Under Cyprus Law, a pledgee, in the event of default of the pledgor, may:
- bring an action against the pledgor, upon the secured debt, and retain the pledge, as a collateral security; or
- sell the pledged assets as per the methods provided in the pledge agreement, after obtaining an expert and proper valuation of the pledged assets, and giving to the pledgor the reasonable written notice as per Section 134 of Contract Law CAP. 113, about its intention to sell the pledged assets; and/or
- appropriate the pledged assets, provided the requirements set out in the Financial Collateral Law (Law 43 (I)/2004) are satisfied.
The pledgee (as the mortgagee) has a duty to act in good faith, and also to take reasonable care to obtain the true market value, or the proper price of the pledged assets, at the date on which it decides to sell same (see CUCKMERE BRICK CO LTD -V- MUTUAL FINANCE LTD (1971) CH 999). The pledgee cannot sell the pledged assets to itself, or its nominee, because such an act will amount to the commission of the tort of conversion.
Where there is a guarantor, the duties of the pledgee extend also to him, as he has an interest in the sale, and he will be liable for any debt remaining, after the sale of the pledged assets (see STANDARD CHARTERED BANK LTD -V- WALKER LTD (1982) 3 ALL ER 938).
For further information on this topic please contact: Mr. Soteris Pittas( spittas@pittaslegal.com) at SOTERIS PITTAS & CO LLC, By telephone (+357 25 028460) or by fax (+357 25 028461)
