18 AUGUST 1866, Page 5


IT is a fine thing to have a grand property in debts, and that is the position of the London, Chatham, and Dover Railway Company, which has this week formally announced its own insolvency, with liabilities, it is stated, of from five to ten millions sterling. It has borrowed so recklessly and spent so lavishly, tried so many speculations and entered into so many onerous obligations, it has failed in so many things, owes so much, and has ruined such numbers, that we should not be surprised if it contrived to pull through pretty comfortably after all. Heaps of contractors and sub-contractors, engine- makers, and bankers who feed engine-makers, regiments of shareholders, debentureholders, landowners, houseowners, and speculating builders, roomfuls of creditors, and an entire public -of travellers, are all keenly interested that the firm, however extravagant, or daring, or unbusinesslike its proceedings may have been, should not be brought to the ground. " Long live Queen Elizabeth !" groaned the poor Puritan, as his ears were dug out by her order, and "Long live the Company!" sigh its creditors, as they read the cool notice that they are fined for the present in a great part of their incomes. They .swear, but they cannot attack, they curse, but they trust their curses will be empty wind. In the first place, the business cannot stop. When a private firm issues a noti- fication like that to which two Peers are this week not ashamed to put their names, a notification which admits that the said Peers look to fresh loans as the natural way of paying interest on old debts, the first result is to stop their trade, to cut off their only source of income. Overend, Gurney, and Co. were making some 200,0001. a year when they stopped, but the day after they could not have earned as many farthings. Banks become on failure mere sources of expense, merchants are compelled to be idle loafers, tradesmen close their shops or " sell off " at an " alarming sacrifice " alike of property and truth. The London, Chatham, and Dover is too big a defaulter for those unpleasantnesses to occur. It cannot stop. Not to mention the inconvenience to travellers, which alarmed even a Vice-Chancellor, there is another, -which of itself would be sufficient to keep the business in movement. Railways now take the place of rivers, and towns grow up along their banks. Villages rise by the score, towns by the dozen, " properties " by the hundred, all dependent for theirprosperity, or value, or existence on the regu- larity of the trains. In a case like that of-this railway, through which runs metropolitan suburbs, and has laid itself out for short traffic, it would pay the residents on the line to guarantee the creditors, sooner than allow their link with the world to be cut off. That would be a burden, but the alternative would be simple ruin, or to put it exactly, a reduction in the value of all property within five miles of each side of a great system of lines by an average of about one-half. So, with no dividend to declare, and no money to pay bond debtors, and its creditors besieging the till, and its affairs in Chancery, and its plant taken in execution, and its buildings liable to be occupied by bailiffs, the Company goes merrily on, driving a roaring trade, and contemplating, we have not a doubt, further extensions, new debentures, fresh enterprises, wider purchases. If the ruin can only be made wide enough, it will be, says Lord Sondes, and it will be, agrees Lord Harris, who once governed twenty millions of people,—a safe and solid edifice. The debts protect the Company at every turn. Business going on, presumably, and indeed evidently, at a profit, the natural course is to sell that business to people with capital to carry it on, divide the price among all the creditors, and begin again with clean account-books. But a railway cannot be so treated. Pur- chasers could be found, we dare say, for the line and its business at a reasonable figure. We can see certain secre- taries, engineers, chief traffic managers, and directors whose eyes sparkle at the bare suggestion, but then the eyes of debentureholders do not sparkle, and they are protected by Acts, and the purchasers besides buying the business must buy also the right to pay them off, that is, under present circumstances, to give more than they get, which is not a profitable operation. So the Board which has so mismanaged must continue in power, and the shareholders who have so trusted that Board must continue owners of the property, and everything must go on as before, lest worse should happen. The lines of course will be starved, the fares kept as high as possible, the trains be as few as may be, and the public annoyed, and charged, and neglected up to the highest endurable limit of profit, but nobody cares for the public, and a few smashes will only reduce the existing chance of debentureholders getting their interest by some moderate fraction. Suppose they do not get it at all, shareholders don't care, for whether debentures are paid or not their chance of a dividend is not worth the trouble of calculation. They are buttressed with debts, rich in their obligations, secure in the liability of their property to seizure, and may snap their fingers at a world which, however it goes, can neither harm nor benefit them. So may the directors, and secretary, and big contractors, and the rest of the " able," "enterprising," " zealous," and "far-sighted" people who have brought the Company into its present position. The compli- cation is so great that nobody but themselves can even pre- tend to understand it, and they are safe from assault, like dockyard superintendents, because nobody will dare even to hope that he has ability to put such confusion to rights. There are to be committees of all sorts—of shareholders, of debentureholders, of creditors—but what are they all to do ? Extract information which, when obtained, they will only half understand. They cannot actually do anything, even if their interests were identical, which they are not. The funds on which they must act are in the hands of the Court for equitable distribution, sure to be the most inconvenient distribution of all ; they cannot produce new traffic, or reduce expenses, or alter management, or in fact do anything, except indeed quarrel eagerly as to the comparative incidence of loss upon each class of the in- jured, or accept a composition all round, which, as it will benefit the shareholders in the first place, they are pretty sure to reject. There are mellifluous lawyers no doubt in the ser- vice of the Company, but if they persuade a shareholder who wants the receipts to be used for dividend, and the debenture- holder who will have them used for interest on bonds, and the landholder who insists that the Company, having agreed to give twice its value for his " estate," shall pay his claim first or be attacked in Parliament, and the engine-maker who can seize stock if he cannot get cash, all to agree, they will be honey-voiced indeed.

