Lawyers Covered - October 2026

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.

The test for dishonesty

The recent Court of Appeal judgment in Grosvenor Property Developers Limited (in liquidation) v Portner Law Limited [2026] EWCA Civ 1238 provides a clear and succinct reminder of what the legal test for dishonesty is and, importantly, what it is not. 

At first instance, in deciding whether or not a solicitor had acted dishonestly, the High Court had asked itself "whether an honest solicitor with the skills and experience of [the defendant] would have acted in the way that he did".

The Court of Appeal held that this was not the correct legal test for dishonesty.  Lady Justice Falks walked through the two-stage test for dishonesty, set out in the leading case of Ivey v Genting Casino, as follows.

Firstly, the subjective element of the test: 1) to ascertain the individual’s relevant knowledge and beliefs: his actual state of mind. This element considers whether the belief held by the defendant is genuine. This issue of reasonableness is not relevant here.

Second, the objective element:  2) to determine whether, given that state of mind, their conduct was honest or dishonest by applying the standards of ordinary decent people.

An individual's own standard of honesty is not relevant here.  This stage is entirely objective, looking at the standard of 'ordinary decent people'.

In the case before the court, the issue was whether the solicitor had turned a blind eye to a state of affairs, such that he ought to be held to have acted dishonestly. So, what is required for 'blind eye knowledge'? This is another two-stage test: Stage 1- the existence of a suspicion of certain specific facts; and stage 2 - a decision to avoid taking steps that could confirm the suspicion of these facts.

The overriding message is that negligence, even gross negligence, does not amount to dishonesty. The test for dishonesty is well-established and should not be blurred with negligence. The Court of Appeal was, however, keen to stress that this of course should be seen to 'condone lax behaviour' of professionals.  

A more detailed article on the decision (and a link to the Court of Appeal's judgment) can be found here: https://www.rpclegal.com/thinking/tax-take/turning-a-nelsonian-blind-eye-court-of-appeal-clarifies-test-for-dishonesty/

AI guidance from Law Society and CILEX

The Law Society has helpfully published a comprehensive guidance note for solicitors on the pitfalls arising from use of generative artificial intelligence (AI) for both legal work and business administration. Similarly, CILEx Regulation (CRL) also published new AI guidance this month, which explains how the CILEX Code of Conduct applies to AI, covering competence, accuracy, confidentiality, transparency and human oversight.

The central point from both the Law Society and CRL is that responsibility cannot be delegated: any AI-generated output must be reviewed, verified and approved by an appropriately competent individual. All those working in legal services firms should read the appropriate guidance note and reflect on how the obligations outlined there are met during their use of AI. The Law Society is a representative body rather than a regulator, so the Note itself is voluntary guidance. Even so, courts and insurers are likely to treat it as a benchmark of reasonable practice. Due consideration should also be given to the SRA's recent warning notice on the misuse of AI, though the Law Society Practice Note is more comprehensive in mapping where the key risks lie.

Free public tools are the riskiest, but an enterprise licence is no guarantee of safety, and firms that build their own tools take on the burden of testing, security and governance themselves. The stakes rise again with agentic AI, which acts with little human input, so its permissions, its access to client data and the points at which a person must sign off all need tight control.

Verification of AI-generated output is of upmost importance. Because AI cannot reliably check its own work, asking one AI tool to verify another's output will not discharge a lawyer's obligations, and after Ayinde firms should not expect a public admonishment to be the worst outcome if misleading material reaches the court.

Supervisors are encouraged to guard against automation bias and the gradual loss of skills, while clients must not be billed for time a task would have taken without AI. Some questions remain open, notably whether prompts and AI-generated working papers attract privilege, and newer threats are emerging, from deepfakes used to defeat client due diligence to hidden instructions buried in documents.

For insurers, the Note anticipates that negligence claims will stem from using AI badly rather than from failing to use it, although technology-assisted disclosure may prove an exception. Firms are encouraged to discuss the scope of their PI cover with brokers, check their notification obligations to insurers and the ICO, and consider standalone cyber cover. Underwriters can expect AI policies, registers and training records to feature more prominently at renewal.

