Lawyers Covered - October 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.

Troubling High Court judgment alarms legal profession

 In a recent judgment in Mazur v Charles Russell Speechlys LLP [2025] EWHC 2341 (KB), the High Court considered the question of what constitutes the conduct of litigation and whether certain activities undertaken by non-authorised fee earners, such as trainees or paralegals, was unlawful, even if supervised by an authorised person. The dispute arose following a complaint by a former client that a fees recovery claim was being conducted by a formerly suspended solicitor who had been employed (with the SRA's permission) at Charles Russell's Speechlys' instructed solicitors. The conduct of litigation is a reserved legal activity under the Legal Services Act 2007 (LSA), meaning that only those authorised (such as SRA-regulated solicitors) or exempt (such as litigants-in-person) can do so. The SRA and Law Society intervened in Mazur, given the importance of this issue. 

Ultimately, the court declined to determine whether the individual in question had in fact been conducting litigation due to the risk of cutting across any regulatory investigation or findings by the SRA following the firm's self-report. However, the court considered the issues in the abstract, finding that whether someone is conducting litigation is a question of fact and degree, but crucially that employment by an authorised body, or supervision by an authorised person, does not automatically confer a right to conduct litigation on a non-authorised person. The decision has caused significant concern in the legal profession, not helped by the SRA apparently having given incorrect advice to firms in the past about how to interpret the requirements of the LSA. It is not yet clear whether the judgment is under appeal, but in the meantime, firms will want to carry out an urgent review of their supervision arrangements and processes to ensure compliance with the LSA. 

Meanwhile, the Law Society has provided new guidance on the topic here, the SRA has issued a statement on the topic here and further pronouncements from regulators in this regard can be expected. 

Bar Council demands investigation into HMCTS evidence system failures

A report has found that an IT bug caused evidence to go missing, be overwritten or appear lost in the HMCTS systems. The report was leaked to the BBC and found it took several years for HMCTS to react, meaning it did not understand the full extent of the issue and impact.

The software - known as Judicial Case Manager, MyHMCTS or CCD - is used to manage evidence and track cases before the courts. Sources within the organisation believe that civil, family and tribunal courts will have made decisions in cases where evidence was affected and therefore incomplete. The Social Security and Child Support Tribunal, which handles benefit appeals, is thought to have been most affected.

After an initial investigation with a small sample size, the risk category was downgraded from 'high' to 'low', with the suggestion that staff would spot anomalies and manually correct them. However, following a formal whistleblower, the further internal investigation was undertaken which found large-scale data breaches and that data loss incidents continue to be raised.

Judges and lawyers were reportedly not informed because HMCTS management decided it was "more likely to cause more harm than good". HMCTS says its internal investigation found no evidence that "any case outcomes were affected as a result of these technical issues".

Barbara Mills KC, Chair of the Bar Council, expressed alarm that this had potentially caused miscarriages of justice and said there was an urgent need for investigation, particularly into whether emergency child protection cases were affected. She went on to say that this was yet another instance of issues with court IT systems, and that "the Ministry of Justice should undertake an audit of all its IT systems so that any problems can be proactively identified".

CLC Compensation fund

The Council for Licenced Conveyancers (the "CLC") regulates conveyancing and probate lawyers and is responsible for investigating allegations of misconduct. 

It operates a Compensation Fund designed as a fund of last resort for clients who have suffered financial loss due to the dishonesty, fraud or failure to account by a CLC-regulated firm or its staff. 

On 14 July 2025 the CLC announced that it has received claims from over 300 individuals relating to over 50 developments in property investment schemes. These property investment schemes are promoted as the routine buying of property when in reality the buyer's money is being pooled and used to finance a high-risk development eg where a developer sells a room in a hotel, care home or student accommodation for a high return. The SRA has issued many warning to solicitors providing advice to investors due to their potential to collapse or turn out to be a scam. In 2021 two solicitors (Margaret Bridget Hetherington and Patrick Clement Hetherington) were struck off for their involvement in advising on investments involving parking lots. There have been many warnings issued by the FCA and numerous court cases highlighting the significant legal issues surrounding the schemes, particularly regarding fraud, collective investment schemes and regulatory compliance. 

In September 2025 the CLC confirmed that its initial review identifies clear patterns and similarities in claims dependent upon which development was involved. It is focusing on providing determination by development, starting with the developments in respect of which they have received the most claims. It expects to have completed all of its assessments by spring 2026. 

Due to the high volume of claims, the fund pool created for them has been closed and the CLC is not accepting any more applications. 

Changes to the UK Anti-Money Laundering Supervisory Regime

The UK government’s October 2025 announcement marks a significant shift in anti-money laundering (AML) supervision for law firms. Under the new regime, the Financial Conduct Authority (FCA) will become the single professional services supervisor for AML and counter-terrorism financing (CTF), substantially reducing the role of the Solicitors Regulation Authority (SRA).

