(1980)1980 April 28 [TRIANTAFYLLIDES, P., L. LOIZOU, HADJIANASTASSIOU, A. Loizou, DEMETRIADES, SAwroes, JJ,] TSAMBIKOS KARAYIANNIS AND ANOTHER, Appellants, v, THE CENTRAL BANK OF CYPRUS AND ANOTHER, Respondents. (Revisional Jurisdiction AppealNo. 195). Exchange Control Law, Cap. 199—Non-resident—Subscription to memorandum of company—Permission undersection 10 of the Law—Within unfettereddiscretion ofrespondent Bank—Principles on which administrative Court will interfere with exerciseof such discretion—Whether Bank has to examine possibility of 5 imposing conditions beforeresorting to absolute prohibition. Administrative Law—Discretionary powers—Judicial control—Principles applicable—Permission to non-resident tosubscribe memorandumof company under section 10of the Exchange Control Law,Cap.199—Within unfettereddiscretion ofrespondentBank— IQ Administrative Courtalways cautious andslow to interfere with itsexercise—Subjudice refusalneither wrong inlaw norin abuse or excess of powerand notreached under any misconception of fact—Respondent Bank under no duty to examine possibility of imposing conditions beforeresorting to absolute prohibition— 15 Michael v. Improvement Board of Dhali
(1969)3 C.L.R. 112 distinguished. Applicant No. 1,who isanon-resident, applied to respondent No. 1 for permission, under s. 10ofthe Exchange Control Law, Cap. 199, to subscribe the memorandum of a company to be 20 formed under the name "Apollo 8 Tours Ltd.,". Respondent No. 1 was also informed that the company would undertake the agency of several travel companies and would act as travel agents. Fromtheobjects*oftheproposed company itappeared that it was not just an ordinary travel agent dealing only with 25 Quoted at p. 115 post. 108 3 C.L.R. Karayiannts &Another v. Republic issueof ticketsbut it could, deal, inter alia, withthe "organization of cruises and excursions and generally the attraction and development of internal and international tourism". 5 10 Respondent No. 1, in accordance with its practice, referred the application to the Ministry of Commerce and Industry for its views. The Ministry in reply informed respondent 1 that they objected to such foreign participation, as foreign nationals wouldcompetewithCypriotsinasectorthat was already saturated. Respondent 1 then wrote to the applicant in terms of the Ministry's objection refusing the permission applied for. Applicantschallengedtheaboverefusal bymeansofarecourse which was dismissed and hence this appeal. Counsel for the appellants mainly contended: 15 20 25 30 35 (a) That there was a misconceived reasoning inasmuch as the only element which the respondents took into consideration, in deciding whether to grant or not the permission sought, wasthefact that among the objects of the proposed company was the issuing of tickets. (b) That the respondents resorted to absolute prohibition without considering whether by granting conditionally or on terms the permission sought same would have served the public interest and policy. Held, per A. Loizou,J., L. Loizou,Savvides and Demetriades JJ. concurring,Triantafyllides, P. and Hadjianastassiou JJ. dissenting:
(1)That in no document or other record to be found in the file oftherespondentBank anymention wasmadetotheissuing of tickets in a way suggesting that this object was the only one relied upon, to the exclusion of, or in preference to the other objects of the company, when the Bank came to the subjudice decision; that from the totality of the circumstances and the contents of the various documents placed before the Court, thereisno difficulty in sayingthat therehas been nomisconception offact, either astotheobjectsofthecompanytobe formed, or as to the competition with residents that would occur in a field that unquestionably was already saturated; and that, accordingly, contention (a) must fail.
(2)That if it were to be accepted that in the present case the subjudicedecisionshouldhavebeenannulledbecausetherespon109 Karaylaonis & Another τ.Republic
(1980)dent Bank did not examine the possibility of imposing conditions before rejecting the appellants' application, that would mean that the respondent Bank should embark on an exercise of redrafting the objects in the memorandum of association of a company to be formed, for the purpose of intimating to a 5 prospective applicant how far and in what circumstances its discretion would be exercised under section 10
(2)of the Exchange Control Law, Cap. 199 which was not required of therespondent Bank in the circumstances; that the respondent Bank properly exercised its discretion; that the decision it reached was reason- 10 ably open to it on the basis of the material before it and is validly supported by the reasons given therefor; and that, accordingly contention (b) must, also, fail. (Michael v. Improvement Board of Dhali
(1969)3 C.L.R. 112 distinguished).
(3)That the paramount consideration under section 10
(2)15 of the Exchange Control Law, Cap. 199, is to control the share holding in companies by non-residents, as upon the registration of a company a subscriber automatically becomes a member and a holder of the shares for which he has signed, in this case 3,334 ordinary shares of one pound each as compared with 20 6,666 shares to be subscribed by residents; that this is a section that gives an unfettered discretion and as it covers a matter of fiscal policy it should be considered as a wide one; that being so, an administrative Court is always cautious and slow to interfere with its exercise by the appropriate organ; that, there- 25 fore, there is no difficulty in upholding the approach of the learned trial Judge in the circumstances on this issue as same was neither wrong in Law nor exercised in abuse or excess of power, nor reached under any misconception of fact; that after all, the extent of judicial control of the administrative discretion 30 is confined to the examination of the lawful thinking and the observance of the lawful limits within which such discretion should be exercised; and that, accordingly, the appeal must be dismissed. Appeal dismissed. Cases referred t o ; Michael v. Improvement Boardof Dhali
(1969)3 C.L.R. 112; Laker Airways Ltd., v. Department of Trade [1977] 2 All E.R. 182 at p. 194; Droushiotis v. The Republic
(1966)3 C.L.R. 722 at pp. 729-730; Republic v. Droushiotis
(1967)3 C.L.R. 232; 110 40 35 3 C.L.R. Karayiannis & Another v.Republic Vassos Eliades Ltd. v. Republic
(1979)3C.L.R. 259 at pp. 266267; Cytechno Ltd. v. Republic
(1979)3C.L.R. 513at pp.532-533; 5 PtSias(No. 2) v. The ElectricityAuthorityof Cyprus
(1966)3 C.L.R. 784; Case No. 11/70of the Court of Justice of the European Communities (reported in
(1970)9 C.M.L.R. 294); CaseNo. 300/1936 of the Greek Council of State; Salomon v. Salomon andCo.Limned[1897]A.C.22. 10 Appeal. Appeal against thejudgment of a Judge ofthe Supreme Court of Cyprus (Malachtos, J.) given on the 14th January, 1978 (Revisional Jurisdiction Case No. 251/74) whereby appellants' recourse against the refusal of the respondents to grant permis15 sion to applicant 1 to subscribe in a company to be formed under the name "Apollo 8 Tours Ltd." was dismissed. L. Papaphilippou,for the applicants. G. Constantinou (Miss) for the respondents. Cur. adv. vult. 20 TRIANTAFYLLIDES P.: The first judgment will be delivered by Mr. Justice A. Loizou. A. Loizou J.: This is an appeal from the judgment* of a Judge of this Court by which the recourse of the appellants challenging the decision of the respondent Bank not to permit 25 appellant No. 1 to subscribe to the Memorandum of a Company to be formed, was dismissed with no older as to costs. By the said recourse the appellants sought a "declaration of the Court that the act and/or decision of therespondents, dated 14th March, 1974, whereby they refused to grant permission 30 to the first applicant to subscribe in a company to be formed under the name of 'Apollo 8 Tours' is null and void and of no effect whatsoever". The grounds of Law relied upon in this recourse were the following: 35 " l . The Respondents acted under misconception of facts in finding that the incorporation of Apollo 8 Tours Ltd., * Reported in
(1978)3C.L.R. I. Ill A. Loizou J. Karayiannis & Another v. Republic
(1980)would compete with Cypriots in a sector that is already saturated.
