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1885. NEW ZEALAND.

PUBLIC ACCOUNTS COMMITTEE (REPORT OF THE), ON THE PETITION OF THE WAIMEA PLAINS RAILWAY COMPANY (LIMITED), TOGETHER WITH THE PETITION, MINUTES OF PROCEEDINGS, AND EVIDENCE.

Brought up 4th September, 1885, and ordered to be printed.

REPORT. The Public Accounts Committee, to whom was referred the petition of the Waimea Plains Railway Company (Limited), have the honour to report,— That they have considered the petition and taken evidence in connection therewith, and have passed the following resolution : — That the petition be referred to the Government, with the recommendation that they promote the necessary legislation this session to enable the Waimea Plains Railway Company (Limited) to recover rates on the basis of the cost of the railway having been £95,000. F. J. Moss, 4th September, 1884. Chairman.

PETITION. To the Honourable the Speaker and Members of the House of Representatives of the Colony of New Zealand, in Parliament assembled. The humble Petition op the Waimea Plains Railway Company (Limited), incoepoeated UNDEE THE PROVISIONS OF " The JOINT - STOCK COMPANIES ACT, 1860," AND THE ACTS amending the same. Humbly showeth, — 1. That your petitioner is the company named the Waimea Plains Railway Company (Limited), referred to in the 9th section of " The District Railways Acts Amendment Act, 1883." 2. That, after the passing of the said Act, your potititioner made application to the Minister for Public Works for guaranteed interest for the year ending the 31st day of March, 1883, and for power to raise, by means of a rate, a part of such guaranteed interest payable upon the examination of accounts and books for such year, and on the 4th day of March, 1884, the Honourable Edwin Mitchelson, the then Minister for Public Works for the colony, having first caused the accounts and books of the company to be audited and examined by a person appointed by him for that purpose, signed and issued a direction to your petitioner to levy a rate under the said Act. 3. The said direction was and is in the words and figures following : "Whereas by a written instrument under seal dated the 18th day of October, 1883, the Waimea Plains Railway Company (Limited), hereinafter called 'the company,' pursuant to the provisions of the 9th section of 'The District Railways Acts Amendment Act, 1883,' made application for guaranteed interest for the year ending the 31st day of March, 1883, and for power to raise, by means of a rate, a part of such guaranteed interest payable upon the examination of accounts and books for such year : And whereas the part of the guaranteed interest it is so desired to raise by means of a rate as aforesaid amounts to £4,746 lls. 3d : Now, therefore, in pursuance and exercise of the power and authority vested in me by the 9th section of the said Act, I, Edwin Mitchelson, the Minister for Public Works, having caused the accounts and books of the company for the year ending the 31st day of March, 1883, to be examined, and being satisfied that the company is entitled to raise such rate under 'The District Railways Act, 1877,' and the amendments thereof, for the purposes in 'The District Railways Acts Amendment Act, 1883,' particularly mentioned, do hereby direct that such rate as is requisite to produce the aforesaid sum of £4,746 lls. 3d. shall be made, raised, levied, and collected by the company; and, in further pursuance of the said power and authority, Ido I—l. 7a.

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hereby direct that the dates on which the instalments of the said rate shall respectively be made payable shall be, as to the first equal instalment, the Ist day of May, 1884; as to the second equal instalment, the Ist day of August, 1884. As witness my hand, at Wellington, this 4th day of March, 1884.—Edwin Mitchelson, Minister for Public Works." 4. That, in pursuance of such direction, your petitioner duly made and levied a rate of 3s. 4d. in the pound upon the rateable values of the rateable property situated in the Waimea Plains Railway District, that amount in the pound being requisite to produce the sum of £4,746 11s. 3d. in the said direction mentioned. 5. That a demand for the said rate was duly made upon all persons liable for payment thereof in accordance with the provisions of "The Eating Act, 1882," but only fourteen of the persons liable would pay the same or any part thereof, and only £7 11s. Bd. in all has been paid on account of the said rate. 6. That Edward Brennan, one of the persons so liable for payment of the said rate, refused to pay the first instalment thereof, payable on the Ist day of May, 1884 ; and your petitioner, therefore, caused a summons to be issued against him, out of the Resident Magistrate's Court at Dunedin, for recovery of the amount of such instalment. 7. That the said summons came on for hearing in due course before the Essident Magistrate of the said Court, who gave judgment in favour of your petitioner for the amount claimed. 8. That the defendant appealed against the said judgment to the Supreme Court of New Zealand, Otago and Southland District; and the said Court, having heard argument, took time to consider its decision; and on the 24th day of June last past gave judgment, allowing the said appeal, and holding the said rate to be wholly bad. 9. That the following is a copy of such judgment: "In this case two classes of objections were taken by the appellant—one relating only to the right to maintain the present action against the appellant; but the other raising the question of the validity of the entire rate levied by the respondents. As to the latter question, since the proceedings are taken under the provisions of ' The Eating Act, 1882,' the appellant, by the 27th section of that Act, can only rely on the invalidity of the rate as a whole, on the ground that the rate is a greater amount in the pound than the respondents were empowered to levy. Now, the power given to the respondents is to levy a rate for the purpose of raising a particular sum of money, that is to say, they are authorized to levy a rate of so much in the pound as may be necessary for raising this particular sum. If, therefore, they levy a rate in order to raise a larger sum than they are authorized to raise, the rate so levied must necessarily be for a greater amount in the pound than the respondents are authorized to levy. This is the plain and natural construction of the 27th section, when read in conjunction with the powers vested in the respondents. It is the more important that this construction should be adopted, because here the persons rated have no voice in fixing the amount of the rate, nor any appeal from it when fixed. That the levying a greater rate than is authorized would invalidate the rate is practically admitted by the 27th section ; and the case of Eichter v. Hughes, 2 B. and C, ,499, shows beyond doubt that, where a definite amount is authorized to bo levied by rate, the levying a larger amount will render the whole rate bad. Have, then, the company levied a rate for the purpose of raising a larger sum than they are authorized to raise ? Now, by ' The District Railways Act, 1878,' the company proposing to construct a railway had, by the 11th section of the Act, to deposit with the Council of each county within which lands proposed to be rated were situate a statement containing divers particulars, and, amongst others, an estimate of the cost of the proposed railway and of its equipment. A vote of the ratepayers was then taken; and if a majority, representing more than one-half of the rateable property, consented to the construction of the proposed railway the Governor might declare his approval. In that case the company were entitled to a guarantee of 7 per cent, per annum on the cost, 5 per cent, to be raised by rate, and 2 per cent, to be paid out of the Consolidated Fund. By the original Act of 1877 the cost of the railway, if in dispute, was to be determined by a Commissioner appointed by the Governor. By the Amendment Act of 1878, the 22nd section, it was however provided that a certificate in the form in the Schedule, under the hand of the Minister for Public Works, should conclusively fix the cost or value of the railway for the purposes of the guarantee of the interest on cost. By the 37th section of the same Act it was also provided that, for the purpose of deciding the amount of guaranteed interest to be paid on any district railway, the cost of such railway should in no case exceed the estimate of the cost of the proposed railway and of the equipment thereof, transmitted by the company under the provisions of the 11th section of ' The District Railways Act, 1877.' Plainly, these two sections must be read together. The certificate of the Minister is only conclusive so long as it does not exceed the amount of the estimate. It would require very strong language indeed to compel the Court to hold as conclusive a certificate given by the Minister in contravention of the law, as clearly stated in the 37th section, and which, if upheld, would have the effect of benefiting a private company at the expense not only of the local ratepayer but also of the consolidated revenue. It is, moreover, clearly just, as the ratepayer consents to be taxed on the basis of a given estimate, that he should not be liable to be taxed on a different and higher basis. Now, the case on appeal was stated by the parties, and sets out what was proved. It does not appear from the case that there was any dispute as to the material facts. It was proved that the estimate of the cost for the purposes of section 11 of the Act of 1877 was £101,000. The total amount, therefore, for which a rate could be levied in the extreme case of the receipts being insufficient to pay for the cost of maintenance and working expenses would be 5 per cent, on that amount, or £5,050. An instrument under the hand of Mr. Mitchelson, the then Minister for Public Works, was produced at the hearing before the Magistrate, and is set out in the case. It recites that the company had applied to the Minister for power to raise part of the guaranteed interest for the year ending the 31st day of March, 1883, by means of a

