Bell v Lever Brothers Ltd

Lorp BuanzespureH. My Lords, I under-
stand that my noble and learned friend Viscount Hailsham

(1) L. BR. 2 Q. B. 580, 588. (3) [1916] 2 A. C. 397, 403.
(2) [1903] 2 K. B. 740, 748-751. (4) [1919] A. C. 435, 455, 457.

167

H. L. (E.)
1931
—
BELL
v.
LEVER
BROTHERS,
Lp.

168

H. L. (E.)
1931

——
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1932]

has read the judgment about to be delivered by my

noble and learned friend Lord Warrington of Clyffe, and
agrees with it. The views which I now proceed to express
are my own.

This is an appeal by the defendants from an order of the
Court of Appeal of November 17, 1930, which affirmed a
judgment of Wright J. of the previous June 5, pronounced
after the trial of the action before himself and a City of
London special jury. By his judgment the learned judge,
amongst other things, ordered that two several agreements—
I propose to refer to them as the agreements of settlement—
made on March 19, 1929, with each of the appellants by the
respondents, Lever Brothers, Ld., should be set aside and
that the moneys received under them should be repaid to
Levers. The sum which the appellant, Mr. Bell, had thus
to repay included premiums amounting to 1224]. 2s. 3d. on
an endowment policy, later to be mentioned, which Levers
had paid on his behalf. This sum was ordered to be repaid
by Mr. Bell, on the assumption that the liability of Levers
to pay it arose only on Mr. Bell's agreement of settlement,
by the judgment set aside.

As I regard this case, its facts and the course of the litigation
make a long story, even if, in detail, only those incidents are
dwelt upon which have a bearing on issues still open.

In Niger Company, Ld., a company of large resources,
with a paid-up capital of 4,750,000/. and issues of debenture
stock aggregating 5,500,000/., Levers had as shareholders
a controlling interest. They held in and after 1925 99.5 per
cent. of the issued share capital. The business of Niger was
to deal in West African products, including cocoa. It is
with its cocoa business alone, extensive enough in itself, but
only a fraction of its total activities, that this case is
immediately concerned. For several years before 1923 Niger
had been meeting with heavy losses, and Levers, for the
protection of their then large investment in it, had themselves
been financing or bearing these losses. Confronted in 1923
with the urgent problem of securing less unfavourable results,
Levers approached the appellants with an invitation to

—e So

A. C.- AND PRIVY COUNCIL.

undertake between them the reorganization and management
of Niger.

At that time Mr. Bell was joint manager of one of the great
London banks. He had had a long experience of banking,
with some knowledge of trade on the West Coast.
Mr. Snelling's selection was due to the fact that he was an
accountant of exceptional ability, who had just rendered
notable service to Levers in bringing about a favourable
adjustment of Inland Revenue demands upon them.

Under Mr. Bell's engagement with his bank he was entitled
on retirement after a few further years' service to substantial
pension rights. As he would forfeit these if he were to
leave the bank to take up other work, some substituted
provision on this head, operative without reference to the
duration of the new service, was for him of essential importance.
It does not appear that any similar sacrifice was involved
in Mr. Snelling's acceptance of the offer made him, and this
difference of circumstance in the two cases is reflected in the
final agreements reached. In the result, Levers' invitation
being favourably entertained by both appellants, the condi-
tions of their employment were in due course embodied in
letters passing between Levers, or the late Lord Leverhulme
on Levers' behalf, and the appellants respectively. These
letters and the formal agreements referentially embodying
their terms—separate agreements with each appellant—were
to the following effect.

For Mr. Bell, Levers were to take out and pay all premiums
upon an endowment policy on his life, but maturing at sixty
or previous death, for an amount which on death before
maturity would provide 16,200/., and on maturity would
provide 1500/. per annum or 16,200/. at his option. The policy
was to belong to Mr. Bell and the premiums were to be paid
by Levers, notwithstanding the termination of his engage-
ment, unless it was terminated by himself. To this obligation
on Levers' part, I must return later. As a continuing obligation
it was overlooked in the Courts below. I pause now only to
observe that Mr. Bell's secession from the service of his
bank to undertake his new employment—an act at once

169

H. L. (E.)

1931
"~~
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

170

«HLL. (E.)
1931

=_—
BELL

Vv.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1982]

complete—was the entire consideration for this particular
promise on Levers' part, which stands out separate from the
other provisions of the agreement.

For the rest Mr. Bell was to be appointed and maintained
by Levers as chairman of Niger for five years from November 1,
1923, at a salary of 8000/. a year, during which time he was
to devote the whole of his time and attention during business
hours "to the business" of Levers. Thus was it expressed
in the formal agreement of August 9, 1923. As to Mr. Snelling,
he was to serve "in regard to the West African interests "' of
Levers (note the phrase) for five years from October 1, 1923,
at a salary of 10,0007. per annum to March 31, 1925, and of
6000. per annum for the rest of the term. There was in the
formal agreement with him the same provision as to his

time and attention that was contained in the agreement

with Mr. Bell.

In July, 1926, by further agreements then entered into
the service of the appellants was prolonged. The earlier
contract with Mr. Bell was replaced by a fresh agreement for
five years from July 1, 1926, at the same salary and insurance
premium and with the addition of a commission in certain
events which, however, did not in fact become either actual
or prospective. Mr. Bell was to be chairman of Niger for
the whole term.

The new agreement with Mr. Snelling was for the same
extended period, at his same salary of 6000/. per annum,
with the same commission as in Mr. Bell's case. Mr. Snelling
was to be vice-chairman of Niger for the whole term.

On September 14, 1923, Niger had formally appointed both
appellants to be directors of the company, and the appellant
Bell to be its chairman. On April 8, 1924, Mr. Snelling was
formally appointed by Niger vice-chairman of the company.
From the autumn of 1923 until the,end of April, 1929, when
their service ceased under the agreements of settlement now
in question, the joint management of the appellants continued
through the exercise by them of the duties attached to these
two offices and to the directorate of Niger's Associated
Companies, to which also they were appointed. With

rr ee eee

—we

ee ee ee ee

A. C. AND PRIVY COUNCIL.

reference to that joint management, it is convenient at once
to observe that although in the letters of appointment it was
to the "business" or to "the West African interests' of
Levers that the appellants were respectively apparently to
attend, yet from the beginning to the end of their engagement,
as probably always intended, it was in the business of Niger
that they were exclusively employed. It was by their
appointment to the chairmanship and vice-chairmanship of
Niger and to the directorate of its many associated companies
with all attendant responsibilities that they were clothed with
the necessary and only powers of management and control
which they ever exercised or possessed.

The consequences flowing from all this are important. As
will appear later, these were never fully appreciated at the
trial, and the resultant confusion is only now clearly revealed
before your Lordships' House. Although Lord Leverhulme,
in one of his letters to Mr. Bell, did point out to him that
he would be responsible for his actions to the shareholders
of Niger, it is not plain that by them Lord Leverhulme meant
more than Lever Brothers, Ld., for it is sufficiently clear from
other indications that to his business mind " Levers' West
African interests," '' Levers' West African business," and
the Niger Company, Ld., were practically convertible terms,
notwithstanding the fact that the 4 per cent. outstanding
shares in Niger represented 23,750 shares of 1l. each held
by 300 shareholders, and that 5,500,000/. debenture stock of
that company was outstanding in the hands of the public.
And this view, natural enough perhaps to a layman of Lord
Leverhulme's realism, remained with less justification
persistent up to the close of the plaintiffs' case at the first
hearing of this action. Until then Levers were the only
plaintiffs, the theory still apparently being that Niger was so
subordinate to them that to a suit which in large measure
was for the vindication of its own proprietary rights it was not
even necessary to make it a party. The addition of Niger
as plaintiff made after the first hearing corrected, formally,
this misconception. But it never entirely disappeared.
Levers' West African interests, although there were none in

171

H. L. (E.)

1931
"
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh

172

H. L. (E.)

1931
—_—
BELL

v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1932]

question which were not the property of Niger, was a
description that survived even at your Lordships' Bar, while
the appellants both in the summing-up and in the questions
put to the jury were represented as servants, serving two
masters, Levers and Niger, a position as impossible to-day as
ever it was.

How serious in its present consequences that confusion
has proved will emerge in the sequel. At this stage it
suffices to observe that if regard is had, as is of course, to
the essential separation in personality between Levers and
Niger, to say nothing of their possible divergence in interest
from time to time, the relation in which the appellants
ultimately stood to these two companies respectively is not, as
I think, in any way doubtful. By Levers' agreements with
them, Levers were bound to maintain the appellants in their
respective offices in Niger for the prescribed term at the
prescribed remuneration. The appellants in return agreed
with Levers, but with Levers only, to devote the whole
of their business hours and abilities to the discharge
of their assigned duties. As between the appellants
and Niger it was in that company's articles of association
that their terms of service were to be found: Swabey v.
Port Darwin Gold Mining Co.(1), and it was by the general
law as modified by any provisions of these articles that their
responsibilities and liabilities to Niger in respect of any
actions of their own would fall to be ascertained: Costa
Rica Ry. Co. v. Forwood. (2)

As a result there remained no contract by the appellants
to serve Levers in a post from which Levers could " dismiss "'
them. Nor is "dismissal" the term by which their expul-
sion from office by, or their cessation of office in, Niger would
properly be described. So far as Levers were concerned
they were as the result of their agreement bound to maintain
the appellants in office so long only as they fulfilled their
prescribed duties as officers of Niger, devoting the whole
of their business hours to the discharge of these duties. So
soon as they defaulted in these respects Levers would be

(1) (1889) 1 Meg. 385. (2) [1901] 1 Ch. 746, 757.

a
é
7
&
q
:
b

A. C. AND PRIVY COUNCIL.

justified in stopping any further payments to them, and
would be relieved from the obligation of further maintaining
them in their offices. But that would be all. For results
more drastic Levers had to rely only on their voting power
as shareholders of Niger. And, so far as Niger was concerned,
its powers, never powers of " dismissal,' were in no way
dependent upon any breach of duty by the appellants. The
Niger shareholders as such could at any time effectively
remove the appellants by special resolution (see art. 46 (2.)),
even if, in the discharge of every duty they owed to that
company, their actions had been beyond reproach or even
criticism.

And now to resume the narrative. From July, 1925, the
appellants' remuneration fixed by their agreements with
Levers was paid to them by Niger direct, and such was the
success of their management that the unsatisfactory position
of Niger to which they had succeeded in 1923 was transformed
into a state of great prosperity. "' Every one agrees," said
Wright J., speaking of the appellants in his summing-up of
the case to the jury at the trial, " that their conduct and their
work for their company [was] most efficient, devoted,
strenuous and successful."

And here reference must be made to a matter which, although
only incidental, will be found finally to colour the whole
case of the appellants. On the coast, during the appellants'
management of Niger, there were three other concerns
trading in cocoa—the African and Eastern Trade Corporation,
Ld., the Anglo-Guinea Produce Company, Ld., and Frame &
Co., Ld. In 1925 and 1926 two agreements were come to
between these four companies. They are referred to in the

proceedings as the pool agreements, and they were entered.

into for the purpose of protecting the trade of the companies
in buying and selling cocoa. By them provision was made
for fixing by a committee a pool buying price and a pool
selling price of cocoa, and each company was required
timeously to notify to the others and to the pool committee
the quantities and prices of cocoa purchased or sold by it,
while, for subsequent division amongst the four constituents

173

H. L. (E.)
1931

—

BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

174 HOUSE OF LORDS [1932]

H.L.(E.) according to prescribed percentages, payment was to be made,
1931 'first of a "' pool tax" on all purchases of cocoa by each of
Bri them, and secondly, of any excess sum over a prescribed
Lever 2#mount received on sales by any of them. It is not how-

i ever, the precise terms of these agreements which are now
— directly relevant: their immediate bearing upon the case

Blanesburgh. arises from a clause contained in each agreement which

seeks to associate the directors of every constituent company
in the obligations thereby undertaken by that company.
The clause in the earlier pool agreement is not a little confused.
The clause in the later agreement is, however, free from
ambiguity. It is the clause immediately relevant and it
provides that 'any reference to any company party
thereto shall, where the context so admits, include its
directors for the time being . . . . and that each party under-
takes that its directors . . . . shall be bound by the terms
of the agreement, so far as respects their respective dealings
in cocoa (if any), and that all such dealings shall for all
purposes be deemed to be acts of such party thereto done
under the terms of the agreement and to be accounted for
accordingly."

These pool agreements were, of course, well known to the
appellants. Indeed, they were the result of negotiations in
which one or both of them took part. The first agreement
was signed on behalf of Niger by Mr. Snelling ; the second by
Mr. Bell. Mr. Snelling was a member of the pool committee,
and from time to time attended its meetings. But both
appellants said quite definitely and positively that actual
knowledge of the existence of what may be called the
directors' clause they never had, and that until shortly before
the institution of this action and some months after the
execution of the agreements of settlement they had no idea
that, as a result of any operations of their own, Niger could
be involved in any liability whatever to the pool. And I can
myself have no doubt that the jury accepted as reliable the
evidence of the appellants on this point. It is clear from the
answers given by them to the series of questions addressed to
them by the learned judge at the trial that they regarded the

A.C. . AND PRIVY COUNCIL.

appellants as witnesses of truth. A perusal of the record
shows how invariably the jury in these answers had accepted
the appellants' recollection when it was in conflict with that
of other witnesses. On this present point there was no
conflict. From its very nature it was a subject upon which
the appellants alone could depose. And their statements are
not difficult of acceptance when the agreements themselves and
the situation therein of the clauses in question are examined.

And the acceptance of this statement made by both
appellants becomes of importance at different stages in the case,
and not least when your Lordships approach, as now you must,
the task of ascertaining precisely the nature and implications
of the transactions of the appellants by which the payments
setting aside the agreements of settlement are sought to be
justified. It will be convenient to refer to these as the
offending transactions. Four in number, they all took
place in the short interval between November 4, 1927,
and December 14 following. They were transactions in
cocoa differences on the appellants' own behalf. They were
carried through on the market by Niger's usual brokers on
the instructions of the appellants or one of them and, as the
jury must clearly be taken to have found, to the knowledge
of these brokers that they were the appellants' own trans-
actions. Three of them were more or less unprofitable. One
only was successful, and the net result of the four was a profit
of 13607. In January, 1928, the transactions were closed
and the profit was received from the brokers. And that
was the end. Nothing else of the kind happened before or
afterwards. None of the transactions in fact caused any
damage to Niger, still less to Levers. No use was made by
the appellants in the course of them, either of Niger's property,
or of any information obtained by them as directors of Niger.
Such must be the description of the offending transactions
according to the findings of the jury who, on this subject
also, clearly accepted the evidence of the appellants as the
evidence of truth.

To this description, however, two things must be added.
The first, that these transactions, although the appellants

175

H. L. (E.)

1931
"—~
BELL
v.
LEVER
BROTHERS,
Lp.
Lord
Blanesburgh.

Vv.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1932]

were ignorant of the fact, involved a breach of the directors'
clause of the pool agreement for which—if these agreements
were not invalid as being in restraint of trade—Niger might
be made responsible to the other companies parties thereto.

And the second, that, although in the end regarded by the
jury in the light most favourable to the appellants, these
transactions remained at the best ill-advised. They had
to be executed secretly, and to be described by separate
letters lest in the market they should be supposed to be the
transactions of Niger. And they were so conducted that
they might not be generally known in the office of Niger
itself. Such a procedure when it is discovered inevitably
arouses suspicion. No transaction of a director open to
the least suggestion of association with his company can
ever hope to escape censure or even condemnation if it
has been carried out in secret. In this instance once again,
as so often before, it was the secrecy from Levers practised
by the appellants that brought down upon them the charges
of dishonesty from which they have only succeeded in escaping
after a sixteen days' hearing before a judge and jury.

For, of course, the allegations put forward by the respondents
with reference to these transactions made of them something
very different from the same transactions as found by the
jury. Most grave were the charges of fraud levelled against
the appellants in respect of them. That, however, is another
story which will find its place at a later stage of the narrative.

