This article was first published by Sweet &
Maxwell.
The collapse of the billion dollar Carlyle Capital Corporation
Guernsey-based fund in 2008 led to litigation spanning a decade.
The lessons to be learnt from this case and the legal analysis of
directors' duties are relevant in the current climate of the
COVID-19 pandemic which has caused severe global economic
disruption and may lead to other fund collapses.
Introduction
The Carlyle case arose from the collapse in March 2008
of a Guernsey fund, Carlyle Capital Corporation Ltd
(CCC), which led to the loss of all of its US$1
billion of capital. CCC was set up as a Guernsey company in 2006
and invested mainly in residential mortgage-backed securities
(RMBS) issued by US government-sponsored entities
Fannie Mae
1 and Freddie Mac.
2 The case went to trial, was appealed and heard by
the Guernsey Court of Appeal.
3 It was further appealed to the Judicial Committee
of the Privy Council and was settled a few
