High Commissioner for Pakistan In the United Kingdom v Prince Muffakham Jah & Ors

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.

INTRODUCTION (1) Overview

On 20 September 1948, Nawab Moin Nawaz Jung (Moin) (Footnote: ¹) 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 Bank (Footnote: ²))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.

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 India (Footnote: ³)). Where it is necessary to differentiate between the different emanations of Hyderabad, I do so: otherwise, I shall simply refer to Hyderabad.

Rahimtoola was at the time of the Transfer the High Commissioner to the United Kingdom for the Islamic Republic of Pakistan (Pakistan (Footnote: ⁴)), a position he held until early 1952, when he moved to hold other high office for Pakistan. Whether the Transfer was made to Rahimtoola personally or to Rahimtoola in his capacity as High Commissioner is also a matter of controversy.

So, too, are the circumstances of the Transfer and the basis upon which Rahimtoola held these moneys.

I shall refer to the account out of which the monies were transferred as the Second Account. (There was, as will be described, an earlier established account, out of which monies were transferred to fund the Second Account.)I shall referto the account receiving the monies as the Rahimtoola Account and the monies standing to the credit of that account (after the Transfer) as the Fund.

This objection to the 1954 Proceedings and assertion of sovereign immunity went all the way to the House of Lords. (Footnote: ⁷) The 1954 Proceedings were stayed against the Bank, and set aside against Rahimtoola, by order of the House of Lords on grounds of Pakistan’s successful assertion of sovereign immunity. Pakistan asserted sovereign immunity by reason of the fact that Rahimtoola held the Fund as High Commissioner of Pakistan and that the claim brought by the plaintiffs directly or indirectly infringed Pakistan’s sovereign immunity. Although at no time in these proceedings did Pakistan assert any beneficial interest in the Fund, the House of Lords held (upholding Upjohn J at first instance and overruling the Court of Appeal (Footnote: ⁸)) that Pakistan’s bare legal title in the Fund, through Rahimtoola as High Commissioner, was sufficient to enable her to assert soverign immunity.

Thus, at this stage, it was not clear who the rival claimants to the Fund were. Nizam VII and Hyderabad had asserted an interest. (Footnote: ⁹) Pakistan’s assertion of sovereign immunity, as

There matters rested. Although, in the post-1956 period, there was some attempt to reach agreement as to what should happen to the Fund, these efforts came to naught. In 1963, Nizam VII created a trust over his interest in the Fund (the 1963 Settlement) and in 1965 the capital and income of the 1963 Settlement were irrevocably appointed upon trust for his grandsons (the 1965 Appointment). Nizam VII’s grandsons were:

Also in 1965, Nizam VII assigned to the President of India his claim to the Fund (the 1965 Assignment).

It will readily be appreciated that it is not possible for the same person validly to alienate the same property twice over. Nizam VII’s actions through the 1963 Settlement, the 1965 Appointment and the 1965 Assignment created rival claims to the Fund as between the Princes on the one hand and India on the other. Of course, these rival claims were never articulated in any formal way until the commencement of the present proceedings: there was no point in doing so nor possibility to do so, given the stay imposed by the House of Lords in the 1954 Proceedings.

In 2013, Pakistan commenced the present proceedings. These were against the Bank for payment of the Fund to Pakistan. This involved – for the first time in legal proceedings – an assertion by Pakistan of a beneficial interest in the Fund. Naturally, the other claimants to the Fund (the Princes and India) sought to join, and were joined to, the proceedings. For its own part, the Bank interpleaded, stating (as it had done in the 1954 Proceedings) that it claimed no interest in the Fund for itself and that it would pay the Fund to whoever the Court determined was entitled to it. Pakistan having waived her sovereign immunity in commencing the proceedings, there was now an opportunity for the ownership of the Fund to be determined.

The claims to the Fund operate at two levels or stages:

The question before the Court is, therefore, the shortly-stated one of whether it is Pakistan or the late Nizam VII who was, in 1948, entitled to the Fund.

The parties

The parties to these proceedings are or were:

The issues

Pakistan’s claims to be absolutely entitled to the Fund

As I have noted, Pakistan claims to be absolutely entitled to the Fund. Paragraph 20.10 of Pakistan’s Pleading states:

“…Hyderabad transferred the monies to the Rahimtoola Account in order to compensate/reimburse/indemnify Pakistan in connection with assistance she had provided to Hyderabad/[Nizam VII] and/or to place the monies in the hands of Pakistan, a friendly state which had assisted Hyderabad/[Nizam VII] and keep the monies out of the hands of India. Pakistan assisted Hyderabad/[Nizam VII] by procuring/facilitating the supply and/or transportation of weapons via Pakistan to Hyderabad, in support of Hyderabad’s attempts at self-defence against Indian aggression.”

Thus, Pakistan claims an absolute entitlement to the Fund on two alternative bases:

The Princes’ and India’s contentions that the Fund was held on trust 18. The Princes and India disputed Pakistan’s claim to be absolutely entitled to the Fund. They contended that there was no absolute transfer to Pakistan but that Nizam VII retained the beneficial interest in the Fund and that a trust arose.

The Princes and India also said that the transfer was to Rahimtoola in his personal capacity and that Pakistan had no interest – not even a legal interest – in the Fund. (Footnote: ¹⁷) In short, the Princes and India asserted that the fund was held on trust by Rahimtoola (Footnote: ¹⁸) in his personal capacity alternatively in his capacity as High Commissioner (i.e., for Pakistan). The forms of trust alleged to have arisen were variously: (Footnote: ¹⁹)

Whether there was a trust and, if there was, what sort, involves careful consideration of the conduct, intentions and authority of Nizam VII, Moin and Rahimtoola, both to establish the precise basis of the transfer and the authority and capacity of Moin and Rahimtoola. As I have already noted, there was an issue between the parties as to whether Rahimtoola received the Fund personally or in his capacity as High Commissioner. There was also a dispute as to whether the transfer had been made on the instructions and with the authority of Nizam VII or whether Moin had made the transfer without authority. The Princes and India contended that the transfer was unauthorised by Nizam VII and that Moin acted without authority in making it. (Footnote: ²³)

Pakistan denied that any trust, of any kind, arose. That was the inevitable corollary of Pakistan’s claim to be absolutely entitled to the Fund. However, Pakistan additionally contended that: (Footnote: ²⁴)

“…a payment from one sovereign state to another sovereign state will not give rise to a trust relationship; alternatively will not give rise to a trust relationship without cogent evidence that a trust relationship was intended. States do not intend and cannot be taken to intend to render themselves trustees or beneficiaries in relation to payments made to other states and their agents; alternatively, cannot be taken to intend this highly unusual relationship between states absent cogent evidence of such an intention…”

Thus, even aside from the Arms for Money Argument and the Safeguarding Argument, Pakistan contended that a trust could not or did not arise because of Hyderabad’s and Pakistan’s status as sovereign states.

Rahimtoola

Given the disputes between the parties about (i) the absolute transfer or transfer on trust of the Fund and (ii) the capacity in which Rahimtoola received the Fund, a theoretically possible outcome might be that Rahimtoola received the Fund beneficially in his personal capacity. None of the parties contended for this outcome, but it is one – given the parties’ differences – that is at least theoretically open to me. Rahimtoola died in 1991. His estate was not made a party to these proceedings. That is because his estate has disclaimed any interest in the Fund.

The restitutionary claim

As an alternative to their contention that the Fund was held on trust, the Princes and India made a claim in restitution against both Pakistan and the Bank. (Footnote: ²⁵) The factual basis for the restitutionary claim is exactly the same as that for the Princes’ and India’s trust claim. Specifically, it was contended that the Transfer was unauthorised and that this lack of authority provided the basis for a claim in restitution or unjust enrichment. As with the trust claim, Pakistan denied that there was any unjust enrichment, basing herself on the absolute nature of the transfer. Thus, subject to one point, the restitution claim ought to stand or fall with the dispute about the absolute nature of the transfer to Rahimtoola.

The additional point was that Pakistan advanced a limitation defence, contending that the restitutionary claim was statute barred by virtue of the provisions of the Limitation Act 1939 or the Limitation Act 1980. (Footnote: ²⁶) Pakistan had sought to raise limitation as a defence to the trust claims as well, but this defence was struck out by order of Henderson J. (Footnote: ²⁷)

The Princes and India accepted that prima facie the limitation defence ought to succeed. The restitution claim accrued on 20 September 1948, when (as I shall describe) the Transfer took place. The 1954 Proceedings, brought by Nizam VII, were brought within time. The present proceedings are, on their face, plainly out of time. The Princes and India contended that the limitation defence should, however, fail for the following reasons (which I put in logical order rather than the order in which they were stated by the parties):

Pakistan’s foreign act of state and illegality contentions

Pakistan advanced two further points:

Structure of this Judgment

My approach to resolving these multiple issues will be as follows:

THE EVIDENCE (1) Introduction

Given the very considerable amount of time that has passed between the relevant events and the trial of these proceedings – a period of over seventy years – it is unsurprising that very limited oral evidence of witnesses of fact was adduced by any party. The evidence that was adduced, is described in Section B(2) below.

A number of statements were produced for the purposes of the 1954 Proceedings. Inevitably, these statements focussed on the question of sovereign immunity, which was the question that was before the courts: these statements therefore traversed fewer issues than are before me now. Also, these statements were made when disclosure (or discovery, as it then was) had not taken place; and none of the witnesses were crossexamined. The parties sought to adduce the evidence of various of these witnesses under various Civil Evidence Act Notices. I describe this evidence in Section B(3) below.

The parties produced a significant amount of documentary evidence, spanning the decades. Much of this material came from the parties’ disclosure in these proceedings, but Pakistan also produced documents that she had obtained from various public archives, such as those of Sir Walter, later Lord, Monckton, QC (Monckton), who had some involvement in the affairs of Hyderabad. This material requires special consideration, because it was not produced pursuant to the disclosure process under CPR 31. Three documents produced by Pakistan during the course of her disclosure were the subject of Civil Evidence Act Notices by the Princes and India. I describe the documentary evidence in Section B(4) below.

Section B(5) describes the expert evidence before the court. None of the Princes nor India sought to adduce expert evidence pursuant to CPR 35. However, India and Nizam VIII did seek to rely on the hearsay evidence of a Hyderabad lawyer to explain the constitutional arrangements that prevailed in Hyderabad in 1948. That evidence had been deployed in the 1954 Proceedings. Although initially Pakistan did not seek to adduce any expert evidence, on Day 5 of the trial (17 June 2019), Pakistan made an application to adduce expert evidence from a forensic examiner, Mr Robert Radley (respectively Radley and Radley 1). I refused that application for reasons that I give later on in this Judgment.

It was clear from a very early stage in these proceedings that oral evidence at trial would be minimal and that the documentary evidence might very well be incomplete.

Finally, in Section B(7) below, I say something about my approach to the totality of the evidence that was before me.

Witness of fact called to give evidence

Prince Muffakham

In the event, the only witness of fact that I heard from was Prince Muffakham. Prince Muffakham gave two witness statements. His first statement, dated 20 August 2015, was provided by him during the interlocutory phases of these proceedings (Muffakham 1). His second statement, dated 11 December 2018, was given for the purposes of the trial and represented a somewhat fuller version of Muffakham 1 (Muffakham 2).

Prince Muffakham gave evidence on his own behalf on Day 2 (11 June 2019) of these proceedings. He was a careful and transparently honest witness. However, I am conscious that, notwithstanding the care with which he gave his evidence and his honesty and desire to assist the Court, I must be extremely cautious in the weight that I place on his evidence. That is for three reasons:

Shaharyar

Shaharyar Mohammad Khan (Shaharyar), a distinguished official from Pakistan’s foreign office, now retired, provided a witness statement, dated 14 January 2016, in support of Pakistan (Shaharyar 1). Although, during the course of the interlocutory phases of the proceedings, Pakistan indicated that Shaharyar would attend to give evidence at trial, Pakistan in fact served a Civil Evidence Act notice dated 11 December

Because of what Pakistan had previously said about Shaharyar’s attendance, this first reason for not calling Shaharyar (non-residence in the United Kingdom) met with a degree of criticism from the Princes and India. As it happened, Shaharyar was in London at the time of the trial and ready and willing to give evidence. However, on Day 1 (10 June 2019) of the trial, I was shown a letter from Shaharyar’s wife, indicating her own personal concern about the health implications of Shaharyar giving evidence, this letter being accompanied by a doctor’s letter stating that these concerns were well-founded. In these circumstances, the Princes and India stated that they would make no criticism if Shaharyar were not called. In the event, Shaharyar was not called by Pakistan.

Whilst I have regard to section 4 of the Civil Evidence Act 1995 in assessing the weight to be given to evidence adduced under a Civil Evidence Act Notice, I do not consider that section 4(2)(a) of the 1995 Act is a relevant factor going to weight in this case. Section 4(2)(a) provides that a Court should have regard to “whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness”. In this case, it was clearly neither reasonable nor practicable for Shaharyar to have been called.

Witness evidence given under Civil Evidence Act Notices

In addition to the evidence of Shaharyar, Civil Evidence Act Notices were served in relation to the following statements of the following witnesses:

None of these witnesses could be called, and their evidence obviously relates closely to issues I have to decide. I take it into account, but with the following cautionary notes:

It was suggested that the fact that there might have been an opportunity to crossexamine these witnesses during the course of the 1954 Proceedings, which was not taken, ought in some way to give added weight to the evidence. In other words, it was suggested that the fact that the evidence could have been tested in cross-examination, but was not, justified an inference that the witness was telling the truth or (perhaps more accurately) that the party who could have, but did not, cross-examine, ought in some way to be bound to accept the evidence given as true. I reject that as an approach. The subject-matter of the 1954 Proceedings was very different from that before me now, and it would be unwise to read too much into decisions, taken over sixty years ago, as to whether or not to cross-examine a particular witness.

Documentary evidence

Disclosed documents

Pakistan, the Princes, India and the Bank all gave disclosure. Given the passage of time, this clearly was a challenging exercise for all concerned. It is important that I record that all of the parties fulfilled their responsibilities in an entirely appropriate manner. It is necessary to say this because – inevitably – there were gaps in the documentary record. Some of these gaps were obvious to see. Thus, a document in the disclosure might refer to another document no-one was able to trace or produce. Equally, there were a number of copy-typed documents used for the purpose of the bound case before the House of Lords in the 1954 Proceedings that did not exist in their original form in the disclosure. The inference in such cases must be that these documents did exist in the 1950s, but subsequently were misplaced, misfiled or otherwise lost.

These are the documents that are known to be missing.

I consider that there will be documents that once existed, which have been lost without trace, and without either the parties or the court appreciating that they once existed. A graphic illustration of this can be seen in relation to various documents that were disclosed by Pakistan on 15 January 2019. These documents were discovered amongst documents in the basement of the Pakistan High Commission in London in December 2018. Two are apparently dated 15 September 1948, and the rest date from 1977 and refer to these earlier letters. No other copies of these letters have been found and they are not referred to in the documents that have been disclosed. But for the alertness of Pakistan and her legal team, these documents would never have been produced and there would have been no hint as to their existence from other, disclosed, documents.

Three of these documents are the subject of Civil Evidence Act Notices made by the Princes and India, as set out below:

It will be necessary to consider the content and weight to be given to these documents in due course. By their dates, it is plain that (assuming the dates are correct) the first two documents are closely contemporaneous with the Transfer, which took place on 20 September 1948. The third document is from the Ministry of Foreign Affairs in Pakistan, addressed to the Minister resident at Pakistan’s London Embassy, dated 28 May 1977. The letter reads as follows:

“On 15 September 1948, [Moin], the Finance Minister of the then Hyderabad State, had requested [Rahimtoola], the then Pakistan High Commissioner in London, to accept transfer into his account as a trust of an amount of over 1 million lying at the credit of the Nizam’s government in the Westminster Bank, London. This transfer of funds was accepted by [Rahimtoola] through his letter of 15 September 1948. The original correspondence exchanged between them is however not readily traceable in the Ministry.

2.

We should, therefore, be grateful if you could kindly check up your old records and supply us photocopies of these two letters if available with you.”

Thus, the Ministry in Pakistan was clearly aware of the letters dated 15 September 1948 going between Moin and Rahimtoola, but had only copy-typed versions. (Footnote: ⁴²) The letter to the London Embassy sought to make good that deficiency in the documents. Unfortunately, the Embassy was unable to help, because no correspondence prior to 23 May 1953 was available to the Embassy.

This 1977 letter exchange casts extremely helpful light on the survival and loss of documents:

It would be pointless to speculate as to the cause for missing documents. I repeat what I have said about the care and diligence of Pakistan and her legal team regarding Pakistan’s disclosure, and I make the same point as regards the Princes and India. I draw no inference from the absence of documents, save that I must be alert to the fact that documents – and potentially very material documents – will have gone missing at various points in time over the years. I must decide the case in the absence of these documents, knowing nothing of their significance or otherwise.

Public documents

As I have described, (Footnote: ⁴⁴) the Factual Narratives that I permitted the parties to introduce could refer to public, as well as disclosed, documents. Pakistan undertook a most thorough review of public records for relevant or potentially relevant material. The material that Pakistan considered helpful was referenced in Pakistan’s Factual Narrative and exhibited to that Factual Narrative in some six lever arch files. In terms of volume, this was about the same as the disclosure that the parties chose to include in the chronological run of documents, which also amounted to some six lever arch files.

I have no difficulty in using this material to assist in a consideration of the relevant events. Pakistan – self-evidently, since these were the fruits of her efforts – relied upon them extensively. The Princes and India did not seek to dissuade me from considering this material, but they did stress that I needed to take care when considering these documents. Unlike the disclosure process, which focusses on documents in a party’s control, these documents had been obtained from public records. The volume of material regarding the affairs of India, Pakistan and Hyderabad in the 1940s and 1950s is vast. Inevitably, in identifying the material to be referenced in Pakistan’s Factual Narrative, some process of selection will have been undertaken. That would mean:

Without in any way criticising Pakistan’s process, I consider that the warnings of the Princes and India are apposite. To take but one example: many of the documents cited by Pakistan in her Factual Narrative and produced by her related to the Arms for Money Argument. Everyone accepted that there had been assistance by Pakistan in the supply and transportation of weapons to support Hyderabad’s independence. But that fact does not mean that there is an inevitable link between the Fund and the provision of weapons. I cannot be beguiled into concluding, merely from the inclusion of such documents in Pakistan’s Factual Narrative, that such a link exists, because these documents have not been produced out of the disclosure of the parties but through a trawl of public source documents.

