Habib Bank Ltd v Habib Bank A.G. Zurich
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STEPHENSON,LORD JUSTICE OLIVER,LORD JUSTICE WATKINS |
| Judgment Date | 18 December 1980 |
| Judgment citation (vLex) | [1980] EWCA Civ J1218-2 |
| Docket Number | 1977 H No. 4426 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 December 1980 |
[1980] EWCA Civ J1218-2
Lord Justice Stephenson
Lord Justice Oliver
and
Lord Justice Watkins
In The Supreme Court of Judicature
Court of Appeal
On Appeal from the High Court of Justice
Chancery Division
Group A
(Mr. Justice Whitford)
MR. WILLIAM ALDOUS, QC., and MR. ANTHONY WATSON (instructed by Messrs Stones Porter & Company, solicitors, London) appeared on behalf of the Appellants (Plaintiffs).
MR. JULIAN JEFFS, QC., and MR. ROBIN JACOB (instructed by Messrs Freshfields, solicitors, London) appeared on behalf of the Respondents (Defendants).
I will ask Lord Justice Oliver to give the first judgment.
This is an appeal from a judgment of Mr. Justice Whitford delivered on 12th October 1979 in which he dismissed the plaintiffs action for passing-off. The title to these proceedings indicates the close similarity of the names of the parties and it is the plaintiffs' contention that in carrying on their business under their corporate name in the United Kingdom the defendants are either directly passing off their business as that of the plaintiffs or at least holding out to the public that they are a company controlled by or associated with the plaintiffs. And indeed, so far as association goes, they are to some extent associated as the history of the matter shows, although Mr. Aldous submits that that factual association does not justify what his clients claim to be, effectively, a representation by the defendants that their business forms part of the plaintiffs' banking business.
The history of the matter goes back to the period before the partition of the Indian sub-continent into India and Pakistan. The Habibs were and are a well-known banking family and in 1941 they incorporated a banking company in Bombay. That company bore the same name as the plaintiff in the action and I will refer to it as 'the Original H. B. L..' Upon the partition of India in 1947 the seat of this company was moved to Karachi. The business of the Original H. B. L.. was both substantial and international and in 1952 it was decided toincorporate a further company in Pakistan to handle the Overseas business. That company was Habib Bank (Overseas) Ltd - which I refer to as H. B. O.. for short - and it was owned as to 40% by the Original H. B. L.. and as to 60% by individual members of the Habib family. The affairs of the two companies were, throughout their joint corporate lives, very closely intertwined. The Original H. B. L.. dealt with all business in Pakistan whilst foreign business was undertaken and branches in foreign countries were operated by H. B. O.. But the separation was more theoretical than real, because there seems to have been no practical separation of banking staffs who were treated as freely interchangeable between the two companies and there can be no doubt that the two companies were known to the general public as "the Habib Bank" without differentiating between the two corporate entities.
From 1970 onwards the two companies operated under the shadow of threatened nationalisation. In 1970 the elections in West Pakistan were won by Mr. Bhutto's People's Party whose manifesto included a policy of nationalisation of ( inter alia) the banks, but war with India and the formation of the separate state of Bangladesh intervened and no immediate nationalisation took place. The writing was, however, very clearly on the wall and there was an obvious danger of Government interference or supervision, a danger which became more acute when certain major industries were nationalised in 1972. It had in fact, been on the wall, albeit perhaps in rather fainter characters, since early1967 when Mr. Bhutto had formed his party and the directors of the bank saw the merit - no doubt in the bank's own interest as well as in that of its customers - in forming a branch or affiliate abroad in a country whose laws prohibited the disclosure of banking information, so that any attempted interference or inquiry could effectively be blocked. In July 1967 application was made to the Pakistan State Bank for permission to establish a branch in Switzerland. That was approved in principle and on 9th August 1967 the defendant (to which I will refer as H. B. Z..) was established in Zurich. The attitude of the Swiss authorities was such that the establishment was much facilitated if the new bank was established with local capital and accordingly H. B. O.. had only a minority of the shares (45% initially) the remainder being issued to a Swiss company called Thesaurus. H. B. Z.. formally opened for business on 12th October 1967. Thereafter until 1974 H. B. Zs. business was in fact run by the Original H. B. L.. and H. B. O.. as part of the Habib Bank business, even though H. B. O.. was only a minority shareholder. A member of the Habib family, Mr. Rashid Habib, was Chairman of the I Board and another, Mr. Hyder Habib, was a Vice-chairman and the staff of the bank were freely interchangeable with the staff of H, B. O. and the staff of the Original H. B. L.. H. B. Z.. was, effectively, the Zurich branch of the Habib bank. Contemporary internal correspondence at the time of its formation indicates that the primary purpose of establishing the Swiss bank was to provide a haven for customers who desired to place their funds in a hard-currency area without fear of disclosure.
