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Clause 116: General obligations
323. The OLC, like the Board and the approved regulators, will have a duty to act compatibly with the regulatory objectives in clause 1, and to act in a way which it considers most appropriate to meet those objectives. It will also have to have regard to the principles of best practice in relation to the administration of ombudsman schemes.
Clause 117: Corporate governance
324. This clause requires the OLC to have regard to generally accepted principles of good corporate governance in managing its affairs.
Clause 118: Annual report
325. This clause places a duty on the OLC to produce an annual report to be sent to the Board, reporting the extent to which, in the OLC's opinion, it has met the regulatory objectives. The report must include a copy of the annual report prepared by the Chief Ombudsman under clause 123. This report will be laid before Parliament by the Lord Chancellor.
Clause 119: Supplementary powers
326. This clause makes standard provision empowering the OLC to do anything necessary for carrying out its functions.
Clause 120: Reporting to the Board
327. This clause empowers the Board to require a report from the OLC, separately from the annual report. This enables the Board to monitor the OLC's performance or to seek its views on a particular issue. The Board has a duty to publish any report made by the OLC under this clause.
Clause 121: Performance targets and monitoring
328. This clause empowers the Board to set performance targets for the OLC in relation to any of its functions, or to direct it to set its own targets relating to its functions. Subsections (3) and (4) state that any targets must be published. Subsection (5) allows the Board to monitor the extent to which the OLC has met these targets.
Clause 122: Appointment of Chief Ombudsman and assistant ombudsmen
329. This clause sets out the appointment process whereby the OLC must appoint a person (who must be a lay person, and who will cease to hold office if that person ceases to be a lay person) to act as Chief Ombudsman. The OLC may also appoint assistant ombudsmen with the consent of the Chief Ombudsman. Any person appointed must (by virtue of subsection (4)) have appropriate qualifications and experience. Although assistant ombudsmen, unlike the Chief Ombudsman, are not required to be lay persons, subsection (3) specifies that assistant ombudsmen must not carry out any reserved legal activity for reward during their period of appointment and subsection (7) requires the assistant ombudsman's terms and conditions to set out what consequences may ensue on breach of this condition. Subsection (8) makes provision for the terms and conditions of any ombudsman's appointment to be such as will ensure their independence, and subsection (9) (related to paragraph 24 of Schedule 15) makes it clear that an ombudsman is not a Crown servant.
Clause 123: Annual report of Chief Ombudsman
330. This clause requires the Chief Ombudsman to prepare a report each financial year on the discharge of the functions of the ombudsmen. The report is to comply with any requirements specified by the OLC (which the OLC must publish), and is to be included in the annual report which the OLC is required to produce by virtue of clause 118.
Clause 125: Jurisdiction of the ombudsman scheme
331. This clause broadly defines what types of person are eligible to bring complaints to the OLC and who may be the subject of a complaint. A complaint will fall within the jurisdiction of the ombudsman scheme if:
- it is not excluded under clauses 126 or 127 (because the respondent's "in-house" complaints procedures have not been used, or the complaint is otherwise excluded by provision made in the scheme rules);
- if the respondent falls within clause 128 (i.e. the respondent was an authorised person at the relevant time); and
- the complainant falls within clause 128 and wishes to have the complaint dealt with under the scheme.
332. Subsection (3) prevents an authorised or other person from restricting in any contract or notice the right of a person to bring a complaint.
Clause 126: Complaints excluded because respondent's complaints procedures not used
333. Subsection (1) of this clause provides that a complaint does not fall within the jurisdiction of the ombudsman scheme unless the complainant has first used the respondent's in-house complaints procedure (defined in subsection (2)). Subsection (3) allows for the scheme rules to disapply subsection (1) in certain circumstances (which might be, for example, where the respondent has made it excessively difficult to use the in-house procedure, or where the relationship between complainant and respondent is so acrimonious that it is reasonable for the in-house procedure to be bypassed).
Clause 127: Complaints excluded by scheme rules
334. Subsection (1) provides that the scheme rules may exclude certain described complaints from the jurisdiction of the scheme. Subsection (2) states that complaints cannot be excluded on the ground that they relate to any matter which could be dealt with under an authorised body's disciplinary arrangements.
Clause 128: Parties
335. This clause sets out further conditions as to the parties to a complaint to be handled by the ombudsman scheme. Subsection (1) defines the respondent as an authorised person in relation to a reserved legal activity; but it does not matter if the matter being complained about relates to a reserved legal activity or not. Subsections (2) to (4) set out the conditions for a complainant to be eligible. The first condition is that the complainant is not excluded (see subsection (5)) and is either:
- a person (other than an individual) described in an order made by the Lord Chancellor, pursuant to a recommendation under clause 130.