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rate amounting to £4,746 11s. 3d. It states also that the Minister had caused the books of the company to be examined, and was satisfied that the company were entitled to raise such rate, and then contains a direction by the Minister that such rate as is requisite to produce the sum of £4,746 11s. 3d. is to be levied and collected by the company. The company thereupon proceeded to levy a rate of 3s. 4d. in the pound, which, according to the rate-book, would produce almost exactly the amount required. The secretary of the company admitted that the deficiency above ■mentioned had been ascertained by an audit of the company's books and accounts by a person appointed by the Minister, but that, according to the company's calculations, the deficiency was greater. The secretary also stated that the income of the company for the year ending the 31st day of March, 1883, was £5,791 Bs. Bd., and that the cost of maintenance and working expenses, including property-tax —which for this purpose ought not, I think, to have been included—and directors' fees, was £4,935 4s. 5d., leaving a balance of profit of £856 11s. 3d. The statement of the secretary is confirmed by the report of the directors of the company, which, though it does not show the balance for the twelve months ending the 31st day of March, 1883, yet shows that for the eleven months ending that date the excess of income over expenditure was £784, and that for the year ending the 30th day of April, 1882, the income had been in excess of the expenditure. If this balance of profit of £856 11s. 3d. be deducted from the total guarantee of 7 per cent, on £101,000, or £7,070, there remains £6,213 Bs. 9d. Two-sevenths of this is to be paid out of the Consolidated Fund, and five-sevenths, equal to £4,438 7s. 5d., has to be raised by rate, instead of £4,743 11s. 3d., which the rate of 3s. 4d. in the pound was calculated to cover. The directors, in their report, say that they expect to receive about £6,640 from the rate and from the Consolidated Fund. Now, if two-sevenths of the proposed rate of £4,746 be added to it, the sum reaches £6,644. If to that amount we add the admitted profit, we have a gross total of £7,500, omitting shillings. Taking, therefore, the company's figures with the amount authorized by the Minister, it would appear that the rate is levied to meet a guarantee of interest on a capital of £107,142. The company, however, say that there was a greater deficiency than the rate would cover, or, in other words,"that the Government auditor, for the purposes of the guarantee, has disallowed some items of expenditure which appear in the company's accounts as charges against revenue. If that is so, the rate authorized by the Minister would be really to make up the guaranteed interest on an amount somewhat greater than £107,142. Now, it appears from the case, that Mr. Macandrew, when Minister for Public Works, certified the cost of the railway for guarantee purposes at £108,713, under section 22 of the Ace of 1877. It is, therefore, a probability, almost amounting to certainty, that the sum named in Mr. Mitchelson's direction was to cover a deficiency of guaranteed interest on that amount. In any, event, however, it is plain from the case that the cost of the railway must, for the purpose of the guarantee and of the rate, have been estimated at £107,142 at least, whereas it could not lawfully be estimated for these purposes at more than £101,000. It is said, however, that the direction of Mr. Mitchelson fixing the amount to be raised by rate is conclusive evidence that the amount so fixed was the proper amount, and the seventh and following sections of the Amendment Act of 1882 were referred to in support of that contention. I can see nothing in those sections which would prevent the direction of the Minister being called into question where it appears that it is given in order to raise interest on a larger sum than the law authorizes. It may be that, if there had been a certificate by the Minister, as prescribed by the 3rd section of the Amendment Act of 1883, the certificate would have been conclusive evidence of the amount to be raised. No such certificate was, however, given, and it was admitted that Mr. Mitchelson's direction was not a certificate under this section. The fact of the Legislature having expressly made this particular certificate conclusive evidence shows, if anything, that nothing short of the certificate would be conclusive evidence. If the Legislature had intended the mere direction of the Minister as to the amount of the rate to be conclusive evidence it would have said so. Not having said so, the Court cannot, where the interests of the subject in his tax-paying capacity are in question, hold the direction to be conclusive. As, therefore, it appears beyond doubt that the rate of 3s. 4d. in the pound will raise an amount greater by several hundred pounds than the company are authorized by law to make, it follows that the whole rate is invalid, and that the company cannot recover from the appellant." —Appeal allowed, with £10 10s. costs. 10. That your petititioner is advised that, owing to the mistake in the direction of the Minister for Public Works, pointed out in the said judgment, the said rate cannot be recovered. 11. That no portion of the said rate beyond the before-mentioned sum of £7 11s. Bd. has ever been paid, and the balance thereof —viz., £4,738 19s. 7d. —will be wholly lost to your petitioner, notwithstanding that your petitioner was guaranteed the payment thereof under " The District Eailways Act, 1877." Your petitioner therefore prays that your honourable House will be pleased to take its case into consideration, and cause such measures to bo adopted as to your honourable House may seem fit, whereby your petitioner may obtain payment of the amount of the said rate, or such other relief as in the opinion of your honourable House your petitioner is fairly and justly entitled to. And your petitioner will ever pray, &c. Dated this thirteenth day of July, 1885. The common seal of the Waimea H. Deivee, Chairman, \ Plains Eailway Company (Limited) was D'Arcy Haggitt, hereunto affixed, at a duly-constituted N. Y. A. Wales, i-Directors. meeting of the Board of Directors of John Mitchell, the said company, in the presence of Geoiige W. Eliott, ) B. H. Leaey, „ Secretary to the said Company.

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MINUTES OF PROCEEDINGS.

Wednesday, 2nd September, 1885. The Committee met pursuance to notice. Present: Mr. Moss (Chairman), Hon. Major Atkinson, Mr. Barron, Mr. Cowan, Mr. Dargaville, Mr. Hislop, Mr. Montgomery, Dr. Newman, Mr. Peacock, Hon. Sir Julius Vogel. Minutes of last meeting read and confirmed. A petition from the Waimoa Plains Eailway Company was presented. The Chairman was requested to confer with the Chairman of the Petitions Classification Committee as to whether a mistake had not been made in referring this petition to the Public Accounts Committee, a petition on the same subject being already before another Committee. The Committee adjourned till to-morrow at 11.30 a.m.

