Michaelmas Term
[2017] UKPC 39
Privy Council Appeal
No 0032 of 2015
JUDGMENT
The Attorney General (Appellant) v River Dorée
Holdings Limited (Respondent) (Saint Lucia)
From the Court of Appeal
of the Eastern Caribbean Supreme Court (Saint Lucia)
before
Lord Mance
Lord Reed
Lord Carnwath
Lord Hodge
Sir Bernard Rix
JUDGMENT GIVEN ON
11 December 2017
Heard on 9 May 2017
|
Appellant
James Guthrie QC
(Instructed by
Charles Russell Speechlys LLP)
|
|
Respondent
Nicholas Dowding QC
Stanley Marcus SC
(Instructed by
Eversheds Sutherland (International) LLP)
|
SIR BERNARD RIX:
1.
This appeal raises a central issue of construction arising out of a
lease of agricultural land granted, in the name of Her Majesty Queen Elizabeth
the Second, by the Government of St Lucia, represented here by its Attorney
General, the appellant, to River Dorée Holdings Limited, the respondent. The
lease, which was dated 20 February 1987, was for an initial period of 50 years
commencing on 24 October 1986, and contained an option to purchase. The issue
of construction arises out of a mismatch between a recital (recital E) and the
dispositive part of the lease providing for the option to purchase (clause
9(9)). The Board will refer to the “Government”, “River Dorée”, the “Lease” and
the “land”.
2.
Recital E stated that “at the end of the first ten (10) year period of
this Lease” the Lessee (River Dorée) would be permitted by the Government to
purchase the property “provided THE LESSEE has satisfactorily carried out the
terms and conditions of this Lease including the Development Program”. Whereas
clause 9(9) provided that the option to purchase could be exercised by notice
given “[a]t any time after the end of the tenth year of the term” without
reference to any condition requiring that River Dorée had satisfactorily
carried out the terms and conditions of the Lease including the Development
Program.
3.
The Development Program was a programme imposed on River Dorée,
elaborated in detail in the Lease’s Schedule 6, designed to improve, indeed to
“transform”, the leased land into a modern highly productive farm area for the
production of food both for domestic consumption and for export, utilising and
promoting modern scientific agricultural methods.
4.
When River Dorée sought to exercise its clause 9(9) option by notice
dated 10 January 1997, the Government gave no substantive reply until 21 June
1999, at which time the Permanent Secretary at the Ministry of Agriculture
invited comments from River Dorée on an Interim Report, commissioned by the
Government, which had concluded that the Lease’s Development Program had not been
satisfactorily carried out. That was also the conclusion of the Final Report.
This led to the current dispute, wherein River Dorée insisted on its right to
purchase the land, in reliance on clause 9(9) of the Lease, and the Government,
relying on recital E, refused to acknowledge any such right, on the ground that
the Development Program had not been satisfactorily carried out.
5.
In due course this litigation was commenced by River Dorée on 2 August
2005, claiming a declaration that the exercise of its option on 10 January 1997
entitled it to a transfer and a deed of sale in respect of the land. The
Government disputed this, relying on what it alleged was River Dorée’s failure
to comply with the Development Program.
6.
In the meantime it had sought to determine the Lease by a letter dated
16 June 2003 and compulsorily to acquire the land.
7.
By a notice of application dated 24 January 2006, the Government sought
a preliminary issue on the interpretation of clause 9(9) in the following
terms:
“Whether Clause 9(9) of the Lease
Agreement between the Majesty Queen Elizabeth the Second, and River Doree
Holdings Limited speaks to an automatic transfer of title of the property
subject to the Lease on the effluxion of ten years; or whether it is
conditional on the satisfactory performance of the terms of the lease.”
8.
On 27 October 2006 Master Cottle gave judgment on that preliminary issue
in favour of the Government’s contention, overruling River Dorée’s submission
that a preliminary issue should not be debated. He considered that the issue
might lead to the end of the litigation; and that it was a short point which
required no evidence. In a brief judgment, he concluded (at para 10) that
reading recital E and clause 9(9) together made it clear that -
“… the option to purchase is
conditioned upon the Lessee having satisfactorily carried out the terms and
conditions of the lease including the development program.”
9.
Master Cottle gave two reasons in support of his decision. The first was
that recital E’s importance was emphasised by the fact that it was there that
the parties had provided for payment of the lease rent. In that he was
mistaken. The second was that clause 9(9) was subject to clause 9(11) which
provided that upon the option being exercised the Government was to grant River
Dorée a licence which was to provide for the forfeiture of the land if the
Development Program was not carried out as far as practical. On this appeal to
the Board, Mr James Guthrie QC who appeared on behalf of the Government said
that he did not rely on either of these reasons.
10.
There was no formal appeal from that ruling at that stage, but Master
Cottle’s anticipation that his decision would put an end to the litigation was
not fulfilled. The case went forward to a trial in which inter alia the issue of
interpretation was re-argued, with the consent of both parties, this time with
the Government relying on evidence of certain matters occurring prior to the
making of the Lease as an aid to its construction. The Board will refer to
those matters below. One of them was referred to by Georges J in his judgment
(at paras 49-50), but was not subsequently relied on by him for the purposes of
his conclusion on the issue of construction.
