Skip to main content

Audit Of Railway Accounts Bill

Volume 117: debated on Wednesday 28 May 1851

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Order for Committee read.

House in Committee; Mr. Bernal in the Chair.

Clause 8.

moved, as an Amendment—

"In page 4, line 42, after the word 'payments,' to insert the words, 'And the Auditors shall, in like manner, once at least in every year, require to be produced to them accounts of every sum of money paid to any engineer employed upon the Line of Railway and works of each Company, and also of every account due by the Company for any work done upon such railway; and it shall be lawful for the Auditors, if they shall think fit, to refer all such accounts, whether paid or unpaid, to some competent person to examine the same, and to report to the Auditors upon the charges in such accounts, and as to the expediency of submitting the same to the decision of a competent court.'"

thought the addition to the clause would, in point of fact, stop the progress of all railways. He was inclined to think that the Bill, as a whole, would work well for railway companies, in providing an efficient audit. But if it was made to interfere with the common discretionary power of the directors, the effect would be to drive the present directors from their position. If these words were added, at the proper time he should move that the whole clause be omitted.

thought there wore so many objections to the Bill itself, that if by any means he could get it rejected, he would adopt that course, and, therefore, he should not object to the introduction of these words, because their introduction would make the Bill more objectionable than it was before.

had stated the other day that he objected to the principle of the Bill, as tending to drive out fit persons from the direction of railway companies, by establishing an imperium in imperio. If it was intended the Bill should be a safeguard against the frauds of the directors, he could only say that less had been lost by actual fraud, than by extorting from railway companies exorbitant remuneration, and squandering money on the professional services of the officers. Directors had thought more of the names than of the cost of obtaining the services of gentlemen in the two departments—of law and engineering-—which he wished this clause to touch. That House had already adopted the principle of auditors examining the accounts of gentlemen of the legal profession, and he saw no reason why that should not be extended to the accounts of the engineers; though, whatever course was taken, he should vote against the third reading of the Bill.

had, on a former occasion, stated to the House that, although he did not think the Bill was framed on the principle which he thought most advisable to adopt for the audit of railway accounts, he was disposed to think it would effect a considerable improvement in the present system of audit. He was glad to hear that his hon. Friend the Chairman of the London and North Western Railway (Mr. Glyn), who was justly considered to be the highest authority in railway matters, was of opinion that this would be an improvement on the existing system. That being the case, it was his (Mr. Labouchere's) duty, in taking part in the discussion, not to put forward the opinions he individually held as to the best mode of dealing with the question. He admitted that it was a very difficult question to deal with; but, thinking that the Bill was framed upon a principle of practical improvement, he would not consent to any alteration inconsistent with that principle. It seemed to him that if they struck this clause out altogether, the Bill would become mere moonshine. The question more immediately under consideration was, whether they would place the accounts of engineers on the same footing as the accounts of gentlemen of the law? He thought it would be invidious to make any distinction between them. He could not help thinking there had been great abuses, and most unreasonable charges, on the part of lawyers and engineers. He did not believe any respectable engineer would object to a fair examination of his accounts; and to the directors it must be a great relief and comfort to be able to refer to a competent authority the consideration of those accounts. He did not think any respectable engineer would be thereby debarred from serving a railway company; still less did he believe that any director would be driven to resign. It was of the utmost importance that men of the highest integrity and ability should fill the onerous and responsible situation of directors of railway companies. He should, however, support the Amendment, and also resist any attempt to strike the clause out of the Bill.

thought that among the various difficulties which the Committee had to contend with on this somewhat difficult subject, the greatest was to ascertain what the right hon. Gentleman the President of the Board of Trade thought about it. On the last occasion when the measure was discussed, he understood that the right hon. Gentleman, though he voted for going into Committee upon it, was very much opposed to the Bill, and thought it would by no means work well. Now he (Mr. Ricardo) believed that no alteration had been made in the Bill, with respect to which the right hon. Gentleman now seemed to entertain so much more favourable an opinion; and he confessed, that when he heard the right hon. Gentleman saying that he suspected the hon. Member for Kendal (Mr. Glyn) wished to have an Audit Bill which should be no Audit Bill after all, he (Mr. Ricardo) could not help suspecting also that the right hon. Gentleman, believing it to be his duty to produce an Audit Bill, and finding it rather a difficult matter, was glad to see the question shelved by the Bill before the House. There was an Audit Bill already in existence. Had the right hon. President of the Board of Trade forgotten the Companies Clauses Consolidation Act? The present Bill was incompatible with that, and the two could not work together. He was surprised that the right hon. President of the Board of Trade, considering as that right hon. Gentleman did that an Audit Bill was necessary, had not brought in one of his own. If the Amendment were pressed to a division he should vote for it, believing it would add one other absurdity to the measure, and tend to its total rejection.

