High Commissioner for Pakistan in the UK v Natwest Bank Plc

The clean-hands doctrine requires a sufficiently close and immediate relationship between the alleged misconduct and the equitable relief sought. Whether that relationship exists depends on the facts. At an amendment stage, pleaded facts are generally assumed to be true, but an amendment may be refused where the claim is factually or legally unarguable. Conduct occurring after the claimant’s substantive rights arose, and relating only to contingent or separate claims, lacks the necessary connection. The court may proceed on the basis that clean hands can apply in principle to declaratory relief where the issue has not been fully argued. Late amendments are relevant but will not determine the application where the proposed case has no real prospect of success.

The claimant sought to amend its Particulars of Claim in long-running proceedings concerning competing claims to a fund constituted in 1948. The proposed amendments alleged that India had acted dishonestly and with unclean hands by denying an interest in the fund in 1954 and by procuring a later assignment through duress.

The defendants opposed the amendments. They argued that the allegations were factually unarguable, legally irrelevant to the claimant’s claim, and advanced too late. The principal issues were whether the allegations had a real prospect of success and whether the alleged misconduct had a sufficient connection with the relief and entitlements in dispute.

1. The application was refused. The proposed amendments were not properly arguable and lacked a real prospect of success.
2. The court accepted the general principle stated in Grobbelaar v News Group Newspapers [2002] 1 WLR 3024: equitable relief may be refused where misconduct is sufficiently closely connected with the remedy sought. The relevant connection is fact-sensitive. The approach in Fiona Trust v Privalov [2008] EWHC 1748 Com confirmed that the relationship must be sufficiently immediate and directed to the equity sued for.
3. The court proceeded on the basis that the clean-hands doctrine could apply in principle to declaratory relief. The classification of declaratory relief and the ambit of the doctrine had not been fully argued, and it would have been unduly technical to decide the amendment application on that basis.
4. The allegation concerning the 1954 correspondence was factually unarguable. Read in context, the statement that India had no interest or claim to the funds meant that India was not advancing a claim in the proposed interpleader proceedings at that time. It did not amount to a general denial of every possible future interest in the fund.
5. The alleged misconduct was legally too remote. The proposed defence could arise only after the claimant’s own claim had failed and only in relation to subsequent claims to the former beneficial owner’s interest. The claimant would have no standing in that contingent second stage. The alleged conduct therefore had no sufficient connection with the central issue, namely entitlement arising in 1948.
6. The defendants’ settlement made the proposed argument still more problematic because the claimant sought to deprive allegedly innocent parties of claims through India’s alleged misconduct. The court expressed concern about that contention but did not decide the effect of the confidential settlement.
7. Lateness, further disclosure and the likely involvement of a witness were not determinative. The amendments were refused because they were factually and legally unarguable.