Personally liable and the liable person – what the courts said in 2025

Yerbury v Azets Holdings Ltd [2025] EWHC 757

In Yerbury v Azets, the difference between the individual practitioners and their firm came under the microscope. A lender had appointed Law of Property Act receivers from CLB Coopers. The receivers sold a property for £4.2 million net of costs, which was £720,000 less than the valuation. Azets Holdings Ltd bought the business of CLB Coopers including its future liabilities. A Mr Yerbury bought from the liquidators any claims against the receivers for breach of duty in connection with the sale. He brought proceedings against Azets (the firm) and not the receivers personally.

Mr Yerbury lost at first instance, partly because he’d sued the wrong party. Receivers act in a personal capacity, and there was no authority that that the receivers’ employers/firms are vicariously liable for the receivers’ actions. He appealed that vicarious liability finding. He lost the appeal. The Court said that receivers were appointed personally by deed of appointment. They have to be individuals: a company cannot be appointed as receiver. The receivers’ duties are to the creditors, not to their employer. The Law of Property Act 1925 provides for receivers to be appointed personally so they are accountable to the appointor and the borrower’s creditors. Appointment does not depend on the receivers being employed. They act as agents and are independent. And once appointed, they act in the course of their appointment, not their employment. For these reasons, there is nothing to trigger vicarious liability of the firm for the receivers’ actions.

So Mr Yerbury lost, and the court never needed to consider whether the property was or was not sold at an undervalue. It’s undoubtedly the correct decision, and most of its reasoning applies equally to insolvency practitioners appointed under the Insolvency Act 1986.

Let us now look at two further cases which did consider IPs under the IA 86.

Pagden  (as liquidator of Core VCT plc & others) v Fry and Mather [2025] EWHC 2316 (Ch)

The first of these cases looked at whether liquidators or their firms dealing with a members’ voluntary liquidation can limit their liability.

Background

In the context of some wider litigation, Messrs Fry and Mather, both insolvency practitioners, were the former liquidators (Liquidators)  in a Members Voluntary Liquidation.  They were potentially liable in respect of various claims, as was their firm, Begbies Traynor (Central) LLP and various associated firms (Begbies).

Both Begbies LLP and the Liquidators personally argued that their liability – if any – was limited under the terms of their signed letters of engagement (LOE). These were in identical form, and purported to restrict the liability of Begbies “and persons associated with them” to £1 million.

Judgment

The judge (The Hon. Mr Justice Thompsell) noted that individuals were appointed as liquidators, but inevitably work for (or are partners in) a firm which supports the liquidators using its resources and expertise. He cited Chadwick J (as he then was) in Re Sankey Furniture [1995] 2 B.C.L.C. 594 who acknowledged:

“…the problem arises, as it seems to me, because the practice in relation to the administration of insolvency, at least in the case of large firms with many skilled and experienced employees, may not fit easily into the current legislative framework……..it is not unlikely that the work comes to the firm rather than the individual. It is the collective experience of the firm which attracts the appointment….The day-to-day administration is carried out by employees of the firm.”

Many, particularly those not focussed on the insolvency sector, see a mismatch between the personal appointment of IPs on the one hand, and their firm on the other. The Judge appears to acknowledge this, as did Chadwick J before him.

His decision was as follows:

1. The LOE did succeed in limiting the liability of Begbies as a firm, subject to any claim being within the scope of services provided.
2. It did not, however, limit the liability of the Liquidators themselves. The law does not allow an exclusion or limitation of a liquidator’s liability. This is because in liquidation, the beneficial interest in the company’s assets is suspended, and held on a statutory trust to be dealt with under the statutory scheme of distribution (Ayerst (Inspector of Taxes) v C. & K. (Construction) Ltd [1976] A.C. 167. Note that the assets are held for statutory purposes, not for persons. Therefore it’s not open to any person to change the terms of the trust, including the company. Liquidators’ duties arise by statute, not by contract, therefore liquidators cannot contract out of these duties, or any resulting liabilities. Thus these exclusions in the LOE cannot exclude or limit the Liquidators’ liability.The Court stressed that nobody, including the Company, could waive the performance of the statutory trust, and thus there is no ability in law for liquidators to limit liability. This is in contrast to the position regarding directors and auditors, where a company may limit liability to a certain extent under the Companies Act 2006. A couple of further points were raised but left outstanding:
3. Whether the Unfair Contract Terms Act might limit the scope of the LOE. For now, that argument will have to wait.
4. The judge in Pagden v Fry was not asked to make any findings on whether Begbies was vicariously liable. It would seem that the judge was not aware of Yerbury v Azets Holdings, discussed above.

