Wednesday, 26 February 2014

UK: England and Wales: company law and the interpretation of section 61 of the Trustee Act 1925

The Court of Appeal gave judgment earlier this week in Santander UK Plc v RA Legal Solicitors [2014] EWCA Civ 183. At first instance the trial judge found that RA Legal had acted in breach of trust but that they should be relieved from liability under section 61 ("Power to relieve trustee from liability") of the Trustee Act 1925. On appeal it was argued, amongst other things, that the trial judge had wrongly construed section 61 by referring to cases concerning section 727(1) of the Companies Act 1985 (now section 1157 of the Companies Act 2006). In this regard Lord Justice Briggs stated (para. [32]):
The difficulty with equating section 61 with section 727(1), at least for the purpose of interpreting section 61, is that section 727(1) appears to contemplate that a company officer or auditor may have acted honestly and reasonably, even though negligent, whereas section 61 contemplates no such thing in relation to trustees. It would in my judgment be wrong, by any process akin to reverse engineering, to interpret section 61 by reference to the historically more recent and undoubtedly more difficult provisions now to be found in section 727 of the Companies Act 1985."

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