Effect And Consequences Of Part 36 Offers In Solicitor And Client Assessments

This case concerns an application of Part 36 of the Civil Procedure Rules (CPR) to the court’s assessment, under section 70 of the Solicitors Act 1974 and rules 46.9 and 46.10 of the CPR, of bills rendered by the Defendant solicitor Vardags Limited to its client, the Claimant Ms Reem Zuhri.

Relevant Background

• December 2020: Vardags issues CPR Part 7 proceedings against Ms Zuhri for outstanding unpaid legal bills
• February 2021: Ms Zuhri applies under CPR Part 8 for an order under section 70 of the Solicitors Act 1974 for assessment of Vardags’ bills
• Parties agree to stay the Part 7 proceedings pending the Solicitors Act assessment
• October 2022: Vardags makes a Part 36 offer to settle the disputes
• November 2022: Vardags applies to restore the Solicitors Act assessment proceedings
• July 2023: The bills are assessed at a sum in excess of its Part 36 Offer, Vardags raises issue of consequences of its Part 36 offer

Issues to Be Decided

The key issue to be decided by the Costs Judge was whether Vardags was entitled to the benefits conferred by CPR Part 36 upon a claimant which has bettered its own Part 36 offer in the context of a Solicitors Act assessment.

Parties’ Positions

Vardags’ position was that:

• its Part 36 offer should be considered as a claimant’s offer in the context of a Solicitors Act assessment. Further, notwithstanding John Poyser & Co Ltd v Spencer, it is entitled to the benefits conferred by CPR 36 upon a claimant which has bettered its own Part 36 offer.
• the court has discretion under section 70(10) of the Solicitors Act 1974 to depart from the “one-fifth rule” in section 70(9) if there are special circumstances, which existed here due to the conduct of the Claimant, who had largely failed so cooperate with the assessment process which she herself requested. This justified a finding of special circumstances. Even if it did not, the Defendant’s Part 36 offer does.
• given that special circumstances existed, the automatic provisions of Part 36 should apply regardless of any conflict with the statute. CPR 36 then can, and should, engage as a wholly procedural operation, not a contractual one (CPR36.6(1) and Gibbon v Manchester City Council [2010] EWCA Civ 726). Even a direct conflict with statute would and should not defeat the operation of Part 36 (Orton v Collins [2007] EWHC 803 (Ch).
• the ethos of the CPR and the Jackson Reforms introduced in 2013 support the application of Part 36 to Solicitors Act assessments. An editorial note in the White Book (2023 edition, at 36.2.3.2) acknowledges the stated intention of the Rule Committee to the effect that all parties in litigation would be able to use Part 36 to make settlement offers. Where a party makes an offer that is intended to be a Part 36 offer but a point arises as to its construction, the court should prefer the construction, if possible, that would give effect to its stated intention and allow the offer to be effective: C v D [2011] EWCA Civ 646.

The Claimant did not make any submissions.

Decision

Costs Judge Leonard found that Part 36 had no application to Solicitors Act assessments.

“It seems to me that (apart from the practical difficulties identified in Friston on Costs) one possible reason why CPR 36 has been imported into CPR 47, but not into the provisions for Solicitors Act assessments at CPR 46, is that it is not possible to reconcile the provisions of CPR 36 with subsections 70(9) and 70(10) of the 1974 Act. [41]

“Self-evidently, the “one-fifth” rule at subsection 70(9) is entirely inconsistent with the application of CPR 36. Whilst I agree that the making of a Part 36 offer (or, for that matter, a Calderbank offer) could justify a finding of special circumstances that would allow the court, pursuant to subsection 70(10) to disapply the “one-fifth” rule, it is quite another matter to make the leap to concluding that CPR 36 must then apply. [42]

“Where CPR 36 applies, the court’s jurisdiction to depart from its prescribed consequences is limited to cases in which that would be unjust. That seems to me to be wholly inconsistent with the power conferred upon the court by subsection 70(10), in special circumstances, to “… make such order as respects the costs of the assessment as it may think fit”. [43]

“I am unable to accept that Orton v Collins furnishes authority for the proposition that CPR 36 applies regardless of any conflict with primary legislation. The difficulty addressed by the court in Orton v Collins was that a Part 36 offer made by a claimant and accepted by a defendant did not comply with the formal requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 for a valid contract for the sale or other disposition of an interest in land, in that not all the agreed terms were set out in a single document. The claimant sought to escape from his Part 36 offer on that basis.” [44]

He concluded:

“For those reasons, my finding is that the Defendant’s Part 36 offer cannot have the consequences sought by the Defendant. Had the “one-fifth rule” operated against the Defendant in this case, the offer could have offered a sound ground for making a finding of special circumstances and awarding the costs of the assessment process to the Defendant, but the rule has operated in favour of the Defendant, which has already been awarded those costs.”