High Court confirms liquidators cannot limit statutory liability

The High Court has provided important clarification on a question that has long carried practical significance for insolvency practitioners: can a liquidator limit their personal liability through contractual terms?

In Pagden & Ors v Fry & Anor, Mr Justice Thompsell held that a liquidator cannot contractually restrict their liability for breaches of statutory duty. This judgment confirms that a liquidator’s authority, obligations, and accountability derive exclusively from statute, not from the terms of their engagement.

What it means for insolvency practitioners

While engagement letters remain important in defining the scope and terms of appointment, they cannot limit a liquidator’s liability for breach of statutory duties.

Liquidators’ duties and liabilities are determined exclusively by statute, and their accountability is to the court and stakeholders – not to the contracting parties. Attempts to contractually restrict statutory obligations will be ineffective.

Background

Core VCT plc, Core VCT IV plc, and Core VCT V plc (collectively the Core Companies), were restored to the register with a new liquidator. Following restoration, they brought claims against:

1. The former joint liquidators; Mark Fry and Neil Mather (the former liquidators) of Begbies Traynor LLP for breaches of their fiduciary, tortious and contractual duties 
2. Begbies Traynor (Begbies) for vicarious liability of those breaches
3. BTG Advisory LLP (Begbies Advisory) for vicarious liability for the Joint Liquidators breaches and for failing to exercise reasonable care and skill by reason of the actions of the Former Liquidators. 

(collectively the Defendants) 

In March 2025, Begbies provided letters of engagement (“LoEs”) to the directors of the Core Companies. Clause 7 of the LoE’s sought to limit liability for any loss or damage connected with the provision of services to an aggregate sum of £1 million per company, excluding costs and interest.

The clause provided: “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.”

The Defendants therefore sought to argue that their liability was limited to £1 million per company. The court was therefore asked to determine was whether the Defendants were able to rely on the contractual limitation clauses included in the LoE’s.

The Court’s decision

The court held that no contractual limitation of liability can apply to a liquidator’s statutory role. Once appointed, a liquidator’s duties are defined by statute, and those duties cannot be varied or diluted by agreement.

1. A liquidators duties arise from statute. The Joint Liquidator’s duties arise from statute which does not include any provision for the directors (or the court for that matter) to limit the liability of the liquidator (or the Joint Liquidators in this matter). Accordingly, the directors of the Core Companies did not have the power to agree terms that reduce or limit the joint liquidator’s liability.  
2. Liquidators act as fiduciaries of a statutory trust. The Joint Liquidators are fiduciaries administering a statutory trust and the statutory arrangements make no provision for the liquidator’s liability to be limited.  Accordingly, the court held that the earlier decision in Oldham & Others v Kyrris & Another [2003] EWCA Civ 1506, where liquidators were described as agents of the company, was no longer good authority on this point.
3.  Jurisdiction of the court. Any attempt to limit the liability of the Joint Liquidators would be “an attempt to oust the jurisdiction of the court”.
4. Limitation of Begbies and Begbies Advisory. The court held that the limitation clauses were effective to limit any separate liability that Begbies or any Begbies persons may have under the LoE’s, except for that of the Former Liquidators. The court did not make any finding as to the claims for vicarious liability against Begbies and Begbies Advisory.  

Conclusion

This decision confirms that liquidators cannot seek to limit their liability for breaches of their statutory duties through contractual terms. Liquidators do not act as agents of the company but as fiduciaries holding assets on trust to be administered in accordance with statute.

For insolvency practitioners, the ruling provides much-needed clarity: robust compliance with statutory duties, adherence to professional standards, and transparency in decision-making remain the only effective safeguards against personal liability.