Colin Campbell explores the Hugh Grant privacy case and Part 36 offers in New Law Journal
Colin discusses the use of Part 36 offers in the Phone Hacking litigation to settle claims and what the Hugh Grant case says about the fairness of the rule.
Colin’s article was published in New Law Journal, 5 July 2024, and can be found here.
Mechanisms built into the Civil Procedure Rules 1998 (CPR) which encourage most cases to settle before reaching trial, are rarely a talking point outside the legal profession. In April, however, the actor Hugh Grant drew attention to the “rules around civil litigation” in a lengthy thread posted on the social media platform X, relating to his own case against News Group Newspapers (NGN), the owners of The Sun. By inferring that these very rules effectively forced him to settle his case, much against his wishes, the specific role played by CPR Part 36 in civil proceedings, has come to the fore. If someone with Hugh Grant’s global fame and considerable resources says that he is unable to continue his case because of a hitherto rule little known outside legal circles, people sit up and take notice.
It is important to remember at the outset, that a settlement out of court is in fact unexceptional, as only a tiny proportion of issued cases actually end up before a trial judge. Most are settled, and this has indeed proved to be true for Hugh Grant. On April 17, Mr Grant spelled out his interpretation of the decision to settle his action for misuse of private information against NGN, and in doing so, brought the debatable fairness of the CPR Part 36 into sharp focus.
Prior to the settlement, the Hollywood star, who has become one of the most recognisable British movie actors in the world, along with hundreds of other celebrities, had brought privacy claims against NGN as publishers of the Sun and News of the World newspapers. Their claims focussed on allegations of unlawful information gathering (phone hacking and landline tapping), as well as the concealment and destruction by NGN, of relevant evidence connected to that unlawful information gathering. According to NGN, over 1000 such claims have now been settled, many under Part 36, with the remaining 40 or so, to be tried by Mr Justice Fancourt in January.
In his posts, Mr Grant stated that although NGN had offered him an “enormous sum”, and that he had wanted to see “all the allegations that they [NGN] deny, tested in court”, NGN had used Part 36 to place him in an impossible position. If he rejected the offer and the trial judge “…were to award me a penny less than the settlement,” he would have to pay the legal costs of both sides, “…. something approaching £10 million.” In simple terms, according to the actor in his carefully drafted reaction, a trial had been rendered impossible by the rules of court which had disproportionately favoured the defendant and had compelled him to give up his case.
Since the inference to be drawn from what Hugh Grant has said is that his claim has been bought off, in order to prevent NGN’s witnesses from giving evidence in court in January next year, it is important that the accuracy of his assertion is properly considered , and if he is right, what can be done about it.
In essence, what Mr Grant is saying is that a trial might lead to findings by Mr Justice Fancourt, that NGN’s witnesses have not told the truth about phone hacking and the concealment of relevant evidence, but that Part 36 has been used to force settlements in order to prevent such embarrassing revelations from entering the public domain. If that is correct, should changes be made to Part 36, so that individuals such as Hugh Grant, who are in litigation with parties with deep pockets and can use those resources to make cases “go away”, do not find themselves compelled to settle, and instead, are able to have “their day in court”, as the expression goes?
Before examining Mr Grant’s very pointed accusation against a system which he suggests favours NGN’s proprietor Rupert Murdoch, it is worth looking at the purpose of Part 36 and where, arguably, it is going wrong. In short, the rule is designed to encourage parties to compromise so that actions can be settled on a full and final basis without any need to trouble a trial judge. Those who battle on regardless may find that they win the case, but lose the costs, which may be significantly higher that the compensation awarded, so that their victory, such as it is, becomes pyrrhic.
