Ethics - Duties to Third Parties (9) Flashcards
What is the need for undertakings in a solicitor/client relationship?
Undertakings are often given by solicitors in order to smooth the path of a transaction. They are a convenient method by which some otherwise problematic areas of practice can be avoided.
What does undertaking mean?
In essence, an undertaking is an enforceable promise. For the purposes of the SRA Standards and Regulations, the SRA Glossary defines an undertaking as:
a statement given orally or in writing, whether or not it includes the word ‘undertake’ or ‘undertaking’ to someone who reasonably places reliance on it, that you or a third party will do something or cause something to be done, or refrain from doing something.
A solicitor must perform all undertakings given by them and do so within an agreed timescale or, if no timescale has been agreed, then within a reasonable amount of time.
The SRA Glossary definition of an undertaking is quite wide. Any oral or written statement made by a solicitor to do or not do something, whether given to a client or to another third party (such as another solicitor), may be an undertaking. Indeed, even if such a promise is made on a solicitor’s behalf by a member of their staff, it may constitute an undertaking. It is not necessary to use the word ‘undertake’ for the promise to amount to an undertaking. Even a promise to give an undertaking will usually be interpreted as an undertaking, and therefore will be binding on the solicitor concerned.
A solicitor is not obliged to give or accept an undertaking. A solicitor should think carefully when considering whether to give an undertaking. Once the undertaking has been relied upon by the recipient, it can be withdrawn only by agreement.
What are the consequences if a solicitor breaches an undertaking?
Where a solicitor gives an undertaking, the terms of that undertaking will usually be personally binding on the individual solicitor concerned.
If a solicitor fails to comply with an undertaking, the solicitor may be sued personally by the recipient. The solicitor will also breach the Code of Conduct for Solicitors and may be disciplined by the SRA or the Solicitors Disciplinary Tribunal.
The obligation in Paragraph 1.3 is replicated in the SRA Code of Conduct for Firms.
Undertakings given by solicitors, non- admitted staff, and also undertakings given by anyone held out by the firm as representing the firm are binding on the firm. For example, if an undertaking given by an assistant solicitor is not honoured, there will be a breach of professional conduct by the solicitor and also by the partners of the firm.
Solicitors must be able to be able to justify their decisions and actions and demonstrate their compliance with their obligations under the SRA’s regulatory arrangements (Paragraph 7.2).
A solicitor should therefore maintain an effective system that records when undertakings have been given and when they have been discharged.
What should a solicitor consider regarding the terms of an undertaking?
An undertaking is binding regardless of whether it is given orally or in writing. From the solicitor’s point of view, it is advisable to give undertakings in writing, so that there can be no dispute as to the terms of the undertaking. If, however, it is necessary in the circumstances to give an oral undertaking, the solicitor should ensure that an attendance note recording the undertaking is placed on the client’s file and that it is confirmed in writing as soon as possible.
An undertaking need not be contractual in nature. For example, there is no obligation for consideration (whether in monetary or other forms) to be present for an undertaking to be enforceable against a solicitor. However, given the binding effect of undertakings, and the consequences for breach, solicitors should take just as much care in drafting undertakings as they would do when drafting a contract for a client. Although not expressly stated in the Code for Solicitors, it is likely that any ambiguity in the wording of the undertaking will be interpreted in favour of its recipient.
The Law Society has agreed standard wording for undertakings which commonly arise in practice, for example an undertaking required from the seller’s solicitor in a conveyancing transaction to discharge the mortgage over the property on completion. Even when presented with an undertaking on the ‘standard’ form, the solicitor must check the wording carefully in the light of the particular transaction to ensure that it is appropriate.
What happens if a solicitor is called upon to undertake an act which is outside of the solicitor’s control?
A solicitor may be called upon to undertake to perform an act which is outside the solicitor’s control, such as to forward documents which are not in the solicitor’s possession. The simple fact that the solicitor is unable to perform the undertaking without the cooperation of the client or another third party does not discharge the solicitor’s obligation to perform, and the undertaking remains enforceable.
