Mercedes: Lead case
The failure of the claimants in the ‘Dieselgate’ group litigation to “curb the extent of the involvement of innumerable lawyers” is to be marked by a costs penalty, the High Court has decided.
“The claimants plainly took the view that further explanation was the correct step, rather than any attempt to cut their cloth,” said Lady Justice Cockerill, sitting with Senior Costs Judge Rowley.
As a result, in the event the claimants win the case, their costs of budgeting for the next tranche of the litigation will be reduced by 20%.
The usual order for costs management hearings is costs in the case but the court penalised the claimants for not learning the lessons of criticisms made of the first round of budgeting.
This is the English courts’ largest-ever costs budgeting exercise. It deals with 13 group litigation orders against motor manufacturers and others, such as dealerships and finance companies, over the use of so-called defeat devices whose alleged goal was to cheat emissions tests. The Mercedes case is the lead case.
In 2024, at the costs management hearing for the first two tranches of the litigation, Mr Justice Constable and then Senior Costs Judge Gordon-Saker slashed by 75% the £208m in future costs put forward in the claimants’ budget and suggested that the balance of incurred costs were likely to have been subject to similar “over-lawyering”.
They used words like “absurd” and “staggering” to describe the costs being racked up.
However, they decided that the costs of the process be costs in the case because, even if the claimants had started from a more realistic position, none of the steps within the process, including the three-day hearing, would have been avoided.
Last September, the then Mrs Justice Cockerill and Senior Costs Judge Rowley allowed costs of £22.5m for the claimants for the third tranche of the case, 45% of the £50m they had put in their budget. The defendants were allowed just under £50m, 77% of the £64m they had budgeted.
The main causes of the cuts to the claimants’ budgets were again “over-lawyering” and “layers of representation leading to, for example, claims for individual, non-lead firms to audit or replicate work already being done by the lead firms”.
The defendants submitted that the costs of preparation of the budgets should be costs in the case, but that the costs of preparing for and attending the hearing should be defendants’ costs in the case and there be no order as to the claimants’ costs, mainly because of the claimants’ failure to learn their lessons from the court’s criticism at the first hearing.
The claimants argued they had set out in more detail why they claimed what they did and, where possible, incorporated their experience of conducting the litigation since the first hearing.
“The claimants also relied upon the learning curve of dealing with what is accepted by all to be novel, complex and difficult litigation,” the court said.
“It is plainly appropriate for the parties to adjust their expectations in respect of recoverable costs in the light of their experience of running the litigation. But that does require the parties to take heed of the nature of the court’s criticisms made previously…
“The claimants’ budget sought to counter the court’s trenchant criticisms of over lawyering at the first [hearing] by providing further information, rather than seeking to curb the extent of the involvement of innumerable lawyers in running the cases.”
While the hearing might have been shorter required if the claimants’ approach to the budgets had been more realistic, it was their preparation that was the main problem.
“The claimants plainly took the view that further explanation was the correct step, rather than any attempt to cut their cloth. We explained in the main judgment that the explanation was inadequate.”
By contrast, the defendants had “largely taken on board” criticisms made in the Constable J judgment.
The court decided not to reduce the costs recovery for the hearing out of concern for “double counting”.
Leave a Comment