Thursday, 3rd September, 1885. The Committee met pursuant to notice. Present: Mr. Moss (Chairman), Hon. Major Atkinson, Hon. Mr. Ballance, Mr. Barron, Mr. Cowan, Mr. Dargaville, Mr. Montgomery, Dr. Newman, Mr. Peacock, Hon. Sir Julius Vogel. Minutes of last meeting read and confirmed. A letter from Captain J. H. Sutter, Chairman of the Petitions Classification Committee, dated the 2nd September, with reference to the petition from the Waimea Plains Eailway Company, was read. Besolved, That the petition be now taken into consideration. Mr.'B. Leary attended and gave evidence, which was taken down by a shorthand reporter. Mr. Barron moved, That the Government be recommended to comply with the request of the petitioners during the present session. The question being put, Dr. Newman moved that its consideration be deferred. Carried. Mr. Montgomery moved, That the Committee adjourn till 11.30 to-morrow for the consideration of Mr. Barron's resolution, and that, in the meantime, the Chairman confer with Mr. Cowan as to any evidence he may wish to bring before the Committee. The Committee adjourned till to-morrow at 11.30 a.m.

Friday, 4th September, 1885. The Committee met pursuant to notice. Present: Mr. Moss (Chairman), Hon. Major Atkinson, Mr. Barron, Mr. Cowan, Mr. Dargaville, Mr. Hislop, Mr. Montgomery, Dr. Newman, Mr. Peacock, Hon. Sir Julius Vogel, Mr. Wilson. Minutes of last meeting read and confirmed. Besolved, on the motion of Cowan, That the consideration of Mr. Barron's motion be deferred till Mr. Mitchelson and Mr. O'Connor are examined, as they have important evidence to give respecting the allegcl error in the amount of the certificate upon which the rate was levied. Mr. O'Connor attended and gave evidence, which was taken down by a shorthand reporter. Mr. Leary attended and was re-examined. Besolved, on the motion of Mr. Peacock, That sufficient evidence has been taken to enable the Committee to come to a decision. Mr. Barron asked leave to withdraw his resolution, which was granted. On the motion of Mr. Montgomery it was resolved, That the Committee recommend the Government to promote the necessary legislation this session to enable the Waimea Plains Eailway Company (Limited) to recover rates on basis, of the cost of the railway having been £95,000 Besolved, on the motion of Mr. Montgomery, That the decision of the Committee be reported to the House to-day, with the recommendation that it be referred to the Government immediately.

MINUTES OF EVIDENCE.

Thursday, 3rd September, 1885. Mr. E. H. Leaey, Secretary to the Company, examined. 1. The Chairman.] Would you be kind enough to state your name ? —Eichard Henry Leary. 2. And you are Secretary to the Waimea Plains Eailway ? —Yes. 3. Eesident in Dunedin?—Yes. 4. Would you give the Committee any information which you think desirable that they should have with respect to the relief sought for by the company in this petition ? —I may state shortly that the company was formed in June, 1878, and the railway opened on the Ist August, 1880; the shareholders, relying on "The District Eailways Act, 1877," guaranteeing interest on the cost of the railway invested in the undertaking, thinking the guarantee would be forthcoming. As stated in the petition, the company was unable till 1883 to proceed to recover their rate. At the 31st March, 1883, the company's accounts were balanced, the deficiency ascertained, and application was made to the then Minister for Public Works for directions to raise the deficiency by

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a rate. The company did not propose what the amount should be, but simply asked him for directions to raise the rate, and he instructed an auditor to examine the company's accounts, which was done. The auditor examined them and reported to the Minister. The auditor discarded certain items, and, instead of being for the deficiency shown in the balance-sheet, it was for a less amount. We proceeded with the rate, and did all things necessary to comply with the statute ; and then we came to the point where we recovered the rate in the Eesident Magistrate's Court, and the judgment was successfully appealed against. With reference to the certificate for £108,713, the company desired to raise money for the issue of debentures, and could not do so without a certificate from the Minister for Public Works showing the cost of the line. An estimate of the cost of the line whan completed and fenced throughout was made by the company's engineer and sent to the Minister for Public Works,'Mr. Macandrew. Mr. Macandrew referred it to Mr. Blair. Mr. Blair approved of it, and Mr. Macandrew issued a certificate for £108,713. Naturally enough, when Mr. Macandrew's successor had to issue the certificate he would inquire what was the cost of the line; and the only certificate being that for £108,713, he naturally concluded that was the correct amount on which to base his calculation of the rate, and, in doing that, instead of taking the £101,000, which was what, according to the Judge's decision, we should strike the rate on, he took the larger amount. We want a rate that the law authorizes us to get, no more nor less. If we were only entitled to rate on £101,000 we will take it, and, if entitled to the larger amount, we will take that; but all we want is that the shareholders should receive what they are entitled to. They have had their money altogether out for six years, and never received one shilling interest. It has been stated that the Waimea Plains Railway and the New Zealand Agricultual Company are identical. As a matter of fact, only one shareholder in the agricultural company owns shares in the railway company ; and the agricultural company, out of the four thousand seven hundred odd pounds, had as its share to pay about three thousand; and it is the influence of the Agricultural Company that we have been fighting all along: they are supplying the means to enable the Defence Committee to resist the Eailway Committee at every turn, and this is a company which above all others has obtained advantages by the construction of the line. Of the first rate £3,000, the second £2,530, and the third £2,483 falls to their share, and they are thus indebted to the railway company upwards of £8,000. We want to get relief this session, and are advised that this can be effected by the insertion of a clause in what I understand to be the Special Powers Bill. We want to recover what we were debarred from by what was no more than a clerical error. Instead of giving a certificate for the proper sum it was given for too large a sum, and if we get the smaller we will be content. 5. Major Atkinson.} As the law is at present, the Minister is unable to issue another certificate? —We cannot raise another rate. 6. The time has passed; you want the Minister to issue another certificate, and give the company power to levy on the other certificate ? —ln lieu of the one already levied. 7. You want power to levy the rate? —Yes. 8. Mr. Cozvan.} You are aware that the estimated cost of this railway line was £101,000 ?— Yes ; without land. The certificate states that at the foot of it. I did not know till I came to Wellington that the cost of the land was not included. 9. This paper you have given me is a true copy of the original estimate ?—lt is a copy in brief; I have contracted it a little. It is not a true copy in every particular : Mr. Higginson's signature is not there. 10. But the figures are the same?—Yes. 11. Would you inform the Committee what amount has been expended on the railway line?— £109,048 Is. 7d. 12. The first item of this list is £14,000 for grading, earthworks, and formation; how much of that has been expended ?—We did not class our work in that way. Bridging, culverts, sidings, plate-laying, ballast, and grading, we put all that down as permanent-way, and our expenditure on permanent-way has been £42,267 2s. 4d. ; the estimate was £32,100. 13. Fencing and level-crossings £10,500 : how much of that has been expended ?— The levelcrossings are included in that £42,000. As far as we are concerned we put the level-crossings down to the permanent-way. The fencing has only cost us £2,828 13s. 6d. Ido not know what proportion of the £10,000 estimated should represent the fencing and crossings, but I have put the level-crossings along with the rest of the earthworks in the classification of expenditure. 14. The next item is fifty-two miles permanent-way ironwork, £25,900 ; how much of that has been expended ?—We have expended £30,266 7s. lOd. 15. Sleepers :no sum opposite it here ?—£7,875, that was the estimate ; actual cost, £12,054 11s. Bd. 16. Then, the equipment; how much of this is for rolling-stock ?—The estimate for two locomotives was £3,000 ; the cost was £2,410 6s. 7d. The cars and trucks, estimated at £5,360, which we have not purchased, we are hiring from the Eailway Department. The land has cost £3,686, and is not included in the estimate of cost. We have paid in excess £22,914, and less than on the estimate £14,689, a net result of £8,045 above the estimate. 17. With regard to the land, how much of that is paid for?—A little over £3,000 is owing. 18. There are two items—general contingencies, £9,000; engineering, £4,765 ? —£13,765 on the estimate. We have expended £14,281 14s. sd.—namely, engineer's charges, £2,703 17s. 4d.; advertising, £395 12s. 3d. ; law charges, £333 2s. 7d.; stationery, telegrams, printing, and sundries, £900 Is. 6d.; directors' fees, £165 Bs.; loan charges, £2,100; interest paid during construction, £7,683 12s. 9d.: total, £14,281 14s. sd. I may explain that the advertising and law charges were necessary in consequence of the Act requiring certain things to be d»ne—notifications and so forth, and the advertising for tenders, and the advertising the notices.

