Mohammed Saleem Khawaja v Stela Stefanova & Ors

On 18 July 2024 I handed down judgment dismissing the application of the Petitioner (to whom I shall refer as I did in the Judgment as Mr. Khawaja) for summary judgment in respect of his Petition brought under s.994 of the Companies Act. I directed that consequential matters be dealt with by written submissions which they have been (albeit that the First Respondent, Ms. Stefanova filed a witness statement rather than submissions but I take no point on that).

In essence I have two matters to deal with: costs and an application by the Petitioner for permission to appeal.

Since the hearing there have been two developments which Mr. Khawaja has directed my attention to:-

I will deal first with the matter of costs.

Ms. Stefanova makes the straightforward argument that as the application for summary judgment has been dismissed, she is the winning party and Mr. Khawaja should pay the costs of the application. It is of course the starting point that the successful party should have their costs.

On the other hand, Mr. Roseman on behalf of Mr. Khawaja points to the fact that on many of the allegations in support of unfair prejudice I did consider that Ms. Stefanova had no real prospects of succeeding and her behaviour in this litigation has been extremely poor as noted in the main judgment.

He argues that no order for costs should be made. Alternatively, he says that Ms. Stefanova should be deprived of a percentage of her costs, perhaps 50%.

This is a very unusual case in many ways. As I stated in the main judgment, the width of the powers available to the Court under s. 996 and its ability to fashion a remedy suitable to meet the particular unfair prejudice make it an area particularly unsuitable for summary judgment and it was very much on that basis that I rejected the application. It was not on the basis that I considered that Ms. Stefanova had a good defence to the allegations in the Petition. It seemed to me that there would need to be a hearing for the Court to consider the case in any event and it was inappropriate to make declarations binding on the Judge who was to deal with that.

In those circumstances, it seems to me that the appropriate order to make in this case is no order as to costs. While it can be said that this application should not have been brought by Mr. Khawaja when successful applications for summary judgment in s. 994 petitions are very rare, it can also be said that Ms. Stefanova could simply have accepted that unfair prejudice has been established and agreed that the sole question for the Court is the fashioning of the appropriate remedy. She has instead attempted to defend what is indefensible.

Mr. Khawaja relies on the following grounds of appeal:-

Grounds 4 to 6 are (largely) dependent on the success of the first three grounds and so the question is whether there are real prospects of these grounds succeeding on appeal.

The first point is that this was a case management decision which is a matter for the discretion of the Court and so it is necessary for it to be shown that the decision was plainly wrong.

The second point is that summary judgment is rarely appropriate in respect of a s. 994 petition where the Court has such wide powers to fashion a remedy. In spite of Mr. Roseman’s arguments that the only remedy possible here was an award of damages, I do not consider that can be right. Indeed he emphasizes in his skeleton argument that the Court can fashion a remedy in many ways and of course the Petition seeks numerous types of relief. That deals with the second and third grounds.

As for the first ground, I accept that HHJ Baumgartner was persuaded that there had been a diversion of business having examined the bank statements in more detail than I did. However, he was looking at the question in a different context, his decision is not binding on me and I was certainly not taken to sufficient factual evidence to form a view that Ms. Stefanova had no realistic prospects of defending this aspect of the Petition. It seemed to me that it was precisely the sort of exercise which required a mini trial.

The fourth and sixth grounds are only arguable if the first three grounds succeed. As to the fifth ground, the transfer of the County Court proceedings to the High Court, it was made clear in oral submissions (as I record in the main judgment) that this was not strongly pursued if summary judgment was rejected. That might have been a material change of circumstances. Mr. Roseman relies on other grounds set out in his skeleton argument and the issue by Ms. Stefanova of her own petition and the comments of HHJ Gerald about the procedural mess as being new evidence which would improve his prospects on appeal.

However, this was also a case management decision which has to be shown to be plainly wrong. What has happened since the hearing does not, in my view, materially change matters. The issue of another petition (which may well be an abuse of process) does not alter the fact that the same matters are being litigated in different courts and the County Court proceedings remain stayed with the Judge who made the initial decision on the agreement in the best position to deal with remedy.

In the circumstances I decline to give permission to appeal. I would be grateful if I can be provided with a draft order and assume that no other case management directions are sought.