It is often presumed that parties involved in claims worth over £10m don’t have a requirement to budget costs. But a recent High Court ruling has changed that, sending a clear signal to the legal profession that no case is too large to escape judicial scrutiny when it comes to costs management.
The change is a result of a £340m claim brought by Uber drivers. In White & Ors v Uber London Ltd & Ors, Mrs Justice O’Farrell ruled that parties would be required to file and seek approval for cost budgets, despite the claim’s value placing it well above the usual £10m threshold exemption.
The ruling came as a surprise for some practitioners, but it does not exist in isolation. It follows the dramatic costs reductions imposed in the Mercedes-Benz Dieselgate case, where budgets running into hundreds of millions were slashed by more than half.
Together, these cases show a fundamental shift in how courts approach costs in large group actions. It is becoming increasingly clear that the days of the £10m threshold being a free pass for unlimited costs are over.
But what are the full implications of this ruling for law firms? Read on as we take a closer look at what it means with analysis from Athene Legal’s director, Tyler McEwan.
Background to the £10m threshold
To understand the significance of the Uber ruling, it’s first important to fully understand how costs budgeting normally works. Also known as costs management, this process requires parties to prepare and file estimates of their anticipated legal costs at an early stage of proceedings, usually the first case management conference.
These budgets are then reviewed, and if deemed necessary, revised by the court to maintain a fair level of proportionality to the matter in hand. Cost budgeting applies to multi-track claims, with the exception of cases valued at more than £10m.
The reason for this is simple: high-value claims tend to be significantly more complex, making it more difficult to accurately predict costs from the start. Imposing rigid budgets in such circumstances could hamper effective case management.
But the exemption isn’t absolute. The court ultimately has the discretion to impose costs budgeting even in cases exceeding the £10m threshold, as established in Sharp v Blank [2015] EWHC 2685 (Ch). The test is whether doing so would be “just and appropriate” in accordance with the overriding objective of dealing with cases justly and at proportionate cost. Each case is assessed on its own merits.
But as Tyler McEwen, Athene Legal’s director, explains, courts are increasingly using their power far more readily, despite always having this discretion.
“What it shows is a determination by the courts to keep costs proportionate regardless of claim value, and practitioners need to factor that into their planning from day one.”
The Uber decision: what happened
As first reported by The Law Society Gazette, Mrs Justice O’Farrell opted to dispense with the usual exemption for claims exceeding the £10m threshold. The White & Ors v Uber London Ltd & Ors case, brought on behalf of 13,000 black cab drivers and two private hire companies, was valued at £340m.
Uber argued to the court that costs budgeting was not necessary, given that the claim was more than 30 times the threshold. However, despite acknowledging that preparing cost budgets from both sides would increase the burden on them, Mrs Justice O’Farrell judged that this would be outweighed by the “real advantage in having visibility” of costs.
The judge said the overriding objective was to ensure that both parties were on equal footing and could participate fully in the proceedings, while saving expense and dealing with the case proportionately.
While the exact budget figures have not been disclosed, the very fact that budgeting has been imposed sends a clear message about the High Court’s expectations for cost control, even in claims of this magnitude.
But it’s not the only recent high-profile case where this has occurred. Only months earlier, judges slashed costs in the Dieselgate group claim.
The Dieselgate precedent: when budgets get slashed
The Uber decision comes just months after a landmark ruling in Various Claimants vs Mercedes-Benz Group Ag & Ors, better known in the media as the high-profile Dieselgate group litigation.
In this case, the court’s willingness to impose and dramatically reduce costs budgets sent shockwaves through the profession. Just as in the Uber claim, this litigation was valued well in excess of the £10m threshold, and involved thousands of claimants alleging they had been misled over vehicle emissions.
The court exercised its discretion to apply costs budgeting, and when parties submitted their proposed budgets, the figures were described as ‘absurd’ and ‘eye-watering’ by senior judges.
Following a three-day costs hearing, Mr Justice Constable and Senior Costs Judge Gordon-Saker reduced the claimants’ costs budget by 75% from £208m to £52m. In addition, the defendants’ budget was similarly slashed by nearly a half, from £212m to £114m.
But the cuts didn’t end there. Subsequently, during a costs management hearing covering another tranche of proceedings, the claimants’ budget was reduced from £75m to £22.5m and the defendants’ budget fell from £79m to £49m. In total, hundreds of millions of pounds in proposed costs were deemed excessive and disproportionate.
In Tyler’s opinion, the message from the judiciary could not be clearer: high claim values do not justify unlimited legal costs.
“The scale of these reductions is remarkable and tells us everything we need to know about how seriously the courts are taking proportionality. It’s a clear warning that even large and complex cases do not get a free pass for inflated costs.”
What this means for the future of group litigation
For many years, law firms have often assumed that high-value cases exist safely beyond the need for costs budgeting. However, as the Uber and Mercedes-Benz decisions illustrate, this is increasingly no longer the case.
Instead, courts are becoming more interventionist in an attempt to reduce costs that are seen as extreme and disproportionate. In Tyler’s view, all indications suggest that this trend is set to continue, and the implications for practitioners are clear.
“The Mercedes-Benz reductions in particular clearly demonstrate that courts will no longer just rubber-stamp large budgets simply because the claim is valuable or complex,” he says.
“For practitioners, it means you should consider the possibility of costs budgeting from day one, regardless of whether the claim exceeds the £10 million threshold. Budgets must be built on realistic, defensible assumptions about what is genuinely necessary to conduct the litigation effectively.”
Preparing for the new reality of costs management
While law firms could once often rely on the £10m threshold, it is now potentially no longer the exemption to cost budgeting that it used to be. Both the Uber and Dieselgate cases demonstrate that courts are prepared to use their discretion to implement cost budgeting readily.
This reality requires careful budgeting, strong underlying assumptions supporting the costs sought, and an expectation to justify every element of expenditure before the courts.
Facing costs budgeting in a high-value claim? Athene Legal’s specialist cost lawyers are here to help. Our team has extensive experience in costs management and budgeting across complex group litigation. Get in touch with us today by filling out our contact form and arranging a consultation at one of our offices in London, Birmingham and Southampton.
