Court stays creditor's action against stricken debtor pending determination of debtor's relief application under Debtors Relief Law.

[*303] 1981 Dec.

(BOYIADJIS, AG. P.D.C. AND KRONIDES, S.D.J.)

IN THE DISTRICT COURT OF NICOSIA

Metal Containers Limited.

Plaintiffs,

v.

Sonco Canning Limited and Others,

Defendants.

(Action No. 3237/80).

Debtors Relief (Temporary Provisions) Law, 1979(Law 24/79). - "Right of every creditor to recover a debt due by. a stricken debtor is suspended" - In section 3(1) of the Law - Suspends the right of action altogether of the creditor against the stricken debtor.

A. Timothi, (Mrs.), for Applicants-Defendants 1, 2 and 3.

G. Arestis, for G. Cacoyiannis, for the Respondents-Plaintiffs.

RULING

The ruling of the Court was delivered by:-

BOYIADJTS. AG.P.D.C.:- On June 3, 1981,[*304] the defendants 1, 2 and 3, hereinafter referred to as the applicants, applied ex parte for an order of the Court staying all further proceedings in the present action pending the determination of the original application No. 155/80 which they had filed under the Debtors Relief (Temporary Provisions) Law, 1979.

On June 9, 1981, the Court refused to grant to the applicants the order applied, for ex parte and directed that notice of the application be served on the plaintiffs. The latter, hereinafter referred to as the respondents, opposed the application and filed in due course their written notice of opposition.

The facts relied upon are simple and undisputed. They are shortly these: On July 28, 1980, the respondents filed the present action against the three applicants and a fourth defendant who has not as yet filed a memorandum of appearance and is not a party to this application. The claim against all the defendants jointly and severally is for an amount of £ 38,288.702 mils wherein a large amount of interest is included. The cause of action referred to in the indorsed statement of claim is the alleged sale of goods on credit by the respondents to the applicants and/or the alleged acceptance by the latter of 30 bills of exchange.

The aforesaid two alternative causes of action arose before the 14th August,1974, and, therefore, the amount claimed in

the action is a "debt" within the meaning given to the word in section 2 of the Debtors Relief (Temporary Provisions) Law 24 of 1979.[*305]

The applicants have filed an originating application No. 155/80 against the respondents for relief under the aforesaid Law 24 of 1979 alleging that they are "stricken debtors" within the meaning of that Law. Application 155/80 is still pending before the Court established under subsection (1) of section 8 of the Law.

The application is based on Order 1+0, Rule 7 of the Civil Procedure Rules the provisions of which we need not examine for the purposes of this ruling as the respondents did not challenge that it empowers the Court to make the order applied for. Neither did they challenge that, in the proper exercise of its discretion, the Court should make the order but for the mere existence, in their opinion, of one obstacle, namely, their suggestions that, even if the applicants were to succeed in their application No. 155/80, the only relief to which they would have been entitled under the provision of Law 21+ of 1979 would be the protection against execution of the judgment, whereas the. right of the creditorsrespondents to sue them and obtain judgment against them would remain throughout intact.

Mr. Arestis for the respondents has argued that the exercise of the discretion of the Court in this case depends wholly on how the provisions of section 3 of Law 24 of 1979 will be interpreted by the Court. He submitted in this respect that the object of Law 24 of 1979 is to suspend only the right of a judgment creditor to execute his judgment by the sale of the property of a stricken debtor but does not[*306]go as far as depriving a creditor from filing an action against a stricken debtor or obtaining judgment against him for a debt incurred before August 14,1974. If his submission be accepted, Mr. Arestis added, then there is no reason for the Court to stay the proceedings in the action pending the determination of the applicants' application No. 155/80 for no useful purpose would evidently be served thereby. Furthermore, although he admitted that in case the applicants ultimately succeed in their application under the Debtors Relief Law, no interest accruing after August 14, 1974, shall be payable by them, he. nevertheless, submitted that the Court should now allow the action to proceed and judgment to issue for the amount claimed, which includes interest, and the applicants' obligation to pay such interest shall later be suspended if they are successful in their application No. 150/80.

