What Constitutes A Breach Of Solicitor’s Undertaking?

An undertaking is a commitment by a solicitor to do something or not do something. Failing to comply with an undertaking can result in disciplinary action being taken by the Solicitors Regulation Authority SRA).

The definition of an undertaking

An undertaking is defined as:

  • an oral or written statement of an intention to do something or refrain from doing something (the word undertaking need to be included),
  • which is made on behalf of you or the firm you work for during your job,
  • to someone who reasonably relies on it (i.e. a client).

All these components must exist for an undertaking to be present.

Other factors which are relevant when distinguishing an undertaking from an unenforceable promise include:

  • a benefiting party cannot assume everything is an undertaking – there is a considerable difference between a solicitor stating they will return a phone call and forgetting and failing to transfer money on completion day when managing a property transaction
  • the reliance placed on the statement by the benefiting party is more important than the solicitor’s intent when making the announcement
  • if a time frame has been agreed it is more likely an undertaking exists

How solicitor’s undertakings are enforced

An undertaking can be enforced by the benefiting party in the following ways:

  • bringing a civil action for specific performance and/or damages
  • applying to the court to exercise its intrinsic authority to order a solicitor (as an officer of the court) to fulfil with an undertaking

The consequences of an undertaking being breached

Although the SRA cannot enforce a solicitor’s undertaking, it can sanction a solicitor for breach.

An example of this is the case of Global Marine Drillships Limited v William La Bella and Others [2014] EWHC 2242 (Ch). The claimant had intended to purchase a deep sea oil drilling vessel with funding from JP Morgan. The bank required standby letters of credit and insurance as security for the loan. The first defendant informed the claimant he could obtain these letters for a fee. The second defendants were Mr La Bella’s solicitors, Landmark, which had been created by the third defendant, Miss Yildiz.

It was agreed the claimant would transfer £7 million to Landmark to enable it to affect the requisite insurance. Miss Yildiz gave an undertaking to use the money for insurance, failing which it was to be returned to the claimant. This undertaking was made on behalf of Landmark and personally.

After the monies were transferred, Mr La Bella insisted Miss Yildiz deposit the monies into certain bank accounts. Mr La Bella threatened Miss Yildiz in emails and in person, stating he would report her to the Law Society.

Miss Yildiz subsequently transferred £5 million from Landmark’s client account to another account as requested by Mr La Bella. Mr La Bella failed to obtain the credit letters. After cancelling the contract with Mr La Bella, the claimant requested the return of the £7 million. Unfortunately, the account the £5 million had been transferred into turned out to be that of a car dealership in Norwich. Most of the monies were never recovered. Landmark was only able to transfer back £2 million of the funds.

The claimant maintained the £5 million had been paid to the car dealership without authority and in clear breach of undertaking.

The court agreed, stating none of the funds were used for the purpose stated, namely purchasing insurance. Furthermore, Mr Justice Newry stated that the fact Mr La Bella became aggressive and applied pressure to Miss Yildiz was no defence.

An example where it was held no undertaking was given

The more recent case of Greenpine v Howard de Walden and Greenpine v Charles Russell Speechlys [2016] EWHC 1923 (Ch) illustrates when a solicitor’s words do not constitute an undertaking.

In this case, the defendant solicitor told the client “we will complete on receipt of funds”. Timothy Fancourt QC ruled that an enforcement of undertaking is a quasi-disciplinary matter, so it was appropriate to take the definition of “undertaking” from the glossary in the Solicitors Regulation Authority Handbook (2012).

He then examined how the claimant would have reasonably understood the statement in the context of which it was given. He held that there was no particular pressure to complete and in his view, the defendant was merely being polite when answering a question about the completion dates. The use of the word “will” did not turn the statement into an undertaking.

How solicitors can protect themselves regarding undertakings

The above case illustrates the fine line between a polite comment and an undertaking. To protect themselves from a civil claim or SRA intervention for breach of undertaking, a system should be in place to:

  • ensure undertakings are given only when intended,
  • monitor and enforce compliance with undertakings, and
  • record:

a) when undertakings have been given, and
b) when they have been discharged

We have been helping legal professionals with professional disciplinary and regulatory hearings for over 20 years. If you have any questions relating to breach of undertakings, please call us on 0151 909 2380 or Free Online Enquiry and I will soon be in touch.