Lawyers Covered - September 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 August 2025 edition of our Lawyers Liability & Regulatory Update, in which we highlight the last month's key developments affecting lawyers and the professional risks they face.

Access to justice or consumer harm? The SRA targets risks in bulk claims

In August 2025, the SRA concluded its thematic review of the high-volume consumer claims sector, highlighting widespread compliance failings that pose risks to consumers. The move follows a series of firm collapses, most notably SSB Law, which went into administration after defaulting on litigation funding obligations tied to thousands of cavity wall claims. Clients who believed their cases were protected under no-win, no-fee arrangements were instead left exposed to adverse legal costs, in some cases up to £40,000, due to inadequate insurance cover.

The SRA identified systemic weaknesses across the sector, including poor client communication, inadequate due diligence on funders, insufficient information on costs and funding options, weak oversight of referrers, and failures in arranging appropriate ATE insurance. Financial overextension was flagged as a particular concern, with some firms taking on unsustainable levels of litigation funding relative to turnover, jeopardising both financial viability and regulatory compliance. Of 25 firms visited during the review, nine are now under investigation.

The regulator also drew attention to the expansion of bulk-claims firms, closely tied to growth in the litigation funding market. When SSB Law collapsed, it held 43,000 claims and owed £200 million to six funders, illustrating the scale of exposure for both clients and investors. Wider regulatory concerns have been echoed by the Civil Justice Council, which in June 2025 recommended new consumer protections in litigation funding, and by joint SRA–FCA warnings around bulk claims in the motor finance sector.

In response, the SRA has taken the unprecedented step of requiring firms that it perceives as high-risk to complete a mandatory declaration confirming that they understand their regulatory duties and that they are following them. The value of such a move is uncertain, as what firm is ever going to answer "no, we don't understand our regulatory duties"? And what will be the implications of answering "yes I understand" and then later reporting or being found not to have complied? Will this prompt the SRA to add a dishonesty charge on the basis of the declaration?

Meanwhile, the SRA is progressing 89 investigations and has raised its 2025/2026 budget by 19% to tackle rising complaints and replenish an increasingly strained compensation fund. With regulatory scrutiny intensifying, bulk-claims firms can expect sustained oversight and robust enforcement. See our article here for a deep dive into the SRA's review and risks arising out of the growth of the bulk-claims and litigation funding markets.

Law Society calls for urgent improvements on SRA's part

As the approved regulator of the solicitors' profession under the Legal Services Act 2007, the Law Society (via its Council) delegates its regulatory functions to the SRA – an independent body.

In January 2025, the Society wrote to the SRA to request information and assurances of the SRA’s compliance with its statutory duty under section 28 of the Act – ie the duty to promote the regulatory objectives. 

The request invited the SRA Board to provide information and assurances relating to aspects of the Legal Services Board's review of the regulatory events leading up to the SRA's intervention into Axiom Ince.  The LSB had previously concluded that, in respect of that intervention:

1. The SRA did not act adequately, effectively and efficiently.
2. The SRA did not take all the steps it could or should have taken.
3. The SRA’s actions and omissions necessitate change in its procedures to mitigate the possibility of a similar situation arising again.

Following receipt of the SRA's responses, and following subsequent Council meetings called to assess the adequacy of the SRA’s responses, the Council concluded that the information provided was insufficient to confirm compliance with its section 28 duties during the critical period before and during the intervention of Axiom Ince, citing serious shortcomings in the SRA’s operational efficiency, decision-making, and governance —particularly regarding the protection of client funds and timely reporting. To quote the Society's concerns about the intervention:

"It is difficult to think of a matter more urgent and important than the protection of consumer and public interest in the specific circumstances that prevailed at the time, and to ensure the prevention of foreseeable consumer losses amounting to tens of millions of pounds."

The Council partially accepted the SRA’s commitment to improve its governance and operational processes, and it hopes to rebuild trust in the ability and commitment of the SRA. However, the Council notes that ongoing evidence will be required to demonstrate effective implementation of action plans and to demonstrate progress towards compliance with its regulatory duties.

The Council will continue to monitor the SRA and has reserved its right to request more information from the SRA and expects ongoing engagement and updated assurances at future meetings (the first of which is scheduled for October 2025).

The Society's letter should provide some comfort to the profession at large that the statutory regulator is taking its duties seriously by holding its independent bodies to account.  This may also spell a step change in the regulators' approach to mergers, acquisitions, and interventions. 

New failure to prevent fraud offence now in force

The recent introduction of a new "failure to prevent fraud" offence under the Economic Crime and Corporate Transparency Act 2023 (ECCTA) will look to add greater repercussions for large organisations who fall short of their duty to maintain updated compliance and anti-fraud measures. The new offence applies to organisations that meet at least two of the following criteria: 250 or more employees, a turnover of £36m or more, and/or assets of £18m or more. 

