Call for law to enforce undertakings given by incorporated law firms

Supreme Court: Reluctantly passed on making decision

Parliament should extend the courts’ supervisory jurisdiction over solicitors’ undertakings to cover those given by incorporated law firms, particularly LLPs, the Supreme Court said today.

It expressed concern that people dealing with incorporated law firms were not sufficiently aware that their undertakings “are not currently buttressed by the court’s supervisory jurisdiction”.

The decision in Harcus Sinclair LLP & Anor v Your Lawyers Ltd [2021] UKSC 32, the main thrust of which we have reported on separately, concerned a non-compete undertaking given by one law firm to another.

The Supreme Court decided that it was not a solicitor’s undertaking such as to engage the court’s jurisdiction.

This meant the court did not need to decide whether it was enforceable against the individual solicitor who gave it on behalf of his firm and also against that law firm, which was an LLP.

But it gave its views on the issue as it was one of the bases on which permission to appeal was granted, and also given the importance of undertakings across many areas of practice, particularly conveyancing.

Incorporated law firms authorised to provide solicitor services were not officers of the court, the ruling stressed, both because the authorising legislation has not made them so, “and because the court has yet to recognise any incorporated body as one of its officers, confining itself to the recognition of individuals”.

The court said the strongest argument in favour of expanding the definition was that “the court’s buttressing of professional undertakings within the provision of ‘solicitor services’ ought fairly to be equally available across all types of provider: ie that the jurisdiction should now be applied along functional lines, to all authorised providers of solicitor services, rather than continue to be status-based”.

The strongest argument against was that, since the Legal Services Act 2007, incorporated law firms need no longer be owned, controlled or even managed by solicitors, while licensed conveyancers have since 1985 “apparently been able to provide satisfactory undertakings without the court’s backing in terms of summary enforcement”.

The Supreme Court concluded, “with considerable reluctance”, that this was not “an appropriate occasion” for extending its inherent jurisdiction, first because it would only have the force of obiter dicta.

“Secondly, we consider that a properly informed decision would much better be made with the assistance of submissions from the Law Society, and from any other professional or regulatory body with a legitimate interest such as, for example, the Council of Licensed Conveyancers or the Solicitors Regulation Authority.

“Thirdly, although this continues to be an inherent jurisdiction, this question is probably better dealt with by legislation than by the courts, because of the availability of procedures for consultation which the court lacks.”

This meant that, had the undertaking in this case been a solicitor’s undertaking, it would not have been enforceable against Harcus Sinclair as an LLP nor against the partner who signed it – even though he was subject to the court’s jurisdiction – “for the simple reason that he did not give it in his personal capacity, but only on behalf of Harcus Sinclair”.

The court continued: “In the meantime, we share the judge’s concern about whether those dealing with incorporated law firms, and with solicitors’ LLPs in particular, are sufficiently aware that undertakings given by them are not currently buttressed by the court’s supervisory jurisdiction…

“It may be that, as the judge suggested, the lacuna may be addressed by ensuring that a relevant undertaking is given personally by a solicitor, as well as, or in the alternative to, the incorporated law firm for which he or she acts.

“But that may not always be a satisfactory solution where summary enforcement is sought, if the individual solicitor lacks the power within his or her incorporated law firm to ensure that compliance occurs.

“We take the view that this is at best a partial and temporary solution. We therefore express the hope that Parliament will consider the lacuna that this judgment has confirmed in relation to undertakings given by solicitors working for incorporated law firms, particularly LLPs.”

The court left open “for another occasion” the question of whether a solicitor may attract the court’s supervisory jurisdiction “by actively procuring the non-compliance by an incorporated law firm with an undertaking of a type which, if it had been given by a solicitor, would have been a solicitor’s undertaking”.

Iain Miller, a legal services regulatory partner at City firm Kingsley Napley, commented: “Today’s decision raises an important issue for all those who give and rely on undertakings.

“Whilst it is still possible to report an LLP to their regulator for failing to comply or bring a breach of contract claim, both will take time.

“The absence of a summary remedy is significant; not least because solicitors’ undertakings are seen as cast iron. Law firms and their risk teams will need to ensure that steps are taken to mitigate the impact of the Supreme Court’s decision.”

Aman Johal, director of Your Lawyers, which received the undertaking in the case, argued that the loophole identified by the ruling undermined “the entire legal system as solicitors often give undertakings on behalf of an entity, their firm, rather than personally in their own name”.

He advised those seeking an undertaking “to take a kitchen sink approach” and insist it was signed by the individual solicitor and partners personally as well as on behalf of the corporate entity.

The ruling also gave some guidance on when an undertaking from a solicitor would attract the court’s jurisdiction.

The generally accepted test was that the undertaking must be given by the solicitor in his or her ‘capacity as a solicitor’ and two questions should be asked to determine this: does the undertaking require the solicitor to do (or not to do) is something which solicitors regularly carry out (or refrain from doing) as part of their ordinary professional practice; and does the reason for giving it, and the extent to which the cause or matter to which it relates, involve the sort of work which solicitors regularly carry out as part of their ordinary professional practice?

“If both questions are answered affirmatively then the undertaking is likely to be a solicitor’s undertaking.”

The court decided that here the undertaking given by Harcus Sinclair did not meet the test: “A business arrangement between two law firms is not the sort of work which solicitors undertake as part of their ordinary professional practice.

“It is a business matter rather than a professional matter, even if the business in question relates to the provision of professional services.”

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