clr/1987/1987_3_933.pdf

(1987)On 3rdDecember, 1986,followinganapplication,theCentralBank issued a permit by which it allowed the transfer of the nghtsof the shareholders of applicants 1 -York International Secunties B V » to the company «Downholme Investments Ν V» which it was stated to be a company registeredin Holland By letter dated 14 2 87 the respondents revoked the aforesaid permits on the followinggrounds, namely (

1. a)The permission of 3rd December 1986 was obtained by misrepresentations thatDownholme International Investments Ν V was a Du'ch company whilst itwas acompany of Netherland Antilles 10 (
2. b)Applicants 1 are carrying out the business of Brokers which was not envisaged in and itisultravires their Memorandum of Association, (
3. c)The activities of applicants 1 in procunng, accepting and investing money belonging to persons other than their shareholders are contrary to the conditions setout in aforesaid letterof 16thSeptember, 1986 15 Beforereachingtheaforesaiddecisiontherespondentsexaminedtheissue whether tomodify theconditionsofthe aforesaidpermits,butdecidednotto do so on the following grounds, namely (
4. a)The applicants have not demonstrated the senousness and professionalism which isdemandedin the carryingoutofthebrokerage 2 0 business, a field which is extremely sensitive because it deals with the investment ofmoney of a largesectionof the public (
5. b)The applicants were not giving adequate financial data and were not issuing a proper prospectus, but, on the contrary they were applying methods which are contrary to all brokerage propnety and which are 2 5 descnbedas «boilerroom methods (
6. c)Both Mr Leslie Steward Weber, who is the Managing Director of applicants 1 and who is represented as shareholder of applicants 2 as wellastheofficerofapplicants1 Mr TonyMurphy,wereconnectedwith Rrst Commerce, and in any event, neither these two nor the other two 3 0 alleged shareholders of applicant 2, affordedthe safeguards for such a senous activity On 20 2 87 the respondents decided to block the accounts, which applicants 1 kept with the Bank ofCyprus, and the Hellenic Bank Hence this recourse impugningthe validity ofthe saidrevocation and the decisionto block the accountsof applicants 1 In a nutshell the case for the applicants is as follows (
7. a)There was no misrepresentation, but a mere misdescnpbon as regards the place of registration of applicants 2, which the respondents could discover with 934 35 3 C.L.R. Y o r k I n t e r n a t i o n a l v. C e n t r a l B a n k rudimentary diligence in any event this was not a matenal factor because it did not contravene the policy of the respondents as explained in a pamphlet Exh 17 In this respect counsel for the respondent contended that if the respondents had been aware of the place of registration they w o u l d never 5 have given the permits because according to their policy very stnct conditions are imposed when giving permits to companies registered in places of convenience Counsel for the respondents further contended that respondents'policy is not to be found in Exh 17. but m Exh 14, which is a letter to the Vice-President of the Cyprus Bar Council 10 (
8. b)The business of brokers was not ultra vires the Memorandum o i Association In support of his case he invoked inter alia sub-clause3

(6)ofthe M e m o r a n d u m , which is drafted in the usual terms and gives to the Board power to do whatever thev may deem lo be beneficial to the companv, (

1. c)As regards ground (
2. c)in the letter of revocation, counsel for applicants 15 submitted that «investment» presupposes exercise of discretion by the person «managing funds» as to where to invest (
3. u)The applicant 1 ! were not bound to issue a prospectus and therefore the respondents in deciding not to modify the conditions of ύικ permits ' " " r e labounng under a misconception of fact namely that the applicants were 20 b o u n d to issue a prospectus It must be noted that before the *ub judice revocation* of the permits the Central Bank received information through«Interpol» that«York International Secunties Ν V» of Holland which was the initial shareholder of applicants 1 and the activities of which applicants 1 were continuing was involved in the 25 sale of shares of Biomedica Ν V and of Practical Investor Publications Ν V with the method k n o w n as «boiler room» (Exhibit 18) The message also mentioned that this company had applied to the Dutch authonties for a permit under a law recently enacted in Holland to deal with the sale of shares and of other valued documents but its application was rejected In addition it was 30 mentioned that against the company there were accusations, which until then had not been investigated and that Mr Leslie Steward Weber Managing Director of this company, as well as of applicants 1, had worked as a ^salesman of shares through telephone» with the company First Commerce which is mentioned in Exhibit 7 35 H e l d dismissing the recourse

(1)There is a difference between Exhibit 17 and Exhibit 14 in that Exhibit 14 contains a provision to the effect that the ultimate beneficial owners of an off-shore company shall not change without the p n o r approval of the Central Bank The Court considered the contentions of both counsel as regards ground (a)of the letterof revocation and is satisfied 40 that the Central Bank of Cyprus acted on information given to It by the then advocates of applicants 1a n d that the bank w o u l d not have given the permits if it knew that the D o w n h o l m e company was registered in the Dutch Antilles which is a place of convenience 935 York Internationalv. Central Bank

(2)The legality, scope and effectiveness of a clause, such as the clause in sub-paragraph 6

(3)of the Memorandum of Association of Applicants 1, was consideredin BellHousesLtd ν City WallPropertiesLtd [1966]2Q Β 656 What is in issue is the constructionof the Memorandum of the company, in order to ascertain whether the business of brokers is intra vires or ultra vires 5 the Memorandum ThisCourt hascometotheconclusionthatthebusiness of brokers is ultra vires the Memorandum of the company because it is not expressly stated in the Memorandum as part of the objects clause and also because it cannot be held that the business of brokers is incidental and conducive to the attainment of the objectsof the company JQ

(3)As regardsground (c)in the letter of revocation the short answer tothe submission of the applicants is that the applicants admitted that they sold shares toover3.000 personswhichwere notshareholders oftheircompanies and,thereforethey actedcontrarytotheconditionssetoutin thesaidletterof the 16thSeptember, 1986 15

