Tito v Waddell

 

 

DATES: 1975 April 8-11, 14-18, 21-25, 28-30; May 1, 2, 5-8, 12-16, 19-23; June 3-5, 9-13, 16-20, 23-27, 30; July 1-4, 7-11, 14-18, 21-25, 28-31; Oct. 22-24, 27-31; Nov. 3-7, 10-14, 17-20, 24-28; Dec. 1-5;

1975 Dec. 15-19;

1976 Jan. 12-16, 19-23, 26-30; Feb. 2-6, 9-13, 20, 23-27; March 1-5, 8-12, 15, 18, 19, 22-26, 29-31; April 1, 2, 5-9, 13, 14, 27-30; May 3-7, 10-14, 17-21, 24-28; June 8-11, 14-18;

1976 Nov. 29, 30; Dec. 1-3

1977 May 19; July 28; 29

 

 

Cur. adv. vult.

 

                      I. General                                 Page

1. Introduction   ...   ...   ...   ...    ...   ...   ...   ...  123

2. Ocean Island   ...   ...   ...   ...    ...   ...   ...   ...  125

3. The litigation ...   ...   ...   ...    ...   ...   ...   ...  126

4. Constitutional position of Ocean Island ...   ...   ...   ...  129

5. The land transactions      ...   ...    ...   ...   ...   ...  132

   (1)  1900-1913:   before the 1913 agreement   ...   ...   ...  132

   (2)  1913-1920:   the 1913 agreement    ...   ...   ...   ...  141

   (3)  1920-1931:   the British Phosphate Commissioners and the

                     compulsory acquisition ...  ...   ...   ...  150

   (4)  1931-1937:   the funds ...  ...     ...  ...   ...   ...  174

   (5)  1937-1947:   the war, Rabi and the 1947 agreement    ...  183

   (6)  1947-1973:   voluntary increases in royalties  ...   ...  192

   (7)  1973: the last agreement    ...     ...  ...   ...   ...  207

6. The claims in general...    ...  ...     ...  ...   ...   ...  208

 

                     II. Ocean Island No. 2

 

1. The Crown royalties  ...    ...  ...     ...   ...  ...    ... 210

2.  The 1931 and 1947 claims   ...  ...     ...   ...  ...    ... 210

    (1) The Crown as trustee   ...  ...     ...   ...  ...    ... 210

    (2) The 1913 agreement     ...  ...     ...   ...  ...    ... 219

    (3) The 1931 transaction   ...  ...     ...   ...  ...    ... 225

       (a) Trust from 1913 agreement        ...   ...  ...    ... 225

       (b) Fiduciary relationship from trust of royalties     ... 226

       (c) Fiduciary relationship from statutory duty  ...    ... 229

       (d) "The Crown is one and indivisible"     ...  ...    ... 231

    (4) The 1947 transaction   ...  ...     ...   ...  ...    ... 232

       (a) Trust under the Ordinance of 1937...   ...  ...    ... 232

       (b) Fiduciary relationship under the Ordinance of 1937 ... 235

    (5) Governmental obligations    ...     ...   ...  ...    ... 235

3. Results of a fiduciary position  ...     ...   ...  ...    ... 238

    (1) Conflict of interest and duty       ...   ...  ...    ... 238

    (2) Lease by a fiduciary to itself      ...   ...  ...    ... 240

    (3) Self-dealing and fair-dealing       ...   ...  ...    ... 240

4. Limitation    ...   ...     ...   ...    ...   ...  ...    ... 244

    (1) Fraudulent concealment ...   ...    ...   ...  ...    ... 244

    (2) "Trust"  ...   ...     ...   ...    ...   ...  ...    ... 246

    (3) Account  ...   ...     ...   ...    ...   ...  ...    ... 250

 

[*123]

 

                                                                  Page

5. Jurisdiction against the Crown     ...    ...   ...  ...    ... 252

    (1) Crown Proceedings Act 1947    ...    ...   ...  ...    ... 252

    (2) Exchequer equity jurisdiction ...    ...   ...  ...    ... 256

    (3) Declarations   ...    ...     ...    ...   ...  ...    ... 260

6. Locus standi ...    ...    ...     ...    ...   ...  ...    ... 260

    (1) The Council of Leaders        ...    ...   ...  ...    ... 260

    (2) Mr. Rotan      ...    ...     ...    ...   ...  ...    ... 262

7. Quantum      ...    ...    ...     ...    ...   ...  ...    ... 264

 

                    III. Ocean Island No. 1

 

1. Sand: the red land  ...    ...     ...    ...   ...  ...    ... 265

2. Replanting   ...    ...    ...     ...    ...   ...  ...    ... 272

   (1) The obligations ...    ...     ...    ...   ...  ...    ... 273

   (2) "Replant"       ...    ...     ...    ...   ...  ...    ... 275

   (3) Possibility     ...    ...     ...    ...   ...  ...    ... 282

   (4) Merger          ...    ...     ...    ...   ...  ...    ... 284

   (5) Novation        ...    ...     ...    ...   ...  ...    ... 285

   (6) Benefit and burden     ...     ...    ...   ...  ...    ... 289

   (7) Failure to prescribe trees     ...    ...   ...  ...    ... 311

   (8) Prescription by Governor       ...    ...   ...  ...    ... 316

   (9) Specific performance   ...     ...    ...   ...  ...    ... 321

       (a) Unsuitability      ...     ...    ...   ...  ...    ... 321

       (b) Part ownership     ...     ...    ...   ...  ...    ... 323

       (c) Individual plots   ...     ...    ...   ...  ...    ... 325

       (d) General replanting ...     ...    ...   ...  ...    ... 327

   (10) Damages        ...    ...     ...    ...   ...  ...    ... 328

       (a) Basis       ...    ...     ...    ...   ...  ...    ... 328

       (b) Quantum     ...    ...     ...    ...   ...  ...    ... 336

   (11) Title          ...    ...     ...    ...   ...  ...    ... 338

3. Overmining: the purple land        ...    ...   ...  ...    ... 339

4  Conclusion    ...   ...    ...     ...    ...   ...  ...    ... 339

5. Assessment of daMages      ...     ...    ...   ...  ...    ... 340

 

    Costs  ...   ...   ...    ...     ...    ...   ...  ...    ... 345

 

 

1976. November 29. MEGARRY V.-C. read the following judgment.

 

I. GENERAL

 

1. Introduction. This is litigation on a grand scale. From April 8, 1975, until June 18, 1976, I was engaged in hearing two cases relating to Ocean Island. Each was commenced by the same writ, issued on November 10, 1971. However, as one substantial section of the plaintiffs’ claim did not directly concern one group of defendants, the three British Phosphate Commissioners, a sensible arrangement was made with a view to saving part of what were bound to be massive costs. A second writ was accordingly issued on June 18, 1973, with the British Phosphate [*124] Commissioners among the defendants; and then on September 20, 1973, the commissioners were struck out of the first action, which was left to proceed against Her Majesty’s Attorney-General as the sole remaining defendant to a substantially reduced set of claims.

 

It was agreed on all hands that the action as constituted by the second writ should be heard first, and that the original action, in its reduced form, should follow immediately afterwards. As a result, the action heard first became known as “Ocean Island No. 1,” even though it was the subject of the second writ; the action heard second, based on the reduced form of the original writ, thus became “Ocean Island No. 2.” I shall continue to use these names, or the abbreviations “No. 1” or “No. 2.” Put explicitly, Rotan Tito & Ors. v. Waddell & Ors., 1973 R.2013 is “No. 1,” and Rotan Tito & Another v. Her Majesty’s Attorney-General, 1971 R.3670 is “No. 2.”

 

There was no agreement that the evidence in one case should constitute evidence in the other; but inevitably there was some degree of cross-reference between the two cases, and in No. 2 it was agreed that I should use in that case the background knowledge that I had acquired in No. 1. This inter-relation of the two cases was accentuated by various common elements. One was the sharing of counsel. For the plaintiffs there was accretion, and for the Attorney-General subtraction. Mr. Macdonald led for the plaintiffs in No. 1, and in No. 2 he was himself led for the plaintiffs by Mr. Mowbray. For the Attorney-General in No. 1, Mr. Le Quesne, until he left the Bar for other duties, led Mr. Vinelott, and thereafter Mr. Vinelott led for the rest of No. 1 and for all of No. 2. For the British Phosphate Commissioners, I may say, Mr. MacCrindle led Mr. Browne-Wilkinson in No. 1.

 

Another common factor was much of the documentation. Fifty bundles of agreed letters, reports, minutes, and other documents did duty in both actions, together with a rich miscellany of other documents; and five more bundles served in No. 1. In all, well over 10,000 pages must have been put before me. The documents and transcripts of the evidence, when stacked, stand well over six feet high, or perhaps I should say a little over two metres. This included the pleadings, which in No. 1 are over 120 pages long, ending with an amended surrejoinder to amended rejoinder; in No. 2 they are rather less in bulk and considerably shorter in substance, since over 35 pages consist of a detailed enumeration of documents relied on by the plaintiffs. In both cases there were many arguments on the pleadings, and much amendment during the hearings. In this, No. 2 perhaps surpassed No. 1; certainly its pleadings became more prismatic. On the other hand, No. 1 amply demonstrated for all concerned the physical difficulties in conducting litigation in an orthodox courtroom when in addition to the voluminous documents and a wealth of authorities there are manifold maps and plans, some of them five feet or more long or wide, and some with an area of 20 square feet or more.

 

In duration, No. 1 took 106 court days as against the 100 days of No. 2: and it also required the additional 15 days (between Day 74 and Day 75 of the hearing) that were needed for holding a view of the locus in quo in the circumstances that I have related in Tito v. Waddell [1975] 1 [*125] W.L.R. 1303. I heard much evidence, though in No. 1 there were many more witnesses than in No. 2: there were over 30 in No. 1 as against nine in No. 2. This difference was reflected in the speeches; in No. 1 they took a little more than 60 days out of 106, whereas in No. 2 they lasted for about three-quarters of the 100 days. It took Mr. Macdonald about a month to open No. 1 and another month to reply. Much law was involved in each case. Over 130 reported cases were cited in No. 1 and over 90 in No. 2, with many passages from textbooks and other sources as well.

 

I have recited these statistical details at the outset as they help to explain a number of matters. First, all concerned have encountered the obvious difficulties of volume and complexity. Second, the press of materials inevitably left some loose ends, with some points doubtless thought to be not worth the pursuit. Third, the judgment in such cases is bound to be massive, and to deal with every point that has been raised would make it of intolerable length. Fourth, I propose to set out in one judgment much material that is common to both actions, and then to treat as being incorporated by reference such of the material as is relevant to each action, without repeating it. Fifth, I propose to deliver judgment first in No. 2, which is what remains of the original action, and then to deliver judgment in No. 1. I may add that I fully concur with counsel in thinking that the appropriate course to pursue was to hear both cases before delivering judgment in either.

 

There is one other matter that I must mention at this stage. I was told that a third Ocean Island action was waiting to come on after No. 1 and No. 2 had been decided. Subject to one reservation by the British Phosphate Commissioners, I was accordingly pressed on all hands in Ocean Island No. 1 to express my views on all the issues that arose, even if by reason of some finding of fact or some ruling on a point of law that issue did not necessarily arise for decision in No. 1; for these views, it was said, might be of assistance in reaching a settlement in No. 3. No. 3, I was told, has not far short of 300 plaintiffs, instead of the dozen or so in No. 1 whose cases were intended to represent the various combinations of fact that might arise in No. 3. In due course I shall have to consider how far I can properly give effect to this request, and to the reservation that went with it: this related to what was known as the purple land. For the present I merely record it, and also the fact that I know little more about No. 3 than is indicated by this statement.

 

I should add that in this judgment I have inserted a number of headings; and I shall preface the transcript with a list of these headings in order to provide something of a table of contents. I do this merely for ease of reference; the headings are not intended in any way to affect the meaning of the text.

 

2. Ocean Island. I must first say something about Ocean Island. It lies just south of the equator in the Western Pacific, about 170� west of Greenwich, and roughly half-way between the Hawaiian Islands and the coast of Australia. Its nearest neighbour is Nauru, lying some 160 miles to the west; and Nauru plays an important though subsidiary part in the story. Both islands are known as phosphate islands, in that nature has [*126] given them deep deposits of high-grade phosphates. Whether these are of avian or marine origin seems to be uncertain. Ocean Island has a surface area of not much over 1,500 acres, or some 21�2 square miles. It is roughly circular in shape, except for a bite taken out of the southern side, which is called Home Bay. Viewed in profile, the island is the shape of a shallow dome, with the centre of the island rising to some 250 feet. The structure of the island consists of a coral limestone base overlaid by phosphate; and there is a surrounding coral reef which dries out at low tide. On the island the coral is mainly in the form of a large collection of what are usually called “pinnacles.” These are not easy to describe, and although the photographs are helpful, they do not really convey the picture that meets the eye. In its natural state, the surface of the island consisted of grass, trees and vegetation, growing more or less directly out of alluvial phosphate, with very little of what could be called “topsoil” in any real sense of the word; but there are outcroppings of coral pinnacles, of a greyish colour. The process of extracting the phosphate consisted of open-cast working which removed the relatively small quantity of alluvial phosphate, consisting of small fragments down to a dust, and the relatively large quantity of phosphate in rock form, some rocks weighing many tons. The phosphate deposits were deepest in the centre of the island, and there the process of extraction has left a terrain consisting of scores of pinnacles to the acre, many standing 60 or 80 feet high, or more, with pits beside each of them narrowing down to a small area. The pinnacles themselves are of widely varying shapes and sizes, with abundant pitting and erosion; admirers of modern sculpture might find much to please them in the pinnacles.

 

The depth of the phosphate deposits decreases as one approaches the coast, and there is a substantial “pinnacle belt” of exposed pinnacles, mainly on the east and north, where the land drops away on the seaward side. On the surrounding rim of the island there is not enough phosphate to be worth mining. The main residential quarter for the staff and workmen who extract the phosphate is near the south-west and west of the coast; and the plant for treating the phosphate and providing services is on the south. I shall say more about the physical features of the island in due course; for the present that suffices.

 

3. The litigation. The general shape of the litigation is that various claims are made by the Banabans against the British Phosphate Commissioners and the Attorney-General, as representing the Government of the United Kingdom. Before I outline these claims, I must say something about the background. When phosphate was discovered on Ocean Island in 1900 the island was occupied by a population of some 500 indigenous inhabitants who called the island “Banaba” and were themselves known as “Banabans”: in each name the first “a” is long, being pronounced as if an “r” were inserted between it and the following “n.” For 20 years the phosphate was extracted by a British company, first by the Pacific Islands Co. Ltd., and soon, from 1902, by its subsidiary, the Pacific Phosphate Co. Ltd. Then in 1920 the British Phosphate Commissioners were constituted by the governments of the United Kingdom, Australia and New Zealand. This was when the governments had jointly [*127] acquired the mining undertakings which the company had built up on Ocean Island and on the neighbouring Nauru as well.

 

Since 1920 the mining has been conducted by the British Phosphate Commissioners, with one commissioner appointed by each of the three countries. The commissioners, who were never incorporated, held the undertaking in trust for the three governments in the proportion of 42 per cent. for the United Kingdom, 42 per cent. for Australia, and 16 per cent. for New Zealand. The mining of phosphate on Ocean Island was carried on with the Banabans remaining in residence; but the outbreak of World War II in 1939, and the subsequent occupation of the island by the Japanese in 1942, first curtailed production and then brought it to an end. The Japanese transferred most of the Banabans to other islands, and when in 1945 Ocean Island was recovered from the Japanese, it had been devastated and was uninhabitable. Though the Banabans’ right to return to Ocean Island has been carefully preserved, it was plainly impossible for them to go back immediately after the war. Another island, Rabi (pronounced as if an “m” separated the “a” and the “b”) had been bought for them in 1942 out of a fund which had been built up for them out of phosphate royalties; and it was to Rabi that they went, and where, after a plebiscite in May 1947, they finally decided to remain as their “headquarters and home.”

 

One complication was that whereas Ocean Island was part of the Gilbert and Ellice Islands Colony, Rabi was in the Fiji Colony: it lies some 1,600 miles south-east of Ocean Island, and is some 17,000 acres in extent, compared with Ocean Island’s 1,500 acres. Parties of Banabans have from time to time visited Ocean Island and remained there for some while; indeed, a party was in residence when I visited it. But from any practical point of view there has long been no question of the Banaban community as a whole ever returning to live on Ocean Island. About three-quarters of the island has now had phosphate extracted from it, and when the last of the workable phosphate has gone in another two or three years, little will be left save a desolation of uninhabitable pinnacles surrounded by a rim of land bearing such buildings and plant on it as the British Phosphate Commissioners abandon there.

 

I think that I should at this stage give an outline of the litigation so that when I come to the detailed facts they may be seen in relation to the broad issues between the parties. I shall, of course, be guilty of some degree of duplication in doing this, since I shall have to consider the claims in detail at a later stage: but the size and complexity of the case seems to me to make repetition on a modest and selective scale a virtue rather than a fault. The litigation has two main aspects, one physical and the other financial: Ocean Island No. 1 is principally concerned with the former and Ocean Island No. 2 with the latter. In No. 1, claims are made by a selection of Banaban landowners against the first three defendants, who were the British Phosphate Commissioners when the writ was issued. The first, Sir Alexander Waddell, was appointed by the United Kingdom Government on January 1, 1965; the second, Mr. Gainey, was appointed by the New Zealand Government on February 1, 1973. Unhappily, he died during the hearing of No. 1; but all concerned [*128] expressed themselves as being satisfied that any consequent procedural complications could be overcome. The third defendant, Sir Allen Brown, was appointed by the Australian Government on July 1, 1970; but after I had reserved judgment I was informed that as from July 1, 1976, he had been replaced by Mr. Maurice Carmel Timbs.

 

In very broad terms, the claims in Ocean Island No. 1 that were made against the first three defendants fall under three main heads. First, there is a claim for specific performance of contractual obligations to replant certain land with trees and shrubs, or alternatively for damages; and this is the main issue in the case. Second, there is a claim for overmining. This seeks damages for the wrongful removal of phosphate from what was called the purple land, consisting of long thin strips just outside the boundaries of the mining areas on the east and north of the island. Third, there is the sand claim. This alleges that there has been an unauthorised removal of sand from what was called the red land, on the south-east coast of the island. The fourth defendant, the Attorney-General, is concerned with only the first of these claims, and then only in minor degree. The contention is that the United Kingdom Government, acting by the Governor of the Gilbert and Ellice Islands Colony, is bound to prescribe the trees and shrubs that are to be planted.

 

That is No. 1. No. 2 is very different. The claim is made by Mr. Rotan Tito, who claims to be the owner of much land on Ocean Island, and by the Council of Leaders, an incorporated body which is, in effect, the governing body of the Banabans. The sole defendant is the Attorney-General. Again there are three main heads of claim. The first two relate to the Crown standing in a fiduciary position towards the Banabans in connection with two transactions, one in 1931 and the other in 1947. These were quite different. The 1931 transaction was in essence the compulsory acquisition of 150 acres, whereas the 1947 transaction was a voluntary disposition of two areas of 291 and 380 acres. For the 1931 transaction, the core of the plaintiffs’ claim is that the royalty payable to the Banabans under the mining lease granted to the British Phosphate Commissioners by the resident commissioner of the Gilbert and Ellice Islands Colony as part of the compulsory process was fixed under the relevant statute by an officer of the Crown (the resident commissioner) in a transaction in which the mining rights were being conferred by the Crown upon the Crown itself, in the shape of the British Phosphate Commissioners, so that there was a conflict of duty and interest. The royalty was fixed at less than a proper figure, say the plaintiffs, and so the Crown must pay compensation to make up the amount in fact paid by way of royalties to the amount that ought to have been paid. An alternative basis for the claim is that the mining lease was a lease by a fiduciary to itself, and that this produces the same consequences.

 

That is the 1931 transaction. The 1947 transaction consisted of an agreement made by the Banaban landowners with the British Phosphate Commissioners for the mining of the 291 and 380 acres, in return for certain lump sums and a royalty. No direct element of compulsion entered into this, though the compulsory powers still existed and had not been forgotten; but the claim is that the Crown stood in a fiduciary [*129] position towards the Banabans, and so the agreement was an agreement between a fiduciary acting by its creatures, the British Phosphate Commissioners, and the beneficiaries of that fiduciary. The Crown as such fiduciary was therefore, it is claimed (and I put it very broadly), under a duty to make full disclosure to the Banaban landowners, and to ensure either that they received a full commercial price, or that they had competent independent advice. The Crown failed to discharge this duty, it is said, by failing to reveal that the phosphate was being sold at less than its true value to Australian and New Zealand concerns for manufacture into superphosphates. Substantial benefits were thus being conferred on Australian and New Zealand farmers instead of larger royalties being paid to the Banabans. Furthermore, there had been no disclosure of what sums were being paid by the British Phosphate Commissioners to the Gilbert and Ellice Islands Colony in respect of phosphate exports, in lieu of taxation or otherwise; and nothing was done to ensure that the Banabans had proper advice. The royalty payable under the 1947 agreement was far below the proper royalty, and so the Banabans were entitled to compensation against the Crown.

 

Those are the first two claims, based primarily on the alleged fiduciary position of the Crown; and together they constitute the major part of Ocean Island No. 2. The third claim is completely different. It relates to certain of the sums in respect of phosphate exports that I have just mentioned. These sums were made payable by the British Phosphate Commissioners to the Gilbert and Ellice Islands Colony in lieu of taxation, or in relation to taxation, by a series of agreements between the British Phosphate Commissioners and the Gilbert and Ellice Islands Colony government, and by a series of Gilbert and Ellice Islands Colony Ordinances. What the plaintiffs contend under what for brevity may be called “the Crown royalties claim” is that certain other Ordinances of the Gilbert and Ellice Islands Colony and of Fiji catch these payments, and make them payable to the Banabans instead. Here the question is essentially one of construing the relevant documents. The relief under all three heads is primarily claimed in the form of a series of declarations that the Crown is liable or bound to pay or transfer the sums in question (and not in the form of judgments for the money, or orders to pay it), with supporting accounts, inquiries and directions.

 

4. The constitutional position of Ocean Island. Before I consider any of these claims, there are other matters that I should outline. First, there is the constitutional position of Ocean Island. I do not propose to discuss this in any great detail. The broad position is that under the Pacific Islanders Protection Act 1875, the British Settlements Act 1887, the Foreign Jurisdiction Act 1890 and the Pacific Order in Council 1893 a High Commissioner for the Western Pacific was established, together with a system of courts and other institutions, and provisions as to the law applicable. Article 108 of the Order in Council empowered the High Commissioner to make, alter and revoke “Queen’s Regulations” for various purposes. In 1892 the islands in the Gilbert and Ellice groups (not then including Ocean Island) were proclaimed as British protectorates. On October 2, 1900, after some correspondence between the Pacific [*130] Islands Co. Ltd. and the Colonial Office in Downing Street, a licence in the name of Queen Victoria and executed by the Secretary of State for the Colonies was granted to the company: the company had applied for such a licence on January 4, 1900. The licence granted the company the exclusive right to occupy Ocean Island for 21 years from January 1, 1901, for the purpose of removing guano and other fertilising substances, and to display the British flag in token of the occupation.

 

The company had in fact already hoisted the British flag. This had been done on May 5, 1900, by Albert Ellis, an employee of the company, who had discovered the presence of rich phosphate deposits on the island. On May 3, two days before the flag was hoisted, Ellis had entered into a short written agreement on behalf of the company with the “King and Natives of Ocean Island,” expressed to be made “for and on behalf of the entire population of Ocean Island.” The agreement purported to give the company the sole right to raise and ship all rock and alluvial phosphate on the island; it provided for the company to pay the natives £50 a year, or trade to that value; and the company agreed not to remove any alluvial phosphate from land where coconut trees or other trees or plants cultivated by the Banabans were growing. I do not think that I need comment on this piece of commercial enterprise. Nor shall I mention the other provisions of the agreement, apart from observing that it was to be in force for 999 years. This concept can have meant little to the Banabans, if, indeed, it was ever put to them: the interpreter stated that he was never told to interpret it to the Banabans, and his competence as an interpreter of written English seems at least doubtful. The “King” was not in fact a king; he was, it seems, a ceremonial functionary of a much lower stature. Within a year it had been agreed that the annual £50 was to be divided among the landowners whose land had been worked. Active operations had begun in August 1900, when representatives of the company landed and started to erect houses and work the phosphate. But I need not pursue the point, for nothing that I have to decide turns on this initial agreement. It is the licence from the Crown that was the significant document. In addition to making the provisions that I have mentioned, it prohibited any assignment or underletting without the written consent of the Secretary of State for the Colonies, and it provided for the company to pay £50 a year to him for the use of the Crown; and there were various other provisions that I need not recite.

 

On November 28, 1900, the High Commissioner issued a proclamation applying the Pacific Order in Council 1893, and such of the Queen’s Regulations made thereunder as applied to the islands of the Gilbert and Ellice Islands Protectorate, to all persons within Ocean Island, which was thereupon included within the jurisdiction of the resident commissioner and deputy commissioner of the protectorate. Two days later, on November 30, 1900, the High Commissioner made a Queen’s Regulation. In this regulation, the term “Gilbert and Ellice Islands Protectorate” was to include Ocean Island; and the removal of guano and other fertilising substances from waste or unoccupied lands in the protectorate without the prior permission of the High Commissioner or resident commissioner was prohibited. On September 28, 1901, the captain of H.M.S. [*131] Pylades, on Admiralty instructions, hoisted the British flag on Ocean Island, and took possession of Ocean Island in the name of Edward VII. In doing this, the captain read a proclamation stating that the hoisting of the flag showed that the jurisdiction of the resident commissioner and deputy commissioner of the protectorate, as notified by the proclamation of November 28, 1900, extended to Ocean Island.

 

In the meantime, a revised licence dated August 13, 1901, had been issued to the company in place of the first licence dated October 2, 1900. This was for a term of 99 years from January 1, 1901. On August 15, 1902, the Secretary of State gave approval for the assignment of the licence for Ocean Island by the Pacific Islands Co. Ltd. to its newlyformed subsidiary, the Pacific Phosphate Co. Ltd. (which I shall call “the company”). This assignment was soon made. Shortly afterwards, by a deed dated December 31, 1902, the third and final licence was granted. This was in the form of a grant by Edward VII to the company in substitution for the second licence. It conferred an exclusive right to occupy Ocean Island for the purpose of working phosphate deposits for the term of 99 years from January 1, 1902. By clause 2 of the licence the company covenanted to pay to the Secretary of State, for the use of His Majesty, £50 a year for the first four years, and then, in lieu thereof, on or before March 31, 1907, and every subsequent March 31 until and including the year 2,000, “a royalty of 6d. a ton” upon all guano and other fertilising substances exported by the company from the island during the preceding year. There were a number of other terms and provisions, and of these I think I need mention only clause 5. By this the company covenanted that it would properly feed, support and treat all its employees, and “duly respect the persons and rights of other inhabitants of the said island.” This third licence, I may say, is the licence that has remained in force throughout.

 

I can now come forward to November 10, 1915, when the Gilbert and Ellice Islands Order in Council 1915 was made. By that order, the Gilbert and Ellice Islands within the protectorate were annexed to His Majesty’s dominions, and became known as the Gilbert and Ellice Islands Colony. The order made a number of provisions relating to powers, jurisdiction, offices, and so on, which I need not mention at this stage. The order took effect on January 12, 1916. Shortly afterwards, by an Order in Council made on January 27, 1916, and taking effect on May 19, 1916, the boundaries of the Gilbert and Ellice Islands Colony were extended so as to include, inter alia, Ocean Island.

 

I can now summarise the position as follows. Jurisdiction over Ocean Island was obtained peacefully and without any overt act of conquest or cession. It became part of the Crown’s dominions by virtue of the occupation of the island by the company and the hoisting of the flag on May 5, 1900, coupled with the Crown’s licence to the company; and it thereupon became a British settlement under the British Settlements Act 1887. The law officers (Sir Robert Finlay and Sir Edward Carson) so advised on May 16, 1904, and I think they were right. Although on February 29, 1912, the then law officers (Sir Rufus Isaacs and Sir John Simon) disagreed with part of their predecessors’ opinion, that was on another [*132] point. On any footing Ocean Island was part of the Gilbert and Ellice Islands Colony from 1916 onwards. In 1975, I was told, the Gilbert Islands and the Ellice Islands were divided into two separate colonies, with Ocean Island remaining part of the Gilberts. But that, of course, was long after these proceedings had been commenced; and at all material times from 1916 onwards Ocean Island was part of the undivided Gilbert and Ellice Islands Colony. Before that, Ocean Island seems to have been a British possession administered as part of a protectorate. I do not think that any serious issue remains between the parties arising from this constitutional situation.

 

As a colony by settlement, Ocean Island received English law, apart from any relevant native customary law; and this was not affected when in 1916 Ocean Island became a part of the Gilbert and Ellice Islands Colony, a colony by cession. Article 20 of the Pacific Islands Order in Council 1893 provides that subject to the other provisions of the Order, civil and criminal jurisdiction exercisable under the Order are, “so far as circumstances admit,” to be exercised “upon the principles of and in conformity with the substance of the law for the time being in force in and for England....” That language, it is contended, is wide enough to let in any recognised Banaban law; and this is not seriously disputed. What has been disputed is the extent to which the owner of the surface of land on Ocean Island is also the owner of the subjacent minerals, or has any right to dispose of them; and the Attorney-General contends that no such ownership or right has been established. Subject to this, I do not think that it is questioned that in essence English law has at all material times applied to Ocean Island, subject to local statute law.

 

5. The land transactions. The land transactions between the British Phosphate Commissioners and their predecessors, the two companies, on the one hand, and the Banabans on the other hand, may be ranged under seven heads. In setting out the facts, I may say, I shall refer to many dates not because the exact date has any special significance, but in order to facilitate reference to the particular document, and so on.

 

(1) 1900-1913: before the 1913 agreement. First, there was the period from 1900 to 1913, before the 1913 agreement had been made. During this period the company (by which I mean the relevant company at the time) at first entered into many somewhat haphazard transactions with individual Banabans. The island was divided into a large number of small separate plots of land, identifiable by landmarks, in a wide variety of irregular shapes; and most plots were substantially less than an acre in area. Many landowners owned more plots than one; and the Banaban custom of landholding kept the land within the family, so that on the death of a landowner his land would pass to one or more of his children. However, others could readily be adopted so as to take by descent, and so inheritance was not confined to issue of the landowner. At various times this system was described by Europeans as being one of the land being entailed, though this is obviously a very rough analogy.

 

It has long been a matter of dispute how far a landowner could dispose of his land inter vivos; but despite that dispute, in early days a number of [*133] leases and purchases were made from individual landowners. The company in effect made such bargains as could be made with those landowners who were willing to deal with the company, the general pattern being that of freehold sales at about £15 or £16 an acre. At an early stage, however, the Colonial Office drew the company’s attention to the Queen’s Regulations and other legislation which, in brief, prohibited outright purchases of native lands, with minor exceptions, and severely restricted leases of such lands. Under regulations 22 and 23 of the amended and consolidated King’s Regulations 1908, purchases required the approval of the resident commissioner or High Commissioner; they were restricted to plots not exceeding one acre; nobody could buy more than one plot in any one island; and land in cultivation with permanent food-producing crops was excluded. Any conveyance required the endorsement of the resident commissioner as to the vendor’s title, as to the land not being required for his support, and as to the fairness of the contract; and even when the conveyance had been thus endorsed, it might be disallowed by the High Commissioner. These provisions replaced the absolute prohibition on sales which regulation 17 of the King’s Regulations 1903 had imposed.

 

Leases were dealt with by regulation 24. They were restricted to 99 years and to land in any island not exceeding five acres. Furthermore, the lessee, if a non-native, was required to submit the lease to the resident commissioner, who was to make suitable inquiries of the lessor and native authorities. He was to refuse to confirm the lease

 

“if it shall appear that the land sought to be leased is not the property of the proposed lessor, or that the lease had been unfairly obtained, or that the terms are manifestly to the disadvantage of the native lessor, or that there will not be left sufficient land to support the family of the lessor, or that the lease is otherwise contrary to sound public policy.”

 

This was virtually the same as regulation 18 of the King’s Regulations 1903, save that this had contained no five acre limit, and the maximum term had been 21 years. If the resident commissioner confirmed the lease, he was to register it by having a copy entered in a book, indorse it, and charge £1. These and many other provisions of the King’s Regulations were plainly designed to protect the native inhabitants against exploitation.

 

The difficulties for the company resulting from these provisions of the King’s Regulations and other legislation were met in part by a King’s Regulation made on February 18, 1903. This validated 19 specified outright sales to the company that had been made in 1901. For the most part, however, the company sought to avoid the impact of the King’s Regulations for the future by evolving what became known as the “P and T” deeds, the initials standing for “phosphate and trees.” These were documents expressed to be made in consideration of the payment by the company of a lump sum which varied from £6 to £30 per acre. The usual practice was to make an additional payment for any coconut trees on the land, though this was done outside the formal agreement, which remained silent on the matter. The landowner was expressed to sell to [*134] the company all the coconut, pandanus and other trees growing or to be grown on his land, and all the rock and alluvial phosphate that might be found on it, with the right to remove and ship the same within a period which was sometimes five years and sometimes ten.

 

Though expressed to be deeds, the documents were executed under hand only, with the landowner usually affixing his mark in lieu of a signature. The deeds were very short, and often the detailed description of the land was longer than the rest of the deed. I may take one such deed at random. It is dated November 27, 1903, and relates to Nei Benia’s land. The description gives the area, and then continues, “Commencing at peg 1, and proceeding on a bearing of 311� 42' for 72 links to peg 2, thence on a bearing of 323� 20' for 43 links to peg 3...,” and so on, for 12 typewritten lines. A plan on the back shows the 12-sided plot. The word “Nei,” I may say, is a prefix used to denote that Benia was a female; this prefix is used for married and unmarried women alike. Among the Banabans there is not, and never has been, so far as I am aware, any difference between men and women in relation to the ownership of land or any other legal rights; and on marriage a woman has always retained her own name and has not assumed that of her husband. In such matters Ocean Island has never required the statutory reforms which England found necessary in the last century and this.

 

The P & T deeds were thus, it was thought, a solution of the company’s difficulties under the King’s Regulations. Without purchasing the land or taking a lease of it, the company nevertheless acquired the rights that it needed for the extraction of the phosphates. The deeds were registered, at first with the High Commissioner and soon with the resident commissioner. The first of these deeds was registered in April 1904. But acquisitions remained haphazard; the company was still acquiring small individual plots of land, as and when it could, by individual bargains with those landowners who were willing. The result was in some degree unsatisfactory to all concerned. The small island was becoming dotted about with small plots here and there that were being mined. This presented obvious mining difficulties for the company, and could hardly have been welcome to those neighbouring landowners who were not willing to have their land mined. Further, the company had no assurance how much more land would become available for mining. By the end of 1908 the company had worked some 65 acres and had another 135 acres available under P & T deeds; and the annual rate of export of raw phosphate had begun to exceed 200,000 tons. The Colonial Office decided that instead of the resident commissioner merely visiting Ocean Island from time to time (for he was then based on Tarawa) Ocean Island should become the headquarters of the Gilbert and Ellice Islands Protectorate. Thus at the end of 1907 it became a seat of government, and remained so until the resident commissioner left in World War II. The Colonial Office also decided that as from April 1, 1909, the revenue under the Crown licence of 1902 should be paid to the government of the Gilbert and Ellice Islands Protectorate. Early in 1909, if not before, there was an acting resident commissioner in residence on the island.

 

By this time the Banabans were understandably getting alarmed at [*135] the extent of the company’s operations in relation to the size of their island. The Banabans lived in four villages. Tabwewa was near the west coast. Tabiang was near the south-west coast, and at the western end of Home Bay. Ooma was not far from the coast near the centre of the curve of Home Bay, and rather further from Ooma Point (or Sydney Point) which is the southern tip of the island and forms the eastern extremity of Home Bay. Buakonikai was near the summit of the island, a little to the east of centre. All stood on phosphate land, though Buakonikai, in contrast with the others, was in the heart of the land with the greatest depth of phosphate.

 

The Banabans were not surprisingly concerned with their future in relation to the mining. Before 1900, they had been supporting themselves with some difficulty. The average rainfall was desperately small, and in times of drought they had had to collect what water they could from underground caves in the subjacent coral limestone, known as “bangabangas.” They had in the main subsisted on the fruit of coconut, pandanus and almond trees, together with what fish they could catch. In years of drought hundreds had died of starvation when the fruit trees died. The coming of the company had meant that water could be obtained (the company produced it by condensing sea-water), and the money received under P & T deeds and for working for the company enabled them to buy food from the company’s store. In that sense their lot had been improved; certainly their mode of life had greatly changed. But the land on their small island was being replaced at an alarming speed by the barren workings from which phosphate had been extracted: a scattered pattern of 65 acres of worked-out land out of a total of some 1,500 acres must have been striking, and so must the acceleration in the process that had occurred between 1900 and 1908.

 

In April 1909 the acting resident commissioner reported to the High Commissioner that, after allowing for the area occupied by the villages and also the area of the barren coral pinnacles, over one-third of the island was then useless to the Banabans. The future plainly held the grave question whether the company was to stop mining at some point, or whether the Banabans should be persuaded to go and live on some other island; and there was a suggestion that the company should purchase another island, Kuria, to be exchanged for Ocean Island. Questions such as these were being discussed at the time, not least in the Colonial Office minutes; and those minutes began to raise the question whether the P & T deeds were not an attempt to evade regulation 24 of the King’s Regulations 1908. Even as early as this, Ocean Island had been the subject of debate in the House of Commons and discussion in the newspapers. The company was finding increasing difficulty in persuading landowners to part with land near the existing workings; and while some owners contented themselves with asking £100 or £150 for their plots, others flatly refused to make any dispositions.

 

Matters came to a head with a letter dated November 12, 1909, from the resident commissioner to the company. In this, the resident commissioner said that he was unable to see that certain agreements which had been sent to him for registration were in accordance with any [*136] of the existing regulations, and so he could not register them until the High Commissioner had decided the matter. The agreements were evidently P & T deeds. A month later, after discussion with representatives of the company, the resident commissioner proposed that certain areas should be marked off for mining, with enough in them to last the company for another 20 years, and that no mining should take place except in a mining area. Land outside the areas which the company had already acquired, he suggested, should either be sold back to the former owner, or exchanged for land inside a mining area. He proposed that 170 acres should be marked off in addition to the areas already acquired by the company. He also suggested that the company should pay an annual sum to be held in trust for the general benefit of the Banabans, “always having in view the purchase of another island in the Gilbert group and the ultimate transfer of the natives to that island.”

 

The company viewed the general tenor of these proposals with favour, though it wished to make some variations in the terms. Thus for the resident commissioner’s 170 acres the company wished to substitute 300, a figure which was later increased to 500. There was a long period of discussion of the proposals. There were discussions between the company and the Colonial Office, and discussions within the company and within the Colonial Office. The resident commissioner, the High Commissioner and various officials all played their part in the proposals and counter-proposals, understandings and misunderstandings, and agreements and disagreements; and there was at least one official rebuke within the colonial service. Steps were taken, and steps were retraced; and from time to time there were massive recapitulations of the march of events. The Colonial Office was emphatic that there could be no question of removing the Banabans from Ocean Island unless the transfer was most clearly for their benefit and also voluntary in the full sense of the word.

 

I shall not attempt to summarise the ebb and flow of negotiations. The company, as it was entitled to, throughout bargained hard and astutely for its own benefit; but the Colonial Office was showing great concern for the protection of the Banabans, and so was the resident commissioner and, to a somewhat lesser extent, the High Commissioner. Innumerable arguments and contentions emerged from the company, whereas the Colonial Office, the resident commissioner and the High Commissioner, with whom rested the ultimate legislative and administrative power, argued less with the company and more among themselves. On the official side there was an evident concern that no terms should be put before the Banabans for acceptance unless they were considered to be proper and in the best interests of the Banabans. On all sides it was accepted that nothing could be done unless the Banabans agreed.

 

During this period there had been discussions on Ocean Island between the resident commissioner and representatives of the company as to the proposed mining areas. As far back as June 1910 a large meeting of Banabans had unanimously approved the principle of mining areas, and had left the details to the resident commissioner. After many discussions, by the end of 1911 three areas had been agreed, with a total of some [*137] 477 acres. There was a northern area of 171 acres, a central area which. with its extension, was 171.8 acres, and an eastern area of 134 acres. The company was not to be allowed to acquire all the land in these areas: they were to be areas within which future acquisitions could be made by the company up to a total of whatever acreage was finally agreed. In other words, the mining areas were to constitute an “envelope,” as it has been called, within which the company was to be permitted to acquire further land for mining up to the total of the agreed “ration,” so that if (as was the case) the “ration” was less than the land available within the “envelope,” some of the “envelope” would have to be left unmined. In the event, the acquisitions already made by the company in the northern area meant that the new acquisitions would all have to be in the central and eastern areas.

 

By the spring of 1913 the company and the Colonial Office had finally reached agreement. By then nearly 215 acres in all had been the subject of P & T deeds; and of this area, nearly 130 acres remained unworked. On March 14, 1913, the Colonial Office wrote to the company, setting out in 11 numbered paragraphs a recapitulation of the terms that had been agreed. The company had suggested that a draft agreement embodying the terms should be submitted to the company for approval; but the Colonial Office replied that a formal and definite agreement could not conveniently be drawn up until the consent of the native owners had been obtained. In fact, no formal agreement was ever drawn up. By a further letter dated April 11, 1913, the Colonial Office agreed an amendment to the terms set out in its earlier letter, and then on April 23, 1913, the company replied. This reply was not a simple acceptance of the 11 numbered paragraphs in the Colonial Office letter of March 14, but set out nine of these 11 paragraphs in extenso. The two omitted paragraphs related to the prices for goods sold by the company, and the sale of water to the Banabans. In one sense nothing turns on these omissions; but they do go some way towards supporting a contention that was put forward in Ocean Island No. 2. Looked at in terms of offer and acceptance in the law of contract, the exchange of letters has its problems; looked at in terms of an agreement relating to the exercise of governmental powers the difficulties disappear. In fact, the two omitted terms duly appear in the 1913 agreement made between the company and the Banabans.

 

I do not propose to set out in full the 11 numbered paragraphs of the recapitulation in the Colonial Office letter of March 14, 1913; but I must make some reference to them. By paragraph 1, the future mining operations of the company were to be confined to the three mining areas that I have mentioned, with a “ration” of 50 acres in the northern area, 100 acres in the central area, and 100 acres in the eastern area. By paragraph 2, the mining rights in 103 acres of land within the mining areas which had already been acquired by the company under P & T deeds were to be recognised; and the mining rights on unworked land outside the mining areas were, with the consent of the landowners, to be exchangeable for mining rights in equivalent land within the mining areas. There was a time limit on this, which, however, was omitted from [*138] paragraph 2 in the company’s letter. Instead, the company’s letter included a paragraph protesting about this time limit. Paragraph 3 of the Colonial Office letter prescribed that, apart from land exchanged, a price of not more than £60 an acre and not less than £40 an acre should be paid for “the total of 147 acres (more or less) to be purchased,” with a provision for paying any deficiency between the total paid and £6,000 “to the fund for the general benefit of the natives.” The 147 acres, I may say, when added to the 103 acres that the company already had in the mining areas, made up the total of 250 acres that the company was to be allowed. Paragraph 4 then provided that when the lands had been worked out they should revert to the native owners as soon as this could take place without inconvenience to the company’s operations.

 

Paragraph 5 I should set out in full:

 

“That an additional royalty of 6d. per ton be paid by the company on all phosphate shipped from Ocean Island as from July 1, 1912, the royalty to be calculated on the same basis as the existing royalty, viz., on the total tonnage of phosphate exported by the company from the island, the proceeds of this additional royalty to be devoted to the general benefit of the natives.”

 

This is a provision on which considerable argument developed in Ocean Island No. 2. At this stage I propose to say no more than that the original 6d. royalty payable to the Crown had, by this stage, as I have already mentioned, become payable by the company to the government of the Gilbert and Ellice Islands Protectorate; and although paragraph 5 does not in terms specify the payee, it seems plain that the additional royalty, like the original royalty, was to be paid to the same government.

 

Paragraphs 6 and 7 dealt with mining rights in the 250 acres, allowing the company to make up the 250 acres gradually if there was difficulty in getting native owners to sell simultaneously, and permitting mining for the remaining period of the company’s licence, subject to the provision for reverter. Paragraphs 8 and 9 dealt with trees and shrubs. They were not to be cut down on any of the 250 acres on which mining operations were not being conducted. Paragraph 9 read:

 

“That the company shall replant with suitable trees and shrubs any land on which mining operations have been completed, before handing back the land to the owners.”

 

By a letter dated April 11, 1913, the Colonial Office agreed to meet the company’s wishes by inserting between “completed” and “before” the words “at least to the extent to which the land was previously planted.” Paragraphs 10 and 11 of the main letter I have already mentioned.

 

That was the agreement that was ultimately achieved between the company and the Colonial Office. Not until it had been made was the company in a position to proceed with the acquisition of any land from the Banabans. But, in addition, there had to be in existence forms for the individual transactions with the landowners, to take the place of the P & T deeds for the future. By May 1913 the Chief Judicial Commissioner of the High Commission had made a start in drafting these instruments. The Colonial Office then took a hand in the drafting, and on August 13 [*139] sent the company three draft deeds. These became known as the A, B and C deeds respectively. The B deeds, intended for exchanges of land, were of no importance. They ran into difficulties, and I think in the end only one was ever executed. At all events, it was agreed during the hearing of Ocean Island No. 1 that there was no need to consider the B deeds. But the A and C deeds, when finally settled, were used extensively. The A deed was drafted for the case where the company had a P & T deed for the land and was surrendering its rights and interests under that deed for the rights granted by the A deed. The C deed was drafted for cases where there was no existing P & T deed. On August 15 the company made detailed comments on the draft deeds, and on August 23 the Colonial Office sent to the company drafts revised so as to meet the company’s points.

 

A day or two earlier Mr. Eliot, the new resident commissioner, had left London for Fiji and Ocean Island, taking the revised drafts with him. It was he who drew up the form of agreement between the company and the Banabans which was to become the 1913 agreement. The agreement, he said, “embodied the conditions arrived at between the Colonial Office and the company’s board.” The agreement also contained an important group of provisions agreed on Ocean Island between the resident commissioner and representatives of the company who had gone to Ocean Island. These provisions were set out in a letter from the resident commissioner dated November 10, 1913, and the company’s reply dated November 11; and on November 12 the resident commissioner reported the substance of these proposals to the High Commissioner, and sent a copy to the Colonial Office.

 

On December 19, 1913, after the 1913 agreement containing these terms had been signed, the High Commissioner wrote to the Colonial Office, concurring in the resident commissioner’s proposals and recommending approval by the Colonial Office. I think that I should read most of the resident commissioner’s letter to the High Commissioner. After some introductory matters, the resident commissioner wrote:

 

“3. As Your Excellency is aware, the Pacific Phosphate Co. have undertaken to pay the extra 6d. a ton to the proposed Banaban Fund as from July 1, 1912, and I think it probable that I shall require the whole of the first year’s payment, viz., from July 1, 1912, to June 30, 1913, for immediate expenditure, provided that the further leases are first signed. I propose that this money which, according to Mr. Ellis’s calculation, represents a sum of £4,743, should be paid direct to me in the presence of the Banabans, and that it should be drawn out, whenever required, by the Banaban community with the approval of the Native Magistrate and Kaubure of the island, subject to my being satisfied that it was not used for any wasteful purposes. Mr. Ellis agrees to this proposal on behalf of his directors; the company would, of course, benefit by the expenditure of most of this money in the island, though I have no doubt that a portion of it would be used by the Banabans in travelling around the Gilbert Islands, and to this I see no objection. 4. Should I find that the purposes of the proposed trust fund are understood, and deemed satisfactory, I [*140] should not bring forward the above proposal, but it should be borne in mind that the greatest opposition to future leases within the permitted areas will be from the oldest members of the community, and I deem it essential that I should be able to demonstrate to them, by the immediate transfer of this sum for their use, that they will personally benefit, as well as the younger generation, by the early settlement of this business. 5. It will be made clear that no part of this trust money can be touched as from July 1, 1913, without the permission of Your Excellency and the Secretary of State, but that I have no doubt that permission might be obtained to utilize the accruing interest for the payment of an annuity to those who have parted with their lands. 6. I trust Your Excellency may be able to support my action to the Secretary of State if I find it advisable to expedite the final settlement by going beyond the powers given to me, and without further delaying matters by obtaining sanction for this proposal. I am aware that I shall bind the Government by so doing, and that I must incur the full responsibility for such action.”

 

The discussions on Ocean Island began on November 7, 1913, the day that representatives of the company reached the island. From November 7 to 17 there were daily meetings between the resident commissioner and the representatives of the company; and out of these arose the exchange of letters that I have mentioned. On November 18 long public meetings with the Banabans began, as well as separate meetings by the Banabans among themselves. Detailed accounts of the meetings between the resident commissioner and the company on the one hand and the Banabans on the other hand have survived. The proposed agreement was explained and discussed in considerable detail, and many questions and complaints were answered as well. Though the representatives of the company took part, the resident commissioner carried the main burden of the discussions with the Banabans. I think that it is reasonably clear that the resident commissioner did explain to the Banabans the provisions of the agreement relating to the Banaban fund on the general lines set out in his letter of November 12 to the High Commissioner, though he went further in relation to the interest on the fund. Instead of the tentative reference to “permission might be obtained to utilising the accruing interest for the payment of an annuity to those who have parted with their lands,” there was the firm provision that the interest would be utilised thus. One record of the meeting on November 19 records the resident commissioner as telling this to the Banabans, and saying that future generations of Banabans would be the richest natives in the Pacific. He also said that he did not know what would be done with all the money, but the British Government would find a way to expend it in their interests, and would listen to suggestions from them in the matter.

 

At the public meetings a division between the Banabans began to emerge, with Buakonikai and Tabwewa tending to be in favour of the agreement and Tabiang and Ooma against it. On November 28 the resident commission allowed Banabans to begin signing the agreement, [*141] and 72 landowners signed; and within a few days 74 more had signed. On December 10 deputations from Tabiang and Ooma came to the resident commissioner to say they now wanted to accept the terms. At a meeting that day 86 more signed the agreement, and by then 250 landowners were in favour of the agreement and 63 against. Soon a number of others signed the agreement, and in the end it was signed by a total of 258 Banabans.

 

(2) 1913-1920: the 1913 agreement. With the signing of the 1913 agreement comes the second main period. The agreement was the first comprehensive bargain with the Banabans, and it was to govern dealings in phosphate land on Ocean Island until the 1931 transaction. I propose to read the entire agreement, pausing from time to time to make brief comments on its provisions, but leaving any longer discussions until the end. The agreement, with the consequent A and C deeds, is in the forefront of Ocean Island No. 1; in Ocean Island No. 2 it is an important part of the background to the claims based on the 1931 and 1947 transactions.

 

The agreement begins as follows:

 

“Agreement entered into on the under-mentioned days of November and December, in the year 1913, A.D., by us the undersigned landowners and natives of the island of Banaba, and by Albert F. Ellis, local director of the Pacific Phosphate Co., in the presence of E. C. Eliot, His Britannic Majesty’s resident commissioner of this protectorate.”

 

It will be observed that neither the resident commissioner nor any other organ of government is expressed to be a party. It is merely that all concerned signed in the presence of the resident commissioner.

 

The agreement continues:

 

“2. This agreement shall be subject to the fulfilment of the conditions enumerated below, and shall entail on us the obligations herein stated. 3. That land to the extent of 145 acres within the delimited areas shall be acquired by the Pacific Phosphate Co. on the terms laid down by His Majesty’s Government, and which are embodied in the deeds which shall hereafter be signed.”

 

The “delimited areas” are, of course, what has been called the “envelope,” and the deeds in question are the A, B and C deeds.

 

“4. That as soon as each plot of land has been surveyed the owner of such land shall sign the prepared deeds before the resident commissioner on payment being made to him of the purchase price as arranged, namely, at a sum of not more than £60, and not less than £40, per acre, according to the position and quality of the land, or by exchange by mutual consent, also compensation for food-producing trees as has been done in the past under the`Phosphate and Tree Purchase’ agreements.”

 

The Banabans had had it explained to them that the company was offering to pay £60 an acre for land in the central mining area and £40 [*142] in the eastern mining area; the deposits of phosphate were deeper in the central area than in the eastern.

 

“5. That as soon as the deeds have been signed to the extent of eight acres in the central mining area, and eight acres in the eastern mining area, the company will at once comply with the terms agreed upon and which are embodied below, but it is hereby undertaken that as each lot is surveyed, up to the limit of 145 acres aforesaid, we, the landowners concerned, will be prepared to receive our purchase money and sign the deeds. 6. We understand that should we, the Banaban landowners, fail to comply with these conditions, the company would be at liberty to cancel the obligations imposed upon them.”

 

I do not think that I need comment on these two clauses; it is the next five clauses which form the central core of difficulty in the agreement. I shall read them without a break.

 

“7. On the above conditions the company hereby undertakes to hand over to the resident commissioner the whole of the first year’s contributions to the Banaban Fund, namely, from July 1, 1912, to June 30, 1913, which amounts to a sum of £4,734, and that this money shall be devoted to the following uses: – 8. After deducting a sum of £300 to start the annuity fund (at the rate of £150 for the two years 1913 and 1914), the whole of this amount shall be expended for the benefit of the existing Banaban community in any way which may be recommended by them, and agreed to by their Native Magistrate and Kaubure, and subject to the decision of the resident commissioner that such expenditure is equitable and not wasteful. 9. That this sum of £300 reserved out of the total payment of £4,734 shall be used to start the annuity scheme, which scheme is as follows: – 10. For the three years, 1913, 1914, and 1915, a sum of £150 will be available each year, and in the following years this amount will be increased by £150 each year; this represents the simple interest on the yearly sum of £5,000, payable by the company to the Banabans (through the Government) in royalty. That this money shall be used each year for distribution among all Banabans who lease land to the company from this date, in the proportion recommended by the Banabans themselves, and subject to the decision of the resident commissioner that such division is equitable. 11. That this sum of £5,000 is approximate only, and would be subject to increase or decrease, according to the yearly tonnage shipped by the company.”

 

I shall leave these clauses for discussion later. At this stage I merely say that the origin of this group of clauses was not in the correspondence between the Colonial Office and the company, but in the local discussions between the resident commissioner and the representatives of the company in November 1913. The reference in clause 7 to “the first year’s contributions to the Banaban Fund” is a reference not to any existing fund, but to a new fund which by implication was to be established and fed by the new 6d. royalty. I may add that at the meeting with the [*143] Banabans on November 28, 1913, when Mr. Ellis signed the agreement on behalf of the company, he handed to the resident commissioner a cheque for £4,743 with a covering letter. This was to the effect that the cheque should be held until the Banabans had signed the agreement and also had sold to the company eight acres in both the central and eastern areas, and should only be applied on the agreed terms after this had been done.

 

I continue with the agreement:

 

“12. That so soon as the 16 acres of land referred to in paragraph 5 hereof have been leased to the company, the company shall comply with the following conditions from that date, namely: – (a) That they shall return all worked out lands to the original owners, and that they shall replant such lands – whenever possible – with coconuts and other food-bearing trees, both in the lands already worked out and in those to be worked out. (b) That the royalty of 6d. a ton on all phosphate shipped shall be paid to the Government by the company for the Banaban Fund as from July 1, 1912, which includes the first year’s payment of £4,734 referred to in paragraph 7 hereof. (c) That the Banabans shall enjoy the right to cultivate all lands leased by them to the company until the company actually require to work such land, or to put up covered-in areas, or to make railways, etc., over such lands. (d) That the company will adopt a system of uniform prices for all goods sold by them, either to their own employees, or to any natives or other inhabitants of Ocean Island, and pending the arrangement of this matter an immediate reduction in price will be made on many articles as specified on the attached list. (e) That the company shall provide each adult Banaban native with one gallon of fresh water per diem whenever necessary, at the price of three farthings per gallon.” The agreement then ends as follows: “In witness whereof we, the undersigned, have hereby placed our signatures and duly witnessed marks, on the under-mentioned days and months in the year of Our Lord 1913, in the presence of the resident commissioner, at Ocean Island.”

 

There is then the date November 28, 1913. The agreement is signed by Mr. Ellis “per pro” the company, and by 258 Banabans, many signing by a mark, on a range of dates running from November 28 to December 16, 1913. At the end of the signatures there are the words “All the above signatures were affixed in my presence,” and the signature of the resident commissioner.

 

I return to the group of clauses which have given rise to difficulty and argument, clauses 7 to 11. Before I consider these, I must mention clause 12 (b) which, despite its position, really forms a prelude to this group of clauses. It introduces an altogether new feature into the relationship between the Banabans and the company, a royalty of 6d. a ton on all phosphate shipped as from July 1, 1912. This, of course, was quite distinct from the 6d. royalty already payable under the Crown licence of 1902, a royalty which since April 1, 1909, as I have mentioned, had been payable to the government of the Gilbert and Ellice Islands [*144] Protectorate. It was the new royalty which was often referred to as the “additional royalty,” as from the point of view of the company it plainly was. The 1913 agreement was, to some extent, back-dated in its operation. The phosphate year from July 1, 1912, to June 30, 1913, had ended over four months before the agreement was signed, so that the tonnage for that year was already known, and the amount of the royalty for the year had already been ascertained to be the sum of £4,734 mentioned. The amount of the royalties for future years was, of course, unknown, but for the purpose of the agreement, and to facilitate explanation to the Banabans, the amount was taken to be £5,000, with the provision for increase and decrease made by clause 11.

 

By the terms of clause 12 (b) all royalties, including the initial £4,734, were to be “paid to the Government by the company for the Banaban Fund.” No explanation of “the Banaban Fund” in the documents seems to have been thought necessary, beyond what could be gathered from clauses 7 to 12. The royalty was payable on all phosphate shipped since July 1, 1912, irrespective of the plots of land it came from; it was not confined to land newly provided under the 1913 agreement, but extended to phosphate taken from land which the company had already obtained.

 

I can now turn to the effect of clauses 7 to 11. I found these some-what elusive, and by no means easy to comprehend; and more than once during the hearing I had to return to a careful study of them to avoid misunderstandings. I think that their main import is as follows. First, what is established is a single fund, the Banaban Fund. The reference to “the annuity fund” in clause 8 seems to have been a slip for “the annuity scheme”; for under the agreement there never was any separate annuity fund. Second, the Banaban Fund had two quite different functions. One related to the initial payment of £4,734. Of this, £300 was to be used for the annuity scheme. The remaining £4,434 was to be expended “for the benefit of the existing Banaban community” in accordance with clause 8. This, it will be observed, was a “once for all” provision for the first payment alone, with nothing to match it for later years.

 

The other function of the Banaban Fund was to provide money for the annuity scheme. The £300 taken from the first payment of £4,734 provided for the years 1913 and 1914, at the fixed rate of £150 a year. For 1915 and subsequent years, however, two new elements came in. First, the payments were variable with the royalty paid. Thus if in 1915 the royalty were to be £5,000 exactly, £150 would be distributable under the annuity scheme; whereas if the royalty was more than £5,000, or less than £5,000, the annuity payment would be correspondingly more or less. £150 is 3 per cent. of £5,000, and so in effect the annuity payments would be 3 per cent. of the actual royalty paid. Second, from 1915 onwards the annuity payments were to be cumulative. If one assumes royalty payments to be constant at £5,000 each year, the annuity payments would be £150 for 1915. £300 for 1916, £450 for 1917, and so on.

 

The second main feature of these clauses of the 1913 agreement relates to the recipients of the payments. The £4,434 was to be expended [*145] “for the benefit of the existing Banaban community,” in accordance with clause 8; and no particular point arises on this. The annuity scheme, on the other hand, was that “this money” (which must mean the money available for annuities) was to be distributed “among all Banabans who lease land to the company from this date” in accordance with clause 10. No difficulty has arisen before me relating to the mode of distributing this money; but it is noteworthy that the recipients of the annuities were by no means the same as those whose land had given rise to the royalty that produced the annuities. As I have mentioned, the royalty was payable on all phosphate shipped after July 1, 1912. Thus if phosphate had been shipped from A’s land in 1912 or 1913, and A was not one of those who leased land to the company “from this date” (probably November 28, 1913) within clause 10, A would get no annuity, even though his land had helped to produce the royalty; whereas B, who leased land to the company under the 1913 agreement, was entitled to share in the annuity scheme. However, so far as A was concerned, he had struck his bargain with the company before the 1913 agreement was made, and the 6d. a ton royalty was no part of that bargain. The agreement was drafted so as to provide an inducement to Banaban landowners to lease land to the company; and, in a sense, the payment by the company of a royalty in respect of land which they already had was mere bounty. Similar considerations apply to the devotion of the initial £4,434 to the benefit of the existing Banaban community.

 

The third main feature of these clauses of the 1913 agreement is the absence of any provision for the capital of the Banaban Fund. The fund would be increased each year by the royalties of £5,000 a year, more or less, and the notional interest at 3 per cent. on the accumulated royalties would be distributed each year as annuities. Not a word is said about how long this process was to continue, or whether and for what purposes any of the capital of the fund could be expended, apart, of course, from the initial £4,734; this was to go as to £300 for annuities and as to the rest for the benefit of the existing Banaban community. This express provision for the disposition of the first year’s royalty throws into relief the absence of any provision for all subsequent royalties. So far as the 1913 agreement itself was concerned, the accumulated annual royalties were to be held in perpetuity, yielding each year the appropriate annuities for those who leased land to the company “from this date” within clause 10.

 

That leads me to the fourth main feature. “The Government” had important functions under the agreement. One was the receipt of the 6d. royalty payable under the agreement. In clause 10 of the agreement this was expressed in the form of the yearly sum “payable by the company to the Banabans (through the Government) in royalty.” Clause 12 (b) states that the 6d. royalty is to be “paid to the Government by the company for the Banaban Fund.” The latter form of expression seems to me to be the dominant form, so far as the forms conflict. Clause 12 (b) is an operative provision, obliging the company to make the payment, whereas in clause 10 the words are merely exegetical, explaining what the annuity payments of £150 represent. Furthermore, the words [*146] “the Banabans” in clause 10 are somewhat indefinite in meaning, whereas “the Banaban Fund,” though unexplained, represents a more intelligible concept for money which is intended to yield annual payments of annuities. I should also mention the reference in clause 3 to “His Majesty’s Government” in relation to the A and C deeds.

 

In addition to these direct functions, there are a number of other functions which are consigned to a government official, the resident commissioner. He is to witness the A and C deeds (clause 4), he is to receive the initial £4,734 (clause 7), he is to consider whether the expenditure of the £4,434 is “equitable and not wasteful” (clause 8), and he is to consider whether the Banabans’ proposals for dividing the annuities are “equitable” (clause 9). Nevertheless, despite these governmental functions, neither the government nor the resident commissioner was made a party to the 1913 agreement: that was an agreement between the company and the Banabans who signed it, and them alone.

 

There was also what might be called the fifth main feature of these clauses, save that it does not appear in them at all. This was the practice that grew up and was acquiesced in by the 1913 landowners of making payments out of the interest on the fund for the provision and maintenance of various services to the Banabans, such as education, medical services, and so on, with certain other payments, for example, to Banaban elders and for drought relief. Such payments, of course, reduced the sums available for the landowners, but were accepted by them without demur. Despite these payments, by 1930 the balance available for the 1913 landowners provided an income of about £6 a head.

 

I shall have to return to the 1913 agreement both for Ocean Island No. 1 and Ocean Island No. 2; but for the present I need say no more than that in No. 1 the agreement (and in particular clause 12 (a)) is relied upon by the plaintiffs for the obligation imposed on the company to replant the worked-out land with coconut and other food-bearing trees, while in No. 2 it is relied upon by the plaintiffs as helping to establish that prior-to the 1931 transaction the Crown was in a fiduciary position in relation to the Banabans. With that, I can, I think, turn to the A and C deeds, which are mainly of importance in No. 1.

 

The A and C deeds were printed forms, normally completed mainly in typewriting. An original deed was put in evidence as exhibit D.7, and I take this as being typical of the physical condition of the deeds. I think that I ought to set out a specimen of each type of deed. An example of an A deed is the deed made between Naribaua and the company dated March 13, 1916. It is headed with the number allotted to the land concerned, in this case A.233, and the words “Deed for use where there is a licence already existing in respect of the land concerned.” The deed then proceeds:

 

“This deed is made March 13, 1916, between Naribaua his heirs executors or assigns of the first part the Pacific Phosphate Co. Ltd. of London and Melbourne (hereinafter called the company) of the second part and Edward Carlyon Eliot His Majesty’s Resident Commissioner in Ocean Island (hereinafter called the Resident Commissioner) of the third part. Whereas by a deed dated [*147] September 1, 1912, the said Naribaua sold to the company all the cocoanut pandanus and all other trees then growing or that should be grown and all the rock and alluvial phosphate that might be found (with the right to remove the same within the next” [blank] “years) on that piece of land situated at Ooma, Ocean Island as described in the plan on the back of the said deed. And whereas the company has requested the said Naribaua his heirs executors or assigns to extend the said term of” [blank] “years referred to in he said deed which the said Naribaua his heirs executors or assigns has consented to do in the manner and upon the terms and conditions hereinafter appearing and subject to the concurrence of the resident commissioner being obtained to the transaction. And whereas the resident commissioner has agreed to join in this deed for the purpose of signifying his concurrence as aforesaid. Now it is hereby declared as follows: (1) The company hereby surrenders to the said Naribaua his heirs executors or assigns all the rights and interests conferred on it by the said deed of September 1, 1912, to the intent that the said rights and interests may from the date of this deed absolutely cease and determine. (2) (i) The said Naribaua his heirs executors or assigns, hereby grants to the company the right to remove from that piece of land situated at Ooma, Ocean Island the dimensions of which are described in the plan on the back of this deed all rock and alluvial phosphate that may be found therein during the term beginning at the date hereof and ending on December 31, 1999, and the right during the said term to cut down and remove all trees, shrubs, etc., on the said land the cutting down and removing whereof may be necessary (a) for the exercise of any operations actually commenced or immediately contemplated by the company for the purpose of or with a view to extracting any such rock or alluvial phosphate, or (b) to enable the company to construct any railway which may be required for the carrying on of its operations as aforesaid on the said land or any land adjoining the same from which the company has the right to take rock and alluvial phosphate. (ii) Until any such operations are commenced and being carried on the said Naribaua his heirs executors or assigns, his servants and agents shall have free access at all times to the said land for the purpose of cultivating the same and collecting and removing the vegetable produce thereof. (iii) Whenever the said land shall whether before or at the end of the said term cease to be used by the company for the exercise of the rights hereby granted the company shall replant the said land as nearly as possible to the extent to which it was planted at the date of the commencement of the company’s operations under clause I (i) hereof with such indigenous trees and shrubs or either of them as shall be prescribed by the resident commissioner for the time being in Ocean Island and the said lands shall when and as soon as in the opinion of the said resident commissioner this may be without prejudice to the company’s operations as aforesaid revert to and become revested in the said Naribaua his heirs executors or assigns, freed and discharged from all rights [*148] of the company under this deed. In witness whereof the parties hereto have hereunto affixed their signatures this 13th day of March, 1916.”

 

The signatures are then witnessed, and there is a notation by rubber stamp showing that the transaction was registered in the resident commissioner’s office on, in this case, March 15, 1916. There is also a plan with a statement of the area and a description of the boundaries, in the style used for the P & T deeds.

 

I pause there to mention three points. First, in addition to misspelling the grantor’s name in the first recital, this particular deed is obviously imperfect in its failure in the second and third recitals to mention the term of years of the P & T deed which is to be extended. Second, the reference in clause (2) (iii) to the date of commencement of the company’s operations “under clause I (i) hereof” is an obvious slip; the reference should be to “clause (2) (i) hereof.” Probably the slip came about through taking a C deed, where the reference is correct, and then producing an A deed by the insertion of a new clause 1 to effect the surrender, renumbering the former clause 1 so as to make it clause 2, and then forgetting to alter the reference in what had become clause 2 (iii). Nothing, fortunately, turns on it. Nor has anything turned on the third point, that of the A and C deeds being called “deeds” and yet providing for execution (and in fact being executed) under hand only. Perhaps they merely carried on an Ocean Island tradition established by the P & T deeds.

 

I turn to the C deed. The specimen that I have taken is headed “C.101,” with the title “Deed for new plots within the mining areas.” The deed then reads as follows:

 

“This deed is made April 17 between Nei Mimi of the first part the Pacific Islands Phosphate Co. Ltd. of London and Melbourne (hereinafter called the company) of the second part and Edward Carlyon Eliot His Majesty’s resident commissioner in Ocean Island (hereinafter called the resident commissioner) of the third part to record the following transaction: – (1) – (i) In consideration of the sum of £97.11.11 paid to the said Nei Mimi by the company (the receipt whereof the said Nei Mimi hereby acknowledges) the said Nei Mimi hereby grants to the company the right to remove from that piece of land situated at Paukonikai Ocean Island the dimensions of which are described in the plan on the back of this deed, all rock and alluvial phosphate that may be found therein during the term beginning at the date hereof and ending on December 31, 1999, and the right during the said term to cut down and remove all trees shrubs etc. on the said land the cutting down and removing whereof may be necessary (a) for the exercise of any operations actually commenced or immediately contemplated by the company for the purpose of or with a view to extracting any such rock or alluvial phosphate or (b) to enable the company to construct any railway which may be required for the carrying on of its operations as aforesaid on the said land or any land adjoining the same from which the company has the right to take rock and alluvial phosphate. (ii) Until any such operations [*149] are commenced and being carried on the said Nei Mimi his servants and agents shall have free access at all times to the said land for the purpose [of] cultivating the same and collecting and removing the vegetable produce thereof. (iii) Whenever the said land shall whether before or at the end of the said term cease to be used by the company for the exercise of the rights hereby granted the company shall replant the said land as nearly as possible to the extent to which it was planted at the date of the commencement of the company’s operations under clause I (i) hereof with such indigenous trees and shrubs or either of them as shall be prescribed by the resident commissioner for the time being in Ocean Island and the said lands shall when and as soon as in the opinion of the said resident commissioner this may be without prejudice to the company’s operations as aforesaid revert to and become revested in the said Nei Mimi freed and discharged from all rights of the company under this deed. In witness whereof the parties hereto have hereunto affixed their signatures this 17th April, 1914.”

 

The rest of the document is on much the same lines as the A deed that I have set out.

 

It will be observed that in each deed the last subclause (clause (2) (iii) in the A deed and clause (1) (iii) in the C deed) is in identical form, and contains a replanting obligation and a provision for reverter. Both play a prominent part in Ocean Island No. 1. I shall have to return to them later. It will also be observed that the resident commissioner is a party to each deed, though on this the deeds differ somewhat in their terms. In the C deed, the resident commissioner is a party simpliciter, whereas in the A deed it is recited that the landowner has agreed to extend the period stated in his P & T deed subject to the concurrence of the resident commissioner being obtained to the transaction; and it is then recited that the resident commissioner has agreed to join in the deed “for the purpose of signifying his concurrence as aforesaid.” There is also the difference that in the A deed there is no express statement of any consideration, though there is a surrender by the company of its rights under the P & T deed and a grant by the landowner of the right of removal. In the C deed there is an expression of consideration in the payment of the stated sum for the grant of the right of removal.

 

It will also be observed that the last subclause provides for “the resident commissioner for the time being in Ocean Island” to prescribe the indigenous trees and shrubs to be planted, and that the third party to the agreement is the resident commissioner, Mr. Eliot, who was in office at the time. There is nothing to constitute the resident commissioner a corporation, and so, on the face of it, this cannot be more than an agreement by an individual who has long ceased to hold the office of resident commissioner (and is, I think, dead) that whoever is resident commissioner at the relevant time will do the necessary prescribing. There is also a minor difficulty about the words “for the time being in Ocean Island.” At some time during World War II the resident commissioner left Ocean Island, and Ocean Island ceased to be the headquarters of the resident commissioner for the Gilbert and Ellice Islands Colony; these [*150] were established elsewhere in the colony. Thereafter there could thus be said to be no resident commissioner “in” Ocean Island, though there was a resident commissioner “for” Ocean Island, as for the rest of the colony. These are matters that I shall have to consider later.

