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‘Absurd’, ‘extraordinary’, ‘disproportionate’, ‘eye-watering’, ‘redolent of financial incontinence’, ‘plainly unreasonable’ - High Court roasts lawyers over proposed costs budgets (and incurred costs) in the Pan NOx Emissions litigation.

A three-day hearing took place last month to consider common costs budgets for two tranches of the mega-sized emissions litigation, as well as a further wedge of general costs (those running alongside but not specifically related to either of the two tranches). The parties’ incurred and estimated costs were put at nearly £650 million combined, this to progress the Pan NOx Emissions litigation to somewhere short of its halfway point (in fact, as little as one third of the way to the finish line in the estimation of the judges).

 Despite spending in the area of £3.65 million on the cost budgeting exercise alone, the claimants’ lawyers (there are 20 claimant firms) failed to convince Mr Justice Constable and Senior Costs Judge Gordon-Saker that it would reasonable and proportionate to spend upwards of £342 million to take the litigation to the end of Tranche 2.   The claimants’ proposed budget was reduced by 75% (from £207.7 million to £51.9 million);  with the court clear that incurred costs totalling more than an ‘incredible’ £132 million probably also reflected ‘an inefficient, duplicative and over-lawyered approach’.

Whilst the claimant’s lawyers took the brunt of what was a truly withering attack, the defendants’ expenditure, past and proposed, was also heavily criticised by the court.  The defendants’ proposed budget was reduced from £211.7 million to £113.9 million).

The lively and coruscating judgment will be of interest to all litigators and costs consultants involved in costs budgeting, not only because of the scale of the litigation and prodigious sums involved, but principally because of the large number of missteps and excessive claims  identified.  These include:

  1. The claimants’ ‘inexplicable’ decision to take 5 May 2024, rather than 10 June 2024 (the eve of the costs hearing) as the cut off point for the calculation of ‘incurred’ costs. Those (many) lawyers that still prepare budgets on the basis that incurred costs run to the date on which the budget document is prepared, rather than to the eve of the CCMC, should take note of CPR 3.17 (3)(a), and be sure to include appropriate estimates in the ‘incurred’ costs calculations.
  2. The claimants’ lawyers’ inclusion of ‘obvious excess and/or duplication’, a problem compounded by their failure, in many instances, to provide ‘meaningful explanation or justification for the sums sought (notwithstanding the extraordinary sum of £3.65 million spent by the claimants on the budgeting exercise).
  3. The inclusion of very substantial claims for non-lead firms, and without specific and proper explanation or justification, a practice that threatens to undermine the purpose of the GLO ‘to ensure that there are one, or two, firms effectively exclusively responsible for the proceedings.’
  4. The inclusion, by the claimants, of ‘wholly unjustified and inadequately explained’ non-phase specific coordination costs relating to Tranche 1, totalling more than £1.2 million (more than 1800 solicitor hours to cover a period of about 16 weeks).
  5. The inclusion, by the claimants, of an improbable claim for 2100 solicitor hours for the Tranche 1 expert phase (there is to be a single expert, in German law).
  6. The ‘disproportionate’ nature of the claimant’s claims for the Tranche 1 PTR, trial preparation, and trial costs – around £4.8 million in total - which included 1500 hours in respect of the PTR alone. Note: the judges also reduced the trial costs of the principal Tranche 1 defendant, Mercedes – claimed at over £2.5 million - notwithstanding that they had been agreed by the claimants.
  7. The inclusion by the claimants of claims for 263,600 fee earner hours for Tranche 2, to cover a period of around 21 months, something that ‘could only be explained by an approach redolent of inefficiency and duplication both within and between firms.’
  8. The inclusion by the claimants of claims for over £6 million for Tranche 2 coordination costs (i.e. for general costs falling outside of phase-specific coordination costs), without sufficient explanation. The figure was reduced to about £1M. The defendants’ figures for non-allocable coordination also overestimated the extent of likely coordination, although they were considered to be generally more realistic.
  9. The claimants’ unfathomable claim for a budget of £5 million for the two Tranche 2 CMCs (including more than 7000 solicitor hours).
  10. The claimants’ ‘absurd’ proposed budget of £21.5 million for Tranche 2 disclosure, for litigation tranches that will involve the claimants providing very little disclosure of their own. The court was particularly concerned with the claimants’ proposed budget of £5 million for Non-ALGLO disclosure, given that Non-ALGLOs are permitted to submit up to 5000 pages (not documents) only. Note: whilst the court recognised that intensive work on disclosure will be carried out by defendants, their proposed budget for disclosure (£36 million) was also substantially reduced, by about 50%.
  11. The inclusion by the claimants of claims for about £9 million for lawyers in relation to Tranche 2 expert reports (the disbursements estimate for the reports was £4 million). For lawyers to spend £2 for every £1 spent on the expert evidence itself ‘suggests over-zealous involvement of the lawyers in curating the process of the production of independent technical evidence.’
  12. The ‘absurd’ claim for £3 million/6000 solicitor hours for the Tranche 2 PTR.
  13. The claimants’ unreasonable and disproportionate claims for Tranche 2 trial preparation – with an overlarge counsel team charging nearly £1 million per week, and with £20 million claimed overall to prepare their case for a 10 week evidentiary hearing (excluding closing submissions).
  14. The claimants’ proposed trial costs – £440,000 per week for counsel, £1 million a week for solicitors. Even allowing for the need for ongoing work behind the scenes and for the need to address new points, the court felt that ‘it is obviously wholly incredible to consider that there may be any real value whatsoever added by [so large a] fleet of lawyers.’

