Lawyers Covered - January 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 January 2025 bumper 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.

Annual Insurance Review

As ever, we have gathered insights from the finest insurance market experts from within RPC and across our Global Access partner firms, to present you with our assessment of 2024's main events and our hopes (and fears) for 2025, across key international jurisdictions and countless business lines, including solicitors. 

In our 2024 Annual Review we celebrated the diminishing impact of Covid on the insurance market, whilst acknowledging a host of growing risk-factors, including economic, climate, ESG and technological challenges.  

This year you will read how these issues have, indeed, impacted the market, and are likely to continue to do so.  The increased influence of AI, both as a driver of speed and efficiency within the insurance market and as a risk factor for claims, the systemic challenges it presents and its potential weaponisation by states as a cyber threat; the ongoing impact of higher-frequency extreme weather events; continued economic struggles across jurisdictions, including high rates of insolvencies; the growing risk of activist claims and regulatory intervention relating to ESG.  You will see all of these topics featuring heavily in the articles here.

AI-generated phishing scams target corporate executives

We previously reported on a rise in the sophistication of artificial intelligence-assisted deepfake fraud here. There has now been a rise in the number of reports of personalised phishing attacks against high-ranking executives from leading corporations. 

The purpose of a phishing scam is to deceive a target into disclosing sensitive or financial information by impersonating trustworthy entities. They are commonly executed via e-mail, text or website links and have historically been easily identifiable – often they contain spelling, grammatical errors, formatting issues and/or incorrect details. However, leading corporations are reporting that the attacks have become more personalised, leading them to conclude that fraudsters are using AI to mirror a victim or company’s style and tone to make the attack more realistic. AI bots are able to scrape vast amounts of data from companies’ websites and online profiles to mimic their communication style in order to create the 'perfect phishing email'. Cyber experts warn that these attacks are more likely to bypass basic filters, which block repeated bulk phishing campaigns as the use of artificial intelligence allows fraudsters to generate thousands of unique messages, leaving corporations susceptible to harm.

It is important that law firms remain vigilant to these attacks given that they handle large volumes of data and routinely transfers significant sums through their accounts in a demanding, fast-moving environment. If a phishing attack is successful, fraudsters may be able to access contact lists and send phishing e-mails to breach further accounts or conduct payment fraud by changing bank details on an invoice, bill or transaction. The risk of falling victim to a hack is ever present and firms need to be sure they understand the risk and combat it effectively given the devasting consequences they have can have. Whilst most firms now train their employees on how to spot email phishing scams, the sophisticated nature of these attacks are becoming more difficult to identify and, with widespread reports of targeted attacks, firms need to ensure that adequate measures are implemented at all levels to ensure employees remain vigilant to them – failing which they are likely to face a professional indemnity claim for consequential losses when monies are fraudulently diverted. For more information on an of these issues, please contact Richard Breavington.

Undertakings and summary judgment

The recent decision in the case of Social Money Limited v Atwells Solicitors LLP [2024] EWHC 3288 (Ch), where summary judgment was sought for breach of contractual undertaking and breach of trust after a mortgage fraud, considers a range of issues relating to undertakings and summary judgment applications.

Read our article here for our analysis of the decision.

Update on s.37 compliance and recent developments

Last year, we highlighted the implications of the Virgin Media v NTL Pensions Trustees Court of Appeal decision, which confirmed that s.37 actuarial confirmation is essential for amendments affecting benefits in contracted-out pension schemes. Without this confirmation, amendments are void, creating significant risks for employers and trustees, as well as potential claims against their advisers.  Two recent developments – discussions around potential legislative override by the Department for Work and Pensions (DWP) and the forthcoming Verity Trustees v (1) Wood and (2) Save the Children Fund  case – may shape how these risks evolve.

DWP legislative override discussions

Updates from a lawyer/actuarial working group confirm that work continues with the DWP over potential legislative override. This proposal would retrospectively validate amendments voided solely due to the absence of written actuarial confirmation at the time or where confirmation cannot be located.  If implemented, this could offer much-needed certainty and reduce liability exposure for advisers. However, no formal legislation has been introduced, meaning the current legal position remains unchanged for now.

