Legal practices

Written by Will Sefton & Melissa Taylor

Key developments in 2024

A crumbling regulator? The SRA is facing difficult questions about its effectiveness as a regulator in the wake of the collapse of Axiom Ince, which led to the disappearance of £62million and the loss of around 1,400 jobs. Initially Insurers received a flood of claims totalling around £33million. In an unpopular move, the SRA announced the profession will cover the loss through a 270% rise in contributions to the Compensation Fund. 

The Legal Services Board's report found that the SRA "did not act adequately, effectively or efficiently" and did not take all the steps "it could have or should have taken". The SRA denies any failings despite the report finding the SRA failed to carry out a basic accounts check in 2022. If that check had been carried out, it might have prevented any further money being drained from Axiom Ince's client account and it may have reduced the huge cost to the profession. 

Topping off the SRA's tumultuous year, for only the second time in 20 years, the High Court overturned its decision to intervene in a law firm, Santer Solicitors. The SRA also came under fire after it spent ca £16,000 defending its decision to rebuke a solicitor for a minor infringement, despite its own investigations officer recommending that the rebuke should be overturned. These decisions only add to the SRA's woes and the LSB, in an unprecedented move, announced its intention to commence enforcement action under s32 of the Legal Services Act to ensure the SRA now makes changes to better achieve its regulatory objectives and to restore public confidence.  

There has also been a focus on litigation tactics this year, in light of the Post Office scandal. US law firm McDermott Will & Emery was criticised by a Judge for sending a "disgraceful" and "improper" letter to its client's competitor. The Judge found MWE was attempting to put pressure on their client's competitor to pay without asking further queries. Herbert Smith Freehills have also been criticised for managing to spend £163.3m advising the Post Office on compensation relating to the Historical Shortfall Scheme. A leading academic has suggested that lawyerly zeal needs to be reined in and the culture of litigation should be revamped in an effort to avoid large firms appearing to have more power than the Courts. 

What to expect in 2025

The duty on employers to prevent sexual harassment is now in force and it has placed a proactive duty on employers to take reasonable steps to prevent sexual harassment.  All employers should now start to update and review their company policies and procedures. We will start to see cases in which the Courts have to grapple with power imbalances, workplace culture and bullying, particularly in light of the recent criticisms of the use of NDAs. 

The SRA has launched three consultations which include considering whether to change the way law firms hold client money. Fraudsters are becoming increasingly clever at finding new ways to target law firms. In France, lawyers do not have access to client money and it is held in a centralised system; it is mandatory to deposit funds in the system and not doing so leads to a disciplinary matter. A system like this would reduce the risk and associated PII premiums, but it would mean massive changes to the way solicitors operate and the initial response has been negative. The consultations will cease on 21 February 2025 – watch this space! 

Explore Annual Insurance Review 2025