(delivering the Judgment of the Court): We allowed the appeal with costs both here and the court below and set aside the judgment and ordered the refund of the deposit to the appellants. We did not deal with the counterclaim as it was abandoned. We stated that we would give our reasons later. We do so now.

The appeal is basically a question of construction of clauses 2 and 6 of an agreement entered into by the parties on December 29, 1972. Appellants agreed to sell to the respondents a portion comprised 61,050.0 square feet of their land in Kuala Lumpur described as Lot No. 162, section 63 for $167,889.98. Respondents paid a deposit of 10% as earnest money and the balance of the purchase price was to be paid within 30 days of the appellants' notifying the respondents of obtaining two separate titles in continuation for the land. At the time of the execution of the agreement the appellants had already applied for the development of a petrol-filling and service station on the land as evidenced by the Development Order dated February 19, 1971 (see page 44 of the Appeal Record) issued by the Pegawai Peranchang. Prior to the agreement the appellants had already applied for subdivision by using Form 9A under section 137 of the National Land Code (NLC) on June 6, 1972. The intention of the appellant was to obtain a title in continuation in respect of the portion of land where they wished to construct the petrol station.

By a letter dated October 16, 1973 to the appellants the Pemungut Hasil Tanah stated in paragraphs 3 and 4 as follows:—

"3. You are required to state the written agreement for the surrender of the portion of the land provided for the petrol and service station and to re-issue a lease title for 30 years. This is a policy of the Government to allocate the area for a petrol and service station.

4. Upon your due compliance of the conditions herein stated your application shall then be forwarded to the State Authority for their consideration."

Appellants wrote on November 1, 1973 requesting for re-consideration so that two separate titles in continuation could be issued in respect of the two portions of the land. The Pemungut Hasil Tanah replied on November 10, 1973 that their request for a title in continuation of the said petrol station site could not be considered as it was against the policy of the Government. By paragraph 2 he warned the appellants thus:—

"2. I would like to emphasize that if you were to erect, on the said land, any business buildings, you are said to be in contravention to the conditions of the land and have committed an offence under section 127 of the National Land Code and you may be prosecuted under section 129 of the National Land Code."

Consequently, on November 27, 1973 the appellants' solicitors wrote to the respondents informing them that the appellants were unable to obtain separate titles in continuation pursuant to clause 2 of the agreement unless they were willing to surrender the portion where the petrol and service station was constructed in exchange for a lease of 30 years. Since it was not legally possible to subdivide the land in accordance with clause 6 of the agreement they thereby returned the 10% earnest money. In the circumstances, they considered the agreement to become null and void. On December 5, 1973 the respondents' solicitors replied that they disagreed with the appellants' interpretation of clauses 2 and 6 and returned the earnest money. They made clear that they would hold the appellants to the strict performance of the terms and conditions of the agreement which they considered to be subsisting and in full force and effect.

On February 22, 1974 the appellants tried again by requesting the Pemungut Hasil Tanah to reconsider the matter further. The result was that the authority was prepared to issue two separate titles in continuation but the appellants were to surrender the land on which the petrol and service station was to be erected in exchan