Digital Equipment Company Ltd and Others v Bower and Others
| Jurisdiction | England & Wales |
| Judgment Date | 04 December 2003 |
| Date | 04 December 2003 |
| Court | Chancery Division |
CHANCERY DIVISION
Before Mr Justice Laddie
Insolvency - court costs awarded against liquidators were not 'expenses incurred in the winding-up'
Costs payable as a result of a court order made against liquidators who engaged in litigation were not "expenses incurred in the winding-up" under sections 112 and 156 of the Insolvency Act 1986, under which the court could, in the event of the company's assets being insufficient to satisfy its liabilities, order the payment out of the assets, of such expenses, in any order of priority as the court thought just.
Mr Justice Laddie so held in the Chancery Division when dismissing the application of the claimants, Digital Equipment Co Ltd and eight other companies within the Compaq Computers Group, for payment of over Pounds 60,000 held in the insolvency services account of MT Realisations Ltd, a company in voluntary liquidation.
The defendants, the company's liquidators, including Mr Simon Peter Bower, were later joined by Withers LLP, the firm of solicitors instructed by the liquidators.
Payment of the sum would discharge part of the amount due to the claimants by way of costs arising out of unsuccessful proceedings brought against them by the liquidators.
The claimants argued that they were entitled to their costs out of the assets of the company pursuant to various costs orders made in the proceedings, and that the payment should take priority over all the general costs and expenses of the litigation, in particular, over legal costs which the liquidators had incurred in bring the failed proceedings and any fees charged.
Although the liquidators themselves did not oppose the application for the payment of the Pounds 60,000, the solicitors' firm did, arguing that the money in the account was held for it on trust.
The firm accepted that although normally any costs order made against liquidators in relation to civil proceedings undertaken by them had priority over the general expenses of the litigation (In re London Metallurgical CoELR ((1895) 1 Ch 758)), that rule did not apply to assets held in a separate trust fund which did not form part of the assets of the company.
Even if no trust existed, the firm submitted, the judge had a discretion under sections 112 and 156 of the 1986 Act to alter the priority of payments out of the company's assets and, in the circumstances of the instant case, that discretion should be exercised...
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