Why do I need to try to settle my litigation claim? Won't I look weak?

Showing a willingness to settle doesn't make you look weak. It's all about how it is approached, which is the skill of the litigator (your solicitor).  

The Court encourages parties to attempt to settle.  It is even able to pause a claim to require the parties to try mediation (a formal process, using an independent third party who tries to broker a deal while each party sits separately with their legal team).  If a claim doesn't settle, the Court has the power to punish a party who failed to take active steps to attempt settlement by denying them their costs or ordering them to pay at least some of the other party's costs.

Regardless of the Court's powers, it is always sensible to try to settle.  Done right, offering to settle (or attempt to) won't make you look weak.  The benefits of settling are numerous: 

• the outcome is certain; 
• you don't have to give evidence at a trial; 
• you save significant costs; 
• you maximise a recovery or shorten a period during which you're suffering further loss (in a money claim); 
• you shorten the period you are suffering nuisance, loss of a right or other infringement you want to stop;
• you achieve a realistic objective, rather than losing everything (because there will only be one 'winner' and one 'loser');
• you can achieve an outcome the Court cannot order - e.g. land transfers which the Court has no power to order;
• you can have a confidentiality clause in the settlement, so nothing becomes public (outcomes at trial are a matter of public record, so parties are allowed to tell other people what happened).

All correspondence relating to settlement should be marked 'without prejudice'.  That correspondence doesn't get seen by the Court during the trial, so the Court will not know what attempts have been made to settle until it comes time to deal with costs.  At that stage correspondence that has been marked 'without prejudice save as to costs' can be shown to the Court to assist the decision on who pays the costs.

The term 'without prejudice' is used so that it is clear that the contents of the letter discuss settlement and shouldn't be taken as an alteration to your position in the claim.  In this correspondence parties may make admissions or concessions, or agree, for the purposes of settlement, that they owe money.  Without prejudice correspondence does not undermine your position in the claim, so you can still robustly argue your position to the Court (as long as you aren't misleading it).  

You may also make concessions at a mediation, as the entire meeting is treated as 'without prejudice', so the Court will not know what happened there (subject to some rights to disclose limited information to the Court in certain circumstances).

Settling doesn't have to mean selling yourself short; it should be a commercially sound decision.  Your lawyer should be skilled enough to negotiate assertively and to advise you on the reasonableness of an offer (and any counteroffer).  They should also be able to give a view as to whether they think you should accept (or make) an offer, based on the prospects of success or likely outcome.

What we can learn about settlement offers from Hugh Grant and News Group Newspapers?

HRH Prince Harry appears determined to fight News Group Newspapers to trial.  A few months ago, Hugh Grant bowed out of his own concurrent claim, quoted as saying that he couldn't risk potentially becoming liable for c£10m of the newspaper's costs as well as his own if he rejected an offer made under the rules used by the civil courts in England and Wales known as a Part 36 offer.

This was an oversimplification of the rules.  I suspect it was lost in translation when being reported, because it doesn't state when the offer was made or accepted or what NGN's overall costs were predicted to be.  

NGN appears to have lost the appetite for fighting, as recently it was reported that 39 of the litigants in the hacking scandal have accepted offers, presumably made under Part 36.

So what is a Part 36 offer?  And why did these litigants, including Grant, decide to throw in the towel?

A Part 36 offer is a special kind of offer made to an opponent in litigation.  Provided it is made in the correct way, with the prescribed wording, it gives protection on costs to the person making it if they win the case at trial.  

The offer can be made at any time, but the costs protection only applies to the costs incurred after it is made.  The Court can still make whatever order it wishes in relation to the costs incurred before the offer is made.

What happens if a claimant makes an offer to the defendant?

If a claimant (the person who brings the claim) makes an offer, and it is accepted by another party (usually the defendant) within 21 days, the accepting party must pay the claimant's costs to the point the offer is accepted.  

If the amount of costs to be paid cannot be agreed, the Court will decide how much must be paid.  If there is any doubt as to whether or not a particular item on the bill should be paid, the Court will remove it from the bill.

If the defendant rejects the offer, the rules provide that if the outcome is 'at least as advantageous' as the terms of the offer (i.e. equal to), the defendant must pay the claimant's costs from the date 21 days after the offer was made.  However, when the Court assesses the costs any item on the bill in doubt will be paid by the rejecting party. 

The defendant also must pay interest both on any sum they are ordered to pay to the claimant, and on costs, from the date the offer could be accepted.  The current rate of interest is up to 10% above base rate.

Lastly, the defendant must pay an additional 10% of the sum payable to the claimant (for the first £500,000, than 5%, up to an overall maximum of £75,000).

While the Court does retain some discretion about whether or not to award these additional sums, in my experience it takes something significant to make it depart from the rules.

*It should be noted that the rules are slightly different for cases which fall within the Court's Fixed Recoverable Costs regime (money claims between £10,000-£100,000)*

Can a defendant make an offer?

A defendant can also make a Part 36 offer.  In making the offer, the defendant is also offering to pay the claimant's costs up to the point of acceptance, provided the offer is accepted within 21 days.  If the defendant's offer is rejected, and the claimant fails to beat the offer, the claimant must pay the defendant's costs from the time the offer could have been accepted.  

Should I make an offer?

Due to the serious consequences that flow from rejection of a reasonable offer, it is usually a brave litigant who rejects a Part 36 offer and doggedly pursues a claim to trial (and usually also against solicitors advice).  For this reason, when used correctly, Part 36 offers can be a strategic tool to ensure early settlement.  If settlement appears unlikely, a Part 36 offer is the best protection on costs that can be put in place.  

There is a good deal of merit in making a Part 36 offer early on, as the costs protection (and risk to the opponent in rejecting the offer) begins as early as possible.  That isn't to say that a later offer is not worth making.  

Where you are a defendant so that in making the offer, you are agreeing to pay the claimant's costs to date, it is still very often worth making.  This is because if the claimant 'wins' the case in any sense (e.g. is awarded £1 in damages), the ordinary rule is that you would pay the claimant's costs of the claim.  

An early competitive offer, if accepted, will eliminate your exposure to future costs (both your own and your opponent's).  If the offer is made tactically, at a level the claimant is unlikely to defeat, it will either focus the claimant's mind on settlement, or protect you if the claimant fails to beat your offer at trial (because in that case the claimant would normally be ordered to pay your costs from 21 days after the offer was made to trial). This appears to be what NGN did here (though possibly later than would sensibly be advised).

So what was Hugh Grant so worried about?

It isn't clear at what stage the offer was made, as the story might have been written some time after the settlement was tied up.  It isn't immediately clear why his concern appeared to relate to the entirety of NGN's costs.  If he rejected the offer as claimant at a late stage, and didn't beat the offer, he still would have been entitled to seek his own costs to the date of rejecting the offer from NGN.  He would only have become liable for NGN's costs from the time he rejected the offer.  

I have no doubt that he was accurately advised, and the story was lost in translation, or 'spun' to explain why he bowed out.  There is likely also to be an element of him wanting to maximise return for the charity he donated the damages to, rather than gambling on that gift.  

Ordinarily, the opponent's costs aren't likely to reach seven figures, so the sums are less eye-watering.  There remains, though, a risk when dealing with Part 36 and so this type of offer really should be taken very seriously.  

If you would like to discuss any aspect of Part 36 further, please get in touch