Bell v Lever Brothers Ltd [1932] AC 161

Jury Questions
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 transactions "] 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 :
1. in January, 1928?
Jury's answer: Yes.

2. in March, 1929 ?
Jury's answer: Yes.
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 agreements, had the Defendant Bell or the Defendant Snelling in mind
their actings in respect of these transactions ?
Jury's answer : No.

Facts
Appellant-Mr. Bell
Respondents-Lever Brothers Ltd
Lever Brothers had a controlling interest as shareholders in Niger Co.
Ltd, and they held 99.5% in and after 1925

They dealt in West African products eg. cocoa

Lever Brothers had been dealing with losses of Niger for several years
due to their large investment
Lever Brothers approached Bell to undertake reorganisation and
management of Niger between them-Bell was established accountant
The terms were that Levers would pay all premiums on Mr. Bells
endowment policy on his life, which would pay 16,200 upon death at
60 or before, before maturity, and on maturity, 1,500 per year or
16,200 at his option
Bell taking the job was all the consideration on his part
Bell was appointed chairman of Niger for five years from 1st November
1923 with a salary of 8,000 a year-he had to devote all time to the
business of Levers as of the formal agreement on 9 th Nov
Mr Snelling was to serve in regard to the West African interests of
Levers from 1st Oct 1923 for five years-salary of 10,000 per year until
31st March 1925 and then 6,000 per year for the rest of the term, with
same interest requirement as Bell

July 1926-new agreement for 5 years and pervious contract replaced,

with same salary and insurance premium, with Bell remaining chairman
Same agreement for Snelling, with 6,000 salary and position as Vice
Chairman
14th Sep 1923-Niger appointed both As as Directors and Bell as
Chairman
8th April 1924-Snelling appointed as VC
Joint management of the company continued until April 1929
As were employed under business of Niger and purely under the West
African interests
Lord Leverhulme did say to Bell that he would be responsible for the
actions to the shareholders of Niger, and more than just the Lever
Brothers Ltd
It seems clear that Lord Leverhulme meant the whole Niger company,
excluding the .5% they didnt own, which represents 23,750 shares of
1 each held by 300 shareholders
There is essentially no separation between the terms Lever Brothers
Ltd and Niger
Levers essentially couldnt dismiss the Appellants as long as they
fulfilled their prescribed duties-if they didnt, then Lever werent
obligated to pay them or maintain them in their offices
They could only dismiss the As otherwise by the voting power of the
shareholders of Niger
From July 1925, Niger was transformed to a prosperous company
There were three other companies trading in cocoa at the time, the
African and Eastern Trade Corporation Limited, Anglo-Guinea Produce
Company Limited and Frame and Company Limited
Pool Agreements were made between these four to protect the buying
and selling cocoa trade of the companies-Pool buying and selling prices
agreed, and they had to inform the others and the Pool Committee of
quantities and prices of cocoa bought. Also, a Pool Tax was paid on
purchases of cocoa by them and on any excess sum received from
sales above a certain amount
As were aware of the Pool Agreements
They say they werent aware of directors clause-directors of each party
bound by the terms, and actions of them count as actions of the party
(need to adhere to Pool Agreements)
The offending transactions were between 4 th Nov and 14th Dec 1927,
and were transactions in cocoa differences on As behalf, and they were
As own transactions under brokers of Niger
3 were more or less unprofitable and net result of all four was 1,360
profit
Jan 1928-profit received from brokers and transactions done, and didnt
cause any damage to Niger or Levers
As unaware that these were a breach of Pool Agreement, but Niger
would be accountable for this, although no investigation into extent of
this responsibility
These transactions were at the best ill-advised, as they were secret to
avoid being seen as Nigers transactions-secrecy brought on charges of
dishonesty
Rs said that this was fraud

Transactions not in minds off directors when agreements made and

unknown to Levers until after agreement made
Retirement of As was unrelated and came as a result of an
amalgamation of Niger and the African and Eastern Trade Corporation,
where Bell and Snelling had no position and would have retired anyway
necessarily
This resulted in two agreements of settlement that the litigation has
concerned
Mr Bell-retire 1st May 1929 from board for 30,000, and he discharges
of all claims against Lever Bros Ltd or Niger, and Levers will pay
insurance premium still
Mr. Snelling-retire 1st May and pay 20,000 as long as he drops all
claims towards them
Confirmation letters received and all duties continued until 30 th April
when they both resigned and got compensation
During these negotiations, the offending transactions were unknown by
Mr. Cooper, but Bell never said he faithfully and honestly served the
company
Money was paid to Bell because Levers supposed they had satisfied
their salary right for 2 years 2 months of the term remaining
The salary to be lost would be 17,333 6s 8d for Bell and 13,00 for
Snelling, but this couldnt have been recovered even in actions for
wrongful dismissal
Shareholders could have removed them from Niger if they knew
The offending transactions came to light later and at the trial Mr
Cooper accepted no talk of them being innocent
If they had been known then As would have been dismissed, and
Cooper said the As conspired to make secret profits for themselves and
falsely and fraudulently obtained the agreement to retire Cooper
claimed for damages for conspiracy/fraudulent concealment, breach of
duty and breach of contract
When made aware of the Directors clause, As dropped their defence of
the transactions
Eventually, J ruled 31,224 fine against defendant Bell and 20,000
against defendant Snelling, due to a total failure of consideration on
their part

