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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions