Robert Paterson
- Partner
- Insolvency & Restructuring
Can professional firms providing insolvency services be vicariously liable for the acts or omissions of their appointment-taking employees? The case of Yerbury v Azets Holdings Ltd [2025] EWHC 757 (KB) emphasises that an office-holder and his or her firm are not the same thing.
A company called Bethel Retirement Villages Herne Bay Court Limited had purchased a site with planning permission for a retirement village over which it gave security for its borrowings. Bethel defaulted, and the lender appointed Law of Property Act receivers to sell the property and recover its outstanding debt under the terms of the facility agreement and mortgage under ss 101(1)(iii) and 109(1) Law of Property Act 1925. The property was sold for £4.2 million odd plus receivership costs, some £720,000 less than the £5 million at which it had been valued. At the time of their appointment and the sale of the property the receivers had been employed by CLB Coopers, the business of which was acquired by Azets Holdings Limited. It was accepted that Azets was the successor to Coopers and had assumed its responsibilities and potential liabilities.
Mr Yerbury took an assignment from the liquidator of Bethel with a view to bringing a breach of duty claim against the receivers in connection with the property sale. In due course he brought a claim, not against the receivers personally but against Azets alone.
Azets applied to strike out the claim and succeeded before Master Davison who concluded that the claim was against the wrong party, the firm employing the receivers rather than the receivers themselves, and that the cause of action against the receivers (if one existed) had not been assigned to Mr Yerbury. The receivers acted in a personal capacity. There was no authority for the proposition that the employer of an LPA receiver was vicariously liable for a receiver’s breaches of duty to a third party.
Mr Yerbury appealed on the vicarious liability point, arguing what Sweeting J described as “a conventional, and in some ways attractively simple, approach.” He argued that the employed receivers had been acting “in the course of their employment” by Azets since Azets provided a receivership service as part of its business, so there was no reason why it should not be liable for their actions during the receivership. He relied on a number of features of the way in which Azets conducted its business in support of that, including the fact that the receivers were remunerated as employees of Azets, used the firm’s facilities, were under its control and so on. The argument, however, failed. Sweeting J noted:
“Mr Yerbury’s attempt to rely on the doctrine of vicarious liability is, regrettably, something of a rearguard action. It was not set out in the original pleadings, and he has been compelled to fall back on it only because he made an error in his choice of party as defendant. There is nothing to indicate that it was a deliberate choice rather than a mistake. It was in fact the same mistake as was made in [Ramsey v Leonard Curtis (a firm)] and for similar reasons.”
He went on to dismiss the appeal, concluding:
(1) The receivers were appointed personally under a deed of appointment over Bethel’s assets. Their duties were to Bethel’s creditors, not to their employer. In discharging them they were required to act autonomously and independently.
(2) Actions for breach of duty qua receiver were typically brought against receivers personally, not against the firm that employed them or offered their services. Observations made by the courts in decided cases suggested that a claim against their employer founded simply on the receiver’s breach of duty was not possible.
(3) The legislative framework provided that LPA receivers were appointed personally so that there was a direct relationship, and thus accountability, between the receiver and the borrower, and, by extension, parties interested in the equity of redemption.
(4) Since the appointment was personal it did not depend on receivers maintaining their employment with any particular employer. The law treated receivers as independent agents, not as employees or representatives of their employer during the course of a receivership.
(5) For the purpose of an analysis of vicarious liability, once appointed a receiver was acting in the course of his or her appointment in respect of acts and defaults in the receivership and not in the course of his or her employment. An employer is not, therefore, vicariously liable for the receiver’s acts or defaults.
This judgment is sensible and confirms the general understanding in the market. The judge did not have to decide whether the receivers had or had not breached their duties. Nonetheless it is a reminder that officeholders are at risk of personal liability, and should always carry sufficient professional indemnity insurance, and negotiate an indemnity where possible.
Whilst this case was about the status of receivers under the Law of Property Act 1925, similar considerations apply mutatis mutandis to office-holders appointed under the Insolvency Act 1986 who are similarly appointed in a personal capacity. The law is different when it comes to, for example, auditors, where the appointment may be of a firm or (rarely) an individual (see s 1212 Companies Act 2006). For a recent case dealing with the nature of the office of auditor and the susceptibility of a firm of auditors to an order to provide documents or information to an office-holder see Dale & Ors v BDO LLP (Re NMCN PLC and NMCN Sustainable Solutions Ltd) [2025] EWHC 446 (Ch).
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