As has been said, the cocoa business of Niger was little
more than a fraction of its total activities, and in amount
the offending transactions were as small a fraction of Niger's
current cocoa business. To these considerations, coupled with
the view of them taken by the jury, may be attributable
the conclusion also found that these transactions did not
even remain in the minds of the appellants when the agree-
ments of settlement were being made. They were, it must
be emphasized, not known in any way to Levers until after
these agreements had been completed.

The actual retirement of the appellants from the Niger
service had no connection with the offending transactions.

a —<——. —

— ee

ee a ee

A. C. AND PRIVY COUNCIL.

The necessity for it came about in quite a different way.
Niger's principal competitor on the coast had always been
the African and Eastern Trade Corporation already men-
tioned. Amalgamation of the two concerns had in the years
prior to 1929 been the subject of negotiation on a basis of
Niger having one-fourth or at best one-third interest in the
combine. But by 1929 the position of Niger had so greatly
. improved both absolutely and relatively that in that year
the amalgamation negotiations were revived on what has
been called a fifty-fifty basis. And it is apparent on the
record that the higher participation meant for Niger an
increase of many hundreds of thousands of pounds in money's
worth, the credit for which is not denied to the appellants.
The negotiations for this amalgamation were long and deli-
cate. Mr. Snelling was on the coast while they were
proceeding, but Mr. Bell rendered valuable services in bring-
ing them to a successful conclusion—services handsomely
acknowledged at the time by Mr. D'Arcy Cooper of Levers,
who explained to Mr. Bell that the way he had put his
personal position aside throughout the negotiation had re-
lieved him of a great deal of difficulty. (Record p. 383.)
What Mr. Cooper meant was that Mr. Bell had not stood out
for any position in the new company for himself, although
he knew full well that, if neither he nor Mr. Snelling were to
join that company, the scheme of amalgamation must
necessarily involve their retirement altogether from Niger.
For by the scheme the assets of both amalgamating com-
panies were with certain reservations to be transferred to
the new company, each of the old companies receiving in
return equal holdings of fully paid shares in that company.
And the transfer actually took effect on May 1, 1929; and
as from its completion Niger became a mere holding
company influencing by means of its voting power the policy
and administration of United Africa, Ld., the new company,
but with no outlet within its own constitution for the un-
divided energies of the appellants as its chairman and vice-
chairman, respectively. All this was realized while the
negotiations for amalgamation were still only in progress,
A. C. 1932. 3 N

177

H. L. (E.)
1931

eS
BELL
Vv.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh,

H. L. (E.)

1931
—~
BELL
v.
LEVER
BROTHERS,
Lo.

Lord
Blanesburgh.

HOUSE OF LORDS [1982]

and during that interval steps were taken by Mr. Cooper
acting on behalf of Levers to bring about, after everything
had been completed, the termination of the appellants' em-
ployment on some agreed terms of payment. And the
ensuing negotiation conducted with the appellants separately
resulted in the two agreements of settlement, both of which
have been set aside by the orders under appeal.

The agreement of settlement come to with Mr. Bell is
embodied in a letter from Mr. Cooper to him of March 19,
1929, in the following terms :—

" Dear Bell,—As promised at our interview to-day, I write
to record the agreement then arrived at between us, viz.,
that on the provisional agreement for the amalgamation
of the African and Eastern Trading Corporation and the Niger
Company becoming effective as from the Ist May next you
will on that date retire from the Boards of the Niger Company
and its subsidiaries, including H.C. B. and its subsidiaries,
and in consideration of your so doing Lever Brothers, Ld.,
will pay you as compensation for the termination of your
agreement(s) and the consequent loss of office the sum of
30,0001. in full satisfaction and discharge of all claims and
demands by you of every nature and kind and howsoever
arising against Lever Brothers, Ld., the Niger Company,
the H.C. B. and any company, person or firm associated
with them or any of them either directly or indirectly.

With regard to the insurance premium payable on the
policy on your life with the Yorkshire Insurance Company it
was agreed that Lever Brothers will continue to pay such
premium until the policy matures.

Will you please let me have your reply confirming the
above arrangement.

I should like to be allowed to say how deeply the Board
of Messrs. Lever Brothers appreciate the work that you
have done for the Niger Company during the period that
you have been in control.—Yours sincerely,

FF. D'Arcy Cooper."

The agreement of settlement come to with Mr. Snelling
was on lines similar to that reached with Mr. Bell.

A.C. AND PRIVY COUNCIL.

Mr. Cooper's letter to him of even date recording its terms is,
however, as interesting for its variations from that addressed
to Mr. Bell as it is for its similarity thereto. It is as

follows :—
"March 19, 1929.

" Dear Snelling,—As promised at our interview to-day, I
write to record the agreement then arrived at between us, viz.,
that on the provisional agreement for the amalgamation of
the African and Eastern Trade Corporation and the Niger
Company becoming effective as from Ist May next you
will on that date retire from the Boards of the Niger
Company and its subsidiaries including the H.C. B. and
its subsidiaries and in consideration of your so doing Lever
Brothers, Ld., will pay you the sum of 20,000/. in full satis-
faction and discharge of all claims and demands by you
under your agreement of employment or in any other capacity
whatsoever and whether in respect of salary, commission,
bonus, expenses, compensation for loss of office or otherwise.

Will you please let me have your reply confirming the
above arrangement.

I should like to be allowed to say how deeply the Board
appreciate the work that you have done for the Niger
Company during the period that you have been in control.
—Yours sincerely, F. D'Arcy Cooper."

In due course confirmatory letters were written and the
agreements were duly carried out. The appellants received
their remuneration and continued in active discharge of
their duties until April 30 following. They then formally
resigned all their directorships, as required by the agree-
ments, and received from Levers the compensation arranged.

My Lords, while it is fully accepted that the offending
transactions were entirely unknown to and unsuspected by
Mr. Cooper when the negotiations were proceeding, there was
a serious difference of recollection between Mr. Cooper and
Mr. Bell on the question whether Mr. Bell did not, in order
to justify a large payment to himself, expressly say in the
course of the negotiations that he had faithfully and honestly

served Niger during his association with that company.
3 N 2

179

H. L. (E.)

1931
ww
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh,

180

1: ig PROB)
1931

os
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1982]

Mr. Bell was certain that he made no such statement in any
such connection, and the jury it is clear accepted his recol-
lection and, as will be seen later, exonerated him from the
charge of fraudulent misrepresentation based upon the
allegation that the statement was his.

With regard to these agreements of settlement there is
one matter which may be conveniently dealt with while
the agreements themselves are immediately in view. It is
affirmed by the respondents, with reference to them, and the
acceptance of the allegation is implicit in the judgments
appealed from, that the sole consideration moving from
Levers for their agreement to pay Mr. Bell 30,000]. and
Mr. Snelling 20,000]. was the satisfaction of what Levers, still
in ignorance of the offending transactions, supposed were
their respective salary rights under enforceable agreements
of service with two years and two months of the term in
each case unexpired. The suggestion touches an issue of
primary importance in the final decision of this appeal. It
is, I think, demonstrably incorrect. Although it is true
that in the letter to Mr. Snelling commission is actually
mentioned, I do not find on an examination of the record
that the prospect of any commission being receivable by
either appellant was ever of substance, and I feel satisfied
that it in no way entered into the adjustment of figures.
On the basis of salary to be lost, therefore, the maximum
figure in prospect for Mr. Bell was 17,3331. 6s. 8d. and for
Mr. Snelling 13,000/. But these sums could not have been
recovered even in actions for wrongful dismissal, because
allowance must in each case have been made for the fact
that the whole sum was being immediately paid and for the
further fact that each appellant was being released from
his obligation of continued service and was being left free to
seek other remunerative employment. And this employment,
in the case of Mr. Snelling at all events—Mr. Bell, it seems,
proposed to return to his farm—was likely to be immediate
and on terms perhaps little less favourable than those
attached to the post of which he was being deprived.
Accordingly even these maxima must on this basis have been

A.C. AND PRIVY COUNCIL.

subject to serious reduction. Moreover that this sole con-
sideration did not instruct the amounts paid is confirmed
when it is found that these sums were not on that footing
proportionate (as seems erroneously to have been supposed
in the course of the trial. See Record, p. 437). If 20,0001.
was on this footing the sum claimable by Mr. Snelling,
26,6661. 13s. 4d. only should have been awarded to Mr. Bell.
If Mr. Bell's payment of 30,000/. was the standard,
Mr. Snelling should have received not 20,000/. but 22,500/.
And this line of reasoning might easily be further pursued,
with the result of making it, as I think, clear that, while
undoubtedly the claim for unearned salary amounting at the
remote outside in one case to over 17,0007. and in the other
to 13,000/. was a material consideration for the payments
agreed to, it was neither on the terms of either letter nor in
fact the sole inducing cause. Into that inducement there
undoubtedly entered the desire tangibly to recognize the
exceptional services rendered to Niger by each appellant
acknowledged in each letter and even now affirmed: still
more perhaps to enlist their support of the amalgamation
and to have their assistance in carrying it through in all its
details to completion : above all, to secure on May 1 following,
the voluntary resignation by each appellant of all his offices,
results of value, it may have been of infinite value, to the
prospects of a delicate negotiation in the success of which
millions of pounds were involved. And these last two results
could not have been secured if Levers, instead of writing
through Mr. Cooper the letters of March 19, 1929, had, with
the real offending transactions then disclosed to them,
repudiated all further obligations under their agreements
with the appellants, and as shareholders in Niger had sought,
in spite of the appellants' opposition—quite effective for a
sufficiently long period—to remove them from office. The
vital significance of this conclusion, even so far as it can be
reached on existing materials and apart from amplification
resulting from further investigation, will presently appear.
Some two months later, as a result of inquiries made of
the appellants with reference to certain cocoa transactions

181

H. L. (E.)
1931

——
BELL
v.
LEVER

BROTHERS,

Lp.

Lord
Blanesburgh,

i
Blanesburgh.

HOUSE OF LORDS [1932]

of Niger, of which complaint in arbitration proceedings was
being made by other members of the pool, the offending.
transactions were brought back to the minds of the appellants,
and for the first time, as they asserted, they became aware
of the directors' clause in the pool agreements. Mr. Bell
thereupon informed Mr. Cooper of the facts relating to the
offending transactions in terms which in effect were those
ultimately found by the jury as above stated. There was
immense controversy at the trial as to the details of this
conversation with Mr. Cooper, but it does not seem necessary
to go more deeply into that matter now, for Levers did not
and would not accept from Mr. Bell any innocent explanation
of transactions, in their view highly improper, which until
that moment had been completely concealed from them.
And on August 7, 1929, they issued their writ in this action
with themselves alone as plaintiffs, and the appellants as
defendants. The allegations made by the points of claim
were to the effect that the appellants were the servants of
Levers; that it was their duty to serve Levers faithfully
and honestly and not to act in any way prejudicial to the
interests of Levers ; that the offending transactions constituted
such misconduct on the part of the appellants as to entitle
Levers instantly to terminate the service agreements with
them and to dismiss them without notice, and that had
Levers known of the offending transactions they would have
in fact dismissed the appellants; alternatively it was alleged
that the appellants had wrongfully conspired to make secret
profits for themselves and that. the agreements of settlement
were obtained by them respectively, "falsely and fraudulently
concealing from [Levers] that they and each of them had
[entered into the offending transactions] and also by
falsely and fraudulently verbally representing to [Levers]
that they had faithfully and honestly served Levers and/or
Niger."

Para. 26 of the points of claim was as follows: ' Alterna-
tively the said agreements (i.e., the agreements of settlement)
and each of them were made and the moneys paid thereunder
were paid under a mistake of fact."

A. C.. AND PRIVY COUNCIL.

Particulars being asked for of the " mistake," it was stated
to be "that the defendants and each of them had acted
honestly in their conduct of the affairs of the Niger Co., Ld.,
and had not dealt in cocoa on their own account and/or in
so dealing on their own account had not acted contrary to
their duty and/or the terms of their respective contracts."

The relief claimed was damages for conspiracy and/or
fraudulent concealment, breach of duty and breach of
contract ; rescission of the agreements of settlement; an
account of all transactions and dealings in cocoa entered into
by the appellants, and payment by them of the amounts
found due on the taking of such account.

Objections on the lines which I have already indicated
might very effectively have been taken to the whole scheme
of the action and, in particular, to the relief claimed by
Levers for themselves in respect of the offending transactions
in a suit to which Niger was not even a party. But none
such were in terms taken. Indeed, from the moment when
the directors' clause of the pooling agreement was brought to
the notice of the appellants, they refrained from any justifica-
tion of the offending transactions as such and were ready
to account for all the profit they had made by them. "Tf I
had known that [the directors' clause] existed I would not
have defended even at the time any of the transactions that
I did,' was one of Mr. Snelling's answers in cross-examina-
tion ; and in accord with this attitude the 1360/. profit from
these transactions had in January, 1930, been duly tendered
to Niger by the appellants, and had been refused.

The action as so framed came on for trial before Wright J.
and a special jury on March 26, 1930, and it was opened and
evidence was called to prove a case of fraudulent misrepre-
sentation and concealment only. Nothing at all was said
about such things as mistake, or duty to disclose or fiduciary
relation or uberrima fides. On the fourth day of the hearing
Levers closed their evidence, and, following, as they stated,
information derived from an examination of the brokers'
books, they applied for leave to amend their points of claim in
order to raise against the appellants further charges of fraud,

183

Hi EES

1931
—-
BELL
V.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh,

184 HOUSE OF LORDS [1982]

H.L.(E.) the nature of which they foreshadowed. The trial had
1931 become one of wide public interest, and so soon as these
Ber new charges—all of them of the gravest description—were
Lever Stated in open Court, the appellants, in the interests of their

oil ee own reputations felt, as they said, that they must be met.
ae Accordingly with no discussion except as to terms, leave to

Bianesburgh.~ amend, on stringent conditions, was given to Levers and
the hearing, on the amended pleadings, was adjourned until
May 18, to be then heard by the learned judge with a new
jury. During the interval the opportunity was taken to
add Niger as a co-plaintiff, with the appropriation to Niger
of the relief appertaining to the offending transactions. It
was apparently taken for granted when Niger was so added
that its rights in the matter had not as a part of its under-
taking passed to United Africa on the amalgamation. Per-
haps they did not. Niger's title to sue has not been challenged
any more than has Levers'; although if Levers did, quite
justifiably, charge against Niger the compensation paid under
the agreements of settlement, as they were charging against
Niger the remuneration of the appellants represented by a
part of it, even the right to claim rescission of the agreements
of settlement may also have passed to United Africa as part
of Niger's undertaking. But this objection has not been
taken. Levers, who made the compensation payments in
the first instance, may have been content as between
themselves and Niger to bear them finally, and for other
reasons there may be nothing in the point. Accordingly I

~ pass on.

A perusal of the other voluminous amendments shows
that the sting of them lay in the new allegation that the
offending transactions were all of them in their origin the
transactions of Niger itself, subsequently appropriated to
themselves by the appellants through the innocent agency
of the company's brokers after it had become clear to the
appellants that the transactions would be profitable.
Para. 26 of the original points of claim remain unaltered.
And still no case of duty to disclose or of fiduciary relation
or of uberrima fides was made by the amended pleading.

A. C.: AND PRIVY COUNCIL.

My Lords, the respondents took upon themselves a very
grave responsibility in launching at that stage against men
who in all other respects had deserved well of them these
charges so grave as to be almost criminal in character. I
do not doubt that the respondents acted in good faith in
making them. But, although persisted in to the end of the
long hearing, the charges entirely failed, and the appellants
are entitled at the least to have that failure remembered on any
application by the respondents for further indulgence in this
action whether by way of amendment of pleadings or otherwise.

The matters dealt with in the evidence will in the main
be found reproduced in the questions left by the learned
judge to the jury at its close. To these questions reference
has already been made. With the answers given by the
jury to each, I now record them :—

1. Did the defendant Bell and/or the defendant Snelling
fraudulently misrepresent to the plaintiffs Levers that they
had faithfully and honestly served Levers and/or Niger with
the object and effect of inducing Levers to make the agree-
ments or either of them of March 19, 1929 ?

