[2025] EWHC 2316 (Ch)

The argument based on a statutory trust

In Fakhry v Pagden [2020] EWCA Civ 1207; [2021] B.C.C. 46, a case arising out of the same facts as the case before me, but in relation to a different aspect, concerning alleged procedural irregularities in restoring the Companies to the register, David Richards LJ (as he then was) explained (at [28]) that:

“In all types of liquidation, the beneficial interest in the assets is suspended and they are held on a statutory trust to be dealt with in accordance with the statutory scheme”.

The statutory trust is explained in Goode on Principles of Corporate Insolvency Law (5th edition) (“Goode”) at paragraph 3-09 as follows:

“Although winding-up does not of itself divest the company of legal title to its assets, it ceases to be the beneficial owner and holds the assets on trust to apply them in discharge of the company’s liabilities in accordance with the statutory scheme of distribution.

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”).

As Goode goes in to explain at paragraph 3-10, this is a particular type of trust that does not confer on creditors beneficial co-ownership or, indeed a proprietary interest of any kind in the assets until completion of the liquidation. Rather:

“The company thus holds the assets for statutory purposes, not for persons.”

Clearly, as the trustee of a statutory trust, a liquidator is a fiduciary and owes corresponding fiduciary duties, such as a duty not to profit otherwise than through the remuneration allowed in statute – see ReGertzenstein Limited [1937] 1 Ch 115; and a duty of care - see Top Brands Limited & Another v Sharma & Another [2014] EWHC 2753 (Ch); [2015] 2 All E.R. 581.

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.