- The Respondents misconceived applicants application in that its main object is not at all saturated in Cyprus.
- The Respondents' decision or act is contrary to the 5 general Policy of the Government of Cyprus for promoting tourism in Cyprus.
- Respondents resorted to absolute prohibition without considering whether conditional or in terms of otherwise grant would have served the public interest and policy 10 and the objects of the application of the applicants." The relevant facts which are not in dispute are these: Theappellantsthrough theircounselappliedtotherespondent Bank that appellant No. 1,a travel agent of Greeknationality, residing permanently outside the Republic, namely in Rhodes 15 island, Greecebepermitted under section 10subsection 2ofthe Exchange Control Law,Cap. 199to subscribethe Memorandum of Association of a private company to be formed under the Companies Law,under thename of "Apollo 8Tours Ltd.". The said application, dated the 22nd February, 1974,(exhibit 20 1) is worth quoting verbatim and it reads: "We have been instructed to form a private Company of Limited Liability as per attached draft of Memorandum and Articles of Association. You will observe that this Company will undertake the 25 agency of several travel Companies and will act as travel agents. The Travel Companies listed inclause 3(b) ofthe objects of the Company are exclusively represented by Mr. Tsambikos Karayiannis in Greece and we understand that 30 he has the exclusivity as regards Cyprus also. Weareinstructed toinform youthat duringthetwoyears 1972-1973hemanaged toattract 230,000tourists in Greece and it is estimated that he will be in a position to switch tourists to Cyprus of even a greater number. The Company will be subscribed by Cypriots for 6,666 112 35 3 C.L.R. Karayiannis St Another v. Republic A. Loizou J. • shares and Mr. Tsambikos Karayiannis will subscribe for 3,334 ordinary shares of £1each. 5 In view of all the above wehereby apply for permission under the Exchange Control Law, Cap. 199 that Mr. Tsambikos Karayiannis subscribes for the above shares in the captioned Company." Onreceivingthisapplication therespondentBankwrotetothe Director-General of the Ministry of Commerce and Industry (exhibit 5)and attached theretoaphotocopy ofexhibit 1,herein10 above setout and of the Memorandum and Articles of Association submitted therewith for their perusal and return and requested their views on the matter. : Onthe 7th March, 1974,theappellants through their counsel wrote, exhibit 2, to the Ministry of Commerce and Industry 15 (Tourist Department), the material part of which reads as follows: 20 25 30 "We believe that since the policy of the Government is to promote and encourage thetouristic industry in Cyprusthe participation of Mr. Karayianni in thecompany will really promote tourism. In the years 1972-1973 he managed alone to attract to Greece 230,000 tourists and he is in a position todivert thesetourists to Cyprus,provided that he will participate in the company to be formed. If he does not participate this company will not beable to implement its objects as the companies mentioned inthe Memorandum of Association have Mr. Karayiannis as their exclusive agent and under no circumstances theywill assign their representation to the company in which Mr. Kaiayiannis will not participate. The company to be formed will not be just ordinary travel agents but will really attract groups of tourists from abroad thtough thewellorganized tourist companies which are mentioned in the Memorandum." On the 8th March, 1974 the Ministry of Commerce and 35 Industry wrote to the respondent Bank, exhibit 6, as follows: "Application by Company Apollo8Tours. With reference to your letter dated 26th February, 1974 113 A. Loizou J. Karayiannis ft Another τ. Republic
(1980)No. F.D./1650, on the aforesaid subject I have instructions to inform you that the Ministry objects in this case as foreign subjects will compete with Cypriots in a sector that is already saturated. The Memorandum and Articles of Association of the company are returned." 5 The next piece of evidence is the following entry made by the officer of the respondent Bank handling the matterin the relevant file, exhibit " A " which reads as follows: "According to the information given by the Ministry of Commerce &Industry thereare in Cyprus 100 local agencies and a quite big number of sub-agencies and representatives, carrying on this line of business. In addition the air companies themselves are in this field, acting as booking and travel agents. In 1973 we had 178,598 arrivals and 87,244 departures. If we take into consideration that these persons leave £3 each, average to the travel agencies, then we shall come to a figure of about £600,000. These funds have to be distri buted between over 200 agencies, sub-agencies and representatives of companies thus leaving approximately £2,500 to to £2,700 for each. They hardly cover their expenses." 10 15 20 Thereafter there followed the communication of the decision of the respondent Bank dated the 14th March, 1974, exhibit 3, it reads as follows: "APOLLO 8 TOURS LIMITED With reference to your letter dated 22nd February, 1974, requesting permission on behalf of the above company to issue shares to a non-resident we regret to inform you that under the Exchange Control Law, Cap. 199 we are 30 unable to grant the requisite authority as they would compete with Cypriots ina sector that is already saturated." The picture and the material factors that the respondent Bank and the Ministry of Commerce and Industry had before them would not be complete if a brief reference was not made to the 35 objects of the company for which permission to subscribe was sought, as set out in Article 3 of the Memorandum of Associa tion. 114 25 3 C.L.R. 5 10 15 20 25 30 Karayiannis & Another r. Republic A. Loizou J. These objects divided into 35 paragraphs include the acquisition by purchase and/or the taking over of the business and every asset including the good-will of the partnership "Apollo 8 Tours"; the taking over of the business or the cooperation with Mr. Tsambikos Karayiannis and the representation among others of a number of European companies and organizations set out therein; the agency and representation of air, shipping, and travelling companies; the organization of cruises and excursions and generally the attraction and development of internal and international tourism; the hire or chartering of ships and aircrafts for the carriage of passengers and cargoes and every description of every kind; the establishment and operation of tourist agencies and offices for information and travel, and the issue of tickets in Cyprus and abroad and the promotion, organization assistance and participation in excursions for tourists and visitors of every kind, the construction, supply, maintenance, repair, purchase, sale hire, charter and exploitation of ships, cargoes of every type and kind, the establishment of a business for hire, purchase, sale of motorcars, motorbuses, boats and other means of transport and/or their use for the service and promotion for the purposes of the company and for touristic purposes in general; the establishment and operation of customs clearing offices; the agency of insurance companies and the promotion of insurance policies of every kind, of every type of insurance cover; the purchase, sale hire, exchange of every kind of immovable property as lands, buildings, stores installations which the company would consider from time to time expedient to acquire for any of these purposes; the building maintenance, improvement and lepair of buildings, stores, piers and every other kind of premises, either for the business of the company or for other business. This enumeration of most of the objects of the company shows the extent of the business intended to be carried out by the said company which was stated in the letter of the appellants of the 35 7th March, 1974(exhibit 2),that it willnot bejust ordinary travel agents but who will really attract groups of tourists from abroad, through the well organized tourist companies which are mentioned in the memorandum. 40 An application for particulars was filed under rule 10
(2)of the Supreme Constitutional Rules as follows: "That particulars be given substantiating the view that 115 A. Loizou J. Karayiannis & Another v. Republic
