Jackson v Dear et al — derivative claims in Guernsey

In March 2013, the Guernsey Royal Court in Jackson v Dear et al provided clarity in relation to an intriguing area of company law, namely the derivative claim. A derivative action is a mechanism whereby a member or shareholder in a company brings proceedings on behalf of the company, where the company cannot, or will not, seek redress for an alleged wrong it has suffered.

The English common law position in relation to derivative claims was first stated in Foss v Harbottle [1843] 2 Hare 461, which said that if a company has suffered a wrong, the only proper claimant to seek redress for that wrong is the company itself, as the cause of action vests in the company, as opposed to anyone else (the ‘Foss v Harbottle Rule’). Foss v Harbottle also stated that the courts would not intervene in the internal management of a company acting within its powers.

A narrow set of exceptions to the Foss v Harbottle Rule were established, with one such exception being that a minority shareholder may bring a derivative action where the wrong suffered by the company amounts to fraud and the wrongdoers themselves are in the control of the company, thus being able to frustrate any claim by the company against them…

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