HUMPHREYS ESTATE (QUEEN'S GARDEN) LTD v. ATTORNEY GENERAL AND ANOTHER

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JUDGMENT

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1. Gentlemen, the Judgment I am about to deliver is that which I was prevented from giving on 26th April by effluxion of time. I much regret the fortnight's delay in having my decision reduced to writing, which, I hasten to say is not attributable to any doubts or change of mind on my part, but to the same causes of which Mr. Anning* had cause to complain on Tuesday last. We here also suffer from counter-productive penny-pinching by those elsewhere, who seem to have no thought for Judicial efficiency and who appear not to understand the basic needs of a Judiciary. Like Mr. Anning's Force, we also are needlessly starved of modern efficiency equipment and of adequate, trained back-up staff.

*    The Commissioner of Police.

2. This action, in effect, involves a dispute between two self-impoverished giants in conflict about a hillside area of south Victoria, once wooded and dotted with fine buildings, which, by their sustained mutual effort, they have turned into a desolate wasteland.

3. They have chosen as their battle-field before me, that area of law so beloved of academics - estoppel in pais (in nubibus, Mr. Alexander would have me believe).

4. Each side presses upon me that what I have to decide is of great and far-reaching importance to the law of and in Hong Kong. Although I usually misgive such statements, I must bear in mind that, especially in relation to land, in Hong Kong estoppels flutter about the courtrooms in flocks greater than those of swifts in the Sandakan caves.

5. I will in this judgment, therefore, look at the matter both as if the equity contended for by Mr. Godfrey exists and as if, as Mr. Alexander contends, it can not and does not exist in such form.

6. In 1979, negotiations commenced between the parent company of the plaintiff, (which I shall refer to as "Lands") and the Crown, (to whom I shall refer as "H.K.G."). Those negotiations concerned a site at Queen's Gardens ("Q. G. "), said to be in Hornsey Road, but which lay at the mouth of May Road where it ran off Old Peak Road (the old route of chairmen up to The Peak).

7. The plaintiff, as its name implies, was formed for the purposes of dealing with Q.G. The Departments of the Crown in right of H.M. government of Hong Kong concerned in this action are Building Development, Buildings Ordinance Office, Crown Lands and Survey, Environment, Lands, Lands and Works, Public Works and Registrar-General. See Exhibit 2.

8. On 8th April 1980, H.K.C. wrote to Lands say that negotiation had been authorised concerning two buildings, Friston and Balmacara, (belonging, to Lands) and the site of Glenealy Junior School. Nine basic terms were referred to in that letter, the fifth concerning the necessity for a Master Development Plan, and the sixth concerning an assignment by Lands to H.K.G. of some flats in a development on Tregunter Path known as "Tregunter". The letter (C 44/5) was signed by the Principal Government Land Agent, Mr. P.A. Ward, who was called to give evidence before me. The third paragraph of that letter is of such significance that I must recite it here :-

"3. I should now be obliged if you will consider the basic terms quoted above and advise me if they are acceptable to you. I must point out, however, that at this stage 1 have no authority to formally commit Government in this matter and the basic terms quoted may be varied or withdrawn at any state prior to formal completion of the transaction. Furthermore any terms we might tentatively agree will be subject to rectification by the Governor-in-Council. I would also add that it is not the intention to create any legal obligation either on your Company or on Government, nor (regardless of whether correspondence may be entered into on the subject) will Government accept any such obligation, unless and until the document or documents necessary to give legal effect to this proposal are executed on behalf of H.E. the Governor and registered in and issued out of the Registrar General's Department (Land Office)." : C. 45.

 

Discussions and negotiations followed, both between H.K.G. and Lands, and within H.K.G. and Lands themselves, and, on 30th August 1980, Mr. Ward wrote again setting out the "basic terms" that he was prepared to recommend to the Government "for consideration"; pp. C 143/7. The paragraph numbered "3." bears recital in full  :-

"I should be obliged if you would now consider the basic terms quoted above and advise me if they are acceptable to you. I must point out, however, that, as stated in my letter of the 8th April 1980, at this time I have no authority to formally commit Government in this matter and the basic terms quoted may be varied or withdrawn at any stage prior to formal completion of the transaction. Furthermore any term we might agree will be subject to rectification by the Governor in Council. I would also add that it is not the intention to create any legal obligation either on your Company or on Government, nor (regardless of whether correspondence may be entered into on the subject) will Government accept any such obligation, unless and until the document or documents necessary to give legal effect to this proposal are executed on behalf of H.E. the Governor and registered in and issued out of the Registrar General's Department (Land office)." : C 145/6.

 

9. On 9th September, Mr. McFadzean, (who gave evidence on behalf of the plaintiff), wrote on behalf of Lands saying that the proposed conditions were, for the most part, acceptable to Lands, and that the basic terms contained in the letter of 30th August were "in principle" acceptable to Lands : C 148/151.

10. H.K.G. then made their calculations, and, on 17th September 1980, informed Lands that a premium of $1.5 million would be payable "in this transaction if subsequently approved by Government." : C 157.

11. There followed wild fluctuations in the property market, and, in particular, a sale by H.K.G. of a property in Kennedy Road (also in the city of Victoria) at a singularly high price. On 21st November 1980 there was a meeting between Lands and H.K.G. starting at an hour not usually associated with Civil Servants, at which Lands was informed that the premium to be payable by Lands had been re-calculated by H.K.G., and had been re-set as $77.3 million : C 210.

12. Some two months later, on 12th January 1981, H.K.G. made a "formal offer" to Lands in terms of singular importance in relation to this action. The letter is to be found at D 300/304. It was headed "WITHOUT PREJUDICE", words which prompted questions from me to Mr. Ward when he did give evidence, (which are to be found at pp. 410/411 of the transcript of the evidence). The opening paragraph read thus  :-

"Further to our previous correspondence and to your last meeting ...., I am pleased to inform you that subject to contract, Government have agreed in principle to grant ...... on the following basic terms and conditions :-" D 300.

 

Term and Condition 6(b) (vii) related to a Deed of Mutual Covenant ("D.M.C."), and Term and Condition 7 dealt with the Mutual possession of flats and "penthouses" in Tregunter by H.K.G., and of the Q.G. site by Lands. Paragraph 2 of the letter, at D 303, read as follows (the first paragraph in Government letters and Memoranda in Hong Kong never bears a number; but the next succeeding paragraph is "2")  :-

"I should be obliged if you would now consider the above basic terms and advise me within 28 days from the date of this letter if they are acceptable to you. I must, however, point out that the above basic terms may be varied or withdrawn prior to formal execution of the transaction. Furthermore, any agreement reached shall he subject to formal approval by the Government and until the document or documents necessary to give legal effect to this transaction are executed and registered, this letter should not be construed as binding, on Government in any way.".

 

13. Lands replied on the following day, and that letters is to be found at D 306/310. The letter is headed "WITHOUT PREJUDICE". The second paragraph reads thus  :-

"We take pleasure in now formally confirming that the said basic terms are acceptable to this Company subject to the satisfactory resolution of the following matters"'': D 306.

 

There follow references to the site of Glenealy Junior School, (then in Hornsey Road), the site of the home of the French Consul-General, (then possibly the most beautiful private house still existing in the Colony and its Dependencies) and the "proposed documentation", and concludes thus :-

"Finally, save for the above points we take pleasure in reiterating that we accept the basic terms proffered in your letter of 12th January 1981, and we look forward to finalising this transaction in the very near future.".

 

The "basic terms" referred to there, are those which appeared on pages D 300/303 running from (1) to (8)(d), but not containing the paragraph 2 on D 303, to which have just referred.

14. At this juncture, as I have been informed that, whatever my decision, the matter will go before the Lords of the Council, I should point out that, at the time in question, Hong Kong had not reached even 1881 in matters of conveyancing, and that tenancies in common were the order of the day. I must not be taken to say that we have since progressed, but merely that that was the background against which much of the documentation in this case and must be viewed.

15. As the "Grand Scheme" envisaged H.K.G. occupying (through the medium of the 2nd defendant) flats and "penthouses" in the multi-storey blocks then being erected by Lands in Tregunter Path, and, as the tenure would be in terms of undivided shares of the whole held jointly as tenants in common, a D.M.C. was necessary. There was, therefore, correspondence between Messrs. Deacons, solicitors for Lands, and H. K. G. : See, for example, L21/25. Here I should point out that the Registrar-General's Department was handling the legal side of the negotiations between Lands and H.K.G., through its own solicitors, and not through the Crown Solicitor's Division of the Attorney-General's Chambers - a matter which assumed some considerable importance in the final submissions made by Mr. Alexander. In relation to the Deed of Mutual Covenant, it behoves me to refer to the letter at D 445/6, and, in particular, to the final paragraph therein, which indicates the importance of the D.M.C. to Lands, regardless of the proposed "assignment/occupation" of part of Tregunter by H.K.G.

16. Again I must digress, in order that the Lords of the Council may understand all of the background, and observe that in the Crown Colony itself (in contradistinction to its Dependencies, which work on the Block Crown Lease System) all Land (other than the Anglican Cathedral) is held on Crown Lease or, prior to the issue of such lease, on Conditions of Grant or, where appropriate, Conditions of Exchange, the which Conditions contain "General Conditions" and "Special Conditions".

17. On 1st June 1981, H.K.G. wrote to Lands enclosing a copy of the proposed Conditions of Exchange in relation to the proposed scheme : D 492/3. This letter is an important document for two principal reasons; first it contains the first formal documentation emanating from H.K.G., and, second, it spells out the terms governing the proposed relationship between the parties prior to completion. It is essential, therefore, that I recite the second paragraph of that letter :-

"At this stage I invite your comments on the preliminary conditions forwarded herewith and I must emphasise that these are forwarded solely for your comment and information and that Government reserves the right to alter or substitute any of the conditions at any time before the transaction is finally completed and that there is no intention to create any legal obligation on Government nor will Government accept any such obligation unless and until the documents necessary to give legal effect to this proposal are executed on behalf of the Government and duly registered. I would also mention that I am not in a position to commit Government in any way and nothing contained herein must be taken as an offer of Grant ......".

 

18. In parallel to the correspondence, discussions, negotiations and physical matters were afoot. Part of Hornsey Road was closed; the Hong Kong & China  Gas Company Limited commenced work on moving gas kiosks and gas mains; the Hong Kong Electric Company Limited became involved, and the Water Supplies Department of H.K.G. commenced movement of and reprovisioning works on water mains; see, for example, the memorandum from the Secretary for the Environment to the Principal Government Land Agent of 20th June 1981 (D 538/9), and the Departments to which copies were sent (at D 539 and D 567) ; and arrangements were made with the Ladies' Recreation Club ("L.R.C.") to take over some, and to lease other, parts of its grounds.

19. On 29th June 1981 Lands handed over to H.K.G. the first "penthouse" in Tregunter, and, on 25th July 1981, Sir Alan Huggins, Senior Vice-President of the Court of Appeal, took up occupation of that "penthouse" : Schedule Y p.4.

20. The question arose as to the terms on which H.K.G. would take up, not merely that "penthouse", but the other flats and "penthouses" in Tregunter, pending completion.

21. It appears to have been agreed between H.K.G. and Lands that the occupation should be on Licence : see E 598 and the handwritten note thereon, and also C 4/15. There seems to be no doubt that, on 16th July, Messrs. Deacons, on behalf of Lands, handed to an Assistant Solicitor in the Registrar-General's Department on behalf of H.K.G. a draft licence. That is a matter to which I must now turn.