did not agree with his Friend and Colleague of the North-Western Railway (Mr. Glyn), that any good would be derived from this Bill. He believed the less they had of it the better, and he should do his best to destroy it. Undoubtedly there would be some ground for legislation if railway companies could not take care of themselves; but that was a proposition he was prepared to deny.

wished to know if it was not patent to the world that the malpractices in the accounts had destroyed one-half the marketable value of railway property? Whatever might be the fate of the Bill, he rejoiced in the circumstance that the public would know by the division who were the faithful trustees of the interest of railway proprietors.

wished to know how they could put the engineers on the same footing as the solicitors, without establishing a taxing office for engineers similar to that which existed for solicitors. The Amendment merely gave a power to the auditors to refer the accounts of engineers to some person to examine, and report as to whether it was expedient to submit the same to the decision of some competent court; in other words, it referred the Bills to somebody else, who was to look into them, and, if fit, to tell them that they might go to law.

said, he could not see that there was that great difficulty which the hon. Gentleman (Mr. Henley) supposed. The auditors would be enabled to represent the matter to the shareholders, if they conceived an examination of the accounts expedient, and, after being examined, the shareholders would know whether there was primâ facie such a case as would justify them in resisting the payment of the accounts, and referring them to some competent authority to take proper and legal means to diminish and cut them down. The hon. Gentleman seemed to think that no railway company ever resisted the demands of an engineer; but it was quite a common case to appeal to the courts of law in resisting exaggerated demands.

thought the general power to inquire into sums received or expended by the directors would include sums paid to the engineer as well as anybody else. They were about to give a special remedy, and the special remedy was to be referred to the decision of a competent court. The more simple course would be for the directors to refuse payment of unreasonable demands, and allow engineers, like other parties, to bring actions for the amount. The Bill professed also to deal with moneys already paid; but if the engineers had the money he should like to know how they were to set about getting it back again?

doubted whether the Bill was not a very cumbrous and complicated piece of machinery; but having great confidence in the railway experience of the hon. Member for Honiton (Mr. Locke), he was ready to accept it. His only complaint was, that it did not go far enough— that the Bill did not protect the public. He did not see how this particular Amendment could be carried out. It would have the effect of involving railway shareholders in unnecessary disputes in courts of law. They should do them justice at all events, and keep them out of courts of law and equity if they could. If, when railway directors had paid an engineer's account, that account was reopened and referred to a legal tribunal, they would inflict upon the company most painful litigation and expense.

was ready to yield to the superior judgment of the hon. Members who had objected to the form of the Amendment, and was ready to make such alteration in it as would meet their views, and at the same time answer his purpose. He would therefore omit the last word of the Amendment.

Amendment proposed to the said proposed Amendment to leave out the words "and as to the expediency of submitting the same to the decision of a competent court."

