Are Undertakings from Incorporated Firms Enforceable?

Undertakings play an essential part in the eff ective operation of the legal system – in the conveyancing process most obviously, but in litigation also. All practitioners will need to have confi dence that any undertakings that they accept will be performed by those providing them, and that if they fail or refuse to do so, that they will be capable of being enforced. As such the legal standing of undertakings has long been a basic aspect of legal practice, but there are now warnings that there might be concerns as to the reliability of undertakings provided in certain circumstances.

So far as the SRA is concerned an undertaking is defi ned in the Glossary to the Standards and Regulations as being “a statement, given orally or in writing, whether or not it includes the word ‘undertake’ or ‘undertaking’, to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something”.

Based on this defi nition undertakings can be seen as being no less than promises given in the course of practice to another person who can be assumed to want or need to rely upon it to be met. The Codes of Conduct then stress the need for undertakings to be honoured with para 1.3 of both the Codes for Solicitors and for Firms also providing that solicitors must perform all undertakings that they provide within an agreed timescale, or within a reasonable timescale if no such time limit has been agreed in advance.

The evidence suggests that this traditional understanding as to the role and enforceability of undertakings continues to work well, with the Law Society commenting in its recent news item on this subject by regulatory expert Iain Miller of Kingsley Napley that there is no evidence of the reliability of undertakings having been questionable in the more than 1m property transactions conducted in the last 12 months.

In this regard it may well be that there is no great problem here that needs fi xing, but this does depend on the SRA choosing to become involved if a fi rm fails to honour an undertaking, and if they do not do so it may be necessary to apply to the court to enforce the obligation. Concerns have been expressed in the Supreme Court case of Harcus Sinclair v Your Lawyers [2021] UKSC32. The dispute arose from concerns as to the emissions from Volkswagen diesel cars and certain confi dential information was shared between the parties in this regard, obliging the respondent fi rm not to accept instructions for, or to act on behalf of, any other group of claimants in any relevant litigation. This information was then nonetheless shared with another fi rm in breach of this agreement, and the dispute therefore arose as to which fi rm could act in the substantial litigation dispute that then ensued.

The particular point in question was that the agreement had been signed by the individual solicitor concerned “for an on behalf of” the

THE EVIDENCE SUGGESTS THAT THIS TRADITIONAL UNDERSTANDING AS TO THE ROLE AND ENFORCEABILITY OF UNDERTAKINGS CONTINUES TO WORK WELL

respondent fi rm. An injunction was obtained on the basis of a contractual obligation but the High Court ruled that it had no jurisdiction to enforce the undertaking despite the breach. In due course the Supreme Court was asked to rule on whether the promise made was a valid undertaking and, if so, whether it was enforceable against the individual solicitor who had signed it and against that fi rm as well. The High Court had ruled that its supervisory jurisdiction over solicitors was confi ned to solicitors as individual offi cers of the court and did not extend to the limited liability partnerships and incorporated practices through which they might practise. The Supreme Court agreed with this view and, quoting Cordery on Legal Services agreed with the trial judge’s concerns as to whether those dealing with incorporated fi rms “are suffi ciently aware that undertakings given by them are not currently buttressed by the court’s supervisory jurisdiction” (para 148).

USER by Matthew Moore

So how should this gap in the operation of the legal system be addressed? The Supreme Court suggested that insisting on the undertaking being provided by an individual solicitor within the fi rm, rather than from the practice as an entity, would be a partial solution only. They instead expressed the hope that Parliament would address the lacuna that the judgment created in relation to the enforceability of undertakings by incorporated fi rms.

So where does this leave the fi rm that wishes to be sure on where it stands on this issue? One view is that the professional rules that are in place, that are commonly accepted to extend to licensed conveyancers also, mean that all other such concerns are perhaps exaggerated. To the extent that this remains a concern, however, it has been suggested that the undertaking should be expressed to be a contract supported by consideration so as to be enforceable as such. The Law Society has also suggested referring to the issue in fi rms’ retainer letters or terms of business, though it is not immediately apparent how this might reassure the client or protect the solicitor.

For the time being, however, greater care might be required when acting not so much in relation to the standard undertakings that make the conveyancing process tick, but more attention should perhaps be given to the more unusual circumstances that might arise in litigation.

To fi nd out more about how Infolegal can assist your fi rm with its compliance, please email

enquiries@infolegal.co.uk.

Matthew Moore is a director of Infolegal Ltd, which provides guidance on this issue, including templates and policies tailored for sole practitioner users. See www.infolegal.co.uk