An undertaking is a commitment by a solicitor to do or not do something. It can be enforced against the solicitor by the courts and failure to comply with an undertaking can also be professional misconduct leading to disciplinary action by the Solicitors Regulatory Authority (SRA).
It can be made in writing or verbally and does not always have to include the word ‘undertaking’ and so sometimes it can be difficult to work out whether an undertaking has been given or not by a solicitor.
A firm of solicitors can now take many forms – from the traditional sole traders and partnership to limited companies (private and public) and alternative business structures (ABS). Many firms also operate as Limited Liability Partnerships (LLPs) which is an incorporated entity introduced by the Limited Liability Partnership Act 2000. The SRA data shows that in 2019/2020 there were 1,526 law firms operating as an LLP.
The recent case of Harcus Sinclair LLP v Your Lawyers Limited (2021) looked at whether an LLP could give a binding undertaking.
Harcus Sinclair LLP v Your Lawyers Limited (2021)
This was an appeal heard at the Supreme Court in March 2021 with judgment handed down in July 2021. It arose from a dispute between two firms as to who could act for group claimants in the substantial litigation concerning emissions from Volkswagen vehicles.
The question the court had to decide was whether a non-compete undertaking was unenforceable as an unreasonable restraint of trade and related to this whether the undertaking was a solicitor’s undertaking enforceable against the individual solicitor and also against the LLP law firm.
The Non-Disclosure Agreement (NDA) was signed on 11 April 2016 by Mr Parker at Harcus Sinclair and contained the following (non-compete) clause:
2. The Recipient undertakes not to use the Confidential Information for any purpose except the Purpose, without first obtaining the written agreement of the Discloser. The Recipient further undertakes not to accept instructions for or to act on behalf of any other group of Claimants in the contemplated Group Action without the express permission of the Discloser.
The High Court Decision
The first decision was made by the High Court in 2017.
The judge held that the non-compete undertaking took effect as a solicitor’s undertaking, but that the court’s supervisory jurisdiction was not available as against Harcus Sinclair. This was on the basis that the Court of Appeal in Assaubayev v Michael Wilson & Partners Ltd  EWCA Civ 1491;  PNLR 8 had decided that the court’s supervisory jurisdiction over solicitors was confined to solicitors as officers of the court and did not extend to limited liability partnerships and companies through which solicitors conduct their practice. The judge also held that the court’s supervisory jurisdiction was not available against Mr Parker, because he gave the undertakings contained in the NDA expressly on behalf of Harcus Sinclair
The Court of Appeal Decision
Permission was granted to Your Lawyers and the decision of the Court of Appeal was handed down in March 2019.
In relation to the non-availability of the jurisdiction over an LLP, the Court of Appeal considered itself to be bound by the decision in Assaubayev v Michael Wilson & Partners Ltd. There was a dispute between the parties as to whether the Court of Appeal had accepted or rejected the judge’s conclusion that the non-compete undertaking was a solicitor’s undertaking. The Court of Appeal’s order does not address the issue.
The Supreme Court
The issues that came before the Supreme Court were:
- Is the non-compete undertaking a solicitor’s undertaking?
- Does the High Court have an inherent supervisory jurisdiction over incorporated law firms, whether limited liability partnerships, such as Harcus Sinclair, or limited companies such as Your Lawyers, through both of which solicitors practise?
- Can the High Court’s inherent supervisory jurisdiction be exercised in this case in relation to Mr Parker?
- If the non-compete undertaking constitutes a solicitor’s undertaking that in principle is capable of enforcement against Harcus Sinclair and/or Mr Parker, should it be enforced notwithstanding that, applying contractual principles, as the Court of Appeal held, the non-compete undertaking constituted an unreasonable restraint of trade?
- If the non-compete undertaking was a solicitor’s undertaking, was the Court of Appeal wrong in holding (if it did) that this was irrelevant to the question whether the non-compete undertaking was contrary to public policy on the grounds of restraint of trade?
- Was the Court of Appeal wrong in holding that the non-compete undertaking constituted an unreasonable restraint of trade
As regards the first issue, the starting point is to note that a court’s supervisory jurisdiction to enforce solicitors’ undertakings arises from their inherent jurisdiction over solicitors as ‘officers of the court’.
Undertakings given by solicitors must be done so in their ‘capacity as solicitors’.
In deciding whether an undertaking is enforceable by the courts, there are two relevant questions:
The first concerns the subject matter of the undertaking and whether what the undertaking requires 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.
The second concerns the reason for the giving of the undertaking and the extent to which the cause or matter to which it relates involves 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 first instance decision (which concluded that the non-compete clause was a solicitor’s undertaking) on this issue was overturned.
Given this, it was unnecessary to proceed to determine issues 2 and 3 but the Supreme Court felt that they raised questions which were of general public importance.
It was made clear that:
Incorporated law firms authorised to provide solicitor services are not officers of the court. This is 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, whether they be solicitors, liquidators, bailiffs, receivers or sequestrators.
The critical difference where the undertaking is given on behalf of a solicitors’ LLP (or a limited company) is that it binds only the separate legal person constituted by the LLP, not its solicitor members. Mr Parker was signing the NDA as an agent and so there was no personal liability against him.
The Supreme Court declined to extend jurisdiction of the court over incorporated entities because it felt:
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…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.
The Supreme Court decided that the Court of Appeal was wrong in holding that the non-compete undertaking constituted an unreasonable restraint of trade.
Where does that leave us?
It seems that until such time as we have legislative certainty, there is a bit a bit of ‘lacuna’ where undertakings given by incorporated bodies are not as robust as those given by unincorporated bodies.
We can of course still refer the solicitor to the SRA for disciplinary action or bring a claim for breach of contract, but neither of these routes are quick and in the latter, cheap either.
Firm and clients alike should therefore review their reliance on and provision of undertakings going forward.