Laurence Pagden & Ors v Core VCT PLC & Ors [2025] EWHC 2316 (Ch)

[2025] EWHC 2316 (Ch)Case Numbers: CR-2021-001548, CR-2022-000144 & BL-2024-001058IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESINSOLVANCY AND COMPANIES LIST (ChD) and BUSINESS LIST (ChD)Venue 7 Rolls Buildings, Fetter Lane, London, EC4A 1NLDate 10 September 2025
Before
THE HONOURABLE MR JUSTICE THOMPSELL
Between
Laurence Pagden & OrsClaimantCore VCT PLC & OrsDefendantIN THE MATTER OF CORE VCT PLC (IN LIQUIDATION), IN THE MATTER OF CORE VCT IV PLC (IN LIQUIDATION), IN THE MATTER OF CORE VCT V PLC (IN LIQUIDATION)AND IN THE MATTER OF THE INSOLVENCY ACT 1986BETWEEN: 1. LAURENCE PAGDEN (as Liquidator of Core VCT IV plc and Core VCT V plc)
[2]SIMON JAMES UNDERWOOD[3]DAVID ROBERT BAXENDALE[4]STEVEN ANTHONY SHERRY (as Joint Liquidators of Core VCT plc) Applicants - and -[1]MARK ROBERT FRY[2]NEIL JOHN MATHER (as former Joint Liquidators of Core VCT plc, Core VCT IV plc, and Core VCT V plc)Respondents AND BETWEEN: 1. CORE VCT PLC (in liquidation) CORE VCT IV PLC (in liquidation)[3]CORE VCT V PLC (in liquidation) Claimants - and –[1]SOHO SQUARE CAPITAL LLP (formerly ESO Capital Advisors LLP and, before that, Core Capital Partners LLP)[2]Mr WALID KHALIL FAKHRY[3]STEPHEN PETER EDWARDS[4]MARK ROBERT FRY[5]NEIL JOHN MATHER[6]BEGBIES TRAYNOR (CENTRAL) LLP[7]BTG ADVISORY LLP (formerly BTG Financial Consulting LLP)[8]BEGBIES TRAYNOR GROUP PLC[9]SOHO SQUARE CAPITAL I LP (formerly Core Capital I LP)[10]SOHO SQUARE CAPITAL II LP (formerly Core Capital Partners II LP)[11]RHONDA NICOLL[12]DAVID JOHN ALEXANDER STEEL[13]PETER MENZIES SMAILL Defendants Ms Catherine Addy KC, Daniel Lewis and Charles King (instructed by Harcus Parker Limited and from 3 September 2025, Michelmores LLP) for the Claimants Mr Adam Deacock (instructed by Reynolds Porter Chamberlain LLP) for the Defendants Hearing dates: 18-19 June 2025 - - - - - - - - - - - - - - - - - - - - - APPROVED JUDGMENT - - - - - - - - - - - - - - - - - - - - - This judgment was handed down remotely at 10.30am on 10 September 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives[1]INTRODUCTION Can liquidators or their firms dealing with a members’ voluntary liquidation limit their liability? This question is at the heart of the matter that has been argued before me in a two-day trial of a preliminary issue which I describe in more detail below (the “Preliminary Issue”). The Preliminary Issue has arisen in connection with a lawsuit being brought by the three claimant companies (the “ClaimantCompanies”) following their restoration to the Companies Register though their new liquidators.[2]This litigation is being brought against, amongst others, the following defendants (collectively, the “Begbies Defendants”): i) the Fourth and Fifth Defendant (respectively “Mr Fry” and “Mr Mather”, and collectively the “FormerLiquidators”); ii) the Sixth Defendant, Begbies Traynor (Central) LLP (“Begbies LLP”) being a firm within which the Former Liquidators operated; and iii) the Seventh Defendant, BTG Advisory LLP, formerly BTG Financial Consulting LLP, (“BTG Advisory”) being a firm associated with Begbies LLP.[3]A trial of the preliminary issue was directed pursuant to the Order of HH Judge Davis-White KC dated 4 December 2024. The Preliminary Issue for the Court’s determination is:
“Whether clause 13.2.3 of the Sixth Defendant’s Standard Terms of Business (“the Terms”) and Clause 7 of their letters of engagement dated 5 and 6 March 2015 (“the letters of engagement”) limits the liability of the Fourth to EighthSeventh Defendants (“the Begbies Defendants”) and each of them to an aggregate sum of £1 million in respect of the breaches of duty alleged in paragraphs 155-158 of the Particulars of Claim (in their original form or as amended by the Amended Particulars of Claim) or any of them.”
[4]Although the Preliminary Issue as ordered referred to the Fourth to Eighth Defendants, the Claims against the Eighth Defendant have been dismissed by consent.[5]The Preliminary Issue is to be determined by reference to a Schedule of Assumed Facts and Matters which has been agreed for the purposes of this Preliminary Issue. This has been agreed only for such purpose, and nothing in this judgment should be seen as making any determination in respect of such assumed facts or matters.[2]BACKGROUND[6]Given the narrow nature of the matters to be determined, there is no need to describe in detail the matters that are the subject of the wider litigation. It is sufficient to note that the Begbies Defendants are subject to various claims arising out of the conduct of a Members Voluntary Liquidation, and that they aver that any liability that any of them may have is limited under the terms of signed Letters of Engagement (each an “LoE”).[7]In a little more detail, but still in overview, the Assumed Facts and Matters are: i) Begbies LLP provided final LoEs to the directors of the Claimant Companies in early March 2015; ii) the Former Liquidators owed relevant fiduciary, tortious, and contractual duties to the Claimant Companies and assumed all decision taking responsibilitiesin relation to the Claimant Companies including a duty “to ensure the transaction[a sale of the principal assets of the Claimant Companies] is conducted at fair value, without prejudice to any shareholder” ; iii) representations were made to the meeting of shareholders on 10 August 2016 by Mr Fry that “a valuation report was completed by his firm” and “considerable consideration was given to the sale process, valuations, control and realising the best value in a realistic timescale”, and statements were made by the Former Liquidators to members that they had applied a significant level of scrutiny to the transfer of assets and were satisfied it was in the best interests of the shareholders; iv) Begbies LLP owed a contractual duty to the Companies under clause 13.1 of the terms of business attached to the LoEs (the “Terms”) to exercise reasonable skill and care in the provision of services by it to the Companies, further or alternatively a like tortious or equitable duty; v) BTG Advisory owed a tortious, contractual and equitable duty to exercise reasonable skill and care in the course of its retainer; vi) that in various specific respects the Former Liquidators acted in breach of their fiduciary, tortious and contractual duties; vii) that Begbies LLP and BTG Advisory are vicariously liable for those breaches; viii) that Begbies LLP and BTG Advisory breached their own duties to exercise reasonable care and skill by reason of the actions of the Former Liquidators; and ix) that the Claimant Companies have sustained loss and damage by reason of such breaches of duties.[8]Again, I emphasise that these Assumed Facts and Matters are assumed, rather than admitted or determined by this court.[9]It is common ground between the parties that an LoE was written in identical form between each of the Claimant Companies and Begbies LLP, and in each case attaching the Terms. I will deal in more detail with the provisions of the LoEs and of the Terms later in this judgment, but meanwhile it is enough to note that they purported to restrict the liability of Begbies LLP and persons associated with them to £1 million (per Claimant Company).[10]The Begbies Defendants argue that they are all protected by this limitation. The Claimants argue, on various grounds, that no such protection applies. In summary, they argue that: i) it is impossible for a liquidator to enjoy limited liability; ii) even if that were possible, no such limitation could be agreed by the directors of the relevant company; iii) in any case, on a true construction of the LoEs, the LoEs do not provide for the limitations of liabilities to extend to the Former Liquidators, or to any other of the Begbies Defendants who might be liable for anything done by the Former Liquidators; and finally iv) in any case even if a limitation could be and had been validly agreed, the Limitation Clause is rendered invalid by the Unfair Contract Terms Act 1977 (“UCTA”).[11]As regards this last point, the parties agreed, and I also agreed, that the trial of the Preliminary Issue (which has been ordered on the basis that no oral evidence is to be heard) was not a suitable forum for determining the effect that UCTA might have in the circumstances, as this may depend on evidence that may need to be tested. Accordingly, this point is left outstanding. Nothing in this judgment should be seen as making any determination in relation to that point.[12]I will take the arguments raised on behalf of the Claimants individually.[3]THe Claimants’ Case that IT IS IMPOSSIBLE FOR LIQUIDATORS TO LIMIT THEIR LIABILITY[13]The Claimants’ first argument is that it is impossible for liquidators to limit their liability on the grounds (if I may state these broadly) that the statutory framework under which they are appointed makes no provision for limitation of liability. The Claimants argue that, against a background that: i) they were appointed by each of the Claimant Companies in general meeting; ii) their remuneration is set by each Claimant Company in general meeting; iii) they are required to be registered to act as liquidators and are subject to a scheme of regulation; iv) they are fiduciaries holding the assets of each Claimant Company on a statutory trust; and v) they are subject to the jurisdiction of the court, the court should conclude that as there is no express power anywhere within the regulatory framework that specifically allows a limitation of their liability, it may be inferred that no such limitation is possible.