believed, as far as he could understand, that no objection was made to the principle of this Bill, except by those who were directors, solicitors, or the employés in some shape of railway companies. That fact was significant, and the House was bound to take notice of it. One great objection to legislation at all in respect to this matter was founded on the assumption that if the directors were faulty in their conduct, the shareholders had the remedy in their own hands. That was theoretically the case, but practically not so, nor was it difficult to discover the cause. Some of the chairmen of railways represented 8,000 or 10,000 shareholders, while at any meeting it would be a remarkable attendance if as many as 1,000 or 1,500 shareholders were present. A great body of the shareholders consisted of children, whoso property was in the hands of trustees, not moved by any personal consideration to attend the railway meetings; and many were women, widows of military men, &c; and others were clergymen spread over the country, whose duties made it almost impossible for them to travel to the places of meeting. From all these circumstances the meetings, no matter what was the subject under consideration, were invariably—unless for a short time during the panic, when gross cases with regard to particular boards were notorious—in the hands of the directors, who might require them to do whatever they chose. He agreed with the hon. Member for Cockermouth (Mr. Aglionby), that the interest of the public was not provided for in the present Bill; but at any rate its object was to obtain for the shareholders something like a clear and common-sense balance-sheet once a year. Speaking, however, in reference to the public interest, and supposing that before long the Court of Chancery would recognise the investment of trust money in railways, he asked under what circumstances would the property of children be now invested in them? In many instances, under the most fallacious circumstances; for cases had been known of railway companies so exaggerating their prosperity as to induce the public to purchase the shares at double their worth. Under such circumstances, it was wise to provide that a perfectly correct balance-sheet should be submitted to the shareholders; and though he entertained but small hopes of a beneficial result from legislation, as the evil must cure itself, still, as there was a Bill before the House on the subject, they were bound to make it as efficient as possible.

wished to know who were to be the persons referred to as "competent" to examine the accounts?

said, his interpretation of it was, that the accounts should be referred to such persons as the auditors should consider competent.

said, the Amendment proposed that the bills of the engineers should be looked into after the money was paid, while the bills of the solicitors were to be taxed before payment. He thought they should both be placed on the same footing, and that both sets of the bills should be examined before payment.

said, the auditors could not be limited to unpaid accounts, but they would pass an opinion on examining the paid accounts as to the propriety of the course the directors had taken.

did not really understand what the Amendment now before them was. The clause, and particularly this part of it, ought to be taken not by itself, but with the whole Bill, and then the extraordinary complication of the machinery would be seen. First, the accounts were to be kept by the directors in a particular form; then the accounts were to be overhauled by auditors appointed by the shareholders. Then an accountant was to be employed who was to report to the auditors, who were to report to the directors, who were to report to the shareholders. But that was not all. After this there were twenty shareholders to examine the accounts again, who were to have the power of calling in special auditors, and they were to have all the powers of the former auditors. Where was all this to stop? When hon. Gentlemen said they wished shareholders to understand how their money was disposed of, they should take care they did not make a double mystification of the accounts by these various processes, and get them into an inextricable complication of knots which no man could disentangle. This clause would just enable such directors as were disposed to be rogues to be greater rogues than they had been. He could not let this opportunity pass without protesting against legislation which proceeded entirely on the assumption that all directors of companies were laying their heads together to plunder the shareholders.

considered that the Amendment, as now amended, was an improvement on the clause, and afforded additional protection to the shareholders and the public. It would give the auditors fresh powers in reference to accounts paid as well as those unpaid.

disclaimed the intention of imputing unworthy conduct to railway directors, but thought it could not be denied that they did some things in their capacity of directors which they would shrink from doing as private individuals. The Committee had now an opportunity of saying whether there should be an intelligible audit of railway accounts, for it was proposed to give the auditors the power to inquire into every item which was paid. The Bill afforded greater facilities for a good audit than could be attained by the Companies Clauses Consolidation Act.

said, that by the Companies Clauses Consolidation Act the acccounts wore open for inspection a fortnight before and a month after the balance.

thought that equal power should be given for inquiring into all the transactions of engineers as well as others, whether paid or unpaid.

would recommend the hon. Member who had moved the Amendment not to make any distinction between engineers and others.

said, that after an hour and a half's discussion it would appear that they had been debating on an Amendment which was not in exact accordance with the principle of the Bill. The Bill itself contemplated a continuous audit, and the Amendment began by stating that auditors once in every year, at least, should require the production of accounts. He would not oppose the Amendment, seeing that it touched on the question of engineers; but he held it to be quite inconsistent with the principle on which the Bill was framed.

said, that the Amendment was not his, but had been drawn up with great care by a person of considerable experience in these matters.