In May 1973 the Board of H. B. Z.. decided to open a branch in London. H. B. O.. was already operating there with a small head office at Finsbury Pavement and a substantial number of branches outside London in cities where there was a substantial immigrant population from Pakistan. The arrangements for the opening of the London branch of H. B. Z.. were handled in London by H. B. O.. Powers of Attorney were given to two senior executives of H. B. O.. in London, Mr. Pirbhai and Mr. Padiyar, and the latter negotiated the necessary permission from the Bank of England. It did not really make commercial sense to establish, in effect, a competitor in the United Kingdom with the same group but Mr. Padiyar's letter to the Bank of England dated 5th June 1973 indicated, perhaps rather surprisingly, that the Swiss Bank 'find considerable scope for expansion of their business here and they desire to participate in the banking activities of the City of London and the United Kingdom'. The primary business of H. B. O.. was the remittance to Pakistan of funds received from immigrants of Pakistan origin and one cannot help doubting whether in fact the opening of a branch of the Zurich business was intended to do more than provide on the spot facilities for remittance to hard-currency areas without the risk of disclosure which would have existed if they were channelled through a branch directly controlled from Pakistan. This is consistent with the object which the then board of the Original H. B. L.. had in mind when H. B. Z., was formed as it appears from a letter from Mr. Pirbhai (an executive of H. B. O.. in London) to Mr. Rashid Habib dated 24th February 1967.Nevertheless, a contemporary note of a meeting held on 15th February 1974 (that is after nationalisation) of representatives of both H. B. O.. and H. B. Z.. with H. B. Os.. auditors, Messrs Thompson McLintock, indicates that both H. B. O.. and H. B. Z.. ii then had it in contemplation that H. B. Z.. would expand into a general banking business in London.
Insofar as any conclusion can be drawn from this it seems to me to be merely this, that it bears out the plaintiffs' case that the Swiss branch in London was treated simply as a branch of the international business of the Habib Bank and that it was really a matter of indifference at that time by which corporate entity the actual business was conducted. The whole Group was under the management of members of the Habib family.
The London Office of H. B. Z.. opened for business in November 1973 in a very modest way. It consisted of a room adjoining the offices of H. B. O.. in 12 Finsbury Pavement. It had an independent entrance to the outside corridor but was also accessible through the telex room in H. B. Os. office and in practice it consisted of a room, a desk and a telephone which was manned by one of the members of the staff of H. B. O.. as occasion required. Up to March 1974 it had done very little business in the United Kingdom. By that time it had only three accounts, so that apart from such reputation as it may have enjoyed as part of the Habib banking group it had had very little time or opportunity to build up any independent goodwill of its own in London. On 1st January 1974 the Damoclean sword fell. The Pakistan Government announced the nationalisation of all the banks in Pakistan, whichincluded both H. B. L.. and H. B. O.. Subsequently in the summer of 1974 both H. B. L.. and H. B. O. were merged in a new state corporation, the present plaintiff, and it is not disputed that the effect of this, as a matter of law, was to vest in the plaintiff all the goodwill and rights of the original H. B. L.. and of H. B. O..
The effect of nationalisation, however, was to produce a radical change in the management of the business. All the existing chief executives and directors of H. B. L.. and H. B. O.. were removed, so that from the beginning of January 1974 the Habib family ceased to have any say din the banks' operations. But, of course, that did not apply to H. B. Z.. which was not susceptible to control from Pakistan, since H. B. O.. had only a minority shareholding. That in fact had been cut down to 22½% as a result of a further issue of shares in November 1973. Matters came to a head in March 1974. Mr. Rashid Habib and Mr. Hyder Habib were persuaded to transfer their own nominee shareholdings to the direction of the Government of Pakistan in July 1974 and this...
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