11. About the 25th day of May, 1895, the Governor, under " The Bail ways Construction and Land Act, 1881," and on the ground that the company had failed to carry out its contract, took possesssion of the line, which was almost the only security the debenture-holders had for repayment of their advances; and the Governor has ever since kept possession of the line. 12. Since then the Crown has managed and worked the railway, and carried on its further construction, and has from time to time demanded from the debenture-holders, through the company, the cost of such work. 13. The debenture - holders have satisfied such demands to the extent of £37,876 15s. Id., which sum, together with £8,518 9s. 9d., the net earnings of the line since the Crown took possession of it, makes in all a total sum of about £1,384,395 thus expended in and about the construction of the Midland Eailway. 14. When your petitioner was appointed Receiver it became his duty to test the question of whether the debenture-holders were or were not entitled under the debentures, and under section 13 of the Act of 1884 to a real first charge on the railway, or whether their so-called "first charge " was one that could be defeated and destroyed by the Crown taking possession of the line owing to some default of the company for which the deben-ture-holders themselves were in no way whatever responsible. 15. It was considered by the debenture-holders essential, both in the interests of the colony and of the debenture-holders themselves, that this question should be conclusively settled, and it was therefore litigated by your petitioner in the law courts of this colony, and was finally decided against the debenture-holders by the Privy Council in the month of February of this year, and on the 18th day of April last the Crown served upon this petitioner and upon the general manager of the company a notice of its intention to confiscate the railway and all rolling-stock and other appurtenances at the end of three months from the said date. 16. The position of the debenture-holders is now therefore this : They have advanced to the company as bond fide lenders, relying on their security, some £764,000, and the whole of this sum has been spent in the construction of the Midland Eailway line. 17. To encourage, and as a premium for the construction of the railway-line, but in no sense as part payment for it, the Crown made certain landgrants to the company, valued at about £260,000 in all. 18. These lands have all been sold or mortgaged to their full value 'and the proceeds expended in the further construction of the line and the payment in part of interest due to debenture-holders. 19. Since 1894 the debenture-holders have received no interest whatever in cash, though £93,000 is represented by a further issue of debentures, and, including this amount, there is now owing to them for interest a sum of about £207,000, making, with the principal moneys due and the £46,395 4s. 10d. in paragraph 13 hereof, a total of £1,017,395 4s. 10d.

i.-ii.

attempt to support the petition by proof to that effect. The point he has to meet is that the deben-ture-holders' security was a railway to be completed pursuant to the contract, and that if the railway was not so completed nothing constituting the security was ever brought into existence. 11. No remarks.

12. No remarks. 13. The total figure in this paragraph includes the evidently erroneous figures in paragraph 6. 14. The " so-called " first charge was a valid and effectual first charge on the railway if completed by the contractors. The question which the petitioner tested was the validity of his contentions that the first charge was effectual although the railway was never constructed, and that the deben-ture-holders were entitled to the possession and ownership, to the exclusion of the Government, of fragments of a main line of railway connected at each end with other fragments to be constructed and worked by the Government. 15. No remarks. • 16. No information is given to show how the sum of £764,000 is arrived at. The amount differs materially from the amount mentioned in paragraph 7. 17. No remarks. 18. No remarks. 19. No remarks.

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