Context is everything: a document’s source can be telling. For example, a document regarding the provision of weapons to Hyderabad coming from an archive of Nizam VII would be more compelling in support of the Arms for Money Argument than a similar document emanating from (say) the records of Sidney Cotton (Cotton), the gentleman centrally involved in the provision of arms to Pakistan and Hyderabad.

The source of documents

The parties provided a chronological schedule of documents, containing the key documents from disclosure relied upon by them, together with the source from which that document had been obtained. I found this extremely helpful.

Expert evidence

India and Nizam VIII sought to rely upon two affidavits of Nonavinakere Srinavasa Raghavan (Raghavan) sworn 17 February 1956 (Raghavan 1) and 17 March 1956

It is well-established that CPR 35 does not constitute a complete code for adduction of expert evidence in English civil procedure, (Footnote: ⁴⁵) and that expert evidence can be received outside the confines of CPR 35, for instance by way of section 3 of the Civil Evidence Act 1972. (Footnote: ⁴⁶) Raghavan, like the factual witnesses referred to in paragraphs 40 above, is now deceased and I do take his evidence into account. Of course, I recognise that Pakistan had no ability to cross-examine Raghavan, and that is a matter that would go to weight. As it happened, however, there was relatively little controversy over Raghavan’s evidence.

As I have described, (Footnote: ⁴⁷) Pakistan sought to adduce the expert evidence of Radley during the course of the trial. I rejected Pakistan’s application. I explain why when describing the documents which Radley 1 considered.

The Factual Narratives

I have described the Pakistan and India Factual Narratives in paragraph 33 above. In themselves, they are not evidence, merely narratives pulling together into a coherent whole the respective factual contentions of Pakistan and India. I have relied upon them both in order to construct the factual narratives contained in this Judgment: I have, however, when referencing documents, tended to reference the primary documents as identified in the Factual Narratives, rather than the Factual Narratives themselves.

My approach to the evidence

In the ordinary course, when assessing factual evidence, a Judge has well in mind the approach of Lord Goff in Grace Shipping Inc v. CF Sharp and Co (Malaya) Pte Ltd: (Footnote: ⁴⁸)

“In such a case [where witnesses were seeking to recall events and telephone conversations of five years earlier] memories may very well be unreliable; and it is of crucial importance for the Judge to have regard to the contemporary documents and to the overall probabilities.”

In this case, none of the critical actors at the time of the Transfer – in particular Nizam VII, Moin and Rahimtoola – could give evidence. After the event – for instance during the course of the 1954 Proceedings – some of these actors did give evidence. But that evidence suffers from all of the fragilities that I have described in paragraph 41 above. For those reasons, the contemporary documents, particularly those directly related to the Transfer, are critical. Of course, the greater effluxion of time between the relevant events and the date of the document, and the remoter the subject-matter of the document, the less cogent such documentary evidence is. I also must bear in mind the potential for the contemporary record to mislead by reason of its incompleteness, known and unknown. (Footnote: ⁴⁹) I have well in mind Lord Goff’s injunction to have regard not only to the contemporary documents, but also to the overall probabilities. My intention is to view the overall picture having well in mind the overall probabilities, and to consider specific events in that light.

HYDERABAD (1) Partition: India, Pakistan and Hyderabad

Hyderabad was a princely state during the British Raj, ruled over by the Nizams of Hyderabad. The princely states were not part of British India, but His Majesty The King exercised “suzerainty” over the princely states.

The Indian Independence Act 1947 partitioned British India to create, as from 15 August 1947 (referred to in the Act as the appointed day (Footnote: ⁵⁰)), “two independent

This partition did not affect the princely states, not part of British India, and referred to in the 1947 Act as the Indian States. Although section 2 effected the partition of British India between India and Pakistan, and did not affect the princely states/Indian States, section 2(4) of the Act provided that “nothing in this section shall be construed as preventing the accession of Indian States to either of the new Dominions”.

Sections 6 to 8 provided for the consequences of independence. Section 6 stated the competence of the Legislature of each of the new Dominions to have “full power to make laws for that Dominion, including laws having extra-territorial operation”⁵³ and made clear that these legislatures could enact legislation “repugnant to the law of England, or to the provisions of this or any existing or future Act of Parliament of the United Kingdom, or to any order, rule or regulation made under any such Act, and the powers of the Legislature of each Dominion includes the power to repeal or amend any such Act, order, rule or regulation in so far as it is part of the law of the Dominion.”

Section 7 provided as follows:

“(1)

As from the appointed day –

(a)

His Majesty’s Government in the United Kingdom have no responsibility as respects the government of any of the territories which, immediately before that day, were included in British India;

(b)

the suzerainty of His Majesty over the Indian States lapses, and with it all treaties and agreements in force at the date of the passing of this Act between His Majesty and the rulers of Indian States, all functions exercisable by His Majesty at that date with respect to Indian States, all obligations of His Majesty existing at that date towards Indian States or the rulers thereof, and all powers, rights, authority or jurisdiction exercisable by His Majesty at that date in or in relation to Indian States by treaty, grant, usage, sufferance or otherwise; and

(c)

there lapse also any treaties or agreements in force at the date of the passing of this Act between His Majesty and any persons having authority in the tribal areas, any obligations of His Majesty existing at that date to any such persons or with respect to the tribal areas, and all powers, rights, authority or jurisdiction exercisable at that date by His Majesty in or in relation to the tribal areas by treaty, grant, usage, sufferance or otherwise:

Provided that, notwithstanding anything in paragraph (b) or paragraph (c) of this subsection, effect shall, as nearly as may be, continue to be given to the provisions of any such agreement as is therein referred to which relate to customs, transit and communications, posts and telegraphs, or other like matters, until the provisions in question are denounced by the Ruler of the Indian State or person having authority in the tribal areas on the one hand, or by the Dominion or Province or other part thereof concerned on the other hand, or are superseded by subsequent agreements.

Section 8 made temporary provision as to the government of each of the new Dominions.

The position of Hyderabad in 1948

Geography and religion

It is important to bear in mind the geography of Hyderabad. A map is at Annex 2 of this Judgment, which I use purely to illustrate the geography. As can be seen, Hyderabad is landlocked within India, and is geographically very far from Pakistan. In terms of religion, the bulk of Hyderabad’s 17.5 million people (at that time) were Hindus, as was the bulk of the Indian population. Nizam VII, by contrast, was (like the bulk of Pakistan’s population) a Muslim. (Footnote: ⁵²)

Approach of the United Kingdom

The Indian Independence Act 1947 sought to ensure that arrangements prior to the appointed day with regard to transit, communications, etc continued after the appointed day, (Footnote: ⁵³) but that the princely states/Indian States would be free to accede to either of the new Dominions if they so chose. (Footnote: ⁵⁴) This freedom of choice was a theme throughout the debates in the House of Commons of what was then the Indian Independence Bill. However, there was an equally telling measure of appreciating the realities of the situation. During the second reading of the Indian Independence Bill on 10 July 1947, the Prime Minister, Mr Attlee said this:

“…The House will remember that the Cabinet Mission, in their memorandum of 12 May 1946, informed the States that His Majesty’s Government could not, and will not in any circumstances, transfer paramountcy to an Indian Government. With the transfer of power to two Indian Dominions, it is necessary to terminate the paramountcy and suzerainty of the Crown over the Indian States, and, with them, the political engagements concluded under paramountcy and the mutual rights and obligations of the Crown and the States which derive therefrom. The reason for this is that they all depended for their implementation on our part, on the continuance of the responsibility of Great Britain for the Government of India; and with the transfer of power to two Dominion Governments, it would be impossible for the British Government to carry out these obligations. An important element of those rights and obligations concerns the protection of the States against external aggression or internal subversive movement, and the methods whereby the paramount Power has in the past influenced the policy of the States so as to enable it and them to fulfil such undertakings. A feature running through all our relations with the States has been that the Crown has conducted their foreign relations. They have received no international recognition independent of India as a whole.

With the ending of the treaties and agreements, the States regain their independence. But they are part of geographical India, and their rulers and peoples are imbued with a patriotism no less great than that of their fellow Indians in British India. It would, I think, be unfortunate if, owing to the formal severance of their paramountcy relations with the Crown, they were to become islands cut off from the rest of India. The termination of their existing relationship with the Crown need have no such consequence. In fact, already a large number of the States have declared their willingness to enter into relationships with the new Dominions, and some have been represented in the Constituent Assembly of India. It is the hope of His Majesty’s Government that all States will, in due course, find their appropriate place within one or other of the new Dominions within the British Commonwealth, but until the constitutions of the Dominions have been framed in such a way as to include the States as willing partners, there must necessarily be a less organic form of relationship between them, and there must be a period before a comprehensive system can be worked out.”

The position of His Majesty’s Government was thus clear: the Indian States would – with the passage of the Indian Independence Act – “regain their independence” (to quote the Prime Minister), but it would be unfortunate if such States were, as a result, “to become islands cut off from the rest of India”. The Prime Minister was using “India” to refer to British India, but it is quite clear that, after partition, Hyderabad would be an island floating in an India and not a Pakistan sea.

Approach of Nizam VII

The then ruler of Hyderabad – Nizam VII – declared his intention to remain independent of India and Pakistan, rather than becoming a part of either. In a confidential note dated 28 July 1947 to Mr Jinnah – the future President of the Constituent Assembly of Pakistan and Pakistan’s first Governor-General – it was stated that Nizam VII “would of course much prefer to have close treaty relations with Pakistan rather than with the Dominion of India. It is the land-locked position of Hyderabad in the belly of the most Hindu part of Hindustan which makes it inevitable for His Exalted Highness with his vast Hindu population to make, if possible, some friendly arrangement with Hindustan”. (Footnote: ⁵⁵) The note continued to say that Nizam VII “has definitely made up his mind not to accede but he may be driven to closer unity by treaty in regard to External Affairs than he would have wished. But a treaty, as the British have shown, can be denounced”. (Footnote: ⁵⁶) The note went on to ask what sort of assistance Mr Jinnah could provide to Hyderabad in terms of supplies of food, salt, kerosene oil, arms, equipment and troops. (Footnote: ⁵⁷)

On 29 November 1947, Nizam VII entered into the Standstill Agreement with India, which aimed – pending final agreement – to continue as between Hyderabad and India those arrangements which had existed as between the Crown and Hyderbad before the appointed day.

The approach of India, as viewed by Nizam VII

As the subsequent debates at the United Nations show, (Footnote: ⁵⁸) there are two views as to the approach of India. So far as Nizam VII was concerned, I am satisfied that (whatever the objective truth) the Nizam considered that India was seeking to force Hyderabad, against her (or, at least, his) will to accede to India and become a part of India. The following documents show very clearly the Nizam’s thinking:

Operation Polo

I shall refer to the interaction between the forces of India and the forces of Hyderabad that took place in September 1948 by its code name, Operation Polo.

On 24 August 1948, the Secretary-General of the United Nations passed on to the Security Council of the United Nations a communication he (the Secretary-General) had received from Zahir Ahmed (Zahir), the Foreign Secretary to the Government of Hyderabad, on 21 August 1948:

“The Government of Hyderabad, in reliance on Article 35(2) of the Charter of the United Nations, requests you to bring to the attention of the Security Council the grave dispute which has arisen between Hyderabad and India, and which, unless settled in accordance with international law and justice, is likely to endanger the maintenance of international peace and security. Hyderabad has been exposed in recent months to violent intimidation, to threats of invasion, and to crippling economic blockade which has inflicted cruel hardship upon the people of Hyderabad and which is intended to coerce it into a renunciation of its independence. The frontiers have been forcibly violated and Hyderabad villages have been occupied by Indian troops. The action of India threatens the existence of Hyderabad, the peace of the Indian and entire Asiatic continent, and the principles of the United Nations. The Government of Hyderabad is collecting and will shortly present to the Security Council abundant documentary evidence substantiating the present complaint. Hyderabad, a State not a member of the United Nations, accepts for the purpose of the dispute the obligations of pacific settlement provided in the Charter of the United Nations.

It is understood that the submission of the present complaint to the Security Council does not prejudice the submission of the dispute to the General Assembly.”

The Secretary-General brought this further communication, also from Zahir, to the attention of the Security Council on 13 September 1948:

“In view of the officially proclaimed intention of India as announced by its Prime Minister to invade Hyderabad and in view of the actual preparations for imminent invasion the Government of Hyderabad earnestly request that the complaint of Hyderabad against India be put on the agenda of the Security Council at the earliest possible date such as Wednesday 15 September. Invasion is bound to cause unrestrained communal war throughout the Indian continent. International peace, fundamental principles of the Charter and the duty to prevent widespread bloodshed demand immediate consideration of the matter by the Security Council.”

Operation Polo took place between 13 and 18 September 1948. The Times for 18 September 1948 records:

“Delhi, Sept 17

Four and a half days after the Indian Army had crossed the Hyderabad border from all points of the compass fighting in Hyderabad ended officially this evening at 5 o’clock, when a “cease fire” order by his Exalted Highness the Nizam to his troops came into effect. This followed a broadcast by Mir Laik Ali, the Hyderabad Prime Minister, announcing his own and his Ministry’s resignation, and the sending of a message by the Nizam to Mr Rajagopalachari, the Indian Governor-General, in which the former said that he had ordered that Indian troops should be allowed free entry into Secunderabad (Footnote: ⁵⁹) and undertook to disband the Razakars (Muslim volunteers).”

The press also reported that Hyderabad’s appeal to the United Nations had been withdrawn.

Previously, on 17 September 1948, Nizam VII made the following radio broadcast:

“My beloved people, I have great pleasure to inform you that I have sent the following message today to His Excellency, Rajagopalachari, Governor-General of India. My Government has tendered their resignation and have asked me to take the political situation into my purview. In answer to this, I told them that I was sorry that this was not done earlier and it was impossible for me to do anything at this critical juncture. However, I have ordered a cease fire to my troops and also have ordered to ban the Razakars and allow the Indian Union to occupy Bolarum (Footnote: ⁶⁰) and Secunderabad tomorrow. Further, till I have had an opportunity of appointing a Prime Minister and appointing a regular Ministry, I hereby constitute the following into committee…

…

I have also had consultations with my friend, Mr KM Munshi, India’s Agent General. I take this opportunity to acknowledge the help he rendered to me at this occasion.

…

I have also ordered my representatives of my old ministry who are now prosecuting the appeal on behalf of Hyderabad before the Security Council of the [United Nations Organisation], not to press it, as I am opening a new chapter of friendliness with India.”

On 28 September 1948, there was a meeting of the United Nations Security Council.

On 12 December 1948, Moin wrote to the President of the Security Council in the following terms:

“On 9 October 1948, I informed the President of the Security Council that it was not my intention at the next meeting of the Security Council devoted to the question of the complaint of Hyderabad against India, to appear before the Security Council and to participate in the discussion concerning the validity of the credentials of the Hyderabad delegation.

That decision was prompted by the desire not to delay either the discussion of the substance of the complaint of Hyderabad or any action of the Council resulting from that discussion.

Since then, reliable information has come to our knowledge which no longer permits us to leave the Security Council in doubt as to the fact that neither at the time when the alleged instructions to withdraw the complaint from the United Nations were issued nor at any subsequent period till the present day has the Nizam been a free agent able to express without constraint the will of the State.

It now appears clearly that instructions in the matter were given under duress, and that the Nizam is now held virtually in the position of a prisoner of the Indian military authorities who have occupied the country by force of arms.

It is evident that the Nizam has been prevented from communicating freely with his friends and advisers in and outside the country. Indian sponsored newspapers and bodies – such as the Hyderabad State Congress – have been openly advocating the deposition of the Nizam. The evidence in our possession shows that he approves of the continued effort of the Hyderabad delegation to enlist the support and authority of the United Nations for the repression of the aggression which has taken place against Hyderabad.

In view of this, we consider it our duty to re-assert, in most emphatic terms, the authority of our delegation as originally appointed and its continued right and obligation to defend the interests of Hyderabad before the United Nations…”

On 19 May 1949, there was a further meeting of the United Nations Security Council. At this meeting, the differing views of India and Pakistan on the question of Hyderabad were again evident. A flavour of this can be seen from the following extracts from the record of the meeting. India’s representative stated (amongst many other things):

“Let me repeat: the action which India was forced to take was not directed against the people of

Hyderabad, or even against the ruler, but against a fascist clique which had usurped power and

was misusing it in a manner that threatened the tranquillity of India as well as Hyderabad itself. As soon as these men resigned and the Nizam was free to resume charge, he withdrew the complaint which they had made to the United Nations.

I ask, is there anything of international significance in all this? Do not let us be led away by words. This complaint is not really made by Hyderabad, but by certain individuals who had once usurped a little brief authority in Hyderabad and have now lost it. They have ceased to represent the ruler; they never represented the people. Whatever dispute or situation they created in Hyderabad has now come to an end, and conditions are gradually settling down to normal. The Nizam and his officers have been co-operating with the Indian authorities in Hyderabad for the restoration of law and order. No Hindu-Muslim clashes have been reported during the last two or three months. Relations between the two communities are cordial. Various good-will missions led by prominent Muslims from various parts of India have toured Hyderabad. There is no ban or restriction on the entry of any visitor into Hyderabad. Press representatives from India and abroad have visited the State without let or hindrance.”

By contrast, Pakistan’s representative stated (again, amongst many other things):

“The representative of India went on to say that the position of the Nizam was that he had been rescued, as it were, from the hands of his provisional Government, he was now perfectly happy under the Military Governor and was perfectly free, and had voluntarily and quite freely directed that the case which had been brought before the Security Council should be withdrawn. The very first step of the Nizam after the march of Indian troops into Hyderabad was to hand over all authority and jurisdiction to the Military Governor. Thereafter, whether he is free or not is immaterial, he has no authority. He has been completely set aside. All authority has been vested in the Military Governor and the administration is in the hands of the Military Governor.

There are, however, one or two very significant photographs which show what the position of the Nizam and of his heir apparent is. I shall hand these photographs to representatives on the Council for their examination. Here is a man who is described as the richest man on earth – whether that is a qualification or a disqualification is a different matter – who, up to the march of the military forces of India into Hyderabad, was the ruler, and according to correspondents, the more or less absolute ruler, subject to such grants of authority as he had already made or contemplated making, of 17,500,000 people in a territory extending over 82,000 square miles. (Footnote: ⁶¹) In the first photograph he is standing next to the Military Governor, and the very positions of the two form an eloquent commentary on what the position of the Nizam is today. In the second photograph the Nizam is standing between the Military Governor and Pandit Nehru. The third photograph, on the same page, is again extremely eloquent. The Deputy Prime Minister of India, Mr Patel, is receiving His Highness the Prince of Berar, the heir apparent to the Nizam. I will make no comment. Representatives on the Council will themselves see with what distinctive courtesy the Deputy Prime Minister of India is receiving His Highness the Prince of Berar…”.