[14]I discern three main strands in relation to the argument that it is impossible for a liquidator’s liability to be restricted, even with the express consent of shareholders: i) the law makes no provision for the shareholders (or the court) to limit the liability of a liquidator, and therefore the liquidator can only be appointed, and afforded remuneration, as approved by the company in question in general meeting and no other terms can be agreed: his or her appointment and rights to remuneration are set by shareholders or by the court and the extent of his duties follows as a matter of law and not as a matter of any contract; ii) that a liquidator is a fiduciary administering a statutory trust and the statutory arrangements make no provision for the liquidator’s liability to be limited; iii) to limit the liability of a liquidator would be an attempt to oust the jurisdiction of the court; and iv) other considerations also point to this conclusion.[15]I will address these arguments individually, but will try not to lose sight of their cumulative effect. (a). The argument that the statutory regime does not provide for, and therefore excludes limitations of liability[16]The Claimants’ primary argument is that s.92(1) Insolvency Act 1986 (“IA 1986”) provides that it is the company in general meeting that fills any vacancy arising by death, resignation or otherwise in the office of liquidator (although, in addition, s.108 IA 1986 provides that in any voluntary winding up if there is no liquidator acting, the court may appoint a liquidator and that the court may, on cause shown, remove a liquidator and appoint another). Upon their appointment as joint liquidators pursuant to IA 1986, the Former Liquidators assumed a statutory role and any liability for their conduct in that role (as distinct from under any contract they might subsequently enter into with a third party on behalf of any of the Claimant Companies) arises under a framework created by statute and is a matter for the jurisdiction of the court. Neither their role nor their potential liability could be limited otherwise than in accordance with the legislation; it could not be circumscribed or constrained by means of any contract entered into with the relevant company either prior to or upon their appointment.[17]A further plank of this argument is that only licensed insolvency practitioners may be appointed as liquidators (s.230(3) IA 1986); only individuals (not firms) may be insolvency practitioners (s.390(1) IA 1986); and insolvency practitioners must be a member of a professional body recognised for these purposes and authorised by that body to act as a liquidator (s.390(2) IA 1986).[18]In my view this plank does not add substantially to the argument. It has not been suggested to me that any relevant body has used its rules or regulations to limit the ability of a liquidator to benefit from any limitation of liability.[19]The proposition that it is individuals who are appointed as liquidators is clearly correct as a matter of law. However, the proposition is somewhat at odds with the commercial reality that liquidators are chosen because they work for a particular firm which has the resources and expertise to support liquidators.[20]This was commented on in Re Sankey Furniture [1995] 2 B.C.L.C. 594 (“Sankey”) where Chadwick J (as he then was) was considering the question whether the court should approve a change of a liquidator in circumstances where one of the liquidators was moving firms or whether the matter needed to be referred back to a meeting of creditors (this was an insolvent liquidation). He found (on page 600) that:
“… the problem arises, as it seems to me, because the practice in relation to the administration of insolvency, at least in the case of large firms with many skilled and experienced employees, may not fit easily into the current legislative framework. The 1986 Act provides that a person who is not an individual cannot be qualified to act as an insolvency practitioner (see 390 (1))…. The effect is that, in law, appointment as a liquidator or trustee in bankruptcy is an appointment which is personal to the individual who accepts it. It is not an appointment to the firm of which he or she happens, for the time being, to be a member. But in large firms containing a number of partners and employees who are qualified as insolvency practitioners it is not unlikely that the work comes to the firm rather than to the individual. It is the collective expertise of the firm which attracts the appointment … The day-to-day administration is carried out by employees of the firm.”
[21]Surprisingly, given the importance of this issue and the length of time for which the office of liquidator has been present, there is next to no authority that clearly determines whether the Claimants’ argument is correct or not. However, to make good their proposition, the Claimants’ counsel refer me to the decision of Maugham J in In Re Home & Colonial Insurance Co Ltd [1930] 1 Ch. 102 (“Home & Colonial”).[22]In that case, a liquidator in a voluntary winding up who was accused of not properly performing his duties sought to rely on a provision in the articles of the relevant company excluding liability for directors/other officers of the company as a defence in misfeasance proceedings.[23]Maugham J (at pages at 126-127) held there was “no evidence whatever that the respondent was appointed to be liquidator on the condition that art. 157 should apply” and that: “it seems hardly possible that art. 157 can afford any protection to a liquidator in proceedings for the benefit of creditors of the company, since the liquidator has a statutory duty towards them which the Article cannot affect; and this forms an additional reason for not extending the Article to the acts of a liquidator”.[24]This last comment does suggest that the judge was not relying only on the conclusions he had already reached (that the liquidator was not a party to the articles and that it was unlikely that he had contracted on the implicit understanding that he would be protected “for the grossest negligence, idleness or incapacity”) but was making an additional point that it was not possible to contract out of the liquidator’s statutory duties.[25]Ms Addy KC also referred me to Re Rhino Enterprises Properties Ltd [2020] EWHC 2370 (Ch); [2021] BCC 18 at [101]–[109]. Here it had been argued that a claim under paragraph 75 of Schedule B1 of the IA 1986 against former joint administrators by contributories was barred by a term within a Company Voluntary Arrangement (“CVA”) (the route of exit from the administration) to which the company had agreed, and which released the former joint administrators from liability.[26]HH Judge Simon Barker QC accepted an argument to the effect that the release, having been formulated and proposed to creditors by the joint administrators for their own benefit, was in breach of the rule that powers must be exercised for the purpose for which they are granted and in breach of the joint administrators’ fiduciary obligations. As such, it was ineffective and unenforceable.[27]The submissions accepted by the court included that: “[i]t would be inconsistent with the scheme of Sch.B1 to allow an office-holder to exclude liability or the risk of liability expressly provided for and preserved after release by the statute itself” and that it was “improper for an administrator to use the machinery of a CVA to exclude a liability after the event which could not be excluded before or during the event”.[28]This case largely turned on the proposition that it was misfeasance on the part of the liquidators to use their powers to benefit themselves through causing the company to approve a CVA which provided them with exculpation, and so it is distinguishable from the case before me, where it was the directors of the Claimant Companies who agreed the limitation of liability. I would not rely on it by itself as establishing the proposition that the Claimants are trying to establish here, but certainly the reasoning is not inconsistent with the case that they are making, particularly as it appears that the party seeking to avoid the exculpation clause in that case had argued that it would be inconsistent with the scheme of Schedule B1 to allow an office-holder to exclude liability or the risk of liability expressly provided for and preserved after release by the statute itself.[29]Next, Ms Addy referred me to Fulham Football Club(1987) Ltd v Richards and another [2011] EWCA Civ 855 ; [2012] Ch. 333, and in particular dicta of Patten LJ expressed at [74] to the effect that the members of a company cannot, whether by contract or otherwise, in advance of liquidation override the exercise of the liquidator’s powers under sections 238 to 239 of the Insolvency Act 1986. This a reference to powers rather than to duties (or to liability for breach of duties), but nevertheless is consonant with the theme that the Claimants seek to establish.[30]Finally in relation to this point, Ms Addy cited Insolvency Practitioners, Appointments, Duties, Powers and Liability (second edition) at paragraph 8.45 as follows: “Once an IP takes office, they become subject to the supervision of the court and the statutory requirements of their role. It is not possible for the IP to limit the scope of their duties or otherwise to limit their liability in the context of carrying out their role as office-holder, since to do so would otherwise have the potential to conflict with the IP’s duties under the statutory scheme. This would amount to an attempt to oust the jurisdiction of the court.