(4)In the lightof the factsin thiscasethe Court reachedthe conclusionthat the respondents ought not tohave examined the possibility of modifyingthe conditions, because that would mean that the respondents should embark on an exercise ofredrafting the objectsintheMemorandum ofAssociation of applicants 1 (KarayianmsandAnother ν Central Bank

(1980)3 C L R 108 2 0 followed, Vassos Ehades Ltd ν The Republic

(1979)3 C L R 259 distinguished)

(5)Since, however, the respondents did in fact examine the possibility of imposingconditionstheCourt hastoexaminethe implicationofthefactthat respondents laboured under the erroneous impression that the applicants were bound to issueaprospectus When severalgroundsare givenin justification of adecision,it issufficient if one of them can support the decision, but exceptionally when one of the several grounds is erroneous, the decision should be annulled, if it does not appear therefrom the degree of influence of the erroneous ground in the takingofthe decision (A passage fromthe Conclusions fromthedecisions of theGreek Council ofState 1929-1959 citedwith appoval) In the opinion of the Court the fact that one of the grounds set out in paragraph 8 of the Opposition was defective,does not make all the grounds defective because, in the circumstances of this case,this misconception did not influence toagreat extent the respondent bank in itsdecision 25 30 35

(6)The Bank oughtnottohavetaken intoconsiderationthecontentsofthe message of Interpol (Exh 18), because the applicants were not given the opportunity tobe heardwith regardtothecontentsofthemessageandthisis contrary totherulesofnaturaljustice In the lightofthematenalbeforeit,the 4 0 Court has come to the conclusion that the respondents in deciding the sub judicerevocation did not rely onsuchreport 936 York International v. Central Bank 5

(7)Thecruxof thiscase i^whether the respondentbankproperly exercised itsdiscretionandthedecisionitreachedwas reasonably opentoitonthe basis of the matenal before it In the light of the matenal before this Court the answer isintheaffirmative bothasregards thedecision torevoke thepermits of the applicants and as regards the decision to block the accounts of applicants1 Recoursedismissedwith costs to be assessedby theRegistrar Casesreferredto 10 Bell Houses Ltd ν CityWallPropertiesLtd [1966)2QB 656 KarayiannisandAnother ν TheCentralBank of Cyprusand Another

(1980)3 C L R 108. VassosEliadesLtd ν TheRepublic

(1979)3 C LR 259 Recourse. 15 20 Recourse against the dectbiun of the respondent to revoke the permits granted, under the provisions of section 10 of the Exchange Control Law, Cap 199, to applicants 2 to become shareholders of applicants 1and also toblock theirbank accounts by virtue of the provisions of theabove Law T. Papadopouhs, for the applicants. A. Evangelou, Senior Counsel of the Republic, for the respondent. Cur adv.vult KOURRIS J read the following judgment By the present 25 recourse applicants pray for:- 30 1)Adeclaration of theCourtthattheactand/ordecision of the respondent Central Bank of Cyprus, which was communicatedto the applicants by letter dated 14th February, 1987 whereby it revoked the permits which were granted by virtue of the provisions of s. 10 of the Exchange Control Law, Cap. 199, to applicants 2 to become a shareholder of the applicant company No. 1, isvoid and of nolegal effect. 2)Adeclaration of the Courtthatthe actand/ordecision of the respondent Central Bank of Cyprus, which was communicated to 35 the applicants by letter dated 9th March, 1987 whereby it 937 Kourris J. York International v. Central Bank

(1987)prohibited the applicants from carrying out their business and whereby itblocked the bank accounts of the applicants byvirtue of the provisionsofTheExchange Control Law,Cap. 199 and/or as a result of the unlawful act of the respondents referred to in paragraph 1above, itisalsovoid and of no legal effect. 5 Therespondent CentralBankbytheiroppositionallegethatthe actionsand/or decisionscomplained of, havebeen taken lawfully and correctly in accordance with the provisions of sections 40(l)(b),44

(2)and34ofTheExchange ControlLaw,Cap. 199(as amended) on the basisofall facts and circumstances of the case. 10 Thesalient facts of thisrecourse shortly are asfollows:On 21stMay, 1986thelawoffice ofMessrs.K.Chrysostomides and Co.submitted tothe Central Bankan application toestablish in Cyprus what is commonly known as an «off-shore» company,«York International Securities (Cyprus) Ltd.,» (Exhibit 15 1), the proposed objects of which were the carrying out of the business ofinvestmentsandmanagement ofinvestementsand for thispurpose the acquisition and possession ofshares, bonds etc., the then proposed shareholder was the company Downholme International Investment N.V.which wasstated toberegistered in 20 Holland. Because theaforesaid applicantsfailed topresenttotheCentral Bank, bank references forthe proposed shareholder asthey were initially requested, they proposed on 11th September, 1986 asa new shareholder of the company two Cypriot companies which 25 would be holding the shares as nominees of the company «York International Securities B.V.» of Holland (Exhibit 2). Bank references were presented in respect of the company «York International Securities B.V.». In addition on 16th September, 1986 the applicants by letter of their advocates informed the 30 Central Bank of the names of three persons as the registered shareholders of «YorkInternational SecuritiesB.V.,».Again, there was no bank or other reference for these persons and no such references were taken into account for the purpose of the application except the assurance that no Cypriot interests were 35 involved (Exhibit3). On 16th September, 1985,theCentralBankissued itspermitto theapplicant company under certain conditions(Exhibit4).Itwas a basic condition of the licence that the company, applicants 1 in this recourse, should not cany out any activities which would be 40 938 3 C.L.R. York International v.Central Bank KourrU J. considered as banking activities in general, activities which are usually carried out by banks or to deal with the management of moneysofanypersonsexceptthosewhowereshareholdersofthe company or would specifically be approved bythe Central Bank 5 ofCyprus. On 3rd December, 1986,following an application, the Central Bankissued a permit bywhich itallowed the transfer of therights of the company «York International Securities B.V.» to the company«Downholme InvestmentN.V.»whichagainitwasstated 10 tobe a company registered inHolland (Exhibits5(a),(b)and(c)). Followinginformation receivedbytheCentralBankconcerning theactivitiesofapplicants1,applicants 1 wereaskedtosubmitfull details of the work which they had carried out since the establishment of the company. They were asked to include in 15 these details the list of names of the parties with which the company had dealt with i.e., concluded deals. Instead of complying, applicants 1 asked for a meeting with the Central Bank, which meeting took place on 7th February, 1987 At that meeting, a certain John Addey, on behalf of applicants 1, spoke 20 from a manuscript and delivered a copy of his speech together with several documents (Exhibits6(a), (b), (i)(ii),(Hi),(iv), (c),(d), (e),(0and (g)). During that meeting it was ascertained that Downholme International Investments NV. was established in the Dutch 25 AntillesandnotinHollandanditwaspointed outtothe applicants thatastheiradvocatesverywellknewtheCentralBankwouldnot haveissuedthepermit (Exhibit5(c))if, astheywereobliged todo, theyhaddisclosedthatapplicants2wasaDutchAntilescompany; andthisbecause,onthebasisofthepolicybeingfollowed insuch 30 matters, it was not allowed to off-shore companies, being registeredinCyprus,toopen offices inCyprus,inthecaseswhere the shareholders or the beneficial owners of such shares are companies established in places of convenience. It was furthermore, stressed to applicants 1that their business as stock35 brokers were contrary to the terms of their licence dated 16th September, 1986 (Exhibit 4),and that activities of such kind are ultraviresof their Memorandum of Association. On 9th February, 1987twoofficers of the Central Bankvisited the office of applicants 1for a fuller briefing on the operationsof 40 applicant 1. For this purpose applicants 1 were again asked to 939 York International v. Central Bank