Accession of Hyderabad to India

Whilst a public international lawyer might expect a single answer to the question of whether, and if so when, Hyderabad acceded to India, it is quite clear that there is no single answer to this question. It is a part of Pakistan’s case that the conduct of India in invading Hyderabad was unlawful on many levels – on the level of public international law and at municipal law. I have absolutely no doubt that, viewed from the perspective

I also have absolutely no doubt that, viewed from the perspective of the law of India – including in particular her constitutional law (Footnote: ⁶²) – Hyderabad has been, since 1950, a State within the Union of India, the territory of which Indian State was subsumed into three other States of the Indian Union in 1956. It was India’s case that Hyderabad was, at no time, a sovereign state. (Footnote: ⁶³)

However, it does not seem to me that these perspectives are of any assistance to me. I am sitting as a Justice of the High Court of England and Wales, and it is my duty to apply English municipal law, including English foreign relations law, to the extent that the status of Hyderabad is relevant to these proceedings. Questions of foreign affairs arising in English courts have, as will be described, English law answers.

THE PAYMENT INTO THE RAHIMTOOLA ACCOUNT (1) Establishment of the Hyderabad State Bank Account

On 16 September 1947, Nawab Mir Nawaz Jung (Mir), Agent General for Hyderabad in London cabled the Finance Minister in the following terms:

“Imperial Bank, whose branch here has our large funds, is subject to jurisdiction of Government of India under the Imperial Bank Act. It would be safer to transfer them to an English bank. I suggest Westminster Bank and Mr Laik Ali agrees with my view and suggestion. If you approve, kindly make arrangements by code cable from Imperial Bank Hyderabad to Imperial Bank London.”

Gupta wrote to the General Managers of the Bank a letter dated both 21 and 22 October 1947 in the following terms:

“I wish to draw your attention to the discussions that [Mir] had some time back with the Chairman and Directors of [the Bank] in connection with the establishment of agency arrangements between the Hyderabad State Bank and [the Bank]. The question of agency arrangements is engaging the attention of His Exalted Highness’ Government and a communication will be sent to you in due course. It will, however, take some time before the terms of these agency agreements are finally settled between the parties and, therefore, as a first step towards the proposed arrangements, His Exalted Highness’ Government have decided that the Hyderabad State Bank should maintain a current account at one of your branches at London with Government funds. An official letter about this proposal is enclosed herewith for your consideration and I hope that you will kindly take early action in the matter.”

A letter to Mr RAB Allan, Managing Director, Hyderabad State Bank, also dated 21 October 1947, and also signed by Gupta, stated:

“I am to state that His Exalted Highness the Nizam’s Government desire that arrangements should be made to open with an appropriate office of [the Bank], in London, a current account with Government funds in the name of the Hyderabad State Bank. This account will be operated by the Managing Director, Hyderabad State Bank and one other responsible Officer of the Bank to be named by the Managing Director.

In pursuance of this decision of the Government, I am arranging to place a sum of £2,000,000/- (Two million pounds only) at the disposal of the Head Office of [the Bank]. You are requested kindly to send this office your specimen signature [form] so that these specimen signatures may be attested and forwarded to [the Bank].

In case [the Bank] desires that any Account Opening Forms should be signed, such forms will be received by you through the Agent General for Hyderabad in London [i.e. Mir] and you are requested kindly to take immediate action to complete and return the forms to the Agent General.”

On 22 October 1947, Gupta again wrote to the Bank:

“His Exalted Highness the Nizam’s Government desire that the Hyderabad State Bank should maintain a current account with [the Bank]. I have, therefore, separately instructed the Imperial Bank of India, London, to place a sum of £2,000,000/- (Two Million Pounds only) at the disposal of your Head Office and you are requested kindly to open at an appropriate branch a current account in the name of the Hyderabad State Bank and credit thereto the above mentioned amount. This account will be operated upon by the Managing Director of the Hyderabad State Bank himself and one other senior officer of that Bank to be named by the Managing Director. For the present the specimen signatures of Mr RAB Allan, Managing Director, Hyderabad State Bank, duly attested by me, are enclosed herewith. I shall be glad to learn about the action taken by you in the matter.” The specimen signatures were enclosed.

I shall refer to this account, which was in due course set up, as the Hyderabad State Bank Account. It is quite clear – but bears emphasising – that this was an official account, to be operated by the Managing Director of the central bank of Hyderabad (the Hyderabad State Bank) – then RAB Allan (Allan) – and a senior officer of Hyderabad State Bank to be nominated by him.

Annex 3 to this Judgment sets out the various dealings on the three accounts here in issue, namely the Hyderabad State Bank Account, the Second Account and the Rahimtoola Account. From time to time, this Judgment will make reference to these dealings. The transactions listed in Annex 3 are numbered, and I shall refer to them as Transaction x, where x is the numbered transaction listed in Annex 3.

On the same day (22 October 1947), Imperial Bank of India was instructed to transfer the sum of £2,000,000 to the Bank. On 23 October 1947, Allan wrote to Westminster Bank regarding details of the operation of the Hyderabad Government Account.

The Bank – by a letter addressed to Allan and dated 28 October 1947 – responded positively to the proposal that an account be opened. The Bank did make the point that a current account would not be interest bearing, whereas a deposit account would be:

“By an instruction issued by the Committee of London Clearing Banks in 1945, interest on current account was no longer permitted, but on the other hand we can accept deposits for any fixed period, minimum 14 days, or if preferred a continuing deposit subject to 14 days’ notice of withdrawal, at the rate of one-half per cent per annum.”

The Bank also responded, in this letter, to the points Allan had made regarding the operation of the Hyderabad Government Account.

On 29 October 1947, the Bank wrote a further letter to Allan. This stated, amongst other things, that:

“The Agent General for the State of Hyderabad [i.e. Mir] called here today to discuss this matter with my Chairman, the Honourable Rupert Beckett, and myself and expressed general approval of the arrangements we propose for the opening and conduct of the account. We agree that the account should be domiciled at our Foreign Branch Office (situated in this building) where facilities exist for conducting such specialised transactions as we envisage you may from time to time require…”

On 30 October 1947, the Bank confirmed to Mir that “we have today received the £2,000,000 (Two million pounds) from the Imperial Bank of India and have placed the amount on deposit at 14 days’ notice bearing interest at one-half per cent per annum”. By a letter of the same date, the Bank informed Gupta of the opening of the account and the specimen signatures of Allan (but not the other signatory) had been received. This is Transaction 1 in Annex 3.

Establishment of the Second Account

On 1 April 1948, Moin wrote to Allan as follows:

“With reference to our conversation the other day I write to confirm that out of the £2 millions sterling deposited by the Nizam’s Government with the Westminster Bank, London, the sum of one million pounds sterling may kindly be transferred to another account in favour of the Nizam’s Government on the same terms and conditions as were applicable to the original deposit of £2 millions with the instruction that the new account will be operated upon by the Agent General for Hyderabad in London [i.e. at that time Mir] and/or the Finance Minister of the Nizam’s Government [i.e. at that time Moin].

I shall be grateful if you will kindly take necessary action as indicated above and let me know.”

On 2 April 1948, Allan wrote to the Bank requesting that an account be opened in these terms. I have referred to this account – in paragraph 5 above – as the Second Account. As with the Hyderabad Government Account, this was an official account. However, control of its operation moved away from officials of the Hyderabad State Bank to Moin and Mir in their official capacities. It is important to note that Moin’s 1 April 1948 letter to Allan referred to himself and Mir not by reference to their names but to the offices they held. There is no doubt in my mind that had Nizam VII decided to replace one or other of these gentlemen, it would be their successors in office that would have responsibility for the Second Account.

On 4 April 1948, Moin wrote to Mir noting the establishment of the Hyderabad Government Account and the subsequent setting up of the Second Account. Regarding the Second Account, Moin said:

“…The intention of course was that the account will be operated upon by the Finance Minister himself [i.e. Moin] or by the Agent General [i.e. Mir] under instructions from the Finance Minister.

In view of the present circumstances it is however considered advisable, as a measure of protection, that the High Commissioner of Pakistan in the UK should also be authorised to operate on this account and this fact should be communicated to [the Bank]. Like the Hyderabad Agent General, the High Commissioner of Pakistan will also operate on this account under instructions from the Finance Minister of the Nizam’s Government.”

On 7 April 1948, the Bank wrote to Allan confirming that the second account had been opened and the sum of £1,000,000 transferred to it. This is Transaction 2 in Annex 3. However, because Allan’s letter to the Bank (see paragraph 97 above) had only mentioned two signatories, no reference was made to the High Commissioner of Pakistan being a signatory. Although the possibility of Rahimtoola as a third signatory was raised with the Bank, (Footnote: ⁶⁴) no third signatory was ever recognised on the Second Account.

Transfer of the balance of the Hyderabad State Bank Account to the Second Account

On 24 May 1948, Moin wrote to Allan as follows:

“Please refer to your letter No 91/7/5 dated 14 April 1948, enclosing a copy of the transfer advice from the Westminster Bank Limited with regard to the transfer of £1,000,000/- (one million pounds) from the account of the Hyderabad State Bank to that of HEH the Nizam’s Government. I now write to request that the balance of £1,000,000/- (one million pounds) which still stands to the credit of the Hyderbad State Bank Account at the Westminster Bank Limited, London, may kindly be transferred to the Nizam’s Government Account, on the same terms and conditions as are applicable to the Hyderabad State Bank Account at present.

The Nizam’s Government Account as previously advised will be operated upon by the Agent

General for Hyderabad in London [i.e., Mir] and/or the Finance Minister of the Nizam’s Government [i.e., Moin].

I shall be obliged if you will please take necessary action and let me know the result in due course.”

On the same day (24 May 1948), Allan wrote to the Bank:

“I shall be glad if, on receipt of this letter, you will transfer from our Deposit Account the sum of £1,000,000 (one million pounds) to the account standing in the name of HEH the Nizam’s Government.

2.

The accrued interest on our Account may also be applied to the account of HEH the Nizam’s Government.”

On 29 May 1948, the Bank confirmed to both Allan and Mointhat the transfer of £1 million plus interest had taken place. This is Transaction 5 in Annex 3.

Special treatment of the Second Account

There are a number of documents internal to the Bank suggesting that the correspondence regarding the Second Account should not be sent to the Government in Hyderabad. Thus, a memo dated 3 May 1948, referencing the Second Account, stated:

“Please note that until further notice all further correspondence for this account should be handed to MO. NOTHING is to be sent direct.”

It is not known who “MO” was.

In an internal memo dated 1 July 1948, a manager at the Bank issued the following instructions regarding the operation of the Second Account:

“It is most important that the following instructions regarding correspondence should be carefully observed.

All letters and advices are to be handed to Mr Thorne, Manager’s Assistant, or in his absence to one of the Managers.

All departments’ records of an address to be used in connection with this account must be destroyed.

It should also be noted that advices should not be addressed to H.E.H. the Nizam’s Government but to –

The Agent General [i.e. Mir], H.E.H The Nizam’s Government,

although the account is in the name of H.E.H. the Nizam’s Government.”

The Rahimtoola Account

Approach

This is the most factually controversial part of the case. I propose to approach it in the following way. First – in Section D(5)(b) – I set out, in as neutral a way as possible, the relevant evidence. Thereafter – in Section D(5)(c) – I consider the points Pakistan, the Princes and India made in relation to this evidence and make findings as to what occurred.

The evidence

Communications dated 14 September 1948

On 14 September 1948, Moin wrote to Mir in the following terms:

“This is to inform you that I have today under instructions from HEH the Nizam’s Govt issued instructions to the Westminster Bank, 41 Lothbury, to close the account they have of HEH the

Nizam’s Govt by transfer of funds as per those instructions.”

This is obviously a reference to the Second Account: but, so far as the documentary record is concerned (and I fully appreciate that this record may be incomplete (Footnote: ⁶⁵)), there is no evidence that such instructions were issued to the Bank at this time.

The letter was written from the Dorchester Hotel in London, (Footnote: ⁶⁶) and it is clear that Moin

Communications dated 15 September 1948

By a letter dated 15 September 1948, Moin wrote to Rahimtoola in the following terms:

“In view of the situation that is now developing in Hyderabad and in order to safeguard the interests of the State, I would be very grateful if you would kindly agree to permit the transfer into your account of just over one million pounds sterling that is now lying at the credit of the Nizam’s Government in the Westminster Bank, London. This amount may kindly be kept by

you in trust.”

Rahimtoola responded on the same date:

“Your letter of date.

In the circumstances, I agree to your suggestion to keep the amount mentioned by you in my name in trust.”

By this time, Operation Polo had commenced, but Hyderabad’s capitulation had yet to occur: as I have described, it occurred on 17 September.⁷⁰

Rahimtoola’s evidence

In paragraph 3 of Rahimtoola 1, Rahimtoola says:

“On or about 16 September 1948, it was agreed between [Moin] and myself that the said funds should be transferred to me as the agent of the Government of Pakistan and by a letter dated the said 16 September the said [Moin] instructed the said Bank to transfer the funds standing to the credit of the said account to an account in my name. On receipt of such letter on 20 September 1948 the said Bank in accordance with the instructions therein contained transferred the said funds then amounting to £1,007,940.9.0d to a new account in my name. I accepted such transfer in accordance with the instructions of and as agent for my Government and have never claimed any personal interest in the funds so transferred.”

In his second affidavit, Rahimtoola expanded on his description of the relevant events. Rahimtoola 2 states:

“3.

I have never been to Hyderabad and I have never had any dealings with or spoken to the Nizam of Hyderabad whom I have only seen once in my life and that when I was a boy. I do not remember ever having met the Defendant [Moin]…before the month of September 1948 and before then I had had no dealings of any kind with him.

4.

Some few days before the 20 September 1948, a representative of the Nizam came and saw me at my official residence, 56 Avenue Road, Hampstead. Such representative came to see me on that occasion in order to ask me to accept a transfer into my name of the funds standing to the credit of the Nizam’s Government with the Defendant Bank. The then Foreign Minister of Pakistan, Sir Mohammed Zafrullah Khan [Zafrullah]was present at the interview between such representative and myself and he instructed me to accept the transfer of the said funds. I objected on the ground that the Government of Pakistan should not become involved but my objections were overruled by the said Zafrullah Khan who directed me to agree to the transfer of the said funds to an account in my name but to be described as the High Commissioner for Pakistan and also directed me to sign the necessary specimen signature forms and I thereupon agreed to the transfer of the said funds to the account which was subsequently opened in my name and signed the forms. I would never have agreed to the said transfer unless I had been expressly instructed to do so as the High Commissioner of Pakistan and on behalf of my Government by the said Zafrullah Khan under whose instructions I was as High Commissioner bound to act. At the time when I swore my previous Affidavit herein on the 15 July 1955, I assumed that the representative of the Nizam whom I saw on this occasion was Moin since he had signed the letter dated the 16 September transferring the said funds to me but since then I have discussed the matter with the said Zafrullah Khan and I am not now certain whether it was Moin or the Agent General for Hyderabad [Mir] who came to see me on this occasion, but I am certain that it was one or other of them. I do not remember the exact date on which such interview took place. I was never given any written instructions to accept the said transfer.”

Communications dated 16 September 1948

By a letter dated 16 September 1948, but in fact hand-delivered to the Bank on 20 September 1948, (Footnote: ⁶⁸) Moin wrote to the Bank in the following terms:

“I shall be thankful if you would kindly close the H.E.H. the Nizam’s Govt account with you by transfer of the balance to the credit of Mr Habib Ibrahim Rahimtoola, High Commissioner for Pakistan in London, whose specimen signatures are enclosed herewith.”

This letter – like the others referred to – gave Moin’s address as the Dorchester Hotel. Moin was, of course, in Paris on the 15 September 1948 until quite late. I do not know when he returned from Paris.

The specimen signatures were attached: they, like the letter, identified Rahimtoola as the High Commissioner for Pakistan.

Events of 20 September 1948

As described in paragraph 113 above, Moin’s instruction to transfer the balance of the Second Account to the Rahimtoola Account was hand-delivered to the Bank on 20 September 1948. On the same day, the Bank wrote to Rahimtoola as follows:

“On the instructions of [Moin], we have today opened a deposit account in your name with the sum of £1,007,940.9.-, as shown on the enclosed credit advice.

We have been provided with two specimens of your signature and shall be pleased to receive your instructions.”

The letter was addressed to Rahimtoola, “High Commissioner for Pakistan in London”. It was sent to the High Commission itself, then located at 14/15/16 Fitzhardinge Street in London.

The credit advice referred to in this letter was addressed to “Habib Ibrahim Rahimtoola (High Commissioner for Pakistan in London) Deposit A/C” and recorded a credit to that account of £1,007,940.9s” as a result of a “[t]ransfer by order of H.E.H. The Nizam’s Government”.

Also on 20 September 1948, the Bank wrote to Moin:

“In accordance with the instructions contained in your letter dated 16 September which was handed to us today by Mr Khan, we have transferred the balance of the deposit account in the name of H.E.H. The Nizam’s Government to a new deposit account in the name of Mr Habib Ibrahim Rahimtoola. We thank you for the specimen signatures of this gentleman.

We enclose our formal advice of this transfer and think you may be interested to know that the amount involved is made up as follows…”

As a consequence of the transfer, a memo was sent to all departments within the Bank on 20 September 1948 regarding the Second Account:

“Please note that no payment should be made out of this account without reference to Managers.”

Given the intended closure of the Second Account, this was no doubt to ensure that the account did not inadvertently become overdrawn.

The Bank’s views regarding the basis upon which the account was held

I should record that the Bank itself appears to have been under little doubt as to the basis upon which Rahimtoola held the monies in the Rahimtoola Account. An internal memo dated 7 September 1950 records:

“We have an account in the name of Mr HI Rahimtoola as High Commissioner. (Footnote: ⁶⁹) This was the result of a transfer from the Hyderabad Government account, concerning which there was a good deal of controversy at the time (Autumn 1948). Balance £1,017,000.”

An earlier memo – dated 18 May 1950 – headed “High Commissioner for Pakistan in London” – states:

“When an official announcement of the appointment of a successor to HI Rahimtoola is announced or noticed in the press, the change is to be referred to Mr Peppiatt, of Freshfields.”

I do not suggest that any of the relevant actors for Hyderabad saw these communications, and naturally the internal view of the Bank cannot colour the nature of the Transfer. However, it is appropriate to record these communications, and I return to their relevance later.