(b) The argument based on a statutory trust

[31]In Fakhry v Pagden [2020] EWCA Civ 1207; [2021] B.C.C. 46, a case arising out of the same facts as the case before me, but in relation to a different aspect, concerning alleged procedural irregularities in restoring the Companies to the register, David Richards LJ (as he then was) explained (at [28]) that: “In all types of liquidation, the beneficial interest in the assets is suspended and they are held on a statutory trust to be dealt with in accordance with the statutory scheme”.[32]The statutory trust is explained in Goode on Principles of Corporate Insolvency Law (5th edition) (“Goode”) at paragraph 3-09 as follows: “Although winding-up does not of itself divest the company of legal title to its assets, it ceases to be the beneficial owner and holds the assets on trust to apply them in discharge of the company’s liabilities in accordance with the statutory scheme of distribution.[33]The case usually cited for this proposition is a tax case in the House of Lords, Ayerst (Inspector of Taxes) v C. & K. (Construction) Ltd [1976] A.C. 167 (“Ayerst”).[34]As Goode goes in to explain at paragraph 3-10, this is a particular type of trust that does not confer on creditors beneficial co-ownership or, indeed a proprietary interest of any kind in the assets until completion of the liquidation. Rather:
“The company thus holds the assets for statutory purposes, not for persons.”
[35]Clearly, as the trustee of a statutory trust, a liquidator is a fiduciary and owes corresponding fiduciary duties, such as a duty not to profit otherwise than through the remuneration allowed in statute – see ReGertzenstein Limited [1937] 1 Ch 115; and a duty of care - see Top Brands Limited & Another v Sharma & Another [2014] EWHC 2753 (Ch); [2015] 2 All E.R. 581.[36]These considerations allow the Claimants to argue their point in a separate way. Liquidators as fiduciaries holding assets on a statutory trust are subject to the terms of that trust. That trust is created by statute, and the statute makes no provision for trustees to limit their liabilities. As the trust is a trust to hold the beneficial interest in the assets for the statutory purposes and not for particular beneficiaries, it is not open to anybody to change the terms of that trust.

(c) The argument based on ousting the powers of the court

[37]Section 212 IA 1986 confers upon the court jurisdiction to compel a liquidator who has misapplied or retained, or become accountable for, any money or other property of the company, or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the company – “(a) to repay, restore or account for the money or property or any part of it, with interest at such rate as the court thinks just, or (b) to contribute such sum to the company’s assets by way of compensation in respect of the misfeasance or breach of fiduciary or other duty as the court thinks just.”[38]Subsection 212(2) makes it clear that: “any misfeasance or breach of any fiduciary or other duty in relation to the company includes, in the case of a person who has acted as liquidator of the company, any misfeasance or breach of any fiduciary or other duty in connection with the carrying out of his functions as liquidator of the company”.[39]Under s.212(4), the court’s jurisdiction under that section may be exercised even after the liquidator has had their release pursuant to s.173 IA 1986 if leave is given by the court (as has been the case in these proceedings).[40]Counsel for the Claimants argue that any attempt to limit or exclude the potential liability of the Former Liquidators in their capacity as appointed liquidators would be an attempt to oust the court’s jurisdiction under the IA 1986 and to alter the legislative scheme. Accordingly, even if a monetary liability cap had been purportedly resolved by the shareholders upon appointing the Former Liquidators (which did not happen), it would be ineffective.[41]In support of this analysis the counsel for the Claimants have referred me to Aribisala v St James Homes (Grosvenor Dock) Ltd [2007] EWHC 1694. In that case Alan Steinfeld QC, sitting as a deputy judge of the Chancery Division, was considering s.49(2) of the Law of Property Act 1925 (“LPA 1925”), which provided that: “[w]here the court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit”).[42]He found, at [33] that:
“The section is not in terms of conferring a right upon either party to the contract. What it is doing is conferring jurisdiction on the court, exercisable at its discretion, to order the repayment of any deposit, obviously necessarily paid by the purchaser. On its face, it seems to me that a provision in a contract that purports to exclude the section, as clause 1.2 of the conditions of sale of the contract in this case purports to do, is a provision that is purporting to oust the jurisdiction of the court under that section and that is, accordingly, on well-established authority void and of no effect on the ground of public policy.”
[43]Counsel for the Claimants submit, likewise, that, it is not open to a company (whether acting through its directors or through its shareholders) to oust the statutory jurisdiction of the court by way of contract, particularly given that the relationships created by a liquidation cannot be considered to be bilateral relationships but have an effect on members and creditors. They argue that any attempt to do so must similarly be void and of no effect as a result of public policy.

