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Cayman Court of Appeal considers the Nilon Rectification Jurisdiction

In Ebanks v Waterfront Development Ltd and Others, the Cayman Islands Court of Appeal (the Court) recently reconsidered section 46 of the Companies Law which provides a remedy for the rectification of a company’s register of members.

Mr Ebanks had brought the action claiming that the registration of the transfer of a 50% share in Waterfront Development Ltd was wrongly carried out as (1) there had been no default under a guarantee in the absence of a letter of demand, and (2) there had been no notice given to him, as guarantor, that the primary debtor was in default.

The appellants’ application for strike out was refused at first instance as Justice Mangatal was not satisfied that a letter of demand was not necessary, or if it was necessary, that it had been given or waived. In reliance on Nilon Ltd v Royal Westminster Investments SA, the appellants also argued that section 46 is not appropriate to resolve disputes of this nature.

In examining the issues, the Court referred specifically to the decision in Nilon, which involved consideration of the equivalent BVI provision. In that case, the Privy Council emphasized that the rectification procedure was summary in form and held that if there was a substantial factual question at issue then the court should order the trial of the issue, stay the application or strike it out.

In this case, the Court held that no substantial issues of fact arose.

While stating that the lenders in Ebanks had “jumped the gun by a few months” by amending the register without properly serving demands, the Court was satisfied that they had subsequently put matters right. In allowing the appeal and bringing these proceedings to an end, the Court was clearly influenced by the fact that the appellants had volunteered to accede to an order rectifying Mr Ebank’s removal from the register until the date on which the first demand was properly served on him.

While the Court has referred to Nilon previously, this appears to be the first occasion on which it has considered the decision in any detail and suggests that parties seeking to strike out rectification proceedings on the basis of a substantial factual dispute will have to rely on more than mere assertion to succeed.

 

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