 

Having described the 1913 agreement and the A and C deeds, I can pass quickly over the next six years. The necessary eight acres in each of the central and eastern mining areas were quickly provided by the Banabans, and large numbers of A and C deeds were duly executed. In the period 1913 to 1922 inclusive I think there were just under 300 in all. All were executed before the British Phosphate Commissioners came on the scene at the end of 1920, save for three C deeds, two of which were executed in June 1921 and the other in January 1922; but these are not directly concerned in the present proceedings. I can now come forward to 1920, when the British Phosphate Commissioners were constituted and took over; and that is the third period.

 

(3) 1920-1931: the British Phosphate Commissioners and the compulsory acquisition. As I have indicated, Ocean Island and Nauru have to a considerable degree been interlinked in relation to phosphate deposits. Before World War I Nauru was a German possession; but the Pacific Phosphate Co. had by contract acquired considerable rights for the working of phosphates there, and during the war British forces occupied the island. After the armistice in 1918, there was much negotiation, and in the end three instruments were executed which have a considerable bearing on the issues before me. These instruments were as follows. First, there was a tripartite agreement dated July 2, 1919, made between “His Majesty’s Government in London, His Majesty’s Government of the Commonwealth of Australia and His Majesty’s Government of the Dominion of New Zealand.” I shall call this the “1919 agreement.” Second, there was a five-part agreement dated June 25, 1920, which I shall call the “1920 agreement.” Third, there was a six-part indenture dated December 31, 1920, which I shall call the “1920 indenture.”

 

On the face of it, the 1919 agreement applied only to Nauru; but as will be seen, the 1920 indenture made articles 9 to 14, inclusive, of the 1919 agreement apply to Ocean Island as well. The 1919 agreement recited that a mandate for the administration of Nauru had been conferred upon the British Empire, and that it was necessary to provide for exercising the mandate and mining the phosphate. It was then stated that the three governments agreed as set out in the following provisions. The administration of the island was to be vested in an administrator; and the Australian Government was to appoint the first administrator, for a term of five years. The powers of the administrator were defined. Then by articles 3 and 4 it was provided that there should be a board of commissioners with three members, one to be appointed by each government, and each was to hold office at the pleasure of the government appointing him. Their remuneration was to be fixed by the three governments, or by a majority of them, and the title to the phosphate deposits on Nauru and all the land, buildings, plant and equipment used for working them was to vest in the commissioners. The rights of the Pacific Phosphate Co. were converted into a claim for compensation at a fair [*151] valuation, to be contributed by the three governments in the proportions they agreed, or in default in the proportions set out in article 14 of the agreement.

 

That brings me to articles 9 to 14, the articles which became applicable to Ocean Island as well as Nauru. I think I should set them out in full.

 

“9. The deposits shall be worked and sold under the direction management and control of the commissioners subject to the terms of this agreement. It shall be the duty of the commissioners to dispose of the phosphates for the purpose of the agricultural requirements of the United Kingdom Australia and New Zealand so far as those requirements extend. 10. The commissioners shall not except with the unanimous consent of the three commissioners sell or supply any phosphates to or for shipment to any country or place other than the United Kingdom Australia or New Zealand.”

 

In the event, very little of the phosphate from either island went to the United Kingdom, largely owing to the distances involved and the discovery of large deposits of phosphate in Morocco. Virtually the whole output went to Australia and, to a lesser extent, New Zealand, though from time to time there were surpluses which were exported to Japan and elsewhere.

 

I continue with the agreement:

 

“11. Phosphates shall be supplied to the United Kingdom Australia and New Zealand at the same f.o.b. price to be fixed by the commissioners on a basis which will cover working expenses cost of management contribution to administrative expenses interest on capital a sinking fund for the redemption of capital and for other purposes unanimously agreed on by the commissioners and other charges. Any phosphates not required by the three governments may be sold by the commissioners at the best price obtainable. 12. All expenses costs and charges shall be debited against receipts and if by reason of sales to countries other than the United Kingdom Australia or New Zealand or by other means or circumstances any surplus funds are accumulated they shall be credited by the commissioners to the three governments in the proportions in which the three governments have contributed under article 8 of this agreement and held by the commissioners in trust for the three governments to such uses as those governments may direct or if so directed by the government for which they are held shall be paid over to that government.”

 

Article 11 established the system whereby phosphate was sold to purchasers in the three countries at cost price, after allowing for interest on capital (which was charged at 6 per cent.) and a sinking fund. Outside sales, on the other hand, were to be at the best price obtainable. In practice, the commissioners established an “f.o.b. equalisation fund,” with a normal level of £100,000, and this provided a cushion whereby profits made in one year could be used to offset losses made in another year. The “phosphate year” ran from July 1 to June 30, and the price to be charged for phosphate was normally fixed in advance for the whole [*152] of a phosphate year. The expenses of the year might, of course, be more or less than the estimate; and another important variable was the quantity of phosphate sold during the year. If the sales were less than the estimate, the overheads would be larger in relation to each ton of phosphate sold, and so the prospects of a loss were increased; and conversely, if more phosphate was sold than was estimated. Furthermore, the operations of the British Phosphate Commissioners on the two islands were for many purposes treated by them as one, so that problems arose in this litigation in segregating the Ocean Island element from the Nauru element, particularly in relation to operating and other costs.

 

Next there is article 13:

 

“There shall be no interference by any of the three governments with the direction management or control of the business of working shipping or selling the phosphates and each of the three governments binds itself not to do or to permit any act or thing contrary to or inconsistent with the terms and purposes of this agreement.”

 

This article established the independence of the British Phosphate Commissioners as against any one or two of the three governments, though not, of course, against all three acting in concert. Finally, there is article 14:

 

“Until the readjustment hereinafter mentioned each of the three governments shall be entitled to an allotment of the following proportions of the phosphates produced or estimated to be produced in each year, namely – United Kingdom 42 per cent. Australia 42 per cent. New Zealand 16 per cent. Provided that such allotment shall be for home consumption for agricultural purposes in the country of allotment and not for export. At the expiration of the period of five years from the coming into force of this agreement and every five years thereafter the basis of allotment shall be readjusted in accordance with the actual requirements of each country. If in any year any of the three governments does not require any portion of its allotment the other governments shall be entitled so far as their requirements for home consumption extend to have that portion allotted among themselves in the proportions of the percentages to which they are entitled as above. Where any proportion of the allotment of one of the governments is not taken up by that government that government shall when the phosphates are sold be credited with the amount of the cost price as fixed by the commissioners under the first paragraph of article 11 but if such phosphates are sold to a purchaser other than one of the governments any profit above the said cost price shall be carried to the surplus fund mentioned in article 12.”

 

I need only say that there never was the readjustment that was contemplated by this article; the percentages remained unchanged throughout.

 

That concludes the articles which were to be applied to both islands. The only other article provided for the agreement to come into force on ratification by the Parliaments of the three countries. The Australian and New Zealand Parliaments ratified the agreement in October 1919 [*153] and the United Kingdom Parliament did so on August 4, 1920, by the Nauru Island Agreement Act 1920.

 

In the meantime, on June 25, 1920, the 1920 agreement had been made. The five parties were His Majesty King George V, the High Commissioners for Australia and New Zealand, Viscount Milner (who was then Secretary of State for the Colonies) and the company. After nearly five pages with over a dozen unnumbered recitals, the agreement provided, in effect, for the three governments (the reference to “government” in the singular in clause 1 is an obvious slip) to purchase from the company for £3.5m. the whole of the company’s Ocean Island and Nauru undertakings, rights and assets as from July 1, 1920, together with the company’s offices in Australia. As might be expected, the agreement included elaborate provisions for the three governments to indemnify the company against a wide range of matters, including claims to royalties, and so on: see clause 5. There were also many other provisions. I need not mention these, apart from clause 17, which provided for the company, as from July 1, 1920, pending completion, to be deemed to be carrying on the undertaking on behalf of the governments.

 

After that agreement had been executed, each of the three governments proceeded to appoint a commissioner, a process which was completed by September 1920: on September 21 the three commissioners held a meeting in London. In that state of affairs, the 1920 indenture came to be executed on December 31, 1920. The six parties were (1) the company; (2) His Majesty King George V; (3) His Majesty the King represented by the High Commissioner for Australia; (4) His Majesty the King represented by the High Commissioner for New Zealand; (5) Viscount Milner, the Secretary of State for the Colonies; and (6) the three first British Phosphate Commissioners, Mr. Dickinson for the United Kingdom, Mr. Collins for Australia and Mr. Ellis for New Zealand. The indenture was expressed to be supplemental to the 1919 agreement. After various recitals (including one which described the 1919 agreement as “the phosphates deposits agreement” and another which called the 1920 agreement “the purchase agreement”) the indenture proceeded to provide that the company, by direction of the three governments, conveyed to the three British Phosphate Commissioners all the company’s assets in respect of Ocean Island and Nauru. By clause 1 (c) these included

 

“The full benefit of all leases tenancies and other rights to or over lands in the said islands under the land deeds or leases made between native landowners of the said islands and the company and belonging to the company and registered in the office of the resident commissioner for the Gilbert and Ellice Islands Colony at Ocean Island aforesaid and in the office of the civil administrator at Nauru for all the respective unexpired residues of the terms of years thereby created and for all the estate and interest of the company in the same premises subject to the payments and royalties thereby assured and reserved and the covenants and conditions therein contained.” Then the habendum of the indenture ran as follows: “To hold all the said premises (subject respectively as aforesaid) unto and to [*154] the use of the present commissioners their heirs executors administrators and assigns according to the nature thereof as joint tenants upon trust and to the intent that the said premises shall at all times hereafter be held by the present commissioners (as such commissioners) and the board of commissioners from time to time hereafter to be duly appointed under the phosphate deposits agreement (hereinafter included in the expression ‘the board of commissioners’) for the purposes and upon the terms and with and subject to the powers and in accordance with the provisions contained in the phosphate deposits agreement and to the intent that the phosphate deposits on the said Ocean Island and the said Island of Nauru shall at all times hereafter be worked sold disposed of and dealt with by the board of commissioners in accordance with the provisions of articles 9 to 14 (both inclusive) of the phosphate deposits agreement and subject also to the agreements and obligations on the part of the board of commissioners and the governments respectively hereinafter contained.” Next there were a number of provisions for indemnity and release. “2. The board of commissioners shall henceforth duly perform and observe all the agreements on the part of the governments and provisions set forth in clauses 3 and 4 of the purchase agreement. 3. The governments and each of them shall at all times hereafter duly observe and perform the agreements by the governments for the indemnity of the company as set forth in clause 5 of the purchase agreement. 4. The governments and each of them hereby release the company from all liability on and after July 1, 1920, to make any further payments of royalty under the provisions of the Ocean Island concession and a letter dated October 15, 1912, addressed by the company to the Under-Secretary of State for the Colonies agreeing to pay a new royalty and from all liability in respect of any breach after July 1, 1920, of any covenant or condition therein contained.”

 

The reference to the letter of October 15, 1912, I should explain, is to a letter in which the company agreed to pay the further royalty of 6d. a ton which in due course became the subject of clause 12 (b) of the 1913 agreement.

 

“5. The board of commissioners and the governments and each of them shall as from and after July 1, 1920, undertake to make all payments and observe and perform all covenants and conditions reserved by and contained in the land-deeds and leases referred to in clause 1 (c) and (d) hereof and shall at all times hereafter keep the company indemnified against all claims demands actions and proceedings by any person firm company or authority in respect thereof or in respect of any breach thereof after the said July 1, 1920.”

 

I can pass over several more clauses, and then there was clause 10. This runs as follows:

 

“And it is hereby declared that on any and every appointment from time to time by any of the said three governments of a new [*155] commissioner under the phosphate deposits agreement in the place of any dead retiring or outgoing commissioner it shall be lawful for such government by a deed to be executed by any Minister of such government to appoint such new commissioner to be a trustee of these presents in the place of such dead retiring or outgoing commissioner (as the case may be) and to make a vesting declaration and do all such acts and things (if any) as may be necessary for vesting the said premises in the board of commissioners under the phosphate deposits agreement for the time being.”

 

At this point I should mention one of the problems that has run through the two cases before me, and especially No. 1. That is the status of the present British Phosphate Commissioners. None of them, of course, was a party to the 1920 transactions: each is a successor to successors to the original commissioners. Though the commissioners were from time to time referred to as a “board,” there never was anything to incorporate them. Indeed, clause 10 of the indenture, with its machinery for the appointment of new commissioners as trustees, and the making of vesting declarations, points against any intention to incorporate them. Yet the provisions for vesting contained in clause 10 seem to have been ignored from the outset. From time to time new commissioners have been appointed, yet all concerned seem to have acted as if the commissioners for the time being automatically succeeded to all the property and all the contractual rights and liabilities of the predecessor commissioners, without any need for assignments, or vesting provisions, or novations, or indemnities, or anything else.

 

The change of ownership from the company to the British Phosphate Commissioners seems to have been effected smoothly enough; but there was a very proper concern on all hands that some explanation should be given to the Banabans. On September 25, 1920, the Colonial Office sent a telegram to the High Commissioner saying that the acting resident commissioner should

 

“make clear to natives that agreement under which board of commissioners will work phosphates on behalf of governments of this country Australia and New Zealand has not conferred any political authority on board or brought about any change in the natives’ relations to the local Administration.”

 

A little earlier, on September 11, 1920, the company’s local manager had written to the acting resident commissioner to say that all the company’s labourers had been informed that the governments had purchased the company’s business on Ocean Island and Nauru, and that the change of ownership made

 

“no difference in the agreements or conditions of employment as the company continues to carry on the management of the island for the present, and at no time will any change be made detrimental to their interests.”

 

On October 18, 1920, the acting resident commissioner reported to the High Commissioner, referring to this action by the company, and [*156] enclosing a copy of the letter of September 11. The acting resident commissioner continued as follows:

 

“5. With reference to your telegram of the 25th ultimo, conveying instructions to me from the Secretary of State to inform the Banabans that the change in the ownership of the company would not affect the natives’ relations to the local Administration and to my telegram of even date, I have the honour to inform you that on the afternoon of the 16th instant I gathered all the Banabans together and informed them as instructed by the Secretary of State in the telegram first above-mentioned. 6. They all seemed perfectly satisfied, merely remarking that they had been aware of the change for a long time past and were quite satisfied about it.”

 

I pause there. The relationship of the company and the commissioners to the employees is one thing; the relationship of the commissioners and the administration to the Banabans generally is another. Both seem to have been dealt with. But the relationship of the individual Banaban landowners to the company, a body capable of perpetual existence, and the replacement of that potentially perpetual body by the individual unincorporated commissioners, is very much another matter; and this seems to have remained unconsidered and unexplained. The three original commissioners, I may say, held office for varying periods. The first New Zealand commissioner, Sir Albert Ellis, continued for over 30 years: the first United Kingdom commissioner, Sir Alwin Dickinson, continued for 10 years: while the first Australian commissioner was replaced within the year of his appointment, in 1920. In all, there have been five New Zealand commissioners, seven United Kingdom commissioners, and eight (which very recently became nine) Australian commissioners; but whatever the changes among the commissioners, the undertaking of the commissioners has been carried on without a break, though, of course, subject to the disruption of war. The company, I should add, was ultimately put into liquidation, and on November 6, 1925, was dissolved.

 

The change made, the British Phosphate Commissioners continued with the extraction of phosphate, exercising all the rights that had been conferred upon the company, and observing all the obligations of the company, apart from those in dispute in this litigation, on which I say nothing at this stage. But the land provided under the 1913 agreement would not last for ever, and gradually the need for further land became more and more pressing. As early as September 28, 1923, the British Phosphate Commissioners were writing to the Colonial Office seeking approval for the acquisition of another 150 acres. From the outset the Banabans were firmly opposed to parting with any more land for phosphate working. Their understanding (or more probably misunderstanding) of what had been said to them prior to the 1913 agreement was that no further land would be taken.

 

I shall not attempt any summary of the ebb and flow of argument, contention, suggestion, proposal, hope and despondency that there was over these years among the Colonial Office, the High Commissioner and the resident commissioner, the British Phosphate Commissioners and the Banabans. Gradually it settled down into a state of affairs where it [*157] became reasonably plain that if mining continued, a time would come when it would be virtually impossible for the Banabans (who then numbered some 550) to continue to live upon Ocean Island, to which they were fiercely and understandably attached. At the same time, the Colonial Office, though making prolonged inquiries about other possible islands for the Banabans, were firmly refusing to contemplate any removal of the Banabans to another island without their full consent. The Banabans were also adamant in their refusal to part with any more land. In the end, their refusal was often expressed in a demand for a payment of “£5 a car.” This in effect was a royalty of £5 a ton; and in 1924 phosphate was being sold for £1.5.0 a ton f.o.b.

 

Many suggestions for meeting the difficulty were considered, including, of course, the offer of better terms to the Banabans. One suggestion was that an undertaking should be proffered that no further land would ever be taken for mining. This was strongly opposed by the British Phosphate Commissioners. An alternative was an undertaking that no more land would be taken for a fixed period such as 20 years, a proposal which the British Phosphate Commissioners, though unwilling to give any undertaking to that effect, found less objectionable. It would, of course, solve nothing; but it would leave the problem for future generations to solve, and something might always turn up.

 

By the end of July 1927 agreement had been reached between the British Phosphate Commissioners, the Colonial Office, and the High Commissioner and resident commissioner as to the terms to be put before the Banabans for the acquisition of 150 acres in the central mining area. The main features of these terms were as follows. £150 was paid for each acre, inclusive of all trees on the land; and in addition to the existing Crown royalty of 6d. per ton, the British Phosphate Commissioners were to pay a royalty of 101�2d. per ton in place of the existing “additional royalty” of 6d. per ton for the Banaban Fund. Of this 101�2d., 2d. was to go to a new fund, the Banaban Provident Fund; and with £20,000 from the existing Banaban Fund, this was to accumulate at compound interest until it reached £175,000. 4d. out of the 101�2d. was to go to the landowners of the new 150 acres and also of the land already alienated, with a maximum of £5,000 per annum. (At a later stage it was suggested that this 4d. should be increased by an addition of 1�4d. per ton for every 1s. by which the f.o.b. price of phosphate exceeded the price for the year beginning July 1, 1927: but this suggestion was never acted upon). Out of the 101�2d., the final 41�2d. (with a maximum of £5,750 per annum) was to be divided so that about £2,000 would go to the government for services to the Banabans in the form of a hospital, education, and so on, and the rest would be divided equally among the entire Banaban population. This 41�2d. could be increased by a further 1�2d. to make 5d., in which case the maximum of £5,750 per annum would become £6,250 per annum: but this possible increase was to be held in reserve and not mentioned to the Banabans initially. In the event the British Phosphate Commissioners’ local representative, Mr. Gaze, preferred the alternative 1�4d. that I have mentioned. There were a number of other details, but as the offer was not accepted, I do not propose to set them out. [*158] On July 25, 1927, the resident commissioner, who had delayed going on leave for the purpose, opened discussions with the Banabans on these terms. The resident commissioner, Mr. Grimble, entered in his diary details of these discussions, which continued throughout August and September; but the pages covering August 16 to September 20 have not survived. There were meetings with individuals, with committees, and with various groups of Banabans. By the end of the first week in August one group had decided that they would sell their land only if they received £5 for every car of phosphate removed, a proposal which was said to have been carried by a large majority. As I have mentioned, this was the equivalent of a royalty of £5 a ton for phosphate which was being sold at an f.o.b. price of barely a quarter of that sum. As before, the demand for such a royalty was more a way of refusing to dispose of any land than a serious proposal for payment.

 

At one stage a proposal for a royalty of 1s. (instead of 101�2d.) and £175 per acre (instead of £150) looked as if it might gain acceptance; and later some of the younger Banabans spoke up for 1s. and £150. But then many women reverted to the demand for £5 a car; and when a body stood firm on a proposal of 1s. 8d., the resident commissioner said that this was an absolutely impossible royalty. In the end some of the landowners agreed that they would accept 1s.

 

By early October 1927, out of the 153 Banabans who owned land within the proposed 150 acres, 62 continued to demand £5 a ton, 12 abstained from discussion, and 79 were willing to sell at varying prices. Of these, only five were willing to accept the terms offered. The others sought sums varying from 1s. plus £500 an acre, or 1s. 8d. plus £150 an acre, down to 1s. plus £150 an acre. After this, there were more discussions; and the British Phosphate Commissioners then brought the Governors-General of Australia and New Zealand into the fray with long telegrams to the Secretary of State for Dominion Affairs. Sir Alwin Dickinson, the United Kingdom commissioner, who was evidently a formidable and pertinacious negotiator, and a ready critic of all who did not agree with his views, maintained a steady and voluminous pressure on the Colonial Office. His object was to obtain firm instructions from the Colonial Office which would secure the phosphate that the British Phosphate Commissioners required on the terms offered by them.

 

By November 1927 the previously scattered references to compulsion, mostly in relation to the suggested removal of the Banabans to another island (suggestions which the Colonial Office continued to reject), were becoming focused on the enactment of legislation to allow compulsory acquisition of the land. By February 3, 1928, the Secretary of State was authorising the preparation of a draft ordinance, suggesting that compensation should be settled by a single arbitrator appointed by him in default of agreement, but with the royalties to be as already agreed between the resident commissioner and Mr. Gaze, the local representative of the British Phosphate Commissioners. By February 14 the Chief Judicial Commissioner of the High Commission had produced a draft ordinance. On March 5 the resident commissioner reported that after protracted meetings the Banabans had silenced those disposed towards [*159] accepting the existing terms, and had decided to sit down and see what happened about their demand for £5 a car. The Colonial Office then decided that the draft ordinance put forward by the High Commission was unsuitable, and that a new draft should be produced in London. Pressure from Australia and New Zealand continued, and there was much discussion of the terms of the draft ordinance.

 

Suddenly, on June 25, 1928, the Banabans executed a volte face. They unanimously asked the resident commissioner to tell the Secretary of State of their sincere regrets for having opposed his advice in the land negotiations, and said that they were ready to accept the terms offered by the British Phosphate Commissioners and approved by the Secretary of State; and they asked the resident commissioner to settle the precise boundaries of the land with them. On August 8 the resident commissioner reported that on July 25 the Banabans had ratified their agreement as to the terms, and on July 27 they had agreed the proposed boundary of the mining area. But then, on the evening of July 27 they had suddenly reopened their opposition to the inclusive price of £150 offered for land and trees. The resident commissioner asked for a month in which to try to reach agreement with the Banabans; and with the assent of the British Phosphate Commissioners this was agreed.

 

While these negotiations had been taking place, discussions on the terms of the draft ordinance had continued; and the British Phosphate Commissioners had been consulted and had commented on the draft. On September 7 the resident commissioner reported that all efforts to persuade the Banabans to honour their pledge had failed, and that there seemed to be no hope of their signing the agreement on the authorised terms. The point of disagreement was that the Banabans wished to be paid for coconut, almond and pandanus trees on the 150 acres in addition to the £150 an acre, instead of that being a price inclusive of trees. The resident commissioner said that if this demand had been made initially he would have advised acceptance: but if it was now to be conceded, there would be every reason to expect the Banabans to demand still further concessions. With this, the negotiations came to an end: and on September 18 the draft ordinance was enacted as the Mining Ordinance 1928. By a proclamation made on December 18, 1928, the ordinance was brought into force on December 20, 1928.

 

In the meantime there had occurred an event which has understand-ably given rise to great concern. On August 5, 1928, Mr. Grimble, the resident commissioner, sent a letter in the Banaban language to the inhabitants of Buakonikai, the village in the centre of the island. This, of course, was just over a week after the Banabans had retracted their agreement to the terms offered. The letter was produced in evidence in Ocean Island No. 1, and an agreed translation was put in to join the agreed bundle of documents in both cases. The translation of what came to be called the Buakonikai letter reads as follows:

 

“To the people of Buakonikai, Greetings, You understand that the Resident Commissioner cannot again discuss with you at present as you have shamed his Important Chief, the chief of the Empire, when he was fully aware of your views and your strong request to him and he [*160] had granted your request and restrained his anger and restored the old rate to you – yet you threw away and trampled upon his kindness. The Chief has given up and so has his servant the Resident Commissioner because you have offended him by rejecting his kindnesses to you. Because of this I am not writing to you in my capacity as Resident Commissioner but I will put my views as from your longstanding friend Mr. Grimble who is truly your father, who has aggrieved you during this frightening day which is pressing upon you when you must choose LIFE or DEATH. I will explain my above statement: –

 

POINTS FOR LIFE. If you sign the agreement here is the life: – (1) Your offence in shaming the Important Chief will be forgiven and you will not be punished; (2) The area of the land to be taken will be well known, that is only 150 acres, that will be part of the agreement; (3) The amount of money to be received will be properly understood and the company will be bound to pay you, that will be part of the agreement.

 

POINTS FOR DEATH. If you do not sign the agreement: – (1) Do you think that your lands will not go? Do not be blind. Your land will be compulsorily acquired for the Empire. If there is no agreement who then will know the area of the lands to be taken? If there is no agreement where will the mining stop? If there is no agreement what lands will remain unmined? I tell you the truth – if there is no agreement the limits of the compulsorily acquired lands on Ocean Island will not be known. (2) And your land will be compulsorily acquired at any old price. How many pence per ton? I do not know. It will not be 101�2d. Far from it. How many pounds per acre? I do not know. It will not be £150. Far from it. What price will be paid for coconut trees cut down outside the area? I know well that it will remain at only £1. Mining will be indiscriminate on your lands and the money you receive will be also indiscriminate. And what will happen to your children and your grandchildren if your lands are chopped up by mining and you have no money in the bank? Therefore because of my great sympathy for you I ask you to consider what I have said now that the day has come when you must choose LIFE or DEATH. There is nothing more to say. If you choose suicide then I am very sorry for you but what more can I do for you as I have done all I can. I am, your loving friend and father, Arthur Grimble.

 

P.S. You will be called to the signing of the agreement by the Resident Commissioner on Tuesday next, August 7, and if everyone signs the agreement, the Banabans will not be punished for shaming the Important Chief and their serious misconduct will be forgiven. If the agreement is not signed consideration will be given to punishing the Banabans. And the destruction of Buakonikai Village must also be considered to make room for mining if there is no agreement.”

 

In considering that letter, one must bear in mind the position of Mr. Grimble at the time. He had been put into a position of great difficulty. All concerned had accepted that it was he who should negotiate with [*161] the Banabans; and for a long while he had been doing this. He was the resident arm of government, yet it was he, and not any officer of the British Phosphate Commissioners, who had been trying to persuade the Banabans to enter into an agreement with the British Phosphate Commissioners on terms which had been negotiated between the Colonial Office and the British Phosphate Commissioners, with, of course, much assistance from him and the High Commissioner. For the purpose of negotiating the agreement Mr. Grimble had postponed the leave to which he was entitled. He was, I understand, to some extent a sick man at the time. The negotiations had dragged on for a long while; they had finally come to nothing, or so it seemed, and then, when they suddenly came to life again, they had as suddenly been halted once more, and, as it turned out, killed. The climate, too, was the climate of Ocean Island, and the year was 1928, when the means of alleviating equatorial climates were not what they are today. One must bear all this in mind, and not least that resident commissioners are human beings. I should also say that the letter seems to me to be wholly out of character for one who was a dedicated colonial servant with a deep affection for the Banabans.

 

Even so, with every allowance made, it is impossible to read the letter without a sense of outrage. The letter makes grievous threats if the inhabitants of Buakonikai do not sign the agreement to sell their property to the British Phosphate Commissioners. Those threats are of unspecified punishment; of the destruction of their village; of the compulsory acquisition of their land for “any old price” and for less than the 101�2d. royalty being offered; and of “indiscriminate” mining on their lands. These threats were made by the man who, though subject to the High Commissioner and the Colonial Office, was the effective governor of the colony.

 

Those threats by a high government officer are bad enough: the future was to make it worse. As I have mentioned, some six weeks later, on September 18, 1928, the Mining Ordinance 1928 was enacted; and under this the royalty to be paid for minerals extracted was to be such “as the resident commissioner may prescribe.” The Ordinance was brought into force on December 20, 1928; and under it the Banaban landowners were to get whatever royalty was prescribed by a resident commissioner who had uttered these threats to the people of Buakonikai, and had made these assertions about the low level of royalty payable under a compulsory acquisition.

 

Now there is nothing to suggest that at any relevant time the High Commissioner or the Colonial Office knew about the Buakonikai letter; nor is it clear when Mr. Grimble first knew that the duty of prescribing a royalty would be his. Indeed, some two and a half years were to go by before on January 12, 1931 (and after an abortive attempt rather over a month earlier), Mr. Grimble finally exercised his statutory power to prescribe the royalty. Long before then he knew about his statutory powers and the position in which he had been put, and in which he had put himself. One question is thus that of the position of a person who, in a proposed transaction between vendors and purchasers, has done all [*162] the bargaining on behalf of the purchasers, and, being in a position of high authority, has uttered grave threats to the vendors in an unsuccessful attempt to persuade them to accept the purchasers’ offer. Can such a person, within three years, properly exercise a statutory power to fix the major part of the consideration on a compulsory acquisition, especially when the threats included a statement that on such an acquisition the royalty will be less than has been offered?

 

I do not think that one has to be a lawyer to see that in such a case the vendors may at least suspect that the decision might not be made with the impartiality and detachment that there ought to be, and that someone who finds himself in such a position ought at least to lay his predicament before higher authority and seek some alternative arrangement. That was not done. Part of the responsibility must be laid at the door of the Colonial Office and the High Commissioner, who had arranged for the resident commissioner to attempt to get the consent of the Banabans to the terms agreed with the British Phosphate Commissioners and who nevertheless put the resident commissioner, with this background of apparent partiality, into the position of prescribing the royalty. This, of course, is quite apart from the Buakonikai letter. For that letter and its consequences, and not least for what ought to have been done (but was not) during the two and a half years between the exasperation of the moment that seems to have produced the letter and the actual prescribing of the royalty, the whole responsibility must be borne by Mr. Grimble. Unfortunately I shall have to come back to this letter in due course.

 

I must now return to the march of events. I had reached the enactment and bringing into force of the Mining Ordinance 1928. Much turns on this, and I must read most of it. It is entitled “An Ordinance to regulate the right to mine and work minerals in the Gilbert and Ellice Islands Colony,” a title which conveys little idea of the main purport of the statute. Section 1 confers the short title, and section 2 defines “minerals” in terms which I need not set out; “phosphates” are expressly included. By section 3:

 

“No person shall work or raise any minerals on or remove any minerals from any lands in the Gilbert and Ellice Islands Colony unless he is authorised to do so by licence from the Crown and subject to such terms and conditions as may be prescribed in the licence.”

 

There is then section 4:

 

“Where the holder of any such licence as in the last preceding section provided does not possess rights over the surface of any piece of land comprised in the licence which are necessary for the purpose of the licence and has been unable to come to an agreement with the owner or owners for the acquisition of the said rights and the Secretary of State for the Colonies deems it expedient in the public interest that the land should be made available to the holder of the licence for the purpose of enabling him to work raise and remove any minerals or for any purpose connected therewith or ancillary thereto and the resident commissioner is satisfied having [*163] regard to all the circumstances (including any royalties payable by the holder of the licence) that the terms offered for the acquisition of the said rights are reasonable it shall be lawful for the resident commissioner to deliver to the owner or owners of the said rights a notice (in such form as may be prescribed by the High Commissioner) of his intention to take possession of the said land and if the terms offered as aforesaid are not accepted by the owner or owners by a date named in the notice the resident commissioner may enter into possession of the said land and the said land shall thereupon be deemed to be Crown land.”

 

This is a section which cries aloud for sub-division, a cry that today is heard more and more often and seems to be heeded less and less. There are in effect four conditions to be satisfied before the section comes into play. These are: (1) that the holder of a mineral licence from the Crown does not have surface rights over a piece of land that are necessary for the purpose of his licence; (2) that he has been unable to come to an agreement with the owner of these rights to acquire them; (3) that the Secretary of State deems it expedient in the public interest that the land should be made available to the licence holder for working minerals; and (4) that the resident commissioner is satisfied that in all the circumstances (including any royalties payable by the licence holder) the terms offered for the acquisition of the surface rights are reasonable.

 

If these four conditions are satisfied, the Ordinance confers a twofold power on the resident commissioner. The first power is to deliver a notice to the owner of the surface rights in the prescribed form, stating the resident commissioner’s intention to take possession of the land, and stating a date for acceptance of the terms offered by the licence holder. The second power is a power to enter into possession of the land; but this can be exercised only if the terms offered by the licence holder have not been accepted by the date stated in the notice. When the resident commissioner enters into possession of the land, it is thereupon deemed to be Crown land.

 

Section 5 deals with the next stage, the process whereby the deemed Crown land is made available to the licence holder:

 

“The resident commissioner may issue to the holder of any such licence as hereinbefore provided at an annual rental not exceeding 2s. 6d. per acre a lease of the said land for such period as may be required for the purposes of the licence subject to payments by the holder of compensation to the original owner or owners assessed by arbitration in such a manner as the Secretary of State for the Colonies may direct and subject to payment of such royalty on any minerals raised removed and exported as the resident commissioner may prescribe.”

 

Before I comment on this, I think I should read section 6 (1). This runs:

 

“In assessing any compensation on any land acquired under this Ordinance there shall be taken into account the market value of the land (exclusive of any increase in the value of such land by reason of the existence thereon of any minerals) and the improvements [*164] thereon reasonable allowance being made for any damage that may be caused by severance and if there be a tenant thereon he shall receive a reasonable compensation for disturbance.”

 

These provisions invite a number of comments. First, as a practical matter, sections 4 and 5 must be regarded as two parts of a single process. There cannot be much point in “issuing” a lease to the licence holder subject to paying compensation and royalty if the licence holder is not willing to accept a lease on such terms. If section 4 was operated but the licence holder refused to accept the proffered lease, land which had been acquired because the licence holder needed it would have become Crown land, and yet there would be no effective provision for the payment of any compensation to the landowner; for all the provisions for payment are intended to be contained in the lease. To operate the statutory powers without an assurance that the licence holder will accept the proposed lease would thus produce a most unsatisfactory result.

 

Second, there is the striking contrast between compensation and royalty in the provisions for the basis of assessment. Compensation is to be assessed by arbitration; and section 6 (1) provides a proper basis for assessment, related to market value, though excluding minerals from the assessment. Royalty, on the other hand, which is to be paid for minerals, is merely to be “such royalty... as the resident commissioner may prescribe.” No standard or basis for prescribing this royalty is laid down: there is no reference to market value or to anything else. Obviously the resident commissioner must do his prescribing with due propriety: but apart from that, the matter is left at large. One approach is to invoke section 4: since the process of compulsion comes into play only if there has been a rejection of terms which, having regard to all the circumstances, including royalties, the resident commissioner is satisfied are “reasonable,” then the royalty prescribed by the resident commissioner under section 5 must also be “reasonable.” That is a slender enough guide: but it is better than nothing.

 

Third, there is the striking contrast between compensation and royalty in the machinery for assessment. The value of surface rights on a tiny and often parched Pacific island, with phosphate being mined nearby, is obviously very much smaller than the value of the many thousands of tons of phosphate beneath the surface. Yet whereas the machinery of arbitration, with its opportunities for making representations and adducing evidence, is provided for the assessment of the lesser sum for surface rights, a bare process of prescription by the resident commissioner, without any of these opportunities and safeguards, is laid down for the assessment of the greater sum for the much more valuable mineral rights. What the sense in this was I have remained unable to discover. The Colonial Office files reveal considerable discussion about what for the Banabans was the relatively unimportant process of arbitration, with questions about whether there was to be an arbitrator or arbitrators, and whether there should be an umpire, and so on: but the important process of the resident commissioner prescribing a royalty remains in comparative oblivion. [*165] I now turn to the last group of provisions that I need to set out verbatim, section 6 (2) and section 7:

 

“6 (2) Any moneys payable by way of compensation or royalty shall be paid to the resident commissioner to be held by him in trust on behalf of the former owner or owners if a native or natives of the colony subject to such directions as the Secretary of State for the Colonies may from time to time give. 7. All moneys payable to any native or natives of the colony in cases where acquisition of rights has been the result of agreement shall be paid to the resident commissioner and shall be held by him in trust on behalf of such native or natives to be used in such manner and subject to such directions as the Secretary of State may from time to time give.”

 

I think at this stage I should say something about these two provisions, which were much discussed in argument. First, they make quite distinct provisions for the fruits of agreement, on the one hand, and the fruits of compulsion, on the other; and it is the case of agreement that I shall consider first. If the holder of a mineral licence (and on Ocean Island that meant the British Phosphate Commissioners) reached agreement with a landowner for mining rights, then there was no need, and no power, for any process of compulsion to be operated under the Ordinance. The agreement might, of course, provide for payment by means of royalties, lump sums, instalments, or anything else that the parties wished. Whatever it was, if the money was payable to a native or natives of the colony (and I need not consider any other case) it had to be paid to the resident commissioner; and it was to be “held by him in trust” on behalf of the native or natives to whom it was payable, subject to the provision relating to the Secretary of State. Unlike section 6 (2), section 7 does not in terms specify “former owner or owners”; but “such native or natives” carries one back to the reference to moneys payable to any native or natives in cases where the acquisition of rights has been the result of agreement, and in any ordinary case that will be the landowners who, by agreement, have parted with the mining rights. The provision relating to the Secretary of State is that the money is “to be used in such manner and subject to such directions as the Secretary of State may from time to time give.” This, though clear enough, is a little lacking in elegance; for although the Secretary of State may of course “give” directions, in the ordinary use of English he can hardly “give” manner.

 

Second, there are the fruits of compulsion. Section 6 (2), with its reference to “compensation or royalty,” is plainly in point. Once again, such money is to be paid to the resident commissioner “to be held by him in trust”; but this time the trust is “on behalf of the former owner or owners,” if a native or natives of the colony. This is to be subject to such directions as the Secretary of State may from time to time give; but this time the phrase “to be used in such manner” is omitted.

 

At that point I pause, as anyone might. The process of compulsion was firmly linked with the attempt to achieve an agreement, and the failure of that attempt: only on that failure was compulsion to come into play. In the present case, the background to compulsion was that [*166] ever since the 1913 agreement, a royalty of 6d. per ton had been paid to the Banaban Fund, with the landowners in effect getting only the interest on that fund. Broadly speaking (I omit details), the proposed new agreement was that in place of that 6d. royalty payable to the Banaban Fund there was to be a royalty of 101�2d. Of this, 4d. was to go to the landowners not only of the new 150 acres, but also of the land already alienated: 2d. was to go to a new Banaban Provident Fund, to be accumulated: and 41�2d. was to go to the government to be used for the general benefit of the entire Banaban population, in the form either of services or payments.

 

That being the offer so strongly commended to the Banabans by the government, the government then proceeded to enact section 6 (2). This provides nothing for the landowners of land already alienated, nothing for the Banaban Provident Fund, nothing for the general benefit of the entire Banaban population, and everything for the landowners whose land is taken under the Ordinance. If the Banabans had known about the Ordinance and had fully understood it, it would have provided every landowner of the 150 acres wanted by the British Phosphate Commissioners with a strong incentive to reject the British Phosphate Commissioners’ offer. “Accept the offer, and you will share with the landowners covered by the 1913 agreement a mere 4d. out of the proffered 101�2d. royalty, with a hope of getting some benefits as a member of the Banaban population. Reject the offer, and you will be entitled to share the entire royalty among yourselves, subject to the directions of the Secretary of State.” Why the legislation took this form I do not understand. The remaining three sections of the Ordinance, I may say, merely lay down penalties for working minerals without a licence and for obstructing licence holders, and provide for the commencement of the Ordinance.

 

I confess that I leave this Ordinance with feelings of some relief, tempered by the realisation that I shall have to return to it. It would be merciful to resist temptation and merely describe it as inept. Thirteen years later a memorandum by the Secretary to the High Commission was to describe the provision in section 6 (2) which carried the money to the landowners instead of to the community as an “error,” and as being contrary to the directions of the Secretary of State. The execution of the Ordinance, too, was attended by no excess of competence, as will be seen. Soon after the final breakdown of the negotiations and the enactment of the Ordinance, Mr. Grimble was at last able to go on his long overdue leave, and an acting resident commissioner was appointed in his place. On December 28, 1928, the acting resident commissioner reported that he had held a meeting of the Banabans the previous day, that the provisions of the Ordinance had been “thoroughly explained to them,” and that copies of the Ordinance had been given to them. To give a thorough explanation would have taxed most men; one can only guess at what the Banabans made of it.

 

Soon the British Phosphate Commissioners were at work preparing the detailed offer which had to be made to the Banabans as a preliminary to the process of compulsion. It gradually emerged as being in essence the previous offer (without the 1�2d. or 1�4d. extras), with minor variations. The possible impact of the terms of the Ordinance on the destination of the [*167] payments seems to have been ignored on all hands. At a meeting with the Banabans on February 14, 1929, the British Phosphate Commissioners offered these slightly varied terms to the Banabans; the Banabans forthwith rejected the offer, and although the British Phosphate Commissioners kept it open for 14 days, the Banabans did not accept it. On April 13 the British Phosphate Commissioners wrote formally to the Colonial Office, asking the Secretary of State to deem it expedient under section 4 of the Ordinance for the 150 acres to be made available to the British Phosphate Commissioners; and on May 6 the Secretary of State did this.

 

By the end of June the High Commission had sent to the acting resident commissioner a draft notice under section 4 relating to the 150 acres, of which, said the High Commission, “you are directed by the Secretary of State to enter into possession”: there was, of course, no such direction. The letter concluded with a reminder of the “importance of adhering strictly to the provisions of the Mining Ordinance.” There was some delay while the British Phosphate Commissioners decided upon the areas of certain ancillary non-mining land that they needed, but by October an area of some 273�4 acres of such land had been identified; and in December the British Phosphate Commissioners were making offers to the landowners for this land. In the middle of the month Mr. Grimble left England to return from leave to Ocean Island. At the end of December the Banabans made a written offer in place of their former demand of £5 a ton. This is not very clear, but I think it was an offer to accept for the mining land 1s. 6d. per ton and £180 an acre, with additional payments for trees. For the non-mining land they sought 3d. per square foot for the land on which the buildings stood, as against the British Phosphate Commissioners’ offer to pay rent at £3 an acre. To this the High Commissioner replied on March 14, 1930, bidding the Banabans to be reasonable.

 

In January 1930, Mr. Grimble, who by then was back on Ocean Island as resident commissioner, submitted a new draft notice to the High Commission, relating to both the mining and the non-mining land; and on February 15 the resident commissioner expressed himself as considering that the terms proposed for the non-mining land were reasonable. On April 11 the Secretary of State informed the British Phosphate Commissioners that he was satisfied that it was expedient in the public interest that the non-mining land should be made available for them. The British Phosphate Commissioners then, on April 23, sent to the Colonial Office a formal offer for both the mining and non-mining land.

 

The offer followed the lines of the previous proposals, the main change being that for the mining land the offer was £60 an acre plus £2 per fully grown coconut tree (and less for partly grown trees) instead of £150 an acre, with nothing for the trees; the change was made to meet what were believed to be the wishes of the Banabans. The annual rent of £3 per acre for non-mining land, too, was simplified for areas under one acre. The total royalty offered was the same 101�2d., but its distribution was amended. The Banaban Provident Fund was to receive 3d. a ton instead of 2d. a ton; and £35,000 instead of £20,000 was to be taken from [*168] the existing Banaban Fund to start the Banaban Provident Fund. Each of these changes, of course, would accelerate the time when the limit of £175,000 would be reached and the British Phosphate Commissioners would cease to pay this royalty. The extra 1d. a ton was found by reducing from 4d. to 3d. the royalty that was to go to the landowners; and the annual maximum payment was correspondingly reduced from £5,000 to £3,750. Throughout there was a bland disregard of the destination for the payments laid down by the Ordinance of 1928, which was, of course, in force.

 

The British Phosphate Commissioners then sent details of the offer to the resident commissioner, saying that before they placed the offer before the Banabans they would be glad to know if he considered it “reasonable”; and on April 30, 1930, the resident commissioner replied, saying that the terms and conditions of the offer were “advantageous to the Banabans.” The word used in section 4 of the Ordinance of 1928 is, of course, “reasonable,” and a month later the resident commissioner was to say that no official consent of the resident commissioner for the purposes of section 4 of the Ordinance had been given. On May 6 the British Phosphate Commissioners put the offer before the Banabans; it was not well received, and on May 12 it was rejected, though the British Phosphate Commissioners kept it open for the full 14 days. By May 15 the High Commissioner was beginning to question the changes in the terms offered which had appeared in the formal offer of April 23, and by May 21 he had sent detailed criticisms to the resident commissioner. Thus the extra £15,000 to be taken from the existing Banaban Fund would save the British Phosphate Commissioners that amount, and the annual maxima were open to the grave objection that increased production by the British Phosphate Commissioners would reduce the rate of royalty. The resident commissioner’s reply was that he had fully considered the matter, and that his view was that the paramount consideration was the speediest possible accumulation of the provident fund.

 

Not surprisingly, this explanation did not satisfy the High Commissioner. He could not understand why the resident commissioner should regard favourably terms offered by the British Phosphate Commissioners which were considerably less favourable to the Banabans than the terms previously offered, when those previous terms had been considered to be the minimum which could be regarded by the government as reasonable. The resident commissioner’s explanations and justification came in an 11-page letter on August 14. The whole emphasis was on the need to have a large provident fund quickly in order to safeguard the Banabans against the consumption of their island, the exhaustion of the phosphates and the possible failure of the phosphate industry. He admitted that the British Phosphate Commissioners would profit from the transfer of the extra £15,000 from the Banaban Fund to the proposed Provident Fund; but he submitted that “the question of relative profits, as between the natives and the commissioners, should not be allowed to obscure the main issue in this matter.” He regarded the financial plight of the race as “being so precarious, and the political consequences of the financial failure being so mortal,” that it was [*169] immaterial whether or not the British Phosphate Commissioners would profit by the transaction.

 

I have found some of the reasoning in this letter baffling; and the criticism of it in a High Commission memorandum of September 21 is cogent. In particular, looked at in a broad sense, the extra £15,000 was already Banaban money, and if there was good reason for it, that money could at any time by legislation be transferred from the Banaban Fund to the Banaban Provident Fund. The main effect of transferring it forthwith would be to reduce by £15,000 the amount which the British Phosphate Commissioners would ultimately pay to the Banabans. (Of course, anything taken from the Banaban Fund would also reduce the amount of capital that was available to produce income for the Banaban landowners under the 1913 agreement.) I find it difficult to resist the sad conclusion that the resident commissioner had not fully appreciated the effect of the revised terms, and having expressed the view that they were advantageous to the Banabans, he felt driven to a process of expost facto self-justification.

 

In the meantime the High Commission had sent to the Colonial Office for approval a draft of the lease to be “issued” by the resident commissioner under the Ordinance to the British Phosphate Commissioners, and the Colonial Office had replied, making a number of amendments. Then on September 27 there was a conference between the High Commissioner, the judicial commissioner, the resident commissioner and representatives of the British Phosphate Commissioners. There was considerable discussion of the process of arbitration, and who should be the arbitrator or arbitrators. In the course of this the High Commissioner expressed the view that the surface rights were not worth anything like £150 an acre. The British Phosphate Commissioners’ representatives stated that the British Phosphate Commissioners would stand by the offer of £150 an acre or £60 plus payment for the trees: the High Commissioner preferred the £150 with no payment for trees.

 

There was also a discussion on royalties. The British Phosphate Commissioners agreed that there should be no maxima and no minima. The High Commissioner also expressed the view that the former offer of a 4d. royalty to the landowners and 2d. to the provident fund was preferable to the revised offer of 3d. to each, but that the 4d. to the landowners should not go to them but should in effect be amalgamated with the 41�2d. which was to be held by the resident commissioner in trust for the Banaban community generally. The effect would be that the total 101�2d. royalty would be split into 2d. for the provident fund and 81�2d. for the Banaban community. The High Commissioner also proposed that the sum to be taken from the Banaban fund to start the provident fund should revert from £35,000 to £20,000. All these proposals were submitted on the same day by telegram to the Colonial Office for approval, and amplified two days later in a long despatch, on parts of which Mr. Mowbray placed great reliance.

 

On October 6 the Secretary of State sent a telegram expressing general approval of the High Commissioner’s proposals, but pointing out that they must be put before the Banabans, and refused, before any notice under section 4 of the Ordinance was delivered. By another [*170] telegram of the same date the Secretary of State pointed out the difficulties that arose in relation to arbitration from the High Commissioner’s expression of the view that it was impossible to place a higher value than £150 an acre on the land. The High Commissioner replied to this latter comment by saying that if the arbitration assessed compensation on actual values the Banabans would be heavy losers, and that they certainly would not ask for arbitration if they understood the situation.

 

On October 11 the British Phosphate Commissioners put the revised offer before the Banabans, but this time they gave them only seven days for acceptance in place of the previous 14. On October 17 the British Phosphate Commissioners wrote to the resident commissioner, informing him that the Banabans had that day refused the offer, and asking him if he would inform the British Phosphate Commissioners whether he considered the terms reasonable and whether he would proceed under section 4 of the Ordinance. However, the Colonial Office then told the British Phosphate Commissioners that the offer must remain open for not less than 14 days before the resident commissioner was requested to deliver a section 4 notice.

 

In the meantime, the resident commissioner had acted on the request of the British Phosphate Commissioners. On October 18, after a meeting with the Banabans at which he “very strongly” advised them to accept the terms offered, he issued a section 4 notice naming October 25 as the date of “resumption” of the land by the Crown if the terms were not accepted; and copies of the notice were served on individual landowners. The resident commissioner suggested to the High Commissioner that a week was reasonable and that the Banabans themselves were impatient. But the High Commissioner refused to authorise any departure from the procedure laid down by the Secretary of State. He stated that the offer must remain open for 14 days, that is, up to October 25; and on October 23 the resident commissioner told the Banabans that the notice of October 18 was cancelled. The British Phosphate Commissioners then, on October 27, informed the Banabans that the offer should have been left open until October 25 and asked them if they would accept it; and they refused. Thereupon the British Phosphate Commissioners again wrote to the resident commissioner asking if he considered the terms reasonable, and whether he was able to proceed under section 4. The resident commissioner replied the same day: he again abjured the statutory word “reasonable” and stated that he considered the terms “advantageous to the Banabans,” adding that he was prepared to proceed under section 4.

 

The next day the resident commissioner issued a notice to the Banabans under section 4, dated October 27, 1930. This stated his intention to enter into possession of the two areas of 150 and 273�4 acres of land on November 4 unless the Banabans accepted the terms offered to them in an attached notice. These terms set out the revised version of the terms, with 81�2d. of the 101�2d. royalty being expressed to be held in trust by the resident commissioner for the benefit of the Banabans. The notice also contained a statement that the resident commissioner was satisfied that the terms offered were “reasonable.” [*171] By November 1 the High Commissioner and the Colonial Office had agreed that if the terms were not accepted, the resident commissioner should proceed to take possession. They also agreed that he should then hand over the land to the British Phosphate Commissioners forthwith on the understanding that the form of lease, which was still in draft, would be completed as soon as possible. On November 5 the resident commissioner accordingly issued a second notice to the Banabans, stating that he did that day enter into possession of the 150 and 273�4 acres, and declaring the lands in question to be Crown lands within the meaning of section 4.

 

In the meantime a draft lease had been settled by the Chief Judicial Commissioner; and on November 13 the British Phosphate Commissioners wrote to the resident commissioner, stating that they were prepared to give a formal written undertaking that the new scale of royalties would be brought into force as soon as the land was handed over to them, and that they would execute a lease as soon as it was agreed with the Colonial Office. On November 18 the resident commissioner sent the High Commissioner a convenient summary of the steps taken up to November 5; and the next day the British Phosphate Commissioners gave the resident commissioner their formal written undertaking in the terms of their letter of November 13. On November 24 the resident commissioner wrote to the British Phosphate Commissioners, saying that he had the honour to hand over the 150 acres of mining land to the commissioners as from that day on the footing stated in their undertaking. The 273�4 acres of non-mining land was not mentioned, as the resident commissioner considered that the handing over of the mining land alone would suffice to bring into play the new rate of royalty.

 

The resident commissioner then, on December 5, 1930, issued a proclamation prescribing the royalties that the British Phosphate Commissioners were to pay as from November 24. This was destined to be replaced by another proclamation on January 12, 1931, and so I shall not refer to it in any detail. It was in terms of the 2d. royalty for the Banaban Provident Fund, which was to be accumulated at compound interest with £20,000 from the Banaban Fund until the end of the year in which the principal reached £175,000, and the 81�2d. royalty, which was “to be held in trust by the resident commissioner for the benefit of the Banabans.”

 

By December 12 further difficulties had appeared. The resident commissioner sent a telegram to the High Commissioner saying that he was convinced that the notices issued by him were defective, in that the names of many landowners were omitted, and other land was set down as being owned by the wrong persons. He therefore proposed to issue new notices. The British Phosphate Commissioners had, he said, done no act of ownership on the land handed over on November 24. On December 17 the High Commissioner approved this proposal, though warning the resident commissioner that a full period of 14 days’ notice should be given. On December 22 the resident commissioner issued 244 amended notices in respect of both the 150 acres and the 273�4 acres, covering 368 parcels of land, and specifying January 5, 1931, as the date [*172] of entry by the Crown. It was in fact on January 10, 1931, that the resident commissioner gave the landowners written notice of entry for both the 150 acres and the 273�4 acres.

 

Two days later, on January 12, 1931, the resident commissioner issued a proclamation prescribing the royalties under the Ordinance of 1928, in place of the proclamation of December 5, 1930. After a number of recitals, including a recital about the Ordinance and a recital that the resident commissioner was satisfied that the terms offered by the British Phosphate Commissioners were reasonable, the proclamation states:

 

“Now therefore by virtue of the authority vested in me as aforesaid, I do hereby order and proclaim that from and including January 12, 1931, the British Phosphate Commissioners shall pay, in respect of all phosphate bearing rock or other phosphate bearing substance raised, removed and exported from Ocean Island the following royalties, that is to say (i) 2d. per ton to be credited to a fund to be termed ‘the Banaban Provident Fund’ to continue to be paid until the end of the quarterly period during which the Banaban Provident Fund, accumulating at compound interest, shall have reached a total of £175,000 and thereafter to cease; (ii) 81�2d. per ton to be held in trust on behalf of the Banaban community generally to be held and used or expended in such manner as the Secretary of State for the Colonies may from time to time direct; such royalties to be paid on all phosphate shipped from Ocean Island from the date on which the land hereby demised was made available to the lessees, that is to say, January 12, 1931.”

 

It will be observed that, unlike the previous version, no mention is made of the £20,000 to be taken from the Banaban Fund, so that on the face of it the British Phosphate Commissioners would ultimately have to pay £20,000 more before their liability to pay the 2d. royalty ceased. The point was in fact dealt with on January 21, 1931, by the High Commissioner instructing the resident commissioner to transfer £20,000 to the provident fund and to inform the British Phosphate Commissioners. At the time the Banaban Fund consisted of securities which had cost £32,000, and £40,000 in cash. It will be observed that as regards the 81�2d. the resident commissioner has disappeared, and the Secretary of State has been inserted: instead of the money being “held in trust by the resident commissioner for the benefit of the Banabans,” it is to be “held in trust” (without specifying by whom) “on behalf of the Banaban community generally to be held and used or expended in such manner as the Secretary of State for the Colonies may from time to time direct.”

 

On the same date as the proclamation, January 12, 1931, the lease was executed. By then there had been incorporated in it the various amendments that had been made in London and the Pacific. The lease was expressed to be made between “the resident commissioner of the Gilbert and Ellice Islands Colony” and “the British Phosphate Commissioners.” By it, the resident commissioner demised to the British Phosphate Commissioners both the 150 and 273�4 acres for a term of 69 years from January 1, 1931. In accordance with section 5 of the [*173] Ordinance of 1928, the lease provided for the annual payment of 2s. 6d. per acre rent to the resident commissioner (or to someone authorised by him) for the use of the government of the Gilbert and Ellice Islands Colony. It provided for the British Phosphate Commissioners to pay to the resident commissioner (or to someone authorised by him) “upon trust in accordance with the provisions of the Mining Ordinance 1928 such sums as may be assessed by arbitration” held in such manner as the Secretary of State might direct. It then provided for the payment of the royalties of 2d. and 81�2d. in terms which were identical with the terms of the proclamation of January 12, 1931, that I have set out above.

 

I pause at that point. The Ordinance of 1928 is no lengthy enactment: its 10 sections occupy little more than a page and a half of print. It has, indeed, a number of difficulties; but it is manifestly an enactment authorising the compulsory acquisition of land. The general import of the words in section 6 (2) which run “Any moneys payable by way of compensation or royalty shall be paid to the resident commissioner to be held by him in trust on behalf of the former owner or owners...” is not very difficult to gather. Furthermore, during the whole of this protracted process of compulsory acquisition, all concerned must have made frequent reference to the Ordinance. The lease, indeed, in terms provided for the compensation under the arbitration to be held in trust in accordance with the provisions of the Ordinance of 1928.

 

Despite this, the royalty was treated quite differently. Throughout, all concerned seemed to have been content to arrange to dispose of it by agreement and proclamation and lease as if the rights given by the Ordinance of 1928 to the former owner or owners could and should be ignored. The transfer of £20,000 from the Banaban fund to the new Banaban Provident Fund of course reduced the capital which had yielded income for the landowners under the 1913 agreement. Further, the 4d. royalty that had originally been intended for the landowners under the earlier proposals for the disposition of the 101�2d. royalty had disappeared, being swallowed up in the 8d. royalty for the benefit of the Banaban community. I may add that when in May 1933 the High Commissioner inquired when the £20,000 had been transferred to the new provident fund, the resident commissioner’s answer was that this was done in February 1931, apart from £1,200 which had not been transferred until April 1931.

 

I can pass over the arbitration on compensation quite shortly. The offer of £150 an acre was obviously greatly in excess of the market value of the land devoid of mineral rights. The High Commissioner had plainly been perfectly right in his view on this, though it was doubtless injudicious of him to speak of it in the way that he did. Considerable negotiations had been going on, and in the end the Secretary of State had appointed an experienced colonial servant in the Pacific (though from outside the Gilbert and Ellice Islands Colony), a Mr. J. S. Neill, to act as arbitrator for the Banabans. Mr. H. B. Maynard, who within three years was to become the British Phosphate Commissioners’ manager on Ocean Island, was the arbitrator for the British Phosphate Commissioners.

 

The arbitrators gave notice that they would proceed to assess the compensation on January 27, 1931; and three days earlier Mr. Neill met [*174] the Banabans. He gave them a detailed explanation of what was involved, and then there was a discussion, consisting of questions by the Banabans and answers by Mr. Neill. The Banabans took part in the hearing on January 27; and then, on January 30, the arbitrators issued their award. This was in terms of the offer made by the British Phosphate Commissioners, that is, £150 per acre for mining land, inclusive of trees, and rent for other land at the rate of £3 per year per acre (with smaller sums for small units), and a scheme of payment for trees cut down. The next day Mr. Neill sent a long report of the arbitration to the High Commissioner, stating, inter alia, that the terms offered and awarded were clearly excessive, and that he had agreed to the award as he was getting for the Banabans a much larger sum than he could have pressed for.

 

(4) 1931-1937: the funds. With the process of compulsory acquisition complete, I can come forward to the aftermath. The fourth period covers 1931 to 1937. By way of prelude, I should refer to a proposal that the resident commissioner made to the High Commissioner on December 17, 1930, shortly before the final stages of the compulsory acquisition. The resident commissioner recommended that a Banaban trust officer should be appointed

 

“for the special purpose of guarding the interests and guiding the development of the Banaban race”; for “the task of trusteeship for the Banabans has assumed such substantive importance that it can be no longer safely handled as one of the numerous functions annexed to the office of resident commissioner.”

 

The resident commissioner thought that the officer selected should be a man of legal training, as many aspects of the Banaban situation put the resident commissioner in the position of needing legal advice which was not then available. There was some discussion of what was involved in relation to substantial sums of money on the one hand and schemes for improving education, medical facilities, housing and so on, on the other hand. On February 27, 1931, the resident commissioner submitted a valuable 15-page memorandum dealing with the administration of

 

“Banaban royalties and other trust moneys paid to the resident commissioner by the British Phosphate Commission under section 6 (2) of the Mining Ordinance 1928.”

 

One feature of this document is the emphasis put on the contractual right of the Banaban landowners under the 1913 agreement to receive the interest on the Banaban Fund. In 1930, about £1,550 was distributable, giving each landowner an average annual income of £6. The removal of £20,000 from the Banaban Fund to start the Banaban Provident Fund would, of course, greatly reduce the interest that was distributable among these landowners. According to the resident commissioner, only about £18,000 would be left in the Banaban Fund, though another memorandum received by the High Commissioner on March 27, 1931, which appears to be the work of Mr. Neill, the arbitrator, states that the amount was about £26,000. Ultimately it emerged as being a little over £24,000. Such a sum would not support an annual payment of £1,550, and the resident commissioner recommended that the deficiency should be made up out [*175] of the royalties payable under the 1931 transaction, and that the payments to the 1913 landowners should thus be stabilised at £1,550. There were 260 of these, and instead of an exactly proportionate division of the £1,550, the resident commissioner recommended an annual payment of £6 a head to all of them. He referred to these payments as “annuities.”

 

That was not all. The resident commissioner further recommended that the annuities of £6 a head should be extended so as to include every other person born a Banaban by descent through either father or mother. The resident commissioner said:

 

“It would be invidious and unfair to grant annuities to the 1913 landowners, and refuse the same privilege to those whose land was alienated before 1913, or to those who have been expropriated this year; and since all these classes will claim the right to draw annuities when still other owners alienate their land, they cannot exclude such future alienators from a share of the advantages at present obtaining.”

 

As there were some 530 Banabans, £6 a head would mean about £3,200 a year; and this was to be paid out of royalties.

 

I pause at that point; for it illustrates the official approach at that time. It would be charitable to call it flexible. Under the 1913 agreement the Banaban Fund was producing income which went to the 1913 landowners. £20,000 was taken out of that fund to start the provident fund, and so the 1913 landowners lost the income from that £20,000. However, they were to be recompensed out of the royalties payable in respect of the 1931 land, royalties which by statute were to be held in trust for the 1931 landowners, but which by proclamation and by contract were to be held in trust for the Banaban community generally. (I think the resident commissioner’s recommendation was directed to the 81�2d. royalty and not the 2d. royalty). However, those royalties were also to provide annuities for all other Banabans. Those who had alienated their land before 1913, and perhaps for 20 years or more had been getting nothing, were to share equally in the fruits provided by the 1931 lands. Those who still had all their land were to get the same. Large landowners, small landowners, owners of no land, all were to be provided for equally out of the 150 acres taken in 1931. As a process of administering property rights under enforceable trusts, comment is superfluous. As a process of wise government and social justice, there is much to be said for it, though of course in this sphere there is ample scope for argument.

 

Another feature of the resident commissioner’s memorandum was that he pointed out that there was a conflict of principle between the Banaban custom of land holding and the payment of lump sums to individual landowners for surface rights. Under Banaban custom, a Banaban’s land will of necessity normally descend within his family. Within this principle the landowner has considerable liberty of action. He may divide his land among his children in such proportions as he wishes, irrespective of sex or age; and he may by adoption add to those who are considered his children. In certain limited instances the land might pass out of his family. Thus a landowner whose kindred refused to look after him in sickness or old age might give land to someone who [*176] did care for him. Another example, which later was to be denied recognition by the Native Lands Commission, was where land was taken from a man to provide compensation for a girl whom he had jilted. But subject to that, the land was to stay in the family. The resident commissioner said that the Banaban “holds his land in fee tail to the extent that the succession is reserved generally to his family group”; and if one disregards English eccentricities such as barring the entail, this description will do well enough. The payment of a lump sum to an individual landowner for the surface rights in his land, enabling him to spend any or all of the money and leave none for his family, would thus contravene the Banaban system of land holding; and the resident commissioner said that

 

“the money should have been invested in trust for each landowner with remainder to his or her customary heirs or successors. The interest only should have been made available for expenditure by successive holders.”

 

At this, an English lawyer’s thoughts will turn to the principle of capital money under the Settled Land Act 1925. In relation to the £150 per acre for 150 acres (a total of £22,500) payable as compensation to some 160 owners under the compulsory acquisition, the resident commissioner accordingly recommended that the money should be deposited in trust in the local savings bank, and that only the interest should be paid to successive holders. He also advised that a suitable system of registration and procedure, based upon custom, should be authorised by law for the regulation of the scheme.

 

A third feature of the resident commissioner’s memorandum is that it drew attention to something that all concerned seemed to have been ignoring. This was the conflict on the destination of the royalties that there was between the Ordinance on the one hand and the scheme agreed by the resident commissioner and all others concerned except the Banabans, and set out in the proclamation and lease. The resident commissioner observed that a change in the law would presumably be necessary to validate the use of the royalty for general communal purposes; and he recommended the change.

 

There is much more in the resident commissioner’s memorandum which I do not think I need discuss, especially in relation to the nonmining land. There is also the memorandum, apparently by Mr. Neill, that I have already mentioned; and in this the residue of the Banaban Fund, after losing the £20,000 to the provident fund, is dubbed the “Common Fund.” I shall not discuss this in detail. It supports the view that every Banaban should receive an annual allowance, and that the residue of the royalty payments should be expended under government control in services for the “public benefit,” to be interpreted in a liberal spirit. On May 8, 1931, the High Commissioner sent a copy of this and the resident commissioner’s memorandum to the Colonial Office.

 

In February 1931 the British Phosphate Commissioners began to survey the land compulsorily acquired; and at once they encountered opposition from the Banabans. It is plain that the whole process had come as a shock to the Banabans; and they were resentful and suspicious [*177] of all concerned. Indeed, in a telegram to the High Commissioner the resident commissioner reported that his presence on the island was a hindrance to a peaceful settlement, and that the Banabans would only realise the facts if the case already put to them were to be re-stated by a new resident commissioner appointed from elsewhere. But the High Commissioner did not think that the resident commissioner should be replaced, and said that steps should be taken under section 9 of the Ordinance to ensure that the British Phosphate Commissioners had peaceful possession. Opposition continued through March, April and May; but in the end the actions of the resident commissioner, aided at times by the police, resulted in matters settling down.

 

In July 1931, Sir Murchison Fletcher, the High Commissioner, visited Ocean Island. He held office as High Commissioner, I may say, from November 1929 until May 1936. He discussed the resident commissioner’s memorandum of February 27, 1931, with him, and on July 29 he met the Banabans. They put their grievances before him, and he then addressed them. In the course of this address he is reported as saying that it was the rule generally that the surface of land belonged to the owner, but

 

“any minerals under the land belonged to the government which can do what it pleases with them. The surface owners had not planted the minerals nor were they responsible for them, therefore they belonged to the Crown.”

 

I mention this merely to dispose of it. Whatever may be said about the logic of the proposition, it is clear that no claim to Crown ownership of the phosphates is now made. Mr. Vinelott was quite explicit on that. Apart from a few sporadic statements in minutes and so on, at long intervals, Sir Murchison was on his own in making this assertion, for which I can see no support at all. Indeed, a letter by Sir Murchison himself dated June 2, 1933, is hard to reconcile with any theory of Crown ownership. Whatever difficulties there are in determining the nature and quality of the ownership of land by the Banabans on Ocean Island, they do not include any claim by the Crown to ownership of the phosphate. I speak only of phosphate and say nothing of other minerals, and in particular of gold and silver: for happily such matters are not before me.

 

On March 7, 1932, the newly appointed Native Lands Commissioner, Mr. H. E. Maude (who later, as Professor Maude, was to give evidence before me in Ocean Island No. 2), reported to the resident commissioner on the proceedings of the Native Lands Commission under the Gilbert and Ellice Native Lands Ordinance 1922. This body included four Banabans from each of the four village districts on the island; and it sat in the villages successively from October 5, 1931, until March 7, 1932. A large number of claims were investigated, and in the end 2,479 parcels of land were registered, and their ownership and boundaries settled. These registers would have been invaluable in this litigation, but unhappily they were destroyed during the Japanese occupation of the island. The report had a number of enclosures dealing with matters such as the conveyances which were and those which were not recognised by the commission, in [*178] the sense that the commission recommended that they were not to be recognised for the future. There was also a draft ordinance to regulate the inheritance and conveyance of lands, to give effect to the recommendations in the report. On May 27 the resident commissioner sent the report to the High Commissioner, with an amplified draft of the ordinance.

 

On March 21, soon after Mr. Maude made his report, there was a long High Commission minute discussing the Banaban funds in relation to a despatch that the High Commissioner had sent to the Colonial Office on September 29, 1930, and also the resident commissioner’s memorandum of February 27, 1931. The minute took a number of the points of difficulty that I have commented on, particularly in relation to the various departures from what appeared to be the rights of the various landowners. These included the 1913 landowners getting royalty on land acquired by the British Phosphate Commissioners before the 1913 agreement, and on the other hand having the fund which produced the interest that they received, the Banaban Fund, depleted by expenditure for the general benefit of the Banabans.

 

In August the Banabans presented a petition (which was treated as being a petition to the Secretary of State) complaining of the 1931 transaction; and they repeated this in November. On April 8, 1933, the Secretary of State requested the High Commissioner to give the Banabans a written or oral reply as he thought best. On September 19 the senior administrative officer to the resident commissioner sent the Native Magistrate a written reply, pointing out, inter alia, that the arbitration had been in accordance with the law; and the Native Magistrate was asked to call a meeting of the Banabans, and to inform them of the reply. This was done, and on October 26 five members of what was known as the Banaban committee saw the senior administrative officer about the reply. Finally, on March 19, 1934, the Banabans told the High Commissioner that, though heartbroken, they would loyally accept the final decision that the Secretary of State had made.

 

In October 1932, Mr. Neill had submitted another long memorandum on the Banaban funds, largely following the resident commissioner’s recommendations, but explicitly recommending that the residue of the original Banaban Fund should be transferred to the new Common Fund, that is, the fund to be fed by the 81�2d. royalty. The Colonial Office had not yet spoken on this subject; and on October 18, 1932, the High Commissioner wrote to the Colonial Office. He enclosed a number of documents, including a copy of Mr. Neill’s latest memorandum, and a note of the discussion with the Banabans that the High Commissioner had had in July 1931. The High Commissioner suggested that as the resident commissioner, Mr. Grimble, was in England, the Colonial Office might wish to discuss Mr. Neill’s proposals with him. The urgency, said the High Commissioner, was that the Banabans who had disclosed the boundaries of their land within the 150 acres should receive payment of interest on the sums paid for surface rights. The object was to encourage those Banabans who were still refusing to disclose their boundaries to the British Phosphate Commissioners to make this disclosure.

 

The Colonial Office reply on December 17, 1932, was to approve payment of the interest on the £22,500 until June 30, 1932, or, if that would [*179] give an excessive sum to any individual, until the end of 1931. On the other matters the Colonial Office asked the High Commissioner for his recommendations: Mr. Grimble was ill and not available for consultation. On April 15, 1933, the Banabans signed a complaint, but stated that they had decided to disclose the bounds of their lands because of their love for them, and so that they be not forgotten; and on May 2 they began to do as they had said.

 

On March 7, 1933, the acting High Commissioner sent to the Colonial Office his recommendations, made on the assumption that the terms of the 1913 agreement had been superseded, and that the propriety of past payments from the Banaban Fund was not to be opened in the light of the 1913 agreement. Put shortly, his recommendations were, first, to keep the balance of the old Banaban Fund separately as a reserve fund, either adding the interest to capital or crediting it to the new Banaban Common Fund. Second, the new Banaban Common Fund was to provide an annuity of £6 for all members of the Banaban community, and was to bear the cost of maintaining recognised Banaban community services, and any additional services agreed by the Banabans and approved by the High Commissioner. But a warning was added that landowners might sooner or later seek a judicial decision on the disposal of the Banaban Fund, in view of section 6 (2) of the Ordinance of 1928; and it was recommended that steps to guard against this should if possible be taken. Third, the acting High Commissioner assumed that the Colonial Office had approved the principle of the compensation paid for surface rights being held in permanent trust for the landowners and their heirs, who would get only the interest. Rents and compensation for trees should be paid to the landowners, as representing the annual produce of the land.

