The Regulatory Hour
Tuesday, 17 November 2015
@mhclawyers
Welcome
Declan Black
Managing Partner
Mason Hayes & Curran
Speakers & Topics
Niall Michel, Partner
Topic – Legal Services Regulation Bill: The Impact?
Tom Davy, Partner
Topic – Solicitors' Undertakings in Practice
David Whelan, BL
Topic – Enforcement of Solicitors’ Undertakings
Legal Services Regulation Bill:
The Impact?
Niall Michel,
Partner,
Mason Hayes & Curran
Innocent, Your Honour
Background – Why do People Hate Lawyers?
•
The man on the 46A
•
The OECD; the Legal Costs Working Group; the Competition
Authority; the Law Reform Commission; the EU/IMF; the EU
Council
•
External pressures; external mandating of reform
•
Culminated in Legal Services Regulation Bill 2011
•
Passed by Dail in April, 2015; introduced to Seanad
•
Will be amended and refined in Seanad
The ‘Non-Impact’
•
Still only a Bill
•
Solicitors‟ and barristers‟ professions to be retained
•
Law Society; Bar Council; King‟s Inns to continue to play roles
•
Core principles of professions and relationships with clients
preserved
•
Criteria underlying legal charges/basis/notification/collection;
principles regarding award of costs, to be retained
•
Professional indemnity insurance
The Impact
•
General aims are to promote competition and transparency, and
lower cost, as well as enhance independent complaintsresolution and unify disciplinary procedure
•
Legal practitioners to be subject to independent, external,
regulation, inspection and complaints-resolution (LSRA)
•
Law Society/Bar Council/King‟s Inns professional codes to be
subject to external review, oversight, amendment (LSRA)
•
Legal practitioners to be bound by new LSRA codes of practice,
setting/improving standards
•
Legal practitioners to be subject to professional discipline by a
common, independent, tribunal (LPDT)
The Impact
•
Barristers will be admitted to a new Roll of Barristers to be set
up, maintained publicised by the LSRA
•
Legal partnerships between solicitors and barristers, or between
barristers, can be established
•
Multi-Disciplinary Practices can be established between
solicitors and others (including barristers, but necessarily
including non-legal professionals)
•
Disputes on legal costs to be referred to new body (OLCA)
•
Wider section of public will be able to engage barristers directly
The Impact
•
Legal professions may be unified
•
New profession of conveyancer may be created
•
Both solicitors and barristers will be able to become “Senior
Counsel”
•
Barristers in employment will be able to represent their
employers in court
•
Solicitors and barristers will be able to conduct advocacy for a
client in court at the same time, taking different aspects and
lead, or other, roles
•
Neither wigs nor gowns will be required in future
The Impact
•
Solicitors and barristers may cross over more easily, without
undue admission requirements being imposed
•
Barristers may be allowed to advertise, and in particular,
advertise that they practise as a group of barristers
•
No contingency fees; no deduction of fees from awards without
prior written consent; no charging of junior counsel fees as
proportion of senior counsel‟s fees
How and When will this be Achieved?
•
•
Setting up the Office of the Legal Costs Adjudicator
•
Taxing Master‟s functions
•
Chief LCA and sufficient number of LCAs
•
Register of Determinations
•
Guidelines
Setting up Legal Practitioners Disciplinary Tribunal
•
Replace Solicitors Disciplinary / Barristers‟ Professional
Conduct Tribunals
How and When will this be Achieved?
•
Setting up the Legal Services Regulatory Authority
•
Broad membership; avoidance of Government control
•
Regulate provision of legal services by legal practitioners
•
Maintain and improve standards
•
Subject to statutory objectives (public and professionfacing)
•
Issue codes of practice on setting/improving standards
•
Inspect legal practitioners following complaints, or otherwise
How and When will this be Achieved?
Consult and report on
•
Education and training (within 2 years)
•
Unification of professions (with 4 years)
•
Creation of profession of „conveyancer‟ (when requested by Minister)
•
Introduction of Legal Partnerships (within 6 months)
•
Introduction of Multi-Disciplinary Practices (within 6 months)
How and When will this be Achieved?
•
Deal with complaints of misconduct/inadequate
services/overcharging
•
Resolve complaints
•
Bring misconduct matters before the LPDT
Conclusions
•
The Bill still very much in gestation, and subject to shaping opportunity now
•
Minister has flagged specific issues such as complaints;
misconduct; inspections; limited liability partnerships; barristers
suing for fees; privilege/confidentiality concerns
•
LPs; MDPs and fusion of professions to be further analysed
•
Could lead to more competition; choice; flexibility
•
More transparency on costs and costs-principles/adjudication
Solicitors' Undertakings in
Practice
Tom Davy,
Partner,
Mason Hayes & Curran
What is an undertaking?
– Promise by solicitor in course of practice
– reasonably relied upon
– giving rise to personal liability for the solicitor/firm
18
3 issues for in-house lawyers as regards
undertakings:
1.
How and when can I use undertakings to complete
transactions efficiently?
2.
