the balance-sheet [Exhibit C]. These are approximate, are they not ?—Yes, these are approximate. 25. These are the accounts that were handed in yesterday. Speaking of the Construction Account, what, speaking generally, does that include ?—That includes the amount paid to contractors for the construction of the line, the amount of rolling-stock, administration, engineering charges, the sundry expenditure on behalf of the line and construction. 26. It does not go outside what is properly chargeable as construction account, such things, for instance, as land-tax pending construction ?—No, it is purely construction account. It does not include land-tax on the construction works. 27. Then the Land Account that was handed in. How are the values taken ? —The values are taken by contract valuation. That is the B 1 values under the contract. 28. Is the amount of valuation on the part of the contract attached to the map that was prepared by the Government ?—Yes. 29. And the balance-sheet that was handed in. That cannot be an absolutely accurate balancesheet. I suppose it could not at this stage be constructed? —No, it could not very well. It is as near as possible approximate. But there are certain other amounts in the company's books, and which it has not been quite decided to take as liabilities. 30. But, for the purpose of arriving at the position, it is an approximately correct balancesheet ?—Yes. 31. Mr. Tanner.] Will you please give us the amount expended in construction ? —The amount expended in construction is £760,669 Bs. 7d. 32. And the value of the land-grants received on the Bl valuation?— The value of the landgrants received on the B 1 valuation is £245,845 3s. 2d. 33. And the balance of land-grants owing or claimed?—£2l,o66, according to the award. 34. Now, will you tell the Committee what was the original capital of the company ?—The original capital of the company was £250,000. 35. And the amount received by floating debentures ?—£745,000. 36. That is to say, exclusive of land grants, that the company have had some £995,000 for the purpose of constructing the railway ?—Yes. 37. How do you account for the discrepancy between £760,000 actually spent and £995,000 received —about 25 per cent, of the, money unaccounted for ?—There were certain charges outside. •A—l. 7.

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There were the London office charges, and the charges in connection with the land department, and the timber department. There was also interest payable to the shareholders and debentureholders. 38. For how many years have you paid interest on the debentures ?—Speaking from memory, we have paid from 1890 to 1894. Mr. Tanner : About five years and a half at 5 per cent. Mr. Chapman: The debentures did not absolutely fetch par. Mr. Tanner : I am aware of that. 39. Mr. Hogg.] I should like this to be cleared up a little further. (To witness.) You say £245,845 were received from land-grants ? —Yes. 40. Is that amount to be coupled along with the original subscribed capital, and the amount received from debentures, as receipts by the company ? —Yes, I think that it will come under that head. 41. Altogether about £1,240,845 was received by the company? —Yes. 42. And you say the amount expended on construction is £760,669? —Yes. 43. Then, you deduct the amount expended on construction from the amount received from all sources. A balance is left of £480,186 ?—Adding land-grant to the share and debenture capital the total is £1,240,845. 44. In round numbers that leaves about half a million of money that the company has received more than they have expended on the cost of construction ?—Yes, that is about it. 45. Do you know whether much of this money remains ?—There is not very much in hand. I think the statement of the balance-sheet referred to by me showed a certain figure there, and that is what is reckoned as estimated assets. Of course, that figure may realise a considerable sum on account of the sales of land. 46. I am not taking into consideration the land still claimed and available, but simply the actual receipts. About how much has the company now in hand in hard cash ?—They have no cash balance whatever, so far as I know. . 47.. Ab.out how much of this £480,000 has disappeared in dividends?—l could tell you what amount has been paid on account of dividends. That is, 5 per cent, interest to shareholders and 5 per cent, interest to debenture-holders, but I have not the figures at present. I can get them for you later on. 48. Can you account in any way for the absorption of this large amount of money, this balance of £480,000 ?—The interest at 5 per cent, on the share capital and the debenture capital over a series of years would absorb a large portion of that £480,000. 49. Mr. Guinness.] You have told us the value of the land that was received by the company is put down in that statement at B 1 value. Will you tell the Committee what were the actual cash receipts for the land sold?—I could not give you the exact figures at the present time, but I could let you have them later on. 50. Perhaps the next question will stand in the same way. What is the value of the land that has been already actually granted to the company and not realised by them—that which they have still in hand?— The B 1 value—that is, the contract value of the lands in hand and not yet sold is, £55,531 15s. 3d. That amount is subject to amendment on account of the amended survey of certain blocks. 51. That would not amount to much, would it ? —lt might run into £1,000 or so. 52. Then the company has in hand £55,531 land-grant, and £21,000 of land-grant yet to be handed over under Mr. Blake's award. That comes to £76,500 odd. That is the only asset that the debenture-holders have in addition to the railway. Is that so ?—There are sundry assets, such as certain properties adjacent to the company's line. Certain lands have been acquired by the railway which are not actually required for the line, but which are adjacent to the railway. 53. In addition to these land-grants of the Government ?—Yes. 54. Can you give the Committee any idea as to the probable or estimated value of that class of property? —I can let the Committee have a return later on setting out this land. 55. I only want to get at what is the actual value of the assets belonging to this company in addition to the railway. The Government took possession of the railway in May, 1895. For the three years preceding that, can you give the Committee a statement showing the net earnings of the railway ?—Yes. This statement [Exhibit D] was prepared by Mr. Dalston last April, and it is a copy of a statement which I have checked. It starts at the time the company commenced work in 1890, up to the date of the seizure on the 25th May, 1895. The net receipts for the eleven months ended 30th June, 1890, were £1,608 13s. lid. 56. That will give it year by year. Does it show, opposite that, the amount expended in construction ?—No, it does not show that. 57. I would like to have shown opposite each of these dates what was the total capital expended in constructiou, so as to get at the earning power of the capital expended? —It shows the number of miles opened for traffic up to the time. For the eleven months up to the 30th June, 1890, 14 miles 25 chains open for traffic, net receipts, £1,608 13s. lid.; year ending the 30th.June, 1891, 18 miles 67 chains open for traffic, net receipts, £4,000 16s. id. ; year ending the 30th June, 1892, 39 miles open for traffic, net receipts, £4,288 18s. 7d.; year ending the 30th June, 1893, 39 miles open for traffic, net receipts, £4,408 165.; year ending the 30th June, 1894, 69 miles open for traffic, net receipts, £6,572 2s. lid.; for the eleven months to the 25th May, 1895 (date of seizure), 69 miles open for traffic, net receipts, £3,257 7s. 3d. Total net receipts for 1890-95, are £24,136 14s. 9d. 58. Mr. Mackenzie.] Have you any idea of the present value of your work and rolling-stock to the Government ? It is put at £760,000 odd. What do you think the actual value is now ?— I could not give an opinion on that question.

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59. Do you think the work is worth what it has cost ? —I believe it is worth that because the West Coast is looking up, and the traffic receipts are bound to increase on the opening of the other sections of the line. 60. Then, the success of the line depends on its being connected with the East Coast ?—Yes. 61. From what you have said, I gather there is very little surplus of earning just now above the cost of working?— For the twelve months ending the 30th of June, 1894, the net receipts were £6,572, showing 5725 per cent, working expenses, which is equal to the best paying lines. 62. Of course you do not think the success of the line has had an opportunity of being tested yet ?—I think not. 63. Mr. Blow.] The cost of the line includes all the engineering charges, of course?— Yes, it includes administration and engineering expenses. 64. That includes Mr. Wilson's remuneration ? —Yes. 65. What was Mr. Wilson's remuneration?— Mr. Wilson received a certain salary and he also received a percentage on the amount expended on construction, and he himself paid the engineering staff from his own account. 66. Can you state what the amount of his salary was, and what the percentage averaged?— The amount of salary was £2,600 per annum. I cannot tell you what the percentage was. It mostly depended on the amount of construction work going on, and I have not the figures at present to give you the information. 67. Are you in a position to say whether the percentage resulted in a profit to Mr. Wilson? —So far as I know it has resulted in a profit. 68. Have you any idea of what profit ?—I could not say what. 69. Would it be another £1,000 a year?— Approximately. 70. The Chairman.] You would be able to tell that from the drawings ? —I should think it averaged £1,000 a year. 71. Mr. Blow.] Do the charges include Mr. Scott's salary ?—No, they do not. 72. Mr. Dalston's?—Well, they included a certain proportion of the clerical staff whose time was allocated to engineering work, or work charged against the engineering. It included a certain proportion of some of the other officials' salaries. 73. Does the total cost of construction you have given us include interest on capital? —No, it does not. 74. Have you any idea what the company paid for their rails?—No; I have not any information at present. It could be got from the company's books. 75 You could not tell us whether it was £5, £10, or £15?— No, I could not say. 76. Were all the contracts for the construction of the railway let by tender?—So far as I know, all the different contracts were advertised for and tenders called for. 77. And the lowest tender always accepted? —Well, that is outside my province; I could not say. 78. You have never heard of any contracts being given to contractors at schedule rates arranged between themselves and Mr. Wilson ?—I have no definite information, except that certain contractors have given great satisfaction in the way they have carried out the work, and they have carried on further work. 79. That is what I understand to be the case. As regards the amount of money that has passed through the company's hands, there were, in addition to £745,000 of debentures, £140,000 subscribed afterwards, but prior to the issue of debentures, to meet arrears of future interest ?—We have no information in the company's books in New Zealand on that point. 80. You could not tell the Committee at the moment what profit was made on the land-sales ; but you will probably be able to tell the Committee what was the supposed profit made on the land-sales ?—Yes. I think in 1892 it was shown before the Public Accounts Committee that the profit up to that.time averaged from 37 to 39 per cent, over B 1 value. 81. So that, in addition to the value of the land shown here, we have got to add 39 per cent., being profit realised by the company on the sale of land ?—Yes. 82. Now, turning to the traffic receipts of the railway, you tell us that for 1894 the net receipts were £6,572, and for eleven months in 1895 they were £3,257. If I add one-eleventh to the 1895 receipts, surely I get approximate results for the whole year of 1895 ? The Chairman : Thirty-six days short of the year. 83. Mr. Blow.] Well, it is a fraction more. If I add that, it will, to be liberal, mean that the company earned about £3,700. How do you account for the great difference between £3,700 and £6,572 in 1894 ?—Speaking from memory, the company brought to charge at the 30th June, 1894, various amounts which went into traffic receipts, such as postal charges, &c. I think that accounted for a good deal of the difference. 84. What were the amounts of the postal charges ? —They would amount to about £500 altogether, I think; but I think £300 would have come into the June account, speaking from memory. 85. So that is £300 towards the difference of £3,000. Anything else?—So far as I remember, we had some heavy departmental charges that year. I forget exactly what they were, but I know that, in making up the accounts, we came across these charges, some of which were connected with royalty account of Blackball coal, subsequently written-back. 86. That would not have anything to do with working-expenses ?—No; but subsequently it would be a charge against the traffic department. 87. Then, am I to understand that such receipts as the royalty of Blackball coal are included in the receipts from working the railway?—No ; they are not. There was a certain rate charged with respect to haulage of the Blackball coal, and we had to make a rebate to the traffic department, writing back amounts charged in excess.

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88. I do not understand it at all. In the season preceding 1895, were there any heavy construction-works of the company going on at the end"of its line?— Yes ; I think there were. 89. And would not the loss of the freight on the company's own materials, which, of course, ceased to be sent up when construction stopped, account for the difference ? —Yes ; that would partly account for it, I think. 90. Was any portion of the head office expenses debited to the working expenses of this line ?— No; none of the head office's expenses were debited against the working railways. 91. Any portion of the general manager's salary—Mr. Wilson's? —Yes; but of course that is apart from the head office. All the charges that are dealt with by London are quite apart from 92. I mean the head office in Christchurch ?—Yes; a portion of Mr. Wilson's salary was debited against the working railways, I think, up to the time the arbitration proceedings commenced, and then his salary was charged against arbitration expenses. 93. And a proportion of all the other expenses in the Christchurch head office would be debited against the working expenses ?—Mr. Scott's was always apart from the working railways. None of his salary was charged against the working railways, but part of the other salaries of the clerical staff were charged against working railways. 94. Mr. Button.] Mr. Blow, you asked witness whether certain of the company's own material had not been charged as freight and regarded as receipts. (To witnes) : Was that their custom ?— Not the material; the freight on the material. 95. I presume you charged freight on your own material going up and credited it to receipts ? — Yes; that is so. Freight on the material coming up for construction-works was charged against construction, and credited to traffic receipts (construction material). 96. I see your point. You bring it out that it is special. 97. The Chairman.] You are in the service of the debenture-holders? —Yes, lam in the service of the Eeceiver for the debenture-holders now. 98. Were you formerly in the service of the company ?—For five years I was assistant accountant to the Midland Eailway Company. _ , 99. Did you come from England for the purpose ?—No, I received the appointment m Christchurch. 100. And you continued in the service ever since ?—Yes, until last March. 101. So you are pretty well au fait with the company's system of book-keeping ?—Yes ; I did the writing-up of the company's books. 102. In respect to the great difference in the profits for the ten months prior to the seizure of the line by the Government, as compared with the year preceding, you said that the difference was due to the postal rates being charged up, amounting to some £300, and some other heavy charges. Were these heavy charges an afterthought on the part of the company because the Government had taken possession: in other words, did not some of these charges that were made against the receipts of the company fairly belong to other previous years? If they were properly chargeable at all to the receipts account of the railway, were they not properly chargeable in previous years - and had been held back without having been charged?—So far as I understand your question, all the charges that would have been made on the 30th June, 1895—that is, for the completion of twelve months' traffic—would have been made in order. There would be nothing out of order in bringing amounts to charge, such as postal charges. 103 Then, why is there such an enormous difference of rather more than halt the receipts of that year from'the previous year?— That is mainly due, as Mr. Blow has reminded me, to the stoppage of construction-works. While the construction-works were going on at Jackson's section there was considerable haulage of contractors' materials, and that haulage was debited against construction, and credited to traffic receipts. From the 30th June, 1894, the construction-works had practically stopped, and there was very little revenue from that source. I might explain one of my answers to Mr. Blow in reference to the Blackball royalties. I think on the 30th June, 1894, we did include the Blackball royalties in the working railways revenue. The land is closely connected with the line, and we could not decide at the time whether it should go to the land department or to working railways ; it was included in the revenue account, which was signed by the Auditor. The Head Office in London subsequently advised us to credit the Blackball coal royalties to the the Blackball Coal Company belong to the Midland Eailway Company ?—The Midland Eailway Company selected the block on which the mine is, and the Blackball Mine is leased by the Midland Eailway Company to the Blackball Coal Company. 105 It is, in a manner, a subsidiary company to the company ?—lt has no connection with the Midland' Company, so far as I know. The Midland Eailway Company leased the land to the Blackball Coal Company. The latter pay the Midland Eailway Company a certain amount for it as dead-rent every year, and also a royalty of 6d. per ton on the output. 106 Mr Button.] What did the dead-rental and the royalties amount to ? How much each respectively ?—The dead-rent amounts to £160 per annum. The royalties vary. I may say that for the twelve months ending the 31st December, 1895, the royalties amounted to £847. But the dead-rent merges into the royalties so soon as the royalties exceed the dead-rent. So you may take the royalty figure as the proceeds. 107. When the royalties equal the dead-rent, then the dead-rent ceases I —Yes. This concluded the evidence on the part of the petitioners. Mr Blow, addressing the Committee, said : Mr. Chapman began by referring to the formation of the company and, from parliamentary papers which he produced, he sought to show that the Government took a very keen interest in this matter. Ido not know that the Government took any very special interest in it; but, I think the correspondence shows particularly that the Govern-

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ment were anxious to avoid any improper delay m effecting the assignment of the contract to the company. I may say that the original contract was signed in New Zealand on the 17th January, 1885. Delegates" on behalf of the persons with whom it was entered into proceeded to England immediately ; they received letters of introduction from the Government to the Agent-General, and both the letters of introduction to Mr. Alan Scott and Mr. C. Y. Fell are dated prior to the 17th January, 1885, so that immediately on the contract being signed they might take the first steamer to England, which they did. As a matter of fact the steamer sailed the day after the contract was signed, and considerable expedition had to be used in the head office for the original documents to be put in their hands by the time of the sailing of the steamer. That was on the 17th January, 1885. The assignment was not entered into until the 30th April, 1886, and I submit that the object of those letters and telegrams to which Mr. Chapman has drawn attention was to see that no further delay took place in this matter, as a delay of fifteen months had taken place already, and the keen interest of the Government was in looking after its own interest in seeing that no further delay took place. In support of this view I shall refer to some further correspondence in a minute. In one of the letters to which Mr. Chapman referred —namely, the Agent-General's letter of the 21st April, 1886, printed in D.-2b., of 1886, in which he recites his negotiations with the new company, he states : "As to the assignment, I required the company to covenant that they would execute a new contract direct with the Government." That was on the 21st April, 1886, and the new contract ought to have been entered into forthwith. That new contract was not entered into until the 3rd of August, 1888, a delay of two years and four months. And the delay was so great, and so much attention was directed to it, that the Government sent some further telegrams, which Mr. Chapman will probably contend showed their keen interest in the matter. This is a telegram sent by the Premier to the Agent-General on the 24th July, 1888, No. 9, of D.-2a of 1889 : — J Wellington, 24th July, 1888. Government absolutely declines permit running till agreement made, but willing make agreement immediately. Question as much one of public safety as pecuniary. Clause as last amended practically same Salt's letter 15th April, 1886 Parliament irritated at delay, and Government has had to promise withdraw contract unless signed soon. The-Agent-General, London. ' H. A. Atkinson. The delay had extended over so long a period, and the proposals and counter-proposals put forward by the company seemed so unending, that the Government felt compelled to intimate to the company that unless they signed the contract at once they would withdraw it altogether. Mr. Chapman also contended that it was contemplated all along that debentures would have to be issued. This was certainly the case, and the issue of debentures is expressly provided for in the East and West Coast Railway Act of 1884. There is a special part of the Act in reference to borrowing powers. Section 9"says the company may borrow money on debentures. Section 10 makes provision for appointing agents for raising a loan. Section 11 is in these words "No claim of any debenture-holder, or of any creditor of the company, shall attach to or be paid out of the public revenues of New Zealand or by the Government thereof." Section 12 deals with the form of debentures, and contains these words, " The provisions of the last preceding section shall be stated on the face of each debenture and coupon respectively issued under this Act." This Act of Parlia-ment,-therefore, not only provided that no debenture should become a charge on the colony, but went'further and, as a precautionary measure, expressly declared that this provision should be stated on the face of every debenture and coupon. Mr. Chapman contended that the omission of the declaration of non-liability on the part of the colony really amounted to a tacit admission of liability. This seems to me to be rather strained reasoning. The company is undoubtedly responsible for the omission ; and although the debenture-holders may have good ground of complaint against the company for not having printed this express declaration on the face, of the debentures and coupons, they can have no claim against the colony. Mr. Chapman admitted that the directors, in their share prospectus, took rather a sanguine view of matters ; and, also, that the debenture prospectus was, in some respects, a little highly coloured; and, in particular, that the statement in reference to the value of timber on the land was rather weak. I think I might safely go a good deal beyond this, and characterize both documents as being decidedly misleading. The share prospectus, however, is not in question just now. The prospectus we have to deal with is the debenture prospectus. I have not an original copy to refer to, but I have some notes that I took from it. The first paragraph to which I draw attention is that 'in which the company states that, under its contract, the Government have subsidised the company by a free grant of upwards of two million acres of land ; the land not to be taken in alternate blocks, as is so often the case, but may be selected by the company at their option within a very large area of the Middle Island, specially reserved by the Government for that purpose. Mr. Chapman has admitted that the expression "free grant" was a stronger one than should have been used. Of course, it is quite well known that there was no free grant. The grant was subject to conditions, and not an acre of land could be obtained by the company until the provisions of the contract were complied with. Further on, in same paragraph, these words occur : " The Government have guaranteed that, should these lands not bring in £1,250,000 to the company, additional lands shall be granted to bring up the selling-value to that figure. That statement contained a half-truth which, without a fuller explanation, is a little calculated to mislead. Attached to the contract there is a map, referred to as " the B 1 map." This map shows the whole area that was reserved from sale on the contract being entered into. It is the area marked blue on the copy which I produce. When the Act was going through, it was stated by certain members of the House, who knew the country, that a great part of this area was valueless ; and, to guard against an immense tract of country being given to the company for next to no consideration, the House enacted that no land should be given to them valued at a less rate than 10s. per acre; so that the valuation agreed upon by Mr. McKerrow, on behalf of the Government, and Mr. Alan Scott, on behalf of the company, which appears %

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as a schedule on the map, shows no land at a less value than 10s. per acre. The company foresaw that if they completed their line they would have to ask for so much land as would drive them into this comparatively valueless area before they would get the full amount of the grant, and then they asked to have a clause put in providing that if the area granted to them, valued, at 10s. per acre, did not realise £1,250,000, further land should he granted. This was done, with this very important proviso—namely, that under no circumstances should they go outside that blue area. So that, if the company was driven into this comparatively valueless land to select the total of its land-grant, the only remedy it had was to get more comparatively valueless land. The blue area contains nearly 6,000,000 acres. Out of that the Government had the right to take 750,000 acres for mining purposes, leaving an area of over 5,000,000 acres. Clause 15 of the contract contains these words : " The company shall not be entitled to make a selection or receive a grant of any land outside the authorised area on any account or claim under these presents, or any Act relating thereto." So that, as I have already said, if they had completed their line they would certainly have been driven into this comparatively valueless land to complete their selections, and if the land, when sold, had not realised the full amount of £1,250,000, they merely had the right to get some more of this comparatively valueless land. [Contract put in, D.-2, of 1889.] The next statement in the prospectus to which I wish to draw attention is contained in this clause : " From the valuations made in the colony it is anticipated that the land, when the whole line is made, will realise at least £2,500,000. All increase in value arising from any source belongs to the company, without in any way reducing the above guarantee." In reference to this I contend that, although the land adjacent to the line would doubtless be enhanced in value by the construction of the railway, still the great bulk of this land was miles and miles away from the railway, and would never be enhanced in value at all. It is absurd to contend that any of the land separated from the railway by impassable mountain ranges could in any way be enhanced in value by the construction of the company's railway. And yet the company practically told the probable investors that the whole of the land would be doubled in value. . Land which was to be debited to them at £1,250,000 was to realise £2,500,000. Practically, therefore, investors were led to suppose that every acre of land would be doubled in value. The next statement to which I draw attention is as follows: " Mr. Thomas Pavitt, of Christchurch, timber-valuer, estimates that the timber alone on 91,000 acres of land in the vicinity of the line now to be built (out of a large acreage under timber included in the company's option) is worth £635,000, apart from the value of the land when cleared " ; and this figure is solemnly put down at the end of the prospectus as being the largest item of the four items on which the debentures are specifically secured. I cannot make any stronger comment on that statement than Mr. Chapman made yesterday, when he said that the timber had so far realised nothing. The next statement to which I wish to allude is this : " The line to Beef ton passes through the best coal and gold districts of the colony, where, during the last few years, much land has been taken up for farming and mining, and the population is rapidly increasing." That statement contains another half-truth, which was decidedly calculated to mislead. No doubt, the Brunner mine is a mine from which a very large amount of coal has been taken; but not one ounce of coal taken from the Brunner mine passes over the company's railway ; it is already served by the Government railway. There is a mine on the company's railway —the Blackball Mme —which is being developed, but the output from that mine is not very extensive ; and I wish also to mention that that mine is situated only eight miles up the company's railway. The company's railway to Eeefton is forty miles long, so that they only get haulage of coal for a distance of eight miles out of that forty, and then have to hand it to the Government to be carried on when it reaches Brunnerton. So that the rate charged on that coal has to be exceedingly moderate, inasmuch as it has to pay two rates, one to the Government and one to the company. They also go on to state that " the demand for land (which is under the contract withheld from sale by the Government) is far in excess of what the company is now able to supply." That prospectus is dated the 12th April, 1889, and up to that date the company had not selected one single acre of land on the West Coast. The company has all through selected practically the whole of its land in Canterbury. Although the land on the West Coast Was to be largely enhanced in value by the construction of the railway, they have not practically shown their faith in this doctrine, as they have almost altogether abstained from selecting land on the West Coast. When that prospectus was issued, and they told investors that there was a greater demand for land on the West Coast than they could supply, they had not at that date selected an acre of land in that locality. They also refer to the increase of population. They say that the population is rapidly increasing. I have extracts from the censuses of 1886, 1891, and 1896. That of 1886 would be the latest available to the company at the time they compiled their prospectus. Comparing 1886 with 1891, it shows an increase of not quite twelve hundred people in the four counties of Buller, Inangahua, Grey, and Westland, on the West Coast: total, 17,485 in 1886, and 18,668 in 1891. There was a larger increase in the boroughs. In the latter there was during the same period an increase of three thousand people. The boroughs are Westport, Greymouth, Hokitika, Kumara, and Eoss : total, 9,812 in 1886, and 12,816 in 1891. But in 1896 in both cases there was a decline; the total in the counties in 1896 being 18,402 and in the boroughs 11,090, a gross decline of about two thousand. [Copy of census papers put in. See Exhibit B.] At the time the prospectus was prepared there might or might not have been an increase of population, but certainly there was no increase of population to go into ecstacies about, or to pointedly direct public attention to. The next paragraph to which I wish to draw attention, and one apparently to which the company appears to attach great weight—because I find it printed in very large type, much larger than the rest of the prospectus —is in these words : " The gross receipts of the Greymouth Government line, of which this line is a direct extension, were £3,602 per mile for the financial year ending the 31st March, 1888 ; and when the accounts for the year ending the 31st March, 1889, are published, it is believed this figure will be maintained. It is estimated that an annual gross receipt of only