Jury's answer: No.

2. Did the defendant Bell and/or the defendant Snelling
fraudulently conceal from Levers and/or Niger that they or
either of them had had the dealings complained of with the
object and effect of inducing Levers to make such agreements
or either of them ?

Jury's answer: No.

3. Did the defendants or either of them commit breaches
of contract or duty towards the plaintiffs in :

(a) wrongfully appropriating as their own the contracts
referred to as C.T.C., R.T.D., G.S.2 [the " offending
transactions "'] or any of them being contracts of the Niger
Company and appropriating to themselves the profits on
such contracts ?

Jury's answer: No.

(6) entering into the contracts referred to as C. T.C.,
R. T. D. and G. 8. 2 or any of them as private transactions
on their own account and for their own benefit ?

185

H. L. (E.)
1931

eee
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1932]

Jury's answer: Yes.

(c) in wrongfully appropriating to their own use and benefit:
the sum of 1000/., being moneys of the Niger Company ?

Jury's answer: No.

(d) If so, what damages, if any, under (a) or (0) or (c) ?

Jury's answer: (b) 1360/. 5/. nominal damages.

4. (a) Were the plaintiffs Levers entitled to terminate the

contract of service with the defendants or either of them :
(1.) in January, 1928 ?
Jury's answer: Yes.
and (2.) in March, 1929 ?
Jury's answer: Yes.

If so, would the plaintiffs Levers have elected to exercise
such right at either of such dates ?

Jury's answer: Yes.

(b) Were the plaintiffs, the Niger Company, entitled to
dismiss the defendants or either of them from their positions
as chairman and vice-chairman respectively :

(1.) in January, 1928 ?
Jury's answer: Yes.
(2.) in March, 1929 ?
Jury's answer: Yes.

If so, would the plaintiffs, the Niger Company, have elected
to exercise such right at either of such dates ?

Jury's answer: Yes.

5. When Levers entered into the agreements of March 19,
1929, did they know of the actings of either of the defendants.
in regard to the dealings C. T.C., R. T. D., G.S. 2?

Jury's answer: No.

If Levers had so known would they have made these
agreements or either of them ?

Jury's answer: No.

At the date of the respective interviews prior to these
agreements, had the defendant Bell or the defendant Snelling
in mind their actings in respect of these transactions 2

Jury's answer: No.

Now, if these questions are carefully scrutinized it will be
found that they are based on an acceptance by the learned

A. C.. AND PRIVY COUNCIL.

judge of Levers' view as to the legal position of the parties
towards each other under the service agreements. The
undue prominence thus conceded to Levers served further
to divert attention from the true position, never at any
time accentuated, that the claims against the appellants
in relation to the offending transactions were claims
of Niger only, and that the validity and extent of
these claims depended mainly if not exclusively upon the
regulations of Niger. It is remarkable that so far as appears
on the record these regulations were only once mentioned—
and then in the most casual way—during the whole of the
proceedings. In the summing-up they were never referred
to at all. It will be noted also that no question was asked
upon the issue of conspiracy—that because the learned judge
held that there was no evidence to support it. Lastly, with
regard to the allegation that the appellants had in carrying
out the offending transactions used the property of Niger or
utilized information obtained by them as its directors, the
question 3 (c) was directed to the one matter relevant
thereto, which, as a result of the evidence, remained in doubt,
and in respect of that remaining matter also, the jury, as will
be seen, exonerated the appellants.

The fifth of the questions was drawn up by the learned
judge, after counsel had addressed the jury, but before the
summing-up. It was in the Court of Appeal suggested that
the question was directed to an issue of mutual mistake,
and that the appellants' counsel should have thus regarded
it. I confess that I cannot blame him if he did not. Put
at the end of a long hearing dealing only with grave charges
of fraud and in the course of which no such issue had been
even remotely hinted at, I should myself have thought, as
I gather the appellants' counsel did think, that it was directed
to the issue of fraudulent concealment, an issue which had
throughout bulked prominently in the proceedings.

It was agreed that the learned judge was to be entitled to
draw- necessary inferences of fact upon any question that
might arise which had not been put to the jury, and in the
discission upon the findings and the pleaded case which

187

H. L. (£.)
1931
"——
BELL

v.
LEVER

BROTHERS,

Lp.

ord
Blanesburgh,

188 HOUSE OF LORDS [19382]

H.L.(E.) took place on a later day, counsel for the respondents, after
1931 claiming that Levers were entitled to rescission of the agree-
Bert ments of settlement on the ground of unilateral mistake,
Lever ended by propounding the view that they were so entitled

ieee also on the ground of mutual mistake, that issue as they
aaa contended having been raised by para. 26 of the points of

Blanesburzh. claim, and found in their favour by the jury in their answers

to questions 4 (a) and 5. The learned judge, after argument,
and holding, as it seems, that the issue was sufficiently raised
by para. 26—for he had previously intimated (Record, p. 1437)
that he would allow no question to be put to the jury which
involved any amendment of the pleadings—finally held that
the agreements of settlement must be set aside on the ground
of mutual mistake, and he ordered the moneys paid there-
under, including the premiums on Mr. Bell's policy paid by
Levers on his behalf, to be repaid. The learned judge held
that all the parties to the agreements of settlement entered
into them under the common mistake that the contracts of
service were binding, in the sense that they could not at
that moment have been got rid of without the appellants'
consent.

It is, I believe, the view of all your Lordships that the
order of the learned judge in so far as it directed the repay-
ment by Mr. Bell of the premiums referred to cannot stand.
Wright J. overlooked the fact that, even with the agreements
for settlement set aside, the liability for payment of these
premiums would still remain on Levers under the original
agreement of 1923 because, apart from Mr. Bell's agreement
in that behalf in the rescinded agreement of settlement,
there had been no termination of his engagement by himself.
This point was discussed at your Lordships' Bar, and the
respondents offered no objection to its being taken into
consideration by the House. Accordingly, in that respect at

Ps least, the order of the learned judge must now be corrected.

: But that is relatively a small matter. The greater questions

involved remain.

The appellants appealed to the Court of Appeal. On

November 17, 1930, their appeal was dismissed. The Lords

A. C. AND PRIVY COUNCIL.

Justices took the same view on mutual mistake as the learned
judge had done. They also took the point and held that,
although in no way pleaded, his judgment could be sup-
ported on the ground that the appellants during the negotia-
tion with Levers for the agreements for settlement were
under a duty to disclose their offending transactions of fifteen
months before; and that they were not excused from dis-
closure by reason of the fact that, as the jury had found,
these transactions had passed from their minds. Upon the
question of amendment Scrutton and Lawrence L.JJ. were
of opinion that the issue of mutual mistake had not been
pleaded, but, differing in that respect from the learned judge's
view, which seems to have been overlooked, they saw no
sufficient reason why the pleadings should not be treated as
amended so that the issue might be decided on existing
materials. In Lawrence L.J.'s view, the objection of the
appellants' counsel to that course being taken was
"technical '' and "devoid of merit." Greer L.J. held that
the issue of mutual mistake was sufficiently raised by para. 26
of the points of claim.

From this the appellants appeal again to your Lordships'
House, and upon that appeal, and for the purpose, as I
assume, of obtaining a decision upon any issue open upon the
pleadings, both parties accepted the jury's findings as correct.
Upon this three questions at once arise: (1.) Is this issue of
mutual mistake open to the respondents upon the pleadings ;
(2.) if not, is this action one in which without injustice to
the appellants the necessary amendments to raise it could
after verdict and on the application of the respondents have
been allowed by the learned judge? May these even now
on a like application be allowed by this House; and (3.) if
such amendments be allowed, are the respondents entitled
to judgment upon the issue raised by them? I propose to
deal with each of these questions in their order, I regard
them as being in this case of the first importance, and
I have been careful in what has preceded to state
with particularity facts germane to _ their proper
consideration.

189

H. L. (E.)

1931
"aS
BELL
Vv.
LEVER
BROTHERS,
Lp.

—

or
Blanesburgh,

190

H. L. (E.)

BROTHERS,
Lp.

Lord
Blanesburgh,

HOUSE OF LORDS [1932]

As to the first of them, I believe that all of your Lordships
are of opinion that this case of mistake is not open to the
respondents on the pleadings as they stand. I think no
other view is tenable. In its setting, as well as according to
its terms, para. 26 to me seems quite unambiguous. The case
pleaded by the respondents was on the face of it and from
beginning to end a case of deliberate fraud on the part of the
appellants. The points of claim, at great risk to the
respondents in the matter of costs, were amended, only
that the fraud charged might be more flagrant in character.
Para. 26 remained unaltered. Even without the particulars
of the mistake alleged, I should not have thought that its
meaning or intent was doubtful. With the assistance of the
particulars its meaning becomes, I think, abundantly clear.

-That it is the state of mind of Levers which is alone being

therein described is, surely, shown by the fact that the
moneys are only alleged to have been " paid' under mistake.
There is no allegation at all that the moneys were " received "
under the same mistake. And the particulars appear to
me conclusively to show that no such allegation was intended
to be made. Further para. 26, if limited to unilateral mistake
induced by the appellants' fraud is, even although alternative,
consistent with all that precedes, but mutual mistake, inno-
cent on the part of the appellants, is so entirely destructive
of everything previously alleged against them that no inter-
pretation of para. 26 involving an assumption of honesty
on their part could, in the absence of the clearest words,
properly be placed upon it. Finally the claim made by the
heads of claim is for rescission of the agreements of settlement,
relief properly consequent upon a case of voidability either
for fraud or unilateral mistake induced by fraud. But if the
allegation, even alternative, was that the agreements were
entered into under mutual mistake of fact, then these agree-
ments were not voidable but void ab initio, and no order
on that footing is even hinted at in the relief sought. The
truth is that the respondents having decided to charge fraud
against the appellants did so up to the hilt. There is no
weakening in this respect in para. 26. Accordingly I am of

Be0:) - AND PRIVY COUNCIL.

opinion that the case on which the respondents have
succeeded in the Courts below was not open to them on the
pleadings as they stand. It is clear also, as I have said,
that so far as the learned judge was concerned he only enter-
tained that case because of his view, which all your Lordships
consider erroneous, that no amendment was called for.

This circumstance makes the second of the above ques-
tions of the gravest importance. Are your Lordships in the
Court of last resort to grant an amendment which the learned
trial judge himself would have refused? It is convenient
to set forth here the amendment which the respondents
formulated and asked for, if amendment was held to be
required.

It was as follows :—

"Para. 26(a): Further and in the alternative the said
agreements and each of them were made under a mutual
mistake of fact, and the moneys paid and received thereunder
were paid and received under a mistake of fact.

Particulars.

The plaintiffs Levers and the defendants and each of them
were under a mutual mistake fundamental to the said agree-
ments that the said contracts of service and each of them
existed as binding obligations upon the said plaintiffs and
the defendants respectively and that the said contracts
respectively could not be terminated without the assent of
the defendants respectively.

Further or in the alternative the plaintiffs Levers will
rely upon the particulars set out under para. 26 hereof."

Now there are, of course, no limits to the power of your
Lordships' House to permit, in proper circumstances, almost
any amendment. Nevertheless, the power is not one for
arbitrary exercise, and I propose in dealing with the pro-
priety or otherwise of its exercise now to govern myself by
two authoritative statements of relevant principle, one by
Lord Watson and the other by Sir Herbert Cozens-Hardy M.R.
My first and second reasons for concluding that leave
to amend should in this case be refused are based upon

191

H. L. (E.)

1931
—
BELL
v.
LEVER
BROTHERS,
Lp.

—

Lord
Blanesburgh.

192

H. L. (E.)

1931
——
BELL
v.
LEVER
BROTHERS,
Lp.

Lord

Blanesburgh.

HOUSE OF LORDS [1932]

Lord Watson's observations in the Connecticut Fire Insurance
Co. v. Kavanagh (1), where the respondent had complained
that the case which was being maintained against him before
the Judicial Committee was not within the appellants' declara-
tion: that the evidence led at the trial had not been directed
to that new case, which ought not to be entertained. Upon
that contention Lord Watson, delivering the judgment of
the Board, said: '' When a question of law is raised for the
first time in a Court of last resort, upon the construction of a
document, or upon facts either admitted or proved beyond
controversy, it is not only competent but expedient, in the
interests of justice, to entertain the plea. The expediency
of adopting that course may be doubted, when the plea
cannot be disposed of without deciding nice questions of
fact, in considering which the Court of ultimate review is
placed in a much less advantageous position than the Courts
below. But their Lordships have no hesitation in holding that
the course ought not, in any case, to be followed unless the
Court is satisfied that the evidence upon which they are asked
to decide establishes beyond doubt that the facts, if fully
investigated, would have supported the new plea. To accept
the proof adduced by a defendant in order to clear himself
of a charge of fraud as representing all the evidence which
he could have brought forward in order to rebut a charge
of eeu might be attended with the risk of sme
injustice."

Except that in that instance the new case was one of
negligence, whereas here the new case is one of innocent
mistake, Lord Watson's observations seem to me to be
entirely in point, and I base myself upon them as I proceed.

And my first reason for the conclusion that this amend-
ment should not be allowed is this. It raises, as something
quite new, and in an action hitherto based on fraud alone,
an issue with all fraud eliminated. If the amendment were
allowed, the appellants in the discussion of that new issue
would find themselves faced with and bound by the answers
of the jury to the fourth question. But, on examination of

(1) [1892] A. C. 473, 480.

A. C. AND PRIVY COUNCIL.

the learned judge's summing up, it appears, as I think, quite
clearly that these answers were given by the jury under a
direction which, although it might have been allowed to pass
as relatively harmless in a case based upon fraud, was one

193

H. L. (B.)

1931
"~~
BELL
v.
LEVER

which, as applied to a case from which all fraud has been BEoueaiae

eliminated, cannot in point of law, as I think, be supported.
It is not necessary to suggest—it may not be permissible
for me even to speculate upon—what, under a proper direc-
tion, as applied to the new case, the answers of the jury to
the question would, or should, have been. It is enough
for present purposes, to say, as I do, that to allow the
respondents to make this new case, with the appellants
bound to accept these answers to the fourth question as they
stand, would in my judgment expose them to a risk of injus-
tice from which they are entitled to claim protection.

The answers to that fourth question, of course, depend
upon what was the true nature of the liability of the
appellants to Niger resulting from the offending transactions
as found by the jury and as already described. Did these
transactions as thus ascertained involve on the part of the
appellants a breach of their duty to Niger so serious as on
their discovery by Levers fifteen months later to be sufficient
to justify an immediate disclaimer of all further responsi-
bility under the appellants' agreements of service? That
is the question.

My Lords, I have already given my reasons for the view
that in the fourth question the real relation between the
parties is not properly appreciated. All this, however, is
relatively unimportant here. Even the further direction of
the learned judge, to which I am now about to refer, might
have been allowed to pass, had the fraud referred to in ques-
tion 3 (c) been found instead of being negatived. For with
that fraud brought home to the appellants the action would
have really been undefended. But that charge, like all the
other charges of fraud, has disappeared, and the precise
character in legal responsibility of the offending transactions
stripped of fraud becomes of essential importance. And it
was, I venture to think, quite misunderstood. The point

A.C. 1932. 3 0)

or
Blanesburgh.

194

H. L. (E.)

1931
—_
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1932]

here to be noted is that these transactions involved no con-
tract or engagement in which, either for profit or loss, Niger
was at all concerned. The contracts were all contracts by
which the appellants alone were bound for their own benefit
or burden to some outside party exclusive of Niger altogether.
And this distinction is vital: because the liability of a
director in respect of profits made by him from a contract
in which his company also is concerned is one thing: his
liability, if any there be, in respect of his profits from a con-
tract in which the company has no interest at all is quite
another. In the first case, unless by the company's
regulations the director is permitted, subject to or without
conditions, to retain his profit, he must account for it to the
company. In the second case, the company has no concern
in his profit and cannot make him accountable for it unless ,
it appears—this is the essential qualification—that in earning
that profit he has made use either of the property of the
company or of some confidential information which has
come to him as a director of the company.