Cedar Securities Ltd (in liquidation) v Phillips & Swan [2025] EWHC 2760

The same issues of distinguishing between IPs and their firms, and whether liability can be restricted, arose in Cedar Securities v Swan. This case also involved liquidators in an MVL. The sole shareholder had died, intestate, and the administrator of her estate engaged with PCR to do a solvent winding up. PCR issued a letter of engagement with general terms and conditions, and a service agreement.

The liquidator  retired in due course and obtained a release under section 173 IA 86 in the usual way. A subsequent liquidator brought a claim on the basis that the former liquidator had filed the tax return late and incurred penalties and interest of approximately £400,000. It was claimed these duties arose under the engagement letter, and under the liquidator’s obligations and an assumed responsibility.

The defence filed by the former liquidator admitted a common law duty to carry out functions with reasonable care and skill, and also that a duty of care arose from the engagement agreement.

The engagement letter described the liquidator as a “Relationship Partner” and its general conditions provided that:

“You have agreed that you will not bring any claim in connection with services we provide to you against any of our partners or employees personally.”

The liquidator applied to amend the defence; firstly to rely on the release from liability under section 173, secondly to rely on the firm’s general conditions and the exclusion of a duty of care by the IP personally, and thirdly to withdraw the earlier admission about owing a duty of care.

The application was refused, but in relation to release of liability the Court said:

• The release given under section 173 IA 86 is not absolute, and can be trumped by a misfeasance claim against a liquidator under section 212. It hadn’t been pleaded in the initial defence. For all these reasons the liquidator could not rely on that release in this case.
• (as obiter) the liquidator was not a party to the engagement letter and its general conditions. These were in the name of the firm, not the IPs personally. So the liquidator cannot rely on it. In any event it relates to the firm’s liability, not the joint liquidators’ liability.
• A total exclusion of liability might not be reasonable, and might be void under the Unfair Contract Terms Act. (This echoes the comments in Pagden v Fry).
• It was bound by the Pagden v Fry case summarised above, which said a liquidator can’t limit liability as liquidator. In Cedar the Court held that a liquidator can’t exclude liability (as distinct from merely limiting liability) for the same reasons.

So again, this distinction between the IP and their firm is relevant to the liability for any claims which might arise.

Conclusion

In all of these cases, the court is drawing a clear distinction between the individual practitioner, and their firm.

As regards liquidators, their duties are statutory and fiduciary in nature, and cannot be limited or excluded by contract.

Terms of business can be effective to limit liability of non-appointment taking staff and the firm, provided they are party to the agreement, and that the claim arises within their scope. These engagement terms should be carefully worded to exclude liability in respect of support services provided within the retainer scope, not the officeholders’ statutory duties.

The Courts have suggested that a complete exclusion of liability, and possibly a limitation, may be “unreasonable” and therefore void under UCTA, but as yet we have no direct ruling on that.

In Pagden v Fry, Thompsell J observed that there was a policy point for legislators as to whether liquidators should be able to limit their liability when acting as liquidators. However, as matters stand, there is no ability for liquidators to do so.

These judgments are consistent. None of them had to decide whether the officeholders had or had not breached their duties. But they do remind us that IPs act in a personal capacity, and should ensure they carry sufficient professional indemnity insurance in case things go wrong.

Finally, on a more positive note, the above relates to officeholders limiting their liability to the Company, usually against a subsequent liquidator. IPs can still try to exclude liability to third parties, such as landlords or buyers of the business and assets. We aren’t aware of a case which restricts that form of contractual exclusion, provided it doesn’t interfere with the statutory scheme.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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