Findings

Introduction

All of the parties had points to make in relation to the evidence that I have described. Pakistan sought to persuade me that the letters dated 15 September 1948 were not reliable and that I should not place too much weight on them. (Footnote: ⁷⁰)

The Princes and India, for their part, contended that Rahimtoola’s evidence – and particularly that given in Rahimtoola 2 – should be discounted as substantially incorrect. Although there are points in India’s Factual Narrative suggesting that Rahimtoola’s evidence in Rahimtoola 1 and Rahimtoola 2 was deliberately incorrect – that is to say, dishonest – that contention was not maintained by the Princes and India. (Footnote: ⁷¹)

I begin with the evidence of Rahimtoola and then turn to consider the 15 September 1948 letters. I conclude by stating my findings regarding the transfer.

The evidence of Rahimtoola

Rahimtoola’s affidavits were produced for the purpose of the 1954 Proceedings. As I have described, these proceedings never grappled with the substance of who was entitled to the Fund and were concerned only with the question of Pakistan’s assertion of sovereign immunity. That, in my judgment, explains much both about what Rahimtoola says and does not say in his affidavits:

I conclude that Rahimtoola 1 and Rahimtoola 2 were carefully compiled documents. They would have sought to tell the truth as Rahimtoola saw it. I can see no basis for concluding that Rahimtoola told deliberate untruths in these documents (and, as I have said, the Princes and India made no such contention) nor do I consider that the statements in these affidavits could have been carelessly made. To the contrary: I consider that these affidavits were drafted with great care so as to avoid trespassing into areas where Pakistan did not wish to go. In these circumstances, whilst I accept Rahimtoola 1 and Rahimtoola 2 as broadly reliable, that is subject to two important qualifications:

The 15 September letters

The Princes and India relied upon these letters in support of their case that an express trust arose. The extent to which these letters do assist the Princes and India to further their contentions regarding a trust is a matter I consider further below. However, it is appropriate to determine now the reliability of these documents. Pakistan contended that these letters were essentially unreliable and should not be relied on by the court. This was a difficult contention for Pakistan to make because, of course, these documents were produced by Pakistan herself on 15 January 2019 in the circumstances described in paragraphs 45-50 above. What is more, they were produced together with some 1977 correspondence between Pakistan’s Ministry of Foreign Affairs and Pakistan’s London embassy, to which the 1948 letters were attached. It is plain from the terms of the 1977 correspondence that the persons involved in that correspondence regarded the 15 September letters as genuine copies and as being a proper record of their contents. (Footnote: ⁷⁶)

In these circumstances, the most the Pakistan could do was draw to the Court’s attention certain “oddities” or inconsistencies in the 1948 letters, specifically:

Even if well-founded, and I find they are not, none of these points could persuade me to disregard these letters or even to treat them as having less weight than any other of the contemporary documents written in September 1948. I pressed Mr Qureshi, QC as to what inferences he was asking me to draw as a result of these three points: (Footnote: ⁷⁹)

Pakistan did attempt an altogether more fundamental attack on the letters during the course of the trial. As to this:

My conclusions on the evidence

I find that Moin and Mir formed the intention of transferring the sums standing to the account of Hyderabad in the Second Account to Rahimtoola in September 1948.

It is significant that the Transfer actually occurred on 20 September 1948 (Footnote: ⁸⁶) (after Operation Polo had succeeded (Footnote: ⁸⁷) and after Nizam VII had made his speech on 17 September 1948, accepting the resignation of his Government (Footnote: ⁸⁸)), whereas Moin wrote to Mir on 14 September 1948 (just after Operation Polo began, on 13 September 1948 (Footnote: ⁸⁹)) to say that the Transfer had occurred on that day “under instructions from HEH the Nizam’s Govt”.

Plainly, the Transfer did not occur on that day. Moin had no justification in saying so: the letter of instruction to the Bank is dated 16 September 1948, and the transfer was in fact only effected on 20 September 1948. There is no record of any instructions from Nizam VII, although (given what I have said about the documentary record (Footnote: ⁹⁰)) it is possible such a communication existed. There is, on the face of the record, an inconsistency between when Moin told Mir the transfer took place and when Moin actually effected it. I consider the fact that Moin stated that the Transfer had occurred on 14 September 1948, when it in fact took place on 20 September 1948, to be significant. I consider that Moin waited until it was clear that Operation Polo had succeeded and that Nizam VII was in thrall to India before effecting the Transfer. In short, Moin only wanted to take the drastic step of divesting Hyderabad of this money when it was clear that India was in control of Hyderabad. Of course, by this time, Nizam VII had accepted his Government’s resignation, and Moin could no longer uncontroversially be said to have the power and authority of Finance Minister and Minister for External Affairs – although he claimed to retain office. Hence, I find, the attempt to establish the date of the Transfer as 14 September 1948. In short, I find that the letter dated 14 September 1948 is mis-dated: whereas it bears the date 14 September 1948, I find that it was in fact written on or shortly before 20 September 1948. I consider what Moin might have meant by “instructions from HEH the Nizam’s Govt” and the question of authority from Nizam VII in due course. For the present I will only say that although I have had regard to the possibility that there may have been a written authorisation of the Transfer by Nizam VII, which has been lost in the course of time, I consider on balance that there was no such written authorisation and that is the basis upon which I proceed.

Obviously, in order for the Transfer to be effective, both the Bank and the holder of the new account with the Bank needed to be approached. Although the letter to the Bank was dated 16 September 1948 – again, conveniently pre-dating Nizam VII’s 17 September 1948 speech – it was only delivered to the Bank on 20 September 1948. (Footnote: ⁹¹) I find that this letter could have been written at any time between mid-September and 20 September 1948.

In terms of the approach to Rahimtoola:

Attempts to freeze the accounts

By a cable dated 22 September 1948, Gupta instructed the Bank as follows:

“Reference your letter…dated 30 October 1947¹⁰⁰ regarding two million pounds in fourteen days notice account operated by the Agent General for Hyderabad in London [i.e. Mir] or by the Finance Minister Nizam’s Government [i.e. Moin]. Kindly arrange that no withdrawals are permitted from this account until further instructions from the Financial Secretary Nizam’s Government [i.e. Gupta]. Letter follows.”

Given that Nizam VII’s Government had resigned, it is unclear whether Gupta had the authority to write in these terms, a point made by Mr Qureshi, QC. That is a point that I do not have to decide: Gupta’s authority – or otherwise – is not relevant to the issues in these proceedings. What is relevant is the fact that Gupta’s actions had the effect of causing the Bank to freeze the Rahimtoola Account, as I shall describe.

On the next day (23 September 1948), the Bank cabled in response:

“Your cable 22^nd received. On the instructions dated sixteenth September of [Moin] Finance Minister the balance of the account amounting to 1,007,940 pounds nine shillings (one million and seven thousand nine hundred and forty pounds nine shillings) was transferred on the twentieth September to an account with this bank in the name of Habib Ibrahim Rahimtoola High Commissioner for Pakistan in London.”

Gupta’s letter – which was dated 23 September 1948, and which must have crossed with the Bank’s cable referred to in paragraph 137 above – stated:

“Kindly refer to your letter…dated 30 October 1947, (Footnote: ⁹⁴) through which you had acknowledged receipt of instructions to place a sum of £2,000,000 (Two Million Pounds) which you had received from the Imperial Bank of India, on a deposit account subject to 14 days’ notice of withdrawal and bearing interest at the rate of ½ per cent per annum. It was originally to be operated by [Allan], Managing Director, Hyderabad State Bank. But subsequently you were instructed by [Allan] to transfer it to a new account opened in the name of H.E.H. the Nizam’s Government to be operated upon either by the Agent General for Hyderabad in London [i.e. Mir] or by the Hon’ble Finance Minister of H.E.H. the Nizam’s Government [i.e. Moin].

I am now to request you kindly to arrange that no further withdrawals are permitted from the above account until further instructions from me.”

It appears from these communications that whilst Gupta knew about the Hyderabad Account and the transfers to the Second Account, he did not know about the Transfer to the Rahimtoola Account. Also, his continued reference to the sum of £2 million strongly suggests that he did not know about certain payments out of the Second Account, amounting to nearly £1 million. These are the transactions identified in Annex 3 as Transactions 3, 4, 6, 7 and 8, which I consider in greater detail below.

On 27 September 1948, a telegram signed by Nizam VII was sent to the Governor General of India and the Deputy Prime Minister of India:

“Westminster Bank London informs that my ex-Finance Minister [Moin] has unauthorizedly transferred a sum of rupees [sic: £ sterling is obviously meant] one million and seven thousand nine hundred and forty pounds nine shillings standing in the bank in the account of the State to the account of [Rahimtoola] High Commissioner for Pakistan in London in the same bank. Will be grateful if you will ask HMG to use their good offices to have the money re-transferred into the account of Hyderabad State in the Bank and if necessary freeze the amount.”

The reference to “HMG” was a reference to Her Majesty’s Government of the United Kingdom. The Governor General – in a cable of the same date (27 September 1948) – requested confirmation of the facts and a copy of the communication received from Westminster Bank. Nizam VII replied on 28 September 1948.

At the same time, Nizam VII told Moin to reinstate the money. That request was made repeatedly. (Footnote: ⁹⁵)

On 28 September 1948, Nizam VII authorised “Mr VK Krishna Menon, High Commissioner for India in London UK to institute and conduct legal proceedings on behalf of myself and in any competent court in respect of Rupees [sic] one million and seven thousand nine hundred and forty pounds nine shillings which was standing in the name of Hyderabad State in the Westminster Bank, London.” This authority was set out in a formal power of attorney made on 1 October 1948, signed by Nizam VII, and explicitly stating that the monies had wrongly been transferred out of the Second Account. (Footnote: ⁹⁶)

Also on 28 September 1948, the following exchange occurred between Gupta and the Bank. The cable from Gupta to the Bank read:

“Received cable dated 23 September.¹⁰⁴ [Moin] ex-Finance Minister Hyderabad State had no authority to transfer the amount Nizam Government in your bank to be account of Pakistan High Commissioner. Kindly arrange to re-transfer the amount to the account of Nizam’s Government. In any case, no operations should kindly be allowed on the above said amount by the Pakistan High Commissioner. If unable for any reasons to retransfer the amount to Nizam’s Government account the amount may be held in suspense with you pending further action.” The Bank’s reply was as follows:

“Your cable 28 September received. Transfer to account of Agent General of Pakistan [sic i.e. Rahimtoola] was made by authority of authorised signatory and cannot be re-transferred by bank at your request. Amount transferred must remain at disposition of Agent General of Pakistan [sic] unless an order is made by British court restraining bank from parting with the money. It is open to Hyderabad Government to make immediate application to British court for such an order if they consider such action desirable.”

Pursuant to the request Nizam VII had made to India, India wrote (in a letter dated 29 September 1948, marked “top secret”) to the Prime Minister, Mr Attlee, requesting assistance in obtaining the return of the monies transferred to Hyderabad. The Prime Minister received advice from the Commonwealth Relations Office in Downing Street on 1 October 1948, and a reply was sent on the same day (1 October 1948) indicating that the United Kingdom Government was unable to assist.

It is quite clear that these actions by and on behalf of Nizam VII were being directed by India. I was shown various internal communications of India considering what steps the Nizam should take in order to recover the Fund. I consider later whether Nizam VII was acting willingly in seeking recovery of the Fund or whether – as Pakistan contended – he was acting under duress. What is clear is that whether he was doing so willingly or not, Nizam VII was prepared to be directed by India in what he did.

As I have described, Nizam VII’s efforts to recover the monies were unsuccessful. However, his efforts (and those of others, like Gupta and India itself) were sufficient to cause the Bank to freeze the Rahimtoola Account and to adopt the position of an interpleader or stakeholder, so that neither Rahimtoola himself – nor anybody else – could deal with the Fund without an order of the Court.

EVENTS POST-DATING THE TRANSFER (1) Introduction

The following is not intended to be a comprehensive statement of what happened after the Transfer. Essentially, for nearly seven decades, there was a stalemate regarding the Fund, which only ended in 2013, when Pakistan commenced the present proceedings. However, there are some matters that do need to be described, notably:

Appointment of a new High Commissioner for Pakistan

In 1952, Ispahani was appointed High Commissioner for Pakistan in succession to Rahimtoola. The Bank was naturally concerned how this might affect the Rahimtoola Account. In a letter dated 2 January 1952, the Bank noted:

“According to a report in yesterday’s Daily Telegraph, Mr Ispahani, who has been Pakistani Ambassador to the United States for the past four years, has been appointed High Commissioner in London. This means that he will be taking the place of Mr HI Rahimtoola, in whose name as High Commissioner we have a very important deposit account here, which however is conducted under legal guidance owing to the possibility of a dispute between Pakistan and India which might affect it.”

The Bank considered that if time allowed before his departure, the Chairman of the Bank (Lord Aldenham) should seek to have lunch with Rahimtoola. (Footnote: ⁹⁷) The lunchtime meeting took place, and the following memorandum recorded part of what was said:

“Mr Rahimtoola came to lunch with the Chairman last Thursday, 24 instant. I asked Lord Aldenham today whether any reference had been made to the account of over £1 million opened by H.E.H. The Nizam’s Government in favour of HI Rahimtoola. He said that Mr Rahimtoola had referred to it quite casually and seemed to regard it at his own personal disposition because he said that, now that he was going to Paris, he did not think that anyone would be able to “extradite” him in connection with it.”

The Ispahani letter

In a letter dated 23 May 1953, the Secretary to the Government of Pakistan, Ministry of Foreign Affairs and Commonwealth Relations (a Mr Husain) wrote to Ispahani in the following terms:

“I am directed to write to you regarding the Hyderabad Fund transferred by [Moin] from the deposit account of the Nizam’s Government with the Westminster Bank to a new account in the name of [Rahimtoola], formerly High Commissioner for Pakistan in the United Kingdom.

A meeting was held in Karachi on 16^th May 1953, at which, besides the Prime Minister, who presided, the following were present:

1.

The Minister for Foreign Affairs and Commonwealth Relations

2.

The Minister for Finance

3.

[Rahimtoola]

4.

The Cabinet Secretary

5.

The Private Secretary to the Prime Minister

The position regarding the Hyderabad Fund mentioned above was discussed. It was pointed out that the amount stood in the name of [Rahimtoola] in his personal capacity without any reference to his position as High Commissioner of Pakistan. If it was admitted that the Fund was transferred to [Rahimtoola’s] account in his personal capacity it was likely that the Government of India (claiming to be the Paramount Power of Government of Hyderabad) would file a suit in the British Court against him to recover the amount. Since the Government of Hyderabad had no international status, and the Government of India was the de facto Paramount Power, such a suit would create complications. The Bank was aware of the developments regarding Hyderabad and this Fund, and might out of caution give a notice to India if any attempt was made to operate the account. On the other hand, if the position was accepted that [Rahimtoola] in receiving the Fund had acted as an Agent of the Government of Pakistan, then no suit would lie against him personally and the Government of Pakistan could not be sued in an English Court.

The point was raised also that in a suit against [Rahimtoola] in his personal capacity, the Government of India would claim to be recognised in a British Court as the successor Government to the Nizam’s Government. This would militate against the position we had taken up in the Security Council regarding Hyderabad. On the other hand, any instruction to the Bank that the Fund was held by [Rahimtoola] as an Agent of the Government of Pakistan might be construed by India as an unfriendly act and might further vitiate the relations between the two countries.

Weighing one political disadvantage against another, the general opinion was that action should be taken forthwith to inform the Bank that [Rahimtoola] in accepting the amount transferred by [Moin] had acted in his capacity as an Agent of the Pakistan Government.

It was decided that [Rahimtoola] should send to the Westminster Bank a letter to the effect that the Hyderabad Fund held by [Rahimtoola] was held by him in his capacity as an Agent of the Pakistan Government and that this Fund should now be transferred in the name of [Ispahani], the present High Commissioner of Pakistan in London. The letter should be drafted by HM Law in consultation with [Rahimtoola] who may show it to his solicitors in London before sending it to the Bank.

A copy of the letter drafted in pursuance of this decision is enclosed for your information. It is requested that your agreement to the arrangement proposed above regarding the transfer of this Fund in your name may kindly be communicated urgently to this Ministry.” A letter in these terms, dated 27 July 1953, was duly sent to the Bank: (Footnote: ⁹⁸)

“This is to inform you that the amount of £1,007,940/9/0d which was transferred by [Moin] from the deposit account of the Nizam’s Government with the Westminster Bank to a new account in my name, i.e. Habib I Rahimtoola on 20^th September 1948, together with all interest which has accrued thereon since that date may now please be transferred to the name of Mr MAH Ispahani, the present High Commissioner for Pakistan in the United Kingdom. This amount which has stood in my name so far was held by me not in my personal capacity but as an agent of my Government, i.e. the Government of Pakistan at the time when I was acting as Pakistan’s High Commissioner in UK. I would be much obliged if, after the amount is transferred in the name of my successor-in-office, i.e. [Ispahani], an intimation to that effect is kindly sent to me so that it may be forwarded by me to my Government. This account will, in future, be operated upon by the present Pakistan High Commissioner in UK and his successorsin-office acting as agents of the Government of Pakistan.

I enclose specimens of [Ispahani’s] signature herewith.”

On 14 August 1953, the Bank responded to Rahimtoola in the following terms:

“We refer to your letter of the 27 July (a formal acknowledgement of which and of the enclosure to which was given on 6 August) requesting us to transfer to [Ispahani], as your successor in office as Pakistan High Commissioner in the United Kingdom, the amount now standing to the credit of a Deposit Account in your name in our books.

As you are aware a claim regarding the moneys in question has been put forward by the Nizam’s Government, and in this connection on the 28 September 1948, [Gupta] in the capacity of Financial Secretary Nizam’s Government, Hyderabad, cabled us entering an objection to our action in complying with instructions dated 16 September 1948, of [Moin] (Finance Minister H.E.H. The Nizam’s Government) by transferring under date of 20 September 1948 the amount of £1,007,940. 9s 0d to a Deposit Account in your name.

You will no doubt also be aware of the statement made in the Indian Parliament on 30 November 1950 that the Indian Government proposed to file a suit for the recovery of the amount standing to the credit of such Deposit Account.

In the circumstances, we are advised that we should not act on the instructions contained in your letter of 27 ultimo without the written concurrence of the State of Hyderabad and of the Government of India.

We regret any inconvenience to which you may be put by reason of the terms of this letter.”

The 1954 Proceedings

The Bank’s letter of 14 August 1953¹⁰⁷ provoked the following response (dated 24 November 1953) from Pakistan’s solicitors in the 1954 Proceedings:

“We are Solicitors to the Government of Pakistan, and your letter to [Rahimtoola] dated 14 August 1953 has been forwarded to us for attention.