(1987)produce thelistofthe namesoftheirclients,inthesamewayasthe Central Bank had asked through its letter dated 29th January, 1987 but Mr. Weber refused to comply on the ground that he considered thelistasconfidential andthathemightdelivereitafter consultation with the other shareholders of the company. The officers oftheCentral Banksecured, however,severaldetailsasto the mode of operation ofapplicants 1 and theyweregiven copies of the material used by applicants 1for the promotion of the sale of the shares of Biomedica N.V. and of Practical Investor Publications N.V. 5 Thereupon, the Central Bank communicated through «Interpol» with the Dutch authorities and they received information that «York International Securities N.V.» of Holland, which was the initialshareholder ofapplicants 1and the activities of which applicants 1werecontinuing, wasinvolved inthesale of lo shares of Biomedica N.V. and of Practical Investor Publications N.V. with the method known as «boiler room» (Exhibit 18). The message also mentioned that this company had applied to the Dutch authorities for a permit under a law recently enacted in Holland to deal in the sale of shares and of other valued 20 documents but its application was rejected. In addition it was mentioned that against the company there were accusations, which until then had not been investigated and that Mr. Leslie Steward Weber, Managing Director of thiscompany, aswellasof applicants

1. had worked as a «salesman of shares through 25 telephone» with the company First Commerce, which is mentioned in Exhibit
2. The Central Bank evaluated the material and documents inits possession and decided that the permits issued could not remain valid for the reasons which were finally set out in the revocation 30 letter dated 14th February, 1987 (Exhibit 8). The possibility of modifying thetermsofthethenexistingpermitortheissueofanew permit with varied conditionssothatthecompany could continue itsoperationswasfinally turned down because itwasdecided that this would not be conducive to the financial interests of Cyprus 35 and,especially intheinterestsoftheprotection, maintenance and development of substantive foreign exhange interests of Cyprus. They maintained that whilst the Republic is aiming at the development of thecountryasaCommercial andFinancial centre on ahealthy basisthe applicants:40 940 l 0 3 C.L.R. York International v. Central Bank Kourria J. (a)Have notdemonstrated theseriousnessand professionalism which isdemanded inthe carrying out of the brokerage business, a field which is extremely sensitive because it deals with the investment of money on alargesection of the population. 5 (b)Werenotgivingadequate financial dataandwerenotissuing a proper prospectus but, on the contrary, they were applying methods which are contrary toallbrokerage propriety and which are described as«boiler room» methods. (c) Both Mr. Leslie Steward Weber, who is the Managing 10 Director of applicants 1and who isrepresented asshareholder of applicants
3. as well as the officer of applicants 1, Mr. Tony Murphy,wereconnectedwith«FirstCommerce»andinanyevent, neither these two nor the other two alleged shareholders of applicants2, afforded the safeguards of such serious activity. 15 The respondent Bank alleged that affording to the applicantsa «roof»facilitating the carrying out oftheir operations inthewayin which they were aiming at carrying them out, would irreparably expose the Republic to the danger not only that new reputable «off-shore» companies will not come to Cyprus but also that 20 existing important companies will leave Cyprus with corresponding repercussions to the financial and particularly to the foreign exchange interests of the Republic. Asaresult, on 14th February, 1987,theCentralBankof Cyprus by itsletter (Exhibit8)hasrevoked the licences which were given 25 tothe applicants and forthe reasons mentioned therein. On 16thFebruary, 1987,therespondent CentralBankreceived information from the authorities of Jersey (Exhibit 9), that Richmond Financial Services Ltd., which applicants 1 were presenting as being the underwriters for the shares the sale of 30 which they were promoting was infact usingthe addressof alaw office has repeatedly refused to act as the representative of the groupofcompaniesofRichmondFinancialServicesLtd., because it was not satisfied with the good faith of the persons behind this group. 35 After the revocation of the permits which was done by the Central BankinexerciseoftherightsvestedintheCentralBankby virtue ofs.40

