A.C. AND PRIVY COUNCIL. [HOUSE OF LORDS] BELL anp ANOTHER . . . . . . . APPELLANTS; AND LEVER BROTHERS, LIMITED, en ReEsponpEnts. Oruzrs oe Mistake—Mutual Mistake—Mistake as to Legal Rights—Pleadings—Fiduciary Relation—Breach of Duty—Non-disclosure—Rescission of Contract, ‘The L. Company, who held more than 99 per cent. of the share capital of the N. Company, agreed with one B. that he should be in the service of the L. Company for a term of years during which he should adt os chairman of the board of directors of the N. Company at a salary of 8000/. a year. They made a similar agreement with one 8. that he should be vice-chairman of the board at a salary of 6000/. a year. While acting as chairman and vice-chairman respectively, B, and 8, ontered on their own account into secret speculations in cocoa, a commodity in which the N. Company dealt, of such a character as, on the finding of the jury in answer to a specific question, would have justified the L. Company in terminating their agreements of service and the N. Company in dismissing them from their offices of chairman and vice- chairman. Subsequently the N. Company became amalgamated with another company, and it became necessary to cancel the appointments of B, and §. as chairman and vice-chairman, Being unaware of the aforesaid breaches of duty by B. and S., the L: Company agreed to pay to B. 30,0007. and to 8. 20,0001. as compensation for terminating their services; B. and 8. agreed to accept these sums, and they were duly paid. ‘The jury, in answer to a further specific question, found that the L. Company if they had been aware of the breaches of duty by B. and 8. would have terminated their agreements, and B. and 8. would have been dismissed from their offices without any compensation. The action in which the jury so found was brought in the first instance by the L. Company alone, the N. Company being joined in the course of the proceedings as co-plaintiffs, against B. and S., claiming rescission of the ‘compensation agreements and repayment of the sums paid thereunder on the ground of fraudulent misrepresentation and alternatively, as the ‘House construed the points of claim, on the ground of unilateral mistake induced by fraud, but not on any ground of mutual mistake innocently made by the defendants so far as they were concerned. There was a specific alternative claim that the agreements of settlement and tho payments under them were made under a mistake of fact. The jury negatived the charges of fraud, and found that at the time of negotiating the compensation agreements B. and 8. had not in mind their breaches of duty. * Prosent ; Viscount Harsnam, Lorp BraNessurcx, Lonp WARRINGTON oF Cuvee, Lorp Arr, and Lorp THANKERTON. A.C. 1932. 3 M 161 HL, (B)* 1931 Dec. 18.HOUSE OF LORDS [1932] Wright J., being of opinion on the construction of the points of claim that an issue based upon an allegation of mutual mistake was thereby raised, and the Court of Appeal, being of opinion that if that issue were not raised the pleadings should be treated as amended in order to raise it, held that the compensation agreements were void, having been made under a common mistake as to the legal relation between the parties, each party believing, contrary to the truth, that the one was entitled to claim and the other was bound to pay compensation. ‘The Court of Appeal held furthor, although such @ case had not been raised before Wright J., that each of the defendants owed a duty to the plaintiffs to disclose their breaches of duty, and that their non- disclosure invalidated the compensation agreements. ‘Tho defendants appealed :— Held, first, by Lord Blanesburgh, with special reference to the course of the trial and the circumstances of the case, that any amendment of “their pleadings to enable the plaintiffs to raise a case of mutual mistake implying good faith on the part of the defendants could not without injustice to them be allowed after an action based exclusively on fraud had failed, and that accordingly the issue was not open to the plaintiffs in this House. But on the footing that the points of claim were amended 80 as to raise the issue. Held, by Lord Blanesburgh, Lord Atkin and Lord Thankerton (Viscount Hailsham and Lord Warrington of Clyffe dissenting), that the action failed: as to mutual mistake, on the ground that the mutual mistake related not to the subject-matter, but to the quality of the service contracts; as to unilateral mistake, on the ground that the defendants under their contracts of service with the L. Company owed no duty to them to disclose the impugned transactions. Kennedy v. Panama, New Zealand and Australian Royal Mail Co. (1867) L, R. 2 Q. B. 680 followed. Dictum of Avory J. in Healey v. Société Anonyme Frangaise Bubastic [1917] 1 K. B. 946, 947 approved. Decision of the Court of Appeal [1931] 1 K. B. 557 reversed. AppEAL by the defendants from an order of the Court of Appeal affirming