Undertakings Ben Handy, Barrister, St John s Chambers

Transcription

1 Undertakings Ben Handy, Barrister, St John s Chambers Published on 25 March 2014 What is an undertaking? a statement, given orally or in writing, whether or not it includes the word undertake or undertaking, made by or on behalf of you or your firm, in the course of practice, or by you outside the course of practice but as a solicitor or Registered European Lawyer, to someone who reasonably places reliance on it, that you or your firm will do something or cause something to be done, or refrain from doing something. This is obviously a very broad definition. No particular formalities are required. A simple oral promise can suffice. Everyday examples: Undertaking to: Repay costs if the other side s appeal succeeds (no matter who those costs were actually paid to! Dotesio v Biss (No.2) [1912] 56 Sol. Jo. 736) Acknowledge service for a defendant (failing which the claimant will obtain summary judgment); Pay stamp duties and penalties in relation to documents used in evidence that were not stamped; Pay a court fee within x days when the value of a claim increases (or else risk being struck out); File a certified copy of a birth certificate within x days, in the context of an infant settlement approval hearing (or else the fund will not be set up and the infant will lose investment income); Page 1 of 5

2 Stop doing something in order to avoid the expense of an injunction application; Pay damages to the respondent if an interim injunction later proves to have been unjustified, and to issue the Claim Form promptly (unless you are the Crown); Discharge any registered interest over land so that it can be transferred free of overriding interests (which can be very costly). The Law The law is firmly biased towards the recipient. Any ambiguity is resolved in their favour. It is therefore for the solicitor to make it clear that he is not giving an undertaking: Reddy v Lachlan, CA [2000] Lloyd s Rep. P.N Where the wording of an undertaking is ambiguous, that too will usually be construed in favour of the recipient: Templeton Insurance Ltd v Penningtons Solicitors LLP [2006] EWHC 685 (Ch). The words we on behalf of our clients undertake have been interpreted as an undertaking by the solicitors themselves: Re C [1908] 53 S.J. 119 Even an undertaking by a client may impose an enforceable duty on his solicitors to act when the client is relying on them to implement it: Refson Co v Saggers [1984] 1 W.L.R A solicitor may well be bound to fulfil his undertaking even when it has become unfairly onerous due to someone else s actions or inactions. It is for him to state that his undertaking is dependent on something: Citadel Management Inc v Thompson [1999] 1 F.L.R. 21. Even if he had made that clear, he had a duty to tell the recipient immediately when it became clear that the undertaking was impossible, or else be bound to honour it: Citadel v Thompson (obiter) And even doing so immediately may not be enough: Hole v Pugsley (A Firm) v Sumption [2002] P.N.L.R. 502 An undertaking can be set aside if fairness demands it, but only in exceptional circumstances: Capgemini India Private Limited v Krishnan & Ors [2014] (Unreported) The Consequences They can be serious! Where an undertaking has been given to the court: Page 2 of 5

3 1. Breach is contempt of court: Sandhu v Kaur [2012] EWHC 2679 (Ch) 2. An improperly given undertaking might lead to wasted costs: Salt v Corris Developments [2011] EWHC 3822 (Ch). Any other recipient can: 1. Ask the court to exercise its inherent jurisdiction over the conduct of solicitors in order to enforce the undertaking. i. Such a claim is based on the court s power to ensure honourable conduct on the part of the its officers (which doesn t always seem to apply to court staff); ii. Therefore a later legal claim based on the same facts is not an abuse, and limitation is no defence (though it will be considered); iii. The Court takes a strict approach - unless it is now impossible to perform, the Court will usually order the solicitor to fulfil the undertaking. If he then fails to do so he is in contempt of court. iv. If it is impossible to perform the Court will usually order the solicitor to pay compensation to the recipient who has suffered loss: Udall v Capri Lighting Ltd [1988] Q.B Commence specific legal proceedings for any losses arising as a result. For example: i. Under breach of contract, where there has been consideration for the promise given by way of the undertaking; ii. Under the tort of negligence. 3. Make a complaint of professional misconduct to the SRA, which may result in disciplinary action. The Solicitors Regulation Authority ( SRA ) Handbook makes performance of undertakings a matter of professional conduct. All solicitors must: perform all undertakings given by you within an agreed timescale or within a reasonable period of time : Outcome O(11.2) By, for example: Page 3 of 5

4 Maintaining an effective system which records when undertakings have been given and when they have been discharged : Indicative Behaviour IB(11.5) Where an undertaking is given which is dependent upon the happening of a future event and it becomes apparent the future event will not occur, notifying the recipient of this : Indicative Behaviour IB(11.6) Ensuring a proper system of governance, systems and controls, risk management, supervision and training to ensure that undertakings are given only when intended and that compliance with them is monitored and enforced: Chapter 7 (Management of your business) Failures may result in: a. A letter of advice ; b. A rebuke or warning; c. A fine; d. Referral to the Solicitors Disciplinary Tribunal who can order: i. Strike off; ii. Suspension; iii. Fines without financial limit and forfeit to Her Majesty ; iv. Exclusion of a solicitor from legal aid work; v. Costs. Guidance You do not have to give an undertaking: Chapter 11 SRA Handbook 1. Make sure you know whether you can give an undertaking yourself or in the firms name (bearing in mind you may be personally liable. 2. Understand the firm s policy: Are they forbidden entirely? Must you get permission? If they are given, must they be in standard form? How are they to be recorded? How are they monitored and chased up? 3. Be aware of the risk that the other side may see something as an undertaking, so be sure to expressly state that it isn t in writing. If you do have to give an undertaking, the SRA says make them SMART - Specified, Measurable, Agreed, Realistic, Timed 1. Obtain clear and informed consent from the client in writing. 2. Put every undertaking in writing. Page 4 of 5

5 3. Make them specific, not general. i.e. Exactly who is to do what, by when? 4. For example, avoid saying we will pay X, instead say we will give instructions to our bank to pay X if bank does not pay you are responsible for any losses. 5. Where the undertaking relates to costs, make sure to express they are payable in any event, or the undertaking may be void if the case does not proceed. 6. Try to avoid best endeavours or reasonable endeavours. It goes without saying and opens up the risk of a dispute about what that means. 7. Specify when the thing must be done, or else it will be implied that it is in reasonable time, which is open to interpretation. 8. Make it clear who is giving the undertaking, you or your client. Where possible, make it the client. If so say our client undertakes to do x not we undertake to you on behalf of our client to do x 9. Agree the exact form with the recipient in writing. 10. Only agree things that are realistic and within your control. Be wary of undertaking to do something that requires a third party to do something first. In that case, make it clear that the occurrence of that event is a precondition to performance of the undertaking. 11. Mark the file clearly and tell the right people. 12. Diarise the dates (including the dates the undertaking is dependent on). 13. Ask for formal release from the undertaking in writing once it is completed. 14. If there is a breach, make sure you tell the boss so it can be recorded and reported to the SRA as required. Most importantly, protect your client s position, and protect your own! NB: A health warning: this seminar is an introduction and does not purport to be comprehensive. It sets out the basic points and the main principles that arise from them. It is a summary and is no substitute for careful consideration of the proper case law and the facts of any particular case. Ben Handy Benjamin.handy@stjohnschambers.co.uk Page 5 of 5