Welcome to the eleventh meeting in 2006 of the Justice 2 Committee. We have with us Margaret Ross, who is the adviser to the committee on the Legal Profession and Legal Aid (Scotland) Bill.
Because there have been lots of problems in the Justice 1 Committee regarding people's relationship to the legal profession, I would like to say that my husband no longer has a practising certificate and is no longer a practising solicitor. He was a member of the council of the Law Society of Scotland and, when he was a practising solicitor, he came under the umbrella of the master policy and the guarantee fund.
I welcome our witnesses, who are Louise Miller, Mike West and Chris Graham, from the access to justice division of the Scottish Executive.
It was to do with timing and space in the legislative programme. The outcome of the consultation on reforming the handling of complaints against solicitors and the need to follow up on the outcome of the "Advice For All: Publicly Funded Legal Assistance in Scotland—The Way Forward" consultation came together, from a timing point of view.
With regard to schedule 1, what influenced the Executive's decision to have a lay majority of commission members?
The purpose of the lay majority is to instil consumer confidence and reassure people that the body has non-lawyer as well as lawyer representation. Both sets of people are essential to the effective working of the commission. Complaints about lawyers need legal expertise, which the lawyer members will be able to provide, but the non-lawyer members will be able to provide a good consumer perspective on the cases that come before the commission.
The underlying policy is to provide a complaints mechanism that is, and is seen to be, independent of the legal profession, and under which lawyers do not regulate lawyers as regards consumer complaints. Although it is right to say that it would be impossible for the commission to function sensibly without the benefit of input from people who have experience of legal practice and who understand that environment, if the body had a majority of lawyers the process would be seen as being not very different from what the Law Society of Scotland does at the moment and would be subject to the same criticisms from consumers.
I will press you on that by asking whether any consideration was given to having different proportions in the nine-member panel. You said that the issues of consumer confidence and of the independence of the body that is being established were at the back of your mind. Was consideration given, for example, to a six to three majority in favour of non-practitioners over legal representatives?
We considered various permutations, but we thought that having four lawyer members, four non-lawyer members and a non-lawyer chair was the right balance. If there are too few lawyer members, the commission will be short of legal experience. Given the type of complaints that are made, it is helpful to have lawyers on the commission who know what the standard for a particular piece of work is and who understand the issues involved. That is an essential part of the commission.
I am not suggesting that there should be no legal representation, but you will understand my concern that the public might look at the make-up of the commission and think that four lawyers against five lay people is a high proportion of lawyers for a body that is dealing with fairly intensive legal matters. It might be felt that a bigger proportion of lay members could better reflect the independence and impartiality of the body. Was that fully considered?
It was and, on balance, we came down in favour of having legal experience available to the commission.
The decision was also partly influenced by the fact that the commission will, as the bill stands, be able to adjudicate on lower and moderate-value negligence claims as part of its role in investigating inadequate professional services. It was felt that, in order to do that effectively, the commission will need strong legal input.
I welcome John Swinney to the committee. I am sorry that I did not see him come in—he came in so quietly. He has a right, as a member of the Parliament, to attend the public meetings of any committee. I know that he has a specific interest in the matter before us today. We look forward to his contribution.
Sticking with schedule 1 for the moment, I notice that paragraphs 2(7)(a) to 2(7)(d) in effect provide for the power to amend the number of lawyers and non-lawyers on the commission. The Subordinate Legislation Committee has raised some concerns about the width of that power, as it could be amended however ministers wished. In other words, they could change the five to four balance that you talked about. Although you said that that had to be the balance so that there would be expertise on legal technicalities, the power in schedule 1 is not restricted to preserving that policy position. Since the Subordinate Legislation Committee wrote to the Executive on that point, have you given it any further consideration?
We are currently considering the correspondence that we have received from the Subordinate Legislation Committee. The main point on that power by secondary legislation is that it is subject to affirmative resolution, so the Parliament would need to debate any change. In other words, there could be no unilateral decision by Scottish ministers to change the composition of the commission. The matter would have to be debated by the Parliament and the reasons for any change would have to be clearly explained to the Parliament.
Do you accept that, even though a statutory instrument that would change the balance of members would be subject to the affirmative resolution procedure, the Parliament would have no power to amend the instrument but would be limited to accepting or rejecting it? The Parliament is disinclined to throw out instruments, so it would be difficult to force a change even to an Executive policy that was not universally approved. Do you agree that a restriction on the Executive's power to alter significantly the composition of the proposed new commission would help to achieve the policy objectives that you described?
