Home > Liquidators and liability caps: the Core VCT litigation

Liquidators and liability caps: the Core VCT litigation

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01 Jan 2026

Key points

Can liquidators in members’ voluntary liquidations limit their liability through contractual terms? This seemingly straightforward question conceals layers of complexity about the nature of insolvency appointments, statutory duties, and the boundaries of contractual freedom.
In Core VCT plc (in liquidation) v Fry and Mather [2025] EWHC 2316 (Ch), Mr Justice Thompsell grappled with this issue in a preliminary ruling. Analysing the issue through the lens of the statutory scheme that arises in liquidation, the judge held that the appointment as liquidator brings responsibilities that cannot be limited by prior contractual arrangement.
An outstanding question regarding the applicability of the Unfair Contract Terms Act 1977 was expressly reserved for future determination. That question, together with the scope of a liquidator’s firm’s liability, including vicarious liability in this context, will require resolution as the substantive litigation in this long-running liquidation proceeds.

The Background

The dispute arose from a (solvent) members’ voluntary liquidation of three venture capital trust companies (the Core VCT companies). In March 2015, Begbies Traynor (Central) LLP entered into letters of engagement with the directors of these companies. These letters contemplated the appointment of Mark Fry and Neil Mather as joint liquidators and contained standard terms of business including a £1m aggregate liability cap.

Following restoration of the companies to the register through new liquidators, claims were brought alleging breaches of fiduciary, tortious and contractual duties by the former liquidators in connection with asset sales during the liquidation. The defendants – comprising the former liquidators personally, Begbies LLP, and associated entity BTG Advisory LLP – sought to rely on the liability limitation provisions. This prompted a preliminary issue: could these provisions effectively limit liability for alleged breaches during the liquidation?

The central legal question

At the heart of the case lay a fundamental tension. Liquidators are statutory office-holders, appointed under the Insolvency Act 1986 framework, subject to court supervision, and holding company assets on what case law has established as a “statutory trust”. Yet they are also, in commercial reality, professionals from firms marketing their services, seeking remuneration, and managing business risk through insurance and contractual protections.

The claimants advanced a multi-layered argument that liquidators simply cannot limit their liability. Their position rested on several pillars: (i) the statutory framework contains no provision for limitation; (ii) liquidators hold assets on a statutory trust whose terms cannot be modified by contract; (iii) attempting to limit liability would improperly oust the court’s supervisory jurisdiction under s 212 of the Insolvency Act; and (iv) Parliament’s express prohibition of liability limitations for directors and auditors (but silence regarding liquidators) indicates no such power exists.

The statutory trust analysis

The judge’s reasoning turned significantly on the concept of the statutory trust. Drawing on Ayerst v C&K (Construction) Ltd [1976] AC 167 and Fakhry v Pagden [2020] EWCA Civ 1207, Thompsell J emphasised that upon liquidation, a company’s beneficial interest in its assets is suspended. The assets are held on a statutory trust “to be dealt with in accordance with the statutory scheme” – critically, a trust for statutory purposes rather than for particular beneficiaries.

This characterisation proved decisive. As the judge observed, the duties of a liquidator arising from this statutory trust “are not duties owed to a company. They are the obligations of a fiduciary to carry out the purposes of the statutory trust”. Consequently, “they cannot be waived by the company, either acting through its directors or even through its body of shareholders”.

This analysis distinguished liquidators from directors and auditors, for whom the seminal case of Re City Equitable Fire Insurance Company [1925] Ch 407 had permitted articles of association to limit liability for negligence (absent wilful neglect or default). Directors and auditors owe their duties to the company; liquidators, by virtue of the statutory trust, occupy a fundamentally different position.

The Court’s jurisdiction argument

The judge gave less weight to arguments about ousting the court’s jurisdiction. Section 212 of the Insolvency Act – the misfeasance provision – provides a summary procedure for enforcing existing rights rather than creating new substantive rights. Thompsell J accepted that following City Equitable, such a jurisdictional provision does not itself prevent parties from limiting underlying liability.

However, he noted the difficulty in reconciling City Equitable with the later High Court decision in Aribisala v St James Homes (Grosvenor Dock) Ltd [2007] EWHC 1694, where a contractual provision seeking to exclude the court’s jurisdiction under s 49(2) of the Law of Property Act 1925 was held void as contrary to public policy. Ultimately, Thompsell J regarded City Equitable as binding but found the statutory trust analysis dispositive in any event.