(1)ofThe Exchange Control Law, Cap. 199and on the basis of the information mentioned hereinabove and which had been received in the meantime, the Central Bank on 20th 941 Kourris J. York International v. Central Bank

(1987)February, 1987 by virtue of s. 34 of the said law decided the blockingoftheaccountswhichapplicants 1 werekeepingwiththe BankofCyprusand theHellenicBank(Exhibits10(a)and (b)).The object of this blocking of accounts was the supervision of the movement of the accounts of the company in such a way as to 5 safeguard the interests of Cyprus and to avoid the flow of money abroad either with direct remittances or through «reciprocal dealings» in Cyprus in violation of the Law. The blocking of accounts by virtue of Section 34 does not have the meaning of confiscation ordeprivation ofthe property of applicants 1but, as 10 stated, itaimsatthe exercise of a lawful control. It is pertinent, at this stage, to set out so far as relevant, the contents of the revocation letter (Exhibit 8) «in view of the seriousness of each one of thefollowing facts, namely, that:(

1. a)Our permission of 3rd December, 1986 was obtained by 15 misrepresentations that Downholme International Investments N.V.wasaDutch company whilstitwasacompany of Netherland Antilles; (b)You are carrying out thebusiness of Brokerswhich was not envisaged inanditisultraviresyourMemorandum ofAssociation; 20 (c)Your activities in procuring, accepting and investing money belongingtopersonsotherthanyourshareholdersarecontraryto the conditions set out in our aforesaid letter of 16th September, 1986; We hereby revoke the permissions given to you under the 25 Exchange Control Law, Cap. 199inthe aforesaid letters». The case ofthe applicants,ina nutshell, isas follows:The applicants allege that rumours reached the Central Bank aboutwhattheBankcalls«boilerroom»operationsinHollandand the Bank was informed that one such firm operating in Holland 30 wasFirstCommerce InvestmentLtd.,anditwasalsoinformed that Mr. Leslie Weber, the Managing uirecior of applicants 1, was employed as a salesman of shares for some time;on the basisof the above, the bank unjustifiably and unjustly drew the unwarranted conclusion that applicants 1 were carrying out in 35 Cyprus a «boiler room» operation; and on these rumours and suspicionsand onunproved information thebankdecidedasfrom 7th February, 1987 or at the latest from 10th February, 1987 to 942 3 C.L.R. York International v. Central Bank Kourris J. revoke the licences of applicants 1 without proper or further inquiry and on unjustified grounds both in law and in fact The applicants also allege that the grounds set out in the letter of revocation dated 14th February 1987 (Exhibit 8), are not the 5 true grounds on which the respondent bank based their decision for therevocation of thepermits but these are pretexes and made up grounds used by or devised by the respondents in order to conceal the true grounds on which the revocation was decided upon, because the respondents correctly realized thatthey could 10 not substantiate in law the grounds given in paragraph 8 of the opposition which are really thetrue grounds They submitted that they die notguilty of theacts ascnbed tothem Applicants alleged that the respondents took the decision to withdraw the permits and/or licences of the respondent 15 a)in abuse of power, and/or b)inwrongful and/orunlawful exercise ofdiscretionary powers. and/or c)on a misconception of law and/orfacts, and/or
2. d)in violation of the pnnciples of proper and sound 20 administration, and/or
3. e)wrongly and/or unlawfully and/or without proper inquiry, and/or
4. f)unlawfully and/orwrongly forall theadditional reasons stated in the application and/or the address 25' 1 propose todeal with the grounds given intherevocation letter of 14th February, 1987 (Exhibit 8), in the light of rhe arguments advanced by counsel With regard to the first ground that the permission of the respondent bank was obtained by misrepresentations that 3 0 Downholme InternationalInvestments ΝV wasaDutch company whilst it was a company of Netherland Antilles, counsel for the applicants contended that if there was any misdescnption, that was contained only in Exhibit 5(a)which is the letter addressed by the then advocates of the applicants to the bank The then 35 advocates, however, hesaid, had attached aphotocopy of Exhibit 5 (bj written by Leslie Steward Weber, theManaging Directorof applicants 1 which contains no misdescnption of Downholme 943 Kourrls J. York International v. Central Bank

