In Pallett v MGN Ltd, a case concerning the newspaper phone hacking scandal, the High Court orders the Defendant, owner of the Mirror newspaper, to pay all of the Claimant’s costs of the proceedings, despite arguments that they had accepted the settlement offer outside of the 21 day relevant period under CPR Part 36.
The Claimant, Roxanne Pallett, an actress, issued proceedings over two years ago against Mirror Group Newspapers Limited, owner of the Mirror newspaper for infringement of privacy by interception of her mobile phone and other unlawful information gathering techniques. The matter was set for trial to take place in this month.
What was the phone hacking scandal?
In 2007 investigations were commenced into many journalists including those at the News of the World and the Mirror following concerns they had engaged in illegal and improper activity such as phone hacking, police bribery, and exercising improper influence in the pursuit of stories and information gathering. Allegations led to the closure of the 168-year-old News of the World tabloid in 2011 and a trial costing reportedly up to £100m.
The parties have settled, now what about costs?
In this case, after both parties had made various settlement offers, the Claimant made a Part 36 offer on 20 October 2020 to accept £99,500 from the Defendant to settle her claim. The offer specified that if it was to be accepted within 21 days, the Defendant would be liable for her costs.
The Defendant accepted the offer on the 22nd day on the expressed basis that it was entitled to invite the Court to consider its liability for costs and was not bound to pay the Claimant’s costs.
The following questions arose:
- Is the Defendant entitled to accept the part 36 offer on the basis upon which it did?
- If so, did the Defendant’s conduct amount to an acceptance of the Part 36 offer?
- If so, does that acceptance have the effect as contended by the Defendant?
- If so, should the Court exercise its discretion on costs as proposed by the Defendant?
Parties’ arguments on costs following acceptance of Part 36
The Defendant argued that the Claimant had failed to engage with the settlement process and had she had engaged years earlier, the claim would have been concluded at an earlier stage.
The Claimant argued that none of the Defendant’s offers were adequate and that he had quite reasonably wanted to wait for disclosure to take place prior to making an offer or accepting one.
Court upholds costs liability upon Defendant’s late acceptance of Part 36 offer
Mr Justice Mann in the High Court agreed that the Claimant was not refusing to engage but could not sensible engage until she had more information and that her conduct could not be deemed unreasonable. He expressed that this case turned on the facts and should not be a precedent for all claimants to refuse to enter into negotiations before disclosure however he held that the normal consequences should follow and that the Claimant was entitled to receive “all the costs of the proceedings”.
This case has turned on its own facts, and to a large extent on the justification of the claimant in pressing on for disclosure before valuing her claim. It involves a determination in which the burden is on the defendant under Part 36… it should not be taken as a green light for all claimants to decline to enter into negotiations before disclosure is complete. Such a posture would not be correct in every case. Each case must turn on its own facts. There may be other cases in which a non-engagement will be unreasonable.
Read the full judgment for Pallett v MGN Ltd  EWHC 76 (Ch).
What is a Part 36 offer?
Where a Claimant obtains a judgment that is at least as advantageous as the Part 36 offer, the court must award it the costs consequences set out in CPR 36.17(4). If a party fails to accept a realistic offer made from the other side there is a risk of penalised costs and interest at the end of the case, therefore a legitimate offer is advised which puts the other side under pressure to settle.
Why is a Part 36 offer important?
If you are engaged in litigation, you should consider offers to settle (whether Part 36 or Calderbank offers) in order to achieve the best costs and interest on costs scenario if the matter has to proceed to trial. Parties in proceedings are encouraged to engage in settlement discussions, focus parties’ minds to think commercially and attempt to resolve disputes before going to trial.
We can be instructed to advise on options for settlement or provide you with a second opinion on your case.
When can a Part 36 offer be made?
Part 36 offers can be made before court proceedings are issued. However Part 36 do not apply to claims that are small claims track (claims that are less than £10,000).
The aforementioned costs consequences to not apply to offers made less than 21 days before trial unless the Court permits for the relevant period to be shortened.
Part 36 offers are not applicable to the small claims track.
If you are commencing or engaged in current litigation and require advice on settlement or making a part 36 offer, our specialist litigation and costs lawyers can assist.
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