Commercial reality versus legal theory

The judgment reveals fascinating tension between the legal theory of liquidation and commercial practice. As Thompsell J acknowledged, citing Chadwick J’s observations in Re Sankey Furniture [1995] 2 BCLC 594, the statutory framework treats liquidators as individuals personally appointed, yet “the practice in relation to the administration of insolvency … may not fit easily into the current legislative framework”. Work comes to firms, not individuals. Collective expertise attracts appointments. Day-to-day administration involves firm employees.

This gap between theory and reality created interesting questions about whether services provided during liquidation fell within the scope of contractual protections. The letters of engagement enumerated services including “providing the services of Partners and/or Directors … who are able to accept an appointment as Joint Liquidators” and providing staff “to undertake work on the assignment”. Did these provisions create contractual relationships continuing after appointment, or did the statutory appointment wholly supersede them?

The contractual construction issue

On construction, the judge found the engagement letters clearly contemplated services extending into the liquidation period. Clause 1.7 expressly stated: “During the course of the liquidation we shall deal with the following …” and listed matters including asset realisation, creditor claims, and dividend payments.

The claimants argued these were merely explanatory statements about what would happen in future, outside the “assignment” of helping to place the company into liquidation. Thompsell J rejected this strained reading. The enumerated services were “specifically and clearly” included among services to be provided by Begbies LLP under the services contract. The introductory words “relating to placing the Company into members’ voluntary liquidation” could not be interpreted to exclude services expressly listed as occurring during the liquidation itself.

A nuanced outcome

The judgment’s practical effect is nuanced. The former liquidators personally receive no protection from the liability cap – their statutory duties as liquidators cannot be circumscribed by contract. However, other defendants (Begbies LLP and potentially BTG Advisory) may benefit from contractual limitations regarding their own separate liabilities, subject to establishing that their activities fell within the scope of services defined in the engagement letters.

This distinction recognises that while individuals acting as liquidators cannot limit their statutory obligations, their firms may separately contract to provide services with limited liability, provided such limitations do not interfere with the statutory scheme. The judge noted that cl 13.2.2 of the standard terms, which disapplies limits “where the law prohibits us from excluding or limiting our liability to you”, operates (if needed) to exclude the former liquidators from protection while leaving other defendants potentially covered.

The position regarding vicarious liability remains to be determined. The limitation clause is drafted broadly enough (“in contract, tort, statute or otherwise and howsoever caused”) to cover vicarious liability. But whether it effectively does so may depend on the specific basis on which vicarious liability is established – a matter beyond the scope of the preliminary issue.

Wider implications

The decision has significant implications for insolvency practice. It confirms that individual liquidators cannot contractually limit their personal exposure for breach of statutory duties, regardless of what terms may have been agreed pre-appointment. Professional indemnity insurance and court protection under s 112 (applications for directions) remain the appropriate risk management tools.

However, the judgment stops short of prohibiting all contractual risk allocation in the insolvency services context. Firms providing services in connection with liquidations retain ability to limit liability for their own contractual and tortious responsibilities, provided such limitations don’t undermine the liquidator’s statutory duties or the statutory scheme.

The judge’s obiter comments regarding cl 13.2.4 of the standard terms – a proportionate liability provision – suggest similar reasoning would apply. Namely that it would be unavailable to individual liquidators given their non-waivable statutory duties, but potentially applicable to other defendants within appropriate scope.

Conclusion

Core VCT v Fry and Mather provides welcome clarification that liquidators’ statutory duties, rooted in their position as fiduciaries administering a statutory trust for statutory purposes rather than for particular beneficiaries, cannot be attenuated or circumscribed by contractual limitation clauses. This accords with the fundamental principle that statutory duties prescribed by Parliament cannot be unilaterally modified by private agreement.

Yet the judgment avoids categorical prohibition of all contractual risk management in liquidation-related services. The commercial reality that insolvency practitioners operate within firms providing support services receives recognition, with contractual protections potentially available to those firms (distinct from appointed liquidators) for their separate liabilities.

The outstanding question regarding the Unfair Contract Terms Act 1977 – expressly reserved for future determination with evidence – remains significant. Even if technically capable of limiting liability, such provisions must satisfy reasonableness requirements. That question, alongside the precise scope of vicarious liability in this context, will require resolution as the substantive dispute proceeds.

While this case was followed in Cedar Securities Ltd & Anor v Phillips & Ors [2025] EWHC 2760 (Ch), permission to appeal has been sought. For now, the message to insolvency practitioners is clear: appointment as liquidator brings responsibilities that cannot be limited by prior contractual arrangement. The statutory scheme, rooted in the distinctive concept of a trust for statutory purposes, tolerates no such qualification. Those unwilling to accept that exposure should decline appointment – or rely on the protections Parliament has provided through professional regulation, insurance requirements, and the court’s own supervisory and protective jurisdiction.

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