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Is it time to review the professional undertaking rules?
In many cases, the courts have held that an advocate is obliged in law to honour his professional undertaking. File
It is common practice in banking and property conveyancing transactions for advocates to issue what are known as “professional undertakings”.
The question is; is it imprudent, perhaps even reckless, for advocates to issue such undertakings and should this practice be reviewed in Kenya?
Just what is a “professional undertaking”? It is a promise given by or on behalf of an advocate to do or to procure that something will be done. It binds the advocate personally, even in undertaking to do something outside his control such as to procure delivery of documents or remittance of payment by a client.
The Encyclopedia of Forms and Precedents defines it as follows: “An undertaking is any unequivocal declaration of intention addressed to someone who reasonably places reliance on it and made by…a solicitor in the course of his practice, either personally or by a member of his staff under which the solicitor becomes personally bound.
“An undertaking is therefore a promise made by a solicitor, or on his behalf by a member of his staff, to do or to refrain from doing, something.”
In practice, undertakings are frequently given by lawyers in order to smooth the path of a transaction or to hasten its progress and are a convenient method by which some otherwise problematic areas of practice can be circumvented.
For instance, in a property conveyancing transaction in which a purchaser is being financed by a bank, the bank will ordinarily not agree to release funds until the transfer and mortgage have been registered against the relevant property, which is being acquired.
On the other hand, the vendor is at risk that even after the property has been transferred and an encumbrance in the form of a charge created over it, the purchaser and his bank will fail to remit the purchase price, leaving the vendor up in the creek.
To bridge such a transaction, the advocate acting for the bank would normally give an undertaking to the effect that once the registration of the transfer and charge have been registered, funds will be remitted to the vendor.
Unfortunately, it is quite common for advocates who have given professional undertakings to find themselves in the lurch, when their own clients fail to meet their end of the bargain. If the bank fails to remit funds for the advocate to make good the undertaking, the advocate can be called up to make payment from his own pocket.
The Law Society of Kenya “Digest of Professional Conduct and Etiquette” provides that, “An undertaking shall be in a form which is clear and once accepted by an Advocate shall bind him or his firm to the undertaking and any breach thereof shall constitute professional misconduct.”
Disciplinary action
In the case of Naphatali Radier versus D.Njogu & Co Advocates, the court held that an advocate is indeed obliged in law as an officer of the court to honour his professional undertaking. An undertaking given by an advocate is personally binding on him and must be honoured.
Failure to honour it is evidence of professional misconduct and courts can take disciplinary action against such an advocate.
Issuing professional undertakings is not peculiar to Kenya. The question, however, is how does the practice in Kenya differ from that in other jurisdictions?
In the United Kingdom, solicitors are required under practice notes issued by their law society not to give uninsured undertakings to a lender or other party as this would place their personal assets at risk.
The Conveyancing Committee, in fact, requires solicitors to take out separate insurance for undertakings as this is not covered under the standard professional indemnity cover.
The practice in the UK, therefore, is for lawyers to either be placed in funds prior to issuing the undertakings or to ensure that the amount of the undertaking is fully insured.
In Uganda, the common practice is for lawyers to request their clients to place them in funds before the lawyer can issue a professional undertaking. Banks in Uganda will ordinarily put their lawyers in funds to enable them to issue undertakings.
In Kenya, the Advocates (Professional Conduct) Regulations provide that “An Advocate shall not give any undertaking to another Advocate or any other person knowing that he or she has no authority or means of satisfying the undertaking or knowingly breach the terms of an undertaking.” This, unfortunately, is often not what happens.
Most banks in Kenya will not agree to deposit funds with their lawyers to issue an undertaking. Advocates are, therefore, left in a difficult position.
They have to weigh between choosing the risk of losing fee-earning work from banks if they refuse to issue undertaking on the basis that the bank for which they act has not placed them in funds, or the risk of issuing an undertaking, which the advocate may eventually be unable to honour should the bank ultimately fail to make payment.
In many cases, advocates are issuing undertakings for large amounts, which they very well know their bank accounts and professional indemnity insurance cannot cover.
If an advocate fails to honour his undertaking, it is not an excuse that his client failed to place him in funds. This position was upheld by the courts in the case of Kenya Reinsurance Corporation versus V. E. Muguku Muriu.
Uphold dignity
The curious manner in which the issuing of professional undertakings has evolved in Kenya places advocates at an unduly risky position. It is difficult to justify why the approach taken in the country should be fundamentally different from that of legal professions in many other jurisdictions.
This is a serious matter that requires urgent review and proper guidance, particularly by the LSK, which is charged with the responsibility of governing the legal profession and upholding its dignity.