found it acknowledged that there should be a competent body to look after the solicitor's accounts; and that being admitted, it was only fair that the engineers should be subject to the same treatment. It was the practice where differences arose between contractors and companies that the whole matter should be placed in the hands of the engineer. He was anxious to relieve the engineers from such responsibility, and it was, therefore, requisite that they should have a competent court to which matters of difference and dispute might be referred.

did not see how the hon. Member for Honiton (Mr. Locke) could accede to an Amendment which he deemed wholly inconsistent with the Bill. The hon. Member said the Amendment was inconsistent with the Bill, and yet he wished to have it. The right hon. Gentleman (Mr. Labouchere) had said that he did not approve of the Bill, and yet he wished to have the Bill.

said, that he had not introduced the Bill. At the same time, believing that it would produce a certain amount of improvement, although not such as he should have introduced on the part of the Government, he thought it due to his hon. Friend (Mr. Locke) who brought it forward, and to whom the House was much indebted for it, to attend in his place and give him the best assistance in his power. His hon. Friend the Member for St. Andrews (Mr. Edward Ellice) had proposed an Amendment to place lawyers and engineers in the same situation; and, after having listened to the objections that had been made to it, he could not say it appeared to him to be of so unworkable a description as might be supposed from those objections. If the Committee divided on the subject, he would support the Amendment, seeing that it was in his estimation quite a reasonable proposal.

said, that what he had said was, that the Amendment was inconsistent with the principle of the Bill, because the Bill provided for a continuous audit. It would have seemed invidious in him to have refused assent to the Amendment, as he would then have been in the position of opposing the application of its provisions to engineers.

Question, "That those words stand part of the said proposed Amendment," put and negatived.

Question put—

"That the words, 'and the Auditors shall, in like manner, once, at least, in every year, require to be produced to thorn accounts of every sum of money paid to any engineer employed upon the Line of Railway and works of each Company, and also of every account due by the Company for any work done upon such Railway; and it shall be lawful for the Auditors, if they shall think fit, to refer all such accounts, whether paid or unpaid, to some competent person to examine the same, and to report to the Auditors upon the charges in such accounts,' be there inserted."

The Committee divided:—Ayes 77; Noes 42: Majority 35.

proposed in the same clause the following Amendment:—In line 8, after the word "payment," to strike out "or transaction, whether pending or completed."

regretted that the hon. Gentleman who had charge of the Bill should have assented to the Amendment. He would not bring any sweeping charge against railway directors, who were, generally speaking, men of integrity; but any system of audit must rest upon suspicion of misconduct, and if there were to be a real check, they ought to examine into "transactions," as well as "accounts." In a railway where there was a Government auditor, it turned out that a most improper contract for iron had been entered into by the directors. The efficiency of the Bill would be much impaired by this Amendment, and deprive the auditors of a most useful power of scrutiny.

thought the course taken by the right hon. Gentleman a strange one. He gave his support to a Bill which he admitted would now by this Amendment be deprived of a most desirable provision. It was a most extraordinary declaration for a Member of the Government; and for his (Mr. Ricardo's) own part, he would suggest a postponement of the clause, so that the whole measure might be revised, and that proper powers of audit might be conferred.

defended the course he had taken, and thought, considering the tone and temper in which these subjects were treated by the Committee, there was no encouragement for the Government to introduce such a measure. He had considered, upon the whole, that the Bill was an improvement on the present system, and had therefore given it his support.

said, that if the word "transaction" remained in the Bill, it ought to be called not a Bill for the audit of railway accounts, but for the control of the conduct of railway directors. If directors were not trustworthy, dismiss them; but if they were, let them not be treated as objects of suspicion, and their actions embarrassed by the proceedings of another board.

The right hon. Gentleman (Mr. Labouchere) said, the Amend- ment would weaken and damage the Bill, and yet he would support it. That was to say, the Government would pass a law which the right hon. President of the Board of Trade admitted would he a very had and inefficient law. If they struck out the word "transaction," what would they do with the word "pending," in the Bill? The hon. Gentleman (Mr. Locke) had stated that the first Amendment was inconsistent with the Bill; and then, by way of showing his consistency, supported an Amendment which he owned was inconsistent with the Amendment he had proposed.

