North Western Salt Co Ltd v Electrolytic Alkali Co Ltd

1914. Feb. 12. Viscount Haupane L.C. My Lords, this is an
appeal by the plaintiffs in an action brought to recover damages
for breach of a contract relating to the sale of salt. The question

(1) (1911) 221 U. 8. 106. (2) (1855) 6 E. & B. 47,
(3) [1913] A. O. 781.

467

igle (EO
1914

NORTH
WESTERN
SALT
COMPANY,
LIMITED
Vv.
ELEOTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

468

H. L. (E.)
1914

——
NORTH
WESTERN
SALT
COMPANY,
LIMITED
v.
ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Viscount
Haldane L.C,

HOUSE OF LORDS [1914]

to be determined is whether the contract was enforceable. [His
Lordship stated the facts as above set out and continued : |
Some doubt has been raised as to whether the general agree-

ment with the other salt manufacturers of September 11, 1906,

was putin evidence. But I assume for the present that it was
in evidence, and I turn to it. It is contended that it must be
looked at because of the provision of the contract sued on,
which says (clause 7) that the respondents, if they make any
stoved vacuum salt, are to be elected distributors on the same
terms and conditions as the appellants’ present distributors.
These terms and conditions are contained in a document dated
August 7, 1908, which was submitted to the respondents as
already stated, and which they refuse to sign. It is headed
‘“ Distributors’ Appointment,” and it purports to define the terms
on which a person appointed to be one of the appellants’ salt

distributors may purchase salt from the appellants and sell i

It defines the quantity that may be so purchased at prices to be
fixed by the appellants, and the conditions on which it may be
resold at prices to be similarly fixed, and it contains provisions
regulating the amount to be sold, the discounts, the use of craft
and rolling stock, the freight and other charges, and the
customers to whom sales may be made. It provides that the
appellants are nct to be bound to deliver salt except at the
works where it is produced, and that they may, on receiving any
order, decide at which of the works of any of their members it
is to be delivered. The document contains a statement that
similar appointments had been given to other distributors, who
were named, and in some cases it was stated that the appoint-
ment contained a clause providing that it should not prejudice
rights under an agreement of September 11, 1906, being the
general agreement already referred to between the appellants
and the other salt manufacturers.

This last-mentioned agreement, which purports to be made
with fourteen salt manufacturers of Cheshire, Lancashire,

Worcester, and Stafford, comprising both companies and firms,

contains provisions largely resembling those in the contract sued
on. The purpose of both contracts was to enable the appellant
company to control the sales and prices of salt within its

A. C. AND PRIVY COUNCIL.

sphere of influence, and as the members of the appellant
company were the salt manufacturers themselves, this was not
impracticable.

My Lords, it is no doubt true that where on the plaintifi’s
case it appears to the Court that the claim is illegal, and that it
would be contrary to public policy to entertain it, the Court may
and ought to refuse to do so. But this must only be when
either the agreement sued on is on the face of it illegal, or
where, if facts relating to such an agreement are relied on, the
plaintiff’s case has been completely presented. If the point has
not been raised on the pleadings so as to warn the plaintiff to
produce evidence which he may be able to bring forward rebutting
any presumption of illegality which might be based on some
isolated fact, then the Court ought not to take a course which
may easily lead to a miscarriage of justice. On the other hand,
if the action really rests on a contract which on the face of it
ought not to be enforced, then, as I have already said, the Court
ought to dismiss the claim, irrespective of whether the pleadings
of the defendant raise the question of illegality.

Now, in the case before us it is to me obvious that the Court
of Appeal could not be sure that it had got before it the whole of
the materials which were necessary if it was to be justified in
deciding on the legality of what it took to be a scheme for
securing a monopoly by restricting output and raising prices,
and for depriving the public of the choice of manufacturers,
while hoodwinking them into the belief that such choice was
open to them.

