YAU TOOK HONG CO LTD AND ANOTHER v. ATTORNEY GENERAL

Contract - invitation by Government to treat for transfer of specified land - Government agreed either to reject all tenders or to accept highest tender - tenders stated to be receivable only from "registered owners" of Government Land Exchange Entitlements - by their terms such Entitlements were assignable but only assignments in a form satisfactory to Director of lands and registered in a Commitment Transfer Register would be recognised by Government - Plaintiffs were severally equitable owners of Entitlements, and one was registered as such, but they did not have assignments in a satisfactory form - they were not qualified to tender.

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JUDGMENT

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Sir Alan Huggins, V.-P.:

1. This is an appeal against the judgment of Jackson-Lipkin, J. upon an originating summons. We are called upon to construe some words in two documents relating to a transfer of land by the Hong Kong Government. The Government was minded to dispose of a piece of land but to restrict those who would be allowed to tender for it to persons who were holders of what are known as Land Exchange Entitlements or "Letters A" and "Letters B". It is necessary to understand the nature of those documents, which are described in Bramwell's Conveyancing in Hong Kong at p.230 as follows:

"Letters A and B are therefore in effect acknowledgements by the Government of a debt caused by taking away land from an owner by either (a) requesting him to surrender it voluntarily within a certain specified period in return for which the Government will offer him cash or other land in exchange on the terms mentioned above and subject to other special conditions set out in the letter. This is a letter A; or (b) giving notice of resumption of the land under the Crown Lands Resumption Ordinance by a certain specified day, but offering to avoid the normal resumption consequences of a claim for compensation by an offer of cash or other land in exchange on the terms mentioned above and subject to other special terms set out in the letter - this is a Letter B and the more common of the two types. In either case, if no land suitable to the registered. owner can be provided he will be paid at the rate stated in the letter based on the market value. The practice therefore, where the Government wants land for the development of, for example, new towns in the New Territories, is for notices under the Crown Lands Resumption Ordinance to be issued and then followed up by saying that instead of compensation a Letter B will be issued. The date of acceptance of the Letter B (which is provided for by endorsing an acknowledgment of acceptance and returning this to the Secretary for the New Territories) determines the calculation of the premium payable by the applicant for new land, so that if, say, the letter B is accepted in 1961 and the new land is only taken up today the premium payable will be at 1961 values. A Letter A or B has however a cash value itself and indeed contains within it a shown cash value so that the Government are only too pleased, instead of offering land in exchange, to make a cash payment in order to get rid of a future obligation."

It is common ground that the letters B relied upon by the plaintiff Respondent contained a paragraph in terms of, or similar to, the following:

"In the event that you accept this offer you may upon fulfilling all the conditions laid down in this letter assign all your rights hereunder provided such assignment is effected at my office in a form satisfactory to me. Such assignment, must also be registered in the special Commitment Transfer Register maintained in this Office for that purpose and only assignments which have been completed and registered according to this requirement will be recognized."

The registration contemplated was registration in a Commitment Transfer Register established in the New Territories District Offices "for the purpose of recording unredeemed land exchange entitlements, and sale and purchase agreements, changes in ownership and mortgages thereof". The issues raised before us are (1) whether the Plaintiffs were "registered owners" of these Letters B as those words are used in the documents in question, and (2) if so, at what date or dates they became registered owners.

2. The Government's invitation to tender for the land to be disposed of(or "Application Notice") was published on 24th February 1984. It was addressed to "registered owners of land exchange entitlements giving the owner the right to a grant of building land" and it was common ground that, although the Government was by the terms of the invitation entitled to withdraw the land altogether, if it disposed of it to any of the persons tendering, it had to award the lot to the applicant who made what I will call "the highest bid" - the nature of the bid is irrelevant. By paragraph 5 of the Notice tenders had to be:

 

"	(a)	made on the Application Form attached;
	(b)	enclosed in a sealed envelope addressed to the Director of Lands and clearly marked 'Application for Sha Tin Town Lot No.244, Area 24A, Sha Tin, New Territories';
	(c)	placed in the Public Works Tender Box situated in the Entrance Lobby on the ground floor of Murray Building, Garden Road, Hong Kong before 12 noon on the 23rd day of March, 1984. Late applications will not be considered; and
	(d)	from persons who are the registered owners of land exchange entitlements. Applications from any other person or persons will not be considered. A beneficial title by way of a sale and purchase agreement or such other document that does not give an absolute title will not be acceptable as a tender."

In addition, applicants were required to forward a cheque for $100,000.00, which would be retained uncashed until the Director of Lands had made a decision on the applications submitted. Thereafter

"All cheques will be retained uncashed until the Director of lands has made a decision on the applications submitted. If an application is accepted the cheque submitted therewith will be treated as a deposit towards and applied in part payment of the premium. All other cheques will be returned to the unsuccessful applicants ...."

The successful applicant was to be "the. Grantee".

3. Pursuant to that notice the Plaintiffs lodged a tender. By that tender they offered to surrender various Letters B of which they claimed to be the registered owners. Their tender was admitted to have been submitted in time and in the required form. It was further admitted that if the tender were valid the Plaintiffs ought to have been successful, because they had made the highest bid. What is in dispute is whether they were entitled to bid at all.

4. One of their Letters B had been held by a nominee company in trust for the first-named Plaintiff since 12th November 1980. The company was, it seems, registered as the owner and the interest of the first-named Plaintiff was not registered The company sought on 23rd May 1984 to be joined as a "co-tenderor" but it does not appear whether its letter of that date was received before a decision on the applications was reached on the next day.

