Lawyers Covered - June 2025

It can be tough for busy lawyers to find enough time to service clients, make it safely through the regulation obstacle course, win new work and keep up-to-date with developments, but we've got you covered! Welcome to our Lawyers Liability & Regulatory Update, in which we highlight the last month's key developments affecting lawyers and the professional risks they face.

Exercise extra caution when advising on joint mortgages where one party will use some of the loan for their personal purposes: Supreme Court holds that Etridge applies

Many claims against solicitors have historically arisen from advice given (or not given) to someone unduly influenced to guarantee the obligations of their partner. The leading case on this is Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, in which the court set out how to determine whether the guarantor has been induced to enter into the guarantee or charge. This question is key because if the lender has constructive notice of the undue influence, the charge will not be enforceable. In such cases, lenders tend to explore a claim against the solicitor who advised the guarantor.  

Etridge has been settled law for 24 years – and this month the Supreme Court handed down judgment in Waller-Edwards v One Savings Bank Plc [2025] UKSC 22, confirming that banks must follow Etridge in non-commercial hybrid transactions which include a more than nominal surety element.

The case involved a dispute between a couple where the husband allegedly unduly influenced his wife, Mrs Bishop, to take out a mortgage which was used primarily for their joint purposes, but £39,500 was used by the husband to pay off his personal debts. Mrs Bishop argued that she was essentially a surety for the part of the loan used to pay off her husband's debts and, as such, Etridge applied so the bank was put on inquiry that she may have been unduly influenced.

The Supreme Court agreed, holding that:

"A creditor is put on inquiry in any non-commercial hybrid transaction where, on the face of the transaction, there is a more than de minimis (i.e. trivial) element of borrowing which serves to discharge the debts of one of the borrowers and so might not be to the financial advantage of the other. The transaction must be viewed from the bank’s perspective. Such a transaction, if viewed in this way, should be regarded as a “surety” transaction and the creditor placed on inquiry of the possibility of undue influence. The steps set out in the “Etridge protocol” must then be taken."

Solicitors, especially conveyancers, should consider the judgment in full . In order to minimise the risks of any claims, firms should train staff on this development and ensure that the firm's precedents and processes are updated to reflect this case. 

AI 'hallucination' cases lead to court issuing strong warning to lawyers over AI use

Litigators are increasingly turning to generative AI tools to streamline legal research and drafting. However, these tools come with significant risks. It is well known that large language models can "hallucinate", producing false citations or fabricating passages from judgments.

The dangers of relying on AI-generated content without proper verification were highlighted in two recent joined cases: Ayinde and Hamad Al-Haroun. In both, legal representatives submitted inaccurate and fictitious material to the court, either by referencing non-existent cases, quoting passages not found in authentic judgments, or misrepresenting what real cases actually said. In response, the courts issued strong warnings: failing to meet the duty not to mislead the court, including by failing to verify AI-generated information, could lead to serious sanctions, including criminal sanctions, with the court citing one case where a barrister was imprisoned for perverting the course of justice by deliberately causing a fake authority to be placed before the court by another person (albeit not involving AI). The court’s concern centred on protecting the integrity of the justice system and maintaining public confidence in judicial processes. Dame Victoria Sharp P stated:

"As Dias J said when referring the case of Al-Haroun to this court, the administration of justice depends upon the court being able to rely without question on the integrity of those who appear before it and on their professionalism in only making submissions which can properly be supported…

Those who use artificial intelligence to conduct legal research notwithstanding these risks have a professional duty therefore to check the accuracy of such research by reference to authoritative sources, before using it in the course of their professional work (to advise clients or before a court, for example). Authoritative sources include the Government’s database of legislation, the National Archives database of court judgments, the official Law Reports published by the Incorporated Council of Law Reporting for England and Wales and the databases of reputable legal publishers."

The judgment is essential reading for all lawyers and sets out the relevant rules governing AI and the scope of solicitors' duties to the court in relation to AI. Even those who do not use AI in the course of their work need to be alert to the possibility of inclusion of incorrect or misleading AI-generated content in work they are asked to supervise, in correspondence or submissions made by litigants-in-person and even in material prepared by other law firms.

