Thomas Townsend & Therese Townsend (Deceased) v Persistence Holdings Limited (British Virgin Islands)

A contractual right to terminate a land sale after a specified period without the necessary non-belonger licence must be given its plain and natural meaning. Commercial harshness, expenditure on the property, payment of the price, or execution of transfers does not justify rewriting the bargain. Estoppel by convention requires a shared assumption, or an assumption made by one party and acquiesced in by the other, together with circumstances making it unjust to resile. Conduct expressly contemplated by the contract will rarely establish such an estoppel. A duty to warn of the contractual risk is exceptional and requires a proper evidential basis. Possible restitution for improvements is a separate matter and does not sustain an estoppel.

The vendors agreed to sell land in the British Virgin Islands to a non-belonger company. The contract required the purchaser to obtain a non-belongers land holding licence and provided that, if no licence had been granted within 12 months, either party could thereafter terminate. The purchaser paid the price, entered into occupation, and carried out substantial works. No licence was issued within the year, and the vendors later served notice terminating the contract.

At first instance, Rawlins J held that the vendors were entitled to terminate but were estopped from doing so, and gave judgment for the purchaser on its counterclaim. The Court of Appeal initially dismissed both appeals on illegality grounds. The Board later remitted the matter in [2008] UKPC 15. On the rehearing, the Court of Appeal agreed with the trial judge. The issue before the Board was whether estoppel prevented termination.

Lord Neuberger, delivering the judgment of the Board, allowed the appeal. The Board advised that, in exchange for repayment of US $500,000, Mr Townsend was entitled to possession of the property.

1. The proviso to clause 5 had a plain and natural meaning. If no licence had been granted within 12 months, either party could terminate the contract at any time thereafter. The phrase covering a licence not granted on terms reasonably acceptable to the purchaser included the case where no licence had been granted. Commercial common sense could not justify an indefinite extension of the contract.

2. The transaction had not been completed when the price was paid and transfers were executed. Clauses 5 and 9, the proviso, and the note showed that transfer was conditional on obtaining the licence. The transfers gave the purchaser security for repayment if the contract ended. The later authorisation was consistent with the vendors retaining the right to possession and was inconsistent with a bare trust for the purchaser.

3. The applicable principles of estoppel by convention, stated in Republic of India v India Steamship Co (No 2) (“The Indian Grace”) [1998] AC 878, 913E–F, were accepted and applied. The evidence did not establish the necessary shared or acquiesced-in assumption, or injustice in allowing the vendors to rely on the proviso. Expenditure and payment of the purchase price were contemplated by the agreement. Occupation and outgoings arose under a collateral licence arrangement. There was no evidential basis for a duty to warn the purchaser after the 12-month period.

4. Any possible claim for unjust enrichment or restitution for an increase in value attributable to the works was separate, and its availability and procedural viability were left open. It could be affected by issue estoppel, limitation, or laches.

If the parties could not agree the order, including costs, they were to make written submissions.

• Privy Council — Appeal allowed. The Board advised that possession be given to Mr Townsend in exchange for repayment of US $500,000.
• Privy Council — In [2008] UKPC 15, the Board allowed the earlier appeal and remitted the appeal and cross-appeal to a differently constituted Court of Appeal.
• Court of Appeal of the British Virgin Islands — On 13 September 2010, effectively agreed with the trial judge’s analysis and conclusions.
• Court of Appeal of the British Virgin Islands — On 18 January 2006, dismissed the appeal and cross-appeal on illegality grounds.
• Trial court (Rawlins J) — Held that the vendors could determine the contract but were estopped from invoking the proviso, dismissed their claim, and gave judgment for Persistence on its counterclaim.