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Chapter 1 Introduction

1. During the first session of the Scottish Parliament, the Justice 1 Committee undertook an inquiry into Regulation of the Legal Profession. This focused on the way the legal profession handles complaints, which the Committee perceived to be the main source of public concern about regulation generally. The Committee also considered the way the legal profession regulates itself (called self-regulation, or more accurately co-regulation as it involves the Scottish Legal Services Ombudsman and other interested bodies ¹). It concluded that the best option for the people of Scotland was to retain self-regulation. But it also recommended that the system should be reformed to make it more acceptable and more representative of the public interest.

1.1 Throughout the inquiry, the Committee received oral and written evidence which formed the basis of its report ². This addressed a number of recommendations to the legal professional bodies, most of which have now been implemented (see appendices A and B).

1.2 In the light of the inquiry, research findings ³ and the Annual Reports of the Scottish Legal Services Ombudsman, the Executive takes the view that further change is needed. Many consumers who complain about legal services have similar criticisms: the complaints process is too long and too complicated, requiring undue persistence to reach a conclusion; there is a big difference between the service consumers experience with legal bodies and those in other consumer markets; and there is a general feeling that the overall process might be weighted in favour of the lawyer.

1.3 The Executive proposes to reform arrangements for handling complaints against legal practitioners ⁴ in Scotland by introducing a greater degree of independence and oversight into the system, so instilling greater public confidence into the process. To carry out this reform, changes in legislation need to be made through the Scottish Parliament. This consultation paper invites all parties interested in the matter to put forward their views on the new proposals.

1.4 The paper begins by explaining the existing roles of the legal professional bodies and the Scottish Legal Services Ombudsman ( chapter 2) and by setting the reform proposals in context ( chapter 3). Chapters 4 to 10 discuss proposals for reform, setting them in the context of the relevant Justice 1 Committee recommendations and quoting the relevant excerpts from the Committee's report. Chapters 11 and 12 discuss proposals put forward by the Law Society of Scotland in respect of its disciplinary powers and the Register of Notaries. Your views are invited on the questions raised in these chapters. The appendices provide further background information which might be helpful.

How to respond

1.5 We would like to receive written responses to this consultation paper by 3 August 2005. Please indicate clearly which questions or parts of the consultation paper you are responding to (if appropriate) as this will help our analysis. Remember to complete and return the Respondent Information Form (attached at annex C) with your response.

Please email your response to

complaintshandling@scotland.gsi.gov.uk

Or send it by post or fax to

Fax: 0131-244 8325

Access to responses

1.6 This consultation, and all other SE consultation exercises, can be viewed at http://www.scotland.gov.uk/consultations . Electronic comments would be preferred but all responses, whether electronic or written, will be carefully considered. The electronic questionnaire can be accessed and downloaded at the following website address http://www.scotland.gov.uk/consultations . You can telephone Freephone 0800 77 1234 to find out where your nearest public internet access point is.

1.7 We will make all responses available to the public in the Scottish Executive Library by 31 August 2005, unless confidentiality is requested. All responses not marked confidential will be checked for any potentially defamatory material before being placed in the library.

Chapter 2 Existing roles of the legal professional bodies and the Scottish Legal Services Ombudsman

2. This chapter provides a brief summary of the existing roles of the Law Society of Scotland and the Faculty of Advocates (the legal professional bodies) and the Scottish Legal Services Ombudsman.

The Law Society of Scotland

2.1 The Law Society of Scotland is a statutory body whose main powers are set out in the Solicitors (Scotland) Act 1980. It is funded by its members who are practising solicitors. The Society has a dual role under the 1980 Act to promote both the interests of the solicitors' profession in Scotland and the interests of the public in relation to that profession ⁵. One of its functions is to deal with complaints about the conduct of solicitors or the service provided by solicitors through its Clients Relations Office.

2.2 Complainants are encouraged to resolve their complaint direct with their solicitor or law firm, but where this has not been possible the Society will pass the complaint to a case manager who will undertake an investigation. Depending on the complexity of the complaint, the investigative process may involve correspondence with the complainant and the solicitor. At the end of the process the case manager will report to one of the Society's Client Relations Committees which will then decide whether to uphold the complaint. The membership of the Society's Client Relations Committees is 50% solicitor and 50% non-solicitor. If a complaint about service is upheld, the Society has the power to order the solicitor to charge no fees / outlays, to refund or reduce fees /outlays, to correct mistakes and to compensate the client up to a maximum of £5,000.

Scottish Solicitors' Discipline Tribunal

2.3 Should a complaint include possible professional misconduct, it will be considered by the Society's Professional Conduct Committee (also composed in equal proportions of solicitors and non-solicitors) who can then decide whether to prosecute the complaint before the Scottish Solicitors' Discipline Tribunal. The Tribunal is an independent body which generally sits with three solicitor members and two non-solicitor members. It has the power to censure, fine, restrict, suspend or strike a solicitor off the Roll of Solicitors. The latter action effectively removes the individual's right to practise as a solicitor in Scotland.

2.4 Should complainants be dissatisfied with the way in which the Society has handled their complaint, they can refer their complaint to the Scottish Legal Services Ombudsman.

