BOOK REVIEW: NOVEL : A Comic, Sympathetic Look at Where the Ruined People Live : DUNEDIN <i> by Shena Mackay</i> , Moyer Bell, $21.95, 340 pages

Shena Mackay explains her novel, beautifully, in a passage near its conclusion:

“The bus, which doesn’t run; the train, which glides away early leaving a weeping passenger pleading at the closed barrier; the man who makes a dash across the road as the lights change, knowing in the split second of his momentum that an old lady will follow his lead: each of us has the power, almost every minute, to alter, unknowingly, other lives forever. The heavy links of the causal chain ran backwards out of sight, disappearing into the past. He had been given a gift and he was not going to break it.”

The he is William Mackenzie, a former headmaster living in southeast London; the gift upon which he meditates is impending middle-aged fatherhood, a chance to redeem in some way the death of a student murdered during a school field trip.

William is not the main character in “Dunedin”--that’s his sister and housemate, Olive--but he is the nearest thing (if distant nonetheless) to the voice of reason, a figure capable of discerning the constant, connecting strands in the web of life.

Olive, by contrast, thinks primarily of her own needs and so resents William’s good fortune, which falls hard upon her most recent misguided impulse--the snatching of a baby on the subway. She thinks of herself as misunderstood but is nearer to intolerant and selfish: The last we hear of Olive, she is saying, to a man asking whether she has the correct time, “No, I haven’t. My watch is 10 minutes fast.”

You wouldn’t know it from these characterizations, but “Dunedin” is less a novel of modern middle-class London than of the conflicts and deceits--foreign and domestic, internal and external--of British colonialism.

The teen-ager who died under William’s watch was East Indian, and she was allowed to go on the fatal field trip only after the headmaster’s intervention. The kidnaped boy is black; Olive deceitfully tells William that the child’s parents couldn’t take care of him.

More significantly, the novel begins in Dunedin, New Zealand, in 1909, where Olive and William’s grandfather, a minister, has just arrived from Glasgow, ostensibly to save souls but in reality to make a name for himself as a naturalist.

The Rev. Jack Mackenzie fails, however, to realize his dream of discovering a new species and christening it after himself--largely because he is banished from the colony within the year, having had a short, exploitative, but unexpectedly fruitful affair with Myrtille, one of his Maori servants.

And so Olive and William, it turns out, share a grandparent with Jay Pascal, a 19-year-old New Zealander who also lives in London, squatting in the abandoned house where Jack Mackenzie once lived and which the hypocritical minister called, apparently without irony, Dunedin.

Like his grandfather, Jay traveled the seas with great dreams, and in London he hoped to find himself reunited with his roots and recognized for his skills.

But Jay’s experience is not like Jack’s; Jay’s skin is brown.

Although Jay sees and even talks with his cousin Olive, no saving connection is made or attempted. Jay ends up in a mental institution, the victim of a police dragnet intended to relieve London’s streets of the poor and unkempt. Jay, on the institute’s cleaning detail, suggests to his keepers numerous ways “to really get to grips with this ground-in dirt,” but his naive attempt to help elicits only a casual beating.

“Dunedin,” says one of Jay’s fellow squatters while introducing him to the place, “is where the ruined people live.”

Olive, a relatively successful shopkeeper, considers herself a victim, but Jay and the boy she kidnaps are genuine victims, people whom the Rev. Mackenzie regarded as little better than flotsam and jetsam.

William, feeling responsible for the death of a child, knows better, and Olive intermittently shows signs of knowing the difference. But meanwhile, their cousin Jay lies in the institute, “clammy, ice-cold, sweating; waiting for them to come.”

“Dunedin” is less focused than Mackay’s “A Bowl of Cherries,” published last year, but it’s a better book because it is both more developed and more serious. In aiming higher, however, Mackay has not lost her uncanny ability to portray even the most deluded, most piteous characters in a sympathetic light, to make fun of human flaws without making fun of the people who possess them.

“Dunedin,” read broadly, concerns the derelictions of empire, but scene by scene, chapter by chapter, it’s a comic novel of considerable, unanticipated power.