Jersey: Carlyle Capital v Conway: In The Line of Duty

Last Updated: 27 September 2017
Article by Clara Hamon

A recent judgment of the Guernsey Royal Court provides comprehensive guidance on the duties of directors.   In Carlyle Capital Corp Limited (in liquidation) and ors v Conway and ors there is extensive consideration of the duties owed by a director to the company and the standard of care to be expected.  The judgment will be of great interest to the wider offshore financial services market.

Particular consideration was given on when a company is on the brink of insolvency. Guidance is given as to the point at which a company finds itself in that position and the extent to which directors' duties may differ at such time.  This is a developing field in Jersey and this aspect of the judgment should be of particular interest to the Jersey financial services community.

The liquidators of Carlyle Capital Corp Limited ("CCC") brought a claim against the directors and investment manager for nearly US$2 billion.  CCC was a Guernsey registered fund that was unable to weather the storm of the financial crisis in 2008.  It was claimed that by failing to act sooner to sell off assets, the directors were liable for the losses.  The trial lasted 6 months with evidence from 16 expert witnesses and extensive consideration of authorities from a number of jurisdictions.  The allegations included breaches of fiduciary duty, gross negligence, misfeasance, wrongful trading and breaches of contract.


The judgment makes a clear distinction between the two types of duties owed to the company: (1) fiduciary duties and (2) duties of skill and care.

It was highlighted that fiduciary duties are owed to the company, not to its shareholders.  They are characterised as involving integrity, honesty and loyalty and can be divided into four sub-categories:

  1. Duty to act in good faith in the best interests of the company;
  2. Duty to act for "proper purposes";
  3. Duty to exercise their own independent judgment;
  4. Duty not to act where there is any, or any possible, conflict.

Good faith

This is a subjective duty to act in what the director bona fide believes is in the best interests of the company.  If the director errs in judgment and makes a decision with poor results but honestly considered it in the best interests, then he is not in breach of fiduciary duty.  Although if it is readily apparent that an action is not in the company's best interests then this will cast doubt on whether he did honestly hold that belief.

Failure to consider the interests of the company at all, or a very cursory consideration, will not be sufficient to allow a director to claim he has acted in good faith.

Even where there is an honest belief, if this was a result of some other failing on the director's behalf, for example failure to apprise himself of the relevant facts or figures, then it may give rise to liability for breach of duty of care. The importance of the distinction between liability for a breach of fiduciary duty or the duty of care may arise when there is an exoneration or indemnity clause which is only operative where a director has acted in good faith.

Importantly, the judgment repeatedly rejects an approach which would draw the court into making judgments on the merits of commercial decisions: "...the court must be satisfied that the decision complained of went beyond a mere error of commercial judgment".

Interests of creditors

It is well established that when a company becomes insolvent, the directors must consider the interests of creditors and prospective creditors. The issue here was when a company is in financial difficulty but not yet fully insolvent, at what point does the duty to consider creditors kick in?  It was held that this point arises "when it can be seen that decisions about the company's actions could prejudice the creditors' prospects of recovering their debts in a potential liquidation."

Proper purposes

This duty is concerned with whether a director has acted within his powers. It is purely a matter of law or construction of the Memorandum and Articles.  It follows that directors can be in breach of this duty whilst acting in good faith if they did not realise what they were doing was ultra vires.  Directors should always give consideration to whether they have the power to take a particular action and, if in any doubt, seek professional advice.

Own judgment

A director should not simply do as others tell him. However it is not a breach of duty to follow the views of fellow directors where they have particular expertise in an area.


There is no rule of law to prevent an individual being a director of more than one company, even if those companies are in competition. This is subject to the proviso that a director in that position will have to manage his affairs so as to discharge the duties owed to both companies.  Conflict may be avoided by making full disclosure and obtaining the consent of each before taking any action.

Association with another company within a wider group does not make a director incapable of performing his duty, nor does it mean that a decision cannot be in the company's best interests just because it also benefits a parent or associated company.


This duty comprises five factors: the director's role in the governance and management structure; his particular skills; level of remuneration; size of the company and nature of its business; the circumstances of the company at the time.

It is common ground that a director is entitled to delegate his functions.  However, there is an "irreducible minimum" below which a director cannot delegate the duty to monitor and oversee the affairs of the company.  The extent of delegation permissible will of course vary in companies of differing size and complexity.

The judgment considered whether directors have a duty to seek professional advice. Whilst the law does not specify this is mandatory, "it may go a long way towards demonstrating that they were not in breach of a duty of care to the company. Indeed, it may even be decisive in their favour".


This judgment offers an up to date approach by a court to each of the different aspects of directors' duties. It dissects the relevant tests and the subjective and objective elements of each. Nevertheless, whenever a court lays down guidance, it can only ever be that: a guide.  Any case will always be fact dependent and there will often be no clear cut answer as to whether a proposed decision or course of action would be in breach of duty.  Applying the guidance in practice will often be far from straightforward.  Professional advice should be sought where in any doubt as to the possible liabilities which may result from a particular course of action.  This is even more important for a company on the brink of insolvency when the directors' duties may diverge from those that apply in more salubrious times.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.