The Faculty of Advocates

2.5 The Faculty of Advocates is a body of independent lawyers who have been admitted to practice as advocates before the Courts of Scotland. The Faculty is a democratic body led by its Dean who is elected by the whole membership and is assisted by four other office bearers. The Faculty is self-regulating and controls its own admissions and discipline. Complaints made to the Faculty are considered by the Dean who can then deal with the complaint himself or delegate it to an office bearer or refer it to the Complaints Committee. The Complaints Committee is composed of professional and lay members in equal proportions. If a complaint about service or conduct is upheld after consideration of representations from both parties, a range of penalties may be imposed including a fine or an award of compensation of up to £5,000.

Faculty of Advocates Disciplinary Tribunal

2.6 Alternatively, more serious complaints may be referred to the Faculty of Advocates Disciplinary Tribunal which is also composed in equal proportions of professional and lay members. The range of penalties available then extends to a number of additional remedies including suspension or expulsion from membership of the Faculty.

2.7 Should complainants be dissatisfied with the way in which the Faculty has handled their complaint, they can refer their complaint to the Scottish Legal Services Ombudsman.

The Scottish Legal Services Ombudsman ( SLSO)

2.8 The SLSO is appointed by Scottish Ministers. Her duties are set out in the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 ⁶. Scottish Ministers cannot intervene in the way in which the SLSO deals with her complaints casework, nor can they review or influence her Opinions. The SLSO is independent of both Scottish Ministers and the legal profession and is not a lawyer.

2.9 The SLSO considers complaints about how the professional bodies (the Law Society of Scotland or the Faculty of Advocates) have handled a complaint about a practitioner. She will then put her findings together in a written Opinion. There is no appeal against the SLSO's findings in an Opinion.

2.10 In compiling her Opinion the SLSO will consider the way in which the professional body handled the complaint and whether the body has been fair and thorough. She can recommend to the professional body that it provides more information to the complainant, investigates the complaint further, reconsiders the complaint, exercises its powers in relation to the practitioner or pays compensation for loss, inconvenience or distress caused by the way it handled the investigation of the complaint.

2.11 The SLSO has no power however to enforce her recommendations at present. A professional body has three months to decide if it will accept the Ombudsman's recommendations. If it does not accept, the Ombudsman can publish an Announcement, giving her views and the professional body's views.

Categories of Complaint

2.12 Complaints which are investigated by the Law Society of Scotland fall into two categories

• Complaints about inadequate professional services ( IPS) ⁷;

• Complaints about professional misconduct ⁸.

To these the Law Society of Scotland seeks to add a second category of misconduct to be known as unsatisfactory conduct which would be defined as conduct by a solicitor that falls short of being professional misconduct but is serious enough to merit action ( see chapter 11).

2.13 The Scottish Solicitors' Discipline Tribunal has powers to consider complaints of professional misconduct, complaints of inadequate professional service and appeals by solicitors against findings of the Law Society of Scotland.

2.14 Complaints investigated by the Faculty of Advocates also fall into the categories of professional misconduct and inadequate professional service.

2.15 Complaints alleging negligence on the part of a lawyer are not at present handled by the professional bodies and action must be pursued through the courts. Negligence may be simply defined as a breach of a lawyer's duty of care which has caused quantifiable loss to a client.

Chapter 3 Taking forward the Justice 1 Committee's recommendations

3. In its report, the Justice 1 Committee came to the general conclusions that:

• A completely independent system for dealing with complaints against lawyers is not the only way to restore consumer confidence in the complaints process;

• The best option is to keep the present system of co-regulation - in other words self-regulation with the additional independent regulatory mechanism of the Scottish Legal Services Ombudsman - but with increased independence; and

• The current system should be reformed in order to make it more acceptable to consumers and more representative of the public interest (see report, paragraphs 14 to 23).

3.1 The Executive recognises the strength of the argument for the legal professional bodies to remain primarily responsible for the complaints handling process. Close involvement in this process gives them first hand insight into the quality of service which their members provide, into where the public interest lies in relation to the profession, and into where there might be a need to improve standards in the profession.

3.2 The Executive also recognises the strength of the argument put forward by the former Justice 1 Committee that a completely independent complaints body is not required in Scotland, but that the present system should be reformed to increase the level of independent oversight and make it more user friendly.

3.3 The Executive also takes the view however that the door should not be closed to a more radical approach which would involve a clearly independent complaints handling body being set up under the management of an independent Board. We would be interested to hear the views of a wide range of stakeholders on whether such an approach would be justified.

The Clementi Review

3.4 Recent proposals made by Sir David Clementi include a recommendation that a single independent complaints body be set up in England and Wales ⁹. This body, the Office for Legal Complaints, would deal independently with individual complaints but would work closely with the proposed Legal Services Board (the regulatory body to be set up in England and Wales to oversee the work of the professional bodies) to ensure that early action served to minimise complaints at source. The Office for Legal Complaints would be managed by a board chaired by a non-lawyer and with a lay majority. More information on these proposals can be found at appendix C or in Sir David's report.

3.5 Sir David's report also deals with the way professional bodies in England and Wales are governed and, in particular, with the relation between their regulatory and representative functions. He recommends that the professional bodies should be required by statute to separate their regulatory and representative functions and that the proposed Legal Services Board should ultimately have the right to insist upon institutional separation. The Law Society of England and Wales is already taking steps towards dividing its regulatory and representative roles and is establishing two new Boards for that purpose :

• The Regulation Board will be responsible for regulatory functions, such as legal education, rules of conduct, monitoring compliance with rules and investigating suspected misconduct.

• The Consumer Complaints Board will be responsible for policy concerning the handling of consumer complaints about solicitors' service, and for overseeing the way in which the Consumer Complaints Service discharges its functions. The Board will consist of a lay Chair and eleven members, a majority of whom will be lay.

