The Solicitors Regulation Authority (SRA) has recently reached a regulatory settlement agreement with one law firm, Gudgeons Prentice in Suffolk, following a breach of a conveyancing undertaking.
First, practitioners may welcome a reminder of the regulatory rules on undertakings. An undertaking is more than a promise. It is an oral or written statement, which may or may not include 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”.
Each component must exist for it to amount to an undertaking. Both the SRA codes of conduct (Para 11.3) requires the giver of an undertaking to “perform all undertakings given by you, and do so within an agreed timescale or if no timescale has been agreed then within a reasonable amount of time”.
Failure to comply with a solicitor’s undertaking can amount to professional misconduct and possible disciplinary action by the SRA or the Solicitors Disciplinary Tribunal (SDT). It can result in a fine or a rebuke. An undertaking can also be enforced against the solicitor by the courts.
In 2018 the firm acted for a property developer in relation to the sale of a new build residential property. On 7 March that year, it provided an undertaking to the buyers’ solicitor to provide a Building Regulation Certificate and a structural defects insurance policy on or before completion.
The sale was legally completed on 23 April 2018. However, the firm did not provide the other side with the Building Regulation Certificate until 10 January 2019. Furthermore, no structural defects insurance policy was produced - merely a certificate of completion which provided reduced protection than under the policy itself.
A complaint was made and disciplinary action ensued. The firm admitted failing to perform all undertakings given by it within an agreed timescale or within a reasonable amount of time and in doing so, failed to achieve Outcome 11.2 of the SRA Code of Conduct 2011. It also admitted it “failed to behave in a way that maintains the trust the public places in you and in the provision of legal services” and therefore, breaching Principle 6 of the SRA Principles 2011. By reaching a regulatory settlement agreement, the firm avoided being referred to the Solicitors Disciplinary Tribunal.
When considering what sanctions to impose, the SRA noted that the firm had shown insight of the situation and understood the important role undertakings play in the delivery of legal services. Also, it was an isolated incident and the firm had fully cooperated with the SRA in its investigation.
The regulator concluded that a written rebuke was an appropriate outcome because:
- by failing to comply with the undertaking, the firm was reckless as to the risk of harm to the purchasers;
- by providing the architect’s certificate the firm took some remedial action to lessen the harm to the buyers, but some harm persists;
- a public sanction was required to uphold public confidence in the delivery of legal services.
The firm also agreed to foot the costs of the SRA's investigation in the sum of £300.
Firms and individual solicitors need to beware of the risks and potential problems associated with undertakings. This decision is a salutary reminder that undertakings should not be given unless the solicitor providing the undertaking is certain it can be fulfilled. Furthermore, the terms of an undertaking must be clearly drafted to avoid the risk of promising to do something that could be, or become outside of their control (as in this case).
You should always ask yourself whether this undertaking is appropriate in the particular circumstances and one for which you have authority to provide.
The key problem in Gudgeon’s case was that the firm did not have the actual certificate in its possession at the time the undertaking was given, so it should not have given the undertaken it gave. It could, however, have offered a qualified undertaken if thought had been given to the fact that it was not physically in possession – so, for example, ‘we undertake to provide the document after completion within 2 working days of receipt by us’ (though that raises the issue of whether the other side would accept a qualified undertaking).
Firms should have appropriate systems and controls in place in relation to the giving of undertakings. The risks will depend on factors such as practice area (conveyancing and commercial property being the obvious higher risk areas), size of firm, value of transaction etc. A checklist of issues to think through before undertakings are given would be wise.