(d) Further arguments

[44]Counsel for the Claimants argue further that their contention is supported by the following points: i) Whether a person can waive performance of a statutory requirement, and whether a person bound by a statutory requirement can effectively contract out of complying with it, depends on legislative intention; Bennion, Bailey and Norbury on Statutory Interpretation (8th edition), at 9.6. ii) There is a well-established “general principle that parties cannot contract out of the insolvency legislation” (Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 A.C. 383 at [1] (Lord Collins)). iii) It cannot have been the legislative intention that a prior decision of the directors or any resolution by members/creditors (that could be passed only by a majority) to limit the potential future liability of a liquidator, could operate to oust the jurisdiction of the court that is available under the legislation to all members and creditors.[45]As to the argument that it might operate harshly on a liquidator to have unlimited liability in relation to his provision of services for which he may have charged only a small fraction of the value for which he might be held responsible, the Claimants argue that: i) under the legislative and regulatory framework, all insolvency practitioners appointed as liquidators will necessarily have both professional indemnity insurance (or other appropriate arrangements in place to meet claims arising from being in public practice); and ii) where appropriate, a liquidator can guard against personal exposure by applying to the court for directions under s. 112 IA 1986. As noted by Maugham J in Home & Colonial at page 125, a liquidator owes a high standard of care because: “He is of course paid for his services ; he is able to obtain wherever it is expedient the assistance of solicitors and counsel; and, which is a most important consideration, he is entitled, in every case of serious doubt or difficulty in relation to the performance of his statutory duties, to submit the matter to the Court, and to obtain its guidance”.[46]The Claimants point out also that a liquidator will have provided a bond in the form required pursuant to section 390(3) IA 1986. Pursuant to the Insolvency Practitioners Regulations 2005, paragraph 12 and Schedule 2, such bond must contain provision whereby a surety undertakes to be jointly and severally liable for losses arising from the fraud or dishonesty of the insolvency practitioner up to an aggregate sum in respect of each appointment equal to at least the value of the assets at the date of appointment, up to a maximum of £5m.[47]I do not see, however, how this last point advances their case: the bond is provided for the benefit of the members and creditors of the company in liquidation, not for the benefit of the liquidator, who remains jointly liable for his default. If anything, I see this point as weakening the case since it shows that the legislators were happy to see a limit afforded by the bond.[4]THe Defendants’ Case that IT IS POSSIBLE FOR LIQUIDATORS TO LIMIT THEIR LIABILITY[48]In this section I will consider the arguments made on behalf of the Defendants that it is possible for liquidators to limit their liability by reference to the different strands that I have recognised in relation to the Claimants’ arguments. (a). The argument that the statutory regime does not provide for, and therefore excludes limitations of liability[49]In response to the argument that the statutory regime does not provide for, and therefore excludes, limitations of liability, the Defendants argue that in other contexts where shareholders appoint an officer, or a particular role can be said to be the creation of statute, the general law has not recognised or implied any inherent prohibition on appointees limiting their liability. Rather, it has been necessary for there to be specific legislation restricting limitations on liability.[50]For example s.232 of the Companies Act 2006 (“CA 2006”) renders void any provision to exempt a director to any extent from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company.[51]Similarly, CA 2006 s.532 stipulates that any provision for exempting an auditor of a company (to any extent) from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company occurring in the course of the audit of accounts is void, subject to certain exceptions.[52]The Defendants make the point that Parliament clearly knows well how to legislate to prevent any exclusions or limitations of liability by statutory officeholders but has chosen to make no such provision in the case of liquidators.[53]To support his point that the mere fact that an office has been created and/or regulated by statute, does not of itself impose any prohibition on the ability of the parties to agree that an office-holder might limit his liability, Mr Deacock, for the Defendants referred me to Re City Equitable Fire Insurance Company [1925] Ch. 407 (“City Equitable”).[54]In this case, the Official Receiver as liquidator, brought a misfeasance summons under s.215 of the Companies (Consolidation) Act, 1908 (“CCA 1908”). Section 215 was a precursor to s.212 IA 1986 and in similar terms (although differently formatted). The Official Receiver was seeking to make the respondent directors and auditors liable for negligence in respect of losses occasioned by investments and loans and the payments of dividends out of capital dishonestly brought about by the managing director. The directors (other than the managing director) and the auditors had acted honestly throughout. They sought to rely on provisions in article 150 of the company’s articles of association. This provided an indemnity to the directors, auditors, secretary and other officers for the time being of the company (amongst others) and the trustees (if any) for acting in relation to any of the affairs of the company. The indemnity covered all actions, costs, charges, losses, damages and expenses incurred in the execution of their duty, except where the liability arose through their own wilful neglect or default. The article also provided that none of them shall be answerable for the acts, receipts, neglects or defaults of the other or others of them.[55]Romer J (at page 442), faced with an argument that the rights given by s.215 CCA 1908 are independent of and cannot be modified by any provision contained in the articles of association, refused to accept that argument and instead followed the decision in In re Brazilian Rubber Plantations and Estates, Ltd. [1911] 1 Ch. 425. In that case, Neville J had considered that it was not unlawful for a company to engage its directors upon such terms and found accordingly: “I do not think, therefore, that an action by this company against its directors for negligence, where no dishonesty was alleged, could have succeeded. It appears to me that an application under s. 215 of the Companies (Consolidation) Act, 1908, stands on the same footing."[56]On this basis Romer J found (at page 500) that, whilst the auditors and the respondent directors failed in some matters to perform their strict duty, and, but for the provisions of art. 150, he would have had to grant some relief to the Official Receiver, he would not do so, as if he were to do so he would: “... in effect, be depriving them to a material extent of the protection which that article affords, and for which they must be deemed to have stipulated as a condition of the service that they undertook to render”.[57]The Official Receiver appealed from this decision so far as it affected the auditors. Pollock M.R. gave the leading judgment in the appeal. It had been argued before him that article 150 could not amend rights given by statute. In this context, he noted (at page 507) that s. 215 CCA 1908 deals only with procedure and does not give any new rights. It provides a summary mode of enforcing existing rights. He went on to consider the statutory duties of auditors (under s.113 CCA 1908) to produce a report to shareholders. In summary, he considered that the auditors did meet their statutory requirements but were negligent in part in how they went about doing this. This negligence was covered by the exculpation from liability under article 150 such that the auditors were not to be liable for any “loss, misfortune, or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, unless the same shall happen by or through their own wilful neglect or default respectively”. He considered that the article was not ultra vires and did not offend against s.113.[58]Sargant LJ agreed noting at page 528:
"We have therefore to consider whether if the company here had brought an action against the auditors for neglect or default the defendants would have been entitled to avail themselves of the protection given to them by the article in question. I can see no reason why they should not do so. The article does not limit the nature or extent of the auditor's duties under s. 113. It is in no way contrary to the scheme of the Act, and such cases as In re Peveril Gold Mines, Ld. (1) and Payne v. The Cork Co. (2) seem to me to have no application whatever to this case. The article merely operates to limit the liability of the officers of the company by relieving them from the consequences of certain kinds of neglect or default. It might as well be said that a clause of this kind in trust deeds should be inoperative, because it would tend to induce trustees to be negligent of the interests of their cestuis que trust. The truth is that such restrictions on liability may, and I think often do, operate to protect rather than harm beneficiaries, because they prevent honest and responsible persons from being frightened away from accepting an office which might otherwise involve them in various unmerited and unexpected losses notwithstanding perfect honesty on their part."
[59]Mr Deacock also took me to the two cases referred to in that passage, In re Peveril Gold Mines Ltd [1898] 1 Ch. 122 and Payne v. The Cork Co. [1900] 1 Ch. 308, which provided examples of clauses which were seeking to oust rights given in the legislation in contrast to merely providing an additional jurisdiction to the court.[60]I agree with Mr Deacock that two points can be taken from this judgment: i) s. 215 CCA 1908 dealt only with procedure and does not give any new rights; the same must be true of s.212 IA 1986, which is in similar terms; and it follows that an exemption clause that is affecting directors’ liability is not modifying a statutory provision (at least in relation to s.212): it is modifying liabilities under the general law (for example for negligence or breach of duty); ii) where a statute defines a required responsibility or role (as did s.113 in City Equitable in relation to auditors), a distinction is to be made between: a) a clause which modifies the duties required by statute (which cannot be modified or attenuated by contract, unless the statute provides that they can be); and b) a clause which seeks to limit liability for aspects of performance of the role (which may be possible, subject to other considerations such as UCTA).[61]As regards liquidators, an example of the first case might be a clause purporting to relieve them of the obligation to make a report required by statute or by the Insolvency Rules. Another would be a clause seeking to vary the way that they are obliged under statute and the Insolvency Rules to distribute the assets of the company. As regards the second case, Mr Deacock argues that this would include an exemption clause of the type that we are considering.[62]As regards this part of the argument, I can see the logic of Mr Deacock’s reasoning, but, as I discuss below, I consider that it fails once one deals with the implications of the statutory trust.