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19. And the station-buildings?—The estimate was £2,500. The actual amount expended was £1,253 os. 3d. on building and accommodation. 20. Then you say the actual outlay on this line, including interest on cost of construction, is £109,000 ?—£109,048 Is. 7d., and the Government Auditor says the same thing. He has certified to it after a strict examination. 21. And, notwithstanding all these discrepancies, you assert on certain items you have expended above the estimated cost ?—£8,048 Is. 7d. above the estimated cost, and I can show vouchers for every penny of i-tr, and have done so. 22. That allows for the rolling-stock, estimated to cost £8,360, of which you have spent £2,400 ? —£2,410, and we hire the remainder. 23. Mr. Montgomery .] I understand from his evidence he wishes such a certificate to be issued, or measures be taken to allow the rate to be levied on £101,000 ? —Or such sum as the Committee think we are entitled to. 24. And that is the solo object of your being here ? —Yes. According to the Eating Act we cannot recover a rate after two years have expired; and unless we get relief this session we shall loose £4,000 or £5,000, and we have already lost nineteen months' interest through defective legislation. 25. Will you furnish a list of the shareholders in both companies?- —I will give what I know among the railway company. Amongst our shareholders only one has got an interest in the agricultural company. I cannot supply a list in both. I hand in a list of the shareholders of the Waimea Plains Railway Company. I cannot give a list of the shareholders in the agricultural company because I have not access to the books, which are kept in London. Mr. Joseph Clark is the only shareholder in our company who is also a shareholder in the agricultural company. 26. Do you know if any of the present shareholders in the agricultural company have sold out of the railway?—l denied the two companies were identical. 27. I think you said the railway company was made to increase the value of the land of the agricultural company ?—But I did not say they were identical. It was stated they were identical, and I disputed that; and they cannot be, seeing out of seventy-five shareholders seventy-four have no interest in it. 28. How many shareholders of the agricultural company were shareholders in the railway company originally?—About a dozen. 29. Were they large shareholders?—Yes; Messrs. McCaughan, Driver, Larnach, and Bell were large shareholders. 30. They have sold out their shares in the railway company? —They have sold out of the agricultural company. 31. And are still shareholders in the railway company ?—Yes; with the exception of McCaughan. 32. Mr. Gowan.~\ You said the company had not received a shilling of interest ? —Rates, I said. 33. You did not exclude the payments of the Government which you have received ?—That is not rate, but a portion of the 7 per cent. The statement I made was that the shareholders never received a shilling; neither have they. 34. What payments of guaranteed interest have you received ? —The Government quota for three years up to the 31st March last. 35. Computed on the large certificate ? —Yes, the £108,000. 36. You also asserted that it was your opinion that the agricultural company was supplying funds to the ratepayers to contest this matter? —rlt is well known that they are contributing largely. 37. Are you not aware that the ratepayers are contributing pro ratal —Yes; the pro raid makes the company's share a very large one, as they have to pay three-fourths of the rates. 38. Are you aware that the ratepayers are contributing for the purpose of contesting the matter ? —lt is a common report that they are doing so. 39. Have you not seen an advertisement calling upon the shareholders to pay up for the purpose of contesting this question? —I have not. 40. Will you inform the Committee why your directors propose that a fresh valuation should be made, so as to come to a more satisfactory decision? —I do not think my directors would fear a fresh valution of the line. I suppose you mean as regards interest on cost. As for the cost of the railway, lam prepared with vouchers for every pound; the only matter would be whether interest was properly chargeable to cost. 41. The ratepayers are dissatisfied that they should be called upon to pay a rate on a larger sum than £101,000; and they are also dissatisfied with the items which you put down to make this amount of £101,000. Several of these items have not been expended by the company ? —A larger sum has been expended on other items. 42. Would your company agree that the line should be again valued by professional men so as to bring about a satisfactory value between the company and the ratepayers ?—I cannot say whether they would. They would be likely to say, "We will take what the law gives us; we have to get interest on the cost; the value of the line may be more or less than when constructed." It is manifestly unfair to say that you must bear the fall, supposing iron has gone down 50 per cent. My directors are prepared to do anything in reason; we are always desirous to meet you. 43. That is the point; the ratepayers desire the company to make a fresh valuation of the line ?—That will not do us ; if the time goes beyond May next we shall not be able to recover at all. We want to get the relief before next May; and if we went in for a fresh valuation, the thing could not be settled this session at all. 44. Mr. Barron.~\ This question of valuation has been gone into by the Auditor-General?—By the Government Auditor in Dunedin appointed by the Minister. 45. At all events he is a Government official ?—He is a Government official,

