THE TIMES OF CEYLON COMPANY, LTD. v. THE ATTORNEY – GENERAL

097-NLR-NLR-V-38-THE-TIMES-OF-CEYLON-COMPANY,-LTD.-v.-THE-ATTORNEY—GENERAL.pdf


430
The. Times of Ceylon Co. v. The Attorney-General.
1936Present: Macdonell C J. and Poyser J.THE TIMES OF CEYLON COMPANY, LTD. v. THEATTORNEY-GENERAL.
97—D. C. Colombo, 1,063.
Agreement for sale of land—Covenant to sell property in the event of the vendorpurchasing it—No covenant to buy—Option to buy—No implied covenantto purchase—Successful party deprived of costs—Discretion of Court.
An agreement was entered into between the plaintiff company and theCrown for the sale to the company of a block of land adjoining itspremises, the buildings to be erected thereon, and the transfer of acertain strip of land belonging to the company to the Crown for thepurpose of street-widening in exchange for the transfer by the Crownto the company of a strip of land belonging to the Crown.
In the first seven clauses of the agreement the Crown binds itself tosell and the company binds itself to buy the aforesaid block of landadjoining its premises. The two parties bind themselves mutually togive in exchange the two strips of lands mentioned. There are convenantsby the company as to the value of the buildings it will erect on theblock of land, covenants as to the earliest date at which the companycan ask for a Crown grant and a provision in the event of the agreementfailing. Clause 8 provides as follows : —
The company further agrees to sell to the Crown (in the event of thecompany becoming the owner thereof) such portions of lot 2 and 3coloured red in the said sketch marked A as are inside of and to thenorth and north-west of the street lines of Main street at a price to
1 2 Bal. Reports 122.
The Times of Ceylon Co. v. The Attorney-General.
431
be calculated at the same rate per acre as that at which the companyshall have bought the said lots, provided however the company shallnot be bound to sell until the completion of the aforesaid buildings.And further the Crown hereby agrees that in the event of negotiationstaking place for the acquisition or purchase by the Crown of thewhole of the said two lots, the Crown in effecting such acquisitionor purchase will, as regards so much thereof as is outside of and tothe south and south-east of the street lines of Main street as depictedas aforesaid, do so as agents of and on behalf of the company, and thecompany shall be obliged to purchase the same from the Crown at aprice to be calculated at the samfe rate per acre as that at which theCrown shall have acquired or purchased the same.
Held, that under clause 8 the Crown did not enter into a bindingagreement to purchase the land mentioned therein, and that the clausewas meant only to give the Crown an option to buy.
Held, further, that a covenant to buy on the part of the Crown cannotbe implied into clause 8 of the agreement.
A Court has a discretion to deprive a successful party of its costswhere it disapproves of its conduct in connection with or leading up tothe action.
Donald Campbell and Company, Ltd. v. Poliak (1927, A.C. 732) followed.
T
HE plaintiff the “ Times of Ceylon ” Company, Ltd., sued theAttorney-General as representing the Crown for the recovery of
a sum of Rs. 128,331.46 as damages sustained by the plaintiff forbreach of an agreement entered into by the Crown with the plaintiff.The fact as well as the relevant terms of the agreement are set out inthe head-note. The learned District Judge held that the Crown did notby virtue of clause 8 enter into a binding agreement to purchase theland. The main question argued in appeal was whether a Covenantby the Crown to buy may be implied into clause 8 of the Agreement.
Hayley, K. C. (with him A. E. Keuneman and Gratiaen), for plaintiffs,appellants.—Where two persons mutually agree that one of them shall sellhis property to the other, the law implies a corresponding and correlativeobligation on the other party to purchase the property. Pordage v.Cole1; Wood v. Copper Miners Co.1; Church Ward v. The Queen’;Great Northern Railway Co. v. Harrison
The appellants are entitled to demand the full purchase price stipulatedfor in the contract (Pordage v. Cole (ibid) ). This is so even if the actionis treated as one for damages, as the land is now sterile and valueless(Newnham v. Gomis “).
An action for specific performance lies against the Crown as againstany private individual. Fry on Specific Performance (6th ed.), p. 63 ;■Halsbury’s Laws of England, vol. 27, p. 18.
J.E. M. Obeyesekere, Acting Deputy Solicitor-General (with him M. F. S.Pulle, C.C.) for the defendant, respondent.—There is no express agree-ment in clause 8 of the contract whereby the Crown agrees to buythe land in question. That being so, the only question is whether apromise to buy on the part of the Crown must be implied from the terms1 (1669) 1 Wm. Sound 319 ; 85 E. R. 449.3 l >865) L. R. I. 0. B. 173.
3 (1849) 17 C. B. 906.
* (1853) 12 C. B. 576.
5 35 N. L. R. 119.
432 MACDONELL, C.J.—The Times of Ceylon Co. v. The Attorney-General.
of the contract. A Court will read an implied covenant into a contractonly if it is necessary to do so as to give business efficacy to the transaction(In re Moorcock *). A Court will imply such a term only when on con-sidering the terms of the contract in a reasonable and business like manneran implication necessarily arises that the parties must have intenctedthat the suggested stipulaton should exist (Hamlyn & Co. v. Wood & Co. ’).Counsel also referred to the case of L. French & Co., Ltd. v. Leeston.Shipping Co., Ltd*. It cannot be said in this case that an agreement onthe part of the Crown to buy must be read into clause 8 in order to givebusiness efficacy to the whole transaction. Clause 8 reserves to the Crownan option which it may exercise within a reasonable time, the consider-ation for the option being the advantageous terms under which theCompany became the purchasers of lot 1 of the same land. If this lothad been sold by public auction the Company may conceivably havebeen obliged to pay more than the stipulated price. This is a goodconsideration.
Counsel then proceeded to distinguish the cases of Pordage v. Cole(supra) and Church Ward v. The Queen (supra) cited by Counsel for theappellant. Counsel also referred to Helhy v. Mathew * and Massdorp’sInstitutes of Cape Law, vol. III., p. 74.
Hayley, K.C., in reply.
Cur. adv. vult.
