Die Martis, 15°
Decembris, 1931,
Parliamentary
Archives,
HL/PO/JU/4/3/858
BELL AND ANOTHER
v.
LEVER BROTHERS,
LTD., AND OTHERS.
Viscount
Hailsham
Lord
Blanes-
burgh.
Lord
Warring-
ton of
Clyffe.
Lord
Atkin.
Lord
Thanker-
ton.
Lord Blanesburgh.
MY LORDS,
I understand that my noble and
learned friend Viscount Hail-
sham has read the judgment about to
be delivered by my noble and
learned friend Lord Warrington of
Clyffe and agrees with it. This
is my own opinion which I now
proceed to express.
This is an Appeal by the
Defendants from an order of the
Court of Appeal of the 17th of
November, 1930, which affirmed
a judgment of Mr. Justice Wright
of the previous 5th of June
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 the 19th March, 1929,
with each of the Appellants by
the Respondents Lever Brothers,
Ltd., 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 £1,224 2s.
3d. on an endowment policy,
later to be mentioned, which under
the agreement of settlement with
him had been paid by Levers on
his behalf.
The facts of the case and the
course of the litigation make a
long story, even if, in detail,
those incidents only are dwelt upon
which have a bearing upon the
issues remaining to be dealt with
on the Appeal.
In Niger Co., Ltd., 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, exten-
sive enough in
itself, but only a portion 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 undertake
between
them the reorganisation 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 excep-
tional 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 pen-
sion rights. As he would
forfeit these if he were to leave the bank
2 [2]
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 was
favourably entertained by both Appellants, and in
due course the
conditions of their employment were 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—separ-
ate
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 £1,500
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 ter-
mination of his engagement, unless it was
terminated by himself. To
this obligation on Levers' part, I must
return later. 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 complete—
was the entire
consideration for this particular promise on Levers'
part and
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 the 1st of Novem-
ber, 1923, at a salary of £8,000
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 9th
August, 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 the 1st October, 1923, at a salary of
£10,000
per annum to the 31st March, 1925, and of £6,000 per
annum
for the rest of the term. There was in the formal agree-
ment 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
continued. The earlier contract with
Mr. Bell was replaced by a
fresh agreement for five years from
the 1st of July, 1926, at the
same salary and insurance premium
with the addition of a
commission in certain events which never
in fact became 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
£6,000 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 the 14th September, 1923,
Niger formally appointed both
Appellants to be Directors of the
Company and the Appellant
Bell to be its Chairman. On the 8th of
April, 1924, Mr. Snelling
was formally by Niger appointed
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
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
[3] 3
engagement as probably always
intended, it was in the business of
Niger that they were
exclusively employed. It was by their appoint-
ment to the
Chairmanship and Vice-Chairmanship of Niger and
to the directorate
of its many associated companies with all
attendant
responsibilities as such 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
that expression Lord Leverhulme
meant more than Lever Brothers,
Limited, and it is sufficiently
clear from other indications that to
his business mind Lever's
West African Interests, Lever's West
African business, and the
Niger Company Limited, were practically
convertible terms,
notwithstanding the fact that the .5 per cent.
outstanding shares
in Niger represented 23,750 shares of £1 each
held by 300
shareholders, and that £5,500,000 Debenture Stock
was
outstanding in the hands of the public. And this view,
natural
enough perhaps to a layman of Lord Leverhulme's realism,
re-
mained 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 Levers 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 party. The addition of Niger
as Plaintiff
after the first hearing corrected, formally, this miscon-
ception,
but it never entirely disappeared. Lever's West African
Interests
although there were none in 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, Lever's and Niger, each of whom had separate rights
of
dismissal depending upon identical considerations.
How serious in its present
consequences that confusion may
prove to be will emerge in the
sequel. At this stage it suffices to
observe that if regard is
had, as it must necessarily be, to the
essential separation in
personality between Levers and Niger, to
say nothing of their
possible divergence in interest, the relation in
which the
appellants ultimately stood to Levers and Niger
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 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 Darwen Company 1 Meg. 38), 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 Railway Com-
pany v. Forwood, 1901, 1 Ch. 746,757.
