High Court reinforces need for scrutiny of costs in large-scale group litigation

The High Court has reaffirmed a number of key principles for managing costs in large-scale group litigation, following a two-day hearing in the “Pan-NOx” emissions litigation in England and Wales.

The High Court’s judgment, handed down yesterday, marks the second costs management ruling in the Pan-NOx litigation.

The claimants sought approval for budgets totalling £47 million (not including phases which the Court did not budget and which totalled a further £25 million). Following detailed review of their budgets, the Court concluded that this sum was not reasonable or proportionate, and reduced it by £25 million, allowing the claimants a combined budget of £22 million out of their claimed sum of £47 million. 

Those reductions follow on from the first Pan-NOx costs management judgment in July 2024 in which the Court reduced the claimants’ overall estimated costs by £155 million – almost 75% of the costs sought (see more in our blog post from last year here). This year’s costs hearing, held in July, focused primarily on the third “tranche” of hearings in the litigation, specifically an eight-week quantum trial scheduled for autumn 2026.

It is notable that two different panels of judges, each including a Managing Judge who holds regular progress meetings with the parties, have now reached the same conclusion across two costs management judgments: that the claimants’ proposed budgets have far exceeded what is reasonable and proportionate, even for litigation of this scale.

As a reminder of the unprecedented scale of the litigation, the Pan-NOx litigation involves a series of 13 GLOs subject to collective case management by the High Court and is proceeding in tranches of trials currently timetabled until the end of 2026, with the next two trials focusing on the nominated lead manufacturers. According to the claimants, the Pan-NOx litigation involves over 1.8 million claimants represented by 21 different claimant firms. 

Below, we highlight key takeaways from the judgment. Freshfields acts for one of the defendant groups in the Pan-NOx litigation.

1. High Court continues robust approach to controlling costs in large-scale group litigation, warning against “over lawyering”

The Court found that many of the parties’ budgets – particularly the claimants’ – exceeded the yardstick of what was “reasonable and proportionate” in the context of large-scale group litigation. This finding was reached despite the Court’s acknowledgement of the “considerable” amount of work that the parties are required to undertake. 

The judgment stressed that the structure of the group litigation, whereby a small group of lead claimant firms oversees the claims on behalf of a large number of claimants and other claimant firms, is intended to ensure that legal work is carried out “in an efficient and cost effective manner to bring the issues before the court”. As a result, the common costs claimed by any non-lead claimant firms should be “extremely limited”.

Ultimately, the Court found that the claimants had failed to justify the “enormous amounts of time [they] claimed” and was not persuaded by their argument that “lessons [had been] learned” since last year’s costs management hearing. The judgment repeated many of the previous judgment’s criticisms of the claimants’ previous proposed budgets, again pointing to the claimants’ “over lawyering” of hearings – having proposed that 32 fee earners should attend each Case Management Conference and 30 at the trial itself – and “wildly inefficient” approach to managing the litigation. The claimants’ budgeting was criticised variously as “frankly staggering”, ”frankly remarkable” and “plainly not realistic”. 

2. Prior budgets are a benchmark for future budgets in multi-stage litigation

The Court stressed that previously approved budgets can serve as a reference point for determining reasonable and proportionate costs at later phases of the same litigation. In this case, last year’s budgets remained the “obvious starting point for considering the work to be done […] by the same lawyers in the same litigation”.

The claimants had sought to challenge this approach to budgeting, having sought a higher overall budget for the third tranche of the litigation than their approved budget for the second tranche (despite the third tranche involving a shorter and less complex trial). They argued that the permitted budget for the second tranche would have been higher if they had better explained the extent of work required to last year’s Court, and that the improved descriptions of work they provided for this hearing justified the higher figures put forward. The majority of defendants argued that it was still wrong to budget more for the third (and shorter) tranche than the second and that the claimants had over-budgeted.

The Court found that the defendants had “the better of the arguments” here: given that the quantum trial is shorter and less procedurally complex than the technical trial, it should attract lower costs. The judgment added that many of the initial procedural hurdles faced in the earlier stages of the litigation have been addressed and should result in a more economic running of the litigation going forward.

As a result, while last year’s approved budgets remained the appropriate starting point, the Court expected the parties to budget less – not more – for the third tranche than the second. The claimants’ attempts to argue otherwise did not succeed.

3. Separately-represented defendants may be awarded different budgets for the same work, where appropriate 

The Court considered whether each separately-represented defendant should be awarded the same budget for a given phase of work, particularly where the claimants had made identical offers to multiple defendants of which many had been accepted by some or all defendants.

The judgment acknowledged that costs budgeting involves a degree of subjectivity as different budgeting judges can reach different views on the sums before them. In other words, there is a “range of figures” that can fall within the bounds of what is reasonable and proportionate. However, where defendants are undertaking the same tasks and no compelling reason is given for differing costs, it may be appropriate to allocate a standard figure across the board to each separate defendant. 

In this context, the Court referred to the established practice at detailed costs assessments that costs which exceed a previously filed budget by more than 20% must be justified while those within a 20% margin are generally treated as acceptable (CPR PD 44, para 3; Mastercigars Direct Ltd v Withers LLP [2009] EWHC 651 (Ch)).

Extending that principle to the context of budgeting multi-defendant group litigation, the judges considered that estimated costs that sit within 20% of an opponent’s offer may be considered reasonable and proportionate, assuming that the opponent’s offer itself is also reasonable and proportionate. In doing so, the Court took a more flexible approach than insisting on blanket figures for all defendants.

Where proposed costs exceeded that 20% threshold, the Court required “specific reasoning” for the divergence. On several occasions, in the absence of such justification, it made reductions to bring figures in line with those offered to and accepted by other defendants.

4. Parties may budget lower-than-actual incurred costs if done transparently, even if tactical 

The claimants suggested that the defendants had tactically set out incurred costs in their budgets that were lower than those that had in fact been incurred. This point caused a “steady procession of advocates” for certain of the defendants to clarify that the rates claimed in their client’s budgets were in fact the full rates agreed to be paid.

In any event, on this point, the judgment reinforced the Court’s approach in last year’s costs judgment, which made clear that parties may budget on the basis of hourly rates that differ from their ‘true’ rates, provided they do so transparently.

This year’s judgment went further still to stress that, contrary to the claimants’ suggestion, it does not matter whether incurred costs are reduced in a costs budget because they were considered unjustified or for “some other tactical reason”. As long as there is transparency, a party may include incurred costs in a costs budget that are lower than those actually incurred without breaching the statement of truth.

5. Parties must coalesce around assumptions or budgeting is not possible 

The Court deferred its budgeting of two phases of work: (i) Expert Reports and (ii) Alternative Dispute Resolution, deciding to revisit the Expert Reports phase once the scope of expert evidence for the 2026 quantum trial becomes clearer early next year.

For ADR, the judgment found that the parties’ underlying assumptions about the likely required work were too divergent to allow for meaningful budgeting. It emphasised that, for budgeting to work, parties must “coalesce around assumptions for the litigation, even if there is a range of views”. Where assumptions are too far apart, there is “no sensible way” to budget the phase.

The gulf between the parties’ assumptions was evident from the parties’ estimates for ADR work between April 2026 and the end of 2026: the claimants sought a budget of over £11 million against the defendants’ aggregate estimated costs of just over £1.8 million.