clr/1987/1987_1_303.pdf

(1987)acceptors of the bills of exchange, the respondent company applied for an interlocutory injunction restraining the Bank from proceeding against its former clients as certainof the Bills had been discharged by their acceptors and the company had collectedthe money, butthe bills had remained in the possession ofthe Bank. 3 The tnalCourt held thatany nghtswhich the Bank may have underthebills would depend on the debtofthe company towards the Bank andthat ifthere was no debt the Bank would have no nght to collect on such Bills. Consequently, the tnal Court issued the interlocutory injunction applied for. Hence the present appeal. ^" Held, dismissing the appeal·

(1)Pnmanly the granting of an interlocutory injunction is a matter of judicial discretion which is not interferedwith by an Appellate Court, unless such Court is persuaded that such discretion was wrongly exercised.

(2)Interlocutory injunctions are granted under s 32" of Law 14/60. The 1 5 applicant mustshow thatthereisasenous question tobetnedandthatonthe factsbeforethe Court thereisaprobabilitythattheplaintiffisentitledtorelief. When these two requirements are satisfied the Court must proceed to examine whether the balance of convenience favours the grant or refusal of the interlocutory injunction (A passage from Af andM. Transport Co Ltd ν 2 0 Eteha Astikon Leofonon Lemessou Ltd.

(1981)1 C.L R. 605 cited with approval).

(3)In this case the bills of exchange were given to the Bank as secunty for theadvance. Itwas expressly agreed(Clause7)thatuponmaturitythey would be redeemed by the Bank for the purposes of the advance. Furthermore clause8 provided forthe liability of the respondentcompany topay the Bank the amount of any bill not honoured by the acceptor upon matunty 25

(4)Ifthe respondents'applicationsucceeds,thedebtofthepnncipaldebtor would be suspended duringthe abnormal situation (Section3 ofLaw 24/79) and the protection would extend to the guarantors (Section 2 of the same 3 0 Law). Consequently, insuchacaseany money collectedbytheBank fromthe acceptorswould notbepayable intotheaccountoftherespondent company, whereas in accordance with the agreement they cannot beapplied otherwise than against the debt of the respondent Company.

(5)From the factsbefore the tnal Court this Court reached the conclusion 3 5 thattheapplicant/respondent in thisappealsucceededinmakingan arguable case with a probability thatit isentitled to the relief claimed Itwas within the * "Tie proviso tos 32 is quoted atp. 308 post 304 National Bank v. Motovia Ltd 1 CX.R. discretionofthe tnalCourt topreservethe statusquo untilthe determination of the application Appeal dismissedwith costs Casesreferredto 5 Barclays Bank Ltd ν Aschaffenburger Zelistoffwerkd A G [1967] 1 LI Law Rep. 387. Barclays Bank Ltd ν Astley Industnal TnjstLtd [1970] 1 A11E.R 719, Karydas TaxiCo Ltd v.Komodtkis

(1975)1 C L.R 321, 10 Μ andM TransportCo Ltd v. Etena Astikon Leofonon Lemessou Ltd

(1981)1 C L R 605, Odysseos ν A Piens Estates Ltd

(1982)1 C L R. 557. Appeal. Appeal by respondents against the interlocutory order of the District Court of Nicosia (Papadopoulos, P.D.C.)dated the 22nd 15 July, 1983 (Appl. No.36/80) whereby the injunction restraining them from filing an action against the applicants was made absolute. A. Dikigoropoulos. for the appellants. K.Michaelides,for the respondent. 20 Cur. adv. vult. A. LOIZOUJ read the following judgment of the Court.This is an appeal from an interlocutory injunction of the DistrictCourtof Nicosia in Debtors Relief Application No. 36/80, whereby the respondent Company was, inter alia, restrained from filing an 25 action against the acceptors of billsof exchange drawn by them, applicants in that application - and indorsed in favour of the appellant Bank as security for credit facilities in the terms of two credit agreements. The background to thisappeal is as follows: 30 Therespondent Company,themainbusiness of which isthatof acardealerandimporter,entered intotwoagreements onthe 21st November 1969, and the 8th March, 1971, with the appellant Bank for credit facilities totheamountof £25,000.- 305 A. Lolzou National Bankv. Motovia Ltd

(1987)In accordance with clause 4 of the principal agreement of the 21st November 1969, the respondent Company indorsed and delivered toappellant Bank a number of bills of exchange issued in its favour by third parties for the purpose of securing such overdraft, which were bills calculated at 75 percent of their face 5 value. According toClause 7thebillswerepayable totheBankat maturityandifnothonoured,according toClause 8,theappellant Company was liable to pay the amount of any such bill to the Bank, if not accepted. Respondents 2 and 3 signed as guarantors of the respondent Company. ™ On the basis of the above agreements the appellant Bank provided overdraft facilities to the respondent Company, which continued untilthe 14thAugust

