Undertakings: as good as gold?

On 23 July, the Supreme Court handed down its decision in Harcus Sinclair LLP v Your Lawyers Ltd, confirming that incorporated firms of solicitors are not 'officers of the court' and that only undertakings given by individual solicitors or traditional partnerships can be enforced using the court’s summary jurisdiction.

I say 'confirms' advisedly because that has always been the position. As I stated in my book – The Law of Legal Services – in 2015 the court’s supervisory jurisdiction extends only to people (or bodies) who either are solicitors, act as solicitors or pretend to be solicitors – because someone who is not in any of those categories is neither an officer of the court nor purporting to be one.

Although in Harcus, the court did not doubt the significance of the summary jurisdiction as a buttress for conveyancing, it is not entirely clear that it has been of great practical significance.

It appears to be rarely used, does not apply to other branches of the legal profession, is inappropriate where there are factual disputes, is not that simple and inexpensive, and probably comes some way behind the threat of disciplinary proceedings as a deterrent.

The rock-solid reliability of undertakings is, however, vital. Harcus has provided a wake-up call to those for whom undertakings may have become just another administrative routine.

Compliance with undertakings

There are two interests in ensuring compliance with undertakings – the interests of the public and the recipient.

The public interest is that solicitors’ promises in a professional capacity can be trusted without question. That is essential to the role of solicitors in property transactions and the administration of justice.

The second interest is that the recipient must not be prejudiced by a breach. In the public interest, breaches must be deterred, for the recipient the priority is redress.

Regulators and tribunals are not established to provide redress or remedies. The Solicitors Disciplinary Tribunal has no power to award compensation nor (at least directly) to order compliance.

It is also unlikely to hear a case within any timescale relevant to transactional work. The Solicitors Regulation Authority (SRA) may impose fines which (unless the culprit is a licensed body) are limited to a modest amount.

It seems likely, however, that in the case of clear breaches, the threat of a complaint to the SRA is a powerful pressure to get compliance. Sometimes, where the cost of compliance to the solicitor is very high, more pressure can be required. In those cases, the SRA does have potentially relevant powers to deal with corporate breaches.

The SRA’s Authorisation of Firms Rules allow the regulator to impose conditions on the continued authorisation of a corporate firm to practise. These conditions may specify requirements that must be met or steps that must be taken. Complying with an outstanding undertaking could be such a step.

It is for the recipient to consider, at the time the undertaking is offered, how it might be rapidly enforced. Reporting to the SRA may not be sufficient to secure compliance and compensation may well be relevant.

Therefore, it’s essential that the undertaking is enforceable as a contract. Given that a promise is only a professional undertaking if it is relied upon, and solicitors are not in the habit of giving undertakings gratuitously, professional undertakings will often be supported by consideration and upon scrutiny found to amount to contracts.

That is not, however, enough and recipients should seek undertakings which are expressed in a way which makes their contractual effect crystal clear. A recipient needs to ensure the best chance of summary judgment or interim relief based on contract.

A further concern for recipients is to ensure that what is being given is actually a professional undertaking. For standard undertakings, such as in conveyancing matters, this is unlikely to be in doubt, but for unusual promises it may be a significant problem.

Takeaways from Harcus

In Harcus the undertaking was unenforceable by the court, not because it was given by a corporate firm but because it wasn’t a professional undertaking at all.

The court identified two questions, supported by a range of indicators, to establish whether a particular promise was an undertaking given in the capacity of a solicitor. If the reason it’s required and the substance of the undertaking both concern actions which solicitors regularly do in their ordinary practice it is likely to be a solicitors’ undertaking.

If an undertaking is not given in the capacity of a solicitor, it may also not be given in the course of private practice for the purposes of professional indemnity cover of the civil liability created.

Routine personal undertakings should not be sought from or given by individuals within corporate firms. For misconduct, principals are responsible for breaches of undertakings by their organisation. Individuals shouldn’t undertake without complete control of performance. The price of attempting to preserve a theoretical chance of a summary remedy is likely to be an argument and delay for the client.

The position of undertakings from corporate law firms has not suddenly changed as a result of Harcus. Thousands of undertakings are given and performed each year without problem.

When difficulty does arise it’s often because of undertakings which should never have been given or accepted, questions of authority, unclear wording or simply a lack of sufficient care and formality. Undertakings are a serious business.

 

John Gould is a senior partner at Russell Cooke and author of The Law of Legal Services and Practice.