I.—ll.

any intelligent person could believe that such was the case. lam dealing now with paragraph 6 of the petition, which says,— "It is obvious that there would have been no subscriptions to the issue had it been known that, if by chance differences should arise between the Government and the company, it might result in the total loss of the debenture-holders' security. Those who subscribed to the debenture issue never for a moment supposed that the Government of New Zealand could, under any circumstances, have the right to confiscate the lien held by the debenture-holders on the railway, whatever they might be able to do as regards the interest which the company retained in the undertaking after satisfying the debenture-holders' claims." In reply to that, Mr. Blow says,— "It is impossible that the views set forth in this paragraph could have been held at the time, or can be held now, by any intelligent person perusing the debenture-prospectus and other documents submitted to the investors by the company when inviting offers for the debentures. The debenture-prospectus stated that a copy of the Midland Bailway contract could be seen at the offices of the company, and the contract states that it is made under the Act of 1881, and refers to that Act as ' the principal Act,' and, as I have already stated, a reference to that Act would have disclosed the powers of seizure. Moreover, the contract itself distinctly refers to there being a power in the Governor to ' take possession of the railway.' " These are very vague statements, necessarily perhaps to put an answer in few words, but if you will look at the Act and at the contract itself, you will find that there is not one word in either the Act or the contract which says the Governor or Government shall have the power to seize the lien. They can seize the railway in certain cases, but that is one thing; but to seize the lien which the debenture-holders have over the line is a totally different thing. I desire to emphasize this point. It is well recognised that there may be one or more charges on a property —a first and second mortgage. The second mortgagee may come in and seize that property, but he would not have a right to seize property and shut out the interests over which some other person had a lien. lam not now arguing the law point, but am endeavouring to show that intelligent people may make such mistakes as have been made in this case. Mr. Blow says that a reference to the Act of 1881 would have disclosed the powers of seizure. Well, section 123 of the Act of 1881 provides— "The Governor shall have and may exercise the powers hereinafter set forth in the eases therein provided for—(1) In the event of any unreasonable or inexcusable delay by the company in the prosecution of the works connected with any railway, or in the event of the company, after the completion of the said works, in whole or in part, so that the whole or any complete part or section of such railway may be used for the purposes of traffic, failing or neglecting for the space of twenty-one days, without reasonable excuse, to run trains at the times and in the manner fixed and determined by or in any regulation to be made by the Governor under this Act; or (2) If the company shall, in the opinion of the Governor, commit or suffer a wilful breach of any contract made with the Governor in Council or Governor under this Act." It will be observed that these are all defaults of the company. If the company fails to do such-and-such things, then the Government can step in and seize the line—that is to say, whatever interest the company had in the railway could be seized by the Crown. What is the logical result of the strict legal view ? Supposing that the line were finished, and that the cost of it was £3,000,000, and that £2,500,000 of that was borrowed money, and the company failed for twentyone days to run the grains, the Government could seize the line. I invite my friends Mr. Bell and Mr. Blow to say whether if there was a failure to run the trains for twenty-one days, of which default the debenture-holders knew nothing, the Government could not come in and seize the line and work it to the crack of doom without the debenture-holders having any chance of getting back their security. The Privy Council has placed this security at the mercy of the Government, but can it be supposed for one moment that the debenture-holders would have lent their money if they thought that in any case of failure by the company to complete the line its seizure by the Government would absolutely destroy their security ? They considered that they had an effectual and valid security in this case, a real first charge, but it now appears that the Crown can always step in before them, as they have done, and confiscate the line without any legal obligation to pay anything. Ido not wish to reargue the legal point, but when Mr. Blow says that no intelligent person could have made the mistake which we have done he is making a statement which is not borne out by facts. The debenture-holders had the advice of some of the most eminent lawyers, both in London and in this colony. They consulted Mr. Swinten Eddy, and also, I believe, Mr. Kirby, and both those gentlemen held that the rights of the Crown were not paramount to those of the debenture - holders. I think that the same view was taken by my friend Mr. Bell at one stage of the proceedings, for when he was before the Committee on a previous occasion he said that the Crown could not confiscate the railway. But if now the construction is that no part of the railway can be taken as security for the debenture-holders unless the whole of the undertaking is carried out, then we have no security. When, then, Mr. Blow says no intelligent person could think as we did, he is scarcely fair to Mr. Bell and other eminent lawyers, who held that the rights of the Crown were not as paramount as the Privy Council has declared them to be on appeal. You know that this line was seized in 1895, and immediately the Government proceeded with great energy to carry out its construction. Now, what is the position ? If, after the seizure of the line, the debenture-holders had no rights, surely there was no reason why they should go on paying the demands made on them by the Government for the construction of the line; and yet, after the line was actually in the hands of the Government, the debenture-holders found £38,000 and paid it to the Crown for the construction of the line. If the views held by the Privy Council had been held by them they would not have contributed that £38,000 to the construction of the line. Whether they made a mistake or not, I appeal to that fact to show the

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