Now, unfortunately, the learned judge here, so far as his
observations had precision, directed the jury as if the
offending transactions were in the first class, and not, as was
the fact, in the second, and he gave his direction without
any reference at all to the regulations of Niger. The relevant
duties of a director were laid down by him in terms of the
following quotation which he read to the jury. Their
duties were: "So to act as to promote the best interests
of the company. No one having such duties to perform
can be allowed to enter into engagements in which he
has or can have a personal interest which conflicts or may
possibly conflict with the interests of those whom he
is bound to protect. No question is liable on such occasion
to be raised as to the fairness or unfairness of the dealing. It
may be impossible to demonstrate how far the interest of
the company is affected. No inquiry on that subject is
permitted."

Now, the learned judge did not give the source of his
quotation, and I have not succeeded in tracing it. But

Ree. AND PRIVY COUNCIL. ; 195

both from its wording, and also from its close similarity to H. L. (E.)
Lord Cranworth's locus classicus on the subject printed in 1931
the headnote to Aberdeen Ry. Co. v. Blaikie Brothers (1), Burt
I can have little doubt that, like Lord Cranworth's statement, Luvnr
the quotation is concerned with a company's contracts in se
which, on the other side of the table, a director is interested, a
and with reference to which the company's regulations are Planesbursh
silent. The quotation is not addressed to a director's own
contracts with outsiders in which the company has no
financial interest at all.

The regulations of Niger are illuminating with reference to
both classes of contracts. Art. 47 concedes to its directors
in very wide terms, and subject to exceptionally easy
conditions, the privilege of being concerned in contracts with
the company. And the article also clearly contemplates that
a director may be a director of other companies and entitled
to his privileges as such.

And this brings me to the position of a director in relation
to contracts of the second class, with which we are here alone
concerned. The principle will be found in the case usually
cited in relation to it, although reported only in the Weekly
Notes, of London and Mashonaland Exploration Co. v.
New Mashonaland Exploration Co. (2), where it was held
that, it not appearing from the regulations of the company
that a director's services must be rendered to that company
and to no other company, he was at liberty to become a
director even of a rival company, and it not being established
that he was making to the second company any disclosure
of information obtained confidentially by him as a director _-
of the first company he could not at the instance of that
company be restrained in his rival directorate. What he
could do for a rival company, he could, of course, do for
himself. And in the present case that principle is not
affected by the agreements of each appellant with |
Levers to devote all his time during business hours
to the Niger service. There is no corresponding pro-
vision in the regulations of Niger, and it was not because

(1) (1854) 1 Macq. 461. (2) [1891] W. N. 165.
3 02

a

196

Petts (E.)

1931
—_
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1982]

the offending instructions were instructed during the day
and not in the evening that they are impugned. It was not
suggested that the appellants were in any way precluded by
virtue of their engagement from at any time entering into
private speculations of their own in outside things as, e.g.,
stocks and shares. Indeed any such suggestion was expressly
disclaimed by the respondents. Moreover, my Lords, the
respondents did endeavour to establish that in relation to
these transactions the appellants did make use of Niger's
property, and information and question 3 (c) is directed to
the only instance alleged which after the evidence remained
open, and it was answered inthenegative. Accordingly I reach

the conclusion that, so far, the appellants in relation to the |
offending transactions were under no liability whatever to Niger. —

But all this is apart from the pool agreement. There
remains the question of the liability of the appellants to
Niger by reason of the directors' clause in that agreement,

and as to this, the appellants, in my judgment, were quite |
right in recognizing so soon as that clause was brought to |
their notice that they should not retain the profit they had —

made from these transactions.

From all this it follows that instead of the direction to the
jury on this matter being what it was, that direction, on the
supposition that the facts would be found as they have been,

should, I think, have been to the effect that in the absence of |

any proof that the appellants in carrying out the offending

transactions had utilized for their own purposes any property |

. of Niger or any confidential information obtained by them
as its directors, they were not, apart from the pool agreement,

under liability to account in respect of these offending

—

transactions to Niger, or to Levers, or at all. It was the

directors' clause in the pool agreement alone which left the
appellants under any liability in the matter, and it must be
taken that the existence of that clause was unknown to them
until some months after the agreements of settlement, and
many months after the offending transactions. Nor should
the renunciation of their profit by the appellants after
knowledge of the clause be overlooked in the consideration

nial Aovoeu

A. G. AND PRIVY COUNCIL.

of the question whether the offending transactions of the
appellants would have justified more than a year after the
event a repudiation by Levers of further liability under
the contracts of service.

Upon the actual direction given it is not surprising that
the jury found in reply to question 4 (a) that Levers, and
in answer to 4(b) that Niger, were respectively entitled
to terminate the appellants' contracts of service not
only in January, 1928, but also in March, 1929. What would
be the answer to the proper questions of a jury directed on
the lines just indicated ? I give no answer, save this, that
it would in my judgment be unjust to the appellants to expose
them to the hazard of this amendment bound by the answers
to question 4 as they stand, for it cannot be affirmed that
- under a proper direction, applicable to the facts as found,
that answer would be forthcoming. And it will not be
forgotten that in its absence the whole issue of mutual mistake
remains, as an issue, stillborn. Such, then, is my first reason
for disallowing this amendment.

My second reason is that the appellants have not had the
opportunity of showing by evidence the extent to which
Levers received consideration for the settlement agreements
over and above their release from liability for the further
payments for which, on the hypothesis, it was by all parties
assumed that they remained liable. The mistake must go
to the whole consideration. I have already indicated the
general nature of the further advantages derived by Levers
from the settlement agreements, as these appear on the record,
but this aspect of the case has not been developed in evidence,
because in the action as fought it was not either relevant or
necessary so to do. It may be, indeed I am far from saying
that, even on the existing record, the appellants have not
sufficient evidence on this point to displace the new plea
altogether. But here again it would, I think, be unfair to
leave them exposed to the hazard of the amendment with
that answer to it quite undeveloped.

My third reason for disallowing the amendment is aed
on the principle enunciated by Cozens-Hardy M.R., which

197

H, LJ (E.)

1931
—_~~
BELL
v~.
LEVER
BROTHERS,
Lp.

ee

Lord
Blanesburgh.

198

H. L. (E.)

1931
~
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1982]

I have already foreshadowed. It would be wrong, the
Master of the Rolls said, in Nocton v. Ashburton (1), " to allow
a case based solely on serious charges of fraud to be turned
into a comparatively harmless case based" in that instance
also " upon negligence."" The qualification of his statement
made in this House, in the special circumstances of that
case, in no way questioned its essential soundness, and further
illustrations of its application will be found in Halsey v.
Brotherhood (2) and Noad v. Murrow. (3)

In my judgment the principle applies here with compelling
force. The first amendment made by the respondents charg-
ing further frauds against the appellants with their failure
after a prolonged hearing to make any of them good, as I
think, furnishes, when the services of the appellants to Niger
are remembered, a convincing reason why this complete
change of front after all else has failed should not be per-
mitted to the respondents.

I cannot therefore hold with the view that the appellants'
objections to this amendment are either technical or destitute
of merit. On the contrary, the objections seem to me to be
fundamental, and in the interests of fairness in litigation it
is, I think, optim: exemplr, that in such a case as this they
should be sustained.

I am prepared, therefore, to allow this appeal on this head
solely on the ground that no case other than their pleaded
case is open to the respondents in this House, and mutual
mistake has not been pleaded.

But, my Lords, if, contrary to my own notions of the fitness
of things, the appellants, bound by the jury's answers to
question 4, were to be put at risk by having this question of
mutual mistake determined on an amended pleading upon
existing materials, I should not wish it to be supposed that
in my judgment the appellants would fail. On the
contrary, they would, I think, even so handicapped,
still succeed on that question. There I find myself in
entire accord with the conclusions of my noble and

(1) [1914] A. C. 932, 963. (2) (1880) 43 L. T. 366, 370.
(3) (1879) 40 L. T. 100.

A. C.. AND PRIVY COUNCIL.

learned friends Lord Atkin and Lord Thankerton, whose
judgments I have had the advantage of reading. I refrain
from adding to a deliverance already too long any further
observations on the case so regarded or any further reasons
in support of it. My noble friends begin where I am content
to end. But I follow them also to their goal.

But I would add a word on the second ground relied upon
by the Lords Justices in support of the learned judge's order—
namely, that it could be upheld for the reason that Levers'
unilateral mistake, which was certainly pleaded, resulted from
a neglect on the part of the appellants of their duty, when
negotiating the agreements of settlement, to disclose to
Levers their offending transactions—a duty which was
certainly not pleaded.

My Lords, I am in entire agreement with the answer given
to this suggestion by my two noble friends opposite made
on the assumption that Levers were the employers of the
appellants and that the "offence ' in their transactions had
only temporarily passed from their minds.

But if the true position be, as I have I believe shown, that
the appellants were not in any relevant sense the servants of
Levers and that the only reason why their transactions were
" offending "' was that they involved Niger in a breach of
the directors' clause of the pool agreement, of the existence
of which the appellants were not merely forgetful but were
in complete ignorance, what then, I would ask, remains of any
duty on their part to disclose? My Lords, in that view of
the situation the duty was I suggest plainly non-existent.

The action therefore, in my judgment, so far as it was
contested, entirely fails.

My Lords, I confess that I arrive without reluctance at
this conclusion of the whole matter. It appears to me to
accord with a sound view both of justice and of fairness.
I should have deemed it unfortunate if the appellants had
been left in enjoyment of the profit accruing from the offending
transactions and if they had not been required to pay the
nominal damage which the jury considered these transactions
occasioned to Niger. But that result has not followed. For

ee

199

HL. (B.)
1931

—
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

200

H. L. (E.)

1931
——
Bret
v.
LEVER
BROTHERS,
Lp.

Lord
Blanesburgh.

HOUSE OF LORDS [1932]

both the profit and the damage they remain accountable, as
is wholesome.

Further acceptance, however, by your Lordships' House of
the orders appealed from would have meant that, after the
complete failure of the grave charges of fraud preferred against
officials whose ability and services had brought to Niger
advantages of untold value, these officials, the appellants,
would have been left exposed to the same consequences as
if the charges had all been true. Speaking only for myself
I feel relieved to be able to take a view of equity and
procedure which shields the appellants from such a
consequence.

Nor is it to my mind unjust that, their profit accounted
for, the appellants should be left in possession by way of
return for their services of sums which, while they may seem
bountiful to minds disciplined in a school of progressive
austerity, would doubtless, by those engaged in great
business, be regarded as. no more than adequate to the
occasion.

In the result it will be right that the order of the Court
of Appeal should be discharged, with further consequential
directions which will be given later.

LorD WARRINGTON OF CLYFFE (read by LoRD THANKERTON).
My Lords, this is an appeal by the appellants, Ernest Hyslop
Bell and Walter Edward Snelling (the defendants in the
action), from a unanimous judgment of the Court of Appeal
(Scrutton, Lawrence and Greer L.JJ.) dated November 17,
1930, affirming a judgment of Wright J. (dated June 5, 1930),
pronounced upon the trial of the action before himself and
a special jury of the City of London. By that judgment
certain agreements made between the respondents (Lever
Brothers, Ld.) and the two appellants respectively were
declared void and were set aside, and the appellants respec-
tively were ordered to repay to the respondents (Lever
Brothers, Ld.) the sums of money paid to them thereunder.

The substantial question raised by the Appeal is whether
in point of law upon certain findings of the jury, and upon

A. C. AND PRIVY COUNCIL.

such inferences of fact as could properly be drawn from
those findings and the evidence, the two agreements were
liable to be set aside on the ground of mutual mistake of fact
affecting what is alleged by the respondents to be a funda-
mental assumption accepted on both sides as the basis on
which the agreements were made.

A minor point of procedure was raised and decided against
the appellants in both Courts—namely, whether having
regard to the pleadings and the conduct of the trial it was
open to the learned judge to decide the case on the point
referred to above.

' It is unnecessary for me to repeat the detailed statement
of the facts already made ; it is quite enough to give a short
summary of them in order to explain the conclusions at which
I have arrived.

In 1923 Lever Brothers, Ld., having very large interests
in the Niger Company, Ld. (the respondents of that name),
a company trading in cocoa and other produce on the West
Coast of Africa, were desirous of obtaining the services of
persons of experience and repute in the financial and com-
mercial world to undertake and improve in their interests
as shareholders the conduct of the affairs of the Niger
Company, and with this object approached the two
appellants. The result was. the making of a service agree-
ment with each of the appellants, that with the appellant
Bell being dated August 9, 1923, at a salary of 8000/1. per
annum, and that with the appellant Snelling being dated
October 9, 1923, at a salary of 60001. per annum. Mr. Bell's
agreement was for five years from October 1, and Mr.
Snelling's was for five years from November 1, 1923. Each
period was subsequently extended to five years from July 1,
1926. By each agreement the appellant concerned agreed
to serve the Lever Company and to devote the whole of his
time and attention during business hours to the business
of the Lever Company. The sphere of his service was so
far defined that in Mr. Bell's case he was to be appointed
and maintained as chairman of the Niger Company during
his service with the Lever Company. In Mr. Snelling's

201

H. L. (E.)

1931
ww
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Warrington
of Clyffe.

202

H. L. (E.)
1931
—_—

BELL
v.
LEVER
BROTHERS,
Lp.
Lord
Warrington
of Clyffe.

HOUSE OF LORDS [1932]

case no such specific agreement was made, but he as well as
Mr. Bell was appointed a director of the Niger Company,
and while Mr. Bell was appointed chairman of the Board,
Mr. Snelling was appointed a vice-chairman. Lach of them
thus undertook direct obligations towards the Niger Company
as well as those obligations towards the Lever Company
which resulted from his service agreement. The salary of
each was borne and paid by the Lever Company.

By two letters dated July 1, 1926, signed by Mr. D'Arcy
Cooper on behalf of the Lever Company, and addressed in
the one case to Mr. Bell and in the other to Mr. Snelling,
the then existing service agreements were varied, first by
extending the period of service as above mentioned, and
secondly by giving to each of the two gentlemen a commission
on the profits of the Niger Company as thereby defined in
addition to his salary, which continued as before.

It is not disputed that the services of the two appellants
in their several capacities were of great value to the Lever
Company and to the Niger Company.

Early in the year 1929 certain arrangements for the amalga-
mation of the Niger Company and another company called
the African and Eastern Trade Corporation were made, which
on their becoming effective on May 1 in that year would
involve the termination of the two service agreements before
the period fixed for their continuance—namely, July 1, 1981.

Under these circumstances Mr. D'Arcy Cooper entered
into negotiation with each of the two appellants for fixing
the amount of compensation to be paid to them respectively
for the premature termination of their employment by the
Lever Company. These resulted in the two agreements the
subject of this appeal.

By each of these agreements the appellant concerned
agreed that on May 1, 1929, he would retire from the Boards
of the Niger Company and its subsidiaries, and in considera-
tion of his so doing the Lever Company would pay him as
compensation for the termination of his agreement and the
consequent loss of office, in the case of Mr. Bell the sum
of 30,000/., and in that of Mr. Snelling 20,000/., in full

A. C.. AND PRIVY COUNCIL.

satisfaction and discharge of all claims and demands by
him of every nature and kind and howsoever arising against
the Lever Company, the Niger Company, and other com-
panies and persons therein mentioned. In Mr. Bell's case
provision was made for the continued payment by the Lever
Company of an insurance premium therein mentioned which
will be referred to later on.

These agreements were duly carried into effect by the
resignation by Mr. Bell and Mr. Snelling of their several
offices and by payment to them respectively of the agreed
compensation.

'I now come to the circumstances giving rise to the present
litigation.

