A Department of Railways was created in 1856 with the first appointment of staff. British engineer, George Christian Darbyshire was made first Engineer-in-Chief in 1857, and steered all railway construction work until his replacement by Thomas Higginbotham in 1860. Because of political turmoil in the Victorian Government, Higginbotham was one of 137 officials removed from office on Black Wednesday on 8 January 1878 when the Government was denied supply. He, like a number of other senior officers, was not reappointed.

Robert Watson then took over as Engineer-in-Chief. But in 1880 a new Ministry expressed a wish to redress the injustice by re-instating Higginbotham. However, at the sudden death of Higginbotham in 1880, William Elsdon took over for two years before his retirement in 1882, and Watson then returned to his former position as Engineer-in-Chief, which he held up to the time of his death.

On 1 November 1883 assent was given to the Victorian Railways Commissioners Act 1883, 47 Vic., No.767, to construct, maintain and manage the state's railways. The staff of the Department of Railways came under the authority of the Railway Commissioners, which became commonly known as Victorian Railways. The elaborate headquarters at 67 Spencer Street were opened in 1893.

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