11.
In a lengthy judgment, dated 30 July 2012 (nearly three years after
trial), devoted in the main to the issue of whether River Dorée had failed to
comply satisfactorily with the Development Program, Georges J upheld Master
Cottle’s interpretation of the relationship between recital E and clause 9(9).
His reasoning exactly echoed and supported that of Master Cottle (at paras
10-12 and 306-307 of his judgment). For the rest, Georges J concluded, to
summarise the matter briefly, that River Dorée had not complied satisfactorily
with the Development Program; that although there had been “remarkable
development progress” between 1987 and 1993 “which had been achieved within
that era starting as it were in a sense virtually from scratch” (at para 117);
and although there had been “critical benefits achieved by the claimant for
agricultural diversification in St Lucia as well as the introduction of annual
crops such as vegetables, hot peppers, melons etc together with the application
of drip irrigation and other appropriate technologies” (at para 373);
nevertheless River Dorée had not satisfactorily fulfilled “the terms and
conditions of the Deed of Lease including specifically its obligations in
respect of the Development Program as per clause 9(9) of the Lease”, and the
Government, although it generally knew of these failures, had not acquiesced in
them (para 383). The reference above to “as per Clause 9(9)” (at para 383(i))
is puzzling since clause 9(9) does not refer to the Development Program, but it
suggests that, on the judge’s interpretation, following Master Cottle, clause
9(9) was read as somehow incorporating recital E.
12.
On appeal to the Court of Appeal of the Eastern Caribbean Supreme Court,
the judgment of Georges J on the issue of interpretation was reversed and set
aside. In a judgment given by Justice of Appeal [Ag] John Carrington QC,
concurred in by Dame Janice M Pereira DBE, Chief Justice, and Justice of Appeal
Davidson K Baptiste and handed down on 25 November 2013, it was held that
clause 9(9) was unambiguous and complete in its own terms, so that there was no
need to have recourse to recital E to assist in its construction (at para 46).
Indeed, its terms were in conflict with recital E (at para 44). The judgment
cited Mackenzie v The Duke of Devonshire [1896] AC 400, 408 for the
proposition that it was “settled principle that the operative words of a deed
which are expressed in clear and unambiguous language are not to be controlled,
cut down, or qualified by a recital or narrative of intention” (at para 45).
The Government was therefore in breach of its obligations under the lease by
failing to commence the process leading to the execution of the Deed of Sale
and grant of the Aliens Landholding Licence required by the Lease upon
receiving notice of the exercise of the option in January 1997. Since, however,
River Dorée had not satisfactorily quantified the extent of its financial loss,
it was entitled to only nominal damages in the amount of EC$50,000 (at para
98). It therefore concluded that River Dorée was entitled to the following
relief (at para 99):
“a. A declaration that the
appellant on the 10th day of January 1997 became legally entitled to the
transfer and a Deed of Sale of and in respect of the freehold interest of and
in such of the lands described in the First Schedule to the Deed of Lease dated
20 February 1987 …
b. A declaration that the
appellant on the 10th day of January 1997 became legally entitled to the grant
of an Alien’s Landholding Licence by the Government of Saint Lucia for the
purpose of holding the freehold interest in the said lands.
c. A declaration that on
the 10th day of January 1997 the Government of Saint Lucia became trustee on
behalf of the appellant in respect of the said lands …
d. Damages in the sum of
EC$50,000 for breach of the terms and conditions contained in the said Deed of
Lease …”
13.
The Court of Appeal also awarded River Dorée costs in the appeal and in
the court below.
14.
On this further appeal to the Board, the Government seeks to restore the
answer to the issue of construction given by Master Cottle and Georges J,
albeit in reliance on some fresh arguments.
15.
Nothing however turns so far as the Lease is concerned on the answer to
be given by the Board, since the Board is told that the land concerned has now
been compulsorily acquired by the Government. However, the decision on this
appeal may affect the level of compensation for which the Government has
acquired the land.
16.
In the light of the Court of Appeal’s conclusion, it decided that there
was no purpose in reviewing the findings of Georges J concerning the
performance of River Dorée’s obligations under the Lease with respect to the
Development Program or otherwise. On this further appeal, the parties were
content that, if the Government’s appeal succeeded, River Dorée’s appeal from
Georges J on the question of its performance of its obligations under the Lease
should be remitted to the Court of Appeal.
The background facts
17.
The following facts are agreed, even if the admissibility and relevance
of some of them are not.
18.
River Dorée is a company incorporated in St Lucia essentially for the
purpose of acquiring and operating the land and was formerly owned and
controlled by a private Danish foundation, Faelleseje.
19.
The land concerned is situated at River Dorée in the Quarter of Choiseul
and Laborie, in the south west of St Lucia. The Lease refers to it as
comprising 1,337 acres.
20.
On 20 June 1986 the acting permanent secretary at the Ministry of
Agriculture, Mr Cosmas Richardson, wrote to McNamara & Co, a firm of
attorneys representing Faelleseje, in the following terms:
“I am pleased to inform you that
Cabinet agreed to the acquisition of a property comprising 1,337 acres more or
less being a dismemberment of Park Estate (1962) Limited and Club Santa Lucia
Limited with funds to be provided by FAELLESEJE a Danish Company (the Danes).
