[2025] EWHC 2760 (Ch)

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.

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.

Paragraph 7 of the General Conditions deals with fees and refers to “our fees” throughout.

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”]

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 …”.

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]

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.

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.

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.

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.

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”.

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.

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]

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.”

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:

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.”

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.

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:

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.

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 (Footnote: ¹), 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.”

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).

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.

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.

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.

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.

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.

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.

At around this time, PCR sold its assets to SKSi. Ms Swan says the sale was part of her planned retirement.

On 21 September 2022 interest of £273,077.77 was paid by the estate to HMRC.

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.

On 22 December 2022 a letter of claim was sent and Kennedys replied on 10 May 2023.