For a deeper analysis of these cases and the professional obligations of legal representatives when using AI, see our recent article here.

Complaints about solicitors soar & 'avoidable' conveyancing errors to be made public

The Solicitors Regulation Authority’s (SRA) are seeking an £11m increase in its budget to £168m due to a “significant and sustained increase in the volume of the reports we receive about solicitors’ misconduct".

The SRA are opening on average 40% more investigations a month, concluding 18% more investigations than a year ago, and had to pause work on an ESG policy statement to focus on the increased number of investigations.

Commenting on the proposed increase SRA chief executive Paul Philip stated that “We’re mindful of the pressures on the profession" and stressed that the SRA "remain[s] committed to being efficient and focused, but the scale of new challenges means we need extra resource to continue protecting the public effectively and proportionately.”

Perhaps in a move to help reduce the number of complaints made, HM Land Registry will soon publish the number of ‘avoidable’ errors that conveyancers make in applications to HM Land Registry.

The number of requisitions, a formal request from HM Land Registry for an applicant to supply information due to missing, incomplete, or wrongly drawn information when the application is made, costs the conveyancing sector an estimated £19m a year.

While HM Land Registry already publishes the number of requisitions that firms receive it will, from this autumn, publish the number of ‘avoidable’ errors made by firms. Paul Philip embraced this change, referencing the public need for "easy-to-access relevant information to help them shop around for legal service".

Meanwhile, the SRA is consulting on proposed changes to its complaints-handling requirements, which include a requirement to tell clients in writing about the firm's complaints procedure at the close of the matter as well as at the start, and to publish the firm's complaints policy prominently on the firm's website. The consultation is open until 25 July 2025 and can be found here, including a link to a marked up version of the proposed amendments to the SRA's rules at Annex One.

Helpful decision clarifying the assessment of bills regime under Solicitors Act 1974

Solicitor/client costs assessments under Part III of the Solicitors Act 1974 have been on the rise for a number of years now and the latest decision provides some comfort to firms looking to defend such applications on limitation grounds. In Vishal Mehta v Howard Kennedy LLP [2025] EWHC 1008 (SCCO), Mr Mehta retained Howard Kennedy in June 2022 in connection with litigation brought against his family in respect of an alleged US$ 1 billion fraud. The retainer was terminated by Howard Kennedy on 5 May 2023. During the retainer Howard Kennedy delivered 24 invoices to Mr Mehta which totalled £3,124,674.04. Howard Kennedy asserted that Mr Mehta was not entitled to costs assessment of the unpaid invoices because 13 invoices were delivered and paid more than 12 months before the issue of the action. The action was issued on 23 May 2024.

The Court was asked to assess three questions. 

1. Were the invoices interim statute bills or did they comprise a series of interim invoices as part of a 'Chamberlain' bill which was 'final' with the delivery of the last invoice in May 2023? A Chamberlain bill is a series of bills which become a statute bill only upon delivery of the last bill and is named after the case of Chamberlain v Boodle & King [1982] 1 WLR 1443.
2. Was the retainer a Contentious Business Agreement within the meaning of the Solicitors Act 1974 (the 1974 Act)?
3. Were the invoices 'paid' within the meaning of the Solicitors Act 1974?

On point (1), the court held that the invoices delivered by Howard Kennedy were interim statute bills. The court referred to Howard Kennedy's Terms of Business which described each bill as a final bill and concluded that the invoices met the requirements of interim statute bills i.e. they provided detailed narratives for each charge.

In respect of point (2), the court said Howard Kennedy's Terms of Business demonstrated that the parties intended to assume the rights and obligations set out under ss.69-71 of the 1974 Act, because the invoices were to be delivered by Howard Kennedy to Mr Mehta. The retainer was therefore not a Contentious Business Agreement and Mr Mehta had no entitlement under ss.59-63 of the 1974 Act. Accordingly, it was not necessary for the Judge to determine whether the agreement was fair and reasonable. 

