In continued partnership with Paragon, Beale & Company Solicitors LLP – who provide specialist legal advice to the legal sector – have produced a paper exploring the impact of the Harcus Sinclair LLP v Your Lawyers Ltd case.

The recent Supreme Court decision in Harcus Sinclair LLP v Your Lawyers Ltd [2021] UKSC 32 has clarified that there are, as the law currently stands, significant differences in the options for enforcing solicitors’ undertakings which depend on the regulatory structure of the firm on whose behalf the undertaking is given. Law firms may face professional negligence claims from their clients if they accept an undertaking from another firm, which is ultimately not enforceable, and their client suffers loss as a result. Practitioners should carefully consider the impact and implications of the undertaking given and what enforcement routes are available if it is broken. 

What is a solicitors’ undertaking?

A solicitors’ undertaking is a promise by a solicitor to do, or refrain from doing, a particular act. There is no requirement that the word “undertaking” needs to be given for an undertaking to be made, but it must be a promise given by a solicitor in his capacity as a solicitor.

Enforcement of solicitors’ undertakings

If a solicitor fails to comply with an undertaking given, there are several routes that are potentially available against the solicitor or firm:

1. Under section 50 of the Solicitors Act 1974 the High Court has power to make orders disciplining solicitors for misconduct and requiring them to comply with their obligations because they are officers of the court.

  • Enforcement can be taken by the recipient of the undertaking by use of CPR Part 8 procedure to seek relief on a summary basis to the High Court or County Court.
  • That application is a relatively simple process without the need for pleadings, disclosure or trial.
  • The court can exercise its powers to make an order enforcing the undertaking or grant compensation for its breach.

2.  A breach of contract claim on the basis that the undertaking was a contract (or was given in a deed).

  • Undertakings may also be contracts if the requirements for contract are met (offer and acceptance, consideration, intention to create legal relations and certainty of terms).
  • If disputed, a claim under CPR Part 7 would need to be brought and damages for breach of contract may be awarded.

3. Disciplinary proceedings before the Solicitors Disciplinary Tribunal (SDT) for professional misconduct.

  • Outcome 1.3 of the Solicitors Regulation Authority’s (SRA’s) Code of Conduct for Firms 2019 and Outcome 1.3 in the Code of Conduct for Solicitors requires firms/solicitors to perform all undertakings within an agreed timescale or within a reasonable amount of time.
  • The SRA may therefore take action either internally or by referring an allegation to the SDT for those firms/solicitors who breach an undertaking.
  • The SDT can impose sanctions but cannot give any order to redress the recipient of the undertaking.

The distinction in remedies available against incorporated law firms 

The dispute in Harcus Sinclair v Your Lawyers arose out of a term in a non-disclosure agreement between two firms of solicitors that were contemplating entering into an agreement to progress group litigation against Volkswagen in relation to the VW emissions scandal.

Your Lawyers, who were further forward in the claims process, agreed a non-disclosure agreement with Harcus Sinclair on terms that they would share confidential information with Harcus Sinclair if they “undertook” not to accept instructions from any other group of claimants without Your Lawyers’ express permission. The collaboration did not ultimately take place and Harcus Sinclair started acting for another group of claimants. A dispute arose as to whether Harcus Sinclair were in breach of the non-disclosure agreement and whether this promise was a solicitors’ undertaking.  

The court held that the term was enforceable as a contractual term but was not a solicitor's undertaking because the subject matter of the undertaking was a business arrangement. The court nevertheless went on to consider (obiter dicta) whether, had there been an undertaking, it could be enforced against the solicitor who signed the non-disclosure agreement. The court found that the undertaking could not be enforced as it was signed “for and on behalf of” Harcus Sinclair LLP which was a separate legal entity and was not a solicitor. The court stated that incorporated bodies are not subject to the court’s jurisdiction to supervise solicitors’ conduct.

Comment

As made clear by the Supreme Court in Harcus Sinclair v Your Lawyers, there is a significant difference in the options available for enforcement of undertakings against incorporated firms. LLPs (and other incorporated bodies) are not subject to the court’s inherent jurisdiction to hold solicitors to their undertakings. By contrast, if the undertaking is given by an individual solicitor in his own name or on behalf of an unincorporated partnership, the court will be able to enforce the undertaking. Incorporated firms are of course still accountable to the SRA and their breach of undertaking may result in professional misconduct allegations against them but any disciplinary action in this regard will not result in redress for the recipient of the undertaking.

There is significant risk that solicitors will continue to rely on undertakings in circumstances where the court's inherent jurisdiction does not afford the protection they expect. Law firms may face professional negligence claims from their own clients if they accept an undertaking from another firm, which is ultimately not enforceable, and their client suffers loss as a result. To combat such claims solicitors must give careful consideration in relation to who is giving the undertaking and advise their clients what options there will be for enforcement if breach occurs. If obtaining undertakings from incorporated firms, solicitors should consider whether it is appropriate to:

  • Demand that the solicitor who gives the undertaking does so personally and not as agent of the firm.
  • Demand that the undertaking is provided in contract.

The above steps are not however particularly satisfactory solutions to the problem. Solicitors may naturally be unwilling to provide personal undertakings. In addition, the court will not order the performance of an undertaking if it is impossible for the solicitor to perform it. This would be the case where the solicitor providing the undertaking does not have the authority to ensure the firm complies with the undertaking or if it is impossible for the firm to do so. The only redress in those circumstances would therefore be compensation and that would be against the individual solicitor.

A contractual claim cannot be assumed and would be fact specific. In ensuring the undertaking is provided in contract, it is desirable for that to be expressly acknowledged between the parties. The necessary documentation will need to be prepared which will undoubtably result in additional time and cost pressures.

Given the importance of undertakings in legal practice it is hoped that Parliament will address the lacuna by amendment to the current legislation. In the meantime, practitioners should be alive to these issues and advise their clients accordingly.

This article has been written by Samantha Winstanley, of Beale & Company Solicitors LLP. If you have any questions about Beale & Company, Paragon or the above article please do not hesitate to get in touch.


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Ryan Senior
E rsenior@paragonbrokers.com
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Piers Winton
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This article is intended to provide commentary and general opinion on its subject matter. It is not to be regarded and/or relied upon as a substitute for professional advice which takes account of specific circumstances and/or any changes in the law and practice. No responsibility can be accepted by the firm or the author for any loss occasioned by any person acting or refraining from acting on the basis of this document.