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£1,100 per mile on the Beefton Section would pay 8 per cent, on the capital required for this work." The company took their figures, as regards the gross receipts of the Greymouth line for 1888, from the annual report on working railways of 1888. The quotation is correct. The GreymouthBrunner Railway did earn £3,602 per mile; but the Greymouth-Brunner Eailway is extraordinarily situated, and no other railway of the whole Government system in any way approaches it as regards earnings. The average earnings of the whole Government railways for that year were £570 per mile, as against £3,600 for this particular railway. The company say that their line is a direct extension of the Brunner line, and so it is. But, as I have already pointed out, the Government line carries the whole of the traffic from the Brunner Mines, and the company's line would not carry any of it. So that the company had nothing on their line that would lead them to suppose that their receipts would exceed the average receipts of the Government railways ; and the results have shown that they have fallen far below the average. The gross receipts per mile of the Governments railways for 1887-88 were as follows : Brunner, £3,602 ; Westport, £956 ; Wellington, £801; Napier, £674 ; Kawakawa, £627 ; Hurunui-Bluff, £585; Auckland, £456; Nelson, £397 ; Wanganui, £371; Picton, £326 ; Whangarei, £307 : the average for all sections being £570. For comparison's sake, I have also prepared a statement showing the Government receipts for 1895-96, and have added at the foot the Midland Eailway receipts. For that year the line was in our hands. As the Midland Eailway did not come into our hands until the 25th May, the accountant has given me a statement from the 27th May, 1895, to the 23rd May, 1896. Before going any further, I may say that the company was fortunate in choosing the particular year that it took, for I know of no other year, either before or since, during which the Brunner line has earned so much per mile. The receipts per mile for 1895-96 were as follows: Greymouth-Brunner, £2,865; Westport, £1,046; Wellington, £931; Napier-Taranaki, £625 ; Hurunui-Bluff, £589; Whangarei, £461; Auckland, £435 ; Nelson, £400 ; Hokitika, £356; Kaihu, £338 ; Picton, £313; Kawakawa, £311; the average being £592, and that of the Midland Eailway for as nearly as possible the same period £221, or considerably the lowest on the list. [Certified statement, Exhibit F, and tables put in ; also Eailways Statement for current year, showing all the Government railway figures.] The company not only drew attention to the fact that their line was a direct extension of the Government line, and by inference led investors to believe that something like the same rate of receipts would prevail, but went on in these words : "It is estimated that an annual gross receipt of only £1,100 per mile on the Eeefton Section would pay 8 per cent, on the capital required for this work." The receipts of the Eeefton Section have turned out to be £221 per mile. They put the clause in such words as to lead to the inference that they expected a much larger return than that, but that they wished to be very moderate in their estimate. They say it is estimated that an annual receipt of only £1,100 would produce so much. The prospectus concluded with a paragraph stating that a draft of the trust deed securing the debentures, and a copy of the contract between the Government of New Zealand on behalf of Her Majesty the Queen and the company can be seen at the offices of the company. Any prudent investor, therefore, would have gone to the office of the company to inspect the trust deed and the contract, both which documents plainly set forth that they are entered into under the provisions of the Eailways Construction and Land Act of 1881, which Act reveals the power of seizure on the part of the Governor. In both the trust deed and the contract the Eailways Construction and Land Act of 1881 is referred to as " the principal Act." As regards these misstatements in the debenture prospectus, of course no one contends that the debenture-holders are responsible for them. But neither is the colony. Mr. Chapman suggested that the Agent-General perused this prospectus and approved it. I submit that there is no evidence of anything of the kind. Mr. Chapman referred to Mr. Salt's evidence; but Mr. Salt did not profess to be at all sure of what he was talking about. Mr. Salt did not give positive evidence on the subject at all. He merely said that he " believed so," and his answer to Question 579 (Midland Eailway Arbitration Proceed-ings—D.-4, 1896, page 178), shows that his memory is not to be trusted, because he says there that the Agent-General withdrew at the instance of the Government, whereas the Agent-General's own sense of propriety dictated his withdrawal, as I will show directly. I have referred to the misleading character of this prospectus; and I may safely ask the Committee to judge whether it is at all likely that a statesman of the well-known ability and standing of Sir Francis Dillon Bell would for one moment think of putting his name to any such document, or in any way approving it. In saying this, of course I do not mean to infer that the directors did not at the time believe every word in their statement to be true. The directors themselves had next to no acquaintance with New Zealand. They were acting no doubt on information supplied to them by their servants, and they may have believed honestly that every word stated in that prospectus was true. If so, they were very badly and very improperly advised. But, in any case, the onus of making these misstatements, or in any way approving of them, does not rest on the colony. Mr. Chapman has suggested that, as I have already mentioned, the Agent-General perused this prospectus. The prospectus bore date the 12th April, 1889, and the correspondence in reference to the acceptance of the trusteeship by the Agent-General —printed in D.-2c of 1889—shows that the telegram from the Government authorising him to accept the office of trustee, only left the colony on that very day. Clearly, therefore, at the time that prospectus went to the printers, Sir Francis Dillon Bell had not agreed to act as a trustee, and hence the non-inclusion of his name. We have no occasion to search further as to the reason why the Agent-General's name is not there as a trustee. He had not received authority to act at the time that prospectus was determined upon. As a consequence, therefore, of course, no one was deceived by any reference, either official or otherwise, as to the connection of the Agent-General with the matter. Mr. Chapman further contended that it was only reasonable to suppose that the Agent-General would have perused the prospectus, because he must, of course, have noted and approved the trust deed and the draft of the debenture, inasmuch as he was to be one of the

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trustees. The reason given for supposing Sir Francis Dillon Bell approved this prospectus was that he was to be a trustee, and, of course, as trustee he must have seen the trust deed and the draft of the debenture, and, of course, all the proceedings would have been submitted to him in due course. But lamin a position to show that he had not seen the trust deed at the time, and he writes a letter to, the Government saying it was particularly strange that he could not be shown the trust deed, as at this time it was supposed to be before the general public. Further, he had no idea of the shape the trust deed was to take; and directly he saw it he withdrew from being a trustee. The last letter in print, which Mr. Chapman read yesterday, was written from Paris on the 17th May, 1889 (D.-2c). Another letter from the same place, dated the 30th May, 1889, was addressed to the Hon. the Minister for Public Works, Wellington, and ran thus: — Sib,— With further reference to the instructions contained in your telegram of the 15th instant, I beg leave to state that, on applying to the Midland Railway Company for a copy of the proposed trust deed, they replied (copy of letter enclosed) that the draft is not yet settled, but that a copy would be sent to me as soon as that is done. It is singular that the draft should be still unsettled, seeing that in the prospectus for their recent issue of £745,000 it was stated that a draft of the trust deed could be seen at their offices. I enclose a report of the company's meeting on the 24th instant. I have, &0., F. D. Bell. The following is the enclosure : — The New Zealand Midland Eailway Company (Limited), Dear Sib,— 79, Graceohurch Street, 28th May, 1889. I am in receipt of your letter of the 27th instant with reference to the trust deed of the 5-per-cent. first-mort-gage debentures of this company, and 1 beg to inform you that, as soon as I am in possession of a proof of the document, I will forward it for the perusal of the Agent-General. Yours, &c, Waiter Kennaway, Esq., iENEAS R. McDonell, Secretary. Secretary, Agent-General's Department. Another letter sent to the Minister for Public Works, dated London, 27th June, 1889, was as follows: — Sib — Since writing to you on the 30th ultimo, I have again made application to the Midland Railway Company for a draf.t of the trust deed they propose to be executed by the trustees for their debenture-holders ; but their secretary informs me that it is still before counsel. Under these circumstances, it seems to me that there is much inconvenience attending the appointment of any trustees at all, and, unless the draft is soon settled in a form that is approved by Messrs. Mackrell, I think it will be better for my name to be withdrawn. I have, &c, F. D. Bell. This was followed by a letter from the Agent-General to the Minister for Public Works, from 7, Westminster Chambers, London, dated 12th July, 1889, which ran : — Sir,— I have received to-day from the solicitor of the Midland Railway Company the draft of the trust deed, and also of the debenture they propose to issue. I enclose copies of these drafts, which I at once sent on to Messrs. Mackrell for examination. . . .' . [Remainder of letter on a totally different subject.] I have, &c, F. D. Bell. The next letter is from the Agent-General to the Minister for Public Works, dated London, 26th July, 1889, and worded thus :— Sir, — [First part of letter on different subject.] The draft trust deed, of which I sent you a copy by last mail, having now been carefully considered in conference between Messrs. Mackrell and myself, the result is that they cannot advise me to accept the trusteeship under the conditions there expressed ; in which view I quite concur. I enclose a copy of their letter to me, and I have accordingly requested them to inform the Company's solicitors that my name must be withdrawn as a trustee. I have, &c, F. D. Bell. The enclosure was addressed to the Agent-General, and dated 26th July, 1889, from 21, Cannon Street, London, E.G. It ran : — Deab Sir Francis, — New Zealand Midland Railway. —We have perused the draft of the proposed trust deed and form of debenture, and send herewith a copy of the letter dated the 22nd instant, which we received from Messrs. Paine, Son, and Pollock, and which we read to you at our last interview. It is not possible to foresee what questions may the Government and the company in the future ; and as the company propose to invest the trustees for the debenture-holders with rights, powers, and duties which, in the course of time, it may be necessary for the trustees in the interest of the debenture-holders to exercise and insist upon as against the company it may be (as has been the case under other contracts), that the trustees may be placed in a position in which their interests and duties may conflict with the powers and rights reserved to the Government under the contract with the company. In case it should become necessary for the Government to take any action in this country adverse to the company, or the interest of the debenture-holders, we presume that such action would be taken by the Agent-General; and in this view also, it seems to us, and we understood at our interview that you concurred in our opinion, inexpedient, to say the least, that the Agent-General should act as one of the trustees, unless indeed, after full consideration of the whole matter, the Government should desire that he should do so. You will, of course, not fail to remark that if the Agent-General accepted the office of trustee he would personally be bound to act to the best of his judgment, in concert with his colleagues, to protect the interest of the debenture-holders either as against the company (which the Government might wish to support) or against the Government if the company fell into difficulties, and the trustees were compelled to accept the responsibility of either carrying out the contract or making terms with the Government, which would secure as much as possible for the debenture-holders. Moreover, with an official representative as one of the trustees, the Government would be affected with notice of all that the trustees do or omit to do, and they might thereby, in time of difficulty, be far less free to act independently under the contract than if they had no voice even indirectly, in directing or assenting to the course of action or inaction adopted by the trustees. On these grounds, therefore, we would recommend that you authorise us to reply to Messrs. Paine, Son, and Pollock's letter in the terms of the draft letter which we send herewith for your approval, subject to such alterations as you may suggest. We have, &c, Mackbell, Maton, and Godlee. The enclosure referred to above is from Messrs. Paine and Co., of 14, St. Helen's Place, London, E.C., to Messrs. Mackrell, and is dated July 22nd, 1889. It runs: —

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Deab Sibs,— Midland Railway of New Zealand. —We are requested by Mr. Morgan and Sir Frederick Weld to summon a meeting of the trustees, to be held on Wednesday, at this office, at 3.30 o'clock. The object of the meeting is that Mr. Morgan and Sir Frederick Weld may settle with their colleagues the various details as to meetings of the trustees, certificate to be received from the company as to due payment of interest, &c, all being matters which are certainly well worth attention. We explained to Mr. Morgan that we thought it would be much better that he should summon the meeting, as we did not represent all parties concerned, but he replies that be would rather we took his instructions to do so; accordingly, we have written the foregoing. We hope that you will be able to attend, in order that the regulations that the trustees may wish to lay down may receive your consideration. Paine and Co. The draft letter which Messrs. Mackrell suggested should be sent as a reply to Messrs. Paine and Co.'s communication was as follows. It is dated 26th July, and reads:— Deab Sirs, — New Zealand Midland Railway. —We beg to acknowledge the receipt of your letter of the 22nd instant, upon which we have conferred with the Agent-General for New Zealand. After full consideration of the matter with us, the Agent-General instructs us to say that as at present advised, and in the absence of express instructions from his Government, he does not consider that he can properly and consistently with his position as the representative of the Government act as one of the trustees under the proposed deed. It will, we think, be evident to you, as it is to ourselves, that if the Agent-General were to act as a trustee, he might in certain events be placed in a position in which his duty as trustee and as Agent-General would conflict. Under these circumstances we shall not, of course, attend the proposed meeting ; but the fact of our not doing so must not be regarded as an approval by the Agent-General or ourselves of the draft trust deed or any of its provisions, upon which we should have had something to say if we had been instructed to deal with the draft on behalf of the Government or the Agent-General. The Agent-General desires us also to say that, even if he bad felt able to accept the duties of a trustee of the deed, he would not in his position have accepted any remuneration, as proposed in the draft. We have, &c. Continuing, Mr. Blow said: The Agent-General was not a trustee; he refused to agree to that trust deed the moment he saw it, and consequently there is no reason to suppose that he did anything under it. Instead of being reasonable to suppose that he perused and approved the debenture prospectus, I submit it is exceedingly unreasonable to think that he ever did any such thing. Mr. Chapman also suggested that' Sir F. A. Weld's name was put in the prospectus as a substitute for Sir F. D. Bell's. This could not have been so. The prospectus was published on the 12th April, 1889, and contained the name of Sir F. A. Weld, and I have already shown that it was' only oh that date that Sir F. D. Bell was authorised to act, so that clearly there was no substitution of Weld for Bell. I think I have succeeded in showing that the Agent-General did not approve of the trust deed, and that it is exceedingly unlikely that he approved of the prospectus. I want to go one step further. Even if it could be shown that the Agent-General did approve of the prospectus, if he had gone so far as to express his approval in writing, and the company had published his memorandum on the face of the prospectus, it still would constitute no ground for a claim against the colony unless it could be shown that his action was authorised, and there is no suggestion that it was. I would even go further still, and would say that if the omission on the face of the debentures of the statement of non-liability on the part of the colony had even been concurred in by the Ministry of the day in formal memorandum, it still would afford no ground of claim against the colony, because not even a Minister of the Crown can override the statute law. The Government is not responsible for any misrepresentations contained in the prospectus; and even supposing it could for a moment be shown that the Agent-General was privy to such misrepresentations, no responsibility could rest on the Government. The debenture prospectus, as I have already mentioned, concludes by stating that a copy of the contract and draft deed could be seen on application at the office of the company. I reiterate that any prudent investor should have seen it before investing; and if it was not on exhibition (as probably it was not), that alone should have been a ground for exercising caution. There are some words in the trust deed to which I wish to refer, and which I submit mean a good deal, but which, to a careless observer, might not seem to mean much. In reciting the provisions of the contract, which, by the way, are recited very fully, clause 43 is referred to in these words : " And also provisions for the working the said railway, and for the extension in certain events of the powers of purchase thereof reserved by the said Act." Now, the only event in connection with which an extension of the powers of purchase is given is the event of the seizure of the railway. Clause 43 of the contract (as far as it is necessary to quote it) is as follows : " The power of purchase conferred upon the Governor by the principal Act and the said Act may be exercised at any time after the expiration of ten years from the completion of the said railway. If under the provisions of the principal Act or the said Act, or under or by virtue of these presents, the Governor shall be entitled to take possession of the said railway or any part thereof, then, in lieu of taking such possession, he may, if he think fit, exercise the right to purchase the said railway, although the said period of ten years may not have expired, or the said railway may not have been wholly constructed," &c. We have here an express reference to the liability of the railway to forfeiture in the event of the terms of the contract not being properly observed. Not only is this stated in the trust deed, but it is also in the debenture itself; and if the investors were so careless of their own interests as not to peruse the trust deed, they certainly must have seen the form of debenture, and there is express reference in the form of debenture to the liability of the security to forfeiture, The form of debenture, in stating the conditions under which the money secured by the debentures should become immediately payable, recites the following : "Or if the company commit any breach of or incur any forfeiture or penalty under the contract of the 3rd August, 1888, or under the terms of the Acts of Parliament in the said indenture mentioned." I contend that there can be no reasonable doubt that the debenture-holders had notice of the liability of their security to seizure on behalf of the Crown. It is quite likely that these clauses are not drawn in such express terms as they might have been, but the Government is not responsible for that. Considerable ingenuity has been shown, I think, in drawing these clauses in such a way as not to attract too much attention to the liability to forfeiture, and yet to do it in such a way that they could afterwards show that attention had been drawn to it. B—l. 7.

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Mr. Chapman also suggested that the action of the Agent-General in this matter had an effect on investors in inducing them to put money into this concern. But, as I have shown, the AgentGeneral had no connection with it at all. He was not' authorised to act as a trustee up to the date this prospectus went to press, and his name does not appear on it, and I submit that the names of the directors were in themselves sufficient to warrant investment on the part of persons who invest on the strength of good names on a prospectus. Some of these names were amongst the first in the City; and as to the connection of the Agent-General with the matter, that was simply non-existent. The names of the directors are a sufficient reason for investors, who did not go into matters with great care themselves, in investing their money in this company. Mr. Button (to Mr. Chapman) : We want to know what you claim as the position of the company with regard to the railway now. Do you claim on behalf of the debenture-holders that you have a first charge over the railway legally? It is important we should know our position in this respect before we can arrive at any conclusion as to what you should be entitled to in an equitable settlement. Mr. Chapman : We are not putting our petition on the footing of a legal claim at all. It is because of possible, and, indeed, probable difficulties in our legal position that we are asking the committee to consider in what position we ought to be put. Mr. Button : I want to know what you claim with regard to it. Have you a legal claim, and intend to reserve that ? or are the debenture-holders taking the position that they have no legal claim against the Government ? Mr. Chapman: It is exceedingly doubtful; at any rate, their position is such that I cannot point to them a procedure under which they can assert that claim. Mr. Blow : I was going on to refer to what has been styled the profit of the Government on seizing the line. I produce a copy of a statement signed by the Governor on behalf of the Crown [see Exhibit G], and by the general manager of the railway on behalf of the company, and that statement, as well as giving particulars as to mileage of the sections, shows in two parallel columns the actual estimated cost of the work, and the reduced figure to bring that amount down to the amount named in the contract. The contract provided that the cost of this line should be taken to be £2,500,000, but, as a matter of fact, the estimated cost was in excess of that. We first have a column giving the actual estimated cost, and then we have a column bringing those figures down to the £2,500,000 limited by the contract. This statement, as I have already mentioned, is signed by the Governor and by the general manager of the company. A precisely identical statement in every way, except as regards signatures, is signed by Mr. C. Napier Bell, the original chief engineer of the company, and by Mr. W. N. Blair, the Assistant Engineer-in-chief of the colony. I wish the Committee to understand that the figures inserted in this statement were inserted by engineers of very high standing. Mr. Napier Bell is an engineer eminent in his profession, and as regards the late Mr. Blair's abilities and qualifications I need offer no remarks, as they are well known to members of the Committee. The estimate of actual cost was considered to be a liberal one, and, as regards the section between Springfield and Brunnerton, the amount limited in the contract was considered to be sufficient to construct that section of the railway ; and the two columns, " Estimated cost" and Proportionate cost," are therefore the same for that section. But as regards the section between Stillwater and Belgrove, the limit prescribed by the contract was considered insufficient, and larger figures therefore appear in the former column than in the latter, in the case of that section. The contract assumed the cost of the latter section of the line to be £1,000,000, whereas these engineers estimated that it would be £1,330,000. So that, as regards each subsection of that section of the line, the amount in the column headed " Proportionate cost," is reduced from the actual estimated cost so as to bring it down to the sum total of £1,000,000. The estimated cost of the section of the railway from Brunnerton to Jackson's was put down at £203,500, and similarly the estimate for the Stillwater-Reefton Section, which is as far as the line has gone in the other direction, was put down at £275,000. In addition to these two sections, the company was bound by the terms of its contract to start within a limited period a section of the line at Belgrove and a section of line at Springfield. Of these two sections the one at Belgrove has only been formed, no rails having been laid, and the one at Springfield has had the rails laid, but no trains ever run, except an occasional excursion train. These two sections were to cost £60,000 each. If you add £120,000 to the two figures I have just mentioned, you will have a gross total of £598,500. It is quite likely that the construction of the sections between Brunnerton and Jackson's, and between Stillwater and Reefton, actually cost more than the estimate. I have every reason to believe that they did; but I think I may safely say that it is in the highest degree probable that the Government could have constructed these two sections of the line for the amount of the estimate. At this stage the Committee adjourned.

Monday, 27th July, 1896. Mr. Labatt examined. 1. Mr. Blow.] You stated Mr. Wilson was remunerated partly by salary and partly by commission. You told us what the salary was ; I wish to ask the percentage Mr. Wilson received? —It was 10 per cent, on all payments to contractors, and 5 per cent., I think, on sundry charges of construction—sundry purchases of material. 2. That would be rails imported from England ; on that he would receive 5 per cent. ?—I cannot say that for certain without referring to the books. 3. Can you give the Committee any information as to what the items were on which he received 5 per cent.; or were they exceptional amounts altogether ?—The amounts I had to deal with were all small purchases in the colony.

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4. So we may take it that Mr. Wilson received 10 per cent, on practically all the payments — 10 per cent, on all the actual cost of construction ? —I cannot say definitely whether that is so ; but he received 10 per cent, on all payments to contractors. 5. The Chairman.] Did he receive anything for receipts ? —No ; nothing for receipts, so far as I know. 6. Mr. Blow.] Could you give us a return of the amount Mr. Wilson received ?—Mr. Wilson received 10 per cent, on certain sums, and out of that he had to pay the engineering salaries. 7. How much do they come to ?—I could not tell you that without making a return. 8. Perhaps you will kindly make a return showing the net amount Mr. Wilson received ? The Chairman : Yes, I think it very desirable. 9. Mr. Chapman.] Have you a record of what he had to pay out of it ? —I have a record of the difference. It is brought into the company's account. 10. When did this system begin ? —I understand it began when the contracts were let in the colony; that is, after Messrs. McKeone, Robinson, and D'Avigdor completed their contract. 11. Mr. Blow.] That contract was made in England?—So far as I know it was, but that was before I joined the company. 12. You say they were bought out, who bought them out ? —I cannot give you any information about that. I know it was decided to let the contracts in New Zealand, instead of letting them to Messrs. McKeone and Robinson. 13. They were actually let to Messrs. McKeone and Robinson ?—Yes, they were. 14. And some arrangement made by which they were bought out, but you cannot give any details to the Committee about that?—No, I cannot give you any details. 15. Two of these gentlemen came to the colony; did they not?— Yes; I understand they were in the colony. 16. The Chairman.] Pardon me :Do you say they were in the colony, or were they two gentlemen brought out in order to take up these contracts from England ? —I could not answer that question definitely. I saw the name of the firm in the books, and I know they started the earlier contracts for the company ; but their contract ceased before I joined the company, so that what I know about them is only from hearsay. 17. Mr. Blow.] Was Mr. D'Avigdor a director of the company? —Yes. 18. Mr. Chapman.] Do you know under what circumstances they were bought out ? —No; I have no definite information on that point. Mr. Blow, proceeding, said ; When the Committee adjourned on Friday I was dealing with what has been termed the profit made by the Government in making this seizure. Mr. Labatt gave evidence to the effect that the expenditure on the railway was £760,679, and I was endeavouring to show that that cost was excessive, and that the work ought not to have cost anything like that amount. I produce a statement (Exhibit G.), signed by the Governor as one party and the general manager of the company as the other, giving the estimated cost of the different sections of this line. The portions of the line between Springfield and Jackson's and between Reefton and Belgrove are not shown as divided into sections, but that portion between Jackson's and Brunnerton is divided into sections, and the cost accurately estimated ; and the portion between Stillwater and Reefton is divided into sections, and the cost accurately estimated. I stated that the cost of the railway was limited by the contract to £2,500,000, and it was known that the cost of the line would exceed tha.t sum. This statement has two money columns, in one of which £2,830,000 is given as the actual estimated cost; and in the other, headed " proportionate cost," we find the amounts of each section stated at such a sum as would bring the estimated cost down proportionately, so as to come within the £2,500,000. I have one word to say in qualification of that—viz., that the section of the line between Springfield and Brunnerton was capable of being accurately estimated, because careful surveys had been made of the whole of it, and it was known that that section of the line could be constructed for £1,500,000. Consequently, the column headed "proportionate cost," as regards this section, contains the same sums as the column headed " estimated cost." The section of the line between Stillwater and Belgrove is limited by the Act to cost £1,000,000. It was known that the section would cost more, and the actual cost was estimated at £1,330,000. So, as regards that section, reduced amounts appear in the column headed "proportionate cost." In addition to that statement, which I produced on Friday, I now produce another which shows precisely the same figures in the two columns. My only object in producing this statement is to show that it was certified as correct by Mr. C. Napier Bell, who at the time was chief engineer of the company, and by Mr. Blair, who was Assistant Engineer-in-Chief of the colony. I contend that engineers of such eminence as these might be safely trusted to estimate the cost of that line fairly accurately, at any rate as regards the portion between Springfield and Brunnerton, for which careful surveys were made—part of the survey being made by Mr. Napier Bell himself at the cost of the Government. Mr. Tanner: If this inquiry is to be at all prolonged, I would suggest that, as most of the members of the Committee were not members of the former Committee which investigated the subject, the department should get a large scale map which would show the contemplated line of railway and the portions actually laid down, so that all these points might be immediately referred to. Mr. Mackenzie : What has that to do with the rights of the debenture-holders ? The Chairman : I think this statement of Mr. Blow's is really hardly relevant to the claims of the debenture-holders. Mr. Chapman: I intended to point out that in a very brief reply. Mr. Blow : The point I was leading up to was this : The debenture-holders throw themselves on the mercy of the Committee, and they contend the Government has made a profit of £500,000 in taking the railway, and they ask you to give them some share of that profit. But I say the Government has not made that profit, and I am endeavouring to show it.