Between November 4 and December 14, 1927, the two
appellants entered on their own behalf into certain specula-
tive transactions in cocoa referred to in the proceedings at
the trial as contracts C.T.C., R.T.D. and G.S. 2. These
transactions resulted in a net profit to the appellants of
13601. The fact that these transactions had taken place
was not disclosed to and was not known by any of the
directors or officials of either the Niger Company or the
Lever Company, except, of course, the appellants themselves,
until after the conclusion of the agreements now in question,
and the payment of the compensation payable thereunder.

In or about June, 1929, in the course of certain arbitration
proceedings, the particulars of which it is unnecessary to
state, the appellants, in answer to inquiries made on behalf
of the Niger Company, disclosed the transactions above
referred to and their result.

In answer to questions put to them by the learned judge
the jury found that the appellants committed breaches of
contract or duty towards the respondents by entering into
the contracts above referred to as private transactions of
their own and for their own benefit. The correctness of
this finding is not disputed.

The present action was commenced by the Lever Company
alone on August 9, 1929. By an amendment made on
April 2, 1930, the Niger Company were added as co-plaintifts.

203

H. L. (E.)
1931

BELL

Warrington
of Clyffe.

204

H. L. (E.)
1931

——
BELL
vw.
LEVER
BROTHERS,
Lp.
Lord
Warrington
of Clyffe.

HOUSE OF LORDS [19321

As ultimately submitted for decision the case of the
respondents contained charges of fraudulent misrepresenta-
tion and concealment by both appellants with the object
and effect of inducing the Lever Company to make the
agreements of March 19, 1929, charges of wrongfully appro-
priating as their own the contracts above mentioned being
as alleged contracts of the Niger Company, and appropriating
to themselves the profits on such contracts, and a charge
of appropriating to their own use and benefit 1000/., the
moneys of the Niger Company. All these charges were
negatived by the jury and their findings in this respect are
accepted.

The points of claim after the allegations of fraudulent mis-
representation and concealment above mentioned contained
the following clause: "26. Alternatively the said agreements
and each of them were made and the moneys paid thereunder
were paid under a mistake of fact," and the plaintiffs claimed
rescission of the two agreements of March 19, 1929, and
repayment of the moneys paid thereunder, and a declaration
that previously to the making of such agreements the
plaintifis were entitled to terminate the contracts of service
and to dismiss the defendants without notice by reason of
their alleged conduct.

The appellants admitted their liability to account to the
Niger Company for the 1360]. the profits on the transactions
above mentioned, and this sum was duly paid into Court.

Ultimately the case was decided against the appellants on
the alternative point above referred to, the mistake there
mentioned being treated as a mutual and not as a unilateral
mistake.

The questions material to the issue of mistake as put to
the jury and their answers thereto were as follows :—

3 (b). Did the defendants or either of them commit breaches
of contract or duty towards the plaintiffs in entering into
the contracts referred to as C. T.C., R. T. D., and G.S. 2 or
any of them as private transactions on their own account
and for their own benefit ?

Answer: Yes.

ASC; AND PRIVY COUNCIL.

4 (a). Were the plaintifis (Levers) entitled to determine the
contracts of service with the defendants or either of them ?

Answer: Yes.

(1.) In January, 1928.

Answer: Yes.

And (2.) in March, 1929. If so, would the plaintiffs
(Levers) have elected to exercise such right at either of such
dates ?

Answer: Yes.

(6) Similar questions and answers as to the position of
the Niger Company in reference to the offices therein held
by the defendants respectively.

5. When Levers entered into the agreements of March 19,
1929, did they know of the actings of either of the defendants
in regard to the dealings C.T.C., R.T. D., G.S. 2?

Answer: No.

If Levers had so known would they have made these
agreements or either of them ?

Answer: No.

At the date of the respective interviews prior to these
agreements had the defendant Bell or the defendant Snelling
in mind their actings in respect of these transactions ?

Answer: No.

The final question was put to the jury at the suggestion of
the learned judge, and obviously is only relevant to the issue
whether there was a mutual mistake. No objection to it
was taken on the part of the appellants. Moreover, it is
quite obvious that an argument founded on unilateral mistake
had not the slightest chance of success, and it must have been
clear to both parties that the learned judge was going to deal
with the case as one of mutual as distinguished from unilateral
mistake. I will assume for the present that either on the
pleadings as rightly understood, or on the manner in which
the case was conducted, or on the assumption that all the
evidence reasonably likely to be forthcoming on the point
was before the Court, the learned judge was entitled to deal
with the matter on the footing of mutual mistake, and will
consider the case of that footing.

205

H. L. (E.)
1931

—
BELL
v.
LEVER
BROTHERS,
Lp.
Lord
Warrington
of Clyffe.

206 HOUSE OF LORDS as [1932]
H. L. (E.) The learned judge thus describes the mistake invoked in
1931 this case as sufficient to justify a Court in saying that there

——

Bett | was no true consent—namely, "Some mistake or misappre-
Vv. ° . * :
Lever / hension as to some facts... . which by the common intention
BROTHERS) of the parties, whether expressed or more generally implied,

Lp.
ia | constitute the underlying assumption without which the
Wr olyte | parties would not have made the contract they did." That

fa mistake of this nature common to both parties is, if proved,

TF yas

nner

ye" » '"sufficient to render a contract void is, I think, established law.

I will refer to two cases only amongst several in which
the principle was acted on. The first is one at common
law—namely, Strickland v. Turner.(1) In that case a
contract for sale of an annuity, under which the purchase
money had been paid, was held to be void at law and the
money was ordered to be repaid, on its being discovered
that the person on whose life the annuity depended had
without the knowledge of either party died before the date
of the contract of sale. The parties were treated as having
intended to contract on the basis of something of value
actually existing, and as this proved not to have been the case
the contract failed to be binding.

The other case (Scott v. Coulson (2)) is an example of the
application of the same principle in a Court of equity. A
contract for the sale of a policy was set aside on its being
discovered that the assured was dead at its date, both parties
being in ignorance of that fact. I cite this case for the sake
of a passage in the judgment of Vaughan Williams L.J. He
says: "If we are to take it that it was common ground that,
at the date of the contract for the sale of this policy, both
the parties to the contract supposed the assured to be alive,
it is true that both parties entered into the contract on the
basis of a common affirmative belief that the assured was
alive ; but as it turned out that there was a common mistake,
the contract was one which cannot be enforced. This is so
at law; and the plaintiffs do not require to have recourse to
equity to rescind the contract, if the basis which both parties
recognized as the basis is not true."

(1) 7 Ex, 208. (2) [1903] 2 Ch. 249, 252.

Pl a AND PRIVY COUNCIL. 207

This principle, however, is confined to cases in which " the jH. L. (£.)
mistake is as to the substance of the whole consideration, | 1931
going, as it were, to the root of the matter '—(Kennedy v. " Bana
Panama, &c., Mail Co.(1)—and does not apply where the paver
mistake is only as to some point, a material point it may be, seat
and even one which may have been the actuating motive off =,
one of the parties, an error as to which does not affect the' veo
substance of the whole consideration. nae

Kennedy v. Panama, &c., Mail Co. (1) is a case in which it
was held that the error relied on did not affect the substance
of the consideration and the contract in question was
accordingly enforced. The contract was one to take shares
in a company. The prospectus on the faith of which the
plaintiff had applied for shares contained a representation °
made in good faith that the company had obtained a valuable
contract for the carriage of mails. The representation was
intended to, and did in fact, induce the plaintiff to apply for
shares. It was untrue, for, though at the time the application
for shares was made and accepted there were reasonable
grounds for expecting that such a contract would be obtained,
it was never in fact concluded. It is to be observed that the
error did not affect the shares themselves, the subject of the
contract impeached ; they were, notwithstanding the error,
the very thing about which the parties were contracting. All
that was affected were the prospects of the company earning
profits available for payment of dividends. Accordingly the
plaintiff's action brought for the purpose of setting aside the
contract and obtaining repayment of his subscription was
dismissed.

In Smith v. Hughes (2) the result was the same, but for a
different reason—namely, that there was no sufficient finding
that the mistake was mutual. It was alleged that the vendor
was intending to sell and the purchaser intending to buy
and believed he was buying old oats, whereas the actual parcel
of oats, the subject of the contract, consisted of new oats.

The purchasers' claim to be relieved of the contract failed,
because the learned judge at the trial did not point out the

(1) L. R. 2 Q. B. 580, 588. (2) L. R. 6 Q. B. 597.

208 HOUSE OF LORDS - [19382]

H.L. (E.) necessity of finding not only that the purchaser believed the
1931 oats were old but that he also believed that the vendor was
BELL selling them as old.
es This kind of difficulty does not arise in the present case. It

eS is in my opinion clear that each party believed that the
ca remunerative offices, compensation for the loss of which was

Wane the subject of the negotiations, were offices which could not
ag be determined except by the consent of the holder thereof,

and further believed that the other party was under the same
belief and was treating on that footing.

The real question, therefore, is whether the erroneous
assumption on the part of both parties to the agreements
that the service contracts were undeterminable except by

. agreement was of such a fundamental character as to con-

stitute an underlying assumption without which the parties
would not have made the contract they in fact made, or
whether it was only a common error as to a material element,
but one not going to the root of the matter and not affecting
the substance of the consideration. |

With the knowledge that I am differing from the majority
of your Lordships, I am unable to arrive at any conclusion
except that in this case the erroneous assumption was essential
to the contract which without it would not have been made.

It is true that the error was not one as to the terms of the
service agreements, but it was one which, having regard to
the matter on which the parties were negotiating—namely,
the terms on which the service agreements were to be prema-
turely determined and the compensation to be paid therefor, ,
was in my opinion as fundamental to the bargain as any
error one can imagine.

The compensation agreed to be paid was in each case the
amount of the full salary for the two years and a half unexpired
with the addition in Mr. Bell's case of 10,000]. and in
Mr. Snelling's of 50001. It is difficult to believe that the
jury were otherwise than correct in their answer to the second
branch of the group of questions numbered 5—namely, that
had Levers known of the actings of the appellants in regard
to the dealings in question they would not have made the

Asc.: AND PRIVY COUNCIL.

agreements now impeached or either of them. It is true
that such a finding is not in the strict sense one of fact, but
it is an inference which the jury were entitled to draw from
the evidence and from all the circumstances of the case, it
is one which the learned judge and the Court of Appeal have
also drawn, and, if I may say so with respect, it is one I should
draw myself. I also agree with the learned judge that
looking at the matter from the side of the appellants the
existence of an agreement giving them rights which could
only be compromised by compensation was in the same way
the root and basis of the cancellation agreements.

'In my opinion, therefore, assuming that the point was
open, the appeal on the main question ought to be dismissed.

As to the question whether the point was open I agree
that it is at least doubtful whether mutual mistake as to a
fundamental fact was sufficiently pleaded either in the
pleading itself or by the particulars subsequently given, but
I have no hesitation in coming to the same conclusion as that
arrived at by Scrutton and Lawrence L.JJ.—namely, that
having regard to the proceedings at the trial effect ought
not to be given to a technical objection such as that in question
—no further evidence was in my opinion needed or could
reasonably be expected to be forthcoming on the question,
and no substantial prejudice has been sustained by the
defendants.

But, while I think the appeal ought to be dismissed, there
is one point which appears to have been overlooked at the
trial and in reference to which in my judgment there should,
if the appeal were dismissed, be a variation in the order.

The service agreement with Mr. Bell provided that Lord
Leverhulme was to take out in the Atlas Assurance Company
and Lever Brothers to pay all premiums on an endowment
policy on Mr. Bell's life maturing at the age of sixty or
previous death for an amount which would provide 15001. per
annum or 16,200/. at his option. This policy was to belong
to him, the premiums being paid by Lever Brothers, not-
withstanding the termination of his engagement unless the
same should be terminated by him. The cancellation

A.C. 1932. 3 P

209

H. L. (E.)
1931

of Clyffe.

H. L. (E.)

of Clyffe.

HOUSE OF LORDS [1932]

agreement preserved this obligation on the part of Lever
Brothers, and if this is set aside the original agreement stands.
I cannot think that the conduct of Mr. Bell amounts to a
termination by him of the engagement within the meaning
of the provision above mentioned, and if the judgment
appealed from were to stand provision should be made for
the continued payment by Lever Brothers of the premiums,
and the repayment to Mr. Bell of any premiums paid by
him.

I have purposely avoided dealing with the question whether
the appellants were under an obligation as servants to disclose
to Lever Brothers their breaches of the service agreements.
In the view I take the question is immaterial. If such an
obligation existed it would merely afford a further ground
for the termination by Lever Brothers of the service agree-
ments, for which such breaches themselves afforded a sufficient
ground.

This case seems to me to raise a question as to the application
of certain doctrines of common law, and I have therefore
not thought it necessary to discuss or explain the special
doctrines and practice of Courts of equity in reference to the
rescission on the ground of mistake of contracts, conveyances
and assignments of property and so forth, or to the refusal
on the same ground to decree specific performance, though
I think, in accordance with such doctrines and practice, the
same result would follow.

Lorp Atkin. My Lords, this case involves a question
of much importance in the formation and dissolution of
contracts. The facts are not very complicated, though in
the course of eliciting them the legal proceedings have under-
gone vicissitudes which have made the task of determining
the issues more difficult than need be. In 1923 the Niger
Company, Ld., was controlled by Lever Brothers, Ld., whom
I shall call Levers, who held over 99 per cent. of its shares.
The Niger Company dealt in West African produce, including
cocoa, and at this time appears to have been making trading
losses. To restore the position Levers approached the

DARI tie) yee

ASC.- AND PRIVY COUNCIL.

211

appellant Bell, who had banking experience, and the H.L.(E.)

appellant Snelling, a chartered accountant, with a view
to their taking part in the management of the Niger
Company's affairs. In August, 1923, an agreement was

1931

inide

made between Levers and Bell, under which Bell entered mae

the service of Levers for a term of five years from
November 1, 1923, on the terms of letters of August 8, 1923,
which provided that Bell's salary was to be 80001. a year.
Levers were to pay the premiums on an endowment policy
maturing at the age of sixty for a sum of 16,200/. Levers
were to appoint and maintain Bell as chairman of the Niger
Company during his service. Bell was only to be responsible
to the Committee of Control of Lever Brothers and to the
shareholders of the Niger Company. In October an agree-
ment was made between Snelling and Levers whereby
Snelling was to be in the service of the company for five
years from October 1, 1923, on the terms of a letter of
September 12, which provided that Snelling was to serve
Levers in regard to its West African interests at a salary of
10,000/. per annum to March 31, 1925, and 6000/. for the
remainder of the five years. On September 14 both Bell
and Snelling were appointed by the Niger Company directors
of the company, and Bell was appointed chairman of the
Board. In April, .1924, Snelling was appointed a vice-
chairman. The result of the appointments was a success.
The Niger Company began to prosper and in July, 1926,
the agreements of both Bell and Snelling with Levers were
cancelled and new agreements substituted for a further
period of five years from July 1, 1926, at the same salaries
but with a commission on the profits of the Niger Company.
The Niger Company continued to prosper, and in March,
1929, arrangements were concluded for an amalgamation
between the Niger Company and its principal trade com-
petitor, the African and Eastern Trade Corporation. The
terms of the amalgamation appear to have left no room for
Bell or Snelling. It was necessary, therefore, to dispose of
the agreements between them and Levers. Mr. D'Arcy

Cooper, the chairman of Levers, saw both gentlemen and
3 Peo

Lord Atkin,

212

HOUSE OF LORDS [1982]

H.L.(E.) arranged_terms with them which are recorded in two letters

1931
S
BELL

v.
LEVER

BROTHERS,

Lp.

Lord Atkin.

of March 19, 1929. The letter to Bell is as follows: [His
Lordship read the letter set out in Lord Blanesburgh's
opinion at p. 178.] The letter to Snelling is in similar terms
except that the compensation given was 20,000/. Both
sums were duly paid on May 1, 1929, on which date
the two appellants retired from their service with Levers,
and from the Boards of the Niger Company and various
subsidiary companies to which they had been appointed.
Very little attention appears to have been paid at the trial
to these subsidiary companies, and there is a scarcity of
evidence about them. The position in regard to them may
demand further consideration ; at present I leave them on

one side. The he position tl then is that in March, 1929, the

two appellants left the service of Levers with substantial
compensation in in_ their "pockets anc and 1 mutual expressions ms_of
respect_and_esteem.

