Lever Bros Ltd v Bell [1931] UKHL 2

House of Lords
Between
Lever Bros LtdAppellantBellRespondent
Before
Lord BlanesLord WarringLord AtkinLord ThankerLord Blanesburgh
[1]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 13105 A 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 AC 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 own the con- tracts above mentioned being as alleged contracts of the Niger Com- pany, and appropriating to themselves the profits on such contracts and a charge of appropriating to their own use and benefit £1,000 the monies of the Niger Company. All these charges were nega- tived by the jury and their findings in this respect are accepted. The points of claim after the allegations of fraudulent mis- representation and concealment above mentioned contained the following clause :— " 26. Alternatively the said agreements and each of them " were made and the moneys paid thereunder were paid under " a mistake of fact." and the Plaintiffs claimed rescission of the two agreements of the 19th March, 1929, and repayment of the moneys paid thereunder, and a declaration that previously to the making of such agree- ments the Plaintiffs were entitled to terminate the contracts of service and to dismiss the Defendants without notice by reason of their alleged conduct. The Appellants admitted their liability to account to the Niger Company for the £1,360 the profits on the transactions above men- tioned, and this sum was duly paid into Court. Ultimately the case was decided against the Appellants on the alternative point above referred to, the mistake there mentioned being treated as a mutual and not as a unilateral mistake. The questions material to the issue of mistake as put to the jury and their answers thereto were as follows:— ' 3 (B). Did the Defendants or either of them commit ' breaches of contract or duty towards the Plaintiffs in ' entering into the contracts referred to as C.T.C., R.T.D., ' and G.S.2 or any of them as private transactions on their ' own account and for their own benefit? " Answer:
" Yes." " 4 (a). Were the Plaintiffs (Levers) entitled to deter- " mine the contracts of service with the Defendants or either "of them? ' Answer : "
Yes." " (1.) In January, 1928." Answer : " Yes." " And (2) in March, 1929. If so would the Plaintiffs "(Levers) have elected to exercise such right at either of such "dates?" Answer : " Yes." " ( b ) Similar questions and answers as to the position " of the Niger Company in reference to the offices therein held " by the Defendants respectively. "5. When Levers entered into the agreements of 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?" Answer : " No." " If Levers had so known would they have made these " agreements or either of them? " Answer: "No." " At the date of the respective interviews prior to these " agreements had the Defendant Bell or the Defendant [23] 4 " Snelling in mind their actings in respect of these " transactions? ' Answer: " No." The final question was put to the jury at the suggestion of the learned judge, and obviously is only relevant to the issue whether there was a mutual mistake. No objection to it was taken on the part of the Appellants. Moreover, it is quite obvious that an argument founded on unilateral mistake had not the slightest chance of success, and it must have been clear to both parties that the learned judge was going to deal with the case as one of mutual as distinguished from unilateral mistake. I will assume for the present that either on the pleadings as rightly understood, or on the manner in which the case was conducted, or on the assumption that all the evidence reasonably likely to be forthcoming on the point was before the Court the learned judge was entitled to deal with the matter on the footing of mutual mistake, and will consider the case on that footing. The learned judge thus describes the mistake invoked in this case as sufficient to justify a Court in saying that there was no true consent, viz., " Some mistake or misapprehension as to some " facts . . . which by the common intention of the parties, whether " expressed or more generally implied, constitute the underlying " assumption without which the parties would not have made the " contract they did." That a mistake of this nature common to both parties is, if proved, sufficient to render a contract void is, I think, established law. I will refer to two cases only amongst several in which the principle was acted on. The first is one at Common Law, viz., Strickland v. Turner, 7 Exch. 208. In that case a contract for sale of an annuity, under which the purchase money had been paid, was held to be void at law and the money was ordered to be repaid, on its being discovered that the person on whose life the annuity depended had without the knowledge of either party died before the date of the contract of sale. The parties were treated as having intended to contract on the basis of something of value actually existing, and as this proved not to have been the case the contract failed to be binding. The other case (Scott v. Coulson, 1903, 2 Ch. 249) is an example of the application of the same principle in a Court of Equity. A contract for the sale of a policy was set aside on its being dis- covered that the assured was dead at its date, both parties being in ignorance of that fact. I cite this case for the sake of a passage in the judgment of Vaughan Williams, L.J. He says: " If we ' are to take it that it was common ground that at the date of the ' contract for the sale of their policy both the parties to the con- ' tract assumed the assured to be alive, it is true that both parties ' entered into the contract on the basis of a common affirmative ' belief that the assured was alive; but as it turned out that there ' was a common mistake the contract was one which cannot be ' enforced. This is so at law and the Plaintiffs do not require to ' have recourse to equity to rescind the contract if the basis which ' both parties recognised as the basis is not true." This principle, however, is confined to cases in which " the " mistake is as to the substance of the whole consideration going " as it were to the root of the matter " (Kennedy v. Panama Mail Company, L.R., 2 Q.B., 580, p. 588), and does not apply where the mistake is only as to some point, a material point it may be, and even one which may have been the actuating motive of one of the parties, an error as to which does not affect the substance of the whole consideration. Kennedy v. The Panama Mail Company is a case in which it was held that the error relied on did not affect the substance of the consideration and the contract in question was accordingly 5 [24] enforced. The contract was one to take shares in a company. The prospectus on the faith of which the Plaintiff had applied for shares contained a representation made in good faith that the company had obtained a valuable contract for the carriage of mails. The representation was intended to, and did in fact, in- duce the Plaintiff to apply for shares. It was untrue, for though at the time the application for shares was made and accepted there were reasonable grounds for expecting that such a contract would be obtained, it was never in fact concluded. It is to be observed that the error did not affect the shares themselves the subject of the contract impeached; they were, notwithstanding the error, the very thing about which the parties were contracting. All that was affected were the prospects of the company earning profits available for payment of dividends. Accordingly the Plaintiff's action brought for the purpose of setting aside the contract and obtaining repayment of his subscription was dismissed. In Smith v. Hughes, L.R., 6 Q.B. 597, the result was the same, but for a different reason, viz., that there was no sufficient finding that the mistake was mutual. It was alleged that the vendor was intending to sell and the purchaser intending to buy and believed he was buying old oats whereas the actual parcel of oats, the sub- ject of the contract, consisted of new oats. The purchaser's claim to be relieved of the contract failed because the learned Judge at the trial did not point out the necessity of finding not only that the purchaser believed the oats were old but that he also believed that the vendor was selling them as old. This kind of difficulty does not arise in the present case. It is in my opinion clear that each party believed that the remunerative offices compensation for the loss of which was the subject of the negotiations were offices which could not be determined except by the consent of the holder thereof, and further believed that the other party was under the same belief and was treating on that footing. The real question therefore is whether the erroneous assump- tion on the part of both parties to the agreements that the service contracts were undeterminable except by agreement was of such a fundamental character as to constitute an underlying assumption without which the parties would not have made the contract they in fact made, or whether it was only a common error as to a material element but one not going to the root of the matter and not affecting the substance of the consideration. With the knowledge that I am differing from the majority of your Lordships I am unable to arrive at any conclusion except that in this case the erroneous assumption was essential to the contract which without it would not have been made. It is true that the error was not one as to the terms of the service agreements, but it was one which, having regard to the matter on which the parties were negotiating, viz., the terms on which the service agreements were to be prematurely determined and the compensation to be paid therefor, was in my opinion as fundamental to the bargain as any error one can imagine. The compensation agreed to be paid was in each case the amount c>f the full salary for the two years and a half unexpired with the addition in Mr. Bell's case of £10,000 and in Mr. Snelling's of £5,000. It is difficult to believe that the jury were otherwise than correct in their answer to the second branch of the group of ques- tions numbered 5, viz., that had Levers known of the actings of the Appellants in regard to the dealings in question they would net have made the agreements now impeached or either of them. It is true that such a finding is not in the strict sense one of fact, but it is an inference which the jury were entitled to draw from the evidence and from all the circumstances of the case, it is one which the learned judge and the Court of Appeal have also drawn, and if, I may say so with respect, it is one I should draw myself. I [25] 6 also agree with the learned judge that looking at the matter from the side of the Appellants the existence of an agreement giving them rights which could only be compromised by compensation was in the same way the root and basis of the cancellation agreements. In my opinion therefore, assuming that the point was open, the appeal on the main question ought to be dismissed. As to the question whether the point was open I agree that it is at least doubtful whether mutual mistake as to a fundamental fact was sufficiently pleaded either in the pleading itself or by the par- ticulars subsequently given, but I have no hesitation in coming to the same conclusion as that arrived at by Scrutton and Lawrence L. J.J., viz., that having regard to the proceedings at the trial effect ought not to be given to a technical objection such as that in ques- tion—no further evidence was in my opinion needed or could reasonably be expected to be forthcoming on the question and no substantial prejudice has been sustained by the Defendants. But while I think the appeal ought to be dismissed, there is one point which appears to have been overlooked at the trial and in reference to which in my judgment there should if the appeal were dismissed be a variation in the order. The service agreement with Mr. Bell provided that Lord Lever- hulme was to take out in the Atlas Assurance Company and Lever Brothers to pay all premiums on an Endowment Policy on Mr. Bell's life maturing at the age of 60 or previous death for an amount which would provide £1,500 per annum or £16,200 at his option. This policy was to belong to him, the premiums being paid by Lever Brothers, notwithstanding the termination of his engagement unless the same should be terminated by him. The cancellation agreement preserved this obligation on the part of Lever Brothers, and if this is set aside the original agreement stands. I cannot think that the conduct of Mr. Bell amounts to a termination by him of the engagement within the meaning of the provision above-mentioned, and if the judgment appealed From were to stand provision should be made for the continued payment by Lever Brothers of the pre- miums, and the repayment to Mr. Bell of any premiums paid by him. I have purposely avoided dealing with the question whether the Appellants were under an obligation as servants to disclose to Lever Brothers their breaches of the service agreements. In the view I take the question is immaterial. If such an obligation existed it would merely afford a further ground for the termination by Lever Brothers of the service agreements, for which such breaches them- selves afforded a sufficient ground. This case seems to me to raise a question as to the application of certain doctrines of common law, and I have therefore not thought it necessary to discuss or explain the special doctrines and practice of Courts of Equity in reference to the rescission on the ground of mistake of contracts, conveyances and assignments of property and so forth or to the refusal on the same ground to decree specific performance, though I think in accordance with such doctrines and practice the same result would follow. [16] BELL AND ANOTHER v. LEVER BROTHERS LIMITED AND OTHERS Viscount Hailsham. Lord Blanes burgh. Lord Warring- ton of Clyffe. Lord Atkin. Lord Thanker- ton. Lord Atkin. my lords. This case involves a question of much importance in the forma- tion and dissolution of contracts. The facts are not very com- plicated, though in the course of eliciting them the legal proceedings have undergone vicissitudes which have made the task of deter mining the issues more difficult than need be. In 1923 The Niger Co. Ld. was controlled by Lever Brothers Ld. whom I shall call Levers, who held over 99 per cent, of its shares. The Niger Co. dealt in West African produce including cocoa and at this time appears to have been making trading losses. To restore the position Levers approached the appellant Bell who had banking experience and the appellant Snelling, a chartered accountant, with a view to their taking part in the management of the Niger Co.'s affairs. In August, 1923. an agreement was made between Levers and Bell, under which Bell entered the service of Levers for a term of five years from 1st November. 1923, on the terms of letters of 8th August, 1923, which provided that Bell's salary was to be £8.000 a year. Levers were to pay the premiums on an endowment policy maturing at the age of 60 for a sum of £16.200. Levers were to appoint and maintain Bell as Chairman of the Niger Co. during his service. Bell was only to be responsible to the Committee of Control of Lever Bros, and to the shareholders of the Niger Co. In October an agreement was made between Snelling and Levers whereby Snelling was to be in the service of the company for five years from 1st October. 1923, on the terms of a letter of 12th September, which provided that Snelling was to serve Levers in regard to its West African interests at a salary of £10.000 per annum to 31st March, 1925, and £6,000 for the remainder of the five years. On 14th September both Bell and Snelling were appointed by the Niger Co. directors of the company, and Bell was appointed chairman of the Board. In April, 1924, Snelling was appointed a vice-chairman. The result of the appoint- ments 1 was a success. The Niger Co. began to prosper and in July, 1926, the agreements of both Bell and Snelling with Levers were cancelled and new agreements substituted for a further period of five years from 1st July, 1926, at the same salaries but with a com- mission on the profits of the Niger Co. The Niger Co. continued to prosper, and in March, 1929. arrangements were concluded for an amalgamation between the Niger Co. and its principal trade competitor, the African and Eastern Trading Corporation. The terms of the amalgamation appear to have left no room for Bell or Snelling. It was necessary, therefore, to dispose of the agreements between them and Levers. Mr. D'Arcy Cooper, the chairman of Levers, saw both gentlemen and arranged terms with them which are recorded in two letters of 19th March, 1929. The letter to Bell is as follows. [Set out letter at p. 210.] The letter to Snelling is in similar terms except that the compensation given was £20,000. Both sums were only paid on 1st May, 1929, on which date the two appellants retired from their service with Levers and from the Boards of the Niger Co. and various subsidiary companies to which they had been appointed. Very little attention appears to have been paid at the trial to these subsidiary companies, and there is [27] 2 a scarcity of evidence about them. The position in regard to them may demand further consideration; at present I leave them on one side. The position then is that in March, 1929, the two appellants left the service of Levers with substantial compensation in their pockets and mutual expressions of respect and esteem. In July, 1929, Levers discovered facts which indicated that their expenditure of £50,000 and their expressions of regard had been misplaced, for the years October-October, 1926-7, 1927-8, and 1928-9, the .Niger Co., together with three of its trading com- petitors, including the African and Eastern Trade Corporation, had been parties to what were called "Pooling Agreements," under which the parties undertook to disclose to one another their dealings in Gold Coast cocoa; not to buy cocoa produced elsewhere without the consent of the Pool Committee; agreed to fix from time to time buying and selling prices and not to sell without consent below the agreed selling price; and made provision for distributing in agreed proportions the proceeds of the pool. It appears to have been con- sidered necessary that the operations of the Niger Co. under the pool should be carried out without excessive publicity; and the brokers' contracts for the Niger Co. were recorded under initials. In November and December, 1927, the two appellants, at a time when the Pool Committee were lowering the pool purchase price of cocoa, on several occasions sold cocoa short; and closing in a few days at the reduced price made profits. A few days later they bought for the rise and made a small profit. Altogether the dealings resulted in a profit of £1,360. The transaction was of course conducted without the knowledge of Levers or any responsible official of the Niger Co. It was carried out