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In a landmark ruling handed down on 10 September 2025, the High Court has clarified the legal position on whether professional liquidators and/or their firms can limit their legal liability under the terms of a letter of engagement.
A copy of the judgment can be found here.
Significantly, and notwithstanding the importance of the issue and the length of time for which the office of liquidator has existed, this appears to be the first time the Court has been asked to consider the question. The judgment will be relevant for insolvency practitioners and their professional services firms, who will all need to consider the terms on which they are engaged to act as liquidators in light of the judgment.
The decision arises in the course of claims brought by three venture capital trusts against their former Joint Liquidators, the professional services firm of which the former Joint Liquidators were members during the relevant period and an associated entity.
The Court was asked to determine a preliminary issue: whether or not limitation of liability clauses in letters of engagement entered into between the Claimant venture capital trusts acting through their directors before they were placed into Members’ Voluntary Liquidation and the professional services firm of the former Joint Liquidators were effective in limiting the liability of the former Joint Liquidators, their firm, and the associated entity,
Claimants’ submissions
The Claimants submitted:
- Liquidators, as fiduciaries holding assets on a statutory trust, cannot limit their liability by contract. That trust is created by statute, and the statute makes no provision for trustees to limit their liabilities.
- Any attempt to limit or exclude potential liability would be an attempt to “oust the court’s jurisdiction” under the Insolvency Act 1986. It would also be inconsistent with commercial practice.
- Any decision to approve the limit of liability for liquidators is solely in the hands of shareholders given that it is the shareholders who appoints liquidators in a Members’ Voluntary Liquidation, not directors.
- Alternatively, any attempts to limit liability were invalid under the Unfair Contract Terms Act 1977 regime (‘UCTA’).
Defendants’ submissions
The Defendants submitted:
- In other contexts where shareholders appoint an officer or a role is created by statute, the general law has not recognised or implied any prohibition on limitation of liability.
- Whilst liquidators are appointed under statute, their professional services firms provide services under contract and should be able to limit liability.
- The Insolvency Act does not prohibit such limitations and the clauses applied to both the liquidators and their firms. Limiting liability did not oust the Court’s jurisdiction and doing so was consistent with commercial practice.
- The former Joint Liquidators were therefore entitled to contractually cap their liability under the terms of engagement agreed before the Claimants were placed into liquidation.
The Court’s findings
No entitlement by liquidators to limit their liability by contract
The Court held that the former Joint Liquidators are not entitled to limit their liability under the letters of engagement.
Individuals appointed as liquidators under the Insolvency Act 1986 act as fiduciaries holding assets on a statutory trust. Their duties arise from statute and are owed to the statutory trust, not to the company or its shareholders. As such, their liability cannot be limited by contract.
There is distinction between the statutory role of liquidators and the contractual role of their firms.
In contrast, the Court found that firms supporting liquidators may be able to limit their own liability for services provided, if they were involved in providing services, and provided that the services being provided fell within the scope of services provided under the relevant engagement letter containing a limitation of liability clause. In this case, the Court considered that the letters of engagement and standard terms were sufficiently broad to cover the services provided, both before and after the appointment of the liquidators. A central theme of the judgment is the distinction between the statutory role of liquidators and the contractual role of their firms. This distinction reflects the commercial reality that liquidators often operate within firms that provide infrastructure, personnel, and support.
Firms may be found vicariously liable for the acts of liquidators
The Court found that firms could, in principle, be found to be vicariously liable for the acts of liquidators. However, in this case, those issues remain to be determined in future proceedings.
No findings in relation to UCTA
The Court did not reach a conclusion on the effect of UCTA and whether this could preclude reliance on the limitation of liability clause in the engagement letters, noting that this is a fact sensitive issue and determination would require further evidence and argument.
The outcome of this judgment will have important implications for insolvency practitioners and their firms, and demonstrates the responsibility of liquidators when discharging their statutory functions.
Catherine Addy KC and Charles King of Maitland Chambers, and Daniel Lewis of Wilberforce Chambers were instructed by Jennifer Morrissey and Edward Argles on behalf of the Claimants. If you have any questions arising out of the judgment, please contact jennifer.morrissey@michelmores.com.
Case citation: Core VCT PLC & Ors v Fry & Mather & Ors [2025] EWHC 2316 (Ch)