March 25, 1936. Macdonell C.J.—
In this case the Times of Ceylon, a duly registered company withlimited liability, sued the Crown as represented by the Attorney-Generalof Ceylon for a sum of Rs. 128,331.46 as damages sustained by theplaintiff through the breach by the Crown of its notarial agreement ofOctober 31, 1927, with the plaintiff company.
The whole case turns on the correct interpretation of clause 8 of thisagreement whereby the plaintiff company bound itself (in the eventof its becoming owner) to sell to the Crown a certain piece of land depictedin the plan annexed to this judgment, but in which there are no explicitwords by the Crown binding itself to buy this same piece of land. Aquestion of law arises and it is really the sole question in this case,—must a covenant by the Crown to buy be implied into clause 8 of thisagreement ?
The facts in this case necessitate a plan, and, accordingly, a plan isannexed to this judgment with sufficient detail to make the judgment,intelligible. The plaintiff compnay owned a building for the purposesof its newspaper, facing west to Bristol street in the Fort, Colombo, astreet of secondary importance. To the north of the plaintiffs’ building,blocking it from access to the far more important Main street—whichis a principal artery of traffic—there was a building facing on to Mainstreet which belonged to the Colombo Electrical Tramways & LightingCo., Ltd., but which for shortness sake will be called the “ red ” block orbuilding, and to the east of the plaintiff company’s premises there was a
1 14 P. D. 64.3 (1922) 1 A. C. 451.
* (1891) 2 Q. B. 488.* (1895) A. C. 471.
MACDONELL C.J.—The Times of Ceylon Co. v. The Attorney-General. 433
larger block of land, the property of the Crown, likewise facing on toMain street. This block of land is in the original plan coloured blue, itsnorthern strip facing on to Main street coloured dark blue, and the restof this block, that further to the south and making the greater part of thewhole, coloured light blue. One of the main objects of the agreementbetween the plaintiff company and the Crown was to enable the plaintiffcompany to buy this piece of Crown land to the east of its original premises,,which piece is coloured light blue. Along with this conveyance to theplaintiff company of the Crown land to the east, coloured light blue,,there was to go a certain exchange by which the plaintiff company was toobtain from the Crown a longish narrow strip of land, coloured yellow,,which lay between the Company’s original premises and the light blueCrown land it proposed to acquire, and which therefore it was veryconvenient for the plaintiff company to acquire so as to give access fromits original premises to the light blue Crown land immediately to thelast of those premises. In exchange the company was to give to theCrown a piece of land coloured green parallel to its original premises andfacing on to Bristol street. It is clear also that the plaintiff company wasanxious to obtain two small triangular strips of the red property tathe north of its original premises which would round them off and whichwe will call X and Y. There was also a further small rectangular stripof the Crown land, light blue, which the Crown was willing that theplaintiff company should acquire, which we will call Z.
With these facts before us and the plan to make them clear, it willnow be possible to examine in detail the agreement of October 13, 1927,between the Crown, the defendant, and the company the plaintiffs. Itwas in the following terms : —
“ This agreement made between His Excellency Sir Herbert JamesStanley, Knight Commander of the Most Distinguished Order ofSt. Michael and St. George, Governor and Commander-In-Chief in andover the Island of Ceylon with the Dependencies thereof, acting -onbehalf of His Majesty King George the Fifth, his heirs, &c. (hereinafterreferred to as the Crown which term shall include the said Sir HerbertJames Stanley and his successors in office), of the one part and theTimes of Ceylon Company, Limited, a company registered under theCeylon Joint Stock Companies Ordinance and having its registeredoffice at Colombo (hereinafter called ‘ the Company ’), of the otherpart.
“ Whereas with a view to widening the streets known as Main streetand Bristol street in Colombo in the Island of Ceylon certain arrange-ments have been come to between the Crown and the company inregard to the sale to the company of a block of land adjoining its presentpremises in Bristol street aforesaid and the buildings to be erectedthereon and the transfer of a certain portion of land belonging to thecompany to the Crown for the purpose of the said street wideningin exchange for the transfer by the Crown to the company of aportion of land belonging to the Crown and in regard to other mattersconnected therewith. ”
434 MACDONEL.L. C.J.—The Times of Ceylon Co. v. The Attomey-Gefneral.
“ Now this indenture witnesseth and it is hereby agreed betweenthe Crown and the company as follows : —
“ 1. The Crown shall sell to the company and the company shallpurchase from the Crown at a price to be calculated at the rate of onemillion rupees an acre lot 1 in P. P. 19,144, in extent 1 rood and 5.42perches (subject to any necessary minor alterations for rounding offstreet corners) being the portion coloured light blue in the sketch heretoattached markd ‘ A ’ excepting therefrom the north-west lot marked2a in the said P. P. 19,144.
“ 2. The full purchase price shall be paid in advance on or beforethe execution of these presents but the Crown shall not be under anyobligation to issue a Crown grant in favour of the company untilthe terms of this agreement on the part of the company hereinafterspecified have been fulfilled and until the said grant has issued the saidland shall remain vested in the Crown, provided that if for any reasonthis agreement cannot be fulfilled and thereby becomes determinedand the said lot 1 in P. P. 19,144 has not been granted to the Companythe said purchase price shall be repayable to the company subjecthowever to the right of the Crown to deduct therefrom the amountof any damages for any breach thereof which the company may belegally liable to pay the Crown.
“ 3. Plans for buildings to be erected by the company on the saidland at a cost of not less than Rs. 600,000 shall be submitted by thecompany for the approval of the Crown within six months from thedate hereof.
‘‘4. The said buildings shall not extend beyond the proposed streetlines of Main street and Bristol street as shown in the said sketchmarked ‘ A ’.
“ 5. In consideration of the company paying the purchase pricein advance the Crown undertakes to put the company in vacantpossession of the land at the earliest convenient opportunity and forthat purpose the Crown shall cause the buildings on the sai' lendto be demolished within three months from the-date of this agreement.
