Cedar Securities Limited (in liquidation) & Anor v Mark Richard Phillips (a bankrupt) & Ors [2025] EWHC 2760 (Ch)

[2025] EWHC 2760 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
MASTER MARSH (SITTING IN RETIREMENT)
Venue ROLLS BUILDING, FETTER LANE
Between
CEDAR SECURITIES LIMITED (IN LIQUIDATION)Claimants(acting by its liquidator Claire Louise Middlebrook)ClaimantsJAMES JOSEPH HANNONClaimantsMARK RICHARD PHILLIPS (a bankrupt)DefendantsJULIE SWANDefendantsCEDAR SECURITIES LIMITED (IN LIQUIDATION)Defendants
LONDON EC4A 1NL
BL-2025-000661IN THE MATTER OF CEDAR SECURITIES LIMITED (IN LIQUIDATION)(company number 00553595) AND IN THE MATTER OF THE INSOLVENCY ACT 1986 BETWEEN (1) CLAIRE LOUISE MIDDLEBROOK (as liquidator of Cedar Securities Limited (In Liquidation))(2) JAMES JOSEPH HANNON Applicants and (1) MARK RICHARD PHILLIPS (A BANKRUPT)(2) JULIE SWAN RespondentsJUDGMENTFRANCIS COLLACO MORAES instructed by William Sturges LLP appeared for Claimants/ApplicantsNICHOLAS GOODFELLOW instructed by Arch Law Limited appeared for Second Defendant/Second RespondentJudgment handed down remotely in the absence of the partiesat 14.00 on 24 October 2025Background
[1]Cedar Securities Limited (“Cedar”) was a successful company in the business of letting and managing a portfolio of properties that it owned. Ann Cedar was the holder of 100% of the issued shares. She died intestate on 23 August 2007 and Michael Lawson, who was a partner in William Sturges LLP, was appointed as the administrator of her estate on 18 May 2009. He then became the sole director of Cedar and its sole shareholder. Steps were taken by Mr Lawson to realise most of the properties held by Cedar (and two associated companies) and by September 2016 Cedar held a cash balance of £4.7 million as well as a residue of freehold reversions with a value estimated at £5,000.[2]Cedar engaged PCR (London) LLP (“PCR”) to act on its behalf in connection with the proposed members voluntary liquidation. PCR provided a letter of engagement to Cedar dated 22 September 2016 with General Terms and Conditions of Business and a Service Agreement. The three documents were described collectively as the “engagement pack”. Mr Lawson countersigned the letter of engagement on 28 September 2016 to confirm Cedar’s agreement to the terms set out in the engagement pack. Cedar was placed into members voluntary liquidation on 30 September 2016 and the defendants, Mr Phillips and Ms Swan who were licensed insolvency practitioners, were appointed as joint liquidators. £4.7 million was transferred to PCR on 29 September 2016.[3]The claim concerns Cedar’s obligation to file a corporation tax return for the period up to 29 September 2016 in respect of its liability to tax for the period prior to liquidation and payment of the tax that fell due. The return had to be filed within 9 months of Cedar entering into voluntary liquidation although the obligation to pay any tax due arose on the date of the liquidation. The way the liability to pay tax has been described in the claim varies between the parties but, to state the obvious, the return could not have been filed prior to 29 September 2016 and equally the tax due could not have been paid until it had been assessed by HMRC. The return was for a pre-appointment period, but the process of establishing the sum due could only be undertaken after the appointment.[4]The claimants allege that the defendants were in breach of their duties and obligations (including fiduciary duties and obligations) that led to the late filing of Cedar’s corporation tax return. The return was not filed until 16 October 2019, three years after the defendants were appointed. Tax of £615,000 was paid on the same date the return was filed and the balance of tax due was paid on 30 November 2020. A tax penalty of £133,939.92 levied by HMRC was paid by Ann Cedar’s estate on 9 May 2022 and interest of £273,077.77 was paid by the estate on 21 September 2022. The claimants seek to recover the penalty and interest paid by the liquidators to HMRC.[5]Mr Lawson died in 2017 and was replaced in 2018 as administrator of Ann Cedar’s estate by the second claimant, Mr Hannon, who is also a partner in William Sturges LLP. He became the sole shareholder in Cedar.[6]Ms Swan retired as a liquidator on 16 June 2022, leaving Mr Phillips as the sole liquidator. PCR’s business and assets (but not the LLP) were sold to SKSi which continued to manage the liquidation with Mr Phillips in office. He was made bankrupt on a petition by HMRC on 13 September 2023 and, after a short interregnum, the first claimant, Ms Middlebrook, was appointed as sole liquidator on 23 November 2023.[7]A pre-action letter of claim was sent on 22 December 2022 to Mr Phillips and Ms Swan by William Sturges acting on behalf of Mr Hannon as the sole shareholder in Cedar. The letter was written pursuant to the protocol that applies to Professional Negligence claims. Kennedys Law LLP were instructed to act on behalf of the defendants and a standstill agreement was signed on 17 January 2023. Subsequently, two further standstill agreements were signed extending the period for bringing a claim until 1 November 2023. Kennedys replied to the letter of claim on 10 May 2023 and William Sturges responded on 17 July 2023. The claim was issued on 21 October 2023, originally as a derivative claim brought by Mr Hannon as the sole shareholder in Cedar against the liquidators, with Cedar joined as third defendant. Following the appointment of Ms Middlebrook as liquidator, the claim was amended to remove Cedar as a defendant and to join Cedar as the first claimant. I mention in passing that Ms Middlebrook was not a party to the standstill agreements which were signed before her appointment.[8]In paragraph 21 of the particulars of claim the claimants allege that the liquidators owed:a. To Cedar fiduciary or ordinary duties of care to exercise reasonable care and skill to ensure that the assets of the company were got in and that claims were settled;b. Duties of care to the second claimant, Mr Hannon.[9]At paragraph 22 it is alleged that the duties of the liquidators arose:9.1 In contract under the Engagement Letter;9.2 From their obligations as liquidators;9.3 From an assumed responsibility. Particulars were supplied about how the assumption of responsibility was said to have arisen.[10]In her defence, which was settled by counsel at a time when Kennedys were still acting for Ms Swan, she admitted in response to paragraph 21a of the particulars of claim that she owed a common law duty to carry out her functions with reasonable care and skill. As to paragraph 22a she admitted that a duty arose from the Engagement Agreement. She denied that any duty was owed to Mr Hannon.[11]Three applications were listed to be heard on 5 September 2025:11.1 Ms Swan’s application dated 25 March 2025 seeking permission to amend her defence (“the Amendment Application”).11.2 An application made in claim BL-2025-000661 by Ms Middlebrook and Mr Hannon (“the section 212 Application”). The section 212 Application was transferred to the Business and Property Courts, Business List by the order of ICC Judge Prentis dated 8 May 2025. It is only necessary to deal with the Section 212 Application if Ms Swan is given permission to amend her claim to rely upon her release from liability pursuant to section 173(2)(c) and 173(4) of the Insolvency Act 1986 (“the Act”).11.3 Ms Swan’s application dated 19 August 2025 seeking to strike out the claim or, alternatively, seeking judgment under CPR rule 24 (“the Judgment Application”).[12]At the hearing, an oral application was made on behalf of Ms Swan pursuant to CPR rule 14 seeking permission to withdraw admissions as a necessary part of her application for permission to amend. This is my judgment relating to the Amendment Application, the application made under CPR rule 14 and the Section 212 Application. There was insufficient time to deal with the Judgment Application. However, its outcome stands or falls with the determinations made in this judgment because the issues before the court necessitate a review of the merits of the claim.[13]Francis Collaço Moraes appeared for the claimants/applicants and Nicholas Goodfellow appeared for the second defendant/second respondent. The first defendant is a bankrupt and the Official Receiver did not participate in the hearing. I am grateful to Mr. Moraes and to Mr. Goodfellow for their written and oral submissions.