 

In December 1933 there was a new resident commissioner in place of Mr. Grimble, Mr. J. C. Barley. On April 9, 1934, he sent to the High Commissioner a nine-page letter about the still unsettled position of the Banaban funds. He pointed out that no decision had yet been made on Mr. Grimble’s proposal to keep the residue of the old Banaban Fund (which the letter called “the Old Royalty Trust Fund”) separately as a reserve, or Mr. Neill’s proposal to amalgamate that fund with the new fund, called the Banaban Common Fund, which was to receive the 81�2d. royalty. The resident commissioner had ascertained that the treasurer of the colony had been crediting the new 81�2d. royalty to “the old Banaban Royalty Trust account,” and not, it seems, to a new account for the new Common Fund. Furthermore, nothing had been done to pay the proposed annuity of £6 to every Banaban. The letter also stated that the Banaban Common Fund “has become merged in the Old Royalty Trust Fund.” On the other hand, the interest on the reduced investments of the old Banaban Fund had continued to be distributed, so that the 1913 landowners had been getting their accustomed half-yearly payments, though reduced in amount. Not surprisingly, the Banabans had been bitterly complaining that the only visible result of the new arrangements was that a 35 per cent. reduction had been made in the sums paid to the 1913 landowners. The Banabans asked that three-quarters of the 81�2d. royalty should bear the cost of services to them, with the balance [*180] being distributed to them, and that the remaining quarter should be added to existing funds.

 

Before this had been replied to, a matter on which a great deal had been written had been brought to a close. The Gilbert and Ellice Islands Colony had no currency of its own, and Australian currency and also sterling had circulated in the colony. In April 1930 Australian currency became worth less than sterling; and one odd result was that the quantity of sterling silver in circulation was reduced because, though worth more, it bought no more than the Australian silver. The whole question of currency in relation to the pay of colonial civil servants and otherwise was much debated between London and the Pacific; and one facet of this was that of the currency in which the arbitrators’ award had been made. In the end it was decided to ask the arbitrators; and on October 18, 1934, Mr. Neill wrote to say that so far as he was concerned the sums were expressed “in the currency used in the colony,” and that “in other words it was not intended that the award should be in sterling.” On November 29, 1934, Mr. Maynard, the other arbitrator, made it explicit that the award was intended to be expressed in Australian currency.

 

I can now return to the progress of the discussions about the Banaban funds. In the High Commission office it was being pointed out that in view of the rights of the 1913 landowners, the transfer of the £20,000 from the old Banaban Fund to the new provident fund “would appear to have been illegal as well as without justification, but it was part of the arrangement between the government and the British Phosphate Commissioners.” It was added that if it was desired to retransfer the £20,000, the difficulty could easily be overcome by arranging with the British Phosphate Commissioners to reduce the agreed total which the provident fund was to attain. In discussing this and other matters in a letter dated February 12, 1936, Mr. Barley, the resident commissioner, helpfully summarised the position as it stood on the latest figures then available. There were four funds.

 

(1) The old Banaban Royalty Trust Fund. This was the fund on which the 1913 landowners drew the interest. It stood at a little over £29,000, having been shorn of the £20,000 used to start the provident fund.

 

(2) The Banaban Common Fund, or the new Banaban Royalty Trust Fund, as it was sometimes called. This was the fund fed by the 81�2d. royalty under the 1931 transaction. It had reached a little over £33,000, but this had been reduced by over £12,000 for public services, and so stood at rather more than £20,000. The income from this fund was awaiting the decision of the Secretary of State as to its destination.

 

(3) The Banaban Provident Fund. This fund, fed by the 2d. royalty, was accumulating, and stood at nearly £33,000.

 

(4) The Banaban Landholders Fund. This consisted of £22,500, the total of the compensation of £150 an acre for the 150 acres of mining land under the 1931 transaction. The interest on this fund was being paid to the owners of the mining land which had been taken in 1931.

 

What the resident commissioner proposed was that the first two funds should be merged; that the £20,000 used to start the provident fund should be restored with interest to the old Banaban Royalty Trust Fund; [*181] that the interest from the combined trust fund and common fund should be used to meet the cost of direct public services provided by the government for the Banabans; and that an annuity of £10 a head should be paid to all true-born Banabans out of the 81�2d. royalties coming in each year. A long letter from the High Commission to the Colonial Office on August 5, 1936, took the view that £10 a head was unnecessarily high. By this time there was considerable Banaban discontent; and on August 6 the resident commissioner sent to the High Commissioner and the Colonial Office a copy of a petition by the Banabans. Discussions continued, mainly in the Colonial Office. By the end of 1936 the Colonial Office had approved a settlement on the general lines proposed by the resident commissioner, and had informed the High Commissioner that the consent of the individual landowners to it should be obtained before legislation to amend the Ordinance of 1928 could be enacted.

 

By February 21, 1937, meetings with the Banabans had been going on for three weeks. The officer then in charge of the colony reported general approval by the Banabans, provided that the landowners had some slightly preferential treatment over the non-landowners. He made appropriate recommendations on these lines, with annuities of £8 for adults and £4 for children for all Banabans, and with all landowners whose land went under the 1913 or 1931 transactions receiving annuities ranging from £2 for less than one acre to £10 for landowners with 10 acres or more. Although a number of variants were mooted, it was to a settlement along these lines that official sanction was given on March 9, 1937. At a meeting with the Banabans on July 24, 1937, a spokesman for the Banabans told the High Commissioner and the resident commissioner that the Banabans were agreeable, and the 1913 and 1931 landowners were ready to waive their rights to royalties. Mr. Rotan, however, demurred; he wanted the royalties on his own lands kept separately for him. He was a large landowner, if not the largest.

 

On September 28, 1937, the resident commissioner reported that every Banaban landowner except Mr. Rotan had accepted the proposed terms; and on October 12 the resident commissioner reported that he held a separate document signed by every individual landowner concerned (except Mr. Rotan and his two daughters), accepting the proposed terms of settlement unconditionally. The document was in the Banaban language, and a translation shows that the Banaban Provident Fund and the Banaban Landholders Fund were in terms expressed not to be affected by the agreement. The landowners agreed that phosphate royalties which had accrued or were to accrue should be paid into the common fund. Out of this fund an annuity of £8 for adults and £4 for children under 15 was to be paid to all true-blooded Banabans, and also to half-Banabans so long as they resided at Ocean Island. The resident commissioner soon framed elaborate rules defining who were to be accounted true-blooded Banabans, and who were to be regarded as half-Banabans; and these rules were accepted by the Banabans. Landowners were to receive an annuity of £2 if the total land holding in the 1913 and 1931 areas was less than one acre, £4 if between one and two acres, £6 if between two and five acres, £8 if between five and 10 acres, and £10 if over 10 acres. The payments were to come from the common fund, [*182] which was also to bear the cost of services performed by the government for the Banabans. Payments of annuities to the Banaban elders or for drought relief were to cease.

 

While this 1937 waiver (as I may call it) was being obtained, steps were at last being taken to amend the Ordinance of 1928; and this amendment, under the title of the Mining (Amendment) Ordinance 1937, was enacted on December 10, 1937. I shall turn to this in a moment. On the same day, the resident commissioner paid to the Banabans the annuities of £8 for adults and £4 for children; £36 was refused by Mr. Rotan, his two adult daughters and three children, and this was placed in a deposit account. The resident commissioner also reported that the necessary schedule of landowners for payment of the landowners’ annuity was not complete, but that he hoped to be able to pay the annuity by the end of the year. On December 17 he sent to the High Commissioner a long letter which provided a useful summary of the position. In it, the resident commissioner explained that he had decided not to proceed with the proposed retransfer of the £20,000 from the provident fund to the old Banaban Royalty Trust Fund, which had become merged in the general or common fund; for this transfer had never proved to be the inducement to the Banabans that had been expected, and they had shown not the slightest interest in it.

 

In relation to the Banaban funds, that was a point of repose. Vigorous discussions were going on with the British Phosphate Commissioners about sums to be paid to the government in lieu of taxation; but I need not discuss these here, and can turn to the Ordinance of 1937. By section 1, the Ordinance was to be read and construed as one with the Ordinance of 1928. Sections 2 and 3 then repealed section 6 (2) and section 7 of the Ordinance of 1928 respectively, and substituted quite different provisions; and section 4 provided for a degree of retrospection.

 

First let me take section 6 (2) of the Ordinance of 1928. This, it will be remembered, dealt with moneys “payable by way of compensation or royalty.” It required them to be paid to the resident commissioner, to be held by him “in trust on behalf of the former owner or owners,” if a native or natives of the colony, and subject to the directions of the Secretary of State. The new section 6 (2) was much narrower. It applied to compensation, but it did not apply to royalties at all; it omitted all words of trust; and it substituted the High Commissioner for the Secretary of State. It ran as follows:

 

“(2) Any moneys payable by way of compensation for any land acquired from a native or natives of the colony under this Ordinance shall be paid to the resident commissioner who shall pay the same to the former owner or owners or apply the same for their benefit in such manner as the High Commissioner may from time to time direct.”

 

This, of course, was apt to apply to the Banaban Landholders Fund.

 

The new section 7, on the other hand, was far wider than the old section 7. The new section 7 ran as follows:

 

“7. Any moneys payable by way of royalty whether prescribed under section 5 hereof or fixed by agreement shall be paid to the [*183] resident commissioner who shall pay or apply the same in such manner as the High Commissioner may from time to time direct to or for the benefit of the natives of the island or atoll from which the minerals were derived in respect of which the royalty was payable.”

 

The new section 7 accordingly embraced all the royalties, irrespective of whether they were payable by agreement or as a result of compulsion. Once again, the words “in trust” that had appeared in the old section 7 were omitted from the new section 7; and once again the High Commissioner was substituted for the Secretary of State. There was also the important change that the persons to benefit were no longer the natives from whom the land had been acquired (“such native or natives”) but were to be the natives of the island or atoll from which the minerals had been derived, in this case the Banabans generally.

 

Finally, there was section 4 of the Ordinance of 1937. This ran as follows:

 

“4. Any act or thing done or omitted under the provisions of the principal Ordinance which would have been validly and properly done or omitted if section 6 and section 7 of the principal Ordinance had been as provided by this Ordinance shall be deemed to have been validly and properly done or omitted.”

 

At one stage there was some discussion about whether it was correct to describe this as being a retrospective provision. It seems plain to me that in some degree it was retrospective. Putting matters broadly, the result was that as regards acts and omissions occurring between the Ordinance of 1928 coming into force and the Ordinance of 1937 coming into force, the act or omission was to be valid and proper – (a) if it complied with the Ordinance of 1928 as it stood at the time, or (b) if it would have complied with the Ordinance of 1937 if that had been in force at the time. In short, the act or omission was given alternative forms of salvation. The most important practical effect of this was that the past use of royalties for the benefit of the Banabans generally, contrary to what the old section 6 (2) had provided but in accordance with the new section 7, was at last made valid and proper.

 

(5) 1937-1947: the war, Rabi and the 1947 agreement. With the 1937 waiver and the enactment of the Ordinance of 1937 another stage in the history of Ocean Island came to an end. The next period, the fifth, covers the ensuing 10 years up to the making of the 1947 agreement; and it includes, of course the havoc worked on Ocean Island by the war. First, the waiver and the Ordinance of 1937 were carried into effect. By this time, the old Banaban Royalty Trust Fund and the new Banaban Royalty Trust Fund (or common fund) had been treated as being merged into one fund, called the Banaban Fund, or the Banaban Common Fund. The 1913 landowners no longer received separately the interest due on the old Banaban Royalty Trust Fund, but with the 1931 landowners received out of the common fund the agreed scale of annuities based on acreage. No further payments were made to the Banaban elders or for drought relief; but payments for services to the Banabans continued to be made, out of the common fund, replacing the old Banaban Royalty Trust Fund for this [*184] purpose. There were thus three funds instead of four. These were as follows:

 

(i) The common fund that I have been discussing. This paid for services, and in addition provided both the flat rate annuities payable to all Banabans and also the annuities on an acreage basis payable to all 1913 or 1931 landowners; (ii) the provident fund, which was accumulating money to make provision for the Banabans in the future; and (iii) the landholders fund, which paid to the 1931 landowners the interest on the £22,500 compensation paid for their surface rights.

 

On May 19, 1938, the landowners were paid their “bonuses” (as they were often called) for the year ended June 30, 1937. The delay had been caused by various disputes concerning the partitioning of land and the preparation of a complete register of lands. On August 15 and 16, 1938, both the annuities to all Banabans and the bonuses to the landowners were paid in respect of the year ended June 30, 1938. Mr. Rotan was continuing to object to what was being done, but obtained no satisfaction for his requests. Towards the end of 1938, the British Phosphate Commissioners’ need for further land for mining, about which nothing had been said to the Banabans during the various negotiations with them, was beginning to come to the fore. The British Phosphate Commissioners had only enough land for a further two or three years, and they considered that it was time to open negotiations with the Banabans. By the end of 1938 the view had been formed by the British Phosphate Commissioners and the resident commissioner that any negotiations should be conducted between the British Phosphate Commissioners and the Banabans, with the government taking no hand in the negotiations in the first instance.

 

Meanwhile the Banabans had made various proposals for increasing the payments to them and making some rearrangement in the division of the royalties, as well as other matters; and these proposals were considered by the High Commissioner when he met the Banabans on a visit to Ocean Island on June 29, 1939. But the most striking feature of this period was a petition by the Banabans to the Secretary of State dated June 7, 1940, seeking a new home for the Banaban people somewhere in the Fiji group, so as to be under the same High Commissioner. This request was made in view of the continued gnawing away of Ocean Island by mining operations. The Banabans wanted this other island not instead of Ocean Island but in addition to it, as a second home, and in order to preserve their racial identity and culture. They had in mind the island of Wakaya which they believed would soon be in the market; but if that was not available they would prefer some other island in the Fiji group. This was a striking volte face in the Banabans’ attitude, and showed a realistic approach to a subject which for some while had been being avoided in any discussions with the Banabans, in view of their strong opposition to any idea of an alternative to Ocean Island. The Banabans also asked that Mr. Kennedy, who was an officer in the Colonial Service, should be permitted to retire from it so that he could become the Banabans’ adviser and help them in their settlement on an alternative island. The latter proposal was regarded by the resident commissioner as being premature. [*185] On July 16, 1940, representatives of the British Phosphate Commissioners met the Banabans and put before them proposals for the acquisition of some 230 acres of land on Ocean Island for mining. The offer was to pay £175 per acre (in place of £150) and 1s. a ton royalty (instead of 101�2d.), with 2d. of that 1s. continuing to go to the provident fund and 10d. to go to the trust fund. The payment to the provident fund would continue until the provident fund reached £250,000, instead of £175,000. There was much discussion of this proposal at this and another meeting on July 29. The burden of the Banabans’ attitude, after some skirmishing, was that the offer was acceptable but that they wanted the government to pay over to them more of the money that the government received on their behalf. The British Phosphate Commissioners duly carried out their promise to put this request before the government. Mr. Rotan, however, still adhered to his attitude of independence. The resident commissioner wrote to the High Commissioner on September 24, 1940, stating that he considered that the British Phosphate Commissioners’ offer was “exceedingly generous,” and supporting the Banabans’ request that they should receive more of the money themselves. He suggested increasing the annuities and also the landowners’ bonus. At about this time, I may say, the Banabans, with government assistance, formed a co-operative society.

 

Arrangements had been made to investigate the availability and suitability of Wakaya; and on February 17, 1941, an agricultural officer inspected it and made a detailed report which showed that it was unsuitable for the Banabans. Other islands were considered. By September 20, 1941, Rabi, which was much more suitable, and was to become the second home of the Banabans, had come on the scene; and its owner confirmed that it was available for purchase at £A25,000. The Banabans, however, still hankered after Wakaya, but in the end, with a few dissentients, they agreed that both islands should be bought. War-time conditions had made impossible a proposed visit of inspection. Wakaya was on offer at £F12,500; the High Commissioner offered £F5,000, and this offer was refused. On the other hand, on April 22, 1942, a solicitor reported the completion of all documents necessary to vest Rabi in the High Commissioner at the asking price of £A25,000. The arrangement was that the vendor should continue to occupy the island (which was producing copra) on a leasehold basis for a short while. There was also some discussion about a Fiji government reserve of 50 acres on Rabi which I need not consider.

 

At the end of August 1942 the Japanese occupied Ocean Island. They made little or no attempt to work the phosphate, but heavily fortified Ooma Point. I do not propose to detail the great hardships that the Banabans suffered during this time. By the time of the Japanese surrender most of the inhabitants of Ocean Island had been either killed or deported to other islands. Of some 150 who were left on Ocean Island at the time of the Japanese surrender all save one were later killed by the Japanese; and the sole exception, after a remarkable escape, survived to give evidence in Ocean Island No. 1. All the Banabans’ houses on the island had been destroyed, and many of the trees as well. The island had been reoccupied in August or September 1945, but plainly the immediate [*186] return of the Banabans to live on the island was completely impracticable. After a detailed inspection of Rabi had been made by Major Kennedy, whom the High Commissioner had appointed to do the work, it was plain that the sensible course would be to attempt to arrange at least a preliminary resettlement of the Banabans on Rabi. Rabi had the disadvantage for the Banabans of having a much greater rainfall than they had been accustomed to on the often parched Ocean Island, but it had not been ravaged by war, and it had many advantages. Major Kennedy’s 14-page report dated October 8, 1945, set out an admirably practical and detailed plan for the occupation of Rabi by the Banabans, and the High Commissioner promptly gave it his approval in principle. A month’s notice was given to determine the tenancy of Rabi on November 20, 1945.

 

A camp was prepared for the Banabans on Bairiki Island, on Tarawa Lagoon, and Major Kennedy collected them from various villages throughout the Northern Gilberts, and from Kusaie and Nauru, where many had been taken by the Japanese. All agreed to go to Rabi for an initial period of two years on the footing that they would all retain their rights in Ocean Island and the Banaban funds, and that their transport and maintenance for the first month would be met by the Gilbert and Ellice Islands Colony and not be a charge on their funds. Furthermore, if at the end of two years they wished to return to Ocean Island, the government would bear the cost of their transport. There were some 700 Banabans in all, and also a further 300 Gilbertese who had become associated with them, either on Ocean Island before the Japanese came, or after deportation; and in the latter case the Banaban families with whom they had become associated were required to sign bonds for their good behaviour.

 

On December 14, 1945, the Banabans and Gilbertese arrived on Rabi. Initially they were received in a camp that had been prepared for them: but soon some began to move away. On December 27, 1945, a Fiji Ordinance called the Banaban (Settlement) Ordinance 1945 established a Rabi Island Council, and empowered it, subject to the approval of the governor, to enact regulations on a wide variety of topics. On January 26, 1946, at a meeting of Major Kennedy with over 150 Banaban elders, representing over 150 families, councillors were nominated for the Rabi Island Council. The Banabans expressed the firm view that they preferred not to consider the question whether to settle permanently on Rabi until further agreements with the British Phosphate Commissioners had been made: the 1940 agreement in principle had never become a formal agreement. By this time the change of climate had produced a heavy incidence of pulmonary illnesses; and there were many other ailments, due in many cases to wartime hardships.

 

On March 19, 20 and 21 Mr. Maynard, who had been the Ocean Island manager for the British Phosphate Commissioners from 1933 to 1936, met many of the Banabans on Rabi. One of the questions raised by the Banabans and discussed at that meeting was the British Phosphate Commissioners’ 1940 offer for more land for mining; and Mr. Maynard told the Banabans that the offer had been asleep but was not dead. The Banabans then raised the question of marking the [*187] boundaries of the individual plots of land that would be taken for mining. The general view was that the Banabans would accept the 1940 offer: but one Banaban asked for better terms, and suggested 1s. 6d. a ton royalty and £225 an acre. Mr. Maynard promised to report matters to the British Phosphate Commissioners, and said that he had not been sent to get the proposed agreement signed. On March 22 a number of the Banabans put the request for 1s. 6d. and £225 into writing.

 

In June 1946 there were meetings on June 13 and 17 between the Banaban elders and Mr. Windrum, the Fiji District Commissioner (Northern), with Major Kennedy present. The Banabans wanted Major Kennedy removed from his post as the Fiji Administrative Officer in charge of Rabi. The complaints against him seem to have been a mixture of personal complaints, misunderstandings, and visiting on him homesickness for Ocean Island and a variety of difficulties on Rabi. The district commissioner heard these complaints, and he also raised the question of holding a ballot on whether the Banabans wished to make Rabi their home or whether they wished to return to Ocean Island. The Banabans asked how much Rabi had cost, and at any rate some of them approved the purchase at £25,000. On June 28, 1946, the Banabans wrote a letter, repeating their objection to Major Kennedy, and confirming their agreement to the purchase of Rabi, provided Ocean Island was not lost to them. Another letter of the same date sought the payment to them of the money in the landowners’ fund and the royalty trust fund; and by a third letter of the same date Mr. Rotan inquired about a variety of matters.

 

On September 20, the High Commissioner answered the first two of these letters. To the first the reply was that Captain Holland had replaced Major Kennedy, and that there was no intention of affecting the Banabans’ rights on Ocean Island. To the second the reply was that the matter had been referred to the Secretary of State for his decision. The third letter seems to have been answered, but the answer does not appear to have survived.

 

I must now turn to a memorandum dated September 2, 1946, written by Mr. Maude, who by then was the Chief Lands Commissioner for the Gilbert and Ellice Islands Colony; this was often called the “Maude report.” It is, if I may say so, a most lucid and valuable document, providing a survey of Ocean Island and the Banabans for the past and making recommendations for their future. Mr. Maude was reporting in accordance with instructions that had been given to him by the High Commissioner. He had known the Banabans for some 17 years; and he had been impressed by the progressive moral and physical degeneration of the people. The three main factors were, first, the dislocation of their traditional economy by the growth of the phosphate industry, making them a denaturalised race dependent for life on imported goods; second, there was the lack of any sense of responsibility for the conservation of the Banaban funds, since these were spent without any consultation with their leaders; and, third, there was the system of annuities for the Banaban “which has sapped his moral fibre, turning him too often a dole-fed hanger-on of the British Phosphate Commission.”

 

Mr. Maude’s main hope for the future lay in persuading the Banabans [*188] to settle on Rabi and not to return to Ocean Island; and for this purpose he urged the government to effect a settlement of all outstanding points at issue. He put these under four heads. First, the government should make it clear that the Banabans’ rights over land on Ocean Island would in no way be affected by a decision to settle on Rabi; and he made certain detailed suggestions as to the revesting of the title to worked-out lands in the Banabans. He also regarded it as being “advantageous, from every point of view,” that the British Phosphate Commissioners should effect “a single and final settlement” with the Banabans covering all the land on Ocean Island that the British Phosphate Commissioners required either in the present or in the future. Second, he recommanded that the ownership of Rabi, which stood in the name of the High Commissioner, should be vested in the island council on behalf of the Banabans residing there, subject to a number of detailed provisions. Third, there were the Banaban funds. Mr. Maude discussed the unsettled question whether a landowner was owner of the minerals as well as the surface, and then he considered the control of the Banaban funds. He recommended the amalgamation of the royalty trust fund (or common fund) with the provident fund, which had served its purpose, a reference, no doubt, to the purchase of Rabi. He advised that the control of the fund should be vested in a Banaban funds committee, with certain limitations on the expenditure, and that there should be control by the Banaban welfare officer (the new title suggested for the officer in charge at Rabi) and by the governor, by means of a system of estimates and so on. This committee would be an addition to the Banabans’ other organisations, the island council, the island court and the co-operative society. Fourth, the report dealt with the annuities. These, said Mr. Maude, “have done nothing but harm to their recipients,” and almost all connected with the Banabans had recommended their abolition. But they were too firmly entrenched to be abolished, and so they must be continued, though all attempts to have them increased should be resisted.

 

The report recommended that these proposals should be explained to the Banabans and embodied in an agreement to be signed by them and the government; and most of the recommendations of the report were conditional upon the Banabans electing to settle in Rabi. I should add that there is much in the report that I have not attempted to summarise; but I hope that I have indicated the main features of a document which shows an admirably unsentimental but real concern for the Banabans and their future.

 

November 30. MEGARRY V.-C. continued:

 

In November 1946 the Banaban officer reported to the High Commissioner that the Banabans had informed him of their unanimous decision to make Rabi their permanent headquarters and home; but this proved to be premature. By December 1946 the British Phosphate Commissioners had decided that they were willing to negotiate a final settlement of the land question with the Banabans, as Mr. Maude recommended. The High Commissioner, however, considered that negotiations should be postponed until the Secretary of State had reached a decision on Mr. Maude’s recommendations. This was soon resolved, for on January 2, 1947, the Secretary [*189] of State approved the recommendations with a few minor comments which have not been revealed to me as Crown privilege was claimed for the telegram. By early February the British Phosphate Commissioners had put before the High Commissioner, who was visiting Canberra, a proposal to offer the Banabans 1s. 3d. a ton and £200 an acre, with proportionately less for the less good land; and the High Commissioner’s comment on this, in a telegram to the Assistant High Commissioner, was “This seems reasonable.” The Assistant High Commissioner replied that he regarded the proposed offer as a reasonable basis of negotiation but not unduly liberal, as it represented increases of only 25 per cent. and 15 per cent. respectively on the 1940 terms, whereas currency depreciation in the interval had been much greater.

 

At this stage the Banabans sent another letter to the High Commissioner, dated March 7, 1947, asking to be told that Rabi was their land, like Ocean Island. They stressed their desire to make Rabi their new headquarters and home, and they referred to many meetings that they had had about the division of the land on Rabi. Arrangements were being made for Mr. Maynard to go to Rabi to negotiate with the Banabans for the further land, and on March 25 the secretary to the High Commission informed Major (formerly Captain) Holland of this impending visit. The letter contained a pregnant sentence which I shall quote:

 

“You should, of course, take no part whatever in Mr. Maynard’s land negotiations with the Banabans, making it clear to them, if necessary, that these negotiations are wholly between them and the British Phosphate Commissioners.”

 

In due course I shall have to return to this sentence and its implications. By a letter dated the next day, March 26, Major Holland was also told that Mr. Maude, who by now was the resident commissioner for the Gilbert and Ellice Island Colony, and Mr. P. D. Macdonald, who would represent the Fiji administration, would be present at the final negotiations. On April 9, 1947, in the presence of Major Holland, Mr. Maynard began his negotiations. They took place in a meeting which, with breaks, lasted from 9.00 a.m. to 1.30 p.m.

 

The negotiations related to two parcels of land with a total area of 671 acres. One parcel consisted of about 291 acres of land coloured purple on a plan, which for the most part lay above the 170 foot contour on the island. This was good phosphate land, and included the site of Buakonikai village. The other area was the land marked with a colour called “stone” on the plan, containing about 380 acres. This for the most part lay below the 170 foot contour, and included the sites of Tabiang and Tabwewa villages. This was described as poor phosphate land. The offer made to the Banabans was thenceforward to pay a royalty of 1s. 3d. per ton on all phosphate mined, including phosphate from land which the British Phosphate Commissioners already held and need pay for only at 101�2d. a ton. There was an estimated three and a half million tons of such phosphate, so that for this an extra £65,625 would in effect be paid. For the land, the British Phosphate Commissioners offered £200 per acre for the land coloured purple, a figure mid-way between the £175 agreed in principle in 1940 and the £225 asked [*190] by the Banabans. This, like all the other sums, was in Australian currency. The 291 acres, at £200 an acre, came to £58,200, which was then worth about £51,500 in Fiji currency. For the 380 acres of the stone land, the British Phosphate Commissioners offered £50 per acre.

 

After some discussion the Banabans decided that they wished to dispose of the stone land as well as the purple. But they asked a better price for the stone land; and Mr. Maynard agreed to increase it from £50 to £65 an acre, but refused to go further. 380 acres at £65 an acre, I may say, is £24,700. Mr. Maynard also rejected a request for the same figures but in Fiji and not Australian currency. There were various other requests that I need not mention, apart from a request for a better rate of interest on capital. This, said Mr. Maynard, was bank business; but he promptly arranged for the British Phosphate Commissioners to pay 3 per cent. interest on the total of £82,900 payable for the land, in place of what I think was the current 21�2 per cent. rate of bank interest.

 

On the next day, April 10, 1947, the 1947 agreement was signed by Mr. Maynard and by 21 Banabans, who expressed themselves as signing “for the Banaban landowners of Ocean Island”: Major Holland witnessed all signatures. The agreement was simple in form, and occupies a little over a page in double-spaced typewriting. I do not think I need set it out in full. By clause 1 the Banaban landowners agreed to transfer the two areas of land to the British Phosphate Commissioners, and by clause 2 the British Phosphate Commissioners contracted to make the agreed payments for the land on April 17, 1947, and to pay the increased rate of royalty as from that date. Clause 3 provided that, after being worked out, all the land covered by the agreement was to revert to the Banaban owners as soon as this could take place without inconvenience or prejudice to the operations of the British Phosphate Commissioners; and by clause 4 there was a saving for the terms of the Crown licence. That was all. For the Banabans it was to prove a financial disaster.

 

Despite this speedy conclusion of the negotiations, so speedy that Mr. Maude and Mr. Macdonald did not arrive in time for the final stages, their proposed visit to Rabi duly took place; for the Banabans’ future on Rabi and their rights in relation to Ocean Island had not been formally resolved. Mr. Maude and Mr. Macdonald were on Rabi from May 7 to 13, 1947, and they spent May 8, 9 and 10 in a series of meetings with the Banabans. On May 10 and 11 the Banabans voted by secret ballot on their future, with Banaban supervisors in charge; and then there were further discussions on the result of the ballot. 318 out of a population of 336 adults over 18 had voted. By 270 to 48, a majority of nearly 85 per cent., the Banabans decided to make Rabi their headquarters and home.

 

On that footing, a formal “Statement of Intentions” of the government was then signed by Mr. Maude, Mr. Macdonald, Major Holland, and an administrative officer, on the government side, and by 20 representatives of the Banabans, on the other side. This statement, made in May 1947, provided that the Banabans’ decision to remain on Rabi was not in any way to affect their rights to lands on Ocean Island, and that the title to all worked-out phosphate lands there which had or might in future come into the possession of the Crown should revert to the [*191] Banabans. The ownership of Rabi was to be vested in the Rabi Island Council, except for the Fiji government reserve of 50 acres, and subject to the erection of a government station at Nuka; and the stock, tools, houses and other assets of the copra estate on Rabi were also to vest in the council. The council was to legislate for the division of lands on Rabi, and for the system of land tenure and inheritance.

 

The Banaban Royalty Trust Fund and the Provident Fund were to be amalgamated into one fund, called the Banaban Fund, to be used exclusively for the benefit of the Banaban community on Rabi. The management of the Banaban Fund was to be vested in a Banaban Trust Fund Board consisting of the Banaban Adviser as chairman and up to five members of the Rabi Island Council elected by the council; and there were provisions as to the board’s powers and mode of operation. The board’s accounts and estimates were to require the approval of the Governor of Fiji. The capital of the landholders’ fund was to be transferred to the board for investment, and each landholder was to have the same rights over his invested capital fund as he would have had over the lands represented by the funds. The governor was to be petitioned to permit a landholder to withdraw capital, with the governor’s consent, for the purpose of effecting permanent improvements to his Rabi land. Annuities were to continue to be paid in accordance with the terms of the 1937 annuities settlement, unless the governor varied them on the recommendation of the board; and they were to be paid in Fiji currency to those resident in Fiji, and in Australian currency to those resident elsewhere.

 

Subject to the laws of Fiji and to the availability of shipping, the Banabans were to be permitted to travel freely between Rabi and Ocean Island, and, subject to the rights of the British Phosphate Commissioners over lands purchased by them or leased to them, to reside on Ocean Island. The Banabans on Rabi were to be subject to the laws of Fiji, including the laws relating to taxation, and so they would be eligible to receive all normal services provided by the Government of Fiji on the same terms as other residents in Fiji. Finally, the Banaban Adviser was to be an officer of the government of Fiji, appointed by the governor to advise the Banabans on Rabi on all matters connected with its social and economic advancement; and his salary was to be paid from the Banaban Fund.

 

That Statement of Intentions undoubtedly represented a very considerable step forward towards the final settlement of the Banabans; but it did not satisfy by any means all of them. A lengthy report by Mr. Maude to the High Commissioner on July 11, 1947, records a variety of demands by a number of Banabans. One was that the landowners should be absolutely entitled to the capital as well as the interest in the landholders’ fund, a demand that was at variance with the restrictions on disposition that the Banaban custom of landowning imposed on the owners of land on Ocean Island. Other demands related to the royalties. They sought a proportionate division of future royalties among the landowners, and a division among all Banabans of any balance in the royalty trust fund after paying for any communal works on Rabi that the [*192] provident fund could not meet. Some even wanted the provident fund to be distributed. These proposals ran counter to the government view that royalties should be used for the community as a whole and not merely for those who were members of the community at a particular time. Mr. Maude and Mr. Macdonald took the attitude that they had no power to discuss such radical changes, and that it was premature to consider them before it had been seen how much needed to be spent on communal works. A little later, on September 12, 1947, the High Commissioner sent the Colonial Office a detailed commentary on the Statement of Intentions.

 

In the meantime, on August 5, 6 and 7, 1947, there had been a number of meetings between Mr. Maynard and the Banabans, with Major Holland present. For some months there had been various references to a proposed visit to Ocean Island to be paid by a Banaban boundary marking party, to mark out the boundaries of the various holdings of land which were included in the 1947 agreement. Some 400 or more Banabans were to be in this party, and the task of carrying out a detailed survey of the many small plots of land in the 671 acres of land covered by the 1947 agreement would obviously be very considerable. The British Phosphate Commissioners estimated the total cost at some £A11,000, and so they evolved a scheme for approximating the area of each landowner to the nearest quarter acre and dividing the payments on this basis. At the meetings with Mr. Maynard the Banabans unanimously agreed to this method of dealing with the matter, in return for the British Phosphate Commissioners making an additional payment of £A7,500 to the Banabans. This was to be allocated among the landowners within the 671 acres as they decided. Further meetings with the Banabans on August 8, 9 and 11, 1947, dealt with various other matters, including an agreement for the removal of sand from sites to be agreed with the Banabans when the marking party was at Ocean Island. In return, an annual sum of £A15 was to be paid by the British Phosphate Commissioners to the Banabans, to be allocated as the Banaban community decided. I shall shortly come to what was called “the sand agreement.”

 

In the middle of August 1947 the boundary marking party of some 400 Banabans left Rabi by ship, and the marking of boundaries on Ocean Island on the approximate basis began on August 22. By September 27 the marking of the 291-acre area had been completed, and by November 6 the marking of the 380-acre area had been finished. There were number of other matters to be dealt with, but finally, after a farewell dance to Ocean Island on December 5, 1947, the Banabans left by ship for Rabi.

 

(6) 1947-1973: voluntary increases in royalties. I now come to the sixth period, from 1947 to 1973. This was characterised by a series of attempts by the Banabans to obtain better terms than they had agreed in the 1947 transaction. These attempts achieved some success, but far less than the Banabans considered right. Steps in accordance with the Statement of Intentions were taken early in 1948, and by May an ordinance was in draft, dealing with the Banaban funds. In June the Banabans petitioned that they should have independence of the governments of Fiji [*193] and the Gilbert and Ellice Islands Colony, and that, under the Governor of Fiji, the Rabi Island Council should administer both Ocean Island and Rabi. At a meeting with the Banabans on Rabi on August 3, 1948, the governor referred to the Statement of Intentions, and explained that the Banabans’ request could not be granted. Later that month the High Commissioner agreed that the Banabans should be administered by Fiji as from January 1, 1949.

 

In September there were two further meetings with the Banabans. On September 14 Mr. Maynard gave the Rabi Island Council an answer to their claim that they had been promised that when the 150 acres taken in 1931 had been fully worked out the provident fund would have reached £175,000, and that as it had not done this the British Phosphate Commissioners had become obliged to make up the difference. This answer involved reminding the Banabans in detail about the offers made by the British Phosphate Commissioners prior to 1931 and their rejection of these offers, and much else besides.

 

On September 21, Sir Albert Ellis, who had known the Banabans since 1900, and had been the New Zealand British Phosphate Commissioner since 1920, in company with Mr. Maynard and Major Holland, talked to the Banabans at their request about early days on Ocean Island. In the course of this meeting Mr. Rotan put on a blackboard some figures showing under the heading “Royalties” in one column what payments the company (and later the British Phosphate Commissioners) had made to the government, and what payments they had made to the Banabans. These figures showed the increased rates of royalty payable to the Banabans, from 6d. for 1912-1930 and 101�2d. for 1931-1947 to 1s. 3d. for 1947 until 1999; and beside them there was a uniform 6d. payable to the government throughout from 1906. The significance of this is that the payment to the government had in fact been increased from 6d. to 1s. in 1931, and from 1s. to 1s. 9d. in 1947, and this appeared to be unknown to the Banabans. A memorandum by the Banabans which seems to be dated June 1950 is to the same effect. Of course, as the British Phosphate Commissioners were to point out much later (in August 1968), 6d. had remained the “normal” government royalty throughout, and the extra payments were in lieu of taxation; but this distinction would have had little appeal to the Banabans, whatever significance it might have for officials of the British Phosphate Commissioners. This blackboard exercise, I may say, was the prelude to a request by the Banabans for a 6d. royalty to be paid to them from 1906 to 1912. The Banabans also asked for copies of various documents, from the initial agreement of May 3, 1900, onwards; and Mr. Maynard replied helpfully.

 

A few days later, on September 30, 1948, Mr. Maynard, Major Holland and the Rabi Island Council met again. At this meeting the right of the British Phosphate Commissioners to take sand on Ocean Island was recognised by a written document dated that day. This was signed by the chairman (Mr. Rotan) and members of the Rabi Island Council and witnessed by Major Holland. It reads as follows:

 

“The Banabans have accepted the offer of the British Phosphate Commissioners to pay the Banabans the sum of £A15 per annum as from January 11, 1946, such annual payment to be continued [*194] until the mining operations on Ocean Island cease, and in return for this annual payment the Banabans raise no objection to the removal of sand and shingle from the beach at Ocean Island for making concrete and for other work. The Banabans agree that sand and shingle may be taken from Ooma Boat Harbour to beyond Nei Mokai (a prominent outcrop of coral) – the sites in use and shown to the Banaban marking party during their visit to Ocean Island August 18, 1947, to December 6, 1947. The receipt of the sum of £A45 (£F £39 16s. 6d.) covering the period 11/1/46-10/1/49 is at the same time acknowledged.”

 

I shall call this “the sand agreement.” It is, of course, of importance in relation to the claim in Ocean Island No. 1 in respect of the removal of sand from the red land. At this meeting the Banabans asked that the £15 a year, as well as the £7,500 for forgoing detailed boundary markings and another sum, should all be in Fiji pounds and not Australian pounds; but this Mr. Maynard refused.

 

On October 8, 1948, the Banabans petitioned the Secretary of State, asking that the government should bear all the costs of the huts, tents, equipment, utensils and other things provided in 1945 to establish themselves on Rabi, and not merely the cost of establishing the temporary camp; and they referred to their great losses and sufferings during the war. They said that none of them could recollect having agreed that only the cost of transport to Rabi, of establishing the camp and of rations for one month should be borne by the Gilbert and Ellice Island Colony. Even if they did agree to it, they were not then in a fit state to think for themselves, and so their acceptance ought not to bind them. This petition seems to have arisen out of a charge of nearly £F7,500 made against Banaban funds for the materials and equipment in question. On December 15, 1948, the Secretary of State asked the High Commissioner to tell the Banabans that he was not prepared to intervene as they requested.

 

On January 1, 1949, the Banaban Funds Ordinance 1948 came into force: it had been enacted on September 29, 1948. It carried out part of the statement of intentions by establishing the Banaban Funds Trust Board. This consisted of the Banaban Adviser as chairman, and five members of the Rabi Island Council elected annually by the council. The board was to be a body corporate, and there were provisions as to elections, quorums and so on. By section 9 all moneys standing to the credit of the Banaban Royalty Trust Fund and the Banaban Provident Fund were to vest in the board. The funds were to be amalgamated under the name of the Banaban Trust Fund, and be operated, controlled, invested and expended by the board in accordance with the provisions of the Ordinance.

 

Section 10 provided:

 

“All sums payable by way of royalties in respect of minerals mined by the Phosphate Commission on Ocean Island shall be paid into and form part of the trust fund.”

 

By section 11: [*195] “Payments may be made by the board from the moneys constituting the trust fund for all or any of the following purposes – (a) for the benefit of members of the Banaban community and of the community generally; (b) for the payment of the reasonable expenses incurred by the board in carrying out the provisions of this Ordinance; (c) any other purpose for which the board considers payments may properly be made; Provided that no such payment shall be made unless it has been approved by the Governor in accordance with the provisions of section 12.”

 

By section 12, a system of annual estimates of revenue and expenditure was instituted. The board was to prepare them, and submit them to the island council, which was then to submit them to the Governor of Fiji with their recommendations.

 

Section 13 dealt separately with the landholders’ fund:

 

“All moneys standing to the credit of the Banaban Landholders’ Fund on the date of the coming into operation of this Ordinance shall vest in the board and shall be held by the board in trust for the payment of the interest accruing from the fund to the persons lawfully entitled thereto: Provided that the board may, with the consent of the Governor, pay to any person entitled to a payment of interest as aforesaid the whole or any part of the capital sum representing his interest in the fund.”

 

There were various ancillary provisions as to authority for making payments, accounts, audit and so on, and an exemption from income tax. There was also a general provision in section 16 that subject to the provisions of the Ordinance, the moneys constituting the funds held by the board in pursuance of the provisions of the Ordinance should “be operated, controlled and invested in such manner as the Governor may direct.”

 

Not surprisingly, there were some accountancy problems in relation to the funds in question, partly due to the destruction of records on Ocean Island by enemy action during the war. In January 1949 the Fiji government was stating that it had not yet taken over the administration of the funds, and that it could not do so until there were audited accounts of them. By August 1949 the Fiji government was pressing the Gilbert and Ellice Islands Colony government for the accounts. Not until October 17, 1949, were the royalty trust fund and the provident fund actually amalgamated to form the Banaban Trust Fund.

 

In 1950 the Gilbert and Ellice Island Colony was still receiving grants in aid from the United Kingdom Treasury to assist it in its post-war difficulties; and these grants, together with the degree of Treasury control that the grants carried with them, continued until January 1955. During this period, and beyond, there were many discussions about the level of taxation that should be borne by the British Phosphate Commissioners, but I do not think that I need say any more about these. In 1957, after the Banabans had sought an increase in their royalties, the High Commission and the Banaban Adviser pointed out that although there was no legal basis for the claim, in that the 1947 agreement did not envisage any variation, nevertheless in their view the request was [*196] reasonable and should be considered between the Banabans and the British Phosphate Commissioners. This view was communicated to the British Phosphate Commissioners in October 1957; and in December the British Phosphate Commissioners agreed to increase the rate of royalty from 1s. 3d. to 1s. 9d. as from July 1, 1958.

 

On June 30, 1959, the Colonial Secretary of Fiji wrote a long letter to the general manager of the British Phosphate Commissioners. The Banabans had observed from the recent annual reports of the Nauru Administration to the United Nations that they seemed to have been much less generously treated by the British Phosphate Commissioners than had been the Nauruans. There were two aspects of this. First, there had been two reconstruction loans for the Nauruans’ benefit after the war. £350,000 had been advanced for the complete rehabilitation of administrative buildings and installations and Nauruan villages which had been completely destroyed; and by June 1957 this loan had been fully amortised by payments at the rate of 101�2d. per ton of phosphate. Under the other loan 350 houses had been built at a cost of £303,775 to replace Nauruan houses that had been destroyed. By January 1959 less than £5,000 of this remained to be amortised, by payments at the rate of 9d. per ton.

 

The second comparison made by the Banabans was of the rate of royalty. Their royalty, of course, was running at the recently increased rate of 1s. 9d. a ton. On Nauru, the rate had risen from 1s. 7d. to 2s. 7d. on July 1, 1957, the payments going partly to the landowners and partly to trust funds. In those circumstances the British Phosphate Commissioners were asked in effect to make the Banabans a loan of £200,000 for the erection of permanent housing, and also to increase the royalty of 1s. 9d. so that the increase would amortise the loan and the existing 1s. 9d. would continue to be paid.

 

On September 26, 1960, the British Phosphate Commissioners replied to this request, after two of the commissioners themselves, with their general manager and administrative secretary, had visited Rabi and discussed the matter with the Rabi Island Council and the Banaban Adviser. They rejected the request for an increased royalty, though they said they would consider a future request for an increase. They also rejected the request for a housing loan of £200,000. Instead, they offered to make forthwith an ex gratia payment of £15,000 a year for 12 years or until 250 houses had been built, whichever was the earlier. (In parenthesis, I may say that if the payments continued for the full 12 years this would amount to £180,000 in all; but by October 1964 the British Phosphate Commissioners seemed to have accepted that at £1,000 a house they were committed to a total contribution of £250,000 for houses.) There were certain conditions attached to the offer, including a condition that the Banabans should contribute not less than £4,000 per annum, and that all the money should be held in a special account and be used exclusively for properly designed housing. The letter also discussed other matters, including the lack of roads on Rabi, and the training of some Banabans by the British Phosphate Commissioners.

 

In November 1960 the acting Colonial Secretary of Fiji replied to the British Phosphate Commissioners, saying that the Banabans welcomed [*197] the housing offer, and putting forward certain details. The letter also asked the British Phosphate Commissioners to consider assisting the Banabans on the provision of roads on Rabi. In the end, in July 1961, the British Phosphate Commissioners duly provided the annual payment of £15,000 for houses, and in April 1962 they agreed to meet half the cost of a road building programme up to a maximum of £F35,000 in all.

 

In July 1963 the Banabans wrote to the British Phosphate Commissioners asking for the rate of royalty to be increased from 1s. 9d. to 4s. and for increases to be made in the payments for housing and roads. The letter referred to the amount being paid to the Gilbert and Ellice Island Colony as having “increased from 6s. to over £1 a ton,” so that even if the Banabans did not then know the exact figures (the payment went up from 21s. to 23s. as from February 6, 1963) they knew approximately. In May 1964 the British Phosphate Commissioners agreed to an increase of about 50 per cent., to match the 50 per cent. granted to Nauru, so that the Ocean Island royalty became 2s. 8d. as from July 1, 1964.

 

One of the considerations that the British Phosphate Commissioners bore in mind throughout, and was emphasised before me, was that for geographical and other reasons the costs of production of phosphate on Ocean Island were very much higher than those for Nauru. Estimates made by the British Phosphate Commissioners for 1963-1964 show the total island expenses (that is, apart from administration, sinking fund, pension fund and so on) as being 74s. 6d. per ton for Ocean Island and 33s. 4d. for Nauru. In considering this, one must remember that tile output from Ocean Island was only one-fifth of that from Nauru. Further, these figures include 26s. 3d. for Ocean Island and 13s. 6d. for Nauru, representing, for Ocean Island, 23s. for commuted taxation, and 1s. 9d. royalty for the Banabans, plus 1s. 6d. for roads and housing, as against the Nauru royalties and administration expenses. A Colonial Office table of January 1965 shows how for Ocean Island over the period 1946 to 1964 the payments by the British Phosphate Commissioners to the Gilbert and Ellice Island Colony had risen from 1s. 9d. a ton to 23s. a ton, compared with the increase in the payments to the Banabans for royalties and, latterly, houses and roads, from 101�2d. a ton to 4s. 2d. a ton.

 

In April 1965 there was an ugly episode which, among other things, gives some indication of how strong and deep-seated the feelings of some of the Banabans about the phosphate royalties had become. A number of the Banabans had become dissatisfied with the Banaban Adviser, then Mr. Laxton. This was mainly on the ground, said the Reverend Tebuke Rotan, that Mr. Laxton had not obtained information on the Gilbert and Ellice Island Colony share of the royalties, and had not helped them to get more for their phosphate. I pause there merely to say that nearly two years earlier, as I have mentioned, the Banabans knew at least approximately what the Gilbert and Ellice Island Colony was then getting, and the real complaint may have been that Mr. Laxton had not told them that more money was available, so that higher royalties could have been paid. However that may be, some Banabans were dissatisfied, while others supported Mr. Laxton.

 

The Reverend Tebuke Rotan is a Methodist minister; he held his [*198] first appointment as such in 1960 on Rabi. In his evidence before me, he described in chief what happened in April 1965. A short passage in his cross-examination by Mr. Vinelott puts it succinctly.

 

“Q. You told my Lord that you became the leader of the faction, the powerful group on the Banaban council which was determined to get itself rid of Mr. Laxton. That is right, is it not? A. Yes, that is correct. Q. And the way you planned to get rid of him, you told my Lord, was to burn down his house and to murder his supporters? A. That was the plan, yes.”

 

The witness then said that at the time they thought that there were about 100 supporters of Mr. Laxton; that he thought that he had been asked to carry out this armed rising before he had had a chance to consider petitioning the governor; that he was told that the others had done all they could to persuade the authorities, though he had not asked them if they had petitioned the governor; that the plan was that 400 armed men should surround and cut down the 100; and that they had a right to do this in order to save their country. The witness had previously in chief summarised the plan to get rid of Mr. Laxton.

 

“I asked 400 of our men to arm themselves with spears and knives, and we made a pledge that we should burn his house and take him to the other side of the island, and let the government pick him up, and then to kill the followers.”

 

When he was asked what was so urgent about the removal of Mr. Laxton, the witness answered:

 

“We could not stand paying someone whom we trusted that he should look after our interest and yet he did not. Secondly, he gradually built up his followers, as I have said, to 100. If we delayed he would be in the end successfully getting another 200, another 300, so it is basic, we must stop it before he got more and more people on his side.”

 

The plan, in short, was a plan for the wholesale murder of fellow countrymen with different political, economic or social views in order to prevent the minority becoming the majority. I am glad to say that prompt and tactful action by a Fiji District Officer, Mr. Hughes, averted any actual uprising. Mr. Laxton departed, and on June 1, 1965, the council terminated his appointment. Shortly afterwards, the Reverend Tebuke Rotan was appointed manager by the council; he moved into Mr. Laxton’s house and took over most of his functions.

 

Some two months after this incident, in a petition to the Governor of Fiji dated June 11, 1965, the Banabans referred to the Gilbert and Ellice Islands Colony receiving 23s. a ton (which was the correct amount) and contrasted it with their 2s. 8d., a figure which of course ignores the payments for housing and roads. By August 1965 the Rabi Island Council had instructed Mr. Walker, an Australian economic and market research consultant who gave evidence before me; and by October 1965 the council had instructed solicitors in Fiji. The council nevertheless continued to negotiate on its own account. A letter to the Colonial Office, [*199] dated November 5, 1965, signed by Mr. Rotan, as chairman of the council, and by four others, contained the statement that

 

“No Banaban has ever had the chance to discuss or negotiate with either the British Phosphate Commissioners or the British Government the amount he should receive for the sale of his homeland.”

 

I cannot imagine the point of making a statement so obviously untrue or misleading as this.

 

In December 1965 Mr. Christofas, the head of the Economic Department of the Colonial Office, and others, had two meetings with the Rabi Island Council on Rabi: and the council’s solicitor was there. At the first meeting Mr. Christofas put forward the result of discussions in Canberra with the governments of Australia and New Zealand. It had been agreed that there should be an increase of 3s. a ton in the total royalty payments for an interim period consisting of most of 1965 and much of 1966, and that the sole responsibility for dividing the increase between the Gilbert and Ellice Islands Colony and the Banabans was to be the British government’s. The proposal that he had in mind to put to the Secretary of State was that the Banabans should receive 1s. of this increase and the Gilbert and Ellice Islands Colony the other 2s. An independent technical advisory group (“T.A.G.”) was to be set up to examine and report on all aspects of the phosphate question, and the long-term settlement would depend on the group’s report.

 

At the second meeting the Banabans’ answer was uncompromising. They firmly asserted that the royalty belonged to the Banabans absolutely. They did not agree to any division of it whereby any person or government obtained any part of it, and they did not recognise that any person or government (including the British government) had any right to dispose of the royalty to anyone except the Banabans. Mr. Christofas expressed disappointment, but after a long discussion, in which the Banabans emphasised their distinction from the Gilbertese, and Mr. Christofas emphasised the governmental right to tax, little progress had been made.

 

Very shortly afterwards, on December 17, 1965, the Colonial Office wrote a long letter to the Commonwealth Development Corporation, setting out the terms of reference of the T.A.G., with the names of the agreed members and a summary of the position. From this letter it appears that by this time the payment to the Gilbert and Ellice Islands Colony stood at 26s. a ton, though this included the additional 3s. of which the Banabans had been told by Mr. Christofas; and it was stated that consideration was being given to paying 1s. of this 3s. to the Banabans. Furthermore, the British Phosphate Commissioners’ exemption from taxation had been cancelled. The Nauru payments had reached 17s. 6d. a ton. In addition, there were the payments for the cost of administration which were borne by the phosphate revenue, which were estimated at 10s. a ton. The report of the T.A.G. would, it was stated, be confidential to the Secretary of State, and would not be made available in toto to the Australian and New Zealand governments. In 1966 the T.A.G. duly reported; and what I understand to be Part I of the report was put in evidence. It gives a most useful account of the whole operation on Ocean Island, and much else besides. [*200] On January 14, 1966, Mr. Christofas, who was passing through Fiji, had a meeting with Mr. Rotan and other members of the Rabi Island Council, with their solicitor present. Mr. Christofas told them that the T.A.G. had already started work, and discussed this; but the main subject of discussion was the extra 3s. and the future. The Banabans claimed that as the 3s. had been called a royalty, all of it must go to them. This seems to foreshadow the “Crown royalties” claim in Ocean Island No. 2. However, in the end, without prejudice to anybody’s claims of principle, and without resolving problems of terminology, the Banabans accepted as an interim arrangement that if the British government gave them 1s. as royalty they would accept it, leaving 2s. to go to the Gilbert and Ellice Islands Colony. A month later Mr. Rotan wrote to Mr. Christofas to say that the council was not satisfied with what had been done, and was going to send a delegation to the United Nations in New York. Mr. Christofas duly replied, suggesting that Banaban representatives might be attached to the United Kingdom delegation at proposed talks between the governments of Australia, New Zealand and the United Kingdom. Mr. Rotan replied, requiring in effect independent representation in the talks.

 

In Suva, on May 5, 1966, there was a further meeting between Mr. Christofas, members of the council (including Mr. Rotan) and others. In the course of this, Mr. Christofas explained that although originally the British Phosphate Commissioners had the responsibility for the phosphate payments, for “some years now” they had been instructed to stay clear of it, and it had been a matter for the three governments. After much discussion, in which the Banabans’ solicitor played a leading part, the Banabans accepted the proffered status of advisers to the British delegation at the proposed talks on phosphates. On July 8, 1966, Mr. Christofas wrote to Mr. Rotan to say that the British government agreed that the payments made by the British Phosphate Commissioners should be split into taxation, payable to the Gilbert and Ellice Islands Colony, and royalties, all of which were to go to the Banabans. He proposed that the contributions for roads and housing should be consolidated with the royalty; and he said that the British government would agree to a delegation of four to represent the Banabans at the talks, and pay their expenses.

 

The long-awaited discussions duly took place in Wellington, New Zealand, from August 29 to September 1, 1966, with representatives of the Gilbert and Ellice Islands Colony and the Banabans present as advisers to the British delegation. It was agreed to put forward to the governments a series of recommendations. The road and housing payments to the Banabans, the value of which had previously been over-estimated, were to lapse. The Banaban royalty was to be increased by 9d. per ton from the existing 3s. 8d. (made up of the 2s. 8d. which had run from July 1, 1964, and the 1s. which had emerged from the discussions with Mr. Christofas) to 4s. 5d. per ton. (The difference between the 9d., and the 1s. 6d. at which the roads and housing payments had previously been estimated, was at least in part a reflection of the difference between spreading the payments over a shorter period and spreading them over the whole remaining life of the phosphates). The rate of export of [*201] phosphates from Ocean Island was to be increased from 340,000 to 450,000 tons a year. Another meeting was to take place after discussions with Nauru, and in any case by June 1968. Until then, the total payments to the Gilbert and Ellice Islands Colony and the Banabans were to be 42s. 1d. per ton, with the British government having the sole decision on how much of the increase was to be treated as taxation for the Gilbert and Ellice Islands Colony, and how much of it was to be royalty for the Banabans.

 

The New Zealand and Australian delegations asserted that these provisions represented the maximum reasonable total levels of benefit for the interim arrangements, and that further discussions might well show that they represented the most that the Ocean Island phosphate industry could support, or more. The British delegation said that they would seek the most generous possible definitive settlement in the interests of the Gilbert and Ellice Islands Colony and the Banaban community. A letter from the Department of External Affairs in Wellington estimated that the proposed terms represented a total additional payment by the British Phosphate Commissioners of 12s. 8d., though after allowing for various savings (including the payments for roads and housing) the net increase would be 10s. 10d.

 

On November 8, 1966, the Secretary of State wrote to Mr. Rotan to say that the three governments had accepted the recommendations of the Wellington meeting, and that he had decided that out of the increased payment to be made by the British Phosphate Commissioners, 10s. 1d. was to go to the Gilbert and Ellice Islands Colony, and 2s. 7d. was to go to increase the royalty payable to the Banabans from the 4s. 5d. that had emerged from the meeting to 7s. The letter took the value of the road and housing payments as being not 9d. but 4d., and on this footing stated that the increase from 4s. (consisting of 3s. 8d. plus 4d.) to 7s. was an increase of 75 per cent., compared with an increase of only 34 per cent. in the payment to the Gilbert and Ellice Islands Colony. I may say that a contemporary Colonial Office document which during the hearing acquired the marking “Misc. 3A” shows that these changes were to take effect as from July 1, 1966. The document, which is an extension of the table of January 1965 that I have already mentioned, usefully shows the rates paid to the Gilbert and Ellice Islands Colony and the Banabans for each year from 1946 to 1966. The council’s view of this decision (which I think reached them in advance of the letter) was that it was unjust and unreasonable; and they said that they would continue to fight for a proper distribution, and would seek world opinion on the action of the British government.

 

In May 1967 Mr. Rotan, Reverend Tebuke Rotan and their solicitor attended a series of meetings with representatives of the United Kingdom government in London. The discussions were wide-ranging. They included questions of the political separation of the Banabans, and their protection against the Gilbert and Ellice Islands Colony if it became independent. The contrast between the 35s. 1d. for the Gilbert and Ellice Islands Colony and the 7s. for the Banabans naturally loomed large with the Banabans, particularly in view of the prospects of mining ceasing in about 12 years. By this time, claims by the Banabans to have soil [*202] shipped to Ocean Island, and food-bearing trees planted, had been made. The Banabans contended that the British Phosphate Commissioners’ payments should be divided on a 50-50 basis, in place of the ratio of 7s. to 35s. 1d. The meeting on May 18, 1967, was presided over by the Minister of State for Commonwealth Affairs, Mrs. Judith Hart M.P.; and after some discussion, her proposal of a further meeting was agreed to.

 

At this meeting, on May 23, Mrs. Hart read a prepared statement in which she told the Banabans that, subject to Parliamentary approval, Her Majesty’s government proposed to make a once-for-all ex gratia payment of £80,000 sterling (equivalent to £100,000 in Australian pre decimal currency) to the Banaban Development Fund under controlled conditions for the purpose of developing Rabi economically. In addition, the government would provide technical assistance; and at the next round of phosphate discussions, the government would take fully into account, as sympathetically as possible, the Banabans’ case on the interrelation of taxation and royalties. These proposals were put forward for the Banabans to accept as a satisfactory settlement for the time being.

 

The next meeting was on May 24. At this, Mrs. Hart’s statement was discussed at length; and what was stated to be an agreed minute of the discussions, dated June 6, 1967, was prepared and placed in the library of the House of Commons. In this, the proposed ex gratia payment of £80,000 is stated to be made “in consideration of the effects of phosphate mining upon Ocean Island since 1900,” a form of words which the Banabans say they should not have agreed. The Banaban delegation promptly left London, after they had been advised by their solicitor to accept the £80,000. Back in Fiji, they consulted another lawyer, Mr. Patel, who advised the council not to accept the £80,000: and tile money was not then accepted.

 

At about this time the British Phosphate Commissioners were occupied in considering the areas of land on Ocean Island from which phosphate could still economically be extracted. These included a number of areas occupied by the commissioners otherwise than under mining leases, and two areas of some 65 acres in all which had not so far been leased to them. One result was that the question of the terms on which the British Phosphate Commissioners could obtain these additional rights from the Banabans was added to the existing questions in dispute. On the other issues, in a long memorandum for which the appropriate date seems to be about September 9, 1967, the Banabans expressed themselves as being greatly disappointed by the result of the May meetings in London, and as being unwilling to take part in a further conference that was to take place in Wellington, New Zealand, in September. While in Auckland on September 9 Mr. Rotan wrote to Mr. Christofas, who was also there, saying that the Banaban delegation would not take part in the Wellington conference merely as advisers to the United Kingdom delegation. They required to be free to take part in the talks with the Australian and New Zealand governments, and to leave the division of the 42s. 1d., and any further sums, to be decided at a subsequent conference between the Banabans and the United Kingdom government. On September 11 Mr. Rotan communicated with the Australian and New [*203] Zealand delegates, also claiming direct representation, as well as other things.

 

On September 12 Mr. Rotan wrote again to Mr. Christofas to emphasise that “the agreed minutes” of the discussions in May were “an agreed minute of the discussions. It would be wrong to call it an agreement.” The letter disagreed with other parts of the minutes, and said that the Banabans were not agreeable to the ex gratia grant of £80,000 “in consideration of the effect of phosphate mining upon Ocean Island since 1900.” The letter claimed that the British Phosphate Commissioners should restore the land and replant it with food-bearing trees, and said that the Banabans would seek a separation of the island politically from the Gilbert and Ellice Islands Colony as soon as possible.

 

Meanwhile, on September 11 the discussions had begun, without the Banabans but with representatives of the Gilbert and Ellice Islands Colony present as advisers to the British delegation. The conference ended on September 15 and there is an agreed minute of that date. On November 20, after the three governments had approved the recommendations contained in the minutes, Mr. Christofas sent copies of the minutes to Mr. Rotan, and asked him for the Banabans’ considered recommendations on the division between them and the Gilbert and Ellice Islands Colony, with their detailed reasons.

 

The agreed recommendations to the three governments included financial provisions for the Banabans on an entirely new basis, in effect scrapping the existing payments made in excess of the contractual royalty of 1s. 3d. and starting again. To the contractual 1s. 3d. payable to the Banabans was added 9d. as representing the road and housing payments, instead of the 4d. which had been taken by the Secretary of State in November 1966. The resulting 2s. was then converted into decimal currency at 20 cents: all the figures are in Australian currency. This sum of 20 cents was to be added to the costs of production (as defined), and then the total was to be deducted from the phosphate revenue. The balance was then to be divided between taxation to be paid to the Gilbert and Ellice Islands Colony and additional royalties to be paid to the Banabans (in addition to the basic 20 cents) as the British government should decide from time to time. Further provisions were made as to the basic and actual f.o.b. price of Ocean Island phosphate; and provision was made for a review of the arrangements, subject to which they were to operate indefinitely from July 1, 1967.

 

Some six weeks later, on October 29, 1967, a party of over 50 Banabans arrived at Ocean Island on a pre-arranged visit, together with Mr. Patel, their new legal adviser, and a surveyor. The main purposes of the visit were to inspect and survey the 65 acres of unleased phosphate land, to check the leased areas and inspect them with a view to resettlement, and for their surveyor to check certain boundaries where mining was suspected of having extended into unleased areas. This, of course, presaged the over-mining claim in Ocean Island No. 1. The visit was attended by a number of incidents which I need not relate. On January 12, 1968, the surveyor sent the council a long letter and a number of plans, containing the results of his surveys. At the end of the month, Nauru became an independent self-governing republic. [*204] There was then correspondence between Mr. Rotan and the Commonwealth Office in which the Banabans sought a conference to discuss the allocation of the British Phosphate Commissioners’ payments as between themselves and the Gilbert and Ellice Islands Colony. Further, the Banabans’ legal adviser wrote to the Trusteeship Department of the United Nations to say that the Banabans wished to present to a United Nations’ committee a case for immediate independence and for support and assistance. On June 5, 1968, a committee heard Mr. Patel, the Banabans’ legal adviser, who presented a long memorandum with an addendum. In these the Banabans sought immediate political independence, re-establishment on Ocean Island, no acceleration in the extraction of phosphate, and immediate steps for the full rehabilitation of areas affected by phosphate mining.

 

Much could be said about these documents; but I propose to confine myself to saying that nobody who knew the facts could escape the conclusion that a forceful presentation of the Banabans’ genuine grievances had been marred by significant omissions of what was true and by intemperate assertions of what was false. I shall give only one example under each head. First, a picture of coercion to go to Rabi and stay there was built up without any mention of the ballot or of the large majority for remaining on Rabi. Second, it was said that “the Banaban people revere and worship the remains of their ancestors”; and in relating what the Banabans had found on their recent visit to Ocean Island, it was said that

 

“the Banaban cemetery had totally vanished. We believe that in their greed for phosphate the B.P.C. has dug out the remains of our forefathers and shipped them away to fertilise the farms in Australia and New Zealand.”

 

This statement plainly referred not to the Banaban cemetery near the Sacred Heart Mission, which was outside the areas leased to the British Phosphate Commissioners and was intact, but to the Banaban cemetery at Ooma Point, near the area from which sand had been taken, and where there had been extensive Japanese earthworks and fortifications.

 

During my view of Ocean Island in October 1975 I saw the cemetery; and what has been called the “Pastor’s Tomb” (his name, I think, was Apisaloma) was still standing there prominently. It was, indeed, often used as a point of topographical reference in the hearing before me. The cemetery appeared to have been completely neglected for a very long time; and on a plan delivered with further and better particulars served by the plaintiffs in Ocean Island No. 1 on March 11, 1975, the area is marked “Ooma cemetery, neglected graves.” The plaintiffs’ own surveyor who prepared the plan dated the survey “July 1973.” When I visited Ocean Island, a party of Banabans was living on the island; yet the cemetery showed no signs of attention by anyone, and certainly not reverence or worship. It is completely untrue to say that it “had totally vanished.” Nor has there been any extraction of phosphate anywhere near. What was taken nearby was sand, not phosphate, so that the emotive phrases about “greed for phosphate” and shipping “the remains [*205] of our forefathers” to “fertilise the farms in Australia and New Zealand” were stupidly and offensively false.

 

As I have said, the statement to the United Nations’ committee was made by Mr. Patel. He had been in the party that had visited the island, so that he must at least have had an opportunity to see for himself what he was talking about. Whoever was responsible, he plainly did not understand the elementary verity that even if simple honesty is to be ignored, a good case does not need to be bolstered up by falsities and half-truths, and that in the end these recoil on the heads of those who utter them. As I have said, I shall say no more about this document. Nor need I say anything about the statement in reply made by the United Kingdom representative on June 10, beyond mentioning that it refuted the allegations about graves and much else besides, and referred to the ballot about remaining on Rabi. With that, I can leave the United Nations’ episode; it seems to have produced no direct result.

 

In August 1968 the British Phosphate Commissioners’ general manager had a meeting on Rabi with the Banabans, in which Mr. Patel and Mr. Walker took part; and at this, much was discussed and little achieved. Soon afterwards, in October 1968, there were discussions in London between the United Kingdom Government and representatives of the Banabans and of the Gilbert and Ellice Islands Colony, mostly in separate meetings. The Banaban representatives included Mr. Rotan and Rev. Tebuke Rotan, and also Mr. Shrapnel and Mr. Walker, both of Philip Shrapnel & Co. Pty. Ltd. of Sydney, who presented a long memorandum. Mr. Shrapnel said that an ex gratia payment for the development of Rabi would be very acceptable as a quid pro quo for lack of past development, but that it did not remove the “moral obligation” of the three governments to restore Ocean Island, or to pay full compensation in lieu, which he put at £40m. He accepted that if the ex gratia payment of £80,000 was made it would be used solely for developing Rabi under Her Majesty’s Government control. On the division of phosphate payments made by the British Phosphate Commissioners, he said that the Banabans were in equity entitled to the whole benefit, but that they realised that Her Majesty’s Government would be unlikely to agree, and so they sought a substantially greater share.

 

The United Kingdom representatives next met the Gilbert and Ellice Islands Colony representatives separately from the Banabans, and then on October 29 there was a joint meeting at which the Banaban representatives and the Gilbert and Ellice Islands Colony representatives made their final statements. The Banaban statement included a request for immediate independence for Ocean Island. The contrast between an independent Nauru receiving 100 per cent. of the profits from her phosphate, and a dependent Ocean Island receiving only 15 per cent., and watching the remaining 85 per cent. going to the Gilbert and Ellice Islands Colony, was naturally emphasised.

 

The next day Lord Shepherd, the Minister of State, announced the decision of the United Kingdom Government. The Banabans’ request for independence, the rehabilitation of Ocean Island, the limitation of the rate of phosphate extraction, and an increased share of the phosphate payments, were all rejected; but the offer of the £80,000 was renewed. [*206] In March 1969 there was another Banaban visit to Ocean Island, much concerned with boundaries of the land leased for mining and a number of other matters. By this time it had been agreed with the Republic of Nauru by the three governments that the British Phosphate Commissioners would continue to operate the phosphate industry on Nauru until June 30, 1970, paying the whole proceeds of an agreed f.o.b. price to the republic after deducting costs, and that the republic would purchase the British Phosphate Commissioners’ assets at an agreed price. The three governments had also agreed among themselves that a similar f.o.b. price would be charged for Ocean Island phosphate as from January 1, 1968. The proceeds of this, however, would be allocated between the Banabans and the Gilbert and Ellice Islands Colony by the United Kingdom Government, and the British Phosphate Commissioners would continue to operate the industry until the phosphate was exhausted in about eight years.

 

In the autumn of 1969 the Rev. Tebuke Rotan was in London, writing to the Prime Minister and the Foreign and Commonwealth Office; and in October he had discussions with Lord Shepherd and subsequently with certain officials. There was another meeting with Lord Shepherd on January 6, 1970. From this it appeared that the renewed offer of £80,000 had been accepted; for one of the officials at the meeting referred to “the development grant of £80,000 made to the Banabans following the phosphate talks in London in 1968” as having “largely been spent and mainly on clearing coconut plantations on the island.” On January 28, 1970, Lord Shepherd was in Fiji and met a large delegation of Banabans. One subject for discussion was the impending independence of Fiji, which in fact came about later in the year, on October 10. Once again, much was discussed at these meetings but little achieved: the decision as to the amount of royalty for the Banabans remained unchanged.

 

A meeting between Lord Shepherd and the then leading counsel for the Banabans on February 23, 1970, was concerned mainly with obtaining representation for the Banabans at forthcoming talks in Fiji between officials of the three governments. These talks were to review the Ocean Island phosphate arrangements, particularly in relation to the separation from Nauru: the Banabans’ share of the payments was not to be a subject for discussion. Immediately prior to those talks, which began on March 18, 1970, representatives of Fiji, the Gilbert and Ellice Islands Colony and the Banabans (including leading counsel for the Banabans) held what were called informal discussions with the United Kingdom delegation; and in the familiar pattern they attended the talks as advisers to that delegation. The main object was to obtain as high a profit as possible by reducing costs and raising the price. The talks produced agreed recommendations to the three governments, including an increase in the agreed basic price for the phosphate up to the price sought by the United Kingdom delegation; and there were provisions for review. Leading counsel for the Banabans raised the question whether the British Phosphate Commissioners would work hitherto unleased land on Ocean Island; and he was told that the British Phosphate Commissioners would do this provided permission to do it were given at a fairly early date. By June [*207] 1970 the three governments had all approved the recommendations that had resulted from the talks.