(1980)attracting tourists in Cyprus is a sector that is already saturated, and that thepolicy of the Republic is to limit the tourists coming to Cyprus. That theRespondentmake a discovery of documentsand allow inspection of thesame." 5 When this application came for hearing, counsel for the respondent bank stated that they were ready and willing togive particulars and make documents available for inspection as far as relevant to this case and which were in their possession; she then went on to say that the second sentence of paragraph 1 Ό of the application for particulars should be deleted since there was no allegation on the part of the respondents that the policy of the Republic was to limit "the tourists coming to Cyprus". Upon this, counsel for the appellants asked that the second sentence of paragraph 1of the application should be struck out. 15 Thereupon it was ordered that the respondent bank do give particulars as per paragraph 1 of the application and make available all documents connected with the present recourse. In arguing thecase of theappellants, learned counsel stressed the importance of the fact that the respondents did notgiveany 20 weight to the objects of thecompany and he is recorded to have said: "The same facts were explained to the Ministry of Com merceand Industry by theletter exhibit 2,where it is stated that thecompanies listed above by no means were conside- 25 ring to givetherepresentation of theircompanies in acom pany which Karayiannis was to participate. It is the third paragraph of exhibit 2. And the applicants by their last paragraph in exhibit2 pointed out that they will never act as ordinary travel agents for the issuing of tickets and it is 30 a fact which I would like to argue later but before coming to an absolute prohibition they had to consider whether it was advisable to restrict them only in tour operation which they failed to consider and I citeAphrodite Michaelv. The Improvement Board of Dhali
(1969)3 C.L.R. page 112". 35 Counsel for the respondent bank in arguing thecase for them after referring to the provisions of section 10
(1),
(2)of the 116 3 C.L.R. Karayiannis &Another v. Republic A.Loizou J- ExchangeControl Law,Cap. 199,isrecorded inthetranscribed minutes of the Court to have said the following: 5 10 "In exhibit4 one of the objects of the company was the sale of tickets and so there would be created competition between this company and the purely Cypriot companies. This appears on page 2 of exhibit4. The fact that this profession issaturated is that in 1973in Cyprus thereweie 100tourist offices withoutcountingtheirsubagentsallover Cyprus. In 1973there were 178598 arrivals of foreigners, touristsand 87294departures ofCypriots. Inthesenumbers theremustbeincluded agreat numberofticketswhichwere issued abroad. For this reason the Ministry came to the conclusion that this branch of activity was saturated." Withregard to theallegation ofapplicant No. 1that itwould 15 cause many tourists to come to Cyprus, counsel for the respondent Bank argued that this could beachieved if he collaborated in some other way with a Cyprus company than bysubscribing its memorandum. I have quoted these two extracts of counsel's addresses from 20 the transcribed record of the Court as it has been argued before us that therewasa misconceived reasoninginasmuchastheonly element which the respondent Bank and the Ministry of Commerceand Industry took into consideration in deciding whether to grant or not the permission sought, was the fact that among 25 the objects of the proposed company wastheissuingoftickets. Upon this premise it was further argued that the respondent Bank resorted to absolute prohibition without considering whether bygranting conditionally or on terms, or otherwise the permission sought, same would have served the public interest 30 and policy. In other words that the respondent Bank might point out to the applicants that they could subscribethememorandum provided certain objects of the company to be formed were deleted from it. It wasthecasefor therespondent Bank,asrightlysummedup 35 by the learned trialJudgethat thesub-judice decisionwas taken "after taking into account all relevant factors including the Memorandum of Association of the company, exhibit4, and arrivedattheconclusion that theproposed companywouldhave competed with other local companies taking into consideration 117 A. Loizou J. Karayiannis ft Another v. Republic
(1980)itsobjects, one of which wasthe issue and saleof tickets. There was at the material time a great number of tourist agencies operating. The tourists would have been attracted through the cooperation of applicant No. 1 with any one of these agencies and not solely by the formation of a new company". 5 On this material the learned trial Judge concluded as follows: "Respondent No. 1very rightly upon receiving the application on behalf of applicant No. 1 sought the views of the Ministry of Commerce and Industry under which the Cyprus Tourism Organization comes, as it is clear from the memo- 10 randum of the company to be formed, exhibit 4, that its main objects had to do with tourism. After obtaining the views of the said Ministry and in exercising their discretion in the matter the respondents issued thedecision complained of. It is a well established principle of Administrative Law that on a recourse under Article 146of the Constitution the Court is not empowered to substitute its own discretion for that of the Administration (Charalambos Pissas No. 2 v. The Electricity Authority of Cyprus
(1966)3 C.L.R. 784). 20 An Administrative Court can only interfere if there exists an improper use of the discretionary power or a misconception concerning the factual situation or the non taking into account of material factors (Costas Vafeades v. The Republic of Cyprus, 1964 C.L.R. 454.). 25 I must say that I find no merit in the allegation that the respondents acted contrary to law or that they misconceived the facts of the case. On the contrary, the material before the respondents, including the Articles of Association of the Company under formation and the views of the Ministry of 30 Commerce and Industry, fully justify the issue of the negative decision reached by them." As already stated this appeal was argued along the same lines. It should be stated, however, from the outset that the arguments advanced are not born out from the material in the file. 35 In no document or other record to be found in the file of the respondent Bank any mention was made to the issuing of tickets in a way suggesting that this object wasthe only one relied upon, to the exclusion of, or in preference to the other objects of the 118 15 3 CL.R. Karayiannis & Another τ. Republic A. Loizou J. company, when the respondent Bank came to the sub-judice decision. On the contrary, the reasons given in exhibit "A" for refusing the permit applied for refer to the arrivals and departures of tourists and that such persons—and no difterentia5 tion is made between these two classes—leave on the average to the travel agencies as profits, three pounds each. This document does not speak of the commission that travel agents receive from issuingtickets to passengers but to the overall income derived from tourists whether incoming or outgoing and 10 the passage in the address of counsel for the respondent Bank was not and could not be treated as an admission of fact. It was nothing more than an argument advanced in reply to what was urged by counsel for the appellants. It has to be viewed in thewhole context of the opposition and the address of counsel 15 and no to be isolated from the rest. 20 25 The fundamental facts thatled to the sub-judice decision were the number of travel agencies carrying on the line of business so extensively described in the objects of the company to be formed and the undesirability of having non-residents competing with Cypriots in a sector that is already saturated. From the totality of the circumstances and the contents of the various documents placed before the Court, I have no difficulty in saying that there has been no misconception of fact, either as to the objects of the company to be formed, or as to thecompetition with residents that would occur in a field that unquestion ably was already saturated. Regarding the ground that the respondent Bank should have examined the possibility of imposing conditions before rejecting the appellant's application, 1wish to point out that the case of 30 Aphrodite Michael v. The Improvement Board of Dhali
(1969)3 C.L.R. p. 112 should be distinguished. That was a case of interference with the right of ownership safeguarded by Article 23 of the Constitution and it was decided on its facts and in relation to the question whether there existed the power to 35 disallow completely any building operations on the property of that applicant which have been included in the Second Sche dule to the Antiquities Law, Cap. 31,or whether the appropriate Authority could have imposed terms instead. On the other hand if I were to accept that in the present case the sub-judice 119 A. Loizou J. Karayiannis & Another v. Republic