Unquestionably the combination in question was one the
purpose of which was to regulate supply and keep up prices.
But an ill-regulated supply and unremunerative prices may, in
point of fact, be disadvantageous to the public. Such a state of
things may, if it is not controlled, drive manufacturers out of
business, or lower wages, and so cause unemployment and labour
disturbance. It must always be a question of circumstances
whether a combination of manufacturers in a particular trade is
an evil from a public point of view. The same thing is true of a
supposed monopoly. In the present case there was no attempt
to establish a real monopoly, for there might have been great

469

H. L. (E.)

NORTH
WESTERN
SALT
COMPANY,
LIMITED
w.
ELECTRO-
LY TLC
ALKALI
COMPANY,
LIMITED.

Viscount
Haldane L.C.

470

HL. (E.)
1914

—_—
NORTH
WESTERN
SALT
COMPANY,
LIMITED
Ge
ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Viscount
Haldane L.C,

HOUSE OF LORDS [1914]

competition from abroad or from other parts of these islands
than the part which was the field of the agreement. On material
questions of fact such as these the Court of Appeal had not the
proper evidence before it, and the pleadings of the respondents
had thrown on the appellants no duty to bring forward such
evidence.

The general agreement of 1906, which was referred to in the
document relating to the appointment of distributors, was not the
agreement sued on. It constituted only a surrounding circum-
stance in the case, and it is impossible to predict how that case
might have appeared had the appellants presented full evidence
of all the circumstances. The Court of Appeal ought, in my
opinion, in the absence of amended pleadings and full evidence,
to have refused to enter into what was a mere speculation on an
intricate and wide question of fact. If this be so, then the only
question which can legitimately be considered is whether the
contract sued upon is one which on the face of it ought not to be
enforced. As I read the judgments of the majority of the Lords
Justices, they seem to have thought that the contract, although
possibly valid if taken by itself, was not so in view of inferences
of fact to be drawn from the character of the outside agreements
to which it referred. But if there is not sufficient evidence to
enable a Court to review the situation in its entirety, then the
Court is confined to what appears on the face of the contract
sued upon, including any documents incorporated with it. As
the outside agreements and.documents to which I have referred
were not so incorporated, I think that they could not be looked
at in an action with the restricted issues which the pleadings
before us raise.

I come back, therefore, to the contract on which the action is
based. My Lords, the law as to contracts in restraint of trade is
not doubtful. In order to be valida clause imposing a restraint
must be reasonable, and he who says that the restraint is so
must make it out. But he will discharge this burden if he can

point to other parts of the contract which shew the reasonable-

ness of the restraining clause. If the contract read as a whole
appears on the face of it not to be unreasonable in the interest
either of the parties or of the public, that is enough, and the

A. C. AND PRIVY COUNCIL.

question is not one of evidence. Evidence may, indeed, be given
as to the character of the business and the circumstances. But
it cannot be given on the question of the reasonableness of what
appears on the face of the document when construed in the light
of the circumstances as to which evidence is admissible. The
question is one of law for the Court, and is not an issue of
fact.

My Lords, when the controversy is as to the validity of an
agreement, say for service, by which some one who has little
opportunity of choice has precluded himself from earning his
living by the exercise of his calling after the period of service is
over, the law looks jealously at the bargain; but when the
question is one of the validity of a commercial agreement for
regulating their trade relations, entered into between two firms
or companies, the law adopts a somewhat different attitude—it
still looks carefully to the interest of the public, but it regards
the-parties as the best judges of what is reasonable as between
themselves. In the present case I see no reason for doubting
that in entering into the contract on which this action was
brought the respondents were probably acting in their own best
interest. It may well be that such a contract was, in view of the
powerful position of the appellants, the respondents’ best way of
securing a market and adequate prices. And if this be once
conceded I find nothing else in the detailed provisions of the
contract excepting machinery for working out the bargain. If
the general object was lawful, then these provisions were, in my
opinion, free from objection on the score of illegality. Nor do I
find that the public interest was necessarily or even probably
injured.

I have already adverted to the fact that competition from
abroad and from other parts of the United Kingdom was not
affected. It may be, for all that appears, that agreements of
this kind were the only effective method of preventing domestic
competition from being carried to a length which would ulti-
mately prove not merely ruinous to the parties themselves, but
injurious to the public, even outside that portion of it which
was dependent on the prosperity of the salt manufacturing
‘ industry. No doubt if there were a monopoly attempted to be

471

H. L. (E.)
1914

——
NORTH
WESTERN
SALT
COMPANY,
LIMITED
OP
ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Viscount:
Haldane L.C.

