COLORFUL HISTORY OF REID'S COLOR FILM

NZ Truth, Issue 1128, 14 July 1927, Page 7

COLORFUL HISTORY OF REID'S COLOR FILM

SCATHING COMMENT ON INVENTOR'S CONDUCT IN ENGLAND

Chief Justice Orders Accounts To Be Taken In Action By Interest-holders Against Trustees

HE plaintiffs were Frank Broomfield, civil engineer, Frederick John Gooder, company director, • Donald Ferguson- McArthur, comp a y y director, William • Fraser, law accountant, and Edward Olsen, salesman, all of Wellington (represented by Lawyer W. Perry), and defendants were Edward Nicol Sutherland; merchant, William John Horan, Michael John O'Halloran and Rupert Lancelot Banks Sproule, salesman, all of ,WeHington (represented by O'.-C. Mazengarb). l After hearing the case., reported m "N.Z. Truth," the .Chief Justice, Sir Charles Skerrett, said the plaintiffs' claim, was, inter alia, for an account against the defendants as trustees under the deed, such account to be taken «n the footing of wilful default. "The earlier history of the extra- , ordinary adventure with which this action is concerned may be passed over lightly," said his honor, ■'because no remedy < is or probably can be asked against the trustees , by reason of their acts and trans- . actions, m the early stages of the administration of the trust." However, he considered it necessary that a brief outline of the history of the "adventure" should be given. "In 1924,", said his honor, "William Reid represented that he was the first and true inventor of a process whereby he was enabled by chemical and mechanical means . to produce on photographic films all the. natural colors of still objects photographed. Syndicate Formed "He further' represented that he could, by means of a special camera, with a special lens and a special Alter, produce all the natural colors of moving objects photographed. "He represented that it was necessary for him to develop a*nd complete this latter invention. . "The result "was the formation of a large syndicate for the purpose of exploiting the alleged invention. "Very large sums of money were put into the venture by members of the syndicate. "The machinery by which the. work and business of the venture was to. be carried on w^as provided by the operation of the trust deed, dated December 22, 1924, under which Reid assigned to the defendant trustees his ( invention and all improvements, upon the ad-

ii ■ - ' "l[< (From "N.Z. Truth's" Special Wellington Representative.) TN view of the thousands of po unds and thousands of people interested m William Reid's alleged patent for photographing both still and .mo vin g objects m their natural colors, a comprehensive report of the recent proceedings taken by certain interest holders against the trustees for the taking of accounts is due to the pu blic.

ministrative trusts' expressed m the deed. "The deed is a lengthy instrument; and it is only necessary to refer to such parts of it, as affect the specific questions which it is my duty to decide. "One of the trustees, was t the defendant Sproule; and it appeared at the trial that he had a very suSstantial interest m whatever benefits Reid was to derive from the exploitation, and sale of the invention under the terms of the trust. "He was to get 20 per cent, of the cash received from the sale of an issue of shares or interests m the venture which was to go under certain conditions to Reid. . "The total cash value of this issue of shares — which was usually referred to as "the second issue" of shares under the trust deed— was a sum of £6250. "In addition, he was to be entitled to have a half share m the proceeds of a further issue of shares to Reid contemplated by the deed of trust, amounting l, m value to another £6250. "Sproule did not disclose his interest under the arrangement with Reid to his fellow-trustees. "Mr. Sutherland, the chairman of •the trustees, says that Sproule -never told him that he had any arrangement with Reid as to sharing between them; but that he understood that there was some arrangement between them. "He says that he got that impression shortly after he was appointed chairman. "It is clear that the defendant Sproule was guilty of gross impropriety m not having fully disclosed to his. Co-trustees the interest which he had acquired under the arrangement with Reid. He was both under a legal and a moral obligation to do so. "Without any real disclosure of his relationship with Reid,. he was allowed practically tb settle the terms and provisions of the trust deed and to determine what remuneration and advantages Reid was to receive under the

