Bank voor Handel en Scheepvaart N.v v Administrator of Hungarian Property
| Jurisdiction | England & Wales |
| Judgment Date | 30 July 1951 |
| Date | 30 July 1951 |
| Docket Number | Case No. 40 |
| Court | Queen's Bench Division |
(Devlin J.)
Jurisdiction — Territorial Limits of — Foreign Legislation Transferring Movable Property of Foreign Nationals In England — Whether Enforceable in English Courts — Confiscatory Legislation — Public Policy — Lex situs — Position of Allied Government-in-Exile — Trading with the Enemy Act, 1939 — What is Enemy Property — Meaning of Belonging to or “Held or Managed on behalf of” Enemy — Peace Treaty between United Kingdom and Hungary, 1947 — Interpretation of Order based on Treaty — Charges on Hungarian Property — Whether Company's Property deemed to “belong” to Shareholders.
Treaties — Peace Treaties — Operation of — Interpretation of Order Based on Treaty but Differently Phrased — Powers of Administrator of Hungarian Property — Whether Company's Property Deemed to “Belong” to Shareholders.
Trading with the Enemy — British Trading with the Enemy Act, 1939 — Enemy Property — Property “belonging to or held or managed on behalf of” an Enemy — One-Man Company — Whether Status of Shareholders Material.
Enemy Character — Of Corporations — Whether Affected by Status of Shareholders — Whether Company's Assets “Belong” to or are “Held or Managed on behalf of” the Shareholders — One-Man Company — Trading with the Enemy Act, 1939 — Peace Treaty between United Kingdom and Hungary, 1947 — Treaty of Peace (Hungary) Order, 1948.
The Facts.—The plaintiff Bank was a Netherlands limited company. All the shares were owned by a Hungarian national domiciled in Switzerland, Baron Heinrich Thyssen-Bornemisze, until his death in 1947; when 61/2 per cent. of his estate went to his youngest son Heinri, also a Hungarian national, and 121/2 per cent. each to each of his other children, who were not Hungarian nationals.
Before the Second World War the plaintiff Bank deposited with the City Safe Deposit in London a quantity of gold bars, worth some two million pounds sterling. The gold was there at the outbreak of war on September 3, 1939, when the Trading with the Enemy Act, 1939, came into force. The Custodian appointed under the Act was aware of this deposit of gold, which he supposed erroneously to belong to a German family. He had some communication with the City Safe Deposit about it in September 1939, but he took no action then. In addition to its property in the gold, there was due to the plaintiff Bank on May 20 from various banks in London sundry balances amounting in all to £17,682 17s. 8d.
In May 1940 the Netherlands were invaded, and on May 20 became enemy territory. The Bank retained its commercial domicile in Holland, and thus at once acquired, and during the war never lost, enemy character. After the invasion the Royal Netherlands Government exercised their sovereign powers from London, and on May 24, 1940, they issued a decree (Decree A 1) regarding property belonging to persons resident in occupied Holland. Its object was to prevent such property from being used in ways incompatible with the interests of the Netherlands, and to that end required such property to be entrusted to the State for so long as might be necessary.
On July 3, 1940, the Board of Trade, under the Trading with the Enemy Act, 1939, s. 7, made a vesting order transferring the gold to the Custodian, who sold the gold for the sum of £1,984,120 15s. 5d. and retained the proceeds as enemy property. The bank balances due to the plaintiff Bank from various banks in London were not transferred to him until long after the conclusion of hostilities.
On October 2, 1944, the United Kingdom and the Netherlands entered into an agreement (hereinafter called “the Property Agreement”) which provided that certain property held under British Trading with the Enemy legislation should be transferred to the Netherlands Government, namely, property which “falls within the definition of enemy property contained in the United Kingdom Trading with the Enemy legislation and belongs to persons or bodies of persons who are and have been ‘enemies’ within the meaning of the Trading with the Enemy Act solely because they are and have been resident or carrying on business in Netherlands territory in Europe on and since May 15, 1940”. Under this Agreement a committee was set up to determine what was Netherlands property and what was not. This Committee did not begin to function until some time after the end of hostilities.
On December 7, 1941, the United Kingdom and Hungary became at war with each other; Hungary had been enemy territory for the purpose of the Trading with the Enemy Act, 1939, since April 8, 1941.
