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Pelma Rajapakse
Shanuka Senarath
Commercial Law
Aspects of Residential
Mortgage
Securitisation
in Australia
Pelma Rajapakse Shanuka Senarath
Griffith University University of Colombo
Brisbane, QLD, Australia Colombo, Sri Lanka
This Palgrave Macmillan imprint is published by the registered company Springer Nature
Switzerland AG.
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Foreword
v
vi FOREWORD
these securities falters or fails, entire neighbourhoods and even entire cities
can lose billions of dollars in value. This loss of value has a direct impact
on not only institutional market investors but also homeowners
and families.
In their examination of the securitisation of residential mortgage loans
in Australia, Drs Rajapakse and Senarath do a masterful job of elucidating
the complexity of these transactions. In their methodical exploration of
areas of regulatory gaps and careful identification of securitisation’s nega-
tive externalities, they provide an important critical analysis. Commercial
Law Aspects of Residential Mortgage Securitisation in Australia is an
important reading for those who care about well-regulated and well-
functioning public financial markets and recognise the contagion risks of
market failure in the absence of oversight.
Maine
LoisLaw Foundation Professor of Law R. Lupica
University of Maine School of Law
Portland, ME, USA
Fulbright Senior Scholar 2019
University of Melbourne
Melbourne, VIC, Australia
Preface
vii
viii PREFACE
The views and opinions expressed in the book belong solely to the
authors, and any errors of omission that remain are the authors’ responsi-
bility. The law and practice are stated as at 31 October 2018.
1 Introduction 1
1.1 Background 1
1.2 Objectives of the Book 10
1.3 Scope of the Book 11
1.4 Contributions Made by the Book 12
1.5 Structure of the Book 13
Bibliography 14
xi
xii Contents
4 Mortgage Origination 69
4.1 A Mortgage as “Security” 69
4.2 Consequences of Registering a Mortgage 71
4.3 Guidelines for Capital Adequacy 73
4.3.1 Towards Capital Adequacy Guidelines 74
4.3.2 Risk-Weighting of RMBSs and Consequences of
Guidelines 76
4.3.3 Risk-Weighting of RMBSs in Overseas Jurisdictions 81
4.4 Summary 83
Bibliography 84
Contents xiii
9 Summary of Conclusions269
9.1 Introduction269
9.2 Summary and Main Conclusions270
9.2.1 Current Regulation271
9.2.2 Towards a New Regulatory Framework?273
9.3 Recommendations276
9.4 Suggestions for Further Research278
Bibliography280
Glossary281
Index285
Acronyms
xvii
List of Legislation
xix
List of Cases
Abound Catering Conventions and Receptions Pty Ltd v National Australia Bank
Ltd (unreported, VSC 26 October 1989).
Adams v Eta Foods Ltd (1987) ATPR 40-831.
Adams v Thrift [1915] 1 Ch 557.
Al-Nakib Investments (Jersey) Ltd v Longcroft [1990] 3 All ER 321.
Annand and Thompson Pty Ltd v TPC (1979) ATPR 40-116.
ASC v Nomura International Plc (1999) 17 ACLC 55.
Associated Broadcasting Services Ltd v Comptroller of Stamps (Vic) (1988) 88
ATC 4,359.
Association Broadcasting Services and Humes Ltd v Comptroller of Stamps (Vic)
(1989) 89 ATC 4,646.
Attorney General for NSW v Australian Fixed Trusts Ltd (1974) 1 NSWLR 110.
Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd (1992)
35 FCR 226.
Australian Softwood Forests Pty Ltd v Attorney General for New South Wales
(1981) 6 ACLR 45.
Bank of Barroda Ltd v Punjab National Bank Ltd [1944] AC 176.
Bellah v First National Bank of Hereford 495 F2D 1109 (5th Cir 1974).
Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 40-043.
Blackpool Motor Car Co Ltd, Re, Hamilton v Blackpool Motor Car Co Ltd
[1901] 1 Ch 77.
Brightlife Ltd, Re [1987] Ch 200 [1986] 3 All ER 673.
British India Steam Navigation Co v IRC (1881) 7 QBD 165.
Broad v CSD (NSW) (1980) 11 ATR 59.
Brockbank, Re, Ward v Bates [1948] Ch 206; [1948] 1 All ER 287.
BTR Plc and BTR Nylex Ltd, Re (1989) 23 FCR 553.
xxi
xxii List of Cases
Major’s Furniture Mart v Castle Credit Corp 602 F 2d 538 (3rd Cir 1979).
MC Bacon Ltd, Re [1990] BCLC 324.
Mendelssohn v Normand Ltd [1969] 3 WLR 139.
Metropolitan Toronto Police Widows and Orphans Fund v Telus Communication
Inc [2003] OJ No 128 (ONSC).
Muir v City of Glasgow Bank [1879] 4 App Cas 337.
NatWest Australia Bank Ltd Tricontinental Corporation Ltd (unreported, Supreme
Court of Victoria, No. 2493 of 1990).
Newfoundland Government v Newfoundland Rly Co [1888] 13 App Cas 199.
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9.
Norrish v Marshall (1821) 5 Madd 475; 56 ER 977 [1814] All ER Rep 587.
NRMA Ltd and Ors v Morgan (1999) 17 ACLC 1,029.
NV Slavenburg’s Bank v International Natural Resources Ltd [1980] 1 All ER 955.
Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197.
Octavo Investments Pty Ltd v Knight (1979) 54 ALJR 87.
Olds Discount Co Ltd v John Playfair Ltd [1938] 3 All ER 275.
