Ernst Malmsten v Lara Bohinc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Marcus Smith |
| Judgment Date | 07 June 2019 |
| Neutral Citation | [2019] EWHC 1386 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No. CH-2018-000291 |
| Date | 07 June 2019 |
[2019] EWHC 1386 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
INSOLVENCY AND COMPANIES LIST
ON APPEAL FROM THE ORDER OF MASTER WHALAN DATED 11 OCTOBER 2018 IN THE HIGH COURT OF JUSTICE (SENIOR COURTS COSTS OFFICE) SCCO CASE NUMBER: 1706 655
Rolls Building
7 Rolls Building
Fetter Lane
London EC4A 1NL
THE HONOURABLE Mr Justice Marcus Smith
(sitting with an assessor, Master Rowley)
Claim No. CH-2018-000291
Mr Imran Benson (instructed directly by Mr Malmsten) for the Appellant
Mr Martyn Griffiths (instructed by Emmerson Law Ltd) for the Respondent
Hearing dates: 23 and 24 May 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
A. THE FACTS
. The Appellant, Mr Malmsten, and the Respondent, Ms Bohinc, were the shareholders in a small company which carried on business as an on-line jewellery business. Ms Bohinc was the majority shareholder, holding 60% of the shares, and Mr Malmsten held the remaining 40%. Both were directors of the company, and there were no other directors.
. In time, the relationship between the parties broke down. The detail is immaterial, but they fundamentally disagreed about the future of the business, and Ms Bohinc considered that Mr Malmsten had acted in breach of his duties as director. She wanted him out of the company. To this end, Ms Bohinc sought to convene a meeting of the shareholders which, as majority shareholder, she would control. Mr Malmsten did not attend this meeting, thereby thwarting it.
. Ms Bohinc went to solicitors, who instructed counsel. In his written submissions, Mr Benson, counsel for Mr Malmsten, described the conduct of Ms Bohinc's former legal advisers as follows: 1
“The solicitors do not appear to have been au fait with the principles involved (or, indeed, much of ordinary litigation – they had to learn (and billed for learning) how to use the online filing system and failed properly to assemble the pack to be served with a Part 8 claim form): they instructed experienced counsel not less than 26 times and spent some 230 hours of solicitor's time on it. Witness evidence was duly assembled, there was a bit of correspondence with [Mr Malmsten] and he failed to attend a meeting, the application was issued, further evidence was produced and the hearing led to the inevitable order. Counsel's skeleton argument for the hearing was, properly, pithy and short.”
. Although put with the forensic force of an advocate acting for Mr Malmsten, this was a factually accurate description of the conduct of the litigation. The application by Ms Bohinc was made under section 306 of the Companies Act 2006: Ms Bohinc sought an order for a shareholders' meeting with a quorum of one, so that even if Mr Malmsten failed to appear again, the meeting could go ahead. However, that was not the only remedy considered by Ms Bohinc's legal advisers: the documents show that other remedies under the Companies Act – notably section 168 (resolution to remove a director) and sections 292–293 (circulation of a written resolution) – were considered, in the context of advising Ms Bohinc generally as to her rights in relation to the conduct of the affairs of the company.
. However, Ms Bohinc's application, when made, was only under section 306. The Part 8 claim form making the application indicated a time estimate of 30 minutes, and was supported by a witness statement of Ms Bohinc (running to some 16 pages, and setting out the background in considerable detail) and a far shorter statement from a Mr John Banks, Ms Bohinc's accountant.
. The chronology, briefly, was as follows:
| 18 May 2017 | Ms Bohinc instructs solicitors. |
| 29 June 2017 | At a conference with counsel, it was agreed that the best course of action was a section 306 application. |
| 30 June 2017 | Notice of a general meeting of shareholders, to be held on 1 August 2017, was given. |
| 3 July 2017 | Ms Bohinc gave Mr Malmsten notice that if he failed to sign an undertaking to attend the meeting, Ms Bohinc would issue a section 306 application. |
| 6 July 2017 | Mr Malmsten responded, stating that an undertaking was not appropriate, and suggesting mediation. |
| 14 July 2017 | The section 306 application is filed with the court, and a hearing date confirmed. |
| 19 July 2017 | Mr Malmsten is personally served with the Part 8 claim form and witness statements, but without the acknowledgement of service form and notes (which were subsequently provided). |
| 1 August 2017 | Mr Malmsten fails to attend the general meeting, having communicated this to Ms Bohinc beforehand. |
| 2 August 2017 | Mr Malmsten files an acknowledgement of service, indicating that he intended to contest the claim and seeking an adjournment of the hearing, which had been fixed for 3 August 2017. |
| 3 August 2017 | A hearing took place before Mr Registrar Briggs (as he then was). |
. Mr Malmsten, I should say, was unrepresented throughout this process.
. At the hearing before Mr Registrar Briggs, the Registrar determined that a general meeting with a quorum of one would take place on 31 August 2017. Thus, Ms Bohinc's application was successful (albeit perhaps less so in terms of the timing of the proposed meeting, which Mr Malmsten successfully argued should be put off to 31 August 2017), and Ms Bohinc sought her costs.