1. On the 29th January 1975, the respondent Company was 15 declared by the Ministry of Labour and Social Insurance a «stricken debtor> and subsequently on the 3rd March, 1980, it applied under the Debtors Relief (Temporary Provisions) Law 1979 (Law No. 24 of 1979), as principal debtors and respondents 2 and 3 as its guarantors by Application No. 36/80 of the District 20 Court of Nicosia,thattheybe declaredstricken debtorsandthatas such they were entitled tothe benefits afforded by such Law and in particular thatpayment of all debts tothat Bank be suspended and that no interest be charged on such debts; and that the acceptors of thebillsdelivered tothe Bank as security be declared 25 as their co-debtors and/or guarantors and be afforded the same protection under Law No. 24 of
2. Finally,as theappellant Bank initseffort torecover theamount due toit,had proceeded tofile courtactionsagainst theacceptors of such bills of exchange, which had matured, the respondent 30 Company applied for an interlocutory injunction restraining the Bank from proceeding against its former clients as certain of the bills had been discharged by their acceptors and ithad collected the money but the bills had remained in the possession of the _ Bank. It was decided by the trial Court in granting the interlocutory injunction thatthematterhad tobe considered inthelightof both theprovisions of Law No.24 of 1979 andtheagreement between 306 Λ 1CUR. National Bank v. Motovia Ltd A. Lotzou theparties since «anyrightwhich the Bank may have inrespect of the bills of exchange, according to the terms of the agreement must pass from the applicant Company, thatis, itwould depend on thedebt of thepompany towards theBank, ifsuch existed, as 5 such bills were given to the Bank, as security for the debt of the Company and therefore, if there was no debt, the Bank would have noright tocollect on such bills». As a result of this decision the appellant Bank tiled the present appeal. Its main argument is that it is irrelevant whether the 10 respondent Company,isentitledornottothebenefits of Law No. 24 of 1979 in that it was contended, the Court in granting the interlocutory injunction, misdirected itself and erred in Law in concluding that the rights of the appellant Bank against the acceptors of Billsof Exchange drawn upon such acceptorsby the 15 respondent Company and indorsed to the appellant Bank for good and valuable consideration,weredependentuponthe debt (obligation) if any, of therespondent tothe appellants. It was argued that the obligations of the acceptors are not dependant on the obligations of the respondent Company, but 20 thatinthis instance the acceptors would have nodefence against the Bank which is a holder for value and that irrespective of the termsof theagreement andtheresulting obligations of Motoviato theBank,oncethebillswerehandedover toitassecurity ithasthe righttocollect from those thatare liable topay Motovia. 25 The cases of Barclay* Bank Ltd., v. Aschaffenburger Zellstoffwerke A.G. [196η 1 Lloyd's Law Reports 387 and BarclaysBank Ltd., v.AstleyIndustrial TrustLtd., [1970]1All E.R. 719 were cited in support. On the otherhanditwas argued by counsel for therespondent 30 Company that the position of the respondent Company under Law No. 24 of 1979 is a most material factor and such that must primarily be taken intoaccount indeciding thisappeal and when considering the position of the acceptors of such bills, as it was submitted,ineffect section2of theLawprotectsallpersons whose namesappearonthebillssince oneof them,theprincipaldebtor, 35 isan«affected person», ft was contendedthatthepresentinstance isa case of a loan granted tothe respondent Companyby way of current accountsecured by the pledge of thebillsof exchange to 307 A. Loizou National Bank v. Motovia Ltd

(1987)the Bank and, since such loan cannot directly be repaid by the respondent Company, the Bank cannot indirectly proceed to collect such money from the acceptors of the bills; consequently the interlocutory injunction was correctly granted by the trial Court. Before embarking to deal with the arguments of the parries as put forward, we must considerfirst thebasicprinciples governing the granting of interlocutory injunctions. Primarily the grantingof an interlocutory injunction isa matter ofjudicial discretion which isnot interfered with by an appellate Court unless itispursuaded thatsuch discretionwasexercisedwrongly.See KarydasTaxiCo., Ltd. v. Komodikis

(1975)1 C.L.R. 321 at p. 327; M. & M. Transport Co. Ltd. v. EteriaAstikon Leoforion Lemessou Ltd.,

(1981)1C.L.R. 605 at p.611;Odysseos v.A. Pieris Estates Ltd.,

(1982)1C.L.R. 557. Interlocutory injunctions are granted under section 32 of the Courts of Justice Law 1960, Law 14 of 1960 and the proviso to sub-section