(1987)International Investments N.V. and that with only rudimentary diligence by the respondents the inconsistency could have been readily noticed. Counsel for the respondents contended that it is immaterial whether the misdescription was held out by the applicants or by 5 their advocates. The respondent bank received, he said, to putit lightly, wrong information about the place of registration of the said company. The advocate was acting on behalf of the applicants 1and the respondent bank expected toreceive correct information regarding the registration of the said company in as 10 much as by s. 2 of the Advocates Law, Cap. 2 (as amended) advocates onlycan registeracompany inCyprus;andthebankin exercising itsdiscretion whether or not to grant permit tothesaid company relied on this information and granted the permits. Counsel,alleged that had the Central Bank been aware that the 15 Downholme company was registered in Nethertand Antilles it would never have given the permitsbecause itisitspolicy when - givingpennitstocompaniesregisteredin.placesofconvenienceto impose certain strict conditions so as to'safeguard the financial interests of Cyprus and, especially, the interests, the promotion, 20 maintenance and development of substantive foreign exchange interests in Cyprus. He also contended that the respondents remainedsilentwhentheyknewthattherespondentbankgranted the permits on the information received by their advocate to the effect that the company was registered in Holland. He said, that 25 Dutch Antilles isa place of convenience because the shares of a company are bearer shares and they can change hands without any control exercised by the place of registration. Counsel, however, forthe applicantssuggested that evenifthe respondent bank acted on wronginformation supplied toit,then, 30 thiswasnot a material factor forthe revocation of thepermit. He said that it was insignificant because it did not contravene the policyoftheCentralBankwhichpolicyappearsatp.33inExhibit 17, which isa pamphlet inviting foreigners to invest inCyprus,in as much as,thebeneficial ownersot YorkInternationalSecurities 35 B.V. and Downholme International Investments N.V. were the same persons and were disclosed to the Central Bank. This pamphlet is entitled «Cyprus - International Centre of Business and Professional Services.» He went on to say that the relevant passage in Exhibit 17relied on readsas follows:40 «In order to protect the public interest and preserve the 944 3 C.L.R 5 10 15 20 25 York International v. Central Bank Kourris J. good name of Cyprus it has been decided that, with the exception of offshore enterprises which belong to public corporations orto legal entities whose shares are traded on recognized stock exchanges, offshore enterprises whose ultimate beneficial owners have not been disclosed to and approved by the Central Bank shall not be allowed to open theirown administrative office inCyprus. Such offshore enterprises may secure permission to open their own administrative office in Cyprus at any time by disclosingtotheCentralBanktheirultimatebeneficial owners and bymakingarrangementswiththeCentralBank regarding transfers of ultimate ownership normally as follows: a)Offshore enterpriseswhichbelongtoforeign entitieswith bearer shares shall make arrangements with a recognized bank or trust company to hold the share certificates in the names of the ultimate beneficial owners and to inform the Centra!BankofCyprusregarding anychangesinthe ultimate beneficial owners. b)Offshore enterpriseswhichbelongtoforeign entitieswith registered shares shall make arrangements with appropriate professionals tosubmitannuallytotheCentralBankcopiesof the relevant certificates showing the names and other particulars of the persons on whom the shares are registered and of the persons, if any, for whom they are acting as nominees». Counsel, went on to say, that the policy of the Central Bank appearinginExhibit17,doesnotdiffer fromthepolicyofthebank set out in Exhibit 14 which is a letter addressed to the VicePresident ofThe Cyprus BarCouncilbythe Central Bank. 30 Counsel for the respondents, however, alleged that the declared policy of the bank appears in Exhibit 14, which is an official document signed by E. Ioannou, an officer of the Central Bankof Cyprus, whoisChairman of the Permanent Consultative Committee on Offshore Business, and that furthermore, atp.3of 35 Exhibit 17, which is the preface and is signed by Afxentiou, the Governor oftheCentralBank ofCyprus,itisstated:-«Whileevery effort hasbeenmadetodelineateincleartermsthemostimportant rightsand obligationsof offshore enterprises and their ex-patriate personneltheCentralBankcanacceptnoresponsibilityinrespect 40 of any errors or omissions. Interested parties are advised to seek 945 Kourris J. York International v. Central Bank

(1987)professional advice of specific issues TheCentralBank isreadyto answer inqumes and to supply additional information or clanfications upon request» Ihave examined both documents ιe Exhibit 14 and ρ 33 of Exhibit 17 and I have reached theconclusion thatthepolicy of the 5 Central Bank with regard tooffshore enterpnses isnotstated tobe the same in both documents The main difference between the two isthatthe ultimate beneficial owners shall notchange without theCentralBank's pnorapproval ThisiscontainedinExhibit 14 Ihave considered the contentionsof both counsel on thisissue 10 and I am satisfied that the Central Bank of Cyprus acted on information given toitby thethenadvocates of applicants 1and ! am,also, satisfied thatthe bank would nothave given the permits if it knew that the Downholme company was registered in the Dutch Antilles which is a place of convenience 15 Ground 2 of the revocation letter reads as follows«(b) You are carrying out the business of brokers which is not envisaged in and is ultra vires your Memorandum of Association» It is not in dispute that the applicants were carrying on the 20 business of brokers What is in dispute, however, is whether this was intraviresor ultra virestheMemorandumof Association Counsel for theapplicants contendedthatamereperusal of the Memorandum of Association and by application to it of elementary and well - established pnnciples of interpretation of 25 clauses in the memorandum of a company, will readily establish that the respondents were labounng under a senous misconception as to the facts and the law Hemaintainedthatthe objects of thecompany aresetoutinnumeroussub-paragraphs of the «Objects Clause» which is paragraph 3 of the Memorandum 30 He said that in particular sub-clauses

(1)and

(2)of the Memorandum deal with the activities of the company in investments and administration of investments and in dealing in shares of any company and for anybody. He went on to say that they provided for the offenng of services by the company of an 35 administrative, managing or other ancillary nature and also for providing consultancy services in respect of shares, bonds, debentures, etc ,and he submitted thatthe business of brokers of shares is nothing else but a specific and supporting business of a 946 3 C.L R. York International v. Central Bank Kourris J . very vide range of activities in share which the company, in its Memorandum, isentitledtoengage in Forexample, he said,that sub paragraph

(6),which is drafted in the usual 1 terms,givesto the Board power, in effect, to dowhatever they may deem to be 5 beneficial to the company and that the legality, wide scope and effectiveness of this clause has been considered by the Court of Appeal in England in respect of a company incorporated in England with almost an identical wording of the corresponding ciaube The case in question is Bell Houses Ltd . ν City Wall 10 PropertiesLtd (1966]2QB 656 Counselfor theapplicantscited another four cases insupport of his contention Counsel for the respondent, on the otherhand, submitted that the business of brokers is ultra vires the Memorandum of Association because mthesub-paragraphs of the«objects clauses» 15 of theMemorandum of Association isnotmentionedthe business of brokers and ucannotbe said thatitis ancillary totheobjects of theMemorandum of thecompany What is inissue istheconstructionof theMemorandumof the company, in order toascertain whether thebusiness of brokers is 20 intraviresor ultraviresthe Memorandum In the case of Bell Houses Ltd, (supra) the Court had to construct sub-clause (c)which reads as follows.- «To carry on any other trade or business whatsoever which can in the opinion of the board of directors, be advantageously earned on by the 25 company in connectionor as ancillary to the general business of the Company» Salmon LJ had thistosay atρ 690 - 30 35 «As a matter of pure construction, the meaning of those words seems to me to be obvious An object of the plaintiff company is to carry on any business which the Directors genuinely believe can be earned on advantageously in connection with or as ancillary tothegeneral business of the company Itmay be thatthedirectorstakethewrongviewand in fact the business in question cannotbe earned on as the directors believe But it matters not how mistaken the directorsmay be Providing they formtheirviewhonestly,the business iswithin theplaintiff company's objects and powers This is so plainly the natural and ordinary meaning of the language of sub-clause (c)that 1 would refuse to construe it 947 Kourris J . York International v. Central Bank