(The cost of the lease will pay for the cost of the acquisition.)
Cabinet further agreed to lease
the said property to FAELLESEJE (the Danes) for a period of fifty (50) years
with a right of renewal for a further twenty-five (25) years subject to terms
and conditions to be agreed upon by both parties.
If after ten (10) years of the
lease FAELLESEJE (the Danes) have developed the property in accordance with the
terms of the lease Government will sell the property for the sum of Ten dollars
($10.00) (after granting an Aliens Licence for that purpose).
In accordance with the Aliens
(Landholding Regulation) Act, Cabinet also approved the issue of an Aliens
Landholding Licence to FAELLESEJE (the Danes) to enable them to lease the said
property from the Government.”
21.
A few days later, on 24 June 1986, the Prime Minister of the then
Government, Sir John Compton wrote to McNamara & Co as follows:
“Cabinet considered the
application of your clients to purchase from Mr Eric Lawaetz certain estates in
the Quarter of Choiseul and agreed that because of the unfortunate experience
with the present owners, the estates should not again be placed in the hands of
aliens.
Cabinet however agreed that
Government will purchase the estates from Mr Lawaetz and lease them to your
clients for a period of 50 years, provided your clients pay the cost of the
acquisition with an option for renewal for a further 25 years should all
obligations under the lease be satisfactorily discharged by your clients.
If however your clients carry out
an agreed development programme, your clients will after a period of ten years
be permitted to exercise the option to purchase the said estates, or such part
thereof as mutually agreed, for the sum of $10.00 and your clients will be
granted an Aliens Landholding Licence for this purpose.”
22.
In the present appeal, the Government relies on these two letters as
setting out the mutual matrix forming the background to the Lease and informing
its interpretation. The second letter was referred to by Georges J in his
judgment with the comment that it formed “the bedrock on which the negotiations
proceeded and always rested” (at paras 49-50). However, he did not refer to
either letter in his discussion, analysis and conclusion concerning the
interpretation of the Lease, which, as stated above, exactly mirrored the
reasoning of Master Cottle. On behalf of River Dorée, Mr Nicholas Dowding QC
submits that these letters are inadmissible as part of the negotiations leading
up to the Lease.
23.
The Government also relies, for the first time on this appeal, on a
further document as informing the issue of interpretation, and that is the
Licence dated 12 January 1987 granted to River Dorée to lease the land. The
Licence reads in its essential part as follows:
“UNDER the authority of the Aliens (Landholding Regulation)
Act 1973 (No 10 of 1973) as amended the GOVERNOR-GENERAL hereby grants to RIVER
DOREE HOLDINGS LIMITED a licence to hold as Lessee the immovable property
described in the First Schedule hereto upon the terms and conditions set out in
the Second Schedule.”
The Second Schedule provides as follows:
“The terms and conditions referred
to above are:-
(a) the Lessee shall
develop the property in the First Schedule in accordance with the lease made
between Her Majesty Queen Elizabeth the Second and River Doree Holdings Limited
dated 20th day of February One thousand nine hundred and eighty-seven and
(b) if after ten years of
the lease the Lessee has complied with (a) the Government of Saint Lucia will
sell to the Lessee such of the property in the First Schedule as has not been
disposed of in accordance with the terms of the lease for a sum of $10.00 and
will grant the Lessee an Aliens Licence to own the said property sold.”
24.
There are, however, difficulties about the dating of this Licence. It is
dated “this 12th day of January one thousand nine hundred and eighty-seven”,
but it refers in its Second Schedule to the Lease dated 20 February 1987 (as
cited above). Moreover, there are other dates stamped or written on the
document. One stamp of the “Attorney General’s Chambers” is dated 10 December
1986. Another (indecipherable) stamp is dated 30 December 1986. And a third
stamp of the Office of Deeds & Mortgages is dated 5 March 1987. In the
circumstances, and in the absence of any evidence concerning this Licence, it is
not possible to say on what day it was made, and in particular whether it was
made before or after the Lease, nor whether or not it was shared with River
Dorée at any time before it was recorded at the Office of Deeds &
Mortgages. The Lease itself is stamped as having been recorded in the Office of
Deeds & Mortgages on 18 March 1987. The Licence in itself is a unilateral
document of the Government.
25.
In the circumstances, Mr Dowding submitted that it could throw no useful
light on the issue of interpretation. He also made submissions concerning
inconsistencies between the wording of the Licence and the two letters, on the
one hand, and the Lease on the other, to which the Board will refer below,
after setting out the relevant terms of the Lease.
The Lease
26.
The Lease begins with a preamble of five paragraphs, lettered A to E,
following the word “WHEREAS”. Recital A states that the Government is the owner
of the land and agrees to lease the land for 50 years with an option to renew
for a further 25 years “and subject to the terms and conditions hereinafter
mentioned”. Recital B states that the Lessee “will develop the land in
accordance with a Development Program … set out in Schedule 6”. Recital C
states that the Lessee shall pay to the Government a Lease Rent of US$1,400,000
as provided in Schedule 2. Recital D is concerned with certain sales which may
be made from the land.