22. The parties have not been able to find the original draft, but there has been put before me, a draft, Q 4/15, with amendments proposed by H.K.G., which is the one on which both parties addressed me. In Bundle Q there are two other drafts, one sent under cover of a letter of 28th September 1981 (Q 18), and another sent under cover of a letter of 14th October 1981 (Q 36). I was, however, invited to look at Q 56 and Q 57/8 in relation to clause 2(a), and to Q 39, whereon someone, at some time, had, notwithstanding A. on Q 57, altered "3" to "6" in ink. While the provenance of Q 37 may not in itself be of importance, the fact is that, in November 1981, the parties were still not ad idem as to the period within which Lands should be entitled to terminate the Licence, should the proposed Grant not be made. Preamble B reads : -

"WHEREAS :- The Licensor has agreed to assign to the Licensee All Those said 24,208 equal undivided 45,023rd parts or shares of and in the Land and Tregunter Together with the sole and exclusive right to hold use occupy and enjoy the premises in exchange for the grant of an entitlement to a term of 75 years ...... on terms to be agreed :..... (herein after called "the Grant'').'': Q 4/5.

 

Preamble C recites that :-

"Prior to the Grant the Licensor has agreed to grant to the Licensee a Licence to occupy ......": Q 5.

 

Clause 1(a) of the Licence specifically provides that :-

"....until the making of the Grant by the Hong Kong Government to the Licensor ...... and the execution of the said assignment by the Licensor of All Those said 24,208 equal undivided 45,023rd parts or shares ......" : O 5 and 8.

 

23. Clause 1(b) Was not acceptable to H.K.G., who submitted a proposed new version, which, apparently, was accepted by Lands. It is to be found at Q 7. The wording of the amended clause 1(b) is such that I must read it  :-

"1.(b) such occupation by the Licensee shall be that of a licence only and shall not create or be deemed to create any transfer or assignment of legal or other right or title to the Land and Premises in favour of the Licensee nor to have created  any lease or tenancy or relationship of landlord and tenant between the Licensor and Licensee. For the avoidance of doubt it is recorded that ownership, possession and control of .... remains in the Licensor ... ": 0 7/8.

 

Clause 2, as amended by H.K.G., is also such that I should recite it here. It is to be found at Q 8/6 (Q6 being, interpolated at the request of H.K.G.) : -

The flats and car parks concerned are set out in Schedule Y.

24. The first occupation was, as I have said, on 25th July 1981, when Sir Alan Huggins, V.P., moved into occupation, and the last flat was handed over on 11th August, although I was informed that the last occupant to move in, intended to be Dr. Wilson, was in fact Mr. McLaren, the Political Adviser : see Schedule Y, C 263 and U 7.

25. On 9th September 1981, Lands submitted a Form 9 to H.K.G. giving notice of the appointment of Mr. Peter Ayres of Ore Arup & Partners (Hong Kong) Ltd. as its "authorised person", and certifying that plans for Balmacarra, Friston and Queen's Garden had been checked by Mr. Ayres : E 692A.

26. It is common ground that the occupation by H.K.G. of the flats and "penthouses" at Tregunter was qua licensee and, in all respects material to this action, on the terms of the draft to which I have referred.

27. The reach of the Grand Scheme, so far as H.K.G. was concerned, was very extensive. H.K.G. would obtain the premises set out in U 7, and would permit the demolition of its premises, Q.G. and The Albany (at the junction of Robinson Road and Glenealy), of two fine houses on Mount Kellett Road occupied by Sir Alan Huggins, V.P. and the Political Adviser and of two fine houses on Peak Road occupied by Mr. Justice McMullin, V.P. and The Hon. Dennis Bray, then the Secretary for Home Affairs, and would permit the destruction of Victoria Lodge, the demolition of Balmacarra, Friston and Glenealy Junior School and the adaption (in so far as that might be necessary) of part of the former Victoria Barracks, (an area in north-east Victoria donated to H. K. G. some years ago under the Defence Cuts) for use as school premises. That is in addition to the matters to which I have already referred relating to road works, the Resumption of part of L.R.C., the leasing of another part of L.R.C. and the movement of the Public Utilities which I have mentioned. In pursuance of that Grand Scheme, H.K.G. gazetted the houses in Peak Road on 25th September 1981 :   Schedule X.

28. On 13th October 1984, the D.M.C. was executed between the plaintiff and certain associated companies : L 54/151. The document was clearly envisaged to cover the flats and "penthouses" to be assigned to H.K.G., because, at L 56, there is an exclusion of the 2nd defendant from the necessity to insure - something, I was informed, that H.K.G. never does; and also because of clause 3(c) of the licence to occupy the Tregunter flats and "penthouses", to which I have already referred: See Q9 and F890.

29. On 16th October 1981, H.K.G. gazetted the two houses in Mount Kellett Road : Schedule X.

30. On 3rd November 1981, Lands made the first payment on account of the "premium" to which I have already referred. There is no dispute as to this payment (E 803 and E 804); nor is there as to any of the payments listed in the Particulars under paragraph 3 of the amended statement of claim (A 4).

31. The Grand Scheme progressed, and, on 17th November, H.K.G. issued a Licence for Lands to enter on the Q.G. site to demolish the existing buildings N 10/17, Q.G. there being described as "at no. 9 Old Peak  Road". In view of the pleas advanced before me it behoves me to recite certain parts of that Licence, at N 10. It commences :-

32. On 27th November came the closing date for tenders for the demolition of the Peak Road houses, and on 18th December for the demolition of the houses in Mount Kellett Road.

33. On 3rd February 1982, Lands wrote to H.K.G. : F 888/90, and at F 890 Mr. McFadzean said   :-

"If Government does not anticipate the execution of the Conditions taking place by the end of February 1982, would you kindly arrange for the Licence for the Tregunter flats to be executed in the very near future pending which your occupation must be deemed to be on the terms and conditions of the said Licence.".

 

34. That is the position that Lands has held ever since, and H.K.G. has never suggested that the 2nd defendant's tenure of the flats and "penthouses" is otherwise than in accordance with that sub-paragraph.

35. On 12th February 1982, the Albany tender was gazetted : Schedule X.

36. On 25th February 1982, H.K.G. notified Lands' architects and engineers that their Master Layout Plans were :-

"......  not considered acceptable under the terms of the proposed Conditions of Exchange." : F 915A.

 

It is at this point that I must return to the Conditions of Exchange which, although familiar to ill practitioners and judges in Hong Kong, may be not so well-known to the Lords of the Council. Those used in these proceedings, and to which it would be most convenient for me to refer, appear at U 340/373. General Condition 5 (U 344) makes fulfilment by Lands of obligations under the Conditions a condition precedent to the grant or continuation of any tenancy granted to Lands, and General Condition 6(a) provides that :-

"Upon any failure or neglect by the Grantee to perform, observe or comply with any of these Conditions the Crown shall be entitled to re-enter upon or retain the old Lots, and to re-enter upon and take back possession of the Lot or any part thereof and all or any buildings, erections and works thereon or on such part, and thereupon this Agreement and the rights of the Grantee hereunder shall absolutely cease and determine ......" : U 344.

 

Special Condition (9)(a)(iii) would have obliged Lands, within 6 months, to submit Master Plans to H.K.G. : U 351. Special Condition (9)(b), at U 352, provided for the eventual approval of, inter alia, the Master Plans, and Special Condition (9)(c), on the same page, provided that the said Plans should not be amended, varies or modified, and that there should be no substitution for the same without the prior written consent of H.K.G. Special Condition (10)(a), at U 353, provided that Lands should develop the Lot in accordance with the said Plans and proposals, and any breach of that Special Condition would bring into operation General Condition 5, to which I have referred. The disapproval of the Master Plans at F 915A, therefore, was a matter of importance and danger to Lands at that stage and of utility to it at a later stage, as I shall make clear.

37. I have made reference in my recital of the basic facts to the Glenealy Junior School and its part in the Grand Scheme. I need not refer in detail to the position regarding, it, as that appears clearly in the uncontroverted evidence of Mr. McFadzean, save to say that the tenancy of school would, in the ordinary course of events, have expired by effluxion of time on 31st July 1982. However the Grand Scheme envisaged an earlier surrender and the payment of a premium by Lands, and that appears from the Deed of Surrender 0 27/32, paragraph 3(3)(A)(v) of the Defence at A 17 and paragraph 17(d) of the Counterclaim at A 29.

38. On 26th March 1982 came the closing date for the Albany tender : Schedule X.

39. On 7th April 1982, Mr. Trevor Bedford, then Managing Director of Lands, signed Lands' "Managing Director's Operational Review" for 1981 (W 13/22), and The Hon. David Newbigging, then Chairman of Lands, The "Chairman's statment" for 1981(W 7/11).

40. I am informed, and there is no dispute, that, by 16th April 1982, the demolition of Glenealy Junior School was completed.

41. On 26th May, Land's authorised person certified on Forms 21 that the authorised demolition work at Balmacarra, Friston, Glenealy School and Q.G. had been completed.

42. I have referred to L.R.C. in relation to the Grand Scheme . I must briefly explain what happened there. On 13th June 1982, L.R.C. let to The Queen that part of its premises shewn on S 45. The terms of the agreement appear in an annexure (S 33/45) to a Memorial registered in the Land Office : S 32. On the same date, L.R.C. surrendered to The Queen another portion of its land, supposedly shewn on S 47, in the terms of a deed of surrender (S 47/52), annexed to a Memorial registered in the Land Office : S 46.

43. On 23rd Angust 1982 Lands made the final payment on account of the "premium", namely $18,485,608.00 as appears in the Particulars under paragraph 3 of the Amended Statement of Claim at A 4, and in paragraph 13(d) of the Defence at A22 : See F 1047 and F 1048.

44. I have made reference to the Master Plans already, but I should add here that, while there appears to have been general agreement with some Departments of H.K.G., there was not with others, and the Buildings Ordinance Office was raising very serious objections to the siting of the proposed bathrooms in the industrial-chimney-like buildings proposed to be erected on the Q.G. site, and also to the water heating system and the provision of refuse chutes. The problem appeared at the time to be acute, for the reasons clearly canvassed, and not challenged, in the evidence of Mr. McFadzean, and which it is unnecessary for me here to recite. There is no suggestion by H.K.G. that Lands' anxieties and queries were other than genuine at that time : See the letter at F 1086 /8 and the enclosures at 1088A - I. It is to be noticed that, at p. 1088, Mr. McFndzean himself made reference to the Conditions of Grant to which I have just referred - namely U 353.

45. I was informed in evidence by Mr. McFadzean that, "By early 1983 the Lands Company was in very serious financial difficulties".  :  (see pp. 64/5 of the transcript). Mr. McFadzean told me, and I accept, that Lands was doing a major re-assessment of its property ventures. Mr. McFadzean appeared to believe that, by February 1983, it was public knowledge that the Lands Company was in such difficulties, and he explained that at p. 65 of the transcript between marginal numbers 16 and 29.

46. By the beginning of that year, things had come to such a pass that Lands took the step of going to "the man of the top" : On 1st February 1984, Mr. McFadzean wrote directly to the Secretary for Lands and Works : G 1114/5 : The letter is self-explanatory, and the "difficult times", referred to G 1115, must surely have been understood by the recipient of the letter. The final paragraph at G 1114 has featured large in this action, and it reads  :-

"It is apparent that we are no further forward from the position we were in in November last year and unless the decision of BDD regarding a central hot water system is overruled, we can see no solution to the predicament in which we find ourselves (that makes commercial sense) given that Conditions of Grant have not been executed.".

 

47. On 3rd February 1983, Lands applied on Form 9 for approval of building plans : G 1115A/B, and gave notice of the appointment of an authorised person qua architect and engineer; and attached a copy of "Conditions of Exchange".

48. While Mr. McFadzean was dealing with the Secretary for Lands and Works, Mr. Picken of the Registrar-General's Department was dealing with Mr. Lai of Lands : See pp. G 1116, 1117 and 1119.