Olley v Malborough Court [1949] 1 KB 532.
Orion Finance v Crown Financial Mannt [1996] 2 BCLC 78.
Pappas v Soulac Pty Ltd (1983) 50 ALR 231.
Parker v Jackson [1936] 2 All ER 281.
Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149.
Pass v Dundas (1880) 43 LT 665.
Paula Brock v The Terrace Times Pty Ltd (1982) ATPR 40-267.
Permanent House (Holding) Ltd, Re (1989) 5 BCC 151.
Petera Pty Ltd v EAJ Pty Ltd (1985) ATPR 40-605.
Potts v Westpac Banking Corporation [1993] 1 Qd R 135.
Puxu Pty Ltd v Parkdale Custom Built Furniture Pty Ltd (1980) ATPR 40-171.
Rae v Meek [1889] 14 App Cas 558.
Reves v Ernst and Young US 110 S Ct 945 108 L Ed 2d 47 (21 February 1990).
Riedell v Commercial Bank of Australia Ltd [1931] VLR 362.
Ross v Warner (SD NY Dec 11 1980).
Rovell v American National Bank (Unreported, 21 October 1999: 7th Cir 1999).
Roxburghe v Cox [1881] 17 Ch D 520 (CA).
RWG Management Ltd v Commissioner for Corporate Affairs [1985] VR 385.
Saunders v Vautier (1841) 4 Beav 115; 49 ER 282.
Selangor United Rubber Estates v Cradock (No. 3) [1968] 1 WLR 1555.
Shepherd v Harris [1905] 2 Ch 310.
Shipman Boxboards Ltd, Re [1942] 2 DLR 781.
Smith v Hughes (1871) LR 6 QB 597.
Smith v Parks (1852) 16 Beav 115.
Snoid v Handley (198) ATPR 40-219.
Softley, Re, ex parte Hodgkin, (1875) LR 20 Eq 746.
List of Cases xxv
xxvii
List of Tables
xxix
CHAPTER 1
Introduction
1.1 Background
Financial product innovation has shown remarkable growth and compe-
tition over the past three decades as financial institutions have endeav-
oured to meet the diverse needs of borrowers and investors.1 Notable
product innovations during this period have included Eurobonds, cur-
rency and interest rate swaps, financial futures, options, and mortgage-
backed securities.2
This development in financial innovation has been attributed to various
legal, economic, and social factors,3 including legal and regulatory rules,
1
Financial innovation has been defined as the “development of a new product or process
in the financial system for the purpose of improving operational effectiveness and effi-
ciency”: see R.E. Johnston, ‘Technical Progress and Innovation’ (1966) Oxford Economic
Papers 158, 160.
2
See generally, I. Cooper, ‘Innovations: New Market Instruments’ (1986) 2 Oxford
Review of Economic Policy 1; T.S. Campbell, ‘Innovations in Financial Intermediation’
(1989) Business Horizons 70; E.J. Kane, ‘Interaction of Financial and Regulatory Innovation’
(1988) 78 American Economic Review 328; E.J. Kane, ‘Impact of Regulation on Economic
Behavior’ (1981) 36 The Journal of Finance 355; M.H. Miller, ‘Financial Innovation: The
Last Twenty Years and the Next’ (1986) 21 Journal of Finance and Quantitative Analysis
459; and H.T. Hu, ‘New Financial Products, the Process of Financial Innovation and the
Puzzle of Shareholder Welfare’ (1991) 69 Texas Law Review 1237, 1276.
3
See Sect. 2.4 of Chap. 2 for further discussion of the causes of financial innovation. For
example, see also, Senarath, S. and Copp, R., ‘Credit default swaps and the global financial
crisis: reframing credit default swaps as quasi-insurance’ (2015) 8 Global Economy and
Finance Journal, 135.
4
See also H.L. Baer and C.A. Pavel, ‘Does Regulation Drive Innovation’ (March 1988)
Economic Perspectives 3, 6–11 (discussing the role of regulatory taxes—federal deposit insur-
ance, reserve requirements, and capital requirements); S. Becketti, ‘The Role of Stripped
Securities in Portfolio Management’ (May 1988) Economic Review 20; T.S. Campbell,
(1989) 70–71; J.D. Finnerty, ‘Financial Engineering in Corporate Finance: An Overview’
(1988) 17 (4) Financial Management 14, 16; E.J. Kane, (1988) 332–333, which describes
a dialectical relationship between regulation and financial innovation; M.H. Miller, (1986)
460. See also D. Thornton and C. Stone, ‘Financial Innovation: Causes and Consequences’,
in K. Dowd and M.K. Lewis (eds.), Current Issues in Financial and Monetary Economics
(Basingstoke: Macmillan, 1992) 23; D. Arner, ‘Emerging Market Economies and
Government Promotion of Securitization’ (2002) 12 (2) Duke Journal of Comparative and
International Law 505. S. Senarath., ‘Securitisation and the global financial crisis: can risk
retention prevent another crisis?’, (2017) 18 International Journal of Business and
Globalisation, 153; S. Senarath (2016), Not so “Bankruptcy-Remote’: An insight into Sri
Lankan Securitization Practices in a Post_GFC Context’ (Paper presented at the MAC-
MME conference, Prague, Czech Republic); Senarath, S. ‘The Dodd-Frank Act doesn’t
solve the principal-agent problem in asset securitisation’ (2017) blogs.lse.ac.uk (11 November
2018).