Lastly, on point (3), Mr Mehta argued that the invoices were not paid because they were settled by third parties (such as Danelles Limited, a BVI registered company in which the Claimant had a 100% beneficial interest). The judge said that payments from third parties were effective, provided that they were made with the knowledge and consent of the client. In this case, the Judge accepted that Mr Mehta consented to the payment on the invoices by third parties on his behalf. Accordingly, the court determined that it could not order an assessment of the bills delivered and paid more than 12 months before the issue of the proceedings on 23 May 2024. Mr Mehta was however entitled to assessment on one bill which was issued after 23 May 2023 (i.e. less than a year before the issue of the proceedings).

This decision illustrates some of the technical issues that the outdated Solicitors Act 1974 continues to give rise to, such as the anachronistic distinction between contentious and non-contentious business agreements, which bears little resemblance to the terms upon which law firms now contract with clients. The Civil Justice Council is currently working on reform proposals for the Act and the working group's interim report is expected to be published before the summer this year.

 Bullying at the Bar under review

In the latest submission to the Harman Review by the Bar Standards Board, the culture of the Bar has been further examined.

The submission notes the cultural causes of prevalent bullying and harassment at the Bar. Systemic power imbalances between pupils and junior barristers and their more senior colleagues discourages reporting misconduct due to fear of career repercussions. The small size of chambers is also an aggravating factor, contributing to lack of resources for the implementation and enforcement of anti-harassment policies. Inadequate and inconsistent reporting mechanisms are also flagged as problematic.

The BSB proposes that chambers should adopt a proactive duty to promote equality, diversity and inclusion. Stronger regulatory mechanisms should be established to deter misconduct and reassure victims as part of a broader cultural shift towards a more supportive and accountable environment. The importance of the BSB's Supervision and Enforcement teams is also noted with their responsibility for wider risk assessment and chambers oversight as well as investigations, disciplinary actions and sanctions respectively.

Bar Council research shows that 38% of barristers have experienced bullying, harassment or discrimination related to their work. The BSB's case studies noted that women and racial minority groups have been disproportionately affected. This is by no means a problem confined to the bar, with the Law Society reporting that half of women and a third of men responding to an International Bar Association survey had been bullied at work, with one in 3 women and one in 14 men reporting sexual harassment. SRA Principle 6 requires SRA-regulated solicitors to act in a way that encourages equality, diversity and inclusion (ESI) and a new duty on all employers to prevent sexual harassment in the workplace came into force in October 2024.

Investigations into the culture of the Bar are part of the BSB's modernisation reform programme which aims to improve regulation, modernise delivery systems, including IT systems updates, and ensure efficient but high-quality enforcement work. In recent years, the Bar Council has also created guidance, support resources and promoted a confidential helpline to record and report instances of bullying, harassment and discrimination.

This submission comes alongside the announcement that Core Duty 8 in the BSB's handbook for barristers will not be amended from a clear duty not to discriminate to a duty to generally advance EDI; this was welcomed by the Bar Council. 

Government confirms legislative fix for Section 37 – relief for schemes post-Virgin Media

The government has confirmed plans to legislate for a retrospective solution to the Virgin Media v NTL Trustees judgment, which raised potential issues for amendments to contracted out final salary pension schemes that could not find so-called s.37 actuarial confirmations. The proposed legislation, based on the government announcement, will allow affected schemes to obtain actuarial confirmation after the fact, provided the scheme met the relevant standards at the time of the amendment.

As reported in our previous updates, the Virgin Media decision held that amendments to contracted-out benefits made without contemporaneous actuarial sign-off under Section 37 of the Pension Schemes Act 1993 are void – even where no reduction in benefits was intended. This left many schemes (and their advisers) exposed, particularly where changes were made between 1997 and 2016 and no record of formal confirmation could be located.

The latest announcement, made on 5 June 2025, suggests that schemes will be able to cure these defects by obtaining retrospective written confirmation from an actuary – a move that could significantly reduce legal and financial uncertainty across the industry.

The news will be welcomed by employers, trustees and advisers, as it offers a potential route to validate historic amendments that would otherwise be void, helping to avoid the risk of unintended benefit uplifts (or reductions) and costly Part 8 proceedings.

Whilst full details of the legislation are awaited, and the scope of the legislation remains to be seen, it represents a significant and positive development. For further detail, see RPC’s blog here. The issue was previously covered in the August 2024  and January 2025  issues of Lawyers Covered.