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The Chairman: In other words, the debenture-holders' petition is throwing themselves in an equitable sense on the consideration of this Committee. There is no doubt that your statements have been most valuable to the Committee, and will be, so far as the company's petition is concerned. Mr. Blow : Referring again to this statement signed by the Governor, and general manager of the company, I find from it that the estimated cost of the section of the line from Brunnerton to Jackson's was £203,500, and a similar estimate of the section between Stillwater and Reefton was £275,000. Then there were two smaller sections —one at Belgrove, and one at Springfield —not included in these amounts. As regards these, the company was bound by the terms of its contract to spend £60,000 on each ; and they spent that amount. Therefore, we have a total amount of £598,500 which the work executed by the company ought to have cost. Against that the company has received land grants, according to Mr. Labatt's figures, of £245,845, and has yet to receive twenty-one thousand and sixty-six pounds' worth of land. Then there is the cost to the colony of the recent arbitration proceedings. Put them down at, say, £12,000. Taking, for argument's sake, £598,500 on the one side, as what the works ought to have cost, and £278,911 on the other side as value of land granted, or to be be granted, and costs incurred, and there is a difference of £319,589. In addition to urging that the Committee ought to take the estimate of two eminent engineers like Messrs. Bell and Blair as to the cost of the line, I would further contend that the difference between what the line ought to have cost and what it actually did cost is sufficiently accounted for by the profusely liberal way in which the company went about the conduct of its business. It has already been stated in evidence that Mr. Wilson received a salary of £2,600 a year, besides commission. The commission was 10 per cent, on nearly all the items. Ten per cent, on the whole would amount to over £70,000, and it does not need any words of mine to demonstrate that that is an absurd amount to allow for the engineering of the line. In addition to that Mr. Wilson had £2,600 a year for, I think, about ten years, which is another £26,000, so that the amount that went into Mr. Wilson's pocket was probably nearly £100,000. The engineering on the Government works costs about 5 per cent, and I know of no reason why engineering should have cost the company any more. Then, in addition, it has been shown that the first contract was let to McKeone, Robinson, and D'Avigdor, in England, gentlemen who had not seen an inch of the ground, and Mr. D'Avigdor either was, or afterwards became, a director of the company. The company started by letting contracts at sums agreed upon privately in England. A good firm of contractors at Home would not take a contract like this at the other end of the earth without a considerable margin of profit, on account of their never having seen the country at all. Then at the end these gentlemen were bought out, on what terms we cannot ascertain, but doubtless on terms profitable to themselves. In addition to those contracts that were let in England, we have also had it in evidence that certain other contracts were let in New Zealand privately. In Mr. Labatt's words, certain contractors were found to have given great satisfaction with their work, and further work was given to them. Public tenders were not invited for this work, and consequently the cost would doubtless be considerably higher. There are other matters that are some of them within my own knowledge, and some known to members of the Committee, which indicate that the company was not as frugal in its expenditure as it might have been; consequently Ido not think the difference of £160,000 between my figures and those of the company is at all a matter of surprise, and I think the difference being no larger goes to show that the figures I adduce are fair and reasonable. Then, if the Committee decides to recommend the House to make any payment to the debenture-holders on account of this balance of £319,000, which the colony seems to be the gainer by in taking possession, the Committee will, of course, take into consideration the enormous loss incurred by the colony in having 5,000,000 acres of land locked up and entirely unavailable for settlement for a period of more than ten years. There is also another loss. The company contracted to give us a railway in return for certain concessions, which they have not done; and, if this case were before a Court of Law on a claim for breach of contract, doubtless very considerable damages could be recovered against the company for this default. The Chairman : I think that is all shown in the proceedings before the arbitrator. Mr. Blow : Further, if any payment is to be made to the company or to the debenture-holders at all, it should be borne in mind that we are losing money by this railway, on account of its small receipts, so that in this light there seems to be no ground whatever for making any further payment, either to the company or to the debenture-holders. The line is only earning about 10s. per cent, on what it is stated to have cost, and less than 1-J- per cent, on what the Government has already paid in respect of it —namely, land-grant and arbitration-expenses, so that we are losing money over it every day. Mr. Chapman : I do not propose to go at length into anything like an exhaustive answer to M r - Blow's observations. I shall point out that one or two portions of Mr. Blow's address are necessarily speculative, and he has not supported them by evidence. But that is a matter I shall come to presently. What I wish to draw the attention of the Committee to is the central fact with which I opened, and that is the substantial value of the assets, which is there in the shape of a railway. In that view Ido not consider it necessary to go into those questions which are railway questions between the company and the colony. I wish, however, at the outset, before discussing what Mr. Blow has put before the Committee, to refer to the subject with which I opened the AgentGeneral's supposed approval of the prospectus and trust deed. I was not aware of the existence of the correspondence which Mr. Blow has produced. I relied upon. Mr. Salt's statement that such was the case. Moreover, to show that that was not a mere reliance upon a passing piece of evidence, not very material to the issue then before the arbitrator, I wish to say this : That the receiver cabled to London to ascertain more definitely what supported that evidence, but only received a reply that the Agent-General did approve of the prospectus, carrying the matter no further than Mr. Salt's evidence. But in face of the correspondence produced by Mr. Blow, it would not be right

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on our part to attempt to sustain the contention that the Agent-General did approve of the prospectus, and I wish now entirely to withdraw that contention, pointing out, however, that it was not made hastily; that we thought we had reason for making it, and reason for supporting it. That portion of the case I admit must go. That, however, I put forward as leading up to the contention that the debenture-holders in subscribing their money relied on having the security of that railway-lino. Undoubtedly, they did rely on having the security of the railway-line already constructed, and to be constructed, out of their money ; and we contend that under all the circumstances ours is not a legal claim which we can enforce in the Courts of Law of the colony ; but, as a claim which Government and Parliament ought to consider a valid claim against the colony, we claim it ought to be allowed. That inasmuch as their money can be traced substantially in this asset which the colony now has, that circumstance ought to receive recognition. The Chairman : What about the prospectus ? I presume this is preliminary to your examining Mr. Blow ? Mr. Chapman: Ido not think I have anything to ask Mr. Blow. The Chairman: Are you replying now? Because members of the Committee may have to ask Mr. Blow several questions. [Mr. Chapman then sat down, and Mr. Blow was questioned by several of the members]. 19. Mr. Montgomery.] We have heard of the value of the asset of the Midland Railway. How much do you think it would fetch when put up to auction as a going concern, rolling-stock and everything else included ?—That would be ruled by the amount of receipts above working-expenses. That amount is about £4,000 a year at present. Persons who were willing to invest their money at 5 per cent., with a chance of having to pay considerable sums to cover depreciation and repairs by and by, might perhaps pay £100,000 for it. 20. And what would be the capitalised value for it ?—Less than £100,000, 21. And do you think they would be likely to rely on the future prospects of the railway ?— The future prospects of the section to Jackson's, unless completed, are nil. 21a. Supposing another company bought this railway. If they had the option of completing it on the same terms as the company had, would that option be of any value, do you think ? —I think not. 'As one company has failed, it would deter any other company from venturing probably. 22. If they had the option of completing the line over the Otira to Springfield, would the line from Jackson's to Springfield be of any value ?—lt would probably pay working-expenses, but not leave much margin for interest. 23. And you would not expect any capitalist to invest capital simply to earn workingexpenses?—Certainly not. 24. Then you estimate that if the railway were offered to capitalists, it would be under the value of £100,000 ?—Yes. 25. And your reasons are based on the earning-power of the property, depreciation, and the fact that the outlook in the future is not more hopeful than at present ?—3!es ; and they are also based on the assumption that the purchaser would be absolved from the terms of the Midland Railway contract. 26. Do you think you can find any purchaser to take up the bargain?—l am afraid not. 2.7. Do you think, on the contrary, if it was necessary for the Government to have it done, that they would not have to compensate any one who would take up that contract with a very heavy figure ?—They would have to offer concessions beyond what have been given. 28. Therefore, if the contract was offered as it stands at present no one would take it up ? —I do not think any one would take it up. 29. Mr. T. Mackenzie.] Regarding your estimate of Mr. Wilson's commission, do you not think that it is an absurd figure?—l do not think anything I said was absurd. 30. £70,000 ?—lt is on the basis of the company's accountant's evidence. 31. From your experience of railways, do you mean to say that a company composed of sane persons would pay £100,000 to an engineer for a work of that sort ?—That is a point upon which I cannot offer any opinion. It is a matter of evidence. We have it in evidence before the Committee that Mr. Wilson's commission was 10 per cent, on the bulk of the items, and also we have it that his salary was £2,600 a year. I think these facts are shown. 32. But you have arrived at the conclusion through an indefinite estimate? —I did my best to make the estimate definite. I asked Mr. Labatt definite questions, but could not get very complete replies, and I merely passed my remarks on the information before the Committee, and I could do no more. 33. I heard you say the contracts were let to the directors without competition privately?—l believe that to be the case, but I am not in a position to swear to it. 34. In effect you said that so badly was it managed that directors obtained contracts privately from themselves. Then, regarding the contractors never seeing the colony, they may not have seen the colony, but may they not have had ample information before them—surveys of the country and reports ?—They had exactly the same information before them as was before Mr. Bell and Mr. Blair when they made their estimate. 35. So that it was nothing unusual for them tendering without seeing the country ? —I think it is very unusual, indeed. 36. You consider if the line was completed to Springfield it would only pay working-expenses ? —I said it would leave a margin, but not sufficient, I think, to pay interest on the outlay. 37. What effect would the completion of the line to Springfield have upon the prosperity of the colony generally?—l do not think the effect would be very marked. It would, no doubt, stimulate tourist traffic, but I do not think it would cause a ton more coal to be produced on the West Coast than now. 38. But, as was stated in the reports of Mr. Blair and others, when the line was under way, would not the completion of that line mean an increased trade on the other lines of the colony ?—

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Only to a very limited extent. The railway freight on coal, which would be the principal item, would be so great, if carried over other lines very far, that it would not pay to carry it. 39. There would be an increase in the passenger traffic? —That would be very slight. 40. In commenting on the opinion expressed in the prospectus, you made it appear that they were not justified in saying that there was an increase of population on the West Coast, whereas your own figures showed that in the period 1886-91 the boroughs had increased by one-third, or 33 per cent. ?—I stated that there was an increase of population, but not sufficient to warrant drawing prominent attention to it, or going into ecstacies about it. 41. Did you not think it was weak to refer to years which were not covered by the prospectus? You went to 1891 and 1896, years far ahead of the period the company had to go by?—l wanted to bring the fullest possible information before the Committee so as to give them ample ground on which to judge, and therefore I thought it would be wisest to give the comparison over a longer period. 42. You have given us the hard-and-fast figures. You have not estimated the prospective benefit of the line to the whole colony, and you have not considered this important point: Do you not think that the honour of the colony is somewhat at stake in connection with seizing the security, and that at any rate the debenture-holders are justified in thinking they have a right to compensation ?—I do not think so. Our contract was with the company, not with the debentureholders. If the company liked to mortgage its undertaking we are not responsible to their mortgagees. 43. Yes ; but even by your own working-out you show there is about three hundred thousand pounds' worth of work in excess of what we have given value for. We are seizing that, and giving nothing for it. That money is the money of our kinsmen in Great Britain, and if it goes abroad there that this colony practises sharp tricks of that description, what would the influence of that be upon the people of Great Britain in their position towards us ?—These points are eminently points for the Committee to consider, but not points for me to deal with. 44. You consider your whole duty is to give the very worst view of the position, and not give consideration to any of these other factors ?—I think it is my business to meet Mr. Chapman's statements as far as possible. 45. And, on the assumption that Mr. Chapman gives it on the strongest point on his side, you give it in the very worst light from the colonial point of view ? —I do not think I have given it in the worst light. 46. Section 13 (I think it is section 13) of the East and West Coast (Middle Island) and Nelson Railway and Railways Construction Act of 1884 gives the debenture-holders reason, do you not think, to infer that they had some claim on the line ?—You mean the clause that states debentures are to be a first charge on the assets of the company. This Act was only a supplementary Act passed to give greater powers and concessions than had already been given in the Railways Construction and Land Act. It was not necessary to state over again what the Railways Construction and Land Act sets forth. That Act clearly gives the power to seize. 47. Should that clause not, in order to be complete, have specified more ?—I would submit that, practically, it is like advancing money on a leasehold. The owner reserves the right of re-entry. If anything happens to give him the right, he enters, but does not compensate the lessee's mortgagee. 48. There are conditions which he must observe even in the lessee's covenant. You stated that they had selected all the lands on the Canterbury side, avoiding the West Coast side?— Nearly all. 49. As a matter of fact, was not that prevented ? Have you got the map there showing the lands reserved for mining purposes ?—Yes; the maps are attached to Parliamentary Paper 1.-7 aof 1892. 50. What I want to make clear is that the Government, exercising the rights they had for the reservation of that 750,000 acres, reserved, as a matter of fact, nearly all the frontages to the railway. —Only on one side of the line, and only as regards the Reefton line. Not as regards the Christchurch line at all. 51. Did that not prevent their selecting large areas of land tbey would have selected on the West Coast had you not reserved these pieces ?—No doubt the exercise of their right by the Government prevented the exercise of any other right by the company; but as the Government had the right to this land I do not see where the injury to the company came in. 52. But you do not in your evidence point out that the right of selecting this land on the West Coast would be barred by these reservations?— There were areas available for selection on the West Coast quite apart from them. 53. Yes; but not so good? —As good and better. 54. Nearly all that land was reserved right along the main line, along the frontages, for several miles back ?—The bulk of what had not been already alienated has been reserved. 55. £100,000 is what you think is the total value of that line now, including rolling-stock and everything? —I gave that answer to a question put by Mr. Montgomery, and based it upon its earning-power. Of course, the cost has been shown to be largely in excess of that. 56. Another computation is that the work should have cost £598,500 ?—lt depends who makes the estimate. Some of our engineers make their estimates with too narrow a margin. Mr. Blair's estimates were generally full, and this estimate has been pronounced by several engineers to have been very full. . 57. Is it not a fact that some of your works have cost double your estimate, and more than double your estimate ?—I do not think I know of anything costing double the estimate. 58. Do you not know of any of your works that did?—l know of one work, the North Island Main Trunk Railway, which, when completed, will probably cost double the estimate. But the estimate was based on a hasty, flying-survey; there was no proper detailed survey. 59. Yes; but they might have managed that without going to double the amount?— That estimate was more of a guess than an estimate.

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60. Is this an estimate ? —This was a careful estimate, at least as regards the BrunnertonSpringfield section of the line. 61. Are you not aware, after you had carefully computed your values, that some of your works have cost double your estimate ?—I am not aware of that, but it may possibly be the case. 62. Take the line between Invercargill and Mataura; that line cost quite double, did it not?— I do not at the moment recollect what the estimate was ; but I know that the contract for that line was let privately to an English firm without competition. 63. That was not a reason for running into a higher cost. 64. Mr. Guinness.] I heard you say that in your opinion no financiers would take up a contract to build the line from Brunnerton to Springfield on the concessions offered at the present time ? —That is my opinion. 65. Will you tell the Committee what knowledge you have of the money-market with reference to railway construction ?—I do not claim to have any knowledge of it. 66. I see, you simply speak as one of the public ?—I am aware that a petition by the Midland Railway Company is before the House at the present time, asking for further concessions. This I take to be an evidence that the present concessions are not sufficient; and, as the persons who have floated and financed this company have a very large experience of the London money-market, I think we may go by their opinion. 67. Mr. Tanner.] With regard to the reservations on the West Coast, can you give us the date of the Proclamation when the 400,000 acres were reserved?— There were quite a number of Proclamations. I can give you the date of every one if you wish it. 68. Perhaps it would be an advantage if you could give us them all. First of all, have you any knowledge of a map known as Larnach's Map, dated 1877, showing 750,000 acres reserved?— I have. 69. Could you produce a copy of it before the Committee ?—Yes. 70. Can you tell me the date when the first reservation of about 400,000 acres of these lands marked in Larnach's Map of 1877 was first published?— The whole of the lands in that Proclamation were reserved at one time. - 71-. But that Proclamation was afterwards lifted, was it not ? —Yes, it was. 72. Then a later Proclamation was issued applying to 400,000 acres of practically the same land ? —Portions of the same land. 73. The date of that?— There were fifty-nine Proclamations altogether. The first was issued in August, 1891, and the last in February, 1895,1 think. 74. Now, was any portion of that land reserved by Proclamation at the time of about 1889 or 1890 when the Midland Railway Company made their selections on the eastern side of the ranges ? —None of it. 75. Do you mean to say that the whole of the land which has been referred to in your conversation with Mr. Mackenzie was there for the Company to make selections from at the time they made selections in the Amuri country ?—lt was all there for them to make selections from ; but as of course a large part of the West Coast was known to be auriferous, and a great deal of it was being worked, it is quite likely that selections there in certain localities would have been objected to. 76. Yes, lam not disputing that. Was it competent for the Midland Railway Company to have taken up that land reserved by Proclamation in August, 1891, at the time they made large selections in North Canterbury and the Province of Nelson?—l have no doubt some of it could have been taken up by the company. 77. Did they express any desire to take up that land previous to the Proclamation ? —None whatever. 78. Was it known that the whole of it was auriferous, and a great deal outside the limits mentioned in the Proclamation?— Yes. 79. With regard to the surveys, you tell us that a careful and accurate estimate had been made of portions of the line previous to the signing of the contract. Does that apply to the whole of the line ?—No; it only applies to the piece between Springfield and Brunnerton. 80. Is it within your knowledge that nine careful surveys were made of the section between Springfield and Brunnerton ?—Several surveys have undoubtedly been made. 81. Made with great care and cost? —That is so. 82. What kind of a survey was made of the country between Reefton and Nelson?— Only a trial survey. 83. Which occupied how long?—I could not say, but it was made by the same engineer who made a trial survey for the North Island Main Trunk Line, and whose estimate has turned out unreliable. 84. Was it not termed in 1892 a flying-survey, occupying three days?—lf so, that was not right. It certainly took much longer than that. 85. Did the company go into the contract with the full knowledge that all the information they had with regard to the country between Reefton and Nelson was based on that single flyingsurvey ? —Certainly. 86. They knew exactly that it had been made hurriedly in a short time, and at that time no such accurate estimate had been made as existed for other portions of the line ? —Certainly. 87. Mr. Montgomery.] Supposing you take the view of what the colony lost through the Midland Railway, through not having a railway to open up the whole of the West Coast, you have not estimated anything for that large loss ? —Nothing at all. 88. If you were to consider what the colony would have to give now to get somebody to make that railway under a new contract, have you any idea what the colony would have to give in concessions over and above what were given before ?—I could not say what they would have to give, but I am convinced the concessions would have to be substantial.

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89. It would have to be over £100,000 ? —Largely, I should think. 90. Explain to the Committee what you think has been the profit or loss on the part of the colony through the company's not carrying out the contract. Are we better off now in having a portion of the railway, or would it be better to have the whole of the railway made at the company's expense ?—Of course, it goes without saying that it would be better for the colony if the contract as a whole had been carried out. 91. My question is this : Would the colony be in a better position if the whole of the railway had been made according to the original contract than they are now when only one-fifth of the railway has been made, and they have an asset suggested by you to be worth £100,000? —The preferable position certainly would be to have the whole contract carried out. 92. With regard to the lands selected, this yellow [pointing to the map] represents the exact lands that have been reserved ? —That map shows what was reserved up to 1892. Other reserves were made after that. 93. As a matter of fact the colony has not reserved the frontage of the line ? —Not the actual frontage, that had been alienated years before. 94. Exactly ; and when it was suggested that the colony had reserved the frontage of the line all along, it appears that, except in the Valley of the Buller at only one point up to 1892 had that been reserved ?—The company admit that these reserves in the Valley of the Buller were properly reserved. They do not question that, and what is stated as regards the remainder is correct. Only in that place [pointing to the map], a portion of Block LIIL, did the area come right up to the railway. 95. Do you think it would be more profitable to select the land on the Canterbury side or the West Coast ? —Undoubtedly the Canterbury, as they have selected. 96. Do you know whether they sold that land at an increased value ?—I think I stated they made a profit of about 40 per cent. 97. About tourists : Do you think the effect of putting the line through the Otira Gorge, for it is nearly all tunnels, would be to induce tourists to go by that rather than by coach ?—I think if the line were through that the coach would not run, so it would be a case of going by train or not at all. I think a great many people would go. 98. Do you think it would improve the scenery to put the line through ?—I do not think it would improve the scenery. 99. Has the railway through the Manawatu Gorge improved the scenery ?—No; it has very largely spoilt the scenery. 100. You are not a lawyer, Mr. Blow, and any opinion you may give is like the opinion of anybody else, I presume. You do not pretend to be an expert on legal documents ?—I have an experience of the working of these Acts, perhaps more than any other officer in the Government service, but I do not pretend to give a legal opinion. 101. And it has been suggested to you that you know nothing about what financiers would do in England. Would you not probably have heard if any financiers would be likely to take up a matter of this sort ?—At any rate no financier has offered to take it up. 102. You have heard the debenture-holders do not propose to take it up? —I have heard that. 103. You have heard that the Midland Railway Company cannot raise the money for it ?— Yes ; that has been given in evidence. 104. And therefore you are competent to express an opinion as well as other people ?—As well as any other person who was not personally conversant with the conditions of the money-market. 105. And in the evidence you have given, have you given the exact facts before us, or have you endeavoured to conceal or misrepresent facts ?—That question hardly needs an answer. I have certainly endeavoured to put the facts before the Committee as accurately as possible, so that they could judge. 106. Mr. T. Mackenzie.] Would the company as well as the colony have been better off if they had completed the railway ? —That is not for me to consider. The company entered into a definite contract to do it, and it was the business of the colony to hold them to their bargain as closely as they could. 107. So that the colony would be better off by its construction and the company poorer?— Yes. 108. Would the Canterbury land have been better in the interest of the company than these reserve blocks on the West Coast if the company had had the right to take them ?—lf the company had had the right of taking that reserved area, a very large part of which contained actual goldworkings, of course it would have been better for the company; but that would have been contrary to the provisions of the contract. lam not a lawyer, however, and do not pretend to give the legal position. 109. And even pieces where gold was not known to exist would have been better than Canterbury land?— Certainly not; as mere land it was almost valueless. 110. Not the timber country ?—I should have thought so. Much of the land is high, broken, and not easily accessible. Mr. Guinness : There are fifteen sawmills working there now. 111. Mr. Mackenzie.] And you do not profess to give the legal position, but you have given the legal ? —I have stated sundry hypotheses and, of course, if the Committee is not satisfied, they will obtain legal opinion. 112. But you do not think it necessary to come before the Committee with the assistance of counsel ? —No. 113. Mr. Chapman.] I should like to ask Mr. Blow one question. Is that test which Mr. Montgomery put to you, of whether the line could be auctioned at a given figure, or, without saying auctioned, sold at a given figure —is that a test that could be applied to colonial lines in a new