49. A misunderstanding then arose between the Director of Lands, the Registrar-General, the Buildings Ordinance Office and the Principal Government Building Surveyor. I mention it at this stage, its chronological position, merely to get it out of the way, because, on the oral evidence, I misleading. The misunderstanding was genuine, as Mr. McFadzean said at p. 198 of the transcript, and explained between pp. 197 and 203 of that transcript, and I accept that it was genuine.

50. The Secretary for Lands and works on behalf of H.K.G. answered Mr. McFadzean on 21st February 1983 : G 1122/3: Basically, he said that he was unable to help. The situation, which was well described in evidence, was that, following the recommendations of a number of Coroners' juries consequent upon deaths due to gas water-heaters, subsidiary legislation was to be introduced to make it mandatory for developers to provide pre-formed holes in bathroom walls to take gas water-heaters of a "balanced flue" type. In the final paragraph, on G 1123, H.K.G. said to Lands :-

"It is of course for your Company and its professional advisers to decide on the course it wishes to take in the matter. I do not think that the Building Authority can assist further, and I trust the above explains the situation as far as he is concerned.''.

 

Mr. Alexander placed considerable reliance on that paragraph.

51. On 23rd February 1983 Lands wrote to H.K.G. : G 1128.

52. The third paragraph of Mr. McFadzean's letter deals with the misunderstanding to which I have just referred, but, in his final paragraph, he said  :-

"Please be assured that we have no desire to unnecessarily prolong the completion of documentation, but would ask you to understand that to protect the commercial interest of this Company it is necessary that this tedious matter concerning water-heaters be resolved before we are able so to do.".

 

Mr. McFadzean was cross-examined about that letter, and at pp. 204-6, there followed this exchange:-

53. Seeming attempts to clear up the "misunderstanding" followed : G 1129, 1130, 1132 and 1133.

54. At the foot of the letter at G 1132, there is note in the hand of Mr. McFadzean : It was addressed to Mr. Frank Lai and reads : -

"Frank have we any other grounds for not signing?".

 

55. Mr. McFadzean dealt with that in his evidence-in-chief at pp. 64/66 and in cross-examination of at pp. 207/211, and I accept that Lands was at that time looking for ways to try "to buy time"; and I accept the explanation given by Mr. McFadzean at p. 262 of the transcript.

56. On 8th March, H.K.G. Wrote to Lands in relation to L.R.C. The letter was, significantly, from the Registrar-General's Department and it was addressed to Mr. Frank Lai, the Developments Manager of Lands. H.K.G. said : -

"Although you have made it quite clear that you are not prepared to enter into the Conditions of Exchange in respect of Tregunter/Queen's Gardens, I see no reason why the Tenancy Agreement in respect of the Works Area at the Ladies' Recreation club cannot be finalised."  :  G 1134.

 

57. Two letters from Mr. Lai crossed that one. The first, G 1135/6 was significant in two respects : First, the length of the term of the Building Covenant (paragraph 3(iii) : G 1135); and second, the implied references to contemplated implementation of the Grant in the last line of the 1st paragraph and in the 2nd paragraph on G 1136.

58. On 30th March 1983,  Mr. Trevor Bedford, still the Managing Director of Lands, signed Lands' "Managing Directors Operational Review" for 1982 and The Hon. David Newbigging the "Chairman's Statement" for 1982  : W 65 -  W 73 and W 57 - W 63.

59. I have now mentioned the 1981 and the 1982 Annual Reports of Lands, and I feel it an appropriate time to say that, on the totality of the evidence and submissions made to me, I have come to the conclusion that they did not affect, and could not have affected, H.K.G. 's actions, beliefs, decisions or thinking.

60. Silence seemed then to have descended, whereas before, as I told Counsel, the parties reminded me of a vividly descriptive remark by Mr. B. Wooster, "Aunt calling to Aunt like mastodons bellowing across a vast primeval swamp" in the midst of which they were unable to meet. Mr. Godfrey assures me that that is to be found in "Right-O Jeeves!", and, as Mr. Alexander tells me that he never challenges the citations of Chancery Counsel, I have not investigated that further.

61. Nothing happened between 25th March (G 1145) and 29th July 1983 : G 1248/9, G 1250/1, G 1252 and G 1252A - H, when H. K. G. gave qualified approval to Lands' Building Plans. Here, I should add parenthetically that the printed letter at G 1248 was specifically designed to avoid the then implied approval of plans after the lapse of a prescribed time after their submission. Paragraph 5 (G 1249) reminded Lands that the approval should not be deemed to confer any title to land or to act as a waiver of any term in any lease or licence. Condition (b) on G 1250 met Lands' objections concerning the heating of water for the bathrooms; G 1252 reminded Lands that such approval did "Not authorise the commencement or carrying out of any building works"; paragraph 5 on G 1252B, (it appears to be the same as G 1249); and C 1252C - H sets out a number of modifications, but I was never told if those were internal or if H.K.G. had actually despatched them to Lands' architect.

62. It appears that, in the following month, the Registrar-General became personally aware of the potential dangers of the situation, and, on 17th August, he telephoned Mr. McFadzean, who made a Note of his call : G 1254. Mr. Gleeson, then the Registrar-General, must have been made aware that lands was taking legal advice in London, because reference is made to such knowledge in a further Note of 17th August from Mr. McFadzean : G 1255. Those "attendance notes" were addressed to Mr. Oates, a solicitor in "Group G.M. Property" of Lands. On the next day Mr. McFadzean passed a further Note, (G 1257) in which he referred to  Q.G. having been "deferred one year" - but it is common ground that H.K.G. was never informed of such "deferral''. Apparently there were more telephone calls, and Mr. Gleeson actually telephoned from London to find out what was happening and, apparently, was told that Lands had received London Counsel's opinion, and was studying it : G 1259.

63. On 25th august, H.K.G. emote confidentially and urgently to the Managing Director of Lands : G.1260. It is to be noted that (for the first time I believe) the letter was copied to the Attorney-General's Chambers (for the attention of Mr. Kaplan, then of the civil advisory and litigation side of those Chambers). The letter is in strong terms, which is unnecessary for me to recite : suffice it to say that it called upon Lands to execute Conditions of Exchange by 30th August.

64. I was informed, by consent of both parties and in order to avoid any misunderstanding between Counsel, that, on 6th September, The Honourable David Newbigging had a "without prejudice" meeting with the 1st Defendant ; and that, on 28th September, there was another "without prejudice" meeting, this time between Mr. Ray Moore and the 1st defendant : Mr. Moore is not with Lands, but he is a solicitor of very high repute with a Company known for its propensity to wear the flag of St. Andrew, notwithstanding that its registered office is now in Bermuda! That was followed by another meeting between Lands and H.K.G. (of which I was informed for the same reason, and in same manner), at which, re-negotiation of the terms was suggested by Lands. Those, and possibly other, meetings account for the further two months' silence that descended, to be broken by H.K.G's letter of 14th November 1983 (G 1267) enclosing, for Lands to execute, "a complete set of conveyancing documents".

65. Lands' reply the next day, G 1268, in which reference was made to the approaches to the 1st Defendant, said :-

"..... it would, in our view, be inappropriate for us to reply to you on any of the issues raised in your letter of 14th November.".

 

66. On 26th February 1984, (H 1275/8), Messrs. Deacons wrote, on behalf of Lands, to the Crown Solicitor to the effect that Lands would be prepared to proceed with the Grand Scheme   :-

"if, but only if, the financial aspects can be re-negotiated to reflect present day relative valuation of the Tregunter flats and the Queen's Gardens site and certain other related concerns of our clients can be met.''.

 

67. That letter was acknowledged by the Crown Solicitor on 29th February (H1281) and answered on 23rd Harch H1285/6. In the second paragraph of the letter, the Deputy Crown Solicitor said, "As you say, at least we are agreed that there was no legally binding contract between the parties;".

68. At this stage of affairs, the 1983 Annual Report of Lands was published. The Chairman's statement was signed by Mr. Simon Keswick, the new Chairman, and the Operational Review by Mr. David Davies, the Chief Operating Officer, on  28th March 1984: H1292/4 and H1295/1300. That Report referred to the cancellational or deferral of a number of projects, and the transfer to "the land bank" of the deferred projects: H1293. The "land bank" is dealt with at H1296, and particular mention is made of Q.G. and Glenealy Junior School. Details of the "land bank" appear at H1322, where mention is made of "Queen's garden/Victoria Lodge" but which, I was informed, included Balmacarra and Friston. A Note at the foot of that page includes these words,

"......... In particular, until the conclusion of the Queen's Garden's exchange, part of the Queen's Garden's/Victoria Lodge site referred to above remains owned by Government.".

 

69. On 29th March, Messrs. Deacons, for Lands, acknowledged H.K.G.'s "open letter" of 23rd March (H1285/6), and picked up H.K.G.'s confirmation that there was no legally binding contract between the parties: H1329. H.K.G.'s letter was answered in detail by Messrs. Deacons on 9th April: H1331/3, the which letter, inter alia, demanded a repayment of $103,865,608 and enclosed a Notice. That was the Notice of Termination of H.K.G.'s. Licence, which appears at H1334.

70. Those letters were acknowledged on 11th April (H1335) and dealt with by letters of 24th April at H1336 and H1337.

71. By the end of April 1984, the parties had drawn up in line. Lands' field pieces roared out "animus contrahendi non", but, by then, H.K.G. had come under chancery command and, while their infantry stood defensively on paragraph 4 of the Defence (A18), there followed an attack on Lands by Heavy and Light Brigades of Horse. The former using the sabres of the equity raised in paragraphs 13, 17 and 18 of the Defence and Counterclaim (A21/7 and A23/31) and prayer (2) at A32, and the latter using the lances of the estoppel raised in paragraphs 11, 12 and 14 of the Defence (A20 and A28) and prayer (1) of the Counterclaim (A31). Lands then prepared to meet cavalry, and formed squares: Thus Lands stood, to the conclusion of the hearing, double-filed behind the bayonets of "subject to contract". I have to decide if those squares were overrun by H.K.G.' Dragoons, or penetrated by H.K.G.'s Lancers.

72. Not so, says Mr. Alexander: H.K.G. have this the wrong way round. To revert to my analogy, it is frequently said that equitable generals do net have dragoons and lancers: They have but lines of infantry, who, of course, themselves can form squares against cavalry: But here, there is no charge; there is an advance in line along the whole front. The case, Mr. Alexander says, is very simple. It is admitted that there is no contract; no agreement binding in law; no intention to upset the "subject to contract" principle. What H.K.G. is trying to do is to oblige an unwilling purchaser to buy something it no longer needs; something it no longer desires, and something that it can no longer afford to buy, when H.K.G. was the founder (and drafter) of the "protective terms".

73. That, of course, is partly true - it would be the consequence of making an Order in the terms of prayer 2 of the Counterclaim (A32B). To make such an order would be tantamount to granting a mandatory injunction, and the principles governing the grant of such an order are something that I must bear in mind.

74. It was in fact common ground that there was no legally binding contract between the parties in respect of the Grand Scheme, or any part thereof.

75. The case for Lands was that, where there is an arrangement subject to contract and where one or more of the parties has averred that there is no intention to create legal obligations, then, unless there is an express resilition, equity cannot interfere. Mr. Alexander, however, was constrained, eventually, to concede that conduct could amount to an implied promise or representation that the "subject to contract" position would be abandoned, but submitted that there would then have to be representations which were in the highest degree clear and unambiguous before such a situation could arise.

