Source: https://tmcls.co.uk/malmston-v-bohinc-proportionality/
Timestamp: 2020-02-22 01:38:56
Document Index: 98099662

Matched Legal Cases: ['EWCA ', 'art 8', 'art 1', 'art 8', 'art 36', 'art 36', 'art 36']

Proportionality: a view from the High Court - TMC Legal Services Limited
It’s been six years since the introduction of the “new” proportionality rule in CPR 44.3(5). In that time there have been a handful of decisions at circuit judge level but none from the higher courts, until now.
On appeal from Master Whalan in the Senior Courts Costs Office, The Hon. Mr Justice Marcus Smith was tasked with determining a number of issues arising from the detailed assessment of costs, including proportionality.
Unfortunately, but not entirely surprisingly, the decision does not offer much in the way of general guidance to practitioners.
However, on the facts of the case before him the judge found that the Master’s decision to entertain no further proportionality reduction at the end of the assessment was one that could not be sustained.
He went on to reduce the “reasonable” assessed figure of £47,500 to £15,000 plus VAT.
On its face, a worrying decision for claimant lawyers. However, it perhaps needn’t be given some important fact-sensitive features of the case, including:
The costs related to “a narrow and straightforward application” brought under s306 of The Companies Act 2006 and determined after a 30 minute hearing less than three weeks after it had been brought. In all, the work covered a period of just 10 weeks from time of instruction to conclusion.
The judge found that the Master had failed to exclude costs of advice given and work done by the receiving party’s legal team in relation to various matters other than the section 306 application itself, a factor he specifically bore in mind when determining a proportionate costs figure.
He further held that having determined that costs had been increased as a result of the paying party’s conduct (CPR 44.3(5)(d)) the Master had erred in failing to identify precisely how such conduct had resulted in additional costs.
In his view “perhaps more by luck than judgment” the paying party’s conduct had not in fact had any effect on the level of costs incurred.
“given the narrowness and straightforwardness of the application – resulting in a clearly correct outcome after a hearing of half-an-hour (including a ruling and submissions on costs) – costs of £47,500 require some justification, and pretty cogent justification at that.”
Although not particularly contentious issues in practice the judge did clarify by way of general guidance that:
Under the new rules a proportionality assessment must occur at the end of the detailed assessment.
The approach is the same whether on a summary or detailed assessment of costs.
VAT and the costs of preparing the bill are to be excluded for the purposes of determining proportionality.
The decision also examined the meaning of “costs of and incidental to” an application.
MALMSTON v BOHINC [2019] EWHC 1386 (Ch)
PROPORTIONALITY : DETAILED ASSESSMENT : CPR 44.3(5) : CPR 44.3(5)(d) : CONDUCT : COSTS OF AND INCIDENTAL TO
“It is incumbent upon a costs officer (and anyone else assessing costs) to give effect to any orders made by the court. In my judgment, Master Whalan failed to do so when carrying out his detailed assessment.” [34]
“In short, Ms Bohinc’s legal team was considering and advising in relation the overall position of the company; and the section 306 application was something that arose out of that consideration.” [36]
“it is for Ms Bohinc and not for Mr Malmsten to bear the costs of the advice given and work done by Ms Bohinc’s legal team in relation to matters other than work done in relation to the section 306 application itself.” [37]
“some effort needs to be made in differentiating between the section 306 application work and the non-section 306 application work: the Master, however, drew no such distinction, and in this I consider he erred.” [38]
Costs incidental to the application
“The expression “of and incidental to” is a time-hallowed phrase in the context of costs [which] has received a limited meaning, [in particular] the words “incidental to” have been treated as denoting some subordinate costs to the costs of the action. If [counsel for the receiving party] was right in this action it would mean that the costs of some very substantial proceedings would be treated as costs of and incidental to other proceedings.” [39]
Contractreal Ltd v Davies & Anor [2001] EWCA Civ 928
“I do not consider, for precisely this reason, that the non-section 306 application costs can be “incidental” to the section 306 application.” [40]
“the Master failed altogether to differentiate between section 306 costs and non-section 306 costs. He should, in my judgment have disallowed the latter.” [41]
“It is quite clear, from the express wording of CPR 44.3(2)(a) that there may be a reduction in costs on grounds of disproprortionality even if those costs were reasonably or necessarily incurred.” [51]