3.6 In Scotland, the regulatory position is less complex than in England and Wales as fewer bodies are involved. The Law Society of Scotland has a statutory duty to promote both the interests of the solicitors' profession in Scotland and the interests of the public in relation to that profession. The Faculty of Advocates has a similar, but non-statutory, dual role.

Main areas for reform

3.7 The Justice 1 Committee recognised both the potential conflicts of interest arising from the Society's dual role and public concern about lawyers dealing with complaints against lawyers. It reckoned, however, that the changes it proposed to the system - such as strengthening the powers of the Ombudsman and creating a single gateway for complaints - would help to change that perception ¹⁰. The Executive acknowledges the argument that the Law Society of Scotland should retain both its regulatory and representative functions, since a Law Society which does more than simply promote the interests of its members brings a number of public benefits. The Executive would however be interested in the views of consultees on whether these dual functions should be maintained as they are at present, or whether they should be clearly separated.

3.8 To improve the public perception of impartiality, the Justice 1 Committee also recommended that

• the powers of the Scottish Legal Services Ombudsman should be enhanced;

• the involvement of lay people on the client relations committees of the Law Society of Scotland should be increased; and

• the Society should adjust its procedures to ensure that complaints were handled by an independent unit and that the interests of the complainant and the solicitor subject to complaint were clearly separated.

The first recommendation forms a set of proposals in this consultation paper, and the Law Society of Scotland has already acted on the latter measures.

Preview

3.9 The chapters which follow invite your views on ways in which the recommendations made by the Justice 1 Committee should be taken forward:

• Chapter 4 highlights the importance of conciliation as a means to resolve complaints at source, and to avoid the need for complainants to enter the formal complaints handling system.

• Chapter 5 invites views on ways in which complaints handling arrangements might be restructured.

• Chapter 6 proposes how the powers of the Scottish Legal Services Ombudsman ( SLSO) might be increased.

• Chapter 7 addresses questions about the definition of a complaint and the handling of small negligence claims.

• Chapter 8 deals with the redress available to complainants whose complaint is upheld.

• Chapter 9 deals with membership issues relating to the Scottish Solicitors' Discipline Tribunal.

• Chapter 10 covers matters relating to the Law Society of Scotland's Master Policy and Guarantee Fund.

Chapter 4 Conciliation : resolving complaints at source

4. The Justice 1 Committee recommended that:

"The conciliation process should be strengthened so as to resolve complaints at an early stage; a practice rule should be introduced to require law firms to have a complaints procedure with a named individual to deal with them; conciliation services should be provided to small firms and sole practitioners and the conciliation process should have strict time limits." (paragraph 122) ¹¹.

4.1 The Executive is firmly of the view that complaints against solicitors should, wherever possible, be resolved at source. Law firms which operate effective complaints handling procedures and have designated client care managers:

• allow complaints to be dealt with effectively at local level;

• are more likely to retain the goodwill (and business) of their clients; and

• tend to avoid the need for legal professional bodies and the Scottish Legal Services Ombudsman becoming involved.

Good complaints procedures and a pride in dealing with complaints at source are the hallmarks of a responsible professional firm. While, however, local resolution is always highly desirable the Executive believes that complainants should have an unrestricted right of access to the formal complaints system.

4.2 The Law Society of Scotland has prepared a new practice rule requiring law firms to have complaints procedures in place and a partner designated to deal with complaints ¹². The Executive understands this practice rule may simply confirm existing good practice in many firms, but welcomes these developments and sees the rule as necessary and in the interests of users of legal services. Caseload statistics published each year in the Society's Annual Report should continue to record the number of complaints resolved by conciliation, but include a run of years to allow progress to be measured.

Chapter 5 Options for changing the structure of complaints handling

5. The current arrangements for handling complaints are explained in chapter 2. There are a number of alternative approaches which might improve the way complaints are handled. This chapter invites views on options to

• enhance existing arrangements by increasing the powers of the Scottish Legal Services Ombudsman ( option A). Such increased powers would also be relevant if a gateway modelled on either option B or C were to be based on the office of the Scottish Legal Services Ombudsman.

• introduce a "gateway" approach on the lines recommended by the Justice 1 Committee. This would mean that complaints which could not be resolved at source by the law firm or practitioner would be channelled to an independent statutory office holder who would sift all complaints, allocate them to the relevant professional body for investigation, and monitor progress. There are two possible models ( options B and C).

• set up an independent complaints handling body, managed by a board with a lay chair and lay majority ( option D).

Option A Enhancing the status quo

5.1 The Executive recognises the existing system of co-regulation could be modified by enhancing the powers of the Scottish Legal Services Ombudsman (as recommended by the former Justice 1 Committee) without following the Committee's single gateway recommendation. These additional powers, which are discussed more fully in chapter 6, would enable the Ombudsman to:

• investigate the original decision made by the professional body;

• enforce his/her recommendations;

• conduct general audits of the complaints files of the professional bodies;

• prescribe general timescales for the resolution of complaints by the professional bodies; and

• direct the professional bodies to investigate a complaint.

This would keep the same structure for complainants who could go to the local law firm or advocate in the first instance; to the legal professional body if they were still unhappy; and ultimately, if required, to a Scottish Legal Services Ombudsman with greatly enhanced powers.

5.2 The Executive appreciates the benefits of a familiar structure and increased powers for the Ombudsman (which could also be introduced under options B or C). The Executive takes the view however that the complaints handling system needs to be more independent, and seen to be more independent; and that a greater degree of oversight is needed to increase public confidence.