The moneys referred to in [Rahimtoola’s] letter to you dated 27 July 1953 were held by him as agent for the Government of Pakistan at the time when he was High Commissioner for Pakistan in the United Kingdom, and it is now desired that they should be transferred into the name of his successor-in-office, namely [Ispahani], the present High Commissioner for Pakistan in the United Kingdom.

Our clients cannot agree that your letter disclosed any valid reason for failing to carry out the instructions given to you by [Rahimtoola] as their agent, and on behalf of our clients we reiterate those instructions.

We have been instructed to inform you that if you wish to communicate either with the Government of Pakistan or with [Rahimtoola] in connection with this matter you should do so through us.”

On 17 May 1954, the solicitors for Nizam VII (Messrs Stanley, Johnson & Allen, Nizam VII’s solicitors in the 1954 Proceedings) wrote to Rahimtoola in the following terms:

“We are instructed to act on behalf of [Nizam VII] and on behalf of the Government of the State of Hyderabad with reference to a sum amounting to £1,007,940.9.0 which, in the month of September 1948 was held by the Westminster Bank in London in a deposit account to the credit of the Hyderabad Government.

On or about the 30 September 1948, on the instructions of [Moin], the whole of this sum together with the accrued interest thereon was withdrawn from the Hyderabad Government account and placed to the credit of another account with the same Bank in [Rahimtoola’s] name.

[Moin] had no authority from the Nizam or his Government to effect this particular withdrawal and, as your Excellency is of course aware, the fund transferred to the account in your Excellency’s name, and all accrued interest theron, have at all times been and still are the property of [Nizam VII] and his Government. We assume that your Excellency has safeguarded the fund and the interest thereon on that basis.

[Nizam VII] and his Government now require the sums in question to be paid to them or to their order, but it is doubtful whether the Bank will feel able to make such payment except in pursuant of an order of the court. We have the authority of H.E.H. the Nizam and his Government to commence proceedings to obtain such an Order, and, if such proceedings should prove requisite, it seems to us to be desirable and proper that your Excellency should be joined as a party. We shall accordingly be grateful if your Excellency will be good enough to nominate Solicitors in London to accept service in London, on your Excellency’s behalf, of any proceedings for the recovery of these sums which we may find it necessary to institute.

We think we should add that the necessity for proceedings might well be obviated if your Excellency would be good enough to authorise the Bank to pay over the sums in question to the Nizam and his Government, or to their order. We shall be very grateful indeed to hear that your Excellency is prepared to give such authority.”

A letter before action was also written to the Bank, seeking the Bank’s assurance that it would not pay away the sums in question or any part of them, except either pursuant to a court order or to a person nominated by Nizam VII’s government.

There appears to have been a letter from the Bank’s solicitors (Messrs Freshfields, the Bank’s solicitors) dated 8 June 1954, but that was not before the court. On 11 June 1954, Nizam VII’s solicitors in the 1954 Proceedings wrote to the Bank as follows:

“We have to acknowledge receipt of your letter of the 8 inst, but we have received no communication either from Mr Rahimtoola or from [Pakistan’s solicitors in the 1954 Proceedings] on his behalf as to the attitude which they have adopted although we have written to Mr Rahimtoola on the matter.

We are obliged by the suggestion you make regarding interpleader proceedings and when the attitude which is to be taken by the other parties has been more fully ascertained we will take our Counsel’s view as to the suggested course.

The State of India for whom we act have no interest or make any claim to the funds in question.”

Proceedings were commenced by Nizam VII and the State of Hyderabad by a writ issued on 8 July 1954. The defendants were (i) Moin, (ii) the Bank and (iii) Rahimtoola.

In response to the letter of 8 June 1954 (referred to in paragraph 156 above), Pakistan’s solicitors in the 1954 Proceedings wrote to the Bank’s solicitors as follows on 9 July 1954:

“…as you are aware, Mr Rahimtoola, who is now the Governor of West Punjab in Pakistan, does not claim any personal interest in the monies. He was concerned solely as agent of the Government of Pakistan, of which he was High Commissioner in the United Kingdom at the relevant time and on whose behalf the monies were originally transferred to him.

The Government of Pakistan do claim to be entitled to the monies in question and they do not recognise that as a matter of public international law either the Nizam of Hyderabad or the present Government of the State of Hyderabad or the Government of India (who you previously informed us had also made a claim) is the de jure successor to the State of Hyderabad as it existed at any relevant time. The issues involved are obviously unsuitable for adjudication by any municipal, as opposed to international, tribunal and the Government of Pakistan are not prepared to waive their sovereign immunity to the jurisdiction of the Courts of the United Kingdom either by consenting to be made parties to the Interpleader proceedings initiated by your clients or otherwise.

In these circumstances, we cannot agree to accept service of any proceedings on behalf of the Government of Pakistan and we are instructed to inform you that if service of proceedings is effected on the Government of Pakistan steps will be taken to have such service set aside.”

The Bank’s solicitors responded on 29 July 1954, noting the contents of this letter, but noting also that Nizam VII had commenced proceedings and that the dispute would no doubt come before the court in due course. On behalf of the Bank, it was stressed that the Bank had “no interest in this matter save as bankers”. As regards India:

“[India’s solicitors in the 1954 Proceedings] have informed us that the State of India, for whom they act, have no interest nor make any claim to the funds in question.”

On 8 July 1955, Pakistan wrote to her solicitors with the following instructions:

“With reference to the above mentioned action in which the plaintiffs are claiming the sums of £1,007,940.9.0d now standing to the credit of Mr Rahimtoola with Westminster Bank I now instruct you on behalf of my Government to take such steps as may be necessary to bring to the attention of the Court the fact that my Government claims to be entitled to the said sum, which is held by Mr Rahimtoola as its agent, and declines to submit to the jurisdiction of the English Courts in any proceedings relating thereto and accordingly that my Government objects, on the ground of its sovereign immunity to the jurisdiction of the English Courts, to this action being proceeded with against Mr Rahimtoola, since it is one which directly or indirectly impleads my Government.

This letter is written by the direction of and on behalf of the Government of Pakistan.”

This document was placed before the court in the proceedings commenced by Nizam VII. As I have described, Pakistan did not venture beyond this bare assertion of an interest in the Fund, without articulating how, if at all, a beneficial interest arose. (Footnote: ⁹⁹)

The matter came before Upjohn J in the Chancery Division and was heard by him in June/July 1956. (Footnote: ¹⁰⁰) He held that the debt, being vested in Rahimtoola as a servant of the Government of Pakistan, must be treated as a debt which was due at law to the Government and to which the Government had a title that was not illusory or manifestly defective, even though the Government showed no equitable title to the debt. On appeal to the Court of Appeal, (Footnote: ¹⁰¹) this decision was overturned. The matter came before the House of Lords, (Footnote: ¹⁰²) which held that the proceedings should be stayed because Rahimtoola was the agent of the sovereign state of Pakistan, which had the legal title to the subject matter of the action and the right to sue the Bank for it. I have already described the strategic course pursued by Pakistan in the 1954 Proceedings not to assert any beneficial interest in the Fund. (Footnote: ¹⁰³)

It is necessary to describe the events leading up to the 1954 Proceedings in this detail in order to deal with one point, which was pressed by Pakistan during the interlocutory stages of these proceedings, and mentioned (but not pressed very hard) by Mr Qureshi, QC in his submissions at trial. The point was not, however, abandoned and so I deal with it now:

The 1956 Assignment

By a deed dated 27 October 1956, the State of Hyderabad assigned to Nizam VII all of its interest in the Fund. The point of the 1956 Assignment appears in its recitals, which provide:

“Whereas:

(1)

prior to 20 September 1946 the sum of £1,007,940.9.0 was held by the Westminster Bank Limited in a deposit account to the credit of His Exalted Highness the Nizam’s Government of Hyderabad, such deposit account bearing compound interest at the rate of one half per cent per annum, to be credited quarterly.

(2)

[Moin] was authorised to operate the said account subject to directions to be given to him from time to time by the Nizam.

(3)

The parties have been advised that in law the said sum and the accrued and accruing interest thereon have always remained the property of the Nizam in his personal capacity.

(4)

On or about the said 20 September 1948 without the knowledge or authority of the Nizam said sum together with the accrued interest thereon was wrongfully and in breach of trust transferred by the said [Moin] to a new account at the said Bank in the name of one [Rahimtoola].

(5)

Proceedings for the recovery of the said sum and the accrued and accruing interest thereon have been instituted in the Chancery Division of the High Court of Justice in England.

(6)

The Nizam is the first plaintiff in the said proceedings but [Hyderabad] has been joined as plaintiff in the proceedings as a precautionary measure and in order to avoid questions as to whether the said proceedings are properly constituted.

(7)

By virtue of the provisions of the States Reorganisation Act 1956, the State will cease to exist as from the 1^st day of November 1956.

(8)

For the removal of doubt it is desirable that [Hyderabad] should release and assign all its claim, right, title, property and interest (if any) to or in the said fund and the interest accrued and accruing thereon to the Nizam.”

The 1956 Assignment was intended to prevent Nizam VII’s (potential) entitlement to the Fund from vanishing down a legal “black hole”. It will be necessary to consider in greater detail the change in Hyderabad’s legal status over time, but (as I have described in paragraph 84 above) at least from India’s point of view Hyderabad was a State of India from 1950 onwards. Prior to that, Hyderabad was not a part of India and the property of the Nizam and the property of the government of Hyderabad were (as will be seen) indistinguishable. Whether Hyderabad’s accession to India changed this state of affairs – so that the Nizam’s personal property came to be differentiated from that of Hyderabad itself – was clearly regarded as a possibility by those advising Nizam VII, hence the joinder of Hyderabad to the 1954 Proceedings as an alternative claimant. In short, it was clearly considered possible that the Nizam’s interest in the Fund vested – after the accession of Hyderabad to India – in Hyderabad and not in the Nizam.

The effect of the States Reorganisation Act 1956 was to cause Hyderabad to cease to exist as a State of the Indian Union. Its territory was subsumed into three other States of the Indian Union by that Act. Thus, the identity of the person holding the Nizam’s (potential) interest in the Fund might become extremely unclear if, prior to the States Reorganisation Act 1956, that interest was actually held by Hyderabad. Hence, for the avoidance of doubt, any interest of Hyderabad was transferred to Nizam VII prior to the entering into force of the States Reorganisation Act 1956.

Subsequent dealings

There were, after the conclusion of the 1954 Proceedings, various (fruitless) efforts to resolve the issue of the Fund, which I shall not describe here. These efforts are, to an extent, material to the insight they provide into the nature of the transfer of the Fund to Rahimtoola, and I consider these efforts in this light below. I do not consider them further here.

There were, however, a number of dealings (or purported dealings) with the equitable interest in the Fund – in addition to the 1956 Assignment – that must be mentioned, even though the Princes and India have compromised their differences and advanced a unified claim before me.

The Princes

By the 1963 Settlement, Nizam VII assigned all his estate, right, title and interest in the Fund to the Bank of Nova Scotia Trust Company (Bahamas) Limited to hold upon the discretionary trusts declared in that deed. By the 1965 Appointment, the trust fund of the 1963 Settlement was irrevocably appointed as to capital and income upon trust for Nizam VIII and Prince Muffakham in equal shares absolutely.

The Princes contended that they were thereafter together absolutely entitled to the Fund and respectively had an absolute beneficial interest in 50% of the Fund.

On 17 February 2015, Nizam VIII assigned part of his interest in the Fund to Hillview. Subsequently, Nizam VIII assigned the remainder of his interest to Hillview, such that he had no beneficial interest at all in the Fund – the entirety of that interest vesting in Hillview. In these circumstances, Nizam VIII applied to be removed as a party to the proceedings, and (by an order dated 25 October 2018) I acceded to that application. (Footnote: ¹⁰⁶)

Shannon is the assignee of the rights of Prince Muffakham in the Fund.

India

By the 1965 Assignment, Nizam VII assigned to the President of India his claim to the Fund. India’s claim to the Fund is pursuant to the 1965 Assignment.

Other interests

The Administrator of the estate of Nizam VII is a party to these proceedings so that any other person claiming through Nizam VII is bound by the result. The Administrator played no active part in the proceedings and advanced no case in relation to the Fund.

During his lifetime, Rahimtoola disclaimed any interest in the Fund, and that is the position of Rahimtoola’s estate. For that reason, Rahimtoola was not made a party to the proceedings.

THE ACTUAL AUTHORITY OF NIZAM VII AT THE TIME OF THE TRANSFER (1) Introduction: why the issue matters

It was a live issue between the parties whether or not Nizam VII had actually authorised the Transfer. Pakistan contended that he had done so; the Princes and India that he had not. As will be seen, the question of authority is a material factor when it comes to analysing the nature of the Transfer.

Before considering what Nizam VII may or may not have authorised, it is necessary to consider what his authority actually was and how it could be exercised.

The nature of the Nizam’s authority falls to be considered at the relevant time, which is the time of the Transfer, September 1948. It will already be appreciated that September 1948 was a momentous month for Hyderabad and its ruler. The events of September 1948 affect the nature of Nizam VII’s authority. It is also clear that the events of September 1948 in some way informed the Transfer itself. The terms of the Transfer were – as I have found¹¹⁶ – agreed as between Moin and Rahimtoola on or about 15 September 1948 – just as Operation Polo began – whilst the Transfer itself was executed on 20 September 1948, a few days after it would have been clear to Moin that Nizam VII’s position was politically very different to that which had pertained prior to the commencement of Operation Polo.

The fact is that between 15 and 20 September 1948, Hyderabad fell to Indian forces and, on 17 September 1948, Nizam VII dismissed his Government. The question of the Nizam’s authority and how he exercised it is thus a difficult one, that potentially changed over precisely this period.

I approach the question of the Nizam’s authority in the following way:

Applicable law

I must use English law to determine the issues before me, unless some foreign or international element in the case indicates that the law of another jurisdiction is applicable: “[t]he objective of conflict of laws rules is to enable a court to decide which system of law is to be applied to resolve a legal question when there is a foreign, i.e. non-English, element involved in an issue”. (Footnote: ¹⁰⁷)

The Nizam was a personal and absolute ruler of Hyderabad. No distinction was drawn as between his personal capacity and his capacity as ruler. Plainly, the question of the authority of a foreign principal and ruler raises a question with a non-English element.

Whether the question is framed as one of personal capacity, the delegation of authority by a principal to an agent or the authority of a ruler of a state, the same law is indicated: the law of the state where the principal is domiciled or resident or the law of the state the ruler rules over. More specifically:

I conclude that the applicable law is that of Hyderabad, which was indeed India’s contention. (Footnote: ¹¹⁵)

Is the law of Hyderabad law that is recognised in the English courts?

The problem stated

The English conflict of laws – amongst other things – identifies the law applicable to a particular issue being litigated before an English court. Normally, one refers to applying the law of another “country”:¹²⁷

“This word has from long usage become almost a term of art among English-speaking writers on the conflict of laws, and it is vitally important to appreciate exactly what it means. It was defined by Dicey as “the whole of a territory subject under one sovereign to one body of law.”

He suggested that a better expression might be “law district”: but this phrase has never found much favour with English-speaking writers, who prefer the more familiar word “country.” England, Scotland, Northern Ireland, the Isle of Man, Jersey, Guernsey, Alderney, Sark, each British colony, each of the Australian States and each of the Canadian provinces is a separate country in the sense of the conflict of laws, though not one of them is a State known to public international law. However, for some purposes larger units than these may constitute countries. Thus, the United Kingdom is one country for the purposes of the law of negotiable instruments, Great Britain is one country for most purposes of the law of companies, Australia is one country for the purposes of the law of marriage and matrimonial causes, and Canada is one country for the purposes of the law of divorce.”

The question is whether Hyderabad is a “country” or “law district” in this sense. This is no straightforward question, given the unique status of princely states during the British Raj, the difficult nature of their new status after 15 August 1947, the effect of Operation Polo and the subsequent incorporation (in 1950) of Hyderabad as a State in the Indian Union. Some measure of these difficulties can be discerned from paragraph 99 of India’s Pleading:

“(i)

For many years until 15 August 1947, Hyderabad had been a vassal state of the British Crown. The arrangements between Hyderabad and the Crown included that Hyderabad had no external relations, these being conducted by the Crown. While it is denied that such matters are material to the true issues in the present proceedings, India has taken

the position that Hyderabad was not an independent sovereign state either before or after 15 August 1947.

(ii)

The United Kingdom’s suzerainty, or paramountcy, ceased on 15 August 1947 pursuant to section 7 of the Indian Independence Act 1947…

(iii)

It is admitted and averred that pursuant to the 1947 Act there was Partition of former British India to create the Dominion of India and the Dominion of Pakistan. It is further admitted that the territory of Hyderabad was not within either Dominion and that the same was true of other Indian “princely states”. It is further admitted that Hyderabad did not initially accede to India.

(iv)

By a Standstill Agreement between India and Hyderabad (by [Nizam VII]), dated 29 November 1947, it was agreed that all agreements and administrative arrangements as to the matter of common concern, including external affairs, defence and communications, which were existing between the Crown and the Nizam immediately before 15 August 1947 would continue (so far as might be appropriate) as between India and the Nizam for one year from 29 November 1947.

(v)

Accordingly, India was responsible for the external relations of Hyderabad at all material dates and in particular throughout 1948.

(vi)

On 13 September 1948, troops of India entered the territory of Hyderabad in a Police Action (known as Operation Polo).

(vii)

On 17 September 1948, the troops of Hyderabad surrendered and the Government of Hyderabad administration headed by Laik Ali (and including Moin) resigned, and it was at no point reconstituted.

(viii)

It is admitted that Hyderabad later acceded to India. Further, on 26 January 1950 there came into being the Union of India and a new State of the Union of India, the Union State of Hyderabad.

(ix)

By his letter dated 18 November 1948 to the Governor-General of India, [Nizam VII] acknowledged that Hyderabad had no external relations, whether before or after 15 August 1947, and asked that India continue to be responsible for external affairs, defence and communications. In any event, the subject of external relations on behalf of Hyderabad was treated as the responsibility of the Government of India from 18

November 1948 at the latest, by the express desire of [Nizam VII].”