“That, to my mind, inevitably indicates that under the new rules a proportionality assessment must occur at the end of the process, whereas under the old rules it occurred at the beginning.” [52]
“What the new rules require is for the judge, having completed a detailed assessment of costs, to take a step back, look at the assessed bill, and ask whether a further reduction is required on grounds of proportionality.” [53]
“the distinction between “reasonable” costs and “necessary” costs – intrinsic to the Lownds test – has been eliminated, given that CPR 44.3(1) refers only to costs “unreasonably” incurred or “unreasonable” in amount.” [57]
VAT and costs of drawing the bill
“the Master was entirely right to leave both VAT and the costs of drawing the bill out of account when considering the question of proportionality. These are no more than distorting factors, when considering the overall proportionality of costs.” [60]
“The fact is that, when consideration [sic] proportionality, one is seeking to determine whether there is a proper – a proportionate – relationship between the overall costs and the action or the application giving rise to those costs.” [60]
“Self-evidently, the costs of any detailed assessment – which are costs entirely unrelated to the nature of the action or application whose costs are being assessed – must be left out of account.” [60]
“The fact is that VAT is – when payable – not an option, but an inevitable cost to the receiving party. Sometimes, of course, a party will not be obliged to pay VAT; and sometimes, a party will be able to recover it. It seems to me to be entirely undesirable to include such a factor in any proportionality assessment, as it simply distorts and confuses any proportionality assessment.” [61]
The Master’s approach
“Of the various factors [set out in CPR 44.3(5), the Master] discounted, as irrelevant, factor (a) (the sums in issue in the proceedings) and factor (e) (any wider factors involved in the proceedings). I consider that he was right to do so.” [62(1)]
“He regarded factors (b) (the value of any non-monetary relief), (c) (the complexity of the litigation) and (d) (any additional work generated by the conduct of the paying party) as relevant, “almost in ascending significance”.” [62(2)]
“I have … concluded that the Master’s decision to entertain no further proportionality reduction is one that cannot be sustained” [64]
“faced with what was undoubtedly a narrow and straightforward application, if the Master was going to use factor (d) (any additional work generated by the conduct of the paying party) as the reason for effecting no proportionality deduction, he needed to identify how Mr Malmsten’s conduct resulted in additional costs to Ms Bohinc.” [64(3)]
“given the narrowness and straightforwardness of the application – resulting in a clearly correct outcome after a hearing of half-an-hour (including a ruling and submissions on costs) – costs of £47,500 require some justification, and pretty cogent justification at that.” [64(4)]
“The costs are – simply by reason of the narrowness and straightforwardness of the application in relation to which they were incurred – prima facie disproportionate.” [64(4)]
“If it could have been shown that – for example – the frequent reference of questions to counsel by Ms Bohinc’s solicitors was in some way caused by Mr Malmsten’s conduct, that would be a matter to take into account.” [64(5)]
“the fact is that Mr Malmsten’s acknowledgement of service (with an accompanying witness statement) occurred late in the day: on 2 August 2017, the day before the hearing. The frequent resort to counsel cannot be explained on this basis, nor indeed any of the disproportionate costs arising between instruction of Ms Bohinc’s legal team and 2 August 2017.” [64(5)]
“I conclude that the Master’s reliance on factor (d) was not justified by the circumstances before him and that the Master’s decision on proportionality is, for this reason, wrong in law.” [64(5)]
“Of course, the application was of importance to Ms Bohinc, as it affected the fate of the company she was very much interested in. As a result, no doubt, her solicitors instructed very experienced company law counsel, and I would not regard that as inappropriate. However, this cannot justify the considerable number of hours spent on what was, I reiterate, a narrow and straightforward application.” [64(6)]
“The costs for the section 306 application made by Ms Bohinc are, without any doubt, excessive. That is, no doubt, in part because the Master included as recoverable costs which, so I have found, fell outwith the costs order made by the Registrar.” [69(4)]
“I am … quite prepared to accept the Master’s finding that Mr Malmsten was trying to be awkward … However, I consider that – perhaps more by luck than judgment – Mr Malmsten’s conduct in this case did not actually have an effect on the level of costs, as I have already noted.” [69(5)]
This was an appeal against decisions made in the course of a detailed assessment before Master Whalan in the Senior Courts Costs Office.