27.
Recital E states as follows:
“E. THE LESSEE at the end of
the first ten (10) year period of this Lease will be permitted by THE
GOVERNMENT to purchase the then remainder of the land and buildings in Schedule
5 provided THE LESSEE has satisfactorily carried out the terms and conditions
of this Lease including the Development Program for the sum of East Caribbean
Currency TEN DOLLARS (EC$10.00) and THE GOVERNMENT will grant to THE LESSEE a
licence under the Aliens (Landholding Regulation) Laws of Saint Lucia to hold
as owner such lands and buildings.”
28.
The substantive terms of the Lease are then set out following the words
“WITNESSETH AS FOLLOWS”.
29.
Clause 1 is a definitions clause. It defines “Development Program” in
terms of the programme “set out in Schedule 6 as modified by this Lease and as
updated from time to time by THE GOVERNMENT and THE LESSEE”; and defines “River
Doree Holdings Limited Development” as “the project being undertaken by THE
LESSEE and THE GOVERNMENT for the agricultural development of the lands in
Schedule 5 …”
30.
Clause 5 is concerned with the period of the Lease and the option to
extend it for a further 25 years. It provides:
“Unless terminated by THE
GOVERNMENT pursuant to Sub-Clauses 9(1) or 9(4) this Lease shall be for a term
of fifty (50) years commencing on the 24 October, 1986 and THE LESSEE shall
have the option of renewing this Lease for a further period of twenty-five (25)
years on making written application in the forty-ninth year to THE GOVERNMENT -
all relevant terms and conditions of this Lease having been satisfactorily performed.”
31.
Clause 6 is concerned with the payment of the rent. It has been partly
omitted in the copy of the Lease in the record, but concludes with the words
“the basic rent as set out in Schedule 2 hereof”. Schedule 2 (which refers in
its heading back to clause 6) provides that “The Basic rent is US$1,400,000”
payable in eight instalments of which the first had been $125,000 (already paid
on 24 October 1986) and seven more instalments were of $182,142.86 payable in
each year starting with 15 October 1987 and concluding on 15 October 1993.
Those eight instalments amount to $1,400,000.02. There was also provision for
10% interest per annum to be paid on the outstanding balance (in quarterly
instalments throughout the year). In any event, it is common ground that the
basic rent had been paid in full, and early, together with all interest due, by
May 1989. It is also common ground that the basic rent equated to the purchase
price of the land, so that, as will appear, the option to purchase the land
only involved the nominal further payment of EC$10.
32.
Clause 8 provides that the Lessee covenants that during the Lease it
“will perform and observe the obligations set out in Schedule 3”. Schedule 3
has three Parts, I, II and III. Part I is a further covenant to pay the basic
rent. Part II contains a variety of covenants, of which the most significant is
that set out in para 3 (inter alia “to submit to and comply at all times with
the Development Program”), but others cover such matters as the maintenance of
buildings, water tanks, sewers, drains, water courses, cables, pipes and wires,
trenches, gullies, roadways and footpaths. Part III is concerned with
obligations to supply water for and to maintain the irrigation system. Further
provisions concerning the irrigation system are contained in clause 10.
33.
The obligation to comply at all times with the Development Program,
defined in clause 1 as the programme set out in Schedule 6, takes the reader to
Schedule 6. That is a lengthy Schedule in which the programme’s objects and
implementation are spelled out in detail. For instance, acreage under
cultivation for various types of fruit and other produce are projected for each
year from 1987 to 1991. There might however be debate about what is
aspirational and what is stipulated.
34.
Clause 9 is a lengthy clause with 14 sub-clauses. Clause 9(1) permitted
the Government to re-enter on the land and determine the Lease in the event of
the basic rent being in arrears or breach of any of the obligations imposed by
the Lease. Sub-clauses 9(9), (10), (11) and (12) are concerned with the option
to purchase the land and need to be set out in full:
“(9) At any time after the end
of the tenth year of the term hereby created and prior to the expiration of
such term THE LESSEE may give notice in writing to THE GOVERNMENT of its desire
to purchase the absolute ownership of the lands and buildings then subject to
this Lease in which event subject to sub-clauses (10), (11) and (12) below THE
GOVERNMENT will forthwith execute in favour of THE LESSEE a Deed of Sale of the
lands and buildings then subject to this Lease in a form to be settled by Lawyers
for THE GOVERNMENT and THE LESSEE so as to be consistent with the obligations
of THE LESSEE in this Lease and to enable restrictions and positive obligations
for the benefit of the River Doree Holdings Limited Development to be imposed
and enforced by THE GOVERNMENT and THE LESSEE.
(10) THE LESSEE shall pay to
THE GOVERNMENT EC$10.00 by way of the purchase price.
(11) THE GOVERNMENT shall
grant to THE LESSEE a Licence under the Aliens (Landholding Regulation) Laws
free of charge for THE LESSEE to hold as owner the land and buildings then
subject to this Lease and transferred in accordance with Sub-clauses (9) and
(11) hereof. Such Licence to contain conditions designed to ensure that in so far
as practical the Development Program, on pain of forfeiture of the said land
and buildings, shall be carried out in accordance with its terms and this
Lease.
