Editor's blog | Complain and earn up to £150,000

Are lawyers really as bad as financial advisers who missold endowment mortgages, personal protection insurance and unsuitable pension plans? This is what the profession wonders following the consumer panel’s suggestion, in its response to the legal ombudsman’s consultation on effective redress, to increase the compensation ceiling for complaints to £150,000.

As with much of the recent work by both LeO and the panel, the object of the consultation is primarily services provided to individuals rather than to businesses. The underlying assumption is that individuals, most of whom are not educated repeat users of legal services, need greater protection and a more effective route to redress.

On this basis there is indeed no reason why law firms should be less immune than other professional advisers handling sensitive personal matters such as pensions and other major investments. This is the line the panel seems to take, saying the maximum compensation ceiling it proposes would align with that available from the financial ombudsman.

One of the strongest selling points for traditional law firms, compared with volume businesses or online service providers, is that they offer advice tailored to individual circumstances. They may use case management software and templated documents to cut down on costs, but the relationship remains personal with the client and particular care is given to each case – or at least that’s how it should be.

But things occasionally go wrong. Sometimes this gives rise to a claim in negligence. Sometimes there is no negligence but the client nonetheless suffers a detriment. Of course that should be compensated. But how much should clients be entitled to claim through a process that does not involve judicial scrutiny? LeO’s own proposal is to increase the compensation ceiling from £30,000 to £50,000. This is already quite a leap. What sort of fault would warrant the even higher award of £150,000 proposed by the panel that wouldn’t also amount to conduct akin to professional negligence?

Take this case. Two weeks ago, West-end firm Withers was told by a High Court judge that it had provided negligent advice when assuring the buyers of a £6.8m house in Chelsea that the property came with access to a communal garden for residents. It turned out there was no such access. The buyers sued the firm and were awarded just over £100,000 in damages. This was at the end of a process involving lawyers and the courts, and it took four years.

The availability of a complaints process that may lead to a financial compensation award is a basic requirement for a responsible profession but the scale of the proposal is a concern for law firms.

Like the proposal on third-party complaints last week, which the panel says should be read as part of its response to LeO’s consultation, this response questions the basic principles on which professional liability is assessed and negligence established.

It would be unfair – if not downright wrong – if dissatisfied clients could take a shortcut to compensation for negligence by avoiding the legal process altogether and be able to claim more than might be available through the court process. Instead of pushing for a higher compensation ceiling both the panel and LeO should come up with a structured proposal grading negligence – in a broad sense – by type. This should include clear referral routes to frontline regulators or the courts when particular allegations are made or when claims reach certain levels. It might require a review of the SRA’s own jurisdiction to allow it to make compensation awards. In itself this wouldn’t be a straightforward exercise but it would be a lot more satisfactory than hastily increasing LeO’s compensation ceiling in the blunt pursuit of the consumer agenda.