It is readily to be appreciated that this statement of the facts was controversial amongst the parties: in particular, it was not accepted by Pakistan and it sits ill with the expressed views of Nizam VII up to the conclusion of Operation Polo. (Footnote: ¹¹⁶) However, India’s Pleading lays out with helpful clarity the private international law difficulties that arise in this case:

The status of Hyderabad from 15 August 1947 until the conclusion of Operation Polo

There must be some question as to whether Hyderabad constituted a sovereign state and so a legal person as a pure question of public international law. According to Article 1 of the Montevideo Convention on Rights and Duties of States (Footnote: ¹¹⁷) “[t]he State as a person of international law should possess the following qualifications: (a) a permanent population; (b) a defined territory; (c) government; and (d) capacity to enter into relations with other States”. It is in respect of this last criterion – the ability to conduct international relations – that the question mark as to personality under public international law arises. (Footnote: ¹¹⁸) The fact is that prior to the appointed day, Hyderabad’s external relations were conducted by the Crown; and after the conclusion of the Standstill Agreement, they were conducted by India.

Fortunately, I am not directly concerned with the question of whether Hyderabad was, under the abstract principles of public international law, a sovereign state. As Mann notes: (Footnote: ¹¹⁹)

“The facts, circumstances, and events which lie at the root of foreign affairs and their conduct by the Executive have conveniently been described as facts of State. These are facts which are peculiarly within the cognisance of the Executive. For this reason, at any rate in so far as they are within the scope of the United Kingdom’s Executive, they can be proved only in a special manner, namely by a certificate issued by the Foreign and Commonwealth Office or by a statement made to the court by the Attorney-General rather than by other documentary or oral evidence.”

Whilst the law regarding the manner in which facts of State are proved before an English court has moved on since Mann’s statement, it is quite clear that the extent of British and foreign territory and the existence and recognition of foreign states and governments are facts of State. (Footnote: ¹²⁰)

The present law in this regard is stated by Andrew Baker J in Mohamed v. Breish, which I quote, omitting the references to authority:¹³³

“32.

It is a fundamental principle of English law and an aspect of the unwritten constitutional bedrock of the United Kingdom that it is the prerogative of the Sovereign, acting through Her Government as the Executive branch of the State, to decide whom to recognise as a fellow sovereign state and whom to recognise and treat as the executive government of such a state. The courts, as the judicial branch of the state, must accept, adopt and follow any such recognition as the state must speak with

“one voice” in such matters. Where, therefore, a court, considering a case in which it is relevant to ask who is the government of a foreign state, is informed by the Foreign and Commonwealth Office (the “FCO”) in unequivocal terms that HMG recognises some particular persons or body as such, that information must be acted upon by the court as a fact of State. Such an unequivocal notification from the FCO is, in substance, the voice of the sovereign as to a matter upon which she has an absolute right to direct the answer…

35.

The provision to the courts of direct confirmation as to the recognition status of foreign governments is nowadays not HMG’s general practice. Since 1980, the policy has been to recognise foreign states and, in general, to leave HMG’s attitude as to which individuals or bodies represent their governments to be inferred from its dealing with them. The courts have, therefore, been required from time to time to make a finding by drawing such an inference. Factors that should rightly influence the decision in such a case have been developed…”.

Although Mohamed v. Breish concerned less the recognition of a state and more the recognition of the government of a state, the same approach is taken by the English courts when considering whether or not a state is recognised as a sovereign state where there is no Foreign and Commonwealth Office certification. (Footnote: ¹²¹)

In this case, there has been no Foreign and Commonwealth Office certification of Her

The status of Hyderabad after Operation Polo

In my judgment, the fact that Hyderabad was annexed by India – whether pursuant to a “police action” or otherwise – cannot alter the status of Hyderabad, unless Her Majesty’s Government were unequivocally to say so, whether by a certificate or otherwise. For this court to hold – without such an unequivocal statement – would be to attach uncritical weight to the use of force. It seems to me, therefore, that – absent such an unequivocal statement from Her Majesty’s Government – Operation Polo can have made no difference to the status of Hyderabad, at least for the purposes of an English court.

In due course, Nizam VII became the Rajpramukh (Princely Governor) of the new state of Hyderabad within the Union of India, which position he held until the states of India were reorganised in 1956. (Footnote: ¹²³) At that time, the state of Hyderabad was split into three parts, and was merged with and into neighbouring states. Nizam VII died in 1967.

The accession of Hyderabad, as a State of the Union of India, effected on the face of it voluntarily by Nizam VII is a different matter compared to the effects of Operation Polo. As regards this accession, I must consider once again such evidence as exists regarding this accession and Her Majesty’s Government’s attitude towards it, there again being no certification from the Foreign and Commonwealth Office. I conclude, based upon the following material, that the Government has recognised the accession of Hyderabad to India:

These documents strongly suggest that the Government recognises the accession of Hyderabad to India, and that is the finding that I make. This conclusion reflects the present reality: as I noted to the parties during the trial, the United Kingdom maintains a British Deputy High Commission in the city of Hyderabad in what was once the state of Hyderabad, representing the United Kingdom Government in Hyderabad.

What is the law of Hyderabad on this point?

Having concluded that the law of Hyderabad is the properly applicable law, I turn to consider the nature of Nizam VII’s authority according to that law.

I make the following findings:

The authority of Moin as a Hyderabad Government official

I will consider and make findings in relation to the authority that Moin had at the time of the Transfer later on in the Judgment. (Footnote: ¹²⁹) However, it seems to me to be clear that Moin cannot have had any authority deriving from his position as an official in the Government of Hyderabad. That authority ceased on 17 September 1948, when Nizam VII accepted his Government’s resignation.¹⁴⁴

I do not consider that it is possible to say that Moin’s authority as an official of the Government of Hyderabad continued, notwithstanding the resignation of the Government, because Nizam VII was in some way under duress. That, I consider, would be to second guess the internal constitutional arrangements of Hyderabad. The Nizam was an absolute ruler: having recognised his state and his position, at this time, as the ruler of that state, I am compelled – by the foreign act of state doctrine articulated in paragraph 183(4) above – to recognise his authority and pay it proper regard. The Nizam was undoubtedly capable of dismissing his Government or accepting its resignation, and he did so. At that point, Moin’s authority (for the purposes of this Judgment, at least) as Finance Minister and Minister for External Affairs in Nizam VII’s Government ended.

That does not mean to say that Nizam VII did not confer authority on Moin informally – independent of his role as a Government official. That, as I say, is a matter I will consider in due course.

ABSOLUTE TRANSFER OF THE FUND: THE ARMS FOR MONEY ARGUMENT (1) Introduction

Pakistan’s case was summarised in paragraph 17(1) above. In essence, Pakistan’s case was that the Transfer was made to compensate/reimburse/indemnify Pakistan for assistance provided by her in procuring/facilitating the supply and/or transportation of weapons.

In Further Information of her pleadings provided by Pakistan, it was suggested that the circumstances in which the Hyderabad Government Account and the Second Account were set up and operated suggested a close connection with the clandestine supply of arms to Hyderabad by or through the good offices of Pakistan. Accordingly, so Pakistan contended, the purpose and operation of these accounts might very well assist in inferring the true intentions of the relevant parties when the Transfer was made and the Fund established. (Footnote: ¹³⁰)

There is, as it seems to me, considerable force in this point. It is necessary to consider:

The provision of weapons in Pakistan and Hyderabad

There is no shortage of contemporaneous evidence showing that weapons were being imported into Hyderabad and/or into Pakistan for use in Hyderabad against India. The weapons – or at least some of them – were flown into Pakistan or Hyderabad by Cotton.

A minute from Mr Attlee to the Secretary of State for Commonwealth Relations dated 6 July 1948references a minute from the Secretary of State regarding the flying of arms into Hyderabad. That minute attached a “note giving the facts”. The note provides as follows:

“There is reason to think that the Hyderabad Government have for some time been trying, with at any rate the knowledge, if not the active co-operation, of the Government of Pakistan, to secure supplies of arms and ammunition from Europe. The Government of India, in breach of the Standstill Agreement of last November, have provided no supplies of arms since the transfer of power, and have not allowed any supplies from overseas to transit India territory. Hyderabad would no doubt justify its endeavours to smuggle on the ground that they need equipment to maintain law and order, and that India has failed to fulfil her duty under the Standstill Agreement.

2.

The facts are very difficult to establish. Certain of the information bearing on them comes from secret sources. There have also been a series of reports from Sir L Grafftey-Smith. But they are generally either what is common gossip in Karachi; or statements alleged to have been made in conversation by either Mr Cotton, or by two Air Force officers in the Pakistan Service, or (on one occasion) by the Pakistan Defence Secretary.

3.

Whilst there is no serious reason to doubt that the traffic is taking place, we should probably find it very difficult to establish the facts in court.”

The note went on to list those involved in the smuggling of weapons. These included Mr Cotton.

This note is clearly of the view that the Governments of both Pakistan and Hyderabad were involved in the provision of weapons. Furthermore, in a letter from Pakistan’s Ministry of Finance to Mir dated 7 April 1948, Mir was introduced to Mohammad

Cotton himself appears to have contracted with – amongst other people – a Hyderabad civilian named Najmuddin Khan (Najmuddin) for the import of weapons to Hyderabad. (Footnote: ¹³¹)

In my judgment, the detail of the provision of weapons into Pakistan and Hyderabad is unimportant in this dispute. It is evident that there was such a supply, and that there was a long-running dispute between Pakistan and Cotton regarding payment for this supply, which was ultimately resolved by a payment of money by Pakistan to Cotton. I have no doubt that this story involves a great deal of intrigue, high policy and secrecy; I strongly suspect that the materials before me do not tell the whole story. But, for the purposes of this dispute, it is necessary only to make the following findings:

Evidence of Hyderabad’s involvement in the provision of weapons

In addition to the evidence described in paragraph 209(3) above, there is some general – that is to say, relatively unspecific – evidence of the Hyderabad Government’s involvement in the provision of weapons. Most of the evidence was produced by India in the late-1940s as part of an effort to control those Hyderabad/Pakistan elements who were – or who were perceived by India to be – disruptive or in opposition to India’s annexation (Footnote: ¹³³) of Hyderabad. The evidence clearly must be regarded in this light, but nevertheless I consider that it demonstrates an involvement by the Hyderabad Government in the funding of the provision of weapons:

Moving from the general to the more specific, Annex 3 describes the various transactions which principally took place on the Second Account. Of these, Transactions 3, 4, 6, 7 and 8 are of significance in relation to the question of the provision of weapons:

This expenditure – and its purpose – was well-known to the Hyderabad authorities:

These conclusions are supported by one other indicator. The Nizam’s policy towards India was controversial within his own Government. Clearly, Moin and Mir supported it; equally clearly, Gupta did not, as is evidenced by his assiduity in freezing the Second Account and the Rahimtoola Account. I am sure that there were other officials who favoured either alliance with India or with Pakistan in this controversial matter. The Second Account was operated in a manner intended to enable a “pro-Pakistan” weapons policy to be implemented without interference from “pro-India” Hyderabad officials. Thus, the Second Account had very different signatories for its operation than the Hyderabad State Bank Account, (Footnote: ¹³⁸) and was operated under conditions of some secrecy, whereby the Bank accounted for transactions not to the Nizam’s Government in Hyderabad but to the Agent General (Mir) in London. (Footnote: ¹³⁹) All of this suggests a secret process, in which the Nizam himself was complicit, but by no means all of his Government. The process was secret because it involved (controversially) aligning Hyderabad with Pakistan and not India. That suggests that the Second Account was established for the specific purpose of weapons purchases, which indeed it was substantially used for.

Connection between the Transfer and the provision of weapons

Pakistan’s Arms for Money Argument amounts to this: that the Transfer was – in some unspecified way – recompense to Pakistan for the procurement and transport of arms. I cannot accept this contention and reject it for the following reasons:

Conclusion

Although the Government of Hyderabad was involved in the purchase of weapons in order to resist what Nizam VII saw as attempts by India forcibly to annex Hyderabad, and although the Second Account was used to pay for some of these weapons, I do not consider that the Transfer had anything to do with the purchase of weapons or the compensation of Pakistan (in any way) for the purchase of weapons. The purpose of the Transfer was, as I have found it, entirely different. For these reasons, I reject the Arms for Money Argument.

ABSOLUTE TRANSFER OF THE FUND: THE SAFEGUARDING ARGUMENT (1) Introduction

I have concluded, in my consideration of the Arms for Money Argument, that the purpose – or, at least, Moin’s purpose – in effecting the Transfer was to “safeguard” the Fund. That does not, however, mean that I have concluded that the Safeguarding Argument – as contended for by Pakistan and as summarised in paragraph 17(2) above – succeeds. Whilst I am satisfied that the purpose of the Transfer was to render the Fund less accessible to India on India’s successful annexation of Hyderbad, it does not follow from this that the Transfer was absolutely for the benefit of Pakistan (as Pakistan contended) or, indeed, absolutely for the benefit of Rahimtoola in his personal capacity.

The Princes and India contended that the Transfer was made on trust. The trustee, it was contended, was Rahimtoola in his personal capacity. Three different sorts of trust were contended for by the Princes and India:

I shall begin by considering the relevant facts. I will then consider whether, on the basis of my findings, a trust has or has not been established.

The facts

Approach

I shall consider the facts under the following heads:

Authorisation by Nizam VII

For the reasons I have given, (Footnote: ¹⁴⁰) I do not consider that any pre-existing authority that Nizam VII gave to his Government or to officials within his Government as such persisted after 17 September 1948. The Nizam accepted the resignation of his Government and – again, for the reasons I have given¹⁵⁸ – that is a legal fact that I must simply accept. Accordingly, any powers or authority conferred on Moin in his capacity as an official within the Nizam’s Government ended on 17 September 1948. Given the publicity that surrounded Nizam VII’s announcement, and given Moin’s obvious interest, it is unrealistic to consider that Moin would not have heard of the resignation of the Government of Hyderabad before 20 September 1948, when the Transfer was effected. (Footnote: ¹⁴¹)

Of course, that does not mean that the Nizam could not have conferred authority on Moin independently of his office and even very informally. As I have also found, the Nizam’s authority qua Nizam persisted undiminished even after the end of Operation Polo. (Footnote: ¹⁴²) The question is not whether Nizam VII had the authority, but whether he exercised it.

I have described the payments out of the Second Account. A number of these were made for the provision of weapons to resist perceived Indian aggression and were made – as I have found – with the knowledge and authority of Nizam VII.¹⁶¹

It seems to me that as at the relevant date – 20 September 1948 – it is highly likely that Nizam VII would have wanted his officials to safeguard the monies in the Second Account, in the sense that he would have wanted these monies placed (i) out of India’s reach but (ii) under his own control. In short, I consider that Nizam VII would have wanted the Fund to be protected from India, but not at any price. He would not have wanted the Fund paid away irrevocably. That, to my mind, is highly suggestive of some kind of trust arrangement, where the legal title in the Fund was transferred, but where the beneficial interest was retained by Nizam VII.

Equally, I consider that it would have been very unlikely for the Nizam to have entrusted this safeguarding function to a private person, however eminent. The Nizam’s dealings were at a high level with Pakistan (both states operated together in the procurement of weapons) and it seems to me that the Nizam would only have entrusted a safeguarding function to Pakistan and not, for instance, to Rahimtoola personally.

It is, of course, possible, that between Hyderabad’s capitulation on 17 September 1948 and the Transfer on 20 September 1948, Nizam VII’s views underwent as dramatic a change as the fortunes of Hyderabad, and that Nizam VII decided, more-or-less immediately, to throw his lot in with India. In other words, given that India had succeeded in annexing Hyderabad, it was pointless for Nizam VII to seek to safeguard the Fund. I find such a change of attitude in so short a space of time to be unlikely. I consider that, as at 20 September 1948, Nizam VII would have remained concerned to safeguard the Fund in the manner that I have described and would have wanted the Fund kept out of India’s hands. Equally, I have little doubt that, as the years passed, Nizam VII’s attitude would have changed.

However, I am sceptical as to whether – in these fraught days of September 1948 – Nizam VII would have been able to communicate his wishes to those he trusted, specifically to Moin. Whatever his status, Nizam VII was, after the success of Operation Polo, in India’s custody, and his lines of communication would have been extraordinarily difficult even before then, given Hyderabad’s landlocked state. (Footnote: ¹⁴³)

I find that there was no communication of any sort from Nizam VII to Moin authorising the Transfer – albeit that the Transfer was in accordance with the Nizam’s wishes, as unexpressed to Moin. This is consistent with the evidence before me:

I conclude that Moin acted in what he considered to be the best interests of Nizam VII and Hyderabad. He sought to preserve Hyderabad’s assets from India. This involved preventing even the Nizam from accessing the funds he sought to protect, as evidenced by his evasion of the Nizam’s requests to have the Fund repaid into the Second Account. (Footnote: ¹⁴⁵) It may very well be that Moin’s conduct carried with it the silent approbation of Nizam VII, but I find that any such approbation was indeed silent. Part of the service Moin rendered to Hyderabad was, as I find, a decision to act alone – without Governmental cover – in what he considered to be the best interests of his ruler and his country. But that does not change the fact that I find the Nizam’s evidence to be substantially true (whatever his private feelings may have been) and that after 17 September 1948 Moin acted without authority or instruction from Nizam VII.

If, contrary to my finding, there was any instruction from Nizam VII, it would have been of the vaguest and most general sort: to safeguard the assets of Hyderabad (or the Nizam’s assets, which is the same thing) from India.

Moin’s intention

Introduction

Two, related, issues arise.

There is a question anterior to these issues, namely whether it is open to me to re-visit the first of these issues, given that this issue had already been decided during the course of the 1954 Proceedings. I consider first, therefore, whether an issue estoppel arises, before secondly considering (if it is open to me) the basis upon which the transfer was made.

Issue estoppel

The parties before the House of Lords in the 1954 Proceedings were the same as the parties before me.

The Princes and India acknowledge that an issue estoppel (but not a cause of action estoppel) can arise in the present circumstances, but they contend that no issue estoppel will arise as a result of findings in earlier proceedings where there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, being material which could not by reasonable diligence have been adduced in those proceedings.