“ 6. The said buildings or such portion thereof as shall cost notless than Rs. 600,000 shall be completed and rendered fit for applicationto be made for the certificates of conformity in respect thereof undersection 182 of Ordinance No. 6 of 1910 within three years of the dateof this agreement. Provided that allowance shall be made for anydelay caused by the Crown or its servants, strikes, civil commotions,war, acts of God, or other occurrences beyond the control of the companyor abnormal and unforseen difficulties in connection with the foundationor the obtaining of materials for the said buildings.
“ 7. Within six months of the date of execution of these presentsa deed of exchange shall be executed by the Crown and the companyby which the Crown shall convey to the company lots 2 and 2a inP 2 19,144 in extent 5.86 perches subject to any necessary minoralterations for rounding off street comers, the said lot No. 2 being theportion marked yellow in the said sketch marked A, and the said lot
JlACDONELL C.J.—The Times of Ceylon Co. v. The Attorney-General. 435
5(a being the block on the north-west comer of lot No. 1 coloured lightblue in the said sketch marked A, and the company shall convey to■the Crown lot No. 1 in P. P. 19,275, in extent 6.55 perches being theportion marked green in the said sketch marked A, provided howeverthat the said transfer shall be expressed so as to entitle the companyto remain in possession of the said portion marked green free of allrent until one year after the said certificate of conformity undersection 182 of Ordinance No. 6 of 1910 has issued.
“ 8. In pursuance of the premises the company hereby furtheragrees to sell to the Crown (in the event of the company becoming theowner thereof) such portions of lots 2 and 3 coloured red in the saidsketch marked A as are inside of and to the north or north-west of thestreet lines of Main street as depicted in the said sketch marked Aat a price to be calculated at the same rate per acre as that at whichthe company shall have bought the said lots, provided however thatthe company shall not be bound to sell until the completion of theaforesaid buildings under clause 6. And further the Crown herebyagrees that in the event of negotiations taking place for the acquisitionor purchase by the Crown of the whole of the said lots 2 and 3coloured red as aforesaid (or such portion thereof as includes theportions thereof which are shown in the sketch marked A as beingoutside of and to the south or south-east of the street lines of Mainstreet) the Crown in effecting such acquisition or purchase will asregards so much thereof as is outside of and to the south or south-eastof the street lines of Main street as depicted as aforesaid do so asagents for and on behalf of the company and the company shall beobliged to purchase the same from the Crown at a price to be calculatedat the same rate per acre as that at which the Crown shall have acquiredor purchased the same.
“ 9. The Crown shall keep always a reservation 15 feet wide freefrom all buildings and erections running from the said Bristol streetto Duke street and alongside of and immediately adjoining the southernboundaries of the Times building and lots coloured yellow and blueand depicted in the said sketch marked A ”.
It is necessary to take this agreement in detail. (It seems to have beenexecuted on October 31, 1927, but is referred to in some of the corres-pondence in this case as the agreement “ of 3rd December, 1927 ”, butit is common cause that it is the same agreement and that it was dulyexecuted and apparently on October 31, 1927.) The recital states thatwith a view to widening Main street and Bristol street certain“ arrangements ” had been come to between the Crown and the companyin regard to a sale and to a certain transfer and exchange. Commentingon these recitals one would note that they do not talk of widening Bristolstreet or Main street for the whole extent of those streets but only,having regard to what follows, for the portion" of Bristol street where thecompany’s original building fronted it and for that portion of Mainstreet where the Crown had the northern, dark blue, portion of its blockthe rest of which, the light blue portion, it was about, to sell to thecompany. The arrangements, we are told in. the recitals, are with regard
32/38
436 MACDONELL C.J.—The Times of Ceylon Co. v. The Attorney-General.
to a gale to the company of a block of land adjacent to its present premisesin Bristol streetit is admitted that this is the light blue block in theplan. The arrangements are also with regard to buildings to be erectedthereon, that is to buildings which the company is to erect on the lightblue block. The arrangements between the Crown and the companyare also with regard to the transfer of a certain portion of the company’sland to the Crown for the purpose of widening the said street—admittedlythis refers to the green strip fronting on to Bristol street—in exchangefor the transfer by the Crown to the company of a portion of Crown landwhich admittedly is the yellow strip on the plan. The agreement thengoes on to say that it is hereby agreed between the Crown and thecompany that (clause 1) the Crown shall sell to the company, and thecompany shall purchase from the Crown, at a definitely calculable pricethe light blue Crown land but excepting from it the rectangular strip Zwhich, as will be seen, is part of the exchange between the Crown and thecompany of yellow for green ; the words of this clause 1 are perfectlydefinite, the Crown is to sell to the company and the company is to buyfrom the Crown.
Clause 2 says that the purchase price for the light blue block of Crownland is to be paid in advance and that there is to be no obligation on theCrown to issue a Crown grant until the company has fulfilled the termsof this agreement—this is a clear reference to the subsequent clauses3, 4, and 6 in the agreement—till which fulfilment the title to the lightblue block is to remain in the Crown, and the clause also provides for apossible failure of the agreement in which case the purchase price is tobe repaid to the company less any damages which it may be liable topay to the Crown. This clause again is perfectly clear, and it can becarried out by the company purchasing and paying for the light blueblock and by its conforming to the conditions contained in clauses 3, 4,and 6.