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46. He has revised your figures and passed the amount you claim ?—Yes. 47. The Minister has issued a certificate on the basis of the figures officially approved by the Auditor ?—Yes. 48. And there was no objection to the value you placed on the line, the objection being a technical one, founded on the fact that the Minister had given a certificate in excess of the estimated cost ol the line? —Yes. 49. Your engineer first announced to the ratepayers that your estimated cost was £101,000? —Yes, without the land. 50. And the Minister gave a certificate for £108,000 ?—Yes. 51. And if the Minister had added the land there would not have been any discrepancy ?—■ There would have been a discrepancy. The estimated cost would then be £105,686 55., reckoning actual value of the land. 52. Were you not Secretary to the agricultural company?—No; my firm sold land for them years ago. 53. Are you aware, of your own knowledge, that the solicitors for the Waimea Plains Eailway Company are also solicitors for the agricultural company? —They are. 54. And do you know if the Colonial Treasurer is interested?—l know by report he is a director and is a shareholder; in the same way I know that as I know he is Colonial Treasurer. 55. Have the Government made offers to purchase the line ?—Yes. 56. And the company are willing to sell?—At their price. 57. And what is the difference between what the Government are willing to give and what the company will take?—£lo,ooo. We will sell if we get our money back, £35,610, without interest. We are willing to sell. That was what the directors were willing to do some time ago. They would still be willing to do that, as it is troublesome collecting the rate, and we are all sick of it. 58. Have you seen the Solicitor-General about this thing ?—No. 59. You have seen the Attorney-General ?—I have seen the Attorney-General. 60. Has he given any opinion as to the position of the question, as to whether the matter is a mere technical objection, which it would be fair to ask Parliament to remove ?—I understood him to say it could easily be removed, as it was a mere error that had been made. 61. An error by the Minister?—Yes ; somebody in the office. He based his calculation of the rate on the wrong certificate. It was a very natural mistake. 62. Mr. Peacock.] If you got a fresh certificate issued for the original estimated cost of the land, you will have no difficulty in recovering the rate which you have failed to do before ?—Provided we get power to levy the rate based on the certificate for an amount proportioned to the reduced cost; and the company are content to take that, though considering they are entitled to a much larger sum. 63. That sum is less by £8,000 than the cost of the line to the company ?—Just so. 64. The Chairman.] You said that the company had already lost nineteen months' interest by defective legislation. In what way ?—We found, when we commenced to consider the propriety of levying a rate, we had no power to do it. The District Railway Act said that we should raise it under "The Sating Act, 1882," but it had not come into force in time to admit of doing so, and under the 1883 Act we could only levy for the year ending the 31st March, 1883, instead of giving us power to go back and levy a rate from date of opening; thus we lost the interest from August, 1880, to 31st of March, 1882. 65. Did I understand you could supply a list of the ratepayers: I asked if you could furnish a list of those who arc liable at present ?—They are in the rate-book, it is a very long list. I can give the number of them. There were 443 in 1883, and the agricultural company is one, paying three-fourths of the rate. 66. The list now, and the list when the railway was commenced :is it very different ?—Not very much. Some of the people have sold their property ; they are increased in numbers ; for example, there were in 1883 443, and in 1885 690 persons. 67. Do you know how many ratepayers and owners of property there were when the consent to the construction of the line was obtained in November, 1878? —I do not think a fourth of the number that there are at present. The country was very sparsely populated then. 68. About the difference of £10,000 between the Government and the company ; the company had paid up £36,000 of capital?—£3s,6lo, exactly. 69. And I presume they issued debentures to a certain extent ?—£75,000. 70. That is, £110,000 ?—And then we owed money. We owed £15,000 besides. 71. And the company were content to lose to some extent on the price they were willing to accept from the Government ?—Lose interest for six years. They want their sovereigns back, but will put up with the loss of the interest, £13,000 interest on the capital paid up, for the time it has been paid up, and they think that is quite enough for them to lose. 72. Is it not a fact that then three shareholders of the railway company were largely interested in the country through which the line runs ?—At the time it was constructed, yes. 73. And these landowners were largely benefited by the construction of the line ?— Undoubtedly. 74. Can you give an estimate of the extent to which the landowners who were shareholders in the railway company were benefited by the construction of the line ?—lt had the effect of sending up the value of their land 100 per cent. - 75. What extent of land was improved in value to that degree 7^^-Say, thirty-seven miles by two miles, which would at least have gone up 100 per cent, in value, and some of it improved 300 per cent. 76. About sixty thousand acres ?—Yes.

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77. What would be the average value of the land comprised in that sixty thousand acres?— I could not tell you. 78. Is it £2, £5, or £10 per acre ?—The present value would range from £3 to £10. 79. The average would t>e £5 ?—I dare say it would. 80. So the sixty thousand acres have been increased in value to the extent of £2 10s. per acre by the construction of the line ?—Fully that. I should say the country comprised within this railway district increased fully 100 per cent. 81. And at the -time of thq construction of the line that was mainly owned by the promoters of the agricultural company ?—No. 82. The land was held by the same shareholders then ?—Only four or five were in both. One director who has a thousand pounds in the railway never had a shilling in the agricultural company, nor have I had myself. 83. From first to last the landowners in the district and the shareholders in the company have been for the most part two distinct sets of people ?—Yes. 84. Has Mr. Clark, a shareholder in the railway company, any interest in the agricultural company?—Yes; he is a shareholder, so it is publicly said. 85. Mr. Bell ?—I believe he is not a shareholder. 86. Mr. Driver ?—He was, but he has sold his shares a long time ago. 87. Mr. Larnach?—He was; he has sold out. The railway company was formed before the agricultural company was floated. The agricultural company was not floated till after the railway company. The railway company was incorporated in June, 1878, and one of the inducements to take shares in the agricultural company was, " there is a railway running through the estate." Indeed, that was set forth in the prospectus.

Fbiday, 4th September, 1884. Mr. O'Connoe, ITnder-Secretary for Public Works, examined. 88. The Chairman.'] The question now before the Committee is the rate levied by the Waimea Plains Railway Company, in accordance with the certificate issued from the Public Works Office, or rather by the Minister for Public Works. It is alleged that the amount of this certificate was excessive, and that, on the strength of its being excessive, the company is deprived of the power of levying a rate at all, and the object of the Committee is to inquire into that. Will you state the circumstances connected with the certificate, and the grounds on which the amount was fixed?—The evidence I have to give on that subject is as follows: In pursuance of clause 11 of "The District Eailways Act, 1877," the company lodged in the Public Works Office in Wellington a copy of their plan and book of reference, accompanied by an estimate of the cost of the proposed railway. This is the plan and book of reference, and the estimate of the cost so lodged. [Documents handed in.] The estimate as here shown leads up to £101,000; but there is also a note at the foot of it containing the words, "Cost of land not included." The date of that estimate is the-llth September, 1878. Following on that we got a subsequent estimate from Mr. Higginson, dated the 27th March, 1879, which gives as one of its items, " Land, £7,000." It leads up to a total of £108,713. That estimate was then referred to the Engineer in Charge of the Middle Island for revision, and he sent up a verification of it to the Minister on the 14th April, 1879. He states the amount in round figures as £109,000. Thus we have an estimate from Mr. Blair confirming the revised estimate as supplied by the company. Following on that, in due course, came the certificate of the Minister. It is dated the 2nd May, 1879, and is signed by the Hon. Mr. Macandrew, then Minister for Public Works, and fixes the cost of the railway at £108,713, which is exactly the amount of the company's own estimate. This certificate is in the form of the Fifth Schedule of "The District Eailways Act, 1878." I have now to refer to clause 22 of "The District Eailways Act, 1878," which provides that a certificate in the form set forth in the Fifth Schedule of that Act shall conclusively fix the cost or value of a railway for the purposes of the guarantee of interest. Mr. Macandrew's certificate is in the form of the Fifth Schedule of the Act. I should also point out that this certificate was, in this case, as well as in several other cases, given before the railway was completed. It is based on an estimate of the probable cost; it is not based on the ascertained cost; and it seems to be contemplated in the Act it should be based on the estimated cost. 89. What clause ? —Well, I am merely giving that as my own opinion of the Act, for what it is worth. It seems to me to be contemplated, judging by reading the Act, that the certificate might be based on the probable cost. In the Fourth Schedule of the Act it provides for the giving of debentures by the company, and there is nothing apparently to prevent these debentures being issued at the inauguration of the company. If that is so —and if the company has to show any Ministerial authority for the amount it is borrowing — then it is evident that they must have the Minister's certificate of probable cost before the work is completed. It is evident, at any rate, that the Government went on that assumption, because they gave the certificate, and gave it in the terms of the Fifth Schedule of the Act of 1878, before the railway was completed, and so, necessarily, based it on an estimate of the cost. The orders have been given to the company from time to time to levy rates on the basis of that certificate, given by Mr. Macandrew, that amount being taken as the basis on which the rates were calculated ; and I have got here a table showing the amount authorized to be levied from time to time. On the Bth February, 1884, for the period ending the 31st March, 1883, £4,746 11s. 3d.; on the 12th June, 1884, for the period ending the 31st March, 1884, £4,858 7s.'Bd.; and on the sth June, 1885, for the" period ending the 31st March, iBBS, £5,407. In all cases these are the amounts to be collected from the ratepayers, irrespective of the two-sevenths to be paid by the Government. I should also say that interest on £108,713 at 5 per cent, comes to £5,435 135., and