(12) THE LESSEE shall be
liable only for the cost of registration of the Deed of Sale and Notarial fees.
No other taxes, duties or fees shall be payable to THE GOVERNMENT.”
35.
In sum, so far as the option to purchase is concerned, the following
matters may be observed. The only pre-conditions for the exercise of the option
expressly set out in clause 9(9) are (i) the expiry of “the tenth year of the
term hereby created”, (ii) the service of a written notice on the Government,
and (iii) the payment of EC$10 (under clause 9(10), to which clause 9(9) is
expressly made subject). The option may be exercised “at any time” after the
end of the tenth year of the term. There is no express provision requiring the
payment of the basic rent of US$1.4m (plus interest), but if it had not been
paid in full in accordance with clauses 6 and 8 and Schedules 2 and 3 (Part I),
ie within seven years at the outside, then clause 9(1) would fully protect the
Government by entitling it to determine the Lease. Therefore, in practice,
River Dorée could not exercise its option to purchase without paying the basic
rent. As for compliance with the Development Program, there is no express proviso
in clause 9(9) requiring such compliance as a condition of the ability to
exercise the option to buy, but the Government is protected in two ways: as
long as River Dorée is a lessee, it runs the risk that non-compliance will
render it liable to lose its Lease under the provisions of clause 9(1); and
after the option to buy is exercised, when River Dorée is an owner, it
continues to run the risk that non-compliance will render it liable to
forfeiture of the land under the conditions of the Licence which clause 9(11)
mandates.
36.
These express provisions of the substantive clauses of the Lease may be
contrasted with the wording of recital E. Thus, first, there is no express
language of option at all. Secondly, there is no express requirement for any
written notice on the part of River Dorée. Thirdly, although at most some
request on the part of River Dorée might be implied, subject to that the powers
seem to rest in the Government, for the language of the recital is that River
Dorée “will be permitted by THE GOVERNMENT to purchase”. It is unclear,
however, what if any obligation on the Government is suggested or embraced by
such language. Fourthly, it is an express proviso of such permission that River
Dorée “has satisfactorily carried out the terms and conditions of this Lease
including the Development Program”. That express proviso is not found in clause
9(9) (or in sub-clauses (10), (11) and (12)). Fifthly, that express proviso
goes well beyond a requirement of compliance with the Development Program and
extends to all “the terms and conditions of the Lease”. Sixthly, whatever is to
happen is to do so only “at the end of the first ten (10) year period of the
Lease”. This suggests that, whether the trigger is a request from River Dorée
or an initiative from the Government, what happens is to happen within a
reasonable time of the end of those ten years, whereas under clause 9(9) the
option can be exercised “at any time” over at least the next 40 years.
37.
The terms of recital E and clause 9(9) may also, if necessary, be
contrasted with the terms of the letters from the permanent secretary dated 20
June 1986 and from the Prime Minister dated 24 June 1986, and of the Licence
dated 12 January 1987. Thus, the language of the first letter speaks of “after
ten (10) years of the lease”, which is not clear as to when the ten years
commence and end or for how long the opportunity is to last; moreover there is
no reference to an option to buy being given to River Dorée, rather the letter
states that “Government will sell the property”; and there is no mention of
recital E’s reference to the proviso of compliance with terms and conditions of
a lease outside a development programme, and the language “if … (the Danes)
have developed the property” suggests an uncertain relationship between
development and the Government’s sale of the property. As for the letter dated
24 June 1986, that speaks of “after a period of ten years”, introduces the
concept of an “option to purchase”, requires that the lessee “carry out an
agreed development programme”, which suggests the need for its completion, but
again says nothing about requiring compliance with all the terms and conditions
of a lease as a pre-condition to the exercise of the option. As for the
Licence, that again does not speak of an option to purchase, but states that
the Government “will sell” the land “after ten years of the lease” if at that
time (whatever it might be) the Lessee “has complied” with the obligation set
out in the Licence to “develop the property”, but again without reference to
the need for compliance with all other terms and conditions of the Lease.
The submissions
38.
On behalf of the Government, Mr Guthrie submits that the construction of
the Lease found by Master Cottle and Georges J is correct, and that the Court
of Appeal was in error. In particular he submits that it is important to
approach the question of construction against the background to the creation of
the Lease, which he contends is to be found in the letters from the permanent
secretary dated 20 June 1986 and from the Prime Minister dated 24 June 1986, as
well as in the Licence dated 12 January 1987, cited above. In this connection
he prays in aid the evidence of Mr Soeren Hofdahl, who took part in initial
discussions with the Government, was involved in instructing Faelleseje’s
attorneys, McNamara & Co, executed the Lease on behalf of River Dorée, of
which he was a director and shareholder, and was the manager of the Farm on the
land, and a principal witness for River Dorée at trial. Thus Mr Guthrie notes
that Mr Hofdahl said in his witness statement and in his evidence at trial
that, although Faelleseje had wanted to purchase the land outright, the
Government wanted to control development. Mr Guthrie also relies on the facts
given in evidence by Mr Hofdahl that McNamara & Co had submitted a draft of
the Lease to the Government; and that he linked Lease and Licence (“I signed
the lease document on 20 February 1987 … the Licence having been issued on 12
January 1987”: para 3.1 of his witness statement).