    It is good to see that the court, with the agreement of the parties, took the pragmatic and sensible step of reducing all figures where appropriate (and to levels that it was prepared to approve), rather than refusing to make a case management order in relation to budgets that included figures ‘agreed’ between the parties at what it considered to be too high a level.

    The judgment is available here:  Pan NOx Emissions Litigations, Re - Find case law - The National Archives

Details

‘Absurd’, ‘extraordinary’, ‘disproportionate’, ‘eye-watering’, ‘redolent of financial incontinence’, ‘plainly unreasonable’ - High Court roasts lawyers over proposed costs budgets (and incurred costs) in the Pan NOx Emissions litigation.

A three-day hearing took place last month to consider common costs budgets for two tranches of the mega-sized emissions litigation, as well as a further wedge of general costs (those running alongside but not specifically related to either of the two tranches). The parties’ incurred and estimated costs were put at nearly £650 million combined, this to progress the Pan NOx Emissions litigation to somewhere short of its halfway point (in fact, as little as one third of the way to the finish line in the estimation of the judges).

 Despite spending in the area of £3.65 million on the cost budgeting exercise alone, the claimants’ lawyers (there are 20 claimant firms) failed to convince Mr Justice Constable and Senior Costs Judge Gordon-Saker that it would reasonable and proportionate to spend upwards of £342 million to take the litigation to the end of Tranche 2.   The claimants’ proposed budget was reduced by 75% (from £207.7 million to £51.9 million);  with the court clear that incurred costs totalling more than an ‘incredible’ £132 million probably also reflected ‘an inefficient, duplicative and over-lawyered approach’.

Whilst the claimant’s lawyers took the brunt of what was a truly withering attack, the defendants’ expenditure, past and proposed, was also heavily criticised by the court.  The defendants’ proposed budget was reduced from £211.7 million to £113.9 million).