The relevant facts

[14]Evidence was provided in three witness statements made by Mr Walshe, the partner at William Sturges with conduct of the proceedings, and three witness statements made by Ms Swan (this includes the statement produced during the course of the hearing). In addition, Ms Swan relies upon paragraph 10 of the Amendment Application. The statements provide helpful background to the applications and raise numerous issues of fact that the court cannot resolve at this stage. However, the broad merits of the claim can be considered based upon uncontroversial material.[15]The letter of engagement dated 22 September 2016 sent by PCR to Cedar set out the “service team” who would be responsible for “providing the service you have requested” as including Ms Swan as the “Relationship Partner” and Hannah Gardner as the “Assignment Administrator”. Mr Phillips is not mentioned and it is notable that Ms Swan is not described in her capacity of liquidator. The letter was countersigned by Mr Lawson on behalf of Cedar on 28 September 2016. It is common ground that the General Conditions and the Service Agreement are incorporated and form part of the contractual terms that were agreed.[16]Paragraph 7 of the General Conditions deals with fees and refers to “our fees” throughout.[17]Paragraph 10 of the General Conditions is headed “Limitation of Liability” and provides: “We will provide our professional services outlined in this letter with reasonable care and skill. Our liability to you is limited to losses, damages, costs and expenses caused by our negligence or wilful default. However, to the fullest extent permitted by law, we will not be responsible for any losses, penalties, surcharges interest or additional tax liabilities where you or others supply incorrect or incomplete information, or fail to supply any appropriate information or where you fail to act on our advice or respond promptly to communications from us or the tax authorities. You will not hold us or our principals and staff responsible, to the fullest extent permitted by law, for any loss suffered by you arising from any misrepresentation (intentional or unintentional) supplied to us orally or in writing in connection with this agreement. You have agreed that you will not bring any claim in connection with services we provide to you against any of our partners or employees personally.” [The words emphasised are those relied upon by Ms Swan as providing a release and are defined by her as The Limitation Clause”][18]The Service Agreement also contains terms which are material. Paragraph 1 is headed “Background” and states that the purpose of the Service Agreement was to “set out the basis on which we are to act and to clarify our respective responsibilities.” It goes on to summarise the steps that will be taken to advertise for creditors and says: “Letters will be sent to HM Revenue and Customs (“HMRC”) in order to obtain confirmation that there are no outstanding matters and that they are not creditors of the Company. The Liquidators will then seek agreement from HMRC to conclude the liquidation. Once clearance has been obtained from HMRC … a cash dividend can then be made to the shareholders of the Company, However, if a cash dividend is required before clearance is granted by HMRC we will require any distribution to be made under a form of indemnity …”.[19]Paragraph 2 is headed Scope of Services and contains a clause which is similar but not identical to paragraph 10 of the General Conditions. It goes on to provide: “You have approached us requesting assistance to place the Company into MVL and confirm that we are able to act in this regard. During this process we will provide the following services:a. Advise the directors in the financial control and supervision of the business between the date of this letter [sic] and the appointment of office holders in relation to the Company.b. On behalf of the directors, we will convene a meeting of members of the Company, to place the Company into liquidation, or draft the necessary documentation to satisfy the requirements of the process by written resolution.c. Assist the directors in the preparation of any information, which may include the preparation of a declaration of solvency.d. PCR will not be responsible for the calculation of any final tax liability or the production of the final period accounts; this will rest with your accountants.” [my emphasis][20]It is not necessary to set out further provisions from the Service Agreement in full. It suffices to note that paragraphs 4 and 5 set out the responsibilities of the directors and their position post liquidation. Paragraph 5 records that the directors’ powers are subject to approval by the liquidators upon liquidation. This accords with section 91(2) of the Act pursuant to which the directors’ powers cease upon the company going into liquidation except so far as the liquidator sanctions their continuance.[21]The language used in the contractual terms highlights the real world mismatch between(a) the appointment of a professional firm under a contractual arrangement to deliver services and(b) the appointment of individuals as liquidators acting as officeholders under the Act. The “we” and “our” in the contractual terms refer to PCR and it is not suggested that the defendants were themselves parties to the contract. The mismatch in the context of an attempt to limit liability in contractual terms was considered in a decision of Thompsell J in Pagden v Fry [2025] EWHC 2316 (Ch) which was handed down a few days after the hearing on 5 September 2025. The decision is of considerable significance in relation to the merits and counsel were given an opportunity to provide additional skeleton arguments, it having been agreed between them that a further hearing was not needed. I will consider Pagden v Fry in detail later in this judgement.[22]A draft declaration of solvency had been sent by PCR to Mr Lawson on 22 September 2016. It referred to the estimated realisable value of Cedar’s assets as being the same amount as the cash held in William Sturges’ client account. There were in fact a few freehold reversions still held by Cedar with a relatively nominal value. More materially, no reference was made in the declaration to a liability to HMRC. The only liability included was the estimated amount of PCR’s fees.[23]Ms Swan says there were conversations at around the time of her appointment about how tax would be dealt with. Those conversations are not relied upon in her defence. They might form part of the factual matrix in which the contract with PCR is construed at a trial but at this stage they are peripheral to a review of the merits.[24]Mr Lawson replied to PCR’s letter dated 22 September 2016 on 28 September 2016 providing the letter of engagement countersigned and the necessary documents to place Cedar into liquidation, including the declaration of solvency and his resolution as the shareholder appointing Ms Swan and Mr Phillips as joint liquidators. I note the resolution refers to the liquidators’ fees (not PCR’s fees) having been agreed at £5,000 plus VAT. In the letter, Mr Lawson said he was not willing to provide an indemnity in the event of a distribution being made before PCR obtained “the necessary Tax Clearances”.[25]On the same day that the resolution was dated, Hannah Gardner of PCR repeated what is said in the Service Agreement about the need to obtain tax clearance. Mr Lawson replied saying he was not aware of any VAT registration and that “the other tax information that you require is best obtained from Stephen Fenton, Cedar’s accountant”. On 15 November 2016 Mr Lawson wrote to Ms Gardner enclosing a notice received from HMRC requesting Cedar to deliver a corporation tax return.[26]On 1 December 2016 Ms Gardner wrote to Mr Fenton to remind him that a tax return for the pre-liquidation period needed to be filed with HMRC. The next step is crucial to the claimants’ case. On 25 January 2017 Stephen Fenton wrote to Swedana Lobo of PCR enclosing final accounts for Cedar for the year ended 30 September 2016. The draft accounts included in the profit and loss account a liability for tax of £595,149. Mr Fenton said: “As the company is in liquidation clearly the accounts do not need to be filed with the Registrar of Companies and once I have the approval of the liquidator, I will submit them to HMRC to agree the tax liability. If there is anything else that you require, could you please let me know.” [my emphasis][27]As at 25 January 2017 both PCR (and therefore the defendants) were aware of the need to file a return and Mr Fenton was asking for the defendants to approve the accounts. If Mr Fenton was expected to file the return he could only do so with the defendants’ approval and under their authority. However, nothing was then done by the liquidators to deal with the tax liability. Approval to Mr Fenton to take up with the issue with HMRC was not given. Nearly 5 months later, on 14 June 2017 Mr Lawson wrote to Ms Swan saying:
“Can you please let me know what the present position is with regard to the completion of the liquidation of the above Companies. Is there anything further that you need from me.”
[28]This led Ms Gardner of PCR to write to Mr Fenton on 10 July 2017 seeking information that had already been provided by him in January. She said:
"Please could you confirm the estimate of the tax that is due to be paid by the Companies, to enable to [sic] joint liquidators to calculate how much can be distributed ahead of tax clearance from HMRC?"
[29]She wrote to Mr Lawson the same day saying:
“I confirm that the Joint Liquidators are currently corresponding with Stephen Fenton in relation to the outstanding tax that is due to be paid by each Company. Once confirmation of these figures have been received, the Joint Liquidators will be able to calculate the amount that needs to be left in the Liquidation Accounts prior to receiving Tax Clearance from HMRC and will distribute the remaining funds as a second distribution.”