(1987)differently unlesscompelled todosobytheclearestauthority. And there is no such authority. Indeed, the authorities establish thatthe obviousmeaningtowhichIhavereferred is inlawthe true meaning of the words.» I have examined carefully this issue and I have come to the 5 conclusion that the business of brokers is ultra vires the Memorandum ofthecompany because itisnotexpresslystatedin the Memorandum as part ofthe objects clause and alsoitcannot heheld thatthebusinessofbrokers isincidental andconducive to theattainment of the objects ofthe company. 10 I,now,turn toground (c)oftheletterof revocation which reads asfollows:«Your activities for procuring, accepting and investing moneybelongingtopersonsotherthanyourshareholdersare contrarytotheconditionssetoutinouraforesaid letterof16th 15 September, 1986». This isa short issue and counsel for the applicants contended that applicants did not cany out activities which are customarily performed by banks and he went on to say that «investment» presupposes exercise of discretion by the person «managing 20 funds» as towhere to invest. Buyingand sellingshares, at specific instructions of clients as to when to buy or sell,how manyand at whatprices,isthe businessofashare«broker»and cannot be held tobe an investment. Theshort answertothisisthattheapplicantsadmittedthatthey 25 sold shares to over 3,000 persons which were not shareholders of their companies and, therefore they acted contrary to the conditions set out in thesaid letterofthe 16th September, 1986. I,now, propose to examine the groundssetout inparagraph 8 of the Opposition for not modifying theconditions ofthe permits 30 given to the applicants, and this on the principle that the administration in achieving itslawful aimsshould choose always the lessonerous for aprivate citizen. The grounds are the following:(

1. a)The applicants have not demonstrated the seriousness and 35 professionalism which is demanded in the carrying out of the brokerage business, afield whichisextremelysensitivebecauseit dealswiththeinvestmentofmoneyofalargesectionofthepublic. 948 3 C.L.R. York International v.Central Bank Kourrls J. (b)The applicants were not givingadequate financial data and were not issuing a proper prospectus, but, on the contrary they were applying methods which are contrary to all brokerage propriety and which aredescribed as«boilerrooms» methods. 5 (
2. c)Both Mr. Leslie Steward Weber, who is the Managing Directorofapplicants 1and who isrepresented asshareholderof applicants2aswellastheofficer ofapplicants 1Mr.TonyMurphy, were connected with First Commerce, and in any event, neither these two nor the other two alleged shareholders of applicant 2, 10 afforded thesafeguards forsuch aseriousactivity. Counsel fortheapplicantscontended thattherespondent bank formed a hasty opinion as to the activities of the company, its shareholdersandofficers andactedunderamisconception offacts due mainlytolackofdue inquiry. 15 Counsel forthe respondent contended thattherewas sufficient material before the respondent bank to reach the conclusionsset out in paragraph 8(
3. a)of the Opposition and this material is contained in the publications and other material contained in Exhibit6andtherespondentbankdecidedthatifitissuedapermit 20 with modified conditions, this would not be conducive to the financial interests of Cyprus and, especially, would not be in the interests of the protection, maintenance and development of substantive foreign exchange interests of Cyprus. Regardingparagraph8(b)counselfortheapplicantsmaintained 25 that itwas not the duty of the applicants to issuea prospectus as alleged inthatparagraph andthisisamisconception offact which would vitiate the decision of the bank not to issuea permit to the applicants on modified conditions. He went on to say that there wasno-material before thebankthattheapplicantsemployed the 30 so-called «boiler rooms» methods. Furthermore, he said, the respondents did notallegethatthisisunlawful inCyprus. Regarding paragraph (
4. c)counsel for the applicants suggested thatLeslieStewardWeberwasnotinanywayconnectedwithFirst Commerce but that he wasmerely employed byFirst Commerce 35 for a short period of seven months and this cannot be described that he wasconnected withthe FirstCommerce. Counsel fortherespondents, ontheotherhand,suggested that there was sufficient material that the applicants were not giving 949 Kourris J. York International v.Central Bank

(1987)adequate financial data and that they were employing the «boiler rooms» methods and that, in any event, neither Leslie Steward Weber nor Tony Murphy, who is an officer of applicants 1, afforded the safeguards for such a serious activity. He explained thatbytheword «connected»he meantthattheyworkedwithFirst 5 Commerce. Counsel fortherespondents'argument thattheapplicantswere notbound toissueaprospectus iscorrectbecauseapplicantswere not bound to issue a proper prospectus in selling shares of other companies; and the question arises what isthe effect inlawofthe 10 fact that the respondent bank was under the impression that the applicants were bound to issue proper prospectus. Before doing so, I propose to deal with the issue whether the respondent bank had a duty to examine the possibility of modifying the conditions of thepermitsbefore their absolute revocation. 15 Inthe case of KarayiannisandAnother v. The CentralBank of CyprusandAnother