The lively and coruscating judgment will be of interest to all litigators and costs consultants involved in costs budgeting, not only because of the scale of the litigation and prodigious sums involved, but principally because of the large number of missteps and excessive claims  identified.  These include:

  1. The claimants’ ‘inexplicable’ decision to take 5 May 2024, rather than 10 June 2024 (the eve of the costs hearing) as the cut off point for the calculation of ‘incurred’ costs. Those (many) lawyers that still prepare budgets on the basis that incurred costs run to the date on which the budget document is prepared, rather than to the eve of the CCMC, should take note of CPR 3.17 (3)(a), and be sure to include appropriate estimates in the ‘incurred’ costs calculations.
  2. The claimants’ lawyers’ inclusion of ‘obvious excess and/or duplication’, a problem compounded by their failure, in many instances, to provide ‘meaningful explanation or justification for the sums sought (notwithstanding the extraordinary sum of £3.65 million spent by the claimants on the budgeting exercise).
  3. The inclusion of very substantial claims for non-lead firms, and without specific and proper explanation or justification, a practice that threatens to undermine the purpose of the GLO ‘to ensure that there are one, or two, firms effectively exclusively responsible for the proceedings.’
  4. The inclusion, by the claimants, of ‘wholly unjustified and inadequately explained’ non-phase specific coordination costs relating to Tranche 1, totalling more than £1.2 million (more than 1800 solicitor hours to cover a period of about 16 weeks).
  5. The inclusion, by the claimants, of an improbable claim for 2100 solicitor hours for the Tranche 1 expert phase (there is to be a single expert, in German law).
  6. The ‘disproportionate’ nature of the claimant’s claims for the Tranche 1 PTR, trial preparation, and trial costs – around £4.8 million in total - which included 1500 hours in respect of the PTR alone. Note: the judges also reduced the trial costs of the principal Tranche 1 defendant, Mercedes – claimed at over £2.5 million - notwithstanding that they had been agreed by the claimants.
  7. The inclusion by the claimants of claims for 263,600 fee earner hours for Tranche 2, to cover a period of around 21 months, something that ‘could only be explained by an approach redolent of inefficiency and duplication both within and between firms.’
  8. The inclusion by the claimants of claims for over £6 million for Tranche 2 coordination costs (i.e. for general costs falling outside of phase-specific coordination costs), without sufficient explanation. The figure was reduced to about £1M. The defendants’ figures for non-allocable coordination also overestimated the extent of likely coordination, although they were considered to be generally more realistic.
  9. The claimants’ unfathomable claim for a budget of £5 million for the two Tranche 2 CMCs (including more than 7000 solicitor hours).
  10. The claimants’ ‘absurd’ proposed budget of £21.5 million for Tranche 2 disclosure, for litigation tranches that will involve the claimants providing very little disclosure of their own. The court was particularly concerned with the claimants’ proposed budget of £5 million for Non-ALGLO disclosure, given that Non-ALGLOs are permitted to submit up to 5000 pages (not documents) only. Note: whilst the court recognised that intensive work on disclosure will be carried out by defendants, their proposed budget for disclosure (£36 million) was also substantially reduced, by about 50%.
  11. The inclusion by the claimants of claims for about £9 million for lawyers in relation to Tranche 2 expert reports (the disbursements estimate for the reports was £4 million). For lawyers to spend £2 for every £1 spent on the expert evidence itself ‘suggests over-zealous involvement of the lawyers in curating the process of the production of independent technical evidence.’
  12. The ‘absurd’ claim for £3 million/6000 solicitor hours for the Tranche 2 PTR.
  13. The claimants’ unreasonable and disproportionate claims for Tranche 2 trial preparation – with an overlarge counsel team charging nearly £1 million per week, and with £20 million claimed overall to prepare their case for a 10 week evidentiary hearing (excluding closing submissions).
  14. The claimants’ proposed trial costs – £440,000 per week for counsel, £1 million a week for solicitors. Even allowing for the need for ongoing work behind the scenes and for the need to address new points, the court felt that ‘it is obviously wholly incredible to consider that there may be any real value whatsoever added by [so large a] fleet of lawyers.’

    It is good to see that the court, with the agreement of the parties, took the pragmatic and sensible step of reducing all figures where appropriate (and to levels that it was prepared to approve), rather than refusing to make a case management order in relation to budgets that included figures ‘agreed’ between the parties at what it considered to be too high a level.

    The judgment is available here:  Pan NOx Emissions Litigations, Re - Find case law - The National Archives