The practical message for everyone is simple: think before you prompt. Is there a real benefit, is it the right approved tool, and could its use be justified to a supervisor, an insurer, the court or a regulator?

Barrister who conducted remote hearing from German trains ordered to pay wasted costs order

Barrister Michael Engelhardt-Sprack was ordered to pay £6,767.44 in wasted costs in an Employment Tribunal case, after attempting to appear remotely at a hearing while travelling on German trains.

Mr Engelhardt-Sprack had been granted permission to conduct the first day of the hearing remotely, by reason of childcare commitments and the fact that he lived in Germany with his family and practised in the UK.

However, Mr Engelhardt-Sprack proceeded to attempt to conduct the hearing on a train, whilst the other attendees could hear noise from the carriage. After a break, he then dialled into the hearing when appearing on a second train, where background noise could also be heard and internet connection was poor. The Tribunal determined that it was inappropriate to conduct the hearing in that environment, and postponed the hearing to the next day. Consequently one day of the hearing was aborted and wasted.

Following the aborted hearing Mr Engelhardt-Sprack wrote the Tribunal, apologising and explaining his appearance whilst travelling was due to the unavailability of childcare. There was no explanation as to why he had failed to alert the Tribunal or the respondent prior to the first day of the hearing.

The Tribunal held that "conducting a remote hearing whilst travelling by train is not in accordance with Presidential Guidance and is totally inappropriate and unprofessional." It was also unprofessional and inappropriate that Mr Engelhardt-Sprack failed to contact the Tribunal or the respondent’s legal teams to warn that the first day of the hearing was likely to be aborted due to the inability to conduct the hearing in a quiet environment in accordance with the Presidential Guidance. Applying case law, the Tribunal found that there had been negligent conduct which caused the respondent's legal team unnecessary costs. It found it just to order Mr Engelhardt-Sprack to compensate the respondents for the whole of the relevant costs due to the aborted day. These totalled £6,767.44.

The case provides a useful reminder of the need to consider carefully one's location when appearing remotely in front of a Court or Tribunal. If circumstances change, these should be escalated early with the Tribunal and other parties. Adequate internet connection is also crucial.

Unlawful means conspiracy allegations against solicitors firmly rejected

Claimants against law firms increasingly reach for unlawful means conspiracy instead of or alongside a claim in negligence. In some cases, the attraction of the claim is to give a non-client a potential cause of action against the firm where negligence is unavailable. In other cases, there may be tactical reasons to frame a case in conspiracy.

The recent decision in East-West United Bank S.A. v Gusinski and others [2026] EWHC 2550 (BP) is a rare, and valuable, judgment in a claim against solicitors. Our article on the case outlines key takeaways for professional services firms and their insurers.

Law Society issues practice note on professional undertakings

The Law Society has published a practice note on professional undertakings, highlighting the regulatory and litigation risks for solicitors giving undertakings.

The note emphasises the wide definition of "undertaking". An undertaking can be given orally or in writing and it is not a requirement to use the word “undertake”, so long as the recipient reasonably relies on action being taken, or not taken, as a result of the statement given. Solicitors are cautioned that ambiguous undertakings are generally construed in favour of the recipient and to be careful when using the wording "best endeavours" or "reasonable endeavours", as inaction or insufficient action could constitute a breach of undertaking.

The note warns against solicitors giving a personal undertaking, as failure to comply amounts to professional misconduct, which will be investigated by the SRA. In SRA v Seddon and Gowlings Solicitors Ltd, late/non-performance of personal undertakings resulted in findings of serious misconduct (due to a breach of Principle 6 and a failure to achieve Outcome 11.2 of the SRA Code of Conduct 2011) and fines of £12,000 per respondent plus costs.