 

On March 20, 1970, the Banabans submitted a memorandum seeking to present their case to an independent body such as a Select Committee of the House of Commons, or a Joint Select Committee. Some six months later, on September 30, 1970, leading counsel for the Banabans saw the Parliamentary Under-Secretary at the Foreign and Commonwealth Office in order to request an inquiry. From this meeting it appeared that the Banabans were no longer seeking independence for Ocean Island, as they had decided to take up Fiji citizenship. The main point was, as might be expected, the 15 per cent. that they received compared with the Gilbert and Ellice Islands Colony’s 85 per cent. On March 2, 1971, the Foreign and Commonwealth Office replied in detail to the Banaban’s memorandum, which was treated as a petition. The request for an inquiry was rejected, but there was an offer to discuss certain matters; and these were discussed with leading counsel for the Banabans on March 26, though this was before he knew the Banabans’ detailed reactions. These came in a long letter to the Secretary of State by Reverend Tebuke Rotan dated July 5, 1971, written in London. It sought reconsideration of the refusal to agree to an independent inquiry.

 

In the meantime, the Banaban Settlement Ordinance 1970 had been enacted by the Fiji legislature. This constituted the Council of Leaders, one of the plaintiffs in Ocean Island No. 2, as a body corporate, and provided for the election of its members by the four communities on Rabi. It empowered the council to make regulations on a wide range of subjects, and provided for enforcing them. It also established the Rabi Island Fund, to be controlled by the council, and provided for the payment into the fund of all moneys standing to the credit of the Banaban Trust Fund, and also all royalties and other moneys accruing to the Banaban community for minerals mined by the British Phosphate Commissioners on Ocean Island: these royalties and other payments were to be exempt from income tax.

 

I need do no more than mention a long memorandum by Philip Shrapnel & Co. Pty. Ltd. It was prepared for submission to Her Majesty’s Government, but it was apparently never submitted, though a copy was sent to the British Phosphate Commissioners in October 1971. On October 27, 1971, came the letter before action from the Banabans’ solicitors; and, as I have mentioned, on November 10, 1971, the original writ was issued.

 

(7) 1973: the last agreement. Although it was made after writ issued, I think that I should briefly refer to an agreement dated May 17, 1973, and made between the Council of Leaders and the British Phosphate Commissioners. The salient feature of this was that the council undertook that all landowners on Ocean Island would grant to the commissioners leases in an agreed form of all land on Ocean Island not then leased to the commissioners which contained workable phosphate that the commissioners wished to mine. There was a similar provision for the grant of leases of the right to remove phosphate from defined land which had already been leased to the commissioners for building [*208] purposes. The area of the two categories of land were said to be approximately 34.17 and 52.5 acres respectively. The commissioners were to pay the landowners (not the council, though the council warranted that it was authorised by all landowners to receive all payments) a premium of $A1,000 per acre for land above the 170 foot contour and $A325 per acre for land below it. There were provisions for survey, for the reverter of the land to the landowners as soon as it would not prejudice or inconvenience the operations of the commissioners, and for the agreement to be construed by English law and be enforceable in the English High Court.

 

That agreement was made conditional upon the execution within 30 days of another agreement, to be made between the Governor of the Gilbert and Ellice Islands Colony, the Council of Leaders and the Secretary of State; in fact, this other agreement was duly executed on the same day. It made complicated financial arrangements under which certain lump sums were to be paid or released to the Council of Leaders as soon as the leases were granted, including $200,000 from the United Kingdom Government. Further, the council was to receive 15.12 per cent. of the net proceeds from mining the land to be leased, including the contractual 20 cents; but in the final reckoning, after mining had ceased, any necessary adjustments were to be made so that the total benefits would have been equally shared between the Gilbert and Ellice Islands Colony and the council. In this way, in this last tidying up operation, which was to include the remaining land on Ocean Island from which phosphate could economically and properly be removed, the Banabans at last achieved the equal division of phosphate profits for which they had so long striven, though not, of course, the entire benefit which they had so long claimed. I may add that the Banaban population, which had been of the order of some 500 in 1900, and was not much more in the 1920s, is today of the order of some 2,500.

 

At that point I pause. I have recounted the main facts that seem to me to have a greater or lesser degree of relevance to the issues in the case, as well as a number of others which I have included in order to provide the background and continuity against which this unusual litigation may be seen. Ocean Island, of course, is not England, and 1976 is not 1900 or 1920 or 1950; and I think it is important to have some picture of the place and age in which so many of these events occurred. I have not set out all the relevant facts: there are some which may more conveniently be dealt with in relation to particular heads of claim, and to these I shall come in due course.

 

6. The claims in general. Before I turn to the detailed claims and the substantial body of law concerned, I think that I should say something about the Banabans’ claims in general. There is no difficulty whatever in appreciating the deep-seated feelings of grievance that the Banabans have. Stripped of all that is false, misleading or intemperate, their claims have a central core of genuine grievance. Nobody could say that in recent years anything has been lacking in the tenacity with which they have pressed their claims in every way that seemed open to them, with very little result [*209] before 1973 beyond the ex gratia increases in the royalties and ultimately the ex gratia £80,000. A feeling of desperation, however exaggerated, may explain, though not justify, some of the excesses in their actions and contentions before the proceedings came before me.

 

For the Banabans, the major disaster was the transaction that they so readily entered into in 1947. The 1913 and 1931 transactions had each related to some 150 acres of further land for mining; the 1940 negotiations had been for 230 acres; but the 1947 transaction disposed of more than twice the amount of mining land that had been dealt with in the two earlier transactions put together. Moreover, in accordance with the recommendations of the Maude report, the land was substantially the whole of the remaining land in the island that was economically workable. True, the 1973 transaction swept up a not insubstantial residue; but its area was only about one-eighth that of the 1947 land. The Banabans thus in 1947 deprived themselves of what undoubtedly would have been the very substantial bargaining counter of having a large area of workable land still undisposed of. Furthermore, the 1947 transaction had in it no provision whatever for revision or renegotiation: in 1947 they were disposing of phosphate which would take well over a quarter of a century to work, at a rate of royalty which was fixed and unvariable, no matter how long the extraction took. With hindsight, it is plain that it would have been far better for the Banabans either to dispose of much less land (even if they committed themselves in principle to disposing of it all) or else to insist on including some provision for varying or reconsidering the royalties. 1947 is not 1976, of course, but even in 1947 the possible improvidence of the disposition that was in fact made must have been foreseeable by persons with business experience.

 

During the post-war period, and especially latterly, the Banabans had much to compare themselves with, always to their disadvantage. There was Nauru, a trust territory under the United Nations, and so with an independent supervisory body to which the administration was responsible and there were the prospects of independence which in the end ripened into achievement. There was the Gilbert and Ellice Islands Colony, which took far more of the phosphate revenue than the Banabans got for themselves from the consumption of their own property and the ruining of their own island; and from any such rival claim Nauru was completely free. There were the increased payments which from time to time the British Phosphate Commissioners agreed to make to the Banabans, as well as to the Gilbert and Ellice Islands Colony. Paradoxically, the fact that these increased payments to the Banabans were made ex gratia only made it worse: for if this much could be obtained ex gratia, arguing from a position of weakness, how much might have been obtainable as of right if the Banabans had only had a position of strength from which to advance their arguments?

 

It was in those circumstances, all else having failed, that this litigation was commenced. With that background, it is not in the least surprising that the Banabans should seek to avail themselves of every contention, however technical, which offered any prospect at all of providing them with some recompense for what they had failed to obtain in the past. However, the question for me is not a broad question of whether the [*210] Banabans ought to succeed as a matter of fairness or “equity” in the non-technical sense, or ethics or morality or sympathy. I have no jurisdiction to make an award to the plaintiffs just because I reach the conclusion (if I do) that they have had a “raw deal.” This is a court of law and equity (using “equity” in its technical sense), administering justice according to law and equity, and my duty is to examine the plaintiffs’ claims upon that footing. To the lawyers engaged in the case there is no need to say this: but for the non-lawyers I think it right that I should make it explicit. With that, I turn to consider the claims of the plaintiffs.

 

II. OCEAN ISLAND NO. 2

 

As I have already said, I propose to consider first the claims made in Ocean Island No. 2; and of these, the first that I shall discuss is the claim made under the third head in that case, namely, the claim to the Crown royalties.

 

1. The Crown royalties. [His Lordship considered the plaintiffs’ claim that certain payments made by the British Phosphate Commissioners to the Gilbert and Ellice Islands Colony in lieu of taxation were caught by certain Ordinances of the colony and of Fiji as being “royalties” that were payable to the Banabans under other Ordinances of the two colonies. After part of the claim had been abandoned, his Lordship rejected the whole claim, and continued:] The result is therefore that the plaintiffs’ claim to declarations in respect of what the statement of claim calls “the disputed royalties” and “the disputed payments in the nature of royalties” under paragraphs 1 and 2 of the prayer for relief fails and will be dismissed. I regret that such unmeritorious claims should have been made at all, and, when made, persisted in, though not to their full extent. At the same time, for the reasons that I have given, I can understand how the Banabans’ sense of grievance has led to a search for any possible head of claim, however technical, that might secure some compensation for them.

 

2. The 1931 and 1947 claims. I turn to the other two main heads of claim, relating to the 1931 transaction and the 1947 transaction. These, of course, constitute by far the most important part of the Banabans’ claim in Ocean Island No. 2. As I have already indicated, although initially there was some hesitation on the point, it was soon accepted on all hands that the law applicable to Ocean Island was basically English law, though subject, of course, to local variations, and in particular to local statutes. Thus much of the argument was in terms of the English law of trusts, with more than an occasional glance at the subject of perpetuity. On the procedural matter of limitation of actions, there was of course much discussion of the Limitation Act 1939, to which I shall turn in due course.

 

(1) The Crown as trustee. As might be expected, the claim in respect of the 1931 transaction was very different from the claim in respect of the 1947 transaction; for the former was an exercise of compulsory powers, and the latter was a voluntary agreement. Nevertheless, there was a [*211] common basis for Mr. Mowbray’s contentions about them. That common basis was that the Crown was in a fiduciary position in relation to the Banabans, and in those transactions was guilty of a breach of fiduciary duty towards them. One source of this duty was the 1913 arrangements. The effect of these was carried forward into the 1931 transaction by reason, inter alia, of the 6d. royalty under the 1913 arrangements being increased to 101�2d. under the 1931 transaction: the 6d. was, as it were, embedded in the 101�2d. Another source of the fiduciary duty was the trust declared by the Mining Ordinance 1928, section 6 (2), whereby the resident commissioner held on an express trust for the former owner or owners.

 

A third source of the fiduciary duty, it is said, was the statutory duty of the resident commissioner under section 5 of the Ordinance of 1928 to fix the royalty and hold it in trust. In relation to the 1947 transaction it was also contended that the Mining (Amendment) Ordinance 1937, in its amended version of section 7 of the Ordinance of 1928, had imposed a trust for the Banaban community, even though it contained no express words of trust. The plaintiffs also relied on a very large number of references in the various documents (duly particularised) running from 1909 to 1949, in which there are references to trusts, trusteeship and the like. I do not propose to set out any of these, though I have read them all, often more than once. They make an impressive array.

 

I propose to turn at once to the position of the Crown as trustee, leaving on one side any question of what is meant by the Crown for this purpose; and I must also consider what is meant by “trust.” The word is in common use in English language, and whatever may be the position in this court, it must be recognised that the word is often used in a sense different from that of an equitable obligation enforceable as such by the courts. Many a man may be in a position of trust without being a trustee in the equitable sense; and terms such as “Brains Trust,” “Antitrust,” and “Trust Territories,” though commonly used, are not understood as relating to a trust as enforced in a court of equity. At the same time, it can hardly be disputed that a trust may be created without using the word “trust.” In every case one has to look to see whether in the circumstances of the case, and on the true construction of what was said and written, a sufficient intention to create a true trust has been manifested.

 

When it is alleged that the Crown is a trustee, an element which is of especial importance consists of the governmental powers and obligations of the Crown; for these readily provide an explanation which is an alternative to a trust. If money or other property is vested in the Crown and is used for the benefit of others, one explanation can be that the Crown holds on a true trust for those others. Another explanation can be that, without holding the property on a true trust, the Crown is nevertheless administering that property in the exercise of the Crown’s governmental functions. This latter possible explanation, which does not exist in the case of an ordinary individual, makes it necessary to scrutinise with greater care the words and circumstances which are alleged to impose a trust. [*212] In this case, Mr. Vinelott did not attempt to argue that the Crown could never be a trustee. He accepted to the full Civilian War Claimants Association Ltd. v. The King [1932] A.C. 14, and in particular a dictum of Lord Atkin at p. 27. There, Lord Atkin said, “There is nothing, so far as I know, to prevent the Crown acting as agent or trustee if it chooses deliberately to do so”; and in Nissan v. Attorney-General [1970] A.C. 179, 223, Lord Pearce adopted this dictum. The claim in the first of these cases was in effect that moneys paid after World War I by Germany under the Treaty of Versailles were held by the Crown as agent or trustee for those who had made claims to His Majesty’s Government for loss or damage caused by Germany during the war. The claimants drew a distinction between the treaty-making powers of the Crown, which were admittedly an exercise of the Royal prerogative, and the duties of the Crown in relation to moneys paid to the Crown under the treaty, which were said to be subject to the alleged trust or agency in favour of the claimants. However, on a submission by the Crown at first instance that the petition of right disclosed no cause of action, both the Court of Appeal ((1930) 47 T.L.R. 102) and the House of Lords ([1932] A.C. 14), without calling on counsel for the Crown, unanimously upheld Roche J. ((1930) 46 T.L.R. 581) in having entered judgment for the Crown on the demurrer.

 

In all the courts considerable reliance was placed on I (1876) 1 Q.B.D. 487; 2 Q.B.D. 69, a case in which it had been unsuccessfully contended that the Crown was a trustee or agent for the claimant in respect of moneys received by the Crown from the Emperor of China. In Civilian War Claimants Association Ltd. v. The King [1932] A.C. 14, 25, Lord Buckmaster quoted with approval a passage from Rustomjee v. The Queen, 1 Q.B.D. 487, 497, in which Lush J. had said that no doubt as soon as the money was received a duty arose to distribute it among the persons towards whose losses it had been paid by the Emperor of China, but that the distribution, when made, would be “not the act of an agent accounting to a principal, but the act of the Sovereign in dispensing justice to her subjects.” The distinction between a trustee accounting to a beneficiary and the act of the Sovereign in dispensing justice to her subjects must in essence be the same.

 

The distinction is strongly reinforced by a decision that does not seem to have been cited in the Civilian War Claimants case, possibly because the Crown was not called on to argue in the Court of Appeal or House of Lords. That case is Kinloch v. Secretary of State for India in Council (1882) 7 App.Cas. 619. The claim arose out of some booty of war in the Indian Mutiny campaign. By an Order in Council in 1864, the Crown exercised a statutory power to refer to the judge of the Court of Admiralty certain disputes as to the persons entitled to share in the booty. The Order in Council required the judge to consider any capture of any property that might have been made during the operation: “both in regard to the persons who are, and the proportions in which such persons are entitled to share therein...”; but the Order continued with the words

 

“reserving however to her Majesty the right to direct the rates or scale of distribution according to which the said property, or the [*213] proceeds thereof, shall be paid to the several ranks of the force or forces to which such property shall be adjudged.”

 

The Order in Council will be found, set out verbatim, in Banda and Kirwee Booty (1866) L.R. 1 A. & E. 109, 115-117, the case that I shall cite next.

 

In accordance with this Order in Council, Dr. Lushington heard the conflicting claims urged before him by 15 silks and 21 juniors during alternate weeks of January and February 1866. At the end of June he delivered a judgment that extended over some 140 pages of the Law Reports: Banda and Kirwee Booty (1866) L.R. 1 A. & E. 109. His decision was that only two groups of claimants were entitled to share in the booty. In November 1866 a Royal Warrant was issued, and it was this that gave rise to the proceedings in Kinloch v. Secretary of State for India in Council, 7 App.Cas. 619. Before that, there had been an attempt in In re Banda and Kirwee Booty (No. 2) (1875) L.R. 4 A. & E. 436 to persuade the Court of Admiralty to accept jurisdiction on a claim that some of the booty had not been distributed among the persons entitled; but Sir Robert Phillimore rejected this, on the ground that the court had jurisdiction only to decide what was referred to it by Order in Council, and this claim had not been thus referred. In the end, the claimants turned to the Chancery Division in the Kinloch case.

 

The foundation of the Kinloch case was the Royal Warrant. This contained a number of recitals, setting out a description of the booty concerned, the sale of the booty, the Admiralty proceedings and certain other matters; and it then continued with the operative words. These were:

 

“Now We do hereby give and grant to Our Secretary of State for India in Council for the time being all the aforesaid booty mentioned to have been captured at or in the said towns of Banda and Kirwee, and the proceeds thereof as aforesaid, in trust for the use of” the persons to whom it had been adjudged by Dr. Lushington, “such booty and proceeds to be distributed by Our Secretary of State for India in Council for the time being, or by any other person or persons he may appoint, as follows”;

 

and the warrant then went on to indicate the proportionate shares of each of the several classes of persons found entitled to share. The Royal Warrant then ended as follows:

 

“And We are graciously pleased to order and direct that in case any doubt shall arise in respect of the distribution of the booty or proceeds hereby granted as aforesaid, or respecting any claim or demand on the said booty or proceeds, the same shall be determined by Our Secretary of State for India in Council for the time being, or by such person or persons to whom he shall refer the same, which determination thereupon made shall with all convenient speed be notified in writing to the Commissioners of Our Treasury; and the same shall be final and conclusive to all intents and purposes, unless within three months after the receipt thereof at the office of the Commissioners of Our Treasury We shall be pleased otherwise to [*214] order; hereby reserving to ourselves the power to make such other order therein as to Us shall seem fit.”

 

I pause there only to mention that the words I have quoted are what appear to constitute the most probable version to be collected from the judgments and speeches in the case. Thus the words “the power” near the end of the last quotation are omitted from the quotation of the Royal Warrant by Lord Selborne L.C. and Lord O’Hagan (7 App.Cas. 619, 626, 631) but appear in the quotation by Sir Charles Hall V.-C.: (1879) 15 Ch.D. 1, 5. This, however, makes a number of omissions from the version quoted in the House of Lords.

 

The case came in the first instance before Hall V.-C. on demurrer, sub nom. Kinlock v. Secretary of State for India in Council, 15 Ch.D. 1. His view was that the question was “a very simple and narrow one”: p. 4. He held that the Royal Warrant, which he regarded as a grant, “was made in such a form as to create a trust for the persons who were to share under that decree,” that is, the decree of Dr. Lushington; and plainly these words refer to the phrase “in trust for the use of” in the Royal Warrant. The question that the Vice-Chancellor said that he had to determine was

 

“whether, that trust being so created by the instrument, there is anything at all which should deprive a person, who unquestionably is a cestui que trust under that instrument, of his right” to enforce that trust: p. 4.

 

The Vice-Chancellor rejected the contention that the matter was a matter of state, not justiciable in the courts, and he read the clause at the end of the Royal Warrant, relating to the resolution of doubts by the Secretary of State, as not being inconsistent with the plaintiffs’ right to enforce the trust in the courts. If in taking the accounts in court a doubt arose, it could be resolved in the manner specified in the Royal Warrant; but that did not exclude the jurisdiction of the court.

 

In the Court of Appeal this decision was unanimously reversed: (1880) 15 Ch.D. 1, 8. The court held that no trust, “in the sense of a trust enforceable and cognisable in a court of law,” had been created despite the use of the word “trust” in the Royal Warrant: per James L.J. Furthermore, the Secretary of State for India in Council, though by statute made capable of suing and being sued in that name, had not been made a body corporate. All that had been done had been to provide that the Secretary of State for the time being should be the agent of the Crown for the distribution of the property. James L.J. regarded the consequences of holding that there was a trust enforceable in the courts as “so monstrous that persons would be probably startled at the idea.” At p. 9 he referred to matters such as the right of every beneficiary to sue for the administration of the trust and have the accounts taken, and “imposing upon the officer of State all the obligations which in this country are imposed upon a person who chooses to accept a trust.” He also emphasised the words at the end of the Royal Warrant as showing clearly that questions were to be determined, not by the courts, but by the Secretary of State, with an ultimate appeal to the Treasury, as [*215] advising the Queen: p. 10. Baggallay L.J. and Bramwell L.J. delivered concurring judgments, with the latter emphasising the “monstrous inconvenience” and “enormous expense of litigation” if there were a trust enforceable by the courts, so that “one would be reluctant, even if the words were much stronger than they are, to hold that there is a trust”: p. 13.

 

The House of Lords unanimously affirmed the Court of Appeal: 7 App.Cas. 619. In the leading speech Lord Selborne L.C. attached some weight to the words in the Royal Warrant being “the Secretary of State for India in Council,” and “for the time being,” instead of his being described by his personal name, as indicating that he was not intended to be a trustee in the ordinary sense, but was intended to act as a high officer of State. After discussing the Order in Council, the Lord Chancellor quoted the part of the Royal Warrant which contained the words “in trust for the use of,” and said, at p. 625:

 

“Now the words ‘in trust for’ are quite consistent with, and indeed are the proper manner of expressing, every species of trust – a trust not only as regards those matters which are the proper subjects for an equitable jurisdiction to administer, but as respects higher matters, such as might take place between the Crown and public officers discharging, under the directions of the Crown, duties or functions belonging to the prerogative and to the authority of the Crown. In the lower sense they are matters within the jurisdiction of, and to be administered by, the ordinary courts of equity; in the higher sense they are not. What their sense is here, is the question to be determined, looking at the whole instrument and at its nature and effect.”

 

Lord Selborne then turned to the words at the end of the Royal Warrant, and said that the reference of disputes to the Secretary of State or his delegate, with the ultimate power reserved to the Crown, would be overturned if it were to be held that there was a trust enforceable in the courts. He firmly rejected the concept of administration by the court, with a reference of disputes to the Secretary of State, as creating a sort of mixed jurisdiction without precedent; in his view, there was a plain intention by the Crown to exclude any such extraneous interference. Lord O’Hagan concurred in rejecting the creation of any trust justiciable in the courts. He said, at p. 630:

 

“There is no magic in the word ‘trust.’ In various circumstances, it may represent many things, and the Secretary of State to whom a delegation was made for special and specified purposes, might well be described as a ‘trustee’ for the Crown, as, for the Crown, he was required to take on himself the distribution of the property in question. But he was not constituted a ‘trustee’ for a cestui que trust entitled, according to the rules of equity, to ask for the administration of a fund.”

 

Lord Blackburn also concurred. At pp. 631-632, he said that although it would have been very injudicious to advise Her Majesty to do so, she might have handed over the fund to a trustee in trust for those to whom [*216] she had given a special interest in it, leaving the trustee to determine who they were; and that trust would have been enforceable in the courts. But instead she could appoint an agent to examine the claims and distribute the funds, subject to Her Majesty’s control and power; and “if this were a trust of that kind the Court of Chancery would have no power over it.” On the true construction of the Royal Warrant, that was what Her Majesty had done, so that the Secretary of State was “by no means made a trustee subject to the power and control of the Court of Chancery.” Lord Watson regarded the case as a very plain one, and simply concurred in the result and in the reasons that had been given.

 

That case, of course, concerned facts which were very different from the facts of the case before me. Yet it supports certain principles or considerations which are of relevance and importance. First, the use of a phrase such as “in trust for,” even in a formal document such as a Royal Warrant, does not necessarily create a trust enforceable by the courts. As Lord O’Hagan said, 7 App.Cas. 619, 630: “There is no magic in the word ‘trust.’” Second, the term “trust” is one which may properly be used to describe not only relationships which are enforceable by the courts in their equitable jurisdiction, but also other relationships such as the discharge, under the direction of the Crown, of the duties or functions belonging to the prerogative and the authority of the Crown. Trusts of the former kind, so familiar in this Division, are described by Lord Selborne L.C. as being “trusts in the lower sense”; trusts of the latter kind, so unfamiliar in this Division, he called “trusts in the higher sense.”

 

I pause at that point. This classification of trusts seems to have made little impact upon the books: see, e.g., Lewin, Trusts, 16th ed. (1964), pp. 10, 13; Underhill’s Law of Trusts and Trustees, 12th ed. (1970), p. 51; Halsbury’s Laws of England, 3rd ed., vol. 38 (1962), p. 810. There is, indeed, a certain awkwardness in describing as a trust a relationship which is not enforceable by the courts, though the so-called trusts of imperfect obligation perhaps provide some sort of parallel. Certainly in common speech in legal circles “trust” is normally used to mean an equitable relationship enforceable in the courts and not a governmental relationship which is not thus enforceable. I propose to use the word “trust” simpliciter (or for emphasis the phrase “true trust”) to describe what in the conventional sense is a trust enforceable in the courts, and to use Lord Selborne’s compound phrase “trust in the higher sense” to express the governmental obligation that he describes.

 

I return to the principles or considerations which the Kinloch case, 7 App.Cas. 619, appears to support. The third is that it seems clear that the determination whether an instrument has created a true trust or a trust in the higher sense is a matter of construction, looking at the whole of the instrument in question, its nature and effect, and, I think, its context. Fourth, a material factor may be the form of the description given by the instrument to the person alleged to be the trustee. An impersonal description of him, in the form of a reference not to an individual but to the holder of a particular office for the time being, may give some indication that what is intended is not a true trust, but a trust in the higher sense.

 

I do not think I need discuss Te Teira Te Paea v. Te Roera Tareha [*217] [1902] A.C. 56 at any length. In that case an agreement (which later was incorporated in a statute) provided that various blocks of land in New Zealand should be allotted to various Maori claimants, and were to be “held in trust in the manner provided or hereinafter to be provided by the General Assembly for native lands held under trust.” Despite the words of trust, the Judicial Committee, consisting of Lord Macnaghten, Lord Davey and Lord Lindley, held that in the circumstances of the case a particular named Maori claimant took absolutely and free of any trusts. The Kinloch case was referred to as being a “striking example” of circumstances which excluded the creation of any equitable interest in members of a definite class for whom the property was said to be held “in trust”: see at p. 72, per Lord Lindley.

 

In addition to these authorities, certain cases decided in the United States of America were put before me. There were two cases in the Supreme Court of the United States that were entitled Chippewa Indians of Minnesota v. United States. Chippewa No. 1 is reported at (1937) 301 U.S. 358 and Chippewa No. 2 at (1939) 307 U.S. 1. Wilbur v. United States (1930) 281 U.S. 206 provides a complement to these cases, in that it sets out in extenso section 7 of the statute on which much of the argument turned. The facts of these cases were far removed from the facts of the cases now before me, and there is no counterpart to the peculiar status of tribal Indians in the United States. Nevertheless, Mr. Vinelott contended that Chippewa No. 2 showed that the courts in the United States were slow to construe a statute as creating a true trust in relation to tribal Indians towards whom Congress had been exercising the functions of guardianship. Speaking for a unanimous court, Roberts J. said, at p. 5:

 

“... we may not assume that Congress abandoned its guardianship of the tribe or the bands and entered into a formal trust agreement with the Indians, in the absence of a clear expression of that intent.”

 

I do not find any real assistance in these American cases, on their very different facts. The most that can be said, I think, is that the dictum that I have quoted may be said to provide Mr. Vinelott with some illustrative ammunition in relation to one of his propositions. This was that if the Crown was a trustee at all, it would always be a trustee in the higher sense unless there was enough to show that it was intended to be a trustee in the lower sense. The burden, said Mr. Vinelott, was thus in effect on Mr. Mowbray to show that there was a true trust. Another way of putting much the same point is to emphasise the possible explanations that there are for a transaction. In the case of an individual, there will often be only two feasible explanations, either that he holds on a true trust, or else that he holds on no trust at all, but at most subject to a mere moral obligation. In the case of the Crown, there is a third possible explanation, namely, that there is a trust in the higher sense, or governmental obligation. Though this latter type of obligation is not enforceable in the courts, many other means are available of persuading the Crown to honour its governmental obligations, should it fail to do so ex mero motu. This is accordingly no mere moral obligation; and it can provide a satisfactory and probable explanation [*218] of a transaction which has been conducted with formalities which suggest that more than a mere moral obligation was intended. Without putting matters on the basis of any “burden of proof,” the existence of this alternative explanation when the alleged trustee is the Crown means that the courts will be ready to adopt it unless there is a sufficient indication that instead a true trust was intended.

 

Another American case that was cited was Edgeter v. Kemper (1955) 136 N.E. 2d 630. By clause 5 of his will, a testator left his residue

 

“to the United States of America for a permanent fund, the interest of the said fund to be used for the relief of the various tribes of indigent American Indians of the United States of America...”

 

This was held to create a true charitable trust, despite the absence of the word “trust” or any direct equivalent, with the United States as the trustee, notwithstanding that the United States could not be sued to enforce the trust. Mr. Mowbray relied on this case to some extent as supporting his contention that a trust binding the Crown arose under the 1913 agreement, and not a mere governmental obligation. However, I think it is of some importance that clause 6 of the will provided that if the United States refused

 

“to accept my gift as herein provided, I direct and empower the executor of this my will, to turn over the remainder of my property to a responsible institution, preferably a national bank, with an agreement and instructions, that the remainder of my property as herein provided, will be invested in United States Government bonds and the interest from said gift be applied for the sole benefit of indigent American Indians and as provided in item 5.”

 

It seems clear that as the alternative provided by clause 6 could not possibly operate as a governmental obligation, but must be a true trust, this provided a strong indication that clause 5 must have been intended to create a true trust as well. This by itself, I think, would suffice to negative any tendency to hold that a mere governmental obligation was intended.

 

There is one other American case that I should mention, as Mr. Mowbray and Mr. Vinelott each claimed that it assisted him: that is Fort Berthold Reservation Tribes v. United States (1968) 390 F. 2d 686. I shall not discuss the case, since in the end Mr. Mowbray was able to extract very little help from the decision; and what help he did obtain was, I think, reduced to vanishing point by Mr. Vinelott’s submissions. Mr. Mowbray’s claim that the court recognised fiduciary obligations as flowing from what was not a true trust but merely a governmental obligation is one that I think must be considered against the statutory background in the case; for the statute gave the Indian Claims Commission jurisdiction in cases where the claim was based on “fair and honorable dealings that are not recognized by any existing rule of law or equity”: see p. 690, note 1.

 

With the guidance that the Court of Appeal and House of Lords give in the Kinloch case, and the advantage of such illumination as the American cases provide, I turn to the case before me. What has been [*219] created here? Has there been a series of true trusts, or have there merely been trusts in the higher sense? I say “merely” because I am of course concerned with what is justiciable in this court, and a trust in the higher sense is not. The plaintiff’s claim is in respect of the 1931 and 1947 transactions, but I must begin with the 1913 transaction, since that is said to have clothed the Crown with a fiduciary capacity towards the Banabans. So I return to the 1913 agreement and the A and C deeds.

 

(2) The 1913 agreement. As I have mentioned, the 1913 agreement is an agreement to which the only parties are the company on the one hand and a number of Banabans on the other: neither the Crown nor the resident commissioner is expressed to be a party, though Mr. Eliot, the resident commissioner, is stated to be a witness. First, by clause 7 the company undertook “to hand over to the resident commissioner” the initial £4,734. The expenditure of all save £300 of this sum was to be made

 

“for the benefit of the existing Banaban community in any way which may be recommended by them and agreed to by their Native Magistrate and Kaubure, and subject to the decision of the resident commissioner that such expenditure is equitable and not wasteful.”

 

Second, there was the annuity scheme, fed by the initial £300 and by the subsequent payments of the interest on the 6d. royalty. This interest was to be paid “to the Government by the company for the Banaban Fund,” or as clause 10 put it, “payable by the company to the Banabans (through the Government) in royalty.” This latter expression, said Mr. Mowbray, amounted to a declaration of trust by the Crown, so that when the moneys were paid by the company they were forthwith impressed with a trust. He also emphasised that in establishing a fund the 1913 agreement was creating something that had a flavour of trust about it. In this connection Mr. Mowbray cited the line of cases that included In re Nanwa Gold Mines Ltd. [1955] 1 W.L.R. 1080, Quistclose Investments Ltd. v. Rolls Razors Ltd. (In liquidation) [1970] A.C. 567 and In re Kayford Ltd. [1975] 1 W.L.R. 279.

 

I can well see that in deciding whether a particular obligation is that of a debtor to a creditor or that of a trustee to a beneficiary, it may be a matter of great importance to see whether some funds or assets have been segregated in some way to meet the obligation. Where, however the question is whether there is on the one hand a true trust, or on the other hand a “trust in the higher sense,” or governmental obligation, it does not seem to me that segregation plays the same part. Governments have to keep accounts; and if there is a fund of money applicable for a particular purpose, then as a matter of practice the government will normally keep a separate account of that fund. In Chippewa Indians of Minnesota v. United States (No. 2), 307 U.S. 1, I may say, there was a fund established by statute, and yet there was no true trust. In short, I cannot see how the maintenance of a separate fund, or a separate account, can normally play any significant part in distinguishing between a true trust on the one hand and a governmental obligation on the other: the separateness of the fund or account seems to me to be indifferently a badge of each. [*220] Mr. Mowbray also contended that the existence of a trust was shown by the antecedents of the 1913 agreement, and in particular by the recommendations by the resident commissioner that there should be a trust fund, and also by subsequent references in a variety of official documents to the existence of a trust. At one stage he relied on Thorpe v. Owen (1842) 5 Beav. 224 (a case which is better reported at 11 L.J.Ch. 129) for the proposition that a subsequent acknowledgment of the existence of a trust operated as if it were a declaration of trust; but this proposition encountered such difficulties that in the end it was very properly abandoned.

 

Mr. Mowbray further contended that his argument escaped the clutches of any rule relating to perpetuities. He accepted that the English concept of perpetuities arrived at Ocean Island with the flag, a blessing that the Banabans may not then have appreciated. It might therefore be contended that a trust for the landowners for the time being faced the consequences of having rendered the trust fund inalienable for an indefinite period. But, he said, just as by Banaban custom the land on Ocean Island was rendered virtually inalienable, so the application of any rule against perpetuity or inalienability must be subject to a corresponding modification in relation to moneys subject to a trust for the landowners. In the alternative, if the trust were void for inalienability or perpetuity, there was a resulting trust for the landowners.

 

Mr. Mowbray’s argument was founded upon the 6d. royalty being payable to the government by force of the 1913 agreement, made between the company and the Banaban landowners. They agreed that the 6d. royalty should be paid to the government to be applied in a specified way for the Banabans, and when the government accepted the money with knowledge of why it was paid, the government became a trustee of the money. The defendants’ case, he said, was based on a contention that the 6d. royalty was not paid by force of the 1913 agreement, but had been imposed on the company by the government; and this, he said, could not be done, as was shown by Attorney-General v. Wilts United Dairies (1922) 91 L.J.K.B. 897. In that case, to put it shortly, the House of Lords held that without statutory authority the food controller could not impose a charge of 2d. per gallon on milk as a condition of granting a licence to deal in milk. Taxation cannot be imposed by a side-wind. Mr. Vinelott’s reply was that even if this applied, it did no more than give the company a ground for resisting payment, and as of course the money had been paid, this carried Mr. Mowbray nowhere.

 

Mr. Vinelott, however, went further. He said that on a correct analysis of the facts and the true construction of the documents, the obligation of the company to pay the 6d. royalty was not in any way imposed by the government on the company, nor did it spring from the 1913 agreement. The process had been quite different. After the system of P and T deeds had run into difficulties, there were prolonged negotiations between the company and the Colonial Office as to the terms on which the requisite governmental consent could be given to the acquisition of more land by the company. These terms included not only the demarcation of the mining areas and what was to be paid for surface rights, but also a provision which I have already quoted. This is that [*221] “an additional royalty of 6d. per ton be paid by the company on all phosphate shipped from Ocean Island as from July 1, 1912, the royalty to be calculated on the same basis as the existing royalty... the proceeds of this additional royalty to be devoted to the general benefit of the natives.”

 

(I quote from clause 5 of the terms set out in the exchange of letters of March 14, 1913, and April 23, 1913.) This agreement was plainly recognised as one which could not take effect unless the landowners agreed to part with their land on the terms as to the mining areas, price and so on that the Colonial Office and the company had agreed; but equally, the terms of these arrangements made it possible for the resident commissioner to feel assured that the granting of leases by the Banabans to the company in accordance with them would not be “contrary to sound public policy” within regulation 24 of the King’s Regulations 1908.

 

It was against this background that the resident commissioner explained the proposals to the Banabans and, when they had agreed, gave his consent to the consequent A and C deeds. On this footing, the exchange of letters between the Colonial Office and the company did not of itself constitute a binding contract or even a conditional contract. It was an offer by the company to pay the 6d. additional royalty if the proposed transaction went through; and when the resident commissioner gave the requisite consent to the A and C deeds upon this footing, the company became bound to pay to the government (i.e., the government of the Gilbert and Ellice Islands Protectorate) the new 6d. royalty. This was described as an “additional royalty” as being in addition to the existing 6d. royalty already payable by the company to the Crown; and, as I have mentioned, this existing 6d. royalty had since April 1, 1909, been payable to the Gilbert and Ellice Islands Protectorate government, and it would be natural for the “additional royalty” to follow suit.

 

This way of regarding the matter explains some of the apparent curiosities of the 1913 agreement. Since the company’s obligation to pay the government the additional 6d. royalty had been the subject of an antecedent agreement, to be brought into operation by the resident commissioner giving his consent to the A and C deeds, it was reasonable to refer, in clause 12 (b) of the 1913 agreement, to “the” royalty of 6d. a ton, rather than to set out an obligation to pay “a” royalty of 6d. a ton. More substantially, it helps to explain why the 1913 agreement makes no provision for the disposition of the capital of the Banaban Fund. As between the Colonial Office and the company, no more had been provided than that the proceeds of the additional 6d. royalty should be “devoted to the general benefit of the natives.” The resident commissioner had carried matters further by inserting in the 1913 agreement provisions which dealt specifically with the first year’s royalty and the income flowing from the royalties of subsequent years, but had not dealt with the capital produced by adding those royalties each year to the Banaban Fund.

 

Of the many difficult questions in the case, this is not the least. Mr. Vinelott’s submission explains much; yet it has in some respects a tenuous and fine-spun quality about it which ill-accords with the unsophisticated [*222] nature of Ocean Island in 1913. It is tempting to prefer Mr. Mowbray’s blunt approach that the 6d. additional royalty was made payable by the 1913 agreement, and that, far from the royalties being payable to the government to be held as a fund which the government was to administer governmentally for the general benefit of the Banabans (except so far as it was otherwise disposed of), the royalty was payable to the government as a true trustee for the Banabans, who were entitled to capital as well as income. After all, by clause 10 of the 1913 agreement the yearly £5,000 (be it more or less) was to be “payable by the company to the Banabans (through the Government) in royalty.”

 

As against that, these very general words could be said to be explained by the words in clause 12 (b), which were a little more explicit, stating that the 6d. royalty “shall be paid to the Government by the company for the Banaban Fund”; and there was nothing to give any identifiable Banabans any definable right in the capital of that fund. True, as Mr. Mowbray emphasised, the land was the Banabans’ land, and the royalty was being paid in respect of the phosphate in that land. Yet there was no direct correlation between the royalty that was to be paid and any particular landowner. Much of the phosphate which yielded the royalty would come from land which the company already had obtained but had not begun to work; and yet under the 1913 agreement the interest on that royalty would be distributable only among “all Banabans who lease land to the company from this date,” i.e. from November 28, 1913. I cannot see that there is any satisfactory relationship between the property dealt with in the 1913 transaction and the 6d. additional royalty which would give rise to a fair inference that what was being created was a true trust whereby the Crown, or some organ of the Crown, was to hold the royalties in trust for some group or body of the Banabans. Even if the Banaban custom of land holding, with its limited powers of disposition of the landowner, could be said to justify a modification of the rules relating to perpetuities so as to permit money to be held in trust in perpetuity for whomsoever was the owner for the time being of a particular plot of land (a proposition with a number of interesting difficulties), there would remain serious problems in ascertaining both the beneficiaries and the quantum of their beneficial interests in the Banaban Fund.

 

Quite apart from that, it seems to me that the surrounding circumstances, as well as the terms of the documents, do very little to support the concept of any true trust. Instead, they do much to support the view that, subject to the limited rights created by the annuity scheme, the Banaban Fund was a fund which was subject not to any true trust but to a trust “in the higher sense,” or a governmental obligation, to use it for the general benefit of the Banaban community. It was money which the Banabans were told would be expended by the government in their interests; and no doubt this acted as an inducement to the Banabans to sign the 1913 agreement.

 

I must also remember Lord Atkin’s words in Civilian War Claimants Association Ltd. v. The King [1932] A.C. 14, 27, and consider whether there is anything to show that in this case the Crown deliberately chose to act as a trustee. The fact that the only parties to the 1913 agreement [*223] were the company and the Banaban landowners who signed it, and that neither the Crown nor any officer of the Crown was a party, seems to me to go far towards negating any such choice. The Colonial Office, of course, had made the agreement with the company that is to be found in the exchange of letters in March and April 1913; but far from suggesting that the Crown is to hold the additional 6d. royalty on a true trust for the Banaban landowners, this merely provides for the proceeds of the royalty “to be devoted to the general benefit of the natives.” In my judgment, such language points firmly towards an obligation of government and not a true trust.

 

Difficult questions might have arisen if there had been statements by government officers before, during and after the 1913 transaction which showed an unequivocal intention that the 6d. additional royalty should be held on a true trust, enforceable in the courts, and not merely under a governmental obligation, or trust in the higher sense. But in all the statements by the resident commissioner and others about trust funds and the like, I cannot see that there is anything that comes near to evidencing any such unequivocal intention. If there had been a well known word in the English language which meant what Lord Selborne L.C. in Kinloch v. Secretary of State for India in Council, 7 App.Cas. 619 called a trust in the higher sense, then the fact that instead of that word the documents, formal and informal, used the word “trust” would have been much more significant. But there is no such word: “trust” has to do duty for many things. Looking at matters as a whole, they seem to be explicable, and best explicable, on the footing of governmental obligation and not true trust.

 

In preparing this judgment, and in the judgment itself, I have traced the gradual development of the trust funds and matters connected with them in considerable, and perhaps excessive, detail, bearing in mind throughout the question whether there was a governmental obligation or a true trust. I do not say that the indications are all one way; but it seems to me that of the indications which are not wholly neutral, the overwhelming majority point against a true trust and in favour of a governmental obligation. I say that not only of the indications looked at by themselves, but also looked at against the general background that I have tried to describe. That also applies to the possibility that was put forward of there being a charitable trust. However, the difficulties in this seem to me to be too great to justify me in spending any time on it at this stage.

 

I must mention one point on which Mr. Mowbray placed some emphasis, and that was the fact that in the Kinloch case the Crown was dealing with Crown property, whereas in the present case the property which produced the royalty belonged not to the Crown but to the Banabans. I do not think that this distinction is of any great moment. One has to look at the whole of the circumstances of the case. In one sense, it is easier to infer an intention to create a true trust in a transaction in the sophisticated England of the 19th century than in the unsophisticated Ocean Island of the first half of the 20th century. The Gilbert and Ellice Islands Colony government had peculiar governmental obligations to a relatively primitive people which were not owed by the [*224] United Kingdom Government to citizens in England; and the concept of trusts, quite apart from its many complex and detailed provisions, was as commonplace in England as it must have been ill-comprehended on Ocean Island. I need not, for instance, inquire what the comparative distribution of the textbooks by Lewin and Underhill there was in the two countries. In other words, it seems to me that the Kinloch decision that there was no true trust was in at least one sense a fortiori the present case, when the surrounding circumstances are considered.

 

There is one further matter that I should mention at this stage, and that is the question of the meaning of “government.” Was the governmental obligation in question an obligation of the United Kingdom Government, or an obligation of the government of the Gilbert and Ellice Islands Protectorate? That is a question that I shall have to consider more generally at a later stage in relation to the government of the Gilbert and Ellice Islands Colony. For the present, I shall say no more than that without at the moment formally deciding anything, I shall treat “the Government” as being the Government of the Gilbert and Ellice Islands Protectorate.

 

As I have already indicated, no direct claim is made in respect of the 1913 arrangements. Their importance is primarily in relation to the 1931 claim, on the footing that they had clothed the Crown with a fiduciary relationship towards the Banabans. There were other grounds upon which this fiduciary relationship was based, and these I shall have to consider in due course. But for the present I shall confine myself to what flowed from the 1913 arrangements.

 

One way of putting matters is to say that even if (as I hold to be the case) the Crown did not hold the Banaban Fund on a true trust for the Banabans, that did not exclude the existence of some fiduciary relationship. Such a relationship may of course spring from other sources, such as that of principal and agent. It is well established that an agent owes important duties to his principal, and that, for example, a purchase by an agent of the property with which he is entrusted, or a purchase by an agent from his principal, is subject to rules similar to those which bind a trustee who purchases the trust property or purchases the interest of a beneficiary from him. What was important to the plaintiffs was to establish that the Crown stood in a fiduciary relationship towards the Banabans; and whether that fiduciary relationship was produced by a trust or by some other form of relationship such as agency mattered little. In relation to the 1913 transaction, however, I cannot see any real evidence that the Crown was ever constituted an agent for the Banabans or for any of them. If any fiduciary relationship existed, it must, I think, be founded on a trust. For the reasons I have given, the only trust that there is in relation to the 1913 transaction is a trust in the higher sense, and not a true trust.

 

That gives rise to a further point. A true trust admittedly creates a fiduciary obligation, so that if the trustee purchases the trust property, or purchases the interest of a beneficiary, he is subject to the rules of equity governing such transactions. I shall have to discuss these rules in due course, but it is convenient for me to identify them briefly at this stage. It was a matter of controversy between Mr. Mowbray and Mr. [*225] Vinelott whether there were two rules or one rule; but even if there is only one rule, as Mr. Mowbray contended, there were admittedly two separate elements in that rule. During the argument, two agreed labels emerged for the two rules, or two elements of the one rule; and for convenience of reference I shall use those labels. Without attempting in any way to set out all the details of the rules or elements, and merely for the purposes of identification, I propose to refer to them as follows:

 

(1) The self-dealing rule: if a trustee purchases trust property from himself, any beneficiary may have the sale set aside ex debito justitiae, however fair the transaction.

 

(2) The fair-dealing rule: if a trustee purchases his beneficiary’s beneficial interest, the beneficiary may have the sale set aside unless the trustee can establish the propriety of the transaction, showing that he had taken no advantage of his position and that the beneficiary was fully informed and received full value.

 

Suppose, then, that these rules, or either of them, apply not only to trusts but also to other cases where there is a fiduciary relationship, springing perhaps from agency, or partnership or membership of a committee of inspection in bankruptcy (on which see In re Bulmer [1937] Ch. 499), does a trusteeship in the higher sense, or governmental obligation, also give rise to a fiduciary relationship which invokes those rules? I think that the answer must be No. The fiduciary obligations all arise from relationships which are justiciable in the courts. The relationship from which the fiduciary obligations arise may itself be equitable, or it may be legal, or it may have its origin in statute: but it is a relationship with enforceable legal consequences. A trust in the higher sense, or governmental obligation, on the other hand, lacks this characteristic; and where the primary obligation itself is one that the courts will not enforce, then I do not think that it can of itself give rise to a secondary obligation which will be enforceable by the courts. To hold otherwise would be to give some legal force or effect to a relationship which has none. I therefore hold that the 1913 transaction did not put the Crown, or any officer of the Crown, into any fiduciary position in relation to the Banabans or any of them.

 

(3) The 1931 transaction. I can now come forward to the 1931 transaction. The royalty was finally fixed on January 12, 1931, and on that day, and subsequently, says Mr. Mowbray, the Crown stood in a fiduciary relationship towards the Banabans. This fiduciary relationship he based on three grounds. First, there was the fiduciary relationship which sprang from the 1913 transaction, a transaction that was affected by the 1931 transaction. Second, a fiduciary relationship arose from the trust of royalties which was constituted by the Ordinance of 1928. Third, a fiduciary relationship arose from the statutory duty under the Ordinance of 1928 of fixing the royalty and holding the royalties in trust. I propose to deal with these three contentions in turn.

 

(a) TRUST FROM 1913 AGREEMENT. The first contention is one that for the most part I have already dealt with. In my judgment, no true trust or other relationship capable of creating fiduciary obligations arose from the 1913 transaction. There is, however, one particular aspect of this that [*226] I have not examined, and that is the interrelation of the 1913 transaction with the 1931 transaction in respect of the increase of royalty; and this I shall consider later when I have discussed the 1931 transaction further.

 

(b) FIDUCIARY RELATIONSHIP FROM TRUST OF ROYALTIES. I turn next to the second contention, based on the Ordinance of 1928, and in particular on sections 6 (2) and 7. I have already set these out, but I must quote the relevant parts again. By section 6 (2), any moneys payable by way of compensation or royalty

 

“shall be paid to the resident commissioner to be held by him in trust on behalf of the former owner or owners if a native or natives of the colony subject to such directions as the Secretary of State for the Colonies may from time to time give.”

 

By section 7, all moneys payable to any native or natives of the colony in cases where the acquisition of rights was the result of agreement

 

“shall be paid to the resident commissioner and shall be held by him in trust on behalf of such native or natives to be used in such manner and subject to such directions as the Secretary of State may from time to time give.”

 

Mr. Mowbray naturally emphasised the use of the phrase “in trust” in both provisions, and contended that it created a true trust. The difficulty that it was the resident commissioner and not the Crown that was expressed to be the trustee he met by contending that the resident commissioner was a Crown servant, and the references to him in the Ordinance were impliedly to the resident commissioner as such, i.e. as a Crown servant. Therefore, he said, it was the Crown that was the trustee, and not the resident commissioner. This view, Mr. Mowbray submitted, was supported by In re Oriental Inland Steam Co., Ex parte Scinde Railway Co. (1874) 9 Ch.App. 557, which showed that if an official of a corporation was directed by statute to deal with property of the corporation in a specified way, on behalf of a specified class of persons, the corporation ceased to own that property beneficially and instead held it on trust. That case, I may say, concerned the assets of a company which was the subject of a winding-up order, and the official concerned was the liquidator of the company.

 

It is true that in that case both James L.J. and Mellish L.J. used the word “trust,” and James L.J. referred to the creditors as cestuis que trust. Yet in a case a year or two back I had expressed doubts whether the “trust” there referred to was a true trust, or whether the creditors merely had a right to require the due administration of the assets for their benefit, a right akin to the rights of those entitled under an intestacy or a testamentary gift of residue, on the footing explained in Commissioner of Stamp Duties (Queensland) v. Livingston [1965] A.C. 694, 712, 713: see In re Calgary and Edmonton Land Co. Ltd. [1975] 1 W.L.R. 355, 359. When it was pointed out to Mr. Mowbray that this approach now had the authority of the House of Lords in Ayerst v. C. & K. (Construction) Ltd. [1976] A.C. 167, he resourcefully retreated to a second line of argument, to the effect that if there was no true trust, there was at least a fiduciary relationship, and that this sufficed for his purpose. [*227] I pause at that point to observe that the Ayerst case illustrates the elasticity of the word “trust.” I have already considered the way in which “trust” may be used to describe on the one hand a true trust, and on the other hand a trust in the higher sense, or mere governmental obligation. The Ayerst case shows how distinguished equity judges may use the word to describe a relationship which is not a trust in the full sense of the word, with the trustee owing to the beneficiaries all the duties that in equity a trustee owes to his cestui que trust, but is something less than that. In the words of Lord Diplock in the Ayerst case, at p. 180, all that may be intended to be conveyed by the use of the expression “trust property” and “trust” in such cases is that

 

“the effect of the statute was to give to the property of a company in liquidation that essential characteristic which distinguished trust property from other property, viz., that it could not be used or disposed of by the legal owner for his own benefit, but must be used or disposed of for the benefit of other persons.”

 

One cannot seize upon the word “trust” and say that this shows that there must therefore be a true trust; the first question is the sense in which that protean word has been used. The word, indeed, is one that may be found by the unwary to invite the comment Qui haeret in litera haeret in cortice.

 

That said, I return to the Ordinance. When it provides in section 6 (2) and section 7 that the moneys are to be held by the resident commissioner “in trust” as there stated, is the legislature creating a true trust, or a fiduciary obligation in the Ayerst sense, or a trust in the “higher sense” (or governmental obligation)? It is common ground that the resident commissioner is not a corporation, so that there would be great difficulty in giving literal effect to the statute by holding him to be a trustee. A statutory direction that the resident commissioner is to hold money in trust is indeed an oblique way of manifesting an intention that the Crown is to be a trustee; and Mitford v. Reynolds (1842) 1 Ph. 185, which Mr. Mowbray cited, proved on examination to be more of a hindrance than a support for him on this point. In any case, a colonial Ordinance is not the place where one would expect to find a trust imposed on the Crown in right not merely of the colony, but of the United Kingdom, or of the United Kingdom and Colonies. The power of the Secretary of State to give directions, worded rather differently in the two statutory provisions, also seems out of place in a true trust.

 

There is a further consideration, namely, the subject matter of the alleged trust. That subject matter is the royalties and other payments which will become payable in the future. What is to be held in trust is the fruits of the transaction in question. What the plaintiffs are claiming is that because (on their argument) the Crown will hold these fruits in trust, therefore the Crown is in a fiduciary position in relation to the transaction which in due time will produce those fruits. This, said Mr. Vinelott, cannot be right. A trust of a tree may impose a fiduciary duty in relation to the fruit of that tree: but it would be remarkable if a trust of the gathered fruit of the tree were to impose a fiduciary duty in relation to the tree itself. If a copyright is held in trust for a [*228] beneficiary, dealings by the trustee with that copyright or with the beneficial interest of the beneficiary will be subject to the rules of selfdealing and fair-dealing; but I cannot see how in any normal circumstances these rules can apply to the copyright or the beneficial interest in it if the trustee is a trustee of no more than the royalties as they fall due.

 

In my judgment, the difficulties in the way of establishing that the Ordinance of 1928 gave rise to a trust or fiduciary obligation, binding on the Crown in right of the United Kingdom, and affecting the fixing of the royalty under the 1931 transaction, are far too great for even the resourcefulness and learning of Mr. Mowbray to be able to overcome. In their context, the provisions of section 6 (2) and section 7 of the Ordinance of 1928, despite the use of the words “in trust,” are far more consonant with a governmental obligation than a true trust or fiduciary duty enforceable in the courts. The resident commissioner for the time being, in his official capacity, was to receive the moneys, and, subject to the directions of the Secretary of State, he was under a governmental obligation to use the moneys for those named. The Ordinance gave ample authority to the resident commissioner for him to expend the money only in this manner, and to resist any claim that it should be diverted to other uses: and no doubt that Ordinance imposed on him a duty to apply the money in this way. But in my judgment, in this respect the Ordinance operated only in the sphere of government, and not by way of imposing any justiciable true trust or fiduciary obligation. I do not think that a statutory duty to administer money in a particular way can be said necessarily or even probably to impose a fiduciary obligation upon the person subjected to the duty. Many statutory duties exist without giving rise to any fiduciary obligation, and before such an obligation can arise I think that there must be something to show that the imposition of such an obligation was a matter of intention or implication.

 

Mr. Mowbray relied upon In re Bulmer [1937] Ch. 499, a case concerning a person in the position of a member of the committee of inspection in a bankruptcy; and in argument a number of aspects of what in some respects is not an easy case were fully discussed. I think that all that I need say is that the fiduciary position that was recognised in that case sprang not from the bare imposition of a statutory duty, but from the fiduciary nature of the relevant statutory duties and functions. A member of a committee of inspection is in a fiduciary position not because he has an office established by statute but because he has duties that are fiduciary in nature.

 

I can now mention the point that I postponed, namely, the interrelation of the 1913 transaction with the 1931 transaction. What Mr. Mowbray contended was that the 6d. additional royalty under the 1913 transaction was bound by a true trust for the Banabans, and that what the 1931 transaction did was to increase the existing rate of royalty rather than impose a new and separate royalty. Accordingly, the increased royalty must be subject to the same trust as that which bound the royalty when it stood at its original rate: the increment takes the colour of the thing that it increases. My decision that the additional 6d. of the 1913 transaction was not subject to any true trust (or, for that matter, any fiduciary obligation) of itself disposes of this contention. [*229] However, in addition there is the fact that the subject of the 1931 transaction was different land from the land that had been the subject of the 1913 transaction. I do not see how, if a trust had existed in respect of the 1913 land and the royalty that it yielded, this could create a trust in relation to the 1931 land and the royalty that it was to yield. If T is a trustee in respect of A’s land, and then, in a transaction in relation to B’s land (of which he is not a trustee), he obtains an agreement to an increase in the payment to be made to A in respect of A’s land, I cannot see that this imposes on T any fiduciary duty in respect of what is paid under the transaction in relation to B’s land. A cannot complain that there is any breach of fiduciary duty by the trustee in getting for him more than he was entitled to receive; and although B may have some ground for complaint, in that T may in effect have diverted to A some of what might otherwise have been paid for B’s land, that does not make T into a trustee for B.

 

Finally, there is the general background of the correspondence, discussions and statements that I have mentioned in relation to the 1913 transaction as pointing against a true trust and in favour of a governmental obligation. I accept, of course, that, if a trust or fiduciary obligation has been created, it will not be negated merely because those concerned behave as if it did not exist. You cannot destroy a trust by ignoring it. But such an attitude may indeed be significant if it is contended that some subsequent transaction of a similar nature or in similar circumstances was intended to create a trust or fiduciary obligation. What is impotent to destroy the living may well suffice to negative any intention to bring new life into existence. This consideration seems to me to point against any trust or fiduciary obligation having arisen under the transactions after 1913.

 

(C) FIDUCIARY RELATIONSHIP FROM STATUTORY DUTY. I now turn to the third ground for alleging a fiduciary relationship, namely, the statutory duty under the Ordinance of 1928 to fix a royalty and hold it in trust. Mr. Mowbray made no claim for breach of statutory duty as such, but he did contend that it provided one route to the relief that he claimed. He put forward a proposition that A was in a fiduciary position towards B if he was performing a special job in relation to B which affected B’s property rights, at any rate if A was self-dealing. This, he said, could be put in two ways. First, there was a fiduciary duty if there was a job to be performed and it was performed in a self-dealing way. Alternatively, there was a fiduciary duty if there was a job to perform, and equity then imposed a duty to perform it properly if there was any self-dealing. The concept of “a job to be performed” was taken from Snell’s Principles of Equity, 27th ed. (1973), p. 243, where there is a brief quotation from the judgment of Asquith L.J. in Reading v. The King [1949] 2 K.B. 232, 236. The quotation was to the effect that in the context there under discussion there is a fiduciary relationship “whenever the plaintiff entrusts to the defendant a job to be performed.”

 

Reading v. The King, of course, was a case in which a Crown servant was held to be accountable to the Crown for bribes that he took for misusing the position of responsibility that he held under the Crown. The use that Mr. Mowbray sought to make of this concept was to say that [*230] the fiduciary relationship arose not only when the job to be performed was entrusted, but also when the job was imposed by law, or assumed, at all events if the job related to property; when there was no property, it might be that nothing save an entrusting would suffice. In the present case, the function of fixing a royalty was imposed by statute and assumed by the Crown, and that put the Crown into a fiduciary position. Thus ran the plaintiffs’ argument.

 

In my judgment, this contention is far too wide and indefinite; and it is supported neither on principle nor by authority. I cannot see why the imposition of a statutory duty to perform certain functions, or the assumption of such a duty, should as a general rule impose fiduciary obligations, or even be presumed to impose any. Of course, the duty may be of such a nature as to carry with it fiduciary obligations: impose a fiduciary duty and you impose fiduciary obligations. But apart from such cases, it would be remarkable indeed if in each of the manifold cases in which statute imposes a duty, or imposes a duty relating to property, the person on whom the duty is imposed were thereby to be put into a fiduciary relationship with those interested in the property, or towards whom the duty could be said to be owed. Reading v. The King [1949] 2 K.B. 232, too, was a case in which the Crown servant was held to be accountable to the Crown. Here the contention is not that the resident commissioner is accountable to the Crown, but that the Crown is accountable to a third party by reason of the statutory duty imposed on the resident commissioner; and that involves very different considerations.

 

Furthermore, I cannot see that coupling the job to be performed with self-dealing in the performance of it makes any difference. If there is a fiduciary duty, the equitable rules about self-dealing apply: but selfdealing does not impose the duty. Equity bases its rules about self-dealing upon some pre-existing fiduciary duty: it is a disregard of this preexisting duty that subjects the self-dealer to the consequences of the self-dealing rules. I do not think that one can take a person who is subject to no pre-existing fiduciary duty and then say that because he self-deals he is thereupon subjected to a fiduciary duty. In relation to the facts of this case, I hold that Mr. Mowbray’s contentions under this third head fail.

 

The result is thus that in my judgment the 1931 transaction did not place the Crown in any fiduciary relationship towards the Banabans. The Ordinance of 1928 gave certain powers and imposed certain duties, but neither the Ordinance itself nor the exercise of the powers and acceptance of the duties brought the Crown into any fiduciary relationship with the Banabans. The claim before me is not a claim for negligence or breach of statutory duty, and whatever might be the position of any such claim, what I am concerned with is a quite different claim, based on a fiduciary obligation which in my judgment does not exist.

 

It is of course true that compulsory powers were exercised for the purpose of granting a lease to the British Phosphate Commissioners, and on any footing the Crown in right of the United Kingdom was entitled to a 42 per cent. interest in their assets. If one adds in the interests of the Crown in right of the Commonwealth of Australia and the Dominion of New Zealand, then the Crown is entitled to the entire interest in these [*231] assets. Whichever the position, if the Crown had stood in a fiduciary position towards the Banabans and had exercised the powers of compulsory acquisition for the purpose of granting a lease to itself or its creature, or to a creature in which it had any interest, then subject to any statutory provisions (an important qualification) there would plainly have been a basis for a claim against the Crown for self-dealing. But if there is no fiduciary relationship, the argument falls to the ground. In the absence of such a relationship, there is nothing that I know of to preclude the Crown from exercising compulsory powers for the purpose of taking the property for itself or leasing it to some emanation of the Crown.

 

(d) “THE CROWN IS ONE AND INDIVISIBLE.” In this and other connections there was some discussion of the proposition that the Crown is “one and indivisible throughout the Empire.” The proposition was enunciated in these terms by Viscount Haldane, speaking for the Judicial Committee, in Theodore v. Duncan [1919] A.C. 696, 706; and it is usually illustrated by reference to Williams v. Howarth [1905] A.C. 551. In that case, sums paid to a soldier by the United Kingdom Government were treated as a partial discharge of larger sums due to the soldier under a contract with the Government of New South Wales. The proposition has emerged in a number of different contexts: see, for example, In re Johnson [1903] 1 Ch. 821, 833, per Farwell J., a case not often cited on the point. Despite the language of the authorities, today the proposition is usually stated in the form that the Crown is “one and indivisible throughout the United Kingdom and its dependent territories”: brevity has had to be sacrificed to an accurate reflection of constitutional change. It seems that at any rate for some purposes there are today as many Crowns as there are independent realms. See generally Halsbury’s Laws of England, 4th ed., vol. 6 (1974), p. 336; Roberts-Wray, Commonwealth and Colonial Law (1966), pp. 84-86. In its modern form the proposition sufficed Mr. Mowbray, who contended that within the United Kingdom and the Gilbert and Ellice Islands Colony (including, of course, Ocean Island) there was but one Crown, so that the lease to the British Phosphate Commissioners was a lease by the Crown to itself.

 

In the absence of any fiduciary relationship, I do not think that I need pursue this point to any great extent. Broad propositions must be accepted for what they are, namely, broad propositions. The indivisibility of the Crown may well be a matter of high constitutional significance, and it may well still have important and practical applications in relation to individuals who stand in a particular relationship to the Crown, such as soldiers and, it may even be, judges. But in evolving its doctrines relating to self-dealing and fair-dealing, equity was concerned with the substance and the realities, and not with formulae. Furthermore, I do not think that the indivisibility of the Crown means that an obligation entered into by the government of a colony or other dependent territory can be said to be an obligation of the United Kingdom Government merely because it was entered into in the name of the Crown; and similarly for the converse. Such governments, too, may have interests which sharply conflict with each other. If one of the governments enters into a transaction with the other government, it may well be wholly at [*232] arm’s length and entirely removed, in fact and in interest, from any aspect of self-dealing; and, if this is the case, I do not think that equity, being satisfied that in truth there is no self-dealing, will feel constrained to hold that constitutional theory prevails over the realities.

 

The facts of In re Holmes (1861) 2 J. & H. 527 are far removed from the facts of the case before me; but I think that it provides some support for what I regard as the right approach. There, by Canadian statute, some land in Canada had been vested in the Queen, for Canadian purposes; and Sir William Page Wood V.-C. refused to allow “the technical argument that the Queen... is present in this country” to give jurisdiction to the English courts of equity, or to withdraw the land from the control of the Canadian legislature: see p. 544. At that time, of course, the Statute of Westminster 1931 lay 70 years in the future, and even the British North America Act 1867 was still to come, so that the constitutional position of Canada was far removed from that of the Dominion of today.

 

(4) The 1947 transaction. I turn to the 1947 transaction. The starting point is the contention of the plaintiffs that in 1947 the Crown was in a fiduciary position in relation to the Banaban landowners who entered into the transaction. This contention rests in the main on two alternative arguments. The first is that the Ordinance of 1937 imposed on the Crown a true trust for the Banaban community. The second is that the Ordinance created a statutory relationship which was of a fiduciary nature. I shall take these in turn.

 

(a) TRUST UNDER THE ORDINANCE OF 1937. I will not read again all the terms of the Ordinance. The most relevant part is the new section 7 which was substituted for the old section 7 of the Ordinance of 1928. It will be remembered that this provides that any moneys payable by way of royalty, whether prescribed under section 5 of the Ordinance of 1928

 

“or fixed by agreement shall be paid to the resident commissioner who shall pay or apply the same in such manner as the High Commissioner may from time to time direct to or for the benefit of the natives of the island or atoll from which the minerals were derived in respect of which the royalty was payable.”

 

It will be observed that the words “held by him in trust” which appeared in the old section 7 have gone, and there is no repetition of the phrase “in trust” or its equivalent, so that verbally the section provides less support for the contention that it created a trust. A similar contrast appears in the old section 6 (2) and the new, where the old phrase “held by him in trust” is replaced by a direction to pay the moneys to the former owners or apply them for their benefit.

 

Mr. Mowbray was not daunted by the change of wording. He accepted that one possible inference of the change of language was to remove any argument that a true trust was intended; but he said that this was not the right inference to draw. A phrase such as “shall pay or apply” was, he said, apt for creating a trust. He cited Hardoon v. Belilios [1901] A.C. 118, 123 as an illustration of the ease with which a trust can be inferred when the legal estate was in one person and the beneficial [*233] interest in another. He also relied on Quistclose Investments Ltd. v. Rolls Razor Ltd. (In liquidation) [1970] A.C. 567 as providing something of a parallel, in that the British Phosphate Commissioners paid royalties to the Crown for the purposes laid down by the Ordinance of 1937, and that the acceptance of the money with knowledge of the purpose sufficed to give rise to an inference that a trust was intended.

 

Mr. Mowbray further relied on the absence of any express provision in the Ordinance of 1937 which would revoke the trusts in the proclamation under the Ordinance of 1928 and the 1931 lease, and said that the intention of the Ordinance of 1937 was to confirm and validate the provisions of the proclamation and lease. He accepted that they differed (notably as to the 2d. royalty to be credited to the Banaban Fund, a matter on which the Ordinance of 1937 was silent), but said that this was not a matter of substance. In this way, the words “in trust” in the proclamation and lease, which did not appear in the Ordinance of 1937, in effect gave life to the Ordinance of 1937 and showed that it created or confirmed a trust, despite the absence from it of any express words of trust.

 

Yet a further contention was based on the 1937 waiver. This, it was said, was no agreement to the abolition of any trust, but was merely an agreement to the substitution of the Banaban community for the individual landowners as the beneficiaries under the trust: and if the Ordinance of 1937 put an end to a subsisting trust, then the Ordinance was contrary to the waiver. This in turn led the Ordinance of 1937 into conflict with article VIII (3) of the Gilbert and Ellice Islands Colony Order in Council 1915. Article VIII conferred the power for the High Commissioner to legislate by Ordinance. The power was to provide

 

“for the administration of justice, the raising of revenue, and generally for the peace, order, and good government of the colony, and of all persons therein...”

 

To this there are three provisos, the third of which is

 

“That the High Commissioner, in making Ordinances, shall respect any native laws and customs by which the civil relations of any native chiefs, tribes, or populations under His Majesty’s protection are now regulated, except so far as the same may be incompatible with the due exercise of His Majesty’s power and judisdiction, or clearly injurious to the welfare of the said natives.”

 

An Ordinance which took away the beneficial interest under a trust by abolishing the trust was, said Mr. Mowbray, a breach of this third proviso, and so was ultra vires and void. This therefore pointed to the true construction of the Ordinance of 1937 being one which preserved the trust and so escaped being ultra vires. It was further contended that there were a number of instances in which the Crown had, in subsequent documents, recognised the continued existence of a true trust, and that the Maude report did the same.

 

I do not find these contentions persuasive. At the root of the matter is the Kinloch doctrine of a trust in the higher sense. I have already rejected the existence of any true trust in relation to the 1913 and 1931 [*234] transactions, and in my judgment the 1947 transaction provides even less support for the existence of a true trust. Both the absence of any express words of trust from the Ordinance of 1937 (unlike the Ordinance of 1928) and its language as a whole seem to me to make it more consonant with governmental obligation than true trust. There is nothing in terms to make the Crown a trustee: all that is provided by the new section 7 is that certain moneys are to be paid to the resident commissioner, who is to pay or apply them in such manner as the High Commissioner directs for the benefit of the natives of (in this case) Ocean Island. In other words, two high officers of government are directed by statute to use certain funds for the benefit of the inhabitants of the island which produced the funds. I do not see how this can be converted into a true trust by reason of the words of trust in the proclamation and lease, which themselves in my judgment created no true trust.

 

The arguments on the 1937 waiver and ultra vires also seem to me to lack any real cogency. I do not see how there is any failure to comply with the requirement to “respect any native laws and customs.” If there were a true trust, what would be affected by the Ordinance of 1937 would be a trust created by the Ordinance of 1928, the proclamation and the lease, and not “native laws and customs.” The power to legislate by Ordinance for “the peace, order and good government of the colony” is a power expressed in terms which “connote, in British constitutional language, the widest law-making powers appropriate to a Sovereign”: Ibralebbe v. The Queen [1964] A.C. 900, 923, per Viscount Radcliffe, speaking for the Judicial Committee. I can see nothing in the Order in Council of 1915 (or, for that matter, in the Pacific Order in Council 1893, where the phrase occurs in article 108 (2)) which reduces the width of this wide meaning.

 

It also seems to me that the words “shall respect” merely require the enacting authority to give a real and proper weight to native laws and customs. I do not think that they mean that anything which can be said to be contrary to those laws and customs is for that reason to be void. What is meant is little more than that legislation is not to be enacted in heedless disregard of native laws and customs. The concluding words of article VIII (3) set the legislature entirely free from the obligation to respect native laws and customs where these are incompatible with the due exercise of the Crown’s power and jurisdiction, and where they are clearly injurious to the welfare of the natives; but these exceptions do not elevate the obligation in other cases to “respect” native laws and customs into a paramount law. When, in the completely different field of the law of income tax, Lord Radcliffe referred to the facts found by the general commissioners, he said that the duty of the courts on appeal was

 

“no more than to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado”: Edwards v. Bairstow [1956] A.C. 14, 39. [*235] In that celebrated sentence I think that Lord Radcliffe demonstrated that in the proper use of language a “decent respect” for a tribunal may be perfectly compatible with the reversal of a decision of that tribunal, and that “respect” is a word which requires the giving of serious consideration but does not impose an abject subservience.

