Tito v Waddell (No 2) [1977] Ch 106
Payments held ‘on trust’ for islanders following compulsory acquisition; whether trust enforceable
Facts
Banaba island was a British settlement and the land was owned by individual Banabans. The Crown granted a license to a British company to mine the phosphate which had been discovered there. The Banabans refused to sell or lease further land and the Crown compulsorily acquired it. Monies paid were to be held ‘on trust’ for the Banabans and contractual obligations required certain land to be replanted after mining. The British Phosphate Commissioners took over the mining undertaking in 1920. Some funds purchased another island and the Banabans were relocated. They sought additional royalties from the Crown and, in the linked action against the British Phosphate Commissioners, specific performance of the replanting obligations or damages.
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Issues
The Banabans contended the Crown stood in a fiduciary position, and the royalties fixed in the 1931 compulsory acquisition and the 1947 agreement were substantially less than they should have been. They had not appreciated the value of the phosphate, had received no legal advice and sought damages to the amount that ought to have been paid. Since the Crown was a fiduciary, they were under a duty to give full disclosure to the Banabans as to the phosphate’s value, to give full commercial value to them, or to ensure they obtained appropriate advice. The Crown argued there was no trust in the truest sense and, therefore, there were no fiduciary obligations incumbent upon them. The Crown also raised limitation arguments against the financial claims.
Held
The financial claims against the Crown failed. Although the word ‘trust’ was used in the relevant arrangements and legislation, there was no trust in the sense of imposing fiduciary duties enforceable in the courts. The obligations were governmental obligations, not enforceable equitable trusts. This depended on the context and construction of the arrangements, rather than the word ‘trust’ alone.
Specific performance of the replanting obligations was also refused. Some plots had co-owners who were not parties to the proceedings. There was also a wider objection: ordering replanting of small, isolated plots would be futile and wasteful, and damages were a more suitable remedy. The obligation did not require the extensive levelling, road construction and importation of soil sought by the plaintiffs.
However, landowners who established title to qualifying land under the relevant deeds were entitled to damages against the British Phosphate Commissioners for failure to replant. At the subsequent assessment in the same reported proceedings, damages were fixed at A$75 per acre, based on the land’s reduction in value rather than the cost of the proposed restoration. The litigation was therefore not wholly unsuccessful.
Source: Reported Chancery Division judgment, especially pp 126–129, 210–219, 235–237, 273–277, 321–328 and 340–342.