Clause 3 says that the plans for the buildings (to cost not less than€ lacs) that the company is to erect on the said land, that is, on the lightblue block, are to be submitted to the Crown for its approval withinsix months from October 31, 1&27. This clause again is perfectly clearand refers to buildings on the light blue block and not to anything else.Clause 4 says that these buildings, which means the buildings on thelight blue block, are not to extend beyond certain proposed street linesof Main street and Bristol street as shown in the plan, and the plan isperfectly clear that the street line of Bristol street will include the greenstrip which the company is to give to the Crown, that is to say, the greenstrip is to be part of that street, and likewise that Main street is to includethe portion of Crown land coloured dark blue abutting on Main streetand immediately to the north of the light blue block which the companyis to purchase from the Crown ; the dark blue bit is to be part of thatstreet. Here, for the first time, we have to note an ambiguity in theagreement. The said buildings, i.e., those which the company is to erect,are clearly the buildings which it is to erect on the light blue block it waspurchasing from the Crown. There is nothing hitherto in the agreementas to what is to happen to the company’s existing buildings facing onto Bristol street. By the agreement the company is under no obligation
MACDONELL C.J.—The Times of Ceylon Co. v. The Attorney-General. 437
to rebuild them or alter them in any way but this clause 4 may be readto mean that the company’s existing buildings facing on to Bristol.street must not extend over the green strip which is to go into thatstreet. Clause 5 then says that in consideration of the company payingthe purchase price in advance, the Crown will give vacant possessionas early as possible and will demolish the buildings on the said landwithin three months from October 31, 1927. The “buildings on thesaid land ” clearly mean the buildings on the light blue block which thecompany is purchasing from the Crown. The clause can hardly beinterpreted to refer to any other buildings, and in particular cannotrefer to any buildings that there may be on the dark blue piece of Crownland fronting into Main street. It may have been the intention of theCrown and the draftsman of this agreement that the buildings on thedark blue piece of Crown land were also to be demolished, but the agree-ment does not say so. The undertaking by the Crown to demolish buildingson the said land must mean buildings on the light blue block and not anyother buildings. Then comes clause 6 by which the company undertakesthat such buildings, i.e., the buildings on the light blue block or suchportion of them as shall cost not less than 6 lacs, shall be so far completedthat the company will be able to apply for certificates of conformityunder section 182 of Ordinance No. 6 of 1910 within three years ofOctober 31, 1927, subject to the usual exceptions as to strikes, war,act of God, and the like. Clause 7 deals with the exchange betweenthe two parties, the Crown and the company, and says that within sixmonths of October 31, 1927, the deed is to be executed between theparties by which the Crown will convey to the company the yellowstrip and the rectangular strip of light blue, which we call 7*, and thecompany will convey to the Crown the strip facing on to Bristol street,coloured green, with a proviso that the company may remain in pos-session of the green strip free of rent for one year after it has obtaineda certificate of conformity. This again is a clause which seemsperfectly clear.
We now come to clause 8 which is the crux of the whole agreementand on the interpretation of which this case depends. It will be neces-sary to take it almost word by word. It begins by saying “ In pursuanceof the premises”. Now premises (10 Halsbury, p. 300, paragraph 371)should “ name the grantor and grantee and define the thing whichis granted”, and what follows in this clause 8 has not been mentionedin the “ premises ”, no reference has hitherto been made to it. Tocontinue, “ In pursuance of the premises the company hereby furtheragrees to sell to the Crown (in the event of the company becoming theowner thereof) such portions of the lots …. coloured red in thesketch …. as are inside of and to the north or north-west ofthe street lines of Main street as depicted in the sketch . . . . ata price to be calculated at the same rate per acre as that at which thecompany shall have bought the said lots, provided however that thecompany shall not be bound to sell until the completion of the aforesaidbuildings under clause 6 ”. Taking this in detail; “ the companyagrees to sell to the Crown ”, no time limit is mentioned, save that at the
438 MACDONELL, C.J.—The Times of Ceylon Co. v. The Attorney-General.
and of the sentence it is stated that the company need not sell until thecompletion of the buildings that it is to put up on the light blue block.But save for this, no time limit is given within which the company mustsell and the Crown is to buy, if the Crown is bound to buy. It goes on,
“ in the event of the company becoming owner ” of these portions of thered block; it will be noted that the company is under no obligation tobecome owner. The company is lo sell the red block at the price at whichit has bought it, that is to say, it is not to make a profit on the sale, butit is curious that there is no provision to safeguard the Crown from thepossibility of the company doing the owners of the red block an obligementby itself paying a high price so that the owners of the red block couldget a correspondingly high price from the Crown. It is necessary tomention these facts, namely, contingencies which the draftsman of thisclause has not foreseen—absence of a time limit, absence of sufficientsafeguard as to price—because the Court is asked to read into this firstsentence of clause 8 a covenant by implication on the part of the Crownto buy the red block from the company, in the event of the companybecoming owner of it, such covenant being nowhere explicitly mentionedin the clause. Clause 8 continues: “ And further the Crown herebyagrees that in the event of negotiations taking place for the acquisitionor purchase by the Crown of the whole of the said lots coloured red ”—these words contemplate the possibility of the Crown acquiring the lotscoloured red under Ordinance No. 3 of 1876 or of it buying the wholeeither from the original owners or semble, from the plaintiff companyitself after purchase by that company—“ or such portion thereof asincludes the portions thereof which are shown in the sketch as beingoutside of and to the south or south-east of the street lines of Mainstreet ”, i.e., the two triangular portions X and Y which would round offthe company’s original site—“ the Crown in effecting such acquisitionor purchase will as regards so much thereof as is outside of and to thesouth or south-east of the street lines of Main street as depicted as afore-said do so as agents for and on behalf of the company and the companyshall be obliged to purchase the same from the Crown at a price to becalculated at the same rate per acre as that at which the Crown shall haveacquired or purchased the same ”. This, the second sentence of clause8 states in effect that if the Crown purchases the red block, wholly or inpart, it will, so far as concerns the triangular portions X and Y, do soas agents for the company, and in return the company shall be obligedto purchase (not the whole red block but) the triangular pieces X and Yat the same price per acre as the Crown acquired or purchased them.And note that in this second sentence of clause 8 there is an explicitagreement that if the Crown buys the whole of the red or the triangularbits of it, X and Y, the company shall be obliged to purchase X and Yfrom the Crown at an ascertainable price.
The plaintiff company contends that since it in the first sentence ofclause 8 agrees to sell to the Crown the red portion (in the event of itsbecoming owner of the same), there is an implied corresponding obligationupon the Crown to buy from the company the red portion as soon as thelatter has become owner of it. Confessedly, this corresponding covenant
MACDONELL. C.J.—The Times of Ceylon Co. v. The AttomeyTGeneral. 439
on the part of the Crown is not expressed in clause 8. If it is to be heldthat the Crown has entered into such a covenant, then that covenantmust be implied.
