Undertakings to pay

Mr D instructed solicitors to acquire a leasehold commercial property. In the course of general correspondence, the solicitors were asked if their client would pay 50% of the landlord's costs. The solicitors did not initially reply because other matters were under negotiation at the same time.


Later, when asked whether their client wished to continue, the solicitors gave an undertaking to pay a fixed sum in costs plus VAT. The undertaking was given on the basis that the matter would proceed to completion. The wording indicated that if the matter did not proceed to completion, the client's liability would be 'limited to the landlord's reasonable costs at that stage'. The terms were not acceptable to the landlord's solicitors, who asked for an unqualified undertaking to pay 'half the landlord's costs, namely, £X plus VAT'.


Shortly afterwards, the solicitors wrote again. They made no specific reference to the landlord's further proposal but instead gave an undertaking for costs in the total sum required by the landlord. However, this undertaking did not recite 'whether or not the matter proceeds to completion', and the landlord's solicitors did not request the inclusion of such wording.


In the event, the matter did not complete. Problems arose that proved irreconcilable, and ultimately the client chose not to pursue the property. The landlord's solicitors asked for their costs 'in accordance with the undertaking'. The solicitors refused the request, indicating that the matter had not proceeded to completion.


The landlord's solicitor believed the undertaking to be unqualified and, as he put it, 'regardless of the position reached the assignment has not been completed and you must honour the undertaking'. It seems that he had misunderstood the position.


The wording of principle 18.15.1(a) of The Guide to the Professional Conduct of Solicitors 1999 (8th Edition) states 'an undertaking will be discharged if a matter does not proceed to completion unless there is an express provision to the contrary'. Thus, where there was no express provision, an undertaking would have no further effect if a matter failed to complete.


In this case, the undertaking was for a specific sum, but it did not include the express provision that it would be payable 'in any event'. In those circumstances, the giver of the undertaking had not acted in breach. The solicitor acting for the landlord should have required an express provision that the undertaking would apply 'whether or not the matter proceeded to completion', or in similar terms. Had such wording appeared, the adjudicator would have had no option but to direct compliance with the undertaking. The adjudicator decided that there had been no misconduct and took no further action in respect of the matter.


Every case before the adjudication panel is decided on its individual facts. This case study is for illustration only and should not be treated as a precedent