Providing an undertaking which is wholly reliant on the action/ inaction of a third party should be avoided given the binding nature of such an undertaking. In other appropriate circumstances, a solicitor may seek to give an undertaking that, in respect of the example above, they will use their ‘reasonable endeavours’ to obtain and provide the documents requested. This will impose a lesser obligation upon the solicitor, just as such a ‘reasonable endeavours’ obligation in contract imposes a lesser obligation on the contracting party.
However, it may not give the party who might seek to rely on it the same comfort as an absolute undertaking, and the recipient may therefore choose not to accept it, which may cause delay to the transaction.
What is meant if an undertaking is ‘on behalf’ of a client?
(1) Will not prevent the undertaking from being enforceable as against the solicitor, who will remain personally liable.
(2) It is possible for a solicitor to give an undertaking ‘on behalf’ of a client and exclude personal liability by expressly disclaiming in clear terms.
(3) Unlikely to be accepted by the proposed recipient, as their ability to enforce it (and therefore rely on it) will be greatly reduced.
In what timescale do undertakings need to be performed?
(1) Undertakings must be performed ‘within an agreed timescale’, which is expressed when the undertaking is given.
(2) Where no timescale has been agreed, the undertaking must be performed within a ‘reasonable amount of time’.
(3) What is ‘reasonable’ will depend upon the facts of each case, and so this element of uncertainty should be a consideration when preparing to give or receive such undertakings.
When an undertaking is given in respect of the payment of costs, what does this mean?
The term ‘costs’ will be implied to mean proper costs unless a specific amount is agreed. Therefore, a solicitor is able to request an assessment of the costs by the court if costs are not agreed.
What kind of authority must be given by a client before the solicitor gives an undertaking?
(1) An undertaking is a personal obligation on the solicitor who gave it, and therefore the solicitor will be held liable for it, even if performance would put the solicitor in breach of his duty to the client.
(2) A solicitor must have clear and express authority from the client before giving any undertakings.
(3) When such authority has been received, it may be withdrawn by the client at any time until the solicitor has acted upon it, even if it is expressed to be irrevocable.
How can a solicitor’s undertaking be enforced in the courts?
(1) Court Enforcement/Compensation: Where a solicitor’s undertaking has been breached, an aggrieved party may seek summary enforcement or compensation for any loss.
(2) Indemnity Insurance: Firms are obliged to carry indemnity insurance to cover such claims. However, the value of such claims may well fall within the excess of those policies, leading to personal liability for the solicitor concerned.
(3) Solicitor’s Undertaking: The fact that an undertaking was given by a solicitor does not make it a ‘solicitor’s undertaking’ capable of enforcement by the court. A ‘solicitor’s undertaking’ for these purposes must have been given by an individual in their capacity as a solicitor (as opposed to in a personal or business capacity).
The rationale is that the court’s inherent jurisdiction is aimed a disciplining those performing the role of a solicitor. However, in practice most undertakings will satisfy this requirement.
In Harcus Sinclair v Your Lawyers [2021] UKSC 32, the Supreme Court confirmed that an undertaking given by an incorporated law practice, ie a limited company or LLP (or an undertaking given by an individual solicitor as agent for such a practice), is not capable of being enforced against that practice by the court under its inherent jurisdiction.
This is because an incorporated practice is a separate legal entity. This case has highlighted a sharp divide on the enforcement of undertakings which Parliament may or may not address in due course. Certainly, for the time being, individual solicitors should refer to their firm’s policy on accepting undertakings from incorporated practices.
Where an undertaking is not enforceable by the court, the redress for its breach will be a claim under contract, negligence or breach of statutory trust depending on the facts.
A breach of any undertaking is likely to be a breach of professional conduct. However, given the court’s jurisdiction over solicitors concerning undertakings, the SRA does not usually investigate a breach of an undertaking given to the court itself, unless the court reported the matter to the SRA.
How can a solicitor’s undertaking be enforced in the SRA and Solicitors Disciplinary Tribunal?
(1) Professional Conduct Breach: Breach of an undertaking by individuals and firms (including solicitors and incorporated practices) is a breach of professional conduct.
(2) Enforcement of Undertaking Jurisdiction: The Legal Ombudsman, the SRA and the Solicitors Disciplinary Tribunal have no power to enforce the performance of an undertaking. Neither can these organisations direct that a solicitor pay compensation to an aggrieved third party.