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 expulsion 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
13106 A 2
4 [4]
whole of their business hours to
the discharge of these duties. So
soon as they defaulted in these
respects Levers would be 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 the rest Levers had to rely only on their
voting power as
shareholders of Niger. Again, 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 Appel-
lants by special resolution (see Article 46 (2) ), even
if, in the dis-
charge of every duty they owed to the Company,
their actions had
been beyond reproach or even criticism.
And now to proceed again with
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 Mr. Justice Wright
speaking of the
Appellants in his summing up 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, Limited, the Anglo-Guinea
Produce Company, Limited,
and Frame and Company, Limited.
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 pro-
tecting 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 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 however 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 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 undertakes 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
[5] 5
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 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
the Jury regarded the Appellants as witnesses of
truth. A perusal
of the record shows how invariably in
these answers the Jury 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 agree-
ments 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
which lie at the root of the orders
under appeal. It will be
convenient to refer to these as the
offending transactions. Four
in number they all took place in the
short interval between the
4th November, 1927, and the 14th
December following. They were
transactions in cocoa differences
on the Appellants' 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 transactions.
Three
of them were more or less unprofitable. One only was
successful
and the net result of the four was a profit of £1,360.
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 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 for the other
companies
parties thereto. Apparently, however, no attempt to
ascertain the
existence or the extent of such responsibility has yet
been made.
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 most
ill-advised. They had
to be executed secretly, described by
separate letters lest in the
market they should be supposed to be
the transactions of Niger.
And they were conducted with further
secrecy so that they might
not be generally known in the office of
Niger itself. Such a pro-
cedure 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 condemna-
tion if it has been carried out in
secret. In this instance once again,
13105 A 3
6 [6]
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
escaped 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. 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
minor part of its total
activities, and in amount the offending trans-
actions were a mere
fraction of Niger's current cocoa business. To
these
considerations, coupled with the view of the transactions taken
by
the Jury may be attributable the conclusion also reached by them
that
these transactions did not even remain in the minds of the
Appellants
when the agreements of settlement were made. They
were, it must be
emphasised, 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. The neces-
sity 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
mentioned. 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
delicate.
Mr. Snelling was on the coast while they were proceeding
but Mr.
Bell rendered valuable services in bringing 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 relieved 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 Com-
pany, the scheme of amalgamation must
necessarily involve
their retirement altogether from Niger, For by
the scheme
the assets of both amalgamating Companies 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
the 1st May, 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 Limited, the
new
Company, but with no outlet within its own constitution for
the
undivided energies of the Appellants as its Chairman and
Vice-
Chairman, respectively. All this was realised while the
negotia-
tions for amalgamation were still only in progress and
during that
interval steps were taken by Mr. Cooper acting on
behalf of Levers
to bring about, after everything had been
completed, the termina-
tion of the Appellants' employment on some
agreed terms of pay-
ment. And the ensuing negotiation conducted
with the Appellants
separately resulted in the two agreements of
settlement with which
this litigation has been mainly concerned.
[7] 7
The agreement of settlement come
to with Mr. Bell is embodied
in a letter from Mr. Cooper to him of
the 19th March, 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 pro-
visional agreement for the amalgamation of
the African and
Eastern Trading Corporation and the Niger
Company
becoming effective as from the 1st May next you will on
that
date retire from the Boards of the Niger Company and its
sub-
sidiaries, including H.C.B. and its subsidiaries and in
con-
sideration of your so doing Lever Brothers, Limited, will
pay
you as compensation for the termination of your
agreement(s)
and the consequent loss of office the sum of £30,000
in full
satisfaction and discharge of all claims and demands by
you
of every nature and kind and howsoever arising against
Lever
Brothers, Limited, 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. 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 19th, 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 pro-
visional agreement for the amalgamation of
the African and
Eastern Trade Corporation and the Niger Company
becoming
effective as from 1st 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 Limited will pay you the sum
of
£20,000 in full satisfaction 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
13105 A 4
8 [8]
In due course confirmatory
letters were written and the agree-
ments were duly carried out.
