Monthly Legal Costs Update – October 2025
Here, in Kain Knight Costs Lawyers’ regular monthly legal costs update October 2025, we focus on those cases which we believe are likely to have a practical relevance for its members. We welcome feedback and if there is an area, topic or case you would like us to address, please let us know.
This October 2025 update has been written by Nick McDonnell and Colin Campbell.
The Long Vacation means the calm before the storm in terms of the number of costs judgments being handed down. Thus we have just five cases this month but three of them are absolute stunners! Next month will be business as usual.
We start with costs budgeting and the second costs and case management conference dealing with trance 3 of the “Dieselgate” costs (for tranches 1 and 2 see [2024] Costs LR 1209). In Various Claimants v Mercedes-Benz Group AG [2025] EWHC 2307 (KB), the claimants’ Tranche 3 budgets covering causation and quantum issues for an eight-week quantum trial totalled £55.7m: for the defendants, the total was £75.8m.
They all came away disappointed.
Cockerill J approved £21m for the claimants and £55m for the defendants! She held that Tranche 3 allowances should generally be lower, given fewer complicating factors and greater cooperation between the parties.
The Non-lead firms’ recoverable involvement was confined to narrow circumstances, and routine “keeping abreast” of the litigation was a solicitor–client matter and not recoverable inter partes. Worse was to come. For the costs of two CMCs and one pre-trial review, the claimants sought £3.3m and £1.5m respectively and came away with £850,000 and £300,000, with the court stating that there had been “overlawering”. Nine in-person attendees in court were ample. “Remote monitoring” by 20 more was not and heavy reductions would be made where “overlawering” was detected in future.
The next CMC will take place in January when budgets will be fixed for expert evidence and ADR. Lawyers you have been warned!
By comparison, the next costs budgeting case is a mere minnow. Nonetheless, the judgment has useful take-aways.
In Xtellus Capital Partners Inc v Dl Invest Group Pm S.A. [2025] EWHC 2168 (Comm), following judgment being entered in favour of the Claimant for €1,792,247.93, the Court addressed consequentials.
Having dealt with interest, the court decided that the costs of the action should be paid by the defendants on the indemnity basis because a dishonest defence had been pursued which had been supported dishonestly. Should there be budget variations under CPR 3.15A?
There were 3 points:
(1) given the court’s decision about indemnity costs, was variation relevant?
(2) If so, were there “significant developments in the litigation that warranted variation?
(3) If so, what should the variation be?
Under CPR 3.18, when conducting a detailed assessment, the Court would not depart from the receiving party’s last approved or agreed budgeted costs unless satisfied that there was good reason to do so.
Did an order for indemnity costs make any difference? Yes it did held HHJ Bird.
On an indemnity basis assessment, CPR 3.18 did not apply and the Court could depart from the budget without requiring a “good reason” to do so. Consequently, he declined to deal with any application under CPR 3.15A, leaving any adjustment to the last approved or agreed budgets to be decided by the costs judge.
In this context, it is noteworthy that in Barry v Barry [2025] Costs LR 69, the Court had also made an order for indemnity basis costs and Dexter Dias J went on to deal with budget variations under CPR 3.15(A), rather than leaving the budgets to be dealt with at detailed assessment.
It is not clear whether he was aware of the decision in Lejonvarn Burgess [2020] Costs LR 45 which states that the Court is not constrained by the last approved or agreed budget where an indemnity basis costs order has been made.
In Xtellus, it appears that the Court had that clarity, and therefore left the matter for the Costs Judge.
Next security for costs under CPR 25.
Baker Botts (UK) LLP v Carbon Holdings Ltd [2025] EWHC 2225 (Comm) concerns complex proceedings and Texan lawyers claiming for their fees. David Elvin KC was satisfied that the Part 20 claimant would be unable to pay the firm’s costs if unsuccessful and security of 75% of £2m was ordered. In addition, even on the defendants’ own case, the firm was entitled to be paid for work indisputably done for them, and summary judgment was granted in respect of invoices for that work which claimed a total of US$1,026,053.60.
Those fees would be subject to a common law assessment [emphasis added] and not a detailed assessment to which the Solicitors Act 1974 applied, meaning that the assessment costs will be decided on a “costs follow the event” basis and not under the s70(9) “one fifth “rule.
Returning to “consequentials”, in Ellis v John Benson Ltd [2025] Costs LR 1525, it was common ground that the claimants were the winners and entitled to costs, but it was the defendant’s contention that these should be discounted by 20%, and paid on the standard basis, rather than the indemnity basis. Freedman J ordered standard basis costs.
The refusal to accept three offers made by the claimants did not constitute unreasonable conduct of a high degree, nor did the failure to accede to a notice to admit. Moreover, the fact that the claimants had not succeeded in each of their allegations did not mean that they were not overall the successful party.
No percentage reduction was justified. It was also appropriate to grant a higher percentage as a payment on account where costs were budgeted. That was because the Court was entitled to assume that a large percentage of the approved costs budget would be recoverable at detailed assessment.
85% was ordered.
Finally, a case on retainers that should be a caution to both barristers and solicitors doing work under Damages Based Agreements (DBA).
Having won their case involving a disputed will, the defendants looked to recover costs of £1.3m from the losing claimants. However, in Reeves v Frain [2025] EWHC 2311(KB), Dexter Dias J held that the DBAs were unenforceable so nothing was payable. Clause 10.1 was the downfall.
“If you win you agree to pay us [10% for D1 ; 24% for D2] of any money and any non-monetary award or settlement received.”
Whilst the defendants had succeeded in obtaining a finding that a will made in their favour was valid “… no assets were transferred. Nothing changed hands. Nothing was recovered …..”. It followed that the DBAs did not meet the requirements under the Regulations for permitted payment under Regulation 1(2) and Regulation 4 of the DBA Regulations (2013), so the lawyers won the case, but lost all the costs.
Add to that the defendants now having to pay the other side’s costs and their own…Ouch!
As always, these are a selection of the principal recent cases which are likely to be of use to practitioners and if any further information is required, please contact either Nick McDonnell or Colin Campbell at Nick.McDonnell@kain-knight.co.uk or Colin.Campbell@kain-knight.co.uk