(1980)decision shouldhavebeenannulled becausetherespondentBank did not examine the possibility of imposing conditions before rejecting the appellants' application, that would mean that the respondent Bank should embark on an exerciseofredrafting the objects in the memorandum of association of a company to be 5 formed, for the purpose of intimating to aprospective applicant how far and in what circumstances its discretion would be exercised under section 10
(2)of the Exchange Control Law, Cap. 199which in my view was not required of the respondent Bank in the circumstances. 10 In myview the respondent Bank properly exercised itsdiscretion. The decision it reached was reasonably open to it on the basis of the material before it and is validly supported by the reasons given therefor. Section 10
(2)of the Exchange Control Lawprovides in sofar 15 as relevant as follows: "The subscription of the memorandum of association of a company to be formed under the Companies Law, or any Law amending or substituted for the same, by a person resident outside the scheduled territories, or by a nominee 20 for another person so resident, shall, unless he subscribes the memorandum with the permission of the Financial Secretary, be invalid in so far as it would on registration ofthememorandum havetheeffect ofmakinghimamember of or shareholder in the company,..." 25 The paramount consideration therefore, under the aforesaid provision is to control the shareholding in companies by nonresidents, as upon the registration of a company a subscriber automatically becomes a member and a holder of the shares for which he has signed, in this case 3,334 ordinary shares of 30 onepound each as compared with 6,666 shares to be subscribed byresidents. Thisisasectionthat givesanunfettered discretion and as it covers a matter offiscalpolicy it should be considered as a wide one. Being so, an administrative Court is always cautious and slow to interfere with its exercise by the appro- 35 priate organ. 1 therefore have no difficulty in upholding the approach of the learned trial Judge in the circumstances on this issueassamewasneitherwronginLaw norexercisedinabuseor excess of power, nor reached under any misconception of fact. After all the extent of judicial control of the administrative 40 120 3 C.L.R. Karayiannis & Another v. Republic A.Loizou J. discretion is confined to the examination of the lawful thinking and theobservance ofthe lawful limits within which such discretion should be exercised. For all the above reasons I would dismiss this appeal. 5 A. Loizou J.: Mr. Justice L. Loizou who is absent abroad and whohadtheopportunity ofreading inadvance thejudgment just delivered hasauthorized meto say that heagrees with it. DEMETRIADES J.: I agree with thejudgment just delivered by Mr. Justice A. Loizou. 10 SAWIDES J.: I also agree with thejudgment of Mr. Justice A. Loizou. 15 20 25 30 35 HADJIANASTASSIOU J.: This is an appeal by the appellants, Tsambikos Karayiannis and Apollo 8Tours attacking thejudgment of a single Judge of this Court dated 14thJanuary, 1978, whereby he dismissed their recourse on the ground that the decision of the Central Bank not to permit appellant No. 1to subscribe totheMemorandum ofacompany tobe formed under the aforementioned name,wasa correct decision. Section 10
(2)of the Exchange Control Law, Cap. 199 says:- "The subscription of the memorandum of association of a company to be formed under the Companies Law,or any Lawamending or substituted for thesame, bya person resident outside the scheduled territories, or by a nominee for another person so resident, shall, unless he subscribes the memorandum with the permission of the Financial Secretary, beinvalid in sofar as it would on registration of the momerandum have theeffect of making him a member of or shareholder in the company, so, however, that this provision shall not render invalid the incorporation of the company; and ifby virtue of this subsection the number of the subscribers ofthe memorandum whoon its registration become members of thecompany is less than the minimum number required to subscribe the memorandum, the provisions of the said Laws relating to the carrying on of business of a company the number of whose members is reduced below the legal minimum shall apply to the company as if the number of its members had been so reduced." 121 Hadjianastassiou J. Karayiannis &Another v.Republic
(1980)The relevant facts are these: The appellants, through their advocate, addressed a letter dated 22nd February, 1974, to the Central Bank of Cyprus in these terms:"We have been instructed to form a private Company of limited liability as per attached draft of Memorandum and 5 Articles of Association. You will observe that this Company will undertake the agency of several travel Companies and will act as travel agents. The travel companies listed inclause 3(b)of theobjects ofthe company are exclusively represented by Mr. Tsambikos Karayiannis 10 in Greece and we understand that he has the exclusivity as regards Cyprus also. Weare instructed to inform you that during the two years 1972-1973, he managed to attract 230,000tourists in Greece and it is estimated that he will be in a position to switch 15 tourists to Cyprus of evena greater numbsr. The Company will be subscribed by Cypriots for 6,666 shares and Mr. Tsambikos Karayiannis will subscribe for 3,334 ordinary shares of £1 each. In view of all the above, we hereby apply for permission 20 under the Exchange Control Law, Cap. 199 that Mr. Tsambikos Karayiannis subscribes for the above shares in the captioned Company." On 26th February, the two Officials of the Central Bank addressed a letter to the Director General of the Ministry of 25 Commerce and Industry seeking their views on the matter and had this to say: "We enclose a photocopy of a letter dated 22nd February, 1974,addressed to us by L.Papaphilippou &Co.,advocates requesting permission on behalf of the above company to 30 issue shares to a non-resident and we would appreciate having your views on the matter. Please find enclosed a copy of the company's Memorandum and Articles of Association for your perusal and return". It appears further that on 7th March, 1974,counsel appearing 122 35 3 C.L.R. Karayiannis & Another τ. Republic Hadjianastassiou J. for theappellants addressed a letter to the Ministry of Commerce and Industry in which they said the following;- 5 10 15 20 " 'Εκ μέρους πελατών μας ϋπεβάλαμεν αϊτησιν προς τήν Κεντρικήν Τράπεζαν Κύπρου ήμ. 22.2.1974 δια της οποίας αϊτούμεθα άδειαν συμμετοχής τοϋ κ. Τσαμβίκου Καραγιάννη ίί 'Ελλάδος είς την υπό ΐδρυσιν έταιρείαν Οπό τήν εν Θέματι έπωνυμίαν. Πιστεύομεν ότι, έφ1 όσον ή πολιτική της κυβερνήσεως εΐναι ή προαγωγή και ένθάρρυνσις της τουριστικής βιομηχανίας έν Κύπρω, ή συμμετοχή τοϋ κ. Καραγιάννη είς τήν έταιρείαν θα προάγη πράγματι τόν τουρισμόν. Ούτος κατά τό 1972/73 κατώρθωσε μόνος νά προσέλκυση είς 'Ελλάδα 230,000 τουρίστας και είναι εις θέσιν νά διοχέτευση τους τουρίστας είς Κύπρον, νοουμένου ότι θα συμμετάσχη είς τήν Οπό ΐδρυσιν έταιρείαν. Έάν 5έν συμμετάσχει ή 'Εταιρεία αύτη δέν Θά δυνηθή νά έφαρμώση τους σκοπούς της καθ* όσον αΐ έταιρείαι αϊ κατωνομαξόμεναι είς τό Μδρυτικον εγγραχον έχουν απο κλειστικά άντιπρόσωπόν των τόν κ. Καραγιάννην καΐ έπ' ούδενΐ λόγω θά παραχωρήσουν την άντίττροσώπευσίν των είς τήν έταιρείαν είς τήν οποίαν δέν συμμετέχει ό κ. Καραγιάννης. 25 Ή ΰπό σύστασιν εταιρεία δέν θά είναι οί συνηθισμένοι ταξιδιωτικοί πράκτορες αλλά πραγματικως θά προσελκύει ομάδας τουριστών έκ τοΰ εξωτερικού μέσω τών καλά οργα νωμένων τουριστικών εταιρειών αϊτινες αναφέρονται είς τό Ίδρυτικόν." 30 ("On behalf of our clients we submitted anapplication tothe Central Bank of Cyprus dated 22.2.1974 whereby we requested leave for the participation of Mr. Tsambikos Karayiannis of Greece in the company to be formed under the subject title. 35 We believe that since the policy of the Government is to promote and encourage the touristic industry in Cyprus the participation of Mr. Karayianni in the company will really promote tourism. In the years 1972-1973 he managed alone to attract to Greece 230,000 tourists and he is in a position to divert these tourists to Cyprus, provided that he will participate in the company to be formed. 123 Hadjianastassiou J. Karayiannis & Another τ. Republic
