Lord Upjohn J:

The judgment of their Lordships was delivered by, This is an appeal from the Order dated 18 February 1965 of the Federal Court of Malaysia whereby the appellant was ordered to pay compensation to the respondent under and by virtue of the provisions of s. 71 of the Contracts (Malay States) Ordinance.

It raises some difficult though short questions of general importance on the true construction of s. 71.

The facts are rather complicated but for the purposes of this appeal can be fairly briefly stated. Parts of Johore are rich in minerals which are owned by the State. The appellant (to whom their Lordships will refer as Mr. Siow) had the good fortune to make some discoveries in relation to a few hundreds of acre of land in the Susur Rotan district which gave promise of bearing iron ore. Their Lordships will refer to this land as the mineral lands. On 10 April 1957 he applied to the relevant government authorities for a prospectors licence to prospect for minerals thereon. A licence was granted to him on 21 November 1959 and by statute this gave him, in effect, the right to a first refusal of a lease to mine the mineral lands. To jump ahead chronologically issue of a mining lease for ten years at a rent of $5 per acre to Mr. Siow was duly approved by the appropriate authorities on 28 September 1961 and, though not in evidence before their Lordships, it is not in dispute that a lease of the mineral lands was shortly thereafter granted to him.

It is common ground that neither the application for a prospectors license nor the grant of such licence gave to Mr. Siow any legal or equitable estate or interest in the mineral lands; but it is not in doubt that he could contractually and for consideration transmit to others the rights or expectancies which were likely to accrue to him as a result of his application in accordance with the ordinary and customary practice in relation to such matters in Johore.

Mr. Siow was not a mining engineer and had no great resources; he was a lucky prospector very willing to turn to quick account the discoveries which he thought he had made. On 17 June 1958 he entered into an agreement with two gentlemen trading under the style of Tang Hai Mining Company which (as varied by supplemental agreement of 2 December 1958) provided that he would allow that company to prospect the mineral lands in consideration of a cash sum then and there paid (by way of loan) and he undertook to grant to them a sub-lease if and when a lease should be granted to him in consideration of payment of further sums and a tribute of 50c. per ton of iron ore raised. On 3 July 1959 the Tang Hai Mining Company sold their rights under the agreements just mentioned to one Shan Sai Sow. As between those parties the cash payments and tonnage ributes were increased but nothing turns thereon.

Shan Sai Sow then formed a company called the Kota Mining Company Ltd. (to which their lordships will refer as Kota) and by an agreement on 4 December 1959 the benefits and burdens of the agreement of 3 July 1959 were thereby transferred to Kota. On 19 September 1960 by an agreement made between Kota and the first respondent, Susur Rotan Mining Ltd. (to whom their Lordships will refer as Susur Rotan) Kota granted its rights under the earlier agreements to Susur Rotan in consideration of $40,000 then and there paid and a further $40,000 to be paid at a later stage (which in fact never was paid) and a tribute of $2 for every ton raised. It is clear from cll. 3 and 4 of this agreement that Susur Rotan was the person who was entitled to mine and exploit the mining lands. This would, of course, involve it in much expenditure preparatory to such exploitation such as the building of road, jetties and other works and that such expenditure would fall upon it and it could not look to any other person for reimbursement of such expenditure under or by virtue of this chain of agreements.

By the end of the year 1960 therefore the busines