[2025] EWHC 2316 (Ch)

The arguments relating to construction

Some relevant provisions of the LoEs (which were in the same form for each of the Claimant Companies) are set out below.

The LoEs begin:

“We are pleased to accept your instructions to act for you in relation to placing the Company into members’ voluntary liquidation and for Mark Robert Fry and Neil John Mather to act as Joint Liquidators of the Company pursuant to the provisions of the Insolvency Act 1986.”

The second (unnumbered) paragraph of the LoEs states that

“…It is important that you read this letter and the attached standard Terms of Business carefully prior to signing and returning to us the duplicate letter enclosed. In Particular, we draw to your attention the paragraph headed “Limitation of Liability”.

Numbered paragraph 1 of the LoEs provides as follows

“1.

Nature of advice and services to be provided

We are instructed by you to provide advice and assist you in all matters relating to placing the Company into members’ voluntary liquidation. This will include:

1.1

Undertaking pre-appointment due diligence work in relation to the Company;

1.2

Advising the directors on the matters that they need to consider prior to liquidation;

1.3

Assistance with the preparation of the statutory declaration of solvency and the statement of assets and liabilities of the Company;

1.4

Assistance with the holding of meetings of the directors and members, preparation and circulation of the relevant notices to convene a meeting of members and all notices, minutes and resolutions relating to the same;

1.5

Providing the services of Partners and/or Directors of Begbies Traynor (Central) LLP who are qualified to act as licensed insolvency practitioners and who are able to accept an appointment as Joint Liquidators of the Company.

1.6

Providing the services of members of staff of an appropriate grade to undertake work on the assignment (further details of which are provided in the paragraph headed "Fees and Costs"); and

1.7

During the course of the liquidation we shall deal with the following:

1.7.1

protection and realisation of all of the Company's assets;

1.7.2

ascertainment and agreement of creditors' claims;

1.7.3

payment of dividends to creditors and shareholders;

1.7.4

convening meetings of the Company, if appropriate;

1.7.5

agreeing tax liabilities with H M Revenue & Customs (with the support of the Company's existing tax advisers);

1.7.6

carrying out any other matters that the Joint Liquidators may, by law, be required to do; and

1.7.7

preparing the Joint Liquidator's final report for the Company's shareholders.

“For the avoidance of doubt, our advice is being provided to the Board of Directors of the Company and is not being provided to the directors of the Company in their personal capacities”

Numbered paragraph 7 (the “Limitation Clause”) provides as follows:

"Limitation of Liability

7.1

For the purposes of clause 13 of our Terms of Business, we limit the aggregate liability of Begbies Traynor and Begbies Traynor Persons (as defined in our Terms of Business) in any circumstances whatsoever, whether in contract, tort, statute or otherwise and howsoever caused (including our negligence) for loss or damage in connection with provision of the Services (as defined in our Terms of Business) to the sum of £1 million excluding costs and interest.

7.2

If you require a higher limit on liability please inform us immediately and we shall consider your request with our Technical and Compliance Team.”

The signature section for the Company is prefaced by the words

“Terms of Engagement agreed and accepted on behalf of the Company and its Directors and in agreeing and accepting these Terms of Engagement, we acknowledge and confirm our acceptance of the limitation of liability of Begbies Traynor and Begbies Traynor Persons contained in this letter”

The Terms include inter alia the following :

“1.2

In the Terms, the following words and phrases shall (where the context so permits) have the following meanings:-

….

"Begbies Traynor'' "we" or "us" means Begbies Traynor (Central) LLP a limited liability partnership, registered in England No OC306540, registered office 340 Deansgate, Manchester, M3 4LY

….

"Begbies Traynor Persons" means Begbies Traynor and each and all of our members, partners, directors, employees, consultants and agents;”

….

"Services" means the services to be provided by Begbies Traynor in accordance with the Services Contract; and

"Services Contract" means the contract between the Client and Begbies Traynor, the terms of which are recorded in the Terms and in the Engagement Letter, together with any documents or other terms applicable to the Services to which specific reference is made in the Engagement Letter or in the Terms.

…

3.

Services

The scope of the Services to be provided by us is detailed in the Engagement Letter, as amended or supplemented from time to time. Begbies Traynor shall not be responsible for providing any service or advice outside that scope unless it agrees to do so in writing.

…

13.2.2

Nothing in the Terms or Engagement Letter will limit any liability that we may have to you in respect of any loss caused by our fraud, fraudulent misrepresentation or reckless disregard of our professional obligations or in any other situation where the law prohibits us from excluding or limiting our liability to you, including in respect of any death or personal injury resulting from our negligence.