[30]To say that the liquidators were “currently corresponding” with Mr Fenton was true but not entirely straightforward given that Ms Gardner’s email to Mr Fenton was sent five minutes prior to the email to Mr Lawson after a long period of inactivity.[31]Mr Fenton provided the estimated figure for the tax due (the same figure he had provided in January) in an email sent on 12 July 2017 and on 14 July 2017 he referred to his letter dated 25 January 2017 and pointed out that draft accounts had been provided. This appears to have prompted some searching to be carried out at PCR and on 21 July 2017 Ms Gardner wrote to Mr Lawson to say: "In relation to the delay, it would appear that the accounts were misdirected within our office and have only recently been brought to my attention for which I can only apologise. There are some queries in relation to the accounts, which we are currently in correspondence with Stephen Fenton about and once resolved, the accounts and returns will be submitted to HMRC and we can therefore request tax clearance." [my emphasis][32]It appears that Ms Gardner was contemplating that the defendants would be filing the return and resolving the amount of tax that was due. Mr Lawson died in October 2017. Letters of administration were granted to Mr Hannon on 5 March 2018.[33]Nothing then was done about the tax return until 2019. Julian Hay of William Sturges enquired about progress with the liquidation and on 23 May 2019 Ms Gardner sent two emails. She said to Mr Hay in response to his message to her:
“Upon review of the files, I understand that there was a pre-appointment return for each of the companies The liquidators were also dealing with two other related companies. , which Stephen Fenton was preparing, however, I have heard no further and therefore, I am currently liaising with Stephen Fenton and will update you in due course.”
[34]She wrote to Mr Fenton the same day to make enquiries about the returns and asked whether it had been filed. In an email dated 30 July 2019 Mr Fenton referred back to his email dated 25 January 2017 and said he was not aware that anything further was outstanding (from him).[35]The tax return was finally submitted on 16 October 2019 by the liquidators. It was unsigned on the basis that Ms Swan felt she could not sign a return relating to a period prior to the liquidation and Mr Lawson had died. This appears to have been accepted by HMRC. I do not need to determine the point but I doubt Ms Swan was right to refuse to sign the return. In any event, the point was not raised in mid-2017 when Ms Gardner wrote to say the return would be filed.[36]On 18 January 2022 William Sturges wrote to Ms Swan seeking an explanation for the imposition of tax penalties in the context of Ms Gardner having advised that an appeal to HMRC was unlikely to be successful. William Sturges said that the liquidators had an obligation to submit the return for the period up to the date of liquidation.[37]Ms Swan replied on 21 February 2022. She said the filing of the return was the responsibility of the director. I find this assertion hard to follow. Ms Swan, as an experienced insolvency practitioner, must have known that a tax return would be needed and that, unless the liquidators sanctioned Mr Lawson to take responsibility for filing the return and paying the tax, it was only the liquidators, with the help of Cedar’s accountant, who could file the return. PCR was explicit about the need to obtain tax clearance and that could only be obtained if the return had been filed, the tax liability agreed and the tax paid. In January 2017, the liquidators had the information they needed to file the return but did nothing to take that step or to sanction Mr Lawson to do so. On 21 July 2017 Ms Gardner said in terms that a return would be filed. At the point of passing the resolution to enter members voluntary liquidation the entire holding of cash was transferred to PCR. When making distributions thought should have been given to Cedar’s liability to pay tax.[38]On 9 May 2022 a tax penalty of £133,939 was paid by the estate to prevent the liquidation being converted into a creditors voluntary liquidation.[39]On 23 May 2022 Ms Swan wrote to William Sturges refusing their request to provide a copy of the liquidators’ file and notifying that she would be retiring as liquidator in June after which “this case will be managed by the joint liquidator, Mark Phillips”. On 7 June 2022 William Sturges sent a letter to SKSi referring to the Protocol and seeking a copy of the liquidators’ file relating to the payment of penalties. There was no reply to the letter.[40]On 16 June 2022 form LIQ06 was filed giving notice of Ms Swan’s resignation based upon rule 5.6(1)(d). The letters sent by William Sturges immediately prior to notice of Ms Swan’s resignation being filed could have left her in no doubt that Cedar was considering making a claim.[41]At around this time, PCR sold its assets to SKSi. Ms Swan says the sale was part of her planned retirement.[42]On 21 September 2022 interest of £273,077.77 was paid by the estate to HMRC.[43]On 27 October 2022 SKSi filed Form LIQ03 providing a progress report on the liquidation and noting Ms Swan’s retirement. Mr Phillips was described as the sole liquidator.[44]On 22 December 2022 a letter of claim was sent and Kennedys replied on 10 May 2023.[45]Kennedys ceased to act for Ms Swan on 5 November 2024 after SKSi’s insurers declined cover and she subsequently consulted her current solicitors and counsel. The Amendment Application was issued on 25 March 2025.[46]The draft amended defence proposes to make a series of radical changes to Ms Swan’s case. She seeks to rely upon:46.1 A release from any liability by virtue of sections 173(2)(c) and 173(4) of the Act and rule 5.6 of the Insolvency (England and Wales) Rules 2016 (“the Rules”).46.2 What is described as a limitation of liability clause (“the Limitation Clause”) in the General Terms that were incorporated into the contract of retainer negating any duty of care owed by Ms Swan. This entails withdrawing the admissions she made about owing a duty of care and to deny that any duty was owed to Cedar.[47]The relevant paragraphs of the draft amended defence are set out in full in an appendix to this judgment.[48]There is no issue between the parties about the principles that apply to an application to amend arising under CPR rule CPR17.1(2)(b). Based upon the summary in CNM Estates (Tolworth Tower) Ltd v Carvill-Biggs [2023] EWCA Civ 480 they are:48.1 Permission should not be granted if the proposed amendment would have no real prospect of success;48.2 An amended pleading must be ‘coherent’ and contain the properly particularised elements of the cause of action relied upon;48.3 Except in the case of very late amendments, unless there is no real prospect of success, mini-trials are to be avoided and the merits should be determined at trial; and48.4 In exercising its discretion, the court has to take account of the overriding objective and balance the injustice to the party seeking to amend if refused permission, against the need for finality in litigation and the injustice/prejudice to the other party and other litigants if the amendment is permitted; see Tachi v Woodward [2018] EWHC 2519 (Ch) at para [24].[49]These principles are insufficient on their own to cater for the amendments Ms Swan seeks to make. Under CPR rule 14 permission to withdraw from admissions made in her defence in paragraphs 36.1(a) and (b), 37.1, 37.2,40.1 and40.2 is needed. This appears to have been overlooked. It is not raised in the application notice and Mr Goodfellow’s skeleton argument did not deal with the point. It is now accepted that CPR rule 14 is engaged.[50]Before proceeding further, it is necessary to consider whether CPR rule 14 applies to the complete amendment or whether part of the amendment is merely a new defence that is not contingent upon withdrawing admissions. Paragraphs5.1 and5.2 of the amended defence set out two distinct elements of the amendment. The first element, in paragraph 5.1, seeks to raise for the first time a defence to liability based upon Ms Swan’s release arising from her resignation a joint liquidator. Paragraph 5.2 asserts that the Limitation Clause negated any duty of care so that no liability could arise. In fact, logically, the plea in paragraph clause 5.2 should come before paragraph 5.1; first liability is said to be negated but if there is liability Ms Swan has been released from it.[51]Mr Moraes submitted that the amendment should be viewed as a whole and because the statutory release assumes liability the two elements should be taken together; therefore both need permission to withdraw an admission. However, I consider that the two elements of the amendment are, in fact, quite distinct. Far from reliance upon the statutory release relating to the absence of a duty, it is based upon the assumption that there was, or might be, liability. I am satisfied that the correct approach is to consider the statutory release on ordinary amendment principles, whereas the amendment to rely upon the Limitation Clause involves withdrawing an admission of a duty and must be dealt with in addition according to the criteria set out in CPR rule 14.5.[52]I propose first to deal with the amendment to rely upon the statutory release together with the claimant’s application under Rule 5.6(6) to postpone the effect of the release. Secondly, I will deal with the proposed amendment to rely upon the Limitation Clause. Thirdly, I will deal with the remainder of the Section 212 Application, to the extent that it is necessary to do so.