We are happy to consider the matter. We have not yet responded to the Subordinate Legislation Committee, but we will take its concerns on board as we prepare our response.
When will you respond to the Subordinate Legislation Committee?
We hope to do so in the next few days. We have secured an extension on the deadline that that committee set for our response.
Will you pass a copy of your response to the clerks to this committee, so that the two committees can consider the matter in parallel?
I am sure that we can do that.
It is likely that most issues that come before the proposed Scottish legal complaints commission will be about solicitors. However, as I understand the provisions in schedule 1 on the commission's membership, a situation could arise in which there were no solicitor members of the commission. Is that correct?
Such a situation would be highly unlikely, although nothing in the bill would prevent it from arising.
Does the Executive think that an absence of solicitor members would reduce the commission's understanding, for example, of issues that affect a rural solicitor's practice or that particularly affect solicitors as opposed to conveyancers?
Yes. The lawyer members of the commission will be appointed for their skills and expertise in various areas. Given that there are 10,000 solicitors, 700 advocates and 23 conveyancing and executry practitioners, we expect that proportionate appointments will be made. The essence will be to ensure that there is a range of skills and experience among the lawyer members.
Does the bill say that?
No.
Paragraph 5(1)(b)(iii) of schedule 1 provides that the Scottish ministers may remove a member from the proposed commission if the person
Such provisions are fairly standard in relation to non-departmental public bodies. Ministers would take into consideration all the circumstances of a member's performance and attendance and would consult the chairing member before deciding to remove a member from office.
The bill specifically mentions absence from meetings and conviction of a criminal offence, which should certainly disqualify someone from being a member of the commission, but I would appreciate further clarification and examples of what is meant by
The range of matters covered by conduct complaints is quite wide. I have a few examples to hand: dishonesty; conduct unbecoming; grossly excessive fee charging; acting in a conflict of interest situation; failing to comply with accounts rules; not acting in the best interests of the client; and failing to act on the basis of the proper instructions of the client. Service complaints are in effect consumer complaints, in which the consumer simply feels that a bad job has been done, that there has been an error in executry or conveyancing work, or that there has been an otherwise poor performance in delivering the instructions of the client.
Is that the definition that will be used by the commission? Under section 5, the commission will determine whether the complaint is one of conduct or service. At this stage, we do not know how the commission—which is not constituted—will define a threshold for judging whether a complaint should go forward or be referred back to a solicitor; nor indeed do we know how the commission will determine what conduct and service complaints are.
The distinction between conduct and service was first made in 1988, when the concept of inadequate professional services was introduced in legislation. Since then, the Law Society of Scotland has, for internal purposes, been making a distinction between conduct and service complaints. We recognise that there are grey areas between conduct and service; for example, acting in a conflict of interest situation can be a conduct matter, but if the resulting service to the client is poor, it is also a service matter. For that reason, the bill provides for the commission and the professional body to co-operate on hybrid complaints.
How will the public get to know about such an arrangement?
The commission sifts all incoming complaints. It eliminates vexatious or frivolous complaints and determines the nature of the complaint. If it is service, the commission deals with it, and if it is conduct, it needs to be referred to the professional body. Once that decision has been made, the commission writes to the complainer and the practitioner to tell them either that the commission will be dealing with the service complaint or that the professional body will be dealing with the conduct complaint.
That is the process after the two bodies have agreed where a case lies—I am thinking about your comment about grey areas.
Yes. That would be the process for a hybrid complaint or for cases that were not terribly clear.
One would have thought that conduct complaints, as you have outlined them, are more serious than service complaints. Ms Miller referred earlier to the concern about lawyers regulating lawyers. However, lawyers will still be regulating the more serious complaints. What is the thinking behind an independent function for the lesser of the two types of complaint?
The general view is that conduct is the natural function of the professional body. It fits in with other functions that the professional body carries out: keeping a roll of the members of the body and providing education, training and professional practice rules for members. Essentially, the monitoring and enforcing of professional practice rules and accounts rules are matters of conduct. For that reason, we feel that it is logical that conduct should sit with the professional body. There are safeguards in the bill, though, and the commission will have oversight powers in relation to the professional body's handling of conduct complaints. Some of those powers are held by the Scottish legal services ombudsman, but they are enhanced by some of the stronger powers that the Justice 1 Committee in the previous session recommended that the ombudsman should have. For example, there is the power to carry out general audits of the conduct complaint files of the professional body and the new power to enforce recommendations. All those powers are set out in the bill as safeguards.