The single gateway

5.3 The former Justice 1 Committee made the following observations:

"One way of increasing the independent element in the system of joint regulation would be by creating a single gateway. In this system, there would be an independent body which would receive all complaints about the legal profession. That body would then refer them to the professional body for settlement, with the option of a referral back if the complainant was not satisfied with the handling of the complaint. This function, principally of a "clearing house", could be performed by the Ombudsman. The Ombudsman would receive all complaints and make decisions about what is and what is not a complaint". (paragraph 24)

"The Committee believes that it is vital that the public perception of the complaints systems is that it is both fair and transparent. The Committee is in favour of the creation of a single gateway which it believes will improve the public perception of the complaints system and play a valuable oversight role." (paragraph 30).

5.4 A single gateway for complaints would make clear to complainants where they should address their complaints and provide an element of independence at the outset of the complaints handling process. The Justice 1 Committee thought that the single gateway would work for complainants who had tried to resolve their complaint with the law firm or practitioner concerned but were dissatisfied with the outcome. The Executive agrees that an arrangement like this could be beneficial and that the gateway function would sit well with the existing functions of the office of the Scottish Legal Services Ombudsman ( SLSO) .

5.5 At present the SLSO enters the complaints handling process at the end, when earlier attempts to resolve complaints (with the practitioner through conciliation or with the professional bodies) have failed to satisfy the complainant. However, as a single gateway, the office of the SLSO would play an important role in sifting complaints as soon as they enter the formal complaints handling procedure. The gateway approach could thereby increase public confidence in the system and allay public concerns about lawyers dealing with complaints against lawyers.

5.6 The Executive sees three ways to increase the independent element in the complaints handling system. These are set out in options B, C and D which follow.

Option B A single gateway with oversight functions

5.7 On this model which the former Justice 1 Committee supported, the gateway would be based on the office of the Scottish Legal Services Ombudsman and would

• receive all complaints about legal practitioners ¹³ where the complainant was dissatisfied with local attempts made at resolving the complaint by the law firm or legal practitioner;

• determine if complaints should be investigated;

• have powers to require a professional body, law firm or legal practitioner to respond to a complaint; to give directions to a professional body, law firm or legal practitioner on how complaints should be investigated; and to monitor performance ¹⁴.

5.8 The Executive believes such a gateway would add value by providing an independent sift of complaints and an independent assessment of whether a complaint is eligible. This would reassure the public that complaints could not be unfairly rejected as invalid by the professional bodies and address concerns over professional bodies being quick to find reasons that a complaint is not a complaint in terms of the legislation.

5.9 The costs of introducing a gateway on this model with oversight functions would be limited to some additional resources for the Ombudsman's office to allow for sifting incoming complaints, distributing complaints to the relevant professional body or firm (with instructions where appropriate) and monitoring progress with allocated complaints.

5.10 The Executive sees attractions in such a gateway which, together with the additional powers for the Scottish Legal Services Ombudsman (see above), might be an appropriate adjustment of self-regulation in the light of the Committee's recommendations and the reforms already implemented by the legal professional bodies themselves in response to the Committee's report. The Executive recognises, however, that there remain arguments in favour of a more radical approach, and would be interested in views on the full range of options.

5.11 If Option B were to be taken forward, it is proposed that the Executive, and hence the taxpayer, should fund the gateway, as recommended by the Justice 1 Committee (report, paragraph 84). The additional resources required are likely to be those for the office of the Scottish Legal Services Ombudsman and are estimated at an additional £0.1m a year.

Option C A single gateway with substantive complaint handling functions

5.12 The gateway on this model would also be based on the office of the Scottish Legal Services Ombudsman, but would be an investigatory body which handled most complaints itself. It would deal mainly with complaints of alleged inadequate professional service ( IPS) in-house, and refer most complaints about conduct to the legal professional bodies. This option would be broadly similar to the gateway in New South Wales, Australia, where in 2003-04 the Legal Services Commissioner's office dealt with 77% of the complaints it received and referred the remaining 23% to the legal professional bodies.

5.13 A substantive gateway on the option C model would be funded from two sources:

• from the legal professional bodies, who would benefit from substantial savings in a significant reduction in their complaints handling work; and

• from a fee levied on law firms against which a complaint had been upheld. This would recover the cost of dealing with complaints from the firms responsible, on the 'polluter pays' principle.

5.14 This would enable Scottish Ministers to charge the legal professional bodies an appropriate contribution towards the operating costs of the gateway, but would run contrary to the view of the former Justice 1 Committee that the independent element of the system should be funded by the taxpayer and not the legal profession (paragraph 55 of report - though this related to the option B gateway).

5.15 The cost of option C would depend on the volume of complaints, but at the moment could be calculated as about £2m a year (based on the annual budget for the office of the Scottish Legal Services Ombudsman of about £0.3m in 2005-06 and the Law Society of Scotland's budget for complaint handling of £1.7m in 2005) .

Option D An independent complaints handling body, managed by a board with a lay chair and lay majority

5.16 In support of this option it can be argued that consumer expectations have developed to the extent that this would be the only way to ensure public confidence in the system for handling complaints. The body would be run by a board appointed by Scottish Ministers. It would deal with complaints about the service received from all legal practitioners in Scotland and the professional bodies would continue to handle cases of alleged professional misconduct. The complaints handling body would have powers to assess what constitutes a complaint, to investigate complaints, to order redress and to oversee professional indemnity and compensation fund arrangements operated by the professional bodies. Such a body would be funded by the legal profession (on the same basis as option C).