(1980)If he does not participate this company will not be able to implement its objects as the companies mentioned in the Memorandum of Association have Mr. Karayiannis as their exclusive agent and under no circumstances they will assign their representation to the company in which Mr. Karayiannis will not participate. 5 Thecompany to be formed will not bejust ordinary travel agents but will really attract groups of tourists from abroad through the well organized tourist companies which are mentioned in the Memorandum."). 10 On 8th March, 1974, the Ministry of Commerce and Industry in reply said:" Έν αναφορά προς τήν άπό 26ης Φεβρουαρίου, 1974, καΐ ΰπ' άρ.πρωτ.ΦΔ/1650 έπιστολήν σαςέπί τοϋ έν έπικεφαλίδι θέματος εχω οδηγίαςδπωςσαςπληροφορήσωοτι τόΎπουργεϊον έχει έν προκειμένω ενστασιν καθότι Εένοι υπήκοοι θά συναγωνίζωνται Κυπρίους είς ενα τομέα ό όποιος είναι ήδη κεκορεσμένος. 15 Τό ΊδρυτικόνΈγγραφονκαϊ Καταστατικόν της'Εταιρείας επιστρέφονται.1* 20 ("With reference to your letter dated 26th February, 1974 No. F.D./1650, on the aforesaid subject I have instructions to inform you that the Ministry objects in this case as foreign subjects will compete with Cypriots in a sector that is already saturated. 25 The Memorandum and Articles of Association of the company are returned."). Finally, on 14th March, 1974, the Central Bank addressed a letter to counsel of the appellants, and it is in these terms:"With reference to your letter dated 22nd February, 1974, 30 requesting permission on behalf of the above company to issue shares to a non-resident we regret to inform you that under the Exchange Control Law, Cap. 199 we are unable to grant the requisite authority as they would compete with Cypriots in a sector that is already saturated." 35 The appellants, feeling aggrieved, filed a recourse on 23rd April, 1974, alleging that the act or decision of the respondents 124 3 C.L.R. Karayiannis & Another v. Republic Hadjianastassiou J. dated 14th March, 1974, whereby they refused to grant permission to thefirstapplicant to subscribe ina company tobe formed under the style Apollo 8 Tours Ltd. is null and void and of no effect whatsoever. In support of that application, the following 5 grounds of law were put forward:
(1)The respondents acted under misconception of the facts in finding that the incorporation of Apollo 8Tours Ltd., would compete with Cypriots in a sector that is already saturated;
(2)the respondents misconceived applicants' application in that its 10 main object isnot at allsaturated in Cyprus;
(3)the respondents' decision or act is contrary to the general policy of the Government of Cyprus for promoting tourism in Cyprus; and
(4)respondents resorted to absolute prohibition without considering whether conditional or in terms or otherwise grant would 15 have served the public interest and policy and the objects of the application of the applicants. The learned trial Judge, having considered the arguments of both counsel, dismissed the recourse, and had this to say:20 25 30 35 40 "Counsel for applicants argued that respondents misconceived the facts of the application in considering that the company to be formed was one for the sale of tickets and not for the promotion of tourism. The'application of the applicants was only for permission for applicant No. 1 to subscribe for l/3rd of the total number of shares in the company. He also argued that the respondents did not properly weigh all the factors of the case, such as the great number of tourists that applicant No. 1 was in a position to bring to Cyprus, the number of the companies in the tourist trade which he represented, and the fact that these companies would not appoint as their agent a company in which respondent No. 1 did not participate. He further submitted that the respondents ought to have considered the possibility of imposing iestrictions on the permission before arriving "at an absolute prohibition. Finally, he submitted that the respondents acted ultra vires the Central Bank of Cyprus Law 1963 (48/63) particularly sections 3, 4 and 6 of that Law, which deal with the establishment purposes and functions of the Central Bank. Counsel for therespondents, on the other hand, submitted that the decision was taken after taking'into account all 125 Hadjianastassiou J. Karayiannis & Another v. Republic
(1980)relevant factors including the Memorandum of Association ofthecompany,exhibit4,andarrived at theconclusion that the proposed company would have competed with other local companies taking intoconsideration its objects oneof which was the issue and sale of tickets. There was at the 5 material time a great number of tourist agencies operating. The tourists would have been attracted through the cooperation ofapplicant No. 1 with anyoneoftheseagencies and not solelybytheformation ofanew company It is a well-established principle of Administrative Law 10 that on a recourse under Article 146oftheConstitution the Court isnot empowered to substitute its own discretion for that of the Administration (Charalambos PissasNo. 2 v. TheElectricity Authorityof Cyprus,
(1966)3 C.L.R. 784). An Administrative Court can only interfere if there exists 15 an improper use of the discretionary power or a misconception concerning the factual situation or the non-taking into account of material factors (Costas Vafeades v. The Republic of Cyprus,1964 C.L.R. 454). I must say that Ifindno merit in the allegation that the 20 respondentsactedcontrarytolaworthatthey misconceived the facts of the case. On the contrary, the material before therespondents,including theArticlesofAssociation ofthe Company under formation and the views of the Ministry of Commerce and Industry, fully justify the issue of the 25 negative decision reached by them." It should be added that counsel appearing for the respondent has produced a copy of a document showing the real reasons for refusing the application of counsel for theappellants. This document reads as follows:"According to the information given by the Ministry of Commerce and Industry there are in Cyprus 100 local agenciesand a quite bignumber of sub-agencies and representatives, carrying on this lineofbusiness.In addition the air companies themselves are in thisfieldacting as booking 35 and travel agents. In 1973 we had 178,598 arrivals and 87,244 departures. If we take into consideration that these persons leave £3 each,average to the travelagencies then weshall cometoa 126 30 3 C.L.R. Karayiannis & Another v. Republic Hadjianastassiou J. figureof about £600,000. These funds have to be distributed between over 200 agencies, sub-agencies and representatives of companies thus leaving approximately £2,500 to£2,700for each. Theyhardlycovertheirexpenses." 5 On appeal, counsel for the appellants argued at length (
- a)that the trial Judge was wrong in law that the Administrative Court can only interfere if there exists an improper use of the discretionary power or a misconception concerning the factual situation ornon-takingintoaccountofmaterial factors, because 10 in the present recourse factual misconception was apparent; (b)that thetrialJudgewaswrongnottodecidethat the respondent's discretion ought to have been exercised reasonably; and (
- c)that the trial Judge was wrong not to decide on the grounds of Law raised by the recourse and elaborated in its 15 support. Time and again it was said that although the administrative authorities have discretionary powers under the Law, a discretion has to be exercised properly and it is well-settled that in matters of discretionary powers this Court will not interfere so 20 long as on a proper exercise thereof a decision has been taken which wasreasonably open to theappropriateorgan onthebasis ofthematerialbefore it.ButthisCourtisboundtointerfereifthe. said powers have been exercised in a defective manner, orwhen thedecision reached cannot bevalidly supported by the reasons 25 given or when material considerations have not beenduly taken intoaccount. Inarecentcase,inLakerAirwaysLtd. v. Departmentof Trade, [1977]2AllE.R. 182,Lord Denning,dealingwith the powers of the Secretary of State, under the Civil Aviation Act, 1971,had this to say regarding theextent of the Minister's 30 discretionary powers at p. 194:- 35 40 "Wehaveconsidered thiscaseat somelength because ofits constitutional importance. It is a serious matter for the Courtstodeclarethat a MinisteroftheCrown hasexceeded hispowers. Soserious that wethink hard before doing it. But there comes a point when it has to be done. These Courts have the authority, and I would add the duty, in a proper case, when called on to inquire into the exercise of a discretionary power by a Minister of his department. If it found that the power has been exercised improperly or mistakenly so as to impinge unjustly on the legitimate 127 Hadjianastassiou J. Karayiannis & Another v. Republic rights or interests of the subject, then these Courts must so declare. They stand, as ever, between the executive and the subject, alert, as Lord Atkin said in a famous passage, 'alert to see that any coercive action is justified in Law': see Liversidge v. Anderson, [1941] 3 All E.R. 338 at 361. To which I would add 'alert to see that a discretionary power is not exceeded or misused'. In this case the Judge has upheld this principle. Hehas declared that the Minister did exceed his powers. I agree with him. I would dismiss the appeal."
