Solicitors undertakings underpin a huge number legal transactions. They are relied upon heavily in the property sector.
The Supreme Court’s decision in Harcus Sinclair v Your Lawyers has undermined the power behind undertakings.
This has important implications for the profession.
What the Supreme Court (reluctantly) decided in Harcus Sinclair v Your Lawyers
An incorporated law firm is not an officer of the court. It cannot give an undertaking in its capacity as a solicitor.
The court’s power to enforce solicitors undertakings only applies to individuals and unincorporated law firms.
An undertaking given by a solicitor on behalf of a law firm is not enforceable against that individual. They are acting in their capacity as the firm’s agent.
How this undermines solicitors undertakings
Undertakings are so strong because they can be enforced in three ways:
- By the courts – failure to comply with an undertaking can result in contempt proceedings
- By the regulator (SRA) – solicitors undertakings are a professional conduct issue
- Contractual remedies – the recipient may be able to enforce the solicitor’s obligations in the usual ways
Harcus Sinclair v Your Lawyers removes the first protection for recipients of undertakings given by companies or LLPs.
Recent SRA figures reveal that about two-thirds of law firms are incorporated.
Can we rely on undertakings given by an incorporated firm?
The Supreme Court’s decision will have immediate implications for legal practice:
- Undertakings given by incorporated firms are instantly less powerful.
- Solicitors will be duty bound to advise clients about the enforceability of undertakings received.
- Recipients may insist upon personal undertakings, which will no doubt be resisted.
- Firms will have to amend the wording of the undertakings requested and given.
This has the potential to slow down transactions.
What next?
Solicitors will no doubt settle on a position which works in the short term. Legislation may be required to reinstate the court’s power.
Undertakings are too important to our profession – and jurisdiction – to allow to wither. The Law Society must use its lobbying position to ensure the government acts.
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