clr/1966/1966_1_56.pdf

(1), 18(b), 100 and from stub dut\ because the t>aarantot is the wife of the debtor On the comrar\, fiduciary rela­ tions existing between husband and wife, it behoves a creditor ot banket to he mow as qiiauintot a wife'foi Hank am Conn <u t known owing to the \0\—No strut and carejul duai tin tee - Credit at ι ount act ount -Opined m fti\our as ourdruft under the guarantee of Ins wife -hxlension under the 'guarantee of tin guarantee when accepting the husband's debt < om monly of a wife - In the instant wen· held to hi unahd meuhant of indtt facilities taw the said under sections 100 and 101 of Cup 149, (siipi.i),/><'i£wsc the relevant letter of guarantee was framed in a wax amotintiig a material of piobabdtlies into tt to misrepresentation pari of the transaction the appellant-wife And the banker ha\ing silence on the same mateiiat of the signing aheacly indebted to amount exceeding the future by the letter of the would so framed circumstance guarantee the credit limit in not ha\e entered the said letter kept wr that at the time husband-debtor the bank Respondent) oj guarantee toncerning without which, on the balance in a was considerable sought to bt granted question. T h i s is an appeal f r o m the j u d g m e n t o f the D i s l n c l C o u r t o l Famagusta whereby the appellant (defendant N o a d j u d g e d , as g u a r a n l o i the to hci principal debtor, lo respondent) the sum o f 2) was husband (defendant N o 1), pay to the p l a m l i f l li.ink (now i I S , 0 0 0 plus interest t h e i c o n at 8 % per a n n u m f r o m the 6 t h payment The facts October, 1964, to o f the case may be follows . M> (he date of summarized as The husband, the principal judgment debtor, who is a merchant, signed on the 12lh December, 1961, a contract with the respondent Bank with a view to opening a credit current account (more commonly known as overdraft account) up to the amount of £5,000, such credit account to remain open to the 12th December,

1. The appellant wife signed on the same day the said contract as guarantor The contract and the guarantee are set out fully in the judgment of the Court (mlra) The account opened was entered in the books of the Bank as overdratt No 118 and started to operate on the 4th January,
2. Ihe account was fluctuating and b> the end ol August, 1962, it showed a debit balance of £17,563 There being no subsiantial payments to the said overdraft account, the respondent Bank asked for supplementary security Irom the debtoi The Bank dratted a letter to be signed bj the principal debtor and a form of guarantee to be signed by the guarantor, the appellant wife, both of which weic signed, respectively, on the 31st August,
3. They read as lollows 'Famagusta, 3lst August 1962 The Manager, The Chartered Famagusta Bank. Dear sii, OVERDRAFT ACCOUNT No. 118 With relerence to the above Overdraft Account No 1 lb on which you have granted to me a Limit of £5,000 by virtue ol contract dated 12th December, 1961, 1 shall be obliged if you will kindly allow me at your discretion temporarily to draw upon my said account until the 31st January, 1963, UP TO A maximum of £18,000 (say Eighteen thousand pounds) that is to say an excess of £13,000 over and above the original agreed Limit of £5,
4. I undertake to repay you any debit balance outstanding on the said account upon your first demand Yours faithfully, (Sgd) N, Nicolaides I, the undersigned who jointly and severally guaranteed the obligations of Mr. Ntinos A. Nicolaides Famagusta, 57 © 1965 Dec. 21 1966 Feb. 24 IANTHI A. NICOLAIDES v. CHARTERED BANK OF FAMAGUSTA 1 9 6 5 under j ^ m a x i m u m o f £5,000 hereby personally 24 t c h IANTHI A Νκ oiAiurs Γ. ( HARiiRi» BANK contract dated I2ih D e c e m b e r
5. UP j o i n t l y and ΓΟ A severally extend my guarantee U P T O A m a x i m u m o f (.18.000 (Say Eighteen t o cover thousand pounds) temporary excels drawings which you agreed at y o u r discretion to a l l o w M r . Nlinos A. Nicolaides. Famagusta, in accordance with his Jibovc mentioned request. Ol FAMAMJSrA , „ . , , I f u r t h e r agree to repay you upon y o u i lirst demand debit Λ balance o u t s t a n d i n g on the said any account UP TO' m a x i m u m o f f. 18,000 {Sty!) lant/u V A f t e r Ihe date ol e*eculion ol the last Nuolunles desctibed supple­ mentary security, the debto: in Scpteinbei,
6. made sonic deposits into his aloiesaid overdraft I herc a l l e r , however, his account N o debit balance went up 118 giaduall) until the 25th l a n u a i y , l'>
7. when i i leached the l i g u i e o\~ £37.496 O n that day f u r l h c i secunty was demanded by the respondent Bank and as a result again a letter o f request to extend the credit of lo the l i g u i c o f £20,000 plus a t o r n i guaranlce were prepared bv the Bank, both ol which were d u l y signed by the husband and wile respectively on the 25lh January, 1963 Ί hesc documents read as follows - ' Fa maousta, ? q l h Januai v. I he Managci. The Chartered 1963 Bank. Famagusta Deal Sir. OVFKDRAM ACCOUNT No IIS W i t h reference to the above mentioned O v e r d i a l t Λ/C No I I S o n w h i c h you have g i a n l e d to me a limit ol £ ,\(KK) b\ virtue ol contract dated I 2 l h December, 1961, I shall be obliged i f y o u will k i n d l y a l l o w me at y o u r discietion tempo­ r a r i l y to d r a w u p o n my said 1963, IJp T O a account until maximum thousand pounds) that is to say the 31st July ol £20,000 ( S a y · Twenty an excess o f t l 5.000 over and above the o r i g i n a l agreed l i m i t o f £5.000 I undertake lo icpay you any debit balance outstanding o n the said account u p o n y o u r first demand Yours failhlulh, (Sgd) N. 58 0 Nuolaides I the the undersigned w h o j o i n t l y and obligations o f under Mr. Nlinos contract dated 12th severally guaranteed Nicolaides, Famagusta. December, 1961, UP T O a 1965 Dec. 21 1966 Feb. 24 m a x i m u m o f £5,000.—hereby personally j o i n t l y and severally extend my guarantee U P T O a Twenty thousand IANTHI A. m a x i m u m o f £20,000 (Say : pounds) to cover temporary excess NICOLA ιηKS r. drawings which you agreed at y o u r discretion t e m p o r a r i l y CHARTERED BANK to allow OF FAMAGUSTA him in accordance w i t h his above mentioned request. 1 f u r t h e r agree to repay y o u u p o n y o u r f i r s t d e m a n d any balance o u t s t a n d i n g on the said account U P T O a m a x i m u m of £20,
8. (Sgd) lanthi The responsible bank's Manager Nt. Nicolaides." d i d not inverview meet the appellant-wife in connection w i t h the or guarantees thai she signed. Both supplementary agreements were d r a w n up and typed by the agreements were respondent Bank ; apparently these signed later, not in the presence o f any bank's representative. A n o t h e r relevant fact w h i c h f r o m the evidence is that the emerged statement o f accounts on the said overdraft account N o . 1 IS was sent twice yearly only lo to the balance o f the said the principal debtor, the husband, and not guarantor, that being the bank's practice. O n the 4 t h A u g u s t , 1964, ihe debit account N o . I I S was £29,
9. A demand f o r payment made on that day having proved o f no avai'.. the Bank instituted the proceedings in the District C o u r t o f Famagusta which resulted wife, in the judgment appealed f r o m by the defendant N o . 2, the guarantor. It was argued on behalf o f the ' appellant that the said supplementary guarantees sued o n are v o i d ab initio, alia, a because o f misrepresentation and material fact, that is, the fact that o n inter non-disclosure the dates of o f the execution o f the guarantees the debtor-husband was already indebted over and above the f u l l a m o u n t guaranteed. Sections 100 and 101 o f the Contract Law, Cap. 149 provide : "
10. A n y guarantee which has been obtained by means o f misrepresentation made by the creditor, o r with his knowledge and assent, concerning a material part o f the transaction, is invalid ". 59 " Ι Ο Ι . A n y guarantee winch the c r e d i t o r has obtained by U v 21 !^66 l~cb 24 ΙΑΜΜΙ means o f keeping sdence as to material circumstance is invalid. O n the Λ N'< οι Aiurs r. other hand, section 18 o f the statute viz the C o n t r a c t Law, C a p . 149 piovides " IS CHAR Π H I D BANK Ol F\MA<.U*iTA Misrepicsciitalion ' (a) includes— ( b ) .iiiy breach o f d u t y w h i c h , w i t h o u t an intent to deceive, committing g.uns it, or any an advantage l o οι ο c l a i m i n g ihe under h i m person by mis­ leading another to his piciudicc or l o the preiudice o f any one c l a i m i n g under hira Section 2 of the said statute Cap ' 2

