In civil proceedings, the general costs position is that the losing party pays the winning party’s costs. That being said, this position can be deviated from, and it is important to note that the court has the power to make any order as to costs that it sees fit. More importantly to remember, is that it is unusual that a party to litigation will recover the entirety of its legal costs.
With that in mind, a useful tool to parties to give some protection on costs is through the use of Part 36 offers. Part 36 offers have had a bit of press recently, most notably in the case of Hugh Grant v News Group.
Grant reported via his account on X that he had accepted an “enormous sum” to settle his phone hacking claim against News Group which had been made by way of Part 36. Grant’s report following settlement expressed that the offer had been made in some way as a tactical step to avoid evidence coming to light at court, and that he did not really want to accept the offer.
So, what is the tactical advantage of a Part 36 offer?
Parties to litigation are expected to try to settle their disputes via alternative dispute resolution, perhaps in mediation, or via settlement negotiations. Part 36 offers have costs consequences attached to them, which are said to act as an incentive for parties to settle their disputes in consideration of the significant costs’ risks posed if a party fails to accept a realistic or reasonable offer of settlement.
Put quite simply by Grant, “if I proceeded 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”. Essentially, where a party refuses to accept an offer, and fails to beat that offer at trial (even by a penny less!), the natural consequence of failing to accept the original offer is that they would be liable for the opponent’s costs from 21 days after the date of the offer being made, even if technically they won the case.
So, the risk of having to pay an opponent’s costs is the “sting in the tail”, and not a risk that Grant appeared to want to take in the circumstances.
The reality is that Part 36 offers are used in everyday claims run by litigants through the courts, and do not simply present themselves in high profile, high value cases. The risk presented with such offers in failing to accept and running litigation to trial could have drastic financial consequences.
Grant’s settlement demonstrates the tactical advantage of making the right offer at the right time. It also goes some way in demonstrating that settlement does often have its advantages from a financial perspective, regardless of how aggrieved a party may feel towards the other.
Our dispute resolution team are experts in alternative dispute resolution and have a great reputation for achieving positive results at the mediation stage, meaning that often there is no further action required. Contact our team on 0161 696 6178.
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