admitted, with the hon. Member for Oxfordshire (Mr. Henley), that the words "pending or complete" were governed by the word "payments," as well as the word "transactions," and therefore, that if the Amendment were agreed to, the auditors would not have the power to inquire into payments which had not been actually made. He suggested that the words should be retained, and that, to meet objections of hon. Members, the word "pecuniary" should be inserted before "transactions."

said, that the insertion of the word "pecuniary" would leave the clause quite as vague and indefinite as it stood at present.

supported the retention of the words, with the insertion of the word "pecuniary." If they decided to strike out the words, they would afterwards find that it was necessary to reinsert them with the addition of the word "pecuniary." Without the word "pecuniary" the clause might make the powers of the auditors too extensive. He deprecated the course pursued by some hon. Members in the last division, who had voted for the purpose of making the clause bad in order that they might throw out the Bill altogether. It was not a fair way of proceeding.

must remind the Committee that the Bill was not for the purpose of auditing the policy of railway boards, but for the audit of railway accounts. He could see no reason why the clause should be left so open that an auditor might have power to interfere regarding transactions pending in the board of direction.

said, the whole policy of a railroad was a pecuniary transaction, and therefore if they allowed auditors to interfere in pecuniary transactions, they allowed them to interfere with the policy of the whole line, and made them superior in every respect to the directors. He thought, when the hon. Member (Mr. Locke), who had charge of the Bill, and the right hon. Gentleman the President of the Board of Trade, who represented the interests of the public, had agreed to the omission of the words as suggested by the hon. Member (Mr. H. Brown), that there would have been an end to all further discussion on the question.

said, he thought the Bill was a series of inconsistencies. He should therefore move that the Chairman leave the Chair.

wished to point out to the Committee that the adoption of this Amendment would place him in a position of peculiar hardship. It might be very well for Gentlemen connected with the director interest to oppose this Railway Audit Bill, independently introduced, on the allegation that a Railway Audit Bill ought to be introduced by the Government; but let the Committee call to mind that when the Government did propose a Railway Audit Bill, these very directors went up in deputation to the noble Lord (Lord John Russell) and induced him to withdraw the measure, on their promise to bring in an effective Bill of their own; and they did, indeed, after a time, frame a measure, but a measure so totally inadequate to the just requirements of the general railway proprietary, that they were fain to withdraw it, and to leave the matter in the hands of the shareholders themselves. The shareholders, accordingly, did frame a measure— that now before the Committee; and what was the course of the director interest in that House? Why, to oppose the very measure which they themselves had been, of mere shame, fain to recommend to the shareholders the preparation of. The grand principle with the director interest was to oppose every Railway Audit Bill, by whomsoever brought in; if an independent measure, they opposed it on the pretext that it was not a Government measure; and, if a Government measure, they opposed it on the pretext that it was not an independent measure. Of this railway shareholders might rest assured—that, until some effective Railway Audit Bill was enacted, they could rely upon no constantly vigilant and equitable administration of their affairs.

was free to confess that he had been much surprised at the course taken with respect to this Bill by Gentlemen connected with the direction of railways. He had himself been compelled to take a course with regard to this Bill in opposition to the views of those with whom he acted. He had never, indeed, said that this measure was without defects, There were several provisions in it which he desired to see amended; but he was bound to say that the hon. Member for Honiton (Mr. Locke) was in this matter fairly and bonâ fide carrying out the views of that large body of the railway interest which he represented, and a committee of which, sitting in London pending the past Session, had framed the measure. He was therefore surprised at the course taken with reference to the Bill by many of those Gentlemen to whom the railway proprietary had committed the conduct of their affairs. He thought it would be only proper that the Government should bring forward such a Bill as they might think necessary on the subject of railway audits. He thought it only fair to say that the Bill now introduced was introduced under a pledge given to the noble Lord (Lord John Russell) and that the Government Bill was withdrawn on the express condition that they, the railway directors, should bring forward such a measure.