(1980)3C.L.R.. p. 108the majority decided that the respondent bank was not bound todo so because doing so should embark on an exercise of redrafting the objects in the Memorandum of Association of a company tobe formed. 20 The facts of that case were that applicants No.l was a nonresident, applied tothe respondent No. 1for permission, unders. 10 of The Exchange Control Law, Cap. 199, to subscribe the memorandum of a company to be formed under the name «Appollon 8 Tours Ltd.,». From the objects of the proposed 25 company itappeared that it was no just an ordinary travel agent dealing only with the issue of tickets but it could deal, inter alia, with the organization of cruises and excursions and generally the attraction and development of internal and international tourism. Theapplicantsinthatcaseallegedthattherespondentsresortedto 30 absolute prohibition when considering whether by granting conditionally orto terms the permission sought same would have served the public interest and policy.A.Loizou,J. hadthistosay at p. 119-120:«Regarding the ground that the respondent Bank should 35 have examined the possibility of imposing conditions before rejecting the appellant's application, Iwish to point out that the case of Aphrodite Michaelv. The Improvement Boardof Dhali

(1969)3 C.L.R. p. 112 should be distinguished. That was a case of interference with the right of ownership 40 950 3 C.L.R. 5 10 15 York International v.Central Bank Kourrls J. 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 disallow completely any building operations on the properry of thatapplicantwhichhave been included intheSecond Schedule totheAntiquitiesLaw,Cap. 31, orwhether(heappropriateAuthoritycouldhave imposed terms instead. On the other hand if Iwere to accept in the present case the sub-judice decision should have been annulled because the respondent Bank did not examine the possibility of imposing conditions before rejecting the appellants' application, thatwould mean thatthe 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 prospective applicant how far and in what circumstances its discretion would be exercised under section 10

(2)of the Exchange Control Law,Cap. 199which inmyviewwasnotrequiredof the respondent Bank inthe circumstances.». Triantafyllides, P., had this tosay on thisissue inhisdissenting 20 judgment:- 25 «Thesame principle isreflected in a series of cases (as,for example, No. 300/1936* in which the Council of State in Greece has held that in achieving its lawful aims the administration should choose alwaysthe lessonerous course for a private citizen, though such principle, aspointed outby Daktoglou (supra at p. 108) has been deviated from occasionallybytheCouncilofStateinGreece when itdidnot seem to be adopted by the legislation applicable to a particularcase.» 30 Counsel for the applicants relied on this issue on the case of VassosEliadesLtd.v.TheRepublic{1979)3C.L.R.259wherethe Court annulled the decision of the Minister of Commerce who refused to grant a licence to import rubber gloves because they held thatthe Ministercouldgrant alicenceand impose conditions 35 on the principle that the administration has to choose the more equitable one instead of the more onerous choice. It should be noted that in the Eliades (supra) there was a statutory provision making it incumbent upon the Minister to make such licence subject to such conditions as he may deemfit 40 (Sees.4(l)ofthe Imports (Regulation)Law, 1962(Law49/62).In 951 KourrlsJ. York International v. Central Bank

(1987)the case in hand there was notsuch a statutory provision. I think thefacts of thepresent casebear similarities tothefacts ofthe case of Karayiannis (supra)and Ithinkthattherespondentbank ought nottohave examined thepossibilityof imposing conditions before rejecting the applicants' application, because that would mean 5 that the respondent bank should embark on an exercise of redrafting the objects in the Memorandum of Association of the company;butsincethebankproceeded toexaminethepossibility of imposing conditions before rejecting the appellants' application,Ishall proceed andexamine what istheeffect, inlaw, 10 the fact that the respondent bank was under the impression that theapplicants were bound toissueproper prospectus. Counsel for the applicants contended that it is a principle of administrative law thatwhere several groundsaregiven for anact and/ordecision,andwhere even onlyoneofsuchseveralgrounds 15 or decisions are held to be defective, then the act or decision becomes voidable. He went on to say that the justice of this principle and the justification for its application is that, otherwise, it would be uncertain to what degree the erroneous ground has influenced the decision. Insupport of thisproposition he relied on 20 a passage intheConclusions from theJurisprudence of theGreek Council of State 1929 -1959 which reads as follows: «Κατ' εξαίρεσιν γίνεται δεκτόν, ότι, πεπλανημένης ούσης μιας των πλειόνων αιτιολογιών, η πράξις καθίσταται εν τ ω συνόλω της ακυρωτέα,εφ' όσον δεν 25 συνάγεται εξ αυτής ο βαθμός, καθ'όν ηπεπλανημένη αιτιολογία επέδρασεν επί της εκδόσεως της πράξεως (βλ. π.χ. 966

(48)». («Exceptionally it is accepted that if one of more grounds, given injustification of a decision, is erroneous, the decision 30 should be annulled intoto,if itdoes notappear therefrom the degree in which the erroneous ground influenced the taking of a decision»). With duerespect toCounselfor theapplicantsthepassagecited is not the general rule but the exception to the rule. The whole 35 passageundertheheading «Severalgroundstojustification oneof which isdefective» reads as follows:«Yll. Πλείονες αιτιολογίαιων η μιαπλημμελής. 952 3 C.L.R. York International v.Central Bank Kourrls J . Ενπεριπτώσειεπαλλήλων αιτιολογιών γίνεται δεκτόνότι η πράξιςείναι νόμιμος, εάνη μιατούτων δύναταιεπαρκώς να την στήριξη. 5 Κατ' εξαίρεσιν γίνεται δεκτόν, ό τ ι , πεπλανημένης ούσης μιας των πλειόνων αιτιολογιών, ηπράξις καθίσταται εντ ω συνόλω της ακυρωτέα, εφ' όσον δεν συνάγεται εξαυτής ο βαθμός, καθ'ον η πεπλανημένη αιτιολογία επέδρασεν επί της εκδόσεως τηςπράξεως (βλ.π.χ. 966