5
See R. Pollsen, J. Hu and J. Elengical, ‘A Record Year for Residential MBSs’ (2002)
Mortgage Banking 36; J.C. Shenker and A.J. Colletta, ‘Asset Securitization: The Evolution,
Current Issues, and New Frontiers’ (1991) 69 Texas Law Review 1369, 1380; L. Alles,
‘Securitisation’s Bright Future: How Investment Science Brings Assets to Life’ (2001) 2
Journal of the Australian Society of Security Analysts 28; P.A.U. Ali, ‘Current Issues in
Securitisation’ (book review) (2002) 20 (4) Company and Securities Law Journal 243.
6
The term “receivables” encompasses the receipt of loan repayments, including residential
mortgage loans, car loans, credit card receivables, lease receivables, corporate trade receiv-
ables, and an ever-growing list of asset types.
7
Securitisation is necessarily a topic replete with financial and economic jargon. An apol-
ogy is made in advance to readers with financial economics training if they consider some of
the explanations to be either trite or unnecessary. However, the primary target audience for
the book is the legal fraternity who, it may be assumed, are largely unfamiliar with this finan-
cial and economic nomenclature. For this reason, explanations of financial or economic
theory in the book are kept relatively uncomplicated, and unashamedly so.
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What they could have to say to one another in the window-seat, no
one could imagine. They were neither of them great talkers;
everybody knew that. Yet there was Prince Dwala, with his grave
face tilted to one side, eagerly drinking in her words, answering
rapidly, decisively; and Lady Wyse giggling like a school-girl, blinking
away tears of laughter from her violet eyes. Such a thing had never
been seen. How long had they known one another? Never met till
this evening. Nonsense; he’s there every afternoon.
Whatever the subject of the duologue may have been, the effect of it
on Lady Wyse was of the happiest kind. She was metamorphosed;
radiant, and, for her, gracious; transfused with life, she seemed taller
and larger than before.
The Huxtable’s grim face was wreathed, in spite of him, in smiles; a
flush of pleasure peeped out from under his bristling hair as Lady
Wyse stopped Dwala before him and demanded an introduction.
‘I’ve heard of you so often, Mr. Huxtable. My father knew your uncle
the Judge. I hope you’ll come to some of my Thursdays.’
The scent of her new mood spread abroad like the scent of honey,
and the flies came clustering round her. Chief among them Lord
Glendover, the Cabinet Minister, who had made four remarks in the
course of the evening—all of them foolish. Tall, lean, hairy, brown
and grizzled, he was one of those men who, though neither wise,
clever, strong, nor careful, convey a sense of largeness and
deserved success. He would have been important, even as a
gardener; he would have ruined the flower-beds, but could never
have been dismissed. His only assessable claim to greatness lay in
the merit of inheriting a big name and estate. He was, in point of fact,
quite stupid; but his opinions, launched from such a dock, went out
to sea with all the impressiveness of Atlantic liners, and the smaller
craft made way respectfully.
Sir Benet Smyth winged after him, buoyant with the grave flightiness
of diplomacy, and luminous with the coming glory of his tour of the
Courts. For the Government, despairing of reforms in the army, was
meditating a wholesale purchase of foreign goodwill, a cheap
scheme of national defence, founded on the precept, les petits
cadeaux font l’amitié. The details were not yet made known, but
rumour had it for certain that the Spanish Infanta was to get the
Colonelcy of the Irish Guards, the Mad Mullah was to get the Garter,
and President Roosevelt was to get Jamaica. It was also said by
some that the Government was going to strike out a new line in
honorary titles by making the Sultan of Turkey Bishop of
Birmingham: but this was not certain.
Sir Benet and Lord Glendover sat down with Dwala, the General, the
Biologist, the Baron, and Huxtable, in a semi-circle centring on Lady
Wyse.
‘We’ve been wondering, dear Lady Wyse,’ said the Biologist, ‘what
was the subject of your engrossing conversation with the Prince.’
‘I can guess de sopchect,’ said Baron Blumenstrauss. ‘It was loff ...
or beesness.’
‘You were so animated, both of you.’
‘Den it was bote. De Breence would nod be animated by beesness,
and de laty would nod be animated by loff!’
‘Ha, ha!’ said Lord Glendover, vaguely discerning the outline of an
epigram; ‘that’s a right-and-lefter.’
‘You’re quite right, Baron,’ said Lady Wyse: ‘it was both. We’ve been
making a compact, I think you call it. The Prince puts himself
unreservedly into my hands. I’m to do whatever I like with him.’
‘Gompacts ...’ began the Baron, and broke off.
The Biologist looked as if he would like to kick him, but lacked the
physical courage.
‘I’ve been telling the Prince he’s too modest,’ said Lady Wyse.
‘P’r’aps you didn’t lead him on enough,’ suggested the diplomat; at
which the Biologist vented a sickly grin, and Lady Wyse hit him very
hard with her fan.
‘Too modest about himself, I was going to say, if I had a chance of
ending my sentences with all you wags about. A man of his talents
oughtn’t to be contented to loaf about doing nothing. He might be
anything with his intellect—a great writer, or a scientist, or a
diplomat, or a financier.’
‘Or a tinker or a tailor, or a soldier or a sailor,’ said the Biologist.
‘Do you think that I’m joking, you idiot?’ said Lady Wyse, emitting a
cold shaft of light that went to his backbone.
‘No, of course not, dear Lady Wyse! I was only thinking....’
‘Soldier or sailor—confound you, sir!’ said the little General fiercely.
‘There’s no need to drag in the services.’
‘No, no,’ said Lady Wyse: ‘we were talking of intellect.’
‘One isn’t a scientist by wishing it,’ said the Biologist. ‘One has to go
through the mill. Besides....’
