Al Tamimi v Khodari (Rev 1)

A loan intended to finance future gambling is not rendered irrecoverable by section 1 of the Gaming Act 1892 merely because both parties expect the money to be used for gambling. The Act applies where an express, implied or inferred stipulation requires that use.

Whether repeated lending occurs in the course of a business depends on all the circumstances. Regularity and profit are important but not sufficient. The court must also consider the parties, purpose, formality, security, repayment terms and ordinary features of a lending business.

A lender-borrower relationship is not ordinarily fiduciary. A bank manager’s separate dealings with a customer acquire a fiduciary character only where the circumstances support an undertaking of loyalty or subordination of the manager’s interests.

The claimant made numerous short-term, unsecured personal loans to the defendant, usually at a casino and often by supplying gaming chips. Each loan was repayable on demand with a fee of about 10%. After the defendant ceased making full repayment, the claimant recovered £240,500 plus interest in the High Court, and the defendant’s counterclaim for an account was dismissed.

The defendant appealed on four grounds. He contended that part of the debt was irrecoverable under the Gaming Act 1892; that two £5,000 loans were unenforceable under the Consumer Credit Act 1974; that the credit relationship was unfair; and that the claimant owed fiduciary duties arising from his separate position as the defendant’s bank manager.

The central gaming issue was whether the loan agreements stipulated that the money or chips had to be used for gambling.

1. Disposition. The appeal was dismissed unanimously. Wilson LJ delivered the leading judgment. Hooper LJ agreed. Pill LJ agreed on every issue and added observations concerning section 1 of the Gaming Act 1892.
2. Gaming loans. Section 1 of the 1892 Act could in principle prevent recovery of a loan made for future gambling. The controlling distinction, derived from MacDonald v Green [1951] 1 KB 594, was between a loan which left the borrower free to use the money as desired and one subject to an express, implied or inferred stipulation that it be used for gaming. A shared expectation or purpose was insufficient. The claimant had no interest in the gambling’s occurrence or outcome and sought only repayment, the fee and the goodwill of a banking client. The judge was entitled to find that no stipulation restricted the defendant’s use of the money or chips. Pill LJ stressed that supplying chips could support an inference of a stipulation and did not adopt Wilson LJ’s full analysis of hypothetical later withdrawals from gambling. He nevertheless held that the existence of a stipulation depended on all the circumstances and upheld the trial judge’s finding.
3. Consumer credit licensing. The two £5,000 loans were regulated agreements. They were nevertheless non-commercial agreements because the claimant had not made them in the course of a business. Regularity and profit were important indicators, but did not suffice. The court was entitled to give substantial weight to the personal, ad hoc and informal nature of the dealings, their concentration on one borrower, the absence of security and fixed repayment periods, and the absence of premises, advertising or other business apparatus. Section 40(1) of the Consumer Credit Act 1974 therefore did not prevent enforcement.
4. Unfair relationship. Assuming that all 18 loans were credit agreements within section 140C(1), the 10% fee did not make the relationship unfair under section 140A. The loans were unsecured, the borrower lived abroad, comparable fees were normal, and the defendant had accepted the fee over several years without seeking cheaper arrangements. No order reducing the fee under section 140B was justified.
5. Fiduciary duty and account. Lending and borrowing do not ordinarily create fiduciary duties. Although a bank manager-customer relationship may become fiduciary, the parties’ personal loans remained outside their conventional banking relationship. The claimant’s ability, with specific consent, to arrange some repayments from the defendant’s accounts was merely an administrative facility. It did not establish subordination of the claimant’s interests or an undertaking of single-minded loyalty. The counterclaim for an account was rightly dismissed.

• Court of Appeal (Civil Division): The defendant’s appeal was dismissed unanimously by [2009] EWCA Civ 1109.
• High Court, Queen’s Bench Division: On 18 December 2008 Blair J gave judgment for the claimant for £240,500 plus interest and dismissed the defendant’s counterclaim. No neutral citation is stated.