[2025] EWHC 2316 (Ch)

The argument based on a statutory trust

By reference to various cases Mr Deacock has sought to persuade me that there is a bilateral relationship between a liquidator and the company in liquidation, and therefore it is open to those parties to agree a limitation on the liquidator’s liability.

The cases he has referred me to include, first Oldham & Ors v Kyrris & Anor [2003] EWCA Civ 1506; [2004] BCC 111 (“Oldham”). This concerned the appointment of an administrator and considered the point whether an administrator owes a common law duty of care to general creditors. The matter came to the Court of Appeal and the Court of Appeal decided that point (by reference to the established position in relation to the liability of directors) in the negative (see Jonathan Parker’s LJ judgment at [141]-[145]).

Jonathan Parker LJ quoted approvingly from the judgment of Mummery LJ in Peskin v Anderson [2001] BCC 874 (at [31] –[34] (“Peskin”). Mummery LJ in Peskin confirmed that in general directors owed their duties to their company, not to shareholders, although he acknowledged there may be special circumstances which would create the existence of additional fiduciary duties owed by a director to a shareholder which may be breached by the director personally causing loss to the shareholder directly (as distinct from loss sustained by a diminution in the value of his shares).

The Court of Appeal in Oldham decided that the same analysis would apply in relation to a common law duty of care as it would to a breach of fiduciary duty and to an administrator as it did to a director (see at [143]) and concluded at [146]:

“Given the nature and scope of an administrator’s powers and duties, I can for my part see no basis for concluding that an administrator owes a duty of care to creditors in circumstances where a director would not owe such a duty to shareholders. In each case the relevant duties are, absent special circumstances, owed exclusively to the company.

This decision, of course, related to administrators, who are not trustees of the assets of the company, but are managers of the company’s assets, in a similar position to directors. Mr Deacock drew my attention, however, to the judgment at [149] where Jonathan Parker LJ said:

“My conclusion is also consistent with Romer J’s decision in Knowles v Scott [1891] 1 Ch 717, where he held that a liquidator is not a trustee for the creditors or contributories of a company in liquidation. At p.723 Romer J said this:

‘In my view a voluntary liquidator is more rightly described as the agent of the company – an agent who has no doubt cast upon him by statute or otherwise special duties . . . If this be the true position of a liquidator, and I think at any rate agency more nearly defines his true position than trusteeship, it is clear that he could not as agent be sued by a third party for negligence apart from misfeasance or personal misconduct.’”

Whilst this case remains good authority for the proposition for which Jonathan Parker LJ was relying upon it (that a liquidator is not a trustee for the creditors or contributories of the company in liquidation), it now needs to be read in the context of the statutory trust found in Ayerst. I do not think that it remains good authority for the proposition that the liquidator’s role is best seen as that of an agent for the company (as would be the case for an administrator): the liquidator now must be seen as being a fiduciary holding assets on a trust to be administered according to statute, and not giving any beneficial ownership right to creditors, to contributories or indeed to the company itself.

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.

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.

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.

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.

Whilst the law has moved on from the proposition that a liquidator in general owes duties to the creditors or members, and City Equitable shows us that there may be a distinction between performing a statutory duty (such as that of auditors) and liability for failing to perform that duty to a particular standard, nevertheless the instinct of Maugham J was a good one: the statutory duties of liquidators are not owed, or at least not owed purely, to the company in question, and therefore the company cannot modify the liability of liquidators for performing them negligently .

Having reached my conclusion on this basis, there is no reason for me to consider in more detail the other arguments advanced by the Claimants, but for completeness I will, as far as I can, deal with them.