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the profit that has been made by the company would be indicated by the difference between that amount and the amount they have been authorized to receive from the ratepayers and the Government. In the first year in question, of these three years, they made a profit of £964 14s. 5d., in the second year they made a profit of £808 3s. 5d., and in the third year they made a profit of £40 2s. 2d. Up to last June there was no question at all as to £108,713 being the proper amount on which to levy the rates; but it was disclosed in connection with the negotiations for the purchase of the railway by the Government that the railway had not coat this amount, and there were consequently two points referred to the law officers for opinion, namely : First, whether the Government had power to reduce the amount guaranteed to the company by reason of the fact that some of the works contemplated in the original estimate had not been carried out; or, second, failing that, whether they had power to, or should, reduce it to an amount of £101,000, the exact figures given in the original estimate, irrespective of the land. The first point, therefore, was whether the Government could reduce the amount on which rates would be payable to the actual cost of the railway, to be ascertained by an estimate to be made now on the ground; and the second •point was, whether, failing that, they had power to reduce the guarantee to an amount of £101,000, that being the figure stated in the original estimate, irrespective of the land. Mr. Reid's opinion, stated shortly, was that the reduction could not be made on the first basis stated, in the face of clause 22 of the Act of 1878; and, as regards the other basis, he said if there was nothing on the original estimate except £101,000, that would be binding, and the Government would be called on to reduce the guarantee to £101,000; but it had been brought before his notice that there was a memorandum to the effect that this amount did not include the land, and as the Government received supplementary evidence on that subject, and accepted a revised estimate showing the probable cost as £108,713, he thought we are bound by the certificate given by Mr. Macandrew, and that the rate would have to be declared on that amount as the law stood at present. There is no other matter connected with this subject, that I know of, that I can throw light upon, except the question as to how the railway would be affected by the operation of clause 80 of the Act of 1877, which still stands. By that clause it is provided that, in reckoning up the amount for which rates are to be levied, the Government shall reckon that 30 per cent, of the gross receipts is profit. Supposing the company has made no profit at all—that the working expenses and receipts exactly balanced one another —the company, in the absence of this 30-per-cent. clause, would be entitled to 7 per cent, on the whole cost of the railway; but under this clause 30 per cent, of the gross receipts is directed to be reckoned as profit, therefore 30 per cent, of the gross receipts would be deducted from the 7 per cent, on the whole cost, to which they would otherwise be entitled. The way that the matter works out in the Waimea Plains Railway case, taking their receipts and working expenses last year as a basis to calculate from, is this: instead of receiving, five years after the railway is opened, £7,609 18s. 2d., which is 7 per cent, on the total cost, they will receive £1,887 12s. less than that sum, and the effect that that will have on the financial affairs of the company apparently will be that, after paying interest on £40,000 at 6 per cent., and on £35,000 at 6J per cent, borrowed from the Government Insurance Association, they will only have £1,135 to pay interest on their own capital, which will give them, on £35,610, about 3-J- per cent, interest, instead of about 8-| per cent, which they would have got by the rates as fixed on last year's basis. This is assuming that they make no net profit over and above their working expenses. Their profit last year, out of total receipts amounting to £6,292, was only £40. The five years from date of railway being opened for traffic, and on the expiration of which this clause will come into operation, expires in August of this year. 90. Mr. Wilson.] You said 6 per cent, on £40,000, and 6J per cent, on £35,000; and you went on further to state that the rate would be how much ?—The amount of guaranteed interest altogether at 7 per cent, comes to £7,609 18s. 2d.; but, if you take off from this the sum of £1,887 125., which is 30 per cent, of the gross receipts, it will bring down the amount to which the company is entitled to £5,722 6s. 2d. 91. Do you mean entitled in the shape of rates?-—No; I mean entitled altogether from the Government and the ratepayers; and you have to deduct from that 6 per cent, on £40,000 —£2,400, and 6£ per cent, on £35,000—£2,187. This gives a total of £4,587 to be deducted from £5,722, leaving £1,135 net profit to the company, as interest on their own alleged capital of £35,610. The statements appear in the correspondence. 92. But' you said the interest was 8-J per cent. ?—That is what the company say it is. I was alluding to the correspondence. The company claim in the letters that the concern is a very good one, because they are getting, or would be getting, if they could collect the rates, 8-J- per cent, on their own capital. If they get all round interest of 7 per cent., and borrow a large portion of the capital at 6 per cent., it would necessarily leave them a good deal for their own capital, and would continue to do that if the 30-per-cent. clause did not come into operation. The 3-|- per cent., which I mentioned by way of contrast, would be the amount which the company would have received on their own capital last year, had the 30-per-cent. clause been then in operation, as compared with 8£ per cent, which they would receive in the absence of that clause. This is always supposing that they can collect the rates from the ratepayers. 93. That would materially alter the value of the line?—lt would—the commercial value and the selling value of it. 94. The Chairman.] Not in fixing the value for rating ?—No; the value for rating is fixed on the basis of estimated cost, irrespective altogether of commercial value. 95. Dr. Newman.] You said the first year there was a profit of £964, which shrunk to £808, and then became £40 ? —Yes ; that is so. 96. "Why does that come about ?■—l do not know. The company"has latterly been working the line themselves, and they have probably not done it so economically as the Government did. 2—l. 7a.

