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High Commissioner of Pakistan UK -V- Natwest Bank Judgment

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High Commissioner of Pakistan UK -V- Natwest Bank Judgment Neutral Citation [2019] EWHC 2551 (Ch) Claim No.: HC-2013-000211 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES (ChD) BUSINESS LIST Rolls Building 7 Rolls Buildings Fetter Lane London EC4A 1NL Date: 2 October 2019 Before: THE HONOURABLE MR JUSTICE MARCUS SMITH - - - - - - - - - - - - - - - - - - - - - THE HIGH COMMISSIONER FOR PAKISTAN IN THE UNITED KINGDOM Claimant - and - (1) PRINCE MUKARRAM JAH, HIS EXALTED HIGHNESS THE 8th NIZAM OF HYDERABAD (2) PRINCE MUFFAKHAM JAH (3) SHANNON CONSULTING (4) THE UNION OF INDIA (5) THE PRESIDENT OF INDIA (6) HILLVIEW ASSETS HOLDINGS LIMITED Defendants and Interpleader Claimants - and - (7) THE ADMINISTRATOR OF THE ESTATE OF THE 7th NIZAM OF HYDERBAD Defendant - and - NATIONAL WESTMINSTER BANK plc Defendant and Stakeholder - - - - - - - - - - - - - - - - - - - - - Judgment handed down by the court Pakistan v India Mr. Justice Marcus Smith - - - - - - - - - - - - - - - - - - - - - Mr Khawar Qureshi, QC and Mr Jonathan Brettler (instructed by Stephenson Harwood LLP) for the Claimant Mr Hodge Malek, QC and Mr Jonathan McDonagh (instructed by Devonshires Solicitors LLP) for the Second and Third Defendants and Interpleader Claimants Mr Timothy Otty, QC, Mr Harish Salve, SA, Ms Clare Reffin and Mr James Brightwell (instructed by TLT LLP) for the Fourth and Fifth Defendants and Interpleader Claimants Mr Eason Rajah, QC and Ms Bryony Robinson (instructed by Withers LLP) for the Sixth Defendant and Interpleader Claimant The Seventh Defendant and the Defendant and Stakeholder did not appear and were not represented Hearing dates: 10, 11, 12, 13, 17, 18, 19, 20 and 21 June 2019 - - - - - - - - - - - - - - - - - - - - - Approved Judgment I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic. 2 Judgment handed down by the court Pakistan v India Mr. Justice Marcus Smith CONTENTS A. INTRODUCTION Para 1 (1) Overview Para 1 (2) The parties Para 15 (3) The issues Para 16 (a) Pakistan’s claims to be absolutely entitled to the Para 16 Fund (b) The Princes’ and India’s contentions that the Fund Para 18 was held on trust (c) Rahimtoola Para 23 (d) The restitution claim Para 24 (e) Pakistan’s “public international law” defences Para 27 (4) The structure of this Judgment Para 28 B. THE EVIDENCE Para 29 (1) Introduction Para 29 (2) Witnesses of fact called to give evidence Para 35 (a) Prince Muffakham Para 35 (b) Shaharyar Para 37 (3) Witness evidence given under Civil Evidence Act Para 40 Notices (4) Documentary evidence Para 43 (a) Disclosed documents Para 43 (b) Public documents Para 51 (c) The source of documents Para 55 (5) Expert evidence Para 56 (6) The factual narratives Para 59 (7) My approach to the evidence Para 60 C. HYDERABAD Para 62 (1) Partition: India, Pakistan and Hyderabad Para 62 (2) The position of Hyderabad in 1948 Para 68 (a) Geography and religion Para 68 (b) Approach of the United Kingdom Para 69 (c) Approach of Nizam VII Para 71 3 Judgment handed down by the court Pakistan v India Mr. Justice Marcus Smith (d) The approach of India, as viewed by Nizam VII Para 73 (3) Operation Polo Para 74 (4) Accession of Hyderabad to India Para 83 D. THE PAYMENT INTO THE RAHIMTOOLA Para 86 ACCOUNT (1) Establishment of the Hyderabad Government Para 86 Account (2) Establishment of the Second Account Para 96 (3) Transfer of the balance of the Hyderabad State Para 100 Bank Account to the Second Account (4) Special treatment of the Second Account Para 103 (5) The Rahimtoola Account Para 105 (a) Approach Para 105 (b) The evidence Para 106 (i) Communications dated 14 September 1948 Para 106 (ii) Communications dated 15 September 1948 Para 108 (iii) Rahimtoola’s evidence Para 111 (iv) Communications dated 16 September 1948 Para 113 (v) Events of 20 September 1948 Para 115 (vi) The Bank’s views regarding the basis upon which the Para 118 account was held (c) Findings Para 121 (i) Introduction Para 121 (ii) The evidence of Rahimtoola Para 124 (iii) The 15 September letters Para 126 (iv) My conclusions on the evidence Para 130 (6) Attempts to freeze the accounts Para 135 E. EVENTS POST-DATING THE TRANSFER Para 147 (1) Introduction (2) Appointment of a new High Commissioner for Para 148 Pakistan (3) The Ispahani letter Para 150 (4) The 1954 Proceedings Para 153 (5) The 1956 Assignment Para 164 (6) Subsequent dealings Para 167 4 Judgment handed down by the court Pakistan v India Mr. Justice Marcus Smith (a) The Princes Para 169 (b) India Para 173 (c) Other interests Para 174 F. THE ACTUAL AUTHORITY OF NIZAM VII AT Para 176 THE TIME OF THE TRANSFER (1) Introduction: why