(1)I his Law 149 provides shall he niterpieted in accordance with the pi U K ιpies o f le^al ml· r p r e l a l i o n o b t a i n i n g in ami expieSMons used in Ί shall be Tngland presumed so lar as is consistent with then context, and except as ma> be o t h e i wise cipiessl· provided to be used w i t h the meaning a t t a c h i n g to ilicm in I ngh^h law and shall be construed in accordance therewith I he Supreme C o m ι Held, ( I ) <o n t i j c l the in ιMowing the appeal a p p l i c a t i o n ol section 100 and 101 o l the l a w . Cap M9 (supra) ο ι either ol them to the facts of the case resokes the question in issue

(2)It is obvious h o r n the j u d g m e n t appealed I r o m that the learned trial concealment w i t h i n the meaning ol section 101 (supra) Judges in h o l d i n g thai iheic was no look only i n t o account the tact that ihe overdraft said account N o ! IS of the p r i n c i p a l debtoi was already overdrawn when the said supplementary agicements ul guaiantee were s i g i u d appellant-guarautoi ,im\ i n c h i n g else b\ the Had the case of the appellant icsted on this point alone, the trial Co m i might ha\e been fusiified in not dismissing the action o n this g r o u n d on the a u t h o i i t y of J Hamilton ν J Watson. S l· Κ 1339 p ) H o w e v e r , certain \ i i a l points were apparently left out of consideration u n i t ιact ol ()ne is he g u a i a n l c c as w i l l as accounts undei the original undei the supplemental) letteis ol guarantee were kept in one and the same overdraft account N o also IIS debited (o D i a w t n g s bevond the guarantee l i m i t were this a c t o n ηt AH these documents o f giiai anice wen* p r c p a i c d b\ the lespondent bank 60 Another important point was the way the supplementary letters of guarantee were drafted. Both supplementary guarantees provided for future temporary excess drawings over and above the original guarantee of £5,000 for periods of 5-6 months each respectively. These kind of advances are normally made for business transactions expected to be terminated within the periods stated. Such short term credits are usually open to merchants—as the, husband,, principal debtor in this case—-who export agricultural products or import manufactured goods to this country. Merchants securing such credits are expected to pay off their debts within a reasonable time after such business transactions are over.

(4)From the wording of both •supplementary letters of guarantee (supra) it is clear that temporary excess advances were to be made after the signing of the said letters, in other words, future credit advances were contemplated.

(5)(

1. a)Therefore, the said supplementary agreements for extension of credit were framed in such a way as to mislead the appellant-guarantor on the fact that her husband, ihe principal debtor, was, at the lime of the signing of the aforesaid letters of guarantee, already indebted to ihe respondent-bank in a considerable amount exceeding the future credit limit sought to be granted by the letters in question. (
2. b)This amounts, in our opinion, t> a misrepresentation within the meaning of section IK (
3. b)i f the Contract Law. Cap. MlJ (supra) and we lake it lo be the duly of the creditor not lo mislead any prospective guarantor on a material circumstance. The very fact that the husband-debtor was indebted in the sum of £38,000 at the time the second guarantee was obtained from the appellant-wife (supra) was indeed ;t material circumstance for the guarantor. (
4. c)There is no evidence whatsoever that the appellant wife .knew of the fact thai her husband was so heavily indebted as aforesaid at ihe time of the execution of (he said guarantees and the Court cannot act by guessing on the mailer.
5. fd)On lite oilier hand to the question—as suggested by Vaughan Williams, L. .1. in llolloway's case (infra), namely " Would the surety have entered into this contract vf suretyship if the non-disclosed fact had been disclosed lo hiITS ", we answer in the negative. 61 1965 Dec. 21 1966 Feb. 24 IANTHI A. NICOCAIIJIS V. CHARTERED BANK OF FAMAGUSTA

(6)Ι ι follows lhat the appellant*is entitled t o a relief either under section 100 o r seciion 101 o r b o t h o f the Contract L a w , C a p . 149 (supra) in tin's way : W e have found thai the way the guarantees under consi­ d e r a t i o n were framed amounted l o misrepresentation a n d . w i t h o u t i t , o n the balance o f probabilities, the appellant- wife w o u l d not have cnteied i n t o such guarantee and that Ihe misrepresentation concerns undoubtedly material p a r i o f Ihe transaction in question. Therefore the guarantees in question are invalid under ieclion 100 [supra). O n the other h a n d , this creditor (the respondent-Bank by the f o r m o f guarantee as material d r a f t e d , having misled the circumstance, excessive debit il was halances guarantor in his d u l y t o 'standing in disclose ihe said a the overdraft credit account N o . I 18 o f the husband, the principal debtor. Having failed to d o so. the guarantee is equally invalid under seciion 101 o f the C o n t r a d L a w . C a p . 149 \supra).

(7)I h e fact that the guarantor in this case is the wife o f the p r i n c i p a l debtor docs not delract a n y t h i n g f r o m thed u l y o f a creditor not l o mislead Ihe guarantor on any material circumstance touching the solvency or financial standing o f her husband, the debtor. O n ihe c o n t r a r y o w i n g l o the f i d u c i a r y relations existing between a husband a m i wife it behoves α creditor o r banker t o be more strict a n d careful when accepting as guarantor a wife f o r the husband's sex referred Appeal allowed. costs here and debt. No order as to below. to : ,/. Hamilton v. J. Watson. 8 l-.R. 1339; Chaplin and Co. Ltd ν lirammad |I908| 1 K.H. 233.ai p.237 per Vaughan W i l l i a m s . C.J. I'iihok v. His/top. 27 i:.K. 433 ; L'dwurd Railton Another. London v. I'homas Cutcld and Robert Leonard and 8 L.R. 'ί'λΐ ; (ieneral Omnibus Company Ltd v. Ihdlowav, [1912] 2 Κ 11. 72 Lee and Another v. Jones

(1864)144 L.R. 194 ; Jean Mackenzie P.C ; v. Royal Hank of Canada [1934] A . C . 468, Appeal. Appeal against the judgment o f the District Court o f Fama­ gusta (Rvangelidcs P.D.C & Kourris D.J.) dated the 31st July, I96'J (Action N o . 1681/64) whereby the defendant was adjudged lo pay as guarantor lo her husband, the principal debtor, the sum o f £15,000. 1965 Dec. 21 1966 Feb. 24 IANIHI Λ. Nicor Aints Γ. CHARTERED B A N K S. Paνtides with Chr. P. Μ itsides and A. Antoniades, the appellant. M. Monianios, for for the respondent. Cur. adv. vttlt. The facts sufficiently appear in Ihe judgment o f the Court delivered by : Z F K I A , P. : This is an appeal from the judgment of the District Court o f Famagusta whereby the defendant (appel­ lant) was adjudged to pay as guarantor to her husband, the principal judgment debtor, the sum o f £15.000 with interest thereon at 8 % per annum f r o m (he 6th October, 1964, to the date of payment The facts of Ihe case could be summarized as f o l l o w s : The husband, the judgment principal debtor (defendant No. I in the action), is a merchant engaged in buying, among other ihings, agricultural produce such as potatoes, carrots. and exporting them. On the 12th December, 1961, he signed a contract with Ihe respondent bank with a view to opening a credit current account (more commonly known as over­ draft account) up to Ihe amount o f £5,000. The credit would have remained open up to the 12th December, 1963. The appellant signed ihe same day the said contract as guarantor. The terms and conditions embodied in the contract and the guarantee given by the wife appear in the document exhibited as exhibit N o . 1 which we quote hereunder : " C O N T R A C T O F A G R E E M E N T N o . 118 The undersigned, T H E C H A R T E R E D B A N K , o f the one part, hereinafter called " T H E B A N K " and Ntinos A. Nicolaides, P.O. Box N o . 143, Famagusta, o f the other part, hereinafter called " T H E D E B T O R " , which w i l l have in appropriate cases also a plural meaning, .have agreed as follows : 63 OF FAMAGUSTA 1%5 Dee 21 The li.ink opens loi lecounl ol ihe Debtoi a G i c d i t in c i u i c n l account, up to ihe amount ol I I V I ' I I I O U S A N D P O U N D S O N I Υ (Pounds Sterling Π.000) ΚΓΙΜ |ΛΝ<ΗΙ A Ihis Curienl Account shall be debited, at the end o f June and at the end o f December, of each and evety year N [ ( Ol AIDFS 1 ( Μ \t< i i .<i

1. i)H A N K