Even if new legislation were attempted, as was recently advised in the case of the Irish railways, it is difficult to see how it could be arranged so as to be at once expedient and just. Suppose a railway company were treated like an indi- vidual, and allowed to go into the Bankruptcy Court, sell everything, and receive its discharge. That would be the best course for the public interest, because an impoverished railway company is almost sure to manage its lines badly, to ask high rates because it cannot wait for the operation of re- duction, to overwork pointsmen and drivers, to underdo trains, to run its locomotives to death, to leave its bridges unrepaired and its permanent way unsafe, to save in short at every turn, so as to escape bullying for extravagance from the supplying

creditors. We say nearly sure, for the ruin may be so com- plete:that it is nobody's interest 'to save cheeseparings, and we might by possibility see a railway managed to the point of perfection, simply because it was so loaded with debt that parshnony, and good .management were alike visibly fruitless, and ,the control was left to the immediate executive of the line. Parsimony is, however, by much the more probable alternative; and sale to an unburdened company therefore the coursecniest clearly for the public interest, But then com- pulsory-sale •is -very like confiscation. Property is sure of a fair price, and most businesses • can be sold at some ap- proximation to their value, but a railwayput up to auction can be competed for only by two or three bidders, a new company and the 'nearest • two railways, who are almost certain to arrange a private transaction highly favourable to everybody except -the Company to be victimized by the absence .of competition. That confiscation might be fair as regards the- shareholders, who deserve all they get for not looking after their own affairs, but it is - scarcely fair to debentureholders, who may-get their money if the concern goes on, and manufacturers, who think with some justice that asAhey enable the line to work its receipts should come to them first. The most effective arrangement of all perhaps would be to supersede the Board of Directors by a small com- mittee of liquidators, chosen by all three classes—shareholders, mortgagees, and creditors—invest them with absolute authority, and let them make the best thing they can of the concern ; but then there are the difficulties of detail. The Liquidators would only be a new board, if unpaid would be even less efficient, and if paid would be in no hurry to cancel their own appointments. A single liquidator appointed by the Court chairman ad .interim, with power to make the Directors do their duty, might, if he were very competent, very disinterested, and excessively brusque, succeed in reorganizing affairs, but we'have,long since forgotten how to make anybody do any- thing, and the middle class, which has so mismanaged the monopoly of •comnaunications that it does not pay :4 ,per cent.,.will have it that the State, which all over the Continent has made railways pay splendidly, is by nature incompetent tondminister. There is nothing that we can see for 'Perna.- ment:to do except provide that •whenever a railway which pays .:working expenses shall be about to .close the Board of Trade shall 'tarry, it on, and with that proviso allow cora- ponies to muddle along as they best ean, till • the constittien- des„ at last,. aware that Mr. Gladstone :understands finance rather better .than vestrymen, that bad railway management impedes eommerce, and that. the English railways managed by the. State would speedily begin, to reduce the national debt, shall permit -the reserved power to •be exercised,, and the railway system to he .controlled by the only power which ought -to be entrusted with a monopoly—a •representative department. Till then shareholders must continue' to en- trust their affairs to self-electing boards, 'with pushing men for secretaries and ornamental Peers for chairmen, still pay for oanipaigns undertaken to conquer profitless territory and fatten contractors and engineers, and still when ruined submit to be told .openly by the Times that their ruin has " become one of the established -ills of human nature,", no more to be warded off than death, sickness, or taxation. They deserve it all, for the credulity with which they trust " boards " whose interest and whose pleasure it is to keep them in the dark. If a man will trust an agent with his money, never really understand his accounts, never compel him to obey orders, and never even grumble so long as the cash is forthcoming anyhow, he has a right to do it. All we protest_ against is his claim to be pitied, his right to consider himself anything except a credulous fool.