Laurence Pagden & Ors v Core VCT PLC & Ors

A liquidator’s statutory role includes fiduciary obligations arising from a statutory trust. Those obligations are not owed solely to the company and cannot be waived or limited by the company, whether acting through its directors or members.

A contractual limitation may, however, protect a liquidator’s firm or other persons from their own contractual or tortious liability, including services provided during the liquidation, subject to construction and the Unfair Contract Terms Act 1977. The limitation may also be wide enough to cover vicarious liability, although its effectiveness depends on the basis of that liability.

The proceedings concerned claims arising from members’ voluntary liquidations of three investment companies. The claimants alleged breaches of fiduciary, contractual and tortious duties by former liquidators and associated firms.

The preliminary issue was whether standard terms and letters of engagement capped the aggregate liability of the former liquidators and other defendants at £1 million. The court also considered whether the contractual services extended to work performed after the liquidators’ appointment, and whether the cap could cover vicarious liability. The effect of the Unfair Contract Terms Act 1977 was expressly left unresolved.

1. Former liquidators. The former liquidators could not rely on the contractual limitation. A liquidator holds company assets on a statutory trust for statutory purposes. The resulting fiduciary obligations are not obligations owed purely to the company, so the company cannot waive or limit liability for their negligent performance.
2. Statutory provisions and jurisdiction. Section 212 of the Insolvency Act 1986 provides a procedural route for enforcing liabilities arising under the general law and equity. A limitation of those liabilities would not, by itself, oust the court’s jurisdiction. This reasoning was academic because the statutory-trust analysis independently resolved the issue.
3. Firms and associated persons. The contractual documents covered services during the liquidation, including the provision of suitably qualified staff. They were capable of limiting separate liability of the firms and other covered persons, subject to the outstanding UCTA issue. Clause 13.2.2 also excluded the former liquidators from the cap because the law prohibited limitation of their liability.
4. Vicarious liability and BTG Advisory. The wording was sufficiently wide to cover vicarious liability, but the court did not determine whether vicarious liability arose or whether BTG Advisory in fact fell within the contractual definition. Those matters depended on facts outside the preliminary issue.
5. The observations concerning the application of clause 13.2.4 were expressly obiter and non-binding.