336. In addition to these two conditions, a complainant must also show that:
- the respondent provided the services being complained about to the complainant directly;
- the respondent provided the services being complained about to an authorised person who procured them on the complainant's behalf (for example, where a solicitor instructs counsel);
- the respondent provided the services being complained about in certain capacities in relation to trusts and the administration of a deceased person's estate; or
- the complainant meets such other conditions as set out in an order made by the Lord Chancellor pursuant to a recommendation under clause 130.
337. Under subsection (5), a complainant is excluded from the ombudsman scheme if:
- the complainant is an authorised person in relation to a reserved legal activity, and procured the services to which the complaint relates on behalf of another person, (so that, for example, a solicitor who instructs counsel on behalf of a client may not complain about counsel),
- the complainant is a public body (defined in subsection (7)), or
- the complainant falls within an order made by the Lord Chancellor pursuant to a recommendation made under clause 127.
Clause 129: Pre-commencement acts and omissions
338. This clause makes transitional provision to cover cases where the act or omission complained of took place before commencement of the ombudsman scheme, so that the respondent will not have been an authorised person within the terms of the Bill. Its effect is that the complaint will be within the jurisdiction of the scheme as long as the respondent was at that time a person who, after commencement, comes within the definition of "authorised person".
Clause 130: Orders under section 128
339. The Lord Chancellor is empowered to make an order under clause 128(3)(b), (4)(d) or (5)(c) only on the recommendation of an interested body. The effect of these orders is for new categories of complainants or complaints to be included in or excluded from the scope of the ombudsman scheme's jurisdiction. For these purposes the "interested bodies" are the OLC, the Board and the Consumer Panel. The Lord Chancellor may require those bodies to consider making a recommendation under this clause. If the Lord Chancellor declines to accept a recommendation, the Lord Chancellor must publish reasons for doing so.
Clause 131: Acts and omissions by employees
340. This clause establishes vicarious responsibility in respect of matters which are the subject of complaints. Any act or omission by an employee which is in the course their employment will be treated by the OLC as an act or omission on the part of the employer as well as the employee. Similarly, an act or omission by a partner in a partnership in the course of carrying on the partnership's normal business in the usual way will be treated as an act or omission of the partnership, unless the partner had no authority to act for the partnership and this was known to the person seeking to rely on the partnership's liability.
Clause 132: Continuity of complaints
341. This clause makes provision to ensure that a complaint does not fail simply because of a change in membership of the partnership or body against which the complaint is made. This clause also requires the OLC to make rules setting out the circumstances in which complaints can be continued where a legal person ceases to exist (for example, where a partnership is dissolved) but another person succeeds to the business, and for the continuation of a complaint by persons specified in scheme rules where a complainant dies or becomes unable to act.
Clause 133: Operation of the ombudsman scheme
342. This clause provides for the detailed framework for the ombudsman scheme to be determined by the OLC in scheme rules. It allows the OLC the flexibility to adapt its procedures in line with changing notions of best practice. The rules made by the OLC under this clause will determine how complaints are to be made and how they are investigated, considered and determined by the ombudsman. Procedures for making scheme rules, including requirements as to prior consultation and consent of the Board, are set out in clauses 156 and 206.
343. Subsection (1) provides a broad duty to make scheme rules. Subsection (2) requires scheme rules to establish time limits for the making of complaints, and allows for the possibility of extension in circumstances specified in the rules. Subsection (3) lists areas in which the OLC may wish to make rules. This list is intended purely as an indicative one, and not to limit the breadth of the OLC's power to make rules in other areas. Subsection (4) provides further detail about the circumstances in which rules may provide for complaints to be summarily dismissed (one of the matters listed in subsection (3)). Subsection (5) prevents the power to make scheme rules from being used to compel disclosure where a person could not be so compelled in civil proceedings before the High Court, while subsection (6) enables scheme rules to provide for awards of costs to bear interest at such rate as specified in or determined in accordance with the rules.
Clause 134: Delegation of an ombudsman's functions
344. This clause enables the delegation of the ombudsman's functions to a member of the OLC's staff, with two exceptions: staff to whom these functions are delegated may investigate or consider a complaint, but they may not make a determination, nor may they dismiss a complaint summarily in the terms prescribed by clause 133 sub-section (3)(a). This will enable OLC staff to carry out initial handling of complaints, and work directed to mediation, with the Chief Ombudsman and assistant ombudsmen becoming directly involved with a complaint if the parties do not accept the caseworker's solution. In this instance the caseworker would submit the complaint to an ombudsman for binding determination under clause 137. Similarly, if on initial investigation a complaint appears manifestly unfounded or frivolous, the caseworker would refer it to an ombudsman to consider dismissal (in accordance with clause 133 subsection (3)(a)). The Chief Ombudsman's powers of delegation are further restricted, in that they may not delegate powers of consent to the appointment of an assistant ombudsman, or the duties imposed to produce an annual report.