‘Well, a diplomat, then. He’d look sweet in a cocked hat.’
‘Ah, no really, Lady Wyse, I pro-test,’ said Sir Benet; ‘you don’t know
what a grind one has.... Besides....’
‘Ah! I forgot,’ said Lady Wyse, playing with her fan. ‘Prince Dwala’s a
black. Isn’t he what’s called a black, Sir Benet?’
‘Well, really, Lady Wyse!’
‘Don’t mind me,’ said Dwala.
‘No, no!’ interposed the Biologist: ‘it’s quite a misuse of terms I
assure you. The word is applied loosely to Africans; but it is a
mistake to use it in speaking of the Archipelago. The Soochings, as I
understand, belong to the Malayan family, with a considerable
infusion, no doubt, of Aryan blood. “Dwa-la,” “Two Names,” is
practically Aryan. So that the Prince belongs, in point of fact, to the
same stock as ourselves. In fact, Lady Ballantyne mistook him for an
Englishman....’
‘She’s as blind as a bat,’ said Lady Wyse. ‘Still, black or white, he
belongs to a very old family.’
‘One of the oldest in the world,’ said Dwala.
‘Well, never mind. Shall we make a writer of him? I’m sure that
doesn’t require any preparation.’
‘Ha, ha, that’s good!’ bellowed Lord Glendover. ‘Here, Howland-
Bowser’—he beckoned the journalist, who was hovering near the
group. ‘Lady Wyse says any fool can be a writer.’ He gripped him by
the biceps, presenting him.
‘You know Captain Howland-Bowser, don’t you, Lady Wyse, our
great literary man?’
‘No,’ said Lady Wyse, looking calmly at her fan: ‘never heard of him.’
‘Aha, Bowser!’ said the Baron, with a nod.
The Captain withdrew in good order, discomfited but dignified.
‘You’re very discouraging, all of you,’ pursued the great lady. ‘I
suppose the Baron is now going to tell me that you have to study for
twenty years before you can set up as a money-lender.’
‘Dere is only one brofession,’ said the Baron thoughtfully, ‘where one
can be great man widout knowing anysing; bot it is de most
eenfluential of all.’
‘What’s that?’
‘Bolitics.’
‘Capital!’ said Lady Wyse. ‘We’ll put Prince Dwala in the Cabinet.’
Lord Glendover rose from his chair at this, in what might almost be
called a ‘huff.’ His gaunt, important face hung over the group like the
top of an old Scotch fir.
‘I don’t know whether this sort of thing is thought funny,’ he said,
putting up his large mouth to one side to help support the eye-glass
which he was busy placing. ‘But if you imagine, Baron
Blumenstrauss, that men are entrusted with responsibility for the
welfare of thirty-eight millions of human beings without the most
careful process of selection, you are most confoundedly mistaken. I
never heard such a statement! You’d like to have an entrance
examination instituted for Cabinet Ministers, I suppose?’
‘Excellent ideea!’ said the Baron.
‘Sit down,’ said Lady Wyse.
‘Then all I can say is ... you’re an Anarchist! I’ve served my country
for forty years,’ he pursued, in a voice broken with emotion,
resuming his seat. ‘When I came down, a bright young boy, from
Oxford, instead of running about amusing myself, as I might have
done, I slaved away for years in an Under-Secretaryship....’
‘This is all in “Who’s Who,”’ said Lady Wyse. ‘We’re talking about
Prince Dwala now.’
It was embarrassing and even painful to the smaller quantities of the
group to see that great noble child, Lord Glendover, being shaken up
and dumped down in this unceremonious way. The diplomat played
with his hat, while Huxtable and the Biologist kept very still, with their
eyes on the ground. Dwala himself might have been looking on at a
game of spillikins for all the interest he showed.
‘Cabinet Meenister is beeg to begeen?’ propounded the Baron
tentatively.
‘It’s impossible!’ murmured Lord Glendover.
‘I don’t know whether you clearly understood what I said about a
“compact” just now,’ said Lady Wyse, sitting back, beautifully inert,
with her hands in her lap. ‘It’s meant to be taken quite literally. The
Prince and I have entered into an offensive and defensive alliance.
Whatever we do, we do in common. We have decided that he is to
be a Cabinet Minister. You see? If it’s impossible, make it possible.
You understand me now, no doubt? I’m pretty clear. You’ll have to
exert yourselves, all of you.’ Her eyes travelled slowly from face to
face, looking in turn at Lord Glendover, the Diplomat, the Baron, the
Biologist, and Huxtable.
‘Yes, you too, Mr. Huxtable.’
Then she suddenly yawned a cat-like yawn, and sauntered forth to
where Lady Lillico stood.
‘Good-bye; I’ve had a charming evening. Is this your boy?’
‘Yes, this is Pendred.’
‘He looks very presentable.’ She nodded and passed on.
Lord Glendover and the Diplomat still sat in their places when the
little group dispersed. Lord Glendover rubbed his knees. Their eyes
met at last, with the sly surprise of two naughty boys who have just
had their ears boxed; smiling defiance, altruistically—each for the
other; inwardly resolving to incur no graver danger.
Lord Glendover had only one tiny grain of hope left; he was uneasy
till it was shaken out of the sack. He caught Lady Wyse near the
door.
‘Do you know that Prince Dwala isn’t a British subject even?’
‘Isn’t he? Make him one.’
‘How am I to make him one?’
‘Oh, the usual way, whatever it is. Find out.’
In the next room she was stopped again. The Biologist came writhing
through the grass.
