Lawyers Covered - June 2023
Welcome to the latest edition of our Lawyers Liability & Regulatory Update, in which we look back over the last month at key developments affecting lawyers and the professional risks they face.
Unsafe advice? Conveyancing and the Building Safety Act
There remain serious concerns amongst conveyancers and those insuring them about how to comply with the Building Safety Act 2022 and Fire Safety Act 2021 requirements when acting on leasehold transactions, with some firms simply refusing to take on such work. The BSA is complex and new; a recipe for risk. Particular difficulties arise in verifying the information given by sellers and landlords, leading to uncertainty over whether a lease qualifies for protection against remediation costs under the BSA. In addition, there is concern that lease extensions will lose protection under the Act as they technically involve a surrender and re-grant. This latter issue is something the Government are being urged to legislate to fix.
A (Mc)Clean slate for barrister advising on tax scheme: duties to third party investors
The Court of Appeal's recent decision in David McLean and others v Andrew Thornhill KC considered the circumstances in which duties are owed to non-clients in the context of legal advice made available to investors in tax schemes.
The Court of Appeal dismissed the investors' appeal against the decision of Mr Justice Zacaroli. It applied the test set out by the Supreme Court in Steel v NRAM Ltd and held that no duty was owed. This was because it would have been unreasonable for the investors to rely on the advice without obtaining independent advice and Mr Thornhill could not reasonably have foreseen that they would have relied on his advice in this way.
Read the full analysis from Nick Bird, Laura Stocks and Natalia Jeremiah here.
Generative AI risks: ChatGPT hallucinating citations
There has been a marked increase in the use of technology in legal services recently. Whilst some firms/legal practitioners have been hailing the benefit of various legal technologies for decades, others were less convinced, perhaps entrenched in traditional ways of doing things, or concerned about the new risks technology poses. However, since almost the entire profession was forced to work from home during the Covid-19 pandemic, and rely almost completely on technology, trust and use of technology has increased dramatically in the profession. The Legal Services Board has recently published its latest analysis of Technology and Innovation in Legal Services which states that the "Covid-19 pandemic [was] the biggest positive driver of service development activity" and that it was also the "biggest driver of trust in the use of technology".
To that end, there has been a lot of speculation on the role that generative AI technology (such as Harvey, Bard or ChatGPT) will play in the future practice of law – or even whether it will soon be capable of taking over our roles as lawyers. Right now, it appears that lawyers don't need to panic, in large part because the practice of law depends on the exercise of judgment, not just the recitation of facts. And it is presently unsafe to rely on generative AI chatbots even for recitation of facts. It has been reported that AI has been providing some questionable citations and case law when asked to assist. Unfortunately for the humans who turned to ChatGPT for assistance with upcoming court hearings, AI was unable to provide them with the supportive case law they desired and, instead, provided false information. Both a UK litigant-in-person and a US lawyer have recently apologised to their respective courts for the deployment of fictitious case references, sourced from ChatGPT. The two US attorneys involved in the latter case are facing a hearing in which they will be required to explain their actions. Judicial sanctions, possibly including disbarment, could follow. It remains to be seen how the courts in this jurisdiction would approach a similar case involving a represented litigant.
This phenomenon is known as "hallucination", which is where AI produces an answer that sounds plausible but is either factually incorrect or irrelevant. This occurs due to inherent biases, lack of real-world understanding, or limitations on the data upon which the AI model is trained. Hallucinations are one of the most concerning elements of generative AI technology.
Technological advances provide exciting new ways of working and efficiencies; however, they are not without risk. Most firms are already alive to the obvious risk that any AI may generate false or inaccurate advice; it should not, therefore, be blindly relied upon. There are also regulatory requirements to consider, including maintaining client confidentiality, which may be breached by providing information to an external unregulated entity such as ChatGPT. All firms should, therefore, ensure that they have in place proper guidelines for staff in relation to the use of AI/chatbots. RPC can assist in the preparation of such a policy: if this is of interest, please contact Graham Reid to discuss in the first instance.
For those interested in generative AI technology, Peter Mansfield "interviewed" ChatGPT on his podcast 'Insurance Covered' on 19 June 2023: the episode can be found here. Helen Armstrong, Ricky Cella and Joshy Thomas also examine the UK's proposed regulation of AI technology in our article here.