How do I avoid mistakes when giving undertakings?
3.
How do we achieve compliance with undertakings
furnished to us?
19
Solicitors' Undertakings in Practice
“Critical to the proper functioning of the solicitors‟ profession”
Mr. Justice Kearns in ICS Building Society v Lambert ([2014] IEHC 581)
Enable transactions to be completed more quickly and cost effectively
Boom years - inappropriate use of the undertaking system and high
levels of non-compliance - number one cause for complaint to the Law
Society.
20
Legislative Changes
2009 Regulations introduced to restrict the giving of undertakings to
lenders when the solicitor, or a person closely connected to the solicitor,
has some beneficial interest.
Solicitors (Professional Practice, conduct and Discipline – Secured Loan
Transactions) Regulations 2009 (SI No. 211 of 2009)
21
Legislative Changes
2010 Commercial Undertakings Regulations - as and from 1 December
2010
Statutory prohibition on solicitors undertakings to lenders in commercial
property transactions save in the case of a “de minimis” loan transaction
Anything other than a principal private residence or a not-for-letting
holiday home is a commercial property.
Private dwelling can be subject to commercial undertakings regulations
if it forms part of security for commercial loan – the purpose of the loan
is key;
22
Legislative Changes
Definition of “Relevant Undertakings” does not include an Accountable
Trust Receipt but does include undertakings to lenders in respect of
commercial property:
• to provide a certificate of title or the title deeds
• to pay any stamp duty or to register title
• to procure the discharge of a commercial mortgage
23
Client Undertakings
Enforceable as a contract provided there is a binding contract
No element of professional misconduct as regards the client undertaking
itself
Solicitor may give undertaking to provide reasonable assistance to the
client
If undertaking is on behalf of a client, and is not a solicitors undertaking,
this should be expressly stated in the undertaking.
Bank may require an undertaking from the borrower and/or conditions
subsequent in a facility agreement
24
In-house Solicitors
Obligations no different to those of solicitors in private practice
Professional personal duty to comply with undertakings - should be
explained to employer
Express authority from the employer to give an undertaking
Do not give an undertaking to do something that is outside that
solicitor‟s control or authority.
State clearly if „undertaking‟ is given only as an agent on behalf of the
employer – drafting clarity is key
25
Personal Liability
Exemptions in respect of compulsory professional indemnity insurance
for most in-house solicitors employed in the private sector - providing
legal services to employer only
Broader exemption from professional indemnity insurance for solicitors
employed in the full-time service of the State
But this does not absolve the in-house solicitor from personal liability
Risk of uninsured personal undertaking
Arrangements to protect against personal liability – Good practice to
obtain an employer indemnity – Best practice not to give solicitors
undertaking at all
26
Questions to consider:
1. Am I exempt from the requirement to hold professional indemnity
insurance – legal services to employer only?
2. Is the undertaking given on behalf of the employer/company and
clearly stated as such?
3. Do I have the necessary authority to give the undertaking?
4. If a solicitors undertaking is to be given, are arrangements in place to
protect against personal liability?
27
General Principles
•
In writing and irrevocable instruction in writing from the client
•
Matter of conduct and a matter of contract
•
Cannot assign the burden of an undertaking without the express
agreement of recipient of the undertaking. Recipient can assign
unless there is express restriction.
•
Ambiguous undertaking generally construed in favour of the recipient
28
General Principles
• Undertaking does not have to constitute a legal contract to be
enforceable in conduct
• No limitation period
• Undertaking still binding even if compliance beyond the control of the
solicitor
• Cannot avoid liability by pleading that compliance would be a breach
of duty to his/her client
29
General Principles
• Implied term that an undertaking will be performed within a
reasonable time
• Should not seek an undertaking from another solicitor which the first
solicitor knows, or ought to know, should not be given
• Consider whether an undertaking is appropriate and whether the
transaction should be completed without the subject matter of the
undertaking
30
Takeaways
1. 2010 Regulations – no solicitors undertakings to lenders in
commercial property transactions;
2. In-house solicitors should consider PI insurance, form of undertaking
and, employer indemnity against personal liability;
3. Irrevocable instruction and authority in writing from the client;
4. Ambiguity generally construed in favour of the recipient;
5. Does not have to constitute a legal contract and no limitation period.
31
Enforcement of Solicitors’
Undertakings
David Whelan BL
David Whelan BL
“...a promise made is a debt unpaid, and the trail has its own stern
code.”
Robert W. Service (1874-1958)
Enforcement of Undertakings