These being the facts, I must apply the law on the matter to enableme to try and determine whether we must read into clause 8 such animplied covenant by the Crown, and the law on the subject is authori-tatively stated in Hamlyn & Co. v. Wood & Co. per Esher M.R., wherehe says, “I have for a long time understood that rule to be that thecourt has no right to imply in a written contract any such stipulation,unless, on considering the terms of the contract in a reasonable andbusiness manner, an implication necessarily arises that the partiesmust have intended that the suggested stipulation should exist. It isnot enough to say that it would be a reasonable thing to make such animplication. It must be a necessary implication in the sense that Ihave mentioned ”, and he then proceeds to quote with approval thefollowing words of Bowen LJ., in The Moorcock *. An impliedwarranty, or, as it is called, a covenant in law, as distinguishedfrom an express contract or express warranty, really is in all cases foundedon the presumed intention of the parties and upon reason. The impli-cation which the law draws from what must obviously have been theintention of the parties, the law draws with the object of giving efficacyto the transaction and preventing such a failure of consideration as cannothave been within the contemplation of either side ; and I believe, if onewere to take all the cases, and they are many; of implied warranties orcovenants in law, it will be found that in all of them the law is raisingan implication from the presumed intention of the parties, with the objectof giving to the transaction such efficacy as both parties must haveintended that at all events it should have ”. Can it be said here that theimplication contended for by the plaintiff company is “ necessary ” orone that “ both parties must have intended ” ?
If we examine the recitals and the first seven clauses of this agreementwe find, as I have tried to show in the foregoing analysis of those recitalsand clauses, that they can all be completely carried into effect withoutany need at all of reading into the contract the implication which theplaintiff company asks us to. The Crown binds itself to sell, the companybinds itself to buy, the portion of land marked liht blue. The two partiesbind themselves mutually to give in exchange certain two strips of land.There are covenants by the company as to the value of the buildingsthat it will erect on the light blue portion, covenants as to the earliestdate at which the company can ask for a Crown grant, and a sufficientprovision for the event of the agreement failing. We may add thatthese clauses 1 to 7 do if implemented carry out the recital as to thewidening of Bristol street and Main street, though only for the wideningof the latter street where the dark blue bit abuts on it. The recitals andclauses 1 to 7 constitute, then, an agreement complete in itself, needingno implication to give full effect to its terms. It is only clause 8 whichis in need of any implication such as is contended for by the plaintiff
company.
1 (1891) 2 Q. B. 48S.
* 14 P. D. 68.
440 MACDOI4ELL C-I.—The Times of Ceylon Co. v. The Attorney-General.
The company says, we bind ourselves by clause 8 to sell to the Crown,,therefore it follows of necessity that the Crown binds itself by impli-cation to buy from us, though we are not to be obliged to sell for a certainperiod which can be defined as a period not to exceed three years from theexecution of the agreement. Now it must be noted that in all the otherclauses of the agreement and also in the second sentence of clause 8,wherever it is said that one side shall sell it is also said that the other sideshall buy. This obligation—I am to sell, you are to buy—is explicitlystated in all the other portions of the agreement where buying and sellingis mentioned. There is therefore some ground for concluding that thedraftsman of the first sentence of clause 8 when he placed the companyunder the obligation to sell but omitted any mention of a correspondingobligation on the part of the Crown to buy, did so advisedly. Still thedifficulty remains. Is the implication asked for a necessary one, onethat both parties “ must ” have intended, the company having bounditself to sell, must it not necessarily follow that the Crown impliedlybinds itself to buy ? Now, the law as laid down by Esher M.R., in theHamyln case quoted above, is that it is not enough that the implicationasked for is a reasonable one, it must also be necessary. If there is then adoubt as to that necessity the contention for the insertion of an impliedcovenant fails. Let us examine once again the language of the disputedportion of clause 8, “ The company agrees to sell to the Crown, in the eventof the company becoming owner thereof, the red block at an ascertainableprice”. It seems to me that there is another possible and reasonableway of construing this agreement, other than that contended for by theplaintiff company, since the obligation of the company to sell is condi-tional on its having become the owner of the red block. It would be,I think, a reasonable interpretation of that first sentence of clause 8 tasay that it means that the company when about to purchase the red block—and remember there is no obligation on the company at all to becomethe owner of the red block—should warn the Crown of its intention toconclude a binding contract by which it would buy, and the formerowners would sell, the red block, and in that notice to ask the Crown ifand when it intends to buy. I repeat, the company was under no-obligation whatever to purchase the red block, and until it did so, couldbe under no obligation to sell. In the absence from the words ofclause 8, first sentence, of any words by the Crown agreeing to purchasethe red block from the company, it seems to me that it is at least reason-able to hold that this first sentence of clause 8 meant to give an optionto the Crown to purchase but not that the Crown was thereby enteringinto a binding covenant to purchase. I will put the case for the plaintiffcompany as high as this; the first sentence of clause 8 can be interpretedas implying a covenant by the Crown to purchase when the plaintiffcompany, having itself purchased from the original owners, offers thered block to the Crown, but the first sentence of that clause seems to mealso capable of meaning that the company shall before purchasing thered block from the original owners, inform the Crown of its intentionto purchase and ask the Crown whether it proposes to exercise the optionto purchase, which this first sentence o'f clause 8 seems to give. Putting
MACDONELL C.J.—The Times of Ceylon Co. v. The Attorney-General. 441
it shortly, the first sentence of clause 8 seems to me to be this: eitherit gives an option to the Crown to purchase or it imposes an impliedobligation upon the Crown to purchase, but if there is a doubt onthe matter then the implication contended for by the plaintiffcompany is not “ a necessary implication ”, and the plaintiff company’scase fails.
While writing this judgment, my attention was drawn by my brotherPoyser to the words on the plan annexed to and part of the agreementwhich say—“Premises which the Times (i.e., plaintiff company) will tryto purchase from B coloured red. They will- sell back to Government asmuch as is required for road widening at the price they pay for it”. ■“ Required ” by whom ? Clearly, by Government. And supposingGovernment only requires for road widening a little of the red bit ornone at all ? The words on the plan quoted above show uncertaintyas to this and if so render it more difficult to say that the implicationasked for by the plaintiff company is a “ necessary ” one.