trusts m respect of the transfer of his alleged inventions to the trustees. "It is unnecessary to comment on the provisions of the trust deed with respect to the' terms granted to Reid. "It is enough to say that as might, under the circumstances, be expected, these provisions were exceedingly favorable to Reid." * To England After a further lengthy analysis, the Chief Justice continued: "In January, 1925, Reid proceeded to England under engagement with the, trustees at a salary of £10 per week, with travelling expenses. "Moneys for these and other disbursements were to be provided from time to time by the trustees. "He 'was accompanied, at the cost and expense of the trust, by a Mr. Mothes, apparently m the capacity of watch-dog. "It is not necessary to state m any detail what happened m England. * It is sufficient to say that Reid did nothing m connection with the development of his alleged invention. He sent glowing cablegrams of his progress m this connection, but these cablegrams were afterwards admitted by him to have been wholly false. There can be no doubt that Reid's conduct while m England was wholly improper. ' -." / "He appears to have been assisted m this course of conduct by Mothes, because the trustees never heard at all from Mothes — and when an investigator appointed by the trustees arrived m England he at once decamped. "At the end of August, 1925, one of the plaintiffs, Mi*. Broomfield, was sent to England to ascertain what Reid. had been doing and to investigate and ascertain the position, and report to the trustees. "Broomfield ascertained that Reid had, as I have said, really done nothing;'that he had made absolutely no progress with his camera and that his glowing cablegrams were wholly false; and lastly that he had made- no progress m perfecting the process for the production of photographic films m all natural colors of still life. "Mr. Broomfield, on January 28, 1926, accordingly cabled from London to the trustees that the prospect of success was quite hopeless and that the trustees should arrange to terminate the venture immediately., "Despite! this and other cablegrams m the same tone received from Mr. Broomfield, the trustees cabled to him on February 6, 1926, suggesting that he should form a company for the, purchase of the alleged rights, having a capital of a quarter of a million pounds, of which the trustees were to receive. £50,000 m cash and 100,000 shares. "The promoter was to be paid £20,---000 cash and 25,000 shares from the cash and shares to be received by the trustee's from the proposed company. "Mr. Broomfield very properly declined to have anything to do with the formation of the suggested company and cabled that the trustees must endorse his absolute refusal to' form such a company." Brokerage In regard to the payment by. the trustees to themselves of a brokerage of £5 per cent, on the moneys realised by the. sale of the first portion of the third issue of shares — this brokerage amounting to £957 — his honor held that the. trustees, were only entitled to charge a fair and just brokerage upon shares which were actually sold through* their instrumentality; and they must, therefore, be charged m account, with brokerage on any other footing. "It is difficult to see," added his honor, "how they could justify draw-

s : . ing an over-riding commission of 5 per. cent, upon sales effected by an agent employed by them. "Any brokerage to which . they were entitled could only be charged upon sales effected through their instrumentality." The second specific question related to the receipt by the trustee's of a brokerage of 5 per cent, on the sale of portion of the fourth issue of shares under the trust — the second issue which "Reid was entitled under the trust deed to sell. The chief justice said it was clear that the trustees were not entitled to receive, this^commission or brokerage; and m his opinion the trustees must account to the beneficiaries for the brokerage received by them respectively on the fourth issue of shares. The third question dealt with a compromise under which a sum of £175 was paid by the' trustees to Reid m full settlement of any past or future claims which he might have against the trustees or the. syndicate. "In my opinion," Sir Charles Skerrett continued, "the compromise was beyond the power of the trustees to enter into. ... "Furthermore, I am of the opinion that the compromise was hot entered into m good faith. I acquit the defendants of any per-, sonal dishonesty m entering into the compromise. . "I do not think that they wilfully intended to give an improper advantage to Reid at the expense of the trust funds. . . "The trustees must therefore be •charged with the sum of £175 improperly paid by them out of the trust funds. "I think that under the circumstances I am justified m holding that the account should be taken on the footing of wilful default. "I do not. think that under the circumstances of the present case, this order will have any practical effect, but the .plaintiffs are entitled to it if they so ask." With regard to the claim that the trustees should be removed from the trust and new trustees be appointed m theiif place, his honor did not think it necessary to make such an order. All that now required to be done was to distribute the moneys, m the hands of tho trustees among the beneficiaries and. that an order should be made for the ' administration of the trust under the order of 'the court. Court's Order The order of the Court was: — "(1). — That the accounts of the defendants as trustees of the administration of the trust under the said deed, be taken by the Registrar of this Court, and that the defendants .do pay. into Court all such sums and moneys as shall be found to be due, owing or payable by them on. the taking of such account; ••(2) — That m connection with the taking of such account the following directions shall be given: "(a) — Commission on the sale . proceeds of the before-mentioned first and third issue of shares under the deed ■■ of .trust, shall be allowed or disallowed by the Registrar on the principles stated m this judgment: "(b)— That the defendants be respectively charged with and pay the commission received by them out of the sale proceeds qf tho shares sold by or on behalf of s Reid; "(c)— That the defendants be charged with the sum of £175 improperly paid, out of. the trust moneys under the before-mention-ed compromise; \ "(d)— The defendants must be charged with interest at the rate of £6 per centum per "annum from the date of the receipt of moneys wrongfully, received by them resnpctivGly "(3)— That th'e said trust be administered and wound up under the order of this Court. •«(.4)— The' costs of this action are reserved until after the taking of the aforesaid accounts. "(5)— -Liberty to either party to further apply to this Court m any manner they may think proper." iiiimiiiiiiiii minim m iiiiiiiiiimiiiiiiiiiiiiiiiiiiiiiiniiiniiiimiiiiiiiinii