39.
In this connection, Mr Guthrie submits that Georges J was right to rely
on such background facts, and cites the statement of Lord Hoffmann in Investors
Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
at 912H that -
“Interpretation is the
ascertainment of the meaning which the document would convey to a reasonable
person having all the background knowledge which would reasonably have been
available to the parties in the situation in which they were at the time of the
contract.”
40.
Mr Guthrie also repeats submissions made to the Court of Appeal in
reliance on St Lucia’s hybrid legal system whereby it retains features and
content of the civil law in its Civil Code, closely based on the Quebec Civil
Code: see Prospere (nee Madore) v Prospere [2007] UKPC 2, at paras 13ff
and Commonwealth Caribbean Law and Legal Systems, by Rose-Marie Belle
Antoine, 2nd ed (2008), at 63-72. In particular, he relies on a provision in St
Lucia’s Civil Code concerning the interpretation of contracts at article 945,
and a further provision concerning evidence at article 1141.
41.
Article 945 provides as follows:
“When the meaning of any part of a
contract is doubtful, its interpretation is to be sought rather through the
common intent of the parties than from a literal construction of the words.”
42.
Article 1141 provides:
“An authentic writing is complete
proof between the parties to it and their heirs and legal representatives.
1. Of the obligation
expressed in it;
2. Of what is expressed
in it by way of recital, if the recital have a direct reference to the
obligation or to the subject of the instrument. If the recital be foreign to
such obligation and to the subject of the instrument, it can serve only as a
commencement of proof.”
43.
In sum, Mr Guthrie submits that when recital E is read together with
clause 9(9), against the background of the letters and the Licence, the proviso
of recital E concerning satisfactory performance of the Development Program has
to be read into clause 9(9). In any event, article 945, to which the Court of
Appeal did not refer, relieves the court of pursuing a literal construction of
the words of clause 9(9), and article 1141(2) justifies paying as much regard
at least to the words of the recital as to clause 9(9). Both articles displace
the common law learning to be derived from Mackenzie v The Duke of
Devonshire.
44.
On behalf of River Dorée, on the other hand, Mr Dowding submits that the
Court of Appeal came to the right conclusion, for the right reasons. As for the
St Lucia Civil Code, he refers to article 917A, under the heading of Book
Third, Obligations, General Provisions, the general tenor of which is that the
law of England prevails in St Lucia subject only to a conflict between that law
and the express provisions of the Code, in which case the provisions of the
Code shall prevail. In those circumstances, article 945 is irrelevant unless
clause 9(9) is ambiguous (since article 945 begins “When the meaning of any
part of a contract is doubtful …”), which clause 9(9) is not. In any event,
article 945 is not inconsistent with the common law of England. As for article
1141, that is concerned not with interpretation but with evidence, and the
Court of Appeal was right to say that article 1141(2) “constitutes a rule of
evidence with regard to proof of the content of recitals in deeds and [is] not
a rule of law that recitals are to control the construction of the operative
part of deeds” (para 47).
45.
As for the letters relied on by Mr Guthrie, they were inadmissible as
being part of the negotiations between the parties (see Lord Hoffmann’s third
principle in Investors Compensation Scheme at 913B, re-affirmed by the
House of Lords in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38;
[2009] AC 1101). And as for the Licence, that was a unilateral document of
uncertain date and uncertain knowledge on the part of River Dorée as at the
date of the Lease, and therefore of no utility. In any event, letters and
Licence were inconsistent each in their own way with the ultimate provisions of
the Lease.
46.
As for the Lease, therefore, clause 9(9) was clear and unambiguous. Its
provisions could not be fitted with those of recital E, and, as the critical
operative part of the lease, its provisions had to prevail.
Discussion and analysis
47.
In the Board’s opinion, the decision of the Court of Appeal is correct,
and the submissions of Mr Dowding are to be preferred.
48.
The Board is quite prepared to accept that a recital may in appropriate
circumstances serve as background or as introduction informing or assisting the
interpretation of a substantive provision in the Lease. But the two must at
least be capable of being read consistently with each other, which is not the
case here. Clause 9(9) is clear as to the conditions under which the option to
purchase is to be exercised. No ambiguity can be created from a mere recital
which cannot consistently be read together with the substantive and operative
parts of the contract concerned. The Board has set out the inconsistencies
between recital E and clause 9(9) above (at paras 35-36), and needs not repeat
them. In the circumstances, preference has to be given to one or the other, and
high authority dictates that in such circumstances preference must be given to
a substantive provision over a recital.
49.
Thus in Mackenzie v The Duke of Devonshire [1896] AC 400 a
trust disposition referred in its narrative to “other heirs of entail” and in
the dispositive portion of the deed to “heirs female”. It was held that the
narrative section could not control the operative part of the deed. Lord
Halsbury LC said (at 405-406):
“… it seems to me to be absolutely
unarguable that the true meaning of those words, and the purposes of the trust
so set forth, can be in any way controlled, qualified or modified by the
initial statement of what the motive of the author of the deed was.”