In accordance with the warning given by Esher M.R. in the HamlynCase cited above, where he says, “ A large number of cases have beencited, in some of which the Court implied a stipulation, and in othersrefused to do so. In my opinion, it is useless to cite such cases, so far asthey merely show that in the particular case an implication was or wasnot made ”, it is really sufficient to insist upon the rule of law which mustgovern this matter. The plaintiff company must show that the implica-tion it asks should be read into the agreement is a necessary one, that itmust be “ an implication which the law draws from what must obviouslyhave been the intention of the parties”. It is not obvious to me thatthe covenant to be implied must have been the intention of the partiesto this agreement, since it can be given a perfectly reasonable interpreta-tion (as it seems) without the implication contended for by the plaintiffcompany. The implication must “ prevent such a failure of considera-tion as cannot have been within the contemplation of either side ”.Even on the interpretation of the clause contended for by the company,it cannot be said that there is a complete failure of consideration sinceby purchasing the red block the company does get—and the secondsentence of clause 8 guarantees that it shall get—the two small pieces Xand Y of the red ’block necessary to round off the northern front of itsoriginal premises. But it is not this upon which I would so much relyas on the interpretation that seems forced on me as to this first sentenceof clause 8, since it seems reasonable to construe that sentence eitheras an option to the Crown to purchase or as an obligation on the Crownto purchase, but if it is capable of two interpretations than there canbe no question of the necessity of the implication contended for by theplaintiff company.
As was pointed out by Esher M.R. in the Hamlyn Case (supra),decided cases are of little help since the facts in each case must always bedifferent, and the problem is to apply the rule correctly to the facts of thecase before you, but out of courtesy to the very able argument that wasput to us for the appellants I would wish to refer to two of the cases upon
442 MACDONELL C.J.—The Times of Ceylon Co. v. The Attorney-General.
which that argument relies. The first of these is Pordage v. Cole Therethe words of the agreement were that C should give to P £ 775 for all hislands (which were fully described) and there was “ mutually given asearnest in performance of this agreement 5 shillings,” the balance of themoney to be paid before midsummer 1668. There it was certainlynecessary to make the implication which learned Counsel for the plaintiffcontended for in the present appeal. C had promised a sum of moneyand had given a small portion of it in earnest to P for all the lands of P.What other meaning could you give to the contract save that P should beentitled to claim the money and that C should be entitled to claim theconveyance ? There was nothing uncertain about the contract. P hadcertain lands, C had given certain money for them and promised so muchmore ; the contract would be meaningless unless you implied into it anagreement by P to convey the lands on receiving the money from C.The other case to which I will refer is Wood v. Copper Miners Co.2 Therethe defendants agreed to grant a lease of certain premises to the plaintifffor twelve years at a peppercorn rent for the purpose of plaintiffscarrying on there the manufacture of patent fuel, and it was also a termof the agreement that all the coals consumed and used by the plaintifffor his manufacture during the term of twelve years should be boughtfrom the defendants, “ provided the defendants supplied him with thequantity that he might require from time to time or to such extentas the defendants could supply ”, and that the plaintiff should useand consume no other coal at his factory during the term of twelveyears than that bought from the defendant. Per Wilde C.J.a—“ Whenthe plaintiff contracted to purchase from the defendants all the coalswhich were to be used by him, it was necessary that he should guardhimself against the possibility of their being unable or unwilling to furnishhim with the required supply. It was to meet that contingency thatthese words (quoted above) were introduced. The object that thedefendants had in view was to restrain the plaintiff from using any othercoal than that which came from their colliery. Considering this as acontract of purchase on the one hand and of sale on the other, and lookingto its nature and object, namely, the promotion of the manufactureto be carried on by the plaintiff near the colliery of the defendants. … it appears to me to be plain and free from doubt . …
that the defendants did contract to supply the plaintiff with coal to theextent of 500 tons weekly, provided they were of ability so to do ”. *There again the terms of the agreement were free from doubt. Theplaintiff had a manufactory which would need coal to be carried on.The defendants had a colliery close by which could supply the coal theplaintiff needed, and when the plaintiff bound himself to consume onlythe defendants’ coal, there was the necessary implication that thedefendants should supply the coal to.be consumed by the plaintiff. Thefacts in the present case fall far short of those in the two cases summarizedabove, and if I had to lay stress on one element of uncertainty more thanon another, it would be on the fact that at the time when this agreement
1 Wm. Sound 391 ; 85 E. R. 449.
a 7 C.B. 936.
1 17 C. B. 906 ; 137 E. R. 359.
MACDONELL CJ.—The Times of Ceylon Co. v. The Attorney-General. 443
was made, on October 31, 1927, the plaintiff company was not yet theowner of the red block, was under no obligation to become the ownerof it, and might never become its owner. With this unquestionableelement of uncertainty in clause 8 of this agreement, it surely seemssafer and more in accordance with sound reasoning to construe it asan option to the Crown to purchase on a certain contingency rather thanas a binding agreement that if the plaintiff company purchasedthe red block the Crown would then purchase the same from theplaintiff company.