The Appellants received their re-
muneration and continued in
active discharge of their duties until
the 30th of April
following. They then formally resigned all their
directorships as
required by the agreements and received from
Levers the
compensation arranged.
My Lords, while it is fully
accepted that the offending transac-
tions were entirely unknown
to and unsuspected by Mr. Cooper
when the negotiations were
proceeding, there was a serious differ-
ence of recollection
between Mr. Cooper and Mr. Bell on the ques-
tion 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.
Mr. Bell was certain that he made no such
statement in any such
connection and the Jury it is clear accepted
his recollection 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 them-
selves are immediately in mind. 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 considera-
tion moving from Levers for their
agreement to pay Mr. Bell
£30,000 and Mr. Snelling £20,000
was the satisfaction of what
Lever's, still in ignorance of the
offending transactions, supposed
were their respective salary
rights under enforceable agreements of
service with 2 years and 2
mouths of the term in each case unex-
pired. 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 £17,333 6s. 8d. and for Mr. Snelling £13,000.
But
these sums could not have been recovered even in actions for
wrong-
ful 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 subject
to serious reduction. Moreover that this sole
consideration 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 £20,000 was on this footing the
sum
claimable by Mr. Snelling £26,666 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 £17,000
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 induce-
ment
there undoubtedly entered the desire tangibly to recognise the
[9] 9
exceptional services rendered to
Niger by each Appellant acknow-
ledged in each letter and even now
affirmed : still more perhaps to
enlist their support of the
amalgamation and to have their assist-
ance in carrying it through
in all its details to completion : above
all to secure on the 1st
of May 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 the 19th March.
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 later appear.
Some two months later, as a
result of inquiries made of the
Appellants with reference to
certain cocoa transactions 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 finally
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 con-
cealed
from them, and on the 7th August, 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 con-
'
cealing 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."
The 26th paragraph of the Points
of Claim was as follows :—
" Alternatively 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."
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. Ltd. 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;
10 [10]
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 lines 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 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 justification of
the offending transactions as
such and were ready to account for
all the profit they had made by
them. ' If 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-examination; and in accord with this
attitude the £1,360
profit from these transactions had, in January,
1930, been duly
tendered to Niger by the Appellants, and had been
refused.
The action came on for trial
before Mr. Justice Wright and a
Special Jury on the 26th March,
1930, and it was opened, and
evidence was called to prove a case
of fraudulent misrepresenta-
tion 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 4th 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 Appel-
lants further charges of fraud,
the nature of which they fore-
shadowed. The trial had become one
of wide public interest, and
so soon as these new charges—all
of them of the gravest descrip-
tion—were stated in open
Court, the Appellants, in the interests of
their own reputations
felt, as they said, that they must be met.
Accordingly with no
discussion except as to terms, leave to amend,
on stringent
conditions, was given to Levers and the hearing, on the
amended
pleadings, was adjourned until the 13th of May to be
then heard
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 added as
co-plaintiff
that its rights in the matter had not as a part of its
undertaking
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 Lever's; although if Lever's 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 trans-
actions were all of them in
their origin the transactions of Niger,
subsequently appropriated
to themselves by the Appellants through
the innocent agency of the
company's brokers after it had become
clear to them that the
transactions would be profitable. Para-
graph 26 of the original
points of claim remains unaltered. But
still no case of duty to
disclose, or of fiduciary relation or of
uberrima fides was
made by the amended pleading.
[11] 11
My Lords, the Respondents took
upon themselves a very grave
responsibility in launching at that
stage against men who in all
others 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 agreements or either of
them of the 19th March,
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 transac-
tions "] or any of them being
contracts of the Niger Company
and appropriating to themselves the
profits on such contracts?