a judgment of Wright J., upon the trial of the action with a special jury, whereby it was ordered that two agreements (hereinafter called “the agreements of settlement”) made between the respective appellants and the respondents, Lever Brothers, Ld., should be set aside and that the moneys paid thereunder should be repaid by the appellants. The facts are stated in the report of the case in the Courts below, and in the opinions of Lord Blanesburgh and Lord Atkin, and the following summary is merely for the purpose of explaining the position of the parties and the nature of the dispute.AC. AND PRIVY OOUNCIL. Under two agreements of employment made between the respondents, Lever Brothers, Ld., and the appellants, Mr. H. E. Bell and Mr. W. E. Snelling, the appellants were employed, in the case of Bell, to act as chairman of the respondents, the Niger Company, in which Lever Brothers had a controlling interest, and in the case of Snelling, to look after the interests of Lever Brothers in West Africa, and in pursuance of these agreements Mr. Bell was appointed chairman and Mr. Snelling vice-chairman of the Niger Company. These agreements were to last for a period of five years, subsequently extended for a further period of five years. In the spring of 1929, when the agreements of employment, as extended, had a substantial time to run, an amalgamation was arranged of the business of the Niger Company and the African and Eastern Trade Corporation, and, as the amalgamation afforded no scope for the appellants, the chairman of Lever Brothers negotiated with each of the appellants to give up his position in the Niger Company, and to put an end to his agreement of employment for monetary compensation. Thé agreements of settlement were duly arrived at and the compensation was paid. After the compensation had been paid the respondents Lever Brothers were informed by the appellant, Mr. Bell, that the appellants, when chairman and vice-chairman of the Niger Company respectively, had secretly entered into certain speculative transactions in cocoa on their own account, transactions which the jury, under direction from the learned judge as to the law, found would have given the respondents the right to dismiss the appellants summarily and to determine the appellants’ agreements of employment without notice and without payment of compensation. The jury also found that this right would have been exercised by the respondents if they had known the facts. At the time when the agree- ments of settlement were being negotiated the said breaches of duty, as the jury found, were not present to the minds of the appellants. In these circumstances the respondents, Lever Brothers, commenced an action, to which the respondents, the Niger Company, were subsequently added 3 M2 163 H.L.(E) 1931 ~~ BEL v. ‘LEVER Baorsens, Lo.164 BLL, (B) 1931 BELL e Lever BRorHERs, Lp. HOUSE OF LORDS (1982) as co-plaintiffs, claiming (inter alia) rescission of the agree- ments of settlement and repayment of the compensation on the ground of fraudulent misrepresentation and concealment, which charges were, however, negatived by the jury. There was an alternative claim, which the House construed to be a claim to rescission on the ground of unilateral mistake induced by fraud, but which in the Courts below was either construed as an allegation of common mistake or was treated as amended so as to involve such an allegation. In these circumstances Wright J. gave judgment for the plaintiffs (the respondents) on the ground of mutual mistake as to the fundamental basis of the agreements of settlement, being of opinion that both parties entered into those agree- ments in the common belief that the agreements of employ- ment could not be put an end to without the consent of the appellants. ‘The Court of Appeal (Scrutton, Lawrence and Greer L.JJ.), in affirming the judgment of Wright J., held that the agree- ments of settlement should be set aside: (1.) on the ground of mutual mistake, and (2.) on the ground of the failure of the appellants to disclose their past breaches of duty. 1981. June 23, 25, 26, 29, 30; July 2, 3, 6. Schiller K.C. and Pritt K.C. (with them Vos) for the appellants. 1, There was here no mutual mistake such as to avoid the agreements of settlement. There was no mistake as to the existence or identity of the contracts which formed the subject-matter of the agreements for settlement, and the fact that the parties contracted in ignorance of some fact affecting the quality of the subject-matter as distinct from its existence or identity is not a ground for avoiding the agreements. [They referred to Smith v. Hughes (1); Scott v. Coulson (2) ; Kennedy v. Panama, New Zealand and Australian Royal Mail Co. (3); Cooper v. Phibbs (4); Mackay v. Dick (5); (1) (1871) L. R. 6 Q. B. 597, 606, 587, 588. @) [1903] 1 Ch, 453; [1903] 2 Ch. ro (1867) L. R. 2-H. L. 149, 164, @) (1867) L. R. 2 Q B. 580, "T) (1861) 6 App. Cas, 251, 265.A.C. AND PRIVY OOUNCIL. Couturier v. Hastie (1); Strickland v. Turner (2); Pope & Pearson v. Buenos Ayres New Gas Co.