The position of the plaintiff company is a hard one. On September 1,1926, the Colombo Municipal Council recommended that in the futureMain street, from York street to Lotus road, that is the portion of Mainstreet upon which the red block and the dark blue block abut, should bewidened to 100 feet, and Bristol street to 60 feet, but the evidence doesnot show that this resolution of the Municipal Council was communicatedto the public until some considerable period after the agreement ofOctober 31, 1927, had been executed. Thereafter, on November 27, 1933,there was a recommendation of the Municipal Council that Main streetfrom Prince street to Lotus road should be declared a street 100 feetwide under section 18 (4) of Ordinance No. 19 of 1915, but this resolutionof September, 1933, was considerably later than the purchase of the redblock by the plaintiff company which seems to have taken place onFebruary 1, 1930. On that date, by deed No. 806, the plaintiff companypurchased the red block from its then owners for Rs. 150,000. The effectof the Municipal Council resolution of September, 1933, is that theplaintiff company cannot build on the land originally occupied by thered block, that it must be thrown into the street, and that the companywill receive merely nominal compensation from the Municipal Council.This is undoubtedly hard on the plaintiff company. It bought from theCrown this land, the red block, fully believing that it had a bindingagreement with the Crown to take the red block off its hands at thepricq it paid for it. Now it finds that this agreement does not bind theCrown to take the red block, and further that the department of publicactivity called the Municipal Council steps in and under statutory powerspractically confiscates the land which it has purchased. This is un-doubtedly a hardship on the plaintiff company, though on the other handit must be remembered that the plan attached to the agreement ofOctober 31, 1927, showed that the Crown (quite possibly) would at sometime in the future make the red block part of the street and so incapableof occupation and therefore of earning anything, rent or anything else,but, however much we may sympathise with the company, it is necessaryto apply the law to the agreement which it has made. Doubtless theplaintiff company, when it executed this agreement on October 31, 1927,thought that .the effect of clause 8 was that the Crown was bound topurchase the red block from it as soon as itself had bought the same.The Crown’s advisers pretty certainly thought the same, but it has to beinterpreted not by what the parties thought they had agreed to but bywhat was their intention as shown in the deed ; 10 Halsbury, p. 252,s. 317—“The intention must be gathered from the written instrument.
444 MACDONELL C.J.—The Times of Ceylon Co. v. The Attorney-General
The function of the Court is to ascertain what the parties meant by thewords they have used; to declare the meaning of what is written in theinstrument, not of what was intended to have been written; to giveeffect to the intention as expressed, the expressed meaning being, forthe purpose of interpretation, equivalent to the intention. It is not.permissible to guess at the intention' of the parties and substitute thepresumed for the expressed intention. And the ordinary rules of con-struction must be applied, although by so doing the real intention of the-parties may in some instances be defeated ”.
It is not possible to speak very highly of the conduct of the defendant,the Crown, in this case. The company purchased the red block and then,on February 21„ 1931, it, through its lawyers, wrote to the ColonialSecretary stating that it has bought the red block, that it proposed todemolish the buildings upon it in about a year’s time and that it wishedto know when Government would then take over and pay for “ inaccordance with the agreement of December 3, 1927,” (this is a mistakefor October 31) “the portions of the red block inside the street lines ofMain street ”. (This letter, by the way, shows explicit knowledge thatMain street was to be widened.) The Colonial Secretary acknowledgedthis letter on February 23, 1931, and writing again on March 18, 1931,inquired what portion of the red block the plaintiff company proposd to-retain to be utilized for its new building. The plaintiff company, throughits lawyers, replied on March 27, 1931, stating the area that it proposedto retain for its new building. On May 26, 1931, the Government Agent,Western Province, wrote to the plaintiff company’s lawyers asking them,,to forward the deed of transfer in favour of the company for referenceand return, and at the same time to favour him with their estimate ofthe price to be paid under the agreement for the area to be sold to theCrown. The plaintiff company’s lawyers replied on June 15, 1931,enclosing a copy of the deed of transfer and stating their estimate of theprice to be paid under the agreement for the area to be sold to theCrown. On June 22, 1931, the Government Agent, Western Province,acknowledged the letter and stated that the Surveyor-General wasgoing to be requested to verify the area of the land to be sold to the Crownand make a survey plan of the same. Replying on July 16, 1931, theplaintiff company said by its lawyers that it would give the Surveyor-General all the assistance in its power. On December 4, 1931, theplaintiff company’s lawyers asked when they might hear further inreply to their letter of June 22, 1931, also asking for a Crown grant inrespect of the light blue block. On April 19, 1932, the plaintiff company’slawyers again wrote to the Government Agent stating that the buildingson the red block were now in the course of demolition and asking thatan immediate reply be given them to enable their clients to mark off andprepare the plot of land purchased by Government. This letter wasacknowledged by the Government Agent on April 22, 1932. The plaintiffcompany prayed for an answer by a letter of May 18, 1932, and on May25, received a letter from the Government Agent saying that the matterwas now being dealt with by the Executive Committee for Agriculture
MACDONELL C J.—The Times of Ceylon Co. v. The Attorney-General. 445
and Lands and that no decision had yet been arrived at. This was thefirst intimation in all the correspondence between the parties thatpurchase by the Crown was something that might be uncertain. OhJune 2, 1932, the plaintiff company’s lawyers wrote to the Minister ofAgriculture and Lands saying that they had never yet been told whenGovernment would take over and pay for the portions of land belongingto their clients in accordance with the agreement referred to. On June10 the Secretary to the Minister for Agriculture and Lands wrote askingwhat agreement they referred to, and on June 13, the plaintiff company’slawyers replied that the agreement referred to was the present agreementof October 31. 1927. There does not seem to have been an answer to thisletter but on July 31, 1932, the lawyers of the plaintiff company wrote tothe Minister for Agriculture and Lands to say that if the question of theimmediate payment of the whole amount of the purchase money wascausing difficulty, their clients would be willing to facilitate the complica-tion and to consider any proposals Government might make for deferredpayment. Then at last on July 26, 1932, nearly eighteen months afterthe Crown had been advised by the plaintiff company that it hadpurchased the red block, the Minister for Agriculture and Lands repliedthat “ Government does not propose at present to exercise its rightsunder clause 8 of the agreement to purchase from your clients theportions coloured red …. which fall within the street lines ofMain street ”. The plaintiff company on August 1, 1932, wrote to theMinister for Agriculture and Lands protesting that the letter of July 26was not an accurate statement of the position which was that Govern-ment had entered into a binding agreement to take over and pay for theportion of land referred to. This letter does not seem to have receivedthe courtesy of acknowledgment, and on May 15, 1933, the plaintiffcompany’s lawyers wrote that they had heard nothing further as to thefulfilment by Government of its agreement to take over and pay for thispiece of land. There seems to have been no acknowledgment of thisletter either, and the plaintiff company’s lawyers wrote again on July 11,1933, referring to its letters of May 15, 1933, and of August 1, 1932, andasking for a reply. At last on August 12, 1933, the Minister for Agricul-ture and Lands informed the plaintiff company’s lawyers that theGovernment did not intend to purchase the land lying within the streetlines of Main street and belonging to the plaintiff company.
