Liquidators Responsibilities & Liability: Why Companies Can't Limit or Modify Them

Pagden v Fry [2025] EWHC 2316 (Ch)

Introduction

The High Court has held that a company entering liquidation, whether acting through its directors or shareholders, cannot limit or modify the responsibilities or liability of its liquidators. The court disapplied existing case law for the proposition that the liquidator’s role is that of an agent for the company (as would be the case for an administrator).

Background

Begbies LLP (“Begbies”) were appointed liquidators of 3 linked companies in Members Voluntary Liquidation (MVL). The Letters of Engagement of Begbies (LoE) included a clause that limited Begbies’ liability, and the liability of persons associated with it, to £1 million per company. The trial of the preliminary issue proceeded upon an agreed schedule of assumed facts and matters. These are not facts or matters that the court determined by this Judgment. The purpose of the preliminary hearing was to narrow the issues between the parties in Court proceedings where various allegations of breach of duty have been commenced against named liquidators of the MVL and Begbies. The Defence denied this and averred that liability was limited under the terms of the LoE, and it was this latter issue that the Court determined at the preliminary hearing.

Legal Test 

Claimants argued that it was impossible for liquidators to limit their liability, and the Defendant argued that it was possible.

The Court determined that there were 3 strands to the Claimants’ argument:

1. The statutory regime does not provide for, and therefore excludes, limitations of liability. The liquidator can only be appointed and afforded remuneration as approved by the company in question (via its shareholders) or the Court and the extent of the liquidators’ duties follows as a matter of law and not as a matter of contract;
2. That a liquidator is a fiduciary administering a statutory trust and the statutory arrangements make no provision for the liquidator’s liability to be limited;
3. To limit the liability of the liquidator would be to oust the jurisdiction of the court.

What the court found

In respect of the first strand the Court found there was logic to the Defendants’ position but that the Defendant’s argument fails once the Court dealt with the second strand. The Defendants’ argument was that in other contexts where shareholders appoint an officer, or a particular role can be said to be the creation of statute, the general law has not recognised or implied any prohibition on appointees limiting their liability. Rather, it has been necessary for there to be specific legislation restricting limits on liability. An example is S.232 CA06 which renders void any provision to exempt a director from any liability that would otherwise attach to him in connection with any negligence, default or breach of duty or trust in relation to the company.

In respect of the second strand, the Court decided that Oldham & Ors v Kyrris & Anor [2003] EWCA Civ 1506 is no longer good authority for the proposition that the role of liquidator is best seen as that of agent for the company. Instead it was decided that the liquidator must now be seen as being a fiduciary holding assets on trust to be administered according to statute, and not giving any beneficial ownership to creditors, to contributories or indeed to the company itself. Therefore, the Claimants’ argument was correct, that the company, whether acting through its directors or its shareholders, could not modify the responsibilities or liability of the liquidators.

On the third strand the Court did not accept the proposition that to limit liability would operate as an ouster of the court’s jurisdiction but also accepted that as the Court had found for the Claimants on other grounds, this was of academic interest only.

The Court reserved the question of whether the limitation of liability clause might be invalidated under the Unfair Contract Terms Act 1977.

Why does this decision matter

The decision that 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, means that a liability cap cannot apply under the terms of the LoE appointing the liquidators.

However, while the liquidators as individuals cannot limit liability, the Court found that Begbies as the business through which those individual liquidators provided services, can limit their liability by the LoE, if Begbies were providing services within the scope of the LoEs. The limitation clause was found to be wide enough to cover Begbies’ vicarious liability, although whether it effectively did so would depend upon the basis of such liability which was outside the scope of the judgment, because the trial had proceeded upon the assumed facts and matters.

It is therefore very important that Insolvency Practitioners have adequate professional indemnity insurance cover, and office holders should review LoEs and the terms upon which they act.

Alison Kirby - Associate Director (Eastern)

alison@manolete-partners.com / 07502 650183

An insolvency case law update prepared by Alison Kirby, Associate Director for the IPA February 2026 Newsletter.

Manolete Partners Plc is an investment business focused on dispute finance. It is not a law firm and does not provide legal advice. The information provided in this article is correct at the time of publication.