472

H. L. (E.)
1914

NORTH
WESTERN
SALT
COMPANY,
LIMITED
v.
ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Viscount
Haldane L.C.

HOUSE OF LORDS [1914]

set up which was calculated to enhance prices to an unreasonable
extent, that would, if it so appeared on the face of the contract,
be ground for refusing to enforce it. But an effective attempt
to set up such a monopoly or so to enhance prices can but
rarely appear on the face of an agreement between two traders.
Whether such an attempt is really being made is almost always
a question of fact. It certainly does not appear as being made
on the face of the agreement in question. It may well be that
prices such as 18s. or 23s., which were to be charged for the
appellants’ salt, were fair prices. The fact that the manufacturer
is only to receive 8s. cannot, standing by itself, be treated as
sufficient evidence to the contrary. For it may be well worth
while for a firm like the respondents, which obviously had to
face much competition, to take a low price in order to secure a
steady market, and the appellants’ prices may have been no
higher than a manufacturer might under ordinary circumstances
have expected to get.

Nor am I impressed by the view of Farwell L.J. that the
arrangements stipulated for by the appellants for directing
the supply of orders to be made from the factories which they
thought most convenient in particular cases was detrimental to
the public who might be hoodwinked thereby. Such distribution
arrangements are common in business. One of their obvious
purposes is to save cost of carriage, and there is no reason to
suppose that the business world is either ignorant that they may
exist, and so is likely to be deceived, or is incapable of taking
care of itself. In an appeal which recently came before the
Judicial Committee of the Privy Council (Attorney-General of the
Commonwealth of Australia v. Adelaide Steamship Co. (1)) my
noble and learned friend Lord Parker delivered on behalf of the
Committee a judgment in which the law on these subjects was
fully reviewed. Among other statements in that judgment there
is one which bears closely on the question before us. After
explaining the difference between a monopoly in the strict sense
of a restrictive right granted: by the Crown, and a monopoly in
the popular sense in which what is meant is that a particular
business has been placed under the control of some individual or

(1) [1913] A. C. 781.

A. C. AND PRIVY COUNCIL.

group, he says (1) that it is “clear that the onus of shewing that
any contract is calculated to produce a monopoly or enhance
prices to an unreasonable extent will be on the party alleging it,
and that if once the Court is satisfied that the restraint is
reasonable as between the parties the onus will be no light
one.”’

My Lords, I desire to adopt this proposition as applicable to
the question before us. For the reasons I have given, I do not
think that, consistently with the principle so expressed, a Court
of justice is at liberty to infer from the terms of the contract in
controversy that it is directed to establishing either a pernicious
monopoly or a state of things injurious to the public. And
I agree with what was said by Lindley L.J., one of the
most cautious and accurate judges of our time, in Mazim-
Nordenfelt Co. v. Nordenfelt (2): “‘ The interest of the public is
no doubt adverse to monopolies and to restrictions on trade; but
then its interest is to allow its members to carry on those
businesses which they themselves prefer; and to abandon and
sell to the best advantage those businesses which for any reason
they do not wish to continue.”

The result of the consideration I have given to this appeal is
that I think that this House should declare that the contract in
question has not been shewn to be in unreasonable restraint of
trade, and that it was, therefore, enforceable by the appellants.
As the Court of Appeal did not proceed to dispose of the points
raised by the respondents as to the measure of damages,
the case must be remitted to it for that purpose with the
declaration I have suggested. The appellants are entitled
to their costs of the appeal to this House and also to their
costs of the last hearing in the Court of Appeal. I move

accordingly.

Lorp Moutron. (3) My Lords, I agree, and in my opinion
the sole question which your Lordships are called upon to decide
is one of no difficulty if the history of this case is borne in
mind.

(1) [1913] A. C. at p. 796. (3) Read by Lord Parker of

(2) [1893] 1 Ch, 630, at p, 646. Waddington.

478

H. L. (E.)
1914

NortTH
WESTERN
SALT
COMPANY,
LIMITED

v.
ELECTRO-
LYTIC ©
ALKALI
COMPANY,
LIMITED.

Viscount
Haldane L.C.

