KYRIAKIDES v. CYPRUS
Inadmissible
Gaukur Jörundsson
The applicant, Savvas Kyriakides, is a Cypriot national, born in 1965 and living in Nicosia. He is represented before the Court by Mr E. Pourgourides, a lawyer practising in Limassol. The facts of the case, as submitted by the parties, may be summarised as follows. The applicant is the Managing Director of the company Stellios Kyriakides Trading Ltd and in that capacity he obtained a number of loans from Dr Neophytou. Each time a loan was agreed, both parties entered into a written agreement which provided that the loan would become payable to Dr Neophytou with 7% interest at the end of 60 days. Each time the applicant received a loan, he issued a personal post-dated cheque in Dr Neophytou’s favour for the sum due at the end of the 60 days period. The amount included both the capital and the interest. When the various cheques became payable, Dr Neophytou did not cash them, but instead, entered into new agreements with the applicant whereby the sums due were referred to as “capital loaned”, again attracting 7% interest. The old agreements and cheques were cancelled by the new agreements. In the summer of 1995, the parties decided to merge the numerous agreements and, when all sums fell due, they were added together to form the basis of two further agreements: the first, dated 23 July 1995, showed the capital at 30 000 Cypriot pounds (CYP). The second, dated 19 August 1995, showed the capital at 32 000 CYP. The new agreements provided for the reimbursement of the capital, plus interest at 7%, at the end of 60 days and were supported by two new post-dated personal cheques of the applicant. These cheques were presented to the applicant’s bank and were both dishonoured. On 31 May 1996, Dr Neophytou filed a private prosecution before the District Court of Nicosia against the applicant pursuant to Section 305(A)1 of the Cyprus Criminal Code. At the material time in 1995, a criminal offence was deemed to have been committed under Section 305(A)1 where a cheque was dishonoured due to a lack of funds in the drawer’s bank account. Subsection 3 of the same Section provided that no offence was committed if the bearer of the cheque had no “actionable right” against the drawer. On 26 November 1997 the District Court of Nicosia acquitted the applicant. In particular, it accepted the applicant’s argument that subsection 3 of Section 305(A) applied in the case since the agreements under which the cheques were issued were illegal under Cypriot law (Sections 3 and 5 of Law 2/77 and Sections 23 and 24 of the Contract Law Cap.149). In fact, Dr Neophytou had charged interest above the 9% per year allowed by law, namely 42% (7% every 60 days). This being so, Dr Neophytou had no right of action against the applicant. On 2 December 1997 Dr Neophytou appealed to the Supreme Court. On 8 March 1999 the Supreme Court quashed the judgment of the District Court and convicted the applicant, sentencing him to three months’ imprisonment. The Supreme Court held that the District Court had misinterpreted Section 305(A)3. According to the Supreme Court, the correct meaning of that provision was that “the cheque must have the necessary characteristics of a cheque as these are referred to in the Bills of Exchange Law”, “the complainant must be the legal bearer of the cheque” and the trial court should not have examined the civil aspect of the agreement between the parties which led to the issue of the post-dated cheques. Following that decision, Parliament passed a retroactive amendment to Section 305(A), which came into force on 30 April 1999. The amendment provided that Section 305(A) did not apply to any cheques which were issued under an illegal transaction. Furthermore, it provided that the amending Law was to apply to all pending cases. Since the applicant’s case was still pending, as regards the imposition of sentence, the issue was raised before the Supreme Court on 17 May 1999. The applicant applied for a halt to the judgment, pursuant to Section 79 of the Criminal Procedure Law Cap.155. On 1 June 1999 the Supreme Court held that the amending law did not apply to the applicant’s case. The applicant served 56 days of the sentence and was released after a pardon. Section 305(A)1 of the Criminal Code provides that a person is guilty of a criminal offence carrying a sentence of imprisonment not exceeding six months, if he draws a cheque, which on being presented to the issuing bank within a reasonable time from the date on which it becomes payable, it is not discharged owing to the lack of available funds of its drawer and the latter fails to discharge payment within fifteen days as from the time he acquires knowledge of that fact. Section 305(A)3 states that the provisions of Section 305(A)1 are not applicable with regard to any cheque on which no actionable right ensues against its drawer. Section 25(1) of the Contract Law Cap.149 provides that “an agreement made without consideration is void...”. In the case of Loizou v. Republic of Cyprus (Supreme Court, judgment of 24 June 1994), the defendant raised before the first instance court the defence of Section 305(A)3, claiming inter alia that the complainant had no right of action against him because the agreement under which the cheque was issued was made without consideration. The court examined the contract between the parties and decided that, on the facts of the case, consideration was given and therefore the contract between the parties was valid and enforceable, giving rise to a right of action. Consequently, the defence failed and the defendant was convicted. The same question was raised on appeal and the Supreme Court found that the first instance court examined this matter extensively and that it correctly concluded that consideration was given for the issuing of the relevant cheque. After referring to the facts relating to this matter the Supreme Court added the following: “We also note that the relevant provision refers to an “actionable right”, and not to a good basis or arguable action. We are therefore of the view that the judgment of the first instance court is impeccable and the appeal against conviction is rejected”. Section 62 of the Contract Law Cap.149 provides that “if the parties to a contract agree to substitute a new contract for it or to rescind or alter it, the original contract need not be performed”. In the case of Ergatides Motors Ltd and Georgios Ergatides v. the Police (Supreme Court, judgment of 19 June 1997), the defendant claimed under Section 305(A)3 that the contract under which the cheque was issued had been rescinded and that the parties had entered into a new contract. He contended that since the cheque was issued under the first contract which was rendered unenforceable by virtue of the new one, no right of action existed against him under the former. The Supreme Court examined the first contract and, having found that it was indeed rescinded and replaced, upheld the defence under Section 305(A)3 and acquitted the defendant. No right of action existed under the first contract.