When giving an undertaking solicitors should consider the reasonableness and timescale of the undertaking, by reference to the “SMART” principles i.e. an undertaking should be Specific, Measurable, Agreed, Realistic, and Timed. Once given, firms/companies must have controls to monitor, record and discharge undertakings (for example case management system prompts).

A key practical issue is enforceability against corporate entities. Considering the Supreme Court’s obiter comments in Harcus Sinclair LLP v Your Lawyers Ltd, the Law Society flags that a corporate entity is a distinct legal person that can neither give nor be bound by a solicitor's undertaking.

Overall, the note emphasises that undertakings remain fundamental to transactions, but warns solicitors to exercise careful consideration before an undertaking is given.

Radical reform of Legal Ombudsman?

The Office for Legal Complaints' (OLC) plans to "radically transform" the Legal Ombudsman (LeO) have attracted criticism from the Law Society and Bar Council.

OLC's proposals are aimed at reducing avoidable demand for LeO in light of the fact that one in four LeO complainants said that they never received a final response to their complaint from their legal services provider. OLC also intends to commission an independent review of LeO as well as pursuing a programme of continuous improvement.

The key proposals include that complainants must show a real and material detriment to be eligible for LeO determination and must submit complaints online within a new 12-year longstop running from the date of the alleged service failing. The Bar Council considers that this should be 6 years instead, which is in line with the limitation periods in contract and tort under the Limitation Act 1980. By contrast, the Law Society proposes that LeO has discretion to investigate complaints older than 12 years where the problem could not reasonably be discovered earlier. In relation to the online form, the Law Society has suggested a word limit to prevent unnecessarily long AI-drafted complaints.

Under the OCL's new scheme, LeO will be allowed to dismiss complaints due to unacceptable behaviour by the complainant and limit escalation to an ombudsman to cases where a final decision is "necessary and proportionate". As such, the proposed changes should be welcome to insurers and law firms incurring costs dealing with spurious complaints.

On costs, fees would increase too, with a tiered system reflecting the stage that a complaint has reached: £200 if the complaint is resolved early, £750 for resolution after investigation and £1,500 if a final decision is required. An additional £400 will be payable by firms who fail to provide a final response within eight weeks. The Law Society strongly opposes charging for unmeritorious complaints and has pushed for published guidance on when fees will be waived – this is likely to apply where LeO finds in favour of the legal services provider and the provider took all reasonable steps to resolve the complaint at the first-tier. The Bar Council says that this is too stringent a test as one unintentional misstep may lead to LeO concluding that all reasonable steps were not taken and imposing a fee.

The OLC also proposes that all final decisions will be eligible for publication subject to anonymisation – something the Bar Council considers costly with negligible benefit. The Law Society draws attention to the fact that the decisions currently published have a lower readership than hoped.

While the Law Society is supportive of the aims underlying the proposed reforms, it warns against the risk of passing LeO's inefficiencies on to the profession, creating incentives to settle unmeritorious complaints, undermining confidence in the complaints system and impairing access to justice. It also criticises the proposed new fees as excessive, disproportionate and unfair – a view shared by the Bar Council who described the new scheme as punitive and highlighted that the new £1,500 fee may dissuade some self-employed barristers from seeking a final ombudsman decision. The Law Society also proposes a "permission to appeal" mechanism whereby requests for escalation are reviewed by a Senior Ombudsman to reduce the likelihood of unmeritorious judicial review applications being pursued. The Bar Council considers that the proposals try to do too much, and that LeO should focus instead on reducing the backlog.

It remains to be seen whether the OLC will incorporate the regulators' concerns into a its final plans, but firms should monitor for developments given the likely impact of these reforms.

With thanks to our additional contributors: Charlotte Thompson, Aimee Talbot and Sally Lord

Disclaimer: The information in this publication is for guidance purposes only and does not constitute legal advice. We attempt to ensure that the content is current as at the date of publication, but we do not guarantee that it remains up to date. You should seek legal or other professional advice before acting or relying on any of the content.

If there are any issues on which you'd like more information (or if you have any questions or feedback), please do let us know or get in touch with your usual contact at RPC.