in secrecy; and pay- ment of the profit was made by the brokers at the appellants' request in a draft for American dollars. No defence can be offered for this piece of misconduct. The appellants were acting in a business in which their employers were concerned; their interests and their employers conflicted; they were taking a secret advantage out of their employment; and committing a grave breach of duty both to Levers and to the Niger Co. The jury have found that had the facts been discovered during the service, Levers could and would have dismissed them, and no objection can be taken to this finding. Having made this discovery it naturally occurred to Levers that instead of spending £50,000 to cancel the two service agreements they might, if they had known the facts, have got rid of them for nothing. They therefore claimed the return of the money from the appellants, as well as the amount of the profits made; and on 7th August, 1929, issued the writ in the present action, claiming damages for fraudulent misrepresentation and concealment; an account of the defendants' dealings in cocoa; and repayment of money paid under a mistake of fact. The pleadings were in conformity with the endorsement on the writ. The defendants admitted the dealings in cocoa, alleging that they were speculative dealings in differences. They denied that they were wrongful but pleaded tender of the profit of £1,360 which sum by an amended defence they paid into Court. It was not disputed in the Court of Appeal or before this House that the dealings were wrongful; and no question remains on this issue or as to the remedy ordered in respect of it. The trial began on 24th March, 1930, before Wright J. and a City of London Special Jury. On the fourth day on the con- clusion of their evidence the plaintiffs sought and obtained permission to amend their pleadings by alleging a series of fraudulent dealings in cocoa by the defendants involving misappro- priation of the Niger Co.'s funds. At the same time for the first time the Niger Co. were added as plaintiffs. The 3 [28] defendants were eventually acquitted of all the new charges. On 5th May, 1930, the trial commenced anew before the same Judge and a new Jury. At the conclusion of the evidence there was some discussion as to the questions to be put to the Jury. The Court adjourned for a day or two before the summing up of the Judge. There had been some discussion as to the issue raised by the plea of mistake, and when the case was resumed counsel for the plaintiffs suggested an additional question : " Did the plaintiffs " in entering into the said agreements for the payment of and in " paying the £30,000 and £20,000 respectively act in ignorance of " the defendants' conduct (my Lord that avoids the word " ' mistake ' to which Your Lordship took objection) and was such " ignorance due to non-disclosure by the defendants of such '' conduct ? ' So far this seems to have been the only reference to the matter of mistake in the proposed questions. The learned Judge said : " I have been thinking about that matter; probably " yours is better; but what I thought of asking was this: ' When " ' Levers entered into the agreement of 19th March, 1929, did " ' they know of the actings of the defendants or either of them " ' in regard to the dealings C.T.C., R.T.D. and G.S.2? If Levers ' had known would they have made these agreements or either of " ' them? At the date of the respective interviews prior to these " ' agreements had the defendants or either of them in mind their " ' actings in respect of these transactions? To the last question Mr. Pritt for the defendants objected that there was no evidence that they had. Whereupon the Judge said: " The point must really arise; that issue of fact will have • " to be dealt with by the Jury when they are considering the ques- " tion of fraudulent misrepresentation or fraudulent concealment. " On the other hand the verdict of the Jury on this point may " have some bearing hereafter on the question of mistake." The circumstances under which this last question was admitted are relevant to the complaint of the appellants as to the subsequent admission of any issue as to mutual mistake. They say that the only issue raised by the pleadings was as to a unilateral mistake by the plaintiffs; that the question propounded by the plaintiffs shows this; and that it cannot be assumed that the Judge, while stating that the plaintiffs' questions might be better, but he pre- ferred his own, should have asked a question for the purpose of solving an issue as to mutual mistake which was not upon the plead- ings and upon which no witness had been examined or cross- examined and on which no word bad been said to the jury by counsel on either side. At present it is unnecessary to say more on the topic. The questions as finally left to the jury and their answers have been stated to the House and I need not repeat them. The Judge heard argument as to how judgment should be entered. At some stage of the proceedings the parties had agreed that rescission of the agreements must be left to the Judge and that on any point left to him he must have leave to draw inferences of fact. Eventually the Judge gave judgment for apparently both plaintiffs for £31,224 against the defendant Bell and £20,000 against the defendant Snelling, on the ground that " there was a total failure of considera- tion such as to vitiate the bargain " because " the parties dealt ' with one another under a mutual mistake as to their respective ' rights." On appeal this judgment was affirmed. The three Lords Justices accepted the view of Mr. Justice Wright that there was a mutual mistake which entitled the plaintiffs to recover. They were also agreed that there was a duty upon the defendants to disclose to the plaintiffs their misconduct as to the cocoa dealings and that the contracts under which the money was paid were in consequence voidable. [29] 4 Before the Court of Appeal and before this House the appellants contended that no issue as to mutual mistake had been raised by the pleadings, and that it was not open to the learned Judge or to the Court of Appeal to determine the case without an amendment of the pleadings and upon an issue of fact which was not submitted to the jury. The Lords Justices appear to have held varying views on this point. Lord Justice Scrutton thought that the point was not pleaded, but that it was the practice of the Courts to deal with the legal result of pleaded facts, though the particular legal result is not pleaded except where to ascertain the validity of the legal result would require the investigation of new and disputed facts which had not been investigated at the trial. Here he thought that there were no such disputed facts, and the question could be dealt with without amendment. Lord Justice Lawrence on the assumption that mutual mistake was not pleaded thought that all the facts relevant to mutual mistake had been fully investigated and ascertained at the trial: and that the objection was a mere technical objection without merits. Lord Justice Greer thought that mutual mistake was sufficiently pleaded. I think it is sufficient to say for present purposes that it seems to me clear when the pleadings and particulars are examined that the pleading was confined to unilateral mistake. In these circum- stances the Judge on a trial with a jury has without consent of the parties no jurisdiction to determine issues of fact not raised by the pleadings: nor in my opinion would a general consent to determine issues not decided by the jury include a power without express further consent after the jury had been discharged to amend plead- ings so as to raise further issues of fact. Similarly the powers of the Court of Appeal, which under 0. 58 r. 4 are wider than those of the Judge, are limited in the case of trials by jury to determine issues of fact in cases where only one finding by a jury could be allowed to stand. Further, I think that the Court of Appeal cannot without amendment decide a case upon an unpleaded issue of Law which depends upon an unpleaded issue of fact. If the issue of fact can be fairly determined upon the existing evidence they may of course amend : but in any such case amendment appears to me to be necessary. In this House in the course of the hearing an amendment was tendered by the plaintiffs which did aver a mutual mistake. In the view that I take of the whole case it becomes unnecessary to deal finally with the appellants' complaint that the points upon which the plaintiffs succeeded were not open to them. 1 content myself with saying that much may be said for that contention. Two points present themselves for decision. Was the agree- ment of March 19, 1929, void by reason of a mutual mistake of Mr. D'Arcy Cooper and Mr. Bell ? Could the agreement of March 19, 1929, be avoided by reason of the failure of Mr. Bell to disclose his misconduct in regard to the cocoa dealings ? My Lords, the rules of law dealing with the effect of mistake on contract appear to be established with reasonable clearness. If mistake operates at. all it operates so as to negative or in some cases to nullify consent. The parties may be mistaken in the identity of the contracting parties, or in the existence of the subject matter of the contract at the date of the contract, or in the quality of the subject matter of the contract. These mistakes may be by one party, or by both, and the legal effect may depend upon the class of mistake above mentioned. Thus a mistaken belief by A that he is contract- ing with B, whereas in fact he is contracting with C, will negative consent where it is clear that the intention of A was to contract only with B. So the agreement of A and B to purchase a specific article 5 [30] is void if in fact the article had perished before the date of sale. In this case, though the parties in fact were agreed about the subject matter, yet a consent to transfer or take delivery of something not existent is deemed useless; the consent is nullified. As codified in. the Sale of Goods Act the contract is expressed to be void if the seller was in ignorance of the destruction of the specific chattel. I apprehend that if the seller with knowledge that a chattel was destroyed purported to sell it to a purchaser, the latter might sue for damages for non-delivery though the former could not sue for non-acceptance, but I know of no case where a seller has so com- mitted himself. This is a case where mutual mistake certainly and unilateral mistake by the seller of goods will prevent a contract from arising. Corresponding to mistake as to the existence of the subject matter is mistake as to title in cases where unknown to the parties the buyer is already the owner of that which the seller purports to sell to him. The parties intended to effectuate a transfer of ownership : such a transfer is impossible : the stipulation is naturali ratione inutilis. This is the case of Cooper v. Phibbs, L.R. 2 H.L. 149 (1867), where A agreed to take a lease of a fishery from B. though contrary to the belief of both parties at the time A was tenant for life of the fishery and B appears to have had no title at all. To such a case Lord Westbury applied the principle that if parties contract under a mutual mistake and misapprehen- sion as to their relative and respective rights the result is that the agreement is liable to be set aside as having proceeded upon a common mistake. Applied to the context the statement is only subject to the criticism that the agreement would appear to be void rather than voidable. Applied to mistake as to rights generally it would appear to be too wide. Even where the vendor has no title though both parties think he has, the correct view would appear to be that there is a contract, but that the vendor has either com- mitted a breach of a stipulation as to title, or is not able to perform his contract. The contract is unenforceable by him but is not void. Mistake as to quality of the thing contracted for raises more difficult questions. In such a case a mistake will not affect assent unless it is the mistake of both parties and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be. Of course it may appear that the parties contracted that the article should possess the quality which one or other or both mistakenly believed it to possess. But in such a case there is a contract and the inquiry is a different one. being whether the contract as to quality amounts to a condition or a warranty, a different branch of the law. The principles to be applied are to be found in two cases which as far as my knowledge goes (have always been treated as authoritative expositions of the law. The first is Kennedy v. Panama Royal Mail Co., L.R. 2 Q.B. 580 (1867). In that case the plaintiff had applied for shares in the defendant company on the faith of a prospectus which stated falsely but innocently that the company had a binding contract with the Government of New Zealand for the carriage of mails. On dis- covering the true facts the plaintiff brought an action for the recovery of the sums he had paid on calls. The defendants brought a cross action for further calls. Blackburn J. in delivering the judgment of the Court (Cockburn C.J., Blackburn, Mellor and Shee J.J.) said at p. 586 : ' The only remaining question is one of ' much greater difficulty. It was contended by Mr. Mellish on ' behalf of Lord Gilbert Kennedy that the effect of the prospectus ' was to warrant to the intended shareholders that there really was ' such a contract as is there represented, and not merely to represent ' that the company bona fide believed it; and that the difference in ' substance between shares in a. company with such a contract and [31] 6 " shares in a company whose supposed contract was not binding, '' was a difference in substance in the nature of the thing; and that " the shareholder was entitled to return the shares as soon as he '' discovered this quite independently of fraud on the ground that " he had applied for one thing and got another. And if the " invalidity of the contract really made the shares he obtained " different things in substance from those which he applied for " this would we think be good law. The case would then resemble " Gompertz v. Bartlelt and Gurney v. Womersley where the person '' who had honestly sold what he thought a bill without recourse to "him, was nevertheless held bound to return the price on its " turning out that the supposed bill was a forgery in the one case " and void under the stamp laws in the other; in both cases the " ground of this decision being that the thing handed over was " not the thing paid for. A similar principle was acted on in " Ship's case. There is, however, a very important difference " between oases where a contract may be rescinded on account " of fraud, and those in which it may be rescinded on the ground '' that there is a difference in substance between the thing bargained " for and that obtained. It is enough to show that there was a " fraudulent representation as to any part of that which induced '' the party to enter into the contract which he seeks to rescind; " but where there has been an innocent misrepresentation or mis- " apprehension it does not authorise a rescission unless it is such " as to show that there is a complete difference in substance between " what was supposed to be and what was taken so as to con- " stitute a failure of consideration. For example, where a horse " is bought under a belief that it is sound, if the purchaser was " induced to buy by a fraudulent representation as to the horse's " soundness the contract may be rescinded. If it was indirectly an " honest misrepresentation as to its soundness, though it may be " clear that both vendor and purchaser thought that they were " dealing about a sound horse and were in error, yet the purchaser " must pay the whole price unless there was a warranty, and even " if there was a warranty he cannot return the horse and claim " back the whole price unless there was a condition to that effect " in the contract— Street v. Blay." The Court came to the conclusion in that case that though there was a misapprehension as to that which was a material part of the motive inducing the applicant to ask for the shares, it did not prevent the shares from being in substance those he applied for. The next case is Smith v. Hughes, L.R. 6 Q.B. 597 (1871), the well-known case as to new and old oats. The action was in the County Court, and was for the price of oats sold and delivered and damages for not accepting oats bargained and sold. Cockburn C. J. at p. 604 cites Story on contracts as follows : " Mr. Justice Story " in his work on Contracts (Vol. 1, s. 516) states the law as to con- " cealment as follows : ' The general rule, both of law and equity, " in respect to concealment is that mere silence with regard to a " material fact which there is no legal obligation to divulge will not " avoid a contract although it operate as an injury to the party " from whom it is concealed. Thus,' he goes on (s. 517), " although a vendor is bound to employ no artifice or disguise for " the purpose of concealing defects in the article sold since that " would amount to a positive fraud on the vendee, yet under this " general doctrine of caveat emptor he is not ordinarily bound to " disclose any defect of which he may be cognisant, although his " silence may operate virtually to deceive the vendee. But,' he continues (s. 518), ' an improper concealment or suppression of a " material fact which the party concealing is legally bound to dis- " close and of which the other party has a legal right to insist " that he shall be informed is fraudulent and will invalidate a " contract.' Further distinguishing between extrinsic circum- 7 [32] " stances affecting the value of the subject-matter of a sale and the " concealment of intrinsic circumstances appertaining to its nature, " character and condition, he points out (s. 519) that with reference " to the latter the rule is ' that mere silence as to anything which " 'the other party might by proper diligence have discovered and " ' which is open to his examination is not fraudulent unless a " ' special trust or confidence exist between the parties or be " ' implied from the circumstances of the case.' In the doctrine " thus laid down I entirely agree." In a further passage he says : " It only remains to deal with an " argument which was pressed upon us that the defendant in the " present case intended to buy old oats and the plaintiffs to sell " new, so that the two minds were not ad idem and that conse- " quently there was no contract. This argument proceeds on the " fallacy of confounding what was merely a motive operating on " the buyer to induce him to buy with one of the essential condi- " tions of the contract. Both parties were agreed as to the sale " and purchase of this particular parcel of oats. The defendant " believed the oats to be old and was thus induced to agree to buy " them, but he omitted to make their age a condition of the con- " tract. All that can