The importance of testing your own expert's evidence: a cautionary tale
The recent High Court case of ABC & Ors v Derbyshire County Council & Anor reminds us that instructions and documents sent to experts should be in appropriate formal language and relevant (as these can be disclosed at trial) and of the importance of testing expert evidence, as well as ensuring experts understand the implications of the Civil Procedure Rules. Crucially, the court may take any failures into account when making its decision on costs.
This was a sensitive and complex case. The Claimants' claim alleged breaches of their rights under the European Convention of Human Rights and negligence, as a result of the Defendants removing the Third and Fourth Claimants (the children) from their parents' care (the First and Second Claimants).
The Claimants relied on expert social work evidence by way of a report and testimony. However, at trial the expert could not recall receiving formal letters of instruction and stated that he was not aware of the requirements of the relevant Civil Procedure Rules (despite his signed declaration of truth stating otherwise). Further, two formal letters of instruction to the expert were later disclosed by the Claimants' team which included documentation from their counsel, who had not anticipated that it would be sent to the expert. In light of the above, counsel for the Claimants decided not to rely on the expert's evidence.
Despite both the expert writing to the court blaming significant personal pressures for his errors and the Claimants' solicitor apologising for sending documentation prepared by counsel to the expert and for some of the language used in the letters of instruction, the court still referred to the conduct of the expert and those who instructed him in both the primary judgment on liability and in the decision on costs.
This judgment is a stark reminder of the need to test expert evidence, just as competent solicitors or counsel would test the evidence of lay witnesses in conference when deciding whether to call them. This is a step that can be easily overlooked: once you have spoken to your chosen expert and established their credentials, receipt of a report that appears reasonable is often the end of the process, until trial preparation begins.
How do you 'sufficiently test' expert evidence? The judgment does not say; nor does it identify the nature of the allegedly problematic language in the letters of instruction for which the Claimants' representatives apologised. As such, the case remains a cautionary tale and a reminder to treat experts similarly to lay witnesses - by assessing the likely strength of their evidence before deciding to call them as witnesses. In addition, practitioners will always want to ensure compliance with the relevant Civil Procedure Rules and take care when drafting instructions and considering expert advice.
How to avoid "booby-trapping" your trial bundle and causing an appeal
Without prejudice correspondence and offers are a productive and proportionate means of dispute resolution. They allow parties to participate in meaningful and candid discussions, make concessions, and explore potential settlement options without the need to trouble the court. Privileged correspondence often provides the client with an absolute right to resist its disclosure. The privilege can only be waived, therefore, if the client explicitly agrees.
This freedom to negotiate in good faith and ‘off-the-record’, therefore, is crucial for promoting a time- and cost-effective resolution. As a matter of public policy that seeks to have parties attempt to settle their differences, it follows that without prejudice correspondence and offers should be excluded from trial bundles. Not to do so would undermine the principles of ADR by removing the "safety net" which allows parties to make concessions in the spirit of compromise without risking damage to their case. The current approach also ensures that a court's decision remains wholly impartial and is based on the merits of a case without the influence of earlier settlement discussions or offers.
In the case of Koukash v Koukash  EWHC 1001 (Fam), a finding was overturned because a party had inadvertently left without prejudice offers in the trial bundle without reference to the other party (and thus the privilege was not waived). The judge relied upon the without prejudice offer but was not, as the appeal found, at liberty to do so.
The appeal court stated that it did, however, have great sympathy with the judge who, it said, was handed a ‘boody-trapped bundle containing a document that should not have been there’. It found with ‘a very heavy heart’ that the original judgment was therefore improper and thus allowed the appeal.
The lesson is not confined to the Family Courts as careful bundle preparation is key to any successful case. As any good litigator knows, "a good trial bundle will not win a case, but a bad one may damage it". Inclusion of without prejudice correspondence in a trial bundle inevitably creates the risk of an unsafe or appealable judgment and, whilst the preparation of trial bundles is often perceived to be a thankless task, it is by no means inconsequential and should be treated with great care.
Court of Appeal rules claim form cannot be backdated: beware documents received from the court with a backdated seal
In Walton v Pickerings Solicitors and another  EWCA Civ 602, the Court of Appeal unwound a series of calamitous errors by the Claimant and Court, which had issued a back-dated claim form after losing the originally issued proceedings.