The authority cited in support of this proposition was Arnold v. National Westminster Bank plc. (Footnote: ¹⁴⁶) In that case, the House of Lords held that although issue estoppel constituted a complete bar to relitigation between the same parties of a decided point, its operation could be prevented in special circumstances. Lord Keith said this:¹⁶⁷

“It is to be noted that there appears to be no decided case where issue estoppel has been held not to apply by reason that in the later proceedings a party has brought forward further relevant material which he could not by reasonable diligence have adduced in the earlier. There is, however, an impressive array of dicta of high authority in favour of the possibility of this. It was argued for the defendants that exceptions to the rule of issue estoppel should be admitted only in the case of the earlier judgment being a default or a foreign judgment and further that an exception should not be recognised where the point at issue had actually, as here, been raised and decided in the earlier proceedings, but only where the point might have been but was not so raised and decided. The later dicta are, however, adverse to these arguments. It was argued that there was no logical distinction between cause of action estoppel and issue estoppel and that, if the rule was absolute in the one case as regards points actually decided, so it should be in the other case. But there is room for the view that the underlying principles upon which estoppel is based, public policy and justice, have greater force in cause of action estoppel, the subject matter of the two proceedings being identical, than they do in issue estoppel, where the subject matter is different. Once it is accepted that different considerations apply to issue estoppel, it is hard to perceive any logical distinction between a point which was previously raised and decided and one which might have been but was not. Given that the further material which would have put an entirely different complexion on the point was at the earlier stage unknown to the party and could not by reasonable diligence have been discovered by him, it is hard to see why there should be a different result according to whether he decided not to take the point, thinking it hopeless, or argue it faintly without any real hope of success. In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result, as was observed by Lord Upjohn in the passage which I have quoted above from his speech in the Carl Zeiss Case,[1967] 1 A.C. 853 , 947.”

I conclude that whilst an issue estoppel will generally prevent the re-litigation of the issue previously determined, that rule is subject to an exception, not broad but wideranging, whereby an issue previously determined may be revisited if it is in the interests of justice to do so. Obviously, the rule that an issue previously decided between the same parties must stand for the future is an important one: nevertheless, an issue previously decided may be re-opened where it is in the interests of justice to do so. Typically, that test will be satisfied where there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, being material which could not by reasonable diligence have been adduced in those proceedings.

The question of the capacity in which Rahimtoola acted was, of course, central to the 1954 Proceedings. Unless Rahimtoola received the Fund as the agent of Pakistan, Pakistan’s assertion of sovereign immunity would fail. In a very real sense, Rahimtoola’s capacity was the issue before the House of Lords.

In these circumstances, I have naturally been cautious about whether it is open to the Princes and India to re-open this question. I have concluded that it is, for the following reasons:

The Transfer

When considering Moin’s thinking and intentions, I consider that it is impossible to separate the questions of to whom the Transfer was to be made and on what basis. The two points are inextricable when considering the facts.

I conclude that Moin’s intention was to transfer the Fund to Rahimtoola in his (Rahimtoola’s) capacity as High Commissioner and that the Transfer to Rahimtoola was on the basis that he would, in his official capacity, hold the Fund on trust for Nizam VII. I have reached this conclusion for the following reasons:

Rahimtoola’s intention

I turn to the question of Rahimtoola’s intention. I have described Rahimtoola’s evidence in paragraphs 111 and 112 above and stated my conclusions as regards both its strengths and its weaknesses. I have found that his evidence was essentially directed to the capacity in which he received the Fund, because this evidence was necessary to establish or support Pakistan’s claim to sovereign immunity. Whilst I consider that there may have been a degree of over-emphasis in regard to the question of capacity, I do not consider this evidence to be in its essence unreliable. To the contrary: I believe it. It is consistent with what I have found to be Moin’s intentions as regards the question of the capacity of the transferee; and it seems to me the presence of Zafrullah – which I accept was the case – renders this clearly a case where Rahimtoola was acting in his official capacity. The Princes and India contended that the lunchtime meeting that Rahimtoola had with the Chairman of the Bank (Footnote: ¹⁴⁹) demonstrated that Rahimtoola regarded the Fund as his own. I do not consider that what Rahimtoola is recorded as saying over an informal lunchtime meeting is remotely persuasive as to how Rahimtoola held the Fund. Indeed, the note kept by the Bank does not even record Rahimtoola’s words. It merely records the impression of Lord Aldenham that Rahimtoola “seemed to regard [the Fund as] at his own personal disposition”.

The question of the basis upon which Rahimtoola received the Fund receives rather less attention in Rahimtoola’s evidence, for the reasons I have given.¹⁷² Thus – as I have described – he makes no mention of the 15 September 1948 letters. These letters – and particularly that authored by Rahimtoola himself – make very clear that this was not an absolute transfer, but a transfer where the beneficial interest in the Fund remained vested in Nizam VII. I conclude that Rahimtoola’s intentions are as stated in his letter of 15 September 1948, namely that the Fund would, on transfer, be held on trust for Nizam VII. I find that that intention is to be attributed to Pakistan and that successors to Rahimtoola, in their capacity as High Commissioner, would similarly hold on trust for Nizam VII.

The law

Introduction

As I have noted, the Princes and India contended for a trust on one of three bases: express trust; constructive trust; and resulting trust. I consider these three types of trust in turn below, and – in light of the facts as I have found them – state my conclusions as to the basis upon which the Fund is held.

Express trust

The three certainties

An express trust will arise where the “three certainties” essential for the creation of a trust are met:

Although conceptually speaking the three certainties are separate, they can seldom in practice be segregated. In the present case, assuming there was an intention to create atrust, there can be little doubt as to the second and third certainties. The subject-matter of the trust was the Fund; and the beneficiary Nizam VII. (Footnote: ¹⁵¹)

Agency

In this case, the settlor would have been Nizam VII – the money was his – acting through his agent, Moin. However, since I have found that Moin had no authority to effect the Transfer – whether on trust or otherwise – it follows that no express trust can arise in this case.

If, contrary to my finding, Nizam VII did give Moin authority to make the Transfer on his (the Nizam’s) behalf, then that authority would have been along the lines set out in paragraph 230 above. It would have been a broad authority to safeguard the assets of Hyderabad (or the Nizam’s assets, which is the same thing) from India. Assuming – contrary to my primary finding – that Moin did have authority, it is necessary to consider the question of intention more closely:

Constructive trust

The law

The English law regarding constructive trusts and constructive trusteeship is notoriously woolly or – as Lewin describes it – “an elusive creature”. (Footnote: ¹⁵⁶) In Carl Zeiss Stiftung v. Herbert Smith & Co (No 2), Edmund-Davies LJ noted: (Footnote: ¹⁵⁷)

“English law provides no clear and all-embracing definition of a constructive trust. Its boundaries have been left perhaps deliberately vague so as not to restrict the court in technicalities in deciding what the justice of a particular case might demand.”

As a result, the books agree that “[c]onstructive trusts can arise over a wide variety of situations”, (Footnote: ¹⁵⁸) but there is little consensus over what, exactly, these situations are. The Princes and India relied upon what has been termed a constructive trust of “the first kind”:

A constructive trust “of the first kind” generally

This is not a case where it can be said that there was an intention to create a trust, but where the necessary formalities to do so have not been complied with. As I have found, there was no intention on the part of Nizam VII to create any kind of trust. Had there been such an intention, an express trust would have arisen. (Footnote: ¹⁶²) However, such an intention to create a trust is not required where the constructive trust alleged is a trusteeship de son tort.

A trustee de son tort

I find that Rahimtoola, in his capacity as High Commissioner, was a trustee de son tort. The label is – at least in this case – a misnomer for Rahimtoola cannot be criticised for accepting the obligations of trustee in circumstances where – unknown to him – Moin had no authority. It is in this case clearer to say that Rahimtoola, as High Commissioner, bona fide accepted the obligations to act as trustee for Nizam VII, in circumstances where it appeared (particularly given that the letter evincing his intention to act as trustee was dated 15 September 1948, when Moin still had an official capacity) that Moin had authority to create this trust on behalf of Nizam VII. I accept India’s submission in paragraph 37 of her written submissions:

“All that is required for a finding of such a trust in this case is a conclusion that there was an intent on the part of the transferee that beneficial ownership was not to pass, and that the Fund would therefore be held on trust. If it were held, for example, that Rahimtoola or Pakistan had assumed the responsibility of acting as a trustee (by which it is meant that they had no intention to take beneficially), but for some reason they did not take as an express trustee then a constructive trust of this kind would arise and they would be a trustee de son tort (see Lewin at [7-015], [7-017], [42-101])…a finding of such an assumption of responsibility by Rahimtoola or Pakistan is entirely justified on the facts now before the Court. A finding of such a trust may, moreover, be made without any finding as to the intention of the transferor.”

Resulting trust

A resulting trust can arise in two sets of circumstance, only one of which is relevant in this case. Lord Browne-Wilkinson described this sort of resulting trust in Westdeutsche Landesbank Girozentrale v. Islington LBC: (Footnote: ¹⁶³)

“…where A makes a voluntary payment to B…there is a presumption that A did not intend to make a gift to B: the money is held on trust for B…It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention…”

As regards this type of resulting trust, Lewin says this: (Footnote: ¹⁶⁴)

“In a case where the relationship between transferor and transferee is not such as to raise a presumption of advancement, the presumption of resulting trust, if applicable, will operate so that the transferor retains beneficial ownership if there is no evidence of the actual intention of the transferor…In such a case the presumption of resulting trust is crucial because, apart from the presumption, there would be no basis on which the transferor could claim to retain beneficial ownership against the person in whom the property is vested. But … the presumption of resulting trust is easily rebutted. The reason for this is that while a transferor may certainly have special reasons for wanting to retain the beneficial ownership of the property transferred, it is odd to presume, before one considers the evidence that that was his intention. It has therefore been said that the ‘so-called’ presumption of resulting trust is no more than a long stop to provide the answer when the relevant facts and circumstances fail to yield a solution. In other words the presumption of resulting trust is a fall-back when the evidence of the transferor’s actual intention does not establish whether he did or did not intend to make a gift.

…

It will be observed…that a resulting trust, whether based on a presumption, or on the evidence, is founded on a presumption or evidence as to the transferor’s intention. There is no requirement as such for the transferee to share or participate in that intention.”

If this were not a case of constructive trust – as I have found¹⁸⁹ – this would be a case of a resulting trust. The Transfer to Rahimtoola was entirely voluntary, and there is no evidence to support any suggestion that Nizam VII intended to make a gift of the Fund to either Pakistan or Rahimtoola. To the contrary, I consider that Nizam VII intended to retain his interest in the Fund. (Footnote: ¹⁶⁵)

The question of “choice” as to trustee and the Ispahani letter

In submissions before me, the Princes and India sought to rely upon the Ispahani letter, set out in paragraph 150 above, in support of their contention that the Fund was held on trust by Rahimtoola in his private capacity rather than in his capacity as High Commissioner.

Obviously, this is a document that I have taken into account when considering the intentions of the various parties, specifically those of Rahimtoola himself. It is certainly the case that the Ispahani letter shows a sophisticated level of thinking as to how Pakistan should handle questions as to how the Fund was held going forward. Pakistan was clearly aware that if the Fund was held by Rahimtoola personally, the way would be paved for Nizam VII (and, through Nizam VII, India) to claim the Fund, whereas if the Fund was held by Pakistan (i.e. by Rahimtoola as High Commissioner) the procedural bar of sovereign immunity could be invoked by Pakistan were Nizam VII to lay claim to the Fund. Accordingly, Pakistan elected to make clear that the Fund was held by Rahimtoola in his capacity as High Commissioner.

The trust was constituted on 20 September 1948. It was either constituted with Rahimtoola as trustee in his personal capacity or in his capacity as High Commissioner. That is a question that must be resolved in light of all the evidence – and I have done so. The Ispahani letter is a good example of why I must treat Rahimtoola’s evidence with a degree of caution, and I have done so. But the Ispahani letter cannot of itself affect the conclusion that I have reached on the basis of this evidence. The fact is that Pakistan might very well – in 1953 – debate how its argument might be framed, but she could not, in 1953, alter the terms of the trust as created in 1948 or the capacity of the trustee of that trust. The Ispahani letter, in my judgment says nothing about the constitution of the trust in September 1948: it says a great deal about Pakistan’s approach in the 1954 Proceedings, but that is nothing to the point.

An absolute interest in Pakistan

The inevitable corollary of my finding that the Fund is held on trust is that Pakistan cannot herself hold beneficially. However, even apart from the findings that I have made in the foregoing paragraphs, there are other reasons for finding that Pakistan never held the Fund absolutely for itself:

Conclusions

For the reasons I have given, I find that:

NO TRUST IN ANY EVENT (1) Introduction

Pakistan’s pleading on this point is set out in paragraphs 21-22 above. Pakistan advanced two alternative cases:

Although not completely clear, it appears to be Pakistan’s case first that transactions between sovereign states have no private law implications at all, at least so far as the creation of trusts is concerned; alternatively, that an English court ought to be slow to find the existence of a trust in such a case. I consider these two points in turn below.

No trust relationship can arise as a matter of private law

As a sovereign state Pakistan was entitled to, and did, assert sovereign immunity. That enabled Pakistan to prevent the question of ownership of the Fund from being litigated before and determined by an English Court. Pakistan contended that the doctrine of sovereign immunity went beyond this procedural bar to the bringing of a claim against a sovereign state. It was contended that, in those cases where sovereign immunity was waived by a sovereign state, the law applicable to the matter before the Court was not the law that would ordinarily apply were the litigant not a sovereign state. The applicable law was different and in this case prevented a trust from arising.

No authority was cited in support of this proposition and I can identify no legal basis for suggesting that the ordinary private law consequences of a sovereign state’s actions do not attach in the proceedings that follow a waiver of sovereign immunity.

Indeed, Pakistan’s contention is contrary to established law. English Courts identify as persons for the purposes of private law individuals (that is to say, natural persons), corporate bodies (private legal persons, whether recognised under English law or applicable foreign law) and sovereign states. (Footnote: ¹⁶⁸) One of the consequences of recognising a state is that – as a matter of English law – that state has all the capacities and powers of a person under English law.¹⁹⁴ The state may, therefore, enter into a contract; and own, hold and transfer property. In doing so, it will be subject to the law of the land. That is so, whether the sovereign state acts as a claimant (i.e. where she is seeking to vindicate a private law right that she may have) (Footnote: ¹⁶⁹) or as a defendant (i.e. where another is seeking to vindicate a private law right against that state). (Footnote: ¹⁷⁰) Where a sovereign state is impleaded as a defendant, that state has the benefit of sovereign immunity. Where, however, that immunity is not asserted or waived, then municipal law applies to that state in the ordinary way and without variation or exception. (Footnote: ¹⁷¹)

In this, a sovereign state’s position is no different from that of the Crown. It is clear law that “[t]here is nothing to prevent the Crown from acting as a trustee if it chooses deliberately to do so”. (Footnote: ¹⁷²)

A court should exercise caution when considering whether a trust arises in the case of sovereign states

I have already noted that the use of the term “trust” does not, of itself, determine that an express trust arises. Megarry V-C made this point in Tito v. Waddell (No 2):¹⁹⁹

“I propose to turn at once to the position of the Crown as trustee, leaving on one side any question of what is meant by the Crown for this purpose; and I must also consider what is meant by “trust”. The word is in common use in English language, and whatever may be the position in this court, it must be recognised that the word is often used in a sense different from that of an equitable obligation enforceable as such by the courts. Many a man may be in a position of trust without being a trustee in the equitable sense; and terms such as “Brains Trust”, “Anti-trust” and “Trust Territories”, though commonly used, are not understood as relating to a trust as enforced in a court of equity. At the same time, it can hardly be disputed that a trust may be created without using the word “trust”. In every case one has to look to see whether in the circumstances of the case, and on the true construction of what was said and written, a sufficient intention to create a true trust has been manifested.

When it is alleged that the Crown is a trustee, an element which is of especial importance consists of the governmental powers and obligations of the Crown; for these readily provide an explanation which is an alternative to a trust. If money or other property is vested in the Crown and is used for the benefit of others, one explanation can be that, without holding the property on a true trust, the Crown is nevertheless administering that property in the exercise of the Crown’s governmental functions. This latter possible explanation, which does not exist in the case of an ordinary individual, makes it necessary to scrutinise with greater care the words and circumstances which are alleged to impose a trust.”

I accept that even in the case of private individuals, the use of the term “trust” is by no means conclusive as to the existence of an express trust: it is one of the factors that must be taken into account when considering whether or not a trust has been created. The matter becomes even more sensitive where a state is involved: it is quite possible for property to be held “on trust” importing an obligation that has nothing to do with the private law concept, but as referring to altogether less concrete obligations that are in no way enforceable in a court of law. (Footnote: ¹⁷³)

In the present case, I have of course found that no express trust arose, because Moin had no authority from Nizam VII to constitute such a trust. If, contrary to this conclusion, Moin did have authority, then I consider that the intention was to create a private law trust. Throughout the history of the accounts – from the original transfer of monies into the Hyderabad State Bank Account to the Transfer itself – Nizam VII was dealing with private law obligations: he was transferring a chose in action, owed to him by (initially) Imperial Bank and then the Bank. In no way was the Nizam dealing with non-private law obligations. If Nizam VII authorised the Transfer, then it is to my mind inconceivable that he intended anything other than a private law trust to arise. I can see no point in the creation of a “trust” in any other sense.

Rather than finding an express trust to exist, I have concluded that (i) there was a constructive trust and (ii) if no constructive trust, a resulting trust. Neither of these trusts arise through the intention of the settlor: they both arise through operation of law. In Tito v. Waddell, Megarry V-C was concerned with the significance of the word “trust” in the context of an express trust. He said nothing about trusts arising by operation of law, because in such cases the words used by the settlor are irrelevant to the constitution of the trust.

Accordingly, Pakistan’s contentions in this regard do not alter the conclusions that I have reached regarding the basis upon which Pakistan holds the Fund.

THE RESTITUTION CLAIM (1) Introduction

The Transfer is – self-evidently – an enrichment of Pakistan. For a claim in unjust enrichment to succeed, the enrichment must also be “unjust”, which generally means that the claimant must bring him- or herself within one of the accepted categories of “unjust” enrichment. In this case, the “unjust” factor is the fact that the transfer was not authorised by Nizam VII. That, according to India’s written submissions, is a “classic case for restitution”, (Footnote: ¹⁷⁴) and this was not seriously contested by Pakistan. I have found that the Transfer was indeed an unauthorised one and, accordingly, the restitution claim ought to succeed.

Apart from the limitation defence pleaded by Pakistan, there is no defence to this claim. However, Pakistan has pleaded the defence of limitation, and prima facie (for the reasons described in paragraph 26 above) the defence is a good one.

This section is concerned with the three contentions that the Princes and India advanced in order to overcome this defence. As I have described in paragraph 26 above, the Princes and India contended that:

I consider these points in turn below. Before I do so, it is necessary to say something about the applicable law regarding limitation. When the 1954 Proceedings were commenced, they were within time under the then applicable statute of limitation, the Limitation Act 1939. By order of the House of Lords, and by reason of the House of Lords’ decision that Pakistan could assert sovereign immunity, the 1954 Proceedings were stayed. It might be thought that the limitation defence asserted by Pakistan could be circumvented by having the stay lifted and causing the Princes and India to be joined to the 1954 Proceedings. This point was considered by Henderson J in the interlocutory stages of these proceedings:²⁰²

“The Princes also have an argument of a more technical nature. They submit that, if a statute of limitation were to apply at all, it would be the Limitation Act 1939, not the Limitation Act

1980.