Jury's answer : No.
(B.) entering into the contracts
referred to a 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.
Jury's answer: Yes.
(C.) in wrongfully appropriating
to their own use and
benefit the sum of £1,000 being monies
of the Niger Company.
Jury's answer: No.
(D.) If so, what damages, if
any, under (A.) or (B.) or
(C.)?
Jury's answer : (B.) £1,360.
£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 :
in January, 1928?
Jury's
answer: Yes.
in March, 1929 ?
Jury's
answer: Yes.
12 [12]
If so, would tine 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 the 19th March,
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 agree-
ments, had the Defendant Bell or
the Defendant Snelling in mind
their actings in respect of these
transactions ?
Jury's answer : No.
If these questions are carefully
scrutinized it will be found that
they are based on an acceptance
of Lever's 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 utilised
information
obtained by them as its Directors, the question 3 (c)
was directed
to the only 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. 1
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 discussion upon the
findings and the pleaded case
which took place on a later day,
Counsel for the Respondents,
after claiming that Levers were en-
titled to recession of the
agreements of settlement on the ground of
unilateral mistake,
ended by propounding the view that they were
so entitled also on
the ground of mutual mistake, that issue as they
contended having
been raised by paragraph 26 of the Points of
Claim, and found in
their favour by the Jury in their answers to
questions 4 (a)
and 5. The learned Judge after argument, and hold-
ing, as it
seems, that the issue was sufficiently raised by para-
graph
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
[13] 13
of settlement must be set aside
on the ground of mutual mistake,
and he ordered the moneys paid
thereunder, 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 settle-
ment 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 repayment by Mr.
Bell of the premiums referred
to cannot stand. Wright J. over-
looked the fact that, even with
the agreements for settlement set
aside, the liability for payment
of these premiums would still re-
main on Levers under the
original agreement of 1923 because, apart
from Mr. Bell's
agreement so to do in the rescinded agreement of
settlement there
had been no termination of his engagement by him-
self. 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 least, the order of the
learned
Judge must now be corrected. But that is relatively a small
matter.
The greater questions involved remain in issue.
The Appellants appealed to the
Court of Appeal. On the 17th
November, 1930, their appeal was
dismissed. The Lords Justices
took the same view on mutual mistake
as the learned Judge had
done. They also held that, although in no
way pleaded, his Judg-
ment could be supported on the ground that
the Appellants during
the negotiation with Levers for the
agreements for settlement were
under a duty to disclose their
offending transactions of 15 months
before: and that they were not
excused from disclosure by reason
of the fact that, as the Jury
had found, these transactions had
passed from their minds. Upon
the question of amendment Lord
Justice Scrutton and Lord Justice
Lawrence were of opinion that
the issue of mutual mistake had not
been pleaded, but, differing
in that respect from the learned
Judge's view, 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 Lord Justice
Lawrence's view the
objection of the Appellants' Counsel to that
course being taken
was " technical " and " devoid of merit."
Lord
Justice Greer held that the issue of mutual mistake was
sufficiently
raised by paragraph 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. 1st, 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 neces-
sary 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 Re-
spondents entitled to judgment upon the issue
raised by them. I
propose to deal with each of these questions in
their order.
As to the first, 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, paragraph 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 once
only that
the fraud charged might be more flagrant in character.
Paragraph
26 remained unaltered. Even without the particulars
13105 A 7
14 [14]
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 par-
ticulars
appear to me conclusively to show that no such allegation
was
intended to be made. Further paragraph 26 if limited to
unilateral
mistake induced by the Appellants' fraud is, even
although
alternative, consistent with all that precedes, but
mutual mistake,
innocent on the part of the Appellants, is so
entirely destructive
of everything previously alleged against
them, that no interpreta-
tion of paragraph 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 conse-
quent upon a case of
voidability either for fraud or unilateral mis-
take induced by
fraud. But if the allegation, even alternative,
was that the
agreements were entered into under mutual mistake
of fact, then
these 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 paragraph 26. Accordingly I am of 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 the learned Judge only entertained
that case,
because of his view which all your Lordships consider
erroneous
that no amendment was called for.
