Case Law Clarifies Interaction Between Part 36 Offers and Solicitors Act Assessments

Citation: [2023] EWHC 3050 (SCCO)
Judgment on

Introduction

The case of Reem Zuhri v Vardags Limited is a pivotal one in the context of legal costs and the interaction between Part 36 offers and Solicitors Act assessments. This case explores the complexity that arises when procedural rules within the Civil Procedure Rules (CPR) intersect with statutory provisions under the Solicitors Act 1974. The judgment elucidates the application of these two legal frameworks and provides clarity on the consequences of Part 36 offers in the context of Solicitors Act assessments.

Key Facts

The case involves an assessment of the defendant solicitor’s (Vardags Limited) bills to its client, the claimant, under section 70 of the Solicitors Act 1974 and rules 46.9 and 46.10 of the CPR. The defendant made a Part 36 offer to settle for an amount lower than the subsequently assessed bill amount. When the claimant failed to respond, the defendant sought the benefits associated with a claimant’s Part 36 offer, despite the judgment being in favor of the defendant under the “one-fifth rule.”

The key legal principles discussed in this case include:

  1. Solicitors Act 1974 (Section 70): This Act allows for the court-ordered assessment of a solicitor’s bill of costs and prescribes the “one-fifth rule” as a basis for determining the payment of assessment costs. If the bill is reduced by one-fifth or more, the solicitor pays the costs; otherwise, the client does.

  2. Civil Procedure Rules: Specifically, Part 36 offers and rules regarding detailed assessments under Part 47. Part 36 outlines the consequences of not accepting a settlement offer that meets certain criteria. Part 47 applies to detailed assessments of costs between parties in litigation, though its use in assessments under the Solicitors Act is contested.

The case is heavily guided by the precedent John Poyser & Co Ltd v Spencer, where it was established that most of CPR Part 47 and 44.11 do not apply to a Solicitors Act assessment, and such an assessment is not considered a “detailed assessment” under CPR 44.1.

Outcomes

The court in Reem Zuhri v Vardags Limited determined that:

  • The “one-fifth rule” under the Solicitors Act 1974 is the primary mechanism for assessing the costs of an assessment.
  • The Part 36 offer made by Vardags Limited could not have the automatic consequences specified by CPR 36 because of the conflict with the primary statutory provision of the Solicitors Act 1974.
  • The “special circumstances” provision under section 70(10) of the 1974 Act allows the court discretion to depart from the “one-fifth rule,” but does not extend to integrating CPR 36 consequences.
  • The ethos of the CPR and the Jackson Reforms support the encouragement of early settlement offers, but are not enough to supplant statutory provisions.

Conclusion

The Reem Zuhri v Vardags Limited decision underscores the importance of the interplay between statutory provisions and procedural rules. It clarifies that while Part 36 offers are a key element of CPR and encourage settlements, they cannot override primary legislation such as the Solicitors Act 1974. This case establishes that the consequences of a Part 36 offer in the context of a Solicitors Act assessment do not automatically apply. In cases where offers are made to expedite resolution, the court’s discretion to identify special circumstances and diverge from the standard cost implications is indeed permissible, however, it does not equate to the automatic application of the benefits outlined in Part 36. The analysis of this case is crucial for legal professionals handling cost assessments following a Solicitors Act application to understand their rights and the limitations imposed by statutory provisions.