The reason for this is that any applicable limitation period would have expired before the commencement of the 1980 Act, which itself provides (by paragraph 9(1) of Schedule 2) that nothing in the 1980 Act will enable an action to be brought which was barred by the 1939 Act. The significance of thispoint, for present purposes, is that, if the 1980 Act applied, it might be possible for India or the Princes to apply to be joined to the 1954 proceedings, and to lift the stay on those proceedings for the purposes of bringing a claim against Pakistan in reliance on the procedure provided by section 35 of the 1980 Act and CPR rule 19.5, with the result that the claim would then be treated as having been brought against Pakistan in 1954. I express no view on the question whether the doctrine of relation back in section 35 of the 1980 Act could in principle be successfully invoked by India and the Princes in the circumstances of the present case. What matters is that no similar possibility would be available if the position is governed by the 1939 Act, because it contained no equivalent of section 35 enabling a change of parties with retrospective effect after the expiry of a limitation period. In Ketteman v Hansel [1987] AC 189, the House of Lords confirmed that, under the law as it stood before 1980, a person added as a defendant did not become a party until the writ had been served on him, and his joinder could not be treated as having retrospective effect. It follows that any new claim made against Pakistan in the context of the 1954 proceedings would be treated as having been brought in 2016 rather than 1954.”

Thus, lifting the stay of the 1954 Proceedings to permit other parties to be joined would serve no useful purpose.

I respectfully agree with Henderson J’s reasoning regarding the application of the

Pakistan’s raising of the procedural bar of sovereign immunity prevented time running against any claimants to the Fund, which only began to run when the procedural bar was waived

Neither the Limitation Act 1939 nor the Limitation Act 1980 constitutes a complete code as to when causes of action become time-barred. For example, neither Act provides for when a cause of action accrues. Thus, it has been the common law that has found that causes of action accrue when even “latent” damage (i.e. damage that the claimant could not reasonably have been aware of) occurs. (Footnote: ¹⁷⁵) Significantly, it was the legislature, and not the common law, that dealt with the injustice of a cause of action becoming time-barred before the claimant could reasonably become aware of it, in section 11 of the Limitation Act 1980 (in the case of personal injury) and in section 14A of the Limitation Act 1980 (in the case of latent damage not involving personal injury). (Footnote: ¹⁷⁶)

The fact that it has been necessary to introduce extensions of the limitation period in appropriate cases by statute seems to me to constitute a complete answer to the Princes’ and India’s contention that the period during which Pakistan asserted sovereign immunity does not count towards the limitation period. Both the Limitation Act 1939 and the Limitation Act 1980 are structured similarly. In each case, Part I sets out the periods of limitation for different classes of action, i.e. the period within which, after the cause of action has accrued, the claim must be brought. Part II of both Acts then contain a series of extensions to or exclusions of these ordinary time limits. Thus, for instance, both Acts provide for an extension of the applicable periods in cases of disability. (Footnote: ¹⁷⁷) I do not consider that it is open to me to create a fresh basis for extending the time within which a claim must be brought, no matter how appropriate such a basis for extending time might seem to me. As the law in the case of latent damage shows, such changes have been achieved through legislation, and not through judicial intervention.

The only authority relied upon by the Princes and India in support of their contention was Musurus Bey v. Gadban, (Footnote: ¹⁷⁸) where it was held that the immunity from suit of a foreign ambassador in the English courts during his period of accreditation and a reasonable period thereafter had the effect that time did not begin to run against his creditors until the end of that period. Henderson J considered Musurus Bey in his interlocutory judgment in these proceedings, (Footnote: ¹⁷⁹) where he noted that this decision had been the subject of criticism in later cases. (Footnote: ¹⁸⁰) He concluded:²⁰⁹

“The question is not straightforward, however, and in my view it is unsuitable for summary determination. The better course is to leave it for determination at trial, when it can be considered together with the question whether it is an abuse of process for Pakistan to rely on limitation defences at all. Since the trust claims of India and the Princes will have to go to trial in any event, I cannot see any advantage in determining the difficult questions of law to which these aspects of Pakistan’s limitation defences give rise in advance of the trial, and I think the court will be better placed to consider and rule upon them in the context of its actual, rather than hypothetical, findings of fact.”

There is, as it seems to me, nothing in Musurus Bey to cause me to alter the conclusion expressed in paragraph 277 above. Not only has the Musurus Bey decision been criticised in later cases, as Henderson J noted, but more to the point the decision predates the 1939 Act which – for the reasons I have given – seems to me to be codificatory of the circumstances in which limitation periods can be extended. (Footnote: ¹⁸¹)

Abuse of process in raising the limitation defence

In his interlocutory judgment, Henderson J described the Princes’ and India’s contention in this regard in the following way: (Footnote: ¹⁸²)

“115.

My inclination, therefore, would be to hold that it is in principle open to India and the Princes to argue that Pakistan’s limitation defences are abusive, and the court should not permit her to rely on them. If the court can properly entertain the question, I would then see very considerable force in the argument that Pakistan’s conduct in pleading the defences was indeed abusive. The abuse would lie in Pakistan’s reliance upon limitation to defeat claims which she had herself prevented from being pursued within the relevant limitation periods by her invocation of sovereign immunity. It is important to observe that the abuse would lie, not in Pakistan’s original decision to plead sovereign immunity, nor in her subsequent decision to waive that immunity by starting the present proceedings, but only in the reliance upon limitation defences to defeat claims which she had herself prevented from being begun in time.

116.

It would be no objection to such an analysis, I think, that, once she had invoked her sovereign immunity, Pakistan was in principle able to defer adjudication upon the merits of the dispute indefinitely, and certainly until long after the expiry of any relevant limitation period. The point is, rather, that, once Pakistan had deliberately brought this state of affairs into existence, it would be an abuse of process for her to initiate proceedings for the purpose of resolving the dispute, but then rely on a defence which owed its existence to the immunity which she had now waived. Unless implicitly excluded by the statutory scheme of the Limitation Acts, a challenge to Pakistan’s limitation defences on these grounds would in my view, at the lowest, have good prospects of success.”

Pakistan’s alleged abuse of process thus arises out of a combination of:

The limitation rules under the 1939 and 1980 Acts do not extinguish claims, but simply bar a claim or cause of action.²¹² It was Pakistan’s choice to plead a limitation defence and, had she not done so, the Court would not have been concerned that a claim was being made out of time by the Princes and India.

In considering whether Pakistan’s choice to raise limitation as a bar to the restitutionary claim was an abuse of process, I must stress that I am proceeding on the basis (which is clearly the case) that Pakistan has acted without in any way seeking to “game” the system. Were a sovereign state to raise a sovereign immunity defence, with the intention of waiving it the moment rival claims were time-barred, that would constitute

Viewing matters in this light, the question is whether it can be said that Pakistan’s choice to raise a limitation defence constitutes an abuse of process under CPR 3.4(2)(b), which provides that “[t]he court may strike out a statement of case if it appears to the court…that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings”. As to this:

Accordingly, I hold that it is an abuse of process for Pakistan to assert a defence of limitation in relation to the Princes’ and India’s restitutionary claim against her and that the paragraphs in Pakistan’s statements of case asserting this defence must be struck out. It also follows that the Princes’ and India’s restitutionary claim against Pakistan succeeds.

Claim against the Bank

The Princes and India also contended that they had an alternative restitutionary claim against the Bank, based upon the doctrine of ministerial receipt. The long-accepted rule – established by Lord Mansfield in Buller v. Harrison (Footnote: ¹⁸⁸) – is that where an enrichment is received by an agent, the agent will be liable to repay the claimant, unless the agent has accounted to his principal for the enrichment so received without notice of the claimant’s claim. Where there is notice, the agent must interplead and will be liable if the monies are paid away. It is quite clear that where the agent has simply credited his principal with the enrichment, without actually transferring it to the principal, the agent remains liable to the claimant. (Footnote: ¹⁸⁹) Millett LJ stated the position in Portman Building Society v. Hamlyn Taylor Neck (A Firm):²²¹

“[W]here the plaintiff has paid money under (for example) a mistake to the agent of a third party…[and] the agent still retains the money…the plaintiff may elect to sue either the principal or the agent, and the agent remains liable if he pays the money over to his principal after notice of the claim. If he wishes to protect himself, he should interplead. But once the agent has paid the money to his principal or to his order without notice of the claim, the plaintiff must sue the principal.”

Since the Fund has, since shortly after the Transfer, from about 22 September 1948, been held by the Bank without permitting Pakistan or anyone else to deal with the Fund, it is difficult to see how this claim against the Bank can be resisted. Consistently with its position as an interpleader or stakeholder, the Bank sought neither to advance a limitation defence nor to take any other point. The Bank’s position has, throughout, been that it will pay the Fund in accordance with the Court’s direction.

Pakistan, for her part, relies upon two first instance decisions which hold that, where an agent receives money for and on behalf of a principal then – even before the agent has transferred the money to the principal – the only proper defendant is the principal. That is because, according to these decisions, only the principal has been enriched, and not the agent (who was always obliged to account to the principal). Thus:

Neither of these decisions grapples with – or even mentions – the weight of authority lying behind the doctrine of ministerial receipt, and the view has been expressed that they are per incuriam. (Footnote: ¹⁹²) Even where the law as stated in these decisions is supported in terms of outcome – as in Goff & Jones – it is recognised by the authors of that work that these decisions are heterodox.²²⁶ Neither of the authorities cited in Jeremy D Stone Consultants Ltd stands in clear support of the proposition there advanced regarding enrichment. (Footnote: ¹⁹³)

I consider that I am bound, by established authority, to hold that in a case such as the present, where the bank holds the monies of its principal on notice of the claimant’s restitutionary claim, it is liable to repay those monies and therefore should (as the bank has done here) interplead. In any event, even absent established authority, this is clearly the correct outcome:

In the circumstances, in the alternative to the Princes’ and India’s restitutionary claim against Pakistan, their restitutionary claim against the Bank succeeds.

FOREIGN ACT OF STATE DOCTRINE AND NON-JUSTICIABILITY (1) The nature of the Doctrine

In Belhaj v. Straw, (Footnote: ¹⁹⁷) the Supreme Court considered the foreign act of state doctrine. Lords Mance, Neuberger and Sumption gave substantive judgments. Lord Wilson agreed with Lord Neuberger without giving a separate judgment and Lady Hale and Lord Clarke gave a brief judgment agreeing with the reasoning and conclusions of Lord Neuberger. (Footnote: ¹⁹⁸) Lord Hughes agreed with Lord Sumption without giving a separate judgment. Accordingly, the best starting point is that of Lord Neuberger, as representing the majority view. (Footnote: ¹⁹⁹)

Lord Neuberger considered the foreign act of state doctrine in [118]ff. He referred to it as the Doctrine, which term I shall adopt. He summarised the nature of the Doctrine thus:²³⁴

“In summary terms, the Doctrine amounts to this, that the courts of the United Kingdom will not readily adjudicate upon the lawfulness or validity of sovereign acts of foreign states, and it applies to claims which, while not made against the foreign state concerned, involve an allegation that a foreign state has acted unlawfully…”

Lord Neuberger considered that the Doctrine could be broken down into four rules:

Aspects of the Doctrine relied upon by Pakistan

It seems clear that Pakistan’s assertion of non-justiciability rests on Rule 3. (Footnote: ²⁰³) Indeed, it is difficult to see how Rules 1, 2 or 4 could sensibly be deployed by Pakistan in support of her assertion of non-justiciability.

Pakistan frames her assertion of Rule 3 in the following way: (Footnote: ²⁰⁴)

“The Transfer, together with the other financial dealings between the State of Hyderabad and Pakistan prior to the Transfer, were transactions of a governmental nature engaged in by two sovereign states in a political context. The non-justiciability and/or act of State doctrine applies to such transactions (but not to the banker-customer transaction governed by domestic law between [Pakistan] and the [Bank]), so that the Court will decline or abstain from exercising jurisdiction in relation to the subject-matter of these proceedings, except as between [Pakistan] and the [Bank] in relation to the said banker-customer relationship. [Pakistan] is accordingly entitled to payment of the balance standing to the credit of the Rahimtoola Account, this being the only justiciable claim made in these proceedings.”

This pleading is pardonably general, for a large number of facts were in dispute between the parties, which this Judgment has resolved.²⁴¹ In light of my findings, Pakistan’s case can be put – at its highest – as follows:

Pakistan’s case is perhaps well put by Lord Denning in the 1954 Proceedings, where he said: (Footnote: ²⁰⁵)

“I would therefore for myself approach this case somewhat broadly and ask whether the dispute is one properly cognizable by our courts: and I would test it by asking what would be the position if the transaction had taken place, not between the Finance Minister of Hyderabad and the Foreign Secretary of Pakistan, but between the Finance Minister of Hyderabad and the Foreign Secretary of Great Britain, and the money had been transferred, not into the name of the High Commissioner of Pakistan, but into the name of a high officer such as a Custodian of Property? Would an action lie in our courts for the return of the money? Clearly not. The transaction was more in the nature of a treaty than a contract or a trust. Reference would be made to such well-known cases as Nabob of the Carnatic v East India Co,(1792-3) 2 Ves 56 and Civilian War Claimants Association Ltd v The King,[1932] AC 14 to show that no action would lie for money had and received or upon a trust. The court would not listen to an enquiry whether the Finance Minister of Hyderabad had authority to make the transfer. It would say that any representations to that effect must be made to the Crown and not to the courts. If our courts would not in like circumstances entertain an action against our own Government or its agent, they should not entertain an action against the State of Pakistan or its agent. Upjohn J put the point in a sentence when he said: “The present transaction was an inter-governmental transaction; let itbe solved by inter-governmental negotiations”. That is the kernel of the matter. I agree with it and would allow the appeal.”

Pakistan, unsurprisingly, placed reliance on this passage.

The question is whether the factors that I have enumerated in paragraph 297 above are sufficient to render the question of the Transfer non-justiciable. I should say that I consider these to be the only material factors in relation to this question. As her pleading makes clear, Pakistan also sought to rely upon “other financial dealings” between Hyderabad and Pakistan. I do not consider these to be relevant. I obviously accept that they took place, and that a number of these dealings concerned the purchase of weapons. However, I have found that these transactions had nothing to do with the Transfer, which was entirely concerned with the question of “safeguarding”, that is, keeping the Fund away from India.

I turn, therefore, to the question of justiciability.

Justiciability

The ambit of Pakistan’s case

Pakistan’s primary case was that all aspects of this dispute were non-justiciable, savefor the banker-customer relationship between the Bank and Pakistan, which was justiciable. Pakistan’s alternative case was that all aspects of this dispute were nonjusticiable.

I consider first whether Pakistan can, properly, put forward a case of partial justiciability, before considering the question of justiciability more generally.

Partial non-justiciability

None of the parties was able to identify any law regarding the notion of “partial” nonjusticiability. It seems to me that where an issue is entirely severable, standing distinct from all other issues, it is possible to contend that the issue of justiciability is confined to that particular issue or (alternatively) does not apply to that issue, but applies to all other issues.

However, where the issue said to be justiciable is closely entwined with issues said to be non-justiciable, in my judgment all of the issues are either justiciable or nonjusticiable. For the Court to take a course where it decided one point, but left out of account other, related and material points (because to decide such points would be to infringe Rule 3 of the Doctrine) would be to decide a case on a false and probably unjust basis: ex hypothesi, if a court leaves out of account points that related to and are material to the point it is deciding, the court will likely be – and certainly arguably will be – making a judgment on a false basis.

The present case is an excellent case in point. Assuming the banker-customer relationship to be justiciable, but all other points non-justiciable, the outcome would be that Pakistan would obtain the Fund in circumstances where the non-justiciable points lead to an outcome where Pakistan in fact held on trust for Nizam VII and was not, itself, beneficially entitled. It seems to me that, in this case, justiciability is “all or nothing” and that the contrary is not seriously arguable. The issue, whilst differently framed, is precisely that considered by the Court of Appeal in The Law Debenture Trust Corporation plc v. Ukraine: I have set out the relevant passage in paragraph 284(4) above.

Non-justiciability: Rule 3 expanded

The ambit of Rule 3

Lord Neuberger considered how Rule 3 had been applied in the case-law in [128] to [130] of his judgment and considered the application of Rule 3 in relation to property and property rights (particularly apposite for the purposes of this case) in [144] to [165] of his judgment. I derive particular assistance from the following points:

The public policy exception

Further assistance is obtained from the Court of Appeal’s decision in The Law Debenture Trust Corporation plc v. Ukraine. (Footnote: ²¹⁴) I have set out the material facts in paragraph 284(4) above. One of the issues before the court was whether, as Law Debenture contended, Ukraine’s defence of duress or illegitimate pressure involved acts of high policy by Russia in the sphere of international relations in the exercise of sovereign authority and was, therefore non-justiciable under Rule 3 of the Doctrine. (Footnote: ²¹⁵)

The Court of Appeal approached this issue in the following way:

Synthesis

Rule 3 is essentially concerned with those cases where, in litigation before the English courts (i.e. where there is a “foothold”, that is a claim prima facie justiciable in English courts (Footnote: ²²³)), an issue arises regarding the lawfulness of a state’s conduct that is inherently non-justiciable. That will typically be because the issue is one of public international law, i.e. where there is an issue involving entities having personality according to public international law, which issue operates at the plane of international law rather than municipal law. (Footnote: ²²⁴)

It seems to me to follow that issues of private law, even if they involve sovereign states, are prima facie justiciable. As Lord Sumption made clear, the mere fact that the lawfulness of a sovereign state’s conduct is called into play does not necessarily engage

Assuming an issue, not arising incidentally, but being necessary for the determination of the very subject of the action, gives rise to non-justiciable questions, then Rule 3 is engaged. Whether that means the claim cannot be heard at all and the proceedings stayed or whether parts of the claim can proceed will depend on all the circumstances.

What is clear, however, is that even if Rule 3 is engaged, there is a public policy exception. Quite how this exception works is a matter yet to be explored: it may be that the exception involves a balancing exercise, whereby a “strong” engagement of Rule 3 can defeat a “weak” public policy exception, which is very much what the Court of Appeal’s approach in Law Debenture v. Ukraine appears to suggest. Or it may be that, when once Rule 3 is engaged, the question of non-justiciability is a given that can only be off-set by some form of public interest exception which, once established, does not need to be weighed in the balance. There is something to be said for either approach, but (for the reasons I give below) this is not a matter that arises in the present case.

Application in the present case