(3); Gompertz v. Bartlett (4); Balfour v. Sea Fire Life Assurance Co. (5); Taylor v. Caldwell (6); Galloway v. Galloway (7); Barr v. Gibson (8); Okill v. Whittaker (9); Harris v. Pepperell (10) ; Paget v. Marshall(1l); May v. Platt(12); Trigge v. Lavallée (13); Gill v. McDowell (14); Benjamin on Sales; 7th ed., p. 126.] 2. As to non-disclosure: a unilateral mistake as the result of an innocent concealment does not justify the Court in rescinding the contract. These were ordinary service agree- ments, and the appellants were under no duty to disclose their past misdeeds either to the Niger Company or to Lever Brothers. It is only in contracts where uberrima fides applies that that duty exists—e.g., in the case of an insurance policy or in cases where a fiduciary relationship exists between the parties: Healey vz Société Anonyme Frangaise Rubastic (15) ; Boston Deep Sea Fishing Co. v. Ansell (16); Ramsden v. David Sharratt & Sons, Ld. (17); Fletcher v. Krell. (18) [They also referred to Phillips v. Foxall. (19)] 3. Mutual mistake was not pleaded and was not raised at the trial until the evidence was completed, but the case was fought entirely upon fraud. In these circumstances it is submitted that that point is not open to the respondents. Sir John Simon K.C. and Wilfrid Lewis (with them Stuart Bevan K.C. and George Bankes) for the respondents. 1. The contracts which the cancellation agreements were to determine were contracts of service with Levers to manage the Niger Company, and what was being bought for 50,000. by the cancellation contracts was the right to get rid of the (1) (1858) 6 HL L. ©. 673. (2) (1852) 7 Ex. 208. (10) (1867) L. BR. 6 Eq. 1. (8) (1892) 8 Times L. R. 516, 758. (4) (1858) 2B. & B. 849, (6) (1857) 3 C. B. (N. S.) 300. (6) (1863) 3B. & 8. 826. (7) (1914) 30 Times L. R. 531. (8) (1838) 3 M. & W. 390. (9) (1847) 1 De G. & Sm. 83; 2 Ph. 338. (11) (1884) 28 Ch. D. 255, (12) [1900] 1 Ch. 616, (13) (1863) 15 Moo. P. C. 270, (14) [1903] 2 1. R. 463. (15) [2917] 1 K. B. 946, 947. (16) (1883) 6 C. & P. 15. (17) (1930) 35 Com. Cas. 314, 319. (18) (1873) 28 L. T. 105, (19) (1872) L. R. 7 Q. B. 666, 680. 165 HLL. (E,) 1981 Bett v. Lever Brormers, Lo.166 HOUSE OF LORDS (1932) H.L.(E.) appellants. There was abundant evidence upon which the 1931 mw Brew v BROTHERS, Ib. Courts below could come to the conclusion that the cancella- tion agreements were entered into on a fundamental basis which was assumed to exist but which did not exist. The respondents’ dispute is not as to the law, but as to the application of the law to the particular facts, If the mistake is merely a mistake as to the quality of something, and there is no warranty as regards that quality, the maxim caveat emptor applies. The difficulty is to decide whether in » given state of facts the mistake is a mistake of quality or is a mistake as to subject-matter. Cases on the avoidance of contracts on the ground of mistake or on analogous grounds have been classified under four heads: (1.) mutual mistake ; (2.) impossibility of performance; (3.) commercial frustration; (4.) implied condition; but one principle applies to them all. In every case the parties contract upon a contractual assumption which is false and which on the facts is found to lie at the very root of the contract. Then, if the assumption is not true, the contract is avoided. The assumption must be contractual and fundamental. If the fundamental thing is something which is assumed to exist when it was not there, the fact that some incidental thing may remain outstanding does not affect the question. On the construction of these agreements for service the appellants were contractually bound to give up, on the termination of the agreements, their positions in the companies in which Levers had a commanding interest, because that was the way in which they were serving Levers, and not only were they contractually bound, but there was no pecuniary benefit to be derived from retaining those positions, as they would have been obliged to account to Levers for their consideration. In any case this point has never been taken. The substance of the case is that Levers wished to get something which they had not then got the right to—to terminate the service agreements with the appellants—and the fact (if it be the fact) that there were some incidental things which would not be covered by the express terms of the service agreements does not go to theA.C. AND PRIVY COUNOIL. substance of the matter. In the respondents’ submission all the authorities can be reconciled on the following general principle: Wherever it is to be inferred from the terms of the contract or from its surrounding circumstances that the consensus has been reached upon the basis of a particular contractual assumption which is not true, the