L Morgan & Co v Jenkins O'Dowd & Barth

When a solicitor’s undertaking remains capable of performance, the usual order is specific enforcement of the undertaking. Increased cost caused by the solicitor’s delay does not make performance impossible. The court should not, through enforcement proceedings, require an innocent third-party charge-holder to accept terms which it is not contractually obliged to accept, or impose an inquiry into a hypothetical transaction that never occurred.

An inquiry into loss, with compensation in place of performance, is appropriate where performance has become impossible or cannot achieve the purpose of the undertaking. A short extension may be granted to permit compliance. If circumstances later become wholly unreasonable or fall outside what could have been contemplated, the order may be revisited under a liberty to apply.

The defendant solicitors had given undertakings in conveyancing transactions to redeem existing charges and procure Land Registry DS1 certificates. The undertakings were not performed, and an earlier order required the defendants to procure discharge of the charges by a specified date.

The charge-holder, which had been unaware of the sales, later relied on all-monies charges and offered to release the properties only on payment of substantially larger sums. The defendants applied to join the bank, obtain evidence, and determine what it would have accepted in 2006. The issue was whether the court should replace or qualify enforcement of the undertakings by directing that hypothetical inquiry.

1. Application dismissed. The application to join the bank, direct an inquiry into the sum it should have accepted, and obtain evidence for that purpose was misconceived. The existing order remained binding, subject only to a short extension for compliance.
2. The bank was an innocent third party with no notice of the sales and no cause of action existed between it and the defendant solicitors. The court therefore had no general-principled basis for requiring the bank to accept the amount it might have accepted had a redemption request been made in 2006. Enforcement of a solicitor’s undertaking could not, by a side wind, prejudice an innocent third party.
3. The usual course where an undertaking is capable of performance is to require the solicitor to perform it. The defendant solicitors could obtain discharge by paying the sums required by the bank. The fact that performance had become more expensive because of their earlier breach did not amount to impossibility.
4. Where performance is impossible or cannot meaningfully achieve the purpose of the undertaking, the court may instead direct an inquiry into loss and compensate the person suffering loss. That was not the present case. The earlier order required the defendants to do all acts necessary to procure discharge, and those acts remained possible.
5. The liberty to apply left open a later application to replace the order with an inquiry into damages if the bank demanded terms wholly unreasonable or beyond anything contemplated when the undertaking was given. No view was expressed on the bank’s contractual entitlement to claim more than the proceeds of sale, because that issue was not properly evidenced or argued.
6. The time for compliance was extended by 14 days. The defendants were required either to procure release of the charges or apply under the liberty to apply for release from the existing order.

First-instance decision. The judgment records an earlier enforcement order made by Blackburne J, but gives no citation for that order.