According to legend, the engine was returning home one misty night. As the engine was travelling across the Old Iron Bridge, he suddenly lost control and fell off the bridge, plunging into the Cattle Creek ravine below. No one was able to find his remains. However, in the light of the full moon, several workmen claimed to have seen his ghost repeatedly trying to cross the bridge, only to disappear half way every time.
Rusty told the story to Duncan, after Duncan teased Peter Sam for allowing his trucks to derail and fall into the ravine. At first Duncan did not believe the story, but the next day Peter Sam and Duncan's crew arranged a plan to teach him a lesson.
While crossing the bridge during a full moon, the crew used fireflies to help form the ghostly appearance of an engine and secretly threw a large rock from his cab into the ravine. Duncan believed that the bridge was haunted and the engine was trying to cross the bridge at the same time as him. This frightened Duncan, and he quickly ran back to the safety of his shed.
"I'll tell you a story that will make your funnel quiver. A long time ago, a little engine was returning home. It was a misty moonlit night. As the engine crossed the old iron bridge, he suddenly lost control and plunged over the side into the swamps below. He was never found again. But many workmen will tell you, that when the moon is full, they have seen the little engine trying to get home, but he never reaches the other side."
- Rusty telling Peter Sam and Duncan about the Ghost Engine, fifth series, Duncan Gets Spooked.