The Perils of a Solicitor's Undertaking

A recent decision by the Irish High Court (Peart J.) exposes some of the sloppy banking and legal practices which characterised the Madness, and have contributed to the scale of the crash. The case is remarkable in a number of ways and I may return to the sloppy practices on another occasion.

I will here confine myself to noting this summary by Peart J. - a former solicitor, be it noted ! - of how the court will approach an application to enforce a solicitor's undertaking:

In summary, the following principles emerge from the judgment of Laffoy J. and Geoghegan J. in Coleman, and the authorities considered therein:

1. The Court has an inherent jurisdiction in matters concerning the conduct of solicitors, being officers of the court, including but not confined to compliance with their undertakings.
2. It is both a punitive and compensatory jurisdiction.
3. It is discretionary and unfettered in nature requiring each case to be considered on its own facts and circumstances.
4. In its exercise, the Court is concerned to uphold the integrity of the system, and the highest standards of honourable behaviour by its officers - a standard higher than that required by law generally.
5. The order made by the Court can take whatever form best serves the interests of justice between the parties.
6. In the matter of undertakings, the Court must consider the entire undertaking in order to reach a conclusion as to its real ultimate purpose.
7. The Court may order compliance with the undertaking, though late, where there remains a reasonable possibility of so doing.
8. Even where the undertaking may still be complied with, the Court may nevertheless order the solicitor to make good any loss actually occasioned by the breach of undertaking, which may or may not be the entire of the sum which was the subject of the undertaking.
9. Where compliance is not possible to achieve by the time the Court is deciding what order to make, if any, it may order the solicitor to make good any loss actually occasioned by the breach of undertaking.
10. Carelessness or other form of negligence on the part of the person affected by the undertaking, and in relation to the matter the subject thereof, may be a factor which the Court will have regard to when determining what order may be fair and just.
11. Any order the Court may make ought not be oppressive on the solicitor. Nevertheless, gross carelessness or other conduct considered sufficiently egregious by the Court, though falling short of criminal behaviour or even professional misconduct, will entitle the Court, should it consider it just to do so, to order payment of the entire sum which was the subject of the undertaking, and not simply a lesser sum in respect of loss actually occasioned by the breach of undertaking.

To these statements of principle which I perceive to emerge from Coleman and the other cases referred to therein, I would add one other which is linked in a way to that at 11 above.

It is this. It seems to me that the special supervisory jurisdiction being exercised by the Court in these matters is not unlike an equitable jurisdiction, given the wide discretionary nature thereof, and its objective of ensuring that justice is done between the parties in a broad sense.

In my view, therefore, it seems to me that it is not inappropriate or otherwise wrong for this Court to have regard to the overall behaviour of the solicitor, somewhat akin to seeing whether a person who is claiming an equitable relief has come to court with clean hands, even where the undertaking may be still reasonably capable of being completed, and even where the loss actually occasioned and sustained by the claimant may be less than the entire sum which was the subject of the undertaking.

The Court went on to order that the firm of solicitors should pay over to the bank the entire amount of the loan (€3m) plus interest and costs. This was approximately €1 million more than it would cost to belatedly comply with the undertaking.

Now, that's what I call "non-oppression".

Update on Saturday, March 6, 2010 at 09:01PM by Fergus O'Rourke

(This is my second attempt to publish this follow-up; I was unaware that the first attempt, made almost exactly 24 hours ago, was unsuccessful, for mysterious reasons, until a few minutes ago).

In relation to the "oppression" point, it should be pointed out that, under the option suggested by the solicitors but rejected by the court, the bank, instead of getting its €3 million back with interest, would have been provided with security worth about €0.6 million.

Update on Friday, June 29, 2012 at 07:09AM by Fergus O'Rourke

This decision by the High Court (McGovern J.) - though the circumstances are very different - is another example of how expensive failures to comply with undertakings can be. (A hat-tip to Mark Tottenham at Stare Decisis Hibernia for this, and much else).

Update on Friday, November 8, 2013 at 10:19AM by Fergus O'Rourke

The case citation links in this post have now been repaired.