Amendment to rely upon the statutory release

[53]The release arises from the effect of a series of provisions in the Act and the Rules. Section 173 of the Act provides:
“(2) A person who has ceased to be a liquidator shall have his release with effect from the following time, that is to say…(c) in the case of a person who has resigned, such time as may be prescribed”. “(4): Where a liquidator has his release under subsection (2), he is, with effect from the time specified in that subsection, discharged from all liability both in respect of acts or omissions of his in the winding up and otherwise in relation to his conduct as liquidator. But nothing in this section prevents the exercise, in relation to a person who has had his release under subsection (2), of the court’s powers under section 212 of this Act…”
Rule 5.6 provides: (1)(d) A liquidator may resign “… where two or more persons are acting as liquidator jointly and it is the opinion of both or all of them that it is no longer expedient that there should continue to be that number of joint liquidators”. “6(6): The resigning liquidator’s release is effective 21 days after the date of delivery of the notice of resignation to the registrar of companies under section 171(5), unless the court orders otherwise”. [my emphasis][54]No authority was cited to me about the proper construction of Rule 5.6(1)(d) but I observe that the other ways in which a release arises under the Rules require that members and/or the company receive notice of the removal and release. No notice is needed in the case of Rule 5.6(1)(d) and no external approval needs to be sought. There is no requirement to give notice beyond the requirement to file Form LIQ06. The Rule must import a degree of objectivity and the liquidators’ opinion must(a) as a matter of fact actually be held and(b) be reasonably held. If liquidators are to take advantage of the ability to obtain a release using this mechanism they must be able to demonstrate that the two elements upon which the Rule turns are present. First, both of the liquidators, or all of them if more than two, must have considered the position that will result from the resignation. Secondly, they must both, or all, (reasonably) be of the opinion that continuing with the same number of liquidators is no longer expedient. Active consideration and forming of an opinion is needed rather than what might be termed mere form filling compliance by staff other than the liquidators themselves. There is no need to add a gloss to the Rule to say that strict proof is required but in the absence of a written record of the decision being made, and the basis for it, showing active consideration by both or all the liquidators, the court may expect first hand evidence from all the office holders about the process they undertook and their state of mind about the opinion they formed and the basis for it.[55]Ms Swan says in her witness statement dated 18 August 2025:
“21. I resigned as joint liquidator of Cedar Securities Limited on 16 June 2022. This was in accordance with rule 5.6(1)(d) of the Insolvency Rules 2016, on the basis that I was acting jointly with Mr Philips [sic] and we were both of the opinion that it was no longer expedient for there to be two joint liquidators. I completed the required form LIQ06 [Notice of Resignation], which was filed at Companies House on or around 21 June 2022. In line with rule 5.6(5), my resignation became effective 21 days after the notice was delivered, meaning my release took effect on 12 July 2022. From that point, I was released from all liability in respect of anything done or omitted in the winding up, and from any other obligations arising from my role as liquidator, except where the court has granted permission for an application under section 212 of the Insolvency Act 1986.”
[56]The first sentence in this passage is not as clear as it might be and could be read as saying no more than that the basis for Ms Swan’s resignation was Rule 5.6(1)(d) without confirming that the requirements of the Rule were met. The claimants point to Mr Phillips’ subsequent bankruptcy and his delinquent history in relation to his tax affairs over an extended period. Mr Walshe’s third statement describes Mr Phillips’ finances based upon the information contained in HMRC’s petition as “chaotic, with long histories of late filing penalties, and failures generally to pay taxes due from him to HMRC over many years.” The claimants say that it would not have been possible for Ms Swan and Mr Phillips to have decided that it was expedient for him to continue as sole liquidator.[57]Ms Swan’s knowledge about Mr Phillips’ tax history is in issue. She says she had no knowledge of it. If that evidence is accepted there is a further issue, namely could Mr Phillips, acting objectively, have concluded that he was suitable to act on his own given what he knew about his affairs?[58]Ms Swan’s case about her resignation may face real evidential difficulty at a trial. The reliance upon Rule 5.6(1)(d) will need to be considered in the context of Ms Swan’s evidence that she resigned as liquidator of Cedar as part of her plan to retire from practice. Retirement relying upon rule 5.6(1)(b) might have been a more obvious mechanism to have used although it would have involved following the procedure specified in rule 5.6(2).[59]Nevertheless, an application for permission to amend is not the occasion for the court to conduct a mini trial about the evidence. It is not possible for the court to draw conclusions about the evidence, such as Ms Swan’s state of knowledge about Mr Phillips’ financial affairs, without it being tested at a trial. It is only necessary for Ms Swan, for the purposes of her application, to show that her evidence, taken with the notice of resignation, suffices to demonstrate she has a real prospect of success at a trial of proving that both she and Mr Phillips had reasonably formed an opinion that two liquidators were no longer needed. It will be open to her to supplement her evidence and seek evidence from Mr Phillips. The absence of any direct evidence from Mr Phillips on the point at this stage or any documentary record of their having considered the relevant test before reaching a decision do not quite prevent Ms Swan from reaching the necessary evidential threshold on her application. Although I have real doubts about the evidence before the court at the moment, I am unable to say that Ms Swan’s case about the application of Rule 5.6(1)(d) is fanciful.[60]The claimants seek to meet the new defence based upon Ms Swan’s release by two alternative means that are specified in the section 212 Application.[61]First, the court is invited to exercise its power under Rule 5.6(6) in the passage I have highlighted. The Rule does not provide any indication about the circumstances in which the court may ‘order otherwise’ and read literally there is no temporal limitation about when such an order may be made. No authority was cited to me about the proper construction of this Rule.[62]As to when an order may be made, since the members do not have to be notified in advance of the liquidators’ reliance upon Rule 5.6(1)(d), it must be possible to exercise the power after notice of the resignation has been filed. There is no limitation period stated in the Rule although it may be the longer after the date of resignation the less likely it may be that an order will be made.[63]As to the basis for making an order, it appears that the court is required to exercise a broad discretion that takes into account all the circumstances and gives proper weight to depriving the liquidator of the benefit of a release. The relevant context here is:63.1 As between the joint liquidators, Ms Swan played the principal role.63.2 She was planning to retire from practice when she and Mr Phillips (on her case) reached the conclusion that he could continue as sole liquidator.63.3 On 23 May 2022, when writing to William Sturges to say that the liquidators would not supply full information from the file to explain why tax was paid late, Ms Swan said she would be retiring (without saying that she would be released as a consequence).63.4 Ms Swan was aware of a dispute about the late filing of the return and the consequences of late payment of tax before she resigned.63.5 The tax and the penalty had been paid before her retirement; interest was not paid until some months later.63.6 A progress report, Form LIQ03, was filed on 27 October 2022. It is telling that the report itself was not signed by him but rather another insolvency practitioner who signed it pp Mr Phillips.63.7 There are real doubts about whether Mr Phillips was suitable to continue as a sole liquidator as discussed earlier in this judgment.63.8 Ms Swan did not rely upon her release in response to the letter of claim and in her defence in circumstances that have not been fully explained. Mr Goodfellow’s skeleton argument states in terms that she “does not have a good explanation as to why her Defence does not place reliance on her release under section 173, or the Limitation Clause”.63.9 Mr Phillips is bankrupt and there is no indemnity insurance to cover the claim against him. The latter point cuts both ways. Clearly the absence of cover is a very material consideration for Ms Swan.[64]An indication of the normal approach adopted by a court which is asked to approve a release can be seen from in Re Nortel Networks France SAS [2019] EWHC 2447 (Ch) at [19]. The decision concerns administrators seeking a release. Snowden J (as he then was) observed: “19. When asked to grant a discharge, the Court is naturally concerned to ascertain what, if any, liabilities the administrators in question might possibly have in respect of any of their actions. …”.[65]If liquidators face a possible claim, a release will normally be refused until that claim has been resolved. In the Nortel case there were no liabilities and the administrators were released. Here, a release was obtained without the shareholder being aware that a release was sought in the context of a possible claim against the liquidators being intimated. There is little doubt that had the shareholder been asked to approve Ms Swan’s resignation, having been aware of its effect, consent would not have been forthcoming. If Ms Swan had stated in response to the letter of claim that she relied upon the release, it would have been open to the claimants to apply for postponement prior to pursuing the claim. This is not, as Mr Goodfellow puts it, the release being circumvented. The issue is whether it is just in the circumstances I have summarised for her to rely upon it.