2. a)W i l l i inleicsl a! ihe tale of 8 % pci cent, per annum, (as f r o m the d a y r o r p t yment tor withdrawals, and as I r o m Ihe lollowmg w o r k i n g day for deposits or lodge­ ments) In calculating lite Intcicst, the numbei of days of ν >ch month shall be taken as the case mav be (calcnd.n months), but [U: I manual yeai shall be computed (»l I \M\(,I ΜΛ ^ki.i f> at the I i\ed DIVIS.M ol 300 davs
3. b)W i l l i ι oinnn sum ι' Ihe ιale ol - pci senι hall \ t a i l y c a l e . i l i u d upon the in iMinum Debit Balance v\ Inch ihe l i i i i e i i l accouiil will show d u i m g the itlevant halt \c.n lv pei iod I lie Bank has the inilil l»> .illei the lale nj Inleicsl, at a m linn* h\ Μinpi \ tni*>i mini» in vvi i l i u g tin debtoi Iο ill it c U i U } 1 lie < icdil will lein.'in open up l o am 1 including l h ^ P i n ' D c e c i p l v i . V^J, O\ until MMh I i k i d »te «n d.iti \ is nut> be n v i i u •11Ν igrecd I'pon I K I W ^ C I I ti•* paitie* hei to and cn.foised o\\ the ICAVIM.* I K col m the l o n n o| ,i u i i e w a ! ol t i n , agieeinent, but the i i ink has t i t . ιiL'hl t ι e nice I a inv lime ..nd ρ'ίοι to ιis d· teiiruι Ιι< ·) Hit* picseiii ( κ lit I n simply m l o ming the i ) l IWO!< lo that J l . c i u l n n inv sum due will Κ come ι ι αΆ at c i n e I 'se It iti' 'vill ilwa s Ή u i u l l c d h> debit ll.c pust.nl ί IM e It AetOJllI V, I'll Π1\ "11111 O V . d .lllti | ι ' \ ί Ι Λ ll\ - V I M ' i o i ' \ l u l i K i it "• diu lv In.η as D I B I O K , οι i» 1 M ; U l ( ) ' s , οι I i M i O K S I R ol a Bill o! I alu'-me ·! n ' t lit I! ol 1\>n in· '· IN not homnu ci! ,il ιη., in. Uν, •κ! αί if VMIII a.tv ' Ί ΐ . Ι imtuin' owed and >\\ abl In 1 h ι Λ ιί 1 (ιί< lo lla it ι il ami αι ci iimj· lion- ai'j c l i r e \el i!spe\ei 1 \- M ' H I I as llie s.i.d ( icon is closed foi m,' U ison u ! ι 1 , vt ι ihe A I M - ' M I I -h ill llieieupon Η set'let and ι I K ! ) | Β I < tl< miiM n>> l o i t h u i l h m\ mi.i ml due lo tti- I ' i i k pin-. Mitticst iml all other chuigcs it tnc Bank, (,1 1965 otherwise the interest shall be calculated at the rale of nine per cent (9%) per annum, as from that day and the Bank shall have the right to demand through legal proccedings Ihe payment of Ihe Dehl, plus legal and ;ιιιν othei expenses whalsocvci, up lo full and final ν ll le­ ^'~ F c h ?A I A M III Λ Ν κ i n A i m •« nient V. Any notice shall be coiiMdeicd as having been foimully served on the Debtor, if it is sent lo hi.s last known address by prepaid post or lo the address mentioned in this agreement. The Debtor agrees lo all the terms and conditions of" this Agreement. MADE IN L'amagusta Ihe 12th day of Decembei, 196!. Phe Debtor (Sgd) Λ'. Nicolaides Wheieas the Credit has been opened at my icqucsi, I personally jointly and severally guarantee the fulfil­ ment of all the terms and conditions by llic said Debtor Mr. Nlinos A. Nicolaides, Lamagusla, up to final sellkmcnl, the Bank being entitled to grant extensions to Ihe Debtor without any previous advice to me and ιο accept also payments on account, and I undei lake to pay forthwith any sum due as soon as the said ( icdil shall be closed for any cause whatsoever without any legal action or any objection on our part. In the event of the said Current account exceeding the above mentioned limit during the duration ol" this Credit, our obligation, as Guarantors shall continue being valid and in force but for an amount not exceeding the limit of the Credit that is lo say £5,000, plus interest, and/or Commissions and/or charges and irrespective of whether such Interest and Commission are as origi­ nally agreed upon or have been amended as provided for in the present Agreement. I moreover agree that my Guarantee shall be a con­ tinuing Guarantee, and with a view of giving full effect to our Guarantee, I by the present declare, that I waive any privileges or rights which 1 may have as Guarantor and I authorise you lo lake if necessary legal steps agaist me just as if I were your own original DEBTOR. 65 ( κ AK ΓΕκι D B A N K (i F A M X G I S IX Zckia. P. 1965 Dec21 hcti 4 I fuilher agree thai this m>guarantee is nott o be levoked by any change in theconstitution o f the f i r m unless you receive from me a written advice o f the termination o fmy guaianlee after any such change I A M ιn Λ NiroiMiMs (Sgd) latifhi ι Ν Nictttuidou Guarantor CHARUKII) BANK OF KAM\(.UST\ Witness /ckia Ρ Ihe account opened v\,is tiHcicd in the books ol the Bank as O v e i d i u f l No 118 Ihis account stalled to opeiale o n the 4lh dav o l Januarv, 196? "'he account was fluctuating and on the6th June, 1%?, showed a credit balance o f £38,000 It d i o p p e d , howevei, in July and August o f the same yeai and by theend o f August iheie was a bebil balance of £17,563 I h e i e being no stibstanli.il payments to the said account the respondent bank asked l o i supplenienlarv sccuiit) f r o m Ihe debtoi I h e Bank dialled a Icltei tobe signed byihe prin­ cipal tlebloi anda l o i m ol guaianlee lo be signed bythe guai.intoi, theappellant, both ol which wetc signed, lespeetivelv on ihe i l s i August, 196J Ibey lead as follows ' 1 amtgusla, 'ilst August, 1%2 I he Mauagei. I he <li.uteied Baiii I amagusia Deat stI, OVhRDRAI I A C i O U N I N o 118 W i l l i icferencc l o the above Oveidiait Account N o 118 on which you have giantcd l o me a limit ol £5,000 by v i i l u e o fconli.icl d i l u l 12th Deccmbci, 1961,I shall be obliged il vou will ki ullv allow me at your disuetion I r m p o i a i i K lo di.iw u\)oc\mysaid account until the 31si Januaiv, 196i U P l<> A maximum ol £18000 (Say 1 ιghlee η thousand pounds) thai ts to say an excess o f ΠΉ,ΟΟΟ ovei and a b o w theoneinal ameed I mill ol fS 000 I undeil.ike t o iepa\ you an\debit balance outstan­ ding on the sa'd account upon your lust deir ind Youis fjllllllllly, (Sgd) Ν \'itnUmles ..f, 1 the undersigned who jointly and severally guaran­ teed the obligations o f M r . Ntinos A. Nicolaides Fama­ gusta, under contract dated 12th December, 1961, UP T O A maximum o f £5,000 hereby personally j o i n t l y and severally extend my guarantee UP T O A maximum of £18.000 (Say : Eighteen thousand pounds) to cover temporary excess drawings which you agreed at your discretion lo allow M r . Ntinos A. Nicolaides, Fama­ gusta, in accordance with his above mentioned request. I furlher agree lo repay you upon your first demand any debit balance outstanding on the said account UP T O A maximum ol" £18,000 (Sgd) lanth'i N. Nicolaides." After the dale o f execution of the last described supplemen­ tary security in September, 1962, the debtor made two de­ posits amounting to £6,500 with which his Account No. 118 was credited. Thereafter, however, his debit balance went up gra­ dually until the 25th January, 1963, when it reached the figure o f £37,496. On lhat day further security was demanded by the respondent-bank and as a result again a letter o f request to extend credit to the figure o f £20,000 plus a form o f gua­ rantee were prepared by the respondent-bank, both of which were duly signed by the husband and wife respectively. This was produced as exhibit No. 3, which reads as follows : " Famagusta, 25th January, The Manager, The Chartered Famagusta. 1963. Bank, Dear sir, O V E R D R A F T A C C O U N T No. 118 W i t h reference to the above mentioned Overdraft A/C N o . 118 on which you have granted to me a limit o f £5,000 by virtue o f contract dated 12th December, 1961, I shall be obliged i f you will kindly allow me at your dis­ cretion temporarily l o draw, upon my said account until the 31st July, 1963, UP T O a maximum o f £20,000 (Say: Twenty thousand pounds) that is to say an excess o f £15,000 over and above the original agreed limit o f 5,000. I undertake t o repay you any debit balance outstanding on the said account upon your first demand. Yours faithfully, (Sgd) N. Nicolaides. 67 1965 Dec. 21 1966 Feb. 4 IANTHI A. NICOLAIDES ι. CHARTERLD BASK or FAMAGUSTA Zekia. P. 1965 °^ |7 b 4 Ι Λ Μ 111 Λ . N i l Of MD1.S Γ. ( V V K I I K I I ) lUsk «.ι I-.\M.\<;IIS!.\ -, .. j , 1 the undersigned who j o i n t l y and severally guaraniced the obligations of M r . Ntinos Nicolaides, Famagusta, under contract dated 12th December, 1961, UP T O a maximum of £5,000 hereby personally jointly and severally extend my guarantee UP T O a maximum of £20,000 (Say : Twenty thousand pounds to cover temporary excess drawings which you agreed at your discretion temporarily to allow him in accordance with his above mentioned request. I further agree to repay you upon your first demand any balance outstanding on the said account UP T O a ma­ ximum of £20,000. (Sgd) lanlhi Nt. Nicolaides." On the 31st July, 1963, the debit balance reached ihe figure o f £61,744 ; by the 31.12.1963 i l dropped l o £28,808. From Ihe evidence of ihe manager o f the bank il appears that the reduction in the debit balance was brought about by transferring on 21.9.1963 from Ihe cash guarantee o f the debtor held by the bank lo the overdraft account No.118 the sum o f £10,086, and also by crediting this account with the sum of £25,000 which amount was raided by a mortgage made by the debtor in favour of the respondent bank effected on the 10th October, 196*3. On the 4th August, 1%4, ihe debit balance Account N o . 