Verity Trustees v Wood and Save the Children Fund

This High Court case, set for hearing in March 2025, raises several questions about the operation of s.37 post-Virgin Media, including:

1. Which types of amendments require s.37 confirmation;

    

2. What constitutes sufficient "written confirmation" – does it need to be a formal document, or will information communication suffice (albeit the finding on this point could be limited as the filed court documents indicate that the Court is being asked to consider a specific document and whether that constitutes "actuarial confirmation");

    

3. Whether a retrospective actuarial confirmation can validate earlier amendments;

    

4. Whether courts can infer that confirmation was given, based on the presumption of regularity where documentation is missing; and

    

5. Whether invalid s.37 amendments render an entire deed void or if unaffected provisions can be severed.

The judgment in Verity Trustees could significantly clarify whether s.37 issues exist in contracted out schemes and with that the potential liability risks for advisers.

"Getting around" a failure to follow formalities

Ballard v Buzzard [2024] offers important insights into how courts may approach documentation and formality errors in trust documents.  Although the case concerned a pension scheme, it has a wider implication for trusts.  The case concerned a final salary scheme and the impact of an apparent failure to follow the scheme amendment power.   There were a number of formalities under the scheme amendment power; one step was to have the approval of all trustees "under their hands".  One trustee mistakenly signed in the block for the employer and so the question arose as to whether approval of all trustees had been obtained as one trustee had not signed in their capacity as trustee.  The High Court ordered the rectification of the signature block so it was clear that the one trustee signed in their capacity as a trustee.

The case is a useful example of how a rectification application can be used to "get around" issues with documents where there is an apparent failure to follow formalities which would otherwise render the amendment invalid.  We explore the court's recent approach to formality issues in a recent blog.

New solicitors’ guideline hourly rates for 2025

On 1 January 2025, new updated guideline hourly rates for solicitors came into force. This follows the Civil Justice Council's Costs Review, published in May 2023, which made recommendations for the guidelines hourly rates to be updated annually in line with the Services Producer Price Index (SPPI). Prior to the CJC's review, the guideline hourly rates had only been updated once, in 2021, since their introduction in 2010.

This year's rates, representing a 3.65% increase from the 2024 rates, sees the topline rates for commercial and corporate Grade A fee earners increase to £566 per hour in London with other work in central London increasing to £413 per hour, in outer London increasing to £312 per hour and in other areas nationally to £288 per hour. Unless the rates being previously charged to clients already exceeded the 2024 guideline rates, paying parties should be alive to successful parties' solicitors who increase their costs from 1 January 2025 in line with the new rates, as any increases will need to have been communicated to and agreed by the successful clients, in line with the indemnity principle. However, it will be harder for successful parties to justify rates which exceed the guideline figures, notwithstanding that that the guideline rates are intended to be a starting point only, on the grounds that they are outdated or unreliable, in circumstances where the rates are now regularly revised in line with the SPPI.

Practitioners await to see, however, if the CJC will extend guideline hourly rates to Counsel (including a new top rate for complex commercial work), which is currently being examined by a working group.

"Cut and paste" paragraphs undermine the cogency of the evidence in witness statements

In legal proceedings, the integrity of witness statements is paramount, as they provide firsthand accounts crucial for establishing facts. However, the practice of “cut and paste”—replicating paragraphs from other documents or sources into witness statements—can significantly undermine their cogency.

This issue was notably addressed, recently, by HHJ Emma Kelly in the case of MJF v University Hospitals Birmingham NHS Foundation Trust [2004] which was a claim for personal injury sustained during surgery to fit a feeding tube.  This case underscored the importance of authenticity and accuracy in witness statements.

The Claimant's witnesses, her parents and a long-standing carer, Mrs Sheasby, gave a "rosy picture of the Claimant's level of functioning" prior to the surgery which appeared to largely contradict the Claimant's medical records. However, large numbers of paragraphs in the witness statements of the trio were identical.

When Mrs Sheasby was cross-examined, she said that she had no idea why the wording of part of her statement was identical to that of the Claimant's parents. She accepted that she and the parents had discussed what they would say in their witness statements but said that she had never seen their statements.