contract can be set aside—i.e., it is avoided. ab initio if the assumption is of present fact, and it ceases to bind if the assumption is of future fact when that assumption is shown to be untrue. This proposition is dealing with cases where a consensus has been reached—not with cases where there has never been a consensus at all. [They referred to Kennedy v. Panama, &c., Royal Mail Co. (per Blackburn J.) (1); Krell v. Henry (per Vaughan Williams LJ.) (2); F. A. Tamplin Steamship Co. v. Anglo-Mexican Petroleum Products Co. (per Earl Loreburn) (3); Bank Line v. Arthur Capel & Co. (per Lord Sumner) (4); Anson on Contracts, ch. vi.] The question really turns on where the line is to be drawn between a mistake as to quality and a mistake as to essence. In this case the erroneous assumption was essential to the contract. 2. As to non-disclosure: under the special terms of their contracts of service the appellants were under a duty to disclose their illicit dealings, and the fact that those dealings were not present to their minds at the time the contracts of settlement were negotiated affords no excuse. 3. As to the question whether the issue of mutual mistake was pleaded or was open, assuming the pleading to be obscure, Wright J. treated the issue as open, and for that reason no amendment was asked for, and all the facts necessary to establish mutual mistake were before the Court. The Court of Appeal also were of opinion that no amendment was required. Pritt K.C. replied. The House took time for consideration. 1931. Dec. 15. Lorp Banespurox. My Lords, I under- stand that my noble and learned friend Viscount Hailsham (1) L.R.2Q. B. 580, 588, (8) (1916) 2 A. C. 397, 403. (2) [1903] 2K. B. 740, 748-751. (4) [1029] A. C. 436, 455, 457. 167 HLL. (E) 1931 Benn v Leven ‘BRorsena, Lo.168 HL (BE) 1931 Bru °. Lever Broruens, Lo. Tora Blanesburgh. HOUSE OF LORDS (1982] 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 6, 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 5,500,0001., 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A.C. AND PRIVY COUNCIL. 169 undertake between ther thé reorganization and management 4H. L. (E.) 1931 ee 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 endowinent 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 1500J. 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170 HLL. (&) 1931 BELL . Laver BRoraers, Lp. Tord 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 10,0000. 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 60007. 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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 } per cent. outstanding shares in Niger represented 23,750 shares of 1/. 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 plaintifis, 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 in” BLL, (BE) 1931 er Brn a Lever Brornens, ‘Lp. Tora Bianesburgh172 EL. (E.) 1931 Sv Ber v Lever Broruzrs, Lp. Tora ‘Blanesburgh. HOUSE OF LORDS [1982] 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) (1888) 1 Meg. 385. (2) [1901] 1 Ch. 746, 757.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 Sa 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-Guines, 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 HLL. (E) 1931 Bru, Lever Brormers, Lp. ‘Blanesburgh.174 HL. (E) 1931 mw BELL °. Lever Buorwens, Lo. Lord Blanesburgh. HOUSE OF LORDS [1932] according to prescribed percentages, payment was to be made, first of a “pool tax” on all purchases of cocoa by each of them, and secondly, of any excess sum over a prescribed amount received on sales by any of them. It is not, how- ever, the precise terms of these agreements which are now directly relevant: their immediate bearing upon the case 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 havo 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 Jess unprofitable. One only was successful, and the net result of the four was a profit of 1360/. 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 EL. (E.) 1931 J BELL e. Lever Brornzrs, Lp. Tord Blanosburgh,176 HL (EB) 1931 et BELL a Laver ‘BROTHERS, Lb. Tord Blanesburgh. HOUSE OF LORDS [1982] 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.C. AND PRIVY COUNCIL. ‘Tho 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. ©, 1932, 3 N 17 HL (B) 1931 Bern v Lever Broruurs, Lo. Tord Buasesburgh,178 HLL, (E) 1931 we Bat v. Lever Broraers, ‘Ip. Tora 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 30,0007. 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, F, 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 Coorzr.” 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 N2 179 HLL, (E.) 1931 ww Bem v. Laver Bnorazns, ‘Lb. Tord Blanesburgh,180 HLL. (&.) 1931 Benn v. Lever Brormens, Tord Blanesburgh. HOUSE OF LORDS [1982] Mg. 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 30,0007. and Mr. Snelling 20,0001. 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