Hugh Grant has accepted what he describes as "an enormous sum" to settle his phone hacking claim against News Group. In announcing his decision, Grant expressed regret but explained that the settlement followed a tactical offer made by News Group. This was a Part 36 offer, which can be used to put pressure on litigants to settle.
Part 36 offers utilise the threat of legal costs being payable at the end of the claim, even where a party is successful at trial. But are Part 36 offers always a valid tactical step, or can they be used inappropriately to stifle claims?
Loser foots the bill
The general rule in civil litigation is that the loser pays the winner's costs. The principle is intended to curb vexatious or unmeritorious claims, and all prospective litigants will be warned at the first meeting with their lawyer: if you lose, you pay my fees and theirs. There should also be protection for the innocent defendant, who in the end recovers the expense of defending the claim. Conversely, the defendant who refuses to admit a legitimate claim pays whatever damages might be awarded, plus the costs of the claimant who had to seek recourse through the courts.
It is not however an unqualified or absolute rule. The court retains ultimate discretion over costs and might make a different costs award. Further, a successful party, claimant or defendant, is extremely unlikely to recover all of their outlay. But it is a principle of general and overarching application, and the costs of litigation are and must be a central and continuous consideration as litigation progresses.
Part 36: punishing through costs
A key tenet of the civil justice system is that parties should try to settle their disputes, and offers of settlement can be made at any time. The Part 36 regime incentivises parties to settle as it imposes significant costs risks on a party that refuses a realistic offer, potentially resulting in that party being penalised in costs and interest at the end of the case.
Further, the Part 36 regime can effectively displace the general rule that the loser pays the winner's costs. In broad terms, if a claimant refuses a Part 36 offer, and then fails to "beat" that offer at trial, the claimant is liable for the defendant's costs, from the period starting 21 days after the offer was made, plus interest on those costs. So a claimant could win at trial, but in failing to obtain an award exceeding the level of the Part 36 offer, still find themselves facing a hefty bill for the defendant's costs. This was Hugh Grant's problem.
An "enormous sum of money"
News Group's lawyers have utilised the Part 36 regime to bring Grant's claim to an end.
In a thread on X, Grant explained his decision to accept New Group's offer, which he described as "enormous sum of money", writing: "I would love to see all the allegations that they deny tested in court. But the rules around civil litigation mean that if I proceed to trial and the court awards me damages that are even a penny less than the settlement offer, I would have to pay the legal costs of both sides".
Grant's legal analysis is broadly accurate: costs consequences apply where a claimant fails to obtain a judgment that is more advantageous than a defendant's Part 36 offer, and 'more advantageous' means better in money terms by any amount, however small. If Grant refused News Group's offer, and then failed to beat the offer at trial, he would be liable for News Groups' costs from 21 days after the date of the offer to trial. Even if he won.
Clearly this was not a risk that Grant was willing to take. In a further swipe, Grant wrote, "Rupert Murdoch's lawyers are very expensive. So even if every allegation is proven in court, I would still be liable for something approaching £10m in costs". In settling now, Grant gets the (undisclosed) settlement sum and, as Part 36 dictates, his own costs from News Group, up to the date of acceptance. Grant has indicated that he will donate the pay out to press regulation charities.
An effective but blunt instrument?
Part 36 offers can be an extremely effective tactic in persuading parties to settle claims, simply because the risks of refusal can be so severe, and they are regarded as a legitimate tool in the litigation armoury.
But has News Group effectively used the Part 36 regime to stifle claims in an unacceptable or inappropriate way, such that claimants are denied access to, or the pursuit of, justice? Grant was quick to assert that over £1billion has been paid out to phone hacking claimants, and that 1,500 claims have been settled "in this way". It seems apparent that Grant's case was never motivated by money, but ultimately it was financial risk that ended it.
Every day litigants pursue claims through the courts, but where there is an element of public interest, can it be right that litigants are effectively forced to settle their claims or risk financial ruin? As a result, evidence is not tested, arguments are not scrutinised: claims do not proceed to trial and there are no judgments. What then are the implications for the common law system?
It remains to be seen whether the other high-profile litigant in the News Group claims does decide to settle: Price Harry's legal team has indicated that it may become "impossible" for him to proceed. It is difficult to envisage how the Part 36 regime could be adjusted to address this perceived problem: it works because it raises the stakes. Some might advocate for a public interest exception or similar, although it is unclear how that might operate in practice.
It is of course open to the Prince, as it was to Grant, to continue. Part 36 offers do not in truth force litigants to do anything; they simply present a risk, which may be deemed an unacceptable risk. Further, even if Grant failed to beat News Group's Part 36 offer at trial, he could still seek to persuade the judge that he should not pay New Group's costs. While arguably a high bar, the rule is that the court must order the claimant to meet the defendant's costs, unless it considers it unjust to do so. Indeed, had Grant won at trial but failed to beat News Group's offer, he could have argued that public interest made it important for the claim to proceed, and accordingly the usual rule should be disapplied, such that Grant should not be punished in costs.
Dispute Resolution Partner, Nikki Edwards has also shared insights in The Independent and The Evening Standard about the risks of litigation in relation to this case.
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