InsolvencyLiquidator proposing to bring proceedings against former directors - costs of litigation - no automatic right to recoup costs from company's assets as expense of liquidationLewis v Commissioners of Inland Revenue and others: CA (Peter Gibson, Mummery LJJ and Maurice Kay J): 2 November 2000The liquidator of a company in creditors' voluntary liquidation intended to bring proceedings for wrongful trading and preferences under the Insolvency Act 1986 against the former directors.

He sought an order that he be at liberty to use the company's realised funds to commence proceedings.The judge ruled that the liquidator had an automatic right under the 1986 Act and the Insolvency Rules 1986 to recoup costs of the litigation, whether or not successful, including any costs he might be ordered to pay, out of the assets as an expense of the liquidation.

The company's preferential creditors appealed.Jane Giret (instructed by Isadore Goldman) for the liquidator; John McCaughran (instructed by Philip Ridd, solicitor of the Inland Revenue) for the preferential creditors.Held, allowing the appeal, that there was nothing in the 1986 Act or the 1986 Rules to support the contention that costs of the proposed litigation constituted expenses of the voluntary winding up to be paid automatically in priority to preferential creditors; and that, accordingly, the liquidator had no right to recoup costs in the manner proposed and had to look to the court's assumed discretion to permit him to recover any costs of litigation.