Compensation for financial loss If someone has lost money as a direct result of a failing in their lawyer’s service, our starting point is that the lawyer should give them compensation for the amount they’ve lost. Lawyers sometimes tell us that financial loss claims should really be directed to the courts, under the heading of a professional negligence claim. Our view is, if we believe we’re best-placed to help the parties resolve their dispute, we are generally able to come to a view on most financial loss questions, so the complaint can stay with us. Our approach is similar to the courts’ approach in the calculation of the loss, although it’s important to be clear that we aren’t required to reach the same view as a court would in the same situation, so there will sometimes be differences. How we deal with the remedy for financial loss will depend on the facts of the case, but they fall into three groups: I. When the person complaining was in control of the action taken These take the form of the consumer saying, “If you hadn’t done this, I would have done that instead”. We’re often looking at a situation where a consumer has relied on an action by their lawyer and it has led to them losing money. The consumer is saying they would have acted differently, if the lawyer had acted reasonably. If we are satisfied, on the balance of the evidence, that the consumer would have acted differently, our starting point will be to look at what they would have done instead, calculate the difference, and then propose a full reimbursement of their loss. The financial loss compensation tends to be all or nothing, as we will either decide that the consumer would have acted differently or that they wouldn’t. We’ll do more than purely taking one word over another, though; we’ll look at the evidence we can gather and make a reasoned judgement. Example 1: compensation for financial loss - when the person complaining was in control of the action taken II. Where there is a third party involved Some consumers tell us that they would have acted differently and avoided a loss, but whether this would have happened depends on someone else, too: a court or tribunal’s ruling, the attitude of the other side to settling the claim, whether a landlord would be agreeable to extend a lease, and so on. In those cases, there is generally some risk that, had the lawyer acted reasonably and had the consumer acted differently, circumstances beyond their control would still have meant the consumer didn’t get what they want. Our view is it would rarely be fair for us to give compensation for all of the claimed loss, if we think there is an element of risk. Our approach is to try to come to a view on what we believe is a fair estimate of the loss, which takes into account the chance of avoiding the loss, had the service been reasonable. Our compensation will be an appropriate percentage of the worst-case loss. We can’t always be exact, because we’re dealing with hypothetical situations of what might have happened, but we’ll always look to come to a fair and reasonable figure, and we’ll always give the parties the chance to comment and provide evidence, before we make our decision. Example 2: compensation for financial loss - where a third party is involved III. Where the failing happened after the expense was incurred Sometimes, a consumer will pay an amount that then gets rendered worthless by the failing that follows later. This could be a fee for a medical report in a personal injury case or for searches on a house purchase, for example. The expense had value at the time, but the failing by the lawyer meant it was now wasted. In those cases, like with the first category, our starting point is compensation for the full amount. These tend to be all-or-nothing remedies. Example 3: compensation for financial loss - where the failing happened after the expense was incurred
Reduction of refund of costs Sometimes, the best way to remedy the detriment caused by a failing is to reduce the lawyer’s bill. Depending on whether the fees have been paid at this point, that will either mean the lawyer returns some of what has been paid, or the lawyer sends the consumer something to confirm the new amount owed, like an amended bill or a credit note. This only applies to the fees of the lawyer or law firm we are investigating a complaint about. If a lawyer’s bill includes other expenses (such as court fees, expert fees, search fees, even the fees of a barrister a solicitor instructed on the client’s behalf), this remedy will be limited to the fees of the lawyer that is subject to the complaint. If we were to decide that the lawyer should also cover those expenses, that reduction would be classed as a financial loss, because we’d be making the lawyer responsible for someone else’s bill. We have three kinds of bill reduction: Reductions of a certain amount: this is usually where are removing the costs of a particular part of the work. An example of this might be because the lawyer has charged twice for the same thing. Reductions to a certain amount: we’ll drag the costs back to a specific point in the work, or to a specific point in the costs. This might be where a lawyer should have stopped working after a certain point and avoided extra costs, or where the lawyer exceeded an estimate and the client had no reason to believe the costs would be any different to the last price given. Reductions by a certain percentage: these tend to reflect more general failings, but the principle is always that the failing has