be said is that the two minds were not " ad idem as to the age of the oats; they certainly were ad idem " as to the sale and purchase of them. Suppose a person to buy " a horse without a warranty believing him to be sound and the " horse turns out unsound, could it be contended that it would be " open to him to say that as he had intended to buy a sound horse '' and the seller to sell an unsound one the contract was void because " the seller must have known from the price the buyer was willing " to give or from his general habits as a buyer of horses that he " thought the horse was sound. The cases are exactly parallel." Blackburn J. said, p. 606 : " In this case I agree that on the " sale of a specific article unless there be a warranty making it " part of the bargain that it possesses some particular quality the " purchaser must take the article he has bought though it does not " possess that quality. And I agree that even if the vendor was " aware that the purchaser thought that the article possessed that " quality, and would not have entered into the contract unless he " had so thought, still the purchaser is bound unless the vendor " was guilty of some fraud or deceit upon him, and that a mere " abstinence from disabusing the purchaser of that impression is " not fraud or deceit; for whatever may be the case in a court of " morals, there is no legal obligation on the vendor to inform the " purchaser that he is under a mistake not induced by the act of " the vendor." The Court ordered a new trial. It is not quite clear whether they considered that if the defendants' contention was correct the parties were not ad idem or there was a contractual condition that the oats sold were old oats. In either case the defendant would succeed in defeating the claim. In these cases I am inclined to think that the true analysis is that there is a contract, but that the one party is not able to supply the very thing, whether goods or services, that the other party con- tracted to take : and therefore the contract is unenforceable by the one if executory, while if executed the other can recover back money paid on the ground of failure of the consideration. We are now in a position to apply to the facts of this case the law as to mistake so far as it has been stated. It is essential in this part of the discussion to keep in mind the finding of the jury acquitting the defendants of fraudulent misrepresentation or concealment in procuring the agreements in question. Grave injustice may be done to the defendants : and confusion introduced into the legal conclusion unless it is quite clear that in considering [33] 8 mistake in this case no suggestion of fraud is admissible and must sternly be rejected by the Judge who has to determine the legal issues raised. The agreement which is said to be void is the agree- ment contained in the letter of 19th March, 1929, that Bell would retire from the Board of the Niger Co. and its sub- sidiaries and that in consideration of his doing so Levers would pay him as compensation for the termination of his agree- ments and consequent loss of office the sum of £30,000 in full satis- faction and discharge of all claims and demands of any kind against Lever Bros., the Niger Co. or its subsidiaries. The agreement which as part of the contract was terminated had been broken so that it could be repudiated. Is an agreement to terminate a broken contract different in kind from an agreement to terminate an unbroken contract assuming that the breach has given the one party the right to declare the contract at an end ? I feel the weight of the Plaintiffs' contention that a contract immediately determin- able is a different thing from a contract for an unexpired term and that the difference in kind can be illustrated by the immense price of release from the longer contract as compared with the shorter. And I agree that an agreement to take an assignment of a lease for five years is not the same thing as to take an assignment of a lease for three years, still less a term for a few months. But on the whole I have come to the conclusion that it would be wrong to decide that an agreement to terminate a definite specified con- tract is void if it turns out that the agreement had already been broken and could have been terminated otherwise. The contract released is the identical contract in both cases : and the party paying for release gets exactly what he bargains for. It seems immaterial that he could have got the same result in another way : or that if he had known the true facts he would not have entered into the bargain. A. buys B.'s horse : he thinks the horse is sound and he pays the price of a sound horse : he would certainly not have bought the horse if he had known, as the fact is, that the horse is unsound. If B. has made no representation as to soundness and has not contracted that the horse is sound, A. is bound, and cannot recover back the price. A. buys a picture from B. : both A. and B. believe it to be the work of an old master and a high price is paid. It turns out to be a modern copy. A. has no remedy in the absence of representation or warranty. A. agrees to take on lease or to buy from B. an unfurnished dwelling house. The house is in fact uninhabitable. A. would never have entered into the bargain if he had known the fact. A. has no remedy: and the position is the same whether B. knew the facts or not, so long as he made no representation or gave no warranty. A. buys a roadside garage business from B. abutting on a public thoroughfare : unknown to A. but known to B. it has already been decided to construct a bye- pass road which will divert substantially the whole of the traffic from passing A.'s garage. Again A. has no remedy. All these cases involve hardship on A. and benefit B. as most people would say unjustly. They can be supported on the ground that it is of paramount importance that contracts should be observed : and that if parties honestly comply with the essentials of the formation of contracts, i.e., agree in the same terms oil the same subject matter, they are bound : and must rely on the stipulations of the contract for protection from the effect of facts unknown to them. This brings the discussion to the alternative mode of expressing the result of a mutual mistake. It is said that in such a case as the present there is to be implied a stipulation in the contract that a condition of its efficacy is that the facts should be as understood by both parties, viz., that the contract could not be terminated till the end of the current term. The question of the existence of conditions express or implied is obviously one that affects not the formation of contract, but the investigation of the terms of the 9 [34] contract when made. A condition derives its efficacy from the con- sent of the parties express or implied. They have agreed, but on what terms. One term may be that unless the facts are or are not of a particular nature, or unless an event has or has not happened, the contract is not to take effect. With regard to future facts such a condition is obviously contractual. Till the event occurs the parties are bound. Thus the condition (the exact terms of which need not here be investigated), that is generally accepted as underlying the principle of the frustration cases is contractual: an implied condition. Sir John Simon formulated for the assistance of your Lordships a proposition which should be recorded " Whenever it is to be inferred from the terms of a contract or " its surrounding circumstances that the consensus has been reached " upon the basis of a particular contractual assumption, and that " assumption is not true the contract is avoided, i.e., it is void " ab initio if the assumption is of present fact and it ceases to " bind if the assumption is of future fact." I think few would demur to this statement but its value depends upon the meaning of " a contractual assumption " and also upon the true meaning to be attached to " basis," a metaphor which may mislead. When used expressly in contracts for instance in policies of insurance which state that the truth of the statements in the pro- posal is to be the basis of the contract of insurance, the meaning is clear. The truth of the statements is made a condition of the contract, which failing the contract is void unless the condition is waived. The proposition does not amount to more than this that if the contract expressly or impliedly contains a term that a par- ticular assumption is a condition of the contract the contract is avoided if the assumption is not true. But we have not advanced far on the inquiry how to ascertain whether the contract does con- tain such a condition. Various words are to be found to define the state of things which makes a condition. " In the contemplation " of both parties fundamental to the continued validity of the " contract," " a foundation essential to its existence," ' a funda- " mental reason for making it " are phrases found in the important judgment of Scrutton L.J. in the present case. The first two phrases appear to me to be unexceptionable. They cover the case of a contract to serve in a particular place, the existence of which is fundamental to the service, or to procure the services of a professional vocalist whose continued health is essen- tial to performance. But " a fundamental reason for making a " contract " may with respect be misleading. The reason of one party only is presumedly not intended, but in the cases I have suggested above of the sale of a horse or of a picture, it might be said that the fundamental reason for making the con- tract was the belief of both parties that the horse was sound or the picture an old master, yet in neither case would the condition as I think exist. Nothing is more dangerous than to allow oneself liberty to construct for the parties contracts which they have not in terms made by importing implications which would appear to make the contract more businesslike or more just. The implica- tions to be made are to be no more than are '' necessary '' for giving business efficacy to the transaction : and it appears to me that both as to existing facts or future facts a condition should not be implied unless the new state of facts makes the contract something different in kind from the contract in the original state of facts. Thus in Krell v. Henry 1903 : 2 K.B. at p. 754 Vaughan Williams L.J. finds that the subject of the contract was " rooms to "view the procession": the postponement therefore made the rooms not rooms to view the procession. This also is the test finally chosen by Lord Sumner in Bank Line v. Capel 1919 A.C. 436 agreeing with Lord Dunedin in Metro- [35] 10 politan Water Board v. Dick Kerr 1918 A.C. at p. 128 where deal- ing with the criterion for determining the effect of interruption in " frustrating " a contract he says, " an interruption so long as to " destroy the identity of the work or service with the work or " service when interrupted." We therefore get a common standard for mutual mistakes and implied conditions whether as to existing or as to future facts. Does the state of the new facts destroy the identity of the subject matter as it was in the original state of facts ? To apply the principle to the infinite combinations of facts that arise in actual experience will continue to be difficult: but if this case results in establishing order into what has been a somewhat confused and difficult branch of the law it will have served a useful purpose. I have already stated my reasons for deciding that in the present case the identity of the subject matter was not destroyed by the mutual mistake, if any, and need not repeat them. It now becomes necessary to deal with the second point of the plaintiffs, viz., that the contract of 19th March, 1929, could be avoided by them in consequence of the non-disclosure by Bell of his misconduct as to the cocoa dealings. Fraudulent concealment has been negatived by the jury; this claim is based upon the contention that Bell owed a duty to Levers to disclose his misconduct, and that in default of disclosure the contract was voidable. Ordinarily the failure to disclose a material fact which might influence the mind of a prudent contractor does not give the right to avoid the contract. The principle of caveat emptor applies outside contracts of sale. There are certain contracts expressed by the law to be contracts of the utmost good faith where material facts must be disclosed; if not the contract is voidable. Apart from special fiduciary relation- ships contracts for partnership and contracts of insurance are the leading instances. In such cases the duty does not arise out of con- tract; the duty of a person proposing an insurance arises before a contract is made; so of an intending partner. Unless this contract can be brought within this limited category of contracts uberrimae fidei it appears to me that this ground of defence must fail. I see nothing to differentiate this agreement from the ordinary contract of service; and I am aware of no authority which places contracts of service within the limited category I have mentioned. It seems to me clear that master and man negotiating for an agreement of service are as unfettered as in any other negotiation. Nor can I find anything in the relation of master and servant when estab- lished that places agreements between them within the protected category. It is said that there is a contractual duty of the servant to disclose his past faults. I agree that the duty in the servant to protect his master's property may involve the duty to report a fellow servant whom he knows to be wrongfully dealing with that property. The servant owes a duty not to steal, but having stolen is there superadded a duty to confess that he has stolen? I am satisfied that to imply such a duty would be a departure from the well-established usage of mankind and would be to create obliga- tions entirely outside the normal contemplation of the parties con- cerned. If a man agrees to raise his butler's wages, must the butler disclose that two years ago he received a secret commission from the wine merchant; and if the master discovers it, can he without dismissal or after the servant has left avoid the agreement for the increase in salary and recover back the extra wages paid? If he gives his cook a month's wages in lieu of notice can he on discovering that the cook has been pilfering the tea and sugar claim the return of the month's wages ? 1 think not. He takes the risk; if he wishes to protect himself he can question his servant, and will then be protected by the truth or otherwise of the answers. I agree with the view expressed by Avory J. in Healey v. Societe Anonyme Francaise, 1917, 1 K.B. 946, on this point. It will be 11 [36] noticed that Bell was not a director of Levers, and with respect I cannot accept the view of Greer L.J. that if he was in a fiduciary relationship to the Niger Co. he was in a similar fiduciary relation- ship to the shareholders, or to the particular shareholders (Levers) who held 99 per cent, of the shares. Nor do I think that it is alleged or proved that in making the agreement of 19th March, 1929, Levers were acting as agents for the Niger Co. In the matter of the release of the service contract and the payment of £30,000 they were acting quite plainly for themselves as principals. It follows that on this ground also the claim fails. The result is that in the present case servants unfaithful in some of their work retain large compensation which some will think they do not deserve. Nevertheless it is of greater importance that well established principles of contract should be maintained than that a particular hardship should be redressed; and I see no way of giving relief to the plaintiffs in the present circumstances except by con- fiding to the Courts loose powers of introducing terms into contracts which would only serve to introduce doubt and confusion where certainty is essential. I think therefore that this appeal should be allowed; and I agree with the order to be proposed by my noble and learned friend Lord Blanesburgh. [37] Viscount Hailsham. Lord Blanes- burgh. Lord Warring- ton of Clyffe. Lord Atkin. Lord Thanker- ton. ERNEST HYSLOP BELL and WALTER EDWARD SNELLING (Appellants) v. LEVER BROTHERS LIMITED and NIGER COMPANY LIMITED (Respondents). Lord Thankerton. MY LORDS, The detailed facts of this case have been sufficiently stated already by your Lordships. The findings of the jury were accepted by all parties, who were also agreed that the Court should have leave to draw inferences of fact generally. The two main contentions between the parties are whether the agreements of March, 1929, are liable to be set aside ( a ) on the ground of mutual mistake or error, or (b) by reason of the non- disclosure of material facts by the Appellants, whereby Lever Brothers were induced to enter into these agreements. The judgment of both Courts below was unanimously against the Appellants on the first point, and, while Wright J. expressed no opinion, the Court of Appeal was also unanimously against the Appellants on the second point, though the first point was sufficient for their disposal of the case. The Appellants, however, must succeed on both points in order to succeed in their appeal. Both these points raise important questions of principle and I regret to find myself unable to agree with the conclusions of the Courts below on either point. In this view, it is unnecessary for me to deal with the two further questions, namely, whether the first point is open to the Respondents on the pleadings and the course of procedure, and whether the obligation in Mr. Bell's ser- vice agreement as to payment by Lever Brothers of the premiums on an endowment policy remains binding, despite the setting aside of the agreement of March, 1929. The findings of the jury establish that the Appellants' four cocoa transactions in November and December, 1927, constituted a breach of contract or duty towards the Respondents, which would have entitled Lever Brothers to terminate the Appellants' contracts of service either in January, 1928, or March, 1929, and that Lever Brothers would have exercised such right at either of these dates. The jury also found that the Niger Company would have been entitled to dismiss the Appellants from their positions as chairman and vice-chairman respectively on either of these dates and would have done so. The jury further found that Lever Brothers entered into the agreements of March, 1929, in ignorance of these trans- actions of the Appellants and that, if Lever Brothers had known of them, they would not have entered into these agreements. As regards the state of the Appellants' mind, the question and answer was as follows :- 'At the date of the respective interviews prior ' to these agreements, had the Defendant Bell or the Defendant ' Snelling in mind their actings in respect of these transactions?", to which the jury's answer was " No." By their earlier answers the jury had acquitted the Appellants of inducing Lever Brothers to enter into the agreements of March, 1929, by fraudulent mis- representation of faithful and honest service or by fraudulent concealment of their cocoa transactions. 