The High Commissioner for Pakistan in the United Kingdom v National Westminster Bank Plc & Ors, Court of Appeal - Chancery Division, January 16, 2015, [2015] EWHC 55 (Ch)

Resolution Date:January 16, 2015
Issuing Organization:Chancery Division
Actores:The High Commissioner for Pakistan in the United Kingdom v National Westminster Bank Plc & Ors

Case No: HC-2013-000211

Neutral Citation Number: [2015] EWHC 55 (Ch)



Rolls Building,

Royal Courts of Justice

Fetter Lane, London, EC4A 1NL

Date: 16/01/2015

Before :


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Between :

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Ms Cherie Booth QC and Mr Oliver White (instructed by Farani Javid Taylor LLP) for the Claimant

Mr Adam Zellick (instructed by Ashurst LLP) for the Defendant

Mr Eason Rajah QC and Mr Leon Pickering (instructed by Withers LLP) for Prince Mukkaram Jah, the 8th Nizam of Hyderabad

Mr Hodge Malek QC and Mr Jonathan McDonagh (instructed by Russell-Cooke LLP) for Prince Muffakham Jah and Shannon

Mr Timothy Otty QC and Ms Clare Reffin (instructed by TLT LLP) for India

Hearing dates: 11 and 12 November 2014

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JudgmentMr Justice Henderson:

Introduction and background

  1. On 11 and 12 November 2014 I heard a number of applications arising from the commencement on 11 June 2013, and the subsequent discontinuance by notice dated 21 November 2013, of proceedings in the Chancery Division of the High Court brought by the High Commissioner for Pakistan in the United Kingdom against National Westminster Bank Plc (``the Bank''). The proceedings related to a fund, now worth just under £35 million including accumulated interest, which since September 1948 has been the subject of a celebrated legal stalemate.

  2. The money in question, then amounting to a little over £1 million, was transferred on or about 20 September 1948 into an account opened with the Bank (then the Westminster Bank Limited) in the name of the first High Commissioner of the recently formed sovereign state of Pakistan, Mr Habib Ibrahim Rahimtoola (``Mr Rahimtoola''). The transferor, at least ostensibly, was the absolute ruler of the largest and richest of the Indian princely states, the seventh Nizam of Hyderabad, acting through an agent who undoubtedly had apparent (if not actual) authority to make the transfer on his behalf. The money was received by Mr Rahimtoola in his official capacity, acting on the instructions of the Foreign Minister of Pakistan. The transfer was made at a time of acute political and military tension, after the government of the recently formed sovereign state of India had begun a campaign (called ``Operation Polo'') to annex Hyderabad. Following the partition of the Indian sub-continent in 1947 pursuant to the Indian Independence Act 1947, and the formation of the independent sovereign states of India and Pakistan, the numerous princely states within the sub-continent were permitted by the United Kingdom to elect to join either of the two new states, or to remain independent. The Nizam chose the latter course, but this was unacceptable to India. Operation Polo swiftly achieved its objective. On 18 September 1948 the Nizam's army surrendered, and Hyderabad was annexed to India.

  3. A little over a week later, on 27 September 1948, the Nizam sought to reverse the transfer of money to Mr Rahimtoola, claiming that it had been made without his authority. The Bank was understandably unwilling to comply with this request without the agreement of the account holder, who by now had undisputed legal title to the money. Such consent was not forthcoming, and for a number of years matters remained unresolved while attempts were made to negotiate a solution to the problem. At one stage in the negotiations the Bank suggested interpleader proceedings, but the government of Pakistan was not prepared to waive its immunity, and the suggestion was dropped. Eventually, in an effort to break the deadlock, the Nizam and the State of Hyderabad issued proceedings in England in July 1954, naming the Bank and the agent through whom the original transfer had been implemented as defendants. A concurrent writ was also served outside the jurisdiction on Mr Rahimtoola, who had meanwhile become Pakistan's ambassador to France. Payment of the money in the account was claimed on three alternative grounds: (a) as money held in trust for the claimants; (b) as money due and owing to them; or (c) as money had and received to their use.

  4. Mr Rahimtoola then applied to the court to set aside the proceedings against him, and to stay the proceedings against the Bank, on the ground of Pakistan's sovereign immunity. This contention succeeded before Upjohn J, whose judgment was reversed by the Court of Appeal, but upheld by the House of Lords: see Rahimtoola v Nizam of Hyderabad [1958] AC 379.