474

Hele Gia
1914

NorTH
WESTERN
SALT
COMPANY,
LIMITED

1h
ELEOCTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Lord Moulton.

HOUSE OF LORDS [1914]

The action is one of breach of contract. The plaintiffs sold
goods to the defendants upon terms as to price and conditions
of resale, &c., which are embodied in a written contract. The
defendants broke their contract, and the plaintiffs are suing for
damages for such breach. In their points of defence the defen-
dants admit liability as to some of the alleged breaches and raise
various defences to the others, none of which are now material,
because it is no longer denied that the breaches were in fact
committed, although there has been no final decision as to the
measure or amount of the damages.

At the trial before Scrutton J. the plaintiffs put their manager
into the witness-box to give evidence on some issue of fact raised
in the pleadings. In commencing his cross-examination of this
witness counsel for the defendants put a question to him
admittedly not relevant to any matter pleaded, but directed solely
to shew that the contract was, in fact, a contract in restraint of
trade, and thus void or unenforceable. Objection was taken to
the question on the ground that if the defendants intended to
raise such a defence they ought to have pleaded it. The objection
was sustained by the judge. He could scarcely have done other-
wise in face of the specific provision in the Rules that the
defendant must raise by his pleading all matters which shew the
action or counter-claim not to be maintainable, or that the
transaction is either void or voidable in point of law, and all such
grounds of defence as, if not raised, would be likely to take the
opposite party by surprise, as, for instance, fraud, facts shewing
illegality either by common or statute law. The defendants
thereupon asked leave to amend their pleading so as to raise the
defence of illegality, but the judge refused such leave, on the
ground that it would be unfair to the plaintiffs to allow such
an amendment to be made when the trial had already
commenced.

The reasonableness of this refusal is not now in question. No
appeal was brought against it, and the defendants have at no
stage of the case renewed their application. It is evident, and,
indeed, it is not denied, that the point was before the minds of
their counsel from the first, and that it was not by inadvertence,
but by choice, that it was not pleaded originally, or that leave to

A.C. AND PRIVY COUNCIL.

add such a plea was not applied for during the period of more
than eighteen months that elapsed between the delivery of the
points of defence and the trial.

In the result the judge found in favour of the plaintiffs for
10551. 4s. 10d. damages. The defendants appealed, and on the
hearing of the appeal their counsel raised the contention that the
contract sued on, when considered with the facts of the case as
shewn by the evidence, was in restraint of trade, and was a con-
tract having for its purpose and effect the maintenance of an
illegal monopoly injurious to the public; that the Court was
entitled, and, indeed, bound, to take cognizance of this conten-
tion; and that accordingly it ought to allow the appeal and
dismiss the action, regardless of the fact that the issue of
illegality was not raised in the pleadings. ‘The Court of Appeal
by a majority accepted this view of the case, and allowed the
appeal on that ground. Questions as to the proper measure and
amount of damages, therefore, became irrelevant, and the Court
of Appeal has neither considered nor pronounced upon these
matters.

The present appeal is from this decision of the Court of
Appeal, and the discussion before this House has related solely
to the question whether the Court was justified in dismissing the
action on the ground that the contract was illegal and unenforce-
able. The argument on behalf of the defendants is a very specious
one. It is conceded that if a written contract is ex facie in
restraint of trade so as to be against public policy, the judge is
entitled, and, indeed, bound, to take the point, and the decision
is for him, and not for the jury. The same must be true when
the question is whether a contract, when taken in connection
with the surrounding circumstances, is in like manner against
public policy. This must be so because the question is one of
law, and therefore is for the Court and not for the jury;
although it is needless to say that if there be a dispute as
to the facts, that dispute has to be settled by the tribunal
which has the duty of deciding as to fact before the judge
can exercise his function. If, therefore, say the defendants,
the Court, taking the contract in connection with the facts
appearing in the plaintiff’s case or otherwise legitimately

475

H. L, (B.)
1914

aw

NORTH

COMPANY,
LIMITED

Us
ELECTRO-
LYTIC
ALKALI
CoMPANY,
LIMITED.

Lord Moulton.

476

Heth)
1914

——
NORTH
WESTERN
SALT
COMPANY,
LIMITED

ve
ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Lord Moulton.