76. Mr. Godfrey, however, while acknowledging the force and importance of the "subject to contract" principle, advanced an equity such as could arise from words and conduct leading to a belief, expectation and understanding that the other party would not stand on its "strict legal rights". In other words, there could be a situation where words and conduct cumulatively reach a point where it would be "unconscionable" or "unjust" for the other party not to go ahead with what had been agreed in principle. That, however, presupposes a number of matters: First that, in principle, there was agreement; Second that there was agreement of sufficient particularity for the court to enforce it, even if, by so doing, the court would have to write in terms for the parties; Third, that the cumulative effect of the words and conduct would have clearly and unambiguously to be very weighty; and that that very weightly effect led to an objectively-reasonable, genuine, bona fide belief, expectation or understanding that the other side would not resile from such agreement in principle.

77. Evidence was led and submission made concerning the words and conduct of Lands, but, in so far as they go beyond:-

I shall disregard them. Even in this relaxed modern age, and after extensive revision of the Rules of the Supreme Court, some attention must be paid to the pleaded case, which, after all, is what the other party has come to meet. See, for example, the speech of Lord Radcliffe in Esso Petroleum Co. Ltd. v. Southport Corporation ⁽¹⁾, at p.241; the reasons of the Board in Ng & Ors. v. Lee & Ors. ⁽²⁾ , at p. 3; and the Judgment of Lawton, L.J. in Beacon Carpets, Ltd. v. Kirby & Anor. ⁽³⁾, at p. 498B-C.

78. I shall adopt a similar approach in relation to prejudice or detriment, notwithstanding a submission on behalf of H.K.G. (with which I shall deal later) that no proof of prejudice or detriment is required - I shall not consider matters that go beyond:-

79. I must ask myself, in general, whether such equities as are sought, exist; if they do, can they be co-extensive with agreements "subject to contract"; if they can, in what circumstances can they arise; to what extent, and to what degree must they develop in order to assist he who invokes them to achieve his end; and to what extent, and subjectively or objectively, must belief in or reliance on the allegedly unconscionable behaviour of the other be proved to the court's satisfaction for such an equity to succeed.

80. The "subject to contract" rule not only has an honourable ancestory, but it is of very considerable importance today. Admittedly, there can be abuses - such as gazumping - but, without the rule, all conveyancing would be a trap for the innocent or unwary; and the advantage of it is that, until the necessary contract or arrangements have been made, should circumstances change, there is no contract and either party can withdraw. The present position of the rule is admirably summarised at p.p. 568/570 of the 5th edition of The Law of Real Property: Megarry and Wade. The importance which the courts attach to this principle been highlighted in a number of cases. In Rose & Frank Co. v. J.R. Crompton & Bros. Ltd. & Ors. ⁽⁴⁾, the Court of Appeal was considering an agreement with a very special clause (which appears after the third break on p. 267) disavowing an intention to be contractually bound. All three Lords Justice upheld the view that parties could lawfully come to an arrangement which does not give rise to legal relations, Bankes, L.J. at p. 283, Scrutton, L.J. at p. 288 and Atkin, L.J., at p. 293. Two of them, however, went further: Bankes, L.J. at p. 282, said,

"There is, I think, no doubt that it is essential to the creation of a contract, using that word in its legal sense, that the parties to an agreement shall not only be ad idem as to the terms of their agreement, but that they shall have intended that it shall have legal consequences and be legally enforceable.",

 

and Atkin L. J., at p. 294, said,

"I might add that a common instance of effect being given in law to the express intention of the parties not to be bound in law is to be found in cases where the parties agree to all the necessary terms of an agreement for purchase and sale, but subject to a contract being drawn up. The words of the preliminary agreement in other respects may be apt and sufficient to constitute an open contract, but if the parties in so agreeing make it plain that they do not intend to be bound except by some subsequent document, they remain unbound though no further negotiation be contemplated. Either side is free to abandon the agreement and to refuse to assent to any legal obligations; when the parties are bound they are bound by virtue only of the subsequent document.".

An extreme case of this principle was considered by the Court of Appeal in Eccles v. Bryant and Pollock ⁽⁵⁾. That concerned a proposed purchase of a house, subject to contract. The matter reached the stage where each side had signed its own part of the contract, and so notified the other. The purchaser's solicitor sent their client's signed contract to the vendor's solicitor, and, at that stage, the vendor decided not to proceed. The case is important in two respects, one legal and one moral. Lord Greene, M.R., after summarising the practice of "subject to contract" cases at p. 97, dealt with the significance at pp. 99 and 100. He said,

"It is argued that exchange is a mere matter of machinery, having in itself no particular importance and no particular significance. So far as significance is concerned, it appears to me that not only is not right to say of exchange that it has no significance but it is the crucial and vital fact which brings the contract into existence ..... Mr. Fox-Andrews ..... says we are dealing here with honourable people. I have not the faintest doubt that it is the case, but a little experience in these courts leads one to suppose that it is not always the case in dealing with land. The vendor who likes to keep and refuse to hand over a document of title when he is under no obligation to hand it over is a very common creature.".

At pp. 102/3, he dealt with the unchallenged statements by the vendors that they were ready to proceed, and that they had led the purchaser to believe them, but, at p. 104 he said this,

Cohen, L.J. (as he then was), agreed, and, at pp. 104/5 said,

"....... this is one more of the many cases arising out of preliminary agreements, if they can be so called, subject to contract. It differs from the reported cases in that in this case both parties had signed their respective parts of what might have become the final agreement, but I think the principles applicable are the same ..... where a document or preliminary agreement is expressed to be subject to contract, it means and implies that the parties do not intend to be bound until another document embodying all the terms of the agreement between them is signed by the parties and becomes binding on them.".

 

Asquith, L.J., at p. 108, pointed to the difficulty of not upholding the subject to contract rule. Although that authority has been distinguished over the years, none of the subsequent cases has in any way diminished its force on those aspects of the principle. In Tevana v. Norman Brett (Builders) Ltd. ⁽⁶⁾, a Motion arising out of "gazumping", Brightman, J. (as he then was) said, at p. 1945, after referring to the Eccles' Case ⁽⁵⁾,

"It was true that none of the relevant letters contained the actual formula "subject to contract", but they contained abundantly and repeatedly the meaning of that formula, which was that the contract was to be brought about by the exchange of the two parts signed by the respective parties.".

 

At p. 1946, he is reported as saying,

".....when parties started their negotiations under the umbrella of the "subject to contract" formula, or some similar expression of intention, it was really hopeless for one side or the other to say that a contract came into existence because the party became of one mind not with standing that no formal contracts had been exchanged ..... parties could get rid of the qualification of "subject to contract" only if they both expressly agreed that it should be expunged or if such an agreement was to he necessarily implied.".

 

Those sentiments were cited with approval in the Court of Appeal in Sherbrooke & Anor. v. Dipple & Anor. (Baines, third party) ⁽⁷⁾, a case heavily relied on by Mr. Alexander. Lord Denning, M.R. said, at p. 1203,

"But there is this overwhelming point: everything in the opening letter was "subject to contract". All the subsequent negotiations were subject to that overriding initial condition.".

 

Templeman, L.J. said, at p. 1205,

"Accordingly, in my judgment, the learned Judge, ..... fell into the error ..... of thinking that because parties had got near a contract or conveyance, because parties assumed that they would go happily on until matters had become binding, therefore the "subject to contract" qualification either ceased to have effect or was replaced by new contract It is always the case that in "subject to contract" negotiation one side or both from time to time speak as though there was a contract or would be a contract, and that is because everybody looks on the bright side and thinks a sale is going to take place. The fact of the matter is that for very good reasons the "subject to contract" formula enables one to see at once whether there is or is not a contract - either a contract exchanged or conveyance executed and delivered - or whether parties are in the negotiations stage. Once one gets away from principle, then all is difficulty, and reliance on odd conversations and letters produces uncertainty in law.".

 

With all those sentiments, I respectfully concur. Particularly in Hong Kong, it is of cardinal importance that the "subject to contract" principle be preserved in relation to assignments of Crown leases, Grants and Tenancies in Common. As I have said, without the umbrella of "subject to contract", conveyancing in Hong Kong could become a dangerous trap for the innocent and unwary; we may not have many of the former group, but we certainly have the latter in very large numbers. Quite apart from matters such as Town Planning and Planning Blight, there are the snares of Crown Resumption, fulfilment of General and Special Conditions of Grant, fulfilment of Lease terms and so on. But, I must ask myself, what did Brightman, J. mean in the Tevanan's Case ⁽⁶⁾, which Lord Denning repeated in Sherbrooke's Case ⁽⁷⁾, in the passage,

"parties could get rid of the qualification of subject to contract only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied.", (my emphasis).

 

Is that part of the application of that principle upon which Mr. Alexander stands, or is it a necessary ingredient in the principal equity for which Mr. Godfrey contends? In my judgment it is both, for I have reached the conclusion that no equity co-exists with the agreement of the parties that their negotiations should be "subject to contract" and "without binding legal effect." In none of the cases cited to me did the equity which was invoked over-rule the mutual agreement of the parties that their acts, negotiations and words were "subject to contract", and spoken or done with "no intention to create legal relations". Each of the authorities to which Mr. Godfrey invited my attention was explicable on ordinary principles. The distinguishing features were canvassed at length in the submissions before me, and I see no need to repeat them out in this judgment. It is sufficient that I state my conclusion - as I have just done. If I had felt that equity and justice demanded that I go beyond those authorities and, as it were, make new law, I would not have hesitated to do so. In my judgment, equity and justice demand the opposite. I will revert to the alleged existence of this parallel equity, if I may so describe it, Later in this judgment. Yet, I can conceive of a position where the court would interpret the words and deeds the parties as amounting to an implied expunction of the "protective terms" to which I have referred. For a court to reach that conclusion, in my judgment, there would have to be mutuality, and the words and conduct relied upon would have to be clear and unambiguous.

81. The mutuality needs no authority: one merely has to imagine a situation where words and conduct overwhelmingly lead the "man on the Shaukiwan tramcar" to say "that man has waived the 'subject to contract' principle", yet the representee wishes to continue on the former basis. The proposition is so trite that I do not need to explore it further. Such, however, is not the case here, where H.K.G., qua representee, would desire such expunction.

82. On the clear and unambiguous point, I have had cited to me, by both parties, certain passages in the 28th edition of Snell's Principles of Equity at pp. 556-563, but I must confess to finding the passages unhelpful in this context, and I feel as Oliver J. (as be then was) did in Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd.: Old & Campbell Ltd. v. Liverpool Victoria Friendly Society⁽⁸⁾ at pp. 151H - 152A, and I respectfully adopt what he said, qua Oliver L.J., in Habib Bank Ltd. v. Habib Bank A.G. Zurich ⁽⁹⁾ at pp. 1285B-C, - as did Watkins,  L.J. and Stephenson L.J. at p. 1287.

83. In E & L. Berg Homes Limited v. Grey & Anor ⁽¹⁰⁾ Brandon, L.J (as he then was) said, at p. 476,

"...... I bear in mind that the case for the defendants involves an allegation of unconsionable conduct against the brick company and the plaintiffs, and that such allegation can only be made good by clear and cogent evidence.".

 

In Spence v. Shell U.K. Ltd.: Spence & Anor v. Shell U.K. Ltd. ⁽¹¹⁾, Brandon L.J. (as he then was) said, at p. 63,

"In order to succeed, it was necessary for them to establish three matters. The first matter was a clear and unequivocal promise or assurance by representatives of Shell......"

 

Oliver L.J., at p. 63, said,

"That, by definition, involves the making by the party claimed to be estopped -...... - of some unambiguous promise or assurance which is intended to affect the legal relation between them, and in reliance upon which the other party has acted of course, there may be circumstances in which such a promise or assurance my be implied rather than express. But, whether express or implied, it must be unambiguous and it must be one which, is intended to affect the legal relations between the parties.".

 

Megaw L.J., at p. 64, said,

"In whatever precise form of words the substance of that suggested promise might be framed, I fear that I find it impossible to accept that ...... a clear and unambiguous promise to the effect of that substance ..... was given or would have been understood to have been given.".