Lord Watson said (at 407):
“The narrative words come to no
more than this: ‘My intention is to do’ so and so, and you may add this, ‘and I
have accomplished that purpose by the provisions which follow.’ In such a case
the safer and only legitimate course is to look to the provisions which follow,
and to read them according to their natural and just construction.”
And Lord Davey said (at 408):
“I take it to be a settled
principle of law that the operative words of a deed which are expressed in
clear and unambiguous language are not to be controlled, cut down, or qualified
by a recital or narrative of intention.”
50.
So in the present case, recital E, quite apart from being inconsistent
with clause 9(9) and thus unable to be read together with it, speaks of a
future intention on the part of the Government in the language of permission
(“will be permitted”), rather than in the language of contract. It is true that
the language of the proviso (following the words “provided that”) have more of
the ring of contract about them, but they do no more than state what the Government
will at some future time deem to be necessary to the exercise of their
permission. As in Mackenzie, however, the operative and substantive
terms of the contract set out in detail how these intentions will be arranged
as a matter of contract between the parties. Thus, detailed provision is made
for the earlier payment of the basic rent and thus what is in truth the price
for the land (other than the nominal EC$10), together with provisions that if
that price is not paid, the Government can determine the Lease. Moreover,
detailed provision is made for the grant to River Dorée of an option to
purchase and for the means by which that option is to be exercised, none of
which can be found in recital E. And, most importantly for the issue in this
appeal, detailed provision is made concerning the protection which is to be
given to the Government concerning the satisfactory performance of the contract
by River Dorée, both before and after the exercise of the option.
Thus, if before the option is exercised, when River Dorée is a mere lessee, it
commits any breach of the Lease, the Government can re-enter and determine the
Lease. Moreover, if after the option is exercised, River Dorée fails to carry
out the Development Program “in accordance with its terms and this Lease”, then
again the Government will be in a position to exercise a new right to
forfeiture of the land, despite the sale to River Dorée, by reason of the terms
to be included in the Deed of Sale and the Licence under the Aliens
(Landholding Regulation) Laws: see sub-clauses 9(9) and (11).
51.
It is not for any court or for this Board, following English law, to
remake the contract of the parties under the guise of interpretation. It is
common ground that the most modern restatement of the principles of contractual
interpretation is to be found in the recent cases in the Supreme Court of Arnold
v Britton [2015] UKSC 36; [2015] AC 1619 and Wood v Capita Insurance
Services Ltd [2017] UKSC 24; [2017] 2 WLR 1095. It is settled doctrine that
negotiations are not admissible for the purpose of interpretation: Chartbrook
Ltd v Persimmon Homes Ltd [2009] 1 AC 1101. The Board therefore agrees with
Mr Dowding’s submission that the permanent secretary’s letter dated 20 June
1986 and the Prime Minister’s letter dated 24 June 1986 are not admissible for
the purpose of construing the Lease. They represent part of the negotiations of
the parties towards their Lease, preceded by Faelleseje’s still earlier
proposal of an outright purchase (see, for instance, Georges J’s account of such
negotiations at paras 48-49 of his judgment).
52.
But even if account were to be taken of such letters, they represent but
a stage in the negotiations a full eight or so months before execution of the
Lease. It is clear from the ultimate terms of the Lease that the parties in the
end agreed that the best way of achieving the Government’s ambition of
supervising River Dorée’s performance of the Development Program was not to
make it a specific condition of the exercise of the option to purchase, but
rather to make its satisfactory performance a condition at all times of the
continuing security of River Dorée’s position as either Lessee or owner of the
land. It is entirely understandable that, with that power over River Dorée’s
tenure of the land, it was unnecessary to introduce the question of
satisfactory performance of the Development Program into the exercise of the
option to buy.
53.
As for the Licence, this is not a document of negotiation and thus is
not rendered inadmissible. Nevertheless, it is a merely unilateral document,
and because it has never been relied upon by the Government prior to this
appeal it is not known when it was made, nor when it came to the knowledge of
River Dorée or its lawyers. Prima facie it was made on 12 January 1987 and thus
before the Lease, but there is the oddity that it refers in its Second Schedule
to the Lease and its date of 20 February 1987. In the circumstances the mere
reference to the Licence, or to its apparent date, by Mr Hofdahl in his witness
statement is of no significance. The matter was never in issue. In sum, the
Licence does not assist the Government in its submissions.
54.
Considerations such as these are, in the Board’s opinion, further
confirmed by one other aspect of the contrast between recital E and the substantive
provisions of the Lease. Thus, the Lease contains two options, one to purchase
the land, and the other to extend the original 50-year tenure for a further 25
years. The former option is dealt with in clause 9(9). The latter option is
dealt with in clause 5. It is striking that the clause 5 option is expressly
subject to the condition that “all relevant terms and conditions of this Lease
having been satisfactorily performed”. The absence of the same condition from
clause 9(9) is striking.
55.
