As a result of the economic crisis and subsequent property crash the Law Society dealt with an unprecedented number of complaints against solicitors who had failed to comply with undertakings provided in connection with property transactions. Financial institutions sought recourse through the courts seeking enforcement of those undertakings. Non-compliance with an undertaking also amounts to professional misconduct by the solicitor who gave the undertaking. The obvious intertwining of enforcement of undertakings with the issue of misconduct had led to the High Court dealing with both aspects in these types of cases.
In a recent judgment delivered by the Court of Appeal ('COA') on 21 October 2015 in a case brought by a financial institution against a borrower’s solicitor for non-compliance with an undertaking, the COA held that neither the High Court, nor the COA itself, had jurisdiction to make a finding of misconduct against a solicitor, as had been common practice.
The undertaking in question related to the stamping and lodging of mortgages over property in order that the lender obtain a valid first legal charge over the property. The property was developed and sold as apartments, however, the wording of the mortgages lodged did not refer to common areas. Therefore, the charge related only to the individual apartment units themselves. The Receiver subsequently appointed to sell the remaining properties encountered difficulties in finding purchasers as a result of the foregoing.
The bank on appeal from the High Court sought a declaration that the solicitor was guilty of misconduct for failure to comply with an undertaking and an order directing that the solicitor comply with the undertaking. While the COA acknowledged that the lender had a legitimate grievance in relation to the manner in which the charge was executed, both of the foregoing reliefs were refused and the decision of the High Court was affirmed.
The judgment was of particular note in relation to the refusal of the COA to grant a declaration that a solicitor was guilty of misconduct. The COA found that the High Court did not have jurisdiction to declare a solicitor guilty of misconduct for failure to comply with an undertaking on the basis that "this is not a cause of action known to law" and "such a jurisdiction would be tantamount to usurping the disciplinary functions of the Law Society". While it was acknowledged that a practice had evolved whereby the High Court had been dealing with such matters the COA found that "it should cease forthwith, as it has no proper legal foundation".
ACC Loan Management Limited v Anthony Barry, Orla Cummins and Julie Shanley  IECA 224