Solicitors at incorporated firms should not give personal undertakings

Boyce: Undertakings play a crucial role

Lawyers at law firms that are limited liability partnerships or limited companies should not give personal undertakings even though corporate undertakings are not enforceable, the Law Society has said.

A practice note on professional undertakings was issued almost a year to the day since the Supreme Court warned in Harcus Sinclair LLP v Your Lawyers Ltd 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 court said Parliament should extend its jurisdiction to cover incorporated firms.

The society said managers or employees in such firms might be asked in the meantime to give a personal undertaking, which could be enforced by the courts.

“A solicitor is under no regulatory obligation to give an undertaking regardless of the pressures that may be exerted on them by their client, their employer or any other party.

“We do not recommend the giving of a personal undertaking because of the risks involved. It is important to be aware that the undertaking is enforceable against the individual solicitor concerned.”

Incorporated firms should “consider their position in terms of the giving of undertakings and the pressures under which their solicitor managers and employees may be placed”.

Their policies on undertakings should consider who should give one, the wording of non-standard undertakings and training on the issue.

Firms should also consider “seeking assurances from your own firm’s personal indemnity insurer that the firm’s response to undertakings is aligned with the terms of its indemnity cover”.

Law firms receiving undertakings from incorporated firms should “have in place policies and procedures to deal with such requests”, potentially ensuring that consideration is given or using a deed, so they could be enforced contractually by courts.

Clients should be advised about “the inability to enforce undertakings in certain circumstances”, which could feature in the firm’s terms of business.

The Solicitors Regulation Authority has no power to order a solicitor to comply with the terms of an undertaking, but its codes of conduct require all the types of law firm as well as individual solicitors to do so.

“Providing training to all staff on undertakings issues is particularly important because authorised bodies, and their managers, are responsible for complying with undertakings given by any member of staff, including unadmitted staff,” the Law Society said.

“Firms should therefore consider limiting those members of staff who are permitted to give undertakings and should prescribe the way in which any undertaking is given.”

President I. Stephanie Boyce said: “Undertakings play a crucial role in the efficient running of many types of transactions and legal business.

“This is an important area for all solicitors, whether working in private practice, in-house or as freelance solicitors working for non-SRA authorised entities, not least because a breach of undertaking may be tantamount to professional misconduct.

“Conveyancing and litigation solicitors should particularly take note, as these practices rely on the giving and receiving of undertakings.”

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