In July, 1929, Levers discovered facts which indicated
that their expenditure of 50,000/. and their expressions of
regard had been misplaced. For the years October to
October, 1926-7, 1927-8, and 1928-9, the Niger Company,
together with three of its trading competitors, including
the African and Eastern Trade Corporation, had been parties
to what were called " Pooling Agreements,' under which
the parties undertook to disclose to one another their dealings
in Gold Coast cocoa; not to buy cocoa produced elsewhere
without the consent of the Pool Committee ; agreed to fix
from time to time buying and selling prices and not to sell
without consent below the agreed selling price; and made
provision for distributing in agreed proportions the proceeds
of the pool. It appears to have been considered necessary
that the operations of the Niger Company under the pool
should be carried out without excessive publicity ; and the
brokers' contracts for the Niger Company were recorded
under initials. In November and December, 1927, the two
appellants, at a time when the Pool Committee were lowering
the pool purchase price of cocoa, on several occasions sold
cocoa short, and closing in a few days at the reduced price

A. G. AND PRIVY COUNCIL.

made profits. A few days later they bought for the rise
and made a small profit. Altogether the dealings resulted
in a profit of 13607. The transaction was of course conducted
without the knowledge of Levers or any responsible official
of the Niger Company. It was carried out in secrecy, and
payment of the profit was made by the brokers at the
appellants' request in a draft for American dollars. No
defence can be offered for this piece of misconduct. The
appellants were acting in a business in which their employers
were concerned ; their interests and their employers' con-
flicted ; they were taking a secret advantage out of their
employment, and committing a grave breach of duty both

to Levers and to the Niger Company. The jury have found
that had the facts been discovered during the service, Levers
could and would have dismissed them, and no objection
can be taken to this finding.

Having made this discovery it naturally occurred to Levers
that instead of spending 50,000]. to cancel the two service
agreements they might, if they had known the facts, have
got rid of them for nothing. They therefore claimed the
return of the money from the appellants, as well as the

amount of the profits made; and on August 7, 1929, issued

the writ in the present action, claiming damages for fraudu-
lent misrepresentation and concealment, an account of the
defendants' dealings in cocoa, and repayment of money
paid under a mistake of fact.

The pleadings were in conformity with the endorsement
on the writ. The defendants admitted the dealings in cocoa,
alleging that they were speculative dealings in differences.
They denied that they were wrongful but pleaded tender
of the profit of 1360/., which sum by an amended defence
they paid into Court. It was not disputed in the Court of
Appeal or before this House that the dealings were wrongful ;
and no question remains on this issue or as to the remedy
ordered in respect of it.

The trial began on March 24, 1930, before Wright J. and
a City of London special jury. On the fourth day on the
conclusion of their evidence the plaintiffs sought and obtained

213

H. L. (E.)
1931
—~——

BELL
vw.
LEVER
BROTHERS,
Lp.

Lord Atkin,

214

H. L. (E.)

1931
_~
BELL
v.
LEVER
BROTHERS,
Lop.

Lord Atkin.

HOUSE OF LORDS {1932]

permission to amend their pleadings by alleging a series of
fraudulent dealings in cocoa by the defendants involving
misappropriation of the Niger Company's funds. At the
same time for the first time the Niger Company were added
as plaintiffs. The defendants were eventually acquitted of
all the new charges. On May 5, 1930, the trial commenced
anew before the same judge and a new jury. At the conclu-
sion of the evidence there was some discussion as to the
questions to be put to the jury. The Court adjourned for
a day or two before the summing-up of the judge. There
had been some discussion as to the issue raised by the plea
of mistake, and when the case was resumed counsel for the
plaintifis suggested an additional question: '"' Did the
plaintiffs in entering into the said agreements for the pay- ~
ment of and in paying the 30,0001. and 20,0001. respectively
act in ignorance of the defendants' conduct (my Lord, that
avoids the word mistake to which your Lordship took objec-
tion) and was such ignorance due to non-disclosure by the
defendants of such conduct?' So far this seems to have
been the only reference to the matter of mistake in the pro-
posed questions. The learned judge said: "I have been
thinking about that matter; probably yours is better; but
what I thought of asking was this: 'When Levers entered '
into the agreement of 19th March, 1929, did they know of the
actings of the defendants or either of them in regard to the
dealing C. T.C., R. T. D. and G. 8.2. If Levers had known,
would they have made these agreements or either of them ?
At the date of the respective interviews prior to these agree-\
ments had the defendants or either of them in mind their
actings in respect of these transactions ?' "

To the last question Mr. Pritt for the defendants objetiaa
that there was no evidence that they had. Whereupon the
judge said: '' The point must really arise; that issue of fact
will have to be dealt with by the jury when they are
considering the question of fraudulent misrepresentation or
fraudulent concealment. On the other hand the verdict of
the jury on this point may have some bearing hereafter on
the question of mistake."

ASG AND PRIVY COUNCIL.

The circumstances under which this last question was
admitted are relevant to the complaint of the appellants as
to the subsequent admission of any issue as to mutual
mistake. They say that the only issue raised by the pleadings
was as to a unilateral mistake by the plaintiffs; that the
question propounded by the plaintiffs shows this; and that
it cannot be assumed that the judge, while stating that the
plaintiffs' questions might be better, but he preferred his
own, should have asked a question for the purpose of solving
an issue as to mutual mistake which was not upon the
pleadings and upon which no witness had been examined or
cross-examined and on which no word had been said to the
jury by counsel on either side. At present it is unnecessary
to say more on the topic.

The questions as finally left to the jury and their answers
have been stated to the House and I need not repeat them.
The judge heard argument as to how judgment should be
entered. At some stage of the proceedings the parties had
agreed that rescission of the agreements must be left to the
judge, and that on any point left to him he must have leave
to draw inferences of fact. Eventually the judge gave
judgment for apparently both plaintiffs for 31,224/. against
the defendant Bell and 20,000/. against the defendant
Snelling, on the ground that "there was a total failure of

cs at ata eS a ie
consideration such as to vitiate the bargain" because " the

parties 'dealt with one another under a mutual mistake as to
their respective rights." On appeal this judgment was
affirmed. The three Lords Justices accepted the view of
Wright J. that there was a mutual mistake which entitled
the plaintiffs to recover. They were also agreed that there
was a duty upon the defendants to disclose to the plaintifis
their misconduct as to the cocoa dealings and that the
contracts under which the money was paid were in con-
sequence voidable.

Before the Court of Appeal and before this House the
appellants contended that no issue as to mutual mistake had
been raised by the pleadings, and that it was not open to
the learned judge or to the Court of Appeal to determine

215

H. L. (E.)
1931 -
BELL

v.
LEVER

BROTHERS,

Lp.

Lord Atkin.

216

H. L. (E.)
1931

—
BELL
v.
LEVER
BROTHERS,

Lord Atkin.

HOUSE OF LORDS [1982]

the case without an amendment of the pleadings and upon
an issue of fact which was not submitted to the jury. The
Lords Justices appear to have held varying views on this
point. Scrutton L.J. thought that the point was not pleaded,
but that it was the practice of the Courts to deal with the
legal result of pleaded facts, though the particular legal
result is not pleaded except where to ascertain the validity
of the legal result would require the investigation of new and
disputed facts which had not been investigated at the trial.
Here he thought that there were no such disputed facts,
and the question could be dealt with without amendment.
Lawrence L.J., on the assumption that mutual mistake was
not pleaded, thought that all the facts relevant to mutual
mistake had been fully investigated and ascertained at the
trial: and that the objection was a mere technical objection
without merits. Greer L.J. thought that mutual mistake
was sufficiently pleaded.

I think it is sufficient to say for present purposes that it
seems to me clear when the pleadings and particulars are
examined that the pleading was confined to unilateral
mistake. In these circumstances the judge on a trial with a
jury has without consent of the parties no jurisdiction to
determine issues of fact not raised by the pleadings: nor in .
my opinion would a general consent to determine issues not
decided by the jury include a power without express further
consent after the jury had been discharged to amend pleadings
so as to raise further issues of fact. Similarly the powers of
the Court of Appeal which, under Order Lvmt., r. 4, are wider
than those of the judge, are limited in the case of trials by
jury to determine issues of fact in cases where only one
finding by a jury could be allowed to stand. Further, I
think that the Court of Appeal cannot without amendment
decide a case upon an unpleaded issue of law which depends
upon an unpleaded issue of fact. If the issue of fact can be
fairly determined upon the existing evidence they may of
course amend : but in any such case amendment appears to
me to be necessary. In this House in the course of the
hearing an amendment was tendered by the plaintiffs which

A.C. - AND PRIVY COUNCIL. 217

aid aver a mutual mistake. In the view that I take of H.L.(E,)
the whole case it becomes unnecessary to deal finally with 1931

the appellants' complaint that the points upon which the Berra
plaintiffs succeeded were not open to them. I content Laved
myself with saying that much may be said for that ee
contention. —-
Lord Atkin,

Two points present themselves for decision. Was the =
agreement of March 19, 1929, void by reason of a mutual
mistake of Mr. D'Arcy Cooper and Mr. Bell ?

Could the agreement of March 19, 1929, be avoided by
reason of the failure of Mr. Bell to disclose his misconduct in
regard to the cocoa dealings ?

My Lords, the rules of law dealing with the effect of mistake
on contract appear to be established with reasonable clearness.
If mistake operates at all it operates so as to negative or in
some cases to nullify consent. The parties may be mistaken
in the identity of the contracting parties, or in the existence

of the subject-matter_of the contract at the he date | of the
contract, or in the quality of the subject-matter of the

contract. These mistakes may be by one party, or by both,
and the legal effect may depend upon the class of mistake
above mentioned. Thus a mistaken belief by A. that he is|
. contracting with B., whereas in fact he is contracting with
C., will negative consent where it is clear that the intention)
of A. was to contract only with B.. So the agreement of A.
and B. to purchase a specific article is void if in fact the
article had perished before the date of sale. In this case,
though the parties in fact. were agreed about the subject-
matter, yet a consent to transfer or take delivery of something
not existent is deemed useless, the consent is nullified./ As
codified in the Sale of Goods Act the contract is expressed to
be void if the seller was in ignorance of the destruction of the
specific chattel. I apprehend that if the seller with knowledge
that a chattel was destroyed purported to sell it to a purchaser,
the latter might sue for damages for non-delivery though
the former could not sue_for non-acceptance, but I know of
no case where a seller has so committed himself. This is a
case where mutual mistake certainly and unilateral mistake

218 HOUSE OF LORDS [1982]

H.L.(E.) by the seller of goods will prevent a contract from arising.
1931 Corresponding to mistake as to the existence of the subject-
BELL matter is mistake as to. title in cases where, unknown to the

eoccn parties, the buyer i is s already the owner of that which the seller
me purports to. sell to him. The parties intended to effectuate
eee, 8 transfer of ownership: such a transfer is impossible: the
ae stipulation is naturali ratione inutilis. ?This is the case of
Cooper v. Phibbs (1), where A. agreed to take a lease of a

fishery from B., though contrary to the belief of both parties

at the time A. was tenant for life of the fishery and B. appears

to have had no title at all. To such a case Lord Westbury

applied the principle that if parties contract under a mutual

mistake and misapprehension as to their relative and
respective rights the result is that the agreement is lable

to be set aside as having proceeded upon a common mistake,

Applied to the context the statement is only subject to the

criticism that the agreement would appear to be void rather

than voidable. Applied to mistake as to rights generally it

would appear to be too wide. Even where the vendor has

no title, though both parties think he has, the correct view

would appear to be that there is a contract: but that the

vendor has either committed a breach of a sti stipulation as to.

title, or or is n not able to 'perform | his contract. The « contract i 1s
unenforceable by. him but is not void void.

) j Mistake as_to quality of the thing contracted for raises

more difficult qu questions. In such a case a mistake will not
affect assent unless it is the mistake of both parties, and is as
/ to the existence of some quality which makes the the thing
without the quality essentially different from the thing as it
was believed to be. Of course it may appear that the parties
contracted that the article should possess the quality which
one or other or both mistakenly believed it to possess. But
in such a case there is a contract and the inquiry is a different
one, being whether the contract as to quality amounts to a
condition or a warranty, a different branch of the law. The
principles to be applied are to be found in two cases which,
\ as far as my knowledge goes, have always been treated as

Lee (1) L. R. 2H. L. 149.

eh AACN et patente A Ne Te

ASCi: AND PRIVY COUNCIL.

authoritative expositions of the law. The first is Kennedy v.
Panama Royal Mail Co. (1)

In that case the plaintiff had applied for shares in the
defendant company on the faith of a prospectus which stated
falsely but innocently that the company had a binding
contract with the Government of New Zealand for the carriage
of mails. On discovering the true facts the plaintiff brought
an action for the recovery of the sums he had paid on calls.
The defendants brought a cross action for further calls.
Blackburn J., in delivering the judgment of the Court
(Cockburn C.J., Blackburn, Mellor and Shee JJ.), said:
"The only remaining question is one of much greater diffi-
culty. It was contended by Mr. Mellish, on behalf of Lord
Gilbert Kennedy, that the effect of the prospectus was to
warrant to the intended shareholders that there really was
such a contract as is there represented, and not merely to
represent that the company bond fide believed it; and that
the difference in substance between shares in a company
with such a contract and shares in a company whose sup-
posed contract was not binding, was a difference in substance
in the nature of the thing; and that the shareholder was
* entitled to return the shares as soon as he discovered this,
quite independently of fraud, on the ground that he had
applied for one thing and got another. And, if the invalidity
of the contract really made the shares he obtained different
things in substance from those which he applied for, this
would, we think, be good law. The case would then resemble
Gompertz vy. Bartlett (2) and Gurney v. Womersley (3), where
the person who had honestly sold what he thought a bill
without recourse to him, was nevertheless held bound to
return the price on its turning out that the supposed bill
was a forgery in the one case, and void under the stamp
_ Jaws in the other; in both cases the ground of this decision
being that the thing handed over was not the thing paid
for. A similar principle was acted on in Ship's Case. (4)
There is, however, a very important difference between cases

(1) L. R. 2 Q. B. 580, 586. (3) (1854) 4 E. & B. 133.
(2) 2B. & B. 849, (4) (1865) 2 DeG. J. & 8. 544.

219

H. L. (E.)
1931

Soe
BELL
v.
LEVER
BROTHERS,
Lp.

Lord Atkin,

220 HOUSE OF LORDS [1932]

H.L.(E.) where a contract may be rescinded on account of fraud, and
1931 those in which it may be rescinded on the ground that there is
Brit a difference in substance between the thing bargained for and

Lever that obtained. ft is enough to show that there was a fraudulent
BRoTHERS, representation as to any part of that which induced the
ee party to enter into the contract which he seeks to rescind ;
al but where there has been an innocent misrepresentation or
misapprehension, it does not authorize a rescission unless it
is such as to show that there is a complete difference in sub-
| stance between what was supposed to be and what was
taken, so as to constitute a failure of consideration. |. For
example, where a horse is bought under a belief that it is
sound, if the purchaser was induced to buy by a fraudulent
representation as to the horse's soundness, the contract
may be rescinded. If it was induced by an honest misrepre-
sentation as to its soundness, though it may be clear that
both vendor and purchaser thought that they were dealing
about a sound horse and were in error, yet the purchaser
must pay the whole price unless there was a warranty; and
even if there was a warranty, he cannot return the horse
and claim back the whole price, unless there was a condition
to that effect in the contract: Street v. Blay."' (1)

The Court came to the conclusion in that case that, though
there was a misapprehension as to that which was a material
part of the motive inducing the applicant to ask for the
shares, it did not prevent the shares from being in substance
those he applied for.

