Part 36 offers – effective tactic to persuade parties to settle claims

Hugh Grant has recently settled his claim against News Group Newspapers, the publisher of the Sun newspaper, after accepting what he describes as “an enormous sum” a part 36 offer, albeit reluctantly on his part it seems.

Whilst the terms of the settlement are confidential Hugh Grant has openly expressed his disappointment in not continuing with his claim but has explained his reasons for settling in a series of posts on X (formerly Twitter) advising that he did not want to accept the undisclosed amount and therefore settle the case, preferring the allegations to be tested in court. But the potential costs sanctions of turning down the settlement offer were too severe. X (formerly Twitter) reported Hugh Grant as saying:

‘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.,’ he said. ‘My lawyers tell me that that is exactly what would most likely happen here. 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. I’m afraid I am shying at that fence.’

The general rule in civil litigation is that the loser pays the winner’s costs. A Part 36 offer is a powerful way of pressuring a party to litigation to settle a civil claim and is designed to encourage both parties to reach an agreement.

A claimant or a defendant can make an offer in accordance with Part 36, provided the terms of the offer contain all of the prescribed ingredients to qualify the offer as a Part 36 offer, if the receiving party fails to accept the offer or beat the offer at trial the Court will award additional sums to the maker of the offer. Where the offer was made by a claimant, if the claimant beats the offer made at trial, the Court will order that the Defendant pay, in addition to the judgment sum:

1. Interest on the damages awarded at a rate of up to 10% above the base rate;
2. Legal Costs at a more favourable rate, known as indemnity costs, from the date that the offer should have been accepted;
3. Interest on those costs awarded at a rate of up to 10% above the base rate; and
4. An additional amount up to £75,000 calculated as a maximum percentage of 10% of the damages awarded.

Where a defendant makes a Part 36 offer, the above criteria could not be effective as a defendant will not receive an award of damages, unless he has made a counterclaim. Part 36 prescribes that a defendant that has made an offer in accordance with that rule that the claimant fails to beat at trial shall be entitled to his costs and interest on those costs from the date that the offer should have been accepted.

Hugh Grant’s acceptance of the Part 36 offer sheds light on strategy of such offers and how such offers when considered properly, prevent the possibility of adverse outcomes in litigation.