Court allows loan recovery against public servant, ruling contract legal despite Exchange Control Law concerns.

[*454]1982 Mar 24

(ARTEMIDES, AG. P.D.C. AND IOANNIDES, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Costas Panayi,

Plaintiff,

v.

yiannaki-s. Polycarpou,

Defendant.

(Action No. 4165/79).

Contract - Illegality - Permanent resident of Cyprus borrowing from permanent resident of London - Contract not illegal as contravening sections 3(2) and 35(i) of the Exchange Control Law, Cap. 199.

S. Karides, for the Plaintiff.

L. Papaphilippou, for the Defendant.

JUDGMENT

The judgment of the Court was delivered by:-

IOANNIDES, D.J:- The plaintiff, who is a Cypriot[*455]

and a permanent resident of London, claims against the defendant, a Cypriot public servant, the sum of £24,000.-sterling, or the equivalent in Cyprus pounds as money due on a loan plus 9% interest.

Though the defendant in his defence does not admit the loan, at the hearing of the. action he did

not give any evidence or called any witnesses for his defence and the evidence of. the plaintiff remained uncontradicted.

In his evidence the plaintiff said that he is the owner of a restaurant in London and the defendant, whom he knew very well, was frequently visiting his restaurant . and in September, 1977, he asked him to lend him some ;money in order, as he told him, to buy certain machinery for his company. The plaintiff consented to the request of the defendant and the latter told him that he will send a certain Nakis Christodoulides to get the money. On the 27th of September, 1977, Nakis Christodoulides went to the plaintiff and asked for the sum of £17,000.- sterling. The plaintiff gave to him that sum and asked him to sign a receipt for that amount. On the 6th of October, 1977, Nakis Christodoulides visited again the plaintiff and was given another £1,000.-sterling, and a receipt was again signed "by him. Finally on the l4th of October, 1977, the sum of £6,000.- sterling, was given to him and a receipt was also signed. All the three receipts were filed in Court as Exhibits 1, 2 and 3. In all, three of them, it is stated that the money were received for the account of the defendant. [*456]Defendant himself, some time later, visited the plaintiff and told him that everything was alright and he should not worry about the loan which he would soon repay. To secure the plaintiff he signed a bond for £24,000.- sterling, the whole sum of the loan, with interest at 9%.The bond was not presented in Court as the plaintiff had lost the original, but he said that the bond was signed around the 25th of December, 1977.

The defendant did not repay the loan and the plaintiff came to Cyprus and asked for his money. Although the defendant was. promising to pay it back yet he never did so.

As we have already stated no witnesses were called by the defence and since the whole of

the evidence of the plaintiff stands uncontradicted we accept it in to to. In fact during cross-examination it had become

clear that the defendant admits having received the loan except for the sum of £6,000 sterling, which he alleged he never had received but was added by the plaintiff on the whole sum without consideration, as a 'καπέλλο' to use the words of counsel. We dismiss this allegation.

Counsel for the defence in his final address has argued that the three receipts, filed in Court as Exhibits1, 2 and 3 do not prove agency or privity of contract and also that the whole transaction was illegal as being against the provisions of the Exchange Control Law, Cap. 199.

With regard to the argument concerning Exhibits 1 ,2 and 3 we find that there is no merit in it. Exhibits 1, 2 [*457]and 3 state specifically that the various sums of money were received for the account of the defendant, and the plaintiff himself in his evidence in Court has explained the circumstances under which the various sums of money were paid.

Though on the three exhibits it is also printed the name of a certain Naktrans Inter-Continental Transport Co. Ltd., nothing was said about that company and so we attach no relevance to that name which we completely disregard.

Regarding the question of illegality, counsel for the defendant has particularly referred to section 3(2) and35(i) of Cap. 199 as amended "by Law 53/72 and submitted that the whole transaction was illegal and contrary to these sections.

Section 3(2) provides that:-

"Except with the permission of the Central Bank no person resident in the Republic other than an authorised dealer, shall in Cyprus, do any act which involves, is in association with or is preparatory to the buying or borrowing any gold or any currency other than Cyprus currency from, or selling or lending any gold or any currency other than Cyprus currency to, any person outside Cyprus".

we do not think that this provision of the law applies in any way to the present case. In the present case the defendant, .who is a Cypriot and a permanent resident [*458]of Cyprus, borrows in London from the plaintiff, a permanent resident of London, the sum of £24,000.- sterling; and the money is paid in London. No permission is needed for this transaction by the Central Bank of Cyprus.

As regards section 35(i) of Law 199 this section provides that:-

"It shall he an implied condition in any contract that, where, by virtue of this Law, the permission or consent of the Central Bank is at the time of the contract required for the performance of any term thereof,, that term shall not be performed except in so far as the permission or consent is given or is not required.

Provided that this subsection shall not apply in so far as it is shown to be inconsistent with the intention of the parties that it should apply whether by reason of their having contemplated the performance of that term in despite of the provisions of this law or for any other reason".

This section of the law has again no relevance to the present case.

The transaction is therefore perfectly legal and it is not in any way contrary to the provisions of Cap.199.

In any event even if we were prepared to find that the transaction was contrary to Law 199, that would not have meant that the transaction was illegal or that no action

for the recovery of the loan could he brought for the following reason: [*459] Section 4(i) of the Fourth Schedule of Cap.199

provides that:-

"In any proceedings in a prescribed Court and in. any arbitration proceedings, a claim for the recovery of any debt shall not be defeated by reason only of the debt not being payable without the permission of the Central Bank, and of that permission not having been given or having been revoked".

All District courts were by the "Exchange Control (Prescribed Courts) Order" prescribed as such. (See page 420 of the Rules of Court).

As we have accepted the uncontradicted evidence of the plaintiff we find that he has proved his claim against the defendant and he is entitled to judgment against him for the sum of the loan plus 9% interest from the date the defendant signed the bond.

Judgment is therefore issued for the plaintiff for the sum of £24,000.- sterling, or the equivalent in Cyprus pounds, plus 9% interest as from 25.12.1977 with costs. Such costs to be assessed by the Registrar on the appropriate scale.

Judgment for plaintiff

for £24.000.— sterling with costs