Actor Hugh Grant has reported that he has settled his phone hacking claim against The Sun newspaper’s publisher, News Group Newspapers (“NGN”) in a series of posts on X (formerly Twitter). This follows a Part 36 offer from NGN which would mean that, even if he won, Mr Grant would risk paying NGN’s legal costs of up to £10M if the matter went to trial.
Mr Grant reported that he wished to see his allegations - which include phone hacking, unlawful information gathering, perjury, and destruction of evidence tested in court - but the financial risk was too great. This, effectively, ‘forced’ him to settle.
WHAT IS PART 36?
Part 36 offers exist to encourage parties to settle before trial, which can, in some circumstances, be beneficial to both parties, to focus the parties’ minds and prevent both sides from incurring significant further legal costs. Part 36 offers are a specific, unique type of offer, with attached costs consequences, which can be a powerful tactic to apply pressure to settle.
In very simple terms (and subject to more nuanced rules and case specifics) if a party rejects a Part 36 offer, even if they win at trial, they may have to pay the other side’s legal costs from the date of the Part 36 offer’s expiry, if the damages awarded at trial do not ‘beat’ the Part 36 offer (in addition to paying their own legal costs). As the Hugh Grant phone hacking case shows, rejecting a Part 36 offer can be a significant risk, potentially exposing that party to millions of pounds in legal fees.
Generally, Part 36 offers are uncontroversial, and are common litigation tactic in commercial disputes.
However, Hugh Grant’s dispute with NGN highlights the potential for misuse, particularly by powerful parties with deep pockets who wish to keep the facts of a dispute out of the public realm and avoid their arguments being tested in court. The consequences of using Part 36 in this way are not entirely dissimilar to forcing a party to remain silent by other means, such as an NDA.
There could be strategies available for parties who feel compelled to settle when confronted with a Part 36 offer. In Hugh Grant's situation, a Part 36 counteroffer for a lesser amount might have (somewhat) reduced the cost liability risk. However, this approach could have been risky and potentially expensive, particularly if subsequent offers were made, and it would not have addressed Mr. Grant's preference to have his allegations tested in court.
Alternatively, Mr Grant may have abandoned his damages claim, and sought a court declaration confirming his allegations. Nonetheless, this route would also likely be costly, with no chance of recovering damages, no assurance of recovering his own legal fees, and the residual risk, if he lost, of paying at least some of NGN’s legal costs.