(1)thereof providesas follows: «Provided that an interlocutory injunction shall not be granted unless the Court is satisfied that there is a serious question to be tried atthe hearing, that there isa probability that the plaintiff is entitled to relief and that unless an interlocutory injunction is granted it shall be difficult or impossible to do complete justice at a later stage.» Inthe case of M.&M. Transport(supra)itwasstated inrelation 25 thereto;«The principles governing the grant of an interlocutory injunction, because ofthe wording of theprovisotos.32

(1), follow closely those formulated inPreston v.Luck, [1884] 27 Ch.D. 497, so a party asking for an interim injunction must 30 show that there isaseriousquestion tobetried atthe hearing andthatonthefactsbeforetheCourtthereisaprobabilitythat the plaintiff;is entitled to relief in contrast to the principles adoptedbytheHouseofLordsintheAmerican Cyanamid C. v.Ethicon Ltd., [1975]1 AllE.R.504,wheretheydiscouraged 35 evaluation, at this stage, of the probabilities of success. (Acropol Shipping Co., Ltd., and Others v. Petros I.Rossis,

(1976)1 C.L.R. 38; Nemitsas Industries Ltd., v. S. & S. MaritimeLinesLtd., andOthers

(1976)1 C.L.R.302;Karydas Taxi Co. Ltd. v. Andreas Komodikis,

(1975)1 C L.R. 321; 40 Constantinides v. Makriyiorghou and Another

(1978)1 308 10 15 20 I C.L.R. 5 National Bank v.Motovia Ltd A- Loizou C.L.R. 585).When the above requirements are satisfied, the Court must proceed to examine whether the balance of convenience favours the grant or refusal of the interlocutory relief sought.Inbalancingmattersrelevanttoconveniencean important consideration centres round the need to preserve the status quo. Bythe expression 'preservation of the status quo' we mean the position prevailing when the defendant embarked on the activity sought to be restrained. (The Cyanamid case;Smith andOthersv. InnerLondon Education 10 Authority [1978] 1 AllE.R.411;BryanstonFinanceLtd.,v.de Vries(No.2), [1976] 1 AllE.R.25).» Useful reference mayalsobe made totheKarydascase(supra).. where an extensive review of the English Law governing the granting of interlocutory injunctions appears atpp.327-329. 15 As it appears from the agreement between the parties which wasatallmaterialtimesbefore thetrialCourtandisnowbeforeus, in accordance with Clause 4 thereof, the bills were given to the Bank as security for the advance granted to the respondent Company. Itwasfurther expresslyagreed, byClause 7,thatupon 20 their maturity such billswould be redeemed bythe Bank itself for the purposes ofthe advance. Furthermore in Clause 8, itisprovided thatthe«borrower»that isMotovia, would be responsible topay the Bank the amount of any billnot honoured bythe acceptor upon maturity. 25 Now, ifMotovia were at the end of the day to besuccessful in theirapplication undertheDebtor'sRelief Law,theirdebttowards theBankwould, accordingtosection3 oftheLaw,be suspended duringtheabnormal situation andbyvirtueofsection 2oftheLaw such protection would alsoextend toitsguarantors. 30 Consequently, insuchacase,anymoneyreceived bythe Bank in its effort to recover the debt would not be payable into the account of Motovia and the Bank would therefore not be able to apply the money for the purpose it was collected as it would otherwise bedefeating the purpose ofthe Debtor's Relief Law. 35 Weconsider that itisnot forthisCourt to decide whether such bills were discharged by the acceptors or not, or whether they were, as argued, received by the Bank for discounting or for securing,assuchmattersaretobedecidedbythetrialCourtforthe purposesoftheapplicationbefore it.Suffice itforustosaythatany 309 A.Loizou National Bank v.Motovia Ltd

(1987)moneyreceived bytheappellantBankfrom thosebillsaccording tothetermsoftheagreement canonlybeappliedagainstthedebt oftherespondent Company. We feel therefore that from the facts before the trial Court, alwaysbearinginmindthatsuchinjunction wasgrantedbyitinthe 5 courseofanapplicationundertheDebtor'sRelief Law,therewere sufficient grounds for the applicant Company the present respondents, to make an arguable case withaprobabifity thatitis entitled to the relief claimed. We have therefore reached the conclusion that it was within the discretion of the trial Court to 10 preserve, ifitso deemed fit, as itdid, the status quo untilthe final determinationoftheapplicationbeforeitinorderthatthepurpose for which the Debtor's Relief Law was enacted might not be defeated and that ittherefore correctly granted the interlocutory injunction complained of. In the result this appeal fails with costs in favour of the respondents. Appeal dismissed withcosts infavourof respondents. 310 15