SUPREME COURT.

Lyttelton Times, Volume CXVIII, Issue 18572, 26 November 1920, Page 8

SUPREME COURT.

CIVIL SITTING, TRANSACTIONS IN SHARES. Homing; of a case between Hnrold Sherbroke Gabites amd tho Southern Cross Motors Company was continued in tho Supreme Court yesterday, before his Honor Mr Justice Herdmnn, Plaintiff said that lie had been induced to take 1400 shares in tho company, paying £lOl2 10s for them, by the misrepresentations of Arthur L. Gray, agent for tho company. He claimed recision of the contract an<f refund of the sum of £lOl2 10s, and asked that jhis name should be removed from tho company’s register. Mr M. J. Gresson appeared for plaintiff, nnd Air O. S. Tho-mas for defendant.

His Honor said that responsibility for provrxig misrepresentation rested with plaintiff. In face of that fact, and of evidence for the defence, it was difficult for him to express an opinion on the case at present. He would look intothe facts, and would adjourn further hearing of the case until Alonday.

MARKETING A PATENT. James Carlilo Whiteman, Christchurch, sued Ernest Robert God ward, engineer, Christchurch, for alleged failure to transfer slinres. He stated that on February 1, 1813, defendant agreed to transfer to him 5500 shares in the Eclipse Petrol Economiser System Company. Defendant transferred 8500 shares, out refused to transfer the hnlanoe. On February 23, 1916, defendant agreed by contract to sell to plaintiff 800 further eliarcs in the company for £SO. Plaintiff paid tho sum and defendant transferred 500 shares, hut_ refused to transfer tho balance. Plaintiff asked tho Court to order defendant to 2300 shares, and claimed £250 damages for failure to transfer in August Inst. In t,ho„alternntive, ho claimed £llsO damage's, beinw the markoto valuo of the shares. ATr M. J. Gresson appeared for plaintiff and Mr O. T. J. Alpers for defendant.

Air Gresson snid that the case arose in connection with a patent cnrburettoi invented by defendant in 1912. Plaintiff entered into business relations with defendant, and a company was floated to place the patent on the market, the company’s capital to be £IOO.OOO in £1 shares, defendant to receive 50,000 fullv paid up shares and £IO,OOO in cash. Plaintiff was to be responsible for floating the company, in conjunction with others, and was to he given 9000 shares out of the 60,000 shares given t-o defendant. It was further agreed that, in addition to tho 9000 shares, 11,000 shares should be divided oqunlly between plaintiff Riid Mr M.’KntY, of Invercargill. Plaintiff should have received 6500 of those shares, but had received only 3500, and 2000 snares still were due. Tito main action was based on theso facts. It was contended that the contract was unconditional The dofenee was that verbal considerations were made at the time of that contract. The second contract on which the second course of action was based, was clear, and it could not be overridden by vague statements.

Plaintiff said that it was agreed that 9000 shares and 11,000 shares, 20,000 in all, should be given to M’Kay T. Maude, nnd plaintiff. Maude to have 3000. There was no condition to the arrangement, he did not undertake to find six persons to underwrite the company, but he had an 'idea to find five or six persons *o take vp the shares in largo parcels. If defendant had produced the patent in a reasonable time, plaintiff could have supplied 50,000 shnres. Before tho oompany was floated witness spent about £IOOO on the patent, and half of it had not been repaid. The shares plaoed on the market, 20,000, were oversubscribed in a week. The Australian rights were sold for £25,000. Defendant told plaintiff in Australia that the company had paid defendant only £SOOO instead of £IO,OOO cash, and defendant thought that ho should give plaintiff a proportionate reduction in tho shares arranged for. Plaintiff did not agree to that. In regard to the second contract, defendant said that ho was short of money and would give plaintiff 500 shares for £SO. It was before the company was formed, and plaintiff then held sufficient shnres, and did not want any more, but defendant agreed to give 800 furthor shares to make up shares plaintiff had given away to persons who had helped in floating the company, and who had given the use of a garage for experiments, nnd to a typist for work done. It was not stipulated, that he should sell some of defendant’s shares before he received the 800 shares. To Mr Alpsrs: Ho did not float companies to place on tho market mortite, saturnite ; sheelito, or oleotronite. He was an importer, hut had had some experience in floating companies. Air Alpers; Considerable cxporicnce?

Witness: I know how to float a company. Continuing, he said that there was an idea to pool tho shareß in tho Eclipse Company, but there was no arrangement for aefendant to have onefifth of the result of the pooling.

His Honor: What do you mean by a pool? Witness: Tho idea was that if the tests of the patent proved satisfactory several of us should underwrite the whole company, offer tho shares to the public at a premium, and divide the profits. Mr Alpers said that the idea was to prevent one shareholder watering the market by putting his shares on the market irrespective of other shares. Witness said that it was not part of tho contract that he should sell defendant’s shares as well as his own. and *heie was no stipulation that the 11,000 shares should ho held in reserve by defendant for witness and M’Kay cn condition that defendant received his £IO.OOO in cash. They were held for witness unconditionally.

In reply to Mr Alpers, witness said that the purchase by him of 600 shares from defendant for £SO was made before the company was formed. Defendant needed tho money. The low prieo did not indicate that witness was to give special consideration for the shares. Before the company was formed, witness sold £1 shares at los, 14b, ss, and as low as 4s, to different purchasers.

Mr Alpors, opening for the defence, said that tho original intention was that 30,000 £1 shares should be offered to the public, but that they should bo pooled and sold at £2 a share, making a clear profit of £30,000. Defendant, who was an inventor, and was hopeless in the matter of selling shares, stipulated that Mr M’Kay, tho only one of his friends who could look after his affairs, should como into tho syndicate. Plaintiff was another member, Mr T. Maude was another member and. later, a fourth, Air James, was brought in. As a return for their services in promoting tho company, they were to receive £9OOO shares, to be divided amongst them, making 250 each. When the war began, the pooling arrangement was abandoned, but other arrangements were carried out, and 20,000 shares were offered to the public. Defendant said that lie had worked on the patent for three years and eight months in the Government Laboratory m Washington, United States, under tho supervision of tho American Government. A previous manager for T. A. Edison was negotiating for the sale of tho patent. Vickers, Son and Maxim testod the patent in England. Plaintiff heard of tho tests in 1913, and went to witness, and said that he could get Messrs Rutherford, Stead, Hudson and Sargood and another. Thov were to take up 6000 shares each, and Messrs Whiteman, M’Kay and Maudo were to take up tho sixth 5000 of the 30,000 shares. In order to avoid any bearing of tho market, plaintiff arranged that lie would not sell any of his own shares unless ho sold share for share belonging to witness. If plaintiff sold 100 of lii&

own shares, for instance, he mast sell also 100 of witness’s shares. Hia Honor B.aid that it, was an impossible kind of arrangement. Air. Alpers said that it always was done in pooling. Witness said that, under the arrangement, if plaintiff sold a parcel of shares, witness would have a right to supply half tho shares and take half the proceeds of the sale. Further hearing of the case was adjourned till 10 a.m. next day. IN CHAMBERS, In Chambers his Honor granted probate of the wills of John Benson (Air A. J. Malley) and John Pipe (Air JJ. Dongall), and letters of administration in the estate of Caroline Alary Williams (Air Williams).