‘I’ve thought of a little plan, dear Lady Wyse, for starting Prince
Dwala on his political career.’
‘Have you? I hope it’s a good one.’
‘First rate. Our member, Crayshaw—he sits for London University,
you know....’
‘Hang the details! Ah, there he is!’
Prince Dwala, with his henchman at his side, was lying in wait for
Lady Wyse by the second door.
‘Take the ugly duckling away,’ said Lady Wyse; ‘I want to talk to the
Prince.’
The Biologist buttonholed poor Huxtable and walked him off. Dwala
and Lady Wyse stood face to face again.
‘Well?’ she said.
‘Well?’ he answered.
They remained for some time in a large, light, comfortable silence.
‘I’d been looking forward to another talk with you,’ said Lady Wyse.
‘Had you?’
‘But I see that we really have nothing to say to one another.’
‘Absolutely nothing.’
‘And never shall,’ she added. ‘It wouldn’t matter if we never met
again.’
‘Not a bit.’
They stood looking brightly at one another for a minute or two.
‘What fun it is!’
‘Grand!’ said Dwala.
She nodded and went home.
XIX
Hitherto, Dwala had been great, but great only in the relative
sense, in comparison with you and me and the Man in the Street;
great to the capacity of a vast austerely-fronted house in Park Lane;
overwhelming for us on the pavement who fancy him within, infusing
that big block with a huge cubic soul; who catch glimpses of him
whirling out of the big gates to take tea, no doubt, with Ambassadors
and Duchesses, and whirling in again with some real live Royalty—
so rumours the little crowd outside as the stout policeman touches
his helmet. Not immeasurable, however, to the big-calibred folk who
eat with him, talk with him, see him starting on routes of
acquaintance which they have long since travelled: even to
Huxtable, mere man, a calculable quantity.
But a new movement was beginning, an upheaval; volcanic forces
were at work; the throes of earthquake, striking premonitory awe into
the hearts of men, presaged a rearrangement of geography. And
slowly the Great World became aware that a new mountain was
rising in its midst.
The Dwala Naturalisation Bill, introduced in the Lords, had run a
calm and rapid course, and Dwala was an Englishman. The journals
recorded it without exultation: it was placed among the ‘Items of
Interest’ in the ‘Daily Mail.’ But soon there followed articles on his
scientific interests: it appeared that he was already an eminent
philatelist; Huxtable had bought big stamp-collections for him at the
sales—Huxtable had innocent tastes which he was now able to
enjoy by proxy. The Prince was interested in Antarctic Exploration—
at least, he had signed a cheque for a thousand pounds for the
Relief Expedition; in astronomy, too, for he had promised a new
telescope to the Greenwich Observatory. His claims to represent
Science in Parliament—since he had decided to go into politics—
were indisputable; and there was ground for the rumour that London
University had settled upon him for their representative, provided
that one or two stipulations were fulfilled. If not, the Government had
a safe seat for him in Cornwall.
His private life became a matter of public interest. He had bought
Wynfield Castle in Yorkshire; he was fitting it with lifts and electric
light; the Saharan Emperor had promised to come over for the
shooting next autumn; Sir Benet Smyth, who had arranged the visit,
would be there. There was no truth in the rumour of his engagement
to Lady Alice Minnifer, Lord Glendover’s daughter; the rumour was at
any rate premature.
Politicians began to frequent his ways: he was not destined to be an
ordinary humdrum Member, paying a heavy price to be driven in and
out of lobbies by a sheep-dog; he was going to be a power. Of what
nature, nobody knew exactly; his opinions could only be guessed.
That mattered very little. All the public has to do is to get the big man
and plant him in office; party discipline will do the rest. There were
fifteen parties in Parliament, and only two lobbies for them to vote in;
leaders with opinions were a drug in the market; better the large
unifying vagueness of a mind with none. Why he was to be great no
one clearly knew; the fiat had gone forth from some hidden chamber
of the citadel; or it had descended inscrutably from heaven, or risen
on the breath of the sweating multitude: anyhow, there was a general
agreement of unknown origin to magnify the name of Dwala. These
things are mysterious, and the responsibility cannot be fixed till the
time of recrimination comes.
Huxtable was happy. Well he might be, lucky dog! His uncles smiled
and slapped him on the back in public in their big successful way.
Lady Glendover remembered his face; Pendred Lillico went about
boasting that young Huxtable had been his fag at Eton. These things
were pleasant to the Huxtable mind; pleasant also the graciousness
of Lady Wyse, who distinguished him at her Thursdays above his
betters in the social hierarchy.
Yet there were things in Park Lane that he could have wished
different. Of course he had done what he could to the right human
furnishing of the big house; he had secured his patron the necessary
atmosphere of awestruck service, silent efficiency and unassuming
pomp. There was the stout butler, who looked like a conscientious
low-church Bishop left over from a dinner-party, eager to please but
uneasy at finding himself still there. He went about the house silently
in flat slippers, seeking a clue to his identity, and looking out of
window from time to time, as if he meditated escaping in search of
his See. Tall scarlet footmen, with white legs, borrowed from some
giant balustrade: stately animals, ‘incedingly upborne,’ like Vashti in
‘Villette’—alert but always perpendicular, eager as midshipmen to
the domestic call, blighting visitors at the entry with the frigid
consciousness of social difference. For the rest of the economy,
invisible hands and watchful eyes; she-brownies that came and went
unseen; bells that rang in distant corridors, summoning punctual feet
to unknown observances; green-baize doors that swung and hid the
minor mysteries of the great life.
These things were good. But what of Hartopp and the little girl?