(b) The argument based on a statutory trust

[63]By reference to various cases Mr Deacock has sought to persuade me that there is a bilateral relationship between a liquidator and the company in liquidation, and therefore it is open to those parties to agree a limitation on the liquidator’s liability.[64]The cases he has referred me to include, first Oldham & Ors v Kyrris & Anor [2003] EWCA Civ 1506; [2004] BCC 111 (“Oldham”). This concerned the appointment of an administrator and considered the point whether an administrator owes a common law duty of care to general creditors. The matter came to the Court of Appeal and the Court of Appeal decided that point (by reference to the established position in relation to the liability of directors) in the negative (see Jonathan Parker’s LJ judgment at [141]-[145]).[65]Jonathan Parker LJ quoted approvingly from the judgment of Mummery LJ in Peskin v Anderson [2001] BCC 874 (at [31] –[34] (“Peskin”). Mummery LJ in Peskin confirmed that in general directors owed their duties to their company, not to shareholders, although he acknowledged there may be special circumstances which would create the existence of additional fiduciary duties owed by a director to a shareholder which may be breached by the director personally causing loss to the shareholder directly (as distinct from loss sustained by a diminution in the value of his shares).[66]The Court of Appeal in Oldham decided that the same analysis would apply in relation to a common law duty of care as it would to a breach of fiduciary duty and to an administrator as it did to a director (see at [143]) and concluded at [146]: “Given the nature and scope of an administrator’s powers and duties, I can for my part see no basis for concluding that an administrator owes a duty of care to creditors in circumstances where a director would not owe such a duty to shareholders. In each case the relevant duties are, absent special circumstances, owed exclusively to the company.[67]This decision, of course, related to administrators, who are not trustees of the assets of the company, but are managers of the company’s assets, in a similar position to directors. Mr Deacock drew my attention, however, to the judgment at [149] where Jonathan Parker LJ said:
“My conclusion is also consistent with Romer J’s decision in Knowles v Scott [1891] 1 Ch 717, where he held that a liquidator is not a trustee for the creditors or contributories of a company in liquidation. At p.723 Romer J said this: ‘In my view a voluntary liquidator is more rightly described as the agent of the company – an agent who has no doubt cast upon him by statute or otherwise special duties . . . If this be the true position of a liquidator, and I think at any rate agency more nearly defines his true position than trusteeship, it is clear that he could not as agent be sued by a third party for negligence apart from misfeasance or personal misconduct.’”
[68]Whilst this case remains good authority for the proposition for which Jonathan Parker LJ was relying upon it (that a liquidator is not a trustee for the creditors or contributories of the company in liquidation), it now needs to be read in the context of the statutory trust found in Ayerst. I do not think that it remains good authority for the proposition that the liquidator’s role is best seen as that of an agent for the company (as would be the case for an administrator): the liquidator now must be seen as being a fiduciary holding assets on a trust to be administered according to statute, and not giving any beneficial ownership right to creditors, to contributories or indeed to the company itself.[69]Mr Deacock ended his survey of these cases with the submission that “To say that the company could not waive a right is tantamount to saying that the duty is not really owed to the company”. But, that is exactly what Ayerst tells us. The duties of a liquidator arising out of the statutory trust are not duties owed to a company. They are the obligations of a fiduciary to carry out the purposes of the statutory trust. They therefore cannot be waived by the company, either acting through its directors or even through its body of shareholders.[70]Having regard in particular to the point regarding the statutory trust, I find, therefore, that the Claimants are correct in saying that the Company, whether acting through its directors or its shareholders, could not modify the responsibilities or liability of the Former Liquidators.[71]The existence of the statutory trust also distinguishes the position of liquidators from that of directors or auditors, and so explains why the reasoning in City Equitable (which I consider formed the main plank of the argument that Mr Deacock was making) cannot be read across to the position of liquidators.[72]Whilst none of the cases that to which I have been referred by Ms Addy that have included an objection to liquidators limiting their liability, have mentioned the statutory trust, it seems to me that if the matter is analysed in the detail that I have been obliged to analyse it as a result of the arguments put to me, that is the true basis of the objection, as it explains why a limitation of liability was allowed under the general law for directors and auditors but cannot be given to liquidators, as Maugham J found in Home and Colonial, quoted at [‎23] above.[73]Whilst the law has moved on from the proposition that a liquidator in general owes duties to the creditors or members, and City Equitable shows us that there may be a distinction between performing a statutory duty (such as that of auditors) and liability for failing to perform that duty to a particular standard, nevertheless the instinct of Maugham J was a good one: the statutory duties of liquidators are not owed, or at least not owed purely, to the company in question, and therefore the company cannot modify the liability of liquidators for performing them negligently .[74]Having reached my conclusion on this basis, there is no reason for me to consider in more detail the other arguments advanced by the Claimants, but for completeness I will, as far as I can, deal with them.

(c) The argument based on ousting the powers of the court

[75]I have already quoted at length from City Equitable and have reached the conclusion that s.212 (like s.215 CCA 1908 before it) is a jurisdictional provision providing a particular way of accessing the court, rather than a section that provides any particular powers of the court. To that extent, I agree with Mr Deacock that the liabilities that the Former Liquidators were hoping to exclude were not liabilities created by statute, but the natural incidents of their appointment arising under the general law and equity. There is, therefore, no ouster of the court’s jurisdiction that arises from a provision purporting to limit these liabilities as these are not liabilities created by the statute.[76]Ms Addy points out that s.212(3) appears to go beyond jurisdiction and specifically to provide the court with powers to examine the conduct of particular persons (including liquidators) and to compel liquidators to repay, restore or account for money; or to contribute as the court sees fit”. Under s.214(4), with the leave of court, this could include applications made after a liquidator has had his release. However, in this respect it is no different to s.215 CCA 1908, and so it does not seem possible to distinguish City Equitable on this point.[77]Ms Addy drew my attention to s.112 IA 1986 as a further example of a provision providing the court with control over liquidators. This provision allows a liquidator or any contributory or creditor to apply to the court to determine any question arising in the winding up or to exercise any of the powers which the court might exercise if the company were being wound up by the court. This seems to me to be a similar jurisdictional provision, and I cannot see how a limitation of liability could be seen as an ouster of the powers of the court under this section.[78]It is difficult to square the decision in City Equitable with that in Aribisala(referred to at [‎41]-[‎43] above). In Aribisala, the Deputy Judge, having found that s.49(2) LPA 1925 was a clause conferring jurisdiction on the court (rather than rights on a purchaser of land), considered that it followed that it was against public policy to allow the parties to contract out of the operation of the clause.[79]Mr Deacock made an argument that the difference between these two cases was that the jurisdiction conferred by s.49(2) LPA 1925 inevitably interfered with whatever contractual rights the parties had agreed, so that it was obvious that they could not contract out of the provision, whereas s.215 CCA 1908 (and now s.212 IA 1986) was purely about providing a means of accessing the court to enforce rights that already existed otherwise than under the statute.[80]I see merit in this argument, but even if this is not correct, if I have to choose between the two cases, then I must choose City Equitable as binding on me as a Court of Appeal decision, particularly as it seems that this case was not cited in Aribisala.[81]In conclusion on this point, I do not accept that the argument that allowing the parties to limit liability would operate as an ouster of the court’s jurisdiction itself provides a sound basis for the conclusion that it is impossible for the liability of liquidator to be limited. However, as I have found other grounds to support that conclusion the point is of academic interest only.

