1.—7

17

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.