5.17 Both options C and D are completely independent complaints handling bodies with similar powers. The main difference between them is that option C would be led by a single office holder whereas option D would be under the management of a board. Costs would be broadly similar except that remuneration of the board would be slightly more expensive. The detailed composition and powers of the board would be for further consideration, but its independence would be guaranteed by the requirements for a lay chair and a lay majority among the membership.

Regulatory functions of UK organisations

5.18 In considering options for the handling of complaints, the Executive is aware that certain UK organisations have regulatory or oversight functions in relation to Scottish solicitors or their professional body. These are the Office of the Immigration Services Commissioner (the Office has an oversight responsibility in relation to the Law Society of Scotland and the Faculty of Advocates, which are designated professional bodies under the Immigration and Asylum Act 1999); the Financial Services Authority (which regulates law firms which provide mainstream financial investment advice); and the Office of Fair Trading (which has oversight of a group consumer credit licence, taken out by the Law Society of Scotland, on behalf of law firms which provide consumer credit).

5.19 The Clementi report proposes changes to the role of the Immigration Services Commissioner in England and Wales which, if implemented, would mean that the Commissioner's oversight function in relation to designated professional bodies in England and Wales would move to the proposed Legal Services Board ¹⁵. The Immigration Services Commissioner would continue with his direct regulatory functions in relation to immigration advisers and immigration service providers in England and Wales, whereas in Scotland and Northern Ireland he would be likely to retain both his oversight role in relation to designated professional bodies and his direct regulatory role in relation to immigration advisers etc. The position will be given further consideration in the light of decisions to be taken on Sir David's recommendation.

Chapter 6 Powers of the Scottish Legal Services Ombudsman

6. The former Justice 1 Committee recommended that the Scottish Legal Services Ombudsman ( SLSO) should have five additional statutory powers. These powers form the basis of option A in the previous chapter, but would also be available to the gateway under options B and C on the assumption that the office of the Scottish Legal Services Ombudsman would form the gateway.

6.1 The former Justice 1 Committee recommended that the Ombudsman should have powers:

(a) "to investigate the substance of the original decision made by the professional body." (paragraph 38)

6.2 The Executive agrees that this power should be available to the Ombudsman or gateway. In practice the Ombudsman should not have to look at every case as an appeal against the professional body's decision; the more usual course of action would be for the Ombudsman to direct the professional body to re-investigate the complaint. The power would be used in circumstances such as

• where the Ombudsman believes that a professional body may have failed to investigate a complaint effectively and considers that investigation by her own office would be preferable to directing the body to re-investigate; or

• where a professional body has refused to investigate a complaint and the Ombudsman thinks it necessary/appropriate to investigate the complaint herself rather than require the professional body to do so.

6.3 The Legal Services Ombudsman in England and Wales ( LSO) already has the power ¹⁶ to investigate the matter surrounding a complaint but rarely does so. In her 2003-04 report the present LSO, however, suggested she would extend more investigations to include the original complaint.

6.4 Decisions by the Ombudsman following investigation of the substance of the original decision could not be appealed, but could be the subject of judicial review.

(b) "to enforce recommendations." (paragraph 41)

6.5 The Executive agrees this should be possible in individual cases. In practice, this power might not be used frequently but the Executive thinks it is important that it should be available. Where the Ombudsman has completed an investigation, he/she should have discretion to decide that, rather than making a recommendation ¹⁷, it might be better to ask the professional body to take a particular course of action. In this case the Ombudsman would have to give the professional body, and any other interested party, a reasonable chance to make representations (in writing or in person) to him/her before deciding whether the recommendation should be subject to a binding order.

6.6 This power would complement the proposed power for the Ombudsman to direct a professional body to investigate and would apply only to case recommendations. Systems recommendations, whether made in the context of an Ombudsman's Opinion on a case or the Ombudsman's Annual Report, should remain advisory.

6.7 Where the Ombudsman either investigates the original decision by the professional body or enforces his/her recommendation in relation to a complaint, he/she should also have the power to recommend and (after consultation with the professional bodies) enforce the level of compensation to the client by the legal practitioner or the professional body. Disciplinary measures against a legal practitioner, however, should remain the remit of the professional body or relevant Discipline Tribunal ¹⁸. This would be subject to the Ombudsman still being able to report cases to the Scottish Solicitors' Discipline Tribunal if it appears that a solicitor may have been guilty of professional misconduct ¹⁹.

(c) "to conduct general audits [of the complaints files of the professional bodies]." (paragraph 45)

6.8 This would allow the Ombudsman greater oversight into the standard of complaint handling achieved by the professional body. An exercise to implement this recommendation, via an administrative protocol, was discontinued because of professional body concerns about client confidentiality. The Executive believes that the best way forward would, therefore, be to provide an express statutory right of audit for the Ombudsman. This would allow access to any of the complaints files of legal practitioners, law firms and the legal professional bodies, whether relative to a current handling complaint or not.

(d) "to set appropriate target timescales [for the processing of complaints by professional bodies] and to monitor adherence to them." (paragraph 49)

6.9 In practice, the Ombudsman already recommends advisory target timescales for the professional bodies. These bodies, however, do not have to publish statistics on their performance against targets and have, on occasion, rejected an advisory target timescale. As satisfactory turnaround times are crucial to legal service users, the Executive wants to give the Ombudsman a statutory power to set target timescales (after consultation with the legal professional bodies to agree targets are realistic) and to ensure adherence to them. The Ombudsman should also have the power to request professional bodies to provide information on actual performance against those targets.