(3) Investigatory Powers: They may investigate the matter and impose disciplinary sanctions, as appropriate, against the solicitor, the firm, its members or directors (up to and including, in the case of the Solicitors Disciplinary Tribunal, striking a solicitor off the roll of solicitors).
What duties does a solicitor have to the court?
(1) Upholding Rule of Law and Proper Administration: A solicitor has a duty to act in a way that upholds the constitutional principle of the rule of law and the proper administration of justice (Principle 1).
(2) Client Best Interests: A solicitor also has a duty to act in the best interests of each client (Principle 7). The potential for conflict between these duties can present itself particularly in the context of conducting litigation.
(3) Conflict of Principles: The Principles which safeguard the wider public interest take precedence over an individual client’s interests. Principle 1 is therefore the overriding duty.
(4) Informing Client: The introduction goes on to provide that a solicitor should, where relevant, inform the client of the circumstances in which the solicitor’s duty to the court and other professional obligations outweigh his duty to the client.
What is the solicitors duty not to mislead the court?
(1) Duty Not to Mislead the Court: You must not mislead or attempt to mislead the court (or others), either by your own acts or omissions or allowing or being complicit in the acts or omissions of others (including your client).
Examples: Helping a client to create a false alibi or making false statements to the court.
(2) SRA Principles: This duty is part and parcel of the fundamental requirements for a solicitor to act with honesty (Principle 4) and integrity (Principle 5) and uphold public trust in the profession (Principle 2).
(3) Criminal Litigation Context: Frequent consideration for solicitors acting for the defence in criminal cases. For example, a solicitor may be faced with a client who admits their guilt to the solicitor during the course of the legal proceedings, but nevertheless insists on pleading not guilty and on giving evidence in the witness box, denying guilt. The duty not to mislead the court would require the solicitor to decline to act in such circumstances.
(4) Sanctions: Regarded by the court and must be regarded by any disciplinary tribunal as one of the most serious offences that an advocate or litigator can commit. It is not simply a breach of a rule of a game, but a fundamental affront to a rule designed to safeguard the fairness and justice of proceedings. Such conduct will normally attract an exemplary and deterrent sentence.
What professional conduct obligations does a solicitor have during litigation?
(1) Evidence: A solicitor must not misuse or tamper with evidence or attempt to do so.
(2) Submissions: Must only make assertions or put forward statements, representations or submissions to the court or others which are properly arguable.
Examples of breaches of these duties are wide- ranging and include:
(a) calling a witness whose evidence the solicitor knows is untrue;
(b) continuing to act for a client if the solicitor becomes aware that the client has committed perjury or deliberately misled (or attempted to mislead) the court;
(c) constructing facts to support a client’s case or drafting documents relating to proceedings containing statements or contentions which the solicitor does not consider to be properly arguable before a court.
(3) Contempt of Court: A solicitor must not place themselves in contempt of court and must comply with court orders which place obligations on the solicitor and must not waste the court’s time.
Examples include:
(a) Making allegations without merit. This occurs when a solicitor brings a claim with insufficient investigation of the merits or the underlying legal background. There is little or no legal merit, or the solicitor may threaten/ initiate litigation in such a case in the hope that the opponent will pay a settlement rather than incur the costs of defending the case.
(b) Pursuing litigation for improper purposes. This occurs when a solicitor uses the court process for purposes not directly connected to resolving a dispute, for example to run up high costs for the client’s commercial rival or silencing criticism.
(c) Conducting excessive or aggressive litigation.
What professional conduct obligations does a solicitor have with regards to a solicitor gathering evidence by interviewing witnesses?
(1) Influencing: A solicitor must not seek to influence the substance of evidence, including generating false evidence or persuading witnesses to change their evidence. e.g. Where solicitors have knowingly helped criminal clients to create a false alibi and, where they have known that their client has obtained information to help their case by illegal means, helped them provide a false explanation as to where it came from.
(2) Bribing: A solicitor must not provide or offer to provide any benefit to witnesses dependent upon the nature of their evidence or the outcome of the case.
(3) Interviewing with Legal Representative: To avoid any suggestion of impropriety, it may be prudent to interview a witness in the presence of their legal representative.
