In depth: SSB Law - how regulator failed to defuse timebomb

The Solicitors Regulation Authority has achieved a remarkable coup. Carson McDowell’s report into the circumstances of SSB Law’s demise can be read as even more damning than last year’s devastating investigation into Axiom Ince. 

This time, the regulator has at least been self-aware enough not to attempt to brazen it out. But apologies (see below) are cheap. Even now, no one has resigned or otherwise been held formally accountable. Solicitors familiar with the uncompromising manner in which the SRA dispenses its own brand of justice can be forgiven their incredulity. 

Carson McDowell’s report, commissioned by the Legal Services Board (LSB), painstakingly details how the regulator missed multiple opportunities over more than five years to protect vulnerable clients of the failed claimant business. More than 100 reports were made about the Sheffield firm’s handling of cavity wall claims, but the SRA did not act effectively or efficiently in response. Client complaints were routinely ignored and the SRA failed to heed its own warning notice about firms handling these claims.

The regulator thereby also failed in its obligation to protect consumers, leaving purportedly ‘no win, no fee’ clients facing bills of thousands of pounds for defence costs. 

‘The SRA reached the view that the reports related to a complaint about the standard of service provided by SSB, rather than identifying that there was a pattern of behaviour by SSB which was sufficiently serious that it may result in regulatory action,’ the report states. 

Even when SSB was on the verge of closure, the SRA allowed thousands of cavity wall claims to be transferred to JMR Solicitors, a firm of two partners that specialised in conveyancing. One SRA staff member suggested at the time that allowing JMR to take on SSB cases was ‘unpalatable’ and that clients had not consented, but no steps were taken by the regulator to prevent claims being ‘shunted around’. JMR went out of business last November.

The LSB said it has decided to censure the SRA publicly and introduce performance targets to be met in the coming months and years. It opted not to fine the regulator, on the basis that to do so would harm firms and consumers. 

Catherine Brown, interim chair of the LSB, said: ‘The former clients of SSB have suffered profound emotional and financial harm. There were several early warning signs about the firm, but this review reveals that the SRA failed to act on these. In the board’s view, these shortcomings allowed SSB to cause further harm to its clients and weakened trust and confidence in the regulation of legal services.

‘The action we are initiating reflects the scale of the human impact and the importance of holding regulators to account.’

SSB Law went into administration in January 2024 with debts of more than £200m. Creditors included a barrister who was owed £260,000 for work carried out in hundreds of cavity wall cases. As well as the clients affected, a number of cavity wall insulation contractors went out of business due to insurance premiums soaring because of the claims against them. 

The LSB report states that SSB’s treatment of its clients could cause ‘irreparable damage’ to the reputation of the solicitors’ profession and civil justice system.

It reveals that, in 2019, the SRA established ‘Operation Grouse’, a working group to monitor cavity wall claims and the firms running them – including newly authorised alternative business structure SSB Law. Reports from 2020 raised concerns about the involvement of claims management companies, the lack of instructions from clients and the inadequacy of expert reports.

In November 2021, the same month that SSB took on 4,000 claims from the collapsed Pure Legal, the firm was put on an SRA watch list for closer attention. 

A key missed opportunity to act came in April 2023, when a barrister made a report of non-payment of fees. This prompted a forensic investigation by the SRA, which was subsequently closed on the basis that no evidence was found that SSB was financially unstable. That was despite the fact that SSB owed £128m to litigation funders at high interest rates – one at 32% per annum over LIBOR – and had defaulted on previous funding loans. Moreover, much of SSB’s debt was secured against cavity wall cases, rather than the risk sitting with clients, and SSB had indicated to the SRA that these claims were unlikely to succeed. 

A few months later, a whistleblower made a report about the firm’s financial position, which resulted in its closure.

The LSB makes recommendations in four areas: assessment of reports, the process for submitting a report, the investigations stage and the handling of firm closures. It says that the onus should be on the SRA to consider whether to investigate, not on the complainant to provide supporting evidence. Staff training and procedures should be reviewed, while the SRA should take a more proactive role in assessing the financial stability of firms.

And what of the LSB, which as recently as last year handed the SRA a glowing report card in its annual performance assessment? The oversight watchdog told journalists it is presently reviewing its processes for superintending frontline regulators.