13105 A 11 [38] 2 It will be convenient to deal first with the question whether the Appellants had a duty to disclose their cocoa transactions to Lever Brothers when negotiating the agreements of March, 1929. If there was such a duty, there is no doubt that the failure to dis- close—though innocent—amounted to a misrepresentation as to material facts which induced Lever Brothers to enter into these agreements, and which would entitle the latter to rescind them. The learned Judges of the Court of Appeal appear to regard the duty to disclose as arising at the time of negotiating the contract, but I am unable to see that any such duty could arise out of the circumstances of these agreements; in my opinion, the first ques- tion must be whether the Appellants incurred a duty to disclose these transactions at the time that they were completed. The failure to account for the profits to the Niger Company on which some of the learned Judges lay stress, was an integral part of the breach of duty to that Company. The Appellants had just as much—or just as little—right to continue drawing their salaries without disclosure as they had to negotiate two years later for the commutation of these same salaries. In truth, the negotiations in March, 1929, were at arm's length, and not on the footing of the relationship of master and servant, but for the termination of that relationship, and, if there was not an already existing breach of an obligation to disclose, I am unable to see how the circumstances of the agreements of March, 1929, could be held to create such an obligation. In the absence of fraud, which the jury has negatived, I am of opinion that neither a servant nor a director of a company is legally bound forthwith to disclose any breach of the obligations arising out of the relationship, so as to give the master or the company the opportunity of dismissal; on subsequent discovery, the master or company will not be entitled to hold the dismissal as operating from the date of the breach, but will be liable for wages or salary earned by the servant during the intervening period. In my opinion Healey v. Societe Anonyme Francaise Rubastic, (1917) 1 K.B. 946, which was the case of the managing director of a company, was rightly decided. There may well be cases in which the concealment of the misconduct amounts to a fraud on the master or company, but the jury have excluded that view in the present case. The other cases to which we were referred relate to a duty to disclose all material facts on formation of a contract, and form exceptions to the general rule, which does not impose such a duty. The most familiar of these exceptions is found in the case of policies of insurance, as to which Blackburn J. says in Fletcher v. Krell, (1873) 28 L.T. 105, " mercantile custom has established the rule ' with regard to concealment of material facts in policies of ' insurance, but in other cases there must be an allegation of moral ' guilt or fraud." Other exceptions are found in cases of trustee and cestui qui trust and of a company issuing a prospectus and an applicant for shares, but the number of exceptions is limited, and no authority has been cited which extends the exceptions to cover a case such as the present. Accordingly, I am of opinion that the Appellants had no legal duty to disclose their cocoa transactions either at the time of their commission or in negotiation for the agreements of March, 1929. Turning next to the question of mutual error or mistake, I think that the Respondents' contention may be fairly stated as follows, vizt., that in concluding the agreements of March, 1929, all parties proceeded on the mistaken assumption that the Appellants' service agreements were not liable to immediate ter- mination by Lever Brothers by reason of the Appellants' miscon- [39] 3 duct, and that such common mistake involved the actual subject matter of the agreements, and did not merely relate to a quality of the subject matter. The cases on this branch of the law are numerous, and in seek- ing the principle on which they rest, I will at first confine my attention to those which relate to innocent mutual mistake on formation of the contract, as it appears to me that the cases relat- ing to facts arising subsequently to the formation of the contract may be found to rest on a somewhat different principle. But first let me define the exact position as at the date of the agreements of March, 1929. The service agreements of both Appellants were then existing as binding legal contracts, although it was in the power of Lever Brothers, had they then known of the Appellants' breach of contract, to have terminated the con- tracts; but, until the exercise of such power, the contracts remained binding. It is also clear that an essential purpose of the agree- ments of March, 1929, was to secure the termination of these service agreements. The mistake was not as to the existence of agreements which required termination—for such did exist—but as to the possibility of terminating them by other means. A clear exposition of the principles to be applied in such a case as the present is to be found in the judgment of the Court of Queen's Bench (Cockburn C.J., Blackburn, Mellor and Shee J.J.), in Kennedy v. Panama &c. Co., (1867) L.R. 2 Q.B. 580, delivered by Blackburn J., who, as Lord Blackburn, reaffirmed this opinion in 1881 in Mackay v. Dick, 6 App Cas 251 , at 265. In Kennedy's case the Plaintiff had taken shares in a further issue of capital by the Panama Company, being induced by a statement in the prospectus that the purpose of the issue was to enable the company to carry out a contract recently entered into with the Government of New Zealand for the carriage of mails. That contract had been made with the agent of the New Zealand Government, both parties believing that he had authority to make it; but it turned out that he had no such authority and the Government refused to ratify it. Having failed on. the charge of fraud and deceit against the directors of the company for making the statements in the prospectus, the Plaintiff submitted a second contention, which is stated in the judgment as follows (at p. 586 foot), " It was contended " that the effect of the prospectus was to warrant to the intended " shareholders that there really was such a contract as is there " represented, and not merely to represent that the company bona " fide believed it; and that the difference in substance between " shares in a company with such a contract and shares in a com- " pany whose supposed contract was not binding, was a difference " in substance in the nature of the thing; and that the shareholder " was entitled to return the shares as soon as he discovered this, " quite independently of fraud, on the ground that he applied for " one thing and got another. And, if the invalidity of the con- " tract really made the shares he obtained different things in sub- " stance from those which he applied for, this would, we think, " be good law. The case would then resemble Gompertz v. " Bartlett " (2 E. & B. 849; 23 L.J. (Q.B.) 65) "and Gurney v. " Womersley " (4 E. & B. 133; 24 L.J. (Q.B.) 46) " where the " person, who had honestly sold what he thought a bill without " recourse to him, was nevertheless held bound to return the price " on its turning out that the supposed bill was a forgery in the " one case, and void under the stamp laws in the other; in both " cases the ground of decision being that the thing handed over " was not the thing paid for." 4 [40] The Respondents' contention in the present appeal is in effect the same as the above contention; they maintain that the service agreements surrendered to them are not the service agreements paid for, in respect that they were immediately defeasible by them. Blackburn J. proceeds (at p. 587) : " There " is, however, a very important difference between cases where a " contract may be rescinded on account of fraud, and those in " which it may be rescinded on the ground that there is a difference " in substance between the thing bargained for and that obtained. " It is enough to show that there was a fraudulent representation " as to any part of that which induced the party to enter into " the contract which he seeks to rescind; but where there has been " an innocent misrepresentation or misapprehension, it does not " authorise a rescission unless it is such as to show that there is " a complete difference in substance between what was supposed to " be and what was taken, so as to constitute a failure of considera- " tion. For example, where a horse is bought under a belief that " it is sound, if the purchaser was induced to buy by a fraudulent " representation as to the horse's soundness, the contract may be " rescinded. If it was induced by an honest misrepresentation as " to its soundness, though it may be clear that both vendor and " purchaser thought that they were dealing about a sound horse ' and were in error, yet the purchaser must pay the whole price, ' unless there was a warranty." After referring to the passages in the Digest of Civil Law and the way the question is there mooted, Blackburn J. says (at p. 588) " the answers given by the great ' jurists quoted are to the effect that, if there be misapprehension ' as to the substance of the thing, there is no contract; but if it ' be only a difference in some quality or accident, even though ' the misapprehension may have been the actuating motive to the ' purchaser, yet the contract remains binding." And he adds ' And, as we apprehend, the principle of our law is the same as ' that of the civil law." This passage makes clear that it is not enough for the purchaser to prove that the misapprehension was the inducing cause to him and that, if he had known, he would not have entered into the contract. The earlier passage as to the sale of an unsound horse also shows that it is not enough that a grossly excessive price has been paid for a bad article. In that case it was held that the shares obtained by Kennedy in the com- pany were not substantially different things but that the case was analogous to that of the horse supposed to be sound. It is pointed out in Kennedy's case that, if the directors had known that the contract was not valid, the contract might have been avoided on the ground of a fraudulent misrepresentation. In the present case, there being no obligation to disclose, the Appellants, if they had had their misconduct in mind, would have been entitled to say nothing about it, and the Respondents, in the absence of fraud, would have been bound by the contracts, even though, if they had known, they would not have entered into the contracts, but would have terminated the service agreements. I have difficulty in seeing how the fact that the Appellants did not remember at the time is to put the Respondents in a better position. The phrase '' underlying assumption by the parties," as applied to the subject matter of a contract, may be too widely interpreted so as to include something which one of the parties had not neces- sarily in his mind at the time of the contract; in my opinion it can only properly relate to something which both must necessarily have accepted in their minds as an essential and integral element of the subject matter. In the present case, however probable it may be, we are not necessarily forced to that assumption. Cooper v. Phibbs, (1867) LR 2 HL 149 , is a good illustration, for both [41] parties must necessarily have proceeded on the mistaken assump- tion that the lessor had the right to grant the lease and that the lessee required a lease. Lord Westbury says (at p. 170) " the " Respondents believed themselves to be entitled to the property, " the petitioner believed that he was a stranger to it, the mistake " is discovered, and the agreement cannot stand." In Scott v. Coulson, (1903) 1 Ch 453 . affirmed (1903) 2 Ch 249 , it was common ground that at the date of the contract for sale of the life policy both parties supposed the assured to be alive, the result being that the Plaintiffs were willing to accept as the best price they could get for the policy a sum slightly in advance of its surrender value and very much below the sum due on the death of the assured. As a matter of fact the assured was dead. It was therefore clear that the subject matter of the contract was a policy still current with a surrender value and that accordingly the subject matter did not exist at the date of the contract. Couturier v. Hastie, (1856) 5 H.L. 673, where the cargo sold was held not to have existed at the date of sale, and Strickland v. Turner, (1852) 7 Exch. Cas. 208, where the annuitant was in fact dead at the date of sale of the annuity, were cases where the subject matter was not in existence at the date of the contract. There are many other cases to the same effect, but I think that it is true to say that in all of them it either appeared on the face of the contract that the matter as to which the mistake existed was an essential and integral element of the subject matter of the contract or it was an inevitable inference from the nature of the contract that all the parties so regarded it. In the present case the terms of the contracts throw no light on the question, and, as already indicated, I do not find sufficient material to compel the inference that the Appellants, at the time of the contracts, regarded the indefeasibility of the service agree- ments as an essential and integral element in the subject matter of the bargain. The range of authorities relating to some alteration in circum- stances subsequent to the date of the contract do not, in my opinion, raise a question of mutual error or mistake; in them the formation of the contract is complete and binding, but subsequent events arise which critically affect the contract, but whose occurrence has not been provided for in the contract. However it may be stated, when relief from the contract is given, the Court, as it appears to me, rests such relief on an implied condition which forms part of a complete and binding contract, but which, on the happen- ing of certain events, terminates the contract. These authorities appear to me, therefore, to have no bearing on the question of error or mistake as rendering a contract void owing to failure of consideration. Accordingly, I am of opinion that the Appellants are entitled to succeed in their appeal and that the judgments of the Courts below so far as appealed against by them, should be reversed. I therefore concur in the motion to be proposed by my noble and learned friend Lord Blanesburgh. (13105-50) Wt.55-11 14 12/31 P. St. G.311 Lord Blanes- burgh.[2]Lord Warring- ton of[3]Clyffe.[4]Lord[5]Atkin.[6]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.[7]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.[8]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.[9]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.[10]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.[11]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 13105 A 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.[12]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.[13]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.[14]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.[15]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.[16]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.[17]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.[18]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.[19]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."[20]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.[21]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.[22]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.[23]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.[24]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.[25]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.[26]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.[27]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[28]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,[29]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.[30]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.[31]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.[32]Yours sincerely, F. D'arcy cooper.[33]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 :—[34]March 19th, 1929. Dear snelling,[35]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.[36]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.[37]Yours sincerely, F. D'arcy cooper 13105 A 4 8 [8][38]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.[39]My Lords,[39]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.[40]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.[41]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.[42]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."[43]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."[44]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."[45]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.[46]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.[47]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[48]My Lords,[48]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. .[49]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?[50]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 ?[51]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?[52]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.[53]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.[54]Jury's answer: No. (D.) If so, what damages, if any, under (A.) or (B.) or (C.)?[55]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.[56]If so, would the Plaintiffs Levers have elected to exercise such right at either of such dates?[57]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 : 12 [12][58]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?[59]Jury's answer : No.[60]If Levers had so known would they have made these agreements or either of them ?[61]Jury's answer : No.[62]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 ?[63]Jury's answer : No.[64]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.[65]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.[66]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.[67]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.[68]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.[69]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.[70]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.[71]It was as follows : Paragraph 26 A.[72]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.[73]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.[74]Further or in the alternative the Plaintiffs Levers will rely upon the particulars set out under paragraph 26 hereof.[75]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[76]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 AC 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."