13.2.3

Subject to clause 13.2.2 the aggregate liability of Begbies Traynor and Begbies Traynor Persons in any circumstances whatsoever, and however caused (including as a result of our negligence) for loss or damage arising from or in connection with the provision of the Services shall be limited to the sum specified in the Engagement Letter, or, if no sum is specified, a sum equal to the limit of our professional indemnity insurance at the time the claim is notified to us.

….

17.2

Sub-Contracting and novation

In appropriate circumstances Begbies Traynor will use third parties (including, where appropriate, other members of the Begbies Traynor Group) to assist us in providing any part of the Services. Any reference to our employees in the Services Contract includes these third parties.”

For the principles of construction, the Claimants’ counsel have referred me to the summaries given by Popplewell J (as he then was) in Re Lukoil Asia Pacific Pte Ltd v Ocean Tankers (Pte) Ltd [2018] EWHC 163 (Comm) at [8]; by Carr LJ in ABC Electrification v National Rail Infrastructure Ltd [2020] EWCA Civ 1645, at [17]–[19] and in Lewison on Interpretation of Contracts, 8^th edition, at 12.145 to 12.149.

The Claimants’ Counsel suggest that in view of the legislative background addressed above and having regard to the contractual documents as a whole, a reasonable person, having all the background knowledge that would have been available to Begbies LLP and the Claimant Companies, would have understood that the liability cap now sought to be relied upon by the Begbies Defendants in respect of each of the Claimant Companies would not apply to any conduct of Messrs Fry and Mather when (and if) they were appointed to their envisaged future role as liquidators.

I disagree. Clearly the Begbies Traynor Defendants did not understand that there could be no limitation on the liability of a liquidator or they would have drafted the provisions differently. The analysis based on the background depends on a reasonable person having knowledge of the case law that I have gone through and having reached the same conclusion that I have. I do not think that it is correct to equate the knowledge and understanding of a reasonable person with that of a High Court Judge who has had two days of argument on the point.

However, I think the Claimants are on surer ground when they note in particular that clause 13.2.2 of the Terms disapplies any limit of liability “where the law prohibits us from excluding or limiting our liability to you”. As I have found that the law does not allow an exclusion or limitation of a liquidator’s liability, this clause (if needed) is in my view effective contractually to exclude the Former Liquidators from the protection of the Limitation Clause.

This provision does not, however, prevent the Limitation Clause applying to any of the other Begbies Defendants. It is necessary, therefore, to address the other arguments that are made on behalf of the Claimants to the effect that the Limitation Clause does not apply to anything that happened after the Former Liquidators were appointed.

In summary, these arguments are as follows.

The “nature and services to be provided” listed in clause 1 of the LOEs all fell under the heading “to provide advice and assist you in all matters relating to placing the Company into members’ voluntary liquidation” (emphasis added) and concerned the necessary preparatory steps for that purpose, including:

This last point, it seems to me, was capable of continuing past the appointment of the Former Liquidators. The Claimants make the point that the role of liquidator could not be assigned to Begbies LLP by the LoE, or at all, but I do not see how this affects the point that Begbies LLP could agree to provide staff during the liquidation to assist the liquidators.

Clause 1.7 “[d]uring the course of the liquidation we shall deal with the following…”, clearly envisaged services being provided after the liquidation had commenced, but the Claimants invite me to conclude from the use of the future tense “shall” that these matters did not form part of the assignment, but was rather an explanation of what things would happen in the future, not as a result of the assignment and therefore outside the scope of the Limitation Clause.

This, to my mind, is a strained interpretation. Mr Deacock, for the Defendants makes what I consider to be better points. He points out that the "Services" is defined as the services to be provided by Begbies LLP in accordance with the Services Contracts (being the contracts created by the LoEs read together with the Terms and any other documents or terms referred to in either of them). To identify what are the “Services” one must look at the list of services in the LoEs under the heading, “1. Nature of advice and services to be provided”. This list includes those services listed at 1.5 to 1.7, all of which are either envisaged to take place during the course of, or partly during the course of, the liquidation. Given that these services are specifically and clearly enumerated as being included amongst the services to be provided by Begbies LLP under the Services Contracts, the introductory words “relating to placing the Company into members’ voluntary liquidation” cannot be given an interpretation that restricts these services being included. I agree with Mr Deacock on this point and I see no ambiguity in this drafting.

