Legal Ombudsman publishes full decisions and names firms in transparency push
The case of a law firm that was effectively paid twice for the same work for two employment clients and was ordered to repay half of the money, has been included in the first of three decisions of the Legal Ombudsman (LeO) that have been published in full.
It ordered Anglo-Spanish firm Scornik Gerstein to repay the £36,225 it deducted from their damages, plus 3% interest (£2,391.53) and compensation of £600 for the inconvenience and upset caused, making a total remedy of £39,126.53.
LeO said it would use its statutory powers to publish final decisions where it was in the public interest to do so – specifically, where there was “either a set of individual circumstances or a pattern of behaviour which we believe it is appropriate to do so need to be brought to the public’s attention”.
This would likely be “systemic failures that indicate a substantial number of consumers will be adversely affected”, or where there is an exceptional or severe impact on an individual complainant or group of complainants, a very serious service failure, or a significant lack of co-operation with LeO.
Decisions that meet the criteria and are approved for publication by a public interest decisions committee will be published on LeO’s website quarterly and will remain available for 12 months.
Chief Ombudsman Paul McFadden said: “A key element of LeO’s role as an ombudsman scheme is to share learning from our insights and support the delivery of high-quality legal services. Our renewed commitment to publishing decisions in the public interest increases the transparency of the complaints system and reflects the critical importance of complaints in supporting improvement and high standards in how legal services are delivered.
“While most legal services are delivered professionally and competently, there are times when things go seriously wrong – and when they do, transparency matters. Publishing decisions in these cases not only helps to protect consumers, it also reinforces standards and ensures accountability.”
Scornik Gerstein, based in London, acted for Mr A and Ms B in a claim against their former employer, initially paying their way before entering into a damages-based agreement (DBA). This provided that the firm’s fees would be 35% of whatever was recovered.
The case settled in Mr A and Ms B’s favour and, after a delay in payment leading to enforcement of the debt, the employer paid both the compensation and the pair’s legal costs – ie, 35% of the compensation. Scornik Gerstein then still deducted the 35%.
Mr A and Ms B complained that the firm had effectively charged twice for the work, taking its fees both from the employer and from them. Unhappy with the firm’s response, they referred the matter to LeO.
Though its normal approach is to focus on the service, rather than the law, LeO said here it had to consider the law on DBAs “as the firm was strong in its belief that it had acted both appropriately and with the clients’ consent”.
The ombudsman noted that the DBA Regulations 2013 provide that the winning claimant’s lawyer should not recover more than the percentage fee and the losing defendant should not pay more than the assessed costs, the so-called Ontario model.
“Although employment cases are treated differently, our review of the law and the background led us to conclude that the courts would still say the spirit of the Ontario model applies.
“The firm was given the chance to comment but didn’t give us anything we considered persuasive, so our conclusion was that the 35% should only be taken once, unless there had been some specific and clear reason for a second payment that Mr A and Ms B gave informed consent to.”
The firm argued that the costs recovered were separate, arising from the defendant’s poor behaviour.
“What I’m being asked to follow is that the defendant’s conduct was so poor that a sum equal to the full costs for the work chargeable to the client under the DBA were payable by agreement,” the ombudsman said.
“The clause [in the retainer] that would enable the firm to regard the defendant’s conduct as unreasonable or vexatious was activated, the firm says, but I’ve seen no evidence of this being specified…. I’ve also got nothing to suggest that there was a conduct issue so serious as to warrant a full payment of costs on that scale.”
The ombudsman concluded that the firm had recovered costs from the employer “without the authority to separate these costs from those charged to Mr A and Ms B”.
They went on: “Even if the firm had the authority to do so, my view is that the firm’s cost information was well short of the level it should have been at, including failing to tell the clients that the relevant clause in the DBA had been triggered.”
As a result, when the agreement included the employer paying an amount equivalent to the 35% as their legal costs, Mr A and Ms B “were entitled to believe that was their debt to the firm paid”.
LeO went on: “The Ontario model would mean that the firm had been paid once and in full, and that was enough. On the cost information point, a key feature of our guidance is that a client should never be surprised by the bill they receive from their lawyer, and it was clear to us that Mr A and Ms B were.”
The fair thing to do, it decided, was to say that the firm’s fees should be limited to the amount recovered from the employer.