Testing the orthodoxy of Akers v Samba

Abstract

In Akers v Samba, a trustee, in breach of trust, transferred legal title to shares forming the subject matter of the trust fund to a bona fide purchaser for value without notice, thereby clearing the title. The Supreme Court held that the corporate beneficiary of the trust, which was the subject of winding-up proceedings, could not claim that the loss of its equitable interest in the shares was a void disposition for the purposes of section 127 of the Insolvency Act 1986. The effect in equity, the court reasoned, was that the original equitable interest was defeated, or overridden, and therefore there was no transfer, or disposal. Such an outcome, re-affirming the primacy of equity’s darling is, at least for the original beneficiary, hard to digest. The Supreme Court judgments also contain dicta validating the principle (and long-standing assumption held by the commercial community) that a trust is not defeated simply by the lex situs of the trust property, where such law does not recognize separate and distinct legal and equitable interests. This article examines the core policies and principles that underpin the decision, and assesses whether the decision has more limited application than first might appear to be the case and as has been argued elsewhere.