Flavio de Carvalho Pinto Viegas & Ors v José Luis Cutrale & Ors

Costs of a contested interlocutory application ordinarily follow success. Where an application for trial of a preliminary issue has generated substantial costs because it was strongly opposed and required expert evidence, it is generally inappropriate simply to reserve the costs or make them costs in the preliminary issue.

The recoverable costs may nevertheless be limited to work properly attributable to the application, particularly where some work also bears on the underlying issue. An interim payment on account requires caution where the claimed costs are exceptionally high. The relevant benchmark is the lowest amount that could reasonably have been expected to be spent to conduct and present the case proficiently, having regard to all the circumstances.

The claimants and defendants were engaged in commercial litigation involving limitation issues under Brazilian law. The defendants had successfully applied for the limitation issues to be tried as preliminary issues.

The court was required to determine the costs of and occasioned by that application. The defendants sought 40 per cent of their quantified costs and an interim payment on account calculated at 55 per cent of that sum. The claimants sought to reserve the costs, or make them costs in the application, and challenged the amount of any payment on account.

1. Liability for costs. The application had been contested on a root-and-branch basis. Its determination took substantially longer and required more legal and evidential activity than would ordinarily be expected for an application to determine whether a limitation issue should be tried first. Outline expert evidence on Brazilian law was also necessary. The defendants were therefore successful, and the claimants should pay the costs of and occasioned by the application. There were no conduct reasons to depart from that result (para 4).
2. Recoverable proportion. Some work undertaken for the application, including expert evidence and documentation, would also be relevant to determination of the limitation issue. It was therefore appropriate in principle to limit the costs order at this stage to 40 per cent of the defendants’ costs of the application (para 5).
3. Payment on account. The court applied the costs principle stated in Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm): reasonable and proportionate costs are measured by the lowest amount that could reasonably have been expected to be spent to conduct and present the case proficiently, having regard to all relevant circumstances. The possibility of close scrutiny on detailed assessment required additional caution, given the claimed total, hourly rates, number of solicitors and counsel’s fees (paras 7–9).
4. The appropriate interim payment on account was £225,000, rather than the defendants’ proposed sum of approximately £292,990 (para 9).

Not stated in the judgment.