XX
Huxtable’s advertisement in the ‘Morning Post’ had brought
applications from 130 valets. It brought also a letter from a country
clergyman, beseeking another chance for Prosser—ex-burglar, son
of a country poacher, a reformed character—lately returned to his
father’s humble home in penitence from Portland, after five years of
penal servitude. The blameless, colourless remainder had no chance
against him. Dwala was delighted. Prosser came—a little pale man,
trim and finicking, with shining eyes; nothing of the brutal house-
breaker in him; a man of patient, orderly mind, who had gone to
Burglary as another man might go to the Bar, because he had
‘influence,’ and no aptitude for any other calling. With his father to
back him, he had a connection ready-made among the ‘fences,’ or
receivers of stolen goods. He had not thought himself justified in
throwing away such chances with a wife and child to keep. He
studied the arts of valeting and butlering; entered gentlemen’s
houses with a good character from a friendly ‘fence,’ and left them
with the jewellery and plate, till he was lagged over a wretched little
job in the suburbs, and taken to Portland Bill, where one of his mates
—a fraudulent low-church company-promoter—converted him and
showed him the wickedness of what he had been doing in all its
coarse enormity.
His wife had gone to the bad during his absence, and the little girl
had been adopted and cared for by another friendly ‘fence’—an
afflicted villain of the name of Hartopp. So much he had heard; but
he had not enough the courage of his new innocence to go into that
dangerous neighbourhood to find her.
Dwala elicited these facts in cross-examination. He was deeply
interested in this new side of life; and we must, perforce, follow him
into it, though it has little apparent relevance to the present course of
the story.
For Dwala’s political eminence is a ‘set piece’ which took some time
in the preparing; and in order to give the stage carpenters time to get
through with their work, it is convenient at this point to get done with
one or two necessary ‘flats.’ Besides, the social heights to which
Fate brought him are giddy places for those who have not strong and
accustomed heads, and it is safer to descend now and then and
amble in the plain, among the greasy multitude that crawls so
irrelevantly below—despicable to the mountaineers, who look down
and mark the wind-borne cheers, risking their heroic lives at every
step among the precipices, yet asking nothing more of the valley
than a distant awe, and a handful of guides and porters, with baskets
of meat, well-filled, and topped with bottles of good champagne.
Prosser passed under the trees to Hyde Park Corner, bound on his
daily walk. His eyes were bright, and the world swam by as
unimportant as a dream; for Prosser, in the respectable seclusion of
his room, had taken to drinking—steady drinking day by day, without
resistance or remorse. Life, to which he returned from jail with such
hungry imagination, had suddenly revealed itself to him in its ugly
arid nakedness: his conversion and good resolutions had stripped it
of all its meaning; now it was an old worn billiard-table, with no balls
or cues to it; cumbering the room, importunately present, grim and
terrible in its powers of insistent boredom. To hide from it—to crouch
and hide with his head between his hands, against the dirty floor—
that was the only resource since he had renounced the game and
sent the balls away. He drank and was happy; not actively happy, but
deviating this way and that into dreamy vacancy and strong disgust,
escaping the awful middle way of boredom. He felt his control going,
and he smiled triumphantly at the coming of his hideous mistress.
Often he thought of walking into the servants’ hall and boasting of his
secret. But the coarse activity of real life dispelled the longing as
soon as he neared his audience. He remained trim, upright, and
serenely deferent, with shining eyes and pursed dry lips.
At Hyde Park Corner a little crowd was gathered about a musician—
an old man, with a leg and a half and a crutch, and a placard ‘BLIND’
on his chest. He had just finished a last shrill bravura on the penny
whistle. A respectable wet-eyed girl in black went round with a bag
and collected money.
‘Pity the poor blind!’ shouted the musician in a sudden angry
imperative.
Prosser wagged his head in a soliloquy of recognition; and gazed
giddily at the little girl.
‘Nobody got a penny for the poor blind?’ asked the angry voice.
‘’Ark at ’im,’ said a woman. ‘Why, the gal’s got a nole ’at full!’
‘What girl?’ said the old man sharply.
At that moment the girl dodged through the little crowd and
disappeared, bag and all, down Piccadilly.
‘Stop her! stop her!’ cried one or two ineffective voices.
The old man dashed his penny whistle angrily on the ground, buried
his face in his hands, turned to the wall, and broke into shoulder-
shaking sobs.
‘What, ain’t that your gal?’ asked a compassionate stout man in
black, with a worn leather bag, touching him gently on the heaving
shoulder—a dentist from the slums, one might guess him at.
‘Small girl in black, was it?’ asked the blind man.
‘Yes, I think so. I didn’t exactly notice.’
‘Sort of orphan-looking girl, very quiet?’
‘Yes, that’s her.’
‘That girl’s a——little blood-sucker!’ said the old man. ‘Wherever I
go, there’s that girl comes and collects the coppers kind people
mean for me. Leave me alone, all of you! Clear out! I’ve broke my
whistle now, and haven’t a copper to get another, let alone a crust of
bread these three days.’
‘What a shime!’ commented the crowd. ‘Call ’erself a gal! I’d gal ’er!
A reg’lar little Bulgarian, that’s what she is!’
‘Now, then, move on there,’ commanded a big policeman, bearing
down on the crowd, confident in his own broad momentum, like a
punt among the reeds. ‘What’s all this?’
‘They’ve been robbin’ a pore blind man, that’s what it is,’ said the
benevolent dentist; at which the policeman rounded on him sharply
with extended, directing arm.
‘Now then, you move on there!’ And the dentist retired submissively
in the direction indicated, hovering in safety.