HOUSE OF LORDS [1914

brought before the Court at the trial, comes to the conclusion
that it is against public policy, it is entitled and bound to
dismiss the action.

This reasoning would be sound in the case of a properly con-
stituted action, where the defence of illegality is duly raised on
the pleadings. ‘The Court would then be entitled to assume that
it had before it, in evidence, all the relevant surrounding circum-
stances. If any be missing it is the plaintiff's own fault, and he
must take the consequences. In such a case the legal motto,
de non apparentibus et de non existentibus eadem est ratio, is
rightly applied. But it is not so where the issue is not raised
on the pleadings. The plaintiffs have received no notice that
the point will be raised, and are presumably not prepared with
the necessary evidence. Even if they are in a position to call
the evidence they are not at liberty to do so, because they are
only entitled to call evidence on the issues raised by the plead-
ings. The facts before the Court at the end of the case are
therefore only a casual selection from the surrounding circum-
stances, and the Court has no longer the right to treat them
as properly and fully representing those surrounding circum-
stances so as to justify its pronouncing on their true effect
upon the contract. It may be shortly put as follows: if
the contract and its setting be fully before the Court it must
pronounce on the legality of the transaction. But it may not
do so if the contract be not ex facie illegal, and it has before
it only a part of the setting, which it is not entitled to
take, as against the plaintiffs, as fairly representing the whole
setting.

Lurking beneath the argument for the defendants was the idea
that the public good is a matter of such supreme importance that
Courts should not require proof in due form and in accordance
with the recognized requirements of our legal procedure of any
charge of illegality or offence against the rules of public policy.
But our judicial procedure is based on the principle that in fair-
ness a litigant should have due notice of the issues that are to be
raised in order that he may prepare himself with the evidence
necessary to present his case fittingly to the Court, and it would
indeed be strange to hold that this wholesome rule should be

ASC; AND PRIVY COUNCIL.

relaxed when he is charged with something so grave as acting
against the common weal. Such a proposition partakes of the
absurdity of the rule in criminal proceedings that prevailed in
England centuries ago, namely, that, because felony was so very
wicked, persons accused of it should not be allowed the assist-
ance of counsel. Happily we have shaken ourselves free from
all such notions, and the principle that in all cases fair notice
should be given to the plaintiff of all the defences that are
to be raised is now so fully recognized in our procedure that
it is formulated in the rule above quoted, in language which
permits no misunderstanding as to the general rule, and
which, in particular, specifically includes such a case as the
present.

One special case should perhaps be noticed. It is possible
to conceive a case in which a fact comes to light in the course
of the trial which of itself renders an agreement illegal on
grounds which nothing could cure. In such a case the Court
would act upon it. But this is no exception to the general rule.
Amendments of the pleadings and permission to the plaintiff
to call evidence would ex hypothesi be useless in such a case,
because the fact is conclusive of the illegality. But no such
case is before us here. It is evident that had the issue been
raised on the pleadings, it would have entitled the plaintiffs to
call further evidence of various kinds, and such evidence might
have negatived any inference that the parties were concerned
in creating or supporting a hurtful combination in restraint of
trade.

It remains to apply these principles to the present case. The
contract sued upon is not ex facie illegal. So far as is material
to this question, it may be described as a contract whereby the
defendants have the option to buy up to a certain amount of
stoved salt at a certain price, but there is a condition attached
to this option that if they exercise it they shall not resell the
goods except at certain prices and in a certain way. It was
a hopeless task to argue that such a contract is ex facie against
public policy, and accordingly the argument in the Court of
Appeal and in this House turned mainly on the nature and

. status of a separate and independent contract made by the

ATT

He cE)
1914

NorTH
WESTERN
SALT
COMPANY,
LIMITED

t.
ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Lord Moulton.