Now it certainly cannot be contended that this correspondence estopsthe Crown from taking up the position that it is not bound by clause 8 ofthe agreement. None of the earlier letters written by the ColonialSecretary or the Government Agent in any way caused the plaintiffcompany to change its position for the worse. The correspondence cannotthen be relied upon as creating an estoppel—and it was not contendedto us that it did—but the earlier letters, those written by the ColonialSecretary and Government Agent, contain no protest against theassumption of the plaintiff company, namely,-that the Crown was boundto buy the red block from it. On the contrary, they are in the natureof a tacit acquiescence in that claim of the company. Government waitsfor eighteen months before it even hints that there was anything uncertain
446
POYSER J.—The Times of Ceylon Co. v. The Attorney-General.
-about the agreement, and then for over a year takes no notice of otherquite reasonable and courteous letters on the matter. Then it abruptlydisclaims obligation. This is not mannerly or straightforward conduct,and it is conduct which we hope and believe that no private businessfirm of repute would indulge in for a moment. It is conduct in connectionwith or leading up to the action that gives this Court (Donald Campbell &Co. v. Poliak’) a discretion as to costs, and I think in the exercise of thatdiscretion there should be no costs of the proceedings below. The pointas to whether the conduct of the Crown in connection with this casefurnished the trial Judge with matter for exercise of his discretion as tocosts, does not seem to have been considered in the Court below. If,then, we alter the order of the Court below which was dismissal of- theplaintiff company’s action with costs, this will not be any interferencewith the discretion of the learned Judge as this point was not raised tohim and he was not asked to exercise his discretion thereon^ Nowhowever that the matter has been brought definitely to the notice of aCourt of Justice, as it was to us, by the reading of the correspond-ence between the plaintiff company and the Government, we proposeto exercise the discretion which we think the learned trial Judge wouldhave exercised if the matter had been brought forward and arguedto him.
Since the plaintiff company’s action fails, it is unnecessary to considerthe other points that were raised to us on appeal, namely whether theplaintiff company could have a decree for specific performance againstthe Crown, or failing that, upon what principle its damages should becalculated.
For the foregoing reasons I am of opinion that the decree below shouldbe altered to read “ that the plaintiff’s action be dismissed withoutcosts ” and that this appeal should be dismissed with costs.
Poyser J.—
I have had the advantage of reading the judgment of the Chief Justiceand I agree that this appeal should be dismissed and there is very littlethat I desire to add.
I think, in considering the interpretation of clause 8 of the agreement,(P 1), the following passage in a judgment of Lord Buckmaster should beborne in mind : —“ It is always a dangerous matter to introduce into acontract by implication provisions which are not contained in expresswords, and it is never done by the Courts excepting under the pressure ofconditions which compel the introduction of such terms for the purposeof giving what Lord Bowen once described as “ business efficacy ” tothe bargain between the parties ”.(L. French & Co., Ltd. v. Leeston
Shipping Co., Ltd. ’)
On a consideration of PI as a whole I agree with the contention onbehalf of the Crown that the omission in clause 8 to set out any obligation
> {1927) A. C. 732.
(1922) 1 A. C. 454.
POYSER J.—The Times of Ceylon Co. v. The Attorney-General. 447
on the part of the Crown to purchase was a deliberate omission. Thesecond part of this clause provides that if the Crown acquires or purchasesthe said lots 2 and 3, the company shall be obliged to purchase so muchthereof as is outside and to the south of south-east of the street lines ofMain street, but in the first part of this clause there is no reference to anyobligation on the part of the Crown to purchase, nor can, in my opinion,such obligation be implied.
It therefore seems clear that clause 8, so far as it relates to a possiblefuture purchase of these lots by the company, only constitutes a bindingoffer by the company, if they do purchase these lots, to sell to the Crownsuch portions of the said lots as are within the street lines.
It grants in effect an option to the Crown and the fact that suchoption is not clearly expressed and lays down no time within whichit is to be exercised does not, in my opinion, render it any the lessan option.
As the District Judge points out, if it had been intended that the Crownshould be obliged to purchase, the agreement would presumably have sostated and consequently it seems clear that clause 8 was drafted deliber-ately so as to impose an obligation on the company, if they did purchasethis lot to sell to the Crown if the latter so desired, but to impose noobligation on the Crown to purchase from the company. For thesereasons I think this appeal fails.
I do not however think there is any doubt that the company haveevery reason to complain of the treatment that they have received.
In the letter P 5 written on February 21, 1931, they inform theGovernment that they propose to demolish the building they had acquiredon the Main street front and desired to know if the Government willtfien take over or pay for, in accordance with P 1, such portions of lots2 and 3 as are within the street lines.
The Government made inquiries as to area and price but do not statethat they will not purchase such portions until August 12, 1933.
The consequence was that the company completed the demolition ofthe building purchased from Boustead Brothers, and the land within thestreet lines on which such building stood, is practically valueless to thecompany.*
If the Government had indicated, when the company purchased thisbuilding, that it was doubtful whether they would exercise their optionthe company possibly would only have demolished such part of Bous-tead’s building as was necessary for the completion of their ownbuilding and would have retained a building of some value at any rate,to them.
It was, however, contended on behalf of the Crown that the companyhad no cause for complaint as they had been granted preferential termsin regard to the purchase of lot 1. This contention however is notsupported by the evidence, and in the document D 2, a memorandum
448 -J POYSER J-—The Times of Ceylon Co. v. The Attorney-General.
by the Government assessor, it is stated that “ the sale' to the Tiifeerfat Its. 1,000,000 per acre may be regarded as a fortunate one, thepurchasers being willing to pay a higher price owing to the advantagesthe land had for them as. qjaeers of the adjoining property
I agree that the appeal should be dismissed and with the proposedorder as to costs.
Appeal dismissed.
PRTNTBD AT THE GOVERNMENT PRESS, CEYLON-