118 was £29,973. On thai day the following letter was sent ιο the debtor and a copy of it lo the guarantor (exhibit 4) : " 4ih August, 1964. Mr.' Ntinos Arseηion Nicolaides, 5, Olvinbus Street, Famagusta. Dear Sir, Y O U R O V E R D R A F T A C C O U N T N o . 118. We wish to remind you that both your contract and last annex in connection with ihe above Overdraft account, expired on 12.12.1963 and 31.7.1963 respecti­ vely and shall be glad il you will kindly see for repay­ ment of the balance due to us i.e. £29,973.679 mils plus interest al 8 % as from 25.6.1964 without any delay. for Yours faithfully, THE CHARTERED Accountant <-S BANK. Man.igei 1965 Copy; to guarantor : Occ. 2\ Mrs. lanlhi N l . Nicolaides, 11, Kartessiou Sheet, Famagusta." 1966 Lcb. 4 IAMHI On the 3rd October, 1964, the debtor and the guarantor were informed o f the legal proceedings to be taken against ihem (exhibit 5) : " Famagusta, 3rd October, 1964. M r . Ntinos Arscniou Nicolaides, P. O. Box 143, Famagusta. Dear Sir, YOUROVERDRAFT ACCOUNTNo.118 W i l l i reference to our teller ol" the 4th August last, we regret that in view o f your failure to make repayment arrangements in respect of your above Overdraft account we have no option but t o place the matter in ihe hands o f our lawyers. Yours faithfully, for T H E C H A R T E R E D BANK (Sgd) Accountant Manager Copy l o Guarantor : Mrs. lanthi N t . Nicolaides, Π , Karlcssiou Street, Famagusta. " t h e trial Court found as a fact that on ihe 25th January, 1963, the bank held on behalf o f the principal debtor bills of exchange o f the face value o f £12,428 and that in A p r i l , 1963, the bills lodged with the bank were o f the face value o f £21,673. These bills were held as collateral security under an agreement between the creditor-bank and the debtor which reads as follows (exhibit 6) : " Name o f Client: Mr. Ntinos Ars. Nicolaides, TO T H E C H A R T E R E D Famagusta. Famagusta. BANK, In consideration o f your allowing me/us facilities i n Current Account, or Overdraft Account f r o m time to 69 -\. NlCOI.AIDhS V. (HARiKKro BANK or Ι-"ΛΜΛ<;Ι Ν Ι Α Z e k i a . P. |L,lVl tune and 01 in ikim; advances 01 lacilities lit nie/us in C any g f c l l manner whalevei, 1/We hereby acknowledge and contirm that you have a valid and irrevocable hen on 4 all clean and docunienlaiy bills which I/We have entruΙΛΜΙΙΙ \ Ν κ <» \ i m s I sled 01 may hcrcallei entiusl lo you loi collection I/We inevocably aulhoiise you upon collection ol any such (IUIIIIHIDBWK Bills to utilise the piocccds at yout entire discretion to­ ot ( A M « I ' S I \ waids the paymenl 01 part payment of any sums now /Λ.ι I' owing 01 which m.t\ hcuaflei be owing to SOU bv me/us 01 to hold such pn ceeds as sicutits for any olhet lia­ bilities direct 01 coiUingJiil I/We may ha\e at am time lowaids voul Bank (Sud) Ntinos Pate At ihe \iseiiiou V/ιidanlts 17 1 1963 " ictjuest ol the cLbtoi the said bills on November, 19G3, weie iciuined unpaid lo him die 21st It appeals that the lespondent hank did not pioceed to collect these hills at lite icquesl ol the dchloi and thereloie u cannot be said llicv weie relumed to lh.' debtor because the\ were uncolU cl ible Ihe appellant wile on lite olhet h i n d , to a limited eilenl htiai'ic invoked in the hu MUSS ol ihe husband She was conslil'ii.d as h's .nloiney bv M.iidi L povvci ol allotnc\ dated 3rd lCl<"2 , h\ viitue ul this document she signed some chc pics on behall ol hei husbind the iiaUue ol sshich v.a** Hoi disclosed She also iie-'ohaled ceilain shippinu documents ι elatum to polaloe s shipped loi I nndun | hese weκ docu- ipcnl.ny hills lepiesentinii ι 'ol.tt amount ol £13,541 which bills u u c discounted by lite lespondent bank 11 is also in CSI.UIHC th.it in August, I 9 6 \ Ihc husband and wile foimcd α piivale limited eon ιpain uadi r the sivie Νlinos Aisciiiou Nkoi.udes I Id each suh^ciibed one pound loi one shiic I .Met in l.iiiu.uy, 1963, thev, togclhci with med the Pio'ic.i 2h sh.iies and tile lain· two otlnis l o i - l i d " in which the husband had appellant-wile Ι,'ϊΟΟ shaus Nothing appeals on ihc iccoid as lo the business aclivuijs ol ihcse two companies Anoihci tclevanl Liet win h eniciged l i o m the evid..nee* ol the. hank managci is that ihe slatement o\ ac^umis on the Oveidialt Account No 1,X - M S sent twice yeaily onl\ to Ihe piincipal debloi, the husband and not lo the «maianloi, this being the hank's piaclicc m 196:· The responsible bank's manager did not interview or meet D e c 2! the appellant in connection with the guarantees that she 1966 signed. Both supplementary agreements were drawn up and pet) 4 typed at the respondent-bank ; apparently, these agree­ I A M H I -, ments were signed later, not in ihc presence of any banks NlCOJ.AIDtS representative. On the facts as summarized above il was submitted on be- CHVRHRLH(Us· half of the appellant that the supplementary guarantees arc '" A ^ U U S 1 '" void ah initio because of : Zekia. Κ Λ A. Misiepresentation and nondisclosure of a material cir­ cumstance, thai is,-the fact that on the dates of the execution of ihc guarantees the debtor was already indebted over and above the full amount guaranteed. B. There was no consideration to support either of the supplementary guarantees. < C. In any case the guarantor was discharged because ihc creditor bank has parted with collateral securities deposited with the said bank by the debtor without the consent of the guarantor. Let us deal first with ground A of the appeal. Sections 100 and 101 of ihe Contract Law Cap. 149 are material for the determination of ground A. Sections 100 and 101 read as follows : 100. " Any guarantee which has been obtained by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a material pari of the transaction, is invalid ". 101. " Any guarantee which the creditor has obtained by means of keeping silence as to material circumstance is invalid ". The application of these sections ΌΤ either of them to the facts of the case resolves the answers to be given,to the first submission. Section 2

(1)of the Contract Law enacts that the said Law should be interpreted in accordance with the principles of legal interpretation obtaining in England unless of course it is otherwise expressly provided. The trial Court has taken the following view of the law and its application to the facts of the case on ground A : " We. do not agree with this submission. Our section is identical with section .143 of the Indian Contract Law and the comments of the authors of the books 'Indian 71 1965 l) C ] %6 ? l 4 F c h I \NI Ml V Nil ο ι \ini s I ( i.Minitin BANK • κ ι \MA(,UM,\ ρ /(,k|i Contract and Specific Relief Acts, etc ,' by Pollock and M u l l a , 6th Edition, pp 502-505, do not support the submission o f M r Pavlides In-their view keeping silence means intentional concealment as distinguished from mere non-disclosure In this case thcic is nothing in the evidence that iheie was a wilful concealment It is iruc that there is no evidence that the bank disclosed t o defendant 2 the fact thai the account o f defendant 1 was already overdrawn, but on the other hand, there is no­ thing in Ihc evidence lo show that the non-disclosure was made on purpose so as l o mislead defendant 2 and no evidence whatsoever thai the guarantee was obtained because o f such non-disclosure A n d we might also cite f r o m ρ S03 second paragraph, where il is stated • 'But il is not cveiy d i i d o s u i e that a surely can rcquue Whereacusloniei's ciedit with his bankers is guaranteed the fact lhat a new α edit is to be applied to paying off an existing debt o f ihc customer lo the Bank, is nol such a.s need be disclosed For this is nothing out o f oidinary couise o f business but rather to be expected" We f i n d lhat Iheie was no wilful concealment Ihcicfoic, in our view, llns argument f a i l s " =, * * -- L and, It is obvious f i o m vvluu we have quoted lhal the leai ned Judges, in consiueiing whether there was a concealment w i i h m the meaning o f secito.i 101 of the Conttact Law they took only into account the lact that the Overdiaft Account N o 118 o f