Three primary methods of holding a solicitor to their undertaking:
1.
Invocation of the inherent supervisory jurisdiction of the Courts
2.
Commencement of substantive claim at law or in equity (for
damages/injunctive relief based on breach of contract/trust etc)
3.
Complaint to the Law Society
Inherent Jurisdiction

Bank of Ireland Mortgage Bank v Coleman [2009] 3 IR 699 Authoritative summary of jurisdiction in Supreme Court judgment

Geoghegan J. cited the following cases with approval:

I.P.L.G. v. Stuart (Unrep. HC, Lardner J, 19/3/92) – Held that the
inherent jurisdiction of the Court re solicitors‟ misconduct survived
despite striking down of 1954 Act/provisions of 1960 Act

In re H.A. Grey [1892] 2 QB 440 – Court had a punitive and
disciplinary jurisdiction, not to enforce legal rights, but honourable
conduct
Inherent Jurisdiction

John Fox v. Bannister & Ors [1988] 1 Q.B. 925 – cited by
Geoghegan J as supporting the view that if compensation is to be
paid, it need not necessarily be in the full amount of the sum
covered by the undertaking

Myers v Elman [1940] A.C. 282 – underlying principle of jurisdiction
- the Court has a right and a duty to supervise the conduct of its
solicitors and visit with penalties any conduct of such a nature as to
tend to defeat justice – need not be criminal/dishonest

Udall v Capri Lighting [1988] 1 Q.B. 907 – Geoghegan cited with
approval seven principles relating to the inherent special
jurisdiction. The first principle was that identified in Myers v Elman
above.
Inherent Jurisdiction
1.
Jurisdiction compensatory not punitive - retains a disciplinary slant
2.
If a person has suffered loss, the Court has power to order the
solicitor to make good the loss occasioned by his breach of duty
3.
Failure to implement undertaking is prima facie evidence of
misconduct even if no dishonourable conduct
4.
Jurisdiction not ousted by defences that might be available to an
action at law (e.g. Statute of Frauds) – may take into account
5.
Discretion as to the relief to be granted
6.
If inappropriate to Order performance, Court has discretion as to
whether to order the solicitor to pay compensation
Inherent Jurisdiction

In Allied Irish Bank v Maguire, Peart J. considered the judgment in
Bank of Ireland v Coleman and articulated 11 principles:
1.
Court has an inherent jurisdiction re conduct of solicitors,
including compliance with undertakings
2.
Both punitive and compensatory jurisdiction.
3.
Discretionary and unfettered - each case must be
considered on its own facts and circumstances
4.
Court is concerned to uphold the integrity of the system, and
the highest standards of honourable behaviour by its
officers - standard higher than required by law generally
5.
Order made by the Court can take whatever form best
serves the interests of justice between the parties
Inherent Jurisdiction
6.
Court must consider the entire undertaking to determine real
ultimate purpose
7.
Court may order late compliance if reasonably possible
8.
Even if compliance is possible, Court may order solicitor to make
good any loss occasioned
9.
Where compliance not possible, Court may order the solicitor to
make good any loss occasioned
10.
Carelessness or negligence may be a factor which the Court will
have regard to when determining what order may be fair and just.
11.
Order ought not be oppressive - gross carelessness/egregious
conduct will entitle the Court to order payment of entire sum
covered by undertaking
Special Summons Procedure

Bank of Ireland Mortgage Bank v Coleman [2009] 3 IR 699, per
Laffoy J - “The essence of the inherent supervisory jurisdiction is
that it may be invoked in a summary manner.”

Where no existing proceedings, may use special summons under
O.3, r. 21 or O.3, r. 22 RSC.

Summary process may not be operated in such a way as to
perpetrate an injustice on the solicitor Defendant - Danske Bank
A/S v O’Ceallaigh [2011] IEHC 216

Should be confined to simple cases where, in accordance with
established principles, the level of compensation payable is
quantifiable on affidavit evidence before Court
Opposing Applications to Enforce

Case may be adjourned to plenary hearing if Defendant can show
that summary determination would be oppressive (e.g. because
core issues not sufficiently clear from affidavit evidence)

Jurisdiction is discretionary – open to Court to refuse to make any
Order e.g. if dissatisfied with conduct of Plaintiff or persuaded that
the breach of undertaking caused no loss. Court can take into
account defences at law (laches, failure to mitigate etc.)

