Guernsey: Royal Court considers law on the derivative action

The Royal Court (Ordinary division) gave judgment earlier this year in Jackson v Dear and others (10/2013). The proceedings concern what is believed to be the first derivative action placed on the court rôle of the Royal Court. A copy of the judgment has recently been published within the unreported judgments section of the Guernsey Legal Resources website (registration is required to view the judgment).

The judgment is noteworthy for several reasons, three of which will be noted here. First, Lieutenant Bailiff Patrick John Talbot QC accepted, following Flightlease Holdings (Guernsey) Ltd v Flightlease (Ireland) Ltd. 2009-10 GLR 38, that it was appropriate to look to English law company law where the matter was not covered by Guernsey statutes or customary law. Second, the Lieutenant Bailiff held that Guernsey's customary law permitted the bringing of double derivative actions. In doing so, reference was made to Waddington Ltd v Chan Chun Hoo (2008) 9 HKCFA 63 and Universal Project Management v Fort Gilkicker [2013] EWHC 348 (Ch). Third, the Lieutenant Bailiff held that the rule in Foss v Harbottle, as it stood in England before the introduction of section 260(3) of the UK Companies Act 2006, applied in Guernsey. In this regard he stated (at para. 16): "In my judgment, any change in our law to replace the rule in Foss v Harbottle so as to allow cases in negligence or breach of duty as a new exception to the rule must be a matter for the States to consider, and not for me to decide is necessary or appropriate".