the ptincipal debior was already overdrawn when ihe supplementary agiecmenls o f guarantee were signed by the appellant-guaranioi and nothing else Had the case of the appellant rested on this point alone the trial ( ourt might have been justified in· dismi;sing the action on this ground because in d o i n g so it might very well rely on ./ Hamilton \ / Μ atsoit (English Repoits) volume 8, 1339 ( e i l a m vital points were apparently however left out ol consideration One is lhat Ihe accounts unuer the original conliacl o f gualanlcc a well as undei ihe supplementary letters o f guaiantce weie kept in one and Ihe same overdraft account No 118. Drawings icyond the guarantee limit were also debited to this account All these documents o f guarantee were pre­ pared by tli respondent-bank and signed by the debtot and ihc g u n r a i i t o i . Another important point was the way the supplementary letters of guarantee were drafted Both supplementary guarantees 72 provided for future temporary excess drawings over and above the original guarantee of £5,000 for periods of 5-6 months each respectively. These kind of advances are normally made for business transactions expected to be terminated within the periods stated. Such short term credits are usually open to merchants who export agricultural products or import manufactured goods to this country. Merchants securing such credits are expected to pay off their debts within a reasonable lime after such business transactions are over. From the wording of both supplementary letters of guarantee it is clear that temporary excess advances were to be made after the signing of the'letters, in other words, future credit advances were contemplated. The letters of the debtor requesting the respondent-bank for temporary excess advances appearing in both supplementary agreements of guarantee—both of which, as already mentioned, were drafted by the respondent-bank—may easily lead one to assume that the debtor's overdraft account No. 118 reached the limit of £5,000 only, at the time the letters of request were written by ihe debtor and that he wanted over and above this figure further temporary credit facilities of £13,000 by the first and £15,000 by the second letter of request. Both letters were addressed to the respondent-bank seeking increases of credit limits, prepared as described above and headed "Overdraft Account No. 118". The letters referred to the original agreement of opening credit to the husband with a limit of £5,000 account as Overdraft Account No. 118 and request was made to increase the credit limit in the said overdraft account from £5,000 to £18,000 by the husband's first letter and from £5,000 to £20,000 by his second letter for the purpose of future temporary excess drawings. After the figures £18,000 and £20,000 it is stated clearly on both letters that an excess credit of £13,000 and of £15,000 respectively over and above the originally agreed limit of £5,000 was being applied for. Having read carefully these supplementary letters of guarantee we are of the opinion that the ordinary import to be attributed to them is that the debtor having made use of his original credit limit of £5,000 or this amount not being sufficient for him to transact some future business of temporary character he contemplated, he applied for futher future advances specified therein. This amounts to misrepresentation in view of the fact that at the date of the signing of the 73 Dec. 21 1966 Feb.4 IANTHI A. NicOi.Aiurft r. CHARTERED BAN OFFAMAGUSTA Zekia.P. 1965 2I g Feb 4 f| r ^t supplemental)' agreement the dcbtoi was already mdcbled in the sum of £17,000 and at the date of the signing of t n c b e c o r | d supplementaly letter for credit he was indebted in the sum of 38,000 Unless ihe guatantoi who subscnbed ΙΑΜΙΙΙ Λ these letters of request as guaiantor can be said that she knew N i t Ol AIIMS ot the indebtedness of the pnncipal debtor to the extenl m1 ι MARιι-κιι> BANK dicatcd, at ihe time she signed the letters as guarantoi, she ««ι ι vM.ua-ι\ was bound to be misled as lo the actual stale of affairs and as lo the financial position ol her husband The amount in­ / c k M (> volved being almost twice as big compared with the credit limit gianted on the last occasion it was no doubt a very nialenal eucumstatice lbι the guaianlor to be informed ol it. De I he periodical statements of account were only sent to the dehtoi, the husband , it is true she acted as his alloinc) on ceilain occasions when he was abioad She signed cheques MM\ shipping documents on his behalf. Horn this we cannot infer that she was awaie of her husbands debit balances with the bank at the matciial dales By Ihe formation of the two companies mentioned earliet in the judgment we do not know whclhci any kind of business was transacted oi that tf bu­ siness was transacted at all had any connection with ihe oveidiafl account No 118 kept with the respondent-bank It is M^o true, on ihe olhci' hand, lhat the appellant did not give evidence before the Ural Court Ihe Court, however, has to determine the issues raised on the evidence available and, being a civil case, may act on the preponderance of evidence and on balance of piobabihlies I h e fact that the guarantoi is the wile of the pnncipal dcbtoi dues not deliact anything from the duty o! a creditoi not to mislead Ihe guaiantoi on any matenal cncumstancc touching Ihe solvency οι financial standing of hei husband, the dcbloi On the contrary owing lo the fiduciary relations existing between a husband and wife it behoves a creditor or bankei lo be inoie slnct and cateful when accepting as guarantor a wife for a husband's debt In piactice indepen­ dent advice lo a wife who intends to become a guaianlor lo her husl md, as a mallei ol piecaulion, is usually given Many wives nivhl icadiiy sign any document picscnlcd to them by then ι usbands without much enquiring into its nature and scope and also likewise they might act undei the undue influence οι then husbands II might not be allogelhei oul of place il we icier h a e to Chaplin & Co Ltd \. tituiwiutil [1908] 1 K B 233 The facts wcιe 71 " T h e plaintiffs, having agreed to supply goods lo the defendant's husband on credit if his wife would guaran­ tee payment by him o f their price, sent to Ihe husband a form o f guarantee, in order that he might obtain his wife's signature to it, leaving ihe matter entirely l o h i m . The husband obtained his wife's signature to ihe guaran­ tee, without sufficiently explaining to her the nature o f the document, which she did not understand when she signed i l . Goods having been supplied by the plaintiffs lo ihc defendant's husband, the price o f which was not paid, the plaintiffs sued the defendant on the guarantee : " Held, that the action was not maintainable ". A t page 237 Vaughan Williams, L.J., delivering the j u d g ­ ment of the Court of Appeal stated : " In my judgment this appeal should be dismissed. I hose, who, as representing the plaintiffs, prepared and sent lo Ihe defendant's husband the document sued upon, in order that he might procure his wife's signa­ ture lo it, so that the plaintiffs might have security in respect o f the business transactions into which they were about lo enter with him, were, when they d i d so, clearly cognizant o f the fact that the influence o f a husband was being employed to obtain (he signature o f his wife to lhat document. That being so, I am sorry f o r the plain­ tiffs that they t u r n - o u t not lo be in a position to prove thai any proper explanation o f the instrument which she was about to sign was given to the defendant before she signed i l . On the contrary, Ridley J. has come to the conclusion that i n fact no sufficient explanation o f it was given t o her, and lhat she did not understand it. It is unfortunate that Ihe plaintiffs did not take care to see that the defen­ dant had independent advice in the matter. But the result is that the plaintiffs, who, through their agents, were undoubtedly aware that the execution o f this guarantee was to be procured through the guarantor's husband who was living with his wife at the time, and would pre­ sumably have the influence o f a husband over her, fail to show that the document was properly explained to her ". Let us now turn to the legal aspect o f the case in the light o f the facts and inferences as indicated above. 75 1965 Dec. 21 1966 Feb. 4 IANTHI A. NlCOI.AIDFS Γ. CHARTERED BANK or FAMAGUSTA Zekia, P. 1965 In the case of Pidcock v. Bishop (27 L.R.) at p. 433 it was Ι Λ - ' J l ,n' ~ 1,,^ ^ ΙΛΝΙΙΙΙ Λ. NlCdl AIDI-S Γ. CnARiiRnD B A N K or FAMAI.USTA Zckiii, l'. emphasized that the guarantor " should know *' so much as will tell him what is the transaction for which he is making himself answerable and he will be discharged if there is either active misrepresentation of the matter by the creditor or si­ lence amounting in ihc circumstances to misrepresentation. , , . , . , ' " *'• fl("}"'ion , ... v / %· ι •· . · J Watson (supra) it was held that " An obligation to a banker by a third party to be re­ sponsible for a cash credit to be given to one of the ban­ ker's customers, is not avoided by the facl, that, imme­ diately after the execution of the obligation, the cash credit is employed to pay o:T an old debt due to the banker". Lord Campbell in his judgment in the above ease indica­ ted the criterion to be applied when a banker is to disclose material circumstance to a prospective guarantor in the fol­ lowing words : " The criterion whether the disclosure ought lo be made voluntarily, namely, whether there is anything lhat might not naturally be cxpecled to take place between the parties who are concerned in the transaction that is, whether there be a contract between the debtor and the creditor, to the effect that his position shall be different from that which the surety might naturally expect ; and, if so, ihe surely is to see whether that is disclosed to him. But il" there be nothing which might not naturally take place between these parties, then, if the surety would guard against particular perils, he must put the question, and he must gain the information which he requires". In the case of Edward Railton Thomas Qadtl and Robert Leonard and Another, English Reports, Volume 8, p. 993, The House of Lords made Ihc following statement of law : " Mere non-communication of circumstances affecting the situation of the parlies, material for the surety to be acquainted with, and within the knowledge of the person obtaining a surely bond, is undue concealment, though nc>t wilful or intentional, or with a view to any advantage to himself". In the ease of London Cieneral Omnibus Company Ltd. v. Holluway [1912]2 Κ Β., 72 although the subject matter of the appeal was a fidelity guarantee yet distinction between 70 suretyship for the fidelity of a servant and a guarantee in respect of banking account was widely discussed. Vaughan Williams, L.J., with reference to the facts to be disclosed to a guarantor states : 1965 Dec.21 1966 Feb.4 IANTHI A. " I do not think that the importance of the non-disclosed fact in regard to the duties thesubject of the suretyship is necessarily a mere question of law ; it may be a question of fact to be decided by a jury or Judge sitting alone. The question for Judge or jury to put to himself or themselves seems to be: Would Ihe surety have entered into this contract of suretyship if the non-disclosedfact had been disclosed tohim'? ". The same Judge, after quoting Lord Campbell and ihe criterion he suggested in Hamilton's case, continues : " But I take it this is only an example of the general proposition that a creditor must reveal to the surety every fact which under the circumstances the surety would expect not to exist, for the omission to mention that such a fact does exist is an implied representation that it does not. Such a concealment is frequently described as 'undue concealment'". Further down in his judgment he quoted Lord Cottenham in Raitton v. Mathews (supra) staling : In my opinion there may be a case of improper concealment or non-communication of facts which ought to be communicated, which would affect the situation of the parties, even if it was not wilful and intentional, and with a view to the advantage the parties were to receive ". Kennedy, L.J., in hisjudgment referred also to Hamilton's case and made the following remark*^ " The House of Lords (the Lord Chancellor Lord Brougham and Lord Campbell) held that, neither fraud nor misrepresentation being even alleged, the mere nondisclosure to the surety of these dealings constituted no ground of defence to the action brought by the banker against the surety. The difference between this last cited case and the case of Railton v. Mathews is, I think, reasonably clear ". 77 NICOLAIDES r. CHARTERED BANK OF FAMAGUSTA Zekia, P. '"^ 1>X 21 l n 66 Fe'h 4 . |AN f NicoiMms i t IIAHHMD liAHk '" ' AMM.UMA /cki.i I* I uithet down in his iiidgiiienl Lord Justice Kennedy conlinues " O n the other hand, in the case o f the suretyship or guaianlee o f a financial account, Ihe previous pecuniary dealings between tin. cieditor and the pcison whose futuie liability Ihe suiely is invited to secuie constitute extunsic encumslaiiecs They may be material c n on|y cumstanccs such as might affect the judgment of the pcison who is asked to be surety Bui, in the language o f Sir l i e d e n k Pollock (Pimaples o f C o n l i a c l , 8lh I d i lion ρ 5()8), 'ihe c u d i l o r is iu>t bound to volitnieet mformalion as to the nen.'ial credit o f the dcbtoi οι Λη)l l i m g else wlush i\ not narl of tin tiansat lion ilwlf lo which die \mct\slup nlatcs and on this point iheie is no dilleiencc between law and equity' " I h c point in the present case, howcvei, is no the yeneial cicdit t>l the dcbtoi but vvh.it is embodied in t i e iccilal of Ihe document forming the guaianlee, an IIIIMIISIL mailer to be consideied In Lee and Anothei \ Jones

(1864)English Reports 144, al page 194, the lacts wcie as lollows " One Ρ had been employed by Ihe plainliils in the sale o f coals for them on commission, for which he al the end o f each month gave them his acceptances, and b\ the teims ol his agreement he was to hand ovei lo them within six days all moneys he received from customers Ρ having fallen in anc:«i l o the extent o f 12721, ihe plain­ tiffs required htm lo f i n d secuiity to the amount o f 3001, and at his request the defendant consented lo guaiantee 1001 The agrcemenl ol guarantee recited the terms o f dealing between the plaintiffs and Ρ ; but ihc lact lhat Ρ was already indebted to the plaintiffs in the large sum above mentioned wa< concealed f r o m Ihe suiclies m an action against Ihe delendanl upon the agicement, he pleaded thai he was induced lo make it by Ihe fraudu­ lent concealment by the plaintiffs o f a material tact It was held, by C i o m p l o n , J , Channel, B , Bl<c k b u m , J , and Shec, J , in the Exchequer Chamber, a f f i r m i n g the j u d g ­ ment o f the C o u r t below " that the non-communication by the plaintiffs to the defendant o f the fact lh.it P. was at the time indebted to them, was evidence foi the j u r y in support ol the plea — Pollock, C B , and Bramwell, B , d i s s e n t i n g " η Al page 204, Blackburn, J. ίη his judgment states : " I think that it must in every case depend upon the nature of the transaction, whether the fact not disclosed is such lhat it is impliedly represented not to e.xist and that must generally be a question of fact proper for a jury. If in this case the amount of the balance already due had been small or the period during which the accounts were left unsettled short, there would in my opinion have been such a mere scintilla of evidence as would not have warranted Ihc jury in finding the ver­ dict of fraud ; and the Judge would have been justified in withdrawing the question from their consideration. But, as it is, the amount of the balance already due being, relatively to ihe amount of the security so large, and the period during which no settlement had taken place being so considerable, I think (he Judge could not have with­ drawn the case from the consideration of the jury, who might well come lo the conclusion that the sending of the agreement in these terms amounted to an inaccurate representation. This would not be enough to support the verdict on the plea of fraud, unless it was further established that the plaintiffs made the inaccurate re­ presentation, intending to deceive the defendant and induce him to enter into contract, in the belief that what was represented did exist, whilst the plaintiffs knew it did not exist. But of that also I think there was sufficient evidence ". " The improbability that any one could suppose that sureties would have entered into such an agreement if they had known the truth, is so great that the jury might well think lhat the plaintiffs knew that the defendant was in ignorance of it ; and, if the jury so thought, they might from that alone draw the inference that the repre­ sentation was fraudulently intended to deceive " . Crompton, L.J., and Channel, B., in their judgment at page 205 stated :" Il seems to me that the defendant in the present case would be naturally led by ihe guarantee, and the origi­ nal agreement with Packer annexed thereto, and the reference lo the agreement with Mrs. Tinson referred lo in ihe guarantee, which is said to be supplemental to that agreement, to suppose that a different state of things existed from the real state of things known to the plaintiffs. 