Mirza (t/a Hamza Travel) v Dayman

Payment to a hawaladar under a commercial remittance arrangement does not itself create a resulting trust. A Quistclose-type trust requires terms preventing the recipient from treating the money as freely disposable. Freedom to consolidate or commingle customer funds, use them as general business funds and profit through exchange-rate transactions is inconsistent with a trust. The customer is an unsecured creditor rather than a beneficiary. Without a beneficial interest, a claim under Article 1 of the First Protocol cannot succeed. Permission to appeal should be refused where the proposed appeal has no real prospect of success and there is no other compelling reason to grant permission.

The claimants were customers of a hawala money-transfer business whose assets were placed in receivership. They claimed that £86,776 paid to the business was held for them on resulting or Quistclose trust, and alleged that the receiver’s use of the money breached Article 1 of the First Protocol. HHJ Yelton dismissed the claim on 22 April 2015, holding that the arrangement created no trust and that the claimants were unsecured creditors. Following refusal of permission on paper by Arden LJ, the claimants renewed their application orally. The central issues were whether the trust analysis was arguably wrong and whether CPR Rule 69.7(2) enabled an order concerning the receiver’s costs in separate proceedings.

Application refused. The renewed application for permission to appeal failed because the proposed appeal had no real prospect of success and there was no other compelling reason for permission.

1. HHJ Yelton had addressed the resulting-trust argument. Madina agreed to provide a remittance service in return for consideration. The payment was therefore part of a commercial transaction, not a gratuitous transfer or a purchase of property in another person’s name. The conclusion that a resulting trust was inapplicable was not arguably wrong.
2. A Quistclose-type trust is a species of resulting trust arising where property is transferred on terms which do not leave it at the recipient’s free disposal. The judge was entitled to find that no such restriction existed. Madina was free to use the money, and the absence of any such term was inconsistent with a trust.
3. The hawala arrangements were materially the same as those considered in Re H [2003] EWHC 3551 (Admin) and Azam v Iqbal [2008] Bus. L.R. 168. The features of the system, including consolidation of customer funds, use of those funds for business purposes and profit-making through exchange rates, were inconsistent with any trust. The claimants were accordingly unsecured creditors, not beneficiaries.
4. Because the claimants had no beneficial interest in the money, their claim under Article 1 of the First Protocol to the European Convention on Human Rights had no real prospect of success.
5. CPR Rule 69.7(2) concerned orders made in the receivership proceedings. It did not permit the court, in these separate proceedings, to make or vary an order concerning the receiver’s costs.

The formal order was: Application refused.

• Court of Appeal (Civil Division): On a renewed oral application, permission to appeal was refused. Permission had previously been refused on paper by Arden LJ. [2016] EWCA Civ 699.
• High Court of Justice, Queen’s Bench Division: HHJ Yelton, sitting as a deputy High Court judge, dismissed the claim on 22 April 2015.