[77]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.[78]My Lords,[78]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.[79]My Lords,[79]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.[80]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.[81]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."[82]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.[83]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[84]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.[85]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.[86]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.[87]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.[88]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.[89]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.[90]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.[91]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.[92]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.[93]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.[94]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.[95]My Lords,[95]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.[96]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.[97]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.[98]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.[99]Lord Atkin. Lord Thank- erton. [20] BELL and ANOTHER v. LEVER BROTHERS, LTD., AND ANOTHER. Lord Warrington of Clyffe. MY LORDS,[100]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.[101]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.[102]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.[103]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.[104]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.[105]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.[106]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.[107]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.[108]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.[109]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.[110]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.[111]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.[112]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][113]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.[114]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 own the con- tracts above mentioned being as alleged contracts of the Niger Com- pany, and appropriating to themselves the profits on such contracts and a charge of appropriating to their own use and benefit £1,000 the monies of the Niger Company. All these charges were nega- tived by the jury and their findings in this respect are accepted.[115]The points of claim after the allegations of fraudulent mis- representation and concealment above mentioned contained the following clause :— " 26. Alternatively the said agreements and each of them " were made and the moneys paid thereunder were paid under " a mistake of fact." and the Plaintiffs claimed rescission of the two agreements of the 19th March, 1929, and repayment of the moneys paid thereunder, and a declaration that previously to the making of such agree- ments the Plaintiffs were entitled to terminate the contracts of service and to dismiss the Defendants without notice by reason of their alleged conduct.[116]The Appellants admitted their liability to account to the Niger Company for the £1,360 the profits on the transactions above men- tioned, and this sum was duly paid into Court.[117]Ultimately the case was decided against the Appellants on the alternative point above referred to, the mistake there mentioned being treated as a mutual and not as a unilateral mistake.[118]The questions material to the issue of mistake as put to the jury and their answers thereto were as follows:— ' 3 (B). Did the Defendants or either of them commit ' breaches of contract or duty towards the Plaintiffs in ' entering into the contracts referred to as C.T.C., R.T.D., ' and G.S.2 or any of them as private transactions on their ' own account and for their own benefit? " Answer: " Yes." " 4 (a). Were the Plaintiffs (Levers) entitled to deter- " mine the contracts of service with the Defendants or either "of them? '[119]Answer :
" Yes." " (1.) In January, 1928."
Answer : " Yes." " And (2) in March, 1929. If so would the Plaintiffs "(Levers) have elected to exercise such right at either of such "dates?"[120]Answer :
" Yes." " ( b ) Similar questions and answers as to the position " of the Niger Company in reference to the offices therein held " by the Defendants respectively. "5. When Levers entered into the agreements of 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?"[121]Answer : " No." " If Levers had so known would they have made these " agreements or either of them? " Answer: "No." " At the date of the respective interviews prior to these " agreements had the Defendant Bell or the Defendant [23] 4 " Snelling in mind their actings in respect of these " transactions? ' Answer: " No."[122]The final question was put to the jury at the suggestion of the learned judge, and obviously is only relevant to the issue whether there was a mutual mistake. No objection to it was taken on the part of the Appellants. Moreover, it is quite obvious that an argument founded on unilateral mistake had not the slightest chance of success, and it must have been clear to both parties that the learned judge was going to deal with the case as one of mutual as distinguished from unilateral mistake. I will assume for the present that either on the pleadings as rightly understood, or on the manner in which the case was conducted, or on the assumption that all the evidence reasonably likely to be forthcoming on the point was before the Court the learned judge was entitled to deal with the matter on the footing of mutual mistake, and will consider the case on that footing.[123]The learned judge thus describes the mistake invoked in this case as sufficient to justify a Court in saying that there was no true consent, viz., " Some mistake or misapprehension as to some " facts . . . which by the common intention of the parties, whether " expressed or more generally implied, constitute the underlying " assumption without which the parties would not have made the " contract they did." That a mistake of this nature common to both parties is, if proved, sufficient to render a contract void is, I think, established law. I will refer to two cases only amongst several in which the principle was acted on. The first is one at Common Law, viz., Strickland v. Turner, 7 Exch. 208. In that case a contract for sale of an annuity, under which the purchase money had been paid, was held to be void at law and the money was ordered to be repaid, on its being discovered that the person on whose life the annuity depended had without the knowledge of either party died before the date of the contract of sale. The parties were treated as having intended to contract on the basis of something of value actually existing, and as this proved not to have been the case the contract failed to be binding.[124]The other case (Scott v. Coulson, 1903, 2 Ch. 249) is an example of the application of the same principle in a Court of Equity. A contract for the sale of a policy was set aside on its being dis- covered that the assured was dead at its date, both parties being in ignorance of that fact. I cite this case for the sake of a passage in the judgment of Vaughan Williams, L.J. He says:
" If we ' are to take it that it was common ground that at the date of the ' contract for the sale of their policy both the parties to the con- ' tract assumed the assured to be alive, it is true that both parties ' entered into the contract on the basis of a common affirmative ' belief that the assured was alive; but as it turned out that there ' was a common mistake the contract was one which cannot be ' enforced. This is so at law and the Plaintiffs do not require to ' have recourse to equity to rescind the contract if the basis which ' both parties recognised as the basis is not true."
[125]This principle, however, is confined to cases in which " the " mistake is as to the substance of the whole consideration going " as it were to the root of the matter " (Kennedy v. Panama Mail Company, L.R., 2 Q.B., 580, p. 588), and does not apply where the mistake is only as to some point, a material point it may be, and even one which may have been the actuating motive of one of the parties, an error as to which does not affect the substance of the whole consideration. Kennedy v. The Panama Mail Company is a case in which it was held that the error relied on did not affect the substance of the consideration and the contract in question was accordingly 5 [24] enforced. The contract was one to take shares in a company. The prospectus on the faith of which the Plaintiff had applied for shares contained a representation made in good faith that the company had obtained a valuable contract for the carriage of mails. The representation was intended to, and did in fact, in- duce the Plaintiff to apply for shares. It was untrue, for though at the time the application for shares was made and accepted there were reasonable grounds for expecting that such a contract would be obtained, it was never in fact concluded. It is to be observed that the error did not affect the shares themselves the subject of the contract impeached; they were, notwithstanding the error, the very thing about which the parties were contracting. All that was affected were the prospects of the company earning profits available for payment of dividends. Accordingly the Plaintiff's action brought for the purpose of setting aside the contract and obtaining repayment of his subscription was dismissed.[126]In Smith v. Hughes, L.R., 6 Q.B. 597, the result was the same, but for a different reason, viz., that there was no sufficient finding that the mistake was mutual. It was alleged that the vendor was intending to sell and the purchaser intending to buy and believed he was buying old oats whereas the actual parcel of oats, the sub- ject of the contract, consisted of new oats. The purchaser's claim to be relieved of the contract failed because the learned Judge at the trial did not point out the necessity of finding not only that the purchaser believed the oats were old but that he also believed that the vendor was selling them as old.[127]This kind of difficulty does not arise in the present case. It is in my opinion clear that each party believed that the remunerative offices compensation for the loss of which was the subject of the negotiations were offices which could not be determined except by the consent of the holder thereof, and further believed that the other party was under the same belief and was treating on that footing.[128]The real question therefore is whether the erroneous assump- tion on the part of both parties to the agreements that the service contracts were undeterminable except by agreement was of such a fundamental character as to constitute an underlying assumption without which the parties would not have made the contract they in fact made, or whether it was only a common error as to a material element but one not going to the root of the matter and not affecting the substance of the consideration.[129]With the knowledge that I am differing from the majority of your Lordships I am unable to arrive at any conclusion except that in this case the erroneous assumption was essential to the contract which without it would not have been made.[130]It is true that the error was not one as to the terms of the service agreements, but it was one which, having regard to the matter on which the parties were negotiating, viz., the terms on which the service agreements were to be prematurely determined and the compensation to be paid therefor, was in my opinion as fundamental to the bargain as any error one can imagine.[131]The compensation agreed to be paid was in each case the amount c>f the full salary for the two years and a half unexpired with the addition in Mr. Bell's case of £10,000 and in Mr. Snelling's of £5,000. It is difficult to believe that the jury were otherwise than correct in their answer to the second branch of the group of ques- tions numbered 5, viz., that had Levers known of the actings of the Appellants in regard to the dealings in question they would net have made the agreements now impeached or either of them. It is true that such a finding is not in the strict sense one of fact, but it is an inference which the jury were entitled to draw from the evidence and from all the circumstances of the case, it is one which the learned judge and the Court of Appeal have also drawn, and if, I may say so with respect, it is one I should draw myself. I [25] 6 also agree with the learned judge that looking at the matter from the side of the Appellants the existence of an agreement giving them rights which could only be compromised by compensation was in the same way the root and basis of the cancellation agreements.[132]In my opinion therefore, assuming that the point was open, the appeal on the main question ought to be dismissed.[133]As to the question whether the point was open I agree that it is at least doubtful whether mutual mistake as to a fundamental fact was sufficiently pleaded either in the pleading itself or by the par- ticulars subsequently given, but I have no hesitation in coming to the same conclusion as that arrived at by Scrutton and Lawrence L. J.J., viz., that having regard to the proceedings at the trial effect ought not to be given to a technical objection such as that in ques- tion—no further evidence was in my opinion needed or could reasonably be expected to be forthcoming on the question and no substantial prejudice has been sustained by the Defendants.[134]But while I think the appeal ought to be dismissed, there is one point which appears to have been overlooked at the trial and in reference to which in my judgment there should if the appeal were dismissed be a variation in the order.[135]The service agreement with Mr. Bell provided that Lord Lever- hulme was to take out in the Atlas Assurance Company and Lever Brothers to pay all premiums on an Endowment Policy on Mr. Bell's life maturing at the age of 60 or previous death for an amount which would provide £1,500 per annum or £16,200 at his option. This policy was to belong to him, the premiums being paid by Lever Brothers, notwithstanding the termination of his engagement unless the same should be terminated by him. The cancellation agreement preserved this obligation on the part of Lever Brothers, and if this is set aside the original agreement stands. I cannot think that the conduct of Mr. Bell amounts to a termination by him of the engagement within the meaning of the provision above-mentioned, and if the judgment appealed From were to stand provision should be made for the continued payment by Lever Brothers of the pre- miums, and the repayment to Mr. Bell of any premiums paid by him. I have purposely avoided dealing with the question whether the Appellants were under an obligation as servants to disclose to Lever Brothers their breaches of the service agreements. In the view I take the question is immaterial. If such an obligation existed it would merely afford a further ground for the termination by Lever Brothers of the service agreements, for which such breaches them- selves afforded a sufficient ground.[136]This case seems to me to raise a question as to the application of certain doctrines of common law, and I have therefore not thought it necessary to discuss or explain the special doctrines and practice of Courts of Equity in reference to the rescission on the ground of mistake of contracts, conveyances and assignments of property and so forth or to the refusal on the same ground to decree specific performance, though I think in accordance with such doctrines and practice the same result would follow. [16] BELL AND ANOTHER v. LEVER BROTHERS LIMITED AND OTHERS Viscount Hailsham. Lord Blanes burgh. Lord Warring- ton of Clyffe. Lord Atkin. Lord Thanker- ton. Lord Atkin. my lords.[137]This case involves a question of much importance in the forma- tion and dissolution of contracts. The facts are not very com- plicated, though in the course of eliciting them the legal proceedings have undergone vicissitudes which have made the task of deter mining the issues more difficult than need be. In 1923 The Niger Co. Ld. was controlled by Lever Brothers Ld. whom I shall call Levers, who held over 99 per cent, of its shares. The Niger Co. dealt in West African produce including cocoa and at this time appears to have been making trading losses. To restore the position Levers approached the appellant Bell who had banking experience and the appellant Snelling, a chartered accountant, with a view to their taking part in the management of the Niger Co.'s affairs. In August, 1923. an agreement was made between Levers and Bell, under which Bell entered the service of Levers for a term of five years from 1st November. 1923, on the terms of letters of 8th August, 1923, which provided that Bell's salary was to be £8.000 a year. Levers were to pay the premiums on an endowment policy maturing at the age of 60 for a sum of £16.200. Levers were to appoint and maintain Bell as Chairman of the Niger Co. during his service. Bell was only to be responsible to the Committee of Control of Lever Bros, and to the shareholders of the Niger Co. In October an agreement was made between Snelling and Levers whereby Snelling was to be in the service of the company for five years from 1st October. 1923, on the terms of a letter of 12th September, which provided that Snelling was to serve Levers in regard to its West African interests at a salary of £10.000 per annum to 31st March, 1925, and £6,000 for the remainder of the five years. On 14th September both Bell and Snelling were appointed by the Niger Co. directors of the company, and Bell was appointed chairman of the Board. In April, 1924, Snelling was appointed a vice-chairman. The result of the appoint- ments 1 was a success. The Niger Co. began to prosper and in July, 1926, the agreements of both Bell and Snelling with Levers were cancelled and new agreements substituted for a further period of five years from 1st July, 1926, at the same salaries but with a com- mission on the profits of the Niger Co. The Niger Co. continued to prosper, and in March, 1929. arrangements were concluded for an amalgamation between the Niger Co. and its principal trade competitor, the African and Eastern Trading Corporation. The terms of the amalgamation appear to have left no room for Bell or Snelling. It was necessary, therefore, to dispose of the agreements between them and Levers. Mr. D'Arcy Cooper, the chairman of Levers, saw both gentlemen and arranged terms with them which are recorded in two letters of 19th March, 1929. The letter to Bell is as follows. [Set out letter at p. 210.] The letter to Snelling is in similar terms except that the compensation given was £20,000. Both sums were only paid on 1st May, 1929, on which date the two appellants retired from their service with Levers and from the Boards of the Niger Co. and various subsidiary companies to which they had been appointed. Very little attention appears to have been paid at the trial to these subsidiary companies, and there is [27] 2 a scarcity of evidence about them. The position in regard to them may demand further consideration; at present I leave them on one side. The position then is that in March, 1929, the two appellants left the service of Levers with substantial compensation in their pockets and mutual expressions of respect and esteem.