The Legal Services Act 2007 (the Act) created the Offi ce for Legal Complaints (OLC) to administer a new scheme to deal with consumer complaints about legal services. The proposed Legal Ombudsman scheme rules have been published and the new scheme ‘went live’ on 6 October 2010. On the same day, related changes to the Solicitors’ Code of Conduct 2007 came into force, refl ecting the fact that responsibility for complaints handling has passed to the Legal Ombudsman and spelling out fi rms’ obligations to provide information to clients on their rights to complain.
The Legal Ombudsman scheme is based upon the rules of the Financial Ombudsman Service and, looking at the experience of the fi nancial services sector, we can speculate on the key issues likely to arise.
A complainant must be an individual, or fall into one of the following categories: certain small charities, clubs and associations; trustees; personal representatives; and residuary benefi ciaries. In addition, small businesses (known in the relevant EU regulations as ‘microenterprises’ - with fewer than 10 staff and a balance sheet of less than €2m) can complain. Because the service is free to the complainant and informal, the award of costs is “likely to be rare” (rule 5.39).
The complaint must only relate to the services provided. No class of complaint is excluded, but the Legal Ombudsman may dismiss a complaint if, for example, it is frivolous or vexatious or it would be more suitable to be heard by the courts. The accompanying notes expressly state that, in relation to professional negligence, the Ombudsman will consider on a case by case basis whether the complaint would be better dealt with by the courts.
This does not impinge on the primacy of the Legal Ombudsman. Indeed, rule 5.8 (which allows the Ombudsman to refer a point of law to the court) does not require the Ombudsman to then accept the court’s ruling. In exercising its jurisdiction, the Legal Ombudsman, like the FOS, will not be bound by “what decision a court might make”. It was confi rmed by the High Court that “… the [FOS] is free to make an award which differs from that which a court applying the law would make, provided he concludes that the award he wishes to make is one which is fair and reasonable in all the circumstances of the case and provided he has taken into account [the relevant law, regulations, regulators’ rules and guidance and standards, relevant codes of practice and, where appropriate, what he considers to have been good industry practice at the relevant time] …”1.
The time limits under the Legal Ombudsman Scheme do not refl ect those in the Limitation Act. Whilst the FOS adopts similar six year primary and three year secondary limitation periods, rule 4.5 requires complaints to be made within one year of the date of the act or omission or, if later, the date “the complainant should reasonably have known there was cause for complaint”.
As with the FOS, a complainant must fi rst allow the fi rm eight weeks in which to provide its fi nal response under its own internal complaints procedure. Thereafter the complainant has six months in which to make the complaint (so long as the fi nal response includes a notice to that effect).
Legal service providers will therefore be comparatively better protected from old liabilities than those operating under the FOS’s jurisdiction. Not only will a complaint have to be made within a year of the act or omission, or cause for complaint, but the Legal Ombudsman has the express power to dismiss a complaint if “it is not practicable to investigate the issue fairly because of the time which has elapsed. …”.
The Ombudsman will fi rst consider whether the complaint is eligible and may then try to facilitate an informal settlement at an early stage. To facilitate informal resolution, rule 5.21 expressly provides that an apology is not an admission of liability. To avoid a common gripe about the FOS, the Legal Ombudsman fee (of £400 per case after the fi rst two complaints brought against the fi rm in any year) is not chargeable if the complaint falls outside the jurisdiction or is resolved in favour of the respondent fi rm; or if the Ombudsman is satisfi ed that the fi rm took all reasonable steps in its internal complaints procedure to resolve the complaint.
If required, the Legal Ombudsman will investigate the complaint and issue a provisional decision. Both the fi rm and the complainant can reject that ‘assessment’, in which case the complaint is referred to an Ombudsman for fi nal decision.
Refl ecting a recent FOS rule change, the Legal Ombudsman can treat another fi rm as a joint respondent to the complaint and will make separate determinations, perhaps as to the contribution each must make to the overall redress. In pursuance of its consumer protection objective, the FOS has tended to allow complaints for the entire loss to proceed against whichever respondent the complainant wishes, leaving it for that respondent to seek a contribution from any other fi rm it believes is liable separately.
The Legal Ombudsman can hold hearings, including by phone, which could prove to be a useful deterrent against ‘try on’ claims, as those complainants who might be tempted to embellish the truth may be less prepared to do so face to face with the relevant tribunal of fact.
Determinations and awards
The Legal Ombudsman must determine the complaint by reference to what is “in his/her opinion, fair and reasonable in all the circumstances of the case”. The complainant (but not the fi rm) can accept or reject the Ombudsman’s decision. If accepted, the decision is binding on both parties and fi nal. In recognition of recent employment tribunal case law2, the rules expressly provide that “neither party may start or continue legal proceedings relating to the subject matter of the complaint”. The fi rm’s only recourse would be judicial review, which is notoriously hard to achieve.
The Legal Ombudsman has a range of compensatory powers under rule 5.38 to make directions that the fi rm pays compensation, interest, apologises or ensures and pays for the rectifi cation of errors or omissions.
At present, “the total value that can be awarded” is limited to £30k but it is expected that the Lord Chancellor will increase this limit, probably to the £100k FOS limit. The drafting of the rule suggests that the Legal Ombudsman proposes to comply with a judicial review case3 in which it was decided that if the cost of complying with a FOS direction was unknown at the time when the direction was made, it was subject to an implicit limitation that it would not be enforceable beyond the statutory cap. However, whilst the FOS has the power to make a recommendation that a respondent pays in excess of the limit, the Legal Ombudsman (in spite of its lower limit) has no such power.
There are some indications that the criticisms of consumer bias made against the FOS have been taken on board in relation to this scheme. The stricter time limits, reduced compensatory powers and simpler rules should make for more balanced outcomes for legal service providers. However, fi rms familiar with court procedure and jurisdiction and the old complaints processes are still in for quite a shock.
An earlier version of this article was published in the New Law Journal.