(1980)5 In Yiangos Droushiotis and the Republic of Cyprus, through
- The Minister of Commerceand Industry,
- The Senior Mines Officer,
(1966)3C.L.R. 722,Triantafyllides, J., (ashe then was), dealingwiththediscretionary powers oftheadministration under that law, said at pp. 729-730:™ "...the fact remains that once, under the relevant legislation (Cap. 270), a discretion has to be exercised, as to whether or not to grant a prospecting peimit, such discretion has to be exercised properly; and it is well settled that in matters of discretionary powers this Court will not interfere so long 20 as on a proper exercise thereof a decision has been taken which was reasonably open to the appropriate organ on the basis of the material before it; but this Court is bound to interfere if the said powers have been exercised in a defective manner, as for example, when the decision reached cannot 25 be validly supported by the reasons given therefor, or when material considerations have not been duly taken into account As the ground on which the applications of Applicant were refused did not render it reasonably open for Respon- 30 dent to refuse them finally, at that stage, and as their final refusal, as then made, was clearly not otherwise based on a due consideration of all relevant factors pertaining to their individual merits, it follows that such applications were turned down finally, at the material time, in a defective 35 exercise of the relevant discretionary powers and that the three relevant sub-judice decisions of Respondent in the matter are contrary to law (in the sense that they are contrary to basic principles of Administrative Law relating • to the proper exercise of discretionary powers) and they 40 128 10 15 3 C.L.R. Karayiannis &Another τ. Republic Hadjianastassiou J. have also been taken in excess and abuse of powers, and have to be annulled;" 5 10 15 20 25 30 35 The judgment of this case was affirmed by the Full Bench in the Republic of Cyprus v. Yiangos Droushiotis
(1967)3 C.L.R.
- In Greece, if I may add, the question of judicial control regarding the discretionary powers of the administration in Greece, is dealt with admirably by Professor Economou in his well-known textbook "Judicial Control of Discretionary Powers". At p. 181 he had this to say:"The judicial control of the administrative discretion has been by case-law extended to most cases where the admi nistration acts in a way contrary to the sense of justice generally and in particular the by now settled principles of good or honest or proper or regular administrationaccording to varying terminology of the case law. In these cases theadministrativeJudgechecksthecorrectnessof themethod of the administrative action as characteristically happens in the following groups of administrative acts: (viz.)
- In the case of administrative acts when there is a choice between equal lawful solutions, it was decided that there is excess of the outer limits of the discretionary power whenever the administration had chosen the more onerous solution instead of the more equitable one. In this case equity in the sense of the benevolent assessment of the conflicting interest aiming at the granting of the greater possible protection to him who is most adversely affected by the Law 1 , constitutes a concept narrower than that of the proper use of the administrative discretion and for this reason falls as a class within the genous, in the category of the outer limits In all theaforementioned cases the control of thecorrect ness of the administrative organs refers to the morejust and equitable way which the administration ought to have acted, according to the principles of good administration which have the force of law and particularly those relating to the outer limits." In Vassos Eliades Ltd. v. The Republic of Cyprus through the
- See M.D.Stassinopoulos at p.
- 129 Hadjianastassiou J. Karayiannis & Another \: Republic
(1980)Minister of Commerce andIndustry,
(1979)3 C.L.R. 259 the Full Bench reiterated the principle regarding the discretionary powersoftheadministrationandhadthistosayatpp.266-267:"We think wewould reiterate, what has been said in other cases, that in a modern State it is often found desirable to 5 subject specified activities to some form of governmental control. The purpose of such control will vary. Sometimes, a control is imposed for the purpose of collecting revenue; sometimes the type of activity may be such that it is desirable in the public interest to restrict the number 10 of persons who exercise it. In practice one of the commonest methods whereby control can be imposed is the licence,and a company like any other importer whodesires tocarryonthebusinessofimportation, isrequired tosecure a licence from the Ministry of Commerce and Industry 15 which is the licensing authority under the provisions of section 4
(1)of Law49/62. The import licences are usually granted in persuance of protectionist policies. One, therefore, should remember that inspite of the fact that the Minister has a discretion under the law to refuse or grant 20 a licence to a company—in the public interest, the trend of the authorities in Cyprus is that once a discretionary $ power is exercised, such exercise must be for the purpose for which it was given. As long as the discietion is exercised in a lawful manner the Supreme Court will not 25 interfere with theexercise of suchdiscretion by substituting its own discretion for that of the authority's concerned, even if in exercising its own discretion on the merits, the Court would have reached a different conclusion. (See lacovosL. lacovides v. The Republic
(1966)3 C.L.R. at 30 pp. 219-220) With this in mind and having considered carefully the able arguments of both counsel, and looking at thegeneral scope and objects of our Law, wehave reached the conclusion that although the Minister has a discretion to grant 35 ornot togrant animportlicence,nevertheless,suchadiscretion has to be exercised properly and not in a defective manner. Once, therefore, the Minister under the Law,and in accordance with the Principles of administrative law had a choice between more than one, but equally lawful solu- 40 • tions, in choosing the more onerous solution, instead of 130 3 C.L.R. Karayiannis & Another v. Republic Hadjianastassiou J. themoreequitable one,hasacted, inour view,inexcessof the limits of his discretionary powers.· Applying the principle enunciated by Economou, we thinkthat therefusal oftheMinisterwastaken inadefective manner, because as we said earlier, in the exercise of his discretionary powers hecould have chosen the less onerous one, viz., to grant the permit and impose conditions, that is to say, by restricting and regulating the quantity of the imported rubber gloves or granting a licence but subject to conditions as he may deem fit, or indeed resort to the imposition of import duty on rubber gloves as has been suggested by the applicant company in this case. ,5 10 For all these reasons, we find ourselves in agreement . with counsel for the appellants that the decision of the, Minister wasmadeina defective manner and wascontrary to the law and in abuse of power. We would, therefore, setasidethedecision ofthe Minister and allow theappeal'*. 15 In Cytechno Ltd. v. TheRepublic
(1979)3 C.L.R. 513, I had thistosayonbehalf oftheFullBenchatpp.532-533:20 25 30 35 · "Having considered very carefully the long and ablearguments of both counsel, and having reviewed and analysed the law in a number of cases quoted, we have reached the conclusion by looking at the general scope and objects of our law, Cap. 270, that the Council of Ministers which is entrusted with a discretion under the said law—particularly under sub-section 4 of section 13—have a discretion to renew, or not to renew the prospecting permits, but such discretion has to be exercised properly as not to frustrate the policy and objects of Law, Cap. 270, particularly with regard to the class of persons for whose benefit the power may be intended to have been conferred. With this in mind, and having regard to the facts and circumstances of this case, we would adopt and apply in the present case the principle enunciated by the father of administrative law in England, Lord Reid, viz., that the discretion ofa Minister mightneverthelessbelimited to the extent that it must not be so used whether by reason of misconstruction ofthestatuteorotherreason,asto frustrate the object of the statute which conferred it 131 Hadjianastassiou J. Karayiannis & Another v. Republic
