Victorian Railway Mania

Law, Lawyers and Victorian Railway Mania 1825-1847

Richard Jones

Lawyers

A cruise ship with 1,000 lawyers on board sinks in the Atlantic. All on board loose their lives.

What do you call this?

A Good Start!

Theme Common Law and Common Lawyers had a

profound and largely negative effect on the rise and development of the steam railway system.

Victorian Railway Mania 1825-1845 – facts and figures

Booms 1825, 1835-6 and 1845-7 e.g in 1846 – 272 separate Acts authorising

railways. 8,000 miles of lines authorised Cost £200 million (equivalent to countrie's GDP) BUT No centralised planning so competition and

duplication.

Legacy

Duplication of some routes and cities possessing several main line stations.

e.g. Birmingham

Creating Railway Companies

Prospectus Application for shares Private Act of Parliament

Putting Together the Prospectus

Creating Railway Companies

South Sea Bubble

Share prices of South Sea Company

Legislative Response

Bubble Act 1720

BUT

Repealed 1825

Bubble Act repeal and the first railway boom

1825 – 30 new railway companies floated December 1825 banks collapsed taking most of

companies with them. No appetite in Parliament to investigate

causes

Role of Lawyers

1. Lawyers provided legal advice on the design of joint stock companies, number of solicitors increased by 2,000 in 1820's.

2. Best lawyers also provided a conduit to the sound investors (the wealthy) who could be persuaded to back the venture. e.g. George A. Pitt a much sought after Liverpool solicitor.

3. Lawyers would also be used as strategist in the development of the Private Act – sounding out those objecting to the land acquisition.

Only tiny number of railway companies remained after the 1825 crash – those that were properly thought through and fully capitalised.

Liverpool and Manchester Railway

Set up cost £740,000 (X100 or so for 2012 cost)

A huge financial and engineering success. BUT -this success led to another boom in

railways

Second Boom 1835-6 (Twice as BIG!)

1836 – 88 Joint Stock Railway Companies were proposed.

Many in competition with each other and with existing lines.

Then in August 1836 Bank of England raised interest rates – most company share prices went into free fall, thousands of investors were ruined.

Legislative Response

Not until change of government in 1841 was there a Parliamentary Inquiry

Inquiry found that in addition to legal functions lawyers– Complicit in helping frame prospectus for

fraudulent companies– By attaching their name (often for a fee) gave a

semblance of respectability.

Legislative Response

1844 Joint Stock Act Registration Section 6 recognising culpability of lawyers places

special obligation on them.

BUT in 1844 - Excellent harvest, spare cash Railways became investment of choice.

1845

ONE THOUSAND FOUR HUNDRED (1,400) railway companies were registered !!!!

450 in September alone. In September -

118 lines under construction 1300 provisionally registered Hundreds on unregistered companies illegally

advertising for subscribers.

Bust 1845 Poor harvest Irish Potato crop failed Bank of England raised interest rates on

October 17th.

Selling began... Overnight 549 companies disappeared. Confidence in railways evaporated.

The Momentous Question

My dear Albert. Please tell me you don'thave any railway shares.

What of the Joint Stock Act?

Was an obvious failure Obtaining a provisional certificate of registration

(for a small cost) provided a veneer of legitimacy.

Role of Lawyers

Lawyers were becoming more involved in the money making side of the process, many were becoming lawyer/promoters

e.g in the 3rd boom - May 1845 in 31 of the 75 registrations were companies where lawyers were 25% or more of promoters.

The Railway Record stated that lawyers were responsible for most of the failed joint stock promotions.

Role of Law

Failure of legislation and legislators Bubble Act repeal Failure to inquire to causes of 1825 crash Delay in 1841 inquiry Failure Joint Stock Act

Bust the aftermath – the litigation

Litigation fell into 3 groups: a. Railway Creditors v provisional committee

men.b. Railway scrip purchasers v Provisional

Committee men c. The Counter Offensive Provisional Directors v

Allottees of SCRIP for unpaid deposits. NB Failure of courts to uphold good practices of

the industry.

Summary Legislature

Failure or delay of Parliament to investigate causes of booms.

Inadequate responses – Joint Stock Act

LawyersMoved from exercising their usual legal functions and

became integral part of the fraudulent activities.

Subsequent LitigationFailure of courts to uphold good practices of the

industry.

2nd Indictment – the army of lawyers for a Private Act

2nd Indictment – the army of lawyers for the Private Act

Complexity created around the procedure and practices relating to the acquisition of a Private Act.

Rules, standing orders, arcane procedures increased complexity.

The turning of Parliamentary hearings into quasi judicial proceedings necessitated the use of barristers – customs of common law trials were imported. (one barrister Charles Austin earned £100,000 in 1847)

More?

Law, lawyers and the operation of the railways.

Reference

Law and English Railway Capitalism. 1825-1875Kostal R.W. Clarendon Press, Oxford (1994)