UK: Attack On All Fronts?

Solicitors´ Liability Briefing Winter 2007
Last Updated: 6 March 2007
Article by Sarah Clover and Nataliah Jeremiah

The Legal Services Bill is intended to make sweeping changes to legal services regulation and complaints handling. However, some may regard the new legislation as a missed opportunity if it fails to address a number of problems with the existing regulatory framework. In this article we examine some of the difficulties faced by the profession in responding to complaints, and whether the proposed legislation addresses these difficulties.

Under the regime proposed by the Legal Services Bill, set out in more detail in our lead article, a new Office for Legal Complaints ("OLC") will handle and determine all inadequate professional service complaints made against solicitors. However, complaints relating to professional misconduct will continue to be dealt with by Front Line Regulators (for solicitors, the Law Society).

Parallel Civil and Regulatory Proceedings

Currently, a disgruntled former client can precipitate concurrent proceedings by both complaining to the Law Society and by issuing a civil claim, potentially doubling pressure on resources and levels of personal stress for the solicitor on the receiving end. There is also potential for inconsistent findings of fact.

Initially, the solution adopted was that if to allow regulatory proceedings to continue would "muddy the waters of justice" in parallel civil (or criminal) proceedings, then an adjournment of the regulatory proceedings might be appropriate. In 2004, the Court ordered a stay of the Institute of Actuaries’ disciplinary proceedings against three former actuaries employed by Equitable Life. However, in other recent cases involving accountants (see R (on the application of Land & others) v The Executive Counsel of the Joint Disciplinary Scheme (2002)), arguments based on the prejudice caused to defendants by concurrent civil and disciplinary proceedings were roundly rejected.

Whether the proposed changes potentially exacerbate the problem remains to be seen; however a number of provisions in the Bill relating to the role of the OLC shed some light:

  • Scheme rules can be made enabling the Ombudsman to dismiss the complaint without consideration of its merits, for instance where the complaint would be better (or has been) dealt with under another ombudsman scheme, by arbitration or in other legal proceedings, or where the Ombudsman considers that there are other compelling reasons why it would be inappropriate for the complaint to be dealt with under the Ombudsman scheme.
  • However, it is proposed expressly to forbid (under clause 124(2) of the Bill) the rules from excluding a complaint from the Ombudsman’s jurisdiction "on the ground that it relates to a matter which has been or could be dealt with under the disciplinary arrangements of the respondent’s relevant authorising body". Bearing in mind the Law Society’s Concurrent Litigation Policy (which provides that "the power to stay regulatory action will be exercised sparingly" and will not generally be exercised "unless there is a real risk of serious prejudice") this makes it likely that OLC proceedings will still be allowed to run concurrently with disciplinary proceedings arising out of the same factual background.
  • The Bill also stipulates (under clause 137(11)) that "neither the complainant nor the respondent, in relation to a complaint, may institute or continue legal proceedings in respect of a matter which was the subject of a complaint, after the time when a determination by an ombudsman of the complaint becomes binding and final". Once an ombudsman has made a determination which has been accepted by the complainant, no concurrent legal proceedings (whether in existence or contemplated) which relate to the subject matter of the complaint can be pursued.

Taking all of this into account, it appears that, whilst under the new legislation, the potential for commencing proceedings on three fronts (civil proceedings, inadequate professional service complaints and complaints relating to professional misconduct) exists, a complainant appears unlikely, ultimately, to be able to pursue financial redress by way of both the OLC and civil proceedings. However, complainants will effectively get a ‘first bite of the cherry’ by way of OLC proceedings and, if dissatisfied with that outcome, can refuse to accept it, and choose instead to pursue civil proceedings. Furthermore, if disciplinary proceedings have been instituted, the difficulties of responding to parallel proceedings will remain.

If civil proceedings do follow an adverse disciplinary finding, the solicitor can argue that a breach of the Professional Conduct Rules does not itself give rise to civil liability and should not therefore be regarded as determinative of negligence (Johnson v Bingley Dyson & Finney (1997) and Harwood v Taylor Vintners (2003)) and that the client has already been compensated by any financial reward.


In disciplinary proceedings, the present position (see Baxendale-Walker v The Law Society (2006) and Gorlov v The Institute of Chartered Accountants in England and Wales (2001)) is that costs do not automatically (or even usually) follow the event. Even where a solicitor is successful, the costs incurred are irrecoverable unless it can be shown that there is "good reason" for a tribunal to make an adverse costs order against a prosecutor (such as bad faith or negligence in conducting the investigation).

The rationale is that prosecutors are regarded as acting in the public interest and must not be deterred from bringing proceedings which they reasonably consider to be meritorious. However, the effect is that a blameless solicitor can often be saddled with significant and irrecoverable costs. There is no reason to suppose that the new Bill will herald any changes here.

In relation to complaints handled by the OLC, the Bill provides that a solicitor may be ordered to pay a complainant’s costs if the Ombudsman considers it appropriate, as well as such charges as may be specified in the scheme rules. Furthermore, under the so-called "polluter pays" principle, the solicitor (or, if appropriate, the complainant) may be required to pay a contribution towards the OLC’s costs if in the Ombudsman’s opinion they have acted improperly or unreasonably in relation to the complaint.

Will insurers have to bear these costs? Due to reasons of public policy a solicitor cannot be indemnified in respect of a fine, penalty or adverse costs order in relation to such complaints, although an award of compensation made at the order of the Law Society’s Consumer Complaints Service ("CCS") or OLC is likely (in the absence of dishonesty) to be covered. The current solicitors’ minimum terms stipulate that a policy must cover the costs of defending a solicitor in "any investigation, inquiry or disciplinary proceedings… arising from any claim" in respect of civil liability.

Unless the minimum terms change (of which there is currently no sign), then insurers may be faced with paying amounts for defence costs for complaints made by clients that may far outweigh the likely amount payable in compensation, leading to potential difficulty for insurers in determining the right commercial approach to handling such complaints.Whilst the compensation for individual complaints might not be large, the cost of settling such claims will by no means be insignificant if these claims mount up, which they may well do if clients are encouraged by the increase in the limits of compensation potentially awardable (up to £20,000 may be awarded by the OLC).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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