Lord Blanesburgh

The Jury agreed that the Lever Brothers would have dismissed the As if
they knew of the transactions and wouldnt have made the retirement
arrangements, but that Bell and Snelling didnt meaningfully deceive
them of these transactions
No evidence to support conspiracy
He states that money shouldnt be repaid by Bell because Levers
hadnt terminated the agreement to pay and was obliged to under the
original 1923 agreement
Appeal should be allowed
CA essentially held that the case could now be heard with all the
information that had come to light, considering it all as present info
The Levers were arguing due to paragraph 26 for deliberate fraud on
the part of As

If p26 limited to unilateral mistake induced by As fraud, then mutual

mistake is innocent on the part of the As
The reasons the Rs succeeded in previous courts are no longer open to
them
Even if contract formed on a mutual mistake of fact, unless Ds
terminated the contract, the Levers are still bound by these obligations
Uses Connecticut Fire Insurance Company v Kavanagh 1892 as case
authority-ruled that when question of law is raised for first time in last
resort court, the plea should be entertained
Due to the Jurys responses being as if they were responding to a case
where the possibility of fraud had been eliminated, for the Rs to make a
case of fraud would risk As being subject to injustice-they may claim
protection
The contracts involved were all those where the As were bound for their
own benefit to a party outside of Niger altogether-different liability of
As when the contract is with a company has no interest at all
They key here is that the company cant make the person accountable
for the profit made unless they used either the property of the
company or some confidential information which has come to him as a
Director of the company

Director duties-" 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."

This quotation is not addressed to a directors own contracts in which

the company has no financial interest
Case law-The London and Mashonaland Exploration Company v New
Mashonaland Exploration Company 1891-Directors services must only
be rendered to that company
However, due to the Directors clause, the As should not retain the
profit they made from the offence transactions
As used none of the property etc of Niger, so aside from the Directors
clause, they shouldnt be liable
He cites Nocton v Ashburton, which says a case based on serious
charges of fraud cant be turned into a relatively harmless one
Rs shouldnt be allowed to amend their case because all else has failed,
so this appeal could be dismissed

However, he says the appeal should be allowed because mutual

mistake has not been pleaded
This is because the Levers were the employers of the As, but if they
were proven not to be, the only offence committed by the As would be
a breach of the Directors clause in the Pool agreement
As remain accountable for the profit and damage entirely
However the As should retain the remuneration for their services

Lord Warrington of Clyffe

Strickland v Turner shows that where a contract is found based on the

presence of something of value, and this turns out not to be there, the
contract ceases to be binding
Scott v Coulson also says that common mistakes may make the
contract one which cant be enforced
However, this is only relevant where the mistake regards the basis of
the contract, and Kennedy v The Panama Mail Company shows that
where the error doesnt affect the consideration, the contract should be
enforced
Although the error wasnt one made regarding the terms of the service
agreements, Warrington believes it is one fundamental to the contract
The appeal on the main question should be dismissed
However, the premiums on the endowment policies that are meant to
be paid by the Lever Bros should remain

Lord Atkin

No question of mutual mistake raised by pleadings and the pleading

are confined to unilateral mistake
2 questions-1) if agreement of March 19th 1929 was void due to mutual
mistake of Cooper and Bell 2) if the agreement of that day could be
avoided by reason of Bell failing to disclose his misconduct
The identity of the subject matter was not destroyed by the mutual
mistake and
On second question, the jury has denied the possibility of fraudulent
concealment
Although Bell was in a fiduciary relationship to the Niger Co., he was
not to the shareholders or to Levers, and they werent acting as agents
for the Niger Co in the March 19th 1929 agreement
Therefore, Levers were acting for themselves as principals and not on
the behalf of Niger, which is who Bell was tied down to by the binding
contract

Lord Thankerton

Essentially, this case is similar to Gompertz v Bartlett and Gurney v

Womersley, in that the Rs position is that where the service
agreements surrendered to them are not the service agreements they
paid for
J Blackburn says there is a difference between fraud and an honest and
innocent misrepresentation, and this innocent mistake doesnt warrant
a rescission unless it is shown that there is a complete difference in
substance between what was supposed to be and what was taken, so
far that there was a failure of consideration
Blackburn says that if there is a complete difference in the substance of
the thing then there is no contract, but if it is merely a difference in
quality, the contract remains binding

An underlying assumption by the parties must really be something

accepted as an essential and integral element of the subject matter,
and the parties must have proceeded on the mistaken assumption
L Thankerton thinks that there is insufficient material to support that
the As, at the time of the contract, regarded the indefeasibility of the
service as agreements as an integral part of the subject matter
The authorities stated are only irrelevant to the question of error or
mistake as rendering a contracting void to failure of consideration
Therefore the appeal should be accepted in his opinion, like Lord
Blanesburgh