Outside street and metal joints view.


21 November 2011

The Legal Ombudsman (LO) is reaching its long arm into law firms – and is not afraid to use its truncheon!

Last week it took High Court action against a solicitor for non-cooperation which included the threat of imprisonment. This follows its decision to publish the name of lawyers or law firms involved in a pattern of complaints or if it is in the public interest.

In its press release, the LO reported on a solicitor who became the first lawyer to be fined by the High Court for failing to cooperate with one of its investigations.  The case was brought under s.149 of the Legal Services Act 2007, which provides that so-called 'defaulting' lawyers can face contempt proceedings (which can result in immediate terms of imprisonment, courtesy of the 'Tipstaff').

Mr Justice Lindblom ruled out a custodial sentence only because the defendant, being the first lawyer to be involved in such proceedings, would not have known the implications of non-cooperation. However, he said: “Undoubtedly there will be cases, though they are likely to be more extreme in their facts than this, in which the court will see no option but to impose a sentence of immediate imprisonment ….”

Financial services firms are usually compelled to comply generally with FOS requests by the high level principle requiring cooperation and the threat of being reported to the FSA.  However, s.232 FSMA provides for the same mechanism as the Legal Services Act by which the FOS could bring High Court contempt proceedings.  Although the FSA has relied on its equivalent 'certification' power under s.177 FSMA, I am unaware of the FOS ever relying on s.232 but it is another example of the increasingly blurred boundary between breach of (civil) regulations resulting in criminal sanctions.

Furthermore, from April 2012, the Office of Legal Complaints (which runs the LO) will commence a policy of identifying lawyers or law firms which have been involved in cases where there is a pattern of complaints or set of individual circumstances that indicate it is in the public interest that the firm or individual should be named.

It will also require the names of all lawyers or law firms involved in complaints that have been resolved by a formal Ombudsman decision to be collated.  This information will then be published quarterly, starting in July 2012, in the form of a table summarising the numbers, outcomes and areas of law involved in the relevant cases.

The FOS is planning much the same and it may be that firms will be grateful to be named as standard rather than in accordance with the LO's approach. So far, there is no talk about financial services firms being named where there is a 'pattern of complaints'.  Surely, if the FOS did identify such a pattern, the respondent firm would be obliged to conclude that it had a systemic, root cause problem and it would have to compensate any similar clients even though they had not complained?

The parallel jurisdiction of ombudsmen gets bigger and more powerful with each passing law or regulation.  The publication of decisions – and the likely evolution of a precedent system – will make it ever harder to argue that the FOS (or ombudsmen like it) remains a quick and informal 'alternative dispute resolution' process.  The publicity will deprive the process of its confidentiality; making it far more like an open court.  The power to compel information (including on threat of imprisonment) has always made the claim to informality ring rather hollow.