(48)». («ΥΠ.Several grounds, one of which is defective. 10 In case of several grounds injustification of a decision it is accepted that the decision is legal, if one of the grounds is sufficient tosupport it. Exceptionally it is accepted that if one of more grounds, given in support of a decision, is erroneous, the decision should be annulled intoto,ifitdoes notappeartherefrom the dt:yiee in which the erroneous ground influenced the taking of a decision»). 20 In my opinion the fact that one of the grounds set out in paragraph 8 of the Opposition was defective, does not make all the grounds defective because I do not think that in the circumstances of this case, this misconception influenced to a great extentthe respondent bank in its decision. Having considered the matter placed before the respondent bankandthearguments of bothcounselrespecting paragraph 8of 25 theOpposition.Ihave cometotheconclusionthattherespondent bank had sufficient material to justify the grounds set out in paragraph 8 of theOpposition for notgranting amodified permit. I think,atthisstage, itisappropriatetodealwith themessage sent by Interpoltothe respondent bank which isExhibit 18 before the 30 Court.I am of theviewthatthebank ought nottohave takeninto consideration thecontentsof thismessagebecause theapplicants were not given the opportunity to be heard with regard to the contents of themessage andthisiscontrary totherules ofnatural justice; and the question ariseswhether the respondentbank had 35 taken intoconsideration Exhibit 18before reaching itsdecision.It appears from Exhibit 13,which are the minutes of the meeting of the respondent bank of the 14th February, 1987, in which it decided to revoke the permits of the applicants and to reject the modification of the permits thatthe message of Interpol was not 40 taken into consideration by the respondent bank. Although it 953 KourrisJ. York International v. Central Bank

(1987)appears in Exhibit 13 thatthey examined the message of Interpol they did not rely on it in taking theirdecision and this is apparent from the paragraph in Exhibit 13 that the information received from Interpolconfirmed their findings The crux of this case is whether the respondent bank properly 5 exercised itsdiscretion andthedecision itreachedwas reasonably open toiton thebasisof thematenal before it OurCase Law has established that although the administrative authonties have discretionary powers under the Law, a discretion has to be exercised properly and it is well settled that in matters of 10 discretionary powers this Court will not interfere so long as on a proper exercise thereof a decision has been taken which was reasonably open to the appropnate organ on the basis of the matenal before it And that this Court will interfere if the said powers have been exercised in a defective manner or when the 15 decision reachedcannotbevalidlysupported by thereasonsgiven when matenal considerations have not been duly taken into account (See Karayiannis case, supra) With due respect, I adopt what A Loizou, J had said in his judgment in the case of Karayiannis at ρ 120, with regard to the 20 discretion of the respondentbank, which reads as follows«The paramount consideration therefore, under the aforesaid provision is to control the shareholding in companies by non-residents, as upon the registration of a company asubscnber automatically becomes a memberand 25 a holder of the shares for which he has signed, in this case 3,334 ordinary shares of one pound each as compared with 6,666 shares to be subscnbed by residents This is a section thatgivesan unfettered discretion and as itcovers a matterof fiscal policy itshould be considered as a wide one Being so, 30 an administrative Court is always cautious and slow to interfere with itsexercise by theappropriateorgan Itherefore have no difficulty in upholding the approach of the learned tnal Judge m the circumstances on this issue as same was neither wrong in Law nor exercised in abuse or excess of 35 power, norreached underany misconception of fact After all the extent ofjudicial controlof theadministrative discretion is confined to the examination of the lawful thinking and the observance of the lawful limits within which such discretion should be exercised » d/1 954 3 C.L.R. York International v.Central Bank Kourris J. I have carefully examined itie material which was before the respondent bankand Igavedueconsideration totheargumentsof both counsel and I have come to the conclusion that the respondent bank exercised itsdiscretion properly.Thedecision it 5 reached was reasonably open to it on the basis of the material before itand isvalidlysupported bythe reasons given therefor. I, therefore, havenodifficulty inreachingtheconclusionthatthesub judice decision wasneitherwronginlawnorexercisedinabuseor excess of power, nor reached under any misconception of fact or 10 lackof due inquiryIshall now proceed and examine the second decision of the respondent bank of 20th February, 1987toblock theaccountsof the applicants inexercise of the nghts vested in the Central Bank under section 40

(1)of the Exchange Control Law, Cap. 199, by 15 virtue of s.34 of the same law. Counsel forthe applicants argued that thisdecision is unlawful and contrary to the true meaning and effect of the Exchange Control Law, Cap. 199 and the declared policy as to «offshore» companies. He went on to criticize the respondent bank for the 20 various actions it had taken subsequent to the blocking of the accounts tothe Immigration and Customs authorities. 25 30 35 AQ Counselfortherespondentssaidthatafterthebankrevokedthe permits of the applicants,received information on 16th February, 1987 from the authorities of Jersey (Exhibit 9), that Richmond Financial Services Ltd., which applicants 1 were presenting as being the underwriters for the sharesthe sale of which they were promoting, was in fact using the address of a law office in Jersey withoutthe consent of thesaid lawoffice. Thesaid lawoffice has repeatedly refused to act as the representative of the group of companiesofRichmondFinancialServicesLtd.,becauseitwasnot satisfied with the good faith of the personsbehindthisgroup. So, the respondent bank blocked the accounts of the applicants.The purpose, he went on to say, of thisblocking of accounts was the supervision ofthe movement of the accounts of theapplicantsin such a wayastosafeguard the interest ofCyprusand toavoid the flow of money abroad either with direct remittances or through «reciprocal dealings» in Cyprus in violation of the law. The applicants,could,however, makepaymentstoresidentsaswellas to nonresidents of Cyprus subject to the approval of the respondent bank. 955 KourrisJ. York International v. Central Bank

(1987)As Ihave said hereinabove, in cases such as the present, the administrative organ has a very wide discretion as it covers a matter of fiscal policy and an administrative Court is always cautious and slow to interfere with its exercise of discretion. In these circumstances I am of the view that the exercise of the 5 discretion of the respondent bank was neither wrong in law nor exercised in abuse or excess of power, nor reached under any misconception of fact and their decision was, also, reasonably open toit. For all the above reasons the recourse isdismissed with costs againstthe applicants. 10 Coststobe assessed bythe Registrar. Recourse dismissed with costsagainstapplicant. 956