High Court Endorses Cautious Approach to Costs in High-End Commercial Litigation; Brazilian Orange Cartel Dispute

The claims concern an alleged cartel between a number of Brazilian companies that produce orange juice. The Claimants are orange farmers, domiciled in Brazil; they allege that antitrust infringements have restricted competition in markets in Brazil.

The judgment - Flavio de Carvalho Pinto Viegas & Ors v José Luis Cutrale & Ors [2024] EWHC 2778 (Comm) - concerns to a contested application for the trial of a limitation issue as preliminary issue. The hearing took place on 22 October 2024 before HHJ Pelling KC.

Key Points of the Judgment:

  1. Application and Costs Debate: The defendants' application was opposed, unsuccessfully, by the claimant. The defendants sought an order for the claimants to pay 40% of their costs (totaling £292,919.16) incurred due to the preliminary issue application, with an interim payment of 55% of that sum. [Note - the defendants claim was limited to 40% because some of the costs related to work that will be relevant to determination of the preliminary issue]. The claimants contended that costs should either be reserved until the conclusion of the preliminary issue, or considered as costs in the application. Additionally, they argued that the claimed costs and interim payment were excessive.
  2. Nature of the Dispute: The dispute centered on whether a limitation issue, governed by Brazilian law, should be tried as a preliminary issue separate from the main liability issues. The court observed that the claimants strongly opposed bifurcation, arguing that limitation should be resolved within the main trial. This led to a prolonged and costly preliminary hearing involving extensive legal and evidentiary efforts, including expert evidence on Brazilian law.
  3. Judicial Reasoning: HHJ Pelling KC found that the defendants had been successful in their application and that there was no conduct-based reason to deviate from the principle that the unsuccessful party should bear the costs. However, the judge agreed with the claimants that caution was necessary when determining an interim payment, particularly given the 'eye watering' sums and the possibility of significant reductions during a detailed assessment (the defendant's total costs of the application were in the area of £1M).
  4. Outcome: Taking account of the sums claimed, and noting the high the hourly rates claimed, the number of solicitors involved and the level of counsel's fees, the court deemed a reasonable sum for a payment on account to be £225,000. In reaching his decision the judge thought it 'sensible...to remind all parties of what Legatt J said' in Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm), 'namely that in hard fought commercial litigation involving large sums of money and in which the parties had spared no expense, “… the touchstone (of reasonable and proportionate costs) is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances” with expenditure over and above that level being for the receiving party’s own account.'

Key takeaways:

Costs in interlocutory applications are typically awarded to the successful party unless specific conduct or other circumstances justify a different approach. Whilst it is sometimes appropriate to order the costs of an application for preliminary issues to be 'in the application', that will not be the case when the application takes time and significant resources to resolve.

Proportionality and reasonableness of costs are critical, as emphasized in Kazakhstan Kagazy, which stresses that recoverable costs should reflect the lowest reasonable expenditure for proficient case presentation.

High Court Endorses Cautious Approach to Costs in High-End Commercial Litigation; Brazilian Orange Cartel Dispute

The claims concern an alleged cartel between a number of Brazilian companies that produce orange juice. The Claimants are orange farmers, domiciled in Brazil; they allege that antitrust infringements have restricted competition in markets in Brazil.

The judgment - Flavio de Carvalho Pinto Viegas & Ors v José Luis Cutrale & Ors [2024] EWHC 2778 (Comm) - concerns to a contested application for the trial of a limitation issue as preliminary issue. The hearing took place on 22 October 2024 before HHJ Pelling KC.

Key Points of the Judgment:

  1. Application and Costs Debate: The defendants' application was opposed, unsuccessfully, by the claimant. The defendants sought an order for the claimants to pay 40% of their costs (totaling £292,919.16) incurred due to the preliminary issue application, with an interim payment of 55% of that sum. [Note - the defendants claim was limited to 40% because some of the costs related to work that will be relevant to determination of the preliminary issue]. The claimants contended that costs should either be reserved until the conclusion of the preliminary issue, or considered as costs in the application. Additionally, they argued that the claimed costs and interim payment were excessive.
  2. Nature of the Dispute: The dispute centered on whether a limitation issue, governed by Brazilian law, should be tried as a preliminary issue separate from the main liability issues. The court observed that the claimants strongly opposed bifurcation, arguing that limitation should be resolved within the main trial. This led to a prolonged and costly preliminary hearing involving extensive legal and evidentiary efforts, including expert evidence on Brazilian law.
  3. Judicial Reasoning: HHJ Pelling KC found that the defendants had been successful in their application and that there was no conduct-based reason to deviate from the principle that the unsuccessful party should bear the costs. However, the judge agreed with the claimants that caution was necessary when determining an interim payment, particularly given the 'eye watering' sums and the possibility of significant reductions during a detailed assessment (the defendant's total costs of the application were in the area of £1M).
  4. Outcome: Taking account of the sums claimed, and noting the high the hourly rates claimed, the number of solicitors involved and the level of counsel's fees, the court deemed a reasonable sum for a payment on account to be £225,000. In reaching his decision the judge thought it 'sensible...to remind all parties of what Legatt J said' in Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm), 'namely that in hard fought commercial litigation involving large sums of money and in which the parties had spared no expense, “… the touchstone (of reasonable and proportionate costs) is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances” with expenditure over and above that level being for the receiving party’s own account.'

Key takeaways:

Costs in interlocutory applications are typically awarded to the successful party unless specific conduct or other circumstances justify a different approach. Whilst it is sometimes appropriate to order the costs of an application for preliminary issues to be 'in the application', that will not be the case when the application takes time and significant resources to resolve.

Proportionality and reasonableness of costs are critical, as emphasized in Kazakhstan Kagazy, which stresses that recoverable costs should reflect the lowest reasonable expenditure for proficient case presentation.