the issue matters Para 176 (2) Applicable law Para 181 (3) Is the law of Hyderabad law that is recognised in Para 185 the English courts? (a) The problem stated Para 185 (b) The status of Hyderabad from 15 August 1947 until Para 188 the conclusion of Operation Polo (c) The status of Hyderabad after Operation Polo Para 193 (4) What is the law of Hyderabad on this point? Para 197 (5) The authority of Moin as a Hyderabad Para 199 Government official G. ABSOLUTE TRANSFER OF THE FUND: THE Para 202 ARMS FOR MONEY ARGUMENT (1) Introduction Para 202 (2) The provision of weapons in Pakistan and Para 205 Hyderabad (3) Evidence of Hyderabad’s involvement in the Para 210 provision of weapons (4) Connection between the Transfer and the provision Para 215 of weapons (5) Conclusion Para 216 H. ABSOLUTE TRANSFER OF THE FUND: THE Para 217 SAFEGUARDING ARGUMENT (1) Introduction Para 217 (2) The facts Para 220 (a) Approach Para 220 (b) Authorisation by Nizam VII Para 221 (c) Moin’s intention Para 231 (i) Introduction Para 231 (ii) Issue estoppel Para 233 (iii) The transfer Para 239 (d) Rahimtoola’s intention Para 241 5 Judgment handed down by the court Pakistan v India Mr. Justice Marcus Smith (3) The law Para 243 (a) Introduction Para 243 (b) Express trust Para 244 (i) The three certainties Para 244 (ii) Agency Para 246 (c) Constructive trust Para 248 (i) The law Para 248 (ii) Constructive trust “of the first kind” generally Para 250 (iii) A trustee de son tort Para 251 (d) Resulting trust Para 252 (4) The question of “choice” as to trustee and the Para 255 Ispahani letter (5) An absolute interest in Pakistan Para 258 (6) Conclusions Para 259 I. NO TRUST IN ANY EVENT Para 260 (1) Introduction Para 260 (2) No trust relationship can arise as a matter of Para 262 private law (3) A court should exercise caution when considering Para 266 whether a trust arises in the case of sovereign states J. THE RESTITUTION CLAIM Para 271 (1) Introduction Para 271 (2) Pakistan’s raising of the procedural bar of Para 276 sovereign immunity prevented time running against any claimants to the Fund, which only began to run when the procedural bar was waived (3) Abuse of process in raising the limitation defence Para 280 (4) Claim against the Bank Para 286 K. FOREIGN ACT OF STATE DOCTRINE AND Para 292 NON-JUSTICIABILITY (1) The nature of the Doctrine Para 292 (2) Aspects of the Doctrine relied upon by Pakistan Para 295 (3) Justiciability Para 301 (a) The ambit of Pakistan’s case Para 301 (b) Partial non-justiciability Para 303 (c) Non-justiciability: Rule 3 expanded Para 306 6 Judgment handed down by the court Pakistan v India Mr. Justice Marcus Smith (i) The ambit of Rule 3 Para 306 (ii) The public policy exception Para 307 (iii) Synthesis Para 309 (4) Application in the present case Para 313 L. ILLEGALITY Para 315 (1) Introduction Para 315 (2) Is illegality “analytically irrelevant”? Para 319 (3) The significance of the settlement Para 324 (4) Different types of illegality alleged by Pakistan Para 327 (a) Introduction Para 327 (b) The Indian Independence Act 1947 Para 330 (c) The Standstill Agreement Para 332 (d) The Charter of the United Nations Para 334 (5) Overall conclusion Para 339 M. CONCLUSIONS AND DISPOSITION Para 340 ANNEXES Annex 1 GLOSSARY OF NAMES AND TERMS USED IN Para 1 fn 1 THE JUDGMENT Annex 2 MAP SHOWING THE POSITION OF Para 68 HYDERABAD IN 1948 Annex 3 TRANSACTIONS ON THE HYDERABAD Para 91 STATE BANK ACCOUNT, THE SECOND ACCOUNT AND THE RAHIMTOOLA ACCOUNT TABLES Table 1: Witness evidence given under Civil Evidence Para 40 Act Notices Table 2: Documents put in under Civil Evidence Act Para 46 Notices 7 Judgment handed down by the court Pakistan v India Mr. Justice Marcus Smith Mr Justice Marcus Smith: A. INTRODUCTION (1) Overview 1 1. On 20 September 1948, Nawab Moin Nawaz Jung (Moin) caused the sum of £1,007,940 9s 0d to be transferred from an account of the Government of Hyderabad held at Westminster Bank (the Bank2) to an account in the name of Habib Ibrahim Rahimtoola (Rahimtoola), also at the Bank. I shall refer to this transaction as the Transfer. Until 17 September 1948, Moin had been Finance Minister and Minister for External Affairs for the Government of Hyderabad. His status after 17 September 1948 is one of the many questions of fact and law that will have to be resolved in this Judgment. Equally, the authority of Moin to make this transfer is a matter of dispute that will have to be considered and resolved. 2. I shall refer to the state of Hyderabad – in all its emanations – as Hyderabad. It will, in due course, be necessary to consider Hyderabad’s status as a sovereign state and as a State of the Union of India (India or, if the context requires, the Union of India3).
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