[138]In July, 1929, Levers discovered facts which indicated that their expenditure of £50,000 and their expressions of regard had been misplaced, for the years October-October, 1926-7, 1927-8, and 1928-9, the .Niger Co., together with three of its trading com- petitors, including the African and Eastern Trade Corporation, had been parties to what were called "Pooling Agreements," under which the parties undertook to disclose to one another their dealings in Gold Coast cocoa; not to buy cocoa produced elsewhere without the consent of the Pool Committee; agreed to fix from time to time buying and selling prices and not to sell without consent below the agreed selling price; and made provision for distributing in agreed proportions the proceeds of the pool. It appears to have been con- sidered necessary that the operations of the Niger Co. under the pool should be carried out without excessive publicity; and the brokers' contracts for the Niger Co. were recorded under initials. In November and December, 1927, the two appellants, at a time when the Pool Committee were lowering the pool purchase price of cocoa, on several occasions sold cocoa short; and closing in a few days at the reduced price made profits. A few days later they bought for the rise and made a small profit. Altogether the dealings resulted in a profit of £1,360. The transaction was of course conducted without the knowledge of Levers or any responsible official of the Niger Co. It was carried out in secrecy; and pay- ment of the profit was made by the brokers at the appellants' request in a draft for American dollars. No defence can be offered for this piece of misconduct. The appellants were acting in a business in which their employers were concerned; their interests and their employers conflicted; they were taking a secret advantage out of their employment; and committing a grave breach of duty both to Levers and to the Niger Co. The jury have found that had the facts been discovered during the service, Levers could and would have dismissed them, and no objection can be taken to this finding.[139]Having made this discovery it naturally occurred to Levers that instead of spending £50,000 to cancel the two service agreements they might, if they had known the facts, have got rid of them for nothing. They therefore claimed the return of the money from the appellants, as well as the amount of the profits made; and on 7th August, 1929, issued the writ in the present action, claiming damages for fraudulent misrepresentation and concealment; an account of the defendants' dealings in cocoa; and repayment of money paid under a mistake of fact.[140]The pleadings were in conformity with the endorsement on the writ. The defendants admitted the dealings in cocoa, alleging that they were speculative dealings in differences. They denied that they were wrongful but pleaded tender of the profit of £1,360 which sum by an amended defence they paid into Court. It was not disputed in the Court of Appeal or before this House that the dealings were wrongful; and no question remains on this issue or as to the remedy ordered in respect of it.[141]The trial began on 24th March, 1930, before Wright J. and a City of London Special Jury. On the fourth day on the con- clusion of their evidence the plaintiffs sought and obtained permission to amend their pleadings by alleging a series of fraudulent dealings in cocoa by the defendants involving misappro- priation of the Niger Co.'s funds. At the same time for the first time the Niger Co. were added as plaintiffs. The 3 [28] defendants were eventually acquitted of all the new charges. On 5th May, 1930, the trial commenced anew before the same Judge and a new Jury. At the conclusion of the evidence there was some discussion as to the questions to be put to the Jury. The Court adjourned for a day or two before the summing up of the Judge. There had been some discussion as to the issue raised by the plea of mistake, and when the case was resumed counsel for the plaintiffs suggested an additional question :
" Did the plaintiffs " in entering into the said agreements for the payment of and in " paying the £30,000 and £20,000 respectively act in ignorance of " the defendants' conduct (my Lord that avoids the word "
' mistake ' to which Your Lordship took objection) and was such " ignorance due to non-disclosure by the defendants of such '' conduct ? ' So far this seems to have been the only reference to the matter of mistake in the proposed questions. The learned

Judge said :

" I have been thinking about that matter; probably " yours is better; but what I thought of asking was this: ' When "
' Levers entered into the agreement of 19th March, 1929, did " ' they know of the actings of the defendants or either of them " ' in regard to the dealings C.T.C., R.T.D. and G.S.2? If Levers ' had known would they have made these agreements or either of " ' them? At the date of the respective interviews prior to these " ' agreements had the defendants or either of them in mind their " ' actings in respect of these transactions?[142]To the last question Mr. Pritt for the defendants objected that there was no evidence that they had. Whereupon

the Judge said:

" The point must really arise; that issue of fact will have • " to be dealt with by the Jury when they are considering the ques- " tion of fraudulent misrepresentation or fraudulent concealment. "
On the other hand the verdict of the Jury on this point may " have some bearing hereafter on the question of mistake."[143]The circumstances under which this last question was admitted are relevant to the complaint of the appellants as to the subsequent admission of any issue as to mutual mistake. They say that the only issue raised by the pleadings was as to a unilateral mistake by the plaintiffs; that the question propounded by the plaintiffs shows this; and that it cannot be assumed that the Judge, while stating that the plaintiffs' questions might be better, but he pre- ferred his own, should have asked a question for the purpose of solving an issue as to mutual mistake which was not upon the plead- ings and upon which no witness had been examined or cross- examined and on which no word bad been said to the jury by counsel on either side. At present it is unnecessary to say more on the topic.[144]The questions as finally left to the jury and their answers have been stated to the House and I need not repeat them. The Judge heard argument as to how judgment should be entered. At some stage of the proceedings the parties had agreed that rescission of the agreements must be left to the Judge and that on any point left to him he must have leave to draw inferences of fact. Eventually the Judge gave judgment for apparently both plaintiffs for £31,224 against the defendant Bell and £20,000 against the defendant Snelling, on the ground that " there was a total failure of considera- tion such as to vitiate the bargain " because " the parties dealt ' with one another under a mutual mistake as to their respective ' rights." On appeal this judgment was affirmed. The three Lords Justices accepted the view of Mr. Justice Wright that there was a mutual mistake which entitled the plaintiffs to recover. They were also agreed that there was a duty upon the defendants to disclose to the plaintiffs their misconduct as to the cocoa dealings and that the contracts under which the money was paid were in consequence voidable. [29] 4[145]Before the Court of Appeal and before this House the appellants contended that no issue as to mutual mistake had been raised by the pleadings, and that it was not open to the learned Judge or to the Court of Appeal to determine the case without an amendment of the pleadings and upon an issue of fact which was not submitted to the jury. The Lords Justices appear to have held varying views on this point. Lord Justice Scrutton thought that the point was not pleaded, but that it was the practice of the Courts to deal with the legal result of pleaded facts, though the particular legal result is not pleaded except where to ascertain the validity of the legal result would require the investigation of new and disputed facts which had not been investigated at the trial. Here he thought that there were no such disputed facts, and the question could be dealt with without amendment. Lord Justice Lawrence on the assumption that mutual mistake was not pleaded thought that all the facts relevant to mutual mistake had been fully investigated and ascertained at the trial: and that the objection was a mere technical objection without merits. Lord Justice Greer thought that mutual mistake was sufficiently pleaded. I think it is sufficient to say for present purposes that it seems to me clear when the pleadings and particulars are examined that the pleading was confined to unilateral mistake. In these circum- stances the Judge on a trial with a jury has without consent of the parties no jurisdiction to determine issues of fact not raised by the pleadings: nor in my opinion would a general consent to determine issues not decided by the jury include a power without express further consent after the jury had been discharged to amend plead- ings so as to raise further issues of fact. Similarly the powers of the Court of Appeal, which under 0. 58 r. 4 are wider than those of the Judge, are limited in the case of trials by jury to determine issues of fact in cases where only one finding by a jury could be allowed to stand. Further, I think that the Court of Appeal cannot without amendment decide a case upon an unpleaded issue of Law which depends upon an unpleaded issue of fact. If the issue of fact can be fairly determined upon the existing evidence they may of course amend : but in any such case amendment appears to me to be necessary. In this House in the course of the hearing an amendment was tendered by the plaintiffs which did aver a mutual mistake. In the view that I take of the whole case it becomes unnecessary to deal finally with the appellants' complaint that the points upon which the plaintiffs succeeded were not open to them. 1 content myself with saying that much may be said for that contention.[146]Two points present themselves for decision. Was the agree- ment of March 19, 1929, void by reason of a mutual mistake of Mr. D'Arcy Cooper and Mr. Bell ?[147]Could the agreement of March 19, 1929, be avoided by reason of the failure of Mr. Bell to disclose his misconduct in regard to the cocoa dealings ?[148]My Lords,[148]the rules of law dealing with the effect of mistake on contract appear to be established with reasonable clearness. If mistake operates at. all it operates so as to negative or in some cases to nullify consent. The parties may be mistaken in the identity of the contracting parties, or in the existence of the subject matter of the contract at the date of the contract, or in the quality of the subject matter of the contract. These mistakes may be by one party, or by both, and the legal effect may depend upon the class of mistake above mentioned. Thus a mistaken belief by A that he is contract- ing with B, whereas in fact he is contracting with C, will negative consent where it is clear that the intention of A was to contract only with B. So the agreement of A and B to purchase a specific article 5 [30] is void if in fact the article had perished before the date of sale. In this case, though the parties in fact were agreed about the subject matter, yet a consent to transfer or take delivery of something not existent is deemed useless; the consent is nullified. As codified in. the Sale of Goods Act the contract is expressed to be void if the seller was in ignorance of the destruction of the specific chattel. I apprehend that if the seller with knowledge that a chattel was destroyed purported to sell it to a purchaser, the latter might sue for damages for non-delivery though the former could not sue for non-acceptance, but I know of no case where a seller has so com- mitted himself. This is a case where mutual mistake certainly and unilateral mistake by the seller of goods will prevent a contract from arising. Corresponding to mistake as to the existence of the subject matter is mistake as to title in cases where unknown to the parties the buyer is already the owner of that which the seller purports to sell to him. The parties intended to effectuate a transfer of ownership : such a transfer is impossible : the stipulation is naturali ratione inutilis. This is the case of Cooper v. Phibbs, L.R. 2 H.L. 149 (1867), where A agreed to take a lease of a fishery from B. though contrary to the belief of both parties at the time A was tenant for life of the fishery and B appears to have had no title at all. To such a case Lord Westbury applied the principle that if parties contract under a mutual mistake and misapprehen- sion as to their relative and respective rights the result is that the agreement is liable to be set aside as having proceeded upon a common mistake. Applied to the context the statement is only subject to the criticism that the agreement would appear to be void rather than voidable. Applied to mistake as to rights generally it would appear to be too wide. Even where the vendor has no title though both parties think he has, the correct view would appear to be that there is a contract, but that the vendor has either com- mitted a breach of a stipulation as to title, or is not able to perform his contract. The contract is unenforceable by him but is not void.[149]Mistake as to quality of the thing contracted for raises more difficult questions. In such a case a mistake will not affect assent unless it is the mistake of both parties and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be. Of course it may appear that the parties contracted that the article should possess the quality which one or other or both mistakenly believed it to possess. But in such a case there is a contract and the inquiry is a different one. being whether the contract as to quality amounts to a condition or a warranty, a different branch of the law. The principles to be applied are to be found in two cases which as far as my knowledge goes (have always been treated as authoritative expositions of the law.[150]The first is Kennedy v. Panama Royal Mail Co., L.R. 2 Q.B. 580 (1867). In that case the plaintiff had applied for shares in the defendant company on the faith of a prospectus which stated falsely but innocently that the company had a binding contract with the Government of New Zealand for the carriage of mails. On dis- covering the true facts the plaintiff brought an action for the recovery of the sums he had paid on calls. The defendants brought a cross action for further calls. Blackburn J. in delivering the judgment of the Court (Cockburn C.J., Blackburn, Mellor and Shee J.J.) said at p. 586 :
' The only remaining question is one of ' much greater difficulty. It was contended by Mr. Mellish on ' behalf of Lord Gilbert Kennedy that the effect of the prospectus ' was to warrant to the intended shareholders that there really was ' such a contract as is there represented, and not merely to represent ' that the company bona fide believed it; and that the difference in ' substance between shares in a. company with such a contract and [31] 6 " shares in a company whose supposed contract was not binding, '
' was a difference in substance in the nature of the thing; and that " the shareholder was entitled to return the shares as soon as he '' discovered this quite independently of fraud on the ground that " he had applied for one thing and got another. And if the " invalidity of the contract really made the shares he obtained " different things in substance from those which he applied for " this would we think be good law. The case would then resemble " Gompertz v. Bartlelt and Gurney v. Womersley where the person '' who had honestly sold what he thought a bill without recourse to "him, was nevertheless held bound to return the price on its " turning out that the supposed bill was a forgery in the one case " and void under the stamp laws in the other; in both cases the " ground of this decision being that the thing handed over was " not the thing paid for. A similar principle was acted on in " Ship's case. There is, however, a very important difference " between oases where a contract may be rescinded on account " of fraud, and those in which it may be rescinded on the ground '' that there is a difference in substance between the thing bargained " for and that obtained. It is enough to show that there was a " fraudulent representation as to any part of that which induced '' the party to enter into the contract which he seeks to rescind; " but where there has been an innocent misrepresentation or mis- " apprehension it does not authorise a rescission unless it is such " as to show that there is a complete difference in substance between " what was supposed to be and what was taken so as to con- " stitute a failure of consideration. For example, where a horse " is bought under a belief that it is sound, if the purchaser was " induced to buy by a fraudulent representation as to the horse's " soundness the contract may be rescinded. If it was indirectly an " honest misrepresentation as to its soundness, though it may be " clear that both vendor and purchaser thought that they were " dealing about a sound horse and were in error, yet the purchaser " must pay the whole price unless there was a warranty, and even " if there was a warranty he cannot return the horse and claim " back the whole price unless there was a condition to that effect " in the contract— Street v. Blay."[151]The Court came to the conclusion in that case that though there was a misapprehension as to that which was a material part of the motive inducing the applicant to ask for the shares, it did not prevent the shares from being in substance those he applied for.[152]The next case is Smith v. Hughes, L.R. 6 Q.B. 597 (1871), the well-known case as to new and old oats. The action was in the County Court, and was for the price of oats sold and delivered and damages for not accepting oats bargained and sold. Cockburn C. J. at p. 604 cites Story on contracts as follows :
" Mr. Justice Story " in his work on Contracts (Vol. 1, s. 516) states the law as to con- " cealment as follows : ' The general rule, both of law and equity, " in respect to concealment is that mere silence with regard to a " material fact which there is no legal obligation to divulge will not " avoid a contract although it operate as an injury to the party " from whom it is concealed. Thus,' he goes on (s. 517), " although a vendor is bound to employ no artifice or disguise for " the purpose of concealing defects in the article sold since that " would amount to a positive fraud on the vendee, yet under this " general doctrine of caveat emptor he is not ordinarily bound to " disclose any defect of which he may be cognisant, although his " silence may operate virtually to deceive the vendee. But,' he continues (s. 518), ' an improper concealment or suppression of a " material fact which the party concealing is legally bound to dis- " close and of which the other party has a legal right to insist " that he shall be informed is fraudulent and will invalidate a " contract.' Further distinguishing between extrinsic circum- 7 [32] " stances affecting the value of the subject-matter of a sale and the " concealment of intrinsic circumstances appertaining to its nature, " character and condition, he points out (s. 519) that with reference " to the latter the rule is ' that mere silence as to anything which "
'the other party might by proper diligence have discovered and " ' which is open to his examination is not fraudulent unless a " ' special trust or confidence exist between the parties or be " ' implied from the circumstances of the case.' In the doctrine " thus laid down I entirely agree."[153]In a further passage he says :
" It only remains to deal with an " argument which was pressed upon us that the defendant in the " present case intended to buy old oats and the plaintiffs to sell " new, so that the two minds were not ad idem and that conse- " quently there was no contract. This argument proceeds on the " fallacy of confounding what was merely a motive operating on " the buyer to induce him to buy with one of the essential condi- " tions of the contract. Both parties were agreed as to the sale " and purchase of this particular parcel of oats. The defendant " believed the oats to be old and was thus induced to agree to buy " them, but he omitted to make their age a condition of the con- " tract. All that can be said is that the two minds were not " ad idem as to the age of the oats; they certainly were ad idem " as to the sale and purchase of them. Suppose a person to buy " a horse without a warranty believing him to be sound and the " horse turns out unsound, could it be contended that it would be " open to him to say that as he had intended to buy a sound horse '' and the seller to sell an unsound one the contract was void because " the seller must have known from the price the buyer was willing " to give or from his general habits as a buyer of horses that he " thought the horse was sound. The cases are exactly parallel."