In this connection, it is also significant that there is no claim for
rectification, as there might have been if there had been good evidence
available that the interpretation which the Government seeks to impose on the
Lease had in fact been the prior agreement of the parties during negotiations
and that such agreement had been in existence down to the execution of the
Lease. Therefore nothing can be ascribed to a prior agreement which had by
mistake been omitted from the terms of the Lease. Nor has any submission been
addressed relating to any form of implied term.
56.
There remains the Government’s submission, made to but rejected by the
Court of Appeal, that the terms of the Civil Code of St Lucia make a critical
difference.
57.
First, Mr Guthrie relies on article 945. That is the first of a small
series of articles concerned with “The interpretation of contracts”, to be
found in section III of Chapter Sixth, headed “Contracts”, in Book Third of the
Code, a Book headed “Obligations”. Most of the articles on interpretation introduced
by article 945 are concerned with cases of doubt or ambiguity. Article 945
itself, the only article on interpretation relied on by Mr Guthrie, can
conveniently be cited here again:
“When the meaning of any part of a
contract is doubtful, its interpretation is to be sought rather through the
common intent of the parties than from a literal construction of the words.”
Apart from its opening words “When the meaning of any
part of a contract is doubtful”, this article appears to owe its origin, at
least indirectly, to the well-known article 1156 of the Code Napoléon of 1804,
which has influenced so many similar provisions of the codes of civil law
nations, and which prior to its recent amendment in 2016
used to read (in translation) as follows:
“[In agreements] it is necessary
to search into the mutual intention of the contracting parties, rather than to
stop at the literal sense of the terms.”
58.
This is not the place or time to debate whether the wording of article
945 of the Civil Code of St Lucia, in a case of doubtful meaning, is the same
as article 1156 of the Code Napoléon, nor even whether the wording of either,
with their emphasis on the common intent of the parties and the warning against
pure literalism, is the same or differs from the modern restatement of the
English law of contract interpretation. What, however, is well known is that in
the civil law in France and elsewhere the mutual intent of the parties can be
sought in documents and evidence which the common law does not permit, such as
in subjective intentions or negotiations: see Chartbrook at paras 39-42
per Lord Hoffmann.
59.
This difference between English law and the civil law approach to
contract interpretation is potentially relevant in the light of the overriding
terms of article 917A of the Civil Code of St Lucia, which is to be found under
the heading of “General Provisions” at the beginning of the Code’s Book Third,
on Obligations. Article 917A reads as follows:
(1)
Subject to the provisions of this article, from and after the coming
into operation of this article the law of England for the time being relating
to contracts, quasi-contracts and torts shall mutatis mutandis extend to
this Colony, and the provisions of articles 918 to 989 and 991 to 1132 of this
Code shall as far as practicable be construed accordingly; and the said
articles shall cease to be construed in accordance with the law of Lower Canada
or the “Coutume de Paris”.
(2)
Paragraph (1) of this article shall not be construed as affecting the
provisions of the Ninth Chapter of this Book (which relate to Proof of
Obligations), or as affecting the provisions of the Fifth to Sixteenth Books of
this Part or of any other statute relating to specific contracts save as in so
far as the general rules relating to contracts are applicable to such
contracts.
(3)
Where a conflict exists between the law of England and the express
provisions of this Code or of any other statute, the provisions of the Code or
of such statute shall prevail.
60.
It follows that the English common law principles of contract
interpretation prevail save to the extent that they may find themselves ousted
by the express provisions of the Code, and thus, in terms of the current issue,
save to the extent that they may find themselves ousted by the express terms of
article 945. However, article 945 can only apply “When the meaning of any part
of a contract is doubtful”. That does not apply here. The meaning of clause
9(9) is not doubtful, even when account is taken of recital E. An ambiguity
cannot be created by reference to a recital which is inconsistent with a clear
substantive part of a contract and thus cannot control that substantive part.
Neither Master Cottle nor Georges J supported their conclusion with any
reasoning which can bring this case within article 945. Indeed, the two reasons
they gave have not been relied on by Mr Guthrie. Nor has Mr Guthrie been able
to substitute for those reasons anything new which disturbs the clear provision
of clause 9(9) or its clear inconsistency with recital E. Nothing therefore
turns on article 945.
61.
The other article of the St Lucia Code on which Mr Guthrie has relied is
article 1141(2). However, the Board agrees with the Court of Appeal that this
article is concerned with evidence concerning the proof of the contents of
recitals, not with contract interpretation. It falls within Chapter Ninth of
Book Third, a chapter headed “Proof”. Article 1141 falls within Section I of
that chapter, headed “General Provisions”.
62.
An argument was raised in the Court of Appeal that the Government was
not permitted to bind itself to provide to River Dorée an aliens licence by the
provision in the Lease for the future exercise of River Dorée’s option. That
argument, although formally raised again by the Government in its grounds of
appeal, was not pursued.
Conclusion
63.
In sum, the Board will humbly advise Her Majesty, in agreement with the
Court of Appeal, that River Dorée was entitled to exercise its option to
purchase the land, and that this appeal should accordingly be dismissed and the
order of the Court of Appeal remain as pronounced by it. The parties will have
21 days from the handing down of this judgment to make any submissions in
writing on costs, which should, prima facie, be paid by the Government.