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country with a view to discovering their value to Government ?—I think so, on the principle of an article being worth what it will fetch. It is not an unfair test. 114. I am not asking anything on general principles, but on principles applicable to colonial lines in new districts. Can you point me to any railway in New Zealand which, shortly after its construction, could have been sold for the cost of constructing it ?—Certainly I could. The Brunner line. 115. Could it have been sold at its cost of construction ? —I take it that a line like the Brunner line could have been sold at its cost of construction, and with a percentage added. 116. It is how many miles long ? —Eight miles. , 117. Now, will you tell me another?—l think the whole of the line between Dunedin and Christchurch. 118. The whole of the line, and within a year after it was opened?— Yes, I think so. 119. Now, branch-lines. Can you point out any that could have been sold?— Branch-lines in New Zealand are a drawback. It is the branch-lines of the Hurunui-Bluff section that bring down the earnings. 120. The Provincial Government was unable to grapple with the Dunedin-Clutha line, which is a very good line now ?—Yes; but there was a very considerable amount of settlement along that line when it was opened for traffic. 121. Very considerable, but not so much as now. It is not a test that you can apply. Take, for instance, the existing West Coast lines centring at Hokitika, would that sell at cost of construction? —I should think it is probable, because that would include the Brunner line, which is the most profitable line in New Zealand. 122. Because it would include the Brunner line, which, under very peculiar conditions, is enormously profitable, tending to heighten the value of a large amount of unprofitable railway. 123. Mr. Montgomery.] You base your opinion on the assumption that 5 per cent, would be satisfactory to the purchaser? —Yes, or a little less; 4 per cent., I take it at. 124. Now, in connection with the subject of cost of construction, you have given the cost as estimated. Would you not prefer the actual cost, provided you were assured that the money was properly ■ spent ?—Yes ; but that is an assurance that has not been given, and the evidence so far adduced seems to negative that. 125. Supposing that assurance is given by intelligible evidence, would you not prefer the actual cost ?—I should wish to be allowed to analyse the cost and see that the items were not unfairly charged. 126. Subject to that you would prefer actual returns to estimate ? —Yes. Mr. Chapman, proceeding: I shall be very brief. As I have already pointed out, most of what Mr. Blow referred to in his address was in the view which I have endeavoured to present to the Committee —matter between the company and the Government. The company, I understand, has a petition pending here which has to be heard by this same Committee, and the company will produce evidence in support of its own case. I would point out here that it would probably be convenient to the Committee, and advantageous in every way, that the company should be heard on that petition before this Committee reports on this one, because there are many matters in Mr. Blow's statement which are new to the Receiver and his advisers with which the company are cognisant, and with which we are not cognisant. You will bear in mind this : That I pointed out at the outset that, after the floating of the debentures in 1889, there is a long blank up to the date when the troubles of the company became acute, as to which we really know nothing except for imperfect information we have gathered recently. Nearly all the subjects of examination on which Mr. Blow has been examined by members of the Committee, and a very great deal of the subject of his address to the Committee, are matters beyond the cognisance of the debenture-holders, and more properly to be dealt with by the company and its advisers. Such, for instance, are all those questions respecting contractors, history of the firm of which Mr. D'Avigdor was a member and its relations with the company, whether Mr. D'Avigdor was, as Mr. Blow seems to suggest, corruptly interested as a director in the affairs of the company Mr. Blow : I did not use that term. The Chairman : He did not suggest any corruption, but only pointed to certain facts. Mr. Chapman: That, perhaps, is too strong a term. What was suggested was that while a director he had obtained advantages of the company. That is a matter of which I personally had not heard before. It goes back a long time before the period in which the debenture-holders began to be involved in the affairs of the company, and it is a matter that will be properly dealt with by the company itself. I understand that this is a thing which, as it is now unproved, will remain unproved. lam told the company does not admit such to be the case, and the only evidence on the subject at this stage was a general question put to Mr. Labatt respecting a matter before the date of his connection with the company. "Was Mr. D'Avigdor a director"? —a perfectly general question, referring to no dates or anything, and not asking Mr. Labatt to base his answer on records, or anything of the kind. Now, the real question to which I wish the Committee to direct its attention is that of cost in relation to value, that the Committee should inquire what is the substantial value of this line, or what amount of debenture-capital is substantially represented by this line. I do not for a moment admit Mr. Montgomery's test. No doubt it is often said that the best test of the value of a thing is what it will fetch. It must be evident that that is not the exact way in which a Government proceeds to construct railways, Nor is it really ever a test-value of an article of property which is peculiarly situated. There are many things for which there are no buyers which have a very high value. It is perfectly certain that in many new districts of this country railways have been constructed, and justifiably constructed, without reference to their immediate value. The very presence of a railway itself is the commencement of an increase of population; and it may be regarded ascertain, concerning a portion of this line at least, that 4—l. 7.

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the presence of the railway is tending to increase the population and increase commercial activity. Certainly, in the case of the Reefton line the presence of the railway largely ensures the future of that district; and it is quite certain, from recent events and what is going on in the colony now, that the future of that portion of the West Coast, at least, is almost ensured. It may be looked forward to with certainty that the Reefton line, at least, will greatly increase its traffic and traffic receipts in the very near future, and will continue to increase them for an indefinite period in the future. Now, in passing, I may observe upon Mr. Blow's figures that his estimated cost of the line, and the value of the contribution of Government in the shape of land to the line, brought out the asset to represent in presumed cost £319,500 odd. To show the fallacy of these figures (if I was not mistaken in listening to him), I would point out, in the first place, that he had no business to deduct the* arbitration expenses, which were disallowed by the Arbitrator. That would bring the figures up to £330,000. And I did not hear that Mr. Blow gave any credit to the value of the rolling-stock upon the line when it was taken over. Mr. Blow : Yes, that is part of the cost of construction. That was the figure I started with. Mr. Chapman : In the estimate basing cost of construction upon estimate, what is allowed for rolling-stock? Mr. Blow : I cannot give the answer to that at the moment; but a mileage allowance for rolling-stock was made for the whole railway. Mr. Chapman: I understand; I did not hear it mentioned. There were many matters referred to by Mr. Blow to which I could not in detail refer; such, for instance, as the giving of contracts to successful contractors. It may be necessary, when a Government is constructing lines, to be more rigid in these matters; but I feel sure that, when a company is constructing a line, nothing can be more prudent if it is found that a man has made a thoroughly honest job out of the work he contracted to construct than to make a close or reasonable estimate of the next piece, and say, "You take that over at that price." There is no way of getting greater satisfaction out of construction-works than that. It may not be a method of construction applicable to Government lines, but it certainly is to all classes of private work. We know very well it is done with all kinds of private, work, and where there is ample means of supervising it certainly gives satisfactory and ascertainable results, so that the parties know what they are getting for their money, at any rate. Then, again, such subjects as Mr. Wilson's salary, which was said to have reached a total of £26,000 in the course of ten years. Ido not propose to pick these figures to pieces, beyond saying that if this were so, £26,000 of Mr. Wilson's salary was not debited to cost of construction, because, during the construction of the line, a portion of Mr. Wilson's salary was charged against revenue for working railways. Now, that is a circumstance which brings me back to the figures which were produced the other day, and which were criticized by Mr. Blow as to the profits earned by the railway. A portion of Mr. Wilson's salary, I do not exactly remember how much, but, I think, something like £600 per year, was charged to working railways. If that is deducted from the working railways, the profits of the company's lines will appear to stand out better than in the return handed in by Mr. Labatt. As a matter of fact, during one year Mr. Wilson was not acting in connection with the local management of working railways, and during that year the usual proportion of his salary is not charged against working railways, with this result, that the net profits are considerably increased. That shows this : That under a system of management—probably under the present system of Government management—a deduction might be made from the debit side of the account of working railways, showing that they might be made to earn some hundreds a year more than is shown in the returns we relied on. The large figure, you will remember, something over £6,000, was criticized by Mr. Blow as being inflated by the carrying of contractors' materials. As a matter of fact, and quite by the way, when the actual returns are handed in they will be found to show that the amount earned by carrying contractors' material for that year was very much less than in the previous year, and so far from inflating the figures of that year they only affected them to the extent, I think, of £100, or less than £200. The actual returns of that traffic will be put in detail before the Committee in a return which Mr. Labatt is preparing, or has prepared. I shall not go into details on that subject, but it will be necessary for me to ask the Committee to take more detailed evidence, which will show the actual facts, placing the question beyond criticism as to what these working railways did in the period covered by the returns handed in before. The matter will be placed beyond criticism, and Mr. Blow will himself be satisfied that the figures when worked out are at least as favourable as those which will be put before you, and are favourable in this sense as showing that at least these earnings can readily be made out of the line. The drop that appears in the last year—the broken year—can also be accounted for consistently with the line maintaining its earning faculties, so to speak. Now, Sir, I do not wish to refer to the whole of those topics that have been touched upon. A great deal of Mr. Blow's address to the Committee is no doubt perfectly just; a great deal of it was, in the view which we shall sustain, altogether beside the question which we are endeavouring to get the Committee to consider. The real question is this : I asked the Committee not to tie itself down to that severe kind of criticism of value involved in Mr. Montgomery's question. That is not the way of looking at value when you are speaking of railways in a new country, but rather to consider what there is substantially in the shape of an asset there, and to consider what proposals or suggestions will do substantial justice to the debenture-holders under all the circumstances of the case. I wish the Committee not to overlook what I said at the outset respecting the circumstances under which this concern was put upon the London market; and I shall ask them to also take into consideration the two subjects to which I referred at the outset, viz., that correspondence in the Paper D-2,1886, with portions of Mr. Blair s report to the Government, which was no doubt the original basis upon which matters proceeded. That report is D-la, 1886; and 1 have marked out in pencil the particular passages to which I wish to draw the attention of the Committee. Then, I ask them further to consider those other portions of correspondence to which

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I referred in my opening. And with this material before them, in light of the legitimate cost of the line, the legitimate traffic returns from the line, and a reasonable view of the prospects of the line, to consider what relief ought in justice to be given to the debenture-holders, and what form that relief should take. I would point out this : That though the debenture-holders come in a sense as suppliants before this Committee, it is not necessary for them to come, in the most absolute sense, as making an appeal. They come here to ask that the country shall come to some settlement with them. Whatever settlement is come to with them cannot be said to be a purely one-sided matter for their benefit. It is eminently desirable in the interests of this colony that their claims should be settled in some way, that matters should be brought to a termination, and that the colony should definitely ascertain its position with regard to the debenture-holders. It is idle to suggest that finality is reached by going through the legal form of forfeiting this line. The conscience of the colony would never admit that that was a settlement with the debenture-holders. A settlement with them is eminently desirable, in view of what Mr. Blow pointed out —that at present the whole question of this large area reserved under the contract for selection is in a sense tied up. The debenture-holders are not to blame for that; the company are to blame. But that is not a matter with which I have to concern myself. I prefer to leave all these questions to them and their advocates. But I do point out that that the forfeiture of the line does not settle that question. As Mr. Blow has pointed out, that area is tied up, and it is obviously very desirable to settle the whole question between the debenture-holders and the colony in order that the merits of the question may be settled at once, as speedily as possible, and in such a manner that the debentureholders will feel at least that every endeavour has been made to do justice to them and their case. With this I leave the matter in the hands of the Committee. I have to repeat my request that reasonable adjournment be given, and that Mr. Young be called from the West Coast. The Chairman : I might remind you, Mr. Chapman, that you referred to the colony as being responsible in a great measure in inducing the debenture-holders to lend their money. But I think you omitted to mention anything about the inducements held out to money-lenders in that prospectus. Mr. Chapman : All I say about that prospectus is this : The first thing I did was to withdraw the suggestion that that prospectus had been officially approved by the Agent-General; I cannot carry that any further. The letters put in by Mr. Blow speak for themselves on that subject, and they displace the evidence given by Mr. Salt before the Arbitrator. That the prospectus was sent to the Agent-General's Office is very probable, and that the prospectus was circulated, and that in some sense or other, I presume, it came to the knowledge of the Government of this country, is, no doubt, matter of conjecture ; but it is exceedingly probable that it did come to the knowledge of the Government. But I suppose the Government considered at the time that it was not their duty to go to London and repudiate an instrument with which they were not directly connected. The Chairman : It also does not appear from your remarks whether the debenture-holders had attempted to obtain any mode of settlement from the directors before coming here, but I understand they have done nothing in that direction. Mr. Chapman : I presume they have done nothing. I have no information on the subject. I think we should have seen it through the ordinary channels through which news comes from England, if anything of the kind had been done. The Chairman: Then your case, so far, is closed until further evidence is taken some days hence ? —Yes, Sir. Will the Committee say what returns they would like from Mr. Labatt ? He is here and will remain here till the reports come up, so that if anything is needed in the meantime, Mr. Labatt will prepare it. Mr. Montgomery : The whole amount of money raised or borrowed by the company from time to time on debentures or otherwise ; and the cost in each case on raising such money, showing in a separate schedule the security offered, cost and expenses, amount of money raised, and the rate at which interest was arranged ; total payments to Mr. Wilson, showing salary and commission separately ; also interest paid to debenture-holders and morgagees from time to time up to date. Mr. Labatt: I should like to say a word in relation to Mr. D'Avigdor and the contracts let to the firm of McKeone and D'Avigdor. Mr. Blow inferred that contracts were let to a director of the company. I find Mr. D'Avigdor's name does not appear as a director of the company until the balance-sheet of 30th June, 1891, was presented, at which date the contracts let to Messrs. McKeone, D'Avigdor, and Robinson had terminated. Mr. Blow : Do you know whether Mr. D'Avigdor was a shareholder from the start? Mr. Labatt: I cannot say. [At this stage the Committee adjourned till Thursday, 6th August.]

Friday, 7th August, 1896. Mr. H. W. Young sworn and examined. 1. The Chairman.] You appear for Mr. Parker, the attorney of the debenture-holders, Mr. M. Chapman ? Mr. Chapman: Yes. la. Mr. Chapman.] You, Mr. Young, are an engineer ?—Yes. 2. Where are you employed now ?—I am in private practice at Greymouth at present. 3. You were employed by the Midland Railway Company ?—Yes, from the end of 1886 to the beginning of this year. 4. You are familiar with the line and its construction by the company ?—Yes. 5. There have been some figures before the Committee, Mr. Young, which were intended to show the probable value of the line; the original estimate for the piece from Brunnerton to Belgrove was a million, I believe?— That was the statutory estimate.

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6. What do you say would be the true and proper estimate? How would that be arrived at in valuing the line ?—The Government estimate was in excess of a million. 7. We have had figures given to us for thirty-nine miles constructed ; the estimate for that was £355,000 ? —The cost to the company was about that. 8. The cost of the contract? —The cost to the company, taken from the company's ledger. 9. Mr Button.] From what point to what point ?—From Brunnerton to the present Reefton terminus. 10. The Chairman.] Brunnerton or Stillwater?—lt should be, I think, from Brunnerton to Reefton. 11. The thirty-nine miles from Brunnerton to Reefton, that cost about £355,000 ? —From Brunnerton to Reefton ? Yes. 12. Mr. Chapman.] Was that constructed by tender ? —Except one section, the " Nelson Creek " section. 13. That section was constructed by a London firm of contractors? —Yes; from Stillwater to Nelson Creek. 14. The remainder was constructed in the ordinary way by tender? — The contracts were advertised and tendered for. 15. And the plans submitted to the Government ?—The plans were submitted to the Government. I know the Nelson Creek and Ahaura sections were approved of by Mr. Blackett. 16. But you believe that the plans of all sections were approved?— Yes. 17. Were the contracts let according to the lowest tenders ?—So I believe. I did not actually see them all, but Mr. Wilson told me that the lowest tender was in all cases accepted. 18. Then there is another five miles and a-half. In what portion is it ? Is that at the other end of the line ? —Yes ; that is at the Nelson end of the line. 19. Under the contract of 1888, the Company had to spend £60,000 at that end ? —That is so. It appears in their books as £61,357, which is in excess somewhat, but £60,000 was agreed to by the Government as within actual cost and the land grant given for it. 20. A land grant was passed for it ?—Yes. ' 21. Now, as to the remainder of the Nelson line, the unconstructed portion —96 miles 48 chains—that was estimated by the Government Engineer-in-Chief (Mr. Hales), as given in Midland Railway Paper of 1894, 1.-8, page 16, at £995,000 in round numbers ? —Yes. 22. So that the total Government estimate from Reefton to Belgrove would be £995,000 estimated and £60,000 approved expenditure, making a total of £1,055,000. 23. The portion at Belgrove constructed by the company was let to the lowest tenderer ? — Yes. 24. The Springfield and Patterson Creek section—that is, at the other side of the ranges?— Yes, that is at the Christchurch end; £65,846 has been spent, of which £60,000 was obligatory under the Midland Railway Contract, and £5,846 was expended in excess of the obligation. 25. Has that been approved by Government ?—Yes ; to the extent of £60,000. 26. And land grants made in respect of it ?—Yes ; the balance is made up partly of company's expenses and partly of further work done at Patterson Creek end. 27. That £65,846 was in excess of the contract ?—There was some other work done in excess of the £60,000. 28. Then there is from Stillwater to Jackson's ?—That would be from Brunnerton to Jackson's, £278,411. 29. Some of that was done by London contractors?— Yes. 30. What section is that ?—Brunnerton to Stillwater, and Stillwater to Kaimata. 31. From Kaimata to Stony Creek ?—That was let by tender. 32. To the lowest tenderer ?—Yes. 33. And from Stony Creek to Jackson's?— They were all advertised and tendered for. 34. Were the plans approved by the Government to your knowledge?—l believe they were. The portion of the line extending to Stony Creek was constructed as originally surveyed and pegged by Government Engineer. 35. Before the Midland Railway contract was entered into ?—Yes; and a part of the line beyond Brunnerton was partly made by Government and handed over to the company, by whom it was completed. 36. That was on the line pegged out by the Government ? —Yes. 37. I want to ask you one question only about the London contractors ; The rate at which the London contractors did the work was higher than the colonial rate ?—Yes, it was rather higher. 38. The reason for that would be, possibly, the exigencies of tendering in London, or generally of employing contractors in London ?—I presume that was so. These contracts were let before the end of 1886 ; the first two being let before my connection with the company began. 39. I wish to call your attention to a statement made by Mr. Blow. I presume that this statement is a part of his case. It was this : That Mr. Napier Bell made an estimate of the cost of the line. Do you know anything about that estimate ?—To what estimate do you refer? 40. Perhaps lam wrong in calling it an " estimate." I will call it an " apportionment," that is the term taken from the document ? —That was an apportionment for land-grant purposes. 41. Have you that here ? I wish you to explain what that document is, and to what extent it can be called an "estimate" by Mr. Bell?—A land grant was given, based on what is called the "statutory estimate" of a million and a half for the East and West Coast line, and one million for the Nelson line. Presumably, the Government estimate for the Nelson line was £1,330,000, and for the East and West Coast line it was a million and a half. The company and the Government, through their engineers, Mr. Napier Bell and Mr. Blair, agreed to a certain allocation of the statutory estimate of cost to each particular section for land-grant purposes only. From the nature of the country, it could not be done by average mileage rate. To arrive at an

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apportionment, they each took an estimate, representing the Government and company's estimates respectively. They allocated each section's statutory value in proportion to the estimate adopted by them for the special purpose, and not in proportion to the mileage. This return was signed by Mr. W. N. Blair and Mr. Napier Bell, the former on behalf of the Government, and the latter on behalf of the company. It does not mean that, by signing this, Mr. Napier Bell agreed to an " estimated cost" ; he simply agreed to an apportionment of relative value for land-grant purposes, for his own estimate was higher than the Government one shown in the document in question. I have our estimate here, which he took with him when he was dealing with this matter. It is higher than the Government's estimate of £1,330,000. Therefore, I think Mr. Bell cannot be said to have agreed to any estimate of actual cost which would be binding on the company. He only agreed to an apportionment of the relative statutory value of the sections for land-grant purposes in terms of the Midland contract. 42. In making that apportionment, it did not matter one straw which estimate was taken for the apportionment, did it ?—No; the estimate might be made on one or the other, so long as the relative value was apportioned. 43. That is, if the estimated cost was to be increased, say, by one-third, they had only to agree to increase the figures by one-third, that would set the ratio ?—Looking at the statement alone, one might suppose that the column of estimate of cost might be a matter included in the agreement; but if you look at the company's estimate made at the time it is evident that this is not so. 44. Then, it is not correct to take it that this apportionment is an acceptance of the total figures; it is only a fixing of the ratios for the sections ?—Yes, that is the purport of the document. 45. You have told us the work was done by contract, but that does not carry the thing so far as they wish to carry it; do you think these contracts show a fair price for railway works ? —Yes; they were done as cheaply as they could be done; they were done on plans approved by the Government and let by tender. 46. Do you think the prices of work would bear comparison with those of Government work ?— They were compared at the time with the schedules of Government works, and of other works, so as to check the cost. 47. Then, you think they would not suffer by comparison with Government work?— Not in detail. I may mention that at the time our works were executed wages were heightened on the West Coast by the Trade Unions. The Unions at that time enforced a uniform rate of 10s. a day for labourers. This increase in wage-rate made a great difference in the cost of such works. 48. I believe you made estimates yourself? —Yes ; I did so. 49. Did you find these agree with the actual cost ? The lowest tenders were a little under the estimates, which were, of course, safe ones. The estimates that were made for the Government were prior to your taking the matter over; it might be suggested that those for the Government, being made by experienced men, would be likely to be as correct as your own ?—The Government Engineers had not the same information. Of the Nelson line there was no engineering survey. There was a preliminary survey made in 1872 by Mr. Rochfort, but the line he traversed did not actually follow the proposed railway-line. It was a mere topographical flyingsurvey—good only for its purpose, in demonstrating that the railway could be carried through on certain ruling gradients, and without insuperable difficulties. 50. The object of such a survey would be to ascertain that a line could be constructed there at all ?—Yes. 51. There might be a mountain or an impracticable river in the way ? —Yes. 52. Then the survey was to find whether there was a practicable route that way ?—Yes. 53. A very slight deviation would make a difference of many thousands of pounds ?—lt would not, perhaps, in this case; but, in some of the east and west sections, it would do so. 54. Your estimate was taken from the detail-survey ? —Yes. 55. Was the standard of work equal to that of the Government ?—The standard of work was equal to what the Government is now using, which is better than the standard of work on which the Government estimates were made. For instance, the Government estimates included perishable timber structures, for which we substituted permanent ones of concrete and iron. 56. Now, the fact of alterations going in the direction of increasing the prime cost of the work would go to diminish the cost of maintenance ?—Yes; also, I may mention that, near Reefton, there was a large slip, which cost about £13,000 to remove and secure. 57. That would have happened to the Government or to any one else?— Yes, that would have happened to any one. It was unforeseen and unavoidable. 58. There were other items for the purpose of making the line practicable—temporary works, I mean—to enable the line to earn money at once? —Yes; we had to build a temporary station, so as to be able to secure traffic previously carried by waggons. 59. That would give the line earning-power at once? —Yes. 60. That adds to what the railway cost ?—lt adds to the total cost. It all went into construction account, but was recouped by traffic. 61. I do not wish to go into specific cases, but there were cases of under estimates on the original Government estimates?— Yes, on the Christchurch line; but on the Nelson line I never knew what the Government detailed estimates were, and therefore could not compare in detail. 62. There is one point I wish to put to you. It is said not to be customary in New Zealand for the Government, when estimating the cost of their railways, to add interest on to the cost of construction ?—I have never seen it done in any published statement. Ido not know whether they do so or not in unpublished accounts, but they may do so for their own information. 63. But it is done ?—-It necessarily forms part of the cost of construction.