[154]Blackburn J. said, p. 606 :
" In this case I agree that on the " sale of a specific article unless there be a warranty making it " part of the bargain that it possesses some particular quality the " purchaser must take the article he has bought though it does not " possess that quality. And I agree that even if the vendor was " aware that the purchaser thought that the article possessed that " quality, and would not have entered into the contract unless he " had so thought, still the purchaser is bound unless the vendor " was guilty of some fraud or deceit upon him, and that a mere " abstinence from disabusing the purchaser of that impression is " not fraud or deceit; for whatever may be the case in a court of " morals, there is no legal obligation on the vendor to inform the " purchaser that he is under a mistake not induced by the act of " the vendor."
[155]The Court ordered a new trial. It is not quite clear whether they considered that if the defendants' contention was correct the parties were not ad idem or there was a contractual condition that the oats sold were old oats. In either case the defendant would succeed in defeating the claim.[156]In these cases I am inclined to think that the true analysis is that there is a contract, but that the one party is not able to supply the very thing, whether goods or services, that the other party con- tracted to take : and therefore the contract is unenforceable by the one if executory, while if executed the other can recover back money paid on the ground of failure of the consideration.[157]We are now in a position to apply to the facts of this case the law as to mistake so far as it has been stated. It is essential in this part of the discussion to keep in mind the finding of the jury acquitting the defendants of fraudulent misrepresentation or concealment in procuring the agreements in question. Grave injustice may be done to the defendants : and confusion introduced into the legal conclusion unless it is quite clear that in considering [33] 8 mistake in this case no suggestion of fraud is admissible and must sternly be rejected by the Judge who has to determine the legal issues raised. The agreement which is said to be void is the agree- ment contained in the letter of 19th March, 1929, that Bell would retire from the Board of the Niger Co. and its sub- sidiaries and that in consideration of his doing so Levers would pay him as compensation for the termination of his agree- ments and consequent loss of office the sum of £30,000 in full satis- faction and discharge of all claims and demands of any kind against Lever Bros., the Niger Co. or its subsidiaries. The agreement which as part of the contract was terminated had been broken so that it could be repudiated. Is an agreement to terminate a broken contract different in kind from an agreement to terminate an unbroken contract assuming that the breach has given the one party the right to declare the contract at an end ? I feel the weight of the Plaintiffs' contention that a contract immediately determin- able is a different thing from a contract for an unexpired term and that the difference in kind can be illustrated by the immense price of release from the longer contract as compared with the shorter. And I agree that an agreement to take an assignment of a lease for five years is not the same thing as to take an assignment of a lease for three years, still less a term for a few months. But on the whole I have come to the conclusion that it would be wrong to decide that an agreement to terminate a definite specified con- tract is void if it turns out that the agreement had already been broken and could have been terminated otherwise. The contract released is the identical contract in both cases : and the party paying for release gets exactly what he bargains for. It seems immaterial that he could have got the same result in another way : or that if he had known the true facts he would not have entered into the bargain.a. A. buys B.'s horse : he thinks the horse is sound and he pays the price of a sound horse : he would certainly not have bought the horse if he had known, as the fact is, that the horse is unsound. Ifb. B. has made no representation as to soundness and has not contracted that the horse is sound, A. is bound, and cannot recover back the price. A. buys a picture from B. : both A. and B. believe it to be the work of an old master and a high price is paid. It turns out to be a modern copy. A. has no remedy in the absence of representation or warranty. A. agrees to take on lease or to buy from B. an unfurnished dwelling house. The house is in fact uninhabitable. A. would never have entered into the bargain if he had known the fact. A. has no remedy: and the position is the same whether B. knew the facts or not, so long as he made no representation or gave no warranty. A. buys a roadside garage business from B. abutting on a public thoroughfare : unknown to A. but known to B. it has already been decided to construct a bye- pass road which will divert substantially the whole of the traffic from passing A.'s garage. Again A. has no remedy. All these cases involve hardship on A. and benefit B. as most people would say unjustly. They can be supported on the ground that it is of paramount importance that contracts should be observed : and that if parties honestly comply with the essentials of the formation of contracts, i.e., agree in the same terms oil the same subject matter, they are bound : and must rely on the stipulations of the contract for protection from the effect of facts unknown to them.[158]This brings the discussion to the alternative mode of expressing the result of a mutual mistake. It is said that in such a case as the present there is to be implied a stipulation in the contract that a condition of its efficacy is that the facts should be as understood by both parties, viz., that the contract could not be terminated till the end of the current term. The question of the existence of conditions express or implied is obviously one that affects not the formation of contract, but the investigation of the terms of the 9 [34] contract when made. A condition derives its efficacy from the con- sent of the parties express or implied. They have agreed, but on what terms. One term may be that unless the facts are or are not of a particular nature, or unless an event has or has not happened, the contract is not to take effect. With regard to future facts such a condition is obviously contractual. Till the event occurs the parties are bound. Thus the condition (the exact terms of which need not here be investigated), that is generally accepted as underlying the principle of the frustration cases is contractual: an implied condition. Sir John Simon formulated for the assistance of your Lordships a proposition which should be recorded " Whenever it is to be inferred from the terms of a contract or " its surrounding circumstances that the consensus has been reached " upon the basis of a particular contractual assumption, and that " assumption is not true the contract is avoided, i.e., it is void " ab initio if the assumption is of present fact and it ceases to " bind if the assumption is of future fact." I think few would demur to this statement but its value depends upon the meaning of " a contractual assumption " and also upon the true meaning to be attached to " basis," a metaphor which may mislead. When used expressly in contracts for instance in policies of insurance which state that the truth of the statements in the pro- posal is to be the basis of the contract of insurance, the meaning is clear. The truth of the statements is made a condition of the contract, which failing the contract is void unless the condition is waived. The proposition does not amount to more than this that if the contract expressly or impliedly contains a term that a par- ticular assumption is a condition of the contract the contract is avoided if the assumption is not true. But we have not advanced far on the inquiry how to ascertain whether the contract does con- tain such a condition. Various words are to be found to define the state of things which makes a condition. " In the contemplation " of both parties fundamental to the continued validity of the " contract," " a foundation essential to its existence," ' a funda- " mental reason for making it " are phrases found in the important judgment of Scrutton L.J. in the present case. The first two phrases appear to me to be unexceptionable. They cover the case of a contract to serve in a particular place, the existence of which is fundamental to the service, or to procure the services of a professional vocalist whose continued health is essen- tial to performance. But " a fundamental reason for making a " contract " may with respect be misleading. The reason of one party only is presumedly not intended, but in the cases I have suggested above of the sale of a horse or of a picture, it might be said that the fundamental reason for making the con- tract was the belief of both parties that the horse was sound or the picture an old master, yet in neither case would the condition as I think exist. Nothing is more dangerous than to allow oneself liberty to construct for the parties contracts which they have not in terms made by importing implications which would appear to make the contract more businesslike or more just. The implica- tions to be made are to be no more than are '' necessary '' for giving business efficacy to the transaction : and it appears to me that both as to existing facts or future facts a condition should not be implied unless the new state of facts makes the contract something different in kind from the contract in the original state of facts. Thus in Krell v. Henry 1903 : 2 K.B. at p. 754 Vaughan Williams L.J. finds that the subject of the contract was " rooms to "view the procession": the postponement therefore made the rooms not rooms to view the procession. This also is the test finally chosen by Lord Sumner in Bank Line v. Capel 1919 A.C. 436 agreeing with Lord Dunedin in Metro- [35] 10 politan Water Board v. Dick Kerr 1918 A.C. at p. 128 where deal- ing with the criterion for determining the effect of interruption in " frustrating " a contract he says, " an interruption so long as to " destroy the identity of the work or service with the work or " service when interrupted." We therefore get a common standard for mutual mistakes and implied conditions whether as to existing or as to future facts. Does the state of the new facts destroy the identity of the subject matter as it was in the original state of facts ? To apply the principle to the infinite combinations of facts that arise in actual experience will continue to be difficult: but if this case results in establishing order into what has been a somewhat confused and difficult branch of the law it will have served a useful purpose. I have already stated my reasons for deciding that in the present case the identity of the subject matter was not destroyed by the mutual mistake, if any, and need not repeat them.[159]It now becomes necessary to deal with the second point of the plaintiffs, viz., that the contract of 19th March, 1929, could be avoided by them in consequence of the non-disclosure by Bell of his misconduct as to the cocoa dealings. Fraudulent concealment has been negatived by the jury; this claim is based upon the contention that Bell owed a duty to Levers to disclose his misconduct, and that in default of disclosure the contract was voidable. Ordinarily the failure to disclose a material fact which might influence the mind of a prudent contractor does not give the right to avoid the contract. The principle of caveat emptor applies outside contracts of sale. There are certain contracts expressed by the law to be contracts of the utmost good faith where material facts must be disclosed; if not the contract is voidable. Apart from special fiduciary relation- ships contracts for partnership and contracts of insurance are the leading instances. In such cases the duty does not arise out of con- tract; the duty of a person proposing an insurance arises before a contract is made; so of an intending partner. Unless this contract can be brought within this limited category of contracts uberrimae fidei it appears to me that this ground of defence must fail. I see nothing to differentiate this agreement from the ordinary contract of service; and I am aware of no authority which places contracts of service within the limited category I have mentioned. It seems to me clear that master and man negotiating for an agreement of service are as unfettered as in any other negotiation. Nor can I find anything in the relation of master and servant when estab- lished that places agreements between them within the protected category. It is said that there is a contractual duty of the servant to disclose his past faults. I agree that the duty in the servant to protect his master's property may involve the duty to report a fellow servant whom he knows to be wrongfully dealing with that property. The servant owes a duty not to steal, but having stolen is there superadded a duty to confess that he has stolen? I am satisfied that to imply such a duty would be a departure from the well-established usage of mankind and would be to create obliga- tions entirely outside the normal contemplation of the parties con- cerned. If a man agrees to raise his butler's wages, must the butler disclose that two years ago he received a secret commission from the wine merchant; and if the master discovers it, can he without dismissal or after the servant has left avoid the agreement for the increase in salary and recover back the extra wages paid? If he gives his cook a month's wages in lieu of notice can he on discovering that the cook has been pilfering the tea and sugar claim the return of the month's wages ? 1 think not. He takes the risk; if he wishes to protect himself he can question his servant, and will then be protected by the truth or otherwise of the answers. I agree with the view expressed by Avory J. in Healey v. Societe Anonyme Francaise, 1917, 1 K.B. 946, on this point. It will be 11 [36] noticed that Bell was not a director of Levers, and with respect I cannot accept the view of Greer L.J. that if he was in a fiduciary relationship to the Niger Co. he was in a similar fiduciary relation- ship to the shareholders, or to the particular shareholders (Levers) who held 99 per cent, of the shares. Nor do I think that it is alleged or proved that in making the agreement of 19th March, 1929, Levers were acting as agents for the Niger Co. In the matter of the release of the service contract and the payment of £30,000 they were acting quite plainly for themselves as principals. It follows that on this ground also the claim fails.[160]The result is that in the present case servants unfaithful in some of their work retain large compensation which some will think they do not deserve. Nevertheless it is of greater importance that well established principles of contract should be maintained than that a particular hardship should be redressed; and I see no way of giving relief to the plaintiffs in the present circumstances except by con- fiding to the Courts loose powers of introducing terms into contracts which would only serve to introduce doubt and confusion where certainty is essential. I think therefore that this appeal should be allowed; and I agree with the order to be proposed by my noble and learned friend Lord Blanesburgh. [37] Viscount Hailsham. Lord Blanes- burgh. Lord Warring- ton of Clyffe. Lord Atkin. Lord Thanker- ton. ERNEST HYSLOP BELL and WALTER EDWARD SNELLING (Appellants) v. LEVER BROTHERS LIMITED and NIGER COMPANY LIMITED (Respondents). Lord Thankerton. MY LORDS,[161]The detailed facts of this case have been sufficiently stated already by your Lordships. The findings of the jury were accepted by all parties, who were also agreed that the Court should have leave to draw inferences of fact generally.[162]The two main contentions between the parties are whether the agreements of March, 1929, are liable to be set aside ( a ) on the ground of mutual mistake or error, or (b) by reason of the non- disclosure of material facts by the Appellants, whereby Lever Brothers were induced to enter into these agreements.[163]The judgment of both Courts below was unanimously against the Appellants on the first point, and, while Wright J. expressed no opinion, the Court of Appeal was also unanimously against the Appellants on the second point, though the first point was sufficient for their disposal of the case. The Appellants, however, must succeed on both points in order to succeed in their appeal.