(1980)As we have said earlier, it appears that all the experts expressed a different view and the fears for the pollution ofthewater arenotjustified provided, ofcoursethatappropriatemeasureswouldbetakenbytheappellantcompany... Having in mind thefacts and circumstances of this case, and having relied on the authorities we have quoted, we have reached the view that the renewal of the permits was refused in a defective manner by the administration." 5 This approach laid down inthe abovetwo recent cases of the FullBench,isthecorrectapproach,and Iwouldadopt andapply 10 them in the present case regarding the exercise of the discretionary powers of the administration. The next question is whether the reasons given by the official of the Central Bank in refusing to permit the appellant to subscribe tothememorandum ofthecompany in question, werethe 15 correct ones. I have considered very carefully the arguments put forward by both counsel, and in my view the reasonsgiven by the official of the Central Bank in refusing permission to appellant No. 1 to subscribe tothecompany in question, hasno connection with the powers of the Central Bank. Indeed I 20 would go further and state that in the present case there wasa misconception in the mind of the authority concerned, because the Central Bank in exercising the functions of the Financial Secretary, as our Law shows,wronglyexercisedits discretionary powers in refusing to give permission to appellant No. 1 to 25 subscribetothememorandum ofthecompanybecauseitmisconceived that a person outside Cyprus holding minority shares would compete with the Cypriots in a sector that is already saturated. In myviewbecauseofsuchmisconception theauthority in question, has not taken also into consideration that, it is 30 a cardinal principle of Company Law that it is a separate legal entity and through itselected committeetakesthefinaldecisions in such matters. Once, therefore, an alien shareholder would remaina minority one,in myview,heisunable tocompetewith Cypriots, and the administration, I repeat, in refusing such an 35 application has acted under a misconception regarding the factual issue before them. In thelightoftheauthoritiesandfor thereasonsIhavegiven, I have reached the conclusion that the learned Judge has failed 132 3 C.L.R. Karayiannis & Another τ. Republic Hadjianastassiou J. to attach importance to this point—that appellant No. 1 would have always remained a minority shareholder, and I allow the appeal. Appeal allowed. 5 No order as to costs. TRIANTAFYLLIDES P.: In agreement with my learned brother Judge Mr. Justice Hadjianastassiou, and, regretfully, in disagree ment with my other learned brother Judges who form the majo rity of the Court in the present instance, I am of the opinion 10 that this appeal should be allowed, and not be dismissed. it is an appeal against the first instance judgment of a Judge of this Court by means of which there was dismissed a recourse of the appellants, as applicants, against a decision of respondent 1,theCentralBank of Cyprus, whereby therewas refused permis15 sion to appellant 1 to subscribe for shares in a company, "Apollo 8 Tours Limited", which was being formed. 20 25 For the sake of the completeness of this judgment I have to outline in brief the salient facts of this case, and, in this respect, Ifindit useful to quote,first,paragraphs 1,3and 4of the Opposition which was filed by the respondents in this case: " 1. On 22nd February, 1974, Messrs. L. Papaphilippou & Co., advocates of Nicosia submitted an application to the Central Bank of Cyprus for authority for Mr. Tsambikos Karayiannis, a Greek subject, and a resident of Rhodes to subscribe for 3,334 shares in the share capital of the company APOLLO 8 TOURS LIMITED. 3. The Central Bank in dealing with applications involving the participation by non-residents in the share capital of companies incorporated in Cyprus refers all applica tionsto the appropriateMinistry of theGovernment of the Republic for their views. In this particular case the application was submitted to the Ministry of Commerce and Industry by letter dated 26th February, 1974. 4. The Ministry of Commerce and Industry by their letter dated 8th March, 1974, informed the Central Bank that they objected to such foreign participation as foreign 30 35 133 Triantafyllides P. Karayiannis & Another v. Republic
(1980)nationals will compete with Cypriots in a sector that is already saturated After considering the objections of respondent 2, the Ministry of Commerce and Industry, respondent 1, the Central Bank of 5 Cyprus, informed, on March 14, 1974, counsel acting for the appellants that under the Exchange Control Law, Cap. 199, it was not possible to grant the permission requested by the appellants, namely that appellant 1 should be allowed to sub scribe for 3,334 shares of £1 in the under formation company 10 "Apollo 8 Tours Limited", because "they would compete with Cypriots in a sector that is already saturated". It is to be noted that 6,666 of £1 shares in the said company would be subscribed for by Cypriots, and,therefore, thecompany would not be controlled by an alien non-resident in Cyprus, appellant 1, but by Cypriots resident in Cyprus. 15 It must, also, be stressed that at the time when the permission in question was requested from respondent 1 there existed already in Cyprus appellant 2, "Apollo 8 Tours", which was a partnership, and which would be taken over by the company to 20 be formed as aforesaid. The said partnership was functioning at all material times as a travel agency. That what was conveyed, as aforementioned, to counsel for the appellants by means of the letter dated March 14, 1974, was the true reason for the refusal of the requested permission is 25 fully borne out by the letter of respondent 2 to respondent 1, which is referred to in paragraph 4 of the Opposition, above, and by a document, in the relevant file of respondent 1, which reads as follows:"Reasons for refusing the application of Messrs. L. Papaphilippou ά Co re: Apollo 8 Tours Limited. According to the information given by the Ministry of Commerce and Industry there are in Cyprus 100 local agencies and a quite big number of sub-agencies and repre sentatives, carrying on this line of business. In addition the air companies themselves are in this field, acting as booking and travel agents. In 1973 wc had 178,598 arrivals and 87,244 departures. 134 30 35 3 C.L.R. 5 Karayiannis & Another v. Republic Triantafyllides P. If we take into consideration that these persons leave £3 each, average to the travel agencies then we shall come to a figure of about £600,000. These funds have to be distri buted between over 200 agencies, sub-agencies and represen"tatives of companies thus leaving approximately £2,500 to £2,700 for each. They hardly cover their expenses." It is in accordance with the relevant correspondence and the contents of the said document, that counsel for the respondents presented the case before the trial Court; and, in this respect, I 10 must make it clear that I do not regard what she stated then as any admission, in the strict sense of the term, but as a presenta tion of the case of the respondents in conformity with her instructions and with the material available from the relevant administrative records; in this connection she very properly did 15 what she was bound to do, that is to place before the Court the correct position as regards what has taken place in this case. 20 25 30 35 40 The permission, which had been requested by counsel for the appellants, enabling appellant 1 to subscribe, as a minority shareholder, for shares of "Apollo 8 Tours Limited", was refused under section 10
(2)of the Exchange Control Law, Cap. 199, the material part of which, when modified in accordance with Article 188.4 of the Constitution, reads as follows: "
(2)The subscription of the memorandum of association of a company to be formed under the Companies Law, or any Law amending or substituted for the same, by a person resident outside the Republic, or by a nominee for another person so resident, shall, unless he subscribes the memo randum with the permission of the Central Bank, be invalid in so far as it would on registration of the memorandum have the effect of making him a member of or shareholder in the company, so, however, that this provision shall not render invalid the incorporation of the company; In approaching the validity of the exercise of the discretion resulting in the refusal of permission under section 10