. A statement of costs for summary assessment pursuant to CPR PD 44 §9.5 had been prepared. The grand total was £74,328.90. When this figure was stated as the costs claimed by Ms Bohinc on a summary assessment, the following exchange took place: 2
| Mr Malmsten | And I would document that, I mean, I think it's quite excessive, £75,000, if this was just a simple matter and the witness statement was just background. So, I think there needs to be, what's called, assessment through an assessment, because I think it is totally unproportional. I mean, they had four or five lawyers working on this, plus barrister for today's meeting — £5,000. I mean, it's a lot of money for this kind of case where… |
| Mr Registrar Briggs | I tend to agree with this, Miss Roberts. I mean, the costs… |
| Ms Roberts | I can see, I am not going to push it… |
| Mr Registrar Briggs | It is a large sum to assess in a very short time… |
| Ms Roberts | It is a large sum to assess. I would just say this, and it is important that this is recorded. This whole application has been triggered by Mr Malmsten's unwillingness to cooperate in a proper way in running this company. This was wholly unnecessary. We asked for an undertaking. We have leant over backwards giving him opportunities so that these proceedings were not issued, and there has been – I regret to say, and I am going to say this – an effort on his part to delay this matter. He told my client we would never get a hearing until November, and I am glad that – I didn't interrupt you – I am glad that there has been a robust reception to this application today. That's all I say. |
| Mr Registrar Briggs | Well, I will order then, that the respondent pay the applicant's costs, to be assessed if not agreed. |
| Ms Roberts | Sir, I will draft an order… |
. The order, as sealed by the court, provided (in paragraph 3) that “[t]he costs of and incidental to this application shall be paid by [Mr Malmsten], such costs to be assessed if not agreed”. The words “and incidental to” in paragraph 3 of the order are important for two reasons:
(1) First, because Mr Malmsten contends (although not before me) that these words were improperly included in the order; and
(2) Secondly, because these words broaden the costs recoverable from Mr Malmsten by Ms Bohinc, the question being the extent to which they serve to do so. That is a question that I will have to deal with in the course of this appeal.
. Costs were not agreed between Ms Bohinc and Mr Malmsten, and the matter proceeded to a detailed assessment before Master Whalan. As to this:
(1) A bill of costs was drawn on behalf of Ms Bohinc. Total profit costs, net of VAT, were £42,197.10. Counsel's fees, net of VAT, were £17,500. Other disbursements – notably the costs of personal service on Mr Malmsten, again net of VAT – were £2,823.00. The total bill, inclusive of VAT was £74,968.12. The total net of VAT was £62,520.10.
(2) Points of dispute were served by Mr Malmsten, which were replied to by Ms Bohinc, and provisionally ruled upon by Master Whalan in a series of handwritten annotations to the points of dispute dated 2 March 2018. There was then an oral hearing – at which Mr Malmsten appeared by Mr Benson – where various points were made in relation to Master Whalan's provisional rulings, and where the Master made a final ruling. That hearing took place on 11 October 2018.
(3) The final costs certificate was in the amount of £78,598.24, but this included £12,129.18 in respect of the costs of the detailed assessment itself. Thus, the costs of and incidental to the application were £66,469.06, of which £13,293.81 was VAT. The net figure was £53,175.25. However, this figure included various additional items arising out of the detailed assessment process. In terms of the costs of the section 306 application before the Registrar, the Master came to a final figure of £47,500 net of VAT.
B. THE GROUNDS OF APPEAL
. Mr Malmsten sought permission to appeal, which was refused by Master Whalan. By an order dated 15 January 2019, Mr Justice Nugee gave permission to appeal on all grounds. Mr Malmsten appeals on seven grounds:
(1) Ground 1. The Master erred in permitting recovery of time and work relating to Mr...
To continue reading
Request your trial
-
Ms Basia Lejonvarn v Mr Peter Burgess & Mrs Lynn Burgess
...the CPR in respect of proportionality are important. Their effect has been neatly summarised by Marcus Smith J in Bohinc v Malmsten [2019] EWHC 1386 (Ch) as follows: “49. It is worth considering the role of proportionality before the new rules were introduced. The approach that the courts ......
-
Suzanne West v Stockport NHS Foundation Trust
...when considering proportionality, the court left out of the exercise court fees and the costs of drawing the bill itself. Similarly, in Malmsten v Bohinc [2019] EWHC 1386 (Ch), Marcus Smith J, sitting with Master Rowley, left out of account both VAT and the costs of drawing the bill when c......
-
Magret Thomas and Others v PGI Group Ltd
...1 WLR 6157, at paragraphs 73 and 87–93. In addition, useful guidance can be found in a case which was not cited to us by counsel, Ernst Malmsten v Lara Bohinc [2019] EWHC 1386 (Ch); [2019] 4 W.L.R. 87, per Marcus Smith J, at paragraphs 48–58. Setting a costs budget 107 The reasons which I......
-
Daniel Carlos Scenna v Persons unknown Using the Identity “Nancy Chen”
...(albeit not determinative) when considering the reasonableness and proportionality of the receiving party's costs: Malmsten v Bohinc [2019] EWHC 1386 (Ch) at [69(3)]. The amount of costs sought 11 The starting point when summarily assessing costs is to consider the amount of costs being cl......