Amendment to rely upon the Limitation Clause

[66]The court’s permission is needed to enable Ms Swan to amend or withdraw the admissions she made in her defence concerning the duty of care: CPR rule 14.2(11). CPR rule 14.5 provides under the heading “Application for permission to withdraw admission” that:
“In deciding whether to give permission for an admission to be withdrawn, the court shall consider all the circumstances of the case, including— (a). the grounds for seeking to withdraw the admission; (b) whether there is new evidence that was not available when the admission was made; (c). the conduct of the parties; (d) any prejudice to any person if the admission is withdrawn or not permitted to be withdrawn; (e) what stage the proceedings have reached; in particular, whether a date or period has been fixed for the trial; (f) the prospects of success of the claim or of the part of it to which the admission relates; and (g). the interests of the administration of justice.”
[67]This is a non-exclusive list of the criteria the court must take into account when considering whether to grant permission. The range of issues set out in the list in CPR rule 14.5 indicate that the decision whether or not to grant permission needs to be a carefully balanced with appropriate weight being given to each criteria depending upon all the circumstances. The prospects of success have to be reviewed and inevitably this has to be done at a relatively high level. A compelling case may encourage the court to grant permission whereas a claim that barely reaches the real prospects hurdle is likely to point in the other direction.[68]In J v A South Wales Local Authority [2021] 2 FLR 1441 Lewison LJ considered the importance of admissions and referred with approval to two passages in Zuckerman on Civil Procedure: Principles and Practice 4th ed. at para 6.10 and 6.11 and went on to cite with approval two paragraphs from the judgment of Nugee J (as he then was) in Lufthansa Technik AG v Astronics Advanced Electronic Systems [2020] FSR 18:
“[22] … I agree with Mr Cuddigan that the purpose of what the CPR says about admissions is that, if an admission is made, the opponent can proceed on the basis that that will not be something in issue. Whether it is an admission of fact or an admission of law, it will not be necessary to devote any resources or energy or thoughts to that part of a case, because it is not one of the matters that will be in issue. That, of course, is subject to the powers of the court to allow the admission to be withdrawn in rule 14.1(5), and everybody who faces an admission knows that there is always a possibility that an admission may be withdrawn. [23] However, I agree with Mr Cuddigan that litigation should be capable of being conducted on the basis that admissions mean what they say and that, if a party whose case has been admitted by the other side is facing an application to withdraw the admission, it is relevant to consider whether they will now be put in a worse position — not in a worse position than they would have been had the admission not been made in the first place, but in a worse position than they are with the admission.”
[69]The Court of Appeal also considered the withdrawal of an admission in Clarkson v Future Resources FZE [2022] EWCA Civ 230. The circumstances in that case bear some similarity with this claim because the party seeking to amend did not make an application under CPR rule 14 when applying for permission to amend. The admissions were of a liability to repay loans and it was only when an application was made for summary judgement by the claimant that an attempt was made to withdraw the admissions by seeking permission to amend.[70]In giving the leading judgment, Simler LJ provided the following principles:70.1 The court has a wide discretion to allow withdrawal; [42]70.2 “The factors set out in what is now CPR rule 14.5 are all factors to be considered in accordance with the overriding objective, and no one factor carries greater weight than any other: see Woodland v Stopford [2011] EWCA Civ 226 at [26]. The weight to be attached to each factor will inevitably vary according to the particular circumstances of the case.” [43]70.3 “… it is fundamental to an application of this kind that the judge is given a full and frank explanation of how things have gone wrong, and the basis on which the admission is to be withdrawn. This should include how the admission came to be made in the first place and the grounds upon which the applicant seeks to withdraw the admission, including whether or not new evidence has come to light which was not available at the time of the admission.” [45]70.4 The full and frank explanation should be provided in a witness statement with a statement of truth. A letter will not suffice where there has been adequate time to provide a witness statement. [47][71]Simler LJ commenced paragraph [45] of her judgment with the words “Leaving aside the absence of an application under CPR 14.1(5)” (as the rule then was). She appears to have contemplated that seeking the court’s permission to withdraw an admission should be made by application notice albeit that the rule itself does not specify that this is needed; but the absence of an application was not treated as being fatal.[72]Mr Goodfellow submitted that it was open to the court to treat the application for permission to amend as including an application to withdraw admissions or, alternatively, to permit him to make an oral application in the course of the hearing. When making his submissions he went on to propose that if the court considered that it had insufficient material upon which to base a decision under CPR rule 14, Ms Swan should be given an opportunity to address the issues that arise under CPR rule 14.5 in more detail. However, the submission was not pursued and no application to adjourn the hearing was made. Instead, Ms Swan produced a short witness statement which was handed up when Mr Goodfellow replied to Mr Moraes’ submissions on the Amendment Application and the Section 212 Application.[73]There is no doubt that an application pursuant to CPR rule 14 should have been made and there would have been no objection to it being made as part of the Amendment Application notice. The hearing proceeded on the basis that Ms Swan was permitted to make the CPR rule 14 application. This approach accords with the overriding objective. It would have been wasteful of court resources, delayed the progress of the claim and incurred additional expenditure had the court declined to deal with an application to withdraw admissions.[74]The two decisions of the Court of Appeal I have cited emphasise the importance of the court being given a full and frank explanation. As with many other circumstances in which the court is asked to exercise a discretion to alter the effect of a rule or an order, or to alter the status quo in proceedings, the applicant will have to consider whether matters that are privileged should be revealed. Providing any explanation, let alone a full and frank explanation, about something which is said to have gone wrong, or why a case that is supported by a statement of truth needs to be changed, will almost invariably involve waiving privilege to a greater or lesser degree. An approach which says ‘I wish to provide an explanation, but I am unwilling to waive privilege in order to provide that explanation’, is unlikely to prosper. The applicant has to decide which is more important; maintaining privilege or giving a full and candid explanation.