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That, however, is a matter of opinion; but anyhow the results are as I have stated. Before we can fix the amount they are entitled to levy the rates on, we have to go very carefully into their accounts. Mr. Livingstone is the auditor. The auditor examines the company's books, and reports as to the profit or loss on the year's workings. We have had his certificate each year, showing the result of the year's transactions, and it was these results that I quoted just now; the first year shows a profit of £964, the second a profit of £808, and the third a profit of £40. We get all the details as well; but we depend a great deal on the auditor's report. 97. The profit and loss will depend on the repairs?—Quite so; it may be that they have had to do more renewals this year. 98. Mr. Hislop.]- Is it necessary to state every specific item in the first estimate supplied to the Government?—Clause 11 of the Act of 1877 simply says an estimate. It does not say whether or not details are to be given. 99. Has it been considered necessary by the department to get the details ?—As a matter of fact Mr. Blair did not give details. It is not usual for an engineer-in-chief to give details; he ■no doubt gets them from his assistants; but he does not necessarily forward them on to the Minister. The company gave details in the estimate they furnished. 100. Did other companies give details?—l do not know; lam not prepared to say. Some of them have, I believe, done so, but possibly not all of them. I should also mention to the Committee, in relation to the question of this Waimea Plains Railway estimate, that in clause 85 of the Act of 1877 it is provided that the cost of a railway shall include the cost of the land; and the Solicitor-General seemed to consider that it was not altogether unreasonable that the cost of the land should be admitted afterwards if omitted at first. 101. Mr. Dargaville.] But it was in consequence of admitting the land that the Judge decided the rate was bad?—The Judge appears to have ruled that the estimate was only £101,000 He either did not see or ignored the note that the land was not included, and it was probably represented to him that the estimate was only £101,000 in all. The estimate furnished to us is £101,000 ; but then it says this did not include land. 102. Mr. Hislop.] By whose error was it that the certificate of £108,713 was given?—lt is questionable if there was any error at all, in view of the law as it stood at the time, and still stands now. That is the point I have been endeavouring to make clear all the way through. I should also state that we have on record what purports to be a copy of a notice published by the company at the time the railway was projected. It is dated the 7th October, 1878, and among other things contains these words : " The estimated cost of the proposed railway and the equipment thereof is £101,000." In this there is nothing said as to the cost of the land having been excluded or not having been included. All of this information was before the Solicitor-General when he gave his opinion, and he held the Government was bound to the certificate of the Minister, so far as giving an order to levy rates is concerned, by clause 22 of the Act of 1878. He held, in fact, that we were bound to base the order for raising rates on the certificate given by Mr. Macandrew. 103. Mr. Goivan. It is alleged that the reason that this rate failed, when the judgment of the Supreme Court went against the company, was in consequence of the certificate being too large an amount. It was alleged that that amount was an error of the Government's? —All you can conclude from that is, either that the Judge differs in opinion with the Solicitor-General, or else, as I think is probable, that the whole of the facts were not before the Judge when he gave his ruling. 104. I wish your opinion whether the error originally did not come direct from the company, if error it is ? —Mr. Eeid's opinion shows the thing very clearly, more clearly than I can hope to express it, and, if judgment has been given the other way, it merely indicates a difference of opinion between the Solicitor-General and the Judge. The Solicitor-General attaches considerable importance to the fact of the land not being included, and the Judge may not have had that before him, or perhaps he does not attach equal weight to it, and so holds that the Government should have held to the figures £101,000. Perhaps he had only the newspaper notice before him. It would be within his knowledge that the amount they proposed to levy was more than 5 per cent, on £101,000. 105. It is this point I wish to be clear on, this amount of £108,713. Did that amount come under the consideration of the Government from the company direct, or did the Government fix it themselves?—lt came from the company originally; but it was confirmed by the Engineer-in-Chief. 106. So if there is any error at all it lies with the company ? —As Mr. Eeid puts it, in his opinion, it became a question for the consideration of the Government whether they should include the land or admit a revised estimate at all. 107. Would you look at the estimated cost submitted to the ratepayers, and give us the amount of it? Was that the estimate of cost submitted to the ratepayers on which they agreed to be rated ? —I do not really know, not having been concerned in the matter at the time. This newspaper notice, however, or what purports to be a copy of a newspaper notice, is a record of the office, a record presumably supplied to the Government by the company, and it shows only £101,000 as the estimate cost of the railway, without any qualifying note as to land not being included. 108. Can you say what date that was subinitted to the Government ?—lt is dated the 11th September, 1878. 109. Then, you got the value of the land from Mr. Higginson'a estimate ? —Yes, from a subsequent estimate, supplied by Mr. Higginson on the 27th March, 1879. Ha says, " I have the honour to enclose an estimate of the railway completed, as requested by you. I have put down stations and rolling-stock at the same amount as previously estimated, which is based on the smallest amount which it is possible to work the railway." This estimate is £108,713. 110. On a subsequent date Mr. Higginson, representing the company, forwarded this to the

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Government. Is there an item for land ?—Yes; £7,000. That accounts for the difference practically between it and the former estimate. 111. Do you know if the larger estimate was submitted to the ratepayers or not ?—I have no personal knowledge of that. 112. You have stated to the Committee that there were negotiations for the purchase of the line, and the Government discovered that certain items of the estimated cost had not been expended ?— Yes ; the Government had reason to believe, from an examination of the accounts furnished by the company, in pursuance of the negotiations for purchase, that the railway could not have cost £108,713 in cash, exclusive of interest. 113. Would you state what the deficiency, in your opinion, appeared to be ?—I can only give an opinion as to that. My opinion is that the railway could not have cost in actual cash an amount exceeding from £90,000 to £95,000. That was exclusive of land. I mean to say I gathered that the outgoings of the company, exclusive of interest and discount, and cost of raising loans—namely, the amount spent on the actual works—could not have exceeded from £90,000 to £95,000. 114. It has been given in evidence that, while in the schedule of the estimated cost £8,360 appears as the cost of rolling-stock, only about £2,500 has been expended. In regard to fencing, £10,360 was provided, and only £2,800 has been expended. Buildings, about £±,500 was provided, and only £1,253 expended?—That would leave very much about the amount I have stated. If you take £16,000 off £109,000, it will leave about £93,000. 115. Do you know from your own knowledge that these deficiencies in expenditure are in existence ?—Not from my own knowledge. I have every reason to think the fencing is not done to the extent indicated in estimate, but from my own knowledge I do not know ; nor do I know what is spent on the stations. As regards the rolling-stock, it is evident that, if they hire it instead of buying it, they must be making an excessive charge on the ratepayers. 116. Your opinion is that the most expensive mode of procuring rolling-stock has been adopted by the company ? —Yes ; I think the ratepayers are being asked to pay the interest on the cost of a portion of the rolling-stock twice over : paying first the interest on its estimated cost, although it is not procured, and then paying hire to the Government, which includes interest on cost; that is to say, the rate charged by the Government for the use of their rolling-stock includes not alone the actual wear and tear, but also the cost of maintenance, and a fair rate of interest on the value of the stock. 117. Looking at the country through which that line passes, is it likely that those deficiencies shown in these three items could be possibly expended on other works on the railway ? —I do not know. The Committee should have Mr. Higginson's evidence on that point, or Mr. Fulton's. 118. Is Mr. Fulton competent to give evidence on that point ?—Yes ; either Mr. Higginson or Mr. Fulton could probably tell you what the line actually cost to construct. Both of them are in Wellington. 119. Sir J. Vogel.'j You are aware the Minister gave a certificate up to £108,713 upon the estimate of Mr. Higginson ?—Yes ; after that estimate was confirmed by the Engineer in Charge. 120. You are aware that the original estimate limited the company to £101,000? —That seems to be the difficult point to decide. My evidence has been chiefly on that subject. The original estimate first of all says that the total estimated cost is £101,000; but then it goes on to say that the cost of the land is not included. In the subsequent detailed estimate furnished by Mr. Higginson, which did include the land, the amount was brought up to £108,713, and the Minister referred that estimate to the Engineer-in-Chief for confirmation, and it was confirmed accordingly as a reasonable estimate of the cost of the railway, and on that basis the Minister gave his certificate. 121. What was the amount placed before the burgesses?—So far as I can tell, £101,000 only. We have here what purports to be a copy of a notice published by the company in the newspapers at the time the project was first floated, and in that they say nothing about the cost of the land not being included. 122. The amount which was submitted to the burgesses was £101,000 ?—I do not know that from my own knowledge; I only know it from inference. 123. Supposing we are to consider the question of the cost again, the point remains whether or not the value of the land should be admitted ?—Yes. 124. That is so ?—The question is, whether it should be allowed to be included, whether the Minister ought to have allowed the company to include it afterwards. 125. Mr. Justice Williams has refused the rate because the amount is £108,713 instead of £101,000. I want to consider what course we should take if we wish to give the petitioners the remedy they ask, for they ask for a remedy. The Judge has ruled that they cannot take a race on more than £101,000. Now, I am going to ask you how much that £101,000 in the original estimate includes for rolling-stock ? —£8,360. 126. How much rolling-stock have they on the ground?—l do not know of my own knowledge. 127. How much does that include for locomotives? —£3,000. 128. And if they have that on the ground, how much does it leave ? —£5,360. 129. I need only ask you this final question : ought not the amount of deficiency in the rolling-stock to be deducted from the certificate of cost? — Yes, I think so. If I may be allowed to make a suggestion, I would suggest that it w rould be quite a reasonable thing to amend the Act in this direction now. There was an omission in the Act to start with. It contemplates, I think, that a certificate of the probable cost, on the basis of an estimate, should be j.iven by the Minister before the railway is completed, but there is no guarantee that the company shall do all the works provided for in that estimate. The Act should go on to state that, notwithstanding this certificate for the estimated cost of the railway, the amount of interest to which the company shall