For law firms, this transition brings notable implications. The consolidation aims to streamline supervision, but the Law Society has cautioned that legal sector-specific expertise may be diluted. The Law Society considers firms must prepare for changes in regulatory expectations, particularly as the FCA is expected to emphasise proportionate, risk-based regulation rather than strict compliance. However, the cost and complexity of transitioning to a new supervisor could pose challenges, especially for small and medium-sized practices. The ICAEW considers this change will "cause confusion and increase compliance costs" and that the regulatory burden that already weighs heavily on firms, will only increase. 

The FCA, however, has stated that "We recognise the benefits of an improved regime for anti-money laundering supervision. These changes will simplify the supervision of professional services, ensure more consistent oversight and help us identify and disrupt crime". It also considers its 'extensive expertise' in this area will ensure a smooth transition.  

The reforms remain subject to enabling legislation and further consultation, meaning the actual timeline for implementation is uncertain. It has never been more important for law firms to ensure robust AML policies and procedures are in place.

Complying with Principle 6 - encouraging equality, diversity and inclusion

 The Solicitors Regulation Authority (SRA) has provided updated guidance on Principle 6 of its Code of Conduct, which states that legal professionals promote equality, diversity and inclusion (EDI). Despite the expectations on firms and individuals remaining the same, the new guidance provides better practical advice and examples of behaviours that could raise regulatory concerns.

Individuals must treat colleagues respectfully and avoid discrimination, bullying, or harassment, and senior individuals are expected to lead by example, to challenge incorrect behaviour, and take steps to create an inclusive culture. The SRA has also provided guidance confirming that actions outside of work, including online conduct, can impact public trust and may fall under SRA remit if the behaviour is discriminatory or offensive.

Law firms are being encouraged to take steps to create comprehensive EDI in their workplaces, including implementing policies and training for individuals on EDI topics. Recruitment and promotion practices are another area for firms to consider, and these must be fair and free from discrimination. While not all firms are required to put in place every piece of the guidance, larger firms will be expected to do more and may need to set aspirational targets or publish pay gap reports and other reports on diversity data.

The SRA recommends that firms work on developing EDI policies, ensuring fair recruitment and promotion processes, providing appropriate staff training, encouraging open dialogue around EDI issues and making sure reasonable adjustments are made where appropriate for those with disabilities. For more information read our analysis here. 

Costs orders on applications by King's Counsel for ad hoc admission in Hong Kong

At the time of writing, Re Owen KC [2025] HKCFI 4569 is the most recent judgment concerning an application by overseas counsel for ad hoc admission to appear before the Hong Kong courts. Such applications proceed by consent or are contested before a judge of the High Court. Applicants should be eminent senior counsel (advocates) and the case for which they wish to appear should involve points of law of unusual complexity and difficulty. The court is guided by the public interest when deciding whether to approve an application for ad hoc admission and rarely makes a costs order against an applicant. In Re Owen KC the court gave guidance on costs.

The applicant sought permission to represent two parties on an application for permission to appeal to the Court of Appeal with respect to a restraint order obtained by the Secretary for Justice pursuant to section 15 of the Organized and Serious Crimes Ordinance. The Court of Appeal had refused permission to appeal based on written submissions but subsequently allowed a hearing with oral argument – it was for this hearing that the applicant sought permission to appear together with any substantive appeal (CAMP 290/2023). 

Given that the hearing before the Court of Appeal was (in effect) a "screening exercise" the court declined to grant the applicant permission to appear in the proceedings. In the context of the application for ad hoc admission the court was not convinced that the issues raised before the Court of Appeal involved any points of law of unusual complexity and difficulty. 

Of particular interest is the court's consideration of the Secretary for Justice's request for costs against the applicant. The Secretary for Justice is an interested party with respect to applications for ad hoc admission by overseas counsel. Re Owen KC appears to be the first instance of the Secretary for Justice opposing such an application to which the Hong Kong Bar Association (as another interested party) had agreed. In that context, the court's guidance on costs is important. The court declined to order costs against the applicant – noting that:

• court proceedings arising out of applications for ad hoc admission are not normal adversarial litigation – rather, they are guided by the public interest. The role of the Secretary for Justice and the Bar Association is to assist the court and there should normally be no order as to costs; 
• the court can make a costs order against an unsuccessful applicant but would only do so where their application is "one that should never have been made as no applicant could reasonably view the application as having a reasonable prospect of success" (paragraph 60 of the court's judgment). 

Re Owen KC confirms that the threshold for obtaining an adverse costs order following a contested application for ad hoc admission is high. In short, an application by King's Counsel for ad hoc admission that is made in good faith and to which the Bar Association consents should not attract adverse costs.

With thanks to our additional contributors: Aimee Talbot, Sally Lord and Cat Zakarias-Welch.