 

(b) FIDUCIARY RELATIONSHIP UNDER THE ORDINANCE OF 1937. I turn to the alternative contention that if the Ordinance of 1937 did not impose on the Crown a true trust for the Banaban community, it at least created a statutory relationship which was of a fiduciary nature. It is, of course, well settled that the fair-dealing rule, with or without modifications, applies to many persons other than trustees, including agents, solicitors, company directors, partners and many others: see, for example, Snell’s Principles of Equity, 27th ed. (1973), pp. 241-243. Mr. Mowbray was, I think, seeking to add to this list an innominate statutory relationship in the nature of a trust. The categories of fiduciary obligation are not closed, and I see no reason why statute should not create a relationship which carries with it obligations of a fiduciary nature. The question, however, is not what statute could do, but what this statute has done.

 

I can see that if statute created some relationship essentially different from a trust or agency or partnership or the like, but carrying with it the elements which give rise to some fiduciary relationship, then a fiduciary relationship there would be. On the other hand, when the statutory obligation is said to constitute a trust, or else to be so closely similar to a trust as to carry with it the same or a similar fiduciary obligation, then it seems to me that the considerations which negative a true trust will almost certainly negative the alleged fiduciary obligation. In other words, if a trust is alleged, and alternatively a partnership, the fiduciary obligation will not be negatived merely by showing that no trust exists; for if the quite different relationship of partnership is established, then that can give rise to the fiduciary relationship. It is otherwise where the alternative to a trust is merely a statutory obligation with no features essentially different from a trust; for then if the trust is negatived as a source of fiduciary obligation, so also will be the statutory obligation. It would be a remarkably delicate feat of statutory draftsmanship to use language which, so far as it created a trust, created a trust in the higher sense and not a true trust, but in so far as it created a statutory obligation in the nature of a trust, it created an obligation in the nature of a true trust and not a trust in the higher sense. I can see no rational grounds upon which the Ordinance can be said to have created any obligation or relationship which gives rise to the fiduciary relationship claimed by Mr. Mowbray. Indeed, Mr. Mowbray’s contention that there was a statutory obligation in the nature of a trust reminded me at times of Lord Bowen’s saying that he understood counsel, when calling a man a “quasi-trustee,” really to mean that he knew that the man was not but wished that he were a trustee: see In re Peterson [1909] 2 Ch. 398, 401, per Farwell L.J.

 

(5) Governmental obligations. My conclusion, therefore, is that the Crown was not in a fiduciary position in relation to either the 1931 transaction or the 1947 transaction. Throughout, the obligations of the Crown were governmental obligations and not fiduciary obligations [*236] enforceable in the courts. As must be plain from what I have said, I think that there have been grave breaches of those obligations. I shall refer to two.

 

The worst was in the fixing of the royalty for the 1931 transaction. This was done under the Ordinance of 1928, an Ordinance which with generous moderation Mr. Vinelott was content to call “quite fearful.” Another temperate description of it is that it was inept and liable to lead to injustice. That scheme was that while the value of the surface rights was to be ascertained by arbitration on the basis of market value, an entirely proper and fair scheme, the royalty for the phosphate rights was simply to be prescribed by the resident commissioner, with no process of arbitration and no basis of valuation laid down. The royalty was then in fact prescribed by a resident commissioner who less than two and a half years earlier had written the outrageous Buakonikai letter. I do not intend to add to what I have already said about this, beyond emphasising the length of time during which Mr. Grimble must have known that unless he took some steps to avoid it, it was he who would have to prescribe the royalty; and yet, without taking those steps, he proceeded to fix the royalty.

 

The other failure of government to which I shall refer was the gravest in its consequences to the Banabans. That was the absence of any advice to the Banabans, or encouragement to get advice, when they were embarking on the 1947 negotiations. The Banabans had suffered grievous hardships under the Japanese during the war: they had been uprooted from their homes on Ocean Island and had no immediate prospects of returning even to see what state that island was in; they had been less than a year and a half on Rabi, an unknown island in a different colony with a markedly different climate; they had had all the problems of living in temporary or makeshift accommodation, like so many others after the war; and many of them had been ill. In those circumstances, they were about to embark upon negotiations for by far the largest disposition of phosphate land that they had ever made, one which would take nearly all the workable phosphate left on Ocean Island, and consume well over two fifths of the entire island. The transaction was one in which some provision for varying or reconsidering the royalties ought at least to be considered. The negotiations would be with a concern with great experience of the phosphate industry, while the Banabans were a simple people, knowing virtually nothing of that industry beyond the operations that they had seen on Ocean Island; and these would be no help to them in negotiating. They were, I think, tenacious bargainers, with a tendency once one point had been gained and apparent agreement reached, to come back and make a further demand. But although they were not meek or overawed in bargaining, they needed knowledge and experience if they were to bargain effectively; and these they had not got.

 

All these facts must have been known, and well known, to the High Commissioner and to Major Holland, whom the High Commissioner had appointed to look after the Banabans. In those circumstances, I do not see how the omission to encourage the Banabans to get proper advice and assistance and to make haste slowly, and the prohibiting of Major [*237] Holland from helping the Banabans (for that, as will appear, is what it really amounted to) can possibly be called good government or the proper discharge of the duties of trusteeship in the higher sense. Had there not been this impar congressus Achilli, these proceedings might never have been brought.

 

It seems to me that I am powerless to give the plaintiffs any relief in these matters. If I am right in my conclusion that any obligation of the Crown towards the Banabans was a trust or fiduciary obligation in the higher sense, and not justiciable in the courts, then I have no jurisdiction to make any order on the matter. At the same time I do not think it could be right for a judge before whom matters such as these are brought simply to refuse jurisdiction and say no more. In litigation between subject and subject the position may be different; I have in mind In re Telescriptor Syndicate Ltd. [1903] 2 Ch. 174, 195, when Buckley J. said that the court was “not a court of conscience,” but a court of law. But in litigation against the Crown in which the Attorney-General is a party, I think a judge ought to direct attention to what he considers to be a wrong that he cannot right, and leave it to the Crown to do what is considered to be proper.

 

Accordingly I draw the attention of the Attorney-General to the matters of criticism that appear in this judgment, and in particular the two that I have just mentioned. How far these matters are proper for the attention of the Crown in right of the United Kingdom and how far they are for the Crown in some other right I shall not attempt to say: this is a governmental matter, and not legal. I shall accordingly leave the Attorney-General to make such communications to other persons concerned as he considers proper. The Crown is traditionally the Fountain of Justice, and justice is not confined to what is enforceable in the courts.

 

In those circumstances I have considered anxiously how far I ought to attempt to deal with the many other issues that have been argued before me; for the decision that the Crown was not under any fiduciary obligations that are enforceable in the courts is fatal to the plaintiffs’ claim in Ocean Island No. 2. The examination and resolution of these other issues would be laborious, and it would considerably increase the bulk of an already very long judgment. On the other hand, I must put in the forefront the interests of the parties, particularly in considering the prospects on appeal and the possible resolution of disputed matters by agreement. I also owe the appellate courts the duty of providing what assistance I can if the matter goes before them; and whether a judgment be right or wrong, it undoubtedly provides some assistance to the court and to the parties by at least in some degree crystallising the issues. If on appeal I am held to be wrong on the absence of any enforceable fiduciary obligation, then of course other important questions arise. After much hesitation, I have come to the conclusion that in the special circumstances of this case I ought to attempt to resolve most of those other issues, and not take the easy course of leaving unanswered important questions that have been argued with much learning over very many days. I therefore turn to these issues, and express my opinion on them in case my decision on fiduciary obligations is held to be wrong. [*238]

 

3. Results of a fiduciary position. First, let me suppose contrary to what I have held, that the Crown had been in a fiduciary position towards the Banabans in relation to the 1931 transaction. On that footing, Mr. Mowbray advanced alternative contentions. First, he said that the Crown was in an acute conflict of interest and duty in fixing the royalty. The Crown, in right of the United Kingdom, Australia and New Zealand, owned the entire beneficial interest in the British Phosphate Commissioners’ undertaking, while if it was right for this purpose to discard what the Crown owned in right of Australia and New Zealand (as I think it is), the Crown in right of the United Kingdom owned 42 per cent. of the interest in the British Phosphate Commissioners’ undertaking. In either case, the Crown had a substantial interest in the lease which was to be granted, and it was the resident commissioner, a Crown servant, who was to fix the royalty and grant the lease. This formulation concentrated on the process of fixing the royalty. The royalty, it was contended, was fixed at far too low a figure, and so the Crown must pay compensation to make up the royalties in fact paid to what they ought to have been.

 

The second way in which Mr. Mowbray put it was to concentrate initially on the lease rather than the process of fixing the royalty. The lease was in substance a lease granted by a fiduciary to itself or its creatures, and as such could have been set aside ex debito justitiae by any beneficiary. It was now far too late for that, for most of the phosphate had been extracted and sold; but instead there was a right to compensation equal to the difference between the royalty that had been fixed and the royalty that should have been fixed: see Nocton v. Lord Ashburton [1914] A.C. 932. This second way of putting the case thus reached the same result as the first.

 

(1) Conflict of interest and duty. The argument on the conflict of interest and duty requires a consideration of what was the interest and what the duty. The interest was the interest of the Crown in the British Phosphate Commissioners’ undertaking. That, however, is a statement which I think is too bald and uninformative for equity. Of course, if you apply the principle that the Crown is one and indivisible throughout the United Kingdom and its dependent territories, then you produce the result that the Crown in Ocean Island is the same Crown as the Crown in the United Kingdom. As a matter of constitutional theory that may indeed be so. But as I have said, equity looks to the realities. As the evidence stands, any profit or advantage that flowed to the Crown in respect of the 42 per cent. interest of the United Kingdom in the undertaking of the British Phosphate Commissioners flowed to the Crown in right of the United Kingdom; and there is nothing to suggest that the Gilbert and Ellice Islands Colony in general or Ocean Island in particular would derive any benefit from it. The interest, in terms of possible financial advantage, is the interest of the United Kingdom alone.

 

The duty, on the other hand is the fiduciary duty of the Crown towards the Banaban landowners, a duty which, contrary to my judgment, I am assuming to have existed otherwise than as a mere governmental obligation. First, let me say that there has been no suggestion that this fiduciary duty required the colonial legislature to abstain from enacting the Ordinance of 1928, an Ordinance about which I have already said something, [*239] and propose to say no more here. Accordingly, in addition to the fiduciary duty that I have mentioned, there must be considered the powers and duties under that Ordinance. It is in the interplay of the fiduciary duty and the statutory duty that lies much of the difficulty that this part of the argument engendered.

 

I shall begin with the statutory duty. This is imposed on the resident commissioner for the time being. He is, I think, plainly an officer not of the United Kingdom government but of the Gilbert and Ellice Islands Colony government. On one sense, no doubt, he may be said to be an officer of the Crown; but as such he is an officer of the Crown in respect of the colony and not of the United Kingdom.

 

The statutory duty imposed on him is the general duty to act reasonably and in good faith in accordance with the terms of the statute. He must pay due regard to the relevant and disregard the irrelevant. But that is all. What the statute enacts, the official must obey; and he must do this even if the statute makes provisions which produce results which are far from according with ordinary ideas of justice or equity. If I may take an example, far removed from the present case that I mentioned during the argument, it would be remarkable if a solicitor could act as such in a county court case, and then, having succeeded, bring in his bill of costs for taxation by himself qua registrar of the county court. Yet in H. Tolputt & Co. Ltd. v. Mole [1911] 1 K.B. 836 the Court of Appeal affirmed a Divisional Court decision [1911] 1 K.B. 87 that such a taxation was perfectly valid. Statute required the taxation to be made by the registrar of the county court, and statute must be obeyed, even if it made a man a judge in his own cause. I may say that subsequent changes in the relevant legislation preclude any repetition of such a taxation.

 

Now in the present case, the only person who could prescribe the royalty was, by section 5 of the Ordinance of 1928, the resident commissioner of the colony; and in doing so he was merely carrying out his statutory duty. If the words “such royalty... as the resident commissioner may prescribe” had stood alone, then I think his duty would have been to prescribe a reasonable royalty. In so far as any assistance can be obtained from the rest of the Ordinance, there was the requirement of section 4 that the resident commissioner must be satisfied, having regard to all the circumstances, including any royalties payable by the proposed lessee, that the terms offered were “reasonable.” This, I think, strongly points in the same direction: what the statute required the resident commissioner to fix was a royalty that was not arbitrary but was reasonable.

 

How, then, is this affected by the Crown’s fiduciary duty that I am assuming to exist? The resident commissioner must obey the statute: there can be no equitable duty for him to disregard it and obey some fiduciary obligation instead. The argument must thus require that some fiduciary obligation should be superimposed upon the statutory obligation. Yet I do not see how it could be said that such a fiduciary duty could effectually require the resident commissioner to fix a higher royalty than the statute provided for. If the statute had required the resident commissioner to fix such royalty as he might prescribe “not exceeding 9d. per ton” (like the “not exceeding” 2s. 6d. an acre in [*240] section 5), and the market rate was 1s. a ton, I cannot see any ground for contending that the resident commissioner ought to have fixed 1s. Statutes that provide for compulsory acquisition at less than the market value are not unknown in England, and whatever ethical and political objections to them there may be, I do not think that equity can be used to override them.

 

There is a further consideration. To establish a case of conflict of interest and duty, a sufficient identity must be established between the body having the interest and the body owing the duty. For the reasons that I have given, I do not consider that this identity can be established by simply saying that in each case it is the Crown. I think that the Crown owed this assumed duty not in right of the United Kingdom but in right of the colony. The duty arose out of activities in the colony by the government of the colony. In any case, I do not think that there was any real conflict. I can see that as things stood in 1931 the colony, if struck with financial disaster, might hope to receive some grant in aid from the United Kingdom, and that, conversely, prosperity in the colony’s finances would lessen the prospects of any such appeal being made to the United Kingdom. But that is both indirect and a mere matter of grace; and I cannot see how the colonial government and its officers could be said, either collectively or individually, to have any real interest in seeing that the Crown in right of the United Kingdom had any advantage that would flow from the British Phosphate Commissioners paying only a low royalty. I do not know where any sympathies of theirs lay, but any knowledge of officers serving in a colony suggest that in such a matter much of it may well have been with the inhabitants.

 

(2) Lease by a fiduciary to itself. I turn to the other way that Mr. Mowbray put the point, based on the 1931 lease being a lease by a fiduciary to itself. The lease, of course, is in terms a lease by the resident commissioner to the British Phosphate Commissioners, and as such is literally far from being a lease by a person to himself. But of course equity looks beneath the surface, and applies its doctrines to cases where, although in form a trustee has not sold to himself, in substance he has. Again one must regard the realities. If the question is asked: “Will a sale of trust property by the trustee to his wife be set aside?”, nobody can answer it without being told more; for the question is asked in a conceptual form, and manifestly there are wives and wives. In one case the trustee may have sold privately to his wife with whom he was living in perfect amity; in another the property may have been knocked down at auction to the trustee’s wife from whom he has been living separate and in enmity for a dozen years. So here one must look at the realities; and for my part I do not see how the British Phosphate Commissioners can in any way be sufficiently identified with the resident commissioner, duly exercising his statutory powers, so as to bring the equitable doctrine into play. Nor, for the reasons that I have given, do I see how the British Phosphate Commissioners can be said to be in any way the alter ego of the government of the colony, or the Crown in right of the colony.

 

(3) Self-dealing and fair-dealing. Let me revert briefly to the subject of the rules about self-dealing and fair-dealing, though on the view I [*241] take I doubt if much turns on this. As I have indicated, Mr. Vinelott took what I may call the orthodox view, namely, that there were two separate rules. The self-dealing rule is (to put it very shortly) that if a trustee sells the trust property to himself, the sale is voidable by any beneficiary ex debito justitiae, however fair the transaction. The fair-dealing rule is (again putting it very shortly) that if a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest.

 

On the other hand, Mr. Mowbray strenuously contended that there was only one rule, though with two limbs, and he formulated an elaborate statement to that effect which I do not think I need set out. I can well see that both rules, or both limbs, have a common origin in that equity is astute to prevent a trustee from abusing his position or profiting from his trust: the shepherd must not become a wolf. But subject to that, it seems to me that for all practical purposes there are two rules: the consequences are different, and the property and the transactions which invoke the rules are different. I see no merit in attempting a forced union which has to be expressed in terms of disunity. I shall accordingly treat the rules as being in essence two distinct though allied rules.

 

That said, I turn to the 1947 transaction. Here, given an assumed fiduciary obligation, what I think in the end emerged from the ebb and flow of argument was a contention that the transaction was a transaction between the Crown through its creatures, the British Phosphate Commissioners, with its beneficiaries, the Banabans, and that the Crown had failed to comply with the requirements of the fair-dealing rule. This failure fell under two heads. First, there was a failure to disclose two matters, namely, the amount of the payments being made to the colony, and the fact that the price of Ocean Island phosphate was being fixed by the British Phosphate Commissioners so as confer substantial benefits on the farmers of Australia and New Zealand. Second, there was a failure to see that the Banabans had proper advice on the transaction so that they would get a proper price.

 

There are many questions here. Perhaps the most fundamental is whether the fair-dealing rule applies to cases in which the transaction with the beneficiary is effected not by the trustee but by some person or body with which the trustee is connected. If T holds property in trust for B, and B sells his beneficial interest to X, does the fair-dealing rule apply if T and X are connected in some material way? If it does apply, how does it operate? If X is merely T’s alter ego, one would expect the rule to apply without any great difficulty. On the other hand, if X and T are distinct, but T has some financial interest in X, is the transaction between B and X to be set aside unless T has made full disclosure and ensured that B has proper advice, and so on? How far is T under an obligation to intervene in a transaction to which he is not a party? What if T knew nothing of the transaction before it was completed? Fortunately, this last point cannot arise in the present case, where all concerned [*242] had full knowledge of the proposed transaction. Furthermore, there can be no question here of setting any transaction aside; the only question is one of compensation in lieu of setting aside.

 

There is no claim in this case against the British Phosphate Commissioners. The plaintiffs are not seeking to claim compensation from the persons who have had the alleged advantage from the 1947 transaction. The contention is that the Crown has been guilty of a breach of fiduciary duty and must pay compensation in respect of what the British Phosphate Commissioners have had. Mr. Mowbray relied in the main on Randall v. Errington (1805) 10 Ves. 423, though he also cited Liquidators of the Imperial Mercantile Credit Association v. Coleman (1873) L.R. 6 H.L. 189 and Massey v. Davies (1794) 2 Ves.Jun. 317. In one of the transactions in Randall v. Errington, Mr. Mowbray said that a trustee was held accountable for the profit made on the resale of property which in effect he had bought from a beneficiary through a nominee. He then said that it could make no difference that in that case the trustee got the benefit, whereas in the present case the nominee got it: for the Crown was accountable for what its nominee had. (The transaction in Randall v. Errington was in form a sale by the trustee to his nominee, but as the beneficiary joined in it, it was, said Mr. Mowbray, in substance a sale by the beneficiary.)

 

I can see much force in this contention. Equity must continue to be astute to see that trustees in no way obtain any improper advantage from their positions. But I cannot see how the 1947 transaction can be brought within the doctrine for which Mr. Mowbray contends. The main difficulty, which I find insuperable, is that of the property in question. The 1947 transaction consisted of the disposition to the British Phosphate Commissioners by the Banaban landowners of the land that they owned in the areas in question. Immediately before the transaction there was nothing that amounted to any trust or fiduciary obligation of the Crown in relation to that land. A fiduciary obligation towards the Banaban community generally is one thing; the existence of a trust or fiduciary obligation in respect of specific land another. How, then, can it be said that there was any dealing with beneficial interests under a trust or fiduciary obligation made by the British Phosphate Commissioners with the beneficiaries owning those beneficial interests? Each Banaban landowner was disposing not of a beneficial interest under a trust but of what he held free from any trust: and for that reason alone the fair dealing rule cannot apply. I also feel some hesitation in saying that the peculiar relationship between the British Phosphate Commissioners and the Crown, having regard to the government of the colony and the government of the United Kingdom, was such as to bring the case within the rule.

 

I accept, of course, that trustees, and doubtless other persons in a fiduciary position, are under a duty to answer inquiries by the beneficiaries about the trust property: see, for example, Low v. Bouverie [1891] 3 Ch. 82. But that is a far remove from saying that trustees have a duty to proffer information and advice to their beneficiaries; and I think the courts should be very slow to advance along the road of imposing such a duty. I say nothing about what may be kindly or helpful; I deal only [*243] with a duty for the breach of which the trustees may be held liable in equity. Short of the alter ego type of case I do not think that trustees can be said to be under any duty to proffer information to their beneficiary, or to see that he has proper advice, merely because they are trustees for him and know that he is entering into a transaction with his beneficial interest with some person or body connected in some way with the trustees, such as a company in which the trustees own some shares beneficially.

 

I have already mentioned the contentions that Mr. Mowbray advanced on the footing that the fair-dealing rule applied, and in view of what I have said I propose only to make brief mention of certain further contentions. One head of complaint is the Crown’s failure to disclose how much the colony was getting from the phosphates. I find it difficult to see how there could be a duty to disclose what payments were being made in lieu of taxation under Ordinances of the colony: I have already discussed these Ordinances in relation to the claim for Crown royalties. I do not see how this can be affected by the fact that what Mr. Rotan wrote on the blackboard at the meeting on September 21, 1948, indicated that over a year after the 1947 agreement had been made the Banabans still did not know of the increased payments being made to the colony government.

 

Another head of complaint is that there was a failure to disclose that the phosphate was being sold by the British Phosphate Commissioners at prices fixed so as to confer substantial benefits on the farmers of Australia and New Zealand. Mr. Grimble recorded that on August 10, 1927, he had explained to a delegation of Banabans that the British Phosphate Commissioners were a non-profit-making concern. In evidence, Mr. Rotan said that although he had learned when at school the difference between a profit-making company and a non-profit-making company, in 1927 it was not clear to him which type of concern the British Phosphate Commissioners were. As the evidence stands, I do not think that it can be said to have been established that before entering into the 1947 transaction, the Banabans already knew that the British Phosphate Commissioners were a non-profit-making concern, or that the Australian and New Zealand farmers were reaping the benefit of this, or what that benefit was. Plainly the Banabans did not know how far the price at which the British Phosphate Commissioners sold the phosphate was below the market price of the phosphate; and of course knowledge of this would have been valuable to the Banabans in their negotiations. Mr. Vinelott stressed that the Crown lacked some of this information, and in particular information as to the British Phosphate Commissioners’ costs. Nevertheless, if the Crown had been under a duty of disclosure, it would have been no answer to say that the Crown’s information was incomplete: there should have been disclosure of what was known, even though it was imperfect.

 

As for advice, it is common ground that the Banabans had no advice at all. Indeed, it will be remembered that on March 7, 1947, the High Commissioner had instructed Major Holland to take no part in the negotiations between the British Phosphate Commissioners and the Banabans, and to make it clear to the Banabans, if necessary, that the [*244] negotiations were to be wholly between them and the British Phosphate Commissioners. These instructions were put to Mr. P. D. Macdonald when he was giving evidence. He had had a long and distinguished career in the colonial civil service, mainly in the Western Pacific, with four spells of duty on Ocean Island lasting about three and a half years in all; and it will be remembered that he played a substantial part in the Statement of Intentions of May 1947. His evidence was that he would have read those instructions as being instructions not merely to take no part in the negotiations but also to cease forthwith to give any advice to the Banabans in the matter. In other words, there was not merely a simple omission to see that the Banabans had proper advice but a positive prohibition against the giving of any advice to them by their primary and most obvious source of advice.

 

One can readily see the wisdom of avoiding any government officer being placed in what might be regarded as a dual position, not least when 1931 is remembered; and a prohibition against negotiating, but permission to advise behind the scenes while the negotiations progressed, would not have been realistic. But I think that Mr. Vinelott was driven to recognise that at least it would have been better if the Banabans had been advised that they ought to get proper assistance; and they were in Fiji, so that professional skills were not very far away. On any footing I think that such advice could and should have been given; but it was not. If the fair-dealing rule applied, its requirements were not met.

 

December 1. MEGARRY V.-C. continued:

 

4. Limitation. I turn now to limitation. In its amended form the defence contains a plea in the alternative that the Limitation Act 1939 applies either directly or by analogy: there is no plea of laches or acquiescence. The plaintiffs’ reply relies on section 19 of the Act, which excludes any period of limitation under the Act for actions against a trustee to recover trust property or its proceeds which are in the possession of the trustee or have previously been received by the trustee and converted to his use. The reply also relies upon section 26 (b) of the Act, relating to concealment of the right of action by fraud, a word which in this context has a far wider meaning than fraud at common law. These points were extensively argued, and I do not think it right to say nothing about them in reliance upon what I have already decided. I think that they fall within the category that I have mentioned, namely, of points that I ought to consider, though with relative brevity, in the hope that this may provide some assistance to the parties and to any appellate court. “Relative brevity,” unhappily, is a phrase that has to be construed in the context of the case.

 

(1) Fraudulent concealment. I can take fraudulent concealment most briefly of all. The term “concealed fraud” is still often used to describe this head. This is misleading, in that it suggests that this head applies only when it is fraud that is concealed, and that any process of concealment suffices, whereas in fact the head applies whatever the right of action, though not unless the process of concealing the right of action is shown to be fraudulent. “Fraudulent concealment” thus seems [*245] to me to be the preferable term. For most purposes it is a sufficiently accurate description of the words in section 26 (b) of the Act of 1939: “the right of action is concealed by the fraud” of the persons in question, namely, “of the defendant or his agent or of any person through whom he claims or his agent”: see section 26 (a).

 

As I have indicated, the word “fraud” is here used in a sense which embraces conduct or inactivity which falls far short of fraud at common law: see, e.g., Kitchen v. Royal Air Force Association [1958] 1 W.L.R. 563; King v. Victor Parsons & Co. [1973] 1 W.L.R. 29. Indeed, as the authorities stand, it can be said that in the ordinary use of language not only does “fraud” not mean “fraud” but also “concealed” does not mean “concealed,” since any unconscionable failure to reveal is enough. Mr. Mowbray contended that for this purpose it suffices if there is conduct or inactivity which would make it against conscience for the trustee to avail himself of the elapse of time. The main heads on which he relied (there were others) was that there had been a concealment from the Banabans of the benefits that the Australian and New Zealand farmers were obtaining by reason of low prices for the phosphates, and also a concealment of the gradual increase in the amount of royalty payable to the Gilbert and Ellice Islands Colony government by way of (or in lieu of) taxation, over the initial 6d. Crown royalty. However, Mr. Mowbray said that fraudulent concealment really arose only in relation to his claim to the Crown royalties, and only if there was no trust, though he wished to keep it open for all the claims.

 

I propose only to say that I am not satisfied, on the civil standard of proof, that the plaintiffs have made out a case of fraudulent concealment. I was troubled by the failure of anybody to correct Mr. Rotan’s unwitting mistake when he performed the blackboard exercise on September 21, 1948, and displayed his belief that the government royalty had remained at an unchanged 6d. But this was nearly 18 months after the 1947 agreement had been made. Under section 26 of the Act of 1939 the effect of fraudulent concealment is that “the period of limitation shall not begin to run until the plaintiff has discovered the fraud... or could with reasonable diligence have discovered it.” If time has already begun to run, I do not think that a supervening fraudulent concealment will start time running again. Mr. Mowbray did contend that Kitchen v. Royal Air Force Association [1958] 1 W.L.R. 563 was an authority to the contrary, though he had to accept that the point did not seem to have been argued there, and that at best the case was an authority sub silentio. It is plain, of course, that under sections 23-25 a written acknowledgment or payment will start time running afresh. But the words of section 23 (1) that produce this result are that in such cases “the right shall be deemed to have accrued on and not before the date of the acknowledgement or payment”; and this language is very different from the “shall not begin to run” of section 26.

 

Mr. Mowbray then contended that section 1 showed that section 26, like section 23, was intended to start time running afresh, in that both sections were in Part II of the Act, and section 1 made the time limits of Part I have effect [*246] “subject to the provisions of Part II of this Act which provide for the extension of the periods of limitation in the case of disability, acknowledgement, part payment, fraud and mistake.”

 

However, a provision which postpones the commencement of the running of time seems to me to be one way of providing for the extension of the periods of limitation, just as to start time running afresh is another way of doing it; and I do not see why the fact that both are provisions for the extension of the periods of limitation should make one operate in the same way as the other, when the language of each differs so markedly from the other.

 

I also have in mind one of the general principles of the legislation on limitation, discernible as early as Prideaux v. Webber (1661) 1 Lev. 31. This is that once time begins to run, it runs continuously, and that this principle can be ousted only by a statutory provision. Where the construction of a statutory provision is doubtful, I think the tendency should be towards construing it as conforming with the principle rather than as providing an exception from it. Accordingly I would hold that once time has begun to run, a subsequent fraudulent concealment will not start it running afresh. Even if the “blackboard exercise” amounted to fraudulent concealment, it could have no effect on the time then running, quite apart from the fact that it took place on Rabi, outside the Gilbert and Ellice Islands Colony, and that no officer of the Gilbert and Ellice Islands Colony was present. Furthermore, I think that it would require altogether exceptional circumstances to establish a case of fraudulent concealment in relation to a transaction in the public domain such as provisions for taxation contained in statutes; and I do not think that there are any such circumstances in this case.

 

(2) “Trust.” I can now return to the main question of limitation, namely, whether the Act of 1939 applies at all, whether directly or by analogy; and this primarily depends on the terms of section 19. This provides as follows:

 

“(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action – (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or (b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use. (2) Subject as aforesaid, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued:...”

 

There is then a proviso relating to future interests which I need not read; nor need I read subsection (3).

 

Subsections (1) and (2) are plainly confined to actions “by a beneficiary under a trust”; and of course it is only if I am wrong in holding that there is no true trust that the question of limitation can arise. Given a beneficiary under a trust, and the existence of no other period [*247] of limitation under the Act, subsection (2) operates so as to bar any action by him after the expiration of six years after the accrual of the right of action in two cases. These are where the action is “to recover trust property,” and where the action is “in respect of any breach of trust.” That, of course, is subject to the exclusion of any period of limitation under the Act in cases within subsection (1).

 

One of the more unexpected curiosities of this case is that it became common ground between counsel that the term “breach of trust” had not been defined in any case or textbook known to them. The question arose particularly in relation to a purchase by a trustee of the beneficial interest owned by one of his beneficiaries, made without a proper disclosure by the trustee or proper steps to see that the beneficiary was properly advised. In many cases, no doubt, section 19 (1) would prevent section 19 (2) from applying: but where it did not, could section 19 (2) apply? The first limb of section 19 (2), relating to an action “to recover trust property,” is open to the difficulty that an action to recover a beneficial interest in trust property cannot readily be described as an action to recover “trust property”: what a man owns beneficially is essentially different from what a man holds not beneficially but in trust. The second limb, an action “in respect of a breach of trust,” raises the fundamental question of what is meant by a “breach of trust”; and one aspect of this question is the distinction that I have just mentioned between dealing with a beneficial interest in the trust property and dealing with the trust property itself.

 

Mr. Vinelott contended that any breach of a duty owed by a trustee as such to his beneficiary was a breach of trust. Alternatively, if this was too wide, and in section 19 (2) “breach of trust” was confined to dealing with the trust property, then he said that section 19 (2) would apply by analogy to cases where a trustee dealt not with the trust property but with a beneficial interest. Applying the statute by analogy avoided the anomaly, he said, of an improper purchase of the trust property by a trustee having a six years period of limitation and an improper purchase by him of a beneficial interest in the trust property having no statutory period of limitation.

 

This, and much else besides, was very properly debated at length. At the heart of the discussion, of course, was the meaning of “breach of trust.” There seems to be a substantial body of American authority on this, and as this was not discussed in argument I must consider it with the reservations appropriate to anything which lacks the illumination that argument brings. Two definitions, or descriptions, seem to be current in the United States. The first is that “every omission or violation by a trustee of a duty which equity lays on him... is a breach of trust.” This formulation seems to have been derived from Pomeroy, Equity Jurisprudence, 3rd ed. (1905), vol. 3, p. 2086, para. 1079, and it is adopted by Corpus Juris Secundum (1955), vol. 90, pp. 225, 228, para. 247. (In the latter book, I may say, the term “self-dealing” is used in the sense in which I have been using it: see p. 254, para. 248.) The second formulation is that “a trustee commits a breach of trust if he violates any duty which he owes as trustee to the beneficiaries.” This is the form adopted in Scott on Trusts, 3rd ed. (1967), vol. III, p. 1650, para. 201, and also in [*248] substance by the Restatement of the Law, Second, in vol. 1 of the Trusts volume (1959), p. 442, para. 201. Professor Scott, the distinguished author of Scots on Trusts, was, I may say, the reporter for these volumes of the Restatement. From Words and Phrases, vol. 5A (1967), pp. 309-312, it appears that some courts have adopted one version and other courts the other.

 

The second version seems to be in substance close to Mr. Vinelott’s formulation. I have not found any discussion which compares the two versions. The first seems the wider, for unless some expression such as the phrase “as trustee” which appears in the second version is implied into the first version, it seems that a breach by a trustee of some duty which equity imposes on him otherwise than under the law of trusts would be a breach of trust. However, for reasons that will appear I shall not pursue the point. Nor, I may say, shall I attempt any comprehensive definition of a breach of trust myself, for I do not think it necessary to undertake this perilous task. I am concerned with Mr. Vinelott’s submission, and the assistance which the American books appear to provide for him; and with that I must deal.

 

For my part, I doubt whether defining a breach of trust in terms of a breach of duty, however widely cast or narrowly confined, carries the matter much further: for at once the further question arises of what is meant by a breach of duty by a trustee as such. In this case, the question becomes one of whether a trustee as such can properly be said to be under a “duty” not to purchase the trust property, and under a “duty” not to purchase a beneficiary’s interest in the trust property without making proper disclosure, and so on. If the answer is “Yes,” then of course there is much logical force in the contention that a breach of these duties is a breach of trust within section 19 (2) of the Limitation Act 1939 and so is subject to the six years period of limitation. The problem is essentially one of classification.

 

Now it is true that some textbooks set out the rules about self-dealing and fair-dealing as part of the duties and discretions of trustees. Snell’s Principles of Equity does this (see 27th ed. (1973), pp. 240-243), and there are others. Some books avoid any problems of classification by setting out the rules in a separate self-contained chapter: see Mr. Mowbray’s learned edition of Lewin, Trusts, 16th ed. (1964), pp. 693-706. But Halsbury’s Laws of England, 3rd ed., vol. 38 (1962), pp. 961-966 includes both the self-dealing rule and the fair-dealing rule under the head of “Disabilities of trustees” and not “Duties of trustees”: and it is this that appears to me to be the true view. Snell, I think, is wrong. In my judgment, what equity does is to subject trustees to particular disabilities in cases falling within the self-dealing and fair-dealing rules. I may add that Pomeroy, Equity Jurisprudence, 3rd ed. (1905) discusses self-dealing under “constructive fraud,” and fair-dealing under “constructive trusts,” with no more than a cross reference to these passages under “duties of express trustees”: see vol. 2, p. 1752; vol. 3, pp. 2020, 2085.

 

This way of regarding the matter is reinforced by considering those who fall within the scope of the fair-dealing rule. This applies, of course, [*249] not only to trustees, but also to many others, such as agents, solicitors and company directors. If a breach of the fair-dealing rule by a trustee were to be treated as a breach of trust to which the six years period under the Act of 1939 would apply, while a breach of the rule by one of the others were to be free from the six years period, the result would indeed be anomalous. A possible line of escape from the anomaly would be to treat agents, solicitors and the rest as constructive trustees for this purpose, so that all would be subject to the six years period: but I should be reluctant to resort to such an artificiality unless driven to it.

 

Another aspect of the matter, producing the same result, is that the fair-dealing rule is essentially a rule of equity that certain persons (including trustees) are subject to certain consequences if they carry through certain transactions without, where appropriate, complying with certain requirements. The rule seems to me to be a general rule of equity and not a specific part of the law of trusts which lays down the duties of a trustee. Trusteeship is merely one of the categories of relationship which brings a person within the rule. There are many things that a trustee may do or omit to do which will have consequences for him as a trustee without the act or omission amounting to a breach of trust. I do not think that it could be said that a trustee is under a duty as trustee not to become bankrupt, so that his bankruptcy will constitute a breach of trust: yet his bankruptcy may be a ground for removing him from his trusteeship.

 

Yet a further consideration is the way in which the English textbooks on limitation have dealt with the subject. The predecessor of section 19 (1) and (2) of the Act of 1939 was section 8 of the Trustee Act 1888; and although the language of the two sets of provisions is very different, the broad general effect is the same. Nevertheless, English textbook writers of repute have continued to treat actions by a beneficiary to set aside purchases by trustees, whether of the trust property or of a beneficiary’s interest, as being governed not by an statutory period of limitation but by the equitable doctrine of laches: see, e.g., Lightwood, Time Limit on Actions (1909), pp. 263-266; Brunyate, Limitation of Actions in Equity (1932), p. 243; Preston and Newsom’s Limitation of Actions, 3rd ed. (1953), p. 263; Halsbury’s Laws of England, 3rd ed., vol. 38 (1962), pp. 963, 965; and Lewin, Trusts, 16th ed. (1964), pp. 704, 705.

 

My conclusion, therefore, is that notwithstanding the American support that there is for Mr. Vinelott’s contentions, a true analysis of the self-dealing and fair-dealing rules shows that the breaches of those rules are not subject to the six years period laid down by section 19 (2) of the Act of 1939. I bear in mind, of course, that it is common ground that in the case before me there is no question of setting aside any transaction. It is also common ground that Nocton v. Lord Ashburton [1914] A.C. 932, a case as between solicitor and client, shows that in a proper case a claim for compensation in equity (as distinct from damages at common law) lies in lieu of setting a transaction aside; and the claim before me is essentially a claim for compensation in equity. It seems to me that such a claim ought to be in the same position as regards limitation as a claim to set aside the transaction: if it were not, there might be some very odd results. [*250] In my judgment, therefore, section 19 (2) of the Act of 1939 does not apply directly to the plaintiffs’ claims. I can see even less reason for it to apply by analogy, on the footing that the claim is not for breach of trust but is for breach of fiduciary duty. In each case I consider the matter to be one that falls within the equitable doctrine of laches, by which I mean pure laches and not any branch of laches which consists of applying a statute by analogy. That, however, does not conclude the question of limitation, for I have to consider the plaintiffs’ claim for an account.

 

(3) Account. The law of limitation in relation to actions for an account seems to be in a curious state. An action for an account lay at common law, and section 3 of the Limitation Act 1623 laid down a six years’ period of limitation for “actions of account.” However, the procedure in Chancery, and in particular the machinery for taking accounts, was so superior that by the 18th century the common law action for an account had come to be superseded by equitable proceedings for an account. Bills in Chancery for an account did not directly fall within the term “actions of account” in section 3 of the Act of 1623, and so any application of the six years’ period to them had to be by way of analogy.

 

In that state of affairs the Limitation Act 1939 came into force. Section 2 (2) provided that “An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.” If that had stood alone, the matter would have been simple. There would have been nothing to prevent the six years’ period from applying both to an equitable action for an account (for by section 31 (1) “action” has a very wide meaning) and also, if anyone sought to revive it, to a common law claim. However, there is also section 2 (7) of the Act:

 

“This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the court by analogy in like manner as the corresponding enactment repealed by this Act has heretofore been applied.”

 

If the effect of section 2 (7) is that an equitable claim for an account being a “claim... for other equitable relief,” is excluded from section 2 (2), the result is that section 2 (2) is left to apply the six years’ period only to the obsolete common law claim for an account. However, it may then be said that the second limb of subsection (7) allows the six years’ period of subsection (2) to be applied by analogy to equitable claims for an account; for prior to the Limitation Act 1939 this is what equity did: see. e.g. Knox v. Gye (1872) L.R. 5 H.L. 656, 674, per Lord Westbury. On that footing, Parliament’s scheme for dealing with equitable claims for an account seems to be first, to appear by subsection (2) to subject them to the express six years’ period; then to appear to exclude them from that period by the first limb of subsection (7); and finally, by the second limb of subsection (7), to subject them to a six years’ period by analogy, despite their exclusion from the express six years’ period. [*251] This tortuous scheme of indirection is one that I should be reluctant to attribute to Parliament. After all, subsection (2) is a subsection which deals solely and expressly with actions for an account. If the intention was to make it apply to both legal and equitable actions for an account, it would have been simple enough to say so, with perhaps the addition of a few words to subsection (7) to make the word “equitable” in subsection (2) prevail over it.

 

My reluctance to attribute to Parliament an intention to legislate expressly for the obsolete and only circuitously for the effective is increased by the way in which the court dealt with section 2 (7) in Poole Corporation v. Moody [1945] K.B. 350. There, in relation to a power of sale, the subsection was treated by the Court of Appeal solely as a provision which excluded the operation of section 2 in claims for equitable relief, without any mention of the possibility of it applying the section by analogy. The omission is pointed: indeed, the quotation of section 2 (7) that is set out in the footnote on p. 351 gives only the first half of the subsection and omits altogether the second half, which deals with application by analogy. This is done despite the mention in argument on p. 353 of equitable applications of the statute by analogy in the same breath as a reference to subsection (7). I may add that I do not see any grounds for escape by saying that “other equitable relief” does not include an equitable action for an account.

 

I find this matter indeed puzzling. My difficulty is increased by the consideration that if, as I have held, no six years’ period applies to the claim for equitable compensation, and there is no plea of laches which bars the claim, there may be items of claim beyond the six years which are not barred but to which the six years’ period for an account would apply. However, I think the answer may be along the following lines. In so far as the claim to an account is ancillary to the claim for equitable compensation, the application of the Act and the doctrine of laches to the ancillary claim ought to be the same as its application to the substantive claim. Thus it seems clear that where a claim against a person in a fiduciary position is not barred by lapse of time, he must account without limit of time: see Halsbury’s Laws of England, 3rd ed., vol. 24 (1958), p. 282. If, contrary to what I have held, there is a time limit in the present case, I would hold that neither directly nor by analogy does section 2 of the Act of 1939 impose any time limit on the claim to an account that is not imposed on the substantive claim for equitable compensation.

 

The upshot is that if the plaintiffs’ claim were otherwise valid, I would hold that it is not barred by any statutory period of limitation, either directly or by analogy. Though subject to the equitable doctrine of laches, it is not barred by laches either, since laches has not been pleaded.

 

I should add that this discussion of the subject has been of regrettable length; I can only say that it became longer in the execution than I foresaw when I first embarked upon it. I do not think that I need deal with the further plea by the plaintiffs that if any period of limitation would otherwise apply, section 19 (1) (b) of the Act of 1939 would exclude it on the footing of trust property or its proceeds being still in possession of the trustee or converted to the use of the trustee. Nor do [*252] I propose to discuss a point that was taken on section 21 of the Act of 1939, a section which related to actions against public authorities, and was repealed by the Law Reform (Limitation of Actions, etc.) Act 1954.

 

5. Jurisdiction against the Crown. I must now turn to a group of arguments concerned with whether the court has jurisdiction to make the orders claimed against the Crown. These arose in the course of the main argument, and not under any preliminary objection. Mr. Mowbray framed his contentions that jurisdiction existed under three main heads. First, he said that all his claims fell within the old Exchequer equity jurisdiction to entertain direct claims against the Crown, a jurisdiction now vested in the Supreme Court. Second, he advanced the alternative contention that his claims could formerly have been brought by petition of right, and could now be brought by writ under the Crown Proceedings Act 1947. Third, he contended as a further alternative that his claims could all be framed as declarations, and so be brought within the wide jurisdiction to make declarations against the Crown. These contentions were buttressed by an argument that at all material times the government of the United Kingdom was the only government of the Gilbert and Ellice Islands Colony.

 

I do not intend to examine these contentions at any great length; for there are deep waters here, and on the basis of what I have already said the point does not need to be decided. But again I consider that I ought to attempt to provide some assistance by giving an indication of my views. The most convenient course, I think, is to begin with the Crown Proceedings Act 1947.

 

(1) Crown Proceedings Act 1947. The Crown Proceedings Act 1947 abolished petitions of right (see section 13, Schedule 1), and instead provided for ordinary actions to be brought against the Crown. Section 1 is as follows:

 

“Where any person has a claim against the Crown after the commencement of this Act, and, if this Act had not been passed, the claim might have been enforced, subject to the grant of His Majesty’s fiat, by petition of right, or might have been enforced by a proceeding provided by any statutory provision repealed by this Act, then, subject to the provisions of this Act, the claim may be enforced as of right, and without the fiat of His Majesty, by proceedings taken against the Crown for that purpose in accordance with the provisions of this Act.”

 

Pausing there, it will be seen that the right to sue the Crown is in this way defined by relation to claims which could have been enforced by a petition of right. Further, section 1 takes effect “subject to the provisions of this Act,” and section 40 contains important provisions which affect section 1. Section 40 (2) (b), relating to proceedings against the Crown, is most directly in point, but I must also read section 40 (2) (c), relating to proceedings by the Crown, because some argument was directed to the differences in the wording. The relevants parts of section 40 (2) are thus as follows: [*253] “Except as therein otherwise expressly provided, nothing in this Act shall: – ... (b) authorise proceedings to be taken against the Crown under or in accordance with this Act in respect of any alleged liability of the Crown arising otherwise than in respect of His Majesty’s Government in the United Kingdom, or affect proceedings against the Crown in respect of any such alleged liability as aforesaid; or (c) affect any proceedings by the Crown otherwise than in right of His Majesty’s Government in the United Kingdom; ... and, without prejudice to the general effect of the foregoing provisions, Part III of this Act shall not apply to the Crown except in right of His Majesty’s Government in the United Kingdom.”

 

I should also read section 25 (3). Section 25 appears in Part III of the Act, and is concerned with the satisfaction of orders against the Crown.

 

“(3) If the order provides for the payment of any money by way of damages or otherwise, or of any costs, the certificate shall state the amount so payable, and the appropriate government department shall, subject as hereinafter provided, pay to the person entitled or to his solicitor the amount appearing by the certificate to be due to him together with the interest, if any, lawfully due thereon: –”

 

There is then a proviso that I need not read.

 

It was common ground that a petition of right claiming money could be brought in the English courts only if the money was properly payable out of the United Kingdom Treasury: see Robertson, Civil Proceedings by and against the Crown (1908), p. 340, which uses the phrase “chargeable on the Imperial revenues”; and consider section 13 and 14 of the Petition of Right Act 1860. Consequently it was debated whether the right to sue under the Act of 1947 was subject to two tests or one. For under section 1 the right to bring an action was dependent upon the claim being formerly enforceable by petition of right, and so the case must be one in which the money was properly payable out of the United Kingdom Treasury. Second, there is section 40 (2) (b), which I have just read, preventing the Act from authorising any right to sue “in respect of any alleged liability of the Crown arising otherwise than in respect of His Majesty’s Government in the United Kingdom.” In most cases the two tests would doubtless produce the same result, but in some they might differ.

 

I agree with Mr. Mowbray’s submission that there is only one test, namely, that provided by section 40 (2) (b). The Act of 1947 made great changes in the law, and in section 40 (2) (b) it was expressly dealing with the limits of the new law in days when large parts of the British Commonwealth had become self-governing. It would be wrong to construe the Act so that the overt test laid down by section 40 (2) (b) were to have superimposed on it a covert test by means of section 1 and the old law, particularly when section 1 is expressed to be “subject to the provisions of this Act,” and these include both section 40 (2) (b) and section 25 (3). In short, I think that the express supersedes the implied.

 

The question, then, is whether the 1931 and 1947 claims are claims [*254] which arise “in respect of His Majesty’s Government in the United Kingdom.” If, as Mr. Mowbray contends, at all material times the government of the United Kingdom was the only government of the Gilbert and Ellice Islands Colony, then plainly section 40 (2) (b) provides no obstacle to the plaintiffs. Nor do I think that there is any difficulty about the claims being claims not at law but in equity, for breach of fiduciary duty. There is a curious lack of direct authority on the point (see the discussion in Clode’s Petition of Right (1887), pp. 141-153), but a good deal of general authority that is inferential or sub silentio. I do not think that I need discuss this, especially as Mr. Vinelott accepted that in principle such claims could be made by petition of right and so can now be made under the Act of 1947.

 

First, there is the 1931 claim. Mr. Mowbray naturally emphasised the 42 per cent. interest of the Crown in right of the United Kingdom in the British Phosphate Commissioners; and if this were all that had to be considered it would satisfy section 40 (2) (b) as being an alleged liability not arising otherwise than “in respect of His Majesty’s Government in the United Kingdom.” However, in considering a conflict of interest and duty, one must, as I have already pointed out, look not only at the interest but also at the duty. This, I think, must plainly apply when considering the application of section 40 (2) (b). Now the duty in fixing the royalty was the duty of the resident commissioner. He was an officer of the Gilbert and Ellice Islands Colony, performing a statutory duty under an Ordinance of the colony. It seems to me that the colony had a government of its own both then and at all material times thereafter. That government had, it is true, a somewhat unusual framework, in that instead of there being simply a governor and various subordinate officers there was a High Commissioner and a resident commissioner, with the High Commissioner having authority in more colonies than one. Nevertheless, under the Pacific Order in Council 1893 all essential legislative, executive and judicial functions within the colony could be performed in the Pacific; and the colony had its own financial system.

 

Mr. Mowbray understandably contended that all important decisions were referred to the Colonial Office in London; and of course the Crown, on the advice of the United Kingdom government, had important powers that could be used to override acts of the colonial government, or impose direct rule, in which case the United Kingdom government would become the government. Plainly the colonial government was a subordinate government, as Mr. Vinelott accepted and asserted. But a government does not cease to be a government merely because it is subordinate, unless, indeed, the degree of subordination is so great that it really ceases to govern, and becomes merely the servant or agent of the paramount government; and there is no question of that in this case. Though the facts were very different, I think the passport case, Reg. v. Secretary of State for Home Department, Ex parte Bhurosah [1968] 1 Q.B. 266, provides some support for this view, and at least is not inconsistent with it. Furthermore, an examination of the manifold communications between the Colonial Office and the High Commission frequently leaves it uncertain how far what the Colonial Office is saying is to be taken as [*255] an order or direction and how far it is advice which normally the High Commissioner will accept.

 

In my judgment the government of the United Kingdom was not the government of the Gilbert and Ellice Islands Colony at any material time. It had important advisory and supervisory functions, as well as paramount powers. It also contributed much to the governing of the colony in general and to the 1931 transaction in particular, e.g., in settling the form of the 1931 lease; but it was not the government. I would therefore hold that section 40 (2) (b) of the Act of 1947 provides an additional bar to the success of the 1931 claim. In so far as the claim is against the Crown in respect of its 42 per cent. interest in the British Phosphate Commissioners, section 40 (2) (b) is no bar: but that subsection is a bar in so far as the claim requires (as it does) the inclusion of the resident commissioner’s activities in relation to the 1931 transaction. This applies, in my judgment, whether the 1931 claim is framed as a conflict of interest and duty, or whether it is based on a lease by a fiduciary to itself.

 

Next, there is the 1947 claim. Here, of course, the claim is based on the Crown’s alleged failure to comply with the fair-dealing rule. On any footing, 42 per cent. of the interest in the British Phosphate Commissioners belongs to the Crown in right of the United Kingdom. I would therefore hold that the alleged liability of the Crown is one that to this extent arises in respect of Her Majesty’s Government in the United Kingdom, and that if in other respects the claim could be sustained, section 40 (2) (b) of the Act of 1947 would provide no bar.

 

There are two minor points on section 40 (2) (b) that I should mention. First, Mr. Mowbray emphasised that the phrase was His Majesty’s Government “in” the United Kingdom, and not “of”: but I do not think that this has any great significance. Second, he also drew attention to the contrast between the phrase “in respect of” His Majesty’s Government in the United Kingdom in section 40 (2) (b), and the phrase “in right of” His Majesty’s Government in the United Kingdom in section 40 (2) (c). He emphasised that “in respect of” was a very wide phrase which meant that any connection sufficed: and he cited Paterson v. Chadwick [1974] 1 W.L.R. 890, 893, in support of this contention. A view similar to that taken by Boreham J. in that case had previously been taken in another case where the expression had been said to be “a flexible phrase” which “can be satisfied by any of a wide range of connections or relationships between the two matters in question”: No. 20 Cannon Street Ltd. v. Singer & Friedlander Ltd. [1974] Ch. 229, 248. I do not read the words of Croom-Johnson J. in Ackbar v. C. F. Green & Co. Ltd. [1975] Q.B. 582, 587, as trenching on this.

 

Mr. Vinelott sought to explain the contrast of language by saying that “in right of” was appropriate to claims made by the Crown, and so was used in section 40 (2) (c), and “in respect of” was merely a corresponding expression that was more appropriate to claims made against the Crown, and so to section 40 (2) (b); therefore, he said, the width of “in respect of” was narrowed to being merely the counterpart of “in right of.” I do not understand why the wider should be narrowed [*256] rather than the narrower widened; but in any case I doubt whether this submission can be right. The concluding words of section 40 (2) provide that Part III of the Act is not to apply to the Crown “except in right of His Majesty’s Government in the United Kingdom.” Part III contains four sections, and two of these, sections 25 and 27, are concerned with the satisfaction of orders against the Crown and the attachment of moneys payable by the Crown. A draftsman who in the latter part of section 40 (2) did not shrink from using the phrase “in right of” in relation to claims against the Crown is hardly likely to have avoided the use of it in this sense in the earlier part of section 40 (2). However, even if “in respect of” has the wider sense for which Mr. Mowbray contends, as it probably has, it does not in my judgment suffice him, for the reasons that I have given.

 

I would only add one thing on this branch of the argument. I have already referred to the grants in aid which were made after the war and until 1955 by the United Kingdom government to the Gilbert and Ellice Islands Colony. I do not think that either the grants in fact made or the possibility of further grants being made or refused could very well confer jurisdiction where none would otherwise exist. A grant that is made ex gratia, and at most as a matter of moral obligation or governmental policy, cannot, in my view, be said to affect legal liability in this sort of case.

 

(2) Exchequer equity jurisdiction. I turn from the Crown Proceedings Act 1947 to the old Exchequer equity jurisdiction. I hope that Mr. Mowbray and Mr. Vinelott will not think me discourteous if I do not explore the substantial range of authorities and learned contentions that they deployed before me; for in the end a considerable measure of agreement emerged, and I think that I can deal with the point with a brevity that, once again, is relative.

 

I can begin with Dyson v. Attorney-General (No. 1) [1911] 1 K.B. 410: Dyson v. Attorney-General (No. 2) [1912] 1 Ch. 158, though not irrelevant, is of less importance for the present purpose. The cases, which were both decisions of the Court of Appeal, were concerned with the validity of certain notices issued by the Inland Revenue Commissioners requiring a large number of landowners to deliver returns within 30 days under penalty for failure. In Dyson No. 1 it was held that a claim by a landowner against the Attorney-General for a declaration that he need not comply with the notice should not be struck out as disclosing no reasonable cause of action. In Dyson No. 2, a case that was heard immediately after Burghes v. Attorney-General [1912] 1 Ch. 173, which was on the same subject, it was held that a declaration that the notices were invalid and need not be complied with should be made.

 

A number of points derived from Dyson No. 1 were accepted by Mr. Vinelott, and seem to me to be right. I should, however, add that Mr. Vinelott stated that some of these propositions, though logically faultless, were historically questionable. The points were as follows.

 

(1) The Court of Exchequer, in its equity jurisdiction, could grant declarations against the Crown in proceedings brought against the Attorney-General. [*257] (2) When the Exchequer equity jurisdiction was transferred to the Court of Chancery under the Court of Chancery Act 1841, this power to make declarations against the Crown passed with it; and when under the Judicature Act 1873 the jurisdiction of the Court of Chancery was transferred to the Supreme Court, the power was included in the transfer.

 

(3) This jurisdiction was quite independent of proceedings by petition of right: see generally Esquimalt and Nanaimo Railway Co. v. Wilson [1920] A.C. 358.

 

(4) Any requirement that a claim for a declaration must be coupled with a claim for other relief disappeared when what used to be R.S.C., Ord. 25, r. 5, and is now R.S.C., Ord. 15, r. 16, was made in 1883.

 

(5) The jurisdiction was not confined to declarations that some document or action was invalid, but extended to other cases, such as making declarations that property vested in the Crown was subject to some trust or mortgage in favour of the plaintiff. In Hodge v. Attorney General (1839) 3 Y. & C.Ex. 342 it was declared that the plaintiffs, as equitable mortgagees, were entitled to retain possession of mortgaged property until the Crown, as owner of the equity of redemption, redeemed the mortgage.

 

At this point there was a divergence between Mr. Mowbray and Mr. Vinelott about what could be done in this jurisdiction by way of declaration. Mr. Vinelott said that what is summarised in paragraph (5) above represented the furthest extent to which the court would go. On the other hand, Mr. Mowbray said that the court had power by way of declaration to make coercive orders against the Crown, requiring the Crown to pay a sum of money, or at least declaring that the Crown ought to pay a sum of money.

 

Mr. Vinelott said that in no case did the Court of Exchequer without the consent of the Crown make an order against the Crown for any money payment, or make any other coercive order against the Crown; and in Dyson No. 1 [1911] 1 K.B. 410, 414 Sir Herbert Cozens-Hardy M.R. pointed out that the plaintiff in that case did not seek to divest any property of the Crown or to enforce any pecuniary claim against the Crown. In Hodge v. Attorney-General, 3 Y. & C.Ex. 342, 346, Alderson B. held that he had no jurisdiction to direct a sale of the legal estate that had become vested in the Crown on the conviction of the owner for felony, though the court could and did declare the plaintiffs to be equitable mortgagees, and direct the master to take an account of what was due to them. The tertium quid of making a declaration that the Crown ought to sell the property does not appear to have been considered.

 

One case that I must discuss is Poole v. Attorney-General (1708) Park. 272. The report is very short, and I shall read it all.

 

“Poole devised his estate to A. paying £200 a-piece to his grandchildren, and a power to enter for non-payment, and died. A. sold the estate to B. who had notice of the charge; B. being indebted to the Queen, the estate was seized and extended; and Poole’s grandchildren brought a bill against the Attorney-General and B. to have the legacies, and charge the estate therewith. And decreed accordingly.” [*258] The words “to have the legacies” and “decreed accordingly” plainly give some support to the contention that the court may make an order for payment against the Crown. The sidenote gives even more support to this view: it runs: “The court will decree payment of legacies charged on land, thO’ extended into the Queen’s hands.” However, it should be observed that this case appears, with a number of others, not in the main body of reports in the time of Sir Thomas Parker C.B. but in an appendix of cases from former reigns, which in his preface, at p. iii, he says “were carefully transcribed from authentic manuscripts.” He was about 13 years old when the case was decided, and it seems improbable that he had any further information about it than appears in the report. If the court did no more than charge the estate with the legacies, the decision is in line with Mr. Vinelott’s submissions. But if the court made an order against the Crown requiring the Crown to pay the legacies, then of course the decision assists Mr. Mowbray; and he, I may say, accepted that it was the only authority supporting an order for direct payment.

 

I find the case puzzling. The preface to the reports is dated February 1, 1776, some four years after the Chief Baron’s retirement from the Bench; but the title page gives the date of publication as 1791, some seven years after his death. The provenance of the sidenote I must therefore regard as being problematical. On any footing, the case seems to provide very slender support for the existence of any general jurisdiction to make orders for payment against the Crown without the Crown’s consent; and apart from the brevity and obscurity of the report, the slenderness of the support is emphasised by the case having neither pride of ancestry nor visible posterity. If it really had been possible to make monetary claims against the Crown by using the Exchequer equity jurisdiction, and so avoid having to resort to petitions of right, one would have expected the procedure to have achieved a greater degree of popularity and renown than it appears to have done.

 

In this connection I may mention Bombay and Persia Steam Navigation Co. Ltd. v. Maclay [1920] 3 K.B. 402. There, the plaintiffs sued the shipping controller for a declaration that they were entitled to compensation for loss and expenses incurred by them in complying with some lawful directions that he had given under the Defence of the Realm Regulations. The action failed, on the ground that the plaintiffs could not obtain a declaration of their rights against the Treasury by suing an individual. In the course of his judgment, Rowlatt J. said, at p. 408:

 

“The plaintiffs then say that this is a trifling matter which can be cured by adding the Attorney-General. I do not think the defect can be remedied in that way. The machinery of Dyson v. Attorney-General [1911] 1 K.B. 410; [1912] 1 Ch. 158 cannot be used to prejudge the issue of what may have to be adjudicated upon in a petition of right as to a money claim against the Treasury.”

 

This seems to me to be some indication that a declaration against the Attorney-General could not be sought as a means of establishing a money claim against the Crown.

 

I do not propose to pursue the point at any length. It seems plain [*259] that there is a real difference between a declaration of right, on the one hand, and an order to pay on the other; and a declaration of obligation (i.e. that the Crown ought to pay something) seems to me to be in essence an order to pay, put in a somewhat pallid, or perhaps I should say respectful, form. At the very least it is morally coercive in effect. It may be that some case will emerge in which it is proper to make such an order: but I do not think that this case is that case.

 

In particular, I have it in mind that in ordinary actions for a declaration, as distinct from the Exchequer equity jurisdiction against the Crown, it is well settled that it is discretionary whether or not to make a declaration. That is not because the remedy is an equitable remedy, for as the Court of Appeal made plain in Chapman v. Michaelson [1909] 1 Ch. 238 it is not: it is neither a legal nor an equitable remedy, but statutory. If one then turns to the Exchequer equity jurisdiction, it seems clear that a declaration under this jurisdiction must also be discretionary, not least because the jurisdiction is equitable, and normally equitable remedies are discretionary. That being so, the question is whether, on the assumption that I have jurisdiction to make a coercive order against the Crown, declaring that the Crown ought to pay (and this I doubt), I ought to make such an order in the proper exercise of a judicial discretion.

 

I think the answer is No. I should hesitate in any case to make a declaration of obligation when it is highly doubtful whether there is any power to make a direct order for payment; for if there is no power to order payment, a declaration of obligation seems to me an indirect means of achieving what cannot be done directly, without any sufficient justification for the indirection. Furthermore, the Crown Proceedings Act 1947 was plainly intended as a comprehensive measure which at least in its procedural provisions would regulate virtually all proceedings against the Crown, including actions against the Attorney-General for a declaration: see the definition of “civil proceedings against the Crown” for the purposes of Part II of the Act. But primarily it seems to me that the Exchequer equity jurisdiction to make declarations in England ought not to be exercised unless the obligation is an obligation of the United Kingdom Government and not of a colonial or other overseas government which be sued in the overseas courts. If the case were one where justice would fail because for some reason it was impossible to proceed in the appropriate colonial courts, then it may be that proceedings could be brought here, in reliance upon the United Kingdom Government being able to exercise the paramount powers of the Crown in the colony and so secure compliance with the judgment. But no case for that has been established here, and I do no more than suggest the possibility.

 

These considerations all apply to the 1931 claim. The 1947 claim, on the other hand, is one which, if it could otherwise be sustained, would not be prevented by section 40 (2) (b) of the Act of 1947 from being brought under the Act, in that it arises in respect of Her Majesty’s Government in the United Kingdom. For that reason the last of the considerations that I have mentioned, relating to proceeding instead in the colonial courts, might not apply. On the other hand, the very fact that an ordinary action could be brought as of right in England [*260] under the Act of 1947 would be some reason for not invoking the discretionary remedy of a declaration to secure indirectly what could be obtained directly.

 

(3) Declarations. On the subject of the general jurisdiction to make declarations, I do not forget the importance of not whittling down the subject’s right to come to the courts for a declaration: see Pyx Granite Co. Ltd. v. Ministry of Housing and Local Government [1960] A.C. 260, 286, per Viscount Simonds. Nor do I think that this is a case like Barraclough v. Brown [1897] A.C. 615 in which the legislature has given an exclusive remedy that precludes the making of a declaration. Again, I do not overlook Guaranty Trust Co. of New York v. Hannay & Co. [1915] 2 K.B. 536, which shows that the court can make a declaration at the suit of a plaintiff who otherwise has no cause of action, provided he is seeking something which can fairly be called “relief” (see Thorne Rural District Council v. Bunting [1972] Ch. 470, 477), and provided also that the dispute is within the jurisdiction of the court in a territorial sense. I think that this second proviso is in substance sufficiently established, but in any event Mr. Mowbray helpfully stated that his contention on the Guaranty case was merely that it showed that, given territorial jurisdiction, the plaintiff could get declaratory relief without establishing any cause of action. The case also seems to me to indicate that one ground upon which the discretion to refuse to make a declaration may be exercised is that another and more suitable procedure is open to the plaintiffs, and that they should not be allowed to obtain indirectly by declaration what is open to them to obtain directly by other means: see per Pickford L.J., at p. 564.

 

In the end, my conclusion in relation to the 1931 claim is that even if there is jurisdiction to make a declaration as sought by Mr. Mowbray (which I very much doubt), the court ought in its discretion to refuse to do so. My conclusion in relation to the 1947 claim is similar though more hesitant, by reason of the territorial difference; and I think that if I had to rule on that claim, I should ask for further argument before doing so.

 

6. Locus standi. I now turn to what has been called the locus standi point. The defendant contended that neither the Council of Leaders nor Mr. Rotan is entitled to bring these proceedings. The grounds for these two contentions are quite different. I shall consider them in turn.

 

(1) The Council of Leaders. Put very shortly, Mr. Vinelott’s point is this. He accepts that the Banaban Funds Ordinance 1948, enacted by the Fiji legislature, was valid and effective to establish the Banaban Funds Trust Board, the predecessor of the Council of Leaders, and to vest in it any funds which had already arrived or later arrived in Fiji. But he contends that the Ordinance, being an Ordinance of Fiji, could not vest in the board any right to recover money outside Fiji. This applied in particular to any right to claim sums which arose out of any breach of duty relating to the royalties arising from the phosphate in Ocean Island, which of course was part of the Gilbert and Ellice Islands Colony, and has never been part of Fiji. In other words, while section 9 of the Ordinance [*261] succeeded in vesting the funds in Fiji in the board, section 10 was ineffectual. Although it provided that

 

“All sums payable by way of royalties in respect of minerals mined by the phosphate company on Ocean Island shall be paid into and form part of the trust fund,”

 

it was powerless to give the board any right to claim sums which should have been paid as royalties for the Ocean Island phosphate but had not been paid, or any sum in lieu thereof.

 

The contention on the Banaban Settlement Ordinance 1970 is similar. By this Ordinance the Fiji legislature validly established the Council of Leaders as a body corporate and the Rabi Island Fund as the fund into which all moneys standing to the credit of the Banaban Trust Fund were to be paid: see sections 3, 6 (1), 6 (2) (e). But section 6 (2) (f), requiring “all royalties and other moneys accruing to the Banaban community in respect of minerals mined by the British Phosphate Commissioners on Ocean Island,” could not enable the Council of Leaders to sue for the sums that I have mentioned.

 

There was substantial argument on this point, and this includes some discussion of two conflicting decisions on the extra-territorial effect of legislation purporting to transfer movables. These were the decisions by Atkinson J. in Lorentzen v. Lydden and Co. Ltd. [1942] 2 K.B. 202 and by Devlin J. in Bank voor Handel en Scheepvaart N.V. v. Slatford [1953] 1 Q.B. 248, a decision which on appeal was reversed on a quite different point. Mr. Mowbray, I may say, accepted the Slatford rule (which was against him) for the purposes of this case at first instance, reserving his rights on appeal. I should also say that Mr. Vinelott accepted the validity of the Fiji legislation within Fiji, but said that the question was quite distinct from whether that legislation had extra-territorial effect.

 

There is plainly considerable force in Mr. Vinelott’s contention. But it seems to me to be a technical argument without much merit in it. Of course, an argument does not fail merely because it is technical: if it is right and inescapable, it will prevail. But were it necessary for me to decide the point I should seek to produce a result more in accord with the realities and the merits For long, all concerned in the Gilbert and Ellice Islands Colony, Fiji and the High Commission have been acting on the footing that the Banaban Funds Trust Board and later the Council of Leaders were the proper recipients of all royalties payable by the British Phosphate Commissioners for the benefit of the Banabans. If the plaintiffs are right in their claim, then less has been paid than ought to have been paid. If, for instance, the Council of Leaders claimed that as a matter of accountancy there had been an underpayment to them of the admitted royalties, then Mr. Vinelott’s argument would lead to the conclusion that the council would lack any title to recover the underpayment; and this is a conclusion which seems to me to be unjust. There has not been, and there could not very well be, any suggestion that any other person or body was entitled to what is claimed by the council in this case. Throughout, all concerned, not only in Fiji but also in the Gilbert and Ellice Islands Colony, have acted as if the Fiji Ordinances [*262] were valid and effective, not merely within Fiji but also as justifying the transmission of the Ocean Island royalties to the board and then the council.

 

Mr. Mowbray advanced an argument based on estoppel, which in one sense was appropriate as meeting technicality with technicality: but I felt some difficulty in seeing how a case of estoppel could really be got on to its feet. My inclination is to look towards some simpler principle. It may be that some process of recognition rather than estoppel would provide a solution. Suppose a law enacted by country A has been acted upon by all concerned in country B, and treated by them for a substantial period as being effective. In such a case it does not seem to me to be wrong for the court in country C, when it is contended that only the law of country B could achieve what the enactment in question has purported to do, to say that whatever might have been the position initially, the law enacted by country A has been treated as being effective in country B to such an extent that the courts of country C will apply it as if it were indeed the law of country B. The law of country B is (or at least includes) what is recognised by country B as being its law. However, I do not think that it would be right for me to decide anything on this point, as the argument was not directed to any such proposition; and although it may be a cousin of estoppel, the argument on estoppel does not suffice for the purpose. All I shall say is that I would not without further argument hold that the Council of Leaders lacks the necessary locus standi to make the claims in this case.

 

(2) Mr. Rotan. I turn to Mr. Rotan. Mr. Vinelott contended that Mr. Rotan had no locus standi to bring these proceedings. By the statement of claim he claimed to sue as a landowner entitled under the alleged trusts of the royalties: but, said Mr. Vinelott, such a claim could not be valid. If (contrary to what I have held) there was a true trust, then it must either be a charitable trust or a private trust. If it was a charitable trust, then nobody had a beneficial interest under it which entitled him to sue to enforce the trust: that was a matter for the appropriate Attorney-General. If it was a private trust, then Mr. Rotan’s path to establishing himself as a beneficiary under that trust was by reason of his being a landowner on Ocean Island. On this basis he would be seeking to enforce in the English courts rights relating to foreign land in such a way as to fall within the doctrine associated with British South Africa Co. v. Companhia de Moçambique [1893] A.C. 602, relating to jurisdiction over foreign land.

 

The Mozambique case, as I shall Anglicize and abbreviate the title, was of course a case of trespass to foreign land; and that is not an issue in Ocean Island No. 2. Much of the discussion before me was concerned with a passage in the speech of Lord Herschell L.C. and the subsequent discussion of the principle in St. Pierre v. South American Stores (Gath and Chaves) Ltd. [1936] 1 K.B. 382 and The Tolten [1946] P. 135. What Lord Herschell L.C. said in the Mozambique case [1893] A.C. 602, 626, was:

 

“It is quite true that in the exercise of the undoubted jurisdiction of the courts it may become necessary incidentally to investigate and [*263] determine the title to foreign lands; but it does not seem to me to follow that because such a question may incidentally arise and fall to be adjudicated upon, the courts possess, or that it is expedient that they should exercise, jurisdiction to try an action founded on a disputed claim of title to foreign lands.”

 

In the St. Pierre case [1936] 1 K.B. 382, 397, Scott L.J., after quoting this passage, said:

 

“By these words I understand him to have meant that it is the action founded on a disputed claim of title to foreign lands over which an English court has no jurisdiction, and that where no question of title arises, or only arises as a collateral incident of the trial of other issues, there is nothing to exclude the jurisdiction.”

 

In that case the Court of Appeal refused to stay as being vexatious or oppressive certain proceedings in England to recover from English companies rent due from them in respect of land in Chile, when proceedings in Chile were pending.