79 Dec, 21 1966 Feb. 4 IANTHI A. NICOLAIDES r. CHARTERED BAN OF FAMAGUSTA Zekia. P. l ",1) 1ΐ » 01 ' " ,.. ( i 4 Ι ΑΝ I 111 \ N k -II AIIUS I ( HARiiHihHA'.k *)\ IAMM.HSIV . . ,» It \ν;ι Λ known l o the pi untills that Puckei, the pnncipal, i i had not carried on» his original agicemenl with them, and lhat there was a large sum due from him on his floating bills By his a ucement with them, ihe moneys to be icceived by him horn the eustomeis horn time lo time were to be paid over and accounted for within SIX days, and were lo be applied lo the floating bills Surety, on perusing such documents as weic sent, the pioposed suietics would be led to suppose lhat the moncys to be icceived fro η time lo lime would be appli­ cable in the first i n s l . m x to Ihc bills to be given f i o m lime l o tune and not to Ί large deficit on the old hills In l i u t h , none of the money ο be icceived would be applicable lo ihc new transactions (ill the laige balance was wiped o f f , and it is veiv unlikely lhat the surely would have lomed in the new guaiaiitcc, had he been aw.nc o f the existence of the old debt I think also (hat the new suietics would natuialh be led lo suppose l i o n i the d i a l t uuaianlee, and f i o m its being staled that their engagement was lo be supple­ mental and in addition lo Mrs. I mson's, that hei gua­ ianlee was piacticall) applicable to the new dealings , wheieas, whether the defendant's suretyship was ap­ plicable icliospectively or not, heis would ιcallν be in effect absorbed bv l i e large balance I think, thcrcfoie, thai theic was evidence lhat the defendant was led by the sending of the documents in question to ihc behcl in an untiue state o f facts, where Ihc knowledge of the liue stale o f facts would have pre­ vented him f r o m joining in ihe contiacl o f suieiyship It was said indeed, thai the plaintiffs sending the documents iti this shape may have been without any in­ tentional f i a u d on their p a i l , and that Ihcy may niciely have got the documents drawn by their professional advi­ sors m a propei state, and forwaidcd them without moral h a n d Ί his seems, however, l o me to be a question which the jury wcic l o determine and it is not necessary for me to consider whether in their place I should have found the fraud. We aie only to decide whether there was evidence t o go to the j u r y " This was a case o f f i a u d which might not have a bearing o n the present case but il possesses so many similar features w t l l i the instant case that is w o i t h o f n o t i n g " . SO ' i9u5 •In a more recent case in Jean Mackenzie v. Royal Bank of Canada 11934] A . C . , p. 468, it was held bv the P r i w j ' ' Council lhal " a contract o f guarantee, like any other contract, is liable to be avoided if induced (as il was in ihe present case) by material misrepresentation, even if made inno. , ' .. . Feb This was slated in an action bimight by a married woman against a bank lo set aside, on the ground of the undue influence o f her husband and of .misrepresentation,.;! guarantee ( w i t h pledge of securities) given by her for the indebtedness of a company in which her husband was the principal shareholder, there is not an onus upon the bank lo prove that she had independent advice ; in Ihc absence o f substantive proof of the undue influence (particulars o f which should be pleaded) the action fails so far as i l is based upon that ground". 1 Having gone al sufficient length into some o f the leading cases relevant to Ihe subject we revert to the facts of this appeal. As we have intimated earlier, in our view, both supplementary agreements for extension o f credit facilities, quoted already in extenso in earlier pari o f this judgment were framed in such a way as to mislead the guarantor on the fact that her husband, Ihe debtor, was, a l the time o f signing of the guarantee, not already indebted t o the bank in a considerable amount exceeding the future credit limit sought to be granted by the.letters in question. This amounts, in our opinion, to a misrepresentation within the meaning o f section 18 (

1. b)o f Ihc Contract Law which reads : " Any breach o f duty which, without an intent to deceive gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice o f any one claiming under him." Wc take it to be the duly o f the creditor not to mislead any prospective guarantor on a material circumstance. The very ,} IAMMI A . NH-OI.AIDLS , cciHly. Ihere was no dill icully about restitutio in tntcgntm. The fact that ihe bank had acted upon the contract did not preclude relief ; nor had the plaintiff received under the contract anything which she was unable lo restore " . SI °^·21 1966 ( HAHIFRLD B A N nr FWAOLSTA Zekia. )' l c >6'> filcl · 196f» ... 4 the time Ihc second guar;,nice was obtained from the appellant - , , · , • ,· , ...• was indeed a ι lalctial circumstance tor the guarantoi I his was conceded to by Ihe lea nod counsel o f the respondent bin he maintained thai il wa^ not ihe duty o f the bank lo disclose lo the guarantor the amount of indebtedness o f her husband Grained that il was not the banker's duly to disclose such a debit balance to the guaianlor, the wife, il was, however, ihe hank's d u l y not lo fram.· ;i letter o f request coupled w i t h a form o f guarantee w h u h the plain import o f it lo the guaianlor would have been nolhing else but thai hei husband, under Overdraft Account No 118, was only indebted in the sum guaranteed bv Ihc «uigmal agreement o f eivdil. In ihc circumstances, Ihe bank cither ought u> have pul the facts l o the guarantor as they actually stood or to avoid making use o f language which amounted to an actual misre­ presentation as
2. tt)the solvency or financial position o f the principal debtor. ,)α Ι Λ Ν "Ί Λ · ( HAKiiKii· ΒΑ-.Κ οι ι-*ΜΛ(.ιι<ίΐ\ /oki.i. Ι' t |Kll ( | l c husband was indebted in the sum of £38,000 at Il is to be observed lhat in the original contract o f guaran­ tee ιlie f o l l o w i n g provision was inserted : I moreover agree that my Guarantee shall be a con­ tinuing Guarantee, and with a view o f giving full effect to our Guarantee, I by ihc present declare, thai I waive any privileges or lights which I may have as Guarantor and I nul house you to take if necessary legal steps against me just as if I were your original D L B ' I O R " . Ί ο this our attention was drawn by the learned counsel o f Ihe respondent. If, η deed, all the lerms and conditions appearing in the original conliact were to be taken as having been incorporated into Ihe supplementary agreements, no doubt, we had l o consider the effect to such provision as to what extent the bank gu tided itself against an unintentional or innocent misrepresentation. Although in these supplemen­ tary agreements express reference is made to 1 the original con­ tract and credit limit opened thereby there is no provision in them to the effect that ill lerms and conditions o f the original contract were h c o i p o r a l e d into these agreements. In such a case we have l o ascertain whether the provision we have just quoted could, by necessary implication, be taken as having been incorporated in the subsequent credit agreements. Having considered Ihc point we are unable l o say thai the aforesaid provision ought l o be taken as having been incor«2 porated into ihc aforesaid agreements. It is true in the latter agreements there is no provision also relating to interest and commission lo be charged by the bank in respect o f the new increased advances but other considerations may apply such as the usage in banking business o f charging invariably interest and commission. Moreover, in the instant case this was mil a contentious point. 