[164]Both these points raise important questions of principle and I regret to find myself unable to agree with the conclusions of the Courts below on either point. In this view, it is unnecessary for me to deal with the two further questions, namely, whether the first point is open to the Respondents on the pleadings and the course of procedure, and whether the obligation in Mr. Bell's ser- vice agreement as to payment by Lever Brothers of the premiums on an endowment policy remains binding, despite the setting aside of the agreement of March, 1929.[165]The findings of the jury establish that the Appellants' four cocoa transactions in November and December, 1927, constituted a breach of contract or duty towards the Respondents, which would have entitled Lever Brothers to terminate the Appellants' contracts of service either in January, 1928, or March, 1929, and that Lever Brothers would have exercised such right at either of these dates. The jury also found that the Niger Company would have been entitled to dismiss the Appellants from their positions as chairman and vice-chairman respectively on either of these dates and would have done so. The jury further found that Lever Brothers entered into the agreements of March, 1929, in ignorance of these trans- actions of the Appellants and that, if Lever Brothers had known of them, they would not have entered into these agreements. As regards the state of the Appellants' mind, the question and answer was as follows :- 'At the date of the respective interviews prior ' to these agreements, had the Defendant Bell or the Defendant ' Snelling in mind their actings in respect of these transactions?", to which the jury's answer was " No." By their earlier answers the jury had acquitted the Appellants of inducing Lever Brothers to enter into the agreements of March, 1929, by fraudulent mis- representation of faithful and honest service or by fraudulent concealment of their cocoa transactions. 13105 A 11 [38] 2[166]It will be convenient to deal first with the question whether the Appellants had a duty to disclose their cocoa transactions to Lever Brothers when negotiating the agreements of March, 1929. If there was such a duty, there is no doubt that the failure to dis- close—though innocent—amounted to a misrepresentation as to material facts which induced Lever Brothers to enter into these agreements, and which would entitle the latter to rescind them. The learned Judges of the Court of Appeal appear to regard the duty to disclose as arising at the time of negotiating the contract, but I am unable to see that any such duty could arise out of the circumstances of these agreements; in my opinion, the first ques- tion must be whether the Appellants incurred a duty to disclose these transactions at the time that they were completed. The failure to account for the profits to the Niger Company on which some of the learned Judges lay stress, was an integral part of the breach of duty to that Company. The Appellants had just as much—or just as little—right to continue drawing their salaries without disclosure as they had to negotiate two years later for the commutation of these same salaries. In truth, the negotiations in March, 1929, were at arm's length, and not on the footing of the relationship of master and servant, but for the termination of that relationship, and, if there was not an already existing breach of an obligation to disclose, I am unable to see how the circumstances of the agreements of March, 1929, could be held to create such an obligation.[167]In the absence of fraud, which the jury has negatived, I am of opinion that neither a servant nor a director of a company is legally bound forthwith to disclose any breach of the obligations arising out of the relationship, so as to give the master or the company the opportunity of dismissal; on subsequent discovery, the master or company will not be entitled to hold the dismissal as operating from the date of the breach, but will be liable for wages or salary earned by the servant during the intervening period. In my opinion Healey v. Societe Anonyme Francaise Rubastic, (1917) 1 K.B. 946, which was the case of the managing director of a company, was rightly decided. There may well be cases in which the concealment of the misconduct amounts to a fraud on the master or company, but the jury have excluded that view in the present case. The other cases to which we were referred relate to a duty to disclose all material facts on formation of a contract, and form exceptions to the general rule, which does not impose such a duty. The most familiar of these exceptions is found in the case of policies of insurance, as to which Blackburn J. says in Fletcher v. Krell, (1873) 28 L.T. 105, " mercantile custom has established the rule ' with regard to concealment of material facts in policies of ' insurance, but in other cases there must be an allegation of moral ' guilt or fraud." Other exceptions are found in cases of trustee and cestui qui trust and of a company issuing a prospectus and an applicant for shares, but the number of exceptions is limited, and no authority has been cited which extends the exceptions to cover a case such as the present.[168]Accordingly, I am of opinion that the Appellants had no legal duty to disclose their cocoa transactions either at the time of their commission or in negotiation for the agreements of March, 1929.[169]Turning next to the question of mutual error or mistake, I think that the Respondents' contention may be fairly stated as follows, vizt., that in concluding the agreements of March, 1929, all parties proceeded on the mistaken assumption that the Appellants' service agreements were not liable to immediate ter- mination by Lever Brothers by reason of the Appellants' miscon- [39] 3 duct, and that such common mistake involved the actual subject matter of the agreements, and did not merely relate to a quality of the subject matter.[170]The cases on this branch of the law are numerous, and in seek- ing the principle on which they rest, I will at first confine my attention to those which relate to innocent mutual mistake on formation of the contract, as it appears to me that the cases relat- ing to facts arising subsequently to the formation of the contract may be found to rest on a somewhat different principle.[171]But first let me define the exact position as at the date of the agreements of March, 1929. The service agreements of both Appellants were then existing as binding legal contracts, although it was in the power of Lever Brothers, had they then known of the Appellants' breach of contract, to have terminated the con- tracts; but, until the exercise of such power, the contracts remained binding. It is also clear that an essential purpose of the agree- ments of March, 1929, was to secure the termination of these service agreements. The mistake was not as to the existence of agreements which required termination—for such did exist—but as to the possibility of terminating them by other means.[172]A clear exposition of the principles to be applied in such a case as the present is to be found in the judgment of the Court of Queen's Bench (Cockburn C.J., Blackburn, Mellor and Shee J.J.), in Kennedy v. Panama &c. Co., (1867) L.R. 2 Q.B. 580, delivered by Blackburn J., who, as Lord Blackburn, reaffirmed this opinion in 1881 in Mackay v. Dick, 6 App Cas 251 , at 265. In Kennedy's case the Plaintiff had taken shares in a further issue of capital by the Panama Company, being induced by a statement in the prospectus that the purpose of the issue was to enable the company to carry out a contract recently entered into with the Government of New Zealand for the carriage of mails. That contract had been made with the agent of the New Zealand Government, both parties believing that he had authority to make it; but it turned out that he had no such authority and the Government refused to ratify it. Having failed on. the charge of fraud and deceit against the directors of the company for making the statements in the prospectus, the Plaintiff submitted a second contention, which is stated in the judgment as follows (at p. 586 foot), " It was contended " that the effect of the prospectus was to warrant to the intended " shareholders that there really was such a contract as is there " represented, and not merely to represent that the company bona " fide believed it; and that the difference in substance between " shares in a company with such a contract and shares in a com- " pany whose supposed contract was not binding, was a difference " in substance in the nature of the thing; and that the shareholder " was entitled to return the shares as soon as he discovered this, " quite independently of fraud, on the ground that he applied for " one thing and got another. And, if the invalidity of the con- " tract really made the shares he obtained different things in sub- " stance from those which he applied for, this would, we think, " be good law. The case would then resemble Gompertz v. " Bartlett " (2 E. & B. 849; 23 L.J. (Q.B.) 65) "and Gurney v. " Womersley " (4 E. & B. 133; 24 L.J. (Q.B.) 46) " where the " person, who had honestly sold what he thought a bill without " recourse to him, was nevertheless held bound to return the price " on its turning out that the supposed bill was a forgery in the " one case, and void under the stamp laws in the other; in both " cases the ground of decision being that the thing handed over " was not the thing paid for." 4 [40][173]The Respondents' contention in the present appeal is in effect the same as the above contention; they maintain that the service agreements surrendered to them are not the service agreements paid for, in respect that they were immediately defeasible by them. Blackburn J. proceeds (at p. 587) :
" There " is, however, a very important difference between cases where a " contract may be rescinded on account of fraud, and those in " which it may be rescinded on the ground that there is a difference " in substance between the thing bargained for and that obtained. "
It is enough to show that there was a fraudulent representation " as to any part of that which induced the party to enter into " the contract which he seeks to rescind; but where there has been " an innocent misrepresentation or misapprehension, it does not " authorise a rescission unless it is such as to show that there is " a complete difference in substance between what was supposed to " be and what was taken, so as to constitute a failure of considera- " tion. For example, where a horse is bought under a belief that " it is sound, if the purchaser was induced to buy by a fraudulent " representation as to the horse's soundness, the contract may be " rescinded. If it was induced by an honest misrepresentation as " to its soundness, though it may be clear that both vendor and " purchaser thought that they were dealing about a sound horse ' and were in error, yet the purchaser must pay the whole price, ' unless there was a warranty." After referring to the passages in the Digest of Civil Law and the way the question is there mooted, Blackburn J. says (at p. 588) " the answers given by the great ' jurists quoted are to the effect that, if there be misapprehension ' as to the substance of the thing, there is no contract; but if it ' be only a difference in some quality or accident, even though ' the misapprehension may have been the actuating motive to the ' purchaser, yet the contract remains binding." And he adds ' And, as we apprehend, the principle of our law is the same as ' that of the civil law." This passage makes clear that it is not enough for the purchaser to prove that the misapprehension was the inducing cause to him and that, if he had known, he would not have entered into the contract. The earlier passage as to the sale of an unsound horse also shows that it is not enough that a grossly excessive price has been paid for a bad article. In that case it was held that the shares obtained by Kennedy in the com- pany were not substantially different things but that the case was analogous to that of the horse supposed to be sound. It is pointed out in Kennedy's case that, if the directors had known that the contract was not valid, the contract might have been avoided on the ground of a fraudulent misrepresentation. In the present case, there being no obligation to disclose, the Appellants, if they had had their misconduct in mind, would have been entitled to say nothing about it, and the Respondents, in the absence of fraud, would have been bound by the contracts, even though, if they had known, they would not have entered into the contracts, but would have terminated the service agreements. I have difficulty in seeing how the fact that the Appellants did not remember at the time is to put the Respondents in a better position.[174]The phrase '' underlying assumption by the parties," as applied to the subject matter of a contract, may be too widely interpreted so as to include something which one of the parties had not neces- sarily in his mind at the time of the contract; in my opinion it can only properly relate to something which both must necessarily have accepted in their minds as an essential and integral element of the subject matter. In the present case, however probable it may be, we are not necessarily forced to that assumption. Cooper v. Phibbs, (1867) LR 2 HL 149 , is a good illustration, for both [41] parties must necessarily have proceeded on the mistaken assump- tion that the lessor had the right to grant the lease and that the lessee required a lease. Lord Westbury says (at p. 170) " the " Respondents believed themselves to be entitled to the property, " the petitioner believed that he was a stranger to it, the mistake " is discovered, and the agreement cannot stand."[176]In Scott v. Coulson, (1903) 1 Ch 453 . affirmed (1903) 2 Ch 249 , it was common ground that at the date of the contract for sale of the life policy both parties supposed the assured to be alive, the result being that the Plaintiffs were willing to accept as the best price they could get for the policy a sum slightly in advance of its surrender value and very much below the sum due on the death of the assured. As a matter of fact the assured was dead. It was therefore clear that the subject matter of the contract was a policy still current with a surrender value and that accordingly the subject matter did not exist at the date of the contract. Couturier v. Hastie, (1856) 5 H.L. 673, where the cargo sold was held not to have existed at the date of sale, and Strickland v. Turner, (1852) 7 Exch. Cas. 208, where the annuitant was in fact dead at the date of sale of the annuity, were cases where the subject matter was not in existence at the date of the contract. There are many other cases to the same effect, but I think that it is true to say that in all of them it either appeared on the face of the contract that the matter as to which the mistake existed was an essential and integral element of the subject matter of the contract or it was an inevitable inference from the nature of the contract that all the parties so regarded it.[177]In the present case the terms of the contracts throw no light on the question, and, as already indicated, I do not find sufficient material to compel the inference that the Appellants, at the time of the contracts, regarded the indefeasibility of the service agree- ments as an essential and integral element in the subject matter of the bargain. The range of authorities relating to some alteration in circum- stances subsequent to the date of the contract do not, in my opinion, raise a question of mutual error or mistake; in them the formation of the contract is complete and binding, but subsequent events arise which critically affect the contract, but whose occurrence has not been provided for in the contract. However it may be stated, when relief from the contract is given, the Court, as it appears to me, rests such relief on an implied condition which forms part of a complete and binding contract, but which, on the happen- ing of certain events, terminates the contract. These authorities appear to me, therefore, to have no bearing on the question of error or mistake as rendering a contract void owing to failure of consideration.[178]Accordingly, I am of opinion that the Appellants are entitled to succeed in their appeal and that the judgments of the Courts below so far as appealed against by them, should be reversed. I therefore concur in the motion to be proposed by my noble and learned friend Lord Blanesburgh. (13105-50) Wt.55-11 14 12/31 P. St. G.311