In Woodhouse A.C. Israel Cocon Ltd. S.A. & Anor. v. Nigerian Produce Marketing Co. Ltd. ⁽¹²⁾, Lord Hailsham of St. Marylebone, L.C. said, in his speech at p. 755,

"I must and do accept that both parties  honestly believed in their respective constructions from the first. But I must point out that, in so far as there may be any ambiguity .... it originated in the letter .... which came from the buyers .... I regard this is an important consideration .... I do not myself think there was ambiguity. But, on the assumption there was, I agree with the Court of Appeal that such cases as Low v. Bouverie [1891] 3 Ch. 82 and Canadian & Dominion Sugar Co. Ltd. v. Canadian National (West Indies) Steamship Ltd. [1947] A.C. 46 are authority for the proposition that, to give rise to an estoppel, representations should be clear and unequivocal, and that, if a representation is not made in such a form as to comply with this requirement, it normally matters not that the representee should have misconstrued it and relied upon it.".

 

At p. 756, he expanded further on this aspect of representations, in terms which have left the matter presently beyond doubt. Viscount Dilhorne, at p. 761, said, "To found an estoppel, the representation must be clear and unequivocal.". Lord Pearson, at p. 762, said,

"It may be that the "representation" or promise or assurance has to have at least as much precision as would be needed for a variation of the contract.".

 

Lord Salmon, at p. 771, said,

"Evidently the meaning which the buyers put upon the letter was a possible though unlikely meaning, otherwise they could not so have understood it. This, however, will not do for an estoppel. To work an estoppel the representation relied upon must be clear and unequivocal",

 

and in somewhat schoolmastery terms he went on to give his explanation of the degree of clarity required.

84. Now I have cited those authorities at this point in relation to expunction in order, as it were, to clear that out of the way.

85. On the first day Mr. Godfrey intervened to say,

"It is agreed that it will not be argued that the words "subject to contract" have not been expunged, expressly or impliedly.".

 

By that, I took him to mean that I would not have to decide an issue between the parties as to whether or not those words had been expunged, as H.K.G. would not be submitting that they had. Such a concession does not relieve me of the task of analysis of the apparently conflicting concepts.

86. Mr. Godfrey made it quite clear to me that what he propounded was e separate and distinct equity, which arose out of words and conduct in such a way that the, words "subject to contract" and the disavowal of legal relationships were irrelevant. Although I have found that no such equity exists, I must now further examine that proposition, but I do so against the background of the authorities I have cited, and, in my judgment, I must look for clarity and lack of ambiguity in the "words and conduct" of Lands which led H.K.G. "to believe the plaintiff would not insist upon its strict legal rights.": A 21 para. 13.

87. First, I have to ask myself if such an equity as pleaded does in fact exist: to that my answer is an unequivocal yes; and I shall return to the point again later.

88. Second, I have to ask myself if it can exist within the "subject to contract" principle. To that my answer is a qualified yes, as I shall explain it in due course.

89. Third, I have to ask myself if it can exist within the "no intention to create legal relations" situation: again, I give a qualified yes.

90. Fourth, I have to ask myself if, where there are terms still to be agreed between the parties, essential for the fulfilment of the original intention, can such an equity, in such circumstances, still prevail; to that I give a qualified yes.

91. Last, I have to ask myself if such equity can coexist with the two other principles, yet not of them; and can it operate along parallel lines with them: To that, as I have already indicated, I have come to the conclusion that my answer must be no. I must, however, deal with the principles and the evidence as if I were wrong in so holding as well as on the premise that I might be correct.

92. That the equity exists is beyond doubt. I will not go into the early history, but content myself with starting in 1866 from that so well-known passage in the speech of Lord Kingsdown (dissenting on fact, but not on law) in Ramsden v. Dyson & Anor ⁽¹³⁾. However, I must utter a word of caution, as the learned Law Lord did at p. 171 (in the paragraph after the second break on that page):

"The whole question, I think, in this case, is, within which class does the present claim fall; a point which, of course, depends entirely on the effect of the evidence.".

 

Willmott v. Barber ⁽¹⁴⁾ is so well-known, and has so often been cited, that I do not need to recite the five "elements or requisites" emphasised by Fry J., and dealt with in authorities over the succeeding century, but I will, again, extract a caution from that judgment, and it is this: At the same page, p. 105, Fry J. said,

"It requires very strong evidence to induce the Court to deprive a man of his legal right when he has expressly stipulated that he shall be bound only by a written document.".

 

In Plimmer & Anor. v. the Mayor, Councillors, and Citizens of the City of Wellington⁽¹⁵⁾, the Privy Council expressly adopted and approved Lord Kingsdown's dissenting speech, in a case singular on its facts. I will cite but a few passages from the Reasons of the Board for tendering their advice that the appeal be allowed: Sir Arthur Hobhouse said, at p. 712:-

"In the present case, the equity is not claimed because the landowner has stood by in silence while his tenant has spent money on his land. This is a case in which the landowner has, for his own purposes, requested the tenant to make the improvements ..... Is it to be said that, when he had incurred the expense of doing the work asked for, the Government could turn round and revoke his licence at their will? ..... It would be in a high degree unjust that they should do so, and that the parties should have intended such a result is, in the absence of evidence, incredible.".

 

At pp. 712/3, he said:-

"Their Lordships will not be the first to hold, and no authority had been cited to them to shew that after such a   landowner has requested such a tenant to incur expense on his land for his benefit, he can without more and at his own will take away the property so improved. Their Lordships consider that this case falls within the principle stated by Lord Kingsdown as to expectations created or encouraged by the landlord, with the addition that in this case the landlord did more than encourage the expenditure, for he took the inititative in requesting it the equity arising from expenditure on land need not fail merely on the ground that the interest to be secured has not been expressly indicated.".

 

At p. 714, he said,

"...... those transactions were sufficient to create in his mind a reasonable expectation that his occupation would not be disturbed; and because they and the subsequent dealings of the parties cannot be reasonably explained on any other supposition.".

 

In Inwards & Ors. v. Baker ⁽¹⁶⁾, a case where a son had been encouraged by his father, during the latter 's lifetime, to build on his land with the idea that he would stay there as long as he liked, was held entitled to remain. Lord Denning, M. R. said, at p. 37,

"....... even through there is no binding contract to grant any particular interest to the licensee, nevertheless the court can look at the circumstances and see whether there is an equity arising out of the expenditure of  money. All that is necessary is that licensee should, at the request or with the encouragement of the landlord, have spent the money in the expectation of being allowed to stay there. If so, the court will not allow that expectation to be defeated where it would be inequitable so to do ..... It is an equity well recognized in law. It arises from the expenditure of money by a person in actual occupation of land when he is led to believe that, as the result of that expenditure, he will be allowed to remain there.".

 

Danckwerts, L.J. said, at p. 38,

"It is not necessary, I think, to imply promise. It seems to me that is one of the cases of an equity created by estoppel, or equitable estoppel, as it is sometimes called, by which the person who has made the expenditure is induced by the expectation of obtaining protection, and equity protects him so that an injustice may not be perpetrated.".

 

In Holiday Inns Inc. v. Broadhead: Same v. Yorkstone Properties (Harlington) Ltd. & Anor.⁽¹⁷⁾ a case, again, of unusual facts, Goff, J., as he then was, upheld U claim by the plaintiffs for equitable relief, where the defendants had refused to go ahead with a proposed joint venture for land development. The plaintiff did certain things and incurred expenditure, and, at page 955, the learned Judge said,

"The plaintiffs' case is that they did all this and incurred this expenditure on the faith of a firm understanding, arrangement or bargain which they at all times materially believed existed between them and Mr. Broadhead that if planning permission could be obtained he would grant them a 3 and 1 lease of the 15 acre site on the standard terms. They say that Mr. Broadhead knew this and nevertheless encouraged or allowed them to go on under this belief, and yet when permission had been obtained he would not grant them such a lease, but required terms much more favourable to himself, and although they went a long way to try to meet him, and indeed probably would have reached an agreement on the lines he was requiring, he suddenly broke off these new negotiations and caused a lease ....... to be granted to ....... Thus they say Mr. Broadhead took an unconscionable advantage of them, and while they have never suggested that the understanding, arrangement or bargain was sufficiently precise to be enforceable as a contract, they claim to be entitled to relief in equity.".

 

At p. 1087, he cited Ramsden's Case ⁽¹³⁾ Plimmer's Case ⁽¹⁵⁾ and Inwards' Case ⁽¹⁶⁾ and cited a 1972 judgment of Lord Denning. He said,

"The principle on which it rests is clearly, as Lord Denning said, "because justice and good conscience so require", and the cases fully shew the conditions which have to be satisfied to give rise to it.".

 

At p.1089, he said:-

"Mr. Waite therefore rested his case on what he described, and rightly described, as the crucial question whether there was a belief on the part of the plaintiffs, induced by Mr. Broadhead's words or silence, that they would receive a sufficient interest in the Land to justify the expenditure. He said that this was an arrangement between commercial men dealing with each other at arm's length with their eyes open, and so the plaintiffs must be taken to have elected as a matter of commercial judgment to run the risk that Mr. Broadhead might, as I add he clearly did, have private reservations undisclosed at the date of the expenditure which might frustrate the conclusion of the anticipated bargain, and indeed that they might have had similar reservations themselves. I am wholly unable to draw any such inference or conclusion. Mr. Wilson's evidence, which I accept, was that he thought this was a gentleman's agreement which would be honoured. Mr. Tigrett in his evidence, which I also accept, said that no reservations or thought of backing out ever occurred to him, and the whole tenor of Mr. Broadhead's conduct and letters was calculated to make the plaintiffs believe that if planning permission were obtained they would have a straight 3 and 1 lease on the standard terms. I am satisfied ..... that both Mr. Wilson and Mr. Tigrett believed that and Mr. Broodhead well knew that they did. His failure to inform them of his true state of mind was deceitful and unconscionable",

 

and, at p.1095, he said that the plaintiffs were clearly entitled to relief.

93. In Crabb v. Arcn District Council ⁽¹⁸⁾, the Court of Appeal had to deal with the case of a plaintiff who had found his land landlocked, and who sought to be relieved by an equity such as that which I am considering. The Court of Appeal, having found such an equity, ordered that the defendant grant a right of access and a right of way to the plaintiff. This is a case to which I shall have to refer later, on the question of detriment. Lord Denning, M.R. said, at p.188,

"Short of an actual promise, if he, by his words or conduct, so behaves as to lead another to believe that he will not insist on his strict legal rights -knowing or intending that the other will act on that belief - and he does so act, that again will raise an equity in favour of the other; and it is for a court of equity to say in what way the equity may be satisfied. The cases shew that this equity does not depend on agreement but on words or conduct.".

 

Lawton L.J. said, at pp. 191 and 192,

"From then onwards there can he no doubt whatsoever that the plaintiff believed he had got a firm undertaking from the defendants and he acted as if he had. In so doing he prejudiced his own position greatly by selling off the front portion of his land and failing to retain a right of way over it. It is also clear in the evidence ..... when the agreement was made the defendant knew that the plaintiff wanted access at point 5 because he intended to sell off part of his land ..... Then the defendants behaved in a manner which the Judge described in restrained terms as high-handed and discourteous. I am surprised that a local authority should have behaved in the way this local authority did .... I ask myself whether any principle of equity applies. I am grateful to Mr. Lightman for having drawn our attention this morning to Ranmsden v. Dyson L.K. l H.L. 129. If there had been any doubts in my mind about the application of principles of equity to the facts as I have recounted them, that case has dissipated it."

 

Scarman L.J., as he then was, said at pp. 193/4:

"What is needed to establish an equity? .... I think the law has developed so that today it is to be considered as correctly stated by Lord Kingsdown in his dissenting speech in Ramsden v. Dyson.... That statement of the law is put into the language of landlord and tenant because it was a landlord and tenant situation with which Lord Kingsdown wasconcerned; but it has been accepted as of general application.".

