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.
Issues
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.
Decision/Outcome
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.
Updated 20 March 2026
This case summary accurately reflects the decision in Shanshal v Al-Kishtaini [2001] EWCA Civ 264. The Court of Appeal’s findings on illegality and the application of the Gold, Securities, Payments and Credits (Republic of Iraq) Directions 1990 are correctly stated.
Readers should be aware of one significant subsequent development in the law of illegality. The Supreme Court in Patel v Mirza [2016] UKSC 58 substantially reformed the common law approach to illegality in civil claims, replacing the earlier rule-based approach (associated with Tinsley v Milligan [1994] 1 AC 340) with a more flexible, policy-based range of factors to be considered. The article does not address this development, as it predates it, but students should bear in mind that the broad illegality principles discussed in this case must now be understood in light of Patel v Mirza. The specific outcome in Shanshal, which turned heavily on the mandatory statutory embargo regime, is unlikely to be disturbed by this development, but the general illegality framework has evolved considerably since 2001.
The Iraq sanctions regime has also changed significantly since 1990, though this does not affect the correctness of the decision as it applied to the facts at the time.
