Analysis
The underlying claim concerned monies deposited in a new bank account with the National Westminster Bank (the bank) in the name of Mr Rahimtoola, the High Commissioner for Pakistan in London between 16 and 20 September 1948 (the Fund). The monies deposited had belonged to the state of Hyderabad/the 7th Nizam (Hyderabad’s absolute monarch at the time). The state of Hyderabad had been annexed to India between 13 and 18 September 2016. The underlying claim had been brought by Pakistan against the bank. A number of other defendants claiming an interest in the fund had been joined. Consequently the underlying claim concerned rival claims to beneficial ownership of the funds by Pakistan, India, the 8th Nizam and his younger brother (the princes).
This was the hearing of a number of applications for summary judgment and/or strike out. First, India applied for summary judgment against Pakistan’s claim to beneficial ownership and/or an order striking our parts of her particulars of claim relating to this. Secondly, India sought summary judgment or strike out relief in relation to Pakistan’s plea of non-justiciability. Thirdly, Pakistan cross-applied for summary judgment and/or strike out relief against the defendants principally but not exclusively on limitation grounds. Finally India and the princes applied to strike out Pakistan’s limitation defences.
Summary judgment dismissing Pakistan’s claim to beneficial ownership
Pakistan claimed that the starting point was that a payment from one sovereign state to another would not give rise to a resulting trust relationship or would not give rise to such a relationship without cogent evidence that this was intended. Presumptions arising in a domestic context had no application in the context of inter-state transfers. This indicated that the transfer gave Pakistan full ownership of the monies. In the context of sovereign states, trusteeship was limited by two factors: first they must deliberately choose to be a trustee and should not have that role imposed by the court and secondly the court should be ready to find that they had instead assumed a governmental obligation rather than one of trust law. Further in the present case, where Hyderabad was at imminent risk of being overrun by India, it was implausible that any trust was intended and subsequent conduct by those involved in disowning the transfer could be explicable on the basis that Hyderabad was then under Indian control. Given the sensitivity at the time, it was unsurprising that there were no contemporaneous documents of the true nature of the transfer and therefore this had to be inferred from a careful consideration of all the circumstances. Such consideration was wholly unsuitable for summary determination. Further there was evidence from which it could plausibly be inferred that the transfer was intended to be either for the purchase of weapons or to place the money into friendly hands, immune from seizure by India
The defendants argued that there was no obstacle to a state assuming obligations as a trustee provided cogent evidence was available and that in the present case there was cogent evidence of a trust relationship available. Further Pakistan’s claims that the transfer was for the supply of weapons or to place the funds in safe hands were inconsistent. Further, insofar as Pakistan relied on the evidence collected by its solicitors and exhibited to a statement of a partner of that firm, he had no first hand knowledge of events and could do no more than place relevant documentary material before the court and submit inferences should be drawn from this. There was no prospect of further relevant material from his cross-examination so the court was in a good position at this stage to assess the credibility of that evidence.
Non-justiciability and/or act of state
Pakistan claimed that the transfer and other financial dealings between the State of Hyderabad and Pakistan before the transfer were transactions of a governmental nature engaged in by two sovereign states in a political context and therefore the court was obliged to decline jurisdiction over the dispute on the basis of the doctrine of non-justiciability and/or the application of act of state.
The defendants argued that this allegation should be struck out or summarily disposed of on the grounds that it had no real prospect of success on the basis that Pakistan had begun the present proceedings and in so doing had irrevocably waived its sovereign immunity. It was therefore an abuse of process for Pakistan to seek to prevent adjudication upon the issue which she had brought before the court. Further the doctrine of act of state could not apply since Hyderabad had ceased to exist.
Limitation
Pakistan argued that the defendants’ trust and/or restitution claims were time barred and sought summary judgment accordingly. In respect of the trust claims, the defendants argued that no limitation period applied. In respect of the restitution claim, they argued that limitation had not expired because Pakistan’s reliance on sovereign immunity had prevented time running in her favour until she waived statutory immunity in 2013. Further, the defendants maintained that it was an abuse of process for Pakistan to rely upon the limitation defences in light of the reason for any delay being Pakistan’s invocation of sovereign immunity and accordingly sought strike-out of these defences. In response Pakistan argued that there was no scope for judicial discretion to set aside the Limitation Acts on the ground of alleged abuse of process. Further, in the alternative, it argued that its conduct had not been abusive and that if the suggested abuse lay in its invocation of sovereign immunity, it was fully entitled to invoke this and to treat this invocation as forming part of abusive conduct was inconsistent with the immunity.
Claim against the bank
Pakistan argued that India’s claim against the Bank in restitution had no real prospect of success on the basis that the bank had not been enriched because the deposit with the bank was matched by a corresponding obligation in the form of the debt owed to the account holder. In reply India pointed to a line of authority which recognised the availability of a restitutionary remedy against a bank for money held in a customer’s account provided that the money had not been withdrawn by the customer and the payment could be reversed.
Held
Dismissing all applications for summary disposal (with the possible exception of the strike out of Pakistan’s limitation defence to the trust claims upon which agreement could be reached between the parties, failing which it would be dealt with upon handing down of this judgment):
- 1. Pakistan’s claim to beneficial ownership of the Fund should not be struck out and needed to go to trial.
- 1.1. While there was much force in many of the arguments advanced by India and the Princes, they did not make Pakistan’s claim so weak that it should be disposed of by summary judgment. Complex cases are usually unsuitable for summary judgment and a mini-trial must not be conducted on the documents without the benefit of disclosure and oral evidence.