 

At p. 195, he said:

"'Fraud' was a word often in the mouths of those robust judges who adorned the bench in the 19th century. It is less often in the mouths of the more wary judicial spirits today who sit upon the bench. But it is clear that whether one uses the word 'fraud' or not, the plaintiff has to establish as a fact that the defendant, by setting up his right, is taking advantage of him in a way which is unconscionable, inequitable or unjust. It is to be observed ..... that the fraud or injustice alleged does not take place during the course of negotiation, but only when the defendant decides to refuse to allow the plaintiff to set up his claim against the defendants' undoubted right. The fraud, if it be such, arises after the event, when the defendant seeks by relying on his right to defeat the expectation which he by his conduct encouraged the plaintiff to have ..... The court therefore cannot find an equity established unless it is prepared to go as far as to say that it would be unconscionable and unjust to allow the defendants to set up their undoubted rights against the claim being made by the plaintiff. In order to reach a conclusion upon that matter the court does have to consider the history of the negotiations.....".

 

In Shaw & Anor. v. Applegate ⁽¹⁹⁾, the Court of Appeal again considered this subject. Buckley L.J., at pp. 977/8 said,

"..... what the judge is there saying is that where man has got a legal right - as the plaintiffs have in the present case, being, legal assignees of the benefit of the covenant binding the defendant - acquiescence on their part will not deprive them of that legal right unless it is of such nature and in such circumstances that it would really be dishonest or unconscionable of the plaintiffs to set up that right after what has occurred. Whether in order to reach that stage of affairs it is really necessary to comply strictly with all the five tests ..... set out by Fry J. may, I think, still be open to doubt, although no doubt if all those five tests were satisfied there would be shown to be a state of affairs in which it would be dishonest or unconscionable for the owner of the right to insist upon it .... I do not, as at present advised, think it is clear that it is essential to find all the five tests set up by Fry J. literally applicable and satisfied in any particular case. The real test, I think, must be whether upon the facts of the particular case the situation has become such that it would he dishonest or unconscionable for the plaintiff, or the person having the right sought to be enforced, to continue to seek to enforce it .".

 

In Greasley & Ors. v. Cooke, ⁽²⁰⁾ a case to which I shall have to refer later in another context, the Court of Appeal had to decide on a claim by a housemaid to a right to live rent-free for the rest of her days in the house of her deceased employer, where she had cohabited with one of the sons and cared for a mentally ill daughter, encouraged by the family in the belief that she could. The Court found in her favour. Lord Denning, M.R., said, at p. 1311 H:

"Applying those principles here it can be seen that the assurances given by Kenneth and Hedley to Doris Cooke - leading her to believe that she would be allowed to stay in the house as long as she wished - raised an equity in her favour."

 

I need not repeat here the citations from Taylors Fashions ⁽⁸⁾ or Habib Bank⁽⁹⁾ save to observe that, in the latter case, Oliver, L.J., at p. 1287, accepted and adopted what Whitford, J. had said in the court below, namely,

"Of course, estoppel by conduct has been a field of the law in which there has been considerable expansion over the years and it appears to me that it is essentially the application of a rule by which justice is done where the circumstances of the conduct and behaviour of the party to an action are such that it would be wholly inequitable that he should be entitled to succeed in the proceeding.".

 

The last authority to which I wish to refer, and of which much was made in the course of submissions, is Salvation Army Trustee Co. Ltd. v. West Yorkshire Metropolitan County Council ⁽²¹⁾. That was an action between two bodies of comparatively equal size - as in this case. Mr. Godfrey called it a "subject to contract case", where, notwithstanding that, the Ramsden v. Dyson (supra) principle was applied and the ''arrangement" was enforced by the court. I need not recite the facts here, (they appear very clearly from the headnote at p. 179), or the passages where Wolff, J. earlier in his judgment recited them, but, at p. 198, he said,

"The fact that the case was only put on the basis of an equitable obligation at a late stage is also relevant in considering the propriety of the defendant authority's conduct. It is true that, before the equity can arise, I have to come to the conclusion it was unconscionable for the defendant authority in all the circumstances not to go ahead with their part of the agreement, namely the acquisition of the old site. This unconscionable conduct is sometimes categorised as conduct amounting to a fraud on the plaintiffs. However, I would like to make it clear that I am not seeking to suggest that the defendant authority have acted reprehensibly .... When the claim based on equitable obligation was put forward, the defendant authority were faced with the application of the so-called principle of propriety estoppel to novel circumstances at a very late stage of the action. It was understandable, therefore, that, bearing in mind the obligations that they have ... they should have regarded it as right to obtain a decision of the court before accepting that they were under an obligation ... Before I finish, I would like to add that I regard this case as being within the principle established by Crabb v. Arun District Council. It is novel in the sense that facts of this nature have not been before the courts before, but I would not like it to be thought that, in relation to the enforcement of a sale, it is likely to have wide application.".

 

The learned Judge obliged the defendant authority to purchase the "old site" from the plaintiff company.

94. On p. 199, there is a passage in the judgment of importance, upon which each party relied for a diametrically opposed reason. The learned Judge said:

"... I would not want my decision in this case to interfere with the normal conduct of negotiations "subject to contract"......".

 

To that I will revert.

95. In my judgment, therefore, it is too late to argue there does not exist a discretionary relief to prevent a party from resiling from an agreement which, by his words and conduct, he has led the other party to believe he would complete, in circumstances where his conduct is unconscionable (within the sense of the authorities to which I have referred) But that in itself is not enough. The words and conduct must have led to a belief that the other party would not so resile. And that belief, in my judgment, must be bona fide and genuine and, in my judgment, must be reasonable on any objective view. Having said that, however, the objective view must take into account the subjective reaction. It is at this point that I must revert to Greasley v. Cooke⁽²⁰⁾. In the course of submissions, I was constrained to ask counsel if the effect of what the butcher's son said to the skivvy should be equated with what Lands is alleged to have represented to H.K.G. The case for H.K.G. was that no distinction should be drawn. The case for Lands was that part of the objective test would be to determine the effect of the words and conduct on the representee, having regard to his, her or its background, expertise, learning, resources, upbringing etc. Reduced to its basic terms, would it be right for me to equate the effect on Doris of what Kenneth said ("I will do the right thing by you") and what Hedley said ("no need to worry, you will he looked after") [see p. 1310 of the Report] with the effect that might have followed from Mr. McFadzean patting The Honourable David McDonald on the head and saying,

"No need for the Government to worry, David, Lands will look after them.".

 

96. In my judgment that would be wrong. In the case of Doris Cooke, something that would be laughable as between Lands and H.K.G., would suffice to lead a court objectively to decide that the representation was clear and unambiguous and that, as she acted on it (and to her detriment), she should be allowed to rely on it in equity : As between Lands and H.K.G., with all their resources, something infinitely more grave and weighty, something greater in clarity, something totally unambiguous is required on the one hand, and a considered, reasoned, supportable and well-founded belief is required on the other. Whether or not those elements are present before me is a matter I shall deal with when I come to my analysis of the evidence.

97. I pass to my second point which can be very simply disposed of thus : If the words and conduct amount, when viewed objectively by the Court, to a representation (or assurance, promise or understanding) that the "subject to contract" clause is to be treated as non-effective, or as having been expunged, and if that representation (or assurance, promise or understanding) has given rise to an anticipation, belief or expectation of the quality to which I have just referred, then, in my judgment, the equity contended for can exist within the "subject to contract" principle. In such an instance the court would intervene to preclude the party responsible for such representation (or assurance, promise or understanding) from trying to deny it or its effect.

98. Equally so with the "no intention to create legal relations" situation. If the words and conduct of the one party are so clear and unambiguous that, reasonably viewed, they amount to a representation (or assurance, promise or understanding) that that party will treat as spent the original condition that there was no intention to create a legal relationship, and if the other party acts on that belief, the manner to which I have just referred, then, again, the court will intervene to prevent a representor from such a resilition.

99. I now pass to the position where those criteria are met, but there still remain between the parties, terms to be agreed. Can it then be said that the court can make the parties go through with their agreement, with the court re-writing it in part, or completing it by the insertion of terms? In Gregory v. Mighell ⁽²²⁾, the (master of the Rolls (for The Lord Chancellor) did just that. He decreed specific execution of an agreement which had originally provided that rent should be fixed and ascertained by two arbitrators, who were to be at liberty, in the event of disagreement, to choose one or more umpires. The Master of the Rolls ordered that the rent should be ascertained by a Master : In Laird v. The Birkenhead Rly. Co.⁽²³⁾, the Court overruled a demurrer to a bill praying specific performance of a draft agreement which had originally said,

The Court there said that the terms upon which user had been permitted pendente lite, should be taken as fair and reasonable, and so decreed. In Plimmer's Case ⁽¹⁵⁾, the Privy Council prescribed a term for the plaintiff; at p. 715 :  In Birmingham & District Land Co. v. L. & N.W. Rly Co.⁽²⁴⁾, the Court of Appeal prescribed a term for the plaintiff and the conditions subject to which the Railway Company took : see p. 283 and the final paragraph in the judgment of Cotton, L.J. at p. 279 :  In Crabb's Case ⁽¹⁸⁾ , the Court of Appeal made specific orders and decided against any payment by the plaintiff to the defendant in respect of the right of way and right of access : see p. 190 A-B and p. 199 E-F : In Greasley's Case⁽²⁰⁾, the Court merely specified that Doris Cooke should remain in the house as long as she wished : In the Salvation Army Case⁽²¹⁾ Wolff, J. fixed the sum of compensation and refused to grant interest : And in the Holiday Inns' Case⁽¹⁷⁾, Goff J., at pp. 1095/7, spelt out the terms on which the land was to be held and as to the nett proceeds of sale thereafter and what should be paid out to the plaintiffs and what should be retained on trust. Quite clearly the Court can and will, where equity and justice require it, spell out, write in or complete terms necessary to give effect to its judgment.

100. I return now to the question of alleged independent and parallel existence of the equity. I. will commence with the final passage in the judgment of Wolff, J. in the Salvation Army Case ⁽²¹⁾. I have reached the conclusion that what the learned Judge was saying there, was no more than that was a decision on particular facts which, as he said at p. 199, are unlikely to recur frequently. There is no doubt that it was a subject to contract case : see p. 186, where the learned Judge said,

"The letter was headed "without prejudice", and in this context counsel agreed that those words can be regarded as being equivalent to "subect to contract".".

 

But the case there involved two transactions, one relating to the old site and one relating to the new site. One transaction, which was an integral part of the whole, was legally completed : see p. 189. And before that, the Council had been specifically told that the taking of possession by the Salvation Army Trustee Company would be "part performance of the agreed terms" , the which averment was never challenged or traversed by the Council. I cannot read that judgment as in anywise weakening the protective power of "subject to contract". I must remind myself also of what was said by the Court of Appeal in the Berg Homes Case ⁽¹⁰⁾, where, at p. 479, Ormrod, L.J. said,

"......the court in using its equitable Jurisdiction must, in my judgment, approach these cases with extreme care. It is vital that the courts recognise and apply the limits of this equitable jurisdiction ..... I think also it is important to recognise that the extent of the remedy to which they would be entitled if they were able to qualify for it must, in my view, depend upon the sort of legal rights they mistakenly thought they had, or to use Lord Kingsdown's words, "under an expectation created or encouraged" by the other side. That is not, as I understand it, to be invoked as a general jurisdiction in equity to relieve hardship resulting from the application of the ordinary law; it is a restricted jurisdiction, and is one which should, in my judgment, be exercised with due caution.".

