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Shanshal v Al-Kishtaini [2001] EWCA Civ 264

Claimant’s claim to recover money failed because of illegality

Facts

The claimant transferred 700,000 DM to the defendant in connection with a proposed business venture. Around $500,000 was returned by the defendant to the claimant which represented the exact costs of shares which the defendant agreed to buy. A dispute arose whether any money was still owed to the claimant as a result of a varying exchange rate.

Issue

At first instance, the court held that the defendant was in breach of trust by using the defendant’s money for his own purposes. The transfer of funds to the claimant for the purpose of the share allocation was not complete repayment and the claimant was entitled to recover outstanding monies. On appeal, the defendant argued that the claimant should be prevented from recovering the monies as they had been advanced by him contrary tothe Gold, Securities, Payments and Credits (Republic of Iraq) Directions 1990. The defendant submitted that such a bar to recovery would be a breach of his right to property under the Human Rights Act 1998.

Held

The Court of Appeal held that the trade embargo in the 1990 Directions applied to persons who were resident of Iraq at the time the Directions came into force (which included the claimant). Therefore, the monies were irrecoverable on the basis of illegality. Furthermore, assuming that the claimant was entitled to invoke the right to property under the European Convention on Human Rights at all, the case clearly fell within the public interest exception to the right and the illegality defence is not incompatible with the claimant’s right to property in terms of the Convention.


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