Mrs. Timothi for the applicants has, on the other hand, argued that if the applicants succeed in their application under the Debtors Relief Law and are declared by the proper Court to be "stricken debtors", this would amount to a complete answer or defence to the claim in the action against them because, by operation of section 3(1) of Law 2b of 1979, the action shall become premature in as much as. the cause Of action of the respondents itself shall be suspended and not merely the right of the respondents to levy execution on the applicants' belongings in satisfaction of the judgment to be given in the action.[*307]

One might argue that in order to succeed in their present application, the applicants need not show that it would certainly amount to a complete defence to the claim of the respondents if the Court decides application No. 155/80 in favour of the applicants. It would suffice to show that it is not merely a sham defence, that it is bona fide and that there exists reasonable probability that the legal issue will be decided in their favour if, by staying the proceedings temporarily, it is made possible for them to raise it as a defence or as one of their defences in the action. Be that as it may, as the application has been argued by both sides on the basis of whether, upon the correct interpretation of the provisions of the Debtors Relief(Temporary Provisions) Law, 1979, the relief granted thereby to stricken debtors goes as far as suspending the right of action itself or not, we propose to examine the material provisions of the statute in order to decide the point in the form raised by Mr. Arestis.

The relief granted to stricken debtors is set out in section 3 of the Law which as amended by Law 78 of 1980 reads as follows: -

"3(1) Notwithstanding the provisions of any other Law and subject to the provisions of section 4, during the abnormal situation and in any case. during the period beginning as from the 15th August, 1974, and ending on the 31st December, 1982, the right of every creditor to recover a debt due by a displaced or stricken debtor is [*308] suspended and all forced sales pending or fixed on the date of the coming into operation of this Law shall be stayed if they relate to -

"(a) immovable or movable property situate within a stricken area:

"(b) immovable or movable property not situate within a stricken area but subject to sale in satisfaction of a debt resulting from the sale, mortgage, pledge or other encumbrance of other property situate within a.stricken area.

(2) The stay under this section shall suspend the period during which any writ of sale, receiving order or winding up order in relation thereto is in force".

The words used in subsection (1) hereinabove set out are clear enough and unambiguous. Giving, to the words used therein their literal meaning, the extent of the relief. granted thereby is brightly focussed and its perimeter is well defined. It is plain enough toils that the relief provided for is twofold. First, the right of, every creditor to recover a debt due by a displaced or stricken debtor is suspended, and secondly, all forced sales pending or fixed on the date of the coming into operation of the Law are stayed in either of the circumstances provided for in paragraphs (a) or (b) of section 3(l) of the Law. The two legs of the relief are completely independent and distinct. We are here concerned[*309]only with the first leg thereof and we shall, therefore, overpass the second.

We have considered the arguments of both learned counsel and we came to the conclusion that the effect of the words "the right of every creditor to recover a debt due “by a stricken debtor is suspended" is to suspend the right of action altogether of the creditor against the stricken debtor. If the right of the creditor to recover the debt is suspended, then the corresponding obligation of the debtor to pay the debt is also suspended. In such circumstances where both the creditor's right to recover the debt and the debtor's corresponding obligation to pay the debt having been suspended by operation of law for a fixed period of time, we may say with certainty that, before the expiry of the period of suspension, the creditor's cause of action altogether is likewise suspended and cannot be relied upon.

That this is the object of the legislature is made even more clear from the fact that in section 6 of the Law it is provided that the period during, which "the right of action" is suspended under the provisions, of this Law shall not be taken into account in computing the period of limitation of a right of action.

It follows that, if the applicants had been declared stricken debtors before the present action was filed against them, they could have successfully pleaded in their defence that the action is premature and that in any case for the period beginning the 15th August,1974, and ending on the [*310]31st December, 1982, no interest whatsoever may be charged, debited or collected on the amount of the capital debt. Their application No. 155/80 having not as yet been decided by the proper court, the applicants can do nothing but wait the Court’s decision thereon which shall so decisively affect the outcome of the present action.

The only point raised by the learned counsel for the respondents as an obstacle to the granting of the order applied for, having been decided against them, we hereby, in the exercise of our discretion, do make an order staying all further proceedings in this action against defendants 1, and 3 pending the determination by the Court of the application No. 155/80 filed by the applicants under the provisions of Law 24 of 1979.

In view of all the circumstances we do not make any order as to the costs of this application.

Order accordingly.