The underlying claim was a business dispute between former shareholders and co-directors in a small company.
Ms Bohinc (60% shareholder) considered that Mr Malmsten (40% shareholder) had acted in breach of his duties as director.
Accordingly, she wanted him out of the company and, to this end, she sought to convene a meeting of the shareholders.
Mr Malmsten did not attend this meeting, thereby thwarting it.
Ms Bohinc consulted solicitors and brought an application under section 306 of the Companies Act 2006 seeking 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.
The Part 8 claim form was filed on 14 July 2017 and indicated a time estimate of 30 minutes. It was supported by a witness statement of Ms Bohinc (running to some 16 pages) and a “far shorter” statement from a Mr John Banks, Ms Bohinc’s accountant.
It was noted that prior to bringing the s306 application other remedies had been considered by Ms Bohinc’s legal advisers under the Companies Act – notably section 168 (resolution to remove a director) and sections 292-293 (circulation of a written resolution).
Ms Bohinc was successful in her s306 application before Chief Registrar Briggs on 3 August 2017 and was awarded her costs.
Mr Malmston objected to the level of costs sought (£74,328.90) and an order for detailed assessment was made in the following terms:
“[t]he costs of and incidental to this application shall be paid by [Mr Malmsten], such costs to be assessed if not agreed”
Mr Malmsten contended that the words “and incidental to” had been improperly included in the order and unfairly broadened the costs recoverable by Ms Bohinc. An application to amend the order was pending Chief Registrar Briggs at the time of this appeal.
Mr Malmsten’s general concern about the costs claimed and, specifically, the conduct of Ms Bohinc’s legal advisors was summarised by Counsel at the appeal hearing as follows:
The detailed assessment proceeded as follows:
Mr Malmsten appealed on seven grounds:
(1) Ground 1. The Master erred in permitting recovery of time and work relating to Mr Malmsten as a director, when he was only a party to the action as a shareholder, and in so doing the Master misunderstood the nature of the application and the nature of the parties to it, and in so doing misapplied a fundamental principle of company law.
(2) Ground 2. The Master erred in permitting recovery of costs relating to work on matters not in issue on the basis that they were “incidental”, in particular:
(a) Sections 168, 292 and 293 of the Companies Act 2006.
(b) The rights and wrongs of Mr Malmsten’s actions as a director.
(c) The solvency of the business.
(3) Ground 3. The Master exceeded the discretion open to him in failing to sufficiently reduce the time sought by Ms Bohinc in respect of the evidence relied on by her for the hearing. It went into too much detail, covered irrelevant matters and was over-elaborate.
(4) Ground 4. The Master exceeded the discretion open to him in allowing Ms Bohinc to recover an excessive sum in respect of counsel’s fees for 23 occasions.
(5) Ground 5. The Master exceeded the discretion open to him and/or went wrong in:
(a) Allowing Ms Bohinc to recover the costs of using a process server to serve numerous documents, when an address was readily available and postal service under the CPR would have sufficed.
(b) Permitting recovery of solicitor’s time and counsel’s fees connected to Ms Bohinc’s solicitors’ failure to properly assemble the response pack to accompany the claim form.
THE HONOURABLE MR JUSTICE MARCUS SMITH:
33. As I have noted, it is convenient to consider the first and second grounds of appeal together. The costs order provided that “[t]he costs of and incidental to this application shall be paid by [Mr Malmsten] such costs to be assessed if not agreed”.
It is incumbent upon a costs officer (and anyone else assessing costs) to give effect to any orders made by the court. In my judgment, Master Whalan failed to do so when carrying out his detailed assessment.