[75]There is very little evidence from Ms Swan relating to the application for permission to amend her defence. The application notice seeking permission to amend of course relates to both elements of the amendment. It states: “1. … The application seeks permission to introduce by way of amendments matters which have come to light since the date on which the Amended Particulars of Claim was introduced.[2]Following a change in representation in November 2024 when the 2nd Defendant became a litigant in person a review of the Defence filed by the previous representatives was undertaken and it was identified the 2nd Defendant’s Defence needed to be amended.” [my emphasis][76]The passage I have highlighted is unspecific but appears to be saying that things (matters), that were not known by someone who is not named, came to light after the defence was first considered; but it does not say what those matters are. If ‘matters’ is being used as a synonym for information or evidence, the statement which is signed with a statement of truth may not be accurate. It has not been suggested that the proposed amendment relies upon anything that was unknown to Ms Swan. I note that Mr Goodfellow’s skeleton argument says she does not to have a good explanation for the need to amend.[77]The position becomes very slightly clearer in the statement provided by Ms Swan part way through the hearing. No objection was made on behalf of the claimants to it being considered. She says:
“4. I confirm that neither the release defence now pleaded at paragraph 5.1 nor the limitation defence now pleaded at paragraph 5.2 of the Draft Amended Defence of the Second Defendant were discussed with me prior to Kennedys (instructed by insurers) coming off the record in November 2024.”
[78]The criteria set out in CPR rule 14.5 need to be considered briefly in turn:(a) I have discussed the grounds to the extent that they are revealed.(b) It does not appear to be said that new evidence came to light. It depends upon what Ms Swan meant by referring to “matters” having come to light. This has not been properly illuminated in Ms Swan’s evidence.(c) The conduct of the parties that might be material is the failure by Ms Swan to rely upon the release and the Limitation Clause in her response to the letter of claim and the defence.(d) There is significant prejudice to the claimants by the admissions being removed.(e) The oral application under CPR rule 14 was made at an early stage of the claim. No CMC has yet been held and no directions for trial have been given.(f) The prospects of success of the defence based upon the Limitation Clause were debated at length at the hearing. Despite my concerns about the absence of a full and frank explanation it is necessary to deal with the merits in some detail and I will do so separately.(g) The interests of the administration of justice must be considered with the overriding objective. Competing considerations, such as expedition and fairness, need to be balanced. As the Court of Appeal has emphasised a party is entitled to conduct litigation relying upon an admission. The pre-action protocols are there to encourage a ‘cards on the table’ approach to litigation and as the Court of Appeal has noted, a statement of truth should be valued. In my judgment a party should not be permitted as a matter of routine to adjust its case to say, in respect of key issues, the opposite of what was said in reply to a letter of claim and in a defence. Full and frank disclosure is required to explain why the statement of truth has proved to be inaccurate.

The merits of the Limitation Clause amendment

[79]The strength of Ms Swan’s case in respect of the Limitation Clause was the subject of detailed submissions at the hearing. Mr Goodfellow described the Limitation Clause not just as having a real prospect of success but as a “knockout blow” to the claim. He submitted that both the shareholder and Cedar ought reasonably to have been aware of the Limitation Clause and its effect. It is right, he says, that Ms Swan should be permitted to rely upon it.[80]Mr Moraes submitted at the hearing that the Limitation Clause amendment had no real prospect of success. His principal submissions are in summary:80.1 Ms Swan was not a party to the Engagement Agreement and consequently cannot rely on clause 10.80.2 The clause on its true construction clearly does not include Ms Swan or her obligations as liquidator. The release relates to PCR’s liability and not Ms Swan’s.80.3 It would be perverse for the limitation clause to apply to the appointment of an officer appointed in a personal capacity.80.4 The clause is unreasonable under Unfair Contracts Terms Act 1977 (“UCTA”), given that it is part of the standard terms of PCR.[81]These submissions have in part been overtaken by the decision in Pagden v Fry. Thompsell J’s decision in Pagden v Fry now provides an authoritative ruling on the question of whether it is open to a liquidator to limit liability and the claimants submit the analysis and reasoning apply with equal force to an attempt to exclude liability.[82]The issue before the court in Pagden v Fry, which was the trial of a preliminary issue on agreed facts, was defined in the opening sentence of the judgment:
“Can liquidators or their firms dealing with a members' voluntary liquidation limit their liability?”
[83]The answer to that question provided by the court is that liquidators are unable to limit their liability whereas their firms are able to do so. Although it is possible to point to differences between the assumed facts in Pagden v Fry and this case, the degree of overlap is significant. In Pagden v Fry the claim was brought against the liquidators and the firm, Begbies Traynor (Central) LLP (“Begbies”), within which the liquidators operated. Clause 13.2.3 of the Begbies Standard Terms of Business ("the Terms ") and Clause 7 of their letters of engagement dated 5 and 6 March 2015 ("the letters of engagement") limited Begbies’ liability to an aggregate sum of £1 million in respect of the claims made against them.[84]The judgment includes the following extract from the assumed facts:
“7. 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 responsibilities in 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) [omitted] 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.”
[85]It can fairly be said that the decision relates to(a) a contractual term that limited rather than excluded liability and(b) allegations of breach of duty in relation to the realisation of assets rather than dealing with HMRC and the payment of the company’s liability for tax.[86]The issues dealt with by the court were framed in the following way: “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 "). 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.”[87]The court noted that:
“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.”
[88]The mismatch between the office being held personally and the contractual arrangements made with the firm within which the liquidator operates arises as Chadwick J noted in Re Sankey Furniture [1995] 2 B.C.L.C. 594 from the current legislative framework. However, the judge concluded that the ‘commercial reality’ does not affect the existence and effect of the ‘statutory trust’.

