Lord Templeman:

This appeal involves a short question of construction arising out of an agreement dated 29 December 1972 whereby the respondent "Shell" agreed to sell to the appellants part of a plot of land at Kuala Lumpur.

Shell were the registered proprietors with title in perpetuity of land held under grant number 9982 for lot number 162 Section 63 in the town of Kuala Lumpur. On part of the land Shell erected a petrol filling station. Shell were minded to sell the remainder of the land not required for the purposes of the petrol filling station. Such a sale involved a sub-division of the title. By s. 135 of the National Land Code of Malaysia a registered title may be sub-divided but only with the approval of the State Commissioner, subject to certain conditions which Shell were able to satisfy. Accordingly on 6 June 1972 Shell duly applied, pursuant to s. 138 of the National Land Code, for approval of the sub-division between the petrol filling station site and the remainder of the land. The application was submitted, as required by the National Land Code, to the Collector of Inland Revenue. By s. 138 the Collector must refer the application to the State Commissioner of Lands and Mines, together with the recommendation of the Collector. The State Commissioner, if satisfied that the prescribed conditions are satisfied, shall approve the division.

The agreement dated 29 December 1972 recited that Shell were registered as the proprietor of the land held under grant number 9982 for lot number 162 Section 63 in the town of Kuala Lumpur in the district of Kuala Lumpur, defined as "the said land". Shell then agreed to sell and the appellants agreed to purchase the portion of the said land marked on the plan annnexed to the agreement and comprising the portion which was not required for the petrol filling station. The agreement contained two clauses referring to sub-division as follows:

2. The vendor shall (if it has not already done so) make application to the appropriate authority or authorities for the sub-division of the said land so as to result in the issue of separate documents of title in continuation in respect of the said portion and in respect of the balance of the said land.

6. If for any reason sub-division is refused or for any other reason it shall not be legally possible to sub-divide the said land in accordance with the terms of this agreement then the vendor shall refund to the purchasers the earnest money referred to in Clause 1 hereof free of any interest whereupon this agreement shall be null and void and cease to have any further force or effect and neither party shall have any claim against the other in respect thereof.

In order therefore that the sale should be carried into effect, it was necessary that there should be issued a title in perpetuity to the land being purchased by the appellants and a title in perpetuity to the site of the petrol filling station which was being retained by Shell.

By a letter dated 16 October 1973 the Collector required certain conditions to be fulfilled by Shell before he forwarded the application for sub-division to the State Commissioner. His letter contained the following paragraphs:-

3. You are required to state the written agreement for the surrender of the portion of the land provided for the petrol service station and to re-issue a lease title for thirty 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.

This letter, a copy of which was sent to the State Commissioner, was a plain intimation that approval would not be granted to a sub-division resulting in a continuation of the title in perpetuity of Shell to the petrol filling station site.

By a letter dated 1 November 1973 Shell wrote to the Collector saying inter alia:

We note that we are requested to agree to surren