1965 Dec.'21 1966 Feb. 4 IANTHI A. NICOLAIDES v. (HARrtRto BANK o^ FAMAOUSIA There is no evidence whatsoever thai the wife knew of the fact lhat her husband was heavily indebted at the time of the execution o f the aforesaid guarantees and the Court cannot act by guessing on the matter. Having answered the q u e s t i o n as suggested by Vaughan Williams, L.J., . in Holloway's case already referred to, namely, " W o u l d the surety have entered into this contract of suretyship if the non-disclosed fact had been disclosed t o . him "—in the negative, we f i n d lhat the appellant is entitled to a relief either under seciion 100 or Nection 101 of. the Contract Law. We have found that the way ihe guarantees under consideration were framed amounted lo misrepresentation and, without it, on the balance til"probabilities, the appellant would not have entered into such a guarantee and the misrepresentation concerns undoubtedly material part o f the transaction; the guarantees in question are invalid under section 100 o f the Contract Law. On the other hand, the creditor, by the form o f guaianlee as drafted, having misled the guarantor in a material circumstance, it was his duty to disclose Ihe excessive debit balance standing in the credit account No. 118 o f the husband. Having failed to do so, the guarantee is equally invalid under section 101 o f the Contract law. Having disposed of this appeal on ground A , we d o ' n o t intend lo go into the other grounds o f the appeal. A l t h o u g h the third ground o f appeal, relating to the release of collateral securities had to be decided in case il might reduce the amount o f the liability o f the appellant under the original agreement o f guarantee, this however, does not arise in this case. Because the ultimate debit balance o f the debtor in this ease was £29,973 and the bills held as collateral security by the respondent-bank was of ihe face value o f £21,673 only. Thus, even if Ihesc bills were l o be f o u n d t o be'Worth their face value attain the difference between the judgment debt and the value o f the bills would have been over £8,000 which amount exceeds the maximum liability o f the appellant under the original conlrnci of guarantee. S3 Ze*kia. P. '° ΰ 5 jV fob Ί l l i c t c lemauis, howcvei, die claim ot the respondent arising f i o m the onginal conliact o f guarantee bv which Overdraft Account N o 118 was opened. KMM, χ NIHII \nn«v Appellant has a d i n i t u d lull liability undei [he said con1\AC:1 She paid against > hat liability, however, onIν the sum ol 1,5,008 I he icspopdenl-bank, on the assumption that the appellant was ans*vciuhle under ihe original conliact only, picpaied .1 slulemui o f account which was put 111 evidence al the l i i a l C01.1l . nd icieience vva·. made to it also ( Η Λ it 11 ΚΙ Ο Β VΝ k ΟΙ I \ \ l \ I'M V /«-ki.i l» befoic this C o u i l Hits .lad nieiii ol account, winch inJudes calculations ol inleicsl ip io 8 1 1965, shows a balance of £1,347 090 mils as being due by the principal debloi fully coveted by the o n g i n i l '«uaiantec o f the wife 8 % inleicsl on ibis sum is also claimed as i i o m 8 1 1965 l o the dale ol pay­ ment The respondent-banl· was not aoss-cxamined on the .iccmacy o f this account in the Court below and il was not disputed befoic us either Ihe icstill o f this apjx.il is as follows The appeal is allow­ ed ami the judgment o f ihc District C o u i l again-a. appellant (defendant 2) is set aside and judgment is e n l e u d in favour o f ihe icspondcnl bank ( j ' t a i n l i f f ) and aguin-4 appellant (defendant 2) in ihe sum ol £1,347 690 plus m i e u s t al 8 % p a as f i o m 8 1 1965 to ihe dale o f payment In the circumstances ol this case theic will be ·ιο oider for costs h e u and 111the C o m I below Pach patty to bc.u i l s o w n costs VASSII IADI s, J I have had the advantage ot leading the (iidgment ol my biolhei Zckui Bey, the President of this C o u i l , and I agice with his approach to the m a l l e i , and with the result reached I wish to add, howcvei, l i n t my judgment in this case, rests on the piovisions o f section 101 o f our Contract Law, Cap 149 As it may well appeal f i o m the President's judgment, this seciion, together with olhei provisions in Ihc same |>ait, and indeed, in most o f our Con-1act Law (same as α lot of" out othci laws 111 Cypius) emanate from the common law and coricspoiiding statutes o f i ngland which, in .1 way, oui ( vpius statutes aie intended 10 meoiporatc Bui one must not lose sight o f the fact lh.it in such circumstances, the law governing the mallei in Cypius, is live local statute, as pre­ setved in foice after independence by article 188 o f the Con­ stitution , and as interpreted and applied by oui Courts Μ So, .in this case, the appeal turns on the question whether the respondent Bank has obtained the.guarantee o f the appel­ lant for the payment o f the amount claimed, " by means o f keeping silence as to material circumstance ". A pure ques­ tion of.fact. I f the answer to this question, is in Ihe affirma­ tive, the guarantee is invalid, as provided in seciion 101 of .Chapter 149o f Ihe Statutes o f Cyprus. 1965 Dec211966 Fe-h. 4 IANJTHI Λ. NlCOLAIDI'S Γ. CHARTERED B A S K OF F A M A O V S T A It is not in dispute—and indeed il could not be reasonably suggested—that thc',exlcnl o f ihc debtor's indebtedness to the Bank, at the time when the appellant signed the contract o f guarantee, was not a material circumstance in this case Appellant's original guarantee in exhibit 1, was for " a n amount not exceeding the limit o f the credit " i.e. £5,000 plus interest and other relative charges. Her last and final guarantee in exhibit 3, upon which the Bank's claim rests, is up to a maximum o f £20,000 to cover " temporary excess drawings" which the Bank agreed at their "discretion tempo­ rarily l o allow " the debtor, in accordance with his request, to facilitate him in his export business, as the record shows. But in fact when the appellant signed exhibit 3, dated 25th January, 1963,the debtor's debt to the respondent Bank was already £37,496. So lhat, not only the f u l l amount up tothe maximum limit of £20,000 had been withdrawn by the debtor, bul a substantial excess o f that amount (a further seventeen and a half thousand pounds) was then due and payable l o ihe Bank. Regarding this " material circumstance", silence was apparently kept in connection with the guarantee. Learned counsel for the Bank^ contended that the debtor's wife, whose final guaranlce was obtained upon exhibit 3, was so involved in her husband's affairs, lhat shemust have known of his indebtedness to ihe Bank. In any case, counsel submit­ ted, it has not been shown thai the wife's guarantee was obtained by means o f keeping silence as to this circumstance. Both legs o f this submission arc, in my view, clearly un­ tenable. There is no evidence to show that the wife knew of the extent o f her husband's debts. Indeed, i f she knew, and i f all parties concerned thought lhat she knew, there would be no point in keeping silence about it ; and making nore­ ference ihcreto, whatsoever. N o r would there be any point in giving to the transaction the appearance of a guarantee to enable the debtor t o make " t e m p o r a r y excess d r a w i n g s " as the Bank al their discretion would agree " temporarily S3 Vassiliades. )• 1965 Dec. 21 1966 Feb 4 ΙΑΝΤΙ Μ Λ . N i t or VIDIS- r CHARIER! D BANK f)l FAMAOUSTA Vnssrliades, .1. to allow ". Moreover ihc fact lhat the wife agreed to give a guarantee up to a maximum of twenty thousand pounds, clearly indicates, in my opinion, her mind in that connection. And establishes a very reasonable probability that if she knew of the full extent of her husband's financial difficulties, she might well have acted differently In my view, this case turns on the simple questions of fact required to bring it within the provisions of section 101 : silence as to material circumstance ; and whether the gua­ rantee was obtained by means of keeping such silence. As far as the record can show, there can be no doubt as to the firsl ; and the most reasonable inference from the surroun­ ding circumstances, leads, in my judgment, to the secondUpon these facts, appellant's case comes within (he pro­ visions of section 101 ; and must be decided accordingly. The relevant English cases referred to by learned counsel in the course of the argument, and discussed in the learned Presi­ dent's judgment, deal with the Common Law of England, as il stood at the material time, and before it crystallized into" our statutory provisions for application in Cyprus. As to the variation of ihe judgment of ihe District Court, required to cover interest and other charges on the original guarantee, amounting lo the sum stated in the President's judgment, Ifully share the views expressed in that connection. And I fully concur in the result as stated therein. Josr i'iiii>i-.s, J. : I have had the privilege of reading the very exhaustive judgment which has just been delivered by the learned President of (his Court. I agree with his conclu­ sions and with the reasons he.gives for allowing Ihe appeal, and I have nothing to add. Appeal allowed. Judgment in terms. Each party to bear own costs here and in the Court below. 86