Avoiding the Ombudsman - De-Escalating Negligence Disputes

In our previous article, we looked at new rules that apply to consumer claims for goods and services in the UK which come into force from October 2015 and how this could affect professionals who are increasingly being treated like retailers when it comes to complaints.  As in the retail sector, the customer is king.  As is clear from recent news stories, complaints can quickly escalate and before long a business or professional's name is dragged through the mud in the press and social media.

It is against this background that the ADR Directive is also being introduced from July 2015, to encourage the use of alternative dispute resolution (ADR) as a simple, low cost way to resolve sales and service contractual disputes between traders and consumers, out of court.  

ADR Directive

From 9th July 2015, professional businesses will need to give consumers information about an ADR organisation who could help them resolve any disputes which cannot be resolved in-house. Traders can only supply information about an ADR organisation that has been checked and certified to ensure the independence, quality and accessibility of the service it provides. A certified ADR provider will be able to resolve both online and offline disputes and can only refuse to deal with a consumer who initiates a complaint with it, under very limited circumstances. Where a trader cannot resolve a dispute with a consumer in relation to a sales or service contracts, the trader needs to inform the consumer about its chosen ADR organisation.  The risk is that if a professional does not comply, then Trading Standards can take enforcement action.

Traders include businesses such as unregulated lawyers, which covers will writing services for example.  It is thought that Solicitors and Barristers are covered to the extent that they will need to signpost clients to the existing Legal Ombudsman service, but generally the Legal Ombudsman will not consider complaints which would be better off being dealt with in the Courts, such as negligence claims and it tends to reject these and clients have no option other than to bring Court proceedings.  Similarly, financial advisors for example, are regulated by the FCA and the FOS deals with disputes, but as explained in my previous article that process and the road to resolution can be very slow.

The Legal Ombudsman has confirmed that it is looking at changing its rules so that there is an indefinite time to complain.  It is applying to be an authorised body under the ADR Directive, but is planning to commence from 1 January 2016, rather than 9 July 2015.  There will need to be a consultation on this rule change which may lead to more complaints being made and lawyers having to retain their files indefinitely.  It is definitely worthwhile considering mediating any complaint with a client rather than incurring the £400 fee that applies when a file is opened.

It is worthwhile professionals considering whether they can signpost to an ADR provider as part of the complaints process, before the deadlock letter is sent and the matter is referred to the Ombudsman.  This could avoid the need to log a complaint with the Ombudsman, which may result in publication of the existence of a complaint, and payment of a fee, whatever the outcome.

Professionals are already aware of the benefits of mediation and ADR for dealing with their clients' cases. Why not try it before a complaint is referred to the Ombudsman and spirals out of control, turning into a professional indemnity claim.  Court fees have increased and the revised pre-action protocols encourage the use of mediation, as well as the sanctions that apply for refusing to mediate. Trying mediation at the outset is childsplay!

The Pre-Action Protocol -Stocktaking

With professional indemnity disputes, parties should also bear in mind the revised Professional Negligence Protocol.

The revised protocol encourages parties to resolve their disputes without resorting to proceedings, coupled with the increased Court issue fees introduced in April 2015.  The new protocol therefore demands that the parties explore ADR, including ombudsmen services and adjudication.  

There is also a "stocktake" provision, so that once the parties have exhausted the protocol process they have to look again at the dispute in order, if possible, to avoid court proceedings, or at least to narrow the issues between them before proceedings are issued. 

New penalties can now be imposed on parties failing to take part.  Any refusniks can be ordered to pay the whole or a proportion of the costs of the proceedings, on the indemnity basis. If a claimant is at fault and is awarded damages, the claimant’s entitlement to interest can be withdrawn or interest awarded at a lower rate and for a lesser period. If the defendant is to blame then it can be ordered to pay interest on the damages at up to 10% above base rate. 

The message from the Courts is "mediate or face the consequences" and with the introduction of the ADR Directive, mediation and ADR are on the way up!.

Mediation and ADR Options

ADR providers will be signing up professional businesses, including Solicitors and Barristers, from July 2015 to mediate or arbitrate disputes before the Court process begins. The process is entirely voluntary and non-binding, but can help to solve the problem or at least narrow the issues.

Do "Lawyers" have to comply with the ADR Directive?

As set out above, professionals covered by a voluntary or statutory ADR scheme like the Legal Ombudsman do not seem to have to sign-post clients to another ADR Provider to deal with negligence claims. The Legal Ombudsman is applying to be an authorised body under the Directive. However, there is still some debate and there are conflicting views regarding this. There is certainly a statutory obligation already for regulated lawyers to sign-post clients to the Ombudsman. There is no doubt that unregulated professionals and legal providers will have to provide details of a certified ADR Provider to clients to comply with the Directive.  The majority of legal activities are not listed as "reserved activities" and are not explicitly required by statute to be brought within the scope of legal services specific regulation. This includes the services that most people use and understand to be legal services, and might instinctively expect to fall within the regulatory net – for example general legal advice, transactional corporate advice, will-writing and employment advice. 

In any event, ADR can be tried at any stage in the life of a dispute and can lead to a breakthrough or at least narrow the issues, so then you can relax knowing that the stress and strain of dealing with a complaint is being dealt with in a professional manner.

For more information, please contact enquiries@promediate.co.uk

Disclaimer: The information and any commentary on the law contained in this article is for information purposes only. No responsibility for the accuracy and correctness of the information and commentary or for any consequences of relying on it, is assumed by the author. The information and commentary does not, and is not intended to amount to legal advice to any person on a specific case or matter. The article was written on the date shown and may not represent the law as it stands subsequently. For the avoidance of doubt, the views in this article are personal to the author and not attributable to any other individual or organisation.