Whether complaints about conduct are more serious than complaints about services might depend on one's perspective. The professional bodies would view the level of culpability of the practitioner as higher in cases to do with conduct, which would involve failure to adhere to professional standards that the profession had agreed must be adhered to rigorously.
Under the current mechanism for service complaints, a complaint would go to a reporter and vexatious or frivolous complaints would be weeded out. However, there is no definition to determine the threshold for such complaints, which could be important in the complaints process.
If I understand your question correctly, you are asking what kind of process the commission would follow. The process will be different from that followed by the professional bodies. The Law Society has a series of 10 client-relation committees and voluntary reporters who investigate the complaints and provide reports and recommendations for the committee to consider. The Law Society follows a roughly adversarial process. In other words, a complaint is received from the complainer and is copied to the solicitor for their comments. The solicitor's comments are then copied to the complainer for their comments.
I was asking how the commission will determine what is a vexatious or frivolous complaint. At the moment, we have a mechanism whereby the Law Society does that, but we do not know what criteria the committee would use or what sifting mechanism would be employed.
I find that question difficult to answer, simply because determining whether a complaint is vexatious is in essence a matter of judgment that takes into account the content of the complaint, whether there is substance to it and whether there is any trace of vindictiveness in it. I would not have thought that there were set criteria to determine that. The process that the financial ombudsman operates involves sifting out complaints. Complaints that are deemed to be vexatious or frivolous will not render the practitioner liable to the specific complaints levy. The practitioner will not be charged for the complaint; the complaint will simply be dismissed.
Mr West, you said in response to Jeremy Purvis that there are grey areas between conduct complaints and service complaints. You have also said that the commission will have the power to enforce its recommendations on conduct complaints if it does not believe that the professional body has properly or effectively considered the complaint that has been made. It strikes me that a bit of a contradiction is involved. If the commission is to be given powers to enforce its recommendations at some stage, why, for the sake of clarity, will it not have powers over both service and conduct complaints so that the grey areas are removed altogether?
That harks back to our overall feeling that examining conduct is a legitimate function of the professional body rather than of the independent commission. We see the commission as a body that will deal with the consumer interest and provide a swift and effective dispute-resolution service. In effect, we see responsibility for conduct remaining with the professional body.
I am trying to understand why you take that view. I understand why you should say that if the commission thinks that the professional body has not properly considered a conduct complaint, the commission could say that it is enforcing its recommendations and that something should be done. However, that implies that there is a role for the commission in assessing conduct complaints if it believes that the professional body in question has not properly considered the complaint. I am trying simply to understand why you do not take the same view on conduct and service complaints. A clear logic seems to me to be involved. If the commission is dissatisfied with the professional body and has the power to enforce its recommendations, why will it not do the whole job?
It might be helpful to consider section 16. The commission will be given the power to make different sorts of recommendations about the handling of conduct complaints, which will have different degrees of firmness. For example, it could recommend
In a sense, that makes the point that I am trying to make. Section 16(2)(e) includes a very direct power of direction for the commission. The commission could recommend that a professional body
The power relating to compensation is—
I am not asking simply about compensation. I cited the compensation power as an example of the directness of the powers relating to conduct that will be given to the commission. I am asking simply why ministers did not go the whole distance and propose giving the commission powers over all aspects of conduct. If the commission had such powers, that would remove the grey areas.
The position that we arrived at is that the commission will have strong powers of consumer redress. The focus of the scheme in the bill is on the handling of consumer complaints and on providing redress to consumers. Largely, those issues involve inadequate professional services. Section 16 recognises that a spillover into conduct can occur in cases in which there should be consumer redress in respect of a conduct complaint. Ultimately, the commission is given power to enforce that.
Might not the commission end up feeling dissatisfied that its concerns over a complaint have not been properly pursued by the professional body? Might not that simply continue the current rather unsatisfactory situation, in which the Scottish legal services ombudsman has publicly made clear her dissatisfaction about her inability to enforce questions of justice and to make appropriate responses to complaints?
The problem with the current statutory provisions for the Scottish legal services ombudsman is that the ombudsman has insufficient powers. Research from the end of 1999 or the beginning of 2000 indicated fairly widespread dissatisfaction with those powers. The ombudsman's main sanction is recourse to adverse publicity. The commission will have powers of enforcement and it will have stronger powers than the ombudsman has ever had.
The ombudsman's powers are limited to reviewing how the professional bodies have acted on conduct complaints and on service complaints, which constitute the large majority of complaints. The bill envisages that the commission will take over as the lead body on consumer redress matters, on which it will not be subordinated to the professional bodies, although the professional bodies will continue to take the lead on professional disciplinary matters.