Ms Addy put forward a second argument, which was that essentially after the liquidators are appointed the liquidation is undertaken by them and by their staff, leaving no room for Begbies LLP to undertake anything. Whilst it was no doubt correct that members and staff of Begbies LLP would assist the Former Liquidators, technically when they did so they were doing so as the staff of the Former Liquidators, and not on behalf of or as staff of Begbies LLP.

This brings us to the gap between theory and reality that was commented on by Chadwick J in Sankey in the passage that I have reproduced at [‎20] above. For the purposes of IA 1986, the staff working on the liquidation are regarded as being the Former Liquidators’ staff, and the amounts paid in respect of their services is regarded as being part and parcel of the Former Liquidators’ remuneration. But in the real commercial world these staff were staff or members of Begbies LLP and would look to Begbies LLP for their remuneration and employment rights. Also, in the real world it appears that the remuneration that was in theory payable to the Former Liquidators was in fact invoiced by Begbies LLP and received by Begbies LLP. (Although the matter is slightly confused because of changes in the letterhead used for VAT invoices which sometimes referred to Begbies Global, the VAT invoices consistently refer to payment to a bank account which I consider must be that of Begbies LLP.) Certainly the payments were not received into the personal accounts of the Former Liquidators.

In my view, the LoEs were an attempt to bridge the gap between the theory of liquidation and commercial reality by providing that Begbies LLP would provide the services of members or employees who were qualified to act as liquidators. This, of course was subject to such persons being appointed by the relevant Claimant Company acting through its members. Begbies LLP was agreeing also to provide suitably qualified staff of each grade to work on the assignment to assist such liquidators. This, of course, was subject to the appointed liquidators requiring the assistance of such staff, which had to remain at the discretion of those liquidators.

As regards payment during the period of the liquidation, the provisions in the LoEs at numbered paragraph 6.1 are slightly inconsistent – the clause starts by talking about the remuneration of the Joint Liquidators and the staff, to be paid by reference to the prevailing hourly charge out rates of Begbies LLP or payable on a fixed fee basis, but then ends by saying it is proposed that “our fees” (in context those of Begbies LLP) were proposed to be calculated on a time costs basis.

This inconsistency, I consider, arises from the difference between theory and commercial reality that I have mentioned. In practice, it appears that the work was all invoiced by Begbies LLP.

As a matter of commercial reality, I consider that Begbies LLP through the LoEs was committing itself to put forward members or employees that were suitable to be appointed as liquidators and are able to accept the appointment, and, if those liquidators were appointed, to provide their services (in the sense of allowing their services to be provided and taking responsibility for ensuring that the Former Liquidators continued in the appointment). It also undertook to make staff available during the liquidation.

Of course, if the liquidators were not appointed, or if the liquidators chose not to use the staff of Begbies LLP, Begbies LLP could not insist that they were used, but by signing the LoEs, Begbies LLP was providing the Claimant Companies with the reassurance that suitable liquidators would be available and would be supported by suitable staff. I see no reason why Begbies LLP and the Claimant Companies, acting through their respective members or directors, could not enter into such an agreement and if they did enter into such agreement, why (subject to any argument under UCTA) they could not limit the liability of Begbies LLP and their staff (other than the Former Liquidators themselves for the reasons that I have given).

The Claimants make the point that the LoEs were addressed to the Board of Directors of each of the Claimant Companies, rather than to the Claimant Companies themselves. I do not think it follows that the agreements concluded on the terms of the LoEs (taken with the Terms) were personal to the directors, rather than intended to bind the Claimant Companies. It is common when addressing a company to address the letters to the directors of the company so that it is known who should deal with the letter. That does not mean that the letter is intended for the directors personally to the exclusion of the company involved. In fact, the LoEs were countersigned underneath a rubric to say that the Terms of Engagement were “agreed and accepted on behalf of the Company and its directors”, as well as specifically agreeing and accepting the limitation of liability of Begbies Traynor and Begbies Traynor Persons contained in the LoEs. It is clear that the intention was to bind the Claimant Companies.

Accordingly, I find that there is nothing in the Claimants’ arguments as regards the construction of the LoEs that states that they are not to apply in accordance with the terms.

Accordingly, I think it is clear that they are effective to limit any separate liability that Begbies LLP or Begbies Traynor Persons may have under the LoEs, except that, for the reasons that I have given they are not effective to limit the liability of the Former Liquidators and I have reserved the question of whether they might be invalidated under UCTA.

There remain, however, one or two outstanding issues to discuss before I can claim to have addressed everything that I have been directed to consider.