 

The real point at issue is one upon which there appears to be no direct authority. Where there is an equity between the parties, jurisdiction is not excluded merely because the equity relates to foreign land; and a similar rule applies where there is a contract between the parties: see, e.g. Dicey & Morris, Conflict of Laws, 9th ed. (1973), p. 519. But what if the plaintiff’s title to that equity can be established only by means of establishing his title to foreign land? Mr. Vinelott initially contended that where the title to the foreign land was a necessary ingredient in establishing the plaintiff’s right to sue, there was no jurisdiction. Subsequently he accepted that the “necessary ingredient” test put matters too high, and he contended that proof that Mr. Rotan owned relevant land formed the whole basis of his case, and that therefore Mozambique excluded his claim.

 

I do not propose to examine the many problems of this branch of the law at any length. If the subject matter of the dispute is the ownership or possession of foreign land, then plainly Mozambique applies, and the English courts have no jurisdiction. If, on the other hand, the subject matter of the dispute is the enforcement of some trust or other equity over which the court otherwise has jurisdiction, then the mere fact that a litigant can show that he is a beneficiary under the trust only by showing that he owns foreign land seems to me to be a question that arises “incidentally” or “as a collateral incident,” to quote from the passages in the judgments that I have just read, at all events if there are no rival claimants to the foreign land. In such a case, I do not think that the enforcement of the trust or equity falls within the rule that “the court will not adjudicate on questions relating to the title to or the right to the possession of immovable property out of the jurisdiction,” to borrow the language of Parker J. in Deschamps v. Miller [1908] 1 Ch. 856, 863. If there is some equity to which the owner of foreign land, whoever he may be, is entitled, then a dispute between rival claimants as to which of them was the owner of that equity would plainly, I think, come within the Mozambique rule. But where there are no rival claimants, [*264] and merely a plaintiff who, in attempting to enforce the equity, adduces evidence of his ownership of the land and thus his right to the equity, I would hold that he is outside the Mozambique rule.

 

This view, I think, covers in principle an alternative way in which Mr. Mowbray put the point in relation to the 1947 transaction. This was that there was a contract between the parties, so that the case fell within the contract exception from the Mozambique rule, as well as the trust exception. The Crown’s interest in the British Phosphate Commissioners sufficed to make the Crown in substance one of the parties, and Mr. Rotan was one of the landowners with whom the British Phosphate Commissioners made the agreement; he was, indeed, one of the persons who signed “for the Banaban landowners of Ocean Island.” This made him a party to the contract, even though the Banaban landowners were not named in it.

 

For the reasons that I have given I do not think that the adduction of evidence to establish that Mr. Rotan was one of the landowners, and so was one of the parties to the contract, suffices to invoke the Mozambique rule and exclude the exception. The 1931 transaction was not, of course, based on contract, but Mr. Mowbray had a subsidiary argument. This was founded on the 1913 transaction having created a trust for the benefit of land by Mr. Rotan’s mother; the land had devolved on Mr. Rotan, and had carried with it, as running with the land, the benefit of the trust. If the point arises, I think the same principle would apply.

 

The contention that there is a charitable trust, so that Mr. Rotan cannot himself take steps to enforce it, is one in which, as I have previously indicated, I find considerable difficulty. The prime responsibility for enforcing charitable trusts lies with the Attorney-General, and the concept of the Attorney-General suing the Crown for the enforcement of a charitable trust is one which has its difficulties: this is no ordinary case of the Attorney-General and Solicitor-General each having a part to play. Of course, in a sense the Crown is a trustee when there is a general gift to charity without any selection of objects or nomination of trustees; but there the Crown is a trustee only in a special sense. In the well-known words of Lord Eldon L.C. in Moggridge v. Thackwell (1803) 7 Ves. 36, 83, in such a case, “the King, as Parens Patriae, is the constitutional trustee,” and primarily it is for the Crown to apply such gifts to charitable purposes. I do not, however, propose to explore this subject. I shall say no more than that I should be very slow to hold that if in this case any true trust had been brought into being, that trust was a charitable trust.

 

7. Quantum. There is one further issue that I must mention, and that is the quantum of any sums that the Crown is bound to pay the plaintiffs. As was to be expected, this was an issue on which there was much argument, particularly in relation to the extensive expert evidence given for the plaintiffs by Mr. K. E. Walker, and for the defendants by Mr. J. P. Silcock and Mr. R. M. Collins. If what I have already decided is right, no question of quantum arises, and so there is no point in pursuing the matter. If my decision is wrong, and the Crown is liable, then of course much will depend on what the Crown is liable for, and on what basis that liability arises. Until that is known, I do not think that it [*265] would be useful for me to attempt to quantify the sums. Accordingly I think that it is proper for me, and probably desirable, to abstain from attempting to resolve what on any footing is a substantial and complex question.

 

In the result, therefore, I need only say that for the reasons I have given the plaintiffs’ claims in Ocean Island No. 2 fail, and will be dismissed. I must, however, add an expression of my deep indebtedness to counsel and solicitors for having met the demands of an exceptional case by providing exceptional assistance. The process of discovery and agreeing the bundles of documents must have been daunting and burdensome in the highest degree; and in court counsel were unfailingly helpful to me, despite the difficulties that there must have been in finding at a moment’s notice the right document out of the many thousands in the cramped conditions of the court room.

 

III. OCEAN ISLAND NO. 1

 

I now come to Ocean Island No. 1.

 

1. Sand: the red land. I shall consider first the only claim that is made in respect of something other than mining phosphate, namely, the claim for damages for conversion made by the 12th plaintiff in respect of the alleged wrongful removal of sand and the destruction of the burial ground. This claim was initially made in relation to the land called the “red land,” being the land edged red on plan B annexed to the statement of claim. But in the course of the pleadings that plan was in effect superseded by another plan, called plan G (or PF. 24), on a much larger scale, with a variety of hatchings and colorations, but with the boundary again coloured red: and it is in relation to the land included in this boundary that I use the term “red land.”

 

The question is not easy to follow without a plan, but I must attempt a verbal explanation of the topographical complexities. In place of the rectangle shown on plan B, plan G, which was delivered by the plaintiffs with the further and better particulars served by them in March 1975, shows an area bounded on the south, the seaward side, by a curved line. This runs south-east, then east and then north-east, following the line of the high water mark round Ooma Point, at distances varying from about 30 ft. to about 50 ft. to the landward of that mark. The northern or landward boundary, on the other hand, runs in a generally north-easterly direction. It begins at a sharp point on the west where it meets the curved seaward line, and runs north-easterly in the shape of a very much flattened S-bend to its junction with the eastern boundary. This northern boundary consists of the southern edge of an earth road of variable width. The eastern boundary consists of a line that is nearly straight and some 80 ft. long, running in a north-westerly direction. The total area of the red land is rather under 2 acres. The revised claim for the extraction of sand is made in respect of the western part of the red land, an area of a little under 3�4 of an acre, hatched brown on plan G (“the brown land”). Apart from a small area at the north, the brown land occupies the whole of the western end of the red land, the eastern [*266] boundary of the brown land being a line which, with many changes of direction, runs from south a little west of north.

 

There are two other markings on the plan that I must mention. First, the plaintiffs’ claim is that the cemetery runs from the eastern boundary of the red land well into the brown land; and the blue colouring accordingly covers the whole of the area claimed to comprise the cemetery (the “blue land”). Second, the claim in respect of the sand is made by the 12th plaintiff; and his claim, which originally was that he owned all the red land, was later particularised as being joint owner with his brother and sister (who were joined as the 17th and 18th defendants and took no part in the case) of a red hatched strip of land some 80 ft. wide. This strip was shown on plan G as running a little west of north from the high water mark across the red land and running on across the earth road to the north, with its eastern boundary almost equidistant from the east and west ends of the red land. This strip (which I shall call “the red strip”) has within it nearly the whole of the irregular eastern boundary of the brown land which is the subject of the claim, and also the whole of a track which runs southwards from the earth road towards the sea at the very tip of Ooma Point; and within the red land it runs wholly over land coloured blue and so claimed as part of the cemetery. By the statement of claim the 12th plaintiff claimed damages for the removal of sand and the destruction of the burial ground. The claim was later particularised as relating to the removal of sand in or about 1964 from an area of about 60ft. by 160ft. to an average depth of 6ft.; and special damages of $A20,000 were claimed. It subsequently appeared that this sum was claimed for the whole of the brown land, and not merely the part of the brown land that was covered by the red strip.

 

There is one other area of land that I should mention, and that is the parcel of land which I may call “the boot”; it is shaped roughly like a boot, with its sole at the south. It is wholly within the three areas of land that I have called the red land, the brown land and the blue land: that is to say, it is within the land the subject of the claim, it is within the land from which sand is said to have been extracted, and it is within the area claimed as the cemetery. Further, all save the toe of the boot is within the red strip, i.e. the land claimed by the 12th plaintiff. The boot is at the southernmost tip of the red land, and is the only part of the brown land which lies to the east of the track that runs north and south. I do not know its area, but it is very small. The sole of the boot appears to be less than 30 yds. long, with a line from the heel to the top of the boot of about the same length. To the importance of the boot I shall now turn.

 

After hearing the evidence, Mr. Macdonald very properly accepted that the 12th plaintiff, who was the sole claimant in respect of the sand, had not shown title to any land to the east of the track, and that the only claim he could make was in respect of the boot, in which Mr. Macdonald included the width of the track. I think the claim must be for the boot minus the toe, for this toe projected eastward beyond the red strip. Furthermore, Mr. Macdonald accepted that he could only ask for nominal damages as there was no evidence of the area or depth of the sand extracted from the boot. What I must consider, therefore, is whether [*267] the 12th plaintiff has established any liability of the British Phosphate Commissioners in respect of the extraction of sand and destruction of the burial ground in relation to the toeless boot.

 

In their defence the British Phosphate Commissioners rely on the sand agreement and on limitation. I have already read the sand agreement made in 1948, but I think that I ought to repeat part of it. That part is the phrase which states that in return for the annual payments mentioned in the agreement the Banabans raise no objection “to the removal of sand and shingle from the beach at Ocean Island.” No question has arisen on the location of the beach in question, and it has not been suggested that the sand agreement was not binding on the 12th plaintiff. But there was considerable debate on the meaning of the word “beach,” a word which does not appear to be a term of art, and on which no authorities were put before me.

 

Mr. Macdonald’s contention was that “beach” has the same meaning as “foreshore,” and so meant the land between the high and low water marks of ordinary tides. Though this may well have been the usage in Shakespeare’s time, I do not think that it can be right today. In the normal use of language I very much doubt whether anyone would now use the term “beach” so as to exclude the sand and shingle which lie immediately above high water mark. The word no doubt includes the foreshore: a child who steps below high water mark to paddle or swim could not, I think, be said to have left the beach. If one begins at the seaward side, I would say that the ordinary low water mark (or possibly the low water mark of spring tides) would normally be regarded as the dividing line between the beach and the sea-bed. From low water mark upwards to high water mark and beyond would all fairly be said to be part of the beach: but how far beyond? The terminus a quo may be clear, but what of the terminus ad quem?

 

In my judgment, all that lies to the landward of high water mark and is in apparent continuity with the beach at high water mark will normally form part of the beach. Discontinuity may be shown in a variety of ways: there may be sand dunes, or a cliff, or greensward, or shrubbery, or trees, or a promenade or roadway, or a dozen other natural or artificial structures or entities which indicate where one leaves the beach for something else. But until one reaches some such indication, I think the beach continues. I may add that I would not regard beaches as being confined to tidal waters. I see no reason why non-tidal waters should not have their beaches, running landwards from the normal water mark.

 

As I have said, no authorities were put before me on the meaning of “beach”; and unguided by authority I would reach the conclusion that I have set out above. However, since reserving judgment I have found two authorities, one Scottish and the other in the Judicial Committee, which discuss the meaning of the term “sea-beach,” with or without a hyphen. I must consider these; for I can see no relevant distinction between “beach” simpliciter and “sea-beach.” Musselburgh Magistrates v. Musselburgh Real Estate Co. Ltd. (1904) 7 F. 308 concerned a feu charter which described land as being bounded on the north “by the sea-beach.” It was held in the Inner House of the Court of Session that the boundary was not the sea at low water mark, and that the [*268] beach itself was not included in the land conveyed. By itself, that does not carry matters very far, as it does not state what did constitute the seabeach. But in the course of his judgment, Lord Kingsburgh, the Lord Justice-Clerk, said, at p. 319, that “‘sea-beach’ as the boundary meant the line at which the land ended and the beach over which the sea flowed began”; and the reference to the flow of the sea seems to treat high water mark as the landward boundary of the sea-beach. See also per Lord Trayner, at p. 321, and per Lord Moncreiff, at p. 323. This case is thus of some assistance to the 12th plaintiff.

 

The Privy Council case was an appeal from Malaysia: Government of the State of Penang v. Beng Hong Oon [1972] A.C. 425. It concerned a conveyance of land which stated the western boundary as being the “sea beach.” The landowners claimed that the boundary was accordingly the line of medium high tides, and that as the sea imperceptibly receded, the land thrown up became theirs. The majority held that this claim was right; and in delivering the judgment of the majority, Lord Cross of Chelsea duly considered the Musselburgh case. As I read his judgment, Lord Cross drew a distinction between the meaning of “shore” or “beach” as ordinarily used, and the meaning of those words as used to describe a boundary in a legal document. In the latter case, the word is likely to be used with the precise meaning of “foreshore,” so that the boundary is that of medium high tide. After all, the purpose of describing a boundary is to produce a line to divide what is included from what is excluded, and so the court will readily adopt a meaning for the expression used which will define an ascertainable line. On the other hand, in its ordinary use the term “shore” or “beach” has no such exact meaning.

 

I think I should read the passage in Lord Cross’s judgment that I have in mind. He says, at p. 435:

 

“The words ‘shore’ or ‘beach’ as ordinarily used do not mean only the land lying between the lines of medium high and low tide. They cover also land which is washed by the ordinary spring tides and often land which is only washed, if at all, by exceptionally high tides but which nevertheless is in character more akin to the ‘foreshore’ than to the ‘hinterland.’ As ordinarily used neither word has a precise meaning and opinions might well differ as to whether a particular patch of ground consisting of sand and pebbles interspersed with sparse vegetation should more probably be described as part of the ‘shore’ or ‘beach’ or part of an adjoining field. It is more likely than not that a word used to describe a boundary in a legal document has a precise meaning and it is well settled that the words ‘sea shore’ when used to describe the boundary of land comprised in a conveyance mean prima facie the foreshore (see Scratton v. Brown (1825) 4 B. & C. 485; Mellor v. Walmesley [1904] 2 Ch. 525; [1905] 2 Ch. 164, C.A.). Their Lordships see no reason why the same prima facie meaning should not be attributed to the words ‘sea beach.’”

 

In that passage, I would emphasise two phrases in the second sentence, namely, “only washed, if at all, by exceptionally high tides,” and “in [*269] character more akin to the ‘foreshore’ than to the ‘hinterland.’” These words seem to me plainly to negative ordinary high water mark as the landward boundary of the “beach” in its ordinary meaning. The case thus provides some support for the contentions of the British Phosphate Commissioners. (In parenthesis, I may say that Lord Cross pointed out, at p. 435, that, contrary to what was said in Stroud’s Judicial Dictionary, 3rd ed. (1953), vol. 4, p. 2678, the Musselburgh case, 7 F. 308, never went to the House of Lords; and unfortunately this error has been repeated in the current edition of the book (4th ed. (1974), p. 2455). The Scottish case that did go to the House of Lords was the Fisherrow case that I shall mention in a moment.)

 

In considering the Musselburgh case, I have to remember that the laws of England and Scotland diverge on what constitutes the landward boundary of the foreshore. In Fisherrow Harbour Commissioners v. Musselburgh Real Estate Co. Ltd. (1903) 5 F. 387 the Inner House rejected the English test of taking the line of the average medium high tides as the landward boundary of the foreshore in favour of the Scottish test of the high water mark of ordinary spring tides. The court unanimously held that this was the better test, and that any desirable uniformity between England and Scotland should be achieved not by Scotland adopting the English rule but by England adopting the better Scottish rule. (This comment, I may say, was not mentioned in the judgments of the House of Lords which affirmed the decision, judgments which, incidentally, do not even mention the case said by the headnote to have been “followed”: Musselburgh Real Estate Co. Ltd. v. Provost of Musselburgh [1905] A.C. 491.) In view of this divergence of law (even though not directly on the point) I would apply the Scottish case with caution. The Privy Council case, too, is the later case, and was one that was decided after considering the Scottish case. I therefore prefer it, so far as there is any conflict.

 

There is a further consideration. On the particular facts of the present case it seems to me to be most improbable that the word “beach” was used in the sense of “foreshore.” The sand agreement is a document of no great elaboration, and it was signed in surroundings of no great sophistication. If the extraction of sand was confined to sand below high water mark, and thus excluded any sand above it, the British Phosphate Commissioners would have been faced with all the problems of extracting moist and salty sand, and allowing for the recurrence of high tide in planning their operations. The question is one of construction, and on the evidence as a whole I can see no ground for displacing what seems to me to he the ordinary meaning of the word “beach” as used in the sand agreement.

 

When I put together Government of the State of Penang v. Beng Hong Oon [1972] A.C. 425 and the particular facts of the present case, I feel no doubt that Mr. Macdonald’s contention must fail. I cannot see how the high water mark could properly be said to mark the landward boundary of the “beach.” In the sand agreement the use of the word “beach” is not for the purpose of providing a boundary, and so a line, but to denote an area; and even if there are difficulties in pointing to the exact boundaries of that area, that cannot affect anything which on [*270] any footing is plainly within the area. The British Phosphate Commissioners were given the right to remove sand and shingle “from the beach”; and that, I think, must be a right to remove sand and shingle from what may fairly and properly be described as the beach. Whether one regards the beach as running inland from the sea over all the land that is in apparent continuity with the beach at high water mark, or whether one regards it as running inland from the sea over all the land which in character is more akin to the foreshore than to the hinterland, I think the same conclusion is reached. The beach at Ooma Point was one of the places that I inspected on my view of Ocean Island, and after making every allowance for the effect of the removal of sand from the western portion of the red land, my conclusion from the evidence put before me in court and from what I saw on the view is that what can properly be called the beach at Ooma Point ran inland until it reached the earth road running in a north-easterly direction, except in so far as any area was occupied by the cemetery.

 

Whichever test is applied, I think that the cemetery was not part of the beach: for it provided either discontinuity with the beach at high water mark, or else a character more akin to the hinterland than to the foreshore. If the cemetery had been enclosed within a wall or fence I cannot see how anybody could have regarded it as remaining part of the beach; and I do not think that the absence of any such wall or fence makes any difference. Mr. Browne-Wilkinson suggested that if the cemetery were part of the beach, there would be an implied term against extracting any sand from it. That may well be so; but I prefer to hold that the cemetery formed no part of the beach. The question, then, is whether any sand was excavated from land which, being part of the cemetery, was not part of the beach, and also was land which, being within the toeless boot, was land in respect of which the 12th plaintiff is able to sue. I must therefore consider the western and southern boundary of the cemetery; and this is not easy.

 

One difficulty is that there appears never to have been any proper survey of the cemetery and its boundaries. Another difficulty is that during the last war the Japanese dug an anti-tank ditch in about the position where the track runs today, and made a maze of foxholes in the land immediately to the west, in the brown land. But some facts are, I think, reasonably clear. I do not think that any part of the cemetery ever extended to the west of the track. Apisaloma’s tomb, which lies in the red strip a few feet east of the track and a little over halfway up the red strip from the south, stands at or very close to the western extremity of the cemetery. That, of course, does not establish that the boot was not an incursion into the cemetery, for the top of the boot lies some 50 or 60 ft. south of the tomb, and as one goes further south there is more and more of the boot which lies to the east of the track.

 

I have to decide this question on the civil standards of proof, and with the general burden of proof resting on the 12th plaintiff. I have reviewed all the evidence on the matter, including that of Mr. Chapman. He held a succession of offices for the British Phosphate Commissioners on Ocean Island from 1951 until the end of 1964. Then, after 10 years in Melbourne as the senior engineer for the commissioners, he returned to Ocean Island [*271] at the end of 1974 as manager. He was an impressive witness, and was manifestly fair and reasonable in his approach. The evidence of the 12th plaintiff, on the other hand, after making all allowances for problems of interpretation, had difficulties for Mr. Macdonald. At the end of the day, my conclusion, both on the evidence and on the probabilities, is that there was nothing in the boot which sufficed to withdraw it from the character of “beach” which it otherwise would have had. It may be that in the course of time burials would have taken place in that area, or that it would have been enclosed so as visibly to become part of the cemetery. But in the absence of this, I think that the boot remained part of the beach. The boot lies, of course, at the extreme south of the red land, nearest to the sea, in low-lying land.

 

As Mr. Macdonald very properly accepted, there was no evidence that any bones had been dug up in any land to which the 12th plaintiff has shown title, or that the grave of the 12th plaintiff’s father had been damaged. Whatever rumours and beliefs there may have been among the Banabans, the prolonged investigation that has occurred in this case has failed to produce any evidence that I can accept that the British Phosphate Commissioners ever made any incursion into the cemetery or dug up any human bones from it. The evidence of Mr. Kabunare Koura, a Gilbertese who went to work on Ocean Island before the war, provides a possible explanation. He was the sole survivor of those who remained on the island after the Japanese came, and he was made by the Japanese to work on their fortifications at Ooma Point. This included digging in the cemetery there. In the course of this some bones were dug up, which were then collected and put in a hole. It seems at least possible that as their feelings of resentment against the British Phosphate Commissioners grew, some of the Banabans consciously or unconsciously transferred to the commissioners the blame for the unearthing of the bones that should have been attached to the Japanese. Rumours and resentment tend to grow, and I have already sufficiently commented on the plainly untrue statement on this point made to the United Nations on behalf of the Banabans. As I have said, that is a possible explanation, and there may be others; but however that may be, I hold that on the facts of the case the claim by the 12th plaintiff for the wrongful removal of sand and destruction of the cemetery fails in its entirety.

 

On the question of jurisdiction I need not say much. Mr. MacCrindle’s contention was that in any case this court had no jurisdiction; and this applied to the purple land, which I shall consider later, as well as the red. I have already considered in Ocean Island No. 2 some of the leading cases on want of jurisdiction in cases of foreign land. The court has no jurisdiction to determine the title to foreign land, or the right to possession of it, or to award damages for trespass to it; and it may be that this last head includes other torts to foreign land, such as nuisance or negligence. But in the case before me the essence of the plaintiff’s claim is the commission of the tort of conversion of the sand. The connection with foreign land is, of course, that the British Phosphate Commissioners extracted the sand from the land. If the 12th plaintiff had himself extracted the sand, and then the commissioners had taken it, I cannot see why the exclusion of jurisdiction in the case of foreign land should [*272] have any application, any more than if the commissioners had taken a table or a chair standing in his house. Does it make any difference that the severance from the land was effected by the commissioners, so that the 12th plaintiff’s way of saying: “You took my sand away” is: “You dug my sand out of my land and took it away”?

 

The question is not easy, but as at present advised my answer would be No. If something is severed from land and is thereby converted into a chattel, that does not alter ownership. As the lorry draws away, the landowner may truly say, “They are taking my property,” whether the lorry contains the sand or the table and chair. The difference lies in the evidence which will support the assertion of ownership: in the first case the landowner will say that the sand is his because the land is his, whereas in the second case he will say that the table and chair are his because he made them, or bought them, or as the case may be. That evidence seems to me to be something that arises “incidentally” or “as a collateral incident” within the fair meaning of those terms as used in the judgments that I considered in Ocean Island No. 2. It does not seem to me to be an essential: a bare assertion of ownership, if believed, would suffice without an explanation of how ownership was acquired. Many men are unable to recollect or establish how and when they became owners of some of the chattels they know to be theirs. Accordingly, if I had to decide the point, I should hold that the jurisdiction of the court is not excluded in the case of the sand. In saying that, I do not forget In re Trepca Mines Ltd. [1960] 1 W.L.R. 1273; but that was a very different case.

 

On the defence of limitation, I shall say only this. The claim alleges acts by the commissioners in about 1964. On the evidence of the 12th plaintiff himself, he was told in 1964 that the commissioners had been digging his land, and he complained to the council. A period of six years from the end of 1964 ran out before the initial writ was issued in November 1971; and I do not see what effective answer Mr. Macdonald has to the defence of limitation. In short, I hold that I have jurisdiction, but that the sand agreement authorised what was done, and in any case the claim is statute barred.

 

Finally, before leaving this part of the case, I should say that of course I have considered whether in view of my references to cases that had not been cited in argument I ought to restore the case for further argument. However, on the principles that I tried to state in In re Lawrence’s Will Trusts [1972] Ch. 418, 436-437, I do not consider this to be necessary; for in the upshot my conclusions on those authorities support the view that I had formed without their aid.

 

2. Replanting. I shall next consider the major claim in Ocean Island No. 1. This concerns the replanting obligations, and the plaintiffs’ claim for specific performance of them, or damages in lieu thereof. As will become apparent in due course, there are many complexities under this head, both of principle and of detail, the latter largely due to differences in the circumstances of the individual plots of land in respect of which the claim is made. I propose first to consider the broader issues, before turning to the position of the individual plaintiffs in respect of their [*273] individual plots. Before I do this there is one thing that, in view of the many and persistent mis-statements and misunderstandings that have appeared elsewhere, I think that I should say very slowly and emphatically. There is not, and never has been, any claim whatever in this case that there is a legal obligation to replant the whole of the island: at its highest, the claim is that at most one-sixth of the island should be replanted.

 

(1) The obligations. The starting point must be the documents under which the contractual obligations arise. They are the 1913 agreement and the relevant A and C deeds. I have already recited most of the terms of these documents; but that was a day or two ago, and I think it would be convenient if I set out the most relevant provisions at this point. First, there is the 1913 agreement, entered into by the company and 258 landowners. Clause 12 provided that, in the events which happened,

 

“the company shall comply with the following conditions..., namely: – (a) that they shall return all worked out lands to the original owners, and that they shall replant such lands – whenever possible – with coconuts and other food-bearing trees, both in the lands already worked out and in those to be worked out.”

 

Second, there are the A and C deeds, entered into between the company and the individual landowners over a period covering 1913 to 1922. The terms of the last clause of each of these deeds are identical. If the landowner were called X, the clause would read as follows, the “end of the said term” being December 31, 1999:

 

“Whenever the said land shall whether before or at the end of the said term cease to be used by the company for the exercise of the rights hereby granted the company shall replant the said land as nearly as possible to the extent to which it was planted at the date of the commencement of the company’s operations under clause I (i) hereof with such indigenous trees and shrubs or either of them as shall be prescribed by the resident commissioner for the time being in Ocean Island and the said lands shall when and as soon as in the opinion of the said resident commissioner this may be without prejudice to the company’s operations as aforesaid revert to and become revested in the said X his heirs executors or assigns, freed and discharged from all rights of the company under this deed.”

 

In a few cases the plaintiffs base their claim solely on the 1913 agreement, since their lands were held by the company under P and T deeds, and no A or C deeds for them were executed. But for the most part the claims to specific performance rest on both the 1913 agreement and on an A or C deed; and there are many points of contrast and of resemblance between the obligations under the two categories of document which I should mention.

 

(a) In both cases the operative word is “replant.” Much turns on what that word means in the context.

 

(b) In the agreement, the obligation to replant is modified by the words “whenever possible”; in the deeds, the obligation to replant is [*274] not qualified in any way, though the extent of the replanting is subject to the “as nearly as possible” phrase. The word in the agreement is “whenever” and not the “wherever” that appears in some misquotations of the clause.

 

(c) In the agreement, the replanting is to be with “coconuts and other food-bearing trees”; in the deeds the phrase is “indigenous trees and shrubs or either of them.”

 

(d) In the agreement, there is nothing to state how it is to be decided whether what is to be planted is to be coconuts or whether it is to be “other food-bearing trees,” or whether there is to be some mixture of these. Apart from any implication that can be gathered from the word “replant,” the matter is left at large. On the other hand, the deeds provide for replanting with “such indigenous trees and shrubs or either of them as shall be prescribed by the resident commissioner for the time being in Ocean Island.” The apparent greater certitude of the deeds is balanced by the difficulties arising from there having been no resident commissioner in Ocean Island since the second world war.

 

(e) The agreement lacks any statement of the number of the trees, apart from anything to be inferred from the word “replant.” The deeds, on the other hand, provide for the land to be replanted “as nearly as possible to the extent to which it was planted at the date of the commencement of the company’s operations under clause I (i) hereof.” Again there is a countervailing element for the apparent greater certainty of the deeds, in that the problems of ascertaining the extent to which a small plot of land was planted before mining began 50 or 60 years ago, or more, are not inconsiderable.

 

(f) Under the agreement, the obligation is to “replant such lands,” and that refers back to “all worked out lands,” so that on the face of it the obligation arises as soon as the lands are worked out. Under the deeds, the obligation to replant arises “whenever the said land shall... cease to be used by the company for the exercise of the rights hereby granted.” Those rights included not only the mining of phosphate but also the right to remove trees and shrubs necessary for extracting phosphate or for constructing any railway required for the carrying on of the company’s operations on the land, or any adjoining land from which the company had the right to take phosphate: I put shortly the provisions to be found in clause 2 (i) of the A deed and clause 1 (i) of the C deed.

 

(g) Under the deeds, the obligation to replant is plainly confined to the particular plot of land which is the subject of the particular deed; and the A and C deeds in all comprised a little over 186 acres. (The figures, I may say, are not easy, but document DA.1, with the explanations given by Mr. Chapman in evidence on Day 58, at least provide a foundation.) Under the agreement, the obligation to replant is expressed quite generally as applying both to lands “already worked out” and also to lands “to be worked out.” Initially Mr. Macdonald contended that the obligation applied to all land that had been worked out, wherever it was. In the end, however, he accepted that any land outside the 250 acres but inside the delimited areas which in 1913 had already been worked out must have reverted to the owners, and that it was now too late to claim [*275] that it should be replanted. But he contended that it did apply to all land within the 250 acres that the company had taken at any time. This raised the question whether the land comprised in the A and C deeds, being some 186 acres within the 250 acres inside the delimited areas, was subject to the replanting obligations both in the agreement and in the deeds, or whether to this extent the agreement had merged in the deeds. During the argument a number of variations emerged as to the various areas that were or were not affected by this point, or remained unaffected by it; but I do not propose to consider these, at any rate at this stage, as opposed to the question of principle.

 

(h) A common factor is that both under the agreement and under the deeds (apart from two C deeds executed in 1921 and one in January 1922) it was the company that entered into the transaction and thus the obligation to replant, whereas the claim for specific performance has been made against the three persons who were the British Phosphate Commissioners when the writ was issued. This, of course, raises the question whether the burden of the company’s obligations passed to the commissioners. Mr. Macdonald’s argument that it had passed rested on two contentions. First, he said that the principle that he who takes the benefit of a transaction must also bear the burden operated so as to make the commissioners successively liable. Second, he contended that there had been a series of novations which resulted in the present commissioners being contractually bound to the plaintiffs. Under the first head there is also the question whether the plaintiffs, who were not themselves parties to the agreements or the deeds, are entitled to the benefit of them.

 

I pause there. I am far from having exhausted the features of the 1913 agreement and the A and C deeds that invite comment; and I have not attempted to set out all the consequent arguments on the meaning and effect of the documents in law. But I think that I have laid a sufficient foundation for the matters that I must now consider. Doubtless only a little ingenuity would have been needed to make the documents raise more problems than they do: but on any footing their achievements in obscurity and complexity are ample enough as they stand.

 

(2) “Replant.” I shall begin with the meaning of the verb “replant” as it appears in its context in the 1913 agreement and in the A and C deeds. As a prelude to this I think that I should set out what it is that the plaintiffs claim.

 

The plaintiffs’ contentions developed considerably during the hearing. In the statement of claim there was a simple claim against the defendant British Phosphate Commissioners for specific performance of clause 12 (a) of the 1913 agreement and of the A and C deeds, or damages in lieu thereof at the rate of $A73,140 an acre, with an alternative claim for damages at the same rate for breach of contract. For land which the British Phosphate Commissioners were still using the plaintiffs sought a declaration of the obligation of the British Phosphate Commissioners to replant it when they ceased to use it, and before surrendering it to the owners. During the argument the claim to specific performance became modified in a variety of ways; and in the end, on Day 101, Mr. Macdonald put in the final version of the order that he sought, making a small [*276] addition to it on Day 105. The draft order, as I shall call it, consists of a number of paragraphs which I have lettered from (a) to (i), and five schedules identifying particular plots of land. Paragraphs (a) and (b) relate to the 1913 agreement and the A and C deeds respectively. In each case there is a declaration that the relevant replanting obligation “ought to be specifically performed and carried into execution”; but this is expressed (i) in an unqualified form for some specified plots, and (ii) in a qualified form for other specified plots, the qualification consisting of the words “should all the owners of such land wish it.” In due course I shall consider the effect of this qualification.

 

The body of the draft order then continues as follows: and I shall read it with paragraph (d) containing the small addition at the end of it that was made on Day 105.

 

“(c) Order that the first and third defendants do replant the plots of land specified in the fifth schedule hereto with coconuts, pandanus and almonds at the following density per acre: Coconuts 58, Pandanus 18, Almonds 18. (d) Further order that the first and third defendants do provide a planting medium for each coconut tree which the said defendants are bound to plant sufficient to enable such coconut tree to take root and grow and bear fruit. (e) Declare that a planting medium consisting of a depth of six feet and uniform radius of 10 feet of soil shall be deemed for the purposes of the foregoing paragraph of this order to be a sufficient planting medium. (f) Further order that the first and third defendants do provide sufficient access to the plots of land specified in the fifth schedule hereto to enable the coconuts, pandanus and almonds to be planted and harvested and the first and third defendants do demolish all pinnacles necessary for this purpose. (g) Further order that the first and third defendants within three months do prepare or cause to be prepared all contour and land surveys for the purpose of carrying the foregoing provisions of this order into execution. (h) Further order that the first and third defendants do within nine months prepare or cause to be prepared a schedule of works for the purpose of carrying the foregoing provisions of this order into execution such schedule of works to be agreed with the plaintiffs or in default of such agreement to be approved by the court. (i) Liberty to apply.”

 

The five schedules set out 15 plots of land in all, most of them appearing in more schedules than one. There are nine plots in the first schedule, six in the second, eight in the third, five in the fourth and six in the fifth.

 

This draft order must be considered in the light of the plaintiffs’ evidence. What they contend for is a massive programme of demolishing pinnacles, making roadways, constructing what were called “baskets” beside the roads with a radius of 10ft., filling the baskets with soil to a depth of six feet (in place of the two feet previously claimed), and carrying out the necessary plantings of seedling coconuts grown in nurseries and the other trees. There was no contention that the seedlings, once established, were to be watered. Senator Walker, an expert on coconuts who was called by the plaintiffs, said that about one third of the total levelled area would be occupied by roads 9ft. wide. The result would be [*277] that if the scheme were carried out for the whole of the 250 acres (which is a little less than one sixth of the island), there would be over 80 miles of road. Some indication of the cost is that while the proposal was for two feet of soil, Dr. Schnellmann, who was called by the plaintiffs, accepted that some $A50 million might have to be spent before a coconut was planted. I shall say more about this later.

 

I shall have to return to these claims of the plaintiffs; but for the present I am concerned with the meaning of the word “replant” in its context. On this, the basic issue between the parties is whether or not the obligation to replant carries with it the extensive engineering obligations for which the plaintiffs contend. Mr. Macdonald relied on Dr. Johnson’s Dictionary as showing that the verb “plant” meant “to put into the ground in order to grow,” and on the Oxford English Dictionary as showing that the verb meant “To set or place in the ground so that it may take root and grow,” with “replant” meaning “To plant (a tree, plant, etc.) again.” In relation to Ocean Island, the obligation to “replant,” he said, could not mean planting on the bare coral rock after the phosphate had been extracted. Therefore the inference was that the obligation to replant must include an obligation to provide a planting medium sufficient for the coconuts, when planted in it, to take root, grow and fruit, and also to provide adequate access to them.

 

The question, of course, is not what “replant” means in the abstract, but what it meant in these documents in 1913, and after, in Ocean Island, with the experience that the extraction of phosphate from the island for a dozen years or more had given to all concerned. For the 1913 agreement, the date, of course, is 1913: for the A and C deeds there were various dates from 1913 onwards, with the last of these deeds being executed in 1922.

 

At the outset, it seems plain that on Mr. Macdonald’s argument the word “replant” has to be construed so as to carry with it a heavy burden of implication: the word is “replant,” and not “restore” or “rehabilitate.” On the plaintiffs’ evidence, extensive engineering works will have to be carried out for the demolition of a sufficiency of pinnacles and the construction of a criss-cross pattern of roadways giving access to all the land which is to be replanted. Furthermore, there will have to be a massive importation of soil, probably from Australia, to provide the “baskets” of soil which will sustain the coconuts. Of course, if that is the contract, that is the contract. But inevitably the question must be asked whether parties who had any such intentions would be likely to have entrusted those intentions to so frail a carrier as the one word “replant,” and the implications to be found in it.

 

Second, there is the context provided by the terms of the 1913 agreement and the A and C deeds. They all make it perfectly plain that the company is to have the right to remove all the phosphate from the land in question, and that the process of replanting is to take place only when the land is worked out, or ceases to be used by the company for the purposes granted. What is to be replanted, in short, is the worked-out land: and by 1913 nobody on Ocean Island could have been unaware of what worked-out land looked like, with its pinnacles and adjacent [*278] pits. The practical difficulties of extraction in such a terrain normally meant that some residual phosphate was left at the bottom of the pits. It was that worked-out land that was to be replanted. If the worked-out land was to be transformed by the demolition of pinnacles, the construction of roads and the provision of baskets of earth six feet deep before it was replanted, then at the very least some indication of this in the instruments might have been expected: but I can see none. What is to be replanted is the land after it has been worked out, or after it has ceased to be used by the company. An obligation to replant must, in my judgment, be construed in relation to what is to be replanted.

 

Third, there are the circumstances surrounding the execution of the agreement and the deeds. The concept of replanting worked-out land on Ocean Island was no novelty in 1913. In 1903 the acting resident commissioner suggested to the company that coconuts and pandanus would grow very well in the worked-out spaces if they were not dug down too deep. He proposed to send down some coconuts to be tried out; and in 1904 the company ordered 1,000 coconuts for planting in worked-out ground. Early in 1905 the company took a Banaban representative, the Kaubure, over some old workings, where coconuts that the company had planted between the pinnacles were “doing very well.”

 

In 1909, at a meeting between the company and the Colonial Office, the question of levelling the pinnacles arose as an alternative to a large part of the island having to be left unmined; and the company then investigated the feasibility of this. A detailed report towards the end of the year made by the company’s representative on the island, Mr. Ellis, concluded that this was not an advisable proposal for several reasons. Instead, he proposed leaving enough loose phosphate in the workings for pandanus, almond and coconut trees to be planted in, if experience showed that the coconuts grew satisfactorily: and the success of coconuts planted in this way five years earlier was referred to. The resident commissioner was reported to be of opinion that there was nothing in the proposal to level the pinnacles, and thereafter little or nothing seems to have been said about that proposal. The subject of plantings in the old workings nevertheless recurred at intervals. In March 1911 many of the coconuts planted in the old workings were said to be doing fairly well despite a severe drought; and in July 1911 the company was sent some photographs of coconut and other trees growing in the old workings, and looking quite strong and healthy despite the recent severe drought. Those photographs (Nos. 13 and 14) were included in the agreed photographs put before me.

 

In July 1912 Mr. Ellis reported to the company that although experiments showed that the coconut tree would grow in the old workings, “it has yet to be seen whether it will bear fruit”; and he observed that it was necessary for the welfare of trees planted in the old workings to have several feet of phosphate left in any case. A year later Mr. Ellis reported that the coconut trees planted in the old workings were looking well; and on November 11, 1913, he reported that he had taken the resident commissioner, Mr. Eliot, to see the coconuts growing in the old workings. On the same date Mr. Eliot commented on the replantings [*279] with coconuts which he said had been made eight years before. He said that he was satisfied that

 

“the clause dealing with the replanting of these worked-out lands may properly be retained in the draft deeds prepared for future use, as there can be no doubt that coconut trees so planted can thrive through such a drought as that experienced in 1909-1910.”

 

But he added that he was still of the opinion that it would be a waste of time and labour to attempt such replanting in certain worked-out fields that he had seen.

 

Just over a week later, at the second meeting with the Banabans that led up to the signing of the 1913 agreement, the resident commissioner said:

 

“The company would plant all worked-out lands with coconuts, pandanus, and wild almond, the work to be done by Banabans in its employ. While not saying definitely that coconuts will grow in the old workings, he had seen healthy trees at Ooma and Tapiwa, which had been planted eight years ago, and had survived a severe drought. In future the company would leave some more phosphate round the base of the pinnacles for the coconuts. After the lands were planted, they would be handed back to the natives.”

 

I should add that at the first meeting with the Banabans, the day before, one of the Banabans had asked how, without roads, they could get at the coconuts planted in the worked-out land, owing to the pinnacles; and the resident commissioner replied that though he would not like to get the coconuts, some of the young men would be able to do it.

 

Those, then, are the circumstances in which the 1913 agreement was signed. All concerned must have been well aware that some worked out land had been replanted with coconuts, without any levelling of pinnacles or importation of soil to provide baskets of soil for each tree. Replanting consisted of putting the seed coconuts in a few feet of loose phosphate in the old workings at the foot of the pinnacles. It seems inconceivable to me that anyone in 1913 could have used the word “replant” in the sense for which Mr. Macdonald now contends. Even without an examination of the surrounding circumstances I would have no hesitation in rejecting his contention: but in the light of those circumstances I can only say that, even if I disregard everything to which the Banabans were not privy, my lack of hesitation is, in my judgment, amply confirmed.

 

In my opinion, the word “replant” in Ocean Island in 1913 in relation to the 1913 agreement and the A and the C deeds neither meant nor carried with it by implication any obligation to level pinnacles or construct roadways, or to import soil and form “baskets” for planting coconuts in. In relation to coconuts it merely meant that seedling coconuts were to be planted in suitable positions in the worked-out land in a few feet of the loose phosphate, in a similar way to the replantings carried out in the first decade or so of the phosphate operations. Pandanus and almonds, which were much more hardy than coconuts, were to be planted in a similar way, though the scattering of seed on a [*280] sufficiency of loose phosphate beside the pinnacles rather than the planting of nuts previously nurtured in nurseries would be all that was required.

 

That was the position in 1913; but of course A and C deeds continued to be executed up to January 1922, so that there is the question whether the word “replant” continued to bear the same meaning in the deeds latterly executed. Subject to one point, I can see nothing to suggest that the word in any way changed its meaning. The one point is this. As I have mentioned, in July 1912 Mr. Ellis had reported that it remained to be seen whether coconuts planted in the old workings would bear fruit. The evidence before me satisfies me that although coconuts planted in loose phosphate in the old workings will in many, and probably most, cases flourish to a considerable degree, it is most unlikely that they will bear fruit. Ocean Island, with its very limited annual rainfall and the intermittent recurrence of substantial periods of severe drought, is plainly fairly marginal for the growing of coconuts. The average annual rainfall is a little under 65 inches, and if evenly spread it would more or less suffice: but on the footing that a drought is a period of four or more consecutive months with less than two inches of rain in each month, Ocean Island had 26 droughts in 65 years, some lasting for over a year. Coconuts growing on the island in the unmined areas lost many of their number from time to time as a result of these droughts. Many growing in mined out areas at least had a little help from the shelter provided by the pinnacles: but the few feet of phosphate left there was no substitute for the many feet of phosphate in the unmined areas.

 

Over the years, it gradually became plain that coconuts planted in the old workings flourished up to a point, but normally would not fruit. Some did: in 1937 a long British Phosphate Commissioner’s report recorded that trees planted some 30 years earlier were coming into bearing, but that it was doubtful whether the deeper workings could be effectively replanted. Coconuts vary considerably in the age at which they may be expected to fruit. The more adverse the conditions, the older they are likely to be before they fruit; and drought, if it does not kill the tree, may cause its fruit to abort. Under very good conditions a tree might fruit at six or seven years of age. But on Ocean Island, if growing naturally in deep phosphate as in the centre of the island before it was mined, the tree was likely to be at least 12 or 15 years old before fruiting, and perhaps 20 years, unless it was in or near a village, when it would receive some waste products and liquids which would nourish it.

 

By 1922 some coconuts had been planted in old workings for something like 18 or 19 years. However, in 1916 and 1917 Ocean Island had had its worst drought in recorded history, lasting for the whole of 1916 and the first five months of 1917; and that had been preceded, with a break of only one month, by a four month drought at the end of 1915. In those circumstances I cannot think that any failure of replanted coconuts to fruit could have contributed to any general realisation that coconuts planted in the old workings were never likely to fruit, however [*281] favourable the conditions, or that there is any basis for attributing to the word “replant” in an A or C deed executed up to 1922 any meaning different from that which in my view it bore in 1913.

 

At this stage, I should mention certain other matters. It is clear that from time to time after 1913 the British Phosphate Commissioners carried out various replantings of coconuts on Ocean Island on a substantial scale. The defences alleged that in three waves of replanting, one in 1915-16, another in 1939-41 and the third in 1953-54, a number of the plots in issue had been replanted. However, in the event it came to be accepted by the British Phosphate Commissioners that they could not establish that they had carried out any obligation to replant that lay on them: Mr. MacCrindle was unable to tie down such replanting as had been done to the particular plots in question. Second, in recent years some emphasis has been placed by some of the Banabans on modern ideas of rehabilitation and reinstatement being desirable and even obligatory on environmental grounds. I can indeed follow this as a general concept: but in deciding legal liability it is plainly impossible to take a bargain struck on a basis of no reinstatement but limited replanting and then say that because environmental ideas are changing for the better, the legal burdens accepted by one party to the bargain ought to be correspondingly increased. However potent such arguments may be in political or social fields, they cannot affect the law of contract.

 

Third, one must bear in mind that the provisions for replanting in the 1913 agreement and in the A and C deeds were the last provisions to this effect in any of the transactions between the Banabans and the company or the British Phosphate Commissioners. No such provisions were either effectively sought or actually made in later transactions. The 1931 transaction was, of course, the exercise of compulsory powers; and in the 1947 transaction the Banabans were no longer on Ocean Island and were still far from having recovered from the effects of their war-time hardships. Nevertheless, there were the 1940 negotiations. Though these resulted in no binding agreement, they nevertheless produced an agreement in principle which, in a revised form, later gave rise to the 1947 agreement. The 1940 negotiations were, of course, conducted on Ocean Island at a time before the Banabans had suffered as they did after the Japanese invasion: yet replanting or reinstatement formed no part of these negotiations. As one of the Banabans said at the time, without dissent by the others, “The only thing we want is more money.”

 

When one is considering subsequent assertions by the Banabans about their deeply felt desire for the replanting and reinstatement of Ocean Island, it should be borne in mind what their earlier acts and omissions were in this respect. I say nothing about the 1973 transaction on this point, as it was plainly a somewhat minor tidying up operation which would not really raise this issue. Not until 1967 does there seem to be any record of any complaint by the Banabans about any failure to replant any land. Mr. Macdonald asserted that not until 1970 did the Banabans have any copy of the 1913 agreement or the A and C deeds; but the Banabans’ memorandum of September 9, 1967, just before the meeting [*282] in Wellington, accurately sets out the relevant words of the replanting obligation in the 1913 agreement, and this seems to be the first complaint by the Banabans that the agreed replanting had not been carried out.

 

(3) Possibility. Next I shall consider the words “whenever possible” in the 1913 agreement, and “as nearly as possible to the extent to which it was planted at the date of the commencement of the company’s operations” in the A and C deeds. I think that such phrases have to be construed in a reasonable sense when they are contained in business transactions intended to have legal effect. Today there are very many things which can be achieved, but only with a vast expenditure of time and effort and money. Because they can be achieved in this way they are literally “possible”: but in a business document intended to have practical effect, the parties are unlikely to have contemplated an obligation to do something which is altogether outside the range of the practicable and reasonable merely because they use the word “possible”: see Moss v. Smith (1850) 9 C.B. 94, 103, per Maule J.

 

To Mr. Macdonald’s contention that “possible” bore its literal meaning, Mr. MacCrindle’s reply was that it meant what was reasonably practicable by reasonable endeavours. I do not think that Mr. Macdonald can be right, for the reasons that I have given. At the same time, I somewhat mistrust translations of a word into phrases such as Mr. MacCrindle’s, with its double reliance upon reasonableness, although I think that this is nearer the true meaning of the word than Mr. Macdonald’s literalness. Perhaps “reasonably practicable,” with no reference to “reasonable endeavours,” comes fairly near the meaning. At all events, I think the phrase “whenever possible” in the 1913 agreement softens the obligation enough to exclude any duty to replant the worked-out land to the same density as existed before it was worked, if its condition in a worked-out state makes it impracticable to achieve that density without carrying out levelling or other engineering operations on it. Similarly for the A and C deeds: for these, as for the 1913 agreement, I think that the qualifications introduced by the words of possibility are entirely consonant with, and support, a construction of the documents which makes the obligation to replant apply to the land as it is in its worked-out state, and points against there being any obligation to level the land, construct roads on it and resoil it.

 

There is another aspect of possibility, bearing as much on the making of any decree of specific performance as on the wording of the documents. Mr. MacCrindle advanced a substantial argument on the impracticability of the scheme for replanting put forward by the plaintiffs. On the evidence it was plain that on no rational basis could so large an expenditure on the importation of the soil, the engineering works and all the other elements of the project be justified. As I have mentioned, one of the plaintiffs’ witnesses, Dr. Schnellmann, accepted that an expenditure of something in the region of $A50 million might be involved before a coconut was planted. He also accepted that importing and spreading the requisite half a million tons of soil might well take up to 100 years. Senator Walker agreed that the result would not look very beautiful, and in terms of return for expenditure it would [*283] be an absurd exercise. Coconuts could be imported, or a coconut plantation could be bought and managed, which at a mere fraction of the cost would produce the same yield of coconuts. In due course I shall say something more on the problems of replanting.

 

I pause there. Senator Walker’s proposals were based on a two foot depth of soil in the baskets, though he said that he would prefer six feet. For a long while the plaintiffs’ case proceeded on the basis of a two foot depth, though not formally tied to it; and the engineering estimates were based on this. Indeed, a six foot depth was not even put in cross-examination to Mr. King, the British Phosphate Commissioners’ engineering expert. As the hearing progressed, it became apparent that a two foot depth of soil on Ocean Island, with its marginal rainfall for coconuts, would give the scheme virtually no prospects of success. Indeed, Professor Russell, an expert in soil science called by the plaintiffs, said that coconuts planted on Ocean Island in two feet of soil would have no chance whatever of surviving to being fruit-bearing trees if the roots could not penetrate deeper than two feet. What is left after the phosphate has been extracted is unfortunately a hard form of rock known as dolomitised limestone, and the roots cannot penetrate this but have to engage in a difficult search for fissures. I think it clear on the evidence that a mere two feet of soil would bring no hope of success on Ocean Island.

 

In his closing speech, made after Mr. MacCrindle’s closing speech, Mr. Macdonald accordingly contended that if two feet would not do, then an order should be made on a six foot basis; and of course the draft order that he submitted on Day 101 was, like an earlier version on Day 95, a six foot order. In the circumstances I of course invited counsel for the British Phosphate Commissioners to address me on this point, among others; and on Day 105 Mr. Browne-Wilkinson did so. I do not think that I need explore his detailed comments on the difficulties in the plaintiffs’ attempts to convert what in substance was a two foot case into a six foot case, and the revisions in the engineering and other estimates that must follow, both in time and cost. These, as might be expected, are far from being as simple as merely saying that as two feet require half a million tons of soil, six feet would need one and a half million tons. It suffices to say that in my judgment the revision in the depth of soil meant that a scheme which was thoroughly impracticable became hopelessly so, and one which in the event was never properly considered in evidence. In any case, I am far from satisfied that it has been established that even six feet would be enough to make success reasonably probable.

 

I must also mention the difficult question whether under the Customs Ordinance 1963 of the Gilbert and Ellice Islands Colony it would be legally possible to import soil into Ocean Island without a long and extremely expensive process of soil sterilisation first being carried out. I heard substantial argument about the differences between Prohibited Imports and Restricted Imports as set out in Schedule 2 to the Ordinance; but all that I propose to say is that there seems to be a real point of difficulty here in carrying out the scheme proposed by the plaintiffs. [*284] The difficulty might be resolved by a legislative amendment, or by the exercise of an executive discretion, or possibly in other ways; but until there was any such resolution, the difficulty would remain very real.

 

(4) Merger. I now come to the question of merger that I mentioned a short while ago. Where land is the subject both of the 1913 agreement and of an A or C deed, is it subject to the replanting obligations of both documents, or is there a merger, so that the only replanting obligation is that in the A or C deed? In considering this, I bear certain points in mind. First, it is well settled that merger of this nature is a matter of intention: as Bowen L.J. once said, the court must “endeavour to see what was the contract according to the true intention of the parties”: Palmer v. Johnson (1884) 13 Q.B.D. 351, 357. Second, merger is not excluded merely because the terms of the subsequent document differ from those of the earlier document. Thus where there was a contract to convey land subject to a reservation of “all coal,” and in the subsequent conveyance there was an exception of “all coal and other minerals,” it was held that the contract was nevertheless merged in the conveyance, and that the exception applied both to coal and to all other minerals: Knight Sugar Co. Ltd. v. Alberta Railway & Irrigation Co. [1938] 1 All E.R. 266. This does not mean that such differences are irrelevant; they may be such as to indicate that the contract was not intended to be merged in the conveyance. The real question is always one of intention, the essential question being whether the parties intended the obligation in the contract to be performed by the subsequent deed: see per Lord Russell of Killowen in the Knight Sugar case, at p. 269. In the present case there are a number of differences between the 1913 agreement and the A and C deeds in the obligation to replant.

 

Third, there are differences in the parties. The 1913 agreement was made between 258 Banabans and Mr. Ellis on behalf of the company. The A and C deeds were made between the company, Mr. Eliot, the resident commissioner, and the individual Banaban landowner. Mr. Macdonald accepted that such differences did not per se prevent merger, but he contended that they were strong indications against it. Fourth, there is the further point that the replanting obligation of the contract required compliance by the company only as soon as deeds had been executed for eight acres in the central mining area and eight acres in the eastern mining areas. It would be odd, Mr. Macdonald said, if these first 16 acres were to be different from all subsequent transactions, in that there was merger for the subsequent transactions but not for the first 16 acres; for as the contractual obligation was not in force, it could not merge with the deed. Yet as merger may engulf a binding obligation, I do not see why it should not absorb a conditional or suspended obligation with equal, if not greater, ease. Indeed, when examined, I think that this point really recoils on Mr. Macdonald’s head. If merger applies throughout, then both for the first 16 acres and all subsequent dispositions, replanting will be uniformly governed by the A or C deeds alone. If there is no merger for the first 16 acres, these will be governed by the A or C deeds alone, while subsequent dispositions will be governed by both the agreement and the A or C [*285] deeds as well. Accordingly, since it is the anomalous result that is produced by holding that there is no merger, the more probable intention to be imputed to the parties is that there should be merger.

 

Whether one looks at this question as a matter of fine detail, or whether, as I think one should, one considers it more broadly, my conclusion is that the replanting obligation in the A and C deeds was intended to replace the replanting obligation in the 1913 agreement for the land which was the subject of the deed. The two obligations are, of course, different in a number of respects; but they are also basically similar, in that they are both obligations to replant the land concerned. If Ocean Island had possessed an officious bystander in 1913 (a gentleman whose functions in relation to implied terms must not be allowed to obscure his utility in other spheres), I suppose that he might have cross-examined the parties as to their intentions. If he had, I would have been very surprised if the upshot had been an expression of intention that land subject to A or C deeds should be bound by two differently expressed obligations to replant, operating in different ways both as to what was to be planted and in other respects. The 1913 agreement makes it plain that matters are not to be left resting on the agreement, but that the company is to acquire land under deeds which are subsequently to be executed: see clauses 3, 4 and 5.

 

As for the difference in parties, I see no difficulty in the fact that the resident commissioner, though not a party to the agreement, was a party to the deeds. Nor can I see any difficulty in regarding the doctrine of merger as operating distributively: where a contract applies to many parcels of land, I do not see why it should not continue to apply to those parcels which are not subsequently conveyed and at the same time be merged in the conveyances of those parcels which are conveyed, quoad those parcels. Accordingly, in my judgment the only obligation to replant which applies to land subject to an A deed or a C deed is the obligation contained in that deed: in such cases the replanting obligation of the 1913 agreement does not apply. This conclusion, of course, leaves the replanting obligation of the 1913 agreement in operation for land within its scope which was not the subject of an A or C deed; and on the footing that Mr. Macdonald accepted on Day 81, that is the remainder of the 250 acres within the delimited areas.

 

Next I must consider a question that I have already mentioned, namely, whether the present defendants are liable to the present plaintiffs on the replanting obligation, whether in the 1913 agreement or in the A and C deeds, and, if so, on what footing. Here the main argument centred round the two contentions by Mr. Macdonald that I have briefly indicated, namely, whether the case fell within the principle that he who takes the benefit of a transaction must also bear the burden, and, secondly, whether there has been a series of novations. I shall consider novation first.

 

(5) Novation. It was common ground that none of the present plaintiffs and none of the present defendants were parties either to the 1913 agreement or to any A or C deed. What Mr. Macdonald has to show under the head of novation is that in relation to each parcel of [*286] land there has been a continuous series of novations, so that with every change, whether in the ownership of the phosphate undertaking or in that of the plot of land, the new owner or part-owner became contractually bound to the other party in place of the old owner. Mr. Macdonald did not rely on any express novation, but founded himself on a series of implied novations. Halsbury’s Laws of England, 4th ed. vol. 9 (1974), p. 403, sufficiently supports the proposition that consent to a novation may be inferred from conduct, though it also shows that there must be an intention to effect a novation. In support of his contention, Mr. Macdonald relied in the main on the particulars which appeared in paragraph 50A of the statement of claim after the amendments had reached the purple state. He put the matter in three successive stages. These were:

 

(1) the transfer of the company’s obligations to the first three British Phosphate Commissioners in 1920; (2) the transfer of those obligations through successive generations of commissioners; and (3) the transfer of the rights of the original landowners to the present landowners.

 

I pause there. Mr. Macdonald realistically accepted that he was contending for a prodigious number of implied novations, making a massive total. The difficulties are plainly many and substantial. It takes two to make a contract, as Mr. MacCrindle gently reminded me; and for the land in question there had been no dealings between the present landowners and the present commissioners, none of whom had been appointed before 1965. But Mr. Macdonald contended that there were many matters, some of them small, though cumulatively important, which supported the conclusion that there had been a long series of implied novations. In particular, he emphasised that once a novation was established for the change-over from the company to the British Phosphate Commissioners in 1920, it became easier to imply subsequent successive novations; and accordingly he devoted much attention to this change-over.

 

The change-over occurred in three stages. First there was the period from July 1, 1920, when no British Phosphate Commissioners had been appointed, and all continued as before, save that the company had become bound to sell its undertaking, and was managing it on behalf of the purchasers. Second, there was the period from September 1920 onwards, when the company continued to manage the undertaking on behalf of the purchasers, but the British Phosphate Commissioners had been appointed, and the change was explained to the Banabans. Third, there was the completion of the purchase on December 31, 1920. With operations on Ocean Island continuing unchanged throughout, and all concerned playing some part in the change-over, or assenting to it, there was much, said Mr. Macdonald, to support the view that there had been a series of novations. The British Phosphate Commissioners not only continued to exercise the mining rights that the company had acquired, but also continued to discharge the company’s obligations to pay royalties; and three C deeds were executed in this time, which carried out the obligations under the 1913 agreement.

 

Mr. Macdonald cited a line of cases running from Clarke v. Earl of [*287] Dunraven and Mount Earl [1897] A.C. 59 (better known as The Satanita) to New Zealand Shipping Co. Ltd. v. A. M. Satterthwaite & Co. Ltd. [1975] A.C. 154, with a nostalgic glance at Carlill v. Carbolic Smoke Ball Co. [1893] 1 Q.B. 256 on the way, in support of the proposition that in appropriate cases the court will be ready to imply the existence of a contract despite the absence of any direct dealings between the parties to it. That, of course, may readily be accepted: given suitable facts, it may well be very easy to infer a novation, as appears from Chatsworth Investments Ltd. v. Cussins (Contractors) Ltd. [1969] 1 W.L.R. 1, 4. But the question must always be whether the facts of the particular case make it one that is appropriate for such an implication. I hope that Mr. Macdonald will not think it discourteous of me if I do not discuss at length all the detailed submissions that he made. Some of them carry less weight than others. Thus until the company ceased to exist in 1926 the continued payment of royalties by the British Phosphate Commissioners is readily explicable on the footing of the obligation to indemnify the company; and it also operated to indemnify previous commissioners after their retirement, though it may well be doubted whether this was ever considered. Practical men do practical things without analysing legal liabilities, and those who carry on mining concerns simply pay what the concern appears to be liable to pay.

 

However, though I have read and re-read my notes of Mr. Macdonald’s submissions many times, I shall not pursue the arguments of fact further. I have also, of course, examined the authorities that he cited. I have in particular considered Hart v. Alexander (1837) 2 M. & W. 484 (reported at nisi prius in 7 C. & P. 746) and Bilborough v. Holmes (1876) 5 Ch.D. 255, which must be weighed in the light of Scarf v. Jardine (1882) 7 App.Cas. 345 in relation to the borderline between novation and election. None of these involved a long chain of novations such as is claimed in this case, and I can see nothing in these or any other cases cited which provided any real support for Mr. Macdonald’s contentions.

 

Hart v. Alexander, indeed, seems to me to point to Mr. Macdonald’s essential difficulty. The headnote appears to summarise the point correctly when it refers to the court as having held that certain facts were sufficient evidence to go to the jury to show that H, one of the contracting parties, knew that A (one of the contracting partners) had retired from the firm and E had come in in his place, and that H “had agreed to discharge A from liability, and take the new firm as his debtors.” I say that this points to Mr. Macdonald’s essential difficulty because it illustrates the basis of novation as being the making of an agreement.

 

Novation is the substitution of a new contract for an old by the agreement of all parties to the old and the new; and with the best will in the world I do not see how it begins to be possible to draw from the facts before me any inference of the animus contrahendi that must repeatedly and in multiplicity have brought about this large number of novations. If one takes the appointment of new commissioners alone, there is nothing to show that the Banaban landowners ever knew who [*288] had replaced whom, or that they ever had, or ought to have imputed to them, any intention of discharging the outgoing commissioner from liability and taking the incoming commissioner instead as one of their debtors or potential debtors. Nor, for that matter, has anything been put before me to suggest that a new commissioner, when appointed, had any idea that he was agreeing with a large number of Banaban landowners to undertake the obligations of a large number of contracts, and thereby releasing his predecessor in office. There has been nothing to suggest that a new commissioner even learned the names of those with whom he was said to have been contracting, or knew of the changes that occurred by death and the devolution of the land.

 

Even the 1920 transaction, so much relied upon by Mr. Macdonald, seems to me to point against novation, rather than in its favour. I say this quite apart from Mr. Macdonald’s vacillations about the date on which the first novations occurred, ranging from some date between the meeting with the Banabans on October 16, 1920, and December 31, 1920, to the date when the British Phosphate Commissioners first paid the royalties. In the end, that last date was ousted by December 31, 1920, as Mr. Macdonald’s first preference; but even if that is right, such uncertainties do not provide favourable soil for a rich crop of novations. What seems to me to be most significant is that at the time of the change-over, as I have mentioned, explanations were given to the employees about their relationship with the company and the British Phosphate Commissioners, and explanations were given to the Banabans about the relationship of the British Phosphate Commissioners with the local administration. Yet not a word seems to have been said about the matter that is relevant to novation, namely, the relationship of the individual Banaban landowners to the company, a body capable of perpetual existence, and the replacement of that body by three individual unincorporated commissioners. If this had been explained to the Banaban landowners and accepted by them, the drawing of the inferences for which Mr. Macdonald contends when each commissioner was replaced by another would present far fewer problems: but that was not the point to which the explanations were directed.

 

In a sense, one of the strongest points in Mr. Macdonald’s favour was one which, as a seasoned advocate, he never made explicit in the somewhat crude form in which I propose to put it, though he saw to it that its presence could not pass unnoticed. Bluntly stated, it is that it would be unfair and wrong for the present commissioners to escape liability by reason of their unincorporated condition and the failure of the governments to operate any proper machinery for ensuring that each generation of commissioners was in law not only entitled to the benefits of the company’s undertaking but also subject to the burdens. Therefore the court ought to strain to find a series of novations so as to bring about the proper result.

 

With the whole of that proposition up to the word “therefore” I wholeheartedly agree: but with the “therefore” and what follows I cannot agree, at any rate to the extent that the straining by the court should achieve success. It will be remembered that clause 10 of the [*289] indenture of December 31, 1920, provided for the making of vesting declarations when one commissioner replaced another. Yet neither this nor any other machinery for ensuring continuity in a legal sense seems to have been operated by the governments or the commissioners. I am indeed reluctant to say that the present commissioners should be able to escape liability on the ground that nothing had been done by them or their governments which would expose them to liability for the acts and omissions of their predecessors. Nevertheless I cannot permit that reluctance to induce me to hold that despite facts so unpromising for a massive series of novations, these novations should still be inferred. In my judgment there have been no novations which would make the present British Phosphate Commissioners liable to the plaintiffs.

 

(6) Benefit and burden. I next consider the principle that he who takes the benefit of a transaction must also bear the burden. As might be expected, this was the subject of extensive argument, and much discussion of the authorities; and I must consider it at length. There was general agreement that in a number of respects the present case did not fall within any of the authorities; and one of the many questions was whether the principles to be found in the authorities were properly applicable to this case, and what those principles were.

 

The basic principle has plainly been expanding. Its origin appears in at least two forms: see Megarry and Wade, The Law of Real Property, 4th ed. (1975), p. 750. One form of the principle is as a technical rule relating to deeds. If a person is named as a party to a deed, but does not execute it, the deed will nevertheless be held to bind him if he knowingly takes the benefit of it. In that form, it is not much more than part of a rule for determining who are to be treated as being parties to a deed. In another form, the rule is that if by an indenture to which A and B were the only parties A granted land to B for life with remainder to C, on terms that the land was to be held subject to certain conditions, then if C entered after B’s death and took the land by virtue of the indenture, he thereupon became bound by the conditions, even though he was no party to the indenture. This is the instance given in a passage in Litt. 374 (and in Co.Litt. 230b) to which reference is made in the cases. In each form, it will be observed, the principle applied only to a specified person, either named as a party to the deed, or named (or perhaps ascertainable) as the grantee of an estate.

 

Side by side with these technical instances, and probably underlying them, was the simple principle of ordinary fairness and consistency that from the earliest days most of us heard in the form “You can’t have it both ways,” or “You can’t eat your cake and have it too,” or “You can’t blow hot and cold.” The thought also appears in Latin, in a maxim that I shall mention in due course. With such foundations or parallels, it is not surprising that the principle has been expanding in its scope; and one of the questions is how far it can properly be carried in transcending technicalities. Before I turn to the cases, it is convenient to consider certain aspects of the doctrine that have been settled or are emerging. By no means all of them are clear. [*290]

 

(a) CONDITIONAL BENEFITS AND INDEPENDENT OBLIGATIONS. One of the most important distinctions is between what for brevity may be called conditional benefits, on the one hand, and on the other hand independent obligations. An instrument may be framed so that it confers only a conditional or qualified right, the condition or qualification being that certain restrictions shall be observed or certain burdens assumed, such as an obligation to make certain payments. Such restrictions or qualifications are an intrinsic part of the right: you take the right as it stands, and you cannot pick out the good and reject the bad. In such cases it is not only the original grantee who is bound by the burden: his successors in title are unable to take the right without also assuming the burden. The benefit and the burden have been annexed to each other ab initio, and so the benefit is only a conditional benefit. In the other class of case the right and the burden, although arising under the same instrument, are independent of each other: X grants a right to Y and by the same instrument Y independently covenants with X to do some act. In such cases, although Y is of course bound by his covenant, questions may arise whether successors in title to Y’s right can take it free from the obligations of Y’s covenant, or whether they are bound by them under what for want of a better name I shall call the pure principle of benefit and burden.

 

(b) QUI SENTIT COMMODUM SENTIRE DEBET ET ONUS. This ancient maxim, to be found in 2 Co.Inst. 489, bears an uncertain relationship to the principle under discussion. In spirit it is the same: yet the instances of its operation given in the books are curiously restricted and haphazard: see Broom’s Legal Maxims, 10th ed. (1939), pp. 482-486. Cases of burdens annexed to property binding those who take it are given as instances of the maxim, and so are cases of election. I shall not attempt to explore these thickets. In the case of burdens attached to land, such as mortgages or easements, it hardly seems necessary to resort to any doctrine about benefit and burden: if you take something that has a burden annexed to it, you have to take it as it is, burden and all. Again, you cannot pick out the good and leave the bad. If more Latin is required, transit terra cum onere will do. The parallel between this head and conditional benefits under the previous head is obvious. The only essential difference seems to be that where there is a burden which in its nature is annexed to property there will be no initial question of determining whether or not the burden is a condition of the benefit. In neither case is there any question of applying any pure principle of benefit and burden: each in essence consists merely of having to take a thing as it stands. Perhaps I should add that there may be some ambiguity about the word “burden.” Sometimes it is used in the sense of burdens annexed to property, such as mortgages, and sometimes it is used in the sense of some onerous but independent obligation which under the pure benefit and burden principle may or may not bind successors in title. In most cases the context will make the sense clear. I do no more than indicate a possible source of misunderstanding of what has been said in some of the cases and elsewhere. [*291]

 

(c) OBLIGATORY AND OPTIONAL. In some cases the principle of benefit and burden appears to operate in an obligatory form. In the two technical instances that I have given, once the benefit has been taken under the deed, or once the estate has been claimed under the indenture, the burdens are as binding as if the taker of the benefit or estate had executed the instrument. In the case of conditional benefits, the result seems to be the same: take the benefit, and at once the burdens bind you. But in the case of independent obligations, the pure principle of benefit and burden (if it applies at all) seems at least in some cases to operate in an optional manner. Thus if the benefit is a licence to cross a neighbour’s land and the burden is the making of an annual payment, an assignee of the licence appears to be able to resist claims for future payments if he ceases to enjoy the licence. In such a case, he can say that he has never become contractually bound to make the payments, and that he is taking no benefit for the period to which the payments relate. Plainly there is a great difference between saying “As soon as you accept any benefit you become subject to the whole of the burdens, past, present and future,” and saying “As long as you continue to accept the benefit you must continue to bear the burden.” Whether in the latter case there would be any right to resume enjoying the benefit and bearing the burden after there has once been a discontinuance I do not know.

 

(d) CONTINUING AND UNITARY BURDENS. The previous head leads to the present head. In some cases the burden may be a continuing burden, such as an obligation to pay an annual sum. In other cases the burden may be a future unitary burden, such as an obligation to pay compensation for damage, or to restore land after opencast working; and of course there may be many variants and mixtures of burdens. In the case of continuing burdens, the pure principle of benefit and burden seems to apply in the optional form discussed under the previous head. But in the case of unitary burdens, how does that principle apply? Does every successor in title to the benefit become liable for the whole of the burden when it accrues, however brief his enjoyment of the benefit? If not, how is the burden to be borne?

 

(e) RELATIONSHIP TO ASSIGNMENT OF BENEFIT. It was, of course, accepted on all hands that the burden of positive covenants will not run with the land; and if matters such as novation are left on one side, it is clear that in general contractual burdens are not assignable, though contractual benefits are. How, then, does the principle that he who takes the benefit must bear the burden fit in with cases where benefits such as the right to receive certain payments under a contract have been assigned but the assignee of those benefits has been held or assumed to take free of the burdens under the contract?