The next case is Smith v. Hughes (2), the well known case
as to new and old oats. The action was in the county court,
and was for the price of oats sold and delivered and damages
for not accepting oats bargained and sold. Cockburn C.J.
cites Story on Contracts as follows: 'Mr. Justice Story (3) in
his work on Contracts (vol. i., s. 516), states the law as to
concealment as follows: 'The general rule, both of law and

(1) (1831) 2 B. & Ad. 456. W. W. Story, later in life better

(2) L. R. 6 Q. B. 597, 604, 606. known as a sculptor and a writer

(3) [This attribution wasmistaken: about Rome, where he _ resided.

the author was not the celebrated —F, P.]
text-writer and judge but his son

Do. AND PRIVY COUNCIL.

221

equity, in respect to concealment, is that mere silence with H.L. (E.)

regard to a material fact, which there is no legal obligation

to to divulge, will, not. avoid a contract, although it operate as

an injury to the party from whom it is concealed.' 'Thus,'

1931
—
BELL

Pe
LEVER

he goes on to say (s. 517), 'although a vendor is bound to ja
employ no artifice or disguise for the purpose of concealing see

defects in the article sold, since that would amount to a
positive fraud on the vendee ; yet, under the general doctrine
of caveat emptor, he is not, ordinarily, bound to disclose
every defect of which he may be cognizant, although his
silence may operate virtually to deceive the vendee.' ' But,'
he continues (s. 518), 'an improper concealment_or_suppres-

sion of a material fact, which the party concealing is legally
botind - to to disclose, and of which the other party has a legal _
right to insist that he shall be informed, is fraudulent, and_
will invalidate a contract.' Further, distinguishing between
extrinsic circumstances affecting the value of the subject-
matter of a sale, and the concealment of intrinsic circum-
stances appertaining to its nature, character, and condition,
he points out (s. 519) that with reference to the latter the
rule is 'that_mere silence as to anything which the other

parky might by proper diligence have discovered, and 3 which

is open to his « examination, , is not fraudulent, unle unless a special

trust or confidence exist between the parties, or be implied
from the circumstances of the case.' In the doctrine thus
laid down I entirely agree."

In a further passage he says: "It only remains to deal
with an argument which was pressed upon us, that the
defendant in the present case intended to buy old oats, and
the plaintiffs to sell new, so the two minds were not
ad idem; and that consequently there was no contract. This
argument proceeds on the fallacy of confounding what was

merely a motive operating on the buyer to induce him. to
buy with one of the essential conditions of the contract.
Both parties were agreed as to the sale and purchase of this
particular parcel of oats. The defendant believed the oats
to be old and was thus induced to agree to buy them, but
he omitted to make their age a condition of the contract.

222

H. L. (E.)
1931

Se
BELL
v.
LEVER
BROTHERS,
Lp.

Lord Atkin.

HOUSE OF LORDS [1982]

All that can be said is, that the two minds were not ad idem
as to the age of the oats; they certainly were ad idem as
to the sale and purchase of them. Suppose a person to
buy a horse without a warranty, believing him to be sound,
and the horse turns out unsound, could it be contended that
it would be open to him to say that, as he had intended to
buy a sound horse, and the seller to sell an unsound one,
the contract was void, because the seller must have known
from the price the buyer was willing to give, or from his
general habits as a buyer of horses that he thought the horse
was sound ? The cases are exactly parallel."

Blackburn J. said: ''In this case I agree that on the
sale of a specific article;-unless-there be a warranty making
it part of the bargain that it possesses some particular
quality, the purchaser must take the article he has bought
though it does not possess that quality. And I agree that
even if the vendor was aware that the purchaser thought
that the article possessed that quality, and would not have
entered into the contract unless he had so thought, still the
purchaser is bound, unless the vendor was guilty of some
fraud or deceit upon him, and that a mere abstinence from
disabusing the purchaser of that impression is not fraud
or deceit ; for, whatever may be the case in a court of morals,
there is no legal obligation on the vendor to inform the
purchaser that he is under a mistake, not induced by the
act of the vendor."

The Court ordered a new trial. It is not quite clear
whether they considered that if the defendant's contention
was correct, the parties were not ad idem or there was a
contractual condition that the oats sold were old oats. In
either case the defendant would succeed in defeating the claim.

In these cases I am inclined to think that the true analysis
is that there is a contract, but that the one party is not able
to supply the very thing whether goods or services that the
other party contracted to take; and therefore the contract
is unenforceable by the one if executory, while if executed
the other can recover back money paid on the ground of
failure of the consideration.

aacs | AND PRIVY COUNCIL.

223

We are now in a position to apply to the facts of this case H.-L. (£.)

the law as to mistake so far as it has been stated. It is
essential on this part of the discussion to keep in mind the
finding of the jury acquitting the defendants of fraudulent
misrepresentation or concealment in procuring the agreements
in question. Grave injustice may be done to the defendants
and confusion introduced into the legal conclusion, unless it
is quite clear that in considering mistake in this case no
suggestion of fraud is admissible and cannot strictly be re-
garded by the judge who has to determine the legal issues
raised. The agreement which is said to be void is the agree-
ment contained in the letter of March 19, 1929, that Bell
would retire from the Board of the Niger Company and its
subsidiaries, and that in consideration of his doing so Levers
would pay him as compensation for the termination of his
agreements and consequent loss of office the sum of 30,0001.
in full satisfaction and discharge of all claims and demands
of any kind against Lever Brothers, the Niger Company or
its subsidiaries. The agreement, which as part of the con-
tract was terminated, had been broken so that it could be
repudiated."* Is an agreement to terminate a broken contract
different in kind from an agreement to terminate an un-
broken contract, assuming that the breach has given the
one party the right to declare the contract at an end? I
feel the weight of the plaintiffs' contention that a contract
immediately determinable is a different thing from a contract
for an unexpired term, and that the difference in kind can
be illustrated by the immense price of release from the longer
contract as compared with the shorter. And I agree that
an agreement to take an assignment of a lease for five years
is not the same thing as to take an assignment of a lease
for three years, still less a term for a few months. But,
on the whole, I have come to the conclusion that it would

1931

—_——
BELL
v.
LEVER

BROTHERS,

be wrong to decide that an agreement to terminate a definite |

specified contract is void if it turns out that the agreement
had already been broken and could have been terminated
otherwise. The contract released is the identical contract
in both cases, and the party paying for release gets exactly

Lp.
Lord Atkin.

224

ete.)

1931
a
BELL
v.
LEVER
BROTHERS,
Lp.

Lord Atkin.

HOUSE OF LORDS [1932]

what he bargains for. It seems immaterial that he could
have got the same result in another way, or that if he had
known the true facts he would not have entered into the

bargain. A. buys B.'s horse; he thinks the horse is sound

and he pays the price of a sound horse; he would certainly
not have bought the horse if he had known as the fact is that
the horse is unsound. If B. has made no representation as
to soundness and has not contracted that the horse is sound,
A. is bound and cannot recover back the price. A. buys
a picture from B.; both A. and B. believe it to be the work
of an old master, and a high price is paid. It turns out to
be a modern copy. A. has no remedy in the absence of
representation or warranty. A. agrees to take on lease or
to buy from B. an unfurnished dwelling-house. The house
is in fact uninhabitable. A. would never have entered into
the bargain if he had known the fact. A. has no remedy,
and the position is the same whether B. knew the facts or
not, so long as he made no representation or gave no .
warranty. A. buys a roadside garage business from B.
abutting on a public thoroughfare: unknown to A., but
known to B., it has already been decided to construct a
byepass road which will divert substantially the whole of
the traffic from passing A.'s garage. Again A. has no remedy.
All these cases involve hardship on A. and benefit B., as most
people would say, unjustly. They can be supported on the
ground that it is of paramount importance that contracts
should be observed, and that if parties honestly comply
with the essentials of the formation of contracts—i.e., agree
in the same terms on the same subject-matter—they are
bound, and must rely on the stipulations of the contract
for protection from the effect of facts unknown to them.

le

This brings the discussion to the alternative mode of
expressing the result of a mutual mistake. It is said that in
such a case as the present there is to be implied a stipulation
in the contract that a condition of its efficacy is that the
facts should be as understood by both parties—namely, that |
the contract could not be terminated till the end of the current'
term. The question of the existence of conditions, express

>. al AND PRIVY COUNCIL.

or implied, is obviously one that affects not the formation of
contract, but the investigation of the terms of the contract
when made. A condition derives its efficacy from the
consent of the parties, express or implied. They have agreed,
but on what terms. One term may be that unless the facts
are or are not of a particular nature, or unless an event has
or has not happened, the contract is not to take effect. With
regard to future facts such a condition is obviously contractual.
Till the event occurs the parties are bound. Thus the
condition (the exact terms of which need not here be investi-
gated) that is generally accepted as underlying the principle
of the frustration cases is contractual, an implied condition.
Sir John Simon formulated for the assistance of your
Lordships a proposition which should be recorded: '' When-
ever it is to be inferred from the terms of a contract or its
surrounding circumstances that the consensus has been

225

H. L. (E.)

1931
—
BELL
v.
LEVER
BROTHERS,
Lp.

Lord Atkin.

reached upon the basis of a particular contractual assumption,

and that assumption is not true, the contract is avoided :
ie., it is void ab initio if the assumption is of present fact
and it ceases to bind if the assumption is of future fact."

I think few would demur to this statement, but its value
depends upon the meaning of "a contractual assumption,"
and also upon the true meaning to be attached to " basis,"
a metaphor which may mislead. When used expressly in
contracts, for instance, in policies of insurance, which state
that the truth of the statements in the proposal is to be the
basis of the contract of insurance, the meaning is clear. The
truth of the statements is made a condition of the contract,
which failing, the contract is void unless the condition is
waived. The proposition does not amount to more than this
that, if the contract expressly or impliedly contains a term
that a particular assumption is a condition of the contract,
the contract is avoided if the assumption is not true. But
we have not advanced far on the inquiry how to ascertain
whether the contract does contain such a condition./ Various
words are to be found to define the state of things which

make a condition. 'In the contemplation of both parties
fundamental to the continued validity of the contract," "a

A.C. 1932. 3 Q

226 HOUSE OF LORDS [1982]

99 6¢

H.L. (E.) foundation essential to its existence, a fundamental reason
1931 for making it," are phrases found in the important judgment
Bert of Scrutton LJ. in the present case. The first two phrases

Leven appear to me to be unexceptionable. They cover the case

a ora of a contract to serve in a particular place, the existence of
Lon) akin. Which is fundamental to the service, or to procure the services

of a professional vocalist, whose continued health is essential
to performance. But "a fundamental reason for making a
contract." may, with respect, be misleading. The reason of
one party only is presumedly not intended, but in the cases
I have suggested above, of the sale of a horse or of a picture,
it might be said that the fundamental reason for making the
contract was the belief of both parties that the horse was
sound or the picture an old master, yet in neither case would
the condition as I think exist. Nothing is more dangerous
than to allow oneself liberty to construct for the parties
' contracts which they have not in terms made by importing
implications which would appear to make the contract more
businesslike or more just. The implications to be made are
to be no more than are "necessary"' for giving business efficacy
to the transaction, and it appears to me that, both as to
existing facts and future facts, a condition would not be
implied unless the new state of facts makes the contract
| something different in kind from the contract in the original
state of facts. Thus, in Krell v. Henry(1), Vaughan
Williams L.J. finds that the subject of the contract; was
"yooms to view the procession"' : the postponement, therefore,
made the rooms not rooms to view the procession. This
also is the test. finally chosen by Lord Sumner in Bank Line v.
Arthur Capel & Co. (2), agreemg with Lord Dunedin in
Metropolitan Water Board v. Dick Kerr (3), where, dealing
with the criterion for determining the effect of interruption
in "frustrating" a contract, he says: " An interruption may
be so long as to destroy the identity of the work or service,
when resumed, with the work or service when interrupted.'
We therefore get a common standard for mutual mistake,

(1) [1903] 2 K. B. 740, 754. (2) [1919] A. C. 435.
(3) [1918] A. C. 119, 128.

ee

*

A.C. AND PRIVY COUNCIL.

and implied conditions whether as to existing or as to future

facts. Does the state of the new facts destroy the identity

of the subject-matter as it was in the original state of facts ?

To apply the principle to the infinite combinations of facts
that arise in actual experience will continue to be difficult,
but if this case results in establishing order into what has
been a somewhat confused and difficult branch of the law
it will have served a useful purpose.'

I have already stated my reasons for deciding that in the
present case the identity of the subject-matter was not
destroyed by the mutual mistake, if any, and need not repeat
them. ;

It now becomes necessary to deal with the second point
of the plaintiffs—namely, that the contract of March 19,
1929, could be avoided by them in consequence of the non-
disclosure by Bell of his misconduct as to the cocoa dealings.
Fraudulent concealment has been negatived by the jury;
this claim is based upon the contention that Bell owed a duty
to Levers to disclose his misconduct, and that in default of

'disclosure the contract was voidable. Ordinarily the failure
to disclose a material fact which might influence the mind

227

H. L. (E.)
1931

ad
BELL
v.
LEVER
BROTHERS,

Lord Atkin,

of a prudent contractor does not give the right to avoid
the contract. The principle of caveat emptor applies outside |

contracts of sale. There are certain contracts expressed by
the law to be contracts of the utmost good faith, where
material facts must be disclosed; if not, the contract is
voidable. Apart from special fiduciary relationships, contracts
for partnership and contracts of insurance are the leading
instances. fp such cases the duty does not arise out of
contract ; the duty of a person proposing an insurance arises
before a contract is made, so of an intending partner. Unless
this contract can be brought within this limited category of
contracts uberrimae fidei it appears to me that this ground
of defence must fail. I see nothing to differentiate this
agreement from the ordinary contract of service; and I am
aware of no authority which places contracts of service within
the limited category I have mentioned. It seems to me
clear that master and man negotiating for an agreement of
3 Q 2

228 HOUSE OF LORDS [1932}

H.L.(E.) service are as unfettered as in any other negotiation. Nor
1931 can I find anything in the relation of master and servant,
Berz when established, that places agreements between them
Lenn Within the protected category. It is said that there is a

ee ae contractual duty of the servant to disclose his past faults.

Lond atkn, ~ agree that the duty in the servant to protect his master's
a property may involve the duty to report a fellow servant

whom he knows to be wrongfully dealing with that property.
The servant owes a duty not to steal, but, having stolen,
is there superadded a duty to confess that he has stolen ?
I am satisfied that to imply such a duty would be a departure
from the well established usage of mankind and would be
to create obligations entirely outside the normal contempla-
tion of the parties concerned. If a man agrees to raise his
butler's wages, must the butler disclose that two years ago
he received a secret commission from the wine merchant ;
and if the master discovers it, can he, without dismissal
or after the servant has left, avoid the agreement for the
increase in salary and recover back the extra wages paid ?
If he gives his cook a month's wages in lieu of notice can
he, on discovering that the cook has been pilfering the tea
and sugar, claim the return of the month's wages? I think
not. He takes the risk; if he wishes to protect himself he
can question his servant, and will then be protected by the
truth or otherwise of the answers.

I agree with the view expressed by Avory J. in Healey v.
Société Anonyme Francaise Rubastic (1) on this point. It
will be noticed that Bell was not a director of Levers, and,
with respect, I cannot accept the view of Greer L.J. that if
he was in fiduciary relationship to the Niger Company he was
in a similar fiduciary relationship to the shareholders, or
to the particular shareholders (Levers) who held 99 per cent.
of the shares. Nor do I think that it is alleged or proved
that in making the agreement of March 19, 1929, Levers
were acting as agents for the Niger Company. In the matter
of the release of the service contract ard the payment of
30,0001. they were acting quite plainly for themselves as

(1) [1917] 1 K. B. 946.

ASC. AND PRIVY COUNCIL.

principals. It follows that on this ground also the claim
fails.

The result is that in the present case servants unfaithful
in some of their work retain large compensation which some
will think they do not deserve. Nevertheless it is of greater
importance that well established principles of contract should
be maintained than that a particular hardship should be
redressed ; and I see no way of giving relief to the plaintiffs
in the present circumstances except by confiding to the
Courts loose powers of introducing terms into contracts
which would only serve to introduce doubt and confusion
where certainty is essential.