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6L But it is put into that in England ?—Yes; also it is provided for in case of the Government purchasing the line, for, in terms of the Midland Railway contract, a sum not exceeding £400,000 shall be added to cost of works on account of interest during construction. 65. So that if they had purchased the line under the contract they would have had to pay that interest ?—Yes. 66. Supposing the company had been constructing a line in England, it would be added as a matter of course ?—Yes, because it has to be paid out of capital until the railway earns money. 67. So that you think that the interest of the money expended on it should be added to the cost of construction ?—Yes; it is part of the cost to the company. 68. Mr. Blow was asked this question, I believe by Mr. Montgomery : " How much do you think it would fetch put up to auction as a going concern " [Vide answer 19, 27th July.] That appears to put the railway at £100,000. Is it a fair way of putting it ?—lt puts prospective value out of view altogether. If there were no prospective value possible it would be one possible mode of valuation. 69. In case of a railway not completed, is not the whole value prospective ?—lt depends upon its more or less remote chance of completion. 70. May we say that this mode of estimating value w r ould be entirely illusory ? —Yes ; although for rating purposes you would arrive at the value that way—prospective value being barred. 71. We are dealing with the value the country gets by taking it over?— Then the method of valuation by capitalised net revenue would only hold good if it were absolutely certain that there would never be any extension of the line or expansion of the traffic. 72. Is that a fair assumption ?—I do not think so. 73. If that could be assumed, the Midland Railway Company would not undertake it ?—Certainly not; if the profit was to be limited to £4,000 for all time, or an amount of net revenue bearing that proportion to the whole cost. 74. Mr. T. Mackenzie.] You are of opinion that there was value for the expenditure by the company?—l think that, on the whole, there was. Of course, if you went critically into details and particulars, you might have to make deductions from certain items now included; or, perhaps, on the other hand, allow certain additions. 75. But the basis of your estimate for the work was, as I understood you, upon reliable data. These were not the data the Government estimated on, but on the flying-survey ? —The Nelson survey was a very flimsy flying-survey. The Government estimate based on it could only have been made on a general estimate of so much per average mile. The East and West Coast line estimates were honestly and skilfully gone into by the Government Engineers of the day, but even then it was only a preliminary survey with five-chain pegging, and was not a complete detail survey. Any under estimates or omissions were due to the necessarily hurried class of survey used, and not to any want of care. 76. The Chairman.] Is it your opinion that a five-chain pegging is not enough for broken country ?—lt does not give sufficiently close detail; it was enough for the purposes of the time, but not for construction purposes or for absolute estimates. Our present surveys are pegged every chain, and fully detailed. 77.-Mr. T. Mackenzie.] Have you had any experience of the works?— Yes; I was formerly engineer—a contractor's engineer—for other railways; and, during the nine years and a half that I was chief assistant engineer for the company, was in charge of, and closely engaged in, its works and operations —was, in fact, the executive engineer. 78. You can, therefore, give an opinion of the cost and comparative prices?—l have made a comparative statement, but have not the information with me. 79. Mr. Millar.] Can you inform me how much was the sum-total of the contracts taken in London in connection with this line ?—Speaking from recollection, about £180,000. 80. Mr. Chapman.] That was the amount of the London contracts ? —Yes, I think so. 81. Does the £761,000 include the cost of everything? —Yes; it is taken from the accountant's ledger, in which everything is comprised. 82. Can you give me the actual prices at which the contracts were let ?—I could make a return if required. I did draw up a paper on the subject, but I have not got it with me. 83. The Chairman.] How long were you connected with the Midland Railway Company ?— From November, 1886, until the end of March of this year, when the thing ceased. 84. Ten years ?—Yes, ten years. 85. Were you paid by salary, or by commission?—By salary. 86. I think I heard you say that the work done had been done at a fair cost ?—Yes. 87. Are you taking into consideration the percentage, by way of commissions, paid to the engineer—Mr. Wilson? —That does not come within my knowledge. It was an arrangement between Mr. Wilson and the directors, I presume. 88. I will put it this way : Would you consider the work already done had cost a fair price if you had been informed that as much as 10 per cent, commission had been paid to the engineer ? —That would be a good commission. 89. Would not any commission added to ordinary emoluments add also to the cost ? —I can say that Mr. Wilson paid all the engineers' salaries and charges. He had no salary as engineer, and his commission covered his own remuneration and the expenses of his staff. 90. If that were so, it was a distinction without a difference, was it not ? By profession he was an engineer, and he was paid a high salary in his capacity as manager, besides a commission ? —Yes, that is so. 91. Has it been usual, according to your knowledge, to pay gentlemen of the engineering profession a commission besides salary ?—No, not within my knowlege ; but there might be such cases, of which I know nothing. He was not paid a salary as engineer.

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92. As I understood you, he was paid a salary as manager, and, by profession, he was an engineer ?—Yes. 93. He was paid also as a financier perhaps ? —Possibly. [Questions put through the Chairman.] 94. Mr. Chapman.] You have, Mr. Chairman, asked whether 10 per cent, was a high rate, would you be good enough to ask the witness what would be a fair rate ? 95. The Chairman.] What, in your opinion, would be a fair rate of commission if the salary was not sufficient? If he was paid partly by salary and partly by commission, what would be a fair commission ?—lt would be impossible to say. Circumstances vary so much; it would depend upon his total emoluments and the nature of the work. 96. His emoluments on account of salary ? —You would have to add the two together to get the gross emolument. 97. You have no official knowledge that he was paid a commission?—No official knowledge. 98. Mr. Hogg.] You say that out of this salary and commission, which appear before us, he had to maintain his staff? —Yes. 99. Could you form any approximate estimate of the cost of his staff? —I really could not, for, although the allocations came through my hands, I simply allocated the accounts or vouchers and passed them on to the accountant. I never took any note or made any statement of the general results, and, if I attempted to give an approximate idea, I might only mislead the Committee. 100. Do you think it may be stated at more than £5,000 a year ?—No; the staff varied at different times. Sometimes a good many men were employed, including the inspectors, and sometimes very few—never more than absolutely necessary. 101. The reason I ask that question is that he drew, in the form of salary and commission, as nearly as possible £10,000 a year. The Chairman : That was in the colony. He had similar advantages in London. 102. Mr. Hogg.] In six years he drew £57,957 ? —lt was not my business to know what the ledger said. 103. The Chairman.] Did it ever come within your knowledge that commission was paid by any of the contractors ?—No, not at all. The Chairman: Mr. Blow, as representing the Government, is, I think, entitled to ask the witness some questions. 104. Mr. Blow.] In reference to what you term Mr. Napier Bell's apportionment of the cost of the line, you have seen a statement containing what you call an " apportionment." It is published in 1.-7 aof 1892, page 33, of the Appendix. There is a column in the statement headed " Estimated cost " ?—Yes. 105. Do you think that an engineer of standing, such as Mr. Napier Bell is, would affix his signature to a document purporting to be the estimated cost unless it was an estimate of cost ? —■ That means Government "estimated cost"; but I have here the documents Mr. Bell had with him, which is practically his estimate, and differs from the Government preliminary estimate. 106. This was an estimate signed by Mr. Bell and Mr. Blair. If there was a difference of figures between them, I presume there would be some adjustment ? —Not necessarily so, for he might have said to Mr. Blair, " Yours is lower or higher than mine, but it is near enough to serve as a basis for apportioning the statutory nominal estimate to the various sections." 107. As to the proportion of cost, we have that in a column by itself. Ido not know that the estimated cost was necessary to this paper, but as it is there, we may assume that two eminent engineers would not sign it if it were grossly inaccurate. Here is the paper ; you may perhaps know the handwriting?— Yes. 108. You have the paper in Mr. Bell's handwriting showing the estimated and statutory cost, and the proportion which one bears to the other ?—Yes. 109. What reason have you for thinking that the estimate is not true?—l take it as the Government estimate of cost at the time ; it was not Mr. Bell's estimate, but Mr. Blair's. 110. Then will you tell the Committee what Mr. Bell's estimate of cost was ? —For the Nelson line, £1,496,500; for the other line, £1,500,000. 111. Consequently there was no great disparity?—No; there was £166,000 of disparity. 112. As regards the East and West Coast line the estimates agreed ?—Yes, at that time. 113. As regards the Nelson line, you say there was a disparity of £166,000? —Yes. 114. I should like a little information as to the contract let to the English firm, McKeone, Robinson, and Company ? Can you tell us the contract sum ? The Chairman :] We have it here. Mr. Blow :] Then, if you take this statement it will bring it into the evidence : This is what was the contract sum —£167,000? Witness :] £163,000 for No. 1 ; that was between Stillwater and Teremakau. 115. The Chairman.] Right up to Jackson's?—No; it was to a point called " Dobson's First Peg." 116. From Teremakau to Jackson's ?—No ; it is two or three miles from Jackson's. 117. Was there another contract?— There was a contract for the completion and extension of the line from Brunnerton to Stillwater, which was taken over from the Government. 118. Can you say what the estimate was in both those contracts ?—The Teremakau (No. 1) contract was only completed to Kaimata; the remainder being cancelled. There was some arrangement by which the company paid the contractors a sum of money as compensation for the cancellation of their contract. 119. Do you know any reason why they were desirous to cancel those contracts? —One reason was that Mr. Wilson, when he was in the colony for the first time and went through the different

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estimates and schedules with Mr. Bell and myself, thought it would be more advantageous to the company to let the works to local contractors within the colony. 119 a. Are you aware that a large sum of money was paid to the contractors to abandon their contract ?—Yes ; it is stated here, £12,500 ; but I believe this includes plant and material taken over and worth, say, £2,500. 120. Mr. Blow.] Have you any idea what the saving to the company was by letting the contracts to contractors in the colony ?—Speaking approximately I should say there was 15 per cent, saved. 121. There would be some saving over the contract if it had in the first instance been let in the colony? —Certainly; but there were special circumstances. The company had to spend a certain sum at first in terms of contract, and I suppose one reason for the letting of contracts in London was to save time in getting the work in hand. They were obliged to make some prompt expenditure so as to be within the terms of the contract. No. 1 contract included a good deal of material— twenty-seven miles, rails and fastenings, &c. 122. In other words, the company, in order to gain expedition, did not study economy?— They were willing to make a sacrifice, and it was not done in view of this procedure. I think it rather showed that the company were willing to make a sacrifice so as to keep faith with the colony ; it showed the bona fides of their intention to get the work done in time. 123. The Committee is desirous of ascertaining whether the cost, as given by the company's accountant, is fair and reasonable—whether it could have been done for less money, hence my question as to whether the company studied expedition rather than economy ?—Considering the matter as to the direct cost only, the company would have saved money if they had let the work in the colony. 124. Did you ever look into the matter so as to form an opinion what the saving would have been had the contract been let in England instead of locally ? —There was a comparative statement made. I have not been able to find the document for present use, and consequently came here unprovided with it. 125. Did the contract comprise the supply of rails ?—Yes. 126: Do you know the prices ?—They were high ; speaking from recollection the price was £12 a ton, delivered on the works. 127. Do you know that Government has been purchasing them for £4 a ton ? —Yes ; but at the time the contract was let rails, steel rails were at the highest price, though it dropped shortly afterwards. 128. That is another evidence that the company did not study economy, for they sent them out a long time before they were wanted ?—They, no doubt, thought they might be wanted sooner, and expected that would permit a more rapid progress. 129. How long was it before the whole of them were used up?— Not until about 1891, I think, speaking from recollection. 130. So that they had been lying in the colony from the end of 1887, or towards the beginning of 1888 —three or four years?— Yes. 131. You referred to some plans of works having been approved by the Government? —Yes. 132- What you call approval was it not simply that the Engineer-in-Chief, looking at the matter from an engineering point of view, considered they were sufficiently substantial ?—I took it that he approved generally on behalf of the Government as a party concerned. I remember that Mr. Blackett, in his letter, added a number of recommendations as to details, which we took up and carried out according to his suggestions. 133. But these suggestions were not made for the purpose of saving money to the company?— I suppose that it was Mr. Blackett's.business to see that they came up to the provision in the clause in the contract respecting the work being equal to the Government standard at that time, and perhaps in view of the Government eventually acquiring the lines under certain stipulations. 134. But if the works were designed on a needlessly expensive basis he would not say anything as to that if they were adequate ?—I think he would ;if anything were superfluous he would have drawn attention to it. 135. Did he draw attention to anything of the kind ? —I do not think he did, or had reason to do so. 136. Yet you have told us that the character of the works was in advance of what was provided for in the original estimate ?—They were in advance of the requirement of the early estimate. 137. In advance of the standards which the Government were using at the time the estimates were made ?—Generally it was so. Since that time Government has also used more permanent structures of greater first cost than those contemplated in the early estimate. 138. The rolling-stock was superior?— Not specially so ; the ordinary stock is much the same. 139. Stations were put up in advance of the requirements. A third-class station might have sufficed where you put up a first-class structure, and where we would have been content to put up a third-class ? —We did not. 140. Do you mean to say that the company's stations on the Midland Railway are not much more expensive than the stations on Government lines carrying an equal traffic ?—No ; Stillwater Station is an ordinary Government standard fourth-class station, with additional accommodation added from time to time as actually required. 141. What about Reefton?—Reefton has only room for the people employed, for their furniture and other belongings ; it is a good station, but not beyond its requirements. It is, I think, smaller and cheaper than Government stations in similar positions. 142. You are not certain of your own knowledge that the contracts were let to the lowest tenderers ? —I saw the first tenders as they were received in Greymouth, but afterwards they went into Mr. Wilson at Christchurch, and I did not necessarily see them or compare the amounts. The

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accepted tenders were sent over to me for preparation of signed contracts in the case of the West Coast works. 143. Have you let any contracts without tender at all at schedule rates ?—No; the only thing was an extension of contract for a little bit of line at Reefton, which we let as an addition to existing contract to J. R. Rees and Co., though it was formulated as another contract. 144. Were tenders invited for the Teremakau contract ?—Yes; every contract was advertised. 145. Were the contractors in all cases paid in cash ? —Yes; the colonial contractors were. 146. Prompt cash ? —Yes. The Chairman : Cash is always prompt. 147. Mr. Blow.] I mean money, for I have heard that sometimes payments are made in bonds. Were they paid in cash or scrip ?—I could not say in the case of the London contractor; but the progress and final payments were certified by us in the usual way, and the colonial contractors were paid in the colony in these certificates in ordinary course. 148. At any rate, there was no mystery about the matter when the contracts were let?— No. 149. Is there anything included for outside work—work not particularly appertaining to the railway?—l have not gone through the ledger accounts, and therefore do not know that it is so. 150. What about the Totara Flat Hotel ?—That should not be included in the cost. 151. And the land on which it stands. Is that included?—l think that is included. 152. And those timber-sheds for seasoning timber for export. Are they included?—No ; they were charged to timber accounts. 153. Was your salary paid by Mr. Wilson out of his commission, or did you do any other work for which the company paid ?—lt was first paid by Mr. Wilson, but allocated and charged to various accounts for time occupied in connection with land purchase and compensation, &c, thus most of it would be charged and paid by the company. It was only the engineering part that was debited to Mr. Wilson. 154. Do you know whether other engineers had part of their salaries debited to the company ?— If they were employed on work that was chargeable to the company, then it would be debited to it. In their case this was exclusively surveys. 155. Then surveys are not included in the engineering work?— No. 156. Do you know what the surveys cost the company —what proportion the cost of them will bear to the general cost ? —I think about £15,000. I am not sure, not having seen the total of ledger accounts under this head. 157. Were no other engineers but yourself engaged in land purchase work?—No; in other cases it was generally an allocation between the " engineering " and " surveys." 158. If any engineers were employed apart from the company's work, as when Mr. Napier Bell reported to the Government on harbour-works, were the fees charged received by Mr. Napier Bell or did Mr. Wilson take them ? —I could not say. I was acting-engineer for the Blackball Coal Company, by Mr. Wilson's instructions, he receiving the fees from them.

APPENDIX.

EXHIBIT A. TRUST DEED. This Indenture, made the 2nd day of August, 1889, between The New Zealand Midland Railway Company (Limited), having its head office at No. 79, Gracechurch Street, in the City of London (hereinafter called "the Company"), of the one part; and Beaumont William Lubbock, of No. 15, Lombard Street, in the City of London, Banker; Edmund Charles Morgan, of No. 7, Rowland's Gardens, London, Esquire; Roderick Pryor, of Hylands, Chelmsford, in the County of Essex, Esquire; and Sir Frederick Aloysius Weld, K.C.M.G., of Chideock Manor, Bridport, in the County of Dorset (who and the survivors and survivor of whom, and the executors and administrators of such survivor, and other the trustees or trustee for the time being of these presents, are included in the expression " the Trustees " hereinafter used), of the other part. Whereas the Company is incorporated under the Companies Acts, 1862 to 1882, as a Company with liability limited by shares, and with a capital of £500,000, divided into 50,000 shares of £10 each, with power to increase such capital; and with the objects, among other objects, of constructing the railways hereinafter referred to, and of borrowing such sums of money as may be necessary to carry out any of the objects of the Company : And whereas by a deed of contract (hereinafter called " the said contract "), dated the 3rd day of August, 1888, and made between Her Majesty the Queen of the one part and the Company of the other part, under the provisions of " The Midland Railway Contract Act, 1887 " (hereinafter called " the said Act"), and pursuant to " The Railways Construction and Land Act, 1881 " (hereinafter called " the principal Act"), in consideration of the covenants thereinafter contained on the part of the Queen, the Company covenanted with the Queen that the Company would, with all convenient speed and within the term of ten years from the 17th January, 1885, or within such further time as therein provided, at its own cost, construct and completely finish a line of railway so as to connect at Springfield, in the Provincial District of Canterbury, with the New Zealand Government railway already constructed and having its terminus there and at s—l. 7.

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Brunnerton, in the Provincial District of Westland, with the Government railway already constructed and connecting Brunnerton with the Town of Greymouth; and also a further line of railway from a point on the first-mentioned line of railway, at or near Brunnerton aforesaid, by way of Beef ton, in the Provincial District of Nelson, to a point at or near Belgrove, in the said district, so as to connect therewith the Government railway already constructed and leading thence to the City of Nelson : And that the Company should construct the said railway along the line shown in red upon the map marked " A 1," annexed to the said contract, and known as the " Arthur's Pass route," to Brunnerton, and thence by way of Eeefton through Belgrove, or as near thereto as practicable, such railway to be constructed and, when completed, to be maintained and worked in all respects under and subject to the provisions of the principal Act and the said Act, and also under and subject to the terms and conditions prescribed by the said contract, and to the satisfaction of the Engineer or Engineers to be appointed by the Government of the Colony of New Zealand, as in the said contract is provided : And, further, that all rolling-stock and plant to be from time to time used or employed upon the said railway or in connection therewith should be of at least equal character and strength in all respects to the rolling-stock and plant in general use upon railways constructed by the Government of New Zealand, and so as to be sufficient both in quality and quantity for effectually carrying on the traffic on the said railway as might from time to time be requisite or necessary: And, further, that the Company would, before the 31st day of December, 1888, or within such extended period after the expiration of that date as might be allowed under the powers in the said contract contained, expend a sum of not less than £150,000 in the construction and execution of permanent works on the said railway, to enable some complete section or sections of the said railway to be fit for traffic as early as possible : And, further, that the Company should enter into and enforce the due performance of a bond fide contract or contracts for the construction of a portion of the said railway to commence at Springfield and .extend towards Brunnerton, at a cost of not less than £60,000, and of another portion of the said railway to commence at some point to be agreed upon on the present Government line from Nelson to Belgrove and extend towards Eeefton, at a cost also of not less than £60,000, in addition to a contract then already entered into for a portion of the said railway from Brunnerton to a point on the Tefemakau Eiver, and that such contract or contracts should be entered into as soon as the necessary surveys could be made and tenders obtained, and should each contain a provision, which should be of the essence thereof, for the continuous prosecution of the same until the due completion thereof: And, further, that the Company should not at any time assign, charge, or dispose of that contract, or any benefit or advantage thereof or thereunder, either at law or equity, without the written consent of the Governor on behalf of the said Colony of New Zealand (thereinafter and hereinafter called "the Governor") on behalf of the Queen first had and obtained, but so that that clause should not be deemed to affect or interfere with or in anywise abridge the powers of borrowing given by the said Act: And, further, the Company should, after the railways should be opened for traffic, cause trains to be run as therein provided. And by the same contract the Queen covenanted with the Company to put the Company in possession of the lands of the width and extent necessary for the construction of the said railway, and of the approaches and works ancillary thereto, and would under the conditions, and to the extent therein mentioned, work certain portions of the said railway for the periods therein defined. And it was by the said contract further agreed by and between the Queen and the Company that the particulars of the blocks of land reserved from sale under the said Act, and which the Company might select and whereof grants might be made to the Company, or which might otherwise be dealt with under the said contract, were shown on the map annexed thereto, and marked " B 1," and the same particulars were declared to be binding on the Queen and the Company (the area of lands so reserved under the said Act being therein and hereinafter referred to as " the authorised area "). And it was declared that all lands within the limit of the authorised area should be available for selection by the Company, with certain exceptions as defined in the said contract (being exceptions of lands, other than pastoral lands, in private ownership, and lands to be set apart by proclamation of the Governor as mining lands, or to be reserved for the purposes of public recreation); and that it should be optional for the Company at any time to select lands within the authorised area held under lease or license for pastoral purposes, but in every such case such selection should be subject to all existing rights affecting the same ; and that it should be optional for the Company, with the consent of the Queen in every case, at any time to select the timber on any lands reserved or set apart as aforesaid as mining lands or for public recreation in lieu of land at the same value per acre as such lands should be set down at in the certified valuation of Crown lands, such area of timber so selected to be reckoned as if it were an equal area of land selected by the Company : Provided that such option should not be exercisable so as to interfere with bond fide mining operations, or to comprise timber which, in the opinion of the Governor, would be likely to be required for sawmilling industries or for mining purposes. And in the said contract are contained reservations to the Queen of the flow of rivers and watercourses, and saving of pollution thereof, and to holders of miners' rights or prospecting licenses of rights of entry and search for gold and silver prior to the grant of the lands by the Crown to the Company. And it was declared that nothing therein contained should affect the right of the Queen to resume pursuant to " The Mining Act, 1886," any lands granted to the Company, as effectually as if the same had been alienated by the Crown by way of absolute sale or lease. And after provisions for ascertaining the proportion which the estimated cost of construction of the several sections of the said railway bore to the sum of £250,000, being the estimated cost of the construction of the whole, and for the charging of the same to account against the value of the land to which the Company should be entitled in manner and.at the rate and proportion therein mentioned, it was further provided that the Company should be at liberty from time to time, at discretion, to select any block or blocks of land as defined and set forth on the said map " B 1," and available for selection as thereinbefore

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provided, as it should have earned or become entitled to in respect of any completed section or sections of the said railway, in accordance with the provisions of the said Act and of the said contract, and neither the Company nor the Minister for Public Works should select any lands in alternate blocks as provided by the said Act; and that for the purposes of the said selection the said railway should be deemed to be divided into the several sections numbered and delineated upon the map marked "Al" thereunto annexed; and that, as soon as the block or blocks selected by the Company should have been surveyed, the Governor should direct the District Land Registrar of the district in which the land selected was situated to issue a certificate of title to the Company, or to such person or persons as the Company should direct, in such manner and form as was authorised by law : Provided that the Queen should not be liable to the Company for any delay in making any such survey or in the issue of any certificate as aforesaid ; but the Company should be entitled after making any such selection, and subject to the terms of the said contract, to enter upon the block or blocks selected ; and the Governor should issue and give to the Company, or to such person or persons as the Company should direct, such instrument or authority as might be necessary to define generally the situation and area of the block or blocks so selected. And in the said contract are contained further provisions for grants to be made to Trustees of lands to the value of £60,000 on the Company entering into the contracts thereinbefore referred to for constructing portions of the said railway, and also defining the mode in which lands selected by the Company should be surveyed and blocks of land should be selected ; and it was declared that no land which should be granted to the Company or to any person or persons by direction of the Company should be sold at a less price than shown on the certified valuation thereof, except with the consent of the Queen ; and that, after the completion of the said railway, the whole or any part of the lands which the Company should have earned or become entitled to in respect thereof, and not already selected by and granted to or otherwise vested in the Company, should be granted to it, the legal estate being antevested to the date of selection when the Company should so require or direct, but so that each separate selection should, unless with the consent of the Queen, be granted to the Company in one grant only, and the whole of such lands earned by the Company, or to which it should have become entitled, should be granted to the Company within ten years from the Ist day of January, 1888. And in the said contract are contained provisions for the selection of further land by the Company in the event of the aggregate value of the selections thereunder being less than £1,250,000, or such less sum as should represent one moiety of the cost of the construction of the said railway; , and also provisions for the working of the said railway, and for the extension in certain events of the powers of purchase thereof reserved by the said Act. And it was further declared and provided that the Company should always be represented in New Zealand by a person or persons duly appointed under Part VIII. of "The Companies Act, 1882," empowered to sue and be sued on behalf of the Company in the Courts of the Colony, and to execute deeds and instruments, and generally to act for and on behalf of the Company within the colony, and that it should not be competent for the Company to sue the Queen or any person on her behalf in any Court elsewhere than in the Courts of the colony, nor should any arbitration proceedings be commenced, carried on, or concluded elsewhere than in the said colony ; and that if at any time the Company should not be so represented, it should not, so long as not so represented, be entitled to any rights, powers, or privileges conferred by the stating or any other contract or Act relating to the said railway, and might be compelled, on application to the Superior Court of New Zealand, to appoint forthwith such a representative person or persons as aforesaid. And, further, that disputes and questions arising in reference to the said contract between the Queen and the Company should be determined by arbitration as therein provided. And whereas the Directors of the Company, in exercise of the powers vested in them by the regulations of the Company, have by resolutions of the Board, passed at a Board meeting held on the 10th day of April, 1889, created a series of 5-per-cent. first-mortgage debentures to the amount of £2,200,000 (hereinafter called " the said series "), and they have, pursuant to such creation, made a first issue of such debentures to the amount of £745,000 (hereinafter referred to as "the present issue") at the price of £92 10s. for every £100 debenture, and in debentures of £100, £500, and £1,000, at the option of the holder, payable at par at the expiration of twenty years, and redeemable by purchase in the market at any price not exceeding £105 per cent., or by drawings at that price on three months' notice, and upon the express condition that no further issue should be made in respect of the said series of £2,200,000 of debentures or otherwise howsoever until the line to Reefton be completed as hereinafter is more particularly provided, or until the present issue of £745,000 should be repaid or provided for under the terms of these presents : And whereas the said terms and conditions on which the present issue was made are set forth in the prospectus of the Company published on the 12th day of April, 1889 : And whereas the First Schedule hereto contains a copy of the form of the debentures issued under such Prospectus : Now this indenture witnesseth as follows ;— 1. The Company, as beneficial owner, charges with the repayment to the holder or holders for the time being of the present issue of the said debentures of the principal moneys by the same debentures respectively expressed to be secured on the days, at the times, and in manner defined by the printed conditions indorsed on the said debentures and expressed in these presents, and also with the payment of interest at the rate of 5 per cent, per annum on the principal moneys secured by the same debentures respectively half-yearly on the 15th day of April and the 15th day of October in each year, all and singular the undertaking, assets, and real and personal property of the Company set out in the Second Schedule hereto, until a further issue of debentures of the said series be made; and upon such further issue being made, the Company, as beneficial owner, hereby charges all and singular the undertaking, assets, and property, both real and personal, of the Company with the due repayment of all principal moneys and interest payable in respect of the whole of the debentures of the said series, but so that such charge shall not be operative, except to the extent of the debentures for the time being issued.