(d) The Defendants’ answer to the Claimants’ further arguments

[82]As regards the Claimants’ point that whether a person can waive performance of a statutory requirement depends on legislative intention, having found that there is an established legislative intention to create a statutory trust, that question does not arise. It is established that that trust is a trust to fulfil the statutory purposes, not a trust of assets on behalf of particular persons. There is, therefore, no person who is able to waive performance of the statutory trust.[83]As to the argument that it might operate harshly on a liquidator to have unlimited liability in relation to his provision of services for which he may have charged only a small fraction of the value for which he might be held responsible, that is not a basis on which I could find for the Defendants. There is a policy point for legislators here as to whether it would be a good thing or not for insolvency practitioners to be able to limit their liability when acting as liquidators. There are arguments both ways as noted by Sargant LJ in City Equitable in the passage that I have reproduced at [‎58] above. I must apply the law as I find it, and I have found that on the basis of the law as it stands, there is no ability for provision to be made for liquidators to limit their liability.[5]would any power to limit Liquidators’ be for ONLY FOR shareholders to exercise?[84]The Claimants’ fallback argument, if I did not accept their primary argument that there is no way in which the liability of liquidators can be limited, is that any ability to limit the liability of liquidators in the case of a solvent members winding-up would be in the hands of shareholders rather than directors. It is the company through its shareholders in general meeting (or the court) that appoints a liquidator, and which fixes the remuneration of the liquidator and therefore only that body that could approve a provision modifying the liability of the liquidator.[85]As I have found for the Claimants in relation to their primary argument as regards the liquidators, this question becomes otiose. Nevertheless, for completeness I will say something about the point, on the assumption that, contrary to my finding, there could be a power to limit the liability of liquidators.[86]Clearly it is correct that a company must act through its shareholders in appointing a liquidator (see s. 84(1)(b) IA 1986, and s.91(1) IA 1986).[87]The Claimants argue that, once appointed, whatever their business relationship with the Company may have been previously, the individual’s role thereafter is that of a liquidator appointed under the statutory framework and, upon their appointment, all the powers of the directors cease, except in so far as the company in general meeting or the liquidator sanctions their continuance (section 91(2) IA 1986).[88]This is all correct, but of itself I do not see this argument to be determinative of the question.[89]First, the fact that the powers of the directors cease on the appointment of a liquidator does not of itself nullify any agreement that the directors (lawfully) entered into on behalf of the Company. If one of those agreements was that if the liquidators were to be appointed they (and/or the firm supporting them) would benefit from limited liability in certain circumstances, why does the fact that the liquidators now exercise all the powers previously exercised by the directors nullify that agreement?[90]Secondly, why should the fact that the shareholders undertake the appointment nullify that agreement, particularly in a case (not this one) where the shareholders appoint a liquidator in the knowledge that these terms have been agreed on behalf of the company. After all, where shareholders appoint a director, the director may serve on the basis of a director’s service contract on behalf of the company.[91]The Claimants refer me to Bethell v Trench Tubeless Tyre Co [1900] 1 Ch 408. The facts of this case were that the company passed a subjoined resolution for the voluntary winding up of the company and the appointment of a Mr Walker as liquidator. Notice was given to the shareholders that there would be a further meeting to consider confirming the winding-up and the appointment through separate special resolutions. At that meeting the first resolution was passed but the second failed for want of a seconder and a resolution was then proposed and carried that someone else, a Mr Marreco, should be appointed as liquidator. The case turned on the question whether Mr Marreco had been duly appointed – the argument being that the shareholders had not been given notice of any proposal to appoint him. It was decided that the appointment was valid on the basis that once a resolution had been passed to wind up the company it was competent for the company without notice to proceed to appoint a liquidator.[92]The Claimants refer me in particular to a comment at page 410 made by Lord Lindley, who gave the leading judgment, when he said that to hold otherwise:
“… we do in substance give to directors power to palm off upon the company the liquidator of their nomination, unless the company consents to postpone the meeting and give fresh notice.”
The Claimants argue that self-evidently, much greater concern would arise if the directors had power to limit the liability of the liquidator.[93]I do not agree that this proposition is self-evident or follows from that case.[94]I do not think that this observation provides a reason why, if a liquidator is willing to act, but only on the basis of his or her enjoying a limitation of liability previously agreed by the directors, that appointment could not be put to the shareholders and, if approved by the shareholders, remain a valid appointment.[95]In the case before me, it may be objected that the shareholders were not told about the limitation of liability, and the fact that they gave their sanction to the appointment was therefore not made on an informed basis. The Defendants argue that this makes no difference. If there was a failure in the explanations given to the shareholders when voting on this resolution, that point goes only to the culpability of the directors in allowing this failure, and does not affect the validity of the resolution to appoint them or to the agreement made on behalf of the Claimant Companies, that if appointed, it would be on terms providing for limitation of liability.[96]These are difficult points and did not get much airing within the hearing. In the light of this, and in view of my finding for the Claimants in relation to their principal argument, which anyway renders this argument otiose as regards the appointment of the liquidators, I will not seek to resolve this point.[6]Do the LoEs and Terms have effect after the appointment of the Liquidators?[97]The fact that I have found that the provisions in the LoEs (taken with the Terms) cannot and do not affect liability of the Former Liquidators deals with only part of the Preliminary Issue that I am required to answer. The Former Liquidators are the Fourth and Fifth Defendants. It remains possible, despite that finding, that these provisions may limit the liability of the other Begbies Defendants both before the appointment of the Former Liquidators as liquidators and after that appointment.[98]That an officeholder’s firm may, separately from the officeholder themselves, owe duties on a contractual or tortious basis was accepted by Jacob J in A & J Fabrications (Batley) Ltd v Grant Thornton [1999] BCC 807, at 810 where he said:
“It is true that it is employees of the firm who were the liquidators, but they only took their position as such by virtue of the contract between the plaintiff and Grant Thornton. Grant Thornton, in accepting the consideration of £5,000, were contracting to put their man in as liquidator. Of course once in as liquidator he would owe his duties to the company. But there is nothing inconsistent between the pleaded contract and the employee having duties to the company. The pleaded contract is, in short, that the employee/liquidator undertakes to do a proper job as liquidator. That is what Grant Thornton contracted would happen.”
[99]The Claimants maintain (I have found correctly) that a liability cap could not apply to claims against the Former Liquidators. They argue also that a liability cap cannot apply to any vicarious liability for the conduct of the Former Liquidators on the part of Begbies LLP and/or BTG Advisory. However, they acknowledge that insofar as Begbies LLP and BTG Advisory are themselves separately liable to the Claimant Companies for their own breaches of contract (including by reason of the conduct of the Former Liquidators), it is possible that a liability cap could apply to those claims.[100]However, whilst the Claimants acknowledge this last point in theory, they argue that on their proper construction, the LoEs and Terms do not limit the liability of any of the Begbies Defendants as regards anything done within the liquidation. This is the point that I consider next.