2. This circumstance makes the
second of the above questions
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 :
Paragraph
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 agreements that the said contracts of
service and each
of them existed as binding obligations upon the
said Plain-
tiffs 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
paragraph 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 pro-
pose in dealing with the
propriety or otherwise of its exercise now
to govern myself by two
authoritative statements of relevant prin-
ciple, one by Lord
Watson, and the other by Lord Lindley, when
Master of the Rolls.
My first and second reasons for concluding
[15] 15
that leave to amend should in
this case be refused are based upon
Lord Watson's judgment in the
Connecticut Fire Insurance Com-
pany v. Kavanagh 1892 A.C.
473—where the Respondent had
complained that the case which
was being maintained against
him before the Judicial Committee was
not within the Appellants'
declaration : 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
instruction of a document or upon facts
" either admitted or
proved beyond controversy it is not only com-
" petent 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 deriding nice ques-
" tions 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 negligence might be attended with
" the risk of doing
injustice."
Except, that in that instance,
the new case was one of negli-
gence, 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 amendment
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 4th question. But, on
examination of 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, which as
applied to a case
from which all fraud has been 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 direction, as applied to the new case, the
answers
of the Jury to the questions 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 4th question as they stand, would
in my
judgment expose the Appellants to a risk of injustice from
which
they are entitled to claim protection.
My Lords, 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 dis-
claimer of all further
responsibility under the Appellants' agree-
ments 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 pro-
perly appreciated. I have
also explained why I think it so un-
16 [16]
fortunate that the learned Judge
should have directed the Jury, as
he did, that the answers to
Question 4 (a) and Question 4 (b) should
be based
upon the same considerations. All this, however, is
relatively
unimportant here. Even the further direction, to which
I am now
about to refer, might have been allowed to pass, had the
fraud
referred to in Question 3 (c) been found, 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,
failed and has disappeared, and the precise character in
legal
responsibility of the offending transactions stripped of
fraud
becomes of essential importance. And here the point to be
noted is
that these transactions involved no contract or
engagement in
which, either for profit or loss, Niger was at all
concerned. The
contracts involved 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 quite
different from his liability,
if any there be, in respect of his profits
from a contract in
which the company has no interest at all. In the
first case,
unless by the company's regulations the Director is per-
mitted,
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 per-
" sonal 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 demon -
"
strate how far the interest of the Company is affected. No
"
inquiry on that subject is permitted."
The learned Judge did not give
the source of his quotation,
and I have not succeeded in tracing
it. But both from its wording,
and also from its close similarity
to Lord Cranworth's locus
classicus on the subject printed
in the head note to Aberdeen
Railway Coy. v. Blaikie, 1
Macq. 461, I can have little doubt that
like Lord Cranworth's
statement, the quotation is concerned with
a company's contracts
in which, on the other side of the table, a
director is
interested, and with reference to which the company's
regulations
are silent. The quotation is not addressed to a
director's own
contracts in which the company has no financial
interest at all.
The regulations of Niger are
illuminating with reference to both
classes of contracts. Article
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 another company
and entitled to his privileges as such.
[17] 17
And this brings me to the
position of a Director in relation to
contracts of the second
class, with which we are here alone con-
cerned. The principle
will be found in the case usually cited
in relation to it,
although reported only in the Weekly Notes, of The
London and
Mashonaland Exploration Company v. New Mashona-
land
Exploration Company, 1891, W. N. 165, 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
con-
fidentially by him as a Director of the first Company he
could not
at the instance of that Company be restrained in his
rival
directorate. 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 provision in the regulations of Niger, and it was
not
because the offending instructions were instructed during the
day
and not in the evening that they are impugned. It was not
sug-
gested 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 in the negative.