HHJ Kelly observed that "The circumstances in which the witness statements of the Claimant's parents and that of Mrs Sheasby were prepared are very unsatisfactory. The identical terms of a number of the paragraphs, indeed multiple paragraphs as between the parents, demonstrates that the evidence cannot be their own words. In my judgment, the most likely explanation is that these three witnesses discussed their evidence before giving what amounted to joint instructions to the claimant's solicitor, who then drafted a statement and cut and pasted paragraphs into other statements. This approach undermines the cogency of the evidence as it is impossible to determine the actual words of each witness."

Lawyers are strongly advised to avoid “Cut and paste” practices which can lead to problems such as a lack of personalisation, inconsistencies in the statement and the possibility that the witness will be considered as less trustworthy, potentially affecting the weight given to such evidence. In some cases, this practice could lead to the exclusion of the statement, or adverse inferences being drawn by the Court about the witness’s credibility.

The golden rule is that lay witness statements should always be the witnesses' own words.

SRA Probes Probate Practitioners

Having wandered onto the SRA's radar as a result of high volumes of reports/complaints and payments from the Compensation Fund, probate practitioners have recently come under scrutiny by way of the SRA's thematic review, which was published last December.

The SRA engaged with 25 firms which provided probate and estate administration legal services, met their heads of department and staff, and reviewed files, training records and accountant's reports. The findings were, perhaps inevitably, something of a mixed bag.

All firms had a good awareness of client vulnerability and took steps to meet the needs of their clients, although the SRA suggested some further steps which might be taken. Further, most firms were found to be keeping accurate client and office ledgers and records of estate assets and liabilities, and to be aware of the risks associated with acting both as executor and in the administration of the estate.

On the other hand, however, the SRA found gaps in relation to competence, training, and supervision: over half of the solicitor fee earners were unaware of their obligation to make sure they remained competent; of 30 files reviewed only 9 showed evidence of supervision; and half the heads of department/sole practitioners received no oversight of their work or peer review.

Unsurprisingly the SRA made clear that it would be following up these findings with the firms where there were shortcomings, and using them to support its on-going programmes of work on continuing competence and consumer protection.

The review highlights the importance of solicitors ensuring that their clients are adequately protected by virtue of properly trained and supervised staff. Failure to do so is likely to have damaging regulatory repercussions.

Ethics and Professional Standards Committee final report published

On 13 January 2025, coinciding with the Opening of the Legal Year 2025, the Ethics and Professional Standards Committee (the "Committee") published its Final Report following a 2-year investigation.

The Committee was established in 2023 following a perceived decline in standards within the legal profession, as evidenced by a recent increase in disciplinary tribunal investigations. The Committee was tasked with developing a strategy to reaffirm the moral centre and values of the legal profession, and to enable lawyers and those who aspire to a career in law to understand the legal profession as a calling to be answered with honesty, integrity and dedication.

The Committee's Final Report makes 21 recommendations focusing on the three key areas of “ethos”, “learning”, and the “profession”, all of which have been accepted by the Honourable Chief Justice Menon for implementation in consultation with the profession and stakeholders.

Key takeaways from the report include:

• An increased focus on ethics and professional standards as part of the Continuing Professional Development scheme applicable to lawyers of all seniorities with effect from 2025.
• The need for effective mentoring of the younger generation, with the loss of such opportunities during the pandemic being noteworthy. Senior and supervising lawyers have a duty to teach and pass on ethical values. It was recommended that the Law Society provide training for mentors in order to achieve this, and that structured mentoring within law firms be implemented.
• The need for improved management of law firms, including as regards conflicts of interest, client confidentiality and client complaints.
• The Law Society's adoption of a Policy on the Prevention of Workplace Harassment and Bullying, along with a toolkit to law firms on implementing the same.

Firms may therefore wish to review their internal policies and procedures as regards professional and ethical standards, and their training of junior lawyers, in order to keep ahead of the curve.

Thanks to our additional contributors: Sally Lord, Cat Zakarias-Welch and Aimee Talbot