(a) The arguments relating to construction

[101]Some relevant provisions of the LoEs (which were in the same form for each of the Claimant Companies) are set out below.[102]The LoEs begin:
“We are pleased to accept your instructions to act for you in relation to placing the Company into members’ voluntary liquidation and for Mark Robert Fry and Neil John Mather to act as Joint Liquidators of the Company pursuant to the provisions of the Insolvency Act 1986.”
[103]The second (unnumbered) paragraph of the LoEs states that “…It is important that you read this letter and the attached standard Terms of Business carefully prior to signing and returning to us the duplicate letter enclosed. In Particular, we draw to your attention the paragraph headed “Limitation of Liability”.[104]Numbered paragraph 1 of the LoEs provides as follows “1. Nature of advice and services to be provided We are instructed by you to provide advice and assist you in all matters relating to placing the Company into members’ voluntary liquidation. This will include:1.1 Undertaking pre-appointment due diligence work in relation to the Company;1.2 Advising the directors on the matters that they need to consider prior to liquidation;1.3 Assistance with the preparation of the statutory declaration of solvency and the statement of assets and liabilities of the Company;1.4 Assistance with the holding of meetings of the directors and members, preparation and circulation of the relevant notices to convene a meeting of members and all notices, minutes and resolutions relating to the same;1.5 Providing the services of Partners and/or Directors of Begbies Traynor (Central) LLP who are qualified to act as licensed insolvency practitioners and who are able to accept an appointment as Joint Liquidators of the Company.1.6 Providing the services of members of staff of an appropriate grade to undertake work on the assignment (further details of which are provided in the paragraph headed "Fees and Costs"); and1.7 During the course of the liquidation we shall deal with the following:1.7.1 protection and realisation of all of the Company's assets;1.7.2 ascertainment and agreement of creditors' claims;1.7.3 payment of dividends to creditors and shareholders;1.7.4 convening meetings of the Company, if appropriate;1.7.5 agreeing tax liabilities with H M Revenue & Customs (with the support of the Company's existing tax advisers);1.7.6 carrying out any other matters that the Joint Liquidators may, by law, be required to do; and1.7.7 preparing the Joint Liquidator's final report for the Company's shareholders. “For the avoidance of doubt, our advice is being provided to the Board of Directors of the Company and is not being provided to the directors of the Company in their personal capacities”[105]Numbered paragraph 7 (the “Limitation Clause”) provides as follows: "Limitation of Liability7.1 For the purposes of clause 13 of our Terms of Business, we limit the aggregate liability of Begbies Traynor and Begbies Traynor Persons (as defined in our Terms of Business) in any circumstances whatsoever, whether in contract, tort, statute or otherwise and howsoever caused (including our negligence) for loss or damage in connection with provision of the Services (as defined in our Terms of Business) to the sum of £1 million excluding costs and interest.7.2 If you require a higher limit on liability please inform us immediately and we shall consider your request with our Technical and Compliance Team.”[106]The signature section for the Company is prefaced by the words “Terms of Engagement agreed and accepted on behalf of the Company and its Directors and in agreeing and accepting these Terms of Engagement, we acknowledge and confirm our acceptance of the limitation of liability of Begbies Traynor and Begbies Traynor Persons contained in this letter”[107]The Terms include inter alia the following :
“1.2 In the Terms, the following words and phrases shall (where the context so permits) have the following meanings:- …. "Begbies Traynor'' "we" or "us" means Begbies Traynor (Central) LLP a limited liability partnership, registered in England No OC306540, registered office 340 Deansgate, Manchester, M3 4LY …. "Begbies Traynor Persons" means Begbies Traynor and each and all of our members, partners, directors, employees, consultants and agents;” …. "Services" means the services to be provided by Begbies Traynor in accordance with the Services Contract; and "Services Contract" means the contract between the Client and Begbies Traynor, the terms of which are recorded in the Terms and in the Engagement Letter, together with any documents or other terms applicable to the Services to which specific reference is made in the Engagement Letter or in the Terms. … 3. Services The scope of the Services to be provided by us is detailed in the Engagement Letter, as amended or supplemented from time to time. Begbies Traynor shall not be responsible for providing any service or advice outside that scope unless it agrees to do so in writing. … 13.2.2 Nothing in the Terms or Engagement Letter will limit any liability that we may have to you in respect of any loss caused by our fraud, fraudulent misrepresentation or reckless disregard of our professional obligations or in any other situation where the law prohibits us from excluding or limiting our liability to you, including in respect of any death or personal injury resulting from our negligence. 13.2.3 Subject to clause 13.2.2 the aggregate liability of Begbies Traynor and Begbies Traynor Persons in any circumstances whatsoever, and however caused (including as a result of our negligence) for loss or damage arising from or in connection with the provision of the Services shall be limited to the sum specified in the Engagement Letter, or, if no sum is specified, a sum equal to the limit of our professional indemnity insurance at the time the claim is notified to us. …. 17.2 Sub-Contracting and novation In appropriate circumstances Begbies Traynor will use third parties (including, where appropriate, other members of the Begbies Traynor Group) to assist us in providing any part of the Services. Any reference to our employees in the Services Contract includes these third parties.”
[108]For the principles of construction, the Claimants’ counsel have referred me to the summaries given by Popplewell J (as he then was) in Re Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd [2018] EWHC 163 (Comm) at [8]; by Carr LJ in ABC Electrification v National Rail Infrastructure Ltd [2020] EWCA Civ 1645, at [17]–[19] and in Lewison on Interpretation of Contracts, 8th edition, at 12.145 to 12.149.[109]The Claimants’ Counsel suggest that in view of the legislative background addressed above and having regard to the contractual documents as a whole, a reasonable person, having all the background knowledge that would have been available to Begbies LLP and the Claimant Companies, would have understood that the liability cap now sought to be relied upon by the Begbies Defendants in respect of each of the Claimant Companies would not apply to any conduct of Messrs Fry and Mather when (and if) they were appointed to their envisaged future role as liquidators.[110]I disagree. Clearly the Begbies Traynor Defendants did not understand that there could be no limitation on the liability of a liquidator or they would have drafted the provisions differently. The analysis based on the background depends on a reasonable person having knowledge of the case law that I have gone through and having reached the same conclusion that I have. I do not think that it is correct to equate the knowledge and understanding of a reasonable person with that of a High Court Judge who has had two days of argument on the point.[111]However, I think the Claimants are on surer ground when they note in particular that clause 13.2.2 of the Terms disapplies any limit of liability “where the law prohibits us from excluding or limiting our liability to you”. As I have found that the law does not allow an exclusion or limitation of a liquidator’s liability, this clause (if needed) is in my view effective contractually to exclude the Former Liquidators from the protection of the Limitation Clause.[112]This provision does not, however, prevent the Limitation Clause applying to any of the other Begbies Defendants. It is necessary, therefore, to address the other arguments that are made on behalf of the Claimants to the effect that the Limitation Clause does not apply to anything that happened after the Former Liquidators were appointed.[113]In summary, these arguments are as follows.[114]The “nature and services to be provided” listed in clause 1 of the LOEs all fell under the heading “to provide advice and assist you in all matters relating to placing the Company into members’ voluntary liquidation” (emphasis added) and concerned the necessary preparatory steps for that purpose, including: i) “pre-appointment due-diligence work” (clause1.1 ); ii) advising “the directors” on matters “prior to liquidation” (clause1.2 ); iii) assistance with preparing the statutory declaration of solvency and statement of assets and liabilities (clause1.3 ) (both being responsibilities of the directors to be fulfilled prior to the relevant meetings of shareholders); iv) assistance with convening, holding and other formalities relating to the relevant meetings (clause1.4 ); v) providing persons “who are able to accept an appointment as Joint Liquidators” (clause1.5 ); and vi) providing the services of members of staff at an appropriate grade “to undertake work on the assignment”.[115]This last point, it seems to me, was capable of continuing past the appointment of the Former Liquidators. The Claimants make the point that the role of liquidator could not be assigned to Begbies LLP by the LoE, or at all, but I do not see how this affects the point that Begbies LLP could agree to provide staff during the liquidation to assist the liquidators.[116]Clause 1.7 “[d]uring the course of the liquidation we shall deal with the following…”, clearly envisaged services being provided after the liquidation had commenced, but the Claimants invite me to conclude from the use of the future tense “shall” that these matters did not form part of the assignment, but was rather an explanation of what things would happen in the future, not as a result of the assignment and therefore outside the scope of the Limitation Clause.[117]This, to my mind, is a strained interpretation. Mr Deacock, for the Defendants makes what I consider to be better points. He points out that the "Services" is defined as the services to be provided by Begbies LLP in accordance with the Services Contracts (being the contracts created by the LoEs read together with the Terms and any other documents or terms referred to in either of them). To identify what are the “Services” one must look at the list of services in the LoEs under the heading, “1. Nature of advice and services to be provided”. This list includes those services listed at 1.5 to 1.7, all of which are either envisaged to take place during the course of, or partly during the course of, the liquidation. Given that these services are specifically and clearly enumerated as being included amongst the services to be provided by Begbies LLP under the Services Contracts, the introductory words “relating to placing the Company into members’ voluntary liquidation” cannot be given an interpretation that restricts these services being included. I agree with Mr Deacock on this point and I see no ambiguity in this drafting.[118]Ms Addy put forward a second argument, which was that essentially after the liquidators are appointed the liquidation is undertaken by them and by their staff, leaving no room for Begbies LLP to undertake anything. Whilst it was no doubt correct that members and staff of Begbies LLP would assist the Former Liquidators, technically when they did so they were doing so as the staff of the Former Liquidators, and not on behalf of or as staff of Begbies LLP.[119]This brings us to the gap between theory and reality that was commented on by Chadwick J in Sankey in the passage that I have reproduced at [‎20] above. For the purposes of IA 1986, the staff working on the liquidation are regarded as being the Former Liquidators’ staff, and the amounts paid in respect of their services is regarded as being part and parcel of the Former Liquidators’ remuneration. But in the real commercial world these staff were staff or members of Begbies LLP and would look to Begbies LLP for their remuneration and employment rights. Also, in the real world it appears that the remuneration that was in theory payable to the Former Liquidators was in fact invoiced by Begbies LLP and received by Begbies LLP. (Although the matter is slightly confused because of changes in the letterhead used for VAT invoices which sometimes referred to Begbies Global, the VAT invoices consistently refer to payment to a bank account which I consider must be that of Begbies LLP.) Certainly the payments were not received into the personal accounts of the Former Liquidators.[120]In my view, the LoEs were an attempt to bridge the gap between the theory of liquidation and commercial reality by providing that Begbies LLP would provide the services of members or employees who were qualified to act as liquidators. This, of course was subject to such persons being appointed by the relevant Claimant Company acting through its members. Begbies LLP was agreeing also to provide suitably qualified staff of each grade to work on the assignment to assist such liquidators. This, of course, was subject to the appointed liquidators requiring the assistance of such staff, which had to remain at the discretion of those liquidators.[121]As regards payment during the period of the liquidation, the provisions in the LoEs at numbered paragraph 6.1 are slightly inconsistent – the clause starts by talking about the remuneration of the Joint Liquidators and the staff, to be paid by reference to the prevailing hourly charge out rates of Begbies LLP or payable on a fixed fee basis, but then ends by saying it is proposed that “our fees” (in context those of Begbies LLP) were proposed to be calculated on a time costs basis.[122]This inconsistency, I consider, arises from the difference between theory and commercial reality that I have mentioned. In practice, it appears that the work was all invoiced by Begbies LLP.[123]As a matter of commercial reality, I consider that Begbies LLP through the LoEs was committing itself to put forward members or employees that were suitable to be appointed as liquidators and are able to accept the appointment, and, if those liquidators were appointed, to provide their services (in the sense of allowing their services to be provided and taking responsibility for ensuring that the Former Liquidators continued in the appointment). It also undertook to make staff available during the liquidation.[124]Of course, if the liquidators were not appointed, or if the liquidators chose not to use the staff of Begbies LLP, Begbies LLP could not insist that they were used, but by signing the LoEs, Begbies LLP was providing the Claimant Companies with the reassurance that suitable liquidators would be available and would be supported by suitable staff. I see no reason why Begbies LLP and the Claimant Companies, acting through their respective members or directors, could not enter into such an agreement and if they did enter into such agreement, why (subject to any argument under UCTA) they could not limit the liability of Begbies LLP and their staff (other than the Former Liquidators themselves for the reasons that I have given).[125]The Claimants make the point that the LoEs were addressed to the Board of Directors of each of the Claimant Companies, rather than to the Claimant Companies themselves. I do not think it follows that the agreements concluded on the terms of the LoEs (taken with the Terms) were personal to the directors, rather than intended to bind the Claimant Companies. It is common when addressing a company to address the letters to the directors of the company so that it is known who should deal with the letter. That does not mean that the letter is intended for the directors personally to the exclusion of the company involved. In fact, the LoEs were countersigned underneath a rubric to say that the Terms of Engagement were “agreed and accepted on behalf of the Company and its directors”, as well as specifically agreeing and accepting the limitation of liability of Begbies Traynor and Begbies Traynor Persons contained in the LoEs. It is clear that the intention was to bind the Claimant Companies.[126]Accordingly, I find that there is nothing in the Claimants’ arguments as regards the construction of the LoEs that states that they are not to apply in accordance with the terms.[127]Accordingly, I think it is clear that they are effective to limit any separate liability that Begbies LLP or Begbies Traynor Persons may have under the LoEs, except that, for the reasons that I have given they are not effective to limit the liability of the Former Liquidators and I have reserved the question of whether they might be invalidated under UCTA.[128]There remain, however, one or two outstanding issues to discuss before I can claim to have addressed everything that I have been directed to consider.

