An advance signed as a promissory note was documented as a loan throughout. The Court of Appeal held the borrower and its two guarantors to the loan and to the agreed figure.
In February 2006 a finance company advanced 80,000 Cyprus pounds, 136,681.11 euro, to a property development company. The document at the centre of the deal called itself a promissory note, repayable in two months, with interest charged by the month. Two directors of the borrower guaranteed it personally, and the company mortgaged flats it owned as further security. When the debt was not repaid and the lender sued, the borrower and its guarantors said that all they had signed was a promissory note, and that the lender had pleaded and proved a loan. On 23 September 2026 the Court of Appeal dismissed their appeal and upheld judgment for 135,468.24 euro, with interest at 1.25 per cent a month from 15 December 2011, and an order for the sale of the mortgaged flats.
The case turned on a simple idea: a court decides what a transaction was from what the parties agreed and did, not from the name printed on one document.
The label on the document did not decide the case
The borrowers argued that the lender's documents spoke of a promissory note and not a loan, so its claim did not match its pleading. The court disagreed. The statement of claim had pleaded the debt in the alternative, as a loan, an acknowledgement of debt, a promissory note, a guarantee and more. Following Alexandros Evangelou Camera House Ltd v. Minerva Finance & Investments Ltd (2004) 1 A.A.D. 1734, a cause of action rests on the facts that make it up and not on the description given to it in the pleadings, and a court may grant whatever relief those facts justify.
The facts pointed one way. Apart from the document headed as a note, every other paper the parties signed described a loan: the borrower's own application for a loan, the lender's letters telling each guarantor how much they would be guaranteeing "under a loan agreement", and a later agreement extending the time to repay the loan. The trial court found that the parties intended a loan, which the directors guaranteed and the flats secured, and the Court of Appeal held that finding to be correct.
What the parties signed together, read as a whole, decided the nature of the debt. One document's heading did not.
Why it was not a common form promissory note either
Cyprus law has its own instrument, the common form promissory note, set out in Part X of the Contract Law, Cap. 149. Section 78 defines it as a written promise to pay, signed before at least two witnesses, carrying interest at no more than nine per cent a year. The note here fixed its interest by the month, at a rate that came to well over nine per cent a year. The Court of Appeal agreed with the trial court that the document could not be a common form note for that reason alone.
What the borrowers had already conceded
The appeal on the amount failed for a different reason. At the trial, the borrowers' lawyer withdrew their counterclaim and agreed a set of facts with the lender: if the court found a promissory note, judgment would follow one of the lender's statements; if it found a loan, judgment would follow another. The second statement showed a loan balance of 98,399.66 euro and outstanding interest of 37,068.58 euro, together 135,468.24 euro. The borrowers had paid 100,903.07 euro over the years, but those payments had gone to interest as well as capital.
Having accepted that figure, they could not dispute it on appeal. Admitted facts bind the court as findings. For the same reason the trial court was right to treat the evidence of their own witness as without weight: their lawyer had closed the case without cross-examination, telling the court there was no need, and to rely on that evidence would have undone the facts the borrowers themselves had agreed.
The guarantors and independent legal advice
The guarantors argued that the lender should have told them to take independent legal advice before signing. Before they signed, each had received a letter from the lender setting out the essentials of the guarantee, and each had confirmed understanding it. As directors, they knew the company's finances. Following Mavroskoufi v. Piraeus Bank (Cyprus) Ltd (2014) 1 A.A.D. 839, a lender that has given a guarantor the documents to study before signing is not also obliged to make sure the guarantor has taken independent legal advice. The appeal was dismissed with 4,000 euro costs, plus VAT if any.
What this means in practice
This judgment matters to anyone who borrows from a finance company on short, informal paperwork, and above all to directors who are asked to sign personal guarantees for their company's debt.
- The heading on a document will not change what the deal was. If the application, the letters and the extension all speak of a loan, a court will treat the debt as a loan, whatever the main document is called. Read every document as part of one transaction.
- A director's guarantee is personal. The directors here were bound with the company. Before signing, read the lender's letter that states the amount guaranteed, and keep it.
- Do not count on the lender to send you to a lawyer. Once the lender has given you the documents to study, the decision to take advice is yours. Take it before you sign, not after the claim arrives.
- Every concession at trial is final. An agreed figure, a withdrawn counterclaim, a witness left without cross-examination: each narrows what an appeal court will look at. Agree facts only after the arithmetic has been checked.
- Payments do not simply come off the capital. Where a loan carries interest, what you have paid may have gone mostly to interest. Ask for a statement that separates the two before you argue about the balance.
Our banking and finance disputes page explains how we approach claims between borrowers and lenders, and our litigation practice handles them from the first letter through to appeal.
Sources
- D&L Developments Ltd and others v. Ellinas Finance Public Company Ltd, Civil Appeal 193/2020, Court of Appeal of Cyprus, 23 September 2026
- The Contract Law, Cap. 149, Part X, CyLaw
This article is provided for general information purposes only and does not constitute legal advice.
Klitos Platis
Advocate, Partner
Kleanthous & Platis LLC, Nicosia · Published 3 October 2026
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