In my judgment, it would not be an application of equity to say that, notwithstanding that these parties did everything that they did, and said everything that they said, both "subject to contract" and "without any intention to create legal obligations", their "agreement in principle" would be enforceable, but would be to turn our entire system of conveyancing on its head. No vendor, and no purchaser, would be safe from the cry of unconscionability. It would provide a field-day for the crafty and wily, and would work its hardest on the just and honourable. What I mean is this, agreements "subject to contract" would continue in a state of suspended animation, giving full protection to the parties, and affording them the right not to complete, yet, at the same time, the parties would be obliged to take action, along undefined lines, to give effect to their original negotiations. Put that way, the fallacy in it becomes patent.

101. If, however, there were an equity such as Mr. Godfrey advances, the requirements therefor would be the same as the equity I have found to exist, and they would be  :-

102. It is said that the injustice (or the unconsionability) arises after the event - that is to say when one party whom the other seeks to estop, asserts its legal right : Crabb's Case ⁽¹⁸⁾ , at p. 195D. From my part, I feel, with the deepest respect, that that wording of the learned Lord Justice (as he then was) falls short of his usual felicitously high standard of phraseology. The party asserting the equity must show that he has acted on the assurance, expectation, promise, representation or understanding. To do that, he must demonstrate his belief in it. Such a belief may spring to life in a flash - or, as in this case, it may grow slowly, fostered, as it were by the gradually increasing impact of the words and conduct of the other party- which words or conduct, if taken singly, might not suffice to found a reasonable belief. But in such a case as this, there must come a time when the belief "quickens" or "crystallises", express it how you will. The existence of such belief may be proved by evidence, or by inference.

103. There must follow, and there can not precede, the acting on such belief. But once the party has so acted, then the unconsionability and the injustice (if any) is created, and an equity, albeit inactive, is born.

104. It may remain forever inactive - or it may not. I would, myself, therefore, express, the doctrine thus :-

105. Acting upon that assurance, expectation, promise, representation or understanding is a pre-requisite that needs no explanation. It may be proved either by evidence, or even by presumption : See, for example, per Lord Denning, M.R. in Greasley's Case ⁽²⁰⁾, at p. 1311 (at the foot of the page).

106. That the party must alter his position, is equally clear. All that is required, however, is that the party setting up the equity must demonstrate that he did something which he otherwise would not have done, or refrained from doing something which he otherwise would have done. I do not believe that means any more than this : Inactivity is fatal to the invocation of the equity; doing, or not doing, something which is in nowise attributable to the assurance, expectation, promise or representation is also fatal.

107. I now pass to the question of detriment. The question of the need to shew that, raises some interesting points. In Greasley's case ⁽²⁰⁾, Lord Denning, M .R. said, at p. 1311 :-

"There is no need for her to prove that she acted to her detriment or to her prejudice. Suffice it that she stayed on (at) the house - ..... - when otherwise she might have left and got a job elsewhere.".

 

108. Waller, L.J. commenced his judgment, at p. 1312, with the words, "I agree.". Dunn, L.J. was in no doubt of a necessity for prejudice or detriment (see pp. 1313/4). "Two to one" said Mr. Godfrey; but is that so? I believe not. My reading of the opening words in the judgment of Waller, L.J. is that the learned Lord Justice was saying no more than that he agreed with the result, as set out in the final paragraph of Lord Denning's judgment at that page. Spry, in The Principles of Equitable Remedies, 3rd edition is silent on the point, at p. 179, when referring to Greasley's Case ⁽²⁰⁾. In Snell, at p. 559, it is said to be essential to proprietory estoppel: see l(a) and note 59 on p. 559; but the learned authors are equivocal on the topic in relation to promissory estoppel: see 1(a) and, note 25 on p.556. This was a recurrence of a proposition, which seems first to have surfaced in W.J. Alan & Co. Ltd. v.  el Nasr Export and Import Co. ⁽²⁶⁾, at P. 213G, but only in the judgment of Lord Denning, M.R.. Greasley's Case ⁽²⁰⁾ was decided on 18th June 1980, and the Habib Bank Case ⁽⁹⁾ was decided on 18th December 1980, and, in it, Greasley's Case ⁽²⁰⁾ was cited: Nonetheless, Oliver L.J., in the passage at p. 1289, which I had already read, accepted the necessity for detriment, and what Stephenson, L.J. said at p. 1287 reinforced that view. Spence's Case ⁽¹¹⁾, appeared not to have been cited in Greasley's Case ⁽²⁰⁾, but there, Brandon, L.J. expressly adopted Snell's proposition of the rule, which included the necessity for detriment. In my judgment, detriment must still be demonstrated to the Court, and, until I am told to the contrary by the Lords of the Council, or by the House of Lords, that is, that there is no longer any need to shew prejudice or detriment, I shall continue to expect it to be proved. The burden of proof of detriment is, of course, another matter, but I am not concerned with that point in this action.

109. I must now apply those principles to the facts of, and the evidence given in, this case. The "skeletal" facts, I have already dealt with at some length, and this is the suitable moment to mention an agreement between Counsel concerning this judgment, which I accepted and adopted. In the course of the ten days' hearing, reference was made to a large number of pages in Bundles C-Z, but by no means to all of them. It was the wish of both parties that I should give this decision based on only those pages to which my attention had been drawn, leaving both parties completely free, should they wish, to invite the attention of the Court of Appeal and of the Judicial Committee to any other pages that they may then consider relevant. I offered, and I am still willing, to prepare, as an annexure to this judgment, a list of those pages to which reference was made before me.

110. Each party called but one witness : Mr. McFadzean, who was at first Assistant General Manager (Property Development) and later Group General Manager (Property Development) of Lands; and Mr. Ward, presently Deputy Director of Lands in H.K.G. and at all material times Principal Government Land Agent. They are both gentlemen of great integrity, and I was deeply impressed by the frankness and sincerity of their evidence, which I unreservedly accept. For my part, I can see no conflict whatever between their evidence. However, should anyone, by examination of the jot and tittle of the transcript, uncover such a conflict, it should, in my judgment, be resolved in favour of Mr. McFadzean. That is not because I have any doubt of the veracity of Mr. Ward - as I have said, I do not - but because he was but one finger of one hand or, one limb of the body corporate of the Crown in Hong Kong, and there was demonstrated to me, running throughout the documents, a lack of co-ordination between Branches, Sections, Departments and Divisions of H.K.G. which, although not surprising to a judge, might evoke cries of incredulity in the less worldly-wise. Mr. Ward firmly and honestly believed that the handing over of the Tregunter flats and "penthouses" for the use by civil servants and by judges, was "the point of no return" and that, from then on, neither party could withdraw - yet the Administration and Environmental Affairs Branch never saw fit to shew him a copy of the Note of the first meeting of the Quarters Redevelopment Co-ordination Committee, paragraph 6 of which (E 682) read,

"It was noted all the allocated flats at Tregunter would soon be occupied but the deal could not be concluded for sometime yet. It was agreed that Accommodation Section would write to S for E (now S for L & W) expressing concern at the potential dangers involved in this situation. Government would be in a very embarrassing situation if the deal fell through and all the occupants had to be moved out. In this connection it is important that no redevelopment deal is concluded for Peak Road and Mount Kellett until the Tregunter deal is finalised.".

 

Mr. Ward's evidence on this is at pp. 355/6 of the transcript, and I do not propose to read it here: And the Registrar-General's Department did not see fit to let Mr. Ward know the basis (or terms) upon which H.K.G. had taken possession of the Tregunter flats and "penthouses": I have already read clause 1(b) and 2, and will but observe that, if Mr. Ward had known of those terms, it is unlikely that he would have formed the belief of which he spoke.

111. I have examined the words and conducts of Lands, and, prior to early 1983, I can not find anything that either singly or cumulatively, brings them within the dicta to which I have referred. In my judgment, they are not unconscionable and not inequitable, phrase it as you will. I am unable to find in, or to derive from, any of those words or conduct, any assurance, promise, representation or understanding that Lands "would not insist upon its strict legal rights" (A721 para. 13), such as would satisfy the criteria laid down in the authorities which I have already cited. At the highest that I can put it of what Lands said and did, is that they were those of someone speaking "as though there was a contract or would be a contract" and of someone looking "on the bright side", to use the words of Templeman, L.J. in Sherbrooke's Case ⁽⁷⁾. From the terms of the licence for the occupation of Tregunter (Q 4/8), down to the letter to Mr. McDonald (G 1114), (which, I add parenthetically, was written in an attempt to resolve a point of direct conflict between the Lands Division of the Lands Department and the Buildings Ordinance Office of the Building Development Department), there was, in my judgment, nothing that could have suggested to Her Majesty's Attorney-General, or to the Registrar-General, or to the Secretaries for Environment and (later) for Lands and Works, a resilition by Lands from its stance that it would, if circumstances required it, insist on its legal rights, and assert its freedom to withdraw.

112. If I were wrong on that, and the words and conduct of Lands as pleaded did amount to the assurance, promise, representation or understanding pleaded, and were so clear and unambiguous and unequivocal as to give rise to the expectation or understanding relied on by H.K.G., I would imply or infer the requisite knowledge in Lands that such assurance, expectation, promise, representation or understanding would be acted on upon by H.K.G.

113. I now pass to the question of belief, and here I must, as it were, echo Mr. Alexander. Once again, I am driven to recall words of Mr. Holmes, in the Silver Blaze Case, that the significance of the dog in the stables was that it did not bark. No evidence was called from the Registrar-General's Department, notwithstanding the major part that the Department played in these negotiations. Mr. Alexander said that that was because no professional officer in that Department could possibly have said on his oath or affirmation that he had been led to believe the Lands would never insist on its legal rights. There is, indeed, much force in that submission, and the absence of evidence from any other Branch, Department, Division or Section must seriously weaken H.K.G.'s evidence.

114. That is no doubt that Mr. Ward's belief that a point had been reached where neither side could withdraw, crystallised with the handing over of the Tregunter flats and "penthouses". Paragraph 5 of his memorandum of 18 September, 1981 (E 702) makes that clear. The fact that, at E 703, he proposed the issuance of a licence, making it clear that no contract would exist between H.K.G. and Lands until execution, and referring to "a messy business with claims for mesne profits, etc. and counterclaim", does not weaken the point. I accept his explanation, at pp. 358/360 of the transcript, that the reference to the licence was because he was following "a standard form" and inserting the "usual clause"; and the "messy business" was in a memorandum of the Secretary for Lands and Work, and Mr. Ward said,

"..... when you make a recommendation you are under an obligation to let the person who has the authority know all the facts; you let him know if there are any difficulties and if there are any dangers, you are at least duty bound ..... to let him know ..... in my view it had gone to the point of no return and then I go on to caution the approving authority that as in paragraph 6 there is a danger. and then the approving authority has to decide whether to accept my view or not to accept it ..... I personally thought the parties were committed, but I was making a recommendation to somebody else - the Secretary for Lands and Work and he of course was not under an obligation to accept my recommendation. I was obliged ..... to tell him all the facts, the possible dangers .......".

 

Mr. Ward sent another memorandum (E 759/760), the draft of which is at E 713/6, wherein he again asserted his belief. I do not propose to read large sections of the evidence of Mr. Ward; suffice it to say that, this "crystallisation" becomes apparent from a reading of pages 304, 306, 319/20, 324/6, 344, 345, 351/3,409 and 412 of the transcript. As I have indicated earlier, I can not accept, and I do not believe, that Mr. Ward would have reached the conclusion that Lands had irrevocably committed itself and would not withdraw, if he had been kept fully informed of what was going on around him in H.K.G. I must emphasise here that I have not overlooked Mr. Lai's "File Note" of his meeting with Mr. Corrigall on 10th October, 1981 (E 761/3) - (764 is internal within Lands, and does not reflect what is communicated to Mr. Corrigall or passed between him and Mr. Lai.).