(e) "to direct professional bodies to investigate a complaint." (paragraph 51)

6.10 It would seem to be consistent with the principle of accountable self-regulation for the Ombudsman to be able to direct a professional body to investigate a complaint. This power could, for example, be used to address concerns about the professional bodies applying a restrictive interpretation of what constitutes a complaint. Though it could be argued this is not necessary if the Ombudsman is to have the power to investigate the substance of a complaint him/herself, the option is intended as a reserve rather than a general power.

Chapter 7 Defining a complaint, dealing with negligence

(a) Defining a complaint

7. The Justice 1 Committee recommended that

"A "complaint against a solicitor" should be redefined in statute, and the new definition should be simple and widely drawn." (paragraph 84)

7.1 In options B, C and D described in chapter 5, it is proposed that it should be for the gateway/complaints handling body, and not the professional body, to decide what is or is not a complaint. Complainants should be able to request review of a decision on what constitutes an eligible complaint within 21 days of its submission. The decision thereafter should be final and only subject to challenge by judicial review.

7.2 The former Justice 1 Committee heard evidence in support of clarifying and simplifying the definition of a complaint. A simple and broad statutory definition of a complaint would reduce the chances of a complaint being dismissed at the very outset on the basis of a narrow classification of what constitutes a complaint.

7.3 The Executive proposes a simple definition of a complaint, along the following lines: 'A complaint is any expression of dissatisfaction about the service provided by a legal practitioner, or about the conduct of a legal practitioner, whether justified or not'. This definition might be broadened slightly to read:

7.4 At the moment, the eligibility of third party complaints is assessed on the basis that only persons with 'an interest' should be able to complain ²⁰. The Executive is aware that, in practice, an 'interest to complain' has been quite narrowly interpreted and proposes that anyone who has been directly affected by anything a legal practitioner has said or done, should have such an interest. This would include, for instance, litigants who considered themselves to have been disadvantaged by the incompetent or unacceptable actions of their opponent's legal adviser.

(b) Classifying complaints

"The Committee recommends that the distinction between conduct and IPS complaints should be removed." (paragraph 84)

7.5 After its initial acceptance, a complaint against a solicitor must at present fall within one of two statutory categories ²¹ and be handled as either a complaint about inadequate professional service ( IPS) or a complaint about professional misconduct.

7.6 The consequences of implementing the Committee's recommendation in relation to solicitors would be that statute would not continue to specify different procedures, redress and disciplinary sanctions for IPS and conduct complaints. It would instead have to set out a unified set of procedures for the Law Society of Scotland and the Scottish Solicitors' Discipline Tribunal to follow, together with a general procedure and a menu of disciplinary sanctions and redress for the Society or the Tribunal to apply in cases as appropriate. (If options C or D above were to be implemented, statute would also have to provide for the complaints handling body to have similar powers in relation to cases which it handled itself).

(c) Tests of conduct etc

7.7 The existing tests of conduct and inadequate professional services which apply to solicitors have been both praised for their flexibility and criticised for being hard to understand and uninformative. The existing tests are :

• the test of professional misconduct applied in the case of Sharp ²² (conduct "which would be regarded by competent and reputable solicitors as serious and reprehensible");

• the test of inadequate professional services, defined in section 65 of the Solicitors (Scotland) Act 1980 as "professional services which are in any respect not of the quality which could reasonably be expected of a competent solicitor…".

7.8 It was suggested that these tests should be revised to provide better guidance on desired standards, though the Executive has also been asked to keep the existing definitions as they permit flexibility.

(d) Investigation of small negligence claims

"The Scottish Executive should examine the merits of allowing professional bodies to investigate small negligence claims up to a certain financial limit." (paragraph 94)

7.9 The Executive believes that the legal professional bodies in Scotland, like those in England and Wales, should be able to investigate small negligence claims. Using the courts for claims of loss through negligence can be costly and time consuming so that the option of having a small negligence claim handled as a complaint would allow people the simplest possible access to justice. The maximum level of compensation for inadequate professional service rose from £1,000 to £5,000 with effect from 1 April 2005. Though these increased levels of compensation might attract people with potential negligence claims at the lower end of the spectrum to pursue them as a complaint, complainants with more substantial claims might prefer court action with its potential for a higher level of settlement.

7.10 In recent years, the Law Society of Scotland has asked its reporters and Client Relations Committees to consider both the quality of advice received by the client and the judgment exercised by the solicitor in giving that advice, on the understanding that such consideration relates to reasonableness.

7.11 The Executive proposes that the law should authorise professional bodies to investigate claims of negligence so that statutory backing is given to what is increasingly happening in practice. Where the complainant decides to pursue the matter through complaints channels and not the courts, this decision should not rule out the possibility of the complainant then going through the courts ²³.

Chapter 8 Redress for the complainant

"The Committee believes that redress should be available to the complainant regardless of the classification of the complaint. The Committee therefore recommends that compensation should be offered for a complaint about an individual's conduct where it is established that loss had been suffered as a direct result of the solicitor's conduct." (paragraph 100)

8. With cases of IPS, the Council of the Law Society of Scotland and the Scottish Solicitors' Discipline Tribunal can currently provide redress for a client through reducing a solicitor's fees and outlays and/or directing the solicitor to pay the client compensation. At present the Society has no such powers regarding professional misconduct, and the Tribunal has no powers to provide redress for the client in relation to professional misconduct. The relevant statute ²⁴ describes the purpose of compensation in terms of recompense for 'loss suffered by the complainant or inconvenience or distress caused to the complainant.' It is proposed that compensation should be described in similar terms for the purposes of compensation which the Law Society of Scotland or the Scottish Solicitors' Discipline Tribunal can direct a solicitor to pay a client under the Solicitors (Scotland) Act 1980.