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be entitled shall not exceed 7 per cent, on what the Engineer-in-Chief certifies from time to time to be the cost of the railway to date. 130. Would you put it that they could exceed the amount of works originally contemplated?— No. I should have gone on to say, up to an amount not exceeding in any case the amount originally proposed by the company a,t the time they projected their undertaking. 131. Do you mean on the whole or on each separate work included in the estimates? —I should confine them to the items in the estimates up to an amount for each class of work not exceeding the amount originally shown in the original estimates. 132. Mr. -Mislop.] Has the question been raised as to whether the auditor is right in allowing the rent of the rolling-stock to be deducted from the profit ?—That question has never been raised. 133. Mr. Peacock.] If the company had made the rate on £101,000 the Judge would have given the verdict in their favour without deduction for rolling-stock? —I presume so. 134. Mr. Montgomery.] When the ratepayers voted, did they, the ratepayers, vote on £101,000 or £108,713 ?—That Ido not know. I can only show you what purports to be a copy of the newspaper notices. 135. Could you give the Committee any data to enable them to form an opinion whether there is any power to enable the Government to cause the rates to be levied on £101,000 or a less sum if the railway did not cost that much, and for the future to only levy on the actual cost ?—The Act does not make any such provision. The Act makes no provision for giving a rate on a less amount than that certified by the Minister. 136. You cannot give any idea as to how the amount can be reduced?—The amount should be ihe actual cost of the several items as certified by the Engineer-in-Chief up to the total amount originally foreshadowed. 137. And I presume you mean by that actual cash?—Yes; actual cash. It might however be reasonable when, say, all the earthworks are done, to allow them the full amount they put down for earthworks, even if it had not cost that sum. When they had done all the earthwork they should be entitled to the amount they put down, though the work was done cheaper, and similarly in respect of other items. 138. Sir J. Vogel.] Supposing earthworks were put down at £15,000 and they only cost £12,000, would you allow them to rate on the whole £15,000 ?—Yes, because although they save on that item they might lose on some other one. In order to confine yourself to the estimate you would treat each item as a lump sum; some they may lose on, but others they may gain on. 139. Supposing the original estimate was insufficient, say, for earthworks, and there was a saving on other items, it would be legitimate to add to the earthworks?—Only, I think, to extent of excess in estimates of other items already completed. It would, I think, be quite legitimate to certify for full estimated cost of each item when that item is completed, but not before, as otherwise the transposition from one item to another might be held to warrant the omission of some items altogether, and that would possibly be unjust to the ratepayers. 140. Mr. Barron.] Supposing the Committee are persuaded that this is an error that requires correction, and expert knowledge is necessary in order to enable the Government to arrive at some way of adjustment, would not Mr. O'Connor's information, as that of an expert, be available to the Government directly, without wasting time by filtering it through the Committee? 141. Mr. Montgomery.] Please look on section 85 of " The District Railways Act, 1877 " [clause read]. Surely there is provision there by which the Government can determine the cost of the line ?—I do not think that would meet the difficulty. There was no dispute in this case as to the probable cost of the railway. The estimate was submitted, and the Engineer-in-Chief concurred in it, and the Minister gave his certificate before the work was completed. The Minister gave his certificate, and then we are held to be bound by clause 22, which says that this is conclusive evidence for the purpose of rating. J.42. There is no power in clause 85 ?—Mr. Eeid holds, that if there was power to revise, the objects sought to be attained by clause 22 of the Act of 1878 would be defeated. Mr. E. H. Lbaby, Secretary to the Company, re-examined. 143. Mr. Leary re-examined and stated : I can see at once the fairness of deducting from the cost of our line and equipment the rolling-stock we have not provided. I see the fairness of that; but I hold that, seeing the company has expended £22,000 above the estimates altogether—certain items in the estimated cost, that should be set against the smaller sum of £14,000, they have failed to expend in other items. It is a matter of perfect indifference whether the item has been exceeded if another has been expended to the same amount. The fact is, the over-expenditure is £22,000, and the under-expenditure £14,000; the net result being that £8,000 above the estimated cost has been expended; the estimated cost comes to £101,000, and the actual expenditure to £109,000. 144. Mr. Dargaville.] Does the £22,000 include financing?-—Yes; if you take that off, it brings it down to £100,000. 145. Major Atkinson.] Have you any objection to state, without prejudice, supposing the Committee determines to give relief, what amount your directors would be prepared to accept, on which the rate would be levied ? —On condition the matter was settled at once, £95,000. I made that offer to Mr. Cowan yesterday, and that we are put in a position to get our past rates. I will make it apply to the three years' rates on condition we are put into a position to get our rates.

By Authority : George Didsbury, Government Printer, Wellington, —1885

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