The claimant, a litigant in person, wanted to issue proceedings against two defendants. He visited the court on 20 July 2020 with five copies of the claim form and paid the £10,000 issue fee. The court kept one copy of the claim form and said that it would be issued that day. The claimant confirmed that he would serve the claim form and Particulars of Claim (which were being drafted by counsel) himself. The court gave the claimant a receipt for the £10,000.
On 13 November 2020, the claimant's counsel finalised the Particulars of Claim and the claimant signed them. The claimant, however, was still yet to receive an issued claim form from the court. On 17 November 2020, the claimant served both defendants with an unsealed copy of the claim form and the Particulars of Claim. In response, the solicitors for one of the defendants asked for a sealed copy of the claim form, but the court had no record of the claim.
The claimant then attended the court counter himself and was told that the court did not have his claim on the system. It emerged that they had lost the file and failed to send out the claim form within the four-month period. Shortly after, the court told the claimant that he had used the wrong claim form and that they would e-mail him the correct version. They did so, and the claimant returned the newly completed claim form that day.
On 7 December, the claimant received a sealed copy of the claim form from the court – the court had backdated the seal to 20 July 2020. The next day, the claimant emailed the sealed claim form and Particulars of Claim to both defendants, and, on 10 December, served hard copies. Both defendants said that service was out of time, being over four months since the date of the claim form's seal.
The claimant made an application to extend the time for service and the defendants also made applications for the claim to be dismissed for having been served out of time. The court dismissed the claimant's application, citing that it was not a case where the court had failed to serve a claim form. The claimant appealed to the Court of Appeal.
The Court of Appeal allowed the claimant's appeal unanimously, holding that the court had no power to backdate the claim form and instead must seal it on the date on which it is actually issued. The sealing of the claim form and the issue of the claim form are a single act which takes place at the same time – there is no express power to seal the claim form with a date other than the date on which it is in fact sealed. Proceedings are started when the court issues – and therefore seals – the claim form. As a result, the Court of Appeal allowed the appeal and confirmed that the claim form was served in time on both defendants on the basis that proceedings had actually been issued between 30 November and 7 December when the Court received the claim form in the correct form and sealed it. Service was therefore in time. It appears that the delay between the claimant's first attempt to issue proceedings on 20 July and second attempt on 30 November may have caused his claim to become time-barred, and further judgment on this issue is expected. If so, the court's role in the loss of the claimant's cause of action is likely to be difficult to deal with.
The key takeaway here is a time-worn warning: not to leave service until the last minute and to check any documents received from the court carefully.
Asia: Singapore High Court scolds solicitor for "cavalier disregard for the rules of professional conduct"
In Law Society of Singapore v Andrew John Hanam  SGHC 132, it was argued that Mr Hanam had breached Rules 17(2)(e) and (f) of the Legal Profession (Professional Conduct) Rules 2015, which require solicitors to enable the client to make informed decisions on how to act, and to evaluate with them (i) whether the risk of pursuing a matter is justified; and (ii) their alternative dispute resolution ("ADR") options.
Mr Hanan was instructed to advise on a "relatively straightforward dispute" relating to unpaid invoices arising from a construction project. The client complained that Mr Hanam overcharged him and acted without his knowledge or agreement. The Court upheld eight instances of breach across the following categories:
- Acting without the authority of the client: The Court rejected the argument that a client was incapable of giving instructions on costs and that issues of costs were not "legal". With appropriate advice, the client could have provided instructions.
- Failure to discuss the use of ADR: It was a duty of solicitors to advise clients on ADR options. The fact that a client had received advice on a similar issue did not mean that there was no requirement to advise the client again. Solicitors are required to provide case-specific advice.
- Failure to render legal advice: The Court disbelieved Mr Hanam's testimony that legal advice had been provided due to the lack of any attendance notes.
- Failure to provide proper legal advice: Mr Hanam had given erroneous advice, grounded in a lack of understanding. The fact that the client had signed an affidavit supporting the making of an appeal was not evidence that the client had been provided with proper advice.
The Court held that Mr Hanam's conduct was improper and cumulatively amounted to a "pattern of unprofessionalism symptomatic of his cavalier disregard for the rules of professional conduct". He showed no remorse and blamed the client, who had been prejudiced by his actions, for his own failures. The Court suspended Mr Hanam from practice for nine months.
The case serves as an important reminder of solicitors' obligations to: (i) seek instructions from clients on all legal issues, unless given explicit authority otherwise; (ii) advise clients of their ADR options; and (iii) take contemporaneous records and attendance note.
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.