Undertakings by Incorporated Entities: Protection Undermined

Failure to comply can lead to serious consequences for the solicitor, though thankfully such cases are uncommon.

Yet undertakings are an essential part of the conveyancing process. Briggs LJ said¹ in 2005: “Undertakings are the bedrock of our system of conveyancing.” The whole point of an undertaking is that the other party can rely unequivocally on the substance of the undertaken given.

The regulator defines an undertaking as: “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.”

A failure to comply with an undertaking can result in:

• Disciplinary action, not only against the non-compliant party but also their organisation;
• Proceedings for breach of contract; and
• Potentially an injunction requiring compliance (solicitors being subject to the High Court’s supervisory jurisdiction).

An undertaking should, therefore, only be given when you are certain you can comply.

Importantly, when a conveyancer working for an LLP or limited company gives an undertaking, they are not personally bound – rather, it is given on behalf of the organisation as its agent.

Extent of supervisory jurisdiction

It’s not often the court rules on solicitors’ undertakings, so the Supreme Court decision in 2021 in Harcus Sinclair v Your Lawyers [2021] UKSC 32 was particularly noteworthy. Conveyancers should by now have considered the potential implications for their own practices. The ruling in a dispute between two law firms concerned the extent to which the court’s supervisory jurisdiction applies: to solicitors only, or solicitors and law firms which are incorporated?

The SC said that if the undertaking in question required the solicitor to do or not do something which solicitors regularly do/don’t do in their ordinary professional practice; and the undertaking is given for a reason that involves work regularly carried out by solicitors in their ordinary professional practice, then it’s likely to amount to a solicitors’ undertaking.

But the court declined to rule that the court’s jurisdiction to enforce undertakings extends to undertakings given by LLPs and limited companies who are authorised to provide legal services. The court’s jurisdiction is based on a solicitor’s status as an officer of the court, a status which is not conferred by statute on any of the incorporated bodies authorised to provide solicitor services.

The ruling of the Court of Appeal noted the observation in Cordery on Legal Services: “Given that most solicitors now practise through some form of entity, the practical effect of the decision [of the Court of Appeal] in Harcus Sinclair is that most undertakings can now only be enforced by a breach of contract claim. Alternatively, an aggrieved party can hope that the risk of being reported to the SRA will encourage compliance. “

What does this mean?

The decision undermines the protection traditionally given by undertakings but the SC did acknowledge that this left the position unsatisfactory. The court stated that a potential ‘partial and temporary’ solution could be that a solicitor in an LLP/Ltd Co provides an undertaking in their personal capacity in addition to an undertaking given on the organisation’s behalf.

This state of affairs has been addressed by the Law Society by way of a practice note on undertakings which gives guidance around giving and accepting undertakings where the other party is an LLP or a limited company. The guidance ‘does not recommend’ that a solicitor gives a personal undertaking, given the personal risks.

¹Briggs & Another v Law Society v the SRA [2005] EWHC 1830