That is the situation which potentially faced Hugh Grant had the offer of the “enormous sum” made by NGN been more than the level of damages awarded to him by Mr Justice Fancourt, had he gone on and won his case. His difficulty would have arisen in this way. Under Part 36, a defendant can make a Part 36 offer at any time. If accepted within the relevant period, (usually 21 days) the defendant pays the claimant’s costs unless the court decides it is unjust to do so (see CPR 36.13(1)). If rejected and the trial judge awards a lower sum, the claimant pays the defendant’s costs from the last date on which the offer should have been accepted. Usually, but not automatically, a winning claimant will recover costs up to that date: if there is no agreement, the court will decide (see CPR 36.13.(4)).
So far, so simple. Hugh Grant has accepted NGN’s offer, so he keeps the “enormous sum” and has his costs to the date of acceptance. The risk, had he gone on, would have been that on being awarded a lower sum in damages, he would have had visited on him, NGN’s costs from that date that the Part 36 offer should have been accepted, against which, in all likelihood (but not a certainty) he would have been able to set off his own costs to that date, which would be payable by NGN.
If that were to be the outcome on a worst case scenario, why would Mr Grant believe that being pipped by a penny at trial under Part 36, would have left him on the hook for costs approaching £10m? A possible answer to that which hitherto has not had a mention is insurance cover, and the possible loss of it where a claimant has rejected a reasonable offer of settlement, here the “enormous sum”.
In 2012, s.46 of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) ended the recoverability from losing opponents of After-the-Event insurance premiums in most types of civil litigation. However, specifically excluded from this category were premiums in publication and privacy proceedings. It follows that in the Phone Hacking litigation, claimants such as Hugh Grant have been able take out ATE insurance against the risk of losing so that, if the action were to fail, the insurance policy will pay NGN’s costs.
Now the hidden problem. ATE policies provide cover against adverse costs, subject to a general exclusion that if the opponent makes an offer to settle which is one that is reasonable and should be accepted, cover will be withdrawn if the insured rejects it against advice. Put another way, turn down an enormous sum, and you will be on your own from now on, because your insurance cover will have been withdrawn.
Perhaps that is what Hugh Grant was alluding to in his reference to having a costs liability approaching of £10m if he went on and won his case. By making a Part 36 offer far above the figure that Mr Grant could expect to be awarded by Mr Justice Fancourt, NGN could be confident that if the offer was rejected, the ATE insurers would avoid the policy, leaving Mr Grant with no costs cover going forward, including an expensive trial expected to last several weeks. In that way, according to the Phone Hacking claimants, Part 36 has and continues to be used to buy off claims which NGN do not wish to have heard in open court.
If that has been NGN’s tactic in manipulating Part 36 in a way that money is used to curtail claims which parties have a legitimate interest in coming to court, it is certainly not how the rule makers intended that the rule should be operating. If that be right, should the Civil Procedure Rule Committee (CPRC) be considering a change to the rule?
The Phone Hacking litigation is a Group Action with a public interest. NGN could scarcely argue to the contrary, given that the material written about the celebrity claimants who are members of the Group was said by the newspapers at the time, to have been published in the public interest. That being so, consideration could be given by the CPRC to a rule change to Part 36 under which the rule would be suspended for defendants in Group Litigation with a public interest. That way, claimants could proceed to court without facing the potentially ruinous costs risk which has concerned claimants such as Hugh Grant, should they to fail to beat an over-generous and tactically large defendant’s Part 36 offer at trial.
Not all claimants, of course, are of financial means that dictate that such careful consideration should be given to Part 36 offers. The best known claimant in the Phone Hacking litigation is Prince Harry, the Duke of Sussex. His claims are less likely to be in order to seek financial redress, and more motivated by a desire to find out the truth about whether his phone was hacked, whatever the cost. For Prince Harry, Part 36 will have no horrors even if the outcome is that he wins the case, discovers the truth but loses the costs. However, he is the financial exception to general body of Phone Hacking Claimants for whom an amendment on the lines suggested would rebalance Part 36 and make it work as originally intended. That way, too, it would prevent well resourced entities such as NGM from having the ability to stop claims in their tracks for which there may be no defence, were they to be tried before a High Court Judge in open court.
Colin Campbell, retired costs judge and consultant at costs firm Kain Knight