(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:[32]The statutory trust is explained in Goode on Principles of Corporate Insolvency Law (5th edition) (" Goode ") at paragraph 3-09 as follows:[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:[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 Re Gertzenstein 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.”[89]The determination made in relation to the statutory trust is set out at paragraphs [69]-[72] and [82]-[83]. “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.” … “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.”[90]Based upon the decision in Pagden v Fry, Mr Moraes invites the court to conclude that:90.1 That clause 10 of the General Terms cannot, as a matter of law, exclude or limit the liability of the defendants as liquidators.90.2 As a matter of construction, clause 10 of the General Terms cannot exclude the liability of the defendants as liquidators, for the non-modifiable fiduciary duties of liquidators are part of the factual matrix against which the clause must be construed.[91]However, Mr Goodfellow submits that Pagden v Fry:91.1 Broke new ground and there is a real prospect that another High Court judge or the Court of Appeal may decide the issue differently.91.2 Does not address the question of whether a liquidator’s liabilities can be excluded where the conduct complained of does not relate to assets but instead to the discharge of liabilities.91.3 Supports the proposition that the explanation given by Ms Swan (such as it is) for the withdrawal of her admission should be viewed as being sufficient.[92]I will take Mr Goodfellow’s submissions in turn.[93]Mr Goodfellow’s first submission bears similarities with the second limb of CPR rule 24.1 and the proviso to the test for a strike out on the grounds that a statement of case shows no reasonable grounds as set out in Hughes v Colin Richards & Co [2004] EWCA 266 Civ at [30]. However, I am considering the merits of the point arising under the Limitation Clause in order to deal with CPR rule 14.5(f) pursuant to which the court is required to consider its prospects of success. The court is not required to make a determination whether or not the point is ‘bound to fail’ or has, has not, a real prospect of success. CPR rule 14.5(f) is merely one of the criteria which the court must consider and weigh when coming to a balanced decision about whether Ms Swan should be permitted to withdraw the admissions she made in her defence.[94]The decision in Pagden v Fry is directly on point and is binding on me. I do not agree that it broke new ground. The detailed reasoning in the judgment is based upon well-established principles and, indeed chimes with the case put forward by Mr Moraes at the hearing before the decision in Pagden v Fry was known about. I will come to whether it can and should be distinguished when dealing with Mr Goodfellow’s second submission. However, subject to that it would in my judgment be wrong to second guess the decision of another tribunal unless there were to be a compelling case for saying that it is wrongly decided. The decision does not benefit from my imprimatur but I consider the conclusion reached by the judge cannot be said to be obviously wrong. It is carefully and thoroughly reasoned and reflects the current state of the law.[95]As to Mr Goodfellow’s second submission, I accept that the facts of this claim and the claim before Thompsell J are different in two respects. First, the contractual provision sought only to limit liability rather than to exclude it altogether. Secondly, the breach of duty related to the liquidators’ duties in relation to assets rather than the discharge of a liability. The answer to this submission can be seen from the way in which the issues before the court were framed in paragraph 7 of the judgment. The judgment goes on to consider the scope of the duties without any indication that the conclusions are of limited breadth. There is no difference of principle between exclusion and limitation; the difference is in the outcome, not the applicable principles. Equally, the statutory trust as it is explained in paragraph [32] of the judgment by reference to Goode relates to both assets and liabilities. I can see no good reason why the principles that are explained in Pagden v Fry should not apply with equal force to this claim.[96]Mr Goodfellow’s third submission merely repeats the submissions he made at the hearing about the adequacy of Ms Swan’s explanation for the failure to rely upon the Limitation Clause in her response to the letter of claim and her defence.

Determination of the amendment application

[97]Although there are two strands to the amendment, due to the effect of CPR rule 14, they both involve the exercise of a discretion and balancing competing considerations. If an application to withdraw an admission is not needed, there is generally no requirement to provide a full and frank explanation about why the need for amendment came about. Nevertheless, some explanation about why the point in issue was not relied upon previously will be relevant to the exercise of discretion. The application to amend to rely upon the release, in the absence of earlier reliance, calls for some explanation to assist the court in reaching a balanced decision. As I have previously noted, the terms in which the application notice is drafted are unsatisfactory because it is not clear what matters are said to have come to light that provide an explanation why the release was not relied on previously. Ms Swan’s third statement does little to provide illumination.[98]In relation to the release, the court is required to apply the test summarised at paragraph 48.4 above alongside the exercise of a discretion to postpone the effect of the release. In my judgment, the competing considerations result in a strong case for refusing permission to amend on the basis that the effective date of the release from the current claim should be postponed until after this claim’s final resolution. The claim has real merits both on the facts and the law. The release is not an entitlement which is absolute and incapable of being changed. An application may be made under section 212 which, if successful, will trump the release. I also have in mind the context summarised at paragraph 63 above, the lack of explanation for the failure to rely upon the release earlier and the balance of fairness and unfairness. I will make an order that Ms Swan is not able to rely upon the release arising from her resignation as one of the joint liquidators. That order preserves the status quo arising from her defence which she signed with a statement of truth.[99]The Limitation Clause brings into play different considerations. Ms Swan’s evidence in the application notice and in her statements is very limited and inconsistent.[100]I note that in giving an explanation in her statement provided during the hearing Ms Swan has chosen to waive privilege to a limited degree. Mr Goodfellow in his oral submissions asked rhetorically ‘what else could she say?’. The answer of course is that neither he nor the court or the claimants know the answer to this question. There are some obvious gaps such as:100.1 Is Ms Swan saying she was not aware of the legal effect of her resignation? It seems unlikely she could say, as an experienced liquidator retiring from practice, that she did not know about the legal effect that flowed from her resignation but she needed to say one way or the other. I note that she is the defendant in Parkinson Engineering plc v Swan [2010] Bus LR 857 (CA), a case in which the section 212 was considered.100.2 If she was aware of the effect of resignation, did she raise it with Kennedys and her counsel; if not, why not?100.3 Accepting her evidence that the release was not discussed with her former legal advisers, did she receive any written advice from them about whether the point should be taken? Did they consider it at all?100.4 What are the matters that are said in the application for permission to amend to have come to light or is it now accepted that the basis upon the application was made was incorrectly stated?[101]I am not satisfied that Ms Swan has provided a full and frank explanation and on that basis her application for permission to withdraw the admissions is refused with the consequence that her application to amend the defence to rely on the Limitation Clause is refused.[102]If the court were to be required to apply the criteria in CPR rule 14.5, I would reach the same conclusion. The claim on the facts and the law has real prospects of success. At a trial the court will have to consider the events with the benefit of full evidence. Ms Swan may struggle to persuade a court that the liquidators had no responsibility for dealing with tax when it was part of their role to obtain clearance from HMRC. It was inevitable that a liability for tax had to be reviewed. It should have been obvious to Ms Swan that a tax return would have to be filed and the only persons who could approve and file it were the liquidators, unless they appointed Cedar’s accountant to act as their agent for that purpose or sanctioned the director to perform the task. It is notable that there were very long delays by the liquidators in dealing with the return without a proper explanation or excuse and without the liquidators taking steps to enable the director to file the return. Absent that, it appears to me that only the liquidators could regularise the position as part of obtaining tax clearance, a step it was explicitly agreed they would undertake.[103]The legal basis for the defence based upon the Limitation Clause is weak not just in light of Pagden v Fry. There is force in Moraes’ submissions that Ms Swan does not have the benefit of clause 10 because she was not a party to the contract and as a matter of construction its terms do not apply to her. There is also a strong case to say that the clause was not reasonable.[104]Since the law has been clarified by Pagden v Fry it is not open to Ms Swan to exclude liability.[105]These points on the merits taken with the additional criteria under CPR rule 14.5 which I have discussed earlier in this judgment lead to the clear conclusion that permission to amend should be refused.