478

H.-L, CE.)
1914

NORTH
WESTERN
SALT
COMPANY,
LIMITED

v.
ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

lord Moulton,

HOUSE OF LORDS [1914]

plaintiffs with other persons which was not incorporated in, and
did not form part of, their contract with the defendants. It
was contended that this latter contract was in restraint of trade
and hurtful to the public, and that the contract with the
defendants was in aid of this contract, and that therefore it also
was invalid. There can be no doubt that if this issue had been
raised on the pleadings the plaintiffs might have called relevant
evidence as to the circumstances under which these contracts
were made and as to their object and effect. This they had no
opportunity of doing by reason of the defendants electing not
to raise the issue by their pleadings, and we cannot pronounce
on the question whether the surrounding circumstances were
such as to render the contract with the defendants illegal because
we have not the requisite material before us.

The consequence is that this appeal should be allowed with
costs. The case must be remitted to the Court of Appeal on the
question of damages.

Lorp Parxer or Wappineron. My Lords, I agree. A con-
tract in restraint of trade may on the face of it be so unreason-
able as between the parties, or so detrimental to the public, that
the Court will on its own initiative refuse to enforce it. There
may, however, be contracts in restraint of trade the validity or
invalidity of which cannot be gauged by the terms of the documents
themselves without reference to the circumstances under which
they were executed. In such cases it is more difficult for the
Court to act on its own initiative. Indeed, it ought not so to
act unless it be quite certain that all the relevant facts are in
evidence.

The present action was for damages for breaches of a contract
in restraint of trade. As I read the pleadings, both the breaches
and liability for the breaches are admitted, the substantial
matter in dispute being as to the measure of the damages. No
question was raised as to the validity of the contract itself, nor

.can it be contended that the contract is on the face of it either

unreasonable as between the parties or detrimental to the
public.

At the trial the defendants’ counsel proposed to cross-examine

A.C. AND PRIVY COUNCIL.

one of the plaintiffs’ witnesses as to the circumstances under
which the contract was executed, in order to shew that, having
regard to those circumstances, the contract was invalid. The
judge refused to allow this to be done, as no question of
invalidity was raised by the pleadings. He also refused to allow
the pleadings to be amended so as to raise the question of
invalidity. Under those cireumstances neither party had any
opportunity of tendering the evidence which would have been
relevant on this question if raised by the pleadings. It so
happened, however, that certain facts and documents, which
would have been relevant on this question if raised, were also
relevant, and were admitted in evidence, on other issues in the
action.

On the strength of those facts and documents the majority of
the Court of Appeal (Kennedy L,J. dissenting) have held the
contract sued on to be invalid as part of a scheme for securing a
monopoly by restricting output and by raising prices. The
question your Lordships have to determine is whether this
decision can stand. For my part, I entirely agree with the
dissenting judgment of Kennedy L.J. Even assuming that the
facts and documents in question, if unexplained, would establish
the existence of an attempt on the part of the plaintiffs to establish
such a monopoly, your Lordships cannot disregard the fact that
the plaintiffs have had no opportunity of explaining them. The
full facts, if known, might profoundly modify any inferences
your Lordships might be induced to draw from the imperfect
information now before the House.

For example, the circumstances under which the plaintiffs
entered into the agreement of September 11, 1906, with the
salt manufacturers of Cheshire, Lancashire, Worcester, and
Stafford may have been analogous to those which the Privy
Council recently considered in the case of Attorney-General of
the Commonwealth of Australia v. Adelaide Steamship Co. (1)
in order to determine whether the trade restrictions con-
tained in the “vend” agreement therein referred to were
necessarily detrimental to public interest. The competition

(1) [1913] A. ©, 781,

479

HL. (B.)
1914

—
NORTH
WESTERN
SALT
COMPANY,
LIMITED
Vv.
ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Lord Parker of
Waddington.

480

H. L. (E.)
1914

NorTH
WESTERN
SALT
COMPANY,
LIMITED

Cs
ELECT RO-
LYTIC
ALKALI
CoMPANY,
LIMITED.

Lord Parker of
Waddington.

HOUSE OF LORDS [1914]

between salt producers within the area covered by the agreement
of September 11, 1906, either inter se or with salt producers
outside this area may have been so drastic that some combination
limiting output and regulating competition within the area so as
to secure reasonable prices may have been necessary, not only
in the interests of the salt producers themselves, but in the
interest of the public generally, for it cannot be to the public
advantage that the trade of a large area should be ruined by a
cut-throat competition. Under these circumstances, though it
was no doubt open to the Court of Appeal, taking the view they
did of evidence, to direct a new trial, it was not, in my opinion,
open to them to hold the contract invalid on the imperfect
information before them. It appears that the defendants refused
to concur in asking the Court of Appeal for a new trial, nor
have they asked for this on the present appeal. Under these
circumstances, I think the only course is to allow the appeal,
and remit the case to the Court of Appeal to be dealt with on
the footing that the contract was valid.