(2), above, it is useful tobear in mindthefollowing principles of Administra tive Law, which are set out in Dagtoglou on General Admi nistrative Law—(Δαγτόγλου, Γενικό ΔιοικητικόΔίκαιο)—
(1977), vol. A, p. 100:"Διακριτική ευχέρεια δέν σημαίνει νομική άττοδεϋσμευση της 135 Triantafyllides P. Karayiannis & Another τ. Republic
(1980)διοικήσεως. Δέν σημαίνει δηλαδή τήν τοποθέτηση της έκτος της περιοχής τοΰ δικαίου. Ή διακριτική ευχέρεια δέν σημαίνει Ιδίως έίουσία προς αυθαιρεσία. Δέν σημαίνει καν τήν έΕουσία τοϋ 'ένεργεϊν κατ* άρέσκειαν', μιά δυνατότητα πού έχει μόνο ό Ιδιώτης (ύποτήν προϋπόθεση βέβαια ότι 5 δέν παραβαίνει τόννόμο). Τό κράτος λοιπόν δέν έχει ποτέ απεριόριστες έΕουσίες. Ή αρχή της νομιμότητος της διοικήσεως εξειδικεύει τήν διαπίστωση αυτή, ορίζοντας ότι ή διοίκηση υπόκειται 10 στους ορισμούς καΐ φραγμούς τοΰ δικαίου. Ή διακριτική ευχέρεια της διοικήσεως συμβιβάζεται μέτό κράτοςδικαίου, ακριβώς γιατί δέν αποτελεί άποδεύσμευση άπάτό δίκαιο. Τό δίκαιοόμως περιορίζεται στην περίπτωση της διακριτικής ευχέρειας αφενός στην χάραΕη τοϋ πλαισίου, τών άκρων 15 δηλαδή ορίων τηςδιοικητικής δραστηριότητος, καΐ αφετέρου στον καθορισμό ορισμένων γενικών άρχων πού κατευθύνουν και περιορίζουν τήν άσκηση της διακριτικής ευχέρειας." ("Discretionaly power does not mean a legally unfettered administration. In other words it does notmean that it is 20 placed outside theambit of the law. Inparticular, discre tionary power does notmean power to act arbitrarily. It does not even mean thepower to'actas it pleases', a possi bility which only an individual has (on the assumption, of course, that hedoes not violate thelaw). 25 The state, therefore, never has unlimited powers. The principle of legality of the administration substantiates this proposition by prescribing that the administration is subject to the tenets and fetters of the law. The discre- 30 tionary power of the administration is reconciled with the rule of law just because it does not constitute a departure from thelaw. Butthe role of the law inthecase of discre tionary power is limited, ontheone hand, tothe definition of theframework, that is of the outer limits, of the admi- 35 nistrative activity, and, onthe other hand, tocertain general principles which direct and restrict the exercise of the discretionary power"). As it is pointed outby Dagtoglou (supra,at p. 101)it isnot the task of a Judge to substitute his own discretion for that of 40 136 3 CX.R. 5 Karayiannis & Another v. Republic Triantafyllides P. theadministration, but only tocontrol theexercise of such discre tion; and this was, also, very rightly stressed by the learned trial Judge in his judgment, where he referred, in this connection, to Pissas (No. 2) v. The Electricity Authority of Cyprus,
(1966)3 C.L.R. 784. One of the principles, which according to Dagtoglou, supra, should govern the exercise of administrative discretion is the principle of "proportionality"; it is stated, in this respect, by him (at pp. 107-108): 10 15 20 25 30 35 40 " Ή αρχή της άναλογικότητος επιτάσσει ότι μεταξύ τοϋ.συγκεκριμένου διοικητικού μέτρου καΐ τοΰ επιδιωκομένου νομίμου σκοπού πρέπει νά υπάρχει μιά εύλογη σχέση. Ή σχέση αυτή υπάρχει μόνον όταν τό λαμβανόμενο μέτρο είναι κατάλληλο για τήν έπίτευϋη τοΰ επιδιωκομένου σκοπού (καταλληλότης), συνεπάγεται κατά ένταση καΐ διάρκεια τα λιγότερα δυνατά μειονεκτήματα γιά τόν Ιδιώτη καΐ τό κοινό (άναγκαιότης) καΐ, τέλος, τά συνεπαγόμενα μειονεκτήματα δέν ύπερσκελίζουν τά πλεονεκτήματα (άναλογικότης). Ή αρχή της άναλογικότητος άνεπτυχθη στό γερμανικό διοικητικά δίκαιο (Grundsatz der Verhaltnismassigkeit), δπου συνεδέθη στην νομολογία τού γερμανικού 'Ομοσπονδι ακού Συνταγματικού Δικαστηρίου μέ τήν αρχή τοϋ κράτους δικαίου και απέκτησε μέ αυτόν τόν τρόπο συνταγματική ίσχϋ. Επίσης Εχει αναγνωρισθεί άπό τό Δικαστήριο τών Ευρωπαϊκών Κοινοτήτων ως αρχή τοΰ Ευρωπαϊκού κοινο τικού δικαίου." ("The principle of proportionality ordains that there should be a reasonable relationship between the particular admi nistrative measure and the lawful object which is being pursued. Such relationship exists only when the measure taken is suitable for the achievement of the object which is being pursued (suitability), entails in intensity and dura tion the least possible disadvantages for the individual and thepublic (necessity) and,finally,the resulting disadvantages do not override the advantages (proportionality). The principle of proportionality was developed in German administrative law (Grundsatz der Verhaltnismassigkeit) where it was connected by. the case-law of the German Federal Constitutional Court with the principle of the rule of law and acquired, thus, constitutional force. It has, 137 Triantafyllides P. Karayiannis & Another v.Republic
(1980)also, been recognized by the Court of the European Communities as a principle of European Community law"). The case-law of the Court of Justice of the European Communities, which isreferred to by Dagtoglou in the above quoted passage, is case No. 11/70 (
(1970)9, C.M.L.R. 294) where it was held that the principle of "Verhaltnismassigkeit", that is of reasonableness or proportionality, is an essential part of the law not only of the Federal Republic of Germany but also of the European Communities. 5 The same principle is reflected in a series of cases (as, for 10 example, No. 300/1936) in which the Council of State in Greece has held that in achieving its lawful aims the administration should choose always the less onerous course for a private citizen, though such principle, as pointed out by Dagtoglou (supra, at p. 108), has been deviated from, occassionally, by the 15 Council of State in Greece when it did not seem to be adopted by the legislation applicable to a particular case. In the light of the foregoing, and of case-law such as that referred to by Mr. Justice Hadjianastassiou in his judgment in this case (Droushiotis v. The Republic,
(1966)3 C.L.R. 722, and 20 on appeal
(1967)3 C.L.R. 232, Vassos Eliades, Ltd. v. The Republic,
(1979)3C.L.R. 259,and CytechnoLtd. v. The Republic,
(1979)3 C.L.R. 513), I am of the opinion that in the present instance the relevant discretionary powers, under section 10
(2)of Cap. 199, were exercised in a manner which was not reason- 25 ably proportionate to the facts of this case, and, therefore, in a manner not reasonably open to the respondents; and, furthermore, in a manner which is defective because it is vitiated by factual and legal misconceptions. My reasons for reaching the above conclusion are, mainly, 30 the following: The formation of the company "Apollo 8 Tours Limited" and the taking over by it of the already existing travel agency "Apollo 8Tours" would not have increased even byanother one only the number of travel agencies operating in Cyprus and, 35 consequently, the ground that there would be increased the competition in a sector already saturated is completely devoid of substance. 138 3 C.L.R. Karayiannis &Another τ.Republic Triantafyllides P. Furthermore, there could not arise a situation in which an alien, such as appellant 1, would compete in the travel agencies field with Cypriots, because it is well settled that a company is an entirely separate entity from its shareholders (see, Salomon 5 v. Salomon mid Co. Limited, [1897] A.C. 22, and Pennington's Company Law, 4th ed., pp. 39-55); and even if, on the ground of paramountpublicinterest,therespondentsweretobe allowed to look behind the separate legal personality of "Apollo 8 Tours Limited" in order to take into account the nature of its 10 shareholders, they would find out that it would be a Cypriot controlled company, and not a company controlled by a non resident, such as appellant 1, who would be only a minority shareholder, and, therefore, there could not arise any valid reason for putting forward, as a ground for refusing permission 15 under section 10
(2)of Cap. 199, what is stated in the letter of March 14, 1974, namely that there would be competition by a non-resident with Cypriots in the travel agencies sector. 20 I have, consequently, reached the conclusion that this appeal ought to be allowed and that the sub judice refusal to grant permission to appellant 1 to subscribe for shares of "Apollo 8 Tours Limited" should be annulled. TRIANTAFYLLIDES P.: In the result this appeal is dismissed by majority, without any order as regards its costs. Appeal dismissed.No order as to costs. 139