considered that the railway directors who were opposing this Bill deserved, at the hands of the Government, the most stringent measure that could be devised. They had heard a great deal of the impolicy and impropriety of appointing auditors who might control the directors; but he felt that till auditors were placed in a proper position, no railway property in this country would be safe, nor would it assume that position as an investment which it intrinsically deserved. He was the chairman of two railway companies, and there was no act of his own or his colleagues which he was not prepared to submit to the most searching examination at the hands of any auditors, honourable and high-minded men, whom the proprietary might appoint. If any other than honourable and high-minded men were appointed to such an office, he would at once withdraw from the company, believing that the fact of such an appointment would show that he was no longer entitled to the confidence of the proprietary. He regretted that the whole day had been wasted in discussion as to proceeding with this Bill; but he thought that waste was to be attributed, not to the hon. Gentleman (Mr. Locke), who brought in the Bill, but to the hon. Member for St. Andrews (Mr. Edward Ellice), and those who had acted with him. He trusted the Committee would not agree to the Motion that the Chairman leave the Chair.

would support the Motion of the hon. Member for South Leicestershire (Mr. Packe), because he thought it was of no use to attempt to carry a Bill the very first clause of which was declared to be perfectly inefficacious.

thought he was not open to the charges that had been made against him. He had stated frankly that he had voted against the second reading of the Bill—that he thought it would be better to leave railway companies to settle their own affairs for the next year or two, without any interference of the Legislature—that while he would not oppose endeavours to render the Bill efficient, he did not give up his opinion against the measure—and that he intended to vote against it, should it reach the third reading. He had no personal interest in this matter, for he was only connected with one company, and it was the practice of that company to employ two of the most eminent accountants, entirely unconnected with the company, who had access to the accounts every month.

hoped the hon. Member for South Leicestershire would not press his Amendment. He thought if it was determined to throw out the Bill, it ought to be done in another manner, and one more worthy the Committee, and the hon. Member.

said, the question was, whether the measure was for the good of society or not? Now, he entirely disapproved of the principle of the measure. He did not see why railway people were to be placed in a different situation from any other people. If they passed this Bill, why should Parliament not also provide for auditing the accounts of canal companies, of gas companies, and, indeed, the accounts of every man, if he could not or would not audit them himself? He was not a director, and he did not wish to be a director, of any railway company, and therefore he was not at all personally interested in this subject; but he thought this Bill was an attempt to do what never could be done by Parliament, to the satisfaction either of the shareholders or the public. If the shareholders were too idle and indolent to look to their own affairs, let them pay for the consequences. He would, on these grounds, vote for the Amendment of the hon. Member opposite (Mr. Packe).

notwithstanding what he had heard, would persist in his Amendment, which he thought would have the effect of saving the time of the Committee.

hoped the Committee would not agree to the Amendment, which would have the effect of disposing of the Bill in a very summary manner. He believed one result of the discussion which had taken place on this subject would be, that the Committee and the public would see how vain it was to expect that any great alteration in the system of audit of railway accounts would emanate from the directors themselves. The conduct of the Government had been arraigned in no very measured language, on the ground that they had not brought forward some measure on this subject; but he might remind the Committee that a very numerous deputation of railway directors, who had, on a former occasion, waited upon the noble Lord at the head of the Government, urging him to withdraw a Bill introduced by the Government relating to the audit of railway accounts, pledged themselves that in the ensuing Session of Parliament, a measure for improving the system of railway audits should be submitted to Parliament on their behalf. He rejoiced to hear that statement; but no such measure had been brought forward, and he had no doubt the Gentlemen who contemplated the task, found that they had great difficulties to encounter from the proprietors. He would certainly prefer seeing any measure on this subject proceed from the railway directors themselves; but he thought the discussions that had taken place must convince the public how hopeless it was to expect a measure to emanate from that quarter.

said, that though he was a member of the deputation to which the right hon. Gentleman had referred, he had to learn that, though he was a party to the promise, he was bound to subscribe to any Bill on the subject that might be brought before that House. This Bill had been under discussion several times; but no one Member had had the courage to express his unqualified approval of any one of its clauses. He was most anxious for an efficient audit of railway accounts; but, as a Member of that House, he reserved to himself the right of discussing any Bill that might be proposed with the object of imposing restriction.

Motion made, and Question put, "That the Chairman do now leave the Chair."

The Committee divided:—Ayes 62; Noes 56: Majority 6.

House resumed.

The House adjourned at five minutes before Six o'clock.