COST (MEGA) BITES 165: AN EXHAUSTING CASE (ii): PROPORTIONALITY WHERE THE CLAIMANTS CLAIM THE CASE IS WORTH £6 BILLION: THE PARTIES ARE NOT HANDED A BLANK CHEQUE FOR THE PURPOSE OF RECOVERABLE COSTS

July 10, 2024 · by · in Assessment of Costs, Costs, Costs budgeting

We are continuing with the examination of the judgment of Mr Justice Constable and Senior Costs Judge Saker in Pan NOx Emissions Litigations [2024] EWHC 1728 (KB).  This time by looking at the court’s consideration of issues of proportionality when the claim was said to be worth £6 billion.   The fact that this was said to be a huge claim did not mean that the parties had a blank cheque.

 

“a simple comparison between spend and recovery is not the only measure of proportionality. It must be seen in the context of all the factors set out in CPR 44.3(5):”

 

PROPORTIONALITY

The judges considered the question of proportionality in a case where the claimants asserted the case had a value in excess of £6 billion. The potential size of the claim, the judges held, did not mean that the parties were handed a “blank cheque” in terms of recoverable costs.

 

    1. The Claimants contend that the litigation is worth, conservatively calculated on the basis of £4,000 per Claimant, in excess of £6bn if the Claimants are successful. This is, of course, disputed by the Defendants. It is a matter of public record that (without admitting liability) VW paid £193m in settlement of around 91,000 claims following the preliminary issue judgment of Mr Justice Waksman referred to above, equating to just over £2,000 per Claimant.

 

    1. As indicated above, at the conclusion of Tranche 2, the litigation may be in the region (were every issue to be fought to the end) of about one-third of the way through.

 

    1. The Claimants’ incurred and estimated costs of approximately £350m therefore – at least on a linear basis – suggest that their total common costs would exceed £1bn. Moreover, it may be thought that it is in consideration of causation and loss that the burden on the Claimants in terms of evidence and disclosure will increase, such that the number of Claimants is much more relevant than in relation to liability issues. Applying the same to the Defendants’ budgeted costs, the aggregate spend across all the parties would be around two thirds of the sums at stake, assuming the lower of the figures above, and would on this analysis be well within the foothills of disproportionality.

 

 

    1. However, a simple comparison between spend and recovery is not the only measure of proportionality. It must be seen in the context of all the factors set out in CPR 44.3(5):

 

(a) the sums in issue in the proceedings;

(b) the value of any non-monetary relief in issue in the proceedings;

(c) the complexity of the litigation;

(d) any additional work generated by the conduct of the paying party; and

(e) any wider factors involved in the proceedings, such as reputation or public importance.

    1. The Court is well aware that this large-scale litigation involves not just large sums, but has layers of complexity caused by the need for co-ordination, in each of the Claimants’/Defendants’ camps, and inter se; that the litigation is reputational for the Defendants; and that it concerns matters of public importance. However, that does not give any of the parties a blank cheque for the purposes of recoverable costs. As Waksman J observed in the CMC hearing dealing with what was then a ‘judicial eye-brow raising’ £10m cost budget for the claimants in the context of a two-week legal and technical preliminary issue in the VW litigation, ‘the number of claimants in my judgment doesn’t really affect the budget and it certainly doesn’t affect it for the preliminary issues which aren’t, for example, dealing with questions of causation and loss‘. It is of note that, in that case, the original budget submitted by the Claimants was £10.2m, and following Waksman J’s request for a revised (and lower) budget, it was amended to £5.3m and then approved at £3.6m. Whilst we accept that there are logistical and administrative burdens in dealing with a large cohort of Claimants, the number of itself provides little justification for the extraordinary costs claimed in many phases, in which the scope of work required is largely or completely unrelated to the number of Claimants. In reality, the function of the number of Claimants is to increase the individual costs, rather than the common costs. The Claimants tend, therefore, significantly to overstate the complexity of the tasks they face which – in respect at least of Tranches 1 and 2 – boil down to the resolution of discrete issues of law and regulatory/statutory construction coupled with the type of technical investigation which will focus on independent expert evidence of a type the High Court is entirely familiar with. The sums budgeted are wholly disproportionate when seen in this light.

 

  1. Moreover, proportionality is, of course, not the sole benchmark against which recoverability is measured: costs have also to be reasonable. The costs claimed have to bear some resemblance to the work reasonably required to properly, but efficiently, advance these claims. As explored more fully below, there appears to be little effort – nor, it seems, incentive – to run this litigation in a manner so as 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.
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