Tibbetts v Nikfarjam
| Jurisdiction | Cayman Islands |
| Judge | (Smellie, C.J.) |
| Judgment Date | 19 October 2004 |
| Date | 19 October 2004 |
| Court | Grand Court (Cayman Islands) |
(Smellie, C.J.)
Ms. S.M. Corbett for the plaintiff;
Ms. M.P. Crinis for the defendant.
(1) Harrold v. Plenty, [1901] 2 Ch. 314; (1901), 85 L.T. 45; 17 T.L.R. 545, distinguished.
(2) Lysaght v. EdwardsELR(1876), 2 Ch. D. 499; 34 L.T. 787; 24 W.R. 778, considered.
(3) Manheath Ltd. v. H.J. Banks & Co. Ltd., 1996 S.L.T. 1006, referred to.
(4) Société Gén. de Paris v. WalkerELR(1886), 11 App. Cas. 20; 54 L.T. 389, referred to.
(5) Wood Preservation Ltd. v. Prior, [1969] 1 All E.R. 364; [1969] 1 W.L.R. 1077, distinguished.
(6) Zebmoon Ltd. v. Akinbrook Inv. Dev. Ltd., UNK1988 S.L.T. 146, referred to.
Grand Court Rules, 1995 (Revised), O.50, r.11(1): The relevant terms of this paragraph are set out at para. 15.
r.12: ‘Where a stop notice has been served in accordance with rule 11, then, so long as the stop notice is in force, the person or body on which it is served shall not register a transfer of the securities or take any other steps restrained by the stop notice until 14 days after sending notice thereof, by post, to the person on whose behalf the stop notice was filed, but shall not by reason only of that notice refuse to register a transfer, or to take any other step, after the expiry of that period.’
r.15: ‘(1) The Court, on the application of any person claiming to be beneficially entitled to an interest in any securities of the kinds set out in paragraph 2(2)(b) of the Law, may by order prohibit the person or body concerned from registering any transfer of the securities or taking any other step to which paragraph 4(4) of the Law applies.
The order shall specify the securities to which the prohibition relates, the name in which they stand and the steps which must not be taken, and shall state whether the prohibition applies to the securities only or to the dividends or interest as well.’
Companies-shares-transfer of shares-stop notice-issue of notice only by person with beneficial interest in shares and not to be used to establish beneficial interest of claimant-no beneficial interest under agreement for purchase of shares if condition of purchase not fulfilled-other available remedies to be pursued for enforcement of agreement and stop notice not to be used as form of indefinite restraint
The plaintiff applied for a stop notice, preventing the transfer of certain securities, to be discharged.
The plaintiff and the defendant entered into an agreement for the sale and purchase of shares in a certain company. The defendant did not meet the conditions set out in the agreement (deadline for completion and requirement to obtain business licence) and the plaintiff purported to rescind the agreement. The defendant sought an extension of the deadline and issued a stop notice to prevent the plaintiff from dealing with the shares.
The plaintiff submitted that the defendant had no beneficial interest in the shares and therefore had no standing to issue the stop notice.
The defendant submitted in reply that (a) the valid, enforceable agreement into which he entered for the purchase of shares gave him a beneficial interest in them; and (b) the plaintiff had no right to rescind the agreement as the defendant had the right to waive the condition requiring him to obtain a business licence, which the plaintiff had relied upon to rescind the agreement for the defendant”s failure to comply.
Held, discharging the stop notice:
(1) As the defendant did not have a clear beneficial entitlement to the shares and had been dilatory, the stop notice would be discharged. Its purpose and effect was to prevent the securities being dealt with without the existing beneficial owner having had a fair opportunity of asserting his claim to them and could not be used to establish the defendant”s own beneficial interest. The agreement for the purchase of shares into which the defendant had entered did not give him a beneficial entitlement to them as it was not valid and enforceable, due to his failure to fulfil its conditions, and the plaintiff had validly rescinded or repudiated it on that basis (para. 22; paras. 28–32; para. 43).
(2) The defendant had taken no steps to obtain an order for specific performance of the agreement (and/or damages and an injunction) despite having had ample time to do so and had, in effect, sought to rely on the stop notice as a form of indefinite restraint which was an improper use of the notice (paras. 40–42).
1 SMELLIE, C.J.: This is an application by notice of motion by the plaintiff, by which she seeks an order that the stop notice filed herein on
August 26th, 2004 by the defendant, to stop the transfer of certain securities, be discharged.
2 The securities in dispute are all the issued shares of a locally registered company named Beneath the Waves Ltd. The only significant asset of the company is a registered lease which it holds over certain commercial property located in George Town.
3 The plaintiff and the defendant entered into an...
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