The Treaty of Peace between Hungary and the United Kingdom was concluded on February 10, 1947, and came into operation on September 15. It provided by Article 29 (1) that the United Kingdom should have the right to seize, retain and liquidate all property, rights and interests which were then within its territory and belonged to Hungarian nationals, and to apply such property or proceeds to such purposes as the United Kingdom might desire within the limits of its claim against Hungarian nationals, any excess to be returned. By Article 29 (3) the Hungarian Government was to compensate Hungarian nationals whose property was taken under this Article and not returned to them. By Article 29 (5)(c), however, the property of Hungarians resident in United Nations territory was not in general to be seized.
On January 26, 1948, the Treaty of Peace (Hungary) Order, 1948, was made, to take effect from February 2, 1948. By this Order, Article 29 of the Treaty was given effect as law. The Order set up the office of Administrator of Hungarian Property, and provided that all property to which the Order applied was to be charged with the amounts due at the date when the Treaty came into force in respect of claims against the Government of Hungary or Hungarian nationals.
Meanwhile, on November 6, 1947, the Committee set up under the Anglo-Dutch Property Agreement held its first meeting. As the result of its deliberations a black-list was drawn up by the Trading with the Enemy Department of assets which were not to be released without previous investigation. The property in question in this case was included in this list among the cases in which there was prima facie evidence of substantial enemy interests, it being still erroneously supposed that some German interest was concerned.
From the end of hostilities until July 1948, the Bank was under Dutch Government control. On July 22, 1948, shortly after the control was removed, the Bank's solicitors wrote to the Administration of Enemy Property Department requesting that the assets should be released. After a very long delay the request was refused. On April 6, 1950, the Administrators, pursuant to Article 1 (5)(e) of the Treaty of Peace (Hungary) Order, 1948, required the Custodian to transfer the proceeds of the sales and of the bank balance to him, supporting that demand by a certificate, issued under Article 1 (5)(g) of the Order, that the property was Hungarian property subject to the charge imposed by the Order. Accordingly, the Custodian paid to the Administrator £1,962,852 14s., having deducted a fee of approximately £40,000, which he (the Custodian) was authorized to deduct under Article 7 of the Trading with the Enemy (Custodian) Order, 1939.
On May 19, 1950, the Netherlands Government made an order for restitution to the plaintiff Bank of the property taken under the A. 1 Decree. On the same date the Bank demanded from the Custodian and the Administrator that the property should be transferred to it, and on that demand being refused, issued the writ in the present action.
The plaintiff Bank claimed against the Custodian of Enemy Property (the first defendant), in conversion, the present value of the gold bars, and against the Administrator of Hungarian Property (the second defendant) the amount paid to him by the Custodian, on the ground that it was not within the charge imposed by the Treaty of Peace (Hungary) Order, 1948.
Held: (a) that the A. 1 Decree of the Netherlands Government was ineffective to transfer movable property in England to the Netherlands Government; that the Orders of July 1940 under the Trading with the Enemy Act were accordingly valid; and that the Custodian was not therefore liable to the plaintiff Bank.
(b) that there was nothing in the scope of the Treaty of Peace with Hungary or in the Treaty of Peace (Hungary) Order, 1948, which could be regarded as affecting the rule of law that the property of a company was neither the property of the shareholders, nor held or managed by the company on behalf of its shareholders, and accordingly the Bank was entitled to recover the capital sum representing the proceeds of the sale of the gold from the administrator.
Devlin J., after setting out the facts, dealt first with the claim against the Custodian, which depended upon whether the A. 1 Decree of the Netherlands Government had been effective to transfer the property to the Netherlands Government. “The plaintiffs say that the orders made in July, 1940, under the Trading with the Enemy Act were invalid because at that date the property was not enemy property, but, by virtue of the A. 1 decree, the property of the Netherlands Government. The substantial question raised is, therefore, whether the A. 1 decree was effective to transfer property situate in this country.
“I shall take first the argument on the A. 1 decree. The custodian submits that the English courts will not enforce it since they will treat it as having no extra-territorial effect. The plaintiffs' submission is that the general rule is to the contrary, and that the legislation of a foreign State affecting the title of its nationals to movables in England will be applied by the English courts unless, first, the legislation is contrary to public policy—as, for example, confiscatory or penal legislation—or...
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