I presume that we can ask the professional bodies for their views on the provisions and on how they would handle the grey areas. Mr West has openly highlighted the issue to us fairly early on, so we should be able to ask questions about that of other witnesses.
I have a follow-up question. It strikes me that the bill's distinction between service complaints and conduct complaints is taken straight out of the Law Society's current complaints handling system. Is it fair to say that?
That is true for the service/conduct distinction, but the bill will introduce a new category of unsatisfactory professional conduct. Basically, the split between service and conduct is taken from existing arrangements.
The distinction has been made in line with the way in which the Law Society currently deals with such matters, but do you appreciate John Swinney's point that the public wants a new system that is, first, independent of that and, secondly, not as toothless as the Scottish legal services ombudsman? Did you think about giving the proposed commission responsibility for dealing with all complaints, while leaving the Law Society to deal with concerns about solicitors' professional development?
We certainly considered such an approach, but we concluded that professional discipline is best left to the professional bodies, and that the new body should focus on providing consumers with appropriate redress for their complaints.
I know that the committee is anxious to explore other areas, but I want to press the witnesses on a technical point. Given that there will be a clear procedure for dealing with service complaints, which will be the commission's responsibility, and another clear procedure for dealing with conduct complaints, which will be the responsibility of the Law Society and the Faculty of Advocates, do you envisage any specific problems in dealing with what Mr West called hybrid cases, which do not fall easily into either category? The Law Society has demanded that, in accordance with section 4(2) of the bill, the commission
The bill stipulates that the commission and the professional bodies should "co-operate and liaise" with each other in dealing with hybrid complaints. That will require the bodies to agree which of them should investigate the complaint and how it should be handled.
What happens if there is no agreement? Will the commission have the final say?
It will be up to the commission to categorise the complaint after consultation of the relevant professional body.
That is not the point that Colin Fox is making. If a complaint is deemed under section 4(2) to be a hybrid complaint, will not the final say on it, if it is categorised as a conduct complaint, rest with the professional organisation, subject to the caveats that are set out in section 16?
Yes, it will if it is a conduct complaint. To complicate matters, I suppose that there are strictly speaking two kinds of hybrid complaint. Most hybrid complaints are essentially a series of grievances that arise from the same transaction or relationship, and their various elements can easily be categorised as service matters or conduct matters. As Mike West said, in some cases the same action can be categorised as a service matter and a conduct matter, and both bodies will have equal powers to investigate the action and either enforce their own sanction or award their own redress, as they think appropriate.
I hate to be pedantic, but what about when a complaint raises matters that relate to service and to conduct? Who will make the decision? Will the commission decide that, on balance, the complaint is more to do with service than with conduct, or the reverse? What about occasions when it decides that there will have to be inquiries on both sides?
In that case, there would be inquiries from both angles. It would be up to the professional body to decide what remedy or sanction was appropriate from the conduct angle and it would be up to the commission to decide what to do about the complaint from a services angle.
The committee's difficulty relates to section 34, which states that the definition of "inadequate professional services"
No. The purpose of the provision is to provide complainers with readier access to redress in relation to negligence complaints. If someone currently makes a negligence complaint against their solicitor, their only option is to take the matter to the courts, which is expensive and takes a long time. The process has an uncertain outcome and risks are associated with it.
The complaints would not automatically go to the complaints commission; we have not removed the complainer's right to go to court if they prefer to do so. The ceiling for an award for inadequate professional services—the maximum could be awarded only in what the commission considered to be the most serious cases—is £20,000. If the complainer thinks that their complaint is worth more than that, they would have to go to court to resolve the issue. This is about providing an alternative dispute-resolution mechanism, which does not cost the complainer a lot of money and does not involve the same risks—in particular those associated with costs—that are involved in going to court in a negligence case. The mechanism is designed to improve access to justice in more moderate-value negligence cases.
I will take us back to more general issues. There is so much interest in the split because we are struggling to understand how the Executive concluded that that is the appropriate approach and we are discussing the issue because of widespread concern about self-policing by the legal profession.
Professional misconduct complaints will remain the province of the Scottish Solicitors Discipline Tribunal, and the Law Society will continue to prosecute such complaints before the tribunal. The commission will have no locus in relation to matters that are before the tribunal.
I still fail to understand. In answer to Mr Swinney's questions, you accepted that the commission will still oversee those other areas. We are having this debate because of public perception of professional discipline. Surely the most basic logic suggests that the system would be clearer and more easily understood by the public—who would have greater confidence—if the commission dealt with everything. There would be no grey areas such as we discussed earlier—no hybrids—and we would achieve the consumer confidence that we want to achieve among the public.
