Undertakings – what you need to consider following Harcus Sinclair v Your Lawyers

Following the Supreme Court’s recent decision on solicitors’ undertakings, Iain Miller looks at what this might mean for solicitors and firms.

Whilst undertakings are an important part of day-to-day work for most solicitors, the legal principles that underpin them have not changed for many years.

However, the Supreme Court in Harcus Sinclair v Your Lawyers [2021] UKSC 32 has thrown a spanner into the works that all solicitors need to consider.

The last 20 years or so have seen the solicitors market become dominated by legal entities; the majority of these are LLPs, but limited companies also form part of the picture.

These entities are regulated by the Solicitors Regulation Authority (SRA) but – unlike the solicitors that own them or are employed by them – they are not ‘officers of the court’.

That title relates to the entirely separate and ancient inherent jurisdiction the court has over its individual officers. Within the legal professions, it is unique to solicitors.

This arcane jurisdiction has few remaining practical consequences, save that the Supreme Court confirmed in Harcus Sinclair v Your Lawyers that the court has no jurisdiction to summarily enforce undertakings against these entities in the way it can against individual solicitors.

The Supreme Court also made clear that, even if an individual solicitor signs the undertaking on behalf of their firm, they are acting for a disclosed principle and are therefore not personally liable.

Does this change anything?

There is a debate within the profession as to how significant this issue really is.

SRA-regulated entities are still obliged under the SRA Codes of Conduct to comply with undertakings and can be subject to disciplinary action if they don’t.

Also, in many cases, the undertaking might be enforceable against the entity as a contract.

Licensed conveyancers have been giving undertakings since 1985 without being officers of the court.

In the financial year 2020 to 2021, there were over 1 million residential property transactions in England and Wales, which would have each involved more than one undertaking.

There is no evidence that compliance is an issue.

The significance of the Supreme Court decision is more to do with confidence in the system than the enforceability of undertakings.

What does this mean in practice?

Ultimately, it’s likely that practices will adapt to the Supreme Court decision and little will change.

The ‘unique selling point’ of a solicitor’s undertaking is so strong, with undertakings being breached so infrequently, that this decision is likely to make little practical difference.

However, firms may want to take the following practical steps:

Consider discussing undertakings with clients

Consider whether you need to raise this issue with clients. This could be either in the retainer letter or at an appropriate stage in the transaction.

If raised other than in the correspondence setting out the retainer, it would be wise to have a written record of the discussion with the client.

Review your undertaking acceptance processes

Review the firm’s processes for accepting undertakings from other firms.

Most firms’ policies focus on the management of the giving of undertakings, but the Supreme Court’s decision emphasises that there are risks around relying on undertakings.

These risks primarily relate to undertakings that might be more difficult to enforce either because of the absence of the inherent jurisdiction or because they do not fit within the proper confines of a solicitor’s undertaking.

That risk is greater when the undertaking arises outside the standard undertakings (such as those given in residential conveyancing) and is more bespoke in nature.

Your firm may wish to consider whether such undertakings should refer expressly to consideration so that the undertaking can be enforced as a contract.

Firms should also familiarise themselves with another aspect of the Supreme Court decision that restricts solicitors’ undertakings to those given essentially as part of their work for clients.

In particular, the Supreme Court distinguished these from undertakings given as part of a solicitor’s business.

It’s not yet clear whether the SRA will now take the same approach.

Explore the option of personal undertakings

Consider whether you need to seek a personal undertaking from a solicitor working in the firm you’re dealing with in order to protect your client’s interests.

The Supreme Court canvassed this as a partial solution and there is evidence that some firms have adopted this practice, while others have decided not to.

The court may be reluctant to exercise its inherent jurisdiction where the individual responsibility was created in these circumstances.

There must therefore be some question as to whether adding the ability to enforce under the inherent jurisdiction really has any benefits.

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