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The Cambridge Grammar of the English Language, page 152, reads

If he knew she had too many commitments, he would do something about it is a remote conditional, with the preterite in knew expressing modal remoteness, not past time: the time of knowing is present. So too (certainly in the salient interpretation) is the time of her having too many commitments: it is a matter of knowing in the present about a situation obtaining in the present. And the same applies to I wish he realised that she had too many commitments.

From a semantic point of view, therefore, the preterite carried by have must be distinguished from that carried by know or realise, which is reflected in the grammar in that irrealis were is not substitutable for was in this construction:

If he knew she was/∗were too busy, he would do something about it

I wish he realised that she was/∗were too busy.

In what dialect are those the salient interpretations?

  • I do not know the context. However, the sentence is both grammatically and semantically ambiguous. If we found this sentence in a biography, for example, or history, then “he thought” and “he would do” would be a habitual past. It is context dependent. – Tuffy Oct 15 at 23:54

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