Scotiabank v Ebanks

• Jurisdiction: Cayman Islands
• Judge: (Henderson, J.)
• Judgment Date: 28 February 2012
• Court: Grand Court (Cayman Islands)
• Date: 28 February 2012

Grand Court, Civil Division

(Henderson, J.)

SCOTIABANK & TRUST (CAYMAN) LIMITED

and

EBANKS and GORDON

Ms. H. Spiegel for the plaintiff;

The first defendant did not appear and was not represented;

The second defendant appeared in person.

Cases cited:

(1) Barclays Bank PLC v. Henry, Turks & Caicos Supreme Ct., Action No. CL-80/99, December 15th, 1999, unreported, dicta of Ground, C.J. considered.

(2) Butterfield Bank Cayman Ltd. v. Thornton, Grand Ct., Cause No. 307/10, March 29th, 2011, unreported, referred to.

(3) Cayman Natl. Bank Ltd. v. Smith, 1992–93 CILR 235, dicta of Malone, C.J. considered.

(4) Paradise Manor Ltd. v. Bank of Nova Scotia, 1984–85 CILR 437, considered.

Legislation construed:

Registered Land Law (2004 Revision), s.75(1):

‘A chargee exercising his power of sale shall act in good faith and have regard to the interests of the charger, and may sell or concur with any person in selling the charged land, lease or charge, or any part thereof, together or in lots, by public auction for a sum payable in one amount or by instalments, subject to such reserve price and conditions of sale as the chargee thinks fit, with power to buy in at the auction and to resell by public auction without being answerable for any loss occasioned thereby.’

Land Law-charges-power of sale-sale by ‘public auction’-sale through Multiple Listing Service is by public auction (effectively reverse auction) under Registered Land Law (2004 Revision), s.75(1)-for protection of parties, good practice for court to sanction listing at specified reserve price and require proper valuation

The plaintiff brought proceedings to enforce the charge it held over the defendants” land.

A practice had developed whereby chargees seeking to exercise their power of sale would apply to the court by originating summons for a declaration that the chargor was in default and present the evidence of a licensed appraiser or chartered surveyor as to (i) the true current market value of the property; and (ii) the market value if the property had to be sold within a short period of time. The court could then sanction the listing of the property with a licensed real estate agent on the Multiple Listing Service at a list price at least as high as (and often higher than) the true current market value and, if time passed without a sale, could later authorize the chargee to list the property at a lower price. The plaintiff bank sought guidance on (i) whether the sale of a property through the Multiple Listing Service amounted to a sale by ‘public auction’ for the purpose of the Registered Land Law (2004 Revision), s.75(1) (chargee”s power of sale); and (ii) if so, whether it was appropriate for the court to set the reserve price.

Held, granting the declaration sought:

A sale of property by a chargee through the Multiple Listing Service

was an exercise of its power to sell by ‘public auction’ under the Registered Land Law (2004 Revision), s.75(1). The listing of real estate on the Multiple Listing Service had all the essential attributes of a reverse auction: (i) the list price was initially set at a high level and then lowered progressively; and (ii) the property was advertised widely and was available to any member of the public with an interest in purchasing it. Although the court was not required to sanction the listing at a specified reserve price, this practice was to be encouraged as (i) chargors were protected by the court”s insistence on a...