The High Court has wielded its authority in the ongoing Pan-NOx emissions group litigation by reducing the claimants’ budgeted costs by nearly 75% and describing some of the cost estimates as “absurd” and “eye-watering”.

The landmark ruling, stemming from a detailed three-day cost management hearing held last month, scrutinised cost estimates for litigation spanning the next two years involving 13 separate Group Litigation Orders (GLOs) arising from the dieselgate scandal.

The claimants’ estimated future costs were dramatically reduced from £208m to a budget of £52m while the defendants’ budgets were cut by 46%, from £212m to £114m.

That had the effect of reducing the total budget for litigating a claim with a potential value of £6bn – including costs already incurred – from £650m to £388m.

The court emphasised that these figures only represented around one-third of the anticipated total litigation costs.

The costs hearing and subsequent judgment are an important procedural step in a class action brought against numerous car manufacturers and others over diesel cars whose software is alleged to have defeated emissions control regulations.

The High Court has taken a proactive approach to the Pan-NOx litigation by designating four GLOs as lead cases in a collective case management strategy. In March, the court outlined the litigation in tranches, leading to two preliminary issues trials scheduled between now and 2026.

The first tranche of estimated future costs for the claimants amounted to approximately £11.4m, with defendant costs estimated at £3.6m. The claimants estimated the costs for the second tranche at £136m, while defendant costs varied. One of the lead defendants, Mercedes, estimated its costs at £36m. The aggregated estimated defendant costs were £180m. The total estimated costs for the second tranche alone exceeded £315m for all parties.

In terms of general costs – not specific to tranches one and two – the judges described the total incurred costs by the claimants of around £132m as “incredible”.  The aggregate of the defendants’ incurred costs in the same category was £90m.

Mr Justice Constable, sitting with Senior Costs Judge Gordon-Saker, were scathing in their assessment of the cost budgets presented to the court, although their comments focused mainly on the claimants’ costs.

While acknowledging the complexity of large-scale litigation and requisite coordination, including the reputational aspects, the judges said this didn’t give either side “a blank cheque for the purposes of recoverable costs”.  

They added: “There appears to be little effort – nor, it seems, incentive – to run this litigation in a manner… to minimise, as far as is reasonably possible, the number of lawyers and the hours they suggest they need to work in order sensibly to progress this litigation.”

The court criticised the claimants for submitting budget estimates that appeared “replete with numerous examples of costs which simply cannot be justified” including charges that were described as “redolent of financial incontinence” and “wholly disproportionate”.

They added: “The numerous examples of obvious excess and/or duplication combined with the lack in many cases of meaningful explanation or justification… are more than sufficient to persuade the court that… it has little faith in the reliability of the claimants’ budgets.” The judgment noted the “extraordinary” sum of £3.65m spent on costs budgeting. 

The judges added: “The staggering costs both incurred and estimated are in numerous individual respects and the aggregate frankly absurd.”

The court also highlighted inefficiencies and potential duplications within the GLO structures, particularly criticising the delegation of work between the ‘lead solicitor’ claimant law firms and several ‘non-lead’ firms, which it identified as a potential “breeding ground for inefficiency”.

The joint lead solicitors for eight of the GLOs are Pogust Goodhead and Leigh Day, Pogust Goodhead is lead solicitor of four more GLOs while Milberg and KP Law are lead solicitors for a further GLO.

The court dismissed comparisons between the aggregate budgets of the 22 separately represented defendant groups and the claimants, who generally shared a common case strategy. The defendants’ advisers include Freshfields Bruckhaus Deringer, Kennedys and Cleary Gottlieb. 

The judgment highlighted the “eye-watering” level of costs already incurred by both parties in setting a standard for handling costs in large-scale litigation, pointing out that more than 20 counsel appeared at the costs hearing.