 

(f) ACTIVE AND PASSIVE. The principle in its pure form may operate in two different ways; and during the argument these became known as the “active” and the “passive” forms. The active form looks to the future. X is seeking to exercise some right which has been assigned to him. If the doctrine applies, he can exercise the right only if he accepts [*292] the burdens; he has no choice. The passive form looks to the past. X has done some act, such as entering on Y’s land and damaging it, and he is being sued by Y. X may then have a choice. He may claim to be an assignee under a grant of the right to do the act, in which case, if the doctrine applies, he must bear the burdens imposed by the instrument creating the right, e.g., an obligation to pay compensation. Alternatively, he may refrain from relying on the instrument, and instead accept liability on the footing that his act was unauthorised. If the rate of compensation and the measure of damages at common law differ, the active and passive forms may thus operate differently, though I do not know that there is any great difference in principle between them.

 

(g) LEGAL AND EQUITABLE. It seems clear that the doctrine may operate not only at law, as in the two technical instances that I have given, but also in equity, as appears from the cases.

 

I think that I have said enough about some of the categories and problems of this branch of the law to make it desirable to turn to the authorities. They fall into three groups. In the first, the issue was on the pure principle of benefit and burden. The burden was held to have passed not because the right granted was held to be conditional upon assuming the burden, or to be qualified by it, but because of the principle that he who takes the benefit must bear the burden. In the second group of cases the issue has been whether or not the right granted was a conditional or qualified right; in all the cases save one the right has been held to be conditional, and the claimant has succeeded. The third group of cases consists of cases cited on the relationship that I have mentioned between the principle of benefit and burden, and the assignment of benefits. However, it will be seen on examination that there are cases in this category which really belong to the second group.

 

The leading case in the first group is the well-known decision of Upjohn J. in Halsall v. Brizell [1957] Ch. 169. In that case the owners of an estate laid it out in 174 building plots, and formed roads and sewers, a sea wall and a promenade and so on; and in disposing of the building plots the developers, as I shall call them, retained the roads, sewers, sea wall and promenade. A deed of covenant made between the developers, as trustees for the parties to the deed, and the owners of plots made a number of provisions for the regulation of the estate. All this was done in 1851, in the spacious conveyancing language of the day; I shall try to put matters briefly. One of the provisions was that each party to the deed, and his successors, should contribute and pay a due and just proportion, in respect of his plot of land, of the expenses of maintaining the roads, sewers, promenade and sea wall; and this was supported by a power of distress for the developers and their successors. The deed also provided machinery for the proprietors of plots to determine the expenses in general meeting, with provisions for voting and so on.

 

The litigation arose in respect of a house on one plot which, without being structurally divided, was let to five separate tenants; and much turned on a resolution passed at a general meeting of plot-holders in 1950. That resolution empowered the trustees to make additional annual [*293] calls for every house divided into two or more separate flats or dwellings, with a limit of three calls per plot. The defendants, who were executors of the plot owner who had divided the house, duly paid single calls in respect of the house. But they refused to pay the two additional calls each year which the plaintiffs (who were the present trustees of the deed) had demanded in accordance with the resolution. The plaintiffs did not sue for payment, but instead took out an originating summons which raised two main questions: first, whether the deed was valid and effectual at all in so far as it purported to make the successors of the original contracting parties liable to pay calls; and second, if it was, whether the 1950 resolution imposing additional calls was a valid resolution.

 

Upjohn J. answered the second question by holding, for reasons that I need not discuss, that the resolution was ultra vires and void. That by itself sufficed to dispose of the case: and a declaration that the resolution was ultra vires and void was accordingly made. The trustees therefore failed in their claim, for the single calls had been paid, and only the liability for the additional calls was in issue. But before reaching this conclusion, the judge had considered the first question that was before the court; and of course it is this question that is important in the present case. On this, the judge said, at p. 182, that it was plain that the defendants “could not be sued on the covenants contained in the deed for at least three reasons.” These were that a positive covenant such as that in question did not run with the land; that the provisions for the payment of calls plainly infringed the rule against perpetuities; and that it was conceded that the provision for distress, not being annexed to a rentcharge, was invalid.

 

On these last two points I may mention, first, that the case seems to have escaped notice in books on perpetuities. Second, on rentcharges, there is an interesting contrast with Morland v. Cook (1868) L.R. 6 Eq. 252. In that case, a covenant by various landowners to share the expenses of maintaining a sea wall was held to be enforceable at law against successors in title of the covenantors. The reason subsequently given by the Court of Appeal was that, although framed as a covenant, the obligation was really a rentcharge; and this conclusion was reached because the covenant was to pay the money “out of the said lands”: see Austerberry v. Oldham Corporation (1885) 29 Ch.D. 750, 774, 775, 782.

 

Having held that the defendants could not be sued on the covenants of the deed, Upjohn J. continued [1957] Ch. 169, 182:

 

“But it is conceded that it is ancient law that a man cannot take benefit under a deed without subscribing to the obligations there-under. If authority is required for that proposition, I need but refer to one sentence during the argument in Elliston v. Reacher [1908] 2 Ch. 665, 669, where Lord Cozens-Hardy M.R. observed: ‘It is laid down in Co.Litt. 230b, that a man who takes the benefit of a deed is bound by a condition contained in it, though he does not execute it.’ If the defendants did not desire to take the benefit of this deed, for the reasons I have given, they could not be under any liability [*294] to pay the obligations thereunder. But, of course, they do desire to take the benefit of this deed. They have no right to use the sewers which are vested in the plaintiffs, and I cannot see that they have any right, apart from the deed, to use the roads of the park which lead to their particular house, No. 22, Salisbury Road. The defendants cannot rely on any way of necessity or on any right by prescription, for the simple reason that when the house was originally sold in 1931 to their predecessor in title he took the house on the terms of the deed of 1851 which contractually bound him to contribute a proper proportion of the expenses of maintaining the roads and sewers, and so forth, as a condition of being entitled to make use of those roads and sewers. Therefore, it seems to me that the defendants here cannot, if they desire to use this house, as they do, take advantage of the trusts concerning the user of the roads contained in the deed and the other benefits created by it without undertaking the obligations thereunder. Upon that principle it seems to me that they are bound by this deed, if they desire to take its benefits.”

 

It will be seen that this passage is founded on a concession by counsel. Upjohn J. asked, at p. 180: “Is there not a rule that a person who accepts the benefit of a deed must also accept the burden of it?” Counsel for the defendants replied: “Yes, that is conceded”; and he cited Norton on Deeds, 2nd ed. (1928), p. 26, and the observation in Elliston v. Reacher which was cited in the passage of the judgment that I have just read. Before I go any further, I think I should say something about this observation and its sequel.

 

It is obvious that there is a considerable difference between a rule which applies only to a specified person who is named as party to a deed or as grantee of an estate, and who takes a benefit under the deed or takes the estate, and a rule which applies to “a man” or “a person” who takes the benefit of a deed. In the former case, the rule applies only to a persona designata who is within the contemplation of the other parties to the deed as being intended to take the benefits or the estate under it and bear the burdens of it: the doctrine simply cures the defect of that person not having bound himself by executing the deed. (It is old law that a person who is not a party to a deed may nevertheless bind himself by a covenant in the deed if he executes it: Salter v. Kidgly (1689) Carth. 76.) In the latter case “a man” or “a person” may, if taken literally, be anyone in the world, and outside the contemplation of the parties to the deed, though some limitation must no doubt be implied.

 

With that in mind, it seems plain that the interlocutory observation of Sir Herbert Cozens-Hardy M.R. in Elliston v. Reacher [1908] 2 Ch. 665, 669, the concession by counsel in Halsall v. Brizell [1957] Ch. 169, and what Upjohn J. said in that case, all involve a substantial expansion of the principle. The proposition laid down in Co.Litt. 230b (and Litt. 374, which must be read with it), was not in terms of “a man” or “a person,” but merely in terms of the grantee of an estate. Similarly, the passage in Norton on Deeds, 2nd ed. (1928), p. 26, cited in counsel’s concession was [*295] merely in terms of a party to a deed who does not execute it. Cozens-Hardy M.R.’s observation was, indeed, an interlocutory observation not repeated in his judgment; and one must bear in mind the warning of Viscount Simon L.C. that such observations are not judicial pronouncements, and decide nothing, even provisionally, but are merely made in order to elucidate the argument or point the question or indicate what needs investigation: Practice Note [1942] W.N. 89. Furthermore, the judgment in Halsall v. Brizell was not a reserved judgment; indeed, I observe, a little wistfully, that the case was argued and decided in a single day.

 

Let it be accepted that a degree of historical frailty can be detected in the forensic process in this sphere, and let it also be accepted that, at any rate on one view, what Upjohn J. said on the point was not necessary for his decision and forms no part of his ratio decidendi. Accept all that, and there still remains the fact that, quite apart from other authorities, the propositions enunciated by Cozens-Hardy M.R. and Upjohn J. seemed right to them. Couple that with the simple principle of fairness and consistency that I have mentioned, and it will be seen that there is good reason why I should be ready to adopt and apply the broader proposition that has emerged from the technicalities of past ages. At the same time, in considering the application of the expanded doctrine to the case before me, it will be necessary to consider what are the true limits of that doctrine. With that, I turn to the only other case in this first group.

 

December 2. MEGARRY V.-C. continued:

 

In E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379, the owner of Blackacre erected a building with foundations which trespassed to a small extent on Whiteacre. The owners of Blackacre and Whiteacre then orally agreed that the trespassing foundations of Blackacre could remain but that Whiteacre should have a right of way over Blackacre. The agreement was never registered as a land charge, and Blackacre passed to purchasers. Difficult questions of registration arose, as well as questions of estoppel. But the point with which I am concerned was that which appears at p. 394. There, Lord Denning M.R. applied the principle that he who takes the benefit must also take the burden, referring with approval to Halsall v. Brizell [1957] Ch. 169. “So long as” the owners of Blackacre took the benefit of having foundations which reached into Whiteacre, he said, they must shoulder the burden of the right of way over Blackacre: “so long as” the owner of Whiteacre took the benefit of the right of way, he must allow the trespassing foundations of Black-acre to remain. Danckwerts L.J. took a similar view, at pp. 399, 400, whereas Winn L.J. put the emphasis on estoppel.

 

The words “so long as” plainly appear to indicate that with continuing benefits and burdens on both sides the burdens could be escaped at the price of ceasing to enjoy the benefits. A similar view appeared in Hopgood v. Brown [1955] 1 W.L.R. 213, 226; but that was a case of reciprocal licences, and I think that Sir Raymond Evershed M.R. was putting matters more on the basis of estoppel than on a basis of benefit and burden. However, the point seems to have been explicitly decided by the Supreme Court of Canada in Parkinson v. Reid (1966) 56 D.L.R. (2&D) [*296] 315. There, in the absence of privity either of contract or of estate, it was held that defendants who derive title under an instrument which conveyed land with the right to use the plaintiff’s wall but subject to certain repairing obligations were not liable on those obligations after they had ceased to use the wall. Before I leave E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379 I should add that it makes it clear that the principle applies in the case of parol agreements as well as for deeds, and that in that case the principle was operating in equity, rather than at law.

 

I have now considered the only cases cited which seem to me to depend on the pure principle of benefit and burden. I must next turn to the second group of cases that were cited on this topic, being those which depended on whether or not the benefit was a qualified or conditional benefit. I will first take Aspden v. Seddon. This was litigated in two stages: Aspden v. Seddon (1875) 10 Ch.App. 394 was in Chancery, and Aspden v. Seddon (No. 2) (1876) 1 Ex.D. 496 was at common law. The facts are a little complicated, but in essence they were as follows. A landowner conveyed part of his land to a trustee for a company, excepting and reserving the mines and minerals and the right to work them. The exception and reservation ended with the words “so that compensation in money be made” by the landowner and his successors “for all damage that shall be done to the erections on the said plot by the exercise of any of the said excepted liberties, or in consequence thereof.” There was also an express covenant for the land-owner and his successors to pay compensation for damage to buildings caused by mining.

 

As required by the conveyance, the company erected a cotton mill on the land. There was then a devolution of the landowner’s adjoining land and his mining rights upon the Seddons, and also a devolution of the mill upon Aspden. The Seddons worked the minerals and damaged the mill, whereupon Aspden sued them in Chancery for an injunction to restrain the working, and damages. This claim failed on the ground that the conveyance gave the right to the Seddons to let down the surface and damage the mill on paying compensation, and that the claim for damages was a matter for the courts of law: the case, I may say, was decided before the Judicature Act 1873 came into force.

 

In Aspden v. Seddon (No. 2), 1 Ex.D. 496, the litigation arose on a case stated by an arbitrator, the main question being whether Aspden were entitled to recover compensation from the Seddons. Both in the Exchequer Division and in the Court of Appeal it was held that the answer was Yes. The essence of the reasoning was that the only right to let down the surface that the Seddons had was a right sub modo, or a conditional or qualified right, the condition being the payment of compensation. James L.J., at p. 509, did not think that the law of England could be in such a state that the defendants could justify a trespass in opening a mine under an authority in which there was a qualification, but refuse to pay anything in the way of compensation under the terms of that qualification. He held it plain that “a man exercising the right is to pay the compensation... the simple thing is that the man who has exercised the right is to pay for the damage.” Mellish L.J., at p. 509, treated the case as one of annexing a condition to the grant of minerals, and giving [*297] a right to let down the surface subject to the condition. It could then be said, “‘You shall let down the surface, but you shall only do that sub modo that the man, whoever does let down the surface by getting minerals, shall pay compensation.’” In the court below Bramwell B., at p. 504, made it explicit that a remedy lay at common law for the compensation.

 

Westhoughton Urban District Council v. Wigan Coal and Iron Co. Ltd. [1919] 1 Ch. 159 does not seem to me to add much to Aspden v. Seddon. The essential point was that what had been granted was merely a qualified right to work the minerals under certain land, the qualification being an obligation to pay compensation for damage done. The qualification appears at p. 160; and see also at pp. 171, 174. There was also a covenant by the grantees not to do damage, and to make it good if they did. The grantees worked the minerals and did damage, and were sued by lessees of the land who derived title under the grantor of the mining rights. The lessees were held to be entitled to damages against the grantees. Although they could not claim as assignees of the covenants, they were entitled as lessees to have their land supported except so far as this right had been taken away by the grant of mining rights. The grantees could therefore either rely on the grant and comply with its obligation to pay compensation, or else abstain from relying on it and pay damages at common law. For things past, the grantees had this choice; but for the future the lessees could force the grantees to rely on their grant by claiming an injunction against them: see per Sir Charles Swinfen Eady M.R. at pp. 171, 172. From p. 177 it appears that the order of the Court of Appeal included liberty to apply for an injunction.

 

I pause to emphasise that in these cases there is plainly an initial question of construction. If an instrument grants rights and also imposes obligations, the court must ascertain whether upon the true construction of the instrument it has granted merely qualified or conditional rights, the qualification or condition being the due observance of the obligations, or whether it has granted unqualified rights and imposed independent obligations. In construing the instrument, the more closely the obligations are linked to the rights, the easier it will be to construe the instrument as granting merely qualified rights. The question always must be one of the intention of the parties as gathered from the instrument as a whole. It is familiar law that in leases the tendency is to construe the covenants of the lessor and the covenants of the lessee as being independent of each other, so that the observance of the one is not conditional upon the observance of the other. Such covenants, of course, usually appear separately and distinctly in the lease.

 

In considering this question, the learning of Mr. Macdonald took me to a decision of the House of Lords on the point, reported only as a note to another case. The decision is Chamber Colliery Co. Ltd. v. Twyerould (1893) [1915] 1 Ch. 268n. In that case a grant of mining rights was made, the grantees doing as little damage as the nature of the case would admit of, and making satisfaction to the grantors for all unavoidable damage by making annual payments at a certain rate per acre. There was also a covenant by the grantees that if any damage to any buildings was caused by working the mines, they would make “full satisfaction” [*298] for it to the grantors over and above the annual payments. The proceedings were between parties who derived title from the grantors and grantees respectively: and the plaintiff claimed damages and an injunction in respect of damage to his land and buildings caused by mining. It was argued that the covenant for making full satisfaction for damage to buildings was a personal covenant which could not run with the land, and that it could not be treated as a limitation or qualification of the right to work the mines.

 

In a speech with which Lord Herschell L.C., Lord Macnaghten and Lord Morris simply concurred, Lord Watson rejected this contention. He said, at p. 273, that the covenant did not profess to impose a burden running with the land.

 

“It is an inherent qualification of the coal owner’s licence to work with the effect of letting down the surface, and provides that he shall not do so except upon the condition of compensating the owner for the time being of buildings which are injured by his operations. I do not think it is open to question that what is in form a covenant may nevertheless appear from the whole of the provisions of the instrument to be intended to operate as a condition also.”

 

From the short report it is not very easy to see the exact grounds on which this conclusion was based. One thing seems plain: the opposite conclusion would have produced strange results. The provision for making satisfaction for damage to the surface by means of annual payments was plainly worded so as to qualify the right to mine, much as in Aspden v. Seddon (No. 2), 1 Ex.D. 496. If the covenant to make full satisfaction for damage to buildings had been held to be an independent covenant, the right to mine would be in a curious state of being qualified as to compensation for one form of damage and unqualified as to another. That curiosity, and the express references to the payments under the covenants being “over and above” the annual payments to be made under what were plainly words of qualification, seem to me to provide ample grounds for holding that both provisions for compensation were intended to qualify the right to mine. In the phrase of Mr. Browne-Wilkinson, the words of the grant showed that the covenant was intended to be an extension of the condition. Whether the House was actuated by reasons of this sort I do not know; but at least it seems possible, and, indeed, probable.

 

The last case in this second group is Radstock Co-operative and Industrial Society v. Norton-Radstock Urban District Council [1967] Ch. 1094; [1968] Ch. 605. This concerned a sewer laid in the bed of a river. Predecessors in title of the owner of part of the bed had granted a lease to predecessors in title of the sewage authority, authorising those predecessors to lay, maintain and use the sewer. The lease contained various covenants by the authority’s predecessors with the lessor, including a covenant in clause 14 not to interfere with the flow of the river. (I may say that although the report at first instance includes only an extract from clause 14 (see [1967] Ch. 1094, 1096), the clause appears in full at [1968] Ch. 605, 610.) In time the sewer became exposed, and caused eddies which eroded the banks and did other damage; and the owner then sued the authority, inter alia, on the covenant. On this [*299] point, the issue was whether the authority had merely a qualified right to maintain the sewer, qualified by the obligation of clause 14 not to interfere with the flow of the river, or whether the right was unqualified and clause 14 imposed an independent obligation.

 

At first instance, Ungoed-Thomas J. held, at p. 1120, that the latter was the correct view, and on appeal Harman and Russell L.JJ. agreed, at pp. 628, 632: in the words of the former, “this covenant is not and cannot be construed as a condition.” The dissent of Sachs L.J. was not on this point. The conclusion that clause 14 did not qualify the rights of sewer granted by the lease was in all cases reached as a matter of construction in statements that were brief and emphatic, though Ungoed-Thomas J. did discuss and distinguish Westhoughton Urban District Council v. Wigan Coal and Iron Co. Ltd. [1919] 1 Ch. 159. Chamber Colliery Co. Ltd. v. Twyerould [1915] 1 Ch. 268n. was not cited, and Mr. Macdonald contended that if it had been the decision on this point would have been different. However, the distinctions between the two cases on this point are too obvious to require mention. I should be astonished if any of the judges in the Radstock case would have felt the least surprise at the proposition that what is in form a covenant may nevertheless appear from the instrument as a whole to be intended to operate as a condition also. Unhappily Ungoed-Thomas J. and Harman L.J. are no longer able to speak for themselves; but, if asked, I would have expected them to say: “Of course: but what is there in this instrument to make that appear?” I will venture no hypothetical reply for Russell L.J., who, translated, is happily still with us; but I doubt very much if his answer would differ.

 

It is important to observe that this aspect of the Radstock case seems to have been argued and decided solely on the question whether the right to maintain the sewer was a qualified right, or was unqualified. There does not seem to have been any argument on the further questions that might arise if, as was the case, the right was held to be unqualified, namely, whether the pure principle of benefit and burden could be applied so as to make the authority liable. There is a sentence in the judgment of Ungoed-Thomas J. [1967] Ch. 1094, 1119, which can he read as an oblique reference to the principle; but there is no reference in either court to Halsall v. Brizell [1957] Ch. 169 or to E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379, then very recently decided.

 

I now come to the third group of cases, those cited on the relationship of the pure principle of benefit and burden to the assignment of benefits. As I have already indicated, the point is that if the benefit and burden doctrine is to be given the full width claimed for it, questions must arise on the many instances of assignees of the benefit of a contract not being bound by the burdens of that contract. Mr. MacCrindle relied on Cox v. Bishop (1857) 8 De G.M. & G. 815, Bagot Pneumatic Tyre Co. v. Clipper Pneumatic Tyre Co. [1902] 1 Ch. 146, and Barker v. Stickney [1919] 1 K.B. 121. To these Mr. Macdonald replied with Werderman v. Société Générale d’Electricité; (1881) 19 Ch.D. 246, Dansk Rekylriffel Syndikat Aktieselskab v. Snell [1908] 2 Ch. 127, and May v. Belleville [1905] 2 Ch. 605. [*300] I do not think that I need examine these cases in detail. Cox v. Bishop holds that an equitable assignee of a lease who takes possession of the land is not liable to the lessor on the covenants of the lease. The case was argued and decided on privity, and not on any principle of benefit and burden. The Bagot case [1902] 1 Ch. 146 concerned a licence to use patents which had been assigned in equity. The benefit and burden principle was argued in an attempt to make the assignees liable on the burdens of the licence, but Vaughan Williams L.J. rejected it, relying on Cox v. Bishop: see at pp. 156, 157. Romer L.J. briefly cited Cox v. Bishop as showing that the plaintiffs had no special right to sue the defendants merely because the latter were equitable assignees (see at p. 161), and Cozens-Hardy L.J. simply expressed his agreement. This appears to be the strongest authority against the existence of any pure benefit and burden principle at all, although of course the authorities have not stood still since 1901. In due course I must return to this case.

 

In Barker v. Stickney [1919] 1 K.B. 121 the author of a book assigned the copyright to a publishing company, which covenanted to pay him a royalty. The copyright was later assigned to another company which succeeded to the publishing business, but the author was held not to be entitled to recover royalties from that latter company. The case was argued on variant forms of there being some charge or burden that was attached to the copyright assigned, or ran with it, but the Court of Appeal rejected them all. The case is a warning to authors, and others; and it accounts for the advice given to authors to see that they merely give the publishers a right to publish that is conditional upon the payment of royalties: see per Scrutton L.J., at p. 133. The case was decided purely as a matter of construction of the initial assignment (see per Bankes L.J., at p. 124 and per Warrington L.J., at p. 129), though Scrutton L.J. did also consider the question of covenants said to run with goods. The case is no authority on the pure benefit and burden principle, for that does not appear to have been argued: but the field is one in which that principle might well be applied so as to produce a more just result.

 

I turn to Werderman’s case, 19 Ch.D. 246, a decision that was distinguished in both the Bagot case [1902] 1 Ch. 146 and Barker v. Stickney [1919] 1 K.B. 121. A patentee assigned his patent by an indenture which provided for certain payments to be made to him. The assignees assigned their rights to a company, and the patentee then claimed the payments from the company. The Court of Appeal held that the assignment made it plain that the parties intended the liabilities to attach to the patent itself. Lindley L.J., at p. 257, regarded the case as being almost the same as the dissolution of a partnership with an assignment of assets charged with an annuity to the outgoing partner: and in the Bagot case [1902] 1 Ch. 146, 157 Vaughan Williams L.J. said that the Werderman case was one of a charge or incumbrance imposed on the property. The Dansk case [1908] 2 Ch. 127, too, was a case about an assignment of patents; and Neville J. held that on the true construction of the assignment the vendor had a lien on the patents for the royalties, so that an assignee from the purchaser must pay the royalties to the vendor. The last three cases all seem to fall within the principle of the second [*301] group of cases, concerned with whether or not the right granted was a qualified or conditional right.

 

May v. Belleville [1905] 2 Ch. 605 was rather different. A man sold part of his land, the contract providing for him to reserve rights of way over the land sold. The conveyance contained an appropriate reservation, but the purchaser did not execute it, though he took possession of what he had bought. The question was whether the purchaser and his successors were bound by the reservation. Such a case seems to me to fall squarely within one of the two old versions of the benefit and burden principle that I have mentioned, namely, that if a person is named as a party to a deed but does not execute it, the deed will nevertheless be held to bind him if he knowingly takes the benefit of it. Such a liability was held to exist at law at least as early as Brett v. Cumberland (1619) Cro.Jac. 521. However, none of this seems to have been argued, and Buckley J. held that the purchaser was bound in equity to give effect to the terms on which he obtained possession, and his successors in title were in no better case.

 

Before I go any further, I must return to the Bagot case [1902] 1 Ch. 146, and consider how far it is an authority against the pure benefit and burden principle. The case initially came before Kekewich J.: [1901] 1 Ch. 196. Before him, it was argued on contract and on whether the licence had had liabilities attached to it; and Werderman’s case, 19 Ch.D. 246, was distinguished. The benefit and burden principle did not appear until the case reached the Court of Appeal. There it was presented on the footing that Werderman’s case was a clear authority which supported it: see [1902] 1 Ch. 146, 150, 151. At p. 156 Vaughan Williams L.J. said that it had been contended that the defendants were directly liable to the plaintiffs, not at law but in equity, because they had had the benefit of the licence and had been acting under it.

 

“They have, it is said, received the benefit which has resulted from a contract to which they were not parties, and they have thereby taken upon themselves the burden of that contract. To my mind that has never been the law.”

 

He then said that it seemed to him that this question had been clearly decided in Cox v. Bishop, 8 De G.M. & G. 815 (a case, it will be remembered, which was also one of an equitable assignee), and after citing from the judgment of Knight Bruce L.J., he said that that principle applied in the present case and in all similar cases. Romer L.J. did not discuss the benefit and burden argument, though he did say, at p. 161, that the fact that the defendants were equitable assignees “would not of itself give the plaintiffs any special right to sue the defendants, as was pointed out in Cox v. Bishop, Cozens-Hardy L.J. simply expressed his agreement, and added nothing.

 

I do not think that the Bagot case requires me to reject the pure benefit and burden principle. Only one Lord Justice really dealt with it; his judgment did not explore it in any detail; the argument on the point seems to have been brief, and it cited no authority; and, of course, Halsall v. Brizell [1957] Ch. 169 and E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379 lay in the future. It is they and not the judgment of [*302] Vaughan Williams L.J. in the Bagot case [1902] 1 Ch. 146, 156 that I think I should follow. The other assignment cases do not seem to me to provide any authority against the principle. A court is not to be treated as rejecting an argument that was never put before it, particularly when that argument rests upon a doctrine that is in the course of evolution.

 

I emerge from a consideration of the authorities put before me with a number of conclusions and a number of uncertainties. First, for the reasons I have given, I think that there is ample authority for holding that there has become established in the law what I have called the pure principle of benefit and burden. Second, I also think that this principle is distinct from the conditional benefit cases, and cases of burdens annexed to property. Although language speaking of benefit and burden is sometimes used in the latter classes of case, I do not think it is really apt, and it is liable to confuse. In such cases the rule is really a rule of “all or none,” an inelegant but convenient expression that may be used for brevity. A burden that has been made a condition of the benefit, or is annexed to property, simply passes with it: if you take the benefit or the property you must take it as it stands, with all its appendages, good or bad. It is only where the benefit and the burden are independent that the pure principle of benefit and burden can apply.

 

Third, it is a question of construction of the instrument or transaction, depending on the intention that has been manifested in it, whether or not it has created a conditional benefit or a burden annexed to property. If it has, that is an end of the matter: if it has not, and the benefit and burden are independent, questions of the pure principle of benefit and burden may arise. On the question of construction, there is a possible parallel in the case of two or more things given by a will to the same person, e.g. a leasehold house and its contents: if the will is construed as making a single gift of the two things, as distinct from two separate gifts, the legatee cannot take one and reject the other, as he might wish to do if the lease is onerous.

 

Fourth, the application of the benefit and burden principle will normally come later than the question of construction. If the initial transaction has created benefits and burdens which, on its true construction, are distinct, the question whether a person who is not an original party can take one without the other will prima facie depend upon the circumstances in which he comes into the transaction. If, for instance, all that is assigned to him is the benefit of a contract, and the assignor, who is a party to the contract, undertakes to continue to discharge the burdens of it, it would be remarkable if it were to be held that the assignee could not take the benefit without assuming the burden. The circumstances show that the assignee was intended to take only the benefit, and that the burden was intended to be borne in the same way as it had been borne previously.

 

On the other hand, if the assignee takes as a purported assignee of the whole contract from a company which is on the point of going into liquidation, he undertaking to discharge all the burdens and to indemnify the company, then, unless the benefit and burden principle is to be rejected in its entirety, I would have thought that the circumstances [*303] showed that he was not intended to take the benefit without also assuming the burdens, and that the result would accord with the intention, vis-�-vis not only the company but also the persons entitled to enforce those burdens. No doubt the terms of any relevant document would be of major importance: but I would regard the matter as one which has to be determined from the surrounding circumstances as a whole. One possible way of looking at it is to regard the subsequent transaction as doing what the initial transaction did not, namely, annex the burden to the benefit so that the one could not be taken free from the other: but there are difficulties in this.

 

Fifth, a problem that is unsolved (and, it seems, unconsidered) is that of who falls within the benefit and burden principle. In the old forms of the rule there was no difficulty; a person named as a party to a deed, or a person granted an estate by a deed, could be identified without difficulty. But when the rule came to be stated in the form of “a person” or “a man” who takes the benefit of a deed, the answer is not so obvious. Plainly this is wider than merely those named in the original instrument, but equally plainly it cannot sensibly mean anyone in the world. In Halsall v. Brizell [1957] Ch. 169 and in E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379 the doctrine was applied to successors in title to land which one of the original parties had taken; and plainly such persons should be within the principle. But is it to be confined to those who are shown to be successors in title to land or other property? Should someone who has such a title be bound, while someone else, who may on investigation be found to have no proper title, take free? I do not see why there should be any such distinction. It seems to me that the principle ought to embrace anybody whose connection with the transaction creating the benefit and burden is sufficient to show that he has some claim to the benefit, whether or not he has a valid title to it. Mere strangers seem to me to be another matter: I would exclude them from the meaning of “a man” or “a person” for the purposes of the principle. I shall not attempt to explore the obvious difficulties in determining just where the dividing line lies or ought to lie.

 

I shall next consider whether the defendant British Phosphate Commissioners are liable under any form of the benefit and burden rule, whether pure or “all or none.” First, there is the question of the construction of the 1913 agreement and the A and C deeds. In the former I can see nothing which gives any real support to the view that the benefits to the company under the agreement have been made conditional on accepting its burdens; and in particular that applies to clause 12 (a), relating to replanting. The mere fact that the same instrument creates both the benefit and the burden, or that they both relate to the same subject matter, cannot possibly, in my view, make the one conditional on the other. I can see no words in the instrument, or for that matter anything else, that manifest any intention to bring about this result. The contrast between this document and the documents in cases where there has been held to be a conditional benefit are obvious.

 

The A and C deeds are in like case. Of course, they have fewer clauses than the 1913 agreement, and they concentrate on mining, without extraneous [*304] matters such as clause 12 (d) and (e) of the 1913 agreement, which provide for uniform prices for goods and the supply of fresh water at 3�4d. a gallon. But I am quite unable to see anything which makes the grant of the rights to the company conditional on, or qualified by, the obligation to replant. In the result I hold that neither the 1913 agreement nor the A or C deeds confer benefits which are qualified by or conditional upon the replanting obligations. Accordingly, for the plaintiffs to succeed under this head the case must be brought within the pure principle of benefit and burden.

 

I propose first to consider whether the two defendant British Phosphate Commissioners fall within that principle. There are two questions. First, do the circumstances in which they became connected with the 1913 agreement and the A and C deeds show that they ought not to be able to take the benefit without accepting the burden; and, second, have they a sufficient title to the benefit? I can consider these together.

 

The first defendant became a commissioner on January 1, 1965, and the third on July 1, 1970: the second, as I have mentioned, died during the proceedings. There seems to be nothing special about the appointment of either. Each was put in a position of control over a large concern that had been carrying on the undertaking for over 55 years. The British Phosphate Commissioners have never been expressly incorporated, and it has not been contended that there has been any implied incorporation of them, whether for the purposes of their undertaking or otherwise. Furthermore, the machinery for vesting the assets of the concern in new commissioners never seems to have been operated. There may well have been what Mr. MacCrindle suggested, an equitable assignment of the assets of the undertaking to be inferred from the surrounding circumstances. Yet although not incorporated, the British Phosphate Commissioners carried on the undertaking in the manner of a corporation and not of a partnership. The death or retirement of one of the commissioners produced none of the complexities of a partnership. All that happened was that when a new commissioner was appointed he stepped into the vacant place, with hardly a ripple to show the change. All the plant, machinery, money and other assets of the concern, together with the rights of mining, built up over the years, sat there ready for the new commissioner to control with his brethren. So did the liabilities, whether for royalties or anything else.

 

When the first commissioners took over from the company, the contemporary documents and circumstances made it plain that the British Phosphate Commissioners were to take over not only the rights but also the liabilities: I have already read clause 1 (c) of the 1920 indenture. When thereafter a new commissioner was appointed there were no documents to make this plain, but the circumstances seem to me to be to the same effect. The thought that a new commissioner was intended to take over the assets, but not the liabilities, which the outgoing commissioner, stripped of the assets, was to bear for the rest of his life, and his estate after his death, seems to me to be absurd. I shall not pursue the matter in detail, since it seems to me overwhelmingly clear that at every stage of change the whole basis was that of there being no right to enjoy the benefits without undertaking the burdens. There is no [*305] question of any British Phosphate Commissioner having intended not to accept the benefits but to commit wholesale trespasses instead. Furthermore, the connection of the defendant commissioners with the instruments creating the benefits and the burdens seems to me to be ample for them to be held liable for the burdens if they took any benefits.

 

That brings me to the question of taking the benefits; and here there is a diversity between the 1913 agreement and the A and C deeds. In the course of a discussion on Day 9 Mr. Macdonald, while opening his case, found himself in difficulties over the application of Halsall v. Brizell [1957] Ch. 169 to the 1913 agreement. These arose because since 1922 no A or C deeds had been executed, and the benefit of the 1913 agreement to the company was that 145 acres should be acquired by the company under those deeds. (As I have mentioned, after 1920 no A deed was executed, but two C deeds were executed in June 1921 and one in January 1922; and that was all.) In the end Mr. Macdonald said that his Halsall v. Brizell point fell down in 1921 or 1922 for the 1913 agreement, and so while he still relied on it for the A and C deeds (as well as novation), for the 1913 agreement he could rely only on novation. On that footing the case proceeded until after the evidence was complete. However, on Days 87 and 88 Mr. Macdonald sought to revive his Halsall v. Brizell point on the 1913 agreement, and to resile from the concession that he had made on Day 9. Not surprisingly, Mr. Browne-Wilkinson objected, on the ground that the defendants had met the case put forward by Mr. Macdonald after he had made his concession and had not dealt with the evidence on the footing that the point conceded would in fact be argued.

 

In the end, the benefits which Mr. Macdonald wished to rely upon, apart from the execution of the three C deeds, were the actual use of implied rights of access under the 1913 agreement; he disclaimed any reliance upon the mere existence of these rights of access as a benefit. I said that I would listen to Mr. Macdonald’s submissions on the point, and not exclude them at that stage, and if necessary rule later; and on Day 93 I heard Mr. Macdonald’s final submissions on this point, with a commentary from Mr. Browne-Wilkinson and Mr. Vinelott. Mr. Macdonald took his reliance upon the execution of the C deeds to the point of saying that the execution of a single C deed would expose the defendant commissioners to liability. He also urged a point on the British Phosphate Commissioners being trustees for the Crown.

 

I am not satisfied that there has ever been a sufficient taking of a benefit under the 1913 agreement to expose the defendant British Phosphate Commissioners to liability under that agreement. I think that Mr. Macdonald’s first thoughts about the three C deeds were sound. These deeds concerned land which is not the subject of these proceedings, and I do not see how the execution of those deeds in 1921 and 1922 can really be brought home to the defendant British Phosphate Commissioners as being a real benefit taken by them. As it has developed, I do not think that the pure benefit and burden principle is a technical doctrine, to be satisfied by what is technical and minimal. I regard it as being a broad principle of justice, to be satisfied by what is real and substantial.

 

As for the actual use of implied rights of access under the 1913 [*306] agreement, I am far from satisfied that any relevant access enjoyed by the defendant British Phosphate Commissioners was enjoyed under and by virtue of the 1913 agreement. Of course, this point illustrates the difficulty of reaching a proper conclusion on a subject that had not been raised before the evidence was heard, and on a contention which had been abandoned. I very much sympathise with counsel who, in a case of this complexity, seeks to assist the court by abandoning a point which he feels he cannot sustain, and then later finds that second thoughts appear to make the point arguable. However, sympathy for counsel must not override justice to the other side; and if I had to rule on the point I should hold, with a little hesitation, that it was not open to Mr. Macdonald. But my primary holding is that if the point is open to him it fails.

 

The A and C deeds are another matter. They produce a substantial stock of mining rights which successive British Phosphate Commissioners exploited over the years; and these cannot be brushed aside as being irrelevant or trivial. Nor can there be any question of successive British Phosphate Commissioners being unaware that it was by virtue of these deeds that they enjoyed substantial mining rights. In this connection I should mention the position of the individual plots in the present case. The claim for replanting is made by the first 10 plaintiffs, who between them allege that they own, wholly or in part, 17 plots of land. Four of these plots were the subject of P and T deeds alone, and not A or C deeds. Of these, Mr. Macdonald in the end wholly abandoned the claims in respect of plots 143 and 294, made by the ninth and the second plaintiffs respectively, since these plots were wholly outside the 250 acre area. For the same reason he abandoned part of the claims for plots 263 and 316, made by the eighth and tenth plaintiffs respectively, leaving those claims in being only to the extent of about half and three-quarters of an acre respectively.

 

The other 13 plots out of the 17 were all the subject of A or C deeds. Their status as regards working was much clarified by a document marked D.A.2, coupled with the evidence of Mr. Chapman. Of the 13 plots, four were worked out before January 1, 1965, when the first defendant became a British Phosphate Commissioner, and they have not been used in his time. These four are plots C.17, C.109, C.162 and C.219. Two more plots (A.248 and A.282) would be in the same category but for the fact that phosphate from adjoining plots rilled over into them and was not removed until 1972. Four plots (C.101, C.179, C.183 and A.292) have been wholly or partly worked in the first defendant’s time; two (C.120 and A.233), though partly worked before his time, remained in February 1973 still to be further worked (with C.120 in fact being fully worked in 1975); and one (A.287), though said to have been fully worked in 1913, was retained for further working until 1973, when it was decided that it was no longer required.

 

Mr. MacCrindle not unnaturally stressed that the obligation to replant under the A and C deeds was a plot-by-plot obligation, so that if no mining or other use of a particular plot had been made in the time of a defendant commissioner, he could not be said to have taken the benefit of the A or C deed for that plot, and so ought not to be subject to the burden of it. That, of course, has considerable logical force, and if each [*307] of the plots had remained distinct, I think it would have carried much weight. However, the acquisitions made by the company under the A and C deeds were plainly made with the object of building up large areas that could conveniently be mined as a whole; and it was these large areas that were handed over to the first and successive British Phosphate Commissioners. The acquisitions were in effect pooled, and operations were carried out on a pooled basis.

 

In those circumstances, I do not think that it is open to the defendant commissioners to point to a particular portion of the pooled area and say that as that portion had never been used by them, they were not subject to the burdens relating to it. What their predecessors treated globally and what they succeeded to globally must, I think, be dealt with on a global basis. The defendant commissioners have plainly taken the benefit of these pooled areas, it is not as if they had segregated the worked-out plots and returned them to their owners as contemplated by the A and C deeds. Furthermore, it is clear that in many cases plots were partly worked, or regarded as being fully worked, and then later, with improved methods of extraction, the British Phosphate Commissioners of the day have returned and extracted more phosphate under the rights conferred by the A or C deed. Where a right to mine has been exercised by predecessors, and successors who acquire that right remain able to exercise it in circum-stances which give reality to the right, I think that the successors take a sufficient benefit to invoke the principle. I do not consider that it is, or should be, open to a successor commissioner to say of a plot: “That was worked in the time of my predecessors. True, under the A or C deed I now have the right to work it further if I wish; but not unless I actually do so am I to be treated as taking a benefit under the deed. If instead of returning the plot to its owner I do nothing with it for years, thus keeping open any decision whether to work it further, and in the end I decide to work the plot no more, I have taken no benefit under the deed.”

 

I do not find this an easy matter, and I can well see that there may be other views on it. However, after some hesitation I have reached the conclusion that this, when coupled with what I have said about the relationship of individual commissioners to the undertaking as a whole, is enough to establish that the defendant British Phosphate Commissioners took a sufficient benefit under the A and C deeds in issue to make the pure principle of benefit and burden capable of applying to them.

 

The next question is, “What burden?” This case squarely raises the questions of the application of the pure principle of benefit and burden to unitary burdens, a question which does not seem to have appeared in any previous case. In the case of continuing benefits and burdens, E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379 supports the proposition that if the benefit is given up, the burden ceases; and of course if that applied to unitary burdens, questions might arise in each case whether the benefit was still being taken. But in the case of a unitary burden such as this I do not think that it can be the case that a person taking the benefit can, when challenged, cease to take it, and then say that he is no longer subject to the burden of restoring the land, or paying compensation for the damage done, or doing whatever else there is to be done. [*308] There is little enough help to be found in the cases. Aspden v. Seddon (No. 2), 1 Ex.D. 496 was, as I said, a case of a conditional benefit, and so not within the scope of the pure principle of benefit and burden: it was an “all or none” case. Nevertheless, in the Exchequer Division Cleasby B. did, as happened in some of these cases, discuss benefit and burden. In his view, the defendants were liable under the licence to pay compensation for damage to the land on the footing that “During the time that you have enjoyed it this burden – that is, the obligation to make compensation for what you have done – has come into existence”: p. 508. The indication is very slender: but it seems to me to point in what I think is the right direction. I bear in mind, too, that the two old technical rules which at least have a place in the pedigree of the principle clearly seem to involve acceptance of the whole burden.

 

When the full features of the principle have been worked out, it may well be that if, as I think, any person who takes a sufficient benefit, for however short a period, is held liable for the whole burden, including future unitary burdens, it will also be held that there are implied rights of indemnity which will ensure that, whoever is held initially liable, the liability will ultimately be borne by the right persons. Where there is a terminal liability, such as the obligation of replanting in this case, it seems right that the burden should ultimately be borne by the latest in the chain of persons liable at the time when the burden accrues. Certainly this should be so in the case of an undertaking such as that of the British Phosphate Commissioners, where normal commercial methods contemplate some sinking fund or other provision for meeting future liabilities of this kind. On that footing, the two defendant British Phosphate Commissioners, being now in office, are in my judgment properly subject to the whole of the liability.

 

Next, does the liability exist only in equity, or is there liability at law? In E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379, 394, it clearly appears that the right of way that arose under the principle of benefit and burden was merely equitable; but, of course, whether rights in land in England are legal or equitable depends to a considerable extent on the peculiarities of English land law. In Halsall v. Brizell [1957] Ch. 169 there is no express statement on the point: but what was in issue was an obligation to pay money, and in holding that in taking the benefit the defendants became liable to pay the money I think that Upjohn J. must have been contemplating an obligation at law. I can see no suggestion that there was any equitable obligation under a trust or, indeed, under any other concept of equity. Whether an obligation at law would depend upon an implied contract or upon some form of quasi-contract I shall not pause to inquire: Goff and Jones, The Law of Restitution (1966), I may say, considers neither of the cases that I have just mentioned.

 

In Aspden v. Seddon (No. 2), 1 Ex.D. 496, 504, Bramwell B. found it unnecessary to consider whether the correct form of action in the conditional benefit type of case was assumpsit, or an action on the case, or even tort. The pure principle of benefit and burden, if it applies at law, seems to be no less uncertain. It may be founded on acceptance, so that he who accepts the benefit is taken also to have accepted the [*309] burden, or it may be a rule of law, so that he who accepts the benefit is bound by the burden, irrespective of any acceptance of it. In the conditional benefit type of case it may perhaps be easier to rest the doctrine on acceptance than in cases of the pure principle of benefit and burden: if you accept the benefit you cannot escape the consequence that you have accepted what forms part of the benefit, or is annexed to it, whereas under the pure principle the burden may be the price the law compels you to pay for taking the benefit. However, on the facts of this case I do not think that I need attempt to resolve these problems when considering whether liability under the pure principle exists at law or only in equity. As I have mentioned, there is Halsall v. Brizell; there is also the common law basis of the two old technical rules; and, more important, there is the nature of the burden, to which I must now turn.

 

Put shortly, it seems to me that whether the liability under the pure principle is legal or is merely equitable must primarily depend on whether the burden itself is legal or equitable. If the burden is merely equitable, so will be the liability. If the burden is legal, then I do not see why the liability should not also be legal. Whether the process that requires the burden to be assumed is legal or equitable, and whether it is based on acceptance or operates as a rule of law, what has been assumed should retain its quality of being legal if it is legal and equitable if it is equitable. If you take a burden, you must take it as you find it. If it be assumed that the pure principle operates only in equity (an assumption that I would not readily make), I do not see why equity should not say to the person seeking to take the benefit: “Unless you assume the burden at law, you will be restrained by injunction from taking the benefit.” That, of course, would apply to the active form of the principle. In the passive form, some or all of the benefit has already been taken, and the question is whether the burden has to be borne. If some of the benefit still remains, an injunction could be granted, as in the active form: but if all of it has been taken, this could not be done. It may be that declaratory relief could be obtained, or possibly the principle of equity treating as done that which ought to have been done might be invoked. At all events, I think it would be most undesirable if the result were to be any different from that in the case of the active form.

 

My conclusion on the benefit and burden point is thus that the British Phosphate Commissioners are liable at law on the replanting obligations in the A and C deeds, and so are subject to the normal remedies (including damages) for any breach of that obligation. That of course, is subject to other matters dealt with in this judgment. This liability could also be supported, if necessary, by the liability to pay damages in substitution for specific performance under the Chancery Amendment Act 1858 (Lord Cairns’ Act) if this is a case in which specific performance could be decreed.

 

I can deal quite shortly with one last matter, namely, whether the plaintiffs are entitled to enforce the obligations. This arises because they are not, of course, original contracting parties. Subject to one point, I can see no difficulty. There is no reason why the benefit of the replanting obligations should not run with the land both at law and in equity. The obligations could hardly more clearly touch and concern [*310] the land, and the benefit of them must have been intended to run with the land and be enforceable by the owner for the time being. The present owners of the land are therefore the persons entitled to enforce the obligations.

 

The one point that I mentioned by way of reservation is that of jurisdiction. Mr. Vinelott submitted that where a plaintiff could establish his right to sue only by showing that he owned his plot of land, that brought the case within the doctrine of British South Africa Co. v. Companhia de Moçambique [1893] A.C. 602, and so the court had no jurisdiction because the action concerned foreign land. I have already considered this doctrine to some extent in Ocean Island No. 2, and also in relation to the sand. Of course, in Ocean Island No. 2 the issue was somewhat different. Nevertheless, much the same point arises, namely, whether the ownership of the land is something that merely arises “incidentally” or “as a collateral incident,” and so is outside the Mozambique doctrine, or whether that doctrine applies to it on the ground that the ownership of the land is an essential ingredient of the plaintiff’s case, or the whole basis of it, and that this suffices.

 

It will be remembered that in the passage that I quoted from St. Pierre v. South American Stores (Gath and Chaves) Ltd. [1936] 1 K.B. 382, 397, Scott L.J. said that he understood the words of Lord Herschell L.C., at p. 626, in the Mozambique case to have meant that “it is the action founded on a disputed claim of title to foreign lands over which an English court has no jurisdiction.” In the present case I cannot see what “disputed claim of title” the plaintiffs’ action is “founded on.” What the claim is founded on is the obligation to replant that the plaintiffs contend is binding on the commissioners; and the main battleground has been on whether the burden of the obligation binds the commissioners. There has been no contention that the benefit of that obligation has not passed to the present landowners, whoever they are: indeed, it was Mr. Vinelott who cited Reid v. Bickerstaff [1909] 2 Ch. 305, 319, 320, as part of his submission that it was because the benefits had passed in this way that the Mozambique doctrine barred the plaintiffs’ path.

 

As in Ocean Island No. 2, I would hold that where, as here, there are no rival claimants to the land, a plaintiff who adduces evidence of his title to foreign land as a means of establishing that he is entitled to enforce some obligation or assert some right is not thereby brought within the Mozambique rule. Such a question seems to me to arise “incidentally” or “as a collateral incident,” even though it may form a necessary link in the plaintiffs’ path to success. A rung on a ladder may be essential for progress to the top, but it is not itself the top. The claim of want of jurisdiction fails.

 

With that, I have reached the end of the question of benefit and burden. In a sentence, I hold the defendant British Phosphate Commissioners liable at law on the replanting obligations in the A and C deeds by virtue of the pure principle of benefit and burden. I know that I shall not be alone in regretting the length of my judgment on these points: but difficult questions are involved, and the subject was argued over many more days than had been devoted to it in other cases. I am conscious that there is much that remains unresolved and open for [*311] decision in the future; but that is inevitable in a developing branch of the law. My task, too, is to decide the case before me rather than to attempt a comprehensive rationalisation of this or any other branch of the law. In so far as I have considered matters, whether of principle or otherwise, that do not directly arise for decision, I have done so in an attempt to understand how the principles do or should operate.

 

(7) Failure to prescribe trees. I shall now consider the question of prescription by the resident commissioner. The obligation to replant under the A and C deeds is to replant the land as nearly as possible to the extent to which it was planted when the company’s operations commenced “with such indigenous trees and shrubs or either of them as shall be prescribed by the resident commissioner for the time being in Ocean Island.” It is common ground that there never has been any such prescribing. Furthermore, there has been no resident commissioner in Ocean Island since the last war, when Tarawa became the seat of government. Nor has there been any resident commissioner at all since January 1, 1972, when under the Gilbert and Ellice Islands (Amendment) Order 1971 the office of resident commissioner was replaced by that of governor.

 

The obligation to replant contained in the A and C deeds is, of course, to do so when the land should “cease to be used by the company for the exercise of the rights hereby granted”; and Mr. Macdonald contended that a letter dated March 2, 1971, from the Secretary of State for Foreign and Commonwealth Affairs to the chairman of the Council of Leaders showed that the Secretary of State then knew that much of the land in question could be returned to the Banabans. The extent of this land is shown by a British Phosphate Commissioners’ memorandum dated April 16, 1969, which stated that 50 per cent. of the land in the eastern mining area and 50 per cent. of the land in the central mining area could be surrendered at that stage. (The memorandum, incidentally, illustrates the practice of the British Phosphate Commissioners in dealing with the land on a block basis rather than on a plot-by-plot basis.) This knowledge of the land no longer needed by the commissioners meant, said Mr. Macdonald, that the duty of the resident commissioner to prescribe the trees and shrubs arose at some time during the period 1969-1971.

 

Mr. MacCrindle, who also relied on other defences, said that if all else failed the defendant British Phosphate Commissioners contended that the claim was premature because there had been no prescribing by the resident commissioner. At that, Mr. Macdonald said he would claim damages for anticipatory breach: but he had difficulties in this on the pleadings, and ultimately he dropped the contention. The point cropped up in various forms at various stages of the proceedings. One point was whether in replacing the resident commissioner by the governor the Order in Council of 1971 had in effect simply substituted “governor” for “resident commissioner” in the replanting obligation. The answer to that appeared to be No. What article 5 (3) of the Order did was to provide that

 

“In the existing laws any reference to the High Commissioner or to the resident commissioner shall in their application to the colony be construed as a reference to the governor”: [*312] and whatever else the A and C deeds may be, they are not “existing laws.” By article 5 (5), I may say, that expression was defined as meaning laws having effect as part of the law of the colony immediately before the appointed day, and not revoked by the Order.

 

On Day 106, however, there was an important development. In this, Mr. Browne-Wilkinson and Mr. Vinelott concurred in accepting, on behalf of the British Phosphate Commissioners and the Attorney-General respectively, that the governor could prescribe the trees and shrubs in place of the resident commissioner. This was accepted not under any express provision of the Order, but on the footing that the governor was now discharging the functions of the resident commissioner in Ocean Island, and that as he was now lawfully exercising the same governmental functions in the same governmental structure, he could do what the resident commissioner could have done in this respect. This came late in the day, but it seems to me entirely proper, and, for that matter, inescapable. I cannot think that the courts would readily accept any concept of duties ceasing to exist merely because of changes in offices, duties, or locations.

 

That, however, is not the end of the matter. Let the duty of prescribing rest with the governor, and there yet remains the difficulty, among others, that there has not yet been any prescribing. How, then, can an action for specific performance (or, perhaps, damages) succeed when what is to be done has not yet been defined? Mr. MacCrindle urged that it could not. When a contractual obligation was dependent upon the decision of a third party, he said, the court would not decree specific performance when the third party had not defined the obligation by his decision. Mr. Vinelott’s primary submission was wider: he said that the proper prescription of the trees and shrubs was a condition precedent to any obligation to replant. He further contended that there was a general principle that if an essential term of a contract was left to the discretion of a third party, the contract was incomplete unless the court could infer an agreement that the term left to the third party was to be ascertained by reference to some objective standard capable of being applied by the court. In that case the reference to the third party would be treated as being inessential machinery.

 

Mr. Macdonald’s basic submission, made after Mr. MacCrindle had advanced his argument, but before Mr. Vinelott advanced his, was that the provision for the trees and shrubs to be specified by the resident commissioner was merely incidental: it was not an essential part of the contract, but merely part of the means of carrying it into effect. The relationship of this proposition to the qualification in Mr. Vinelott’s proposition that I have just set out will be obvious. Mr. Macdonald further contended that in addition to striving to avoid holding a contract void for uncertainty, the court would also strive to hold valid any contract that had been partly performed. In litigation on this scale it was, perhaps, not surprising to find that these rival contentions were buttressed by nearly 20 authorities. Though I have considered all of them in some detail, I am glad to say that I do not think that I need discuss them seriatim.

 

First, I think I may leave on one side the cases about contracts [*313] being void for uncertainty. It seems clear that the court strains against holding a contract void on this ground; and I think that the authorities to this effect are sufficiently referred to in Brown v. Gould [1972] Ch. 53. Second, there is a substantial line of cases, sometimes known by the name of Milnes v. Gery (1807) 14 Ves. 400, to the effect that if there is a contract for sale at a price to be fixed by valuers or arbitrators, and the price is not fixed, the court will not decree specific performance; but it is otherwise if the contract provides no machinery for fixing the price, in which case the court will fix it if a sufficient formula is provided, such as “at market value.” Again, Brown v. Gould refers to a number of the authorities on this point.

 

On this, however, I think that I should add a reference to Vickers v. Vickers (1867) L.R. 4 Eq. 529. In that case Sir William Page Wood V.-C., at p. 536, made plain something that is not explicit in all the cases, namely, that in his view the question was not merely that of the circum-stances in which the court will grant the discretionary remedy of specific performance; the point is based upon there being no contract at all until the price has been fixed. The decision itself encountered some criticism from Mr. Macdonald, in which I see considerable force: I hope today that the courts would, by means of an implied term or otherwise, prevent a party from escaping from his contract by instructing his valuer not to proceed. But that does not affect the point that I have just mentioned. In Hart v. Hart (1881) 18 Ch.D. 670, 688, Kay J. pointed out that in these cases what the court was being asked to enforce was not a complete contract, but an agreement that a contract should be made.

 

I ought also to mention Babbage v. Coulburn (1882) 9 Q.B.D. 235. That was not a specific performance case, and none of the Milnes v. Gery line of cases was cited. A tenant of a furnished house agreed that at the expiry of his tenancy he would deliver up possession of the house and furniture in good order, and that in the event of loss, damage or breakage he would make it good or pay for it, the amount, if in dispute to be settled by two valuers or their umpire. A Queen’s Bench Divisional Court held that the landlord could not sue for the money until the amount had been fixed in the prescribed manner, for there was no independent covenant not to do damage, but merely a covenant to pay a sum ascertained by the valuers. A bleak little note on p. 237 says “Affirmed on appeal, May 8”; but the Law Reports contain no report of the appeal.

 

I have now ascertained that the appeal was in fact reported in another series of reports: see Babbage v. Coulbourn (1882) 52 L.J.Q.B. 50. This shows that the appeal was heard on May 8 and, after judgment had been reserved, it was decided on May 11. The decision was affirmed only because the two Lords Justices who heard it differed. Cotton L.J. was for reversing the decision, while Brett L.J., “with great hesitation and doubt,” inclined to think the decision right, and said that he was certainly not satisfied that it was wrong. This treatment in the Court of of Appeal does not add to the weight of the decision, which in any case I do not find of great assistance. The slender citation of authority in each court did not embrace any of the cases that I have cited, nor, which is more important, any of the cases that I am about to cite. The real point of the decision seems to me to he this: that if the contract is for the [*314] tenant to pay whatever is fixed by two valuers, one appointed by each party, and the landlord sues for the sum fixed by his valuer without, it seems, attempting to operate the contractual provision for determination by two valuers or their umpire, his claim will fail. I have not found, either in the reports that I have cited or in the report at first instance at 51 L.J.Q.B. 638, anything to suggest that it was not a simple case of the landlord ignoring the contract and suing without attempting to comply with it, with no question of the contractual machinery having given rise to difficulties or having broken down. This sharply contrasts with the present case, where the plaintiffs, far from ignoring the contractual provision for prescribing, are claiming that it should be complied with.

 

Third, there is a distinction where what remains undetermined goes not to the entirety of the contract but only to some subsidiary part of it. In Jackson v. Jackson (1853) 1 Sm. & G. 184 the contract was to sell some land and bleach works at a fixed price, but with the plant and machinery at a valuation: and Sir John Stuart V.-C. held that the need for a valuation was no bar to a decree for specific performance of the contract. This decision was not cited to Kindersley V.-C. in Darbey v. Whitaker (1857) 4 Drew. 134, a similar case, which concerned the valuation of fixtures in a public house; and specific performance was refused. Milnes v. Gery, 14 Ves. 400, I may say, was cited in both cases; and all three were cited in Richardson v. Smith (1870) 5 Ch.App. 648.

 

That case concerned a contract to sell an estate at a fixed price, with some furniture and other articles to be taken at a valuation. The vendor refused to appoint a valuer, and at the suit of the purchaser Stuart V.-C. decreed specific performance. On appeal, his decision was affirmed with a variation, the variation being the omission of any mention of the furniture and other articles. Lord Hatherley L.C. and Giffard L.J. refused to accept that Milnes v. Gery, 14 Ves. 400, applied to such a case. Darbey v. Whitaker, 4 Drew. 134, was distinguished on the ground that the fixtures in the public house were an essential part of the contract, whereas the furniture and articles in the case before them were comprised in a minor and subsidiary part of the agreement which was not at all essential. In Axelsen v. O’Brien (1949) 80 C.L.R. 219, 226, Dixon J. distinguished between what is an essential part of the contract and what is merely a subsidiary means of carrying it into effect.

 

Fourth, it is clear that where a contract has been partly performed, the court is far more reluctant to hold that some provision in it that depends on an act or decision of a third party is void or ineffective than if there has been no performance and the contract is still wholly executory. Thus in Dinham v. Bradford (1869) 5 Ch.App. 519 a partnership agreement contained a provision that on the determination of the partnership. one partner should purchase the share of the other at a valuation to be made by two arbitrators. The agreement made no provision for an umpire, and when the partnership had run its course and determined, difficulties in making the valuation not surprisingly arose. The vendor partner then claimed that the provision for purchase was not binding, and that he was entitled to have the partnership wound up in the usual way: but both Stuart V.-C. and, on appeal, Lord Hatherley L.C. rejected this claim. Lord Hatherley said, at p. 523: [*315] “This case is not like that of the sale of an estate the price of which is to be settled by arbitration, but is a case in which the whole scope and object of the deed would be entirely frustrated if the court were to apply the well-known doctrine to the present state of circumstances. In cases of specific performance the matter is very plain and simple. One person agrees to sell his estate in a given way, and no rights are changed by the circumstance of that method of selling the estate having failed. The estate remains where it was, and the money where it was. But here is a man who has had the whole benefit of the partnership in respect of which this agreement was made, and now he refuses to have the rest of the agreement performed, on account of the difficulty which has arisen. It is much more like the case of an estate sold, and the timber, on a part, to be taken at a valuation, the adjusting of matters of that sort forming part of the arrangement, but being by no means the substance of the agreement; and in such cases the court has found no difficulty. If the valuation cannot be made modo et forma, the court will substitute itself for the arbitrators. It is not the very essence and substance of the contract, so that no contract can be made out except through the medium of the arbitrators. Here the property has been had and enjoyed, and the only question now is, what is right and proper to be done with regard to settling the price?”

 

In Hordern v. Hordern [1910] A.C. 465, a similar case, this decision was approved by the Judicial Committee.

 

With these considerations in mind, I turn to the A and C deeds. The only difficulty arises in relation to a provision which was to be carried out in the future, namely, the replanting obligation: and machinery was provided for the operation of that provision which, at the time when the deeds were executed and for many years afterwards, was perfectly certain and capable of being operated according to its tenor. The deeds have been acted upon, and apart from the replanting they have in most cases been either fully or partly performed by the Banabans and by the company or the British Phosphate Commissioners. The obligation to replant is defined as to its extent, and the only difficulty on the documents arises as to the types of trees and shrubs to be planted. In one sense that difficulty was at least potentially removed on Day 106, when Mr. Browne-Wilkinson and Mr. Vinelott made their concession about the governor being able to do what the deeds provide for the resident commissioner to do. But, of course, neither the resident commissioner nor the governor has in fact done any prescribing. Furthermore, the concession operates only in the sphere of governmental capacity, and not of obligation, whether governmental or contractual: it is merely that the governor can do it, not that he must or will.

 

There is always difficulty in applying expressions such as “minor” or “subsidiary” when used in apposition to “essential” or “entirety.” However, it seems to me that the prescription of the types of shrubs and trees is not only a minor or subsidiary part of the A and C deeds as a whole, but a minor or subsidiary part of the replanting obligation itself. That is a conclusion that I think I should reach without resort to the [*316] attitude displayed by the courts in the case of contracts partly per-formed: but with that aid I have no doubt in reaching my conclusion. It seems to me to be quite wrong that liability on the replanting obligation should be escaped or postponed by reason of difficulties over the resident commissioner. If a lessee had covenanted to redecorate the premises at the end of the term in a colour and style prescribed by X, it could not be right to allow the lessee to avoid or postpone liability merely by reason of some failure in the prescribing.

 

I think that the court has ample powers to devise means of surmounting the difficulty, which does not seem very great: for the range of trees and shrubs which are indigenous to Ocean Island and suitable for being prescribed is very far from being extensive. In Gourlay v. Duke of Somerset (1815) 19 Ves. 429 there was an agreement for a lease which was to contain all such usual and proper terms as should be judged reasonable and proper by X. Sir William Grant M.R. held that under a decree for specific performance at the suit of the lessee, the court would, where X had not prescribed the terms, substitute a reference to the master to settle them. In that case, which was discussed in Hart v. Hart, 18 Ch.D. 670, 690, 691, the lessee’s act in seeking specific performance was held to disable him from objecting that X had not prescribed the terms. Here, of course, it is not the British Phosphate Commissioners who are seeking specific performance: but I do not see why those who have already taken the benefit of an agreement should be any better off than those who are merely seeking to enforce it. Nor do I think that this is a case where, as in Richardson v. Smith, 5 Ch.App. 648, the court should simply omit the disputed matter. Where a contract is wholly executory, the omission of furniture to be taken at a valuation may well do no injustice: the vendor keeps his furniture, the purchaser keeps his money. But the position is very different when the contract has been partly performed: the omission of part of the consideration for what has already been taken would plainly be unjust.

 

In the result I consider that on this branch of the case Mr. Macdonald’s contentions are right in their essentials. I hold that the absence of any prescription of trees and shrubs is no bar to the plaintiffs’ success. If specific performance is decreed, the court will, in the continued absence of any proper prescribing, make suitable provision for the trees and shrubs to be specified: if damages are awarded instead, probably no such specifying will be needed, at all events as a separate matter. Whether any order can or should be made which will result in any trees and shrubs being prescribed by the governor is, of course, another question. Although it is primarily a matter for the Attorney-General rather than the British Phosphate Commissioners, I think it would be convenient if I dealt with it now.

 

(8) Prescription by the Governor. What is claimed against the Attorney-General is a declaration that the United Kingdom Government, acting by the Governor of the Gilbert and Ellice Islands Colony, is bound to prescribe the trees and shrubs which should be planted in accordance with the A and C deeds. Against this claim Mr. Le Quesne offered a variety of defences. The Attorney-General of England has nothing to [*317] do with the action and should not have been sued: there is no jurisdiction to make any order against him, declaratory or otherwise: even if the plaintiffs are suing the right Attorney-General and there is jurisdiction, declarations are discretionary remedies, and the discretion of the court ought to be exercised against making a declaration: and the resident commissioner undertook no contractual liability under the A and C deeds, but only a governmental duty. I think the right course is for me first to consider the nature of the duty before I consider questions ot jurisdiction and discretion.

 

The starting point is that each A and C deed is expressed to be made between the landowner of the first part (sometimes with, and sometimes without, the addition of the words “his heirs executors or assigns”), the company of the second part, and “Edward Carlyon Eliot, His Majesty’s resident commissioner in Ocean Island (hereinafter called ‘the resident commissioner,’ of the third part.” Pausing there, it is plain that the third party to the deed is a particular person holding the office of resident commissioner at the time of the deed. Unlike the C deeds, the A deeds then embark upon three recitals. The first recites the existing P and T deeds, and the second recites the agreement between the landowner and the company to extend the term of years under the P and T deeds. This is in terms of the company having requested the landowner to do this, and the landowner having consented to do it

 

“in the manner and upon the terms and conditions hereinafter appearing and subject to the concurrence of the resident commissioner being obtained to the transaction.” The third recital then runs “and whereas the resident commissioner has agreed to join in this deed for the purpose of signifying his concurrence as aforesaid.”

 

Up to this point, it will be observed, no future resident commissioner is in contemplation: “the resident commissioner,” of course, has been defined as meaning Mr. Eliot, and it is Mr. Eliot who is joining in the deed for the purpose of signifying his concurrence to the replacement of the P and T deed by the A deed.

 

When one comes to the company’s obligation to replant, the reference to the resident commissioner is in terms of “the resident commissioner for the time being in Ocean Island,” and “the said resident commissioner,” so that although this is capable of including Mr. Eliot, it is by no means confined to him. The company’s duty to replant is expressed in plain words of obligation (“shall replant”), but there are no such words for the resident commissioner’s prescribing of trees and shrubs, or forming an opinion as to a lack of prejudice to the company’s operations for the purposes of reverter. Mr. Eliot does not contract that he or future resident commissioners will prescribe or form an opinion: there is simply an assumption that this will be done.

 

Again I pause. If there were still a resident commissioner in Ocean Island, I find it impossible to see how the courts could hold him bound as a matter of contract to prescribe trees and shrubs. He has never agreed to do so, and the fact that Mr. Eliot was a party to the A deed could not impose on the present resident commissioner any contractual [*318] obligation. The resident commissioner is not incorporated, and even if the replanting clause were to be construed as implying that the resident commissioner for the time being was to be under a contractual obligation to prescribe trees and shrubs, the only person contracting to this effect would be Mr. Eliot. X may, of course, contract that Y will do something, just as he may contract that it shall rain tomorrow; and if the event does not occur he must pay damages. But the contract makes only X liable, not Y or the source of the weather.

 

I cannot see any escape from this for Mr. Macdonald by contending that Mr. Eliot contracted on behalf of the Crown, or the Crown in right of the United Kingdom, or the United Kingdom Government. There is no trace of any such basis in the A deeds, or, for that matter, outside them. The extent to which the deeds were evolved in London can have nothing to do with that. In short, not only is there no contractual obligation at all, but also such obligation as there is does not seem to me to be one which subjects the United Kingdom Government to the liability of having a declaration made that, acting by the governor of the colony, it is liable to prescribe the trees and shrubs.

 

If that is not the effect of the replanting clause of the A deeds, what is it? It seems to me that a simple and entirely adequate explanation is that the function of the resident commissioner is to be purely govern-mental. The clause is drafted on the footing that “the resident commissioner for the time being in Ocean Island” will, as part of his duties in providing for the good government of the colony, carry out the requisite prescribing and the forming of his opinion. The deed imposes no obligation, but assumes its existence. The obligation to do these acts is governmental or administrative, not contractual, and as such does not give the court jurisdiction to make the declaration claimed. In my judgment, this ground alone compels the rejection of this claim.

 

As regards the C deeds, there is an absence of the recitals that appear in the A deeds, and so there is no recital that the resident commissioner “has agreed to join in this deed for the purpose of signifying his concurrence as aforesaid,” that is, his concurrence in the transaction whereby the P and T deed is replaced by the A deed. However, for both the A and C deeds the requirements of the King’s Regulations provide ample reasons for the resident commissioner joining in the deed: and those reasons were governmental in nature. The recital in the A deeds plainly strengthens the conclusion that in the replanting clause there is nothing contractual in relation to the resident commissioner, though I do not think that any such strengthening is needed. I therefore reach the same conclusion on the C deeds as I reach on the A deeds. This part of the claim accordingly fails.

 

In those circumstances I do not propose to consider at any length the other obstacles in Mr. Macdonald’s path, although they were extensively argued and were the subject of much authority. The resident commissioner was an officer not of the United Kingdom but of the High Commission and the colony, appointed by the High Commissioner under the Pacific Order in Council 1893, article 9 (2). The term “deputy commissioner” in the Order seems in practice to have been superseded by “resident commissioner” as an abbreviation of the term “resident and [*319] deputy commissioner” which appears in an appointment made in 1893. Mr. Eliot’s appointment in 1913 shows the full form: it was made by the High Commissioner and consisted of a letter appointing Mr. Eliot resident commissioner of the Gilbert and Ellice Islands Protectorate, and a commission, enclosed with the letter, appointing him a deputy commissioner for the Western Pacific. Though not independent, the government of the Gilbert and Ellice Islands Colony was a separate government, with its own obligations, duties and funds. I have already considered this to some extent in my judgment in Ocean Island No. 2, and I shall not repeat here what I said there.

 

Mr. Le Quesne relied on Buck v. Attorney-General [1965] Ch. 745 as showing that the Attorney-General of England cannot be sued in England save in respect of the Crown in right of the United Kingdom or the Government of the United Kingdom. In that case, the action concerned the newly independent country of Sierra Leone; and, of course, the position of an independent sovereign state in this respect is by no means necessarily the same as that of a dependent colony. But Mr. Le Quesne said that this made no difference to his point: the only question was whether or not the action was in respect of the Government of the United Kingdom, or the Crown in right of the United Kingdom.

 

I do not think that the decision either of Wilberforce J. or of the Court of Appeal carries Mr. Le Quesne’s point, though some of the reasoning gives it some support. I fully appreciate, of course, that much that happened in relation to the A and C deeds happened as a result of what was decided in London; but in putting into effect what had been decided, Mr. Eliot and his predecessors were acting as officers of the protectorate or colony, and not as officers of the United Kingdom Government. In the world of company law the act of many a subsidiary company has been decided upon or advised by the parent company: but the act is still the act of the subsidiary.

