[2025] EWHC 2972 (Comm)

Before the court is the defendants’ application dated 26 September 2025 for an order that CPR 3.2 and Practice Direction 3D dealing with costs budgeting should not apply in this case.

There are three witness statements in relation to the application: firstly, that of Rachel Lidgate of HSF Kramer on behalf of the defendants dated 26 September 2025; secondly, the witness statement of Hazel Chambers of Mishcon de Reya for the claimants, dated 10 October 2025; and thirdly, the witness statement of John Simon of Willis Limited dated 10 October 2025.

The circumstances in which the application comes to be made are that the claim forms as served did not contain a statement that the claims were valued at in excess of £10 million. The claims as pleaded however, by way of a class action, indicate that the value of the claims in total is about £340 million. The court has ordered the trial of a preliminary issue regarding the date of knowledge for the purposes of section 32 of the Limitation Act 1980, which is currently estimated to be heard in June or July of 2026.

The principles that the court should consider and apply are not in dispute and have been very helpfully set out by the parties in their skeleton arguments.

Firstly, the court has discretion to do what it thinks is just and appropriate and in accordance with the overriding objective.

Secondly, there is no presumption for or against requiring costs budgets for claims that exceed the normal threshold of £10 million. The court's discretion is wholly unfettered, as explained by Nugee J (as he then was) in Sharp v Blank [2015] EWHC 2685 (Ch) at [17]-[21].

Third, the threshold at which costs budgeting ceases to apply is in part because the higher the value of the claim, the less likely it is that issues of proportionality will be important or even relevant, as explained by Coulson J (as he then was) in CIP Properties v Galliford Try [2014] EWHC 3546 (TCC) at [27]-[28].

Fourthly, the court must weigh the advantages and disadvantages of costs budgeting when deciding whether to exercise its discretion in all the circumstances of the case.

The defendants’ case is that it is not appropriate in this case for the court to order costs management. I summarise the reasons for that submission. Firstly, the total amount claimed is estimated at about £340 million, obviously very significantly in excess of the threshold at which costs budgeting would normally cease to apply. Although it does not give rise to any presumption one way or the other, it is nonetheless a very relevant consideration because it can affect the court's assessment of whether costs management is necessary in order to ensure that the costs are proportionate to the case as a whole.

Secondly, there is no basis for the suggestion that the defendants have incurred or will likely incur disproportionate costs defending this claim and in support of that, it is said, well, the defendants have proposed the preliminary issue. One of the reasons for that is to facilitate a swift and cost effective end to the litigation. It is also the case that the defendants have indicated their spending to date is approximately £2 million, not indicating that there has been any loose spending or extravagant spending in the case to date.

Thirdly, it is submitted that the claimants don't require a costs management order for the purposes of arranging an appropriate ATE insurance policy in contrast to the facts in Sharp v Blank (above). They have already secured their litigation funding and ATE insurance and in particular, the ATE insurance will cover any adverse costs orders to the tune of £14 million. Therefore there is adequate coverage against adverse costs in that sum. It is unlikely that the costs of the preliminary issue trial will come close to exceeding the limit of that funding. And also, the defendants have offered to provide updates as to their total expenditure in relation to costs over the forthcoming months.

Fourthly, the disadvantages of costs budgeting are said by the defendants to be clear. They will add to the costs of the proceedings and divert resources that could otherwise be deployed in relation to the substance of the case. It is clear that a cost does attach to the preparation of costs budgets, the attendance at a costs management hearing and any subsequent changes to the costs budget.

It is also submitted that it is difficult to assess the various contingencies that are required in this case. In particular, it is not yet clear how many witnesses the claimants are likely to call at the preliminary issue. The DRD document has not yet been finalised and therefore there are a number of question marks over the value of producing costs budget at this stage and in addition, it is likely it add an additional layer of procedural complexity that is not necessary in this case.

For their part, the claimants seek to persuade the court that it would be appropriate in this case to order costs budgeting. They submit that it would further the overriding objective, in particular the requirement that the parties should be placed on an equal footing, and that litigation should be conducted without needless expense and at proportionate cost.