- 1.2. The material disclosed in previous proceedings combined with new material was sufficient to persuade the court that the purpose and operation of the accounts may well turn out to play a central part in the difficult exercise of inferring the true intentions of the parties involved when the Fund was established. In making this assessment, the court would have to weigh in the balance subsequent behaviour but it would be naïve to assume that such behaviour was carried out as free agents or that there may not have been other reasons making it expedient for those involved to place a different construction on steps taken to establish the Fund after the event.
- 1.3. The court could not conclude that no further relevant material would be forthcoming in disclosure. It was often the case that the documents a party chooses or is able to put before the court when resisting summary judgment would be significantly augmented by disclosure.
- 1.4. While the main actors were all dead and therefore oral evidence was unlikely to form a major part of the material for the court to evaluate, there were individuals involved who were alive and whose evidence would need to be tested in cross-examination before the court could conclude whether any reliance should be placed upon it.
- 1.5. The court would guard against the dangers of (a) looking at the present dispute through the prism of the previous proceedings where the issue to be determined was different and (b) assuming that the solution to the dispute would necessarily be found by application of English trust law and in particular the law of resulting trusts. Such principles may have an important part to play but the possibility that the arrangements were intended to operate at a governmental level and not give rise to any trust or fiduciary relationship must not be overlooked. If examined at that level, apparent inconsistencies in how Pakistan put its claim to a beneficial interest may dissolve.
- 2. Pakistan’s plea as regards non-justiciability or act of state should not be struck out.
- 2.1. Whereas sovereign immunity was capable of being waived, the principle of act of state or non-justiciability was not. If the court lacked jurisdiction to determine an issue, such jurisdiction could not be conferred on it by the parties. The court was in principle obliged to investigate the question even if it would otherwise be an abuse of process for a party to ask it to do so. Since the question went to jurisdiction, it could not be an abuse of process for Pakistan to raise this.
- 2.2. The subsequent dissolution of Hyderabad was irrelevant, or at least arguably irrelevant. Because the doctrine of act of state had to be applied to the facts as they were at the time of the disputed transactions. The non-justiciable character of an inter-governmental transaction could not be altered merely because one of the states in question had subsequently ceased to exist.
- 3. Pakistan’s application for summary disposal of the defendants’ claims on the grounds of limitation must be dismissed.
- 3.1. No limitation period applied in respect of the defendants’ trust claims and therefore the claims were not time-barred. Further the court would be prepared, in principle, to strike out Pakistan’s limitation defence in this respect.
- 3.2. India’s restitutionary claim was subject to a limitation period of six years being, for limitation purposes, a claim to be regarded as founded on simple contract. However Pakistan’s reliance on sovereign immunity may arguably have prevented time from running in her favour until she waived her immunity in 2013 meaning that the limitation period had not expired. This question was not straightforward and therefore was unsuitable for summary judgment. The better course of action was to leave it for determination at trial when it could be considered together with the question of whether it was an abuse of process for Pakistan to rely on limitation defences at all.
- 3.3. Further, it was better for the issues of limitation to be decided at trial. First, if the court was to conclude that the relevant transactions took place at inter-governmental level and to uphold Pakistan’s plea of act of state the limitation issues would become irrelevant. Secondly, since the trust claims would have to go to trial in any event there was no advantage in determining the difficult questions of law regarding limitation arising in the restitution claim in advance of the trial. The court would be better placed to consider and rule upon them in the context of its actual rather than hypothetical finding of fact Further disposal summarily at this stage would only lead to delay, expense and use of court time in dealing with appeals on these difficult questions of law determined on a summary basis.
- 4. The question of whether the limitation defences invoked against the defendants by Pakistan were an abuse of process should be determined at trial and not on a summary basis at this stage.
- 4.1. The court was probably in as good a position now to determine the question as the trial judge would be because (i) it involved a short question of law about the scope of the Limitation Acts and whether there was room for the doctrine of abuse to apply and (ii) the underlying facts which arguably made Pakistan’s conduct abusive were matters of procedural history which could not be controverted and were unlikely to have further light shed upon them by disclosure and oral evidence.
- 4.2. However if summary judgment was granted and the defences struck out, an appeal by Pakistan on the issue of law would almost certainly follow and the trial would be delayed until that appeal had been determined. Therefore, since Pakistan’s application for summary judgment on the basis of limitation had been dismissed and therefore the claims would have to go to trial in any event, the preferable solution, as a matter of case management was to leave the question to be decided at trial.
- 4.3. [OBITER] The statutory scheme of the Limitation Acts was not exhaustive. The scheme was not compulsory and if a party could contract out of it or act in such a way as to be estopped from relying upon it, it could be an abuse of process for a defendant to rely on a particular limitation defence. The court’s inclination, were it to have decided this issue, would have been to hold that it was possible for Pakistan’s limitation defences to be abusive and that there was considerable force in an argument that its conduct in pleading the defences was in fact abusive. The abuse would not lie in Pakistan’s original decision to invoke state immunity or to subsequently waive that immunity but only in reliance on limitation defences to defeat claims which she had herself prevented from having been begun in time by her invocation of sovereign immunity.
- 5. Pakistan’s application for summary judgment on the basis that that India’s claim against the bank in restitution had no prospects of success should be dismissed. India’s claim in restitution was not unarguable in light of the line of authority that there was available a restitutionary remedy against a bank for money held in a customer’s account provided that the money had not been withdrawn by the customer and the payment could be reversed. This was not the occasion to investigate the question at length. The potential merit of the claim comfortably exceeded the threshold which would make it suitable for summary disposal in Pakistan’s favour.