The offence covers a broad range of conduct, including false accounting and tax evasion, and applies to overseas companies with links to the UK. Organisations that fail to comply with ECCTA may face exposure to prosecution, regulatory sanctions, and unlimited fines. Further, the legislation will simplify UK authorities' ability to hold organisations liable if they have failed to maintain updated compliance procedures. In addition to the risk of undermining any defence an organisation may wish to plead in response to prosecution, failure to maintain adequate compliance procedures may also attract exposure to claims of professional negligence, especially if such failure results in criminal liability or regulatory action.

Accordingly, the ECCTA emphasises the heightened expectation and importance of law firms being able to demonstrate preservation of stringent, up-to-date, anti-fraud procedures, which aim to identify and tackle risks of circumstances in which fraud could occur through the course of the firm's business operations. These antifraud procedures include:

• Reviewing and updating anti-fraud policies and procedures.
• Conducting regular risk assessments and documenting findings.
• Implementing and maintaining effective whistleblowing and reporting mechanisms.
• Providing ongoing training to staff and relevant third parties.
• Monitoring and refreshing compliance provisions in contracts.

Law firms should be able to show that they have clear anti-fraud procedures in place and that these are regularly reviewed. It is important to keep improving these measures to address new types of fraud as criminals are constantly evolving, especially as technology such as deepfake and generative AI becomes more sophisticated and widely available. Taking these steps can help protect firms and may support their position in the event that fraud occurs.

Use of data to identify patterns of fraud is a legitimate use under GPDR

In a decision likely to be particularly relevant to insurers and defendant firms, the High Court recently dismissed a data protection claim brought by three claimants against law firm DWF Law LLP. In Yesim Kul & Ors v DWF Law LLP [2025] EWHC 1824 (KB) it was claimed D had breached the individuals' rights as data subjects in using their data for an application to dismiss personal injury claims for fundamental dishonesty.

The claimants' names and health data had been included in a spreadsheet exhibited to a witness statement as a means to identify patterns in groups of road traffic accident claims, including those brought by the claimants' own solicitors. D denied that any breach had occurred.

In judgment, Mrs Justice Eady determined D had undertaken the data processing "for a specified, explicit and legitimate purpose" and as part of D's professional obligations to its clients, to ensure the proper administration of justice and in furtherance of the legitimate interests of its clients.

The hearing also included evidence given for the claimants from a solicitor who appeared to have been hired purely for the purpose of dealing with the litigation and, as such, could not give evidence from his own knowledge; but rather only from documents that he had seen or about what he had been told. Mrs Justice Eady described the situation as "extraordinary" following his inability to explain why he was giving evidence other than because he had been paid to do so.

The judgment serves as a helpful guide for lawyers on the scope of lawful processing of personal data in the course of litigation and as a reminder to ensure that witnesses called are individuals who can give evidence on the substance of the dispute from their own knowledge, where possible.

The claim is reportedly under appeal and the Court of Appeal's judgment will be essential reading, especially for defendant firms.

Legal advice privilege as between company and shareholder (HK)

The landmark judgment of the Judicial Committee of the UK Privy Council (UKPC) in Re Jardine Strategic Ltd [2025] UKPC 34 has attracted much attention in England and Wales and Hong Kong. In short, the UKPC decided that the "shareholder rule" – that a company generally cannot claim legal advice privilege to withhold documents from a shareholder except where the advice relates to litigation with the shareholder – is not part of Bermudan common law, and nor should it be recognised as part of English law. Therefore, the "shareholder rule" has been abolished in England and Wales.

The considerable interest in Hong Kong is in large part explained by the following:

• for now, Hong Kong common law recognises the "shareholder rule": Re NDT (BVI) Trading Ltd [2009] 2 HKLRD 409 (a judgment of the Court of First Instance of the High Court); 
• disputes between companies and shareholders are prevalent in the Hong Kong courts and arise in all manner of circumstances, including (for example) – unfair prejudice petitions, derivative actions and shareholder access to corporate documents; and
• the historical treatment of UKPC and UK Supreme Court (UKSC) judgments in Hong Kong before and after Hong Kong's "reunification" with the People's Republic of China in 1997.

All this begs an important question: how likely is it that the Hong Kong courts will follow the reasoning in UKPC's judgment in Re Jardine Strategic Ltd and abolish the "shareholder rule"?

For now, the safer course for a first instance court may be to follow Re NDT (BVI) Trading Ltd and apply the "shareholder rule" – thereby, applying local common law – in the knowledge that the issues raised are deserving of appellate court deliberation. The issues raised – against a background of legal advice privilege – are of fundamental public importance (to clients and lawyers) and, in the right case, would make their way to Hong Kong's "top court" (the Court of Final Appeal to which eminent overseas non-permanent judges are appointed).

Since 1 July 1997, judgments of the UKSC and UKPC are accorded great respect by the Hong Kong courts, but they are not binding; their persuasiveness depends on relevant and local circumstances. However, in the apparent absence of any local circumstances that detract from the UKPC's reasoning in Re Jardine Strategic Ltd and given similar positions in Australia and Canada, it appears the survival of the "shareholder rule" is on rather shaky ground in Hong Kong – a jurisdiction in which legal advice privilege has a rock-solid (granite) foundation.

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