reduced the value of the work in some way. It might be a cost information failing, but not always: it could be that the legal work was done to a lower standard than it should have been and we believe that the consumer should not pay full price for it. I. Reductions to a certain amount – estimate complaints One of the most common areas of complaint in costs is that a lawyer has exceeded the estimate they told the client to expect to pay. In our publication An Ombudsman’s View of Good Costs Service, we give guidance on estimates and what we expect to see, as part of a reasonable service. We recognise that an estimate is intended to be a rough guide for the client, so we will generally give a little leeway on the estimate. A consumer who is given an estimate of £1,000 for the work should not be more surprised by a bill of £1,100 than by a bill of £900. The estimate, properly given, should help a consumer understand that the bill is expected to be “around £1,000”. We are aware that there is well-established case law on estimates, but we’ll always look at the particular circumstances of each case to help us decide what is fair. A good test on estimates is What was this person reasonably expecting to pay? The answer won’t always be the last estimate given, because the client might have been given fair reason to believe the last estimate is now out of date and the work is going to cost more. Whilst there might still be a failing, our focus will be on reaching a view on the price we believe the consumer should reasonably have expected to pay. Example 4: reduction or refund of fees - estimate complaints II. Reductions by a certain percentage We sometimes see cases where the value of the work done has been undermined by one or more failings. This is similar to unhappy diners being offered a reduction on their restaurant bill. It’s very rare for us to waive a bill in its entirety. That is usually reserved for where the work had no value at all to the consumer. Much more often, there will be some value in the work, even if that value has been reduced by deficiencies in the service. The failings might be cost-related (lawyers are required by their conduct rules to provide clear information about costs to their clients and sometimes to others involved in a case), but they don’t have to be. A failure to tell the consumer something important, long delays, poor communication during the case, excessive changes of person handling the case, a series of minor mistakes that add up to something significant, poor advice and many other things can legitimately lead to us deciding the lawyer should not be charging full price for the work. It's important to be clear that we might deal with the detriment caused to the consumer in other ways with our remedies, so a bill reduction might sometimes not be appropriate, if we’re giving compensation for financial losses. Or we might reduce the bill by less than we would have done, so that we’re not counting it twice and penalising the lawyer. We’ll need to decide whether the reduction should be on all or just part of the lawyer’s fees. This will normally depend on whether the failing has been on all or part of the bill. A lawyer that does a good job to a certain point and then gives poor cost information for the next stage of the work would fairly challenge us for reducing the parts of the bill for work that was done well; we’d focus on the part that went wrong. The percentages we decide on will generally be simple and easy to follow, because we know that reductions are inexact by their nature, and what we’re trying to come to is a number that takes all the factors into account, and which is fair to both sides. As a guide, we generally put our reductions into three broad categories: Modest reductions of up to 15% will reflect minor failings. Significant reductions of 20-33% will commonly reflect situations where there has been a significant failing or failings, but where the overall legal work has been of a reasonable standard. We don’t want to go further than that and ignore that there has been work done of value, but we also believe that the lawyer charging full price for the work would be wrong. Substantial reductions of 50% or more tend to be for the really serious failings, where the value of the work is seriously undermined by what has gone wrong. These percentages are designed to be a guide and there could be cases where a percentage that sits between the groups is fair. We’ll always take these things on a case-by-case basis, but the key thing to remember is we’re looking at the scale of the failing and what effect it has had on the value of the work done. Example 5: reduction or refund of fees - reductions by a certain percentage We do see cases where consumers tell us that their lawyer missed something important in advice. Sometimes, this is because another lawyer has since told them how they would have handled it instead, or because the client has been doing their own research. It won’t always be a failing in the service, though; lawyers are employed to have and share their own professional opinions with their clients, and two lawyers, on the same facts, might give different views on what was important. We see this as no different to two mechanics giving advice on what to do about a fault on a car: there will be some things which any professional should do and spot, but there will be other things that are down to individual interpretation. If it’s just a difference of legitimate opinion, we won’t find the lawyer to be at fault.
