What does the magistrate say had happened as a result of the nuts being removed? Does Denis understand the implications of the magistrate comment?

From the text, we can infer that Denis doesn't understand the implications behind the judge's words. In my opinion, he believes that the judge is accusing him of "wanting" to run the train off the track, his response is one of complete shock. He cannot believe the judge would think such a thing.

"He keeps pretending to be a fool! as though he'd been born yesterday or dropped from heaven! Don't you understand, you blockhead, what unscrewing these nuts leads to? If the watchman had not noticed it the train might have run off the rails, people would have been killed -- you would have killed people."

"God forbid, your honour! What should I kill them for? Are we heathens or wicked people? Thank God, good gentlemen, we have lived all our lives without ever dreaming of such a thing. . . . Save, and have mercy on us, Queen of Heaven! . . . What are you saying?"