Accordingly I reach the con-
clusion that, so far, the Appellants
in relation to the offending trans-
actions 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 Appel-
lants in my judgment were
quite right in recognising so soon as that
clause was brought to
their notice that they should not retain the
profit they bad made
from these transactions.
Instead, therefore, 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 carry-
ing out the
offending transactions had utilized for their own pur-
poses any
property of Niger or any confidential information obtained
by them
as its Directors, they were not, apart from the Pool Agree-
ment,
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 lie 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 con-
sideration 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
to the Jury it is not surprising
that they 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
13105
A
9
18 [18]
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 oppor-
tunity 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.
I have already
indicated the general nature of the 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 based on
the principle enunciated by Lindley,
M.R., which I nave already
foreshadowed. It would be wrong, Lord
Lindley said, in Nocton
v. Ashburton (see 1914, A.C. 963),
" to allow a case based 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, 43 L.T. 466, 470, and Noad v.
Murrow, 40 L.T. 100.
In my judgment it applies here
with compelling force. The
first amendment made by the Respondents
charging 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
permitted 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 objection
seems to me to be funda-
mental, and in the interests of fairness
in litigation it is, I think,
optimi exempli, 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 existing materials,
I should not wish it to be sup-
posed 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
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. 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
[19] 19
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.
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 tried to show, 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 enjoy-
ment 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 both
the profit and the damage they
remain accountable, as is
wholesome.
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. Speak-
ing 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 remuneration
for their services of sums
which, while they may seem bountiful to
minds disciplined in a
school of progressive austerity, would doubt-
less, 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.
Viscount
Hailsham.
Lord
Blanes-
burgh.
Lord
Warring-
ton
of
Clyffe.
Lord
Atkin.
Lord
Thank-
erton.
[20]
BELL and ANOTHER
v.
LEVER BROTHERS, LTD., AND ANOTHER.
Lord Warrington of Clyffe.
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 the 17th
November, 1930, affirming a
judgment of Mr. Justice Wright (dated
the 5th June, 1930) pro-
nounced 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, Ltd., and the two
Appellants respectively) were declared
void and were set aside and
the Appellants respectively were
ordered to repay to the Respondents
(Lever Brothers, Ltd.) 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 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
fundamental 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, viz.,
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, Ltd.,
having very large interests in the
Niger Company, Ltd. (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 commercial 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 Ap-
pellants. The result
was the making of a service agreement with each
of the Appellants,
that with the Appellant Bell being dated the 9th
August, 1923, at
a salary of £8,000 per annum, and that with the
Appellant
Snelling being dated the 9th October, 1923, at a salary
of £6,000
per annum. Mr. Bell's agreement was for five years
from the 1st
October, and Mr. Snelling's was for five years
from the 1st
November, 1923. Each period was subsequently
extended to five
years from the 1st July, 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 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
[21] 2
a Vice-chairman. Each 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 the 1st
July, 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 Trading Company
were made, which on their
becoming effective on the 1st May in
that year would involve the
termination of the two service
agreements before the period fixed
for their continuance, viz.,
the 1st July, 1931.
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 the 1st May, 1929, he would
retire from the Boards of the
Niger Company and its subsidiaries
and in consideration 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
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 pro-
vision 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 resigna-
tion 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 the 4th November and the
14th December, 1927, the two
Appellants entered on their own
behalf into certain speculative
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 £l,360. 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 Com-
pany 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 pro-
ceedings, the particulars of
which it is unnecessary to state, the
Appellants, in answer to
enquiries 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.
8 [22]
The present action was commenced
by the Lever Company alone
on the 9th August, 1929. By an
amendment made on the 2nd April,
1930, the Niger Company were
added as Co-Plaintiffs.
As ultimately submitted for
decision the case of the Respon-
dents contained charges of
fraudulent misrepresentation and con-
cealment by both Appellants
with the object and effect of inducing
the Lever Company to make
the agreements of the 19th March,1929, charges of
wrongfully appropriating as their