  5. For present purposes, it is unnecessary to explain in any detail why Pakistan's claim of sovereign immunity was upheld. It is probably enough to quote what Viscount Simonds said at 397:

    ``The claim is that money was paid to Rahimtoola in trust for the Nizam or as money due and owing to the Nizam or as money had and received to the use of the Nizam. These are matters which directly concern the principal on whose behalf Rahimtoola received the money. They cannot be determined without impleading him. Therefore they cannot be determined at all.''

    So far as the claim against the Bank was concerned, its attitude (then as now) was ``one of impartial willingness to pay its debt to whomsoever it may be justly due'' (p 393). Viscount Simonds said, at 398, that it was clear that it would not be right to allow the action to proceed against the Bank alone, because the Bank would be left unprotected if it were obliged to pay the fund to a third party under an order of the court made in proceedings by which the government of Pakistan was not bound.

  6. In reaching these conclusions, the House of Lords recognised that the stay of proceedings against the Bank might lead to an indefinite period of deadlock if the various claimants to the fund were unable to resolve their differences. This was most clearly stated by Lord Denning, who said at 421:

    ``If the Nizam of Hyderabad is not allowed to proceed with this action, the money will lie stagnant in the bank and the debt may remain unpaid forever. The bank cannot safely pay either Rahimtoola or the State of Pakistan because, once it does so, there will clearly thenceforward be no immunity available to protect the bank. The bank must wait until it is sued by Rahimtoola or the State of Pakistan: and once that is done, the State automatically waives its immunity. If Pakistan succeeds in getting a stay, therefore, it means that it does not choose to sue for the debt itself: and yet by claiming immunity, it can prevent the Nizam from ever getting the money: and it can prevent the bank from ever getting a good discharge. That would not seem to be right. It creates a stalemate.''

    Lord Denning nevertheless upheld Pakistan's plea of sovereign immunity, on the basis that the essential nature of the dispute was inter-governmental, and as such it should be solved by inter-governmental negotiations: see 422-423, and the judgment of Upjohn J at [1957] Ch 185, 209.

  7. Lord Denning's words were prophetic. For over half a century, from 1957 to 2013, the fund steadily grew in size, but no agreement on its distribution could be reached. Meanwhile, the position was further complicated by the emergence of other potential claimants to the fund. Apart from Pakistan and India, those asserting a beneficial interest in the fund now include (at least):

    a) the present (eighth) Nizam of Hyderabad, Prince Mukkaram Jah, who succeeded his grandfather, the seventh Nizam, on the latter's death in 1967;

    b) Prince Muffakham Jah, the younger brother of Prince Mukkaram Jah, and his assignee Shannon Consulting Limited (``Shannon''); and

    c) other members of the extensive family of the seventh Nizam, who claim through or against him in various ways. The potential size of this last category of possible claimants can be gauged from the fact that the seventh Nizam is reputed to have had as many as 49 concubines and around 150 illegitimate children.

    I will refer to Prince Mukkaram and Prince Muffakham together as ``the Princes'', and to them and India as ``the Interested Parties''.

  8. In a little more detail, the general nature of the rival claims to beneficial ownership of the fund appears on the evidence now before me to be broadly as follows. I emphasise that none of the potential claimants (apart from Pakistan) has yet had an opportunity to plead its case, and what I say is not intended in any way to curtail or prejudice their right to set out their respective cases at the appropriate time as they think fit. I also make no comment on the merits of the claims, but will proceed on the assumption that each of them is at least arguable.

  9. I will begin with Pakistan. In the proceedings in the 1950s, Pakistan did no more than assert its sovereign immunity. As Viscount Simonds said in the House of Lords at 394-395:

    ``Much stress has been laid on the fact that [Pakistan] has not asserted a beneficial interest in the fund. But why should it? It is not concerned to admit, assert or deny. It has the legal title, which cannot be displaced except by litigation which it is entitled to decline.''

    At first instance, Upjohn J commented ([1957] Ch 185 at 202) that Mr Rahimtoola had adduced no evidence on behalf of the government of Pakistan as to why the transfer had been made, and Pakistan (as it was entitled to do) had declined to file evidence on the matter. The judge inferred that the probable reason for the transfer was a reasonable desire on the part of Hyderabad to try to keep the sum from being claimed by a possibly victorious Indian government,

    ``but whether that be so or not (and I express no concluded view upon that) in so far as the equitable title of the Government of Pakistan to the debt is relevant, in my judgment, for the purposes of this motion, they do not establish a scintilla of such a title ...''

    In the Court of Appeal further evidence was adduced on behalf of...

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