Hugh Grant and the impact of settlement offers

This week, actor Hugh Grant has settled his High Court claim against the publisher of The Sun newspaper. Grant had made various accusations against the publisher, including unlawful information-gathering, landline tapping, and bugging his phone. Following the settlement, Grant went on to say that “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 settlement with The Sun raises questions around what this concept means, and how it takes effect in court proceedings.

This case illustrates the impact of settlement offers on the potential liability for legal costs. The general rule is that the losing party has to pay most of the winning party’s costs. But for costs purposes, what counts as ‘winning’ or ‘losing’ will depend not on whether any damages at all are awarded, but whether an offer made by one party is ‘beaten’ at court. In other words, whether the court ultimately awards more or less than an offer made prior to trial. If the court awards less than an offer, even though a party has won the case, they may lose out on costs as the court then looks retrospectively at the offers and can order a winning party to pay both their own costs and the cost of the losing party for having unnecessarily continued the case from the date from which the offer could have been accepted. The courts do however have a broad discretion on costs and so some modification to the strictness of the above can be made unless the offers  made are what are known as Part 36 Offers, which have automatic costs consequences.

Part 36 Offers, are governed by the Civil Procedure Rules (CPR). Such offers follow the general principles about the costs consequences as mentioned above but have additional, mandatory implications which further penalise a party who has not accepted an offer that is not “beaten” at trial. Those implications involve the paying party having to meet a greater proportion of the overall costs claimed (which are otherwise assessed as to what is fair to pay rather than what has been incurred), and having to pay a penalty as a percentage of damages, and interest charges. To reiterate Grant’s comments, this stands even if the court awards only a penny less than what was offered in the rejected Part 36 Offer. The rationale for such rules is to encourage parties to focus on settling a dispute without the need for trial, and so it heavily incentivises parties to make reasonable settlement offers. Grant’s settlement therefore highlights the importance of whether to make a Part 36 Offer as a tactical step during legal proceedings, and similarly, to consider carefully any Part 36 Offer made by an opponent.

The Birketts view

Part 36 Offers can be used to settle matters to avoid long and costly trials. They can also be used to take tactical cost advantages to put pressure on parties to settle. Grant alludes to the downside of his settlement, being the loss of the opportunity to have allegations adjudicated by a court. The fact that The Sun had offered Grant “an enormous sum of money” to keep the matter out of court, perhaps allows the public to draw their own inferences as to the merits of Grant’s allegations.

This article has not addressed the strict requirements and formalities that the CPR impose, and which must be adhered to when making or receiving a Part 36 Offer and in respect of which specialist legal advice should be sought. If you have any queries regarding the content of this article or wish to discuss a Part 36 Offer as part of legal proceedings, please contact Rosie Morgan or Hayley Songhurst to see how Birketts can help.