AND PRIVY COUNCIL.

161
[HOUSE OF LORDS.]
BELL AND ANOTHER APPELLANTS ;
LEVER BROTHERS, LIMITED, AND!
OTHERS _j RESPONDENTS.
Mistake—Mutual Mistake—Mistake as to Legal Rights—Pleadings—Fiduciary Relation—
Breach of Duty—Non-disclosure—Rescission of Contract.
The L. Company, who held more than 99 per cent, of the share capital of the N. Company, agreed with
one B. that he should be in the service of the L. Company for a term of years during which he should act
as chairman of the board of directors of the N. Company at a salary of 8000/. a year. They made a
similar agreement with one S. that he should be vice-chairman of the board at a salary of 60001. a year.
While acting as chairman and -vice-chairman respectively, B. and S. entered on their own account into
secret speculations in cocoa, a commodity in which the N. Company dealt, of such a character as, on the
finding of the jury in answer to a specific question, would have justified the L. Company in terminating
their agreements of service and the N. Company in dismissing them from their offices of chairman and
vice-chairman. Subsequently the N. Company became amalgamated with another company, and it
became necessary to cancel the appointments of B. and S. as chairman and vice-chairman. Being
unaware of the aforesaid breaches of duty by B. and S., the L: Company agreed to pay to B. 30,0002. and
to S. 20,0002. as compensation for terminating their services; B. and S. agreed to accept these sums,
and they were duly paid. The jury, in answer to a further specific question, found that the L. Company if
they had been aware of the breaches of duty by B. and S. would have terminated their agreements, and
B. and S. would have been dismissed from their offices without any compensation. The action in which
the jury so found was brought in the first instance by the L. Company alone, the N. Company being
joined in the course of the proceedings as co-plaintiffs, against B. and S., claiming rescission of the
compensation agreements and repayment of the sums paid thereunder on the ground of fraudulent
misrepresentation and alternatively, as the House construed the points of claim, on the ground of
unilateral mistake induced by fraud, but not on any ground of mutual mistake innocently made by the
defendants so far as they were concerned. There was a specific alternative claim that the agreements of
settlement and the payments under them were made under a mistake of fact.

Lever bros appointed Mr Bell and Mr Snelling (the two defendants) as Chairman and Vice Chairman to
run a subsidiary company called Niger. Under the contract of employment the appointments were to
run 5 years. However, due to poor performance of the Niger company, Lever bros decided to merge
Niger with another subsidiary and make the defendants redundant. Lever bros drew up a contract
providing for substantial payments to each if they agreed to terminate their employment. The
defendants accepted the offer and received the payments. However, it later transpired that the two
defendants had committed serious breaches of duty which would have entitled Lever bros to end their
employment without notice and without compensation. Lever bros brought an action based on mistake
in that they entered the agreement thinking they were under a legal obligation to pay compensation.

The House of Lords held that this was only a mistake as to quality and did not render the contract
essentially different from that which it was believed to be. The action therefore failed.