8.1 The Executive accepts in principle that the Scottish Solicitors' Discipline Tribunal should have similar powers to provide redress where professional misconduct has resulted in loss, inconvenience or distress being suffered by the client. In this case, the length of some hearings might have to be extended as loss would have to be proved before the Tribunal.

8.2 If the Council of the Law Society of Scotland is to have disciplinary powers in cases of professional misconduct or unsatisfactory conduct by a solicitor or a conveyancing or executry practitioner ( see chapter 11), the question arises whether it should also have powers to award compensation.

Additional proposal on redress

8.3 The Executive proposes to increase from £1,200 to £5,000 the current maximum level of compensation for inconvenience which the Scottish Legal Services Ombudsman can recommend the Law Society of Scotland or the Faculty of Advocates pay to a complainant. The figure was set at £1,000 in 1997 ²⁵ and uprated for inflation to £1,200 in 2001. There is no limit to the compensation the Ombudsman in England and Wales can recommend in such circumstances though, in practice the average award for loss, distress or inconvenience was only £426 in 2003-04. The Executive thinks it preferable for the parameters for such awards to be specified and proposes that a higher maximum of £5,000 would be appropriate.

Chapter 9 The Scottish Solicitors' Discipline Tribunal

(a) Appointments and composition

"The Committee recommends that members of the Scottish Solicitors' Discipline Tribunal should be appointed by an open selection process. The Committee also recommends that the membership of the Scottish Solicitors' Discipline Tribunal should be made up of 50% lay people. It should also be possible for the Scottish Solicitors' Discipline Tribunal to be chaired by a lay person, with the assistance of a legally qualified clerk." (paragraph 134)

9. An open selection process now happens for both solicitor and non-solicitor appointments to the Tribunal ²⁶ and it is already possible for a lay member to be appointed as chairman ²⁷.

9.1 The Executive accepts the Committee's recommendation that the membership of the Scottish Solicitors' Discipline Tribunal should be made up of 50% lay people. Legislation will be needed to implement the change, however, as Schedule 4 to the Solicitors (Scotland) Act 1980 currently provides that the Tribunal should have not less than ten and not more than fourteen solicitor members, and eight members who are neither solicitors nor advocates. In view of recent increases in the Tribunal's workload, the Executive thinks the number of solicitor members should be set at fourteen (without a minimum level); and that the complement of lay members should increase from eight to fourteen. This would achieve the 50% lay membership recommended by the Committee and help ease the workload of the Tribunal.

9.2 The quorum required for the Tribunal to be properly constituted to hear any particular case should be at least four members (as at present), but these should consist of at least two solicitor members and at least two lay members (only one lay member is required at present).

(b) Arrangements for the appointment and remuneration of solicitor members of the Tribunal

9.3 The Law Society of Scotland is concerned that:

• the Scottish Solicitors' Discipline Tribunal should be perceived more clearly as a Tribunal which is entirely independent of the Law Society. It believes that the Council of the Law Society of Scotland should no longer recommend solicitor members to the Lord President of the Court of Session for appointment to the Tribunal, so that the independence of the Tribunal from the Society is put beyond doubt.

• Solicitor members of the Tribunal are not paid to attend Tribunal hearings whereas the Scottish Executive pays lay members an attendance and preparation fee for each meeting ²⁸. As the caseload of the Tribunal increases and the number of hearings which solicitor members attend rises, there may be a case for remunerating solicitor members.

9.4 The Law Society of Scotland suggested to the former Justice 1 Committee that, to underscore the Tribunal's independence, the Judicial Appointments Board for Scotland might be a suitable body to appoint solicitor members of the Tribunal (paragraph 131). The Board's existing remit is to:

• provide the First Minister with a list of candidates recommended for appointment to the offices of Judge of the Court of Session, Sheriff Principal, Sheriff and Part-time Sheriff;

• make such recommendations on merit, but in addition to consider ways of recruiting a Judiciary which is as representative as possible of the communities which they serve; and

• undertake the recruitment and assessment process in an efficient and effective way.

9.5 The Executive thinks that it is appropriate for the Law Society of Scotland to have a role in nominating solicitor members to the Tribunal. The Judicial Appointments Board for Scotland would not be suitable to take over this function which would not sit comfortably with its present remit. The Board has no responsibility for appointment to legal tribunals generally, although an extension of its remit to include tribunals is not ruled out for all time. It is very doubtful, however, whether the appointment of solicitors to the Scottish Solicitors' Discipline Tribunal would feature in any extension of the Board's responsibilities in the short or medium term.

9.6 The Executive considers that remuneration of these members should be a matter for the professional body, not the taxpayer, as a cost of regulating the profession.

Chapter 10 The Guarantee Fund and the Master Policy

"The Executive should examine ways in which the operation of the Law Society of Scotland's Guarantee Fund ²⁹ and Master Policy ³⁰ could be made subject to external regulation."²⁹ and Master Policy ³⁰ could be made subject to external regulation." (paragraph 142).

