Bell v Lever Brothers Ltd Case Notes

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<p>Bell v Lever Brothers Ltd [1932] AC 161</p> <p>Jury Questions1. Did the Defendant Bell and/or the Defendant Snellingfraudulently misrepresent to the Plaintiffs Levers that they hadfaithfully and honestly served Levers and / or Niger with the objectand effect of inducing Levers to make the agreements or either ofthem of the 19th March, 1929?Jury's answer : No.2. Did the Defendant Bell and / or the Defendant Snellingfraudulently conceal from Levers and / or Niger that they or eitherof them had had the dealings complained of with the object andeffect 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 ofcontract or duty towards the Plaintiffs in(A.) wrongfully appropriating as their own the contractsreferred to as C.T.C., R.T.D., G-S.2 [the " offending transac-tions "] or any of them being contracts of the Niger Companyand 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 ontheir own account and for their own benefit.Jury's answer: Yes.(C.) in wrongfully appropriating to their own use andbenefit 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 thecontract 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 exercisesuch right at either of such dates?Jury's answer: Yes. .(b) Were the Plaintiffs the Niger Company entitled to dismissthe Defendants or either of them from their positions as chairmanand 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 toexercise 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 inregard 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 agreementsor 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 mindtheir actings in respect of these transactions ?Jury's answer : No.</p> <p>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 9th 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)</p> <p> The offending transactions were between 4th 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 30th 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</p> <p> 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</p> <p>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</p> <p> 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."</p> <p> 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</p> <p> 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</p> <p>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</p> <p>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 </p> <p> 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</p> <p>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</p>

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