Clause 135: Notification requirements
345. This clause makes provision to the effect that if a complaint is excluded, dismissed, referred to another scheme or settled, withdrawn or abandoned, then the ombudsman must inform the complainant, the respondent and any relevant authorising body in relation to the respondent. If a complaint is dismissed, referred to another body or excluded, the ombudsman must give reasons for doing so.
Clause 136: Charges payable by respondents
346. The OLC will be partly funded through "case fees" payable, subject to the exceptions set out below, by respondents (i.e. those legal professionals who are the subject of complaints). Scheme rules must provide for the reduction or waiver of fees in three cases: firstly, if the complaint relates to work completed otherwise than for reward, secondly, if it appears to the OLC that the case fee would be disproportionate to the fee paid for the legal services complained of, or to the seriousness, subject matter or value of the complaint, and thirdly, if requiring payment of the case fee would cause undue hardship (subsection (2)(c)).
347. Subsection (3) provides that scheme rules must require the refund of a case fee in circumstances where it becomes apparent after the fee has been paid that the case fee was disproportionate (in terms as set out above) or causes the respondent undue hardship.
348. Subsection (2)(c) prevents the charging of a case fee unless the complaint is determined or resolved substantially in favour of the complainant.
349. In accordance with subsection (2), scheme rules may also provide for case fees to be reduced, waived or refunded in other circumstances. This subsection also allows the rules to set different charges for different stages of a complaint.
350. Scheme rules can provide that unpaid case fees incur interest and, by virtue of subsection (6), unpaid case fees can be recovered by the OLC as a debt.
351. The OLC will, as is the procedure with all scheme rules, be obliged to consult and gain the Board's approval before making rules on case fees under this clause and, in addition, (by virtue of clause 156) must also obtain the consent of the Lord Chancellor.
Clause 137: Determination of complaints
352. This clause makes provision for the ombudsman's powers in making a determination. The governing principle, set out in subsection (1), is that the ombudsman must determine a complaint according to what is fair and reasonable in all the circumstances of the case. Subsections (2) and (3) set out the directions which the ombudsman may make in a determination, namely:
- that the respondent make an apology to the complainant;
- that the respondent's fees for the services under complaint are limited to a specified amount (and any other action be taken, such as a refund, which may be necessary to give effect to this);
- that the respondent pay compensation for loss, inconvenience or distress;
- that the respondent at their own expense secure rectification of any specified error, omission or other deficiency in connection with the matter under complaint; or
- that the respondent at their own expense take such other action in the interests of the complainant as the direction may specify.
353. Subsection (4) allows for any amount payable pursuant to a determination to bear interest. Subsection (5) provides that the powers of the ombudsman in making a determination are not confined to cases where the complainant may have a cause of action in negligence (and so may be available in cases of "simple" inadequate professional service).
Clause 138: Limitation on value of directions under the ombudsman scheme
354. This clause ensures the total value of the directions made under subsections (2)(c) to (e) of clause 137 on the determination of a complaint under the ombudsman scheme does not exceed £20,000 (excluding interest - see subsection (3)). Currently the highest level of compensation in the legal sector is £15,000.
355. Subsection (2) explains "total value" as the aggregate of the amount of any compensation payable, plus the amount of expenses reasonably incurred by the respondent in rectifying any specified error, omission or deficiency. It does not include any reduction in the level of fees payable, or associated refund etc, by virtue of a direction under subsection (2)(b) of clause 137.
Clause 139: Alteration of limit
356. This clause empowers the Lord Chancellor, by order, to amend the limit on the total value of directions imposed by clause 138, on the recommendation of an "interested body" (the OLC, the Board or the Consumer Panel). The body recommending alteration of the limit must first publish its proposed recommendation and consider representations made in respect of it. If asked to do so by the Lord Chancellor, an interested body must consider whether it is appropriate to make a recommendation under this clause.