Lorp Sumner. (1) My Lords, I agree that it is unnecessary to
decide any question about the form of the pleadings, the propriety
of refusing to allow the defendants to amend, or the admissibility
of any part of the evidence. In a case such as this the burden
is on the respondents of proving the illegality on which they
rely. Since the decision of Attorney-General of the Common-
wealth of Australia v. Adelaide Steamship Co.(2), this must be
taken as established. The whole question is whether or not, in
the condition in which the materials reach your Lordships,
illegality has been proved.

As it appears to me, the agreement of 1906 and the evidence
elicited in the cross-examination of Mr. Clarke are not materials
sufficient to enable a Court to act in this matter. The defendants
were not parties to that agreement, and the contract between the
plaintiffs and the defendants did not become less than legal
because the plaintiffs on their side had entered into particular
engagements with strangers. It is not their motive but the

(1) Read by Lord|Dunedin, (2) [1913] A. O. 781.

A.C. AND PRIVY COUNCIL.

contract sued on that is in question. Much of the oral evidence
was strictly immaterial since, though obtained in cross-examina-
tion, it went to no issue. It may, therefore, be disregarded.
Nor does the residue suffice, for this simple reason. Whatever
else can be made of it, if anything, this is certain, that we do not
know half of the facts material to the case. For myself I should
require to know much more of the conditions of the trade and of
the effect of such arrangements as these before I could profitably
express any opinion on the practical rights and wrongs of the
sale of salt. In such a matter partial information is as bad as
none.

By this contract A. buys all B.’s product for a given and
not protracted period, and buys it to sell again. B. has
the right to buy back, or virtually to keep out, a certain
quantity, if he desires to make a dealer’s as well as a
manufacturer’s profit. To prevent B. from underselling A. he is
put under terms as to his sales over. In law B. is probably a
buyer from A. and-a seller to third parties; practically his
position hardly differs from that of A.’s del credere agent. To
restrict an agent’s authority can hardly be illegality in the
principal, and there is little more here. Further, B. is restrained
from opening up any more salt-bearing ground, directly or
indirectly. In the case of a mineral which is not inexhaustible
and cannot be renewed, that may as well make for the public
good as not. No doubt the difference between the selling price
fixed for the producers, the respondents, and the buying price
open to the public is extreme, but we do not know enough of the
conditions of competition or of the other elements in the ultimate
selling price beyond bare cost of production to act upon it.
Doubtless the parties entered into the contract in order to make
money out of it, probably by keeping up prices, but that is not
conclusive. I daresay the plaintiffs were not any more anxious
to go into all the facts than the defendants were to plead
illegality in black and white, but your Lordships have to decide
this appeal as things stand here.

I am, therefore, of opinion that this appeal should be allowed
with costs, and that the judgment of the Court of Appeal
should be set aside and the case remitted to them to hear

481

H. L. (E.)
1914

—oa
NORTH
WESTERN
SALT
COMPANY,
LIMITED

ELECTRO-
LYTIC
ALKALI
COMPANY,
LIMITED.

Lord Sumner.

482 HOUSE OF LORDS [1914

H.L.(E) nd determine the other questions arising on the defendants’
1914 notice of appeal.

—s

adele Order of the Court of Appeal reversed : Declare that
IED the contract of November 9, 1907, has not been
LIMITED shewn to be in unreasonable restraint of trade
HuEorRo- and that it was therefore enforceable by the
ae appellants: The respondents to pay the costs on
COMPANY, the last hearing of the cause in the Court of
LIMITED.

wey) Appeal and the costs of the appeal to this House :
The cause to be remitted back to the Court of
Appeal, with the above declaration, to dispose of
the points raised by the respondents other than
the matters dealt with by the declaration in this
order contained, and to do therein as shall be

just and consistent with this judgment.
Lords’ Journals, February 12, 1914.