(b) The possibility of limiting vicarious liability

[129]The first is whether these provisions are effective to limit any vicarious liability that Begbies LLP may have for the actions (or inactions) of the Former Liquidators.[130]As regards vicarious liability, I need to be somewhat circumspect as I have not been asked to make any findings about vicarious liability, and I will avoid doing so. I have been asked to assume vicarious liability, but I have not been given the basis on which this assumption applies.[131]As I cannot determine within the scope afforded to me at this stage whether Begbies LLP or any Begbies Traynor Persons (as each is defined in the Terms) are vicariously liable for the acts of the Former Liquidators, all I can say is: i) it does not follows from my finding that there can be no limitation of liability for liquidators that a corporate entity or other employer of a liquidator could not limit its vicarious liability for acts of the liquidator; ii) it appears to me that the limitation of liability in numbered paragraph 7 of the LoEs (excluding liability “in contract, tort, statute or otherwise and howsoever caused (including negligence)”, taken with clause 13 of the Terms is wide enough to cover vicarious liability including vicarious liability for the acts or omissions of the Former Liquidators.[132]I can see that there is a potential corollary to one of the arguments pursued by the Claimant before me that could be used as an argument against the being vicarious liability.[133]This is the argument that the Former Liquidators were acting as independent persons under the appointments respectively by the Claimant Companies, and not under the provisions of the LoEs and not on behalf of or in pursuance of the business of Begbies LLP or BTG Advisory. However, I understand that as regards Begbies LLP at least the Claimants are looking to deploy an argument made under the specific wording of provisions of the Limited Liabilities Partnerships Act 2000.[134]Those arguments will need to be pursued in another forum. (c). Can BTG Advisory can benefit from the limitations of liability?[135]The second question is whether BTG Advisory can benefit from the limitations of liability.[136]I have not found any principle of law that would stop BTG Advisoryfrom benefiting from a limitation of liability. I can say also, that on the wording of the LoEs taken with the Terms, it appears that BTG Advisory could be in scope.[137]The definition of “Begbies Traynor Persons” who are covered by the Limitation Clause refers to Begbies LLP “and each and all of our members, partners, directors, employees, consultants and agents”. Perhaps unexpectedly, it does not refer to other members of the Begbies Traynor Group. However, clause 17.2 of the Terms extends the definition to include third parties (which may include other members of the Begbies Traynor Group) that Begbies LLP may use to assist it in providing any part of the Services, deeming them to be “employees” and so covered by the Limitation Clause.[138]I note, however, that this could only cover BTG Advisory if it was assisting Begbies LLP in providing one of the Services in numbered paragraph 7 of the LoEs (and not, for example if it was separately appointed by the Former Liquidators in its own right). I note further that even if this extension to the definition applies, it only protects BTG Advisory itself and not its employees, or directors.[139]However, that is as much as I can say. This hearing has not been the place to determine whether, on the construction of the LoEs and the Terms that I have indicated to be correct, BTG Advisory is covered by these provisions. This matter will depend on various factors that will need to be established such as: the detail of the relationship between the Former Liquidators and BTG Advisory, and whether any services said to be provided by BTG Advisory fall within the scope of the LoEs or resulted from a separate appointment, or were merely an instance of the Former Liquidators or one of them performing his duties as Liquidator. These are all matters that will need to be played out within another forum. It is not within the scope of this hearing to determine any such facts. (d). The application of clause 13.2.4 of the Terms[140]There is one final matter that is not strictly within the scope of what I have been asked to determine, but which I think has been affected by what I have determined, and on which I feel I should say something.[141]This relates to the application of clause 13.2.4 of the Terms, which provides as follows:
“The extent to which any loss or damage will be recoverable by you from us will also be limited so as to be in proportion to our contribution to the overall fault for such loss or damage, taking into account any contributory negligence by you and any negligence by your other advisers and/or third-party responsible to you and/or liable in respect of such loss or damage.”
[142]As I have been not asked to deal with this, and have not received any substantive submissions from either side in relation to this clause, I make no determination about how this clause may apply in relation to this action. However, without making any determination, I think I can point out that: i) there is a logic to the proposition that the arguments that I have accepted as to why the liability of liquidators cannot be limited would apply equally to any proposed application of this provision to the Former Liquidators; and ii) there is equally a logic to the proposition that the arguments that I have accepted as to why other Begbies Defendants may nevertheless be protected by a clause limiting liability would also apply equally to any proposed application of this provision to the other Begbies Defendants who may come within its scope.[143]The points made in the previous paragraph should be regarded as obiter dicta and will not be binding on a future judge considering this case. However, I hope they will offer a useful starting place for thinking about these issues.

conclusion

[144]In my view, HH Judge Davis-White KC has assisted the parties by directing a trial of the Preliminary Issue. With my reasoned findings above, I have been able to provide the parties with authoritative guidance that: i) the Former Liquidators are not protected by clause 7 of the LoEs and clause 13.2.3; ii) the remainder of the Begbies Defendants may be protected by these provisions if they were involved in providing services (including services provided after the appointment of the Former Liquidators), subject to their being able to show that what they were doing was within the scope of the services provided under the LoEs (following the interpretation that I have given); iii) these provisions are wide enough to cover vicarious liability but whether or not they are effective in doing so may depend on basis on which it is established (if it is) that vicarious liability applies, and that argument is outside the scope of this judgment.[145]Whilst there is still much to determine within this action, I hope that the clarity afforded by this judgment might assist the parties in reaching a negotiated solution.

Cited in 2 later judgments