Malmsten v Bohinc [2019] EWHC 1386 (Ch), Marcus Smith J



Judge: Marcus Smith J.

Citation: [2019] EWHC 1386 (Ch)

Approach to detailed assessment and proportionality – Parts 44 and 47

Summary:

A costs judge erred in drawing no distinction between costs not associated with an application when assessing the costs of and incidental to that application.  The judge had correctly used the net figure when assessing proportionality, however attached too much weight to the resistance to the application, and failed to properly identify which elements of the Respondent’s conduct had caused additional costs to be incurred.

Longer text:

A shareholder who made an application under Section 306 of the Companies Act 2006 was awarded “the costs of and incidental to this application”.  On detailed assessment, the paying party was ordered to pay approximately £78,600, of which £47,500 was attributable to the Section 306 application.  The paying party appealed, arguing that the costs were disproportionate and not incidental to the application.  On appeal, the Court found that the Costs Judge had drawn no distinction between Section 306 costs and non-Section 306 Costs.  The non-Section 306 costs should have been disallowed.[1]   With regard to proportionality, the Master had correctly left VAT and the costs of detailed assessment out of account and had begun the proportionality assessment with the net figure of £47,500.  However, the Master’s approach was held to be a clear error of law, as he had attached too much weight to the fact that the Appellant had resisted the application and failed to identify precisely what aspects of the Appellant’s conduct he thought had caused the Respondent to incur additional costs, given the narrowness and straightforwardness of the application and the short hearings (30 minutes).  The costs were disproportionate and required justification, of which there was none.  The costs payable by the Appellant were reduced to £15,000[2].  That decision was the first costs case to reach the High Court, but was followed swiftly by the Court of Appeal decision in West v Stockport NHS Foundation Trust[3], which quoted the above Judgment with approval.

[1]               See Contractreal Limited v Davies [2001] EWCA Civ 928

[3]               [2019] EWCA Civ 1220

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