That is because he permitted recovery of costs that were not:
The words “costs of and incidental to” proceedings derive from section 51 of the Senior Courts Act 1981. It is well-established that the words “and incidental to” are words of extension rather than words of restriction. I shall consider first why certain costs claimed by Ms Bohinc were not costs of the application. I then go on to consider why these costs were also not incidental to the application.
35. The costs of an application can include costs incurred prior to the issue of proceedings. The Master was perfectly entitled to consider whether Ms Bohinc’s pre-issue costs were recoverable. The section 306 application was commenced on 14 July 2017, which was just under two months after Ms Bohinc first instructed solicitors on 18 May 2017. To the extent that, during this pre-issue period, costs in relation to the application were incurred, these would be recoverable.
36. However, it is very clear from the narrative in Ms Bohinc’s bill of costs that Ms Bohinc’s legal team was considering far more than just an application under section 306. The narrative begins as follows:
In short, Ms Bohinc’s legal team was considering and advising in relation the overall position of the company; and the section 306 application was something that arose out of that consideration.
The narrative continues in that vein, although it is clear, as time goes by, that more and more time was being devoted specifically to the section 306 application. It is, however, difficult – simply from the bill of costs – to determine which costs are attributable to the section 306 application and which not.
37. In my judgment, subject to the question of “incidental” costs (to which I shall turn in due course),
it is for Ms Bohinc and not for Mr Malmsten to bear the costs of the advice given and work done by Ms Bohinc’s legal team in relation to matters other than work done in relation to the section 306 application itself.
It is only to the costs of the section 306 application that the Registrar’s order extends. The order makes no provision for the recovery of costs incurred in relation to other work done by Ms Bohinc’s legal team, even if this work was done at the same time as a consideration of the section 306 application.
38. Of course, I accept that some work might well be attributable to the section 306 application and to other aspects of the work that was done for Ms Bohinc. I am certainly not suggesting that such work would be irrecoverable under Mr Registrar Briggs’ costs order. But
some effort needs to be made in differentiating between the section 306 application work and the non-section 306 application work: the Master, however, drew no such distinction, and in this I consider he erred.
Nor can it be said that these non-section 306 application costs were costs incidental to the section 306 application.
In Contractreal Ltd v. Davies, Arden LJ considered whether the costs of other proceedings could be subordinate to incidental to [sic] proceedings in relation to which a party was obliged to pay costs. She stated:
40. I do not consider, for precisely this reason, that the non-section 306 application costs can be “incidental” to the section 306 application.
41. In his detailed assessment,
the Master failed altogether to differentiate between section 306 costs and non-section 306 costs. He should, in my judgment have disallowed the latter. He clearly did not.
Thus, for example, Part 1 of Ms Bohinc’s bill of costs concerns “work undertaken under a private retainer to 31 May 2017 (Invoice No. 17537)”. The invoice thus covers work for the period 18 to 31 May 2017, over a month before proceedings were commenced. The costs claimed were £7,487.00 (net of VAT), limited to £6,000 (net of VAT) by reference to the interim bill. The Master allowed the vast majority of these costs, even though some clearly related to matters outside the scope of the costs order. The same is true of the other, later, parts of the bill of costs.
42. In these circumstances, Grounds 1 and 2 succeed. The Master has erred in principle by misapplying the scope of the costs order in Ms Bohinc’s favour and to Mr Malmsten’s detriment.
(3) Grounds 3, 4 and 5
43. Again, it is appropriate to consider these three grounds together. They all relate to specific items of cost allowed by the Master which, so Mr Malmsten contended, involved an inappropriate exercise of his discretion. Specifically, Mr Malmsten contended that:
(1) The evidence served on Ms Bohinc’s behalf covered material in too much (sometimes irrelevant) detail (Ground 3);
(2) The Master permitted an excessive sum in respect of counsel’s fees (counsel was consulted on no less than 26 occasions, and the costs of 23 of these occasions were allowed) (Ground 4);
(3) The Master permitted recovery of:
(a) The use of process servers when this was unnecessary;
(b) Costs relating to Ms Bohinc’s solicitors’ mistake in relation to the response pack (Ground 5).