Clause 140: Acceptance or rejection of determination
357. In determining a complaint the ombudsman is required to prepare a written statement of the determination (subsection (1)). Subsection (2) sets out the detail of what should be included in this statement, and subsection (3) lists the people and bodies to whom the statement must be supplied. If the determination is accepted by the complainant, it is binding on both parties (subsection (4)), and no further legal proceedings can be instituted with regard to the matter that was the subject of the complaint (subsection (11)); but if the complainant does not notify acceptance within the time specified for this purpose, the complainant is to be taken as having rejected the determination (subsection (5) and (8)). However, there may be circumstances where a person is unable to reply to the determination within the time specified and subsections (6) and (8) provide for this. On acceptance or rejection by the complainant, the ombudsman must give notice to those parties set out in subsection (7), and the ombudsman's certificate of determination is evidence that the determination was duly made under the scheme (subsection (9) and (10)).
Clause 141: Enforcement by complainant of directions under section 137
358. This clause makes provision for enforcement of directions made by an ombudsman. The complainant or an ombudsman can apply to the High Court or a county court. The court may order that any amount due under a direction to refund fees or pay compensation, including interest, is recoverable as if the amount were payable under an order of the court. If the respondent fails to comply with any other direction pursuant to a determination, the court may, on the application of the complainant or an ombudsman, order the respondent to take such steps as the court directs to comply with it. An ombudsman may only make an application with the complainant's consent and only in circumstances specified by scheme rules (subsection (5)).
Clause 142: Reporting court orders made against authorised persons
359. This clause makes provision governing reporting of any order for enforcement of directions made by a court under clause 141. The court must give the OLC notice of any order made against a person, and the OLC (in the person of an ombudsman) will in turn inform any relevant approved regulators, and may require the approved regulator to report on what action it has taken. If, in such a case, the OLC is not satisfied with the action taken, then it may inform the Board.
Clause 143: Handling of complaints by approved regulator
360. This clause gives the Board the power to make a direction (subsection (1)) allowing an approved regulator to determine such complaints as may be specified in the direction and which would otherwise fall within the jurisdiction of the ombudsman scheme. This clause therefore forms the potential basis of an exception to the rule that only the OLC (by way of the ombudsman scheme) can make awards of redress to consumers of legal services.
361. Before making such a direction the Board must consult the OLC, the approved regulator concerned and any other persons it considers reasonable to consult (subsection (3)). If a direction is given, the Board must publish the direction and provide all of the consulted parties in addition to the Lord Chancellor with a copy (subsection (4)).
362. The Board can vary or revoke a direction (subsection (2)).
Clause 144: Reporting possible misconduct to approved regulators
363. In the course of consideration of a complaint, it may become apparent that there is a possibility that a respondent, or other person in relation to the matter concerned, has breached their regulator's rules of conduct. Where the ombudsman is of such an opinion, this clause allows the ombudsman to notify that person's regulator. The regulator can be required to report to the ombudsman on the actions it takes. If the ombudsman, on studying the report, is of the opinion that the approved regulator is seriously or persistently failing to enforce its rules of conduct, the ombudsman may report this to the Board.
Clause 145: Duties to share information
364. Subsection (1) requires scheme rules to set out that the OLC, an ombudsman or a member of the OLC's staff must disclose information to an approved regulator. The information to be disclosed must be specified in the rules, as must the circumstances in which it must be disclosed. Each approved regulator must for its part provide in its regulatory arrangements for the provision of information to the OLC, an ombudsman or members of the OLC's staff, of such description and in such circumstances as may be specified in the arrangements (subsection (2)). The Board may specify requirements which arrangements under subsection (2) or rules under subsection (1) must fulfil (and must publish any such requirements). In specifying those requirements, the Board must take into account the need, so far as is reasonably practicable, to avoid duplication of investigations and to ensure that the OLC assists approved regulators and vice versa (subsections (4) to (6)). Subsections (7) and (8) impose a mutual obligation on the OLC and on approved regulators to consult one another in relation to draft rules/provisions of the kind described in subsections (1) and (2), and, when seeking the Board's consent to those rules/provisions, to identify any ongoing objections on the part of the other party.
Clause 146: Duties of authorised persons to co-operate with investigations
365. Subsection (1) requires each approved regulator to make provision in its regulatory arrangements that all authorised persons regulated by it must provide co-operation and assistance to the ombudsman in relation to an investigation, consideration or determination of a complaint; and this must include provision for enforcing that requirement. The Board may specify requirements which such provision must satisfy (subsection (2)), and must publish any such requirements (subsection (3)).
Clause 147: Reporting failures to co-operate with an investigation to approved regulators
366. Where an authorised person fails to co-operate with an ombudsman as stated in clause 146 the ombudsman can notify that person's approved regulator. The regulator may be required to report to the ombudsman on the action it takes; and if the ombudsman is of the opinion that the approved regulator is seriously or persistently failing to enforce its rules of conduct, the ombudsman may report this to the Board (and may do so even if the complaint is subsequently withdrawn).
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