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When is an undertaking not a solicitor’s undertaking?

A solicitor’s undertaking is a commitment by a solicitor to do something, make something happen, or desist from doing something. Breaking a solicitors undertaking is serious stuff and can result in severe consequences for the promise-breaker. Not least because the High Court has supervisory jurisdiction over solicitors. As such, aggrieved solicitors can apply to the Court to order another solicitor to comply with an undertaking. And, if they fail to do so, the offending solicitor can be held in contempt.

However, a recent Supreme Court judgement that looked at the issue of solicitors’ undertakings could see them lose some of their power. And the consequences could be far-reaching.

What happened in this case?

The case focused on an emissions-related group action by Volkswagen customers against the car manufacturer. The claimant solicitor was experienced group litigation firm Harcus Sinclair LLP.

Initially, Harcus Sinclair LLP considered collaborating on the group action with Your Lawyers Ltd. As such, Harcus Sinclair provided a non-compete undertaking to Your Lawyers to receive confidential information about its clients. However, this collaboration did not go ahead, and instead, Harcus Sinclair decided to partner with Slater and Gordon.

In Harcus Sinclair LLP v Your Lawyers Ltd [2021] UKSC 32, Your Lawyers argued that Harcus Sinclair broke the undertaking. However, on 23 July 2021, the Supreme Court ruled that the non-compete undertaking was not a solicitor’s undertaking for two key reasons:

Firstly, if a law firm gives an undertaking, it has to be “in the course of practice.” The Court ruled that the proffering of the non-compete undertaking was not in the course of practice (acting on behalf of clients). Instead, it related to a potential business opportunity.

Secondly, even if the non-compete undertaking had been a solicitor’s undertaking, the Court could not compel personal compliance because a solicitor had not issued it – instead, the firm did. The Court does not have any supervisory jurisdiction over LLPs or other incorporated entities.

So, while the non-compete undertaking was enforceable as a contractual covenant, it was not a solicitor’s undertaking.

What are the implications of this decision?

It is the second reason for the Court’s decision that could lead to severe repercussions as it throws into doubt many existing undertakings that law firms have provided. Do solicitors know that many of the undertakings they have received – those issued by an incorporated entity and not an individual – are not subject to the Court’s supervisory jurisdiction?

Likewise, if this is known, will undertakings still be upheld when the only remedy for non-compliance is to seek damages.

Insurance and risk

Another matter that must be considered is how the recent decision might affect a firm’s insurance coverage and professional indemnity policy. Especially as an over-reliance on undertakings given by limited entities could result in professional negligence claims. What steps are now needed to minimise potential exposure to liability and manage the level of risk?

What is the solution?

To tackle this problem, the Supreme Court is proposing that, in the short term at least, any undertakings must be given personally by a solicitor as well as, or as an alternative to their law firm. However, this is unlikely to be welcomed by solicitors. How many are likely to want to put their professional reputations and careers on the line, especially in situations where they don’t personally have the power within their firm to ensure that compliance occurs?

Urgent legal reform is needed for efficient legal practice to continue.

Solicitor undertakings and conveyancing

Solicitor undertakings are used a lot in conveyancing transactions, providing reassurance to the solicitor and client sending the money before receiving the title. It has been standard practice for undertakings not to be given in a personal capacity. But now, conveyancers will have to think carefully about protecting clients if an undertaking comes from an incorporated entity rather than an individual solicitor.  How likely is it that conveyancers will be comfortable committing to personal undertakings with so much at stake?

The bottom line is that the Court’s decision weakens what has been a powerful legal tool. As a result, firms should now look at how they use undertakings and weigh up alternatives to protect themselves, their solicitors, and their clients.

Making sure your firm’s policies and procedures are robust is key. Implementing client onboarding that helps minimise error and mitigate risks all helps serve towards not only providing excellent service but also ensuring all communications with clients are clear and transparent.

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