Open to Defendants to resist proceedings by disputing, inter alia:




The existence/continued efficacy of the undertaking
That a breach of undertaking has occurred
That the breach has caused any loss
The existence of any other reasons (e.g. “egregious” conduct)
for making an award in favour of the Plaintiff
Opposing Applications to Enforce

ACCLM Ltd v Barry & Ors [2015] IECA 224

Undertakings, inter alia, to register charge over property – charge
registered over certain units in property not over common area, car
parks, easements etc

Court has no inherent jurisdiction to declare solicitor guilty of
misconduct for failing to comply with undertaking

Factors which contributed to refusal of relief:
 Remedies claimed – Declaration of misconduct
 Absence of pre-action letter – No formal call for compliance
 Failure to pursue alternative – Borrower willing to assist
 Absence of evidence of loss – inability of receiver to sell
 Actions of Plaintiff – Complaints to Law Society etc
Compensation

Coleman - per Laffoy J (approved, with some qualification in
Supreme Court)
“the correct measure of the respondent's loss would be the value of
the security which it should have obtained but did not obtain”

Geoghegan J – Agreed with Laffoy J that Court must consider
undertaking as a whole in exercising discretion re Order to be
made

Disagreed with suggestion that part of an undertaking could not be
enforced if the original purpose of the transaction could still
potentially be achieved – can still calculate loss arising e.g. from
inability to enforce security earlier due to failure to perfect
Compensation

Regardless of whether undertaking can still be complied with, Court
may make an award of compensation for any loss arising from
breach

Compensation may extend to full amount advanced to borrower or
may be confined to value of security which plaintiff should have
obtained but did not

In AIB v Maguire & Ors [2009] IEHC 374 Peart J Ordered
defendants to repay the Bank all sums paid to borrowers on foot of
loan, plus interest

In BOI v Coleman [2009] 3 I.R. 699 the undertaking had been
performed by the time of the appeal. The Supreme Court remitted
the case to the High Court for assessment of compensation (e.g.
Arising from the Bank‟s inability to act on its security sooner). Full
amount of loan will not be awarded if Bank acted carelessly on an
overvaluation, unless misled by fraud of Defendant
Action at Law

Plenary proceedings under inherent jurisdiction are appropriate
where case is not clear or simple

In involved or complex cases which are issued as plenary
proceedings remedies at law may also be pursued – breach of
contract/ fiduciary duty/trust , negligence, conversion etc

If undertaking given by Defendant re subject matter of intended
action, unusual not to rely on same at least in part

If an undertaking is given by a solicitor in the context of extant
proceedings, an application to enforce same may be made by
motion in those proceedings
Complaint to Law Society

A Guide to Good Professional Conduct for Solicitors (3rd Ed. p. 48)
– A solicitor will be required to honour the terms of a professional
undertaking as a matter of conduct – failure to comply with
undertaking may amount to unprofessional conduct

Law Society has the power to enforce undertakings as a matter of
conduct (3rd Ed, p. 50)

Disciplinary process will not normally be proceeded with where
there is an action before the courts, until their determination.
(O'Callaghan, The Law on Solicitors in Ireland, p145)

Solicitor struck off by President of the High Court in February 2015
for failure to comply with undertakings to banks in relation to
property transactions for clients
Source Material/Further Reading
Solicitors’ Undertakings
and the Valuation of Loss in a Falling
Market, Purcell, Commercial Law Practitioner, vol. 18, 2011 at 181
Solicitors
Irish
Conveyancing Law, Wylie, 3rd ed. 2005
Cordery
The
Negligence and Liability, Flenley & Leech, 2nd Ed, 2008
on Solicitors , 9th Ed. 1995
Law on Solicitors in Ireland, O’Callaghan, 1st Ed. 2000
David Whelan BL, Room 3.12, Distillery Building, Church St.,
Dublin 7. DX 818196, dwhelan@lawlibrary.ie
Direct Line: (01) 8172395, Mobile: (086) 3106285
Contact Details
Niall Michel
Partner
Mason Hayes & Curran
t: +353 1 614 5014
m: + 353 86 827 9301
e: nmichel@mhc.ie
@mhclawyers
Contact Details
Tom Davy
Partner
Mason Hayes & Curran
t: +353 1 614 5001
m: + 353 87 903 8665
e: tdavy@mhc.ie
@mhclawyers
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