Hugh Grant: Bringing Part 36 Offers Into The Spotlight

In May 2023, News Group Newspapers (“NGN”), the publisher of the Sun newspaper, was dealt a blow by the courts as it unsuccessfully argued that several alleged claims against it should be time-barred because of limitation being missed by the potential claimants. Amongst these potential claimants was Hugh Grant, the star of several well-known films such as Love Actually and Notting Hill. Mr Grant’s claims included allegations that private investigators working with NGN and the Sun burgled his house and tapped his phone.

On Wednesday, it was announced by the parties that they had come to an out-of-court settlement that had been reached “without admission of liability”.

However, it is Mr Grant’s social media posts on X (formerly Twitter) that have caused many legal minds to sit up and take notice of the outcome. In particular, the following post:

“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.” – @HackedOffHugh on X

The reason for the interest from all corners of legal social media is that Mr Grant’s post suggests that the settlement was a result of what is called a Part 36 offer and that Mr Grant’s post, to his credit, whether intentionally or otherwise, succinctly and neatly summed up the potential cost consequences that come with such an offer.

With this in mind, what is a Part 36 offer? What are the possible cost consequences? Why do parties use Part 36 offers as a method of settling disputes?

What is a Part 36 Offer?

As mentioned in the firm’s previous Guide to Alternative Dispute Resolution (which can be found here), a Part 36 offer is an offer to settle proceedings pursuant to Part 36 of the Civil Procedure Rules (the “CPR”).

To make sure an offer is compliant with the CPR, it must meet the criteria outlined in Part 36 which includes, amongst other things, the need to confirm that the offer is made pursuant to Part 36.

What are the possible cost consequences?

As touched upon in Mr Grant’s posts, there are possible cost consequences that stem from not accepting a Part 36 offer, even if you are ultimately victorious at trial.

Pursuant to Part 36.17, the consequences will apply where a judgment is entered and:

1)     A claimant (i.e. Mr Grant) fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or

2)     the judgment against the defendant (i.e. NGN) is at least as advantageous to the claimant as the proposals contained in the claimant’s Part 36.

We know from the reports following the settlement announcement that the offer from NGN to settle was for an “enormous sum of money”, but the amount has not been disclosed. This is not uncommon and most of the terms of a commercial settlement will usually be kept confidential.

For the purposes of explaining points 1 and 2 above, let’s assume the following:

1)     If NGN had made an offer of £ 1 million and Mr Grant was awarded a sum of £ 1 million or less, such a judgment would not be classed as “more advantageous” and, as such, Mr Grant would face the cost consequences outlined below. But Mr Grant would still be awarded the amount under the judgment.

2)     If Mr Grant had made an offer to settle at £1million which was not accepted and went on to obtain judgment of over £1million, then, from NGN’s perspective, the judgment would not be “at least as advantageous” as the offer and, as such, they would face the cost consequences outlined below.

So, from Mr Grant’s perspective, what were the potential consequences?

1)     In addition to paying his own legal fees, Mr Grant would have had to pay a portion of NGN’s legal fees incurred during the proceedings. These costs would have been NGN’s costs from the date on which the “relevant period” expired. Based on the reports to date, it has been suggested by Mr Grant that he could have been facing a bill of up to £10million if this happened.

2)     Interest on the above-mentioned costs.

The “relevant period” is a period of at least 21 days stipulated in the offer letter whereby the receiving party can accept the offer without incurring the costs and consequences. After the period expires, the receiving party is exposed to the consequences.

It should also be noted that there are additional consequences for defendants if they fall foul of the Part 36 rules. This includes interest on the sum awarded under the judgment and a possible additional award of up to £75,000.

Why do parties use Part 36 offers as a method of settling disputes?

As can be seen from above, there are a lot of (very expensive) risks associated with Part 36 offers and not accepting them. As such, it can be a very important and pressurising tool in a party’s arsenal. Due to the consequences and risks attached, it is possible that using a Part 36 offer will result in a claimant obtaining a higher amount or a defendant having to pay out a lower amount than it would under normal settlement negotiations or even trial.

Additionally, Part 36 offers are made on a without prejudice save-as-to-cost basis. This means that anything stated within such correspondence cannot be brought to the court’s attention until the matter has been decided and costs are being considered. As such, parties are more inclined to discuss matters openly and concessions can be made and discussed.

Such offers, along with other methods of alternative dispute resolution, can also result in the parties settling matters much earlier than going to trial and saving themselves a lot of money and time in the long run. As stated by NGN, it was in “both parties’ financial interests not to progress to a costly trial”.

Conclusion

Litigators up and down the land will be familiar with Part 36 offers and would have likely seen many offers made in practice, the costs consequences, and strategic thinking that goes into them and flows from them. Nonetheless, it is always interesting and intriguing to see such legal matters thrown into the public spotlight and to see how people react and discuss matters.

If you or your business has an ongoing dispute and would like to discuss possible settlement options, do not hesitate to reach out to Geldards LLP’s specialist Commercial Dispute Resolution department who will be able to assist with your queries.