Section 212 Application

[106]In light of the decision I have reached about the application of Rule 5.6(6) it is unnecessary to deal with this aspect of the section 212 Application. However, it was fully argued and heavily opposed. I will therefore deal with it briefly. The section provides:
“Summary remedy against delinquent directors, liquidators, etc. 212 (1) This section applies if in the course of the winding up of a company it appears that a person who— (a). is or has been an officer of the company, (b). has acted as liquidator . . . or administrative receiver of the company, or (c) not being a person falling within paragraph (a) or (b), is or has been concerned, or has taken part, in the promotion, formation or management of the company, 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. (2) The reference in subsection (1) to 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. (3) The court may, on the application of the official receiver or the liquidator, or of any creditor or contributory, examine into the conduct of the person falling within subsection (1) and compel him— (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. (4) The power to make an application under subsection (3) in relation to a person who has acted as liquidator ... of the company is not exercisable, except with the leave of the court, after [he] has had his release. (5) The power of a contributory to make an application under subsection (3) is not exercisable except with the leave of the court, but is exercisable notwithstanding that he will not benefit from any order the court may make on the application.”
[107]A section 212 claim may be brought by a liquidator or a contributory. The company can also bring the claim as assignee: see Manolete Partners plc v Hayward and Barrett Holdings Ltd [2021] EWHC 1481 (Ch) [51,52 and 56]. Cedar requires permission under section 212(4) to bring the claim in the event that Ms Swan’s release is not postponed; Mr Hannon must obtain permission to bring a claim as contributory under section 212(5).[108]The nature of this jurisdiction was explained in Parkinson Engineering Services v Swan [2009] EWCA Civ 1366 in the context of an administrator who had been released relying upon the release in her defence. The Court of Appeal approved a decision to add the liquidator and granted permission to bring a claim under section 212. The decision principally concerns the scope of the court’s power to permit an amendment outside the limitation period having regard to section 35 of the Limitation Act 1980 and CPR rule 19.5. As to the merits of an application, the two most important criteria as summarised by Lloyd LJ in Parkinson Engineering Services v Swan at [34] are(a) that a reasonably meritorious cause of action has been shown and(b) whether the grant of permission is reasonably likely to result in a benefit for the company. In addition, the reasons for the delay in making the application are relevant.[109]In the course of his judgment, Lloyd LJ approved observations made by Blackburn J in Re Eurocruit Europe Ltd [2007] EWHC 1433 (Ch) that section 212 is procedural in nature and provides an alternative way in which a claim for recompense for breach of duty may be made. The same claim (in the sense of a claim that is based upon the same facts) may be brought either by Part 7 claim or under section 212.[110]The claimants’ case is that the Part 7 claim was issued at a time when Ms Swan had given no indication that she relied upon her release. On the basis that section 212 is procedural in nature, and the means by which the same claim may be brought but by a different route, the grant of permission to bring claims under section 212 and to consolidate them does not involve the bringing of a claim outside the limitation period. The application under section 212 is not barred by limitation. The Part 7 claim was issued within time. For the purposes of this application I accept the claimants’ case that no breach of duty arose until one month after the tax calculation was provided to Ms Swan on 25 January 2017. When the effect of the standstill agreements is taken into account, less than six years elapsed prior to the date of issue. Cedar was a party to the standstill agreements and since Ms Middlebrook wishes to bring a claim on behalf of Cedar she is entitled to take the benefit of the agreements.[111]In the alternative, the claimants are able to take advantage of section 35 of the Limitation Act 1980. Although section 212 is procedural in nature, the claim made under that provision is treated as a ‘new claim’ but it is one that arises out of the same facts (Section 35(5)(a)). It follows that limitation, if relevant is not a bar. And the joinder of Ms Middlebrook is not a bar (section 35(5)(b)).[112]The remaining issue is whether the court should grant leave under section 212. The issues relevant to the grant of an order postponing the release apply with equal force to the grant of leave under section 212.[113]A procedural objection is made by Ms Swan on the basis that the section 212 Application does not in terms apply for substitution of the liquidator for the company. However, I do not consider this should be a bar to relief being granted when the nature of the order sought is clearly indicated. An order for substitution and consolidation are a necessary consequence of granting the order under section 212.[114]Mr Goodfellow submitted that the court cannot reach a provisional view on the merits without expert evidence from a suitably qualified expert. However, the court at this stage is considering whether based upon the statements of case and the uncontentious background facts the claim has real prospects of success. Expert evidence may be required for the trial and no doubt that subject will be debated at the CMC. For the purposes of the court considering the merits at this early stage no expert evidence is needed.[115]I have already discussed the merits of the claim which I consider has real prospects of success. The second criterion is amply met. The delay is explained by Ms Swan not relying upon her release until recently.[116]As a final point, Mr Goodfellow also submitted that William Sturges has a conflict of interest and this is an additional reason why leave should not be granted under section 212. I do not consider that this is a relevant consideration, and I express no view one way or the other about whether such a conflict exists. If it does, it is primarily a professional matter for William Sturges to resolve.[117]It follows that if an order under Rule 5.6(6) is not appropriate, I would be willing to make an order under section 212 permitting Ms Middlebrook and Mr Hannon to bring claims and make an order that the section 212 claim be consolidated with the present claim and the liquidator either substituted for the company or joined as an additional party.

Cited in 1 later judgment