Non-financial remedies These remedies don’t involve compensation or reducing a lawyer’s bill. Instead, they see the lawyer doing something specific to help resolve the complaint. This could be apologising, putting something right at the lawyer’s own expense or taking some particular action in the consumer’s interest. I. Apology A meaningful, sincere apology can be a really good way of resolving a complaint, but there is a range. We find that an early apology is much more valuable than one given late on. And an apology a lawyer is willing to give is much more effective than one we tell the lawyer to make. By the time a complaint comes to us, the lawyer will normally have had the chance to deal with the complaint directly, so, if they have not apologised by that point, they’re unlikely to do so when the complaint is with us. Even if they do apologise, our experience is it can be harder for clients to accept, as the passage of time can make the parties more entrenched in their views. Our Scheme Rule 5.21 says that an apology won’t be treated as an admission of liability. Nevertheless, we recognise that some lawyers are concerned that their insurers won’t want them to give any indication of responsibility, which could expose them to a legal claim. We believe an apology has weight if it has these elements: An acknowledgement of the service failing; An acceptance of responsibility for the problem; An explanation of why it happened; An expression of regret for any detriment; and A brief explanation of what action (if any) is being taken to prevent the same thing happening again. Bad apologies pass the blame on to others (including to the consumer) or doubt the detriment has been as the consumer describes. It’s perfectly possible for a lawyer to be surprised at what they’re told the effect has been, but to reflect that surprise in the apology itself is not a good way to come across as sincere. II. Action at the lawyer’s expense This is one of the simplest remedies we provide, because it should be clear what has gone wrong and what needs doing to put it right. If a lawyer has sent a court an application with the wrong address for the consumer, it’s logical that the lawyer might contact the court, doing what’s needed to fix the mistake. None of that work should be charged to the consumer, as the lawyer has caused the problem. III. Action in the consumer’s interest This includes: Releasing papers, property or money held in the client account; Completing the instructed work within some agreed timescales; Changing the person working on the case; Giving an assurance of carrying out some internal training; and Putting procedures in place to prevent the problem happening again.
Compensation for the emotional effects Although it is impossible to undo the emotional effects caused by poor service, a compensation payment can help to acknowledge the impact and the added worry, upset, distress or general inconvenience it has caused. People sometimes use expressions like “distress and inconvenience” or “time and trouble”, but the best way to refer to an emotional effect is to use the words that most accurately describe what has happened. For example: Alarm Hassle Disappointment Annoyance Confusion Anger Upset Worry Lingering doubt Offence Distress Shock Loss of faith Inconvenience Frustration Embarrassment Whilst many of the awards we make are where the detriment has been over a short period of time, we do sometimes deal with cases where there has been an intense and long-lasting consequence to the person complaining. The table below sets out the levels we use: Modest award £50 - £250 A modest payment might be appropriate if the impact of the poor service was short-lived and no longer exists. For example: Minimal impact/disruption on the consumer’s daily life. There were several individual minor incidents but when added together didn’t significantly affect the consumer’s overall experience. Significant award £250 - £750 A significant payment might be appropriate if there has been a serious, but not permanent effect on the consumer. For example: The consumer has experienced significant inconvenience such as repeatedly chasing for information or correcting mistakes, taking time off work to deal with issues, or carrying out tasks their service provider should have dealt with. The consumer had to complain multiple times about service issues which were not addressed. The impact of the poor service was modest but was made worse by poor handling of the complaint. A serious impact has been lessened by the actions of the lawyer or by part of the remedy, such as a significant costs reduction. The poor service took place over a long period, but the effects are now at an end. Serious award £750 and above A serious payment might be appropriate if there has been a long-term or serious impact on the consumer’s wellbeing or life. For example: The release of a confidential address to an abusive former partner. Avoidable exposure to particularly stressful situations or financial liabilities. Although the theoretical limit of our compensation for emotional effects is £50,000, awards above £1,000 are rare and awards above are £2,000 extremely rare. Emotional effects differ from person to person, and we’ll want to understand what the detriment has been for the consumer in any case we deal with: We’ll ask the consumer to describe the effect or effects in their own words, then compare it to our guidance above. We’ll sometimes want to see evidence to support what the consumer has told us, such as where they tell us they had to go out of their way to do something or had to cancel another engagement. If the consumer tells us they have particular vulnerabilities, which have made the effect on them more severe, we’ll take that into account. We might also take the lawyer’s handling of the complaint into account, because a really good first-tier process can help reduce the effects of any failings, and a really bad one can make things worse. I. Calculating a remedy for emotional effects The first thing we will always do is assess what the emotional effects have been of any failings in the service. Every remedy should reflect the detriment caused by a failing, so it’s often helpful to set out the effects in detail as a first step. Unlike compensation for financial losses – where there will be a separate award for each financial loss – an award for emotional effects will be a single amount, to reflect all of the emotional effects. If we find there were two failings, we won’t give £50 for one and £200 for the other; we’ll look at what the combined effect of those two failings has been and then decide on a fair overall figure. It might be helpful for people deciding on a figure to think first about which of the three categories fits best, then to look at whether the effects sit towards the higher end, the middle or the lower end. In doing so, it’s essential that the particular circumstances of the client are considered, because it’s never a case that a failing always results in the same award of compensation. Example 6: compensation for emotional effects - calculating a remedy