44. I am reluctant to seek to second-guess the granular decisions of the Master in relation to these three Grounds. It may well be that certain cost lines (notably, the extensive consultation with counsel) would fall away because of my conclusion in relation to Grounds 1 and 2. But for the reasons given by Buckley J in Mealing-McLeod [v Common Professional Examination Board], I am reluctant to engage in a line-by-line analysis of costs already considered by the Master. Although I had before me the original papers that were before the Master – including potentially privileged material between Ms Bohinc and her solicitors – I did not consider it appropriate to review or hear submissions in relation to this material, particularly when this was material that Mr Malmsten’s team had not seen.
45. More to the point, it seems to me that the requirement of proportionality – to which I turn next – also constitutes a means of controlling costs without engaging in the sort of granular analysis that I am here eschewing.
46. Accordingly, I dismiss Grounds 3, 4 and 5.
47. Both of these grounds relate to the question of proportionality, and it is again convenient to take them together. It is necessary to begin with the concept of proportionality.
48. As was explained in paragraph 26 above, the proportionality rules in the CPR are relatively new and certainly unconsidered by the higher courts. That these new rules were intended to effect a significant change to the CPR is clear from the fact that they do not apply in relation to cases commenced before 1 April 2013 nor to costs incurred in respect of work done before that date.
49. It is worth considering the role of proportionality before the new rules were introduced. The approach that the courts took was described by Lord Woolf MR in Lownds v. Home Office:
51. The present rules are very different.
It is quite clear, from the express wording of CPR 44.3(2)(a) that there may be a reduction in costs on grounds of disproprortionality even if those costs were reasonably or necessarily incurred.
That, to my mind, inevitably indicates that under the new rules a proportionality assessment must occur at the end of the process, whereas under the old rules it occurred at the beginning.
In Lownds, when considering the old rules, Lord Woolf MR said this:[25]
53. It is already clear from Lord Woolf’s analysis in Lownds that proportionality is essentially a tool that controls the overall bill of costs. That is confirmed by the definition of proportionate in CPR 43.3(5). The five factors listed there are only meaningful when considered in relation to the overall bill of costs, rather than in relation to a specific item of costs.
What the new rules require is for the judge, having completed a detailed assessment of costs, to take a step back, look at the assessed bill, and ask whether a further reduction is required on grounds of proportionality.
56. The new rules accordingly replace the ex ante Lownds test, with a new ex post test. Costs are assessed according to a reasonableness standard (see CPR 44.3(1): “the court will not…allow costs which have been unreasonably incurred or are unreasonable in amount”), with the final costs assessment then being subject to the proportionality test.
57. It would seem that
the distinction between “reasonable” costs and “necessary” costs – intrinsic to the Lownds test – has been eliminated, given that CPR 44.3(1) refers only to costs “unreasonably” incurred or “unreasonable” in amount.
The reference, in CPR 44.3(2)(a), to costs “reasonably or necessarily incurred” does not preserve the Lownds distinction, but simply makes clear that even costs necessarily incurred are subject to the overriding criterion of proportionality.
59. The Master’s approach was to exclude from consideration VAT and the costs of drawing the bill of costs. The substance of Ground 6 of this appeal was that this approach was wrong in law.
60. In my judgment,
the Master was entirely right to leave both VAT and the costs of drawing the bill out of account when considering the question of proportionality. These are no more than distorting factors, when considering the overall proportionality of costs.
The fact is that, when consideration [sic] proportionality, one is seeking to determine whether there is a proper – a proportionate – relationship between the overall costs and the action or the application giving rise to those costs.
Self-evidently, the costs of any detailed assessment – which are costs entirely unrelated to the nature of the action or application whose costs are being assessed – must be left out of account.
I do not consider the contrary to be seriously arguable, given the definition of “proportionality” in CPR 44.3(5).
61. Equally, the inclusion of VAT confuses rather than assists.
The fact is that VAT is – when payable – not an option, but an inevitable cost to the receiving party. Sometimes, of course, a party will not be obliged to pay VAT; and sometimes, a party will be able to recover it. It seems to me to be entirely undesirable to include such a factor in any proportionality assessment, as it simply distorts and confuses any proportionality assessment.