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2. Notwithstanding the charge hereinbefore contained, the Company reserves power until the power of entry or sale hereinafter conferred shall be exercised to hold and enjoy the property hereby charged, and to carry on thereon or therewith the business or any of the businesses authorised by the memorandum of association of the Company, and from time to time to procure grants of land under the terms of the said contract to the Company, or to nominees of the Company, and to sell, exchange, or lease any of such lands or other lands of the Company (other than the land forming the site of or necessary to be held with the said railway) for any of the purposes of the Company's business, and to execute either with or without the concurrence of the Trustees all such conveyances or other instruments as may be necessary for that purpose ; and also from time to time to fell and sell, farm, let, and generally cultivate, manage, and deal with the timber growing on the said lands, or any of them, or any part or parts thereof: Provided, nevertheless, that all moneys realised by the sale of lands and timber shall be dealt with and applied as hereinafter provided. 3. The Company covenants with the Trustees as follows : — (1.) That the Company will keep and maintain the property of the Company, and particularly such portions of the said railway as have been already constructed, or shall during the continuance of this security be constructed, in good working order and repair and condition. (2.) That the Company will pay, or cause to be paid, out of the proceeds of the present issue of debentures —firstly, all expenses attending such issue; secondly, will pay to Messrs. Robarts, Lubbock, and Company (as bankers for the Trustees), to the credit of an account to be opened in the name of the Trustees, the sum of £93,000, being the aggregate amount of interest at the rate of interest reserved on the debentures of such issue for two years and a half from the date of issue, such sum to be applied by the Trustees in payment of such interest, the Trustees to use their best endeavours to procure the said bankers to allow for the benefit of the Company interest on the moneys for the time being standing to the credit of the said account in excess of the sum of £30,000, at such rate not exceeding £5 per cent, per annum as shall represent £1 per cent, per annum below the current discount rate for the time being of the Bank of England ; secondly, will employ and expend the remainder of the proceeds of such issue in the completion of the surveys for the railways next hereinafter mentioned, and in the construction and completion ready to be opened for traffic and the full equipment of the portions of the railways for the completion and equipment whereof the said issue is made as mentioned in the said prospectus —namely, the extension of the line to Reefton (about forty miles); the making and equipment of about twelve miles of railway into the timber district from Kokiu to Hohunu ; and the construction and equipment of two lines of railway, each being about six miles in length, as extensions of the Government railways as now terminating respectively at Springfield (Christchurch) and at or near Belgrove (Nelson); and in the payment of costs of administration during construction, and in opening up the timber lands referred to in the said prospectus. (3.) That the Company will, upon or forthwith after procuring any grant, or making any sale, exchange, or other disposition of any lands or timber hereby charged in pursuance of the powers in that behalf contained in the second clause hereof, pay the proceeds of such sale or other disposition, and also any royalties to be received by them in respect of the said lands, or any of them, to the Trustees, to be applied by them in payment of the interest on the debentures of the, present issue to the extent to which such interest is not provided for under clause 3, subsection (2), hereof, and, so far as not immediately required for such interest, to be carried to the credit of a sinking fund, to secure interest, or (at the discretion of the Trustees) to redeem the debentures of the said series for the time being issued and outstanding, in manner hereinafter mentioned : Provided, however, that of such sinking fund the Trustees shall be bound (for the purpose of securing interest) to retain in their hands, or under their control, a portion equal in amount or value to interest for twelve calendar months at the rate aforesaid on such of the debentures of the said series as shall have been issued, and shall for the time being be outstanding, such amount or value to be ascertained irrespective of any moneys which may be in the hands of the Trustees under clause 3, subsection (2), hereof : Provided, further, that it shall not be obligatory on the Trustees, unless when specially required in that behalf in writing by some holder of a debenture of the said series, to see to the payment over to themselves of any such proceeds or royalties as aforesaid under this clause, and no omission or neglect in any such respect shall be chargeable as a breach of trust: Provided also that no purchaser or transferee of any such lands shall be concerned to inquire whether this covenant has been or is about to be observed, or shall be affected by any notice to the contrary, and that no grant, sale, or exchange, or other disposition shall be impeached or rendered invalid on account of any breacb of this covenant: Provided, lastly, that the word " sale "in this clause shall not be deemed or construed to include a lease, or agreement for a lease, for a term not exceeding twenty-one years at a premium, nor shall any premium received on such lease be deemed or treated as proceeds of sale under this clause. (4.) That, beyond the present issue of debentures, no further issue of bonds, debentures, or debenture-stock shall be made by the Company until (1) the portion of the said railway from Brunnerton to Reefton shall have been fully constructed, completed, and equipped to the satisfaction of the Engineer, as provided by the said contract,

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and ready to be open for traffic; or until (2) the whole of the present issue of debentures has been fully paid off and discharged, or the said sum of £745,000, and all interest in respect thereof up to the date at which such debentures shall become payable, shall have been paid to the Trustees for the purpose of the redemption and payment thereof, whichever of these two events shall first happen. 4. If (1) at any time default shall be made in payment of interest secured by the debentures or any of them forming part of the said series for the time being outstanding for four months after the same shall become due ; or if (2) an order be made or an effective resolution of the Company be duly passed for the winding-up of the Company ; or if (3) a distress or execution be levied or sued out upon or against any of the chattels or property of the Company; or if (4) the Company commit any breach of or incur any forfeiture or penalty under the terms of the hereinbefore-recited contract with the Queen, dated the 3rd day of August, 1888, or under the terms of the Acts of Parliament recited or referred to in such contract, or omit to appoint and continue a duly-accredited representative in New Zealand under the provisions in that behalf contained in the said contract; or if (5) the Company commit a breach of some covenant herein contained, —then and in any of such cases the Trustees or Trustee may, in their or his discretion, and shall if required so to do by resolution passed at any meeting of the holders of such of the debentures of the said series as may for the time being be outstanding, to be called under the provisions of the 13th clause hereof, without any further consent on the part of the Company, enter upon and take possession, either in the name of the Trustees or any one or more of them, or in the name or names of any receivers or receiver agents or agent to be appointed under the powers in that behalf hereinafter contained, of the said railway, lands, timber, and all and singular other the property for the time being hereby charged, and may in their or his discretion either sell and convert the same into money, or manage and work the same, and for such purpose exercise and carry into effect all and every the powers, contracts, and obligations of the Company, or such of the powers, contracts, and obligations as can or may be lawfully delegated by the Company for the purpose of this security. 5. No purchaser shall be bound or entitled to see or inquire whether any of the principal moneys secured by any of the said debentures have become payable, or whether any default has been made by the Company in the terms of these presents or otherwise as to the necessity or expediency of any sale made by the Trustees or Trustee of these presents for the time being, or of any stipulations and conditions ancillary to any such sale ; but all sales and acts by the Trustees or Trustee for the time being under or purporting to be effected under the provisions of these presents shall, notwithstanding any impropriety or irregularity whatsoever, be deemed, so far as regards the safety and protection of any purchaser or purchasers to be within the powers of the Trustees herein contained, and to be valid and effectual accordingly ; and the remedy, if any, of the Company shall be in damages only, and the receipt of the Trustees or Trustee for the time being for the purchase-moneys of any premises that may be sold under these presents and for all moneys whatsoever that shall in any wise be payable to the Trustees or Trustee under these presents shall effectually discharge the persons or person paying the same and from being concerned to see to the application thereof. 6. The Company further covenants with the Trustees that the Company will, at its own expense, at any time hereafter, on demand, execute to the Trustees a legal mortgage or legal mortgages of all or any of the properties for the time being hereby charged or any part or parts thereof respectively, subject to the reservations and with the powers herein contained, and will do all such acts and things and execute all such documents as shall or may be necessary for enabling the Trustees to procure grants of the lands available for selection by the Company under the said contract to the Trustees, or to their receivers, managers, agents, or nominees; and, further, that the Company will at the like expense do all or any acts that may be necessary or deemed desirable for the purpose of registering any such mortgage or mortgages, grant or grants, in such names as the Trustees shall direct for the purpose. 7. The Trustees shall hold all moneys that shall be received by the Trustees or Trustee under or by virtue of clause 4 hereof (other than and except the said sum of £93,000, the trusts whereof are hereinbefore declared) upon trust —in the first place, to pay or retain the costs and expenses incident to the execution of the trusts hereof ; secondly, to pay to the holders of debentures of the said series as may be outstanding, pari passu, in proportion to the amounts due to them respectively, and without preference or priority, all arrears of interest remaining unpaid ; thirdly, to pay to the said holders of the same debentures, pari passu, in proportion to the amount due to them respectively, and without preference or priority, the principal moneys due on such debentures ; and lastly, to pay the surplus, if any, of such moneys to the Company. 8. The Trustees may invest all moneys that shall from time to time be paid to or received by them on account of the sinking fund mentioned in clause 3, subsection (3) hereof, or that shall be realised by means of the exercise of any of the powers of the Trustees hereinbefore contained in any manner for the time being authorised by statute, or by the rules for investment of trust moneys under the control of the Chancery Division of the High Court of Justice, or by placing the same with their said bankers on deposit. 9. The Trustees may, if they shall enter into possession and carry on any of the company's business under the powers hereinbefore contained, employ such agents, managers, receivers, accountants, servants, and workmen, upon such terms as to remuneration and otherwise as they shall think proper, and may repair and renew any buildings, plant, machinery, or implements, and make any additions or improvements to the premises, and generally may do or cause to be done all such acts and things, and may enter into such arrangements respecting the premises, or the working of the same or any part thereof, as they could do if absolutely entitled thereto, and without being responsible for any loss or damage which may arise or be occasioned thereby, and may also at discretion demise, farm, or let the premises, or any part thereof, upon such terms and subject to such stipulations as the Trustees shall think fit; and the Trustees shall, by and out of the rents and profits and income

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of the premises and the moneys to be made in carrying on the said business, pay and discharge the expenses incurred in and about such management, or in the exercise of any of the powers aforesaid or otherwise in respect of the premises, and all outgoings which they shall think fit to pay, and shall pay the residue of the said rents and profits and moneys to the reserve fund hereinbefore provided: Provided, nevertheless, that the exercise of the powers in this clause shall be subject to the conditions of the said contract. 10. The Trustees may delegate all or any of their powers of management to receiver or agent at such remuneration, or on contract, and generally on such terms as they shall think fit, and without being responsible for any loss, and so that no Trustee shall be compellable by the exigencies of the trust to proceed to New Zealand for the execution of the duties of these presents. 11. If and whenever there shall be standing to the credit of the sinking fund mentioned in clause 3, subsection (3), money or investments of a value in excess of interest for twelve calendar months at the rate aforesaid on such debentures of the said series as shall have been issued and shall for the time being be outstanding, such excess may, at the discretion of the Trustees, be applied by them in the redemption of such debentures by means of drawings in the manner mentioned in the form of debenture contained in the First Schedule hereto, or otherwise on production to the Trustees by the Company of any debenture or debentures of the said series which the Company shall have purchased in the market at a price nor exceeding 105 per cent., and shall have thereupon cancelled, the Trustees may, out of the said excess, pay over to the Company an amount equivalent to the money expended by the Company in such purchase. 12. The Company further covenants with the Trustees as follows :—First: That the Company will, after the period of two years and a half for which the payment of interest is secured by the said sum of £93,000 covenanted to be paid to the Trustees as hereinbefore mentioned, pay the interest secured by all and every of the debentures of the said series that shall have been issued and be outstanding, and also the principal moneys secured by such of the said debentures as may become payable, as and when the same shall become due respectively, in accordance with the tenor thereof respectively, and will observe and perform the conditions indorsed thereon respectively. Secondly : That the principal moneys and interest intended to be secured by the debentures having the benefit of the security shall be a first charge on the premises hereby charged in favour of such debentures respectively, and that the said principal moneys and interest shall take precedence over all moneys which may hereafter be raised by the Company by any means whatsoever, and that, as between the several holders thereof (except as herein otherwise provided), the debentures of the said series (including any fresh debentures that may be issued in discharge of and substitution for any of the said debentures, all which fresh debentures are intended to be secured by these presents in like manner as those for which they were substituted), shall rank pari passu without any preference or priority by reason of date of issue or otherwise ; and, further, that the Company will at all times keep an accurate register of the debentures having the benefit of this security, showing the number and holder of each debenture, and the date of issue, and the date and manner of the discharge, redemption, or purchase of any debentures that may have been discharged, redeemed, or purchased, and that the Trustees and the holders of debentures of the said series or any of them shall be at liberty at all reasonable times to inspect the said register, and to take copies of or extracts from-the same or any part thereof. Thirdly: That the Company will, during the continuance of this security, carry on and conduct the business of the Company to the greatest possible advantage; and will keep proper books of account, and therein make true and perfect entries of all dealings and transactions of or in relation to the said business ; and that the said books of account, and all other documents relating to the affairs of the Company, or true copies thereof, shall be kept at the registered office of the Company, or at some other proper and convenient place or places in or near to the City of London, and that the same shall at all reasonable times be open for the inspection of the Trustees and such person or persons as they shall from time to time, in writing, for that purpose appoint ; and that the Company will, at all times during continuance of this security, give to the Trustees, or to such person or persons as aforesaid, such information as shall be required as to all matters relating to the said business, or any after-acquired property of the Company, or otherwise relating to the affairs thereof. Fourthly : That the Company will perform and observe all the conditions of the said contract with the Queen. 13. The Trustees may at any time, and they shall on the requisition in writing of the holders of one-fifth in value of such of the debentures entitled to the benefit of this security as may for the time being be outstanding, summon a meeting of the holders of such debentures by sending to them seven days' notice thereof in manner required by the conditions of the said debentures for the giving of notices. Every such meeting shall be held at such time and place, and shall be conducted in such manner, as the Trustees shall from time to time prescribe, except only that votes may always be given either personally or by proxy, and that voting-power shall be strictly in proportion to the nominal amount secured by the debentures held, and in default of prescription such meetings shall be held and conducted, as nearly as may be, in like manner as meetings of the shareholders of the Company. And any resolution passed at any meeting so held as aforesaid directing the Trustees to exercise or abstain from exercising any power, or to do or abstain from doing any act, or allowing the Company any time for the payment of money, or sanctioning any waiving of rights or any compromise, adjustment, or abandonment of any claims against the Company, shall be as binding and effectual on and against all the holders of the said debentures as if such holders had been sui juris, and had, for valuable consideration, given such direction, allowance, or sanction. And during the pendency of any meeting, bond fide called for the purpose of passing any such resolution as aforesaid, the Trustees shall not, even though otherwise required hereunder so to do, exercise any power or do any other act or thing in conflict with or otherwise prejudicing or affecting any proposal to be considered at such meeting : Provided that the provisions of this clause shall not prejudice or

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affect the rights or powers of the Trustees as regards any purchaser or other third party, and that no such third party shall be concerned or entitled to inquire as to or be bound by any notice of any such resolution as aforesaid, or the pendency of any meeting or any other matter or thing under the present clause. 14. The power of appointing new Trustees contained in " The Conveyancing and Law of Property Act, 1881," shall apply to these presents. 15. The Company hereby covenants with the Trustees that the Company will in each and every year during the continuance of this security pay to each of the Trustees as and by way of remuneration for his services as Trustee the sum of £100, by equal half-yearly payments on the 12th day of October and the 12th day of April in each such year (the first such payment to be made on the 12th day of October next), in addition to all travelling and other costs, charges, and expenses which he may incur in relation to the execution of the trusts hereby in him reposed. And it is hereby agreed and declared that the Trustees shall be deemed to be entitled to, as against all parties interested hereunder, and may retain or pay to themselves out of any moneys in their hands upon the trusts of these presents the amount of the remuneration hereinbefore covenanted to be paid to them, or of any such costs, charges, or expenses as aforesaid ; and, further, that the Trustees shall not be responsible for any loss or damage occurring through any act, neglect, or default of each other or of any persons or person employed by them, although such persons or person need or should not have been employed in the ordinary course of business, or through any error or mistake made in good faith, or through any other cause whatsoever except the gross personal negligence or fraud of the Trustee sought to be made responsible. And no Trustee shall be personally liable for neglecting to exercise any power of sale or other remedy, although herein expressed as a trust ; nor shall any Trustee be called upon to act in the trusts hereof in any manner which may involve him in expenses or liability without being first indemnified. 16. Upon proof being given to the reasonable satisfaction of the Trustees that all the debentures entitled to the benefit of the trusts herein contained, and for the time being issued, have been paid off or satisfied, and upon payment of all costs, charges, and expenses incurred by the Trustees in relation to these presents, the Trustees shall, at the request of the Company, vacate in favour of the Company the charge hereby created, and shall, if they shall have entered on the premises and be in possession thereof under the powers in that behalf hereinbefore contained, forthwith vacate such possession ; and, if any mortgage shall have previously been executed under clause 6 hereof, shall at the expense of the Company reconvey to it the property comprised in such mortgage, and vacate on registration thereof. In witness whereof the New Zealand Midland Railway Company (Limited), hath caused its common seal to be hereunto affixed, and the parties hereto of the second or other part have hereunto set their hands and seals, the day and year first above written.

The First Schedule to the Foregoing Indenture, comprising a Copy of the Form of Debentures to secure the Before-mentioned Sum of £745,000. The New Zealand Midland Railway Company (Limited). Issue of £745,000 First-mortgage Debentures, being Part of a Series of £2,200,000 Firstmortgage Debentures, in amounts of £100, £500, and £1,000, each at the Option of the First Holder, and carrying Interest at the rate of £5 per Cent, per Annum. No. . Debenture . £ 1. The New Zealand Midland Railway Company, Limited (hereinafter called " the Company ")> will, on the day of , 1909, or on such earlier day as the principal moneys hereby secured become payable, in accordance with the printed conditions indorsed hereon, pay to A.8., or to the bearer, or, when registered, to the registered holder, on presentation of this debenture the sum of £ 2. The Company will, in the meantime, pay interest thereon at the rate of £5 per cent, per annum on every 15th day of October and 15th day of April, in accordance with the coupons annexed hereto. 3. This debenture is issued subject to the conditions indorsed hereon. Given under the common seal of the Company, this day of The common seal of the Company was affixed hereto by) authority of the Board in the presence of— j Directors.

(Coupons to be annexed.) The New Zealand Midland Railway Company (Limited). Debenture No. , Interest Coupon No. , for pounds shillings, half-year's interest, due the day of , and payable at the Bank of Messrs. Robarts, Lubbock, and Co., 15, Lombard Street, London, E.C., or at the registered office in London of the Company (less income tax). Secretary.

The Conditions within referred to. 1. This debenture is one of a series of debentures for securing principal sums not exceeding together £2,200,000. Each debenture of the series is to be for such one of the three respective

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amounts of £100, £500, and £1,000 as may be agreed between the Company and the first holder. The holders of debentures of the said series are and will be entitled pari passu to the benefit of an indenture of charge upon the Company's property, dated , 1889, and made between the Company of the one part and Beaumont William Lubbock and others as Trustees of the other part. And this debenture is subject to all the provisions and conditions in the said indenture. 2. Annexed to this debenture are forty coupons, each providing for the payment of a halfyear's interest, and such interest will be payable only on presentation and delivery of the coupons referring thereto. 3. The principal moneys and interest hereby secured will be paid at the Bank of Messrs. Eobarts, Lubbock, and Co., 15, Lombard Street, London, E.C., or at the registered office in London of the Company, without regard to any equities between the Company and the original or any intermediate holder of this debenture. 4. If the principal moneys hereby secured shall under the provisions of the said indenture or of this debenture become payable before the expiration of twenty years from the date of the issue hereof, the person presenting this debenture for payment must surrender therewith the coupons representing subsequent interest, the Company nevertheless paying the proportion of interest for the fraction of the current half-year. 5. The delivery to the Company of this debenture and of each of the said coupons shall be a good discharge for the principal moneys and the interest therein respectively specified, and the Company shall not be bound to take notice of any trust affecting such moneys, or be affected by express notice of the title or claim of any other person than the bearer to such moneys or instruments : Provided nevertheless that when registered as hereinafter provided the receipt of the registered holder, his executors or administrators, shall alone be a good discharge for such principal moneys. 6. If at any time default shall be made in payment of the interest secured by any debenture forming part of the aaid series, and for the time being outstanding for four calendar months after such interest shall have become payable, or if an order shall be made or an effective resolution be passed. for the winding-up of the Company, or if a distress or execution be levied or sued out, upon, or against any of the chattels or property of the Company, or if the Company commit any breach of or incur any forfeiture or penalty under the contract of the 3rd August, 1888, or under the terms of the Acts of Parliament in the said indenture mentioned, or commit any breach of the convenants therein contained, then the principal moneys hereby secured shall immediately become payable. 7. The Company may at any time redeem this debenture by purchasing the same in the Company's name in the market at any price not exceeding £105 for every £100 of principal moneys hereby secured. 8. The Company may redeem any debenture of the said series at the like price upon ascertaining the debentures to be so redeemed by drawings to be held in the presence of some Notary Public, any such drawing to be on the Ist May, and three calendar months' previous notice thereof to be given by advertisement in two London daily newspapers, and immediately after this debenture has been drawn notice thereof shall be given by the Company by like advertisement. 9. The first'issue of debentures of the said series is limited to a principal sum of £745,000, and no further issue thereof shall be made until the portion of the Company's works comprised in the railway-line from Brunnerton to Eeefton shall have been fully constructed, completed, and equipped as provided by the said indenture, or until the whole of the said first issue of debentures has been fully paid off, or the said sum of £745,000, with interest, has been paid to the Trustees of the said indenture as therein provided. 10. This debenture is, except when registered, transferable by delivery, and all persons may act accordingly ; but the Company shall, on the application of the holder for the time being of this debenture, and on presentation hereof and receipt of such fee not exceeding 2s. 6d. as the Directors may from time to time determine, enter into the register of debentures the name and address of such holder, or his nominee, and the number of this debenture and the memorandum of such registration shall be inscribed hereon, and signed by the Secretary, and this debenture when registered shall be transferable only by instrument of transfer and registration in the books of the Company ; and the Company shall, on the application of any registered holder, and on presentation of this debenture, when so registered, cancel any such registration and the inscribed memorandum, and thereupon this debenture shall again become transferable by delivery. 11. A register of the debentures shall be kept at the Company's registered office in London, wherein there will be entered the names, addresses, and descriptions of the registered holders and particulars of the debentures held by them respectively. 12. The Company shall not be bound to enter in the register notice of any trust, and in the case of joint registered holders the principal moneys hereby secured shall be deemed to be owing to them upon a joint account. 13. No transfer shall be registered during the seven days immediately preceding the days by the said coupons fixed for payment of interest.

The Second Schedule referred to in the Foregoing Indenture containing a Description of the Properties specially referred to in the Prospectus of Issue as security for the Repayment of the said Sum of £745,000, but without thereby limiting the Generality of the Charge effected by the Foregoing Indenture. (1.) The portions of the said railway constructed out of the first issue of share-capital, including the rolling-stock equipment and surveys. (2.) The further portions of the said railway intended to be constructed and equipped according to contract out of the proceeds of the present issue of debentures.

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(3.) The grants of land to which the Company will become entitled in consideration of the expenditure on the railway to be constructed out of the proceeds of the said debentures, amounting to 300,000 acres or thereabouts, together with the timber thereon, and all such mines and minerals thereunder as may be granted by the Company. The common seal of the New Zealand Midland Rail- \ ( New Zealand Midland \ way Company (Limited) was hereunto affixed in - - Railway Company L the presence of — J ( (Limited). j Thos. Salt, 1 Direc tors Henry V. Hart Davis, ] .ZEneas R. McDonell, Secretary. Signed, sealed, and delivered by the above-named \ R w LIJBBOCK . (l . s .) Beaumont William Lubbock and Roderick Pryor Eoderick Pryor. l.s. m the presence of— J Horace E. Golding, Of 99, Cannon Street, London, Solicitor. Signed and delivered by the above-named j B c MoRGAN . (Lg<) Edmund Charles Morgan in the presence of — ) J. A. Braik, Accountant, 79, Gracechurch Street, E.C. Signed, sealed, and delivered by the above-named ) Fbed a Weld _ (&fe) Sir Frederick Aloysius Weld in the presence of — ) Arthur Martin, Relief Clerk, G.W.R., Maiden Newton.