A benevolent, bent old gentleman, lately helped by the porter down
the steps of one of the big bow-windowed clubs, came hobbling up
on three legs, and stopped and asked questions. The policeman
saluted. The little crowd closed round them; the black helmet in the
midst leaned this way and that, arbitrating between misfortune and
benevolence. Judgment and award were soon achieved; the black
helmet heaved and turned about, and the crowd scattered obediently
east and west.
‘What a nice old gentleman!’ said one of many voices passing
Prosser.
‘Give ’im a sovring, did he?’
‘Don’t you wish you was blind, Miss ’Ankin?’
‘Lot of sov’rings you’d give me!’
‘Gow on!’
‘What did they take ’im up for then?’
‘On’y takin’ ’im over the road, stoopid.’
Prosser stood and watched the old man cross in the constable’s grip;
saw him loosed into Grosvenor Place; followed, and watched him as
he clumped his way along the blank brick wall, leaning forward from
the crutch, grotesquely and terribly, towards his extended arm, which
beat the pavement with a stick before him, driving pedestrians to
right and left, crying furiously as he went ‘Pity the poor blind!’ and
stopping now and then to mumble the sovereign and chuckle to
himself.
Near Victoria Station he stopped, and thrashed the kerb. A girl
slipped out from somewhere and took his arm; the same girl who
had so lately robbed him.
‘That you, Joey?’ said the blind man.
‘What luck, Toppin?’
The old man grinned.
‘Got a plunk, Joey; benevolent gent.’
‘My, what a soft!’
‘Just take me over to Victoria Street. Wait at the Monico; ain’t safe
here.’
Over the road he gave the sovereign into her keeping, and she
frisked up a side street. Prosser followed him down Victoria Street,
helped him silently over the crossings, and was still dreaming of one
like himself, meeting an old friend and lacking the energy to
acknowledge him; when the blind man turned suddenly and grabbed
him by the arm.
‘What’s your name?’
‘Prosser,’ he faltered.
‘I thought so. You’ve been drinking, you —— fool. Where have you
been all this time since you came out?’
‘I ... I’m in service.’
‘Ah?’
‘I’ve turned over a new leaf. Was that my little girl?’
‘That was Joey. Why?’
‘I only wanted to know.’
‘Ah! making conversation, as it were. Yes; you’re gentry now, of
course—joined the respectable classes.’ He fumbled Prosser’s coat
as he spoke, feeling round the cloth buttons to see if they were
sound and fat. ‘One has to talk for talking’s sake when one belongs
to the gentry. Well, I’m off. Don’t waste your elegant conversation on
me; go back to the Duchess.... Pity the poor blind!’ He was off again,
crying hoarsely along the big grey blocks, and Prosser pursuing
timidly.
‘Stop, stop, Mr. Hartopp! You didn’t mind my mentioning the little
girl?’
‘Pity the poor blind!’
His appeal to the public was launched with an abrupt intonation
which implied a final ‘D—— you!’ as plain as words.
‘It’s my little girl after all,’ said Prosser.
‘Don’t talk like a d——d drunken maudlin fool!’ growled the blind
man, stopping short again. People looked over their shoulders as
they went past, ladies from the Stores drew aside into the road and
hurried by, seeing this maimed old man leaning back over his
extended crutch, blaspheming at the trim underling who stood so
mild and weak behind him.
‘I know your sort! rotten gutless puppies that lose their grit as soon
as they get under. Portland; good conduct marks; conversion; piety;
ticket-of-leave, and then drink, drink, drink! “Gone into service!” “My
little girl!” Ugh! What do you want to do with your “little girl”? Would
you like the little pet to “go into service” too? and wear a little muslin
pinafore, with pockets in front? Speak up, man, speak up. Don’t
stand there like a sodden hog, dreaming over your next big drink
while I’m making conversation. Don’t you hear me, you elegant toff?’
Prosser started guiltily.
‘I’d been thinking perhaps my employer would find her a nice home
somewhere.’
‘A little cottage in the country somewhere, eh? with geraniums in the
window and a little watering pot all her own, eh? And what about
me? I’d make a pretty footman if you’d recommend me, and stand on
the steps in a salmon-coloured suit and help the gentlefolk in and out
of their carriages.’
‘He’d do something for you, I’m sure. He’s a very kind master.’
‘“A very kind master!” Oh, good Lord!... Pity the poor blind!’
‘Mr. Hartopp, Mr. Hartopp!’
The old man stopped again and faced right round.
‘Prosser, if you follow me an inch further I’ll knock out your mucky
fuddled brains with my crutch all over the pavement. I swear I will.
Go home and soak, you sentimental skunk.’
Prosser stood still for some time watching the angry figure bobbing
down the road. Then he turned up by the Turkish Baths and made
his way home.
That evening he related the whole of his adventure to Prince Dwala,
not even omitting the confession of his own intemperance.
‘So you drink, do you? Drink too much of course, that is.’
‘You’re not angry, sir?’
‘Of course not. Not a bit.... It must be awfully expensive?’
‘I can’t help it, sir. I don’t want to help it. Of course I’ll have to go?’
‘Go where?’
‘Leave you, I mean, sir.’
‘Oh, please don’t do that, Prosser. You shall have as much as you
need. Don’t have more than you really need. I’m sorry it’s you, of
course, because I like you so much. But now you explain it to me, I
don’t see how it could have been helped. I’m awfully sorry about it.
That’s a very wonderful old man.’
‘Mr. Hartopp? Yes, sir.’
‘Do you think he’d come and live here?’
‘He wouldn’t take service, sir.’