In support of that submission, it is submitted, firstly, that the claimants are predominantly private individuals of modest means and that the relief that they seek on an individual level is approximately £15,000 per claimant. As a result of that, they are particularly concerned that they are sufficiently protected by ATE insurance against future adverse costs and therefore they need to have a reliable view of their exposure at an early stage of the case. In particular, they are concerned that if they need to top up their ATE insurance at a later stage, it would be prohibitively expensive.

Secondly, it is also submitted that the claimants should not be compelled to over-insure as a result of any uncertainty in the costs of the litigation. Again, it is said that if they are required to do that at a late stage, that will prove to be particularly expensive.

Thirdly, one of the advantages of costs management is said to be that it will eliminate the known unknowns; it will crystallise the parties’ respective exposure to adverse costs in sums that cannot be exceeded at any subsequent detailed assessment without good reason. That is, if the court does costs budget, the costs budgets that are subsequently agreed or approved usually act as a cap as well as a floor. In those circumstances, the claimants will know in advance what sums they can reasonably draw down from their own funding for their costs and will know the ATE that they need to meet the defendants' costs.

Finally, it is said that this is a case where there is a risk that the costs will be disproportionate. It is said in relation to the individual claims, but it is also I think a wider point made in general terms, disproportionate to the nature and complexity of the case, including its value. For all those reasons, it is submitted that the court should make a costs budgeting order in this case.

In weighing the advantages and disadvantages, the starting point must be the purpose for which costs budgeting has been introduced into the litigation field. The purpose of costs management is said to be to further the overriding objective in dealing with cases justly and at proportionate cost. The overriding objective is designed to ensure that the case can be dealt with ensuring that the parties are on an equal footing and can participate fully in the proceedings, saving expense and dealing with the case in ways which are proportionate to the amount of money involved, to the importance of the case, to the complexity of the issues and to the financial position of each party, in each case ensuring that it is dealt with expeditiously and fairly.

This is a very high value claim when the amount claimed is compared to the usual limit above which the court does not require costs budgeting, that is £10 million. As has been stated, and in particular in the CIP Properties v Galliford Try case, that makes it less likely that the costs will appear to be disproportionate to the value of the case. However, it is not necessarily the position, particularly as the court has to consider a range of factors in terms of proportionality, not just the amount of money that is at stake.

Further, I note that the parties have agreed, and the court has ordered, the trial of a preliminary issue which certainly has the potential to shorten, or clarify, and therefore to ensure a speedy resolution to the case. That certainly indicates that the parties are cooperating and adopting a sensible approach to the management of this dispute.

However, the court is very aware of the fact that this is a large group action over 13,000 separate claimants and their claims individually are very modest indeed. In those circumstances, I consider that the real advantage of cost budgeting in this case is that the claimants will then have visibility of their exposure in respect of the defendants’ costs.

Of course, I take the point that if the defendants succeed on the preliminary issue, that could well be an end to the litigation as a whole. The defendants have already indicated that they will keep the claimants aware of their incurred costs in the run-up to that trial and therefore, provided the claimants have sufficient funding and ATE insurance for the preliminary issues trial, which they clearly do at this stage, there is no issue. The costs will be subject to a detailed assessment, if not agreed, in the usual way and there will be no real advantage to any costs budgeting that the court embarks on at this stage.

However, the court also has to consider what might be the position if the claimants were to prevail at the preliminary issue trial. That would not necessarily be the end of the road for the litigation. The concern that is raised by the claimants is that there may have been too much eaten into their funding and ATE insurance at that stage so that it could impact adversely their ability to fight the subsequent proceedings.

This is a case where the individual claimants are entitled to carry out their own cost-benefit analysis of the proceedings at each stage. That will involve, not only tracking their own costs exposure through the percentage of damages, if any, that they might have to forego, but also in tracking the funding and ATE that gets eaten up by their own costs and by exposure to the other side’s costs in terms of the wider funding for the litigation in general.

As against that, I acknowledge that ordering costs budgeting at this stage increases the burden on both sides, both in terms of the work that is required and the costs of preparing, exchanging, commenting on their costs budgets and potentially attending a costs budget hearing, although I note that that wouldn't be necessary if the parties were able to agree their costs budgets. However, those burdens are outweighed by the real advantage in having visibility at this stage as to the estimates of costs in respect of the period up to the end of the preliminary issue trial that will more easily enable the court to keep an eye on and manage the costs of this litigation.

For those reasons, the court will make a costs budgeting order.