EXHIBIT B. [The Lists will close on Wednesday next, 17th, at Four p.m., for both Town and Country.] THE NEW ZEALAND MIDLAND RAILWAY COMPANY (LIMITED).—INCORPORATED UNDER THE COMPANIES' ACTS, 1862 TO 1882. Issue of £745,000 5-per-cent. First-mortgage Debentures (specially secured as stated within) . Lloyds' Bank (Limited) and The National Bank op New Zealand (Limited), are instructed to receive applications for the under-mentioned First-mortgage Debentures, at the price of £92 10s. per £100 Debenture, in Debentures of £100, £500, and £1,000, at the option of the holder; being part of a creation of £2,200,000, repayable at par at the expiration of 20 _ years, and redeemable by purchase in the market, at any price not exceeding £105, or by drawings at that price, on three months' notice. No further issue will be made pending the completion of the line to Reefton, or until such issue is repaid in the terms of the trust deed. Payable—£lo on application, £22 10s. on allotment, £20 on 13th May, 1889, £20 on 15th July, 1889, and £20 on 16th September, 1889. Applicants have the option of paying up in full, under discount, at the rate of £4 per cent, per annum. Interest for two and a half years (i.e., during construction) will be deposited. Interest will be paid half-yearly, the first payment being made on the 15th October next. Trustees for the Debenture-holders .—Beaumont William Lubbock, Esq. (Messrs. Robarts, Lubbock, and Co.); Edmund Charles Morgan, Esq., Deputy-Chairman of the National Bank of New Zealand, and late Director of the Bank of Bengal; Roderick Pry or, Esq., Hylands, Chelmsford ; and Sir Frederick A. Weld, G.C.M.G., late Premier of New Zealand. Solicitors for the Trustees. —Paine, Son, and Pollock, 14, St. Helen's Place, E.C. Directors. —Thomas Salt, Esq., M.P., Chairman (Chairman of Lloyds' Bank, Limited); E. Brodie Hoare, Esq., M.P., Deputy-Chairman (Chairman of the National Bank of New Zealand, Limited, and Director of Lloyds' Bank, Limited) ; Sir Charles Clifford, Bart. (Chairman of the New Zealand Trust and Loan Company, Limited); H. V. Hart-Davis, Esq. (Messrs. Hoare, Wilson, and Co., London); C. Shirreff B. Hilton, Esq. (Messrs. Miles Brothers and Co., London; also Christchurch and Timaru, New Zealand); Walter Chamberlain, Esq., Harborne Hall, Birmingham, will join the Board, subject to the sanction of a general meeting, in accordance with the Articles of Association. Bankers. —Lloyds' Bank (Limited), 72, Lombard Street, E.C, and all branches; the National Bank of New Zealand (Limited), 71, Old Broad Street, E.C, and New Zealand. Brokers. —Messrs. Coleman and May, 2, Tokenhouse Buildings, E.C. Solicitors. —Messrs. Burchell and Co., 5, The Sanctuary, Westminster. Auditors. —Messrs. Cooper Bros, and Co., 14, George Street, Mansion House. Engineer. —Robert Wilson, Esq., M.1.C.E., Joint Consulting Engineer to the Government of New Zealand, 7, Westminster Chambers, S.W. Secretary. —i Eneas R. McDonell, Esq., 79, Gracechurch Street, E.C. The company was incorporated for the purpose of constructing the above-mentioned railway under a contract, dated 17th January, 1885, entered into by the Governor of New Zealand, on behalf of Her Majesty the Queen, under Acts of the New Zealand Parliament, and since assigned to the company, which contract has since been superseded by a contract with the Governor of New Zealand, dated the 3rd day of August, 1888, under which the company has secured additional advantages. Of the share capital, amounting to £500,000, £250,000 has been fully subscribed and already expended on work which will form part of the security for the present issue, as hereafter explained. 6—l. 7.

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Under this contract the Government have subsidised the company by a free grant of upwards of 2,000,000 acres of land. This land is not to be taken in alternate blocks (as is so often the case), but may be selected by the company at their option, within a very large area of the Middle Island specially reserved by the Government for that purpose. The Government have guaranteed that should these lands not bring in £1,250,000 to the company, additional lands shall be granted to bring up the selling value to that figure. From the valuations made in the colony it is anticipated that the land, when the whole line is made, will realise at least £2,500,000. All increase in value arising from any source belongs to the company, without in any way reducing the above guarantee. Mr. Thomas Pavitt, of Christchurch, timber valuer, estimates that the timber alone on 91,000 acres, in the vicinity of the line now to be built (out of a large acreage under timber included in the company's option), is worth, apart from the value of the land when cleared, £635,000. The timber consists chiefly of red- and white-pine with birch, and there is a large and increasing demand for these woods in the colony and Australia. ' This railway is the only authorised line connecting (as shown in the accompanying map) the east and west coasts of the Southern Island, and, while affording through communication between the City of Christchurch and the ports of Greymouth and Nelson, will unite agricultural and pastoral districts with others abounding in timber, as well as gold, coal, and other minerals. The large junction station at Stillwater, and the railway from Brunnerton to Kaimata (in the timber district) and Stillwater to Nelson Creek (in the gold and coal district) —about fifteen miles in all— have been completed and passed by the Government Inspector. Instructions to open the line have been sent out, and a good paying traffic is at once expected. Rolling-stock belonging to the company, sufficient for the line to Reefton, is already in the colony. The present issue of debentures is made (1) to extend and equip the line to Reefton, about forty miles; (2) to make and equip about twelve miles of line into the timber district above referred to; and (3) to construct, in accordance with the contract, at Springfield (Christchurch) and Belgrove (Nelson), the extension (about six miles at each place) of Government railways now in operation at these points; in all about sixty-four miles of railway. The line to Reefton passes through the best coal and gold districts of the colony, where during the last few years much land has been taken up for farming and mining, and the population is rapidly increasing, and the demand for land (which is under the contract withheld from sale by the Government) is far in excess of what the company is now able to supply. There is now a substantial traffic between the important and growing townships of this district and the harbour of Greymouth, which will be largely increased by the construction of the railway. It is estimated that the existing wagon and highway traffic alone should yield about 5 per cent, upon the capital required for this section. The gross receipts of the Greymouth Government line, of which this line is a direct extension, were £3,602 per mile for the financial year ending 31st March, 1888, and when the accounts for the year ending March, 1889, are published, it is believed this figure will be maintained. It is estimated that an annual gross receipt of only £1,100 per mile on the Reefton section would pay 8 per cent, upon the capital required for this work. No further issue of debentures will be made until the line to Reefton is complete and in working order, or until the present issue is repaid in the terms of the trust deed; and the security for the present issue of £745,000 will be— Railway already constructed out of first issue of share capital, includ- £ ing rolling-stock, surveys, &c. ... ... ... ... 220,000 Railway to be constructed and equipped according to contract out of the proceeds of this issue ... ... ... ... ... 545,000 Land, about 300,000 acres, to be granted to the company in consideration of above expenditure, and taken at waste-land value of 10s. per acre... .. ... ... ... ... ... 150,000 Timber on only 91,000 acres in the immediate neighbourhood of the line now to be constructed, separately valued at ... ... 635,000 Total value of security ... ... ...£1,550,000 In addition, the present issue will enable the company to discharge all expenses attending the issue, to complete the surveys for the line, to pay interest and costs of administration during construction, and to open up the timber lands referred to. These addenda will, it is estimated, absorb £200,000. Interest at 5 per cent, per annum for two and a half years will be secured on the present issue by a deposit in the hands of the trustees of a sum sufficient to discharge the same. All proceeds arising from the sales of land granted in respect of the railway to be built, and from timber, royalties, &c, will be devoted to a sinking fund to secure interest and to redeem the debentures, either by purchase in the market at any price not exceeding £105 per £100 debenture, or by drawings at £105 on the Ist May in each year, when advertised. Three months' notice of such repayment will be given. A draft of the trust deed securing the debentures, and a copy of the contract between the Governor of New Zealand on behalf of Her Majesty the Queen and the company, can be seen at the offices of the company. Applications in the form accompanying the prospectus, together with a deposit of £10 per cent, on the amount applied for, must be forwarded to Lloyd's Bank (Limited), 72, Lombard Street, E.C, or to the National Bank of New Zealand (Limited), 71, Old Broad Street. Prospectuses and forms of application can be obtained from the bankers, or at the offices of the company, No. 79, Gracechurch Street, E.C. 12th April, 1889. ' ; '•

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EXHIBIT 0. Return showing Details of the Item " Constructing the Line to 25th April, 1896, £763,958 16s. 6d.," appearing in the pro formd Balance-sheet at 25th April, 1896. £ s. d. Construction plant ... ... ... ... ... 2,366 14 10 Working railways plant and fittings ... ... ... 962 3 9 Stations and buildings ... ... ... ... ... 388 1 9 Locomotive certificates ... ... ... ... ... 13 2 6 Construction account, being payments to contractors ... 523,324 5 10 Wagon-covers, ropes, &c. ... ... ... ... ... 152 12 10 Carriage of construction material ... ... ... ... 3,587 7 3 Compensation account (Belgrove line) ... ... ... 1,532 14 2 Rolling-stock ... ... ... ... ... ... 27,977 5 0 Compensation account (Reefton line) ... ... ... 28,077 0 0 Wages and salaries ... ... ... ... ... 23,639 1 5 Office rent ... ... ... ... ... ... 239 5 0 Sundry repairs ... ... ... ... ... ... 219 4 6 Insurance ... ... ... ... ... ... 637 Freight account... ... ... ... ... ... 327 9 3 Locomotive fuel issued ... ... ... ... ... 786 Sundry expenses ... ... ... ... ... 1,994 17 0 Clothing ... ... ... ... ... ... 3 6 0 Telegraph, &c, materials... ... ... ... ... 185 10 6 Siding at Brunnerton ... ... ... ... ... 180 0 0 Compensations account (East and West line) ... ... 5,290 2 3 Advertising .. ... ... ... ... ... 75 19 6 Stationery and printing ... ... ... ... ... 130 13 4 Surveys ... ... ... ... ... ... 18,385 12 4 - ■ Law costs ... ... ... ... ... ... 1,10114 11 Discounts, bank charges, &c. ... ... ... ... 301 16 8 Rates and taxes Postages and telegrams ... .... ... ... ... 246 14 10 Travelling expenses ... ... ... ... ... 322 9 11 Office expenses ... ... ... ... ... ... 93 19 5 Customs duty ... ... ... ... ... ... 7 3 3 Permanent way... ... ... ... ... ... 73,108 10 2 Land plans ... ... ... ... ... ... 1,993 2 5 Leasehold lands rents ... ... ... ... ... 21 8 0 Purchases of horses ... ... — ... 191 2 6 Carriage ... ... ... ... ... ... 50 0 0 Engineers'fees ... ... ... ... ... ... 43,192 15 3 Materials for use in carriages and wagons .. ... ... 61 4 5 Signals ... ... ... ... ... ... 3 10 Land plans (Belgrove section) ... ... ... ... 199 0 0 Level crossings ... ... ... ... ... ... 430 Stores issued ... ... ... ... ... ... 404 4 6 Parliamentary expenses ... ... ... ... ... 3,220 0 4 Compensations account (suspense account) ... ... ... 115 10 0 Working railways reference plans ... ... ... ... 254 14 10 Total ... ... ... ... ... ... £763,958 16 6

Statement of Estimated Liabilities and Assets at 30th June, 1896.

Liabilities. Assets. £ s. d. £ s. d. To Mortgages by the Company to the By Lands earned and selected, at contract National Bank, Ohristchurch .. 86,578 15 10 valuation, not yet sold .. .. 55,531 15 3 Income-tax .. .. .. 1,819 15 0 Lands earned but not selected (valuaCounty rates .. .. .. 1,111 10 6 tion in terms of the award) .. 21,066 0 0 Sundries.. .. .. .. 60 4 1 Office furniture, stock of timber, and Interest on mortgages to 30th June, timber drying-sheds .. .. 503 0 0 1896, say .. .. .. 1,610 7 2 Sundry debtors for land sold, secured Sundry creditors (£4,831 lis. lid.) — by mortgage, and agreements to Sundry accounts .. .. 750 0 0 mortgage .. .. .. 62,703 6 9 Bates and taxes .. .. 2,009 1 11 Sundry debtors for rent .. .. 800 0 0 Rent .. .. .. .. 72 10 0 Estimated survey fees .. .. 2,000 0 0 96,012 4 6 Balance carried down .. .. 44,591 17 6 Total .. .. ..£140,604 2 0 Total .. .. .. 140,604 2 0 Balance brought down .. .. £44,591 17 6

- E. & 0. E. P. 11. LABATT, Christchurch, 13th July, 1896. Accountant to Receiver.

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Lands Earned and Selected at contract valuation, not yet sold.

Sundry Debtors for Land Sold, secured by Mortgage, and Agreements to Mortgage. £ s. d. £ b. d. Dixon, M. ... ... ... ... ... ... 8,740 0 0 Jane, A. ... ... ... ... ... ... 237 0 0 Wallis, H. ... ... ... ... ... ... 17 10 5 Buttola, P. ... ... ... ... ... ... 99 0 0 Cameron, J. ... ... ... .... ... ... 60 0 0 Vaughan, E. ... ... ... . ... ... 25 13 4 Hall, Sir J. ... ... ... ... ... ... 3,421 9 0 York, T. ... ... ... ... ... ... 12,100 0 0 Giles, E. D. ... ... ... ... ... ... 3,487 0 0 Burke Bros. ... . . ... ... ... ... 17,750 0 0 Vincent, W. ... ... ... ... ... ... 4,800 0 0 Maclure and others ... ... ... ... ... 2,932 10 0 Fox, Colonel ... ... ... ... ... ... 5,750 0 0 Lester ... ... ... ... ... ... ... 3,283 4 0 62,703 6 9 Sundry debtors for rent — Parker and Palmer ... ... ... ... ... 600 0 0 Sundry amounts ... ... ... ... ... ... 200 0 0 800 0 0 Total ... ... ... ~, ... ... ... ... £63,503 6 9 Christchurch, 13th July, 1896,

loc. rea. .moun Share account 131 63 „ „ Westport town sections „ „ Ahaura „ „ „ „ Cobden „ „ A. 17 1,437 E. P. 0 0 1 19 £ s. d. 8 10 0 1,437 7 5 917 10 0 399 0 0 527 10 0 Deduct excessive areas sold ... 1,454 2,598 1 19 1 19 3,289 17 1,352 9 5 6 Debenture account 26 28 42 43 44 48 it- n 53 Pt. 54 62 64 70 71 '„ •'*.„ 77 Pt. 220 1,144 0 0 1,937 7 11 10,590 10,172 6,178 5,570 300 31,564 2,100 338 5,658 269 56 1,750 1,914 0 18 2 33 0 0 0 0 0 0 0 0 0 0 0 4 2 23 1 20 0 0 2 34 0 0 10,590 2 3 10,172 14 1 4,633 10 0 4,177 10 0 0 0 3 225 0 0 15,782 0 0 1,050 0 0 338 0 6 5,658 12 10 134 13 9 28 0 0 875 7 2 957 0 0 Deduct excessive areas sold ... 76,461 1,638 2 12 3 11 54,622 10 10 1,028 3 6 Totals... 74,822 3 1 53,594 7 4 73,678 3 1 55,531 15 3

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Statement of Mortgages by the Company.

Statement of Lands Earned and Selected at Contract Valuation, to 30th June, 1896.

F. H. Labatt, Christchurch, 4th July, 1896. Accountant to Receiver.

Name of Mortgagee. Registered Number, and date of Mortgage. fount Secured. 'arl ;iculars of charged. .am Charles Barclay, Lord Claud Hamilton, and J. B. Braithwait (East Water Trust). 33,544, Canterbury; dated 15 Nov., '94. £ s. d. 40,000 0 0 and interest at 4 per cent. "per annum, payable 30 June and 31 Dec This interest is payable in London All moneys owing by the Company, and interest at 5 per cent., repayable on demand. Collateral security and 5 per cent. Blocks 42, 43, and 53, Bl map, containing about 90,100 acres, Horsely Downs Blocks. Thomas Salt (N. H. M. Dalston, Attorney). Unregistered ; dated 7 Jan, '96 ; caveat 1847, lodged by Mr. Salt'sjattorney. Block 65, P.R. 81/292, containing about j 3,016 acres. (Sir J. Hall's block.) Thomas Salt 3,964,Nelson; dated 20 Feb., '95. 6,000 0 0 Part Block 220, Bl map, 1,914a. 2r. 13p. (Blackball Block.) Part Block 220, Bl map, 1,914a. 2r. 13p (Blackball Block), and also over all estate and interest in any land in New Zealand to which company has any claim. Part Block 64, Bl, containing about 5,823 acres. (Cordy's block.) Thomas Salt Unregistered ; dated 26 Dec,'95 ; caveat 109, Nelson; lodged by Mr. Salt's attorney. 10,000 0 0 and further advances and interest at 5 per cent., repayable on demand. Interest payable 14 May and November. The principal owing on Mr. Salt's mortgages is £16,000. and interest at 7£ per cent, to per cent., repayable 21 June, 1896 ; matures 21 June, 1898. Interest payable 21 June and 21 Dec. The company is at liberty to pay off on giving three months' notice. and interest at 6J per cent. The principal owing on Wilson's mortgages is £6,200 Robert Wilson (N. H. M. Dalston, Attorney). 2,200 0 0 Unregistered; dated 26Dec, '95; caveat 1848, lodged by Mr. Wilson's attorney Robert Wilson 1,119, Westland District Block 26, Bl map, containing about 10,698a. and 18p. Forest land on Lake Brunner. 90,100 acresji (Horsley Downs). 4,000 0 0 National Bank of N.Z. Second mortgage, 33,545; dated 16 Nov., 1894, Canterbury 1,100, Westland .. / National Bank of N.Z. 10,172a. 2r.20p., Block 28, Bl. Memorandum of mortgage 33,465 (sub-mort-gage of Dixon's mortgage). This assignment covers £5,000 of the £21,066 value which the company has right to select. National Bank 33,428a, Canterbury ►24,378 15 10* \ National Bank Assignment of £5,000 due by Government award 86,578 15 10 * Curre; it account. The amount owing for principal and interest up to he 11th March, 1896. Christchurch, 1! Ith July, 1896.

Share- or Debenture-holders' Account. Bl Block. Bl Area. sis H < n Amended Area. Amended Bl Value. Remarks. Debenture-holders' Account.. Shareholders' Account Debenture-holders' Account .. T 1 "., T "„ "„ T Shareholders' Account Debenture-holders' Account T "„ "„ T T T T Shareholders' Account Debenture-holders' Account .. Shareholders' Account T '. Westport town Ahaura Cobden 26 28 41 42 43 44 45 46 48 50 53 Pt. 54 61 62 63 64 65 67 70 71 77 127 130 131 Pt. 220 Pt. 54 . sections A. b. p. 15,750 0 0 8,700 0 0 7,200 0 0 25,000 0 0 26,800 0 0 13,700 0 0 31,500 0 0 8,000 0 0 6,500 0 0 6,800 0 0 26,500 0 0 29,000 0 0 33,500 0 0 1,000 0 0 7,100 0 0 5,700 0 0 3,500 0 0 9,100 0 0 4,800 0 0 8,200 0 0 9,700 0 0 68,600 0 0 15,300 0 0 3,700 0 0 32,600 0 0 (See above). 20/ 20/ 15/ 15/ 15/ 25/ 13/ 15/ 15/ 15/ 10/ 10/ 10/ 20/ 20/ 20/ 22/6 20/ 10/ 10/ 10/ 10/ 10/ 10/ 10/ 10/ A. R. P. 10,698 0 18 10,172 2 33 7,347 0 38 27,000 0 0 27.100 0 0 13,629 0 0 32,437 0 0 8,586 2 21 8,550 0 0 6,738 3 24 36,000 0 0 24,000 0 0 33,126 1 24 1,068 2 32 7,087 1 19 5,999 2 23 3,016 0 0 8,956 0 0 4,864 1 20 8,433 0 0 8,393 2 34 42.101 0 0 17,646 0 0 7,292 0 0 1,914 0 0 5,269 0 0 £ s. d. 10,698 2 3 10,172 14 1 5,510 8 8 20,250 0 0 20,325 0 0 17,036 5 0 21,077 11 0 6,439 19 6 6,412 10 0 5,054 3 6 18,000 0 0 12,000 0 0 16,563 4 0 1,068 14 0 7,087 7 5 5,999 12 10 3,393 0 0 8,956 0 0 2,432 3 9 4,216 10 0 4,196 17 2 21,050 10 0 8,823 0 0 3,646 0 0 957 0 0 2,634 10 0 917 10 0 399 0 0 527 10 0 Not surveyed. Not surveyed. Not surveyed. Not surveyed. Not surveyed. Not resurveyed. Not finally surveyed. Not finally surveyed. Totals £245,845 3 2 367,416 3 6

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The New Zealand Midland Railway Company (Limited). Summary of Traffic and Revenue for the Year ending 23rd June, 1894.

♦Rents received in Greymouth. Note.— Expenditure. £ s. d. £ s. d. Gross total .. .. 16,150 2 3 8,920 8 10 Deducted by head office 774 0 6 8,803 18 10 £15,376 1 9 £116 10 0 — being rebate on Blackball coal. Greymouth, 25th August, 1894. Wellington, 25th July, 1896. F. H. Labatt, Accountant to Receiver.

PASSENGERS. PARCELS. GOODS. U CD - EC j3 (D Season Tickets. Single (Ordinary). Return (Ordinary), to +? a 09* CD •a to s 9 P B <D Ph ffl !H cc m O H Timber. Grain. Merchandise. Minerals. 1st. 2nd. 1st. 2nd. 1st. 2nd. 03 o c3 Gross total, year ending 23rd June, 1894 69 No. 8 No. 24 No. 807 No. 13,081 No. 1,988 No. 17,949 No. 33,825 No. 4,148 No. 141 No. 4 No. 360 No. 6 No. I 48 j I No. I 7 No. 2 No. 5,839 No. 161 No. 264 No. 215 Sup. ft. 4,757,300 Tons cwt. qr. 1,643 14 0 Tons cwt. qr. 4,334 17 1 Tons cwt. qr. 15,152 0 2 — i i Gross total, year ending 24th June, 1893 39 10 23 1,095 12,722 2,904 17,404 34,125 3,473 68 3 ■ 387 18 29 39 2 243 225 340 3,825,000 1,654 5 3 ! 4,315 1 1 | | 2,487 11 1 Increase 30 1 359 545 675 73 1 19 i I I 2,513 3,326 39 932,300 19 16 0 12,664 9 1 I Decrease 2 288 916 300 27 12 32 82 125 10 11 3 TRAPFK REVENUE. MISCELLANEOUS REVENUE. Passengers. Parcels, &c. Goods. Total. Carriage of Mails. Cartage. Engine and "Wagon Hire. Haulage and Cranage. Rents. Special Labour. Wagon and Sheet Mileage. Miscellaneous. Gross Total. Gross total, year ending 23rd June, 1894 £ s. d. 5,454 4 3 £ s. d. 322 3 8 £ s. d. 7,617 13 0 £ s. a. 13,394 0 11 £ s. d. 340 6 5 £ s. d. 321 9 6 £ s. a. 204 1 11 £ s. a. 12 14 4 £ s. d. 454 0 0 £ s. d. 243 15 1 £ s. d. 10 4 £ s. d. 937 18 9 £ s. d. 15,909 7 3 240 15 0* I £16,150 2 3 Gross total, year ending 24th June, 1893 5,353 2 5 242 5 4 6,190 9 11 li,785 17 8 125 0 0 288 1 2 179 15 8 77 12 0 346 1 0 69 1 0 10 0 69 9 1 12,941 17 7 1 16 0' Increase I £12,943 13 7 101 1 10 79 18 4 1,427 3 1 1,608 3 3 215 6 5 33 8 4 24 6 3 107 19 0 174 14 1 0 0 4 868 9 8 3,206 8 8 Decrease 64 17 8

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Summary of Receipts from Sales of Lands. £ s. d. Lands earned and selected (at contract valuation) ... ... ... 245,845 3 2 Deduct— Lands sold (Bl value) ... ... ... ... ... 190,313 7 11 Lands unsold (at contract valuation)... ... ... ... £55,531 15 3 Receipts from sales of lands (as per statement) ... . . ... 251,120 0 5 Deduct — Bl value of lands sold ... ... ... ... ... 190,313 7 11 Balance, being receipts from sales of lands in excess of Bl valuation ... £60,806 12 6 E. and O. E. F. H. Labatt, Wellington, 29th July, 1896. Accountant to Receiver.

