[2025] EWHC 2760 (Ch)

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.

Mr Moraes submitted at the hearing that the Limitation Clause amendment had no real prospect of success. His principal submissions are in summary:

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.

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?”

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.

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.”

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.

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 ").

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.”

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’. The submissions on that topic and his finding follow:

The argument based on a statutory trust