10. The former Justice 1 Committee was aware that lengthy delays in receiving settlements had caused distress to a number of individuals (paragraph 142). The Executive has no information on the turnaround times for the settlement of claims. The role of the insurance broker does, however, include monitoring the performance of insurers and investigating complaints about the insurers' conduct of claims, and the Master Policy Claims Handling Philosophy emphasises the importance of speed of action, clear and early responses and a pro-active approach to force the pace towards a satisfactory conclusion.

10.1 The Master Policy was the subject of a recent investigation by the Office of Fair Trading ( OFT) that the Society's practice rule which requires solicitors to purchase professional indemnity insurance through the Master Policy might be anti-competitive. The OFT concluded that there was no compelling evidence that the Master Policy arrangements had this effect and decided to close the case in February 2005. During the investigation, OFT did however note the existence of consumer disquiet about the operation of the Master Policy.

10.2 It might be possible to extend the remit of the Scottish Legal Services Ombudsman to cover the operation of the Guarantee Fund and the Master Policy ³¹. (The Legal Services Commissioner in New South Wales has similar powers). Any such extension would have to take account of the fact that the insurance industry works mainly within the remit of the Financial Services Authority and the Financial Ombudsman Service. Complaints about settlements arising from current arrangements for professional indemnity insurance for Scottish solicitors do not fall within the remit of the Financial Ombudsman Service.

10.3 To avoid any overlap in statutory functions, a new role for the Scottish Legal Services Ombudsman might be limited to (a) overseeing the appropriateness of the professional indemnity insurance and Guarantee Fund arrangements of the professional bodies, in the interest of consumer protection; and (b) monitoring turnaround times reported by the Law Society of Scotland and the Faculty of Advocates and drawing poor performance, if any to attention. A Memorandum of Understanding might be an appropriate way of dealing with any interface with the responsibilities of the Financial Services Authority and the Financial Ombudsman Service.

Chapter 11 Disciplinary powers of the Law Society of Scotland

11. The Council of the Law Society of Scotland can prosecute a solicitor it believes has been guilty of professional misconduct ³² before the Scottish Solicitors' Discipline Tribunal. If the Council thinks a solicitor's behaviour is unacceptable but does not amount to professional misconduct meriting prosecution before the Tribunal, it has very limited alternative courses of action. The Society considers this gap in its powers unfortunate and believes that a professional body should be able to take action in relation to less serious cases of alleged misconduct itself.

11.1 The Law Society of Scotland has requested express powers to take disciplinary action in relation to

• professional misconduct, where the Council considers that such misconduct should not be prosecuted before the Scottish Solicitors' Discipline Tribunal; and

• unsatisfactory conduct by a solicitor, meaning conduct by a solicitor that falls short of being professional misconduct but is serious enough to merit action.

The Law Society of Scotland also seeks powers to suspend from practice a solicitor who refuses, without reasonable cause ³³, to co-operate with an investigation raised by the Society or fails to reply within set time limits to correspondence from the Society about an ongoing complaint.

11.2 In the above circumstances a decision taken by the Council to suspend a solicitor for failing to co-operate or reply to correspondence might be notified to the Courts and publicised. ³⁴ Suspension might be justified in view of the problems these failures can generate for an investigation (see for example the Scottish Legal Services Ombudsman's Annual Report for 2003-04, page 24 - available at http://www.slso.org.uk/reports.html ).

11.3 The sanctions which the Council of the Law Society of Scotland might have in relation to a finding of professional misconduct³⁵ on the part of a solicitor are powers to:

• record a finding of reprimand on the solicitor's record and to take into account any previous findings in relation to that solicitor when weighing up the options;

• impose a fine not exceeding £5,000 on a solicitor;

• reprimand and fine a solicitor; and

• direct the solicitor to compensate the client (up to £5,000) for any loss, inconvenience or distress they may have suffered.

11.4 It is proposed that the sanctions available to the Council of the Law Society of Scotland regarding a finding of unsatisfactory conduct on the part of a solicitor should be powers to:

• record a finding of unsatisfactory conduct on the solicitor's record; and

• take account of that finding in any future disciplinary proceedings against the solicitor in question.

11.5 A right of appeal for a solicitor, against a finding of professional misconduct or unsatisfactory conduct by the Council of the Law Society of Scotland, would lie to the Scottish Solicitors' Discipline Tribunal. Appeals would be lodged within 21 days of the date of the Council's determination. On hearing an appeal the Tribunal should be able to quash, confirm or vary the Council's determination. Any further appeal against that finding should then be made to the Court within 21 days of the date on which the Tribunal's decision is made ³⁶.

Chapter 12 Register of Notaries Public

12. The Law Society of Scotland has drawn the Executive's attention to a problem with Part V of the Solicitors (Scotland) Act 1980 which deals with the admission and enrolment of solicitors as notaries public ³⁷. A solicitor who is on the Roll of Solicitors is automatically entered on the Register of Notaries Public on being admitted as a notary public. The problem is that the Register includes the names of solicitors who are no longer practising but are maintained on the Roll. The Executive agrees with the Society that it is inappropriate for solicitors who are no longer practising to be able to continue to act as notaries public.

12.1 The Society suggests solicitors who wish their names to be included on the Register of Notaries Public should hold a current practising certificate. Solicitors without a current certificate would not be eligible for inclusion on the Register and their names would automatically be removed on the expiry of their practising certificate. The Executive appreciates this solution would require a statutory amendment, subject to the views expressed in response to this consultation.

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