Statement showing Receipts from Sales of Land and B1 Areas, and Values of Lands unsold.

F. H. Labatt, Wellington, 29th July, 1896. Accountant to Receiver.

Block. Bl Area. Bl Price per Acre. .rea contraetec to be sold. 'rice contractei to be paid. Bl Area unsold. Bl Value of Land unsold. A. B. p. a. e. p. £ s. d. 26 10,698 0 18 20/ 108 0 0 148 10 0 28 10,172 2 33 20/ 41 7,347 0 38 15/ 7,347 0 38 6,612 10 3 42 27,000 0 0 15/ 20,822 0 0 26,432 10 0 43 27,100 0 0 15/ 21,530 0 0 20,819 11 0 44 13,629 0 0 25/ 13,629 0 0 18,086 6 0 45 32,427 0 0 13/ 32,750 0 0 21,287 10 0 46 8,586 2 21 15/ 8,606 0 0 11,968 15 7 48 8,550 0 0 15/ 8,250 0 0 8,250 0 0 50 6,738 3 24 15/ 7,144 0 0 7,117 16 6 53 36,000 0 0 10/ 4,436 0 0 3,338 13 0 Pt. 54 24,000 0 0 10/ 21,900 0 0 14,235 0 0 Pt. 54 5,269 0 0 10/ 5,350 0 0 3,016 17 6 61 33,126 1 24 10/ 33,500 0 0 14,740 0 0 63 7,087 1 19 20/ 5,650 0 0 7,021 7 10 62 1,068 2 32 20/ 730 2 28 1,088 13 11 64 5,999 2 23 20/ 341 0 0 681 5 0 65 3,016 0 0 22/6 3,016 0 0 3,421 9 0 67 8,956 0 0 20/ 9,171 0 0 13,348 0 0 70 4,864 1 20 10/ 4,595 0 0 6,577 5 0 71 8,433 0 0 10/ 8,377 0 0 11,047 17 6 77 8,393 2 34 10/ 6,643 0 0 8,105 18 5 127 42,101 0 0 10/ 42,746 0 19 27,168 1 2 130 17,646 0 0 10/ 19,821 0 0 12,786 15 3 131 7,292 0 0 10/ 7,275 0 0 3,819 7 6 Pt.220 1,914 0 0 10/ Westport town sections Ahaura „ CJobden „ A. B. P. 10,590 0 18 10,172 2 33 £ s. d. 10,590 2 3 10,172 14 1 6,178 0 0 5,570 0 0 4,633 10 0 4,177 10 0 0 0 3 300 0 0 225" 0 0 31,564' 0 0 2,100 0 0 15,782" 0 0 1,050 0 0 1,437 1 19 338 0 4 5,658 2 23 1,437 7 5 338 0 6 5,658 12 10 269 1 20 56 0 0 1,750 2 34 134 13 9 28 0 0 875 7 2 17* 0 0 1,914 0 0 8 10 0 957 0 0 917 10 0 399 0 0 527 10 0 Deduct areas sold in excess of Bl acreage, in respect of 1 Blocks 45, 46, 50, pt. 54, 61, 67, 127, 130 f 77,915 3 31 57,912 8 3 4,237 0 30 2,380 13 0 ■otals 367,416 3 6 293,738 0 5 251,120 0 5 73,678 3 1 55,531 15 3

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EXHIBIT D. Statement showing the Receipts and Expenditure on the Working Railways from 1st August, 1889, to 25th May, 1895 (the Date of Seizure), and from 25th May, 1895, to 9th November, 1895 (during which time the Lines have been under the Management of the New Zealand Government).

E. & 0. E. Norman H. M. Dalston, Christchurch, 25th April, 1896. General Manager.

EXHIBIT E. Census Returns.

Counties. Boroughs. 1886. Buller ... ... ... ... 3,390 Westport ... ... ... ... 1,859 Inangahua ... ... ... ... 3,152 Greymouth ... ... ... 3,133 Grev ... ... ... ... 5,595 Hokitika ... ... ... ... 2,687 Westland ... ... ... ... 5,348 Ross ... ... ... ... 1,054 Kumara ... ... ... ... 1,079 17,485 9,812 1891. Buller ... ... ... ... 4,659 Westport ... ... ... ... 2,622 Inangahua ... ... ... ... 4,648 Grevmouth ... ... ... 3,787 Grey ... . . ... ... 4,330 Brunner ... ... ... ... 2,231 Westland ... ... ... ... 5,031 Hokitika ... ... ... ... 2,178 Ross ... ... ... ... 822 Kumara ... ... ... ... 1,176 18,668 12,816 1896. Buller ... ... ... ... 4,833 Westport ... ... ... ... 2,424 Inangahua ... ... ... ... 4,254 Greymouth ... ... ... 3,099 Grey ... ... ... ... 4,592 Brunner ... ... ... ... 1,632 Westland. ... ... ... ... 4,723 Kumara ... ... ... ... 1,149 Hokitika ... ... ... ... 2,059 Ross ... ... ... ... 727 18,402 11,090

EXHIBIT F. New Zealand Government Railways. Statement showing Gross Revenue, Miles open for Traffic, and Revenue per Mile open on the Jackson's-Reefton Section of the New Zealand Midland Railway, for Period from 27th May, 1895, to 23rd May, 1896. £ s. d. Gross revenue ... ... ... ... ... ... 15,491 0 3 Miles open for traffic ... ... ... ... ... 70 0 0 Revenue per mile open ... ... ... ... ... 221 6 0 A. C Fife, Accountant's Office, Railway Department, Accountant. 23rd July, 1896.

Date. Milken'. Gross Receipts. Expenditure. Net Receipts. Percentage of Working Expenses. Eleven months to 30th June, 1890 10th June, 1891 10th June, 1892 tOth June, 1893 10th June, 1894 Uleven months to 25th May, 1895 M. oh. 14 25 18 67 39 0 39 0 69 0 69 0 £ s. a. 4,069 10 0 9,144 2 1 12,948 18 1 12,765 1 4 15,376 1 9 13,820 5 11 £ s. a. 2,460 16 1 5,143 6 0 8,659 19 6 8,356 5 4 8,803 18 10 10,562 18 8 £ s. a. 1,608 13 11 4,000 16 1 4,288 18 7 4,408 16 0 6,572 2 11 3,257 7 3 Per Cent. 60-46 56-24 66-87 65-46 57-25 76-43 69 0 68,123 19 2 43,987 4 5 24,136 14 9 Pwenty-four weeks to 9th November, 1895 72-68 6,245 17 8 4,540 4 2 1,705 13 6

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EXHIBIT G. New Zealand Midland Railway. Statement showing the Proportion which the Estimated Cost of Construction of the Several Sections of the said Railway bears towards the Sum of £2,500,000 (to be further detailed, with all convenient speed, as regards Sections 1 to 10 and 25 to 35 inclusive).

Agreed to in accordance with clause 24 of contract entered into between Her Majesty the Queen and the New Zealand Midland Railway Company (Limited). Dated 3rd August, 1888. Wm. F. D. Jervois, Governor of New Zealand (on behalf of Her Majesty the Queen). H. Alan Scott, General Manager, New Zealand Midland Railway Company, Limited (on behalf of the company).

EXHIBIT H. g IR; Public Works Department, Wellington, loth July, 1896. Re Midland Railway. I have the honour to enclose herewith, for your information, a copy of a notice which has been served upon the New Zealand Midland Railway Company signifying the intention of His Excellency the Governor to retain the railway as Government property. I have, &c, H. J. H. Blow, G. B. Parker, Esq., Receiver for the Debenture-holders, Under-Secretary. New Zealand Midland Railway Company (Limited), Christchurch. Whereas under and in pursuance and in exercise of the powers conferred by section 123 of " The Railways Construction and Land Act, 1881," and in pursuance and exercise of all other powers either by statute or by common law in that behalf enabling me, I, David, Earl of Glasgow, the Governor of the Colony of New Zealand, did, on the 25th day of May, 1895, take possession and assume the management of a certain railway, being the property of the New Zealand Midland Railway Company (Limited), and being the whole of the line or lines of railway more particularly described in a certain deed made the 3rd day of August, 1888, between Her Majesty the Queen of the one part and the said company of the other part, hereinafter referred to as " the said railway ": And whereas the said company has committed breaches of the contract entered into by the said 7—l. 7.

No. of Section. From-To From To Length of Section. Estimated Cost. Proportionate Cost. 1-10 11 12 13 14 15 16 17 Springfield-Jackson's Jackson's-Paeroa Paeroa-Laketown Laketown-Hohonu ... Hohonu-Surnmit Summit-Tunnel Tunnel-Kokiri Kokiri-Brunnerton ... M. ch. 0 00 64 20 67 50 72 50 77 30 80 70 85 45 88 10 M. ch. 64 20 67 50 72 50 77 30 80 70 85 45 88 10 94 17 M. ch. 64 20 3 30 5 00 4 60 3 40 4 55 2 45 6 07 £ 1,296,500 34,100 21,300 33,500 26,400 32,300 18,200 37,700 £ 1,296,500 34,100 21,300 33,500 26,400 32,300 18,200 37,700 Total —Springfield to Brunnerton 94 17 1,500,000 1,500,000 18 19 20 21 22 23 24 25-35 Stillwater-Nelson Creek Nelson Creek-Ahaura Ahaura-Totara Plat ... Totara Flat-Ikamatua Ikamatua-Mawheraiti Mawheraiti- Slabhut Slabhut-Beefton Beefton-Belgrove 0 00 7 15 12 55 17 55 22 15 28 35 33 05 38 35 7 15 12 55 17 55 22 15 28 35 33 05 38 35 140 63 7 15 5 40 5 00 4 40 6 20 4 50 5 30 102 28 63,000 35,000 26,000 33,000 37,000 24,000 57,000 1,055,000 47,400 26,300 19,600 24,800 27,800 18,000 42,900 793,200 Total —Stillwater to Belgrove 140 63 1,330,000 1,000,000 Total —Springfield to Belgrove 235 00 2,830,000 2,500,000

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deed, and has wholly abandoned and rescinded the same: And whereas accounts have been computed and rendered to the said company as provided by the said section 123 of the said Act: And whereas up to the present, being the space of more than one year since my having taken possession as aforesaid, the company has failed to repay all or any sums of public money which have been expended in or towards completing the said railway and the equipment thereof and all sums of public money which have been expended on the repair and management of the railway or in connection therewith in excess of the receipts therefrom : Now, therefore, I, the said David, Earl of Glasgow, Governor of the Colony of New Zealand, in pursuance and in exercise of the powers hereinbefore recited, and of the powers conferred upon me by section 125 of the said Act, and in pursuance and exercise of all other powers and authorities under statute or the said deed or in any wise howsoever me thereunto enabling, do hereby give you notice that at the expiration of the period of three months from the date hereof I intend to retain the said railway as Government property. Given under my hand, at Wellington, this thirteenth day of July, 1896. Glasgow, Governor. The New Zealand Midland Railway Company (Limited), and to Robert Wilson, Esq., Engineer-in-Chief and General Manager of the said company; and to Norman H. Dalston, Attorney and Representative of the said company in New Zealand.

EXHIBIT I. Christchurch, 28th July, 1896. Sir, — G. B. Parker's Petition. ' At'the close of the proceedings yesterday you asked me whether any steps had been taken by the debenture-holders on the footing of the prospectus, and I answered that I was not aware of any such proceedings. I ought to have pointed out to you that such proceedings are not open to the debenture-holders; the prospectus is not the contract between the parties—that is wholly embodied in the trust deed and the debenture. The only possible action would be for fraudulent misrepresentation. Such an action could not in this case be sustained. It has been finally decided by the House of Lords that to support such an action against directors or other parties to a prospectus a plaintiff must prove actual, wilful fraud (Peek-y. Derry, Law Reports 14, Appeal Cases 337). That would obviously be impossible, as it would impose on a plaintiff the necessity of proving that the directors knew that the statements were false, and wilfully published them with the object of obtaining money from the subscribers. It would not suffice to show that they were made without reasonable ground for believing them to be true. It seems pretty evident that in this case the directors, as well as the subscribers, were misled. Indeed, it is in evidence that they took up, amongst themselves and their friends, a large number of shares and debentures. One class of statement, i.e., as to the land grant and the security, would probably be made on the faith of legal advice ; and another, as to the value of land, &c, on some other class of advice. And it is quite intelligible that the same sanguine views which inspired Mr. Blair's official report might easily be transferred to well-meaning persons who had no means of correcting them. Indeed, before the fresh correspondence came to light I and those associated with me thought that the Agent-General had formed similar views on the faith of this report. These considerations would, in the light of the view which the Courts now take of cases of this class, afford a complete answer to any such action. I have already pointed out that there is no other legal redress open to the debenture-holders. I am, &c, The Hon. W. J. M. Larnach, C.M.G., Chairman, Fredk. Chapman. Public Accounts Committee, Wellington.

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EXHIBIT J. Summary of Revenue of the Working Railways, from 1st August, 1889, to 25th May, 1895.

F. H. LABATT, Wellington, Bth August, 1896. Accountant to Receiver.

| Special | H « Labour. J Cranage . I M -g §> Carriage § • S Cartage. of efigg Mails. Sales. o a tool at 3 Total. Remarks: Date. Passengers. Parcels. Goods. Rents. Enginehire. Amount of Departmental Accounts. £ s. d. 1,610 8 5 £ s. d. 72 5 1 £ s. d. 2,278 5 5 £ s. d. 5 12 6 £ s. d. 77 14 3 £ s d. £ s d. 0 10 0 £ s. d. 24 14 4! £ s. a. £ s. d. £ s. d. £ s. d. £ s. d.l 4,069 10 0; £ s. d. Eleven months to 30th June, 1890 | r (14 miles 25 chains) 30th June, 1891 (18 miles 67 chains) 30th June, 1892 (39 miles) 30th June, 1893 (39 miles) 30th June, 1894 (69 miles) Twelve four-weekly periods, ending 25th May, 1895 (69 miles) 2,673 1 7 5,332 3 9 5,353 2 5 178 3 2 234 7 6 242 5 4 5,234 19 8 6,107 0 3 6,011 17 8 54 11 0 267 1 0 347 17 0 f 240 15 0 (150 7 6 405 12 11 907 9 4 771 13 4 179 15 8 65 16 2 28 19 11 69 1 0 4 11 0 1 15 0 77 12 0 42 15 4 10 0 I 288 1 2 125 0 0 9 12 6 25 10 2 163 2 0 59 16 7 9,144 2 1 12,948 18 1 12,765 1 4 2,846 5 4 1,325 12 10 860 8 1 5,454 4 3 322 3 8 7,501 3 0 | 204 1 11 732 19 3 12 14 4 1 0 4 ! 321 9 6 340 6 5 51 17 4 42 19 3 15,376 1 9 273 6 6 5,192 16 9 323 19 2 6,837 12 3 34 18 9 1 12 0 0 15 D ! 307 17 10 539 0 11 53 18 10 10 0 9 13,820 5 11 220 12 10 112 0 0 Totals 25,615 17 2 1,373 3 11 33,970 18 3 1,471 16 11 2,252 14 6 801 8 9 5,526 5 ,931 15 1 98 14 4 70 5 1:917 8 6 1,004 7 4 115 8 8 68,123 19 2

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E. & O. E. F. H. Labatt, Wellington, sth August, 1896. Accountant to Receiver.

EXHIBIT K. Statement showing Amount of Money raised by Shares and Debentures by the Midland Railway Company (Limited).

Date Money raised. Particulars of Capital. Amount. Deductions for Arrears of Calls and Bonds forfeited. Net Amount. Cost of Raising. 7i% Discount on First Issue of Debentures. Rate of Interest arranged. Security offered by the Company. Share capital — 25,000 shares, of .£10 each, fully called up £ s. d. 250,000 0 0 £ s. a. 575 0 0 £ s. a. 249,425 0 0 £ s. a. Unknown .. £ s. a. Aprd 17, 1886 .. 5% April 18, 1889 .. Debenture capital — First issue, 5-per-cent. first-mort-gage debentures (at the price of £92 10s. per £100 debenture, being part of a creation of £2,200,000, repayable at par at the expiration of twenty years) 745,000 0 0 1,200 0 0 743,800 0 0 58,420 1 7 55,785 0 0 5% Railway already constructed out of first issue of share capital, incluaing rolling stock, surveys, &c .. £220, 000 Railway to be constructed ana equipped according to contract out of the proceeas of this issue .. .. 545,000 Land, about 300,000 acres, tobegranted to the Company in consideration of above expenditure, and taken at waste-lands value of 10s. per acre 150,000 Timber on only 91,000 acres in the immediate neighbourhood of the line now to be constructed, separately valued at .. .. 635, 000 Total value of security .. £1,550,000 January, 1895 .. Oct. 20, 1895 .. Dec. 20, 1895 .. Debenture capital — Second issue, 5-per-cent. debentures to Gas and Water Trust Second issue, 5-per-cent. debentures Second issue, 5-per-cent. debentures, to Thomas Salt, Weeping Cross, Staffordshire, Englana 80,000 0 0 93,125 0 0 20,000 0 0 80,000 0 0 93,125 0 0 20,000 0 0 5% 5% 5% To Gas and Water Trust, as collateral security for their mortgage. To Thomas Salt, Weeping Cross, Staffordshire. England, collateral security for Blackball mortgage, security over all the company's assets. Totals 1,188,125 0 0 1,775 0 0 1,186,350 0 0 58,420 1 7 55,785 0 0

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EXHIBIT L. Statement showing Contracts let to Messrs. McKeone, Robinson, and D'Avigdor.

F. H. Labatt, Accountant to Receiver. E. and 0. E.—Wellington, 4th August, 1896.

Statement showing Interest paid to Shareholders and Debenture-holders to the 30th June, 1894.

Statement showing Salary paid to Mr. Robert Wilson, Engineer-in-Chief and General Manager, from 20th June, 1890, to 1st February, 1896.

Wellington, sth August, 1896. F. H. Labatt, Accountant to Receiver. B—l. 7.

o •si . -^= o Particulars of Contract. Amount of Contract. Amount paid, including Additions to Contracts. Amount paid to Contractors to forego Contracts. Total. 7 miles 41-25 chains in length, commencing at a point marked on plan 12 miles 41-25 chains, near Stillwater Junction, to a point marked 5 miles 4 chains towards the Teremakau Biver. Completed 15th February, 1888 1 mile 16 chains in length, commencing at the end of the existing Government railway at Brunnerton, and ending at a point marked on the plan 12 miles 45-25 chains. Completed 13th March, 1888 6 miles 67 chains in length, commencing at a point marked 1 mile 41 chains, near Stillwater Junction, and ending at a point marked 8 miles 28 chains, near Nelson Creek. Completed November, 1888 Payment to contractors to forego contracts Nos. 1, 2, and 3 £ 89,228 s. a. 3 2 £ s. a. 94,413 10 0 £ s. a. £ s. d. 94,413 10 0 11,306 0 0 12,543 15 7 12,543 15 7 66,600 0 0 68,484 14 1 68,484 14 1 12,500 0 0 12,500 0 0 Totals... 167,134 3 2! 175,441 19 8 12,500 0 0 187,941 19

Year ending Interest paid to Shareholders. Interest paid to Debenture-holders. Total. iOth June, 1887 1888 1889 1890 1891 1892 1893 1894 £ s. d. 4,741 0 11 7,818 16 1 11,254 14 4 12,867 15 6 12,423 7 6 12,469 16 0 12,469 16 0 3,117 9 0 £ s. d. 4,442 13 4 34,874 19 11 37,165 7 6 37,190 0 0 37,190 0 0 37,190 0 0 £ s. d. 4,741 0 11 7,818 16 1 15,697 7 8 47,742 15 5 49,588 15 0 49,659 16 0 49,659 16 0 40,307 9 0 Totals 77,162 15 4 188,053 0 9 265,215 16 1 F. H. Labatt, Accoum iant to Beceiver. Wellington, 3rd August, 1896.

Year ending Particulars. Amount. 10th June, 1891 10th „ 1892 14th „ 1893 !3rd „ 1894 !2nd „ 1895 5Yom 22nd June, 1895, to 1st February, 1896 Salary and allowance (£600) ir a £ s. d. 2,300 0 6 2,446 5 7 2,500 16 10 2,601 12 0 2,600 0 0 1,600 0 0 n H II Total ... £14,048 14 11

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Statement showing Commission paid in New Zealand to Mr. Robert Wilson, Engineer-in-Chief and General Manager, New Zealand Midland Railway Company (Limited), and Amount on which Commission was paid.

(Note. —This statement does not include Engineer's fees paid by the London office.) F. H. Labatt, Wellington, sth August, 1896. Accountant to Receiver.

Certificates, &c. Invoices. Freight Notes. Total Amount on Total Amount Year ending Amount. tfloo g o I Commission. Amount. 03 o O Commission. Amount. (SCO Commission. sion was paid. Commission. £ S. d. : % £ s. d. £ s. d. % £ s. d. £ s. d. f 1,573 12 11 \ 7,486 9 0 14,909 10 5 15 15 0 7,335 14 3 2 5 0 10 10 10 10 10 £ s. d. 118 0 6 748 12 11 1,490 19 3 1 10 8 733 11 5 0 4 6 £ s. d. £ s. d. 11th Nov., 1889, to 30th June, 1890 71,240 15 8 ; 10 7,124 1 5 20,942 12 11 5 1,047 2 8 | 101,243 10 6 9,037 17 6 30th June, 1891 30th June, 1892 30th June, 1893 30th June, 1894 30th June, 1895 118,085 5 2 10 85,370 10 10 i 10 73,732 12 3 10 33,841 3 7 10 113 16 9 ! 10 332,384 4 3 i .. i 11,808 8 9 8,537 0 8 7,373 5 2 3,384 2 2 11 7 8 26,493 1 2 32 16 2 588 7 7 | •• 5 5 j 7i 1,324 13 0 1 12 10 44 2 8 159,487 16 9 85,419 2 0 81,656 14 1 33,843 8 7 113 16 9 14,624 1 0 8,540 4 2 8,150 19 3 3,384 6 8 11 7 8 ■• •• Totals .. I 3,092 19 3 461,764 8 8 43,748 16 3 38,238 5 10 48,056 17 10 48,056 17 10 j •- 2,417 11 2 31,323 6 7

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REGISTER OF EXHIBITS.

___ LIST OF PAPEES REFERRED TO IN THE MINUTES OF EVIDENCE, AND PRINTED IN THE APPENDICES TO THE JOURNALS OF THE HOUSE OF REPRESENTATIVES. 1886. D.-la. Report by Mr. Blair on Midland Railway. D.-2. Correspondence relating to Midland Railway. D.-28. Correspondence relating to Midland Railway. 1889. 8.-6. Financial Statement. D.-2. Midland Railway Contract. D.-2a. Correspondence relating to Signing of Contract. D.-2c. Appointment accepted by Agent-General in connection with Midland Railway Company. 1892. 1.-7 A. Report on Midland Railway Company's Petition by Public Accounts Committee. 1894. 1.-8. Report on Proposals of Midland Railway Company by Midland Railway Committee. 1896. D.-4. Midland Railway Arbitration—Minutes of Evidence, &c. (See Questions 574 to 579 in particular.) D.-4A. Midland Railway Arbitration —Addresses of Counsel. D.-4b. Midland Railway Arbitration—Preliminary Papers, Statements of Claim, Award, &c. Approximate Cost of Paper. —Preparation, not given; printing (1,475 copies), £41 2s. By Authority: John Mackay, Government Printer, Wellington.—lB96.

tescription oJ 'age A B C Trust Deed, Company and Debenture-holders Debenture Prospectus Details of Item, " Constructing the Line to 25th April, 1896 " .. Estimated Liabilities and Assets at 30th June, 1896 Lands earned and selected at Contract Valuation, not yet sold Sundry Debtors for Land sold, secured by Mortgage and Agreements to Mortgage Mortgages by Company Lands earned and selected at Contract Valuation to 30th June, 1896 Summary of Traffic and Revenue for Year ending 23rd June, 1894 Receipts from Sale of Lands Receipts from Sale of Lands and B.-l Areas, and Values of Lands unsold Receipts and Expenditure on Working Railways Census Returns Gross Revenue, &c, from 27th May, 1895, to 23rd May, 1896 Proportion estimated Cost of Construction bears towards Sum of £2,500,000 Notice served on Company that the Governor will retain Possession of Railway Letter from Petitioner's Counsel to Chairman regarding Legal Redress open to Debenture-holders Revenue of Working Railways from 1st August, 1889, to 25th May, 1895 Amount raised by Shares and Debentures Contracts let to Messrs. McKeone, Robinson, and D'Avigdor Interest paid to Shareholders and Debenture-holders to 30th June, 1894 Salary paid to Mr. Wilson Commission paid in New Zealand to Mr. Wilson 33 41 43 44 45 46 I) E F G H I J K L 47 48 48 4S 49 49 50 51 52 53 54