against their British auditors who the local firm claimed were negligent.

In London, Peat Marwick Mitchell & Company and KPMG Peat Marwick successfully appealed against the judgment of Mr. Justice Tuckey, who in June ruled for the Bermuda company, Mutual Reinsurance Company Ltd., on a preliminary matter.

The issue was whether or not the terms of the company bylaws precluded Mutual making a claim against their statutory auditors, alleging they were negligent for failing to detect that money which should have been received by the plaintiff was, as a result of fraud, retained by certain Liechtenstein and German companies.

The reserved judgment, reported yesterday in The Times law reports, came from Lord Justice Hobhouse, with the concurrence of Lord Justice Leggatt and Lord Justice Thorpe.

It was ruled that as the auditors were appointed under the Companies Act 1981 and Mutual's own bylaws, they were in effect officers of the company and therefore were entitled to protection under those bylaws to preclude Mutual's claim against them alleging negligent auditing.

His Lordship said that the Bermuda legislation adopted the same approach to auditors in the material respects as did the English legislation. Auditors might, or might not, be officers of the company.

If they were appointed under section 89 of the Bermudian Act, they would be officers, but if they were employed to carry out an audit without being appointed they would not be officers.

Section 118 of the bylaws, which provides for the appointment of auditors, said that they should be appointed, and their duties regulated in accordance with the Companies Act.

The bylaw, it was said, had to be read together with the Bermuda legislation.

And the bylaws did contemplate and provide for auditors to be appointed through section 89 of the act, as officers of the company.

The court said that it was not in dispute that the defendants were appointed under section 89, and therefore they would be regarded as officers of the company for the periods for which they were appointed, and were entitled to the protection of bylaw 123.

BUSINESS BUC