5. Another of their Letters B, although still registered in the name of Stornaway Lines S.A., was the subject of an agreement for sale and purchase dated 14th December 1983 and registered on 22nd March 1984 whereby Stornaway agreed to sell to the second-named Plaintiff. On 22nd March an assignment was duly executed, but this was not registered until 7th May, after the time for the making of applications.

6. The trial judge came to the conclusion that (1) an equitable interest can exist in a Letter B, (2) the owner of such an equity can be registered and (3) such a registered owner was a person entitled to tender for the land.

7. Mr. Strawbridge for the Attorney General has not disputed before us the first two of these rulings, but he argues that only the registered owner of the legal interest in the Letter B was entitled to apply. The judge further decided that the material date for adjudicating upon the qualification of an applicant was that on which the tender of the highest bider was accepted and not that on which applications had to be lodged, so that registration of the second-named Plaintiff's assignment on 7th May 1984 completed its title in time for it to qualify. Mr. Strawbridge submits that the material date was that by which applications had to be placed in the Tender Box.

8. As it seems to me, the judge attached insufficient weight to the terms of the Letters B. What was conferred by them was merely a contractual right, and for the nature of that contractual right one has to look at the contractual documents. Although there has been a tendency to treat a Letter B as though it were land, there is a danger in so doing. It is clear from the passage which I have cited from the Letters B that no assignee would be recognized by the Government unless his assignment was in a form satisfactory to the Director of Lands and registered. On the proper construction of the documents the word recognize" was used to indicate recognition as an owner having rights against the Government, and the mere fact that equitable rights could be created against the original holders or their successors did not involve "recognition". The evidence is that the first-named Plaintiff had registered no assignment of any kind and that the second-named Plaintiff had not registered an assignment which was in a form satisfactory to the Director of Lands. Accordingly neither Plaintiff was a person whom the Government had agreed to recognize.

9. Mr. Griffiths for the Respondents suggests that the terms of the Application Notice were such as to bind the Government to recognize a registered equitable owner also. I do not think there was any intention to recognize rights which were not recognised in the Letters B. Indeed, the terms of the Application Notice suggest the contrary, and that notice must be construed in the light of the nature of the property which was to be surrendered. I readily accept that paragraph 5(d) was unhappily worded: a "title" could never be "acceptable as a tender".  Nevertheless I have no doubt what was intended by the last sentence of the paragraph and I believe that, on a fair reading, that intention is clear. Paragraph 5(d) was intended to emphasize what was already implicit from the terms of the Letters B, that the Government would not recognize or accept a tender from any assignee whose assignment was not in a form satisfactory to the Director of Lands and, in particular, any assignee who held only a beneficial, as distinct from a legal, title. Mr. Griffiths relies upon the phrase "an absolute title" as meaning a title, whether legal or equitable, which is unencumbered, and he submits that the sale and purchase agreement between the second-named Plaintiff and Stornaway Lines S.A. conferred an unencumbered equitable title on his client. In a sense it did, but that was not a title which the Government was bound to recognize. It is implicit in the words of the last sentence of the paragraph that the sale and purchase agreement "does not give an absolute title" must there refer to the antithesis of "a beneficial title by way of a sale and purchase agreement", namely a legal title.

10. On the date upon which tenders closed the second-named Plaintiff was not a registered owner of the class contemplated by the Application Notice. The question which has been asked in the course of the argument is Could the title be perfected by registration after that date but before the Director of Lands accepted the tender of the highest bidder? I do not think that is the right question, because we are not concerned with the Plaintiffs' title but with their right to make an offer. Play has been made of the fact that paragraph 5(d) uses the phrase "acceptable as a tender" and it is argued that acceptance of a tender must necessarily take place after all the tenders have been received. The word "tender" is itself ambiguous, but it does not follow that every sentence in which it is used is ambiguous. The application form which is placed in the Tender Box is a tender and so is the offer to surrender which is contained in the application form. So also is the presentation of the Letters B by the person whose offer is accepted. The Government was not bound to consider an application from a person who was not qualified under the conditions which it had laid down, although by receiving his application form it might have "accepted" the tender. As soon as the lack of qualification was discovered the tender could be rejected as invalid, void and of no effect. In due course all the valid tenders would be considered and one of them would be "accepted" in the second sense. The mere fact that the Plaintiffs were allowed to place their application form in the Tender Box did not give them any greater standing than they would have had had they been prevented from so doing on the ground that they were not qualified. Their tender was invalid at the moment it was delivered and nothing that happened afterwards could alter that fact; nor could delay in informing the Plaintiffs until after the acceptance of another bid of the rejection of their tender as invalid give rise to some sort of estoppel from contending that their tender was invalid. This was not a case of the Plaintiffs' having agreed to surrender something which they did not have but could acquire before the date for completion but of their not being persons qualified to make an offer at all. By the time the Plaintiffs became qualified to submit a tender the time for lodging tenders had passed, and the Application Notice expressly stated that late applications would not be considered.

11. Documents must be construed as a whole and in the light of the matrix of facts in which they came into existence. On that basis I would allow the appeal and answer questions 1 and 2 posed by the Originating Summons as follows:

12. Question 3 cannot be satisfactorily answered in the form in which it stands and I think that the answers already given are sufficient to decide the dispute between the parties.

Cons, J. A.:

13. I agree with my Lord. I would allow the appeal and answer the questions in the manner he has suggested.

Kempster, J.A.:

14. I also agree.

16th January 1985