This conclusion is borne out by:
(2) The helpful dictum of Morland J in Giambrone v. JMC Holidays Ltd:
62. Accordingly, I dismiss Ground 6.
63. The Master explicitly assessed the question of proportionality at the end of the hearing before him on 11 October 2018. He (rightly) left VAT and the costs of the detailed assessment out of account and began his proportionality assessment with the net figure of £47,500. As to the question of proportionality:
(1) The Master correctly directed himself to CPR 44.3(5).
Of the various factors there set out, he discounted, as irrelevant, factor (a) (the sums in issue in the proceedings) and factor (e) (any wider factors involved in the proceedings). I consider that he was right to do so.
He regarded factors (b) (the value of any non-monetary relief), (c) (the complexity of the litigation) and (d) (any additional work generated by the conduct of the paying party) as relevant, “almost in ascending significance”.
(3) His judgment, given ex tempore, was as follows:
“This was an application for an order under the Companies Act for a meeting of shareholders with the purpose of putting the company into administration, straightforward relief in one sense, but nonetheless important, and of central importance to this particular claimant. Insofar as the litigation’s complexity [is concerned], this was a Part 8 application for the order made by the learned Registrar. As the learned Registrar pointed out this was, or should have been, a relatively straightforward matter. Not a matter which the defendant should reasonably or realistically have objected to or opposed. So, although it is a significant matter to this claimant, it is a relatively straightforward application and should not ordinarily raise any particularly complex issues at law or litigation. But seeing this case effectively overlap, at least in part, with [factor (d)] (any additional work generated by the conduct of the paying party). And this, it seems to me, having seen not simply the file, but the transcript of the hearing before the learned Registrar, and the matters articulated in the bill and [the replies to the points of dispute], this it seems to me was the issue of central significance in this particular case. This was a matter that could have been dealt with in a straightforward manner by the cooperation of the defendant had he turned up to the meeting as convened, but notwithstanding the fact that he indicated he was planning to, he did not turn up. […] I have observed over the course of proceedings today, that in procedural terms, he is not a particularly co-operative litigant, in relation to service and other procedural matters. There is no doubt at all that that led to costs which could otherwise, and should otherwise, have reasonably been avoided. More particularly, his stance throughout, prior to, during and, to a degree, after the hearing was to try and frustrate the process to prevent the company being put into administration. His [submission] expressed during the course of the hearing was that there were sufficient assets or at least debts owed to the company to avoid this particular process, which he sought to do by reference to various different alternative […] proceedings, a section 994 application and the like. I have quoted already the intervention of the learned Registrar, who was persuaded at least in part by the defendant to delay the meeting by 28 days or so, because of his desire, valid or otherwise, to try and continue a substantive defence of the application. But the long and the short of it is that what should have been a relatively straightforward application in the Companies Court, turned out to be a more protracted and bitterly fought and undoubtedly therefore more expensive undertaking than it would otherwise have needed to be. In the light of all those factors, I have to decide on the discretion of the court whether this is a case where a proportionality test [in relation to] the primary assessment requires a further reduction. On the particular facts of this case, the costs of this application, I am of the conclusion that the primary assessment, it is proportionate, and I am not minded to make a further deduction on the basis of proportionality.”
64. Having well in mind the injunctions that I have set out in Section E above, I have nevertheless concluded that
the Master’s decision to entertain no further proportionality reduction is one that cannot be sustained:
The Master attached too much weight to the fact that Mr Malmsten resisted Ms Bohinc’s application. It may very well be right to say that Mr Malmsten should have attended the shareholders’ meeting that had been called and so avoided the need for a section 306 application altogether. It may also be right to say that Mr Malmsten had no good grounds for resisting the application when it was made. I am quite prepared to consider the matter on that basis, for the fact is that (by themselves) these matters say nothing about the quantum of costs that it was appropriate for Mr Malmsten to pay in this case. Of course, these factors strongly point to the incidence of costs resting on Mr Malmsten. But that is precisely what the Registrar ordered. The question before the Master was not the incidence of costs, but their amount.
