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

A transfer made to safeguard property from a third state may preserve the transferor's beneficial interest. Where the transferee accepts the property in an official capacity without intending to take beneficially, a trust may arise even though the transferor's agent lacked authority to create an express trust. The transferee may instead be a constructive trustee, with a resulting trust as an alternative. Sovereign status does not remove ordinary private-law consequences after immunity is waived. A limitation defence may be an abuse where the defendant's earlier immunity prevented timely litigation. A foreign-act-of-state objection does not bar adjudication of private-law questions merely because sovereign states and international events form the background.

The claimant sought payment of a fund transferred in 1948 from an account of the Government of Hyderabad to an account in the name of Pakistan's High Commissioner in London. Pakistan claimed beneficial ownership. The Princes and India claimed through Nizam VII, while the Bank interpleaded as stakeholder.

Earlier proceedings brought by Nizam VII and Hyderabad had been stayed after Pakistan successfully invoked sovereign immunity before the House of Lords: [1958] AC 379. The present proceedings, commenced in 2013, required the court to determine whether the transfer was absolute or left the fund beneficially owned by Nizam VII, whether trust and restitutionary claims were time-barred, and whether foreign act of state, non-justiciability or illegality prevented determination. The Princes and India had compromised their competing successor claims.

1. Disposition. The fund was held by Pakistan through its High Commissioner on trust for Nizam VII and his successors. Pakistan was not beneficially entitled. The Princes' and India's restitutionary claims succeeded against Pakistan and, alternatively, against the Bank.
2. The law of Hyderabad governed Nizam VII's capacity and authority. Hyderabad was a foreign state recognised by the United Kingdom between 15 August 1947 and the conclusion of Operation Polo. Operation Polo did not itself alter that status. Nizam VII was an absolute ruler who could delegate authority formally or informally, but Moin's authority as a government official ended when Nizam VII accepted his Government's resignation on 17 September 1948. No communication authorised the transfer.
3. The purpose of the transfer was to safeguard the fund from India, not to pay for arms. That purpose was inconsistent with an absolute transfer. The evidence showed that the fund was transferred to Rahimtoola in his official capacity as High Commissioner, to be held for Nizam VII. The words used in the 15 September letters supported that conclusion, although they did not alone establish an express trust.
4. No express trust arose because Moin lacked authority. Had authority existed, the three certainties would have been satisfied. In the circumstances, Rahimtoola was a constructive trustee, alternatively the voluntary transfer gave rise to a resulting trust. A sovereign state could hold property on an ordinary private-law trust after waiving immunity.
5. Under Arnold v National Westminster Bank plc [1991] 2 AC 93, the capacity issue could be reconsidered because substantial new material had become available. The limitation defence was barred as an abuse of process under the Civil Procedure Rules 1998: Pakistan could not use immunity to prevent timely litigation and then rely on the resulting limitation period after waiving immunity. The Bank, having retained the money on notice of the claims, was liable under the doctrine of ministerial receipt.
6. The foreign act of state doctrine did not apply. The issues were private-law questions about the transfer and the trust, not questions requiring adjudication of rights on the plane of public international law. The alleged illegality of India's conduct was irrelevant to the claims and, in any event, the Princes and India had validly compromised their competing claims.

The judgment records earlier proceedings brought by Nizam VII and Hyderabad in the Chancery Division. The House of Lords stayed those proceedings after Pakistan successfully invoked sovereign immunity: [1958] AC 379. The present proceedings were commenced in 2013 and were determined at first instance. No appeal from this judgment is stated.