229

H. L. (E.)
1931

<5
BELL
v.
LEVER
BROTHERS,
Lp.

Lord Atkin.

I think therefore that this appeal should be allowed; and —

I agree with the order to be proposed by my noble and learned
friend, Lord Blanesburgh.

Lorp THANKERTON. My Lords, the detailed facts of this
case have been sufficiently stated already by your Lordships.
The findings of the jury were accepted by all parties, who
were also agreed that the Court should have leave to draw
inferences of fact generally.

The two main contentions between the parties are whether
the agreements of March, 1929, are liable to be set aside,

(a) on the ground of mutual mistake or error, or (b) by reason _
of the non-disclosure of material facts by the appellants, _

whereby Lever Brothers were induced to enter into these
agreements.

The judgment of both Courts below was unanimously
against the appellants on the first point, and, while Wright J.
expressed no opinion, the Court of Appeal was also
unanimously against the appellants on the second point,
though the first point was sufficient for their disposal of the
case. The appellants, however, must succeed on both points
in order to succeed in their appeal. :

Both these points raise important questions of principle,
and I regret to find myself unable to agree with the con-
clusions of the Courts below on either point. In this view,
it is unnecessary for me to deal with the two further questions

230 HOUSE OF LORDS [1932]

H. L. (E.) —namely, whether the first point is open to the respondents
1931 on the pleadings and the course of procedure, and whether
Bett the obligation in Mr. Bell's service agreement as to payment
Lever by Lever Brothers of the premiums on an endowment policy
ol remains binding, despite the setting aside of the agreement

Te of March, 1929.

Thankerton. § The findings of the jury establish that the appellants'
four cocoa transactions in November and December, 1927,
constituted a breach of contract or duty towards the
respondents, which would have entitled Lever Brothers
to terminate the appellants' contracts of service either in
January, 1928, or March, 1929, and that Lever Brothers
would have exercised such right at either of these dates.
The jury also found that the Niger Company would have
been entitled to dismiss the appellants from their positions
as chairman and vice-chairman respectively on either of
these dates and would have done so. The jury further found
that Lever Brothers entered into the agreements of March,
1929, in ignorance of these transactions of the appellants
and that, if Lever Brothers had known of them, they would
not have entered into these agreements. As regards the
state of the appellants' mind, the question and answer was
as follows: "' At the date of the respective interviews prior
to these agreements, had the defendant Bell or the
defendant Snelling in mind their actings in respect of these
transactions ?"' to which the jury's answer was "No." By
their earlier answers the jury had acquitted the appellants
of inducing Lever Brothers to enter into the agreements of
March, 1929, by fraudulent misrepresentation of faithful
and honest service or by fraudulent concealment of their
cocoa transactions.

It will be convenient to deal first with the question whether
the appellants had a duty to disclose their cocoa transactions
to Lever Brothers when negotiating the agreements of
March, 1929. If there was such a duty, there is no doubt
that the failure to disclose—though imnnocent—amounted
to a misrepresentation as to material facts which induced
Lever Brothers to enter into these agreements, and which

A.C. - AND PRIVY COUNCIL.

would entitle the latter to rescind them. The learned judges
of the Court of Appeal appear to regard the duty to disclose
as arising at the time of negotiating the contract, but I am
unable to see that any such duty could arise out of the
circumstances of these agreements ; in my opinion, the first
question must be whether the appellants incurred a duty
to disclose these transactions at the time that they were
completed. The failure to account for the profits to the
Niger Company, on which some of the learned judges lay
stress, was an integral part of the breach of duty to that
company. The appellants had just as much—or just as

231
H. L, (E.)
1931

——
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Thankerton

little—right to continue drawing their salaries without -

disclosure as they had to negotiate two years later for the
commutation of these same salaries. In truth, the negotiations
in March, 1929, were at arm's length, and not on the footing
of the relationship of master and servant, but for the
termination of that relationship, and, if there was not an
already existing breach of an obligation to disclose, I am
unable to see how the circumstances of the agreements of
March, 1929, could be held to create such an obligation.

In the absence of fraud, which the jury has negatived,
I am of opinion that neither a servant nor a director of a
company is legally bound forthwith to disclose any breach
of the obligations arising out of the relationship, so as to
give the master or the company the opportunity of dismissal ;
on subsequent discovery, the master or company will not
be entitled to hold the dismissal as operating from the date
of the breach, but will be liable for wages or salary earned
by the servant during the intervening period. In my opinion
Healey v. Société Anonyme Francaise Rubastic (1), which
was the case of the managing director of a company, was
rightly decided. There may well be cases in which the
concealment of the misconduct amounts to a fraud on the
master or company, but the jury have excluded that view
'in the present case. The other cases to which we were
_referred relate to a duty to disclose all material facts on
formation of a contract, and form exceptions to the general

(1) [1917] 1 K, B. 946.

'armen

v.
LEVER
BROTHERS,
Lp.
Lord
Thankerton,

HOUSE OF LORDS [1932]

rule, which does not impose such a duty. The most familiar
of these exceptions is found in the case of policies of
insurance, as to which Blackburn J. says, in Fletcher v.
Krell (1), '' mercantile custom has established the rule with
regard to concealment of material facts in policies of
assurance, but in other cases there must be an allegation
of moral guilt or fraud." Other exceptions are found in
cases of trustee and cestui que trust and of a company
issuing a prospectus and an applicant for shares, but the
number of exceptions is limited, and no authority has been
cited which extends the exceptions to cover a case such as
the present.

Accordingly I am of opinion that the appellants had no
legal duty to disclose their cocoa transactions either at the
time of their commission or in negotiation for the agreements
of March, 1929.

Turning next to the question of mutual error or mistake,
I think that the respondents' contention may be fairly stated
as follows—namely, that in concluding the agreements of
March, 1929, all parties proceeded on the mistaken assumption
that the appellants' service agreements were not liable to

immediate termination by Lever Brothers by reason of the
_appellants' misconduct, and that such common mistake
involved the actual subject-matter of the agreements, and
'did not merely relate to a quality of the subject-matter.

The cases on this branch of the law are numerous, and in
seeking the principle on which they rest I will at first confine
my attention to those which relate to innocent mutual mistake
on formation of the contract, as it appears to me that the
cases relating to facts arising subsequently to the formation
of the contract may be found to rest on a somewhat different
principle.

But first let me define the exact position as at the date
of the agreements of March, 1929. The service agreements
of both appellants were then existing as binding legal contracts,
although it was in the power of Lever Brothers, had they
then known of the appellants' breach of contract, to have

(1) 28 L. T. 105.

mao. AND PRIVY COUNCIL. 233

terminated the contracts; but, until the exercise of such H.L. (E.)

power, the contracts remained binding. It is also clear that 1931

an essential purpose of the agreements of March, 1929, Beu

was to secure the termination of these service agreements. yon

The mistake was not as to the existence of agreements which [ ace

required termination—for such did exist—but as to the —

possibility of terminating them by other means. "' Thankerton.
A clear exposition of the principles to be applied in such

a case as the present is to be found in the judgment of the

Court of Queen's Bench (Cockburn C.J., Blackburn, Mellor

and Shee JJ.), in Kennedy v. Panama, &c., Co. (1), delivered

by Blackburn J., who, as Lord Blackburn, reaffirmed this

opinion in 188i in Mackay v. Dick. (2) In Kennedy's case

the plaintiff had taken shares in a further issue of capital

by the Panama Company, being induced by a statement

in the prospectus that the purpose of the issue was to enable

the company to carry out a contract recently entered into

with the Government of New Zealand for the carriage of

mails. That contract had been made with the agent of the

New Zealand Government, both parties believing that he

had authority to make it; but it turned out that he had

no such authority, and the Government refused to ratify it.

Having failed on the charge of fraud and deceit against the

'directors of the company for making the statements in the

prospectus, the plaintiff submitted a second contention,

which is stated in the judgment as follows: "It was con-

tended .... that the effect of the prospectus was to warrant

to the intended shareholders that there really was such a

contract as is there represented, and not merely to represent

that the company bona fide believed it ; and that the difference

in substance between shares in a company with such a

contract and shares in a company whose supposed contract

was not binding, was a difference in substance in the nature

of the thing; and that the shareholder was entitled to

return the shares as soon as he discovered this, quite

independently of fraud, on the ground that he applied for

one thing and got another. And, if the invalidity of the

(1) L. R. 2 Q. B. 580, 586, 587, 588. (2) 6 App. Cas. 251, 265.

234

H. L. (E.)
1931

ay,
BELL
v.
LEVER
BROTHERS,
Lp.

Lord
Thankerton.

HOUSE OF LORDS [19382]

contract really made the shares he obtained different things
in substance from those which he applied for, this would,
we think, be good law. The case would then resemble
Gompertz v. Bartlett (1) and Gurney v. Womersley (2), where
the person, who had honestly sold what he thought a bill
without recourse to him, was nevertheless held bound to
return the price on its turning out that the supposed bill
was a forgery in the one case, and void under the stamp laws
in the other ; in both cases the ground of decision being that
the thing handed over was not the thing paid for."

The respondents' contention in the present appeal is in
effect the same as the above contention; they maintain
that the service agreements surrendered to them are not the
service agreements paid for, in respect that they were
immediately defeasible by them. Blackburn J. proceeds :
"There is, however, a very important difference between
cases where a contract may be rescinded on account of fraud,
and those in which it may be rescinded on the ground that
there is a difference in substance between the thing bargained
for and that obtained. It is enough to show that there was
a fraudulent representation as to any part of that which
induced the party to enter into the contract which he seeks
to rescind; but where there has been an innocent mis-
representation or misapprehension, it does not authorize a
rescission unless it is such as to show that there is a complete
difference in substance between what was supposed to be
and what was taken, so as to constitute a failure of considera-
tion. For example, where a horse is bought under a belief
that it is sound, if the purchaser was induced to buy by a
fraudulent representation as to the horse's soundness, the
contract may be rescinded. If it was induced by an honest
misrepresentation as to its soundness, though it may be
clear that both vendor and purchaser thought that they
were dealing about a sound horse and were in error, yet
the purchaser must pay the whole price, unless there was
a warranty." After referring to the passages in the Digest
of Civil Law and the way the question is there mooted,

(1) 2B. & B. 849. (2) 4B. & B. 133.

tl i ina a ee

A &
- C. AND PRIVY COUNCIL.

Blackburn J. says: 'The answers given by the great jurists
quoted are to the effect that, if there be misapprehension
as to the substance of the thing, there is no contract; but
if it be only a difference in some quality or accident, even
though the misapprehension may have been the actuating
motive to the purchaser, yet the contract remains binding.''
And he adds: "And, as we apprehend, the principle of

235

H. L. (E.)
1931

-——_
Bern
v.
LEVER
BROTHERS,
Lp.
Lord
Thankerton.

our law is the same as that of the civil law." This passage

makes clear that it_is not enough for the purchaser to prove

. SES LS RS FE Ce en eT .
that the misapprehension was the inducing cause to him

and that, if he had known, he would not have entered into
the contract. The earlier passage as to the sale of an unsound
horse also shows that it is not enough that a grossly excessive
price has been paid for a bad article. In that case it was held
that the shares obtained by Kennedy in the company were
not substantially different things but that the case was
analogous to that of the horse supposed to be sound.

It is pointed out in Kennedy's case (1) that, if the directors
had known that the contract was not valid, the contract
might have been avoided on the ground of a fraudulent
misrepresentation. In the present case, there being no
obligation to disclose, the appellants, if they had had their
misconduct in mind, would have been entitled to say nothing
about it, and the respondents, in the absence of fraud, would
have been bound by the contracts, even though, if they had
known, they would not have entered into the contracts, but
would have terminated the serviceagreements. I have difficulty
in seeing how the fact that the appellants did not remember
at the time is to put the respondents in a better position.

The phrase "underlying assumption by the parties," as
applied to the subject-matter of a contract, may be too widely
interpreted so as & include something which one of the parties
had not necessarily in his mind at the time of the contract ;
in my opinion it can only properly relate to something which
both must necessarily have accepted in their minds as an
essential and integral element of the subject-matter. In
the present case, however probable it may be, we are not

(1) L. R. 2 Q. B. 580.

236 HOUSE OF LORDS [1932]

H.L.(E.) necessarily forced to that assumption. Cooper v. Phibbs (1)
1931 is a good illustration, for both parties must necessarily have

——

Bett proceeded on the mistaken assumption that the lessor had
Luvern the right to grant the lease and that the lessee required a
ao lease; Lord Westbury says: "The respondents believed
oq themselves to be entitled to the property, the petitioner believed
Thankerton. that he was a stranger to it, the mistake is discovered, and
the agreement cannot stand."

In Scott v. Coulson (2) it was common ground that at the
date of the contract for sale of the life policy both parties
"supposed the assured to be alive, the result being that the
plaintiffs were willing to accept as the best price they could
get for the policy a sum slightly in advance of its surrender
value and very much below the sum due on the death of the
assured. As a matter of fact the assured was dead. It was
therefore clear that the subject-matter of the contract was
a policy still current with a surrender value and that
accordingly the subject-matter did not exist at the date of
the contract. Couturier v. Hastie (3), where the cargo sold
was held not to have existed at the date of sale, and
Strickland v. Turner (4), where the annuitant was in fact
dead at the date of sale of the annuity, were cases where
the subject-matter was not in existence at the date of the
contract. There are many other cases to the same effect, but
I think that it is true to say that in all of them it either appeared
on the face of the contract that the matter as to which the
mistake existed was an essential and integral element of the
subject-matter of the contract, or it was an inevitable inference
from the nature of the contract that all the parties so regarded it.
In the present case the terms of the contracts throw no
light on the question, and, as already indicated, I do not
find sufficient material to compel the inference that the
appellants, at the time of the contract, regarded the
indefeasibility of the service agreements as an essential and

integral element in the subject-matter of the bargain.

(1) L. R. 2 H. L. 149, 170. (3) 5 H. L. C. 678.

(2) [1903] 1 Ch. 453; affirmed (4) 7 Ex. 208.
[1903] 2 Ch. 249.

on

A. C. AND PRIVY COUNCIL.

237

The range of authorities relating to some alteration in H.L. (E.)

circumstances subsequent to the date of the contract do not,
in my opinion, raise a question of mutual error or mistake ;
in them the formation of the contract is complete and binding,

1931
——_
BELL

v.
LEVER

but subsequent events arise which critically affect the ee

contract, but whose occurrence has not been provided for

Lord

in the contract. However it may be stated, when relief T2kerton.

from the contract is given, the Court, as it appears to me,
rests such relief on an implied condition which forms part
of a complete and binding contract, but which, on the

happening of certain events, terminates the contract. These.

authorities appear to me, therefore, to have no bearing on
the question of error or mistake as rendering a contract void
owing to failure of consideration.

Accordingly, I am of opinion that the appellants are
entitled to succeed in their appeal and that the judgments
of the Courts below, so far as appealed against by them, should
be reversed. I therefore concur in the motion to be proposed
by my noble and learned friend, Lord Blanesburgh.

Order of the Court of Appeal reversed. Order
of Wright J. and judgment entered thereunder
varied by directing that judgment be entered
for the plaintiffs the Niger Company, Limited,
for the sum of 5l. damages awarded by the
jury in their answer to question 3 (B) on the
issue raised by para. 17 of the amended points
of claim without costs; and so much of the
order of Wright J. as directed that the sum of
13601. should be paid out to the plaintiffs the

as iger Company, Limited, affirmed. Save as
aforesaid, the order of Wright J. and the
judgment thereunder set aside and judgment
entered for the defendants with costs. The
respondents to pay the costs in the Courts
below and also the costs of the appeal to this
House. Cause remitted back to the King's

H. L. (E.)*
1931
ew

Dec. 15.

HOUSE OF LORDS [1932]

Bench Division to do therein as shall be just
and consistent with this judgment.

Lords' Journals, Dec. 15, 1931.