(3) In these circumstances,
faced with what was undoubtedly a narrow and straightforward application, if the Master was going to use factor (d) (any additional work generated by the conduct of the paying party) as the reason for effecting no proportionality deduction, he needed to identify how Mr Malmsten’s conduct resulted in additional costs to Ms Bohinc.
(4) The point can be put in the following way: there can be no doubt that Ms Bohinc was entitled to her proportionate costs, both because Mr Malmsten should not have fought her application and because he lost. To that extent, there is a clear nexus between the Registrar’s costs order and Mr Malmsten’s conduct. But, as a starting point,
given the narrowness and straightforwardness of the application – resulting in a clearly correct outcome after a hearing of half-an-hour (including a ruling and submissions on costs) – costs of £47,500 require some justification, and pretty cogent justification at that.
The costs are – simply by reason of the narrowness and straightforwardness of the application in relation to which they were incurred – prima facie disproportionate.
If it could have been shown that – for example – the frequent reference of questions to counsel by Ms Bohinc’s solicitors was in some way caused by Mr Malmsten’s conduct, that would be a matter to take into account.
the fact is that Mr Malmsten’s acknowledgement of service (with an accompanying witness statement) occurred late in the day: on 2 August 2017, the day before the hearing. The frequent resort to counsel cannot be explained on this basis, nor indeed any of the disproportionate costs arising between instruction of Ms Bohinc’s legal team and 2 August 2017.
I conclude that the Master’s reliance on factor (d) was not justified by the circumstances before him and that the Master’s decision on proportionality is, for this reason, wrong in law.
66. For the reasons I have given, Grounds 1, 2 and 7 succeed. Grounds 3, 4, 5 and 6 fail. Accordingly, Mr Malmsten’s appeal succeeds.
67. I am reluctant, given the costs that have already been incurred, to remit the detailed assessment to another costs judge, unless that course is unavoidable. Had only Grounds 1 and 2 succeeded, then such remission would indeed have been unavoidable. I am not in a position to re-assess Ms Bohinc’s bill of costs, extracting, on an item-by-item basis, matters unrelated to the section 306 application.
68. However, Mr Malmsten has also succeeded on Ground 7, and I do consider that I am in a position to effect a proportionality analysis without remitting the question of costs to another costs judge. This is because such an exercise does not involve, as I have explained, an item-by-item assessment, but rather taking a step back and asking whether, in light of the various factors that go to proportionality, the sum of £47,500 ought to be reduced on the grounds of proportionality. I consider that I can carry out such a proportionality assessment despite the presence, in the figure of £47,500, of costs that should not be recoverable at all by Ms Bohinc, provided that – when making such an assessment – I bear this fact in mind (as I do).
69. I consider that the sum of £47,500 should be reduced to a sum of £15,000 (plus, obviously, VAT). My reasons for reaching this figure or – to put it another way – for reducing the sum of £47,500 by some £32,500 are as follow [sic]:
The costs for the section 306 application made by Ms Bohinc are, without any doubt, excessive. That is, no doubt, in part because the Master included as recoverable costs which, so I have found, fell outwith the costs order made by the Registrar.
It may well be that such costs represent services to Ms Bohinc that were valuable to her in terms of general advice regarding the company of which she was majority shareholder, but these were certainly not costs that Mr Malmsten should pay, as I have found. Aside from that, I find that there is no justification for the extent to which counsel was consulted nor for the number of hours spent by Ms Bohinc’s solicitors. These costs were entirely disproportionate given the nature and complexity of the application.
(5) I accept that these proceedings were of importance to Ms Bohinc and, to be clear, I am certainly not envisaging any discount because her solicitors went to experienced (and expensive) counsel versed in corporate law. I also accept that Mr Malmsten was not a co-operative litigant: partly, that may be due to his status as a litigant in person, but I am also quite prepared to accept the Master’s finding that Mr Malmsten was trying to be awkward. Indeed, that conclusion is rather supported by the very late attempt by Mr Malmsten to re-open the Registrar’s order, a matter I have described in Section C above. However,
I consider that – perhaps more by luck than judgment – Mr Malmsten’s conduct in this case did not actually have an effect on the level of costs, as I have already noted.
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