115. But am I bound by what Mr. Ward said? Must I take it from that, that the Crown has taken the handing-over of Treguntter as the crystallisation point of the requisite belief? I apprehend not: Greasley v. Cooke⁽²⁰⁾, in my judgment, makes that clear. First I must deal with the crystallisation point. It is of two-fold importance; first, on an analysis of the evidence, to see if the belief is well-founded; and second, because it is the commencement point for the "change, of position", "prejudice", "detriment" - call it what you will - the allegation that the parties setting up the equity has had acted on such belief. In the case I am considering, the terminal point is easy to discern, being the date after which H.K.G. did nothing further in pursuance of the "agreement in principle". I have carefully analysed those documents put before me, and the oral evidence, together with the sub missions made to me, and I find myself wholly unable to accept that any reasonable person, sufficiently informed, and aware of the contents of H.K.G.'s formal offer (D 300/304), Lands' "without prejudice" acceptance (D 306/310), H.R.G.'s 'letter of 1st June, 1981 (1) 492/3), the terms of the Tregunter licence and the terms of the Q.C. licence, and bearing in mind Lands' duty to its shareholders, could have formed an honest and objectively-reasoned belief that Lands "would not insist upon its strict legal rights", should the circumstance require: And that is quite apart from the clear knowledge in the Secretary for Lands and Works, (demonstrated by the final paragraph of the letter of 21st February 1983(G 1122/3), where The Honourable David McDonald wrote, as I have already quoted, "It is of course for your Company and its professional advisers to decide on the course it wishes to take in the matter."), that Lands had retained its freedom to withdraw if so advised.

116. If I were wrong on that point also, I would hold that  H.K.G. had acted on its belief, although not to the extent that  Mr. Godfrey would have me believe. In this respect I do not have to consider the year 1983, although, at one time, Mr. Godfrey did seem to be equating the action of Lands then with the "villain of the piece" in the Holiday Inns' Case ⁽¹⁷⁾. The Letter from Dr. David Wilson, the then Political Adviser, of 29th December, 1980, to Mr. James So, then in charge of the C.S. List (for allocation of Quarters at the highest level), shews that H.K.G. was "offering" accommodation in Tregunter before the "agreement in principle" itself was reached; that is, even before its "without prejudice" and "subject to contract" etc. letter of 12th January, 1980 (D 300/304) had been sent out: And, further the letter from Mr. Gordon Brennan, the Quartering Officer, of 14th January, 1981 to the civil servants and to the judges in The Albany (D 311), and the letter from Mr. Lau to those residents of 21st January, 1981 (D 328), shew that H.K.G. had, within the week of the "without prejudice" acceptance by Lands of the "subject to contract" offer by H.K.G. formed an intention to move. Be that as it may, and even if I exclude from my consideration the "decanting" (as it has been referred to in this proceedings) of the civil servants and of the judges from their various houses and flats, there is, in my judgment, ample other evidence of H.K.G. having "acted": for example the arrangements for Glenealy Junior School, the widening of Old Peak Road and the movement of public utilities, inter alia.

117. I would also hold that H.K.G. had altered its position prejudicially. An attempt was made, by the use of Bundle Z, to spew that H.K.G. had in fact gained as opposed to lost by what has happened. On Mr. F.Y. Kan's figures, H.K.G. had lost $24,112,717.50 and had gained $113,590,000; on H.K.G's comments on Mr. Kan's report, in terms of dollars and cents, H. K. G.  would have lost $57,712,272.50 but would have gained $75,611,300.40. In my judgment that is not the proper approach. H. K. G. is left with scenes of desolation, where once there were buildings, and has a large number of civil servants and of judges in premises which it does not own, and to which it has no title.

118. I now pass to the question of detriment, and I can deal with that very simply. If I am correct in my analysis of the authorities, and that there must be detriment in order for the equity to succeed, I would hold for similar reasons as those just given, although I have by no means explored them all that H.K.G. had suffered detriment.

119. To conclude on this aspect of the case, if I were wrong on all of those matters, the fact that the parties were never ad idem as to all the orders, conditions and terms, would not deter me from holding in favour of H.K.G. There are innumerable instances of the Court "writing in" necessary terms to give efficacy to its decision. Among those are Gregory v. Mighell ⁽²²⁾, Crabb v. Arun District Council ⁽¹⁸⁾, Greasley v. Cooke⁽²⁰⁾ and the Holiday Inns' Case ⁽¹⁷⁾, to all of which I have already made reference.

120. If I had found for H. K.G. , I would have made an Order, under prayer 2(b) of the counterclaim (A32B), that Lands execute and engrossment of U 448/478, altered in accordance with U 479/480 - a course acceptable to both parties.

121. I now pass to the second string in Mr. Godfrey's bow. The licence to occupy the Tregunter flats and "penthouses" was, on one view, terminable on three months' notice and, on another view, six months'. Q 8 said three months, and Q 39 has, as I have observed, been altered in ink to read "6". My attention was drawn to Q 56, wherein H.K.G. asked for the period to be extended to six months, and to Q 57, where Messrs. Deacons, on behalf of Lands, said that Lnads would agree to such extension.

122. H.K.G.'s case in support of prayer 1 of the counterclaim (at A 31) is put thus. From February, 1983, when Lands had decided, putting it at its lowest, to defer the project, a year went by before Notice of Termination was given (H 1334), and Mr. Godfrey relied on Birmingham & District Land Co. v. London & North Western Rly. Co., ⁽²⁴⁾, where the Court of Appeal held that, because of the conduct of the Railway Company, it would be estopped from enforcing the contractual date for determination of a building agreement under which the Land Company was in occupation. All three Lords Justice followed Hughes v. The Directors etc of the Metropolitan Rly. Co.⁽²⁷⁾, and in particular the well-known passage in the speech of Lord Cairns, L.C. at p.448. Bowen, L.J. said at p.286,

"It seems to me to amount to this, that if persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time, those persons will not be allowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before. That is the principle to be applied. I will not say it is not a principle that was recognised by Courts of Law as well as of Equity. It is not necessary to consider how far it was always a principle of Common Law.".

 

123. H.K.G.'s case is, that a point came at which Lands began to have second thoughts. Lands was "hard up" in early 1983, and, by February, was re-assessing all its projects. Nonetheless, ran the argument, Lands went on, and its actions to the beholder were consistent only with an intention to complete. Lands, says H.K.G., did not tell the truth until August 1983, but led H.K.G. to believe that Lands was anxious to get the documents executed, and that it was genuine in seeking amendments to Conditions of Exchange; it sent in Building Plans for approval, and even went so far as to permit the L.R.C. to use the Q.G. site as a car park. Mr. Godfrey urged upon me that Lands' behaviour was unconsionable and inequitable vis-a-vis H.K.G. by its delay in determining the Tregunter licence, and in its dealings in this particular matter, and, he said, on the well-known principles relating to estoppel, Lands should not be permitted to determine the licence. I have already read the relevant passages from the cross-examination of Mr. MaFadzean at pp. 204/6 of the transcript, and the passage in the Holiday Inns' Case ⁽¹⁷⁾ , where Goff J., at p. 1089, was dealing with undisclosed private reservations which might frustrate the conclusion of the anticipated bargain, and I do not need to repeat that here. I have already held against the submission that Lands' conduct was unconsionable or inequitable, but this is not the same point: This deals with the events in 1983 and 1984, a period of time that the Crown could not properly rely upon in support of its major plea. However,  I have to look for all the elements necessary for this type of equity or estoppel, and I must also bear in mind what Buckley, L.J. said in Shaw's Case⁽¹⁹⁾ at p. 978,

"In the present case, having regard to the doubtful state of mind of the parties during the period from the spring of 1971 to August 1973, I do not think that one could reach the conclusion that in this case the plaintiffs would be acting dishonestly or unconsionably in seeking to enforce their rights under the contract because of their failure to sue at an earlier date. After all, it should not, I think, be the policy of the Courts to push people into litigation until they are really sure that they have got a genuine complaint and have got a case in which they are likely to be able to succeed, and acquiescence at a time when the parties are in doubt as to what their true rights are could, it seems to me, seldom satisfy the tests I have been discussing.".

124. First, the ratio of my decision on belief applies equally to this period. Second, H.K.G. went into Tregunter, not only with its eyes open, but itself prescribing the terms on which it entered. Third, in the period of time complained of, Lands were not in fact considering anything other than a deferral of the principal project, and, in my judgment, nothing from the facts or evidence placed before me could have justified  an earlier determination of the licence. In my judgment, an earlier determination itself might have been unconsionable, inequitable or unjust, as, up to March 1984, Lands was seeking a re-negotiation so that the transaction could in fact go through: That is quite clear from the final paragraph of the letter from Messrs. Deacons to the Crown Solicitor on 28th February 1984, to which I have referred (H1278). Further, I do not consider the conduct of Lands over the period, of time in question to be unconsionable or dishonest. To, grant relief of this kind would, in effect, again, be tantamount to granting a mandatory injunction, and I bear in mind the limitations which the Courts have imposed on themselves in relation to such Orders. In my judgment, none of the necessary elements for me to grant the relief sought in prayer 1 of the counterclaim (A 31) is present: Without detriment, expectation or belief or encouragement, the estoppel claimed does not arise. If I were wrong, on that, (and H.K.G. accepted that any relief I granted would have to be on equitable terms), the terms I would have imposed, if I had found in favour of H.K.G., are that H.K.G. should purchase or lease the flats and "penthouses", (at the option of Lands), at either a fair market price or rent, to be assessed as at the date of the judgment by a Master, and, further, that H.K.G. should pay mesne profits, together with interest, from the date of the determination of the licence until purchase or lease, such mesne profits to be assessed by the same Master. The interest, in such case, would he calculated in accordance with the agreed summary at A 75.

125. The counterclaim, accordingly, is dismissed.

126. As against the Attorney-General, therefore, Lands is entitled to $103,865,608, with interest to be calculated in accordance with the agreed schedule A 75, and a Declaration that the registration at the Land Registry on 16th November 1983 of an incumbrance against the flats and "penthouses" ought to be vacated.

127. As against the Colonial Treasurer Incorporated, Lands is entitled to the Declarations prayed and to mesne profits from the determination of the licence on 7th May 1984.

128. I will now hear Counsel as to the exact form of the orders sought and on costs.

(1) [1956] A.C. 219

(2) Unreported : Privy Council Appeal No. 20 of 1980

(3) [1948] 3 W.L.R. 489

(4) [1923] 2 K.B. 261

(5) [1948] Ch. 93

(6) (1972) 223 E. G. 1945

(7) (1980) 244 E.G. 1203

(8) [1982] Q.B. 133

(9) [1981] 1 W.L.R. 1265

(10) (1979) 253 E.G. 473

(11) (1980) 256 E.G. 55

(12) [1927] A.C. 741

(13) (1866) L.R. 1 E. & I 129

(14) (1880) 15 Ch. D. 96

(15) (1884) 9 App. Cas. 710

(16) [1965] 2 Q.B. 29

(17) (1974) 232 E.G. 951

(18) [1976] Ch. 179

(19) [1977] 1 W.L.R. 970

(20) [1980] 1 W.L.R. 1306

(21) (1981)41 P. & C.R. 179

(22) (1811) 18 Ves. Jun. 328

(23) (1859) Johns 500

(24) (1888) 40 Ch. D. 268

(25) (1981) 41 P. & C.R. 269

(26) [1972]  2 Q.B. 189

(27) (1877) 2 App. Cas. 439

HCA003278/1983

BETWEEN :-

Appendix I to Judgment

Pages in Bundles C - Z referred to by Counsel or Withesses

(M. H. Jackson-Lipkin )

HCA003278/1983

BETWEEN:-

Appendix II to Judgment

Agreements or concessions by the parties through Counsel