Enforcement of Solicitors’ Undertakings

Professional undertakings are commonly used in residential conveyancing where the Law Society’s Code for Completion by Post is adopted, enabling a faster more convenient style of completion. Underpinning this is the security of a solicitor’s undertaking; each side having confidence that the various undertakings are going to be complied with by all the participating solicitors. These undertakings will usually include the redemption or discharge of any mortgage or loan out of the purchase moneys, authority to receive moneys, delivery of documents to the purchaser, notification that completion has taken place and authorisation to release the keys to the purchaser.

The confidence in this scheme for completion came from the availability of rapid summary enforcement of non-compliance with an undertaking under the court’s supervisory jurisdiction which made it extremely unlikely that a solicitor would fail to comply. A recipient of an undertaking could apply to the court for summary judgment and an order that the solicitor comply with the terms of the undertaking. Any failure to comply would result in the solicitor being held in contempt of court. However the effectiveness of this jurisdiction has been eroded after the judgment in Harcus Sinclair v Your Lawyers [2021] UKSC 32. The Supreme Court commented (obiter) that an undertaking given by an incorporated law firm (whether a limited company or LLP) cannot be enforced against a firm under the court’s supervisory jurisdiction. This is because an incorporated law firm has a separate legal personality and is not “an officer of the Court” pursuant to section 50 of the Solicitors Act 1974. Only where an undertaking is given by a solicitor personally or by a traditional partnership can it be enforced under the court’s supervisory jurisdiction.

In circumstances where the court’s supervisory jurisdiction cannot be relied upon the failure to comply can (i) be reported to the SRA as a matter of professional misconduct and the matter be investigated and/or (ii) a breach of contract claim made for specific performance or damages. In order for there to be an actionable claim in contract, the claimant must first prove that a valid contract was made for adequate consideration. Generally the courts have been quick to find that consideration has been given. In conveyancing situations, consideration will often be in the form of payment of the purchase price.

The comments in Harcus Sinclair has had a major effect on how law firms should address and deal with undertakings given by incorporated firms. Here are some factors to consider when dealing with undertakings given or received by incorporated firms:

1. All firms including individual solicitors regardless of the business structure, are subject to the SRA’s regulatory jurisdiction. Therefore any failure to comply with an undertaking can result in a complaint to the SRA. Any professional disciplinary proceedings are distinct from a claim under the court’s supervisory jurisdiction or civil claim and a firm/solicitor may therefore face both types of action at the same time.
2. A solicitor of an incorporated law firm may be asked to give a personal undertaking whether by the client or by an opposing firm. The benefit of course being that any failure to comply can be enforced under the court’s supervisory jurisdiction without the need to prove the contractual element. It is possible to give a personal undertaking where the solicitor is an employee of an incorporated firm however there is no obligation to do so. Where a solicitor decides to do so, the undertaking would be signed by the solicitor in his/her personally capacity and not by the incorporated firm. The Law Society do not recommend giving these types of personal undertakings because it is enforceable against the individual solicitor and not the firm.
3. Any incorporated law firm receiving an undertaking will want to ensure that it is clear on its face that it has been given pursuant to a contract between the parties and that consideration has been provided in return for the undertaking. The best form in which to do this is by deed to ensure that the undertaking can be enforced as a matter of contract. This will avoid the need of having to prove that there was a valid contract as part of proceedings.
4. Firms may want to ensure that any professional indemnity insurance covers liability for failure to comply with undertakings especially before giving an undertaking in a personal capacity. It is also worth checking that the policy covers undertakings given by contract or deed.

The decision in Harcus Sinclair is unlikely to be the end of the matter. The Supreme court commented that it was open to the court to extend the supervisory jurisdiction to cover incorporated firms but decided that it would not do so in this case. Unless the issue comes directly before the court again, the gap in the supervisory jurisdiction will likely have to be dealt with by a change in legislation. At the time of writing there are no statutory changes forthcoming and therefore practitioners must be mindful of they deal with undertakings given or received by incorporated law firms.

Article by Byroni Kleopa