Walkers win landmark case in the Guernsey Court of Appeal on unfair prejudice

Our Guernsey team acted for the successful Respondents both at trial and then in the Court of Appeal with judgment handed down on 10 April 2025 in the matter of Robert Sinclair v Ian Domaille et al. The judgment usefully analyses the application of unfair prejudice claims under section 349 of the Companies (Guernsey) Law 2008 (the "Guernsey Companies Law") and the judgment offers several key takeaways. 
 
Firstly, the Court of Appeal affirmed the distinct elements of unfairness and prejudice under s 349 of the Guernsey Companies Law. While it was held, on balance, the Appellant suffered prejudice due to the fact of the dilution of his shareholding, the Court found that this prejudice was not unfair, the Court having found that the directors were justified in their view that Mr Sinclair's actions posed a threat to the business and that action needed to be taken. The Court emphasised that prejudice alone is insufficient for a successful claim. 
 
Secondly, another significant aspect of the judgment was the Court's consideration of the "proper purpose" rule. The Court held that the directors' decision to allot shares to Mr Domaille was made for a proper purpose, namely to protect the business from the operational difficulties caused by Mr Sinclair's non-cooperation. This decision aligns with established case law, which allows for share allotments for purposes other than raising capital, provided they benefit the company as a whole.
 
Furthermore, the Court dismissed Mr Sinclair's derivative claim, which alleged breaches of directors' duties. The Court found no breach of duty, reinforcing the principle that directors' decisions, made in good faith and with reasonable skill and care, will not be easily overturned.
 
The case underscores the importance of good corporate governance, clear agreements in the context of shareholders' agreements, and the directors' duty to act in the best interests of the company. The Court also considered the constitution of quasi partnerships. It also highlights the court's reluctance to interfere with directors' commercial judgments made in good faith. 
 
Advocates Sarah Brehaut and Helena Lavin from our Guernsey Insolvency & Dispute Resolution team acted for the Respondents with Maria Mulla from Maitland Chambers. Our successful representation of the Respondents in this case demonstrates the firm's expertise in complex corporate litigation.