Notting a Hill to die on due to costs consequences
The potential costs risks of running a piece of litigation have recently been making headlines, following the conclusion of Hugh Grant’s case against the Sun’s publisher, News Group Newspapers over allegations of phone hacking, unlawful information gathering including “landline tapping, bugging his phone and burgling his flat and office”.
The case was due to proceed to trial next year, after it was ruled in May 2023 that the case was eligible to go to trial barring the phone-hacking allegations. However, in a series of posts on X (formerly Twitter), Mr Grant recently confirmed that he reluctantly agreed to accept a settlement offer (called a Part 36 offer) from NGN.
Mr Grant was advised to accept the offer due to the risks involved if the case went to trial and the Court awarded damages at a lower level than NGN’s Part 36 offer, which carries various consequences.
What is a Part 36 offer?
A Part 36 offer is an offer that can be made by either party under special Court Rules with the aim of settling all or part of the claim relating to liability and / or damages. There can be multiple Part 36 offers made during a case and the rules provide that they must be made in writing.
Once the offer has been made, then the party in receipt of the offer has 21 days to accept. The offer can still be accepted after the 21 day period, but then the party in receipt of the offer would not be entitled to payment of their costs after expiry of the 21 days and would be expected to pay the costs of the party making the offer incurred after this period. Part 36 offers are not disclosed in Court, prior to the conclusion of trial, so as not to influence the Judge making the award.
Part 36 offers can be withdrawn or amended, the costs consequence will no longer be in play, although it may be taken into account under the Court’s general discretion.
Once a Part 36 offer has been made, the party receiving the offer must give careful thought to whether or not the offer can be beaten at Trial. Failure to beat a Part 36 offer, carries significant costs consequences. Where a Part 36 offer is made by the Defendant and the Claimant fails to achieve a better result at Trial, the Claimant will be ordered to pay the Defendant’s costs incurred from the date 21 days after the offer was made. Where a case concludes at after a long and complication Trial, these costs are likely to be significant.
The Claimant can also make Part 36 offers or counter offers (in response to a Defendant’s Part 36 offer) whilst in negotiations with the Defendant as parties are encouraged to resolve matters before trial by making formal offers.
In Mr Grant’s case, NGN made a Part 36 offer and Mr Grant accepted the undisclosed sums, despite the fact that he wanted to run the case to trial for the allegations to be tested in Court.
Hacked Off Hugh
The reluctant acceptance of the offer was due to the pressure created by the Part 36 offer and the potential costs consequences. Mr Grant had been advised by his lawyers that it was most likely that if the case went to trial, the damages awarded by the Court would be less than the Part 36 offer made by NGN. Had Mr Grant not accepted the offer and the Court subsequently awarded damages for a sum less than the Part 36 offer made by NGN, then he would have been liable to pay the legal costs from the date of expiry of the Part 36 offer and onwards, including the trial costs for his own legal team as well as NGN’s. The sum quoted by Mr Grant was circa £10million, a risk which he was unwilling to accept which was the reason he felt he had to reluctantly accept the offer.
What if the Part 36 offer had been beaten at Trial?
If Mr Grant had not accepted the Defendant’s Part 36 offer with the case going to trial and NGN not bettering their Part 36 offer in Court then Mr Grant would have faced no consequences and the usual rules of costs being paid are applied.
However, if the offer had been made by Mr Grant, the offer would have been a Claimant Part 36 offer and would have carried additional consequences with the Defendant, namely an additional amount of 10% of the first £500,000 of damages and enhanced rate of interest not exceeding 10% above base rate for some or all of the period starting from the date on which the relevant period for acceptance of the offer expired.
Conclusion
This shows the power a Part 36 offer can hold in compelling parties to settle claims without recourse to trial even where they believe their primary position was a strong one. NGN had presented a strong offer which was too attractive (and potentially too risky) for Mr Grant to say no to. By taking advantage of the conditions of Part 36 offers, NGM has prevented the evidence to be aired in public and limited their exposure to adverse commentary. It would have been open to Mr Grant to pitch his own offer in response, which would have potentially put NGM under pressure, but this case shows the value of making an offer early, requiring an opponent to factor in the considerable potential cost consequences into their case strategy.