‘No, as a friend, I mean. You see, Prosser, this house is much bigger
than I really need. I have to live in it, of course, because I’m so rich;
besides, there’s poor Huxtable to think of.’
‘You needn’t pity Mr. Huxtable much, sir.’
‘No, that’s true: I suppose he’s very happy. Do you know anything
about Mr. Hartopp’s past life? One isn’t born a “Fence” I suppose?’
‘Oh no, sir, it takes a very intelligent man to be a Fence. Mr.
Hartopp’s a very intelligent man, and had a first-class education.’
‘What’s his story, then?’
‘Story, sir? There’s no story as far as I ever heard. Nothing out of the
ordinary, sir.’
‘How did he become blind?’
‘Overwork, sir. He was a schoolmaster as a young man down in our
part of the country, and overworked his eyes like at his work, sir.
That’s how he lost his place. He had a fever, and they took him to
the Workhouse Infirmary. It’s that what made him go to the bad, they
say, sir; he’d always had a horror of the rates. He often talks of
himself as a pauper, as if it was a disgrace like. He’d worked his way
up like, sir, and couldn’t stand being mixed up with pauperism. So
when they discharged him he came up to London and went to the
bad.’
‘Drink, I suppose? It always begins that way, I’m told.’
‘Mr. Hartopp, sir? Oh no, sir, I never knew him drink anything, sir, nor
smoke neither. Drink and tobacco he says are ... some funny word,
painkillers sort of, to keep the workin’ classes from yellin’ out while
they’re bein’ skinned alive. He’s a very funny man, sir, always makin’
jokes. Not but what he’s fond of good livin’ too, sir. When trade was
good one time he used to go regular every day and lunch at the
Carlton. I only found out by chance; I was that surprised. Up till then
I’d always took him for a Socialist.’
‘How did he lose his leg?’
‘His leg, sir? I really don’t remember how that was. It wasn’t very
long ago, I know. Blind men often get knocked about like in the
traffic.’
XXI
Dwala left his valet abruptly and spent many hours walking up and
down the picture-gallery, deep in thought. Some of his slow ideas
were coming suddenly to maturity.
Men—these strange wild beasts that lived wholly in a delirium of
invented characters, assigning fantastic attributes to one another
and acting solemn plays where everything was real—blood, knives,
and misery—everything but the characters themselves—had thrust
on him the strangest mask of all; they had made him great. And now,
at the touch of one small hand on the lever, all the machinery of the
theatre was in motion to make him greater still, with the greatest
greatness of all—for so to his rude mind, unskilled in the abstract
mystery of Royalty, seemed political greatness, the power of
ordering men’s days and nights.
Himself, he was nothing—nothing to anyone but himself; for others
he was a suit of irrelevant attributes; no one cared what he thought
or felt or was; his Ego had no place in their scheme. He had been
always the same; and all his differences were of human making.
First Man clapped on him the attribute of Monkey, and purposed
putting him in a cage and offering him for an entertainment. Then
Man clapped God, King, Prisoner, and Millionaire on him in quick
succession; now they were preparing Statesman for him to wear.
Empty garments all of them, by the very essence of things: Nature
makes no Gods, Kings, Prisoners, Millionaires or Statesmen. All
fanciful unsubstantialities of men, real only in their effect on men, as
laws of gravity are real only in the eagerness of little things to be
impelled; empty shells, inhabited by irrelevant I’s that live in corners
of them, apart and unconsidered; vacancies, chosen at random for a
centre of genuflexions, services, obediences, gold, velvet, paper,
and different sorts of food. A wise Providence has ordained that
Man’s eyes should be blind to the vision of real naked Nature-given
personality: were it suddenly otherwise, the long-wrought
classifications of the ages would disappear at once in a confusion of
particular differences; all leadership and direction would be lost; just
as Science would shiver to a heap of individual facts if she were
robbed of her slow-built generalisations.
Dwala saw that he could never merely put aside his mask and say,
Behold me as I am. Such revelations are unthinkable to the human
mind: one might as well say, Behold me, for I have disappeared. He
could renounce Statesman if he liked, stay Millionaire, go back to
God or King or Monkey; but until he went away from men, and hid
himself in the wild forest, he could never be plain self again: he must
inhabit either a palace, or a temple, or a cage.
What was he going to do, he asked himself, in this new mask that
Man was preparing for him with so much labour? The answer was
evident; Lady Wyse knew it too. He was making a Joke, a big slow
Joke; men were rolling it painfully up the board for him, panting and
groaning, and when it reached the top he would tip it lightly over and
see it fall with a crash like a falling mountain. Surely that would make
him laugh?
And after? Well, that was a little matter. They would kill him, perhaps;
he would die laughing at them, laughing in their angry shame-lit
faces as they stabbed him. More probably they would let him go.
They would hardly exhibit him in Earl’s Court: ‘Pithecanthropus
erectus, ex-Cabinet Minister.’ He would get back to the woods of
Borneo again, and laugh among the trees. In any case, he would
have had his Joke.
Meanwhile other attributes had been laid on him for which he had no
use: power to demand a million little satisfactions, gross and fine, for
which he had no taste. Space to sleep and wake, food enough to
nourish him—that was all he wanted till the great Joke reached the
tumbling point. A thousand minor jokes would crop up by the way in
the endless inequality of masks: jokes too slender for his own
handling. Must all this go to waste? Why not enjoy by proxy? To his
large mind it was indifferent who was the agent of enjoyment: himself
or another, as they had the fitter talent. Therefore he had long been
vaguely seeking someone who could replace him in the present; an