 

In those circumstances it seems to me an allegation that there is a duty to prescribe trees and shrubs under the A and C deeds ought to be pursued in the jurisdiction in which the obligation is said to exist. The obligation was an obligation of the resident commissioner and is now said to be an obligation of the governor. Let it be assumed that the Government of the United Kingdom has sufficent power to direct the governor to do the prescribing: assume that power, and yet where is the obligation? How has the Government of the United Kingdom made itself liable to have a declaration made that it is obliged, through the governor, to prescribe the trees and shrubs? I do not think that it is open to a litigant to say “X is under an obligation to me. I will not sue him in the jurisdiction to which he is subject, but instead I will sue Y in another jurisdiction because, even though Y has not entered into any obligation, he has the power to compel X to carry out his obligation.” In substance, I think Mr. Le Quesne was right in saying that the wrong Attorney-General had been sued: the claim ought to have been made against the Attorney-General of the colony and not the Attorney-General of England. Chaney v. Murphy [1948] L.J.R. 1301, I may say, sufficiently indicates the difficulties in suing the Attorney-General of a colony in England, and also shows [*320] why, as a matter of discretion, the Attorney-General of a colony ought normally to be sued in the courts of that colony.

 

As might be expected, Mr. Macdonald relied upon the proposition that the Crown is one and indivisible, a proposition that I have already mentioned. His submission, coupled with Attorney-General v. Great Southern and Western Railway Co. of Ireland [1925] A.C. 754, 779, carried him to the contention that although there could be litigation between the Attorney-General of England and the Attorney-General of a self-governing Dominion on behalf of their respective governments, the proposition made it impossible for there to be litigation between the Attorney-General of England and the Attorney-General of a colony. Thus a dispute on a contract between the two governments could not, he said, be litigated. Fortunately, I do not have to decide whether this contention is right: it seems unreasonable. In Canada and Australia litigation between the Attorney-General of a Province or State and the Attorney-General of the Dominion or Commonwealth is plainly possible; and my impression was that the Attorneys-General of the various Provinces and States enjoyed a similar freedom inter se. I do not know how such manifestations fit in with the proposition: they may merely be modern facets of the ancient maxim rex est persona mixta, or they may be part of the mysteries of federation. At all events, if the proposition produces the inconvenient result for which Mr. Macdonald contends, that provides good reason for restricting the ambit of theory in the interests of the practical. Without good reason, abstract propositions ought not in these days to be allowed to fetter the court’s powers to produce fair and sensible results.

 

There was also much discussion on other subjects that I have already considered, namely, the effect of section 40 (2) (b) of the Crown Proceedings Act 1947 and the ambit of the court’s jurisdiction to grant declaratory relief. I do not propose to go over the ground again. I shall say only this. If under this head the points arose for decision, I would hold that the proposition that the Crown is one and indivisible does not suffice to carry Mr. Macdonald to the relief that he seeks. Further, on section 40 (2) (b) of the Act of 1947, I think that so far as the claim is based on some liability of Her Majesty’s Government in the United Kingdom, it would fail because no liability of that government has been established, and in so far as the claim is based on some liability of the resident commissioner or the governor, that claim arises “otherwise than in respect of Her Majesty’s Government in the United Kingdom.” I cannot accept Mr. Macdonald’s contention that section 40 (2) (b) does not exclude proceedings unless they have “no connection” with the United Kingdom Government. However widely the phrase “in respect of” is construed (a question that I have already considered), the phrase must be construed in relation to “alleged liability,” so that connections in relation to matters other than liability are prima facie of no avail.

 

Finally, as regards declaratory relief, I would unhesitatingly exercise my discretion against making the declaration sought, or any modification of it that I can conceive. The real substance of the plaintiffs’ claim is that formerly the resident commissioner, and now the governor, have been bound to prescribe the trees and plants, and have not done so. By [*321] the oblique method of suing the Attorney-General of England as representing the United Kingdom Government the plaintiffs are seeking to litigate the obligation of another person in another country who is not a party to the proceedings, without providing any adequate reason for trying to do indirectly what could be done directly. It seems to me that, in those circumstances, quite apart from other matters (including the inconveniences mentioned in Chaney v. Murphy [1948] L.J.R. 1301), it would be wrong for me to grant a declaration. It follows that the claim against the Attorney-General fails and will be dismissed.

 

I must now return to the claim against the British Phosphate Commissioners. The effect on that claim of what I have just decided is as follows. First, there will be no declaration of the governor’s obligation to prescribe the trees and shrubs, either on behalf of the United Kingdom Government or otherwise. Second, there is nothing to prevent the governor prescribing the trees and shrubs in accordance with the concession made by Mr. Browne-Wilkinson and Mr. Vinelott, if he thinks fit. Third, whether the governor should now prescribe the trees and shrubs is a governmental matter, and not a matter for this court. No doubt if he were requested by the parties to do so, he would give great weight to the request. Equally, if they requested him to abstain from doing so, he would doubtless give great weight to that request also. If he receives no request, or conflicting requests, he might well find greater difficulty in reaching a decision. But whatever happens, the decision is his to make, in relation to the duties of government. Fourth, the fact that I have held that the absence of any prescription of trees and shrubs is no bar to the plaintiffs’ success against the British Phosphate Commissioners is no doubt another matter that the governor will consider; and if the point arises, it may make it less difficult for him to decide.

 

(9) Specific performance. I now come to the remedy of specific performance. Is this a case in which an order for specific performance can and should be made? This raised a number of issues.

 

(a) UNSUITABILITY. I will take first a contention by Mr. MacCrindle that the obligation to replant is a type of obligation that is unsuitable for a decree of specific performance. He put this on the ground that the work was too complicated and experimental, and that while it was being carried out over the long period that it would take it would repeatedly raise questions of whether the complex operations were being properly carried out. On this he cited the well-known case of Wolverhampton Corporation v. Emmons [1901] 1 Q.B. 515. Mr. Macdonald met this in two ways. First, he put forward the draft order that I have already set out, thereby giving a considerable degree of greater certainty to what the court was being asked to order. Second, he cited a line of cases, beginning with Pembroke v. Thorpe (1740) 3 Swan. 437n. and running down to Jeune v. Queens Cross Properties Ltd. [1974] Ch. 97, as tending to show that such a contract was specifically enforceable.

 

In cases of this kind it was at one time said that an order for the specific performance of the contract would not be made if there would be difficulty in the court supervising its execution: see, e.g., Ryan v. Mutual Tontine Westminster Chambers Association [1893] 1 Ch. 116, [*322] especially at pp. 123, 125, 128. Sir Archibald Smith M.R. subsequently found himself unable to see the force of this objection (see Wolverhampton Corporation v. Emmons [1901] 1 Q.B. 515, 523); and after it had been discussed and questioned in C. H. Giles & Co. Ltd. v. Morris [1972] 1 W.L.R. 307, 318, the House of Lords disposed of it (I hope finally) in Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 724. The real question is whether there is a sufficient definition of what has to be done in order to comply with the order of the court. That definition may be provided by the contract itself, or it may be supplied by the terms of the order, in which case there is the further question whether the court considers that the terms of the contract sufficiently support, by implication or otherwise, the terms of the proposed order.

 

I have, of course, considered all the cases cited on this point, but I do not think that I need say much about them. In Storer v. Great Western Railway Co. (1842) 2 Y. & C.C.C. 48, Sir James Knight Bruce V.-C. adopted what I think is the modern approach on difficulties of supervision. He said, at p. 53: “The court has to order the thing to be done, and then it is a question capable of solution whether the order has been obeyed.” However, what is here of greater importance is the attitude of the courts when specific performance is claimed against defendants who have had some or all of the benefit to which they were entitled under the contract. In such a case, said Sir James Wigram V.-C. in Price v. Penzance Corporation (1844) 4 Hare 506, 508, “... the court will go to any length which it can to compel them to perform the contract in specie.” “The court,” said Sir William James V.-C. in Wilson v. Furness Railway Co. (1869) L.R. 9 Eq. 28, 33, “would struggle with any amount of difficulties in order to perform the agreement.” In such cases the court may direct a reference to the master to determine what is necessary and proper to be done, and where and by what means it is to be done: Sanderson v. Cockermouth and Workington Railway Co. (1850) 2 H. & T. 327; Sir Edward Bulwer Lytton v. Great Northern Railway Co. (1856) 2 K. & J. 394.

 

In this field, however, I must consider the warning to be found in Wilson v. Northampton and Banbury Junction Railway Co. (1874) 9 Ch.App. 279. There, a railway company contracted with a landowner, whose land they were taking, to construct on his land “a station.” The landowner sued for specific performance, but both Sir James Bacon V.-C. and the Court of Appeal in Chancery held that justice required that instead of a decree of specific performance there should be an inquiry as to damages. The basic difficulty lay in the crude simplicity of the words “a station,” with nothing to indicate the nature, materials, style, dimensions or anything else; and it was these difficulties which seemed to have been decisive with Bacon V.-C.

 

On appeal, a number of the authorities that I have mentioned on the court struggling with difficulties were duly cited; but in addition to the indefiniteness of “a station,” the court referred to the further difficulty of there being nothing in the contract which obliged the company to use the station when constructed. The main significance of the decision is, I think, that the court will decree specific performance only if this will do more perfect and complete justice than an award of damages. In [*323] assessing damages the court could consider a number of reasonable probabilities, both as to the size and quality of the station and as to its use, whereas a decree for specific performance must either require a thing to be done or else omit it: the order cannot be made on the basis of reasonable probabilities. The decision also seems to me to show that uncertainties which make the court hesitate to order specific performance may well be no bar to an award of damages, especially as damages may be awarded on the footing of resolving uncertainties in favour of the innocent party and against the wrongdoer.

 

For the reasons that I have given, I think that there is considerably less uncertainty about the meaning of the word “replant” in the A and C deeds than about the meaning of “a station” in Wilson v. Northampton and Banbury Junction Railway Co., 9 Ch.App. 279. I certainly do not consider that the case against decreeing specific performance on this score is nearly so strong in the present case as it was in that case; and if in the circumstances it is right to do so, I should certainly seek to struggle with any amount of difficulties to compel the British Phosphate Commissioners to replant in accordance with the A and C deeds under which they have taken the benefit. The complexities of specific performance are weighty and discouraging, but by themselves I do not think that they suffice to induce the court to refuse specific performance. At the same time, I can see considerable advantage in making an award of damages instead. In that state of affairs I think that I must consider the other circumstances of the case before reaching any conclusion on this matter.

 

(b) PART OWNERSHIP. I now come to an obstacle to specific performance in the case of some but not all of the plots concerned. It will be remembered that in the draft order that Mr. Macdonald put forward, a distinction was drawn between plots for which he sought an unqualified declaration that the replanting obligation ought to be specifically performed and carried into execution, and the plots for which the declaration was sought “should all the owners of such land wish it.” Six of the 15 plots fell into this latter category.

 

This distinction arose out of the difficulty that Mr. Macdonald encountered when it appeared that in the case of certain plots of land the plaintiffs who had claimed them admittedly had not shown prima facie evidence that all the persons who owned, or were or might be interested in, the plots were before the court as plaintiffs or defendants. Mr. Macdonald put his procedural house in order on Day 101 by seeking an order under R.S.C., Ord. 15, r. 4 (2), giving liberty to the plaintiffs concerned to continue the action notwithstanding that they might be entitled to the relief claimed jointly with others, whether or not they were those specified in the schedule to the order. The application encountered no opposition in substance, though Mr. Browne-Wilkinson entered caveats in relation both to specific performance and to damages: and I made the order. With one exception, the plots of land coincide with those for which Mr. Macdonald sought the qualified decree for specific performance: but plot A.233 appears in the former but not in the latter, and C.120 in the latter but not in the former. I do not understand why [*324] this is so, but doubtless this point can if necessary be cleared up in discussing the order to be made.

 

The point of substance that arises in these circumstances may be expressed as follows. Can one of several co-owners of a plot of land obtain a decree for the specific performance of a contract relating to that land when the other co-owners are not only not seeking specific performance but have not even been joined as defendants? Counsel were not able to put before me any reported authority which bore on the point either directly or indirectly. There is a sentence in Fry on Specific Performance, 6th ed. (1921), p. 75, which states the general rule as being that “all the parties to the contract should be parties to the suit and no one else”; but although the authorities cited support the last four words of the proposition, they provide little or no support for the remainder of it.

 

In Mr. Macdonald’s resourceful attempt to meet the difficulty by seeking the qualified order that I have mentioned, the proposed order acquired the name of a “conditional Hasham order”; for in effect it consisted of a conditional version of the order made in Hasham v. Zenab [1960] A.C. 316. This form of order, used in a case where the plaintiffs sued for specific performance before the date on which the contract was to be performed, declares that the contract ought to be specifically performed and carried into execution, but omits the consequential directions as to the steps to be taken to perform it. As has been seen, Mr. Macdonald’s adaptation consisted of adding to the declaratory words the phrase “should all the owners of such land wish it.” The result, Mr. Macdonald said, was to leave it to each of the plaintiffs who succeeded in obtaining an order in this form to take the appropriate steps to obtain the concurrence of the other co-owners of the particular plot.

 

I feel no doubt that it would be wrong to make such an order. It may be that in exceptional circumstances such an order could properly be made, though I doubt it. But as a matter of principle it seems to me that no order for specific performance, even in the limited Hasham form should be made at the suit of one co-owner in proceedings to which any other co-owner is not a party. Quite apart from the position brought about by the 1925 property legislation in the case of co-ownership in England, it seems to me that the order proposed is objectionable in at least two respects. First, what are the views of the absent co-owners? The plaintiff may desire specific performance: but the other co-owners might prefer damages, or even not wish to sue at all. Why should the court be set in motion and make an order at the behest of one co-owner when the other co-owners, who may have a majority interest, may desire nothing of the sort? It makes it no better to say that one is merely seeking a declaration as to the rights of all.

 

Second, the conditional nature of the proposed order which would flow from the words “should all the owners of such land wish it” seems to me to be most undesirable. The order provides no machinery for the ascertainment of the other co-owners, or the expression of their wishes. Further, even if such machinery were to be provided, I think that it would be wrong for the court to sanction the conduct of proceedings for specific performance on the footing that at the conclusion of the case [*325] the defendant would still not know whether the contract was to be specifically performed, and would have to await the working of the machinery. At the end of it all the result might well be that the defendant would find that the specific performance that he had been resisting was no longer being sought, and that instead the plaintiffs were together seeking the damages that, perhaps, he had all along been willing to pay. On these two grounds alone I would refuse any order for specific performance in relation to all land in this category.

 

In my judgment, the law is as follows. First, a plaintiff who seeks specific performance can obtain it only if there is before the court every other person entitled to join with him in enforcing the contract. Second, if that is not the case, he cannot cure the defect by seeking a form of order which leaves the views of those whom he ought to have brought before the court to be ascertained after he has involved the defendant in contesting an action for specific performance.

 

(C) INDIVIDUAL PLOTS. I now come to a wider issue. It will be remembered that in Mr. Macdonald’s draft order, 15 plots of land appeared in the schedules, the claim for the other two of the 17 plots in this part of the case having been abandoned. Two of the 15 plots in the schedules are plots which were never the subject of A or C deeds, and the plaintiffs’ claim is now admittedly for only a part of these plots, being about half an acre in one case and three-quarters in the other. The remaining 13 plots are all the subject of A or C deeds. The two largest are each over 13�4 acres, while the six smallest are each a mere quarter or third of an acre. Their total area is about 111�4 acres.

 

As may be seen from plan A, which is annexed to the statement of claim, these plots are scattered about in various parts of the island, with none of them contiguous to any other of them. The owners of the contiguous plots may themselves wish to have the replanting obligation specifically performed, or they may prefer damages: they are not parties to these proceedings and I do not know what they want. Indeed, it is not at all clear that even the plaintiffs to this action understand about the replanting obligations. Five of them (the second, third, sixth, seventh and tenth) all said in evidence that they thought that if they won the action, the whole island would be levelled and replanted. In fact, as I have emphasised, the most that has been contended for is that there is an obligation to level and replant nearly one sixth; and this action relates only to a dozen acres or so at most. Nor do I think that the plaintiffs all really appreciated that what was being claimed for them was an order that would necessarily result in a massive road construction programme. The attractions to the owner of a plot which is a mere one third or one quarter of an acre in extent in having a large part of it made into segments of roadways cannot be very great.

 

However that may be, the main point seems to me to be inescapable. Let me ignore the difficulties arising from the plots affected by the conditional Hasham order, and let me assume (contrary to my judgment) that the obligation to replant goes the full width claimed by Mr. Macdonald for the whole area for which he contends. How, at the suit of 10 plaintiffs owning scattered plots with a total area of a dozen acres [*326] or so, could it be right to make the order sought? The scheme put forward treats the whole area of the claim globally, and not plot by plot. The British Phosphate Commissioners, of course, treated the area globally, as I have already said, but that cannot deprive the owners of individual plots of the right of each to decide for himself or herself what remedy to seek. Let a mere handful of the landowners who are not parties to these proceedings say that they want damages and not specific performance, and the global proposals for replanting put forward in evidence become impossible of achievement. If all the landowners had been plaintiffs, or if, to avoid that, they had all transferred their rights and their land to the Council of Leaders on suitable trusts, and the council had sued for specific performance, matters would have been very different. But that is not the case.

 

If the draft order is construed on the plot-by-plot basis which it literally expresses, I do not see how the evidence of global restoration can sensibly be adapted to it, or how it can be carried out according to its tenor. Thus paragraph (f) requires the defendant British Phosphate Commissioners to “provide sufficient access” to the plots in the fifth schedule to enable the coconuts, pandanus and almonds to be planted and harvested, and also to “demolish all pinnacles necessary for this purpose.” Plots C.109, C.179 and C.183 are all in this schedule; each is about one third of an acre, and each is surrounded by other plots which are not included in the claim for specific performance. How are the defendants to comply with the order? It cannot be suggested that they must buy enough of the surrounding plots to enable them to demolish pinnacles and construct a road to these island sites. The draft order, if I may say so, seems to me to be an ingenious attempt to link the evidence on the global proposals to proceedings brought on a plot-by-plot basis: but the linkage is, in my judgment, far too tenuous and unreal to bear examination.

 

I have said enough to make it clear that in my judgment this is not a case for specific performance on the basis claimed by the plaintiffs. If, as I have held, the obligation to replant is one that does not involve any levelling of pinnacles, construction of roads or importation of soil, but merely involves planting in a few feet of phosphate beside the pinnacles, it could be contended that this should be ordered to be done. I would not accept that contention. It is old law that in specific performance cases “this court will not make any order in vain”: see New Brunswick etc. Co. v. Muggeridge (1859) 4 Drew. 686, 699, per Kindersley V.-C. The usual instances of cases of the courts refusing to make orders that would be useless are cases where the interest that will be obtained by the decree is a very short tenancy, or a partnership which could promptly be determined by the other party.

 

I do not, however, think that the refusal of equity to make futile orders is limited to cases of transient interests. In this case I cannot see what utility there would be for anyone in providing that a small number of isolated plots should be replanted with coconut and other trees in the hollows besides the pinnacles. It is highly improbable that the coconuts would ever fruit, and the plots would be surrounded by other plots not replanted in this way which would make access difficult or impossible for [*327] the owner. It would be a sheer waste of time and money to do this; and I do not think that the court ever should, in its discretion, make an order which it is convinced would be an order of futility and waste. Indeed, in view of the decision in Wilson v. Northampton and Banbury Junction Railway Co., 9 Ch.App. 279, that I have already considered, I think that damages would be not only a perfectly adequate remedy, but also far more suitable. If the owners of the plots want to spend the money in having them replanted, then of course they can do so: but this expenditure will be of their own volition, and not by order of the court. In short, if I leave on one side the cases of part-ownership, my conclusion is that although the court could decree specific performance, in the exercise of a proper judicial discretion it ought not to do so.

 

(d) GENERAL REPLANTING. In view of the pendency of Ocean Island No. 3, it might be of assistance if I reverted to the problems of replanting, and said something more about them, though of course this will in no way be binding in that case. If I assume that the true obligation of the defendant British Phosphate Commissioners is to replant the whole 250 acres in the manner claimed, the result would be that in the end a little less than one sixth of the island would have been levelled and replanted. That one-sixth would consist of a criss-cross pattern of some 80 miles of roadway, nine feet wide, with the circular baskets of earth beside them in which coconuts would be growing: and there would also be almonds and pandanus.

 

How long it would take to reach that state of affairs is a matter of considerable doubt, even assuming no difficulty in the importation of the vast amount of soil required. Mr. King, the engineering expert called by the defendant British Phosphate Commissioners, put in a detailed estimate which showed that the engineering tasks would take over 17 years and cost a little under $A50 million: see exhibits D.15 and the revised version of D.16. As I have indicated, these figures were based on the baskets containing a two foot depth of soil and not the six feet now claimed. As a result of skilful cross-examination by Mr. Macdonald and the making of favourable assumptions (including the continuance of phosphate operations on Ocean Island for long enough to ensure that phosphate ships which had discharged their loads in Australia would be available throughout to bring the requisite earth back), the cost was reduced to some $A32 million, and the period to a little over four years. Plainly there are very large margins for error in all these figures, and I think that both these reduced figures would in the event be increased quite substantially. However, if they are accepted as they stand, due allowance would also have to be made for the time required for the coconuts to grow and begin to fruit. That involves the unpredictable frequency of droughts on an island which Senator Walker accepted as having an annual rainfall which, even if evenly spread through the year, was at the bottom end of the rainfall requirement for coconuts. Droughts, of course, might either kill the trees, or else postpone their fruiting. In a normal year, he said, the coconut trees growing naturally on the island could possibly produce one fifth of a good yield; they had a very low yield.

 

One thing is clear. Even if the engineering was accomplished so that [*328] the coconuts could be planted after five years, the operation would not produce a single coconut for at least 15 years, and more probably 20 years, or more; and it would be at least another five years before the trees came into full bearing, though even then they would probably produce nuts which were only half the normal size. Senator Walker’s view was that if the nuts got a good start and there were average conditions (the “if” is noteworthy), the trees would start bearing after 12 to 14 years and come into full bearing in 18 to 20 years: and to those periods must be added the period required for the engineering. Nor would the operation achieve a cosmetic effect that would make the island look remotely like it once did, either as a whole or in the one sixth that is the most that would be replanted. As I have said, Senator Walker agreed that the result of carrying out his proposals would not look very beautiful, and that in terms of return for expenditure the whole exercise was absurd. Coconuts could be imported, or coconut plantations elsewhere could be bought and managed, which at a mere fraction of the cost would produce the same yield of coconuts. I may add that I have considered a number of variations that were suggested, such as halving the length of the roads; but although these of course affect important details, I do not think that they alter the substance.

 

I intend in no way to prejudge anything that may arise for decision in Ocean Island No. 3: but I think that it may be helpful if I say that unless the evidence in that case is very different from the evidence in this case, I can foresee very grave difficulties in persuading any court that an order for specific performance would be in the least appropriate. On any footing that I can conceive the time and the cost would be very great, and wholly disproportionate to the meagre and long-delayed benefit that might in the end be achieved.

 

If I now leave this wider issue and return to the case before me, I think I have made it plain that I do not consider this to be a case for specific performance. The claim for specific performance seems to me to fail completely. Damages are an adequate remedy; and the case is one in which the court’s discretion ought to be exercised against decreeing specific performance.

 

(10) Damages. The result, therefore, is that in my judgment the appropriate remedy for the plaintiffs is that of damages. Any plaintiff who has sufficiently established his or her title to land which was the subject of an A or C deed and has ceased to be used by the British Phosphate Commissioners is entitled to damages for the failure to replant that land according to the limited obligation that I have held to exist. I must accordingly consider the basis on which damages should be assessed. On this, counsel concurred in the view that it was very difficult to find any direct authority.

 

(a) BASIS. Mr. Macdonald’s primary contention was that the measure of damages was the cost of doing the work of replanting, limited to $A73,140 per acre. His secondary contention was that the measure of damages was a suitable proportion of the cost of replanting, to represent the sum which the British Phosphate Commissioners would have paid in order to be released from the obligation to replant. In a helpful summary [*329] of his submissions on this part of the case which he put in on Day 101, he worked out some figures on the assumption that the one third for which he had contended in argument was the suitable proportion. These contentions were, of course, made in relation to the extensive replanting obligation that he claimed and I have rejected; but in principle they must apply to the lesser obligation that I have held to exist.

 

Mr. MacCrindle, on the other hand, contended that even if the action were not premature by reason of the failure of the resident commissioner to specify trees and shrubs, and was not barred on any other ground, the damages should be either nominal or minimal. His basic submission was that the proper measure of damages was not the cost of doing the work, but was the diminution in the market value of the land by reason of the work not having been done. Mr. Macdonald’s secondary contention, based on what the British Phosphate Commissioners would have paid for being released from the obligation to replant, had not been put forward at that stage. But Mr. Browne-Wilkinson met it on behalf of the British Phosphate Commissioners in his speech in reply; and he contended that this mode of assessment was inapplicable in cases such as this.

 

I shall take first the rival contentions of the cost of doing the work, and the diminution in the market value. The two approaches are exemplified by Joyner v. Weeks [1891] 2 Q.B. 31 and Wigsell v. School for Indigent Blind (1882) 8 Q.B.D. 357 respectively: both were cited to the House of Lords in Conquest v. Ebbetts [1896] A.C. 490. In Joyner v. Weeks, the action was by a landlord against the tenant, brought not during the term but at the end of it, for damages for breach of a covenant to keep the demised premises in repair, and to deliver them up in repair. The Court of Appeal held that the ordinary rule was that the damages recoverable were the cost of doing the repairs, and that there was nothing in the facts of the case which made that rule inapplicable. The tenant had relied upon the fact that the landlord, during the term, had relet the premises as from the end of the term at an increased rent to a new tenant who covenanted to repair and to pull down and alter part of the premises: but this was held to make no difference. I know that in Westminster (Duke) v. Swinton [1948] 1 K.B. 524, 533, it was said that in Joyner v. Weeks it had been held that “the cost of repairs was the measure of damages in all cases,” and that in the latter case Lord Esher M.R. had said that he was very much inclined to think that this was an absolute rule. But he expressly refrained from holding that this was so; and what both he and Fry L.J. actually decided was that it was “the ordinary rule,” or “the ordinary prima facie rule,” and that it was subject to there being no circumstances which made it inapplicable: see Joyner v. Weeks [1891] 2 Q.B. 31, 43, 44, 47.

 

Wigsell’s case, 8 Q.B.D. 357, related to the purchase of 12 acres of land intended for a projected asylum. In the conveyance the purchasers covenanted with the vendor that they would keep their land enclosed on all sides which abutted on the vendor’s land with a brick wall or an iron railing seven feet high. The conveyance also gave the vendor, his heirs and assigns a right of pre-emption if the purchasers did not require the land for a blind school or asylum, and desired within 10 years to sell [*330] all or any of it. Six years later the purchasers decided not to use any of the land for their projected asylum, and offered it back to the executors of the vendor, who had died in the meantime; but the offer was declined. No wall or fence had been erected, and the executors then sued the purchasers for damages for breach of covenant. The cost of erecting the wall or fence was far greater than the diminution in the value of the vendor’s land by reason of the breach.

 

In delivering the judgment of a Queen’s Bench Divisional Court, consisting of himself and Cave J., Field J. said, at pp. 363-364, that if the plaintiffs had really wished to have the wall built, they would have sued for specific performance; and if the court had thought damages an inadequate remedy, it could have ordered specific performance. Instead, the plaintiffs had elected to sue for damages. They would be under no obligation to spend the money on building the wall, and probably they would never think of such expenditure, which seemed to the court to be a simple waste of money. The effect of suing for damages was to entitle them to the amount of the difference between the state of the plaintiffs on the breach of the contract and what this would have been if the contract had been performed. The case, I may say, had come before the court on a rule to set aside the verdict of a jury on a writ of inquiry; and a rule absolute for a new inquiry was made.

 

Conquest v. Ebbetts [1896] A.C. 490, like Joyner v. Weeks [1891] 2 Q.B. 31, was a landlord and tenant case. The plaintiff was a lessee who sued his sublessee and an assignee of the sublease for damages for breach of the repairing covenant in the sublease. When the case was heard the lease and the sublease each had some 31�2 years to run. As appears from the report of the case in the Court of Appeal (Ebbetts v. Conquest [1895] 2 Ch. 377, 383), damages had been assessed by taking the cost of doing the repairs, which was £1,500, and then discounting it to £1,305 because of the length of time that the term had to run; and this was held to represent the reduction in the value of the lessee’s reversion by reason of the breach of the sublessee’s covenant.

 

Both the Court of Appeal and the House of Lords held that this was right in principle. Lord Herschell, with whom Lord Macnaghten and Lord Morris agreed, considered the cost of doing the repairs and the amount of the injury to the reversion as rival methods of determining the damages; and he said in effect that each in a proper case could be the correct method. The real point of the case was the effect of the lessee’s liability to the head lessor under the repairing covenants in the head lease, a matter of which the sublessee had notice. If the lessee sold his leasehold reversion, he could only sell it subject to this liability; and the difference between the premises being in repair and their being out of repair represented the diminution in the value of his reversion. It had been contended that at the end of the term the head lessor would accept a lesser sum for the non-repair because he would want to use the site for something different, and so would not want the buildings repaired: but Lord Herschell rejected such possibilities in assessing damages as between the lessee and a sublessee in breach of his obligations.

 

Pausing there, it is clear that in some cases of a contract to do work [*331] to the plaintiff’s land the measure of damages for breach is the reduction in value of the plaintiff’s interest in the land, and in other cases it is the cost of doing the work. But which? I have been unable to find any clear statement of principle in the cases or books put before me, or in other sources that I consulted. Mr. MacCrindle placed some reliance on McGregor on Damages, 13th ed. (1972), p. 526. In dealing with breaches of covenant by a lessee this states that

 

“In covenants to build, to mine or to farm, the measure of damages is the amount of the diminution in the market value of the premises, and this will be so whether the action is brought during the term or at its determination.”

 

The only alternative that could command any support is said to be the cost of executing the building, mining or farming that the lessee has wrongly failed to do; and the reason for rejecting this is based on what Field J. said in Wigsell v. School for Indigent Blind, 8 Q.B.D. 357, 363-364, in the passage relating to the plaintiff’s failure to sue for specific performance that I have already mentioned.

 

I can see many difficulties in this. I should watch with interest the progress of an action for specific performance of a contract to farm or to mine; and if a plaintiff decided to sue for damages instead, I think most Chancery practitioners would ascribe his decision to prudence rather than a choice between available remedies. For contracts to build, I do not understand how or why a covenant to build and a covenant to repair can or should be distinguished for this purpose: yet Joyner v. Weeks [1891] 2 Q.B. 31 is clear authority for the cost of repairing being the normal measure of damages at the end of the term for breach of a covenant in a lease to deliver up the premises in repair. I do not think that footnote 69 on p. 528 in McGregor on Damages is sound or is supported by the authority cited. In any case, I doubt very much whether a suitable test exists or can be devised which depends on what it is that has been contracted to be done. Certainly I do not think that Wigsell’s case can be generalised into supporting the proposition in McGregor on Damagesthat I have mentioned. In my attempts to pursue the point it emerged that Wigsell’s case seems to be surprisingly modest in its judicial progeny. Wright J. cited it in the Divisional Court in Joyner v. Weeks [1891] 2 Q.B. 31, 38, and I found a discussion of it by O’Connor L.J. in Hepenstall v. Wicklow County Council [1921] 2 I.R. 165, 184, a case that was considered and distinguished in Murphy v. Wexford County Council [1921] 2 I.R. 230. But on an admittedly tenuous search that is all that I found.

 

For reasons that will appear, I do not think that the question falls to be determined by whether the plaintiff sues for damages or whether he sues for specific performance, even though McGregor on Damagesappears to put the matter on this point, at any rate to a considerable extent: see at pp. 493, 526. Plainly it may be important whether or not the plaintiff is claiming specific performance: but I do not think it can be decisive. Suppose that a recluse sells some of his land on terms that the purchaser will erect a high wall that will enclose most of the vendor’s land: the wall is not built, and so the vendor builds a wall himself and then [*332] sues for damages. His land may be worth more on the market without the wall than with it, but I cannot see that either this or the fact that he is not suing for specific performance ought to debar him from obtaining damages equal to the cost of building the wall. Whether the wall to be taken for this purpose is the actual wall, if reasonable, or the contractual wall, I need not discuss. If, without erecting the wall, he sues merely for damages, but establishes that he will spend the money on erecting a wall, preferring to have nothing more to do with the faithless purchaser, I do not see why the result should not be the same.

 

Again, some contracts for alterations to buildings, or for their demolition, might not, if carried out, enhance the market value of the land, and sometimes would reduce it. The tastes and desires of the owner may be wholly out of step with the ideas of those who constitute the market; yet I cannot see why eccentricity of taste should debar him from obtaining substantial damages unless he sues for specific performance. Per contra, if the plaintiff has suffered little or no monetary loss in the reduction of value of his land, and he has no intention of applying any damages towards carrying out the work contracted for, or its equivalent, I cannot see why he should recover the cost of doing work which will never be done. It would be a mere pretence to say that this cost was a loss and so should be recoverable as damages.

 

In the absence of any clear authority on the matter before me, I think I must consider it as a matter of principle. I do this in relation to the breach of a contract to do work on the land of another, whether to build, repair, replant or anything else: and I put it very broadly. First, it is fundamental to all questions of damages that they are to compensate the plaintiff for his loss or injury by putting him as nearly as possible in the same position as he would have been in had he not suffered the wrong. The question is not one of making the defendant disgorge what he has saved by committing the wrong, but one of compensating the plaintiff. In the words of O’Connor L.J. in Murphy v. Wexford County Council [1921] 2 I.R. 230, 240:

 

“You are not to enrich the party aggrieved; you are not to impoverish him; you are, so far as money can, to leave him in the same position as before.”

 

Second, if the plaintiff has suffered monetary loss, as by a reduction in the value of his property by reason of the wrong, that is plainly a loss that he is entitled to be recouped. On the other hand, if the defendant has saved himself money, as by not doing what he has contracted to do, that does not of itself entitle the plaintiff to recover the saving as damages; for it by no means necessarily follows that what the defendant has saved the plaintiff has lost.

 

Third, if the plaintiff can establish that his loss consists of or includes the cost of doing work which in breach of contract the defendant has failed to do, then he can recover as damages a sum equivalent to that cost. It is for the plaintiff to establish this: the essential question is what his loss is.

 

Fourth, the plaintiff may establish that the cost of doing the work constitutes part or all of his loss in a variety of ways. The work may [*333] already have been done before he sues. Thus he may have had it done himself, as in Jones v. Herxheimer [1950] 2 K.B. 106. Alternatively, he may be able to establish that the work will be done. This, I think, must depend on all the circumstances, and not merely on whether he sues for specific performance. An action for specific performance is doubtless one way of manifesting a sufficient intention that the work shall be done: but there are others. Thus the plaintiff may be contractually bound to a third party to do the work himself, as in Conquest v. Ebbetts [1896] A.C. 490. Other cases of what may be called extraneous coercion may easily be imagined, such as the enforcement by a local authority of some statutory obligation.

 

I do not, however, think that this head is confined to cases of coercion. I have already mentioned the case of the plaintiff who does the work himself before he sues: I cannot see that it matters that he did it without being under any obligation to do it. After all, he contracted for valuable consideration that it should be done. Suppose, then, that he has not done it but states that he intends to do it. Of course, he may not be believed: but if he is, why should not his loss be measured by what it will cost him to do the thing that the defendant ought to have done but did not do? In some cases, the circumstances may demonstrate a sufficient fixity of intention in the plaintiff’s resolve, as where the property is his home and will be highly inconvenient or nearly uninhabitable until the work is done. In such a case I cannot think that it matters that the house could be made convenient or inhabitable by doing cheaper or less idiosyncratic work: what matters is the work to which the plaintiff is entitled under the contract.

 

The point may be illustrated by what has come to be settled law in the case of a tenant’s repairing covenant in a lease. A lessor who sues during the term for breach of such a covenant will be entitled to damages for the diminution in the value of his reversion but not for the cost of doing the repairs; he will, of course, normally have no right to enter the premises during the term to do them himself. But if he sues at the end of the term, he can usually (subject to section 18 of the Landlord and Tenant Act 1927) recover the cost of doing the work that he is then able to do or have done; and usually he will do it in order to be able to relet the premises in a state to command the rent that is appropriate to premises in good repair. In other cases, if the circumstances fail to indicate sufficiently that the work will be done, the court might accept an undertaking by the plaintiff to do the work; and this, as in the business tenancy cases, would surely “compel fixity of intention.” Whatever the circumstances, if the plaintiff establishes that the contractual work has been or will be done, then in all normal circumstances it seems to me that he has shown that the cost of doing it is, or is part of, his loss, and is recoverable as damages. Even if it is open to question whether the plaintiff will do the work, the cost of doing it may afford a starting figure, though it should be scaled down according to the circumstances, the real question being that of the loss to the plaintiff: see Smiley v. Townshend [1950] 2 K.B. 311, 322, per Denning L.J. In the words of Denning J. in Westminster (Duke) v. Swinton [1948] 1 K.B. 524, 534, “The real question in each case is: What damage [*334] has the plaintiff really suffered from the breach?” In the end, the question seems to me to come down to a very short point. The cost is a loss if it is shown to be a loss.

 

There is a fifth point. In most cases there can be no certainty about the doing of work which has not yet been done. A lessee bound by covenant to his lessor to do the work may be released from his covenant, or may have his liability compounded on payment of less than the cost of doing that work, as was envisaged by Lord Herschell in Conquest v. Ebbetts [1896] A.C. 490, 494. The local authority may decide not to enforce the statutory obligation, or the court may release a litigant from his undertaking. A plaintiff who had a firm and settled intention to do the work may later find that supervening events have weakened or destroyed his resolve.

 

I do not think that the plaintiffs’ rights are affected by any such absence of certainty. Just as Lord Herschell, in the circumstances of Conquest v. Ebbetts [1896] A.C. 490, 495, denied the defendant the right to “demand that a speculative inquiry shall be entered upon as to what may possibly happen and what arrangements may possibly be come to,” so I think the court should refuse to speculate on other possibilities of this sort. The court ought to be ready to act on evidence which, without assuring certainty, nevertheless carries conviction. In Wigsell v School for Indigent Blind, 8 Q.B.D. 357, of course, the only conviction that could have existed was that the wall would never be built. The object of requiring the wall to be built was plainly to protect the vendor’s land against the proposed asylum. The proposal to build an asylum had been abandoned, and by suing for damages and not specific performance the vendor’s executors were doing little more than recognising the reality that the wall would never be erected. On that footing the executors could not establish that the cost of building the wall represented any loss that they had suffered.

 

These five points seem to me to be supported in parts by the authorities cited, and to be at least consistent with them. I also think that they are coherent, and, what is more, sound in principle; and they offer an intelligible explanation of what at first sight appears to be not readily explicable divergences of approach. But I must give warning that they have not undergone the testing and refinement that comes from dissection in argument, and that there may well, in so large a subject as damages, be other relevant authorities that in any such argument counsel would have cited. On the whole I do not think that I would be justified in restoring the case for further argument on the subject, and so, doing the best that I can on the material before me, I shall act upon the conclusions that I have reached.

 

Does the Chancery Amendment Act 1858 (Lord Cairns’ Act) make any difference? Mr. Macdonald submitted that where a contract was one in which the court can order specific performance but refuses to do so, the damages that would be awarded in substitution for specific performance under the Act must be a real substitute; therefore, he said, in this case they should equal the cost of doing the work. In support he cited Leeds Industrial Co-operative Society Ltd. v. Slack [1924] A.C. 851 and Wroth v. Tyler [1974] Ch. 30. I readily accept this proposition [*335] as far as the word “therefore”; but I cannot see that the conclusion follows. When the court refuses to order the doing of some expensive but largely futile work, the difference in the value of the property to the plaintiff with the work done and without it may be great or it may be small. He may or may not be able to establish that although on the market the difference is negligible, there are reasons, whether idiosyncratic or not, why it is a matter of great moment to him. In damages one always comes back to the fundamental question, that of the loss or injury that the plaintiff has suffered, and the sum of money that will compensate him for it. Whatever may be the position in other cases, I cannot see that on the facts of this case it makes any difference whether the damages are awarded at common law or under the Act.

 

I turn to Mr. Macdonald’s secondary contention, founded on a suitable proportion of the cost of replanting as representing what the British Phosphate Commissioners would have paid to be released from their obligation to replant. This contention did not emerge until very late in the proceedings. It was on Day 96 that Mr. Macdonald first cited Wrotham Park Estate Co. Ltd. v. Parkside Homes Ltd. [1974] 1 W.L.R. 798 and Bracewell v. Appleby [1975] Ch. 408, on which he relied. In the former case, houses had been built on land without the prior approval of the plaintiffs which a restrictive covenant made requisite. On the facts of the case a mandatory injunction to demolish the houses was refused, and damages in substitution therefor were held to be recoverable under the Act of 1858. Brightman J. resolved the difficult question of the appropriate quantum of damages by holding that the plaintiffs should recover 5 per cent. of the defendants’ expected profit from their venture. In Bracewell v. Appleby, Graham J. applied the same principle where the right in question was not a consent under a restrictive covenant, but an easement of way.

 

I find great difficulty in seeing how these cases help Mr. Macdonald. If the plaintiff has the right to prevent some act being done without his consent, and the defendant does the act without seeking that consent, the plaintiff has suffered a loss in that the defendant has taken without paying for it something for which the plaintiff could have required payment, namely, the right to do the act. The court therefore makes the defendant pay what he ought to have paid the plaintiff, for that is what the plaintiff has lost. The basis of computation is not, it will be observed, in any way directly related to wasted expenditure or other loss that the defendant is escaping by reason of an injunction being refused: it is the loss that the plaintiff has suffered by the defendant not having observed the obligation to obtain the plaintiff’s consent. Where the obligation is contractual, that loss is the loss caused to the plaintiff by the breach of contract.

 

In the present case, the loss caused to the plaintiffs by the British Phosphate Commissioners’ failure to replant is the diminution in the value of their land resulting from that failure, or, if it is established that the land would be replanted, the cost of replanting. In the latter case, no doubt, the British Phosphate Commissioners might well have been willing to pay something to be released from their obligation to replant, though that something would probably be rather [*336] less than the total estimated cost of replanting. But the point is that not unless the British Phosphate Commissioners would be liable to replant or pay damages equal to the cost of replanting would there be any liability from which the British Phosphate Commissioners would seek release on the basis of paying a sum equal to the discounted cost of replanting. If Mr. Macdonald establishes that liability, he does not need his less favourable secondary contention: if Mr. Macdonald fails to establish that liability, there is no foundation on which to base his secondary contention. Of course, until it has been determined whether or not some burden exists, the person who would be subject to that burden may always be willing to pay something to be relieved of the risk: but I do not think that this can affect the measure of damages in the case which determines that the burden does exist. In any case, the two authorities in question seem to me to be a long way away from a case where the issue is not one of invading the property rights of another without consent, but of breach of a contract to replant his land.

 

(b) QUANTUM. I return, then, to Mr. Macdonald’s primary contention. Have the plaintiffs shown that the cost of replanting represents the loss to them caused by the failure to perform the replanting obligation? Only one answer to that question seems possible, and that is No. The plaintiffs own small scattered plots of land; there is nothing to establish that the owners of neighbouring plots of land, who are not parties to these proceedings, would procure the replanting of their plots rather than keep any damages for themselves or other purposes; the Banabans are now well established in Rabi, over 1,500 miles away; and there they have an island over 10 times the size and unaffected by mining, as contrasted with the much smaller Ocean Island with some five-sixths of it mined.

 

Let me suppose that these circumstances had been explicitly put to each of the plaintiffs, coupled with the possibility that replanting would be held not to involve demolishing pinnacles and putting down soil, and the certainty that only a relatively small part of the island was subject to any replanting obligation. If the witness had nevertheless strongly asserted a firm intention to spend any damages on replanting his land, I should even then have been slow to accept his answer unless he gave convincing reasons for taking such a course. A mere general assertion of a desire to have the land replanted could carry very little weight in such circumstances. As it is, there was no evidence on behalf of any of the plaintiffs that came near to satisfying me that the cost of replanting represented a loss to him or her which could form the basis of an award of damages.

 

What loss, then, have the plaintiffs established? If I assume a plot which has ceased to be used by the British Phosphate Commissioners for the exercise of their rights under the A or C deed, the difference in that plot with the replanting obligation performed and that obligation unperformed lies in the presence or absence of coconuts, almonds and pandanus planted in the hollows beneath the pinnacles. Theoretically there might be other indigenous trees and shrubs, but that seems to me to be very unlikely. More realistically, there might be considerable [*337] difficulty in establishing the extent to which the plot had been planted when the company’s operations commenced: for, of course, under the A and C deeds the extent of the replanting obligation is limited in this way. However, in some cases there are records of sums paid for trees on the plot; and in any case, as I have indicated, I think the court ought to draw reasonable inferences from the general state of the island.

 

Furthermore, although the general burden of proof lies on the plaintiffs, the circumstances surrounding the execution of the A and C deeds, and the time and manner in which the company acted upon them and began its operations on the plot, would make it unfair for the British Phosphate Commissioners now to rely upon the plaintiffs’ predecessors in title not having kept proper records of what was on the plot when the operations commenced. The obligation to replant to a specified standard lay upon the company, and if the company failed to maintain proper records to establish for each plot what the standard was, the company and its successors, the British Phosphate Commissioners, must, I think, accept whatever fair inferences may be drawn. “Proper records,” in my view, include making explicit statements of the negative in cases where no trees or shrubs stood on the land. The mere absence of recorded payments for trees and shrubs is not enough, for there might be trees and shrubs too small to rank for payment, quite apart from failures in recording payments.

 

If I assume a plot which is subject to an obligation to replant it with a reasonable mixture of coconuts, almonds and pandanus to something like the density claimed by the plaintiffs, so far as the be-pinnacled state of the plots permits, what is the amount of the damage suffered by the owner by reason of the breach of the replanting obligation? There is nothing to suggest that there is any market in worked-out plots of land in Ocean Island, whether naked or replanted, so that it is impossible to compare the value of one with the value of the other. There is a plain aesthetic difference: trees and shrubs do much to mitigate the otherwise barren and forbidding aspect of worked-out land. On the other hand, many plants appear to be growing on some of the worked-out plots without having been planted there by man: for nature has taken a hand. The prospects of any nuts being produced by coconuts planted in a few feet of phosphate seems remote, though the prospects of planted almonds and pandanus (as compared with self seeded trees) appear better.

 

In the way that the case has developed, I do not think that I ought to attempt to quantify the damages without hearing further submissions by counsel. It may be that the parties can reach agreement on the proper amount. At present I do not think that the damages should be merely nominal; and Mr. MacCrindle’s “minimal” has, I think, too severe a sound. At the same time I do not think that they can be very large. In cases of this sort there are obvious objections to directing an inquiry as to damages before a master, and so, unless the parties agree the damages, I think that I ought to adjourn the question of damages for further argument in the light of this judgment. The only alternative that occurs to me is that if the parties so desire I could decide this matter without further argument in the exercise of the [*338] rusticum judicium of which Lord Wright M.R. spoke in Ash v. Dickie [1936] Ch. 655, 664. But that is a matter on which I shall in due course hear any submissions that counsel may wish to make.

 

These submissions should deal with each individual plot. I am not sure whether it is accepted that all the plots have ceased to be used by the British Phosphate Commissioners. In any case I require further assistance on the position of those plots which appear to be owned by two or more persons, only one of whom is a party to the proceedings. I have already considered these plots in relation to specific performance and, as I mentioned, Mr. Browne-Wilkinson made a reservation as to damages when Mr. Macdonald was obtaining his order under R.S.C., Ord. 15, r. 4 (2). The reservation was that although the court could determine the damages payable in respect of the plot, it could not make a final determination as to the share of this to which the plaintiff was entitled.

 

I feel some hesitation about determining the total damages payable in respect of the plot in the absence of some of the plot owners. It may well be that an order could be framed which would sufficiently preserve their rights both in relation to the relative sizes of theirs and the plaintiff’s shares and also as to the total amount payable in respect of the plot: and at present I think that some such protection ought to be provided. The authorities cited do not seem to cover the point. In Roberts v. Holland [1893] 1 Q.B. 665, a lease was granted, and the lessor’s reversion afterwards devolved on six tenants in common. It was held that the lessees’ covenants became in effect separate covenants with each of the tenants in common, so that one of them alone could sue on the covenants. This contrasted with cases where the covenant was initially a covenant with joint covenantees, and all must join in suing on it. The question of quantum did not arise in that case; but in United Dairies Ltd. v. Public Trustee [1923] 1 K.B. 469, 477, Greer J. treated it as being a decision that the tenant in common who sued can recover “such damage as he has suffered” under the breach of covenant. In Sheehan v. Great Eastern Railway Co. (1880) 16 Ch.D. 59, Malins V.-C. held that one of the co-owners of a patent could by himself sue for an account of profits due for the use of the patent, and obtain an order for the payment to him of such part as he was entitled to. What does not appear from these authorities is how the other co-owners are protected if they wish later to contend that the aggregate damages or sums due are larger than the amount upon which the plaintiff has established the claim for his share in the proceedings. It would be remarkable, too, if in three successive actions by each of three co-owners of a plot of land the evidence adduced in each case were to establish that the aggregate loss was £x, £3x and £2x respectively. I think that I must leave this point for further submissions in relation to whatever order should be made.

 

December 3.MEGARRY V.-C. continued:

 

(11) Title. I must now consider the question of title. Which of the plaintiffs have sufficiently established a title to one or more of the plots [*339] to enable them to sustain an action for damages for breach of the replanting obligations? [His Lordship then held that co-owners of a single plot held in effect as tenants in common. He also held that the court ought to accept evidence of title that was relatively slender, and he considered some of the obscurities of the Banaban land records kept by them since 1959 or 1960. After examining in some detail the title to each of the plots claimed by the plaintiffs, he concluded:] It may be convenient if I set out shortly the result of this exercise in Banaban conveyancing. It is as follows. For the purposes of these proceedings – (1) The first plaintiff has shown a good title to plots C.17, C.109, C.219 and A.248. (2) The second plaintiff has shown a good title to a half interest in plot C.179, and some interest in plot C.120. His claim based on plot 294 was abandoned. (3) The third plaintiff has shown a good title to a one third interest in plot C.101. (4) The fifth plaintiff has shown a good title to a one third interest in plot A.282, a probability of some interest in plot C.162, and no title to any interest in plot A.287. (5) The seventh plaintiff has shown a good title to some interest in plot A.292. (6) The fourth plaintiff and the sixth plaintiff have shown no title to any interest in plots A.233 and C.183. (7) The ninth plaintiffs’ case based on plot 143 was abandoned. (8) The eighth and tenth plaintiffs’ cases, based on plots 263 and 316 respectively, were abandoned as to part of each plot; and as to the rest, I do not propose to consider their titles further unless it becomes necessary to do so.

 

On the further submissions concerning what order for damages ought to be made in the light of this judgment, I shall of course wish to hear submissions about damages for those plaintiffs who have established a title merely to some unspecified interest or to a probability of some such interest. I shall also wish to hear submissions about whether and how far under the present law in Ocean Island the titles established by the various plaintiffs enable them to recover beneficially the whole of the damages awarded, and, if not, how those damages should be dealt with. [His Lordship added that he did not think that any question of limitation still remained for decision on this part of the case, but that if it did, it should be considered when further argument was heard on the question of damages.]

 

3. Overmining: the purple land. I turn at last from replanting to the claim for damages for the wrongful removal of phosphate. [His Lordship considered the claim, and on the evidence held that the only plaintiff who had a subsisting claim had failed to establish his title to the land that he claimed and had also failed to show that that land included any of the purple land on which the claim was based. His Lordship accordingly dismissed the claim.]

 

4. Conclusion. That, I think, disposes of Ocean Island No. 1, subject to the reservations that I have mentioned. I shall add only three things. First, as counsel have already been informed, I propose that any discussion on the forms of order, or costs, or anything else should be postponed until transcripts of this judgment have become available and have been considered by the parties. If for any reason counsel consider that this [*340] would be inconvenient, then of course I will hear them: but subject to any such objection, that is the course that I shall take. This applies both to No. 1 and to No. 2: for apart from anything else there may be questions to resolve on costs in relation to the largely common documentation in the two cases.

 

Second, I wish to record that in the course of Ocean Island No. 2 Mr. Vinelott paid tribute to Mr. Rotan as a leader of the Banabans, and as being largely responsible for bringing the Banaban community through the horrors of the war. I was indeed glad to hear what seemed to me to be a very proper recognition of Mr. Rotan’s stature made on behalf of the Attorney-General.

 

Third, I wish once more to express my very real sense of indebtedness to counsel and solicitors for all that they have done to assist me in a case which, though of great interest, has been undeniably burdensome. Although my gratitude is quite general and undifferentiated, I shall add a word about Mr. Macdonald. For a long time his professional practice and, I suspect, much of his private life must have been engulfed by the affairs of Ocean Island. It may be unusual, but I hope that it will not be thought improper, if I say that however disappointed the Banabans may be at the result of this litigation, they have every reason to be deeply grateful to Mr. Macdonald for all the skill and effort that he has manifestly put into his tenacious presentation of their case, both as leading for them in No. 1 and as supporting Mr. Mowbray in No. 2. They must have shared with me the pleasure that I felt when during the course of this litigation I was privileged to call him within the Bar on his appointment to the rank of Queen’s Counsel.

 

Form of orders to be discussed.

 

5. Assessment of damages

 

May 19, 1977. Megarry V.-C. heard submissions of counsel on the damages to be awarded in Ocean Island No. 1. It was agreed between the parties that the Attorney-General was not concerned with damages in that action.

 

Cur. adv. vult.

 

July 28. MEGARRY V.-C. read the following judgment. I now have before me certain questions relating to the damages to be awarded in Ocean Island No. 1. There are three main heads. The first is that of the measure of damages in respect of the breach by the British Phosphate Commissioners of the replanting obligation contained in the A and C deeds. The second is that of the proper order to make in respect of a plaintiff who has failed to establish a claim to the sole ownership of a plot of land, but has shown title to a defined share in it, subject to the claims of other co-owners who, not being parties to the action, will not be bound by the result. The third is that of the proper order to make in respect of a plaintiff who has established that she has some interest in a plot of land, or the probability of having some interest in it, but has failed to prove the size of that interest, and the other possible co-owners of the land are not parties to the proceedings. I shall consider these three heads in turn. [*341] First, then, there is the question of damages. I considered this at some length in my judgment in Ocean Island No. 1, and reached the conclusion that I ought not to attempt to quantify the damages without hearing further submissions by counsel; and I adjourned the matter for further argument in default of agreement. At the same time I threw out the suggestion that if the parties so desired, I could decide the matter without further argument in the exercise of the rusticum judicium of which Lord Wright M.R. spoke in Ash v. Dickie [1936] Ch. 655, 664: see Tito v. Waddell (No. 2), ante, pp. 337G – 338D. Mr. Macdonald and Mr. Rattee have now joined in asking me to decide the matter in this way as they have failed to agree the damages. At the same time they have put before me a consent order made in Ocean Island No. 3 on December 11, 1973, which I had not seen before, the order not having been entered until June 28, 1977. This formally agrees to Ocean Island No. 1 being treated as a test case for all the claims made by the manifold plaintiffs in Ocean Island No. 3, which has yet to be heard. I bear that in mind, of course, though formally I have before me only the individual claims made in Ocean Island No. 1.

 

What was agreed was that without further evidence and without further argument, and on the basis of rusticum judicium, I should decide the measure of damages for the plaintiffs who have succeeded in Ocean Island No. 1. I was asked to express my decision in the terms of a sum of money in Australian dollars for every acre of land, on the assumption that the amount of damages appropriate to each acre of land was the same, whatever its actual location and condition, and on the footing that all the land has ceased to be used by the British Phosphate Commissioners, so that the obligation to replant has arisen. It was further agreed that no question of limitation remained for decision in this part of the case.

 

I do not propose to discuss the basis of damages any further than appears in my judgment. Put broadly, what I have to consider is the loss caused to the owner of an acre of land by reason of the British Phosphate Commissioners’ failure to replant it in accordance with the obligations in the A and C deeds, construed as I have construed them. I have, of course, viewed Ocean Island, and I retain a clear impression of the worked-out land that I saw. I have also considered in detail the relevant passages in my judgment, not least the conclusion that I reached on pp. 337G – 338D, ante. Rusticum judicium abjures any exact method of calculating the amount of damages, and I do not propose to attempt to set out any part of the process of arriving at a sum for damages which, in accordance with the judgment that I have already delivered, should be neither nominal nor minimal, but nevertheless not very large. In broad terms, what I have to consider is the loss to the owner of a plot of land of the advantage of having his land in its present state planted with an appropriate mixture of coconuts, almonds and pandanus, with the consequent improvement in its appearance and such possibility as there is of edible fruit being produced in due time. On the whole, having regard to all the circumstances of the case, including the nature of the terrain, I think that an appropriate sum by way of damages is $A75 per acre. Let me emphasise that this sum in no way represents damages on the basis claimed by the plaintiffs, with its [*342] levelling of the pinnacles and importation of vast quantities of soil, for I have already rejected that basis of claim. Nor does it represent the cost of replanting the land on a more modest basis, for I have already held that the loss to the plaintiffs is not the cost of replanting the land but instead is the diminution in its value caused by the failure to replant it on that more modest basis. I say this merely in an attempt to avoid or curtail misunderstandings.

 

I turn to the second point, that of the order to be made in respect of a plaintiff who has shown title to a defined share in a plot of land but whose co-owners are not parties to the action and will not be bound by the judgment. Some of the difficulties of this type of case are discussed at pp. 337G – 338G, ante. Plot C.101 is in this category. The third plaintiff has established a good title to a one-third interest in this plot, but the other co-owners do not appear to be parties to the action. The short question is whether the third plaintiff can, without more, recover one-third of the damages appropriate to the plot, even though the other co-owners will not be bound by the judgment and might in due time, in other proceedings (unless bound by the order in Ocean Island No. 3), establish that some other measure of damages is appropriate. Mr. Macdonald contended that the authorities sufficed to show that the answer to the question was “Yes”; and to the authorities cited on the point in the judgment (see at p. 338D-F, ante) he added Sedgworth v. Overend (1797) 7 T.R. 279 and Baker v. Barclays Bank Ltd. [1955] 1 W.L.R. 822, especially at pp. 829, 830.

 

On the other hand, Mr. Rattee contended that the court ought to make no order in such a case. He accepted that, particularly in view of R.S.C., Ord. 15, r. 6 (1), the court could determine the issue as regards the third plaintiff even though the other owners of the plot were not parties to this action: but he contended that the evidence as to the third plaintiff’s title was unsatisfactory, in that initially she had claimed to be entitled to the whole of the plot, but in the end she had shown title to only a one-third interest in it. Mr. Rattee was concerned lest others might subsequently emerge who would establish that the third plaintiff owned less than a one-third share in the plot, or none at all. They might instead establish that they owned the whole of the plot, or more than a two-thirds interest, and so were entitled to make claims against the British Phosphate Commissioners in respect of some or all of the third plaintiff’s one-third share, even though the British Phosphate Commissioners had already paid the third plaintiff the damages appropriate to that share. The most that the court should do, Mr. Rattee said, was to make a declaration that the third plaintiff was entitled to damages at the rate of $Ax per acre in respect of whatever was ultimately established to be her true share in the plot. This was a matter that could not be determined in these proceedings, for the other claimants to an interest in the plot were not parties to these proceedings, and the court could not properly direct an inquiry into the titles of those who were not parties. At the same time, Mr. Rattee accepted that it was no obstacle to the ascertainment of the damages per acre for breach of the obligation to replant that one or more of the co-owners of [*343] the plot were not parties to these proceedings, for they simply would not be bound by the decision on quantum.

 

The point is curious. The basis of the plaintiffs’ claims is that the benefit of the obligation to replant has run with the various plots of land, and that as owners of those plots they can sue for damages for breach of that obligation. The obligation is a contractual obligation, and the plaintiffs as landowners are entitled to the benefit of that obligation, while the British Phosphate Commissioners have become subject to the burden of it by virtue of the pure principle of benefit and burden. The right of any plaintiff to sue is thus dependent upon his establishing his title to the plot of land concerned or to some interest in it. In relation to Mr. Rattee’s objection, I cannot see that there is any distinction in principle between a plaintiff establishing title to the whole of a plot of land and a plaintiff establishing title to some partial interest in it: in either case there is the possibility that some person who is not a party to the proceedings may subsequently establish that he, and not the plaintiff, is the true owner of the land or the interest in it. There is some echo here in contract of the problems relating to jus tertii in trespass and conversion.

 

Mr. Rattee has accepted that the first plaintiff has shown title to four plots of land and that I can properly award him damages: yet in theory, at all events, the British Phosphate Commissioners are exposed to the risk that some person who is not party to these proceedings could show that he, and not the first plaintiff, is the true owner of the four plots, and is entitled to sue the British Phosphate Commissioners for damages in respect of them, even after they have paid the damages to the first plaintiff. I think that the position must in substance be the same where the plaintiff has made title only to a partial interest in the land. I can see nothing in the present case lo put the third plaintiff in any special position in this regard. I think that I must deal with the case on the footing of what has been established before me, and leave on one side any possibility of the emergence of other claimants with superior titles. Accordingly, I hold that the third plaintiff is entitled to one-third of the damages appropriate to plot C.101. I do not think that the authorities fairly cover the point, but their tendency is, I think, in this direction. Although Mr. Rattee urged me to do no more than make a declaration of right in favour of the third plaintiff, I should be slow to leave her with the problems involved in converting her declaration into an award of damages when I can, as I have just held, make an award of damages now.

 

That brings me to the third point, the case in which a plaintiff has established that she has some interest in a plot of land, or a probability of some interest, but has not established the size of that interest, and the other possible co-owners are not parties to these proceedings. Mr. Rattee contended that I ought not to direct an inquiry under which the quantum of interest would be ascertained. His reason was that such an inquiry would not bind those who are not parties to these proceedings, and the British Phosphate Commissioners ought not to be exposed to the risk of others establishing that their title was superior to that of the plaintiff. For the reasons that I have given in relation to the second point, I do not accept this argument. Some of the difficulties of title emerged when the three Banaban land books known as the brown, red and green books, [*344] were put in evidence by the British Phosphate Commissioners. This did not occur until Day 51, when the plaintiffs had given their evidence of title and most of them, I was told, had returned to the Pacific. In those circumstances, I do not consider that the plaintiffs in question have really had a proper opportunity of meeting the difficulties disclosed by the land books; and I think it would be unfair and unsatisfactory to refuse them an inquiry as to the extent of their titles to the plots of land that they claim. In the circumstances of the case, I think that, whatever my personal reluctance, I ought to express myself as being willing to conduct the inquiry myself; and I will hear counsel on this, and on the mode of taking such evidence as it is desired to adduce, and any further directions that it may be desirable to give. I am, of course, anxious to save time and money as far as is possible.

 

In addition to directing the inquiry, I think that I ought to make a declaration of rights in respect of the plaintiffs in this category. As matters finally emerged, Mr. Rattee did not oppose this. I may add that Mr. Macdonald and Mr. Rattee concurred in the view that it was unnecessary for me to consider further whether under the present law governing Ocean Island the titles established by the plaintiffs enabled them to recover beneficially the whole of the damages awarded and, if not, how those damages should be dealt with. In view of the agreement of counsel, I am content to leave matters there.

 

In the result, I hold as follows: (1) The first plaintiff is entitled to damages at the rate of $A.75 per acre in respect of plots C.17, C.109, C.219 and A.248. (2) The second plaintiff is entitled to damages proportionately at the same rate in respect of his half interest in plot C.179. (3) The fifth plaintiff is entitled to damages proportionately at the same rate in respect of her one-third interest in plot A.282. In these cases all those interested in the six plots are parties to these proceedings. (4) The third plaintiff is entitled to damages proportionately at the same rate in respect of her one-third interest in plot C.101. Thus far the calculation of the amount of damages is a mere matter of arithmetic; and I award those plaintiffs damages of the amounts so calculated. No doubt counsel will agree the figures. (5) A declaration will be made that the second plaintiff is entitled to some interest in plot C.120, and I direct an inquiry as to the size of that interest. (6) A similar declaration will be made in respect of the seventh plaintiff and plot A.292. (7) A declaration will be made that the fifth plaintiff has shown that there is a probability that she has some interest in plot C.162, and I direct an inquiry as to the size of that interest, if any. (8) After the inquiries directed under (5), (6) and (7) above, the plaintiffs concerned in them will be entitled to judgment for the sums of money to which the inquiries show that they are respectively entitled. (9) As agreed by counsel, no inquiry is to be proceeded with without either the consent of both the plaintiff concerned and the defendant British Phosphate Commissioners, or else the leave of a judge or master. It seems to me that the parties may well find ways of disposing of these matters without resorting to any inquiry. (10) I need add nothing about plots A.233, A.287 and C.183, as I have already held that the plaintiffs who laid claim to these plots have failed to establish any title to any interest in any of them. [*345] Subject to the important question of costs, that, I think, disposes of the matter now before me.

 

Costs

 

July 28. His Lordship then heard submissions on costs.

 

Cur. adv. vult.

 

July 29. MEGARRY V.-C. read the following judgment. The matter of costs stands thus. In Ocean Island No. 2, the action concerning the phosphate royalties, Mr. Vinelott on behalf of the Attorney-General has said that he is instructed not to ask for costs. On behalf of the plaintiffs, who lost, Mr. Macdonald has not surprisingly agreed with this view. Accordingly, in that action I make no order as to costs. The attitude of the Attorney-General seems to me to be very proper in the circumstances of this case.

 

I turn to Ocean Island No. 1, which relates to the replanting obligations and other matters. I can dispose of one point with brevity. The Attorney-General was a defendant on a minor issue, but he was also concerned in that he requested me to hold a view of Rabi if I held a view of Ocean Island, and, after a warning about the risk of costs, I did this. However, Mr. Vinelott and Mr. Macdonald were at one in agreeing that as between the plaintiffs and the Attorney-General in Ocean Island No. 1 there should be no order as to costs, whether as to the view or otherwise. Accordingly in that respect also I make no order.

 

That leaves the issue of costs in Ocean Island No. 1 as between the plaintiffs and the defendant British Phosphate Commissioners. A material factor in that is an open letter which the British Phosphate Commissioners’ solicitors sent to the plaintiffs’ solicitors on May 7, 1975, which was Day 22 of the hearing. Neither the existence of this letter nor its terms were revealed to me until the argument on costs began. The letter offered $A3,000 per acre in satisfaction of the replanting claim in this action, as well as a further sum in respect of all other replanting claims in the actions against the British Phosphate Commissioners, so that the two sums would give a total payment of $A750,000. $A3,000 an acre is, of course, far more than the $A75 an acre that I have awarded, but also far less than the plaintiffs’ claim for $A73,140 an acre. The letter added that the British Phosphate Commissioners would also pay the plaintiffs’ costs of the actions up to May 16, 1975 (which was Day 28), to be taxed if not agreed. On May 16 the plaintiffs’ solicitors replied, declining the offer.

 

In view of this letter, Mr. Rattee sought an order for costs on the following lines. First, he said that the plaintiffs should pay the costs relating to the red, yellow and purple land, on which their claims had failed. Second, with one qualification the British Phosphate Commissioners should pay the costs up to May 16, 1975, the date mentioned in the letter of May 7, 1975. That qualification related to the evidence of Senator Walker, given on Days 15, 16 and 17 (April 28, 29 and 30, 1975). The costs of this, Mr. Rattee said, should be excluded from the costs to be borne by the British Phosphate Commissioners, since Senator Walker’s evidence had been directed to the elaborate mode of replanting the land, [*346] with the levelling of pinnacles and the importation of soil and so on, which I had held was not warranted. Third, the plaintiffs should bear the remaining costs, for they had gone on with their action after an open offer had been made of a far larger sum than the sum that they had actually recovered. Mr. Rattee added that whether the British Phosphate Commissioners would enforce any order for costs in their favour was another matter.

 

Mr. Macdonald, on the contrary, contended that no order as to costs should be made. He pointed out that the yellow land carried very little weight, since although it remained on the pleadings, it had attracted no evidence and no argument, and was treated as having been abandoned. With that I agree: in the scale of the whole action, the costs attributable to the yellow land must be too trivial to carry any weight. The red land, said Mr. Macdonald, was only a small part of the case. It certainly was not trivial, but I agree that in relation to the case as a whole the red land was of relatively small weight. The purple land, on the other hand, occupied a substantial measure of time, and must have involved a substantial amount of costs. It is true, as Mr. Macdonald stated, that the plaintiffs succeeded on the issue of jurisdiction: but what is far more important is that the claim failed. Nevertheless, the British Phosphate Commissioners had admitted that there had been some mining outside their boundaries on to at least some of the purple land, and the claim of the eighth plaintiff, who was the sole plaintiff to claim any of the purple land, failed not on the ground that the British Phosphate Commissioners had not worked land beyond their boundaries but on the ground that the eighth plaintiff had failed to establish that he had any title to any relevant purple land. I should add that the claims in respect of the purple land and red land differed from the other claims in that they were made by the eighth and twelfth plaintiffs respectively and not, as with the other claims, by the whole body of plaintiffs.

 

On the general issue of replanting, Mr. Macdonald stressed that the offer in the letter of May 7 came late in the day. The consent order in Ocean Island No. 3, which on December 11, 1973, had made Ocean Island No. 1 a test case for Ocean Island No. 3, with its 368 plaintiffs, meant that unusual difficulties and delays would be likely to be imposed in getting common consent to a settlement; and he described some of the problems in getting multiple consents in a case such as this. The offer in the letter was in effect a nine-day offer, since it covered the costs up to nine days after the date of the letter. I was referred to R.S.C., Ord. 22, r. 3, relating to the acceptance of money paid into court, but I did not find it of much assistance in relation to the case of an open offer in circumstances such as these. It would be welcome if the Rules of the Supreme Court could contain some provisions to regulate offers which remain undisclosed until after judgment, of the type so familiar in compulsory acquisitions under the title of “sealed offers.” The concept seems valuable, particularly in cases where a payment into court is not appropriate.

 

In litigation on this scale, and with the large number of litigants concerned or affected, I do not think that the nine days was enough. However, as Mr. Rattee pointed out, the plaintiffs simply declined the offer on the ninth day, instead of seeking further time for consideration. This [*347] takes much of the force from the contention that the offer, with its time limit, put the plaintiffs into a very difficult situation. But some force remains.

 

Even on the footing that the nine days was enough, I think it important to consider it in relation to the time-scale of the case as a whole. Apart from the view, Ocean Island No. 1 took 106 days to hear; and, as I have mentioned, the offer was made on Day 22, to cover the costs up to Day 28. Broadly speaking, the offer was made about a quarter of the way through the hearing of the case. Plainly, however, a very large sum must have been incurred in the way of costs by the time Day 1 arrived, so that when the quarter way stage of the hearing came, far more than a quarter of the total costs must have been incurred. By Day 23, one of the Banabans had begun to give his evidence, and others had come to England to give theirs. The costs of nearly all the vast bulk of documents and the preparation of most of the evidence must have been incurred, as well as the great majority of the preparatory work by lawyers and others. If one were to draw a line rather more than a quarter way through the hearing, I would doubt whether the costs subsequently incurred would outweigh the costs previously incurred. I have, of course, to make due allowance for Mr. Rattee’s contentions on the red and purple land and Senator Walker’s evidence; but of course I must not allow anything twice over. Thus if the red and purple land are to be segregated and laid to the charge of the plaintiffs in any event, the time spent on them after the dividing line must be deducted in considering whether the costs incurred after the division balance the costs incurred before. I must also bear in mind the many peculiar features of the case. As they were entitled to, the British Phosphate Commissioners opposed the plaintiffs’ claims with tenacity and resolution, taking a wide range of technical and other points against them. In the end, these were not uniformly successful, and the plaintiffs recovered damages which, though modest, were far from being derisory.

 

After the conclusion of the argument on costs, too, I spent some while in looking through the evidence and arguments recorded in my notebooks. After weighing all this, and all the contentions put forward on costs, I have in the end, after anxious consideration, come to the conclusion that broad and substantial justice will be done if in Ocean Island No. 1 I make no order as to costs; and that is what I do.

 

Ocean Island No. 1 Damages to certain plaintiffs at $A 75 per acre. Inquiries as directed.

 

Ocean Island No. 2 Action dismissed.

 

No order as to the costs in either case.

 

Solicitors: Davies, Brown & Co.; Freshfields; Treasury Solicitor.