It is not accurate to say that the professional bodies are being left with "half the complaints". Our information is that about 70 per cent of complaints that are made to the Law Society are purely about services. Another 10 per cent are classed as hybrid, and the services element would be considered by the commission. Together, the two classes will account for about 80 per cent of all complaints against solicitors.
So, we will be leaving a fifth of all complaints to the Law Society. I was not trying to be accurate when I said that it was half and half; I was just making the point that some complaints would be dealt with by one body and some would be dealt with by another. That seems interesting.
I want to make sure that I heard you correctly, because I would not like the committee to be misled about the role of the commission with regard to practice. You mentioned accounting and other practices. My understanding is that under section 27, on conduct complaints, the commission must monitor practice and identify trends in practice—that is, how practitioners' dealings have resulted in conduct complaints. The commission will have a duty to monitor practice, and there could be complaints about accounting and other areas. The commission will then give guidance to the relevant professional bodies. However, you seem to be saying that the commission will have no role in that. Is that another grey area? The commission will have a statutory duty to monitor conduct complaints and the trends underlying those complaints, although it will not have a role in dealing with the complaints. Could it make recommendations, for example, about accounting procedures in solicitors' firms?
The powers are in effect a translation of the ombudsman's current powers to provide recommendations to the professional bodies on the handling of complaints. The powers have been preserved specifically for handling of conduct complaints. The commission will also have a wider role in disseminating best practice. Over a year, it will receive and deal with a large number of service complaints and it will, as part of its wider role, feed back its findings on the complaints and its general observations to the profession and the professional bodies.
The question that Mr Purvis just asked takes us a step further down the road that I was on because we have identified another area of professional conduct in which the commission will be involved. It leaves me with the impression that we seem to be dipping various toes in the water at different stages. Why do we not just jump in—or do something else as inelegant as that metaphor? We could paddle, perhaps. I think that we will come across hybrid after hybrid and that there will be a lack of clarity about complaints, although part of the bill's purpose is to provide clarity. Perhaps you can comment on that point or reflect on it. The example that was just cited about section 27 reinforces my point in a completely different way.
Given the questioning of the past few minutes, I am inclined to invite the witnesses to go away and think further on members' comments, using the Official Report of the meeting once it is published. They can write back to us to answer the questions, particularly about the Executive's position on how it defines complaints, which seems to be a grey area. Can you manage to do that for us?
We will be happy to do that. There is probably only limited value in going further down this road just now because we are just exchanging different perspectives on the matter. We will see how much further we can go in writing to satisfy the committee.
I am grateful for that.
Good afternoon, colleagues. There will be no external right of appeal for a decision by the new commission on a service complaint; instead, people will be able to go back to an internal committee of the commission or consider going for a judicial review. The witnesses will be aware that the Law Society obtained an opinion from Lord Lester of Herne Hill QC, which stated his view that the lack of an external right of appeal is not fully compatible with article 6.1 of the European convention on human rights, which protects the right to have an independent and impartial tribunal determine one's civil rights and obligations. What is the Executive's view of Lord Lester's opinion? Does the Executive now agree that the lack of an external right of appeal for a decision of the new commission is not fully ECHR compliant? How stands the Executive on that?
We do not believe that it is essential to have an external right of appeal in order for the commission to be ECHR compliant. When the bill was introduced, it was certified by ministers and by the Presiding Officer as being within legislative competence. We are carefully examining Lord Lester's opinion, but we do not think that the situation is as simple as that. What Lord Lester essentially says is that the reason for what he perceives as the compatibility problem is to do with the commission's constitution—its members' tenure and similar issues—and the lack of external appeal from the body as it is currently constituted. The issue is the combination of those two factors.
How long will it take you to analyse and come to a view on not just the absence of an external appeal but the tenure aspect that you have just mentioned, which seems to form the basis for Lord Lester's opinion? Would not it be sensible for the Executive to do that expeditiously, so that it does not get into a situation in which it could be called into question? What is the timetable?
We are considering that at the moment. If we conclude that it will be prudent to do something about the matter to reduce any perceived risk, we will do so at stage 2.
Do you feel that there is a risk, even if it is only one of perception? Could you explain the matter of tenure a wee bit more? I did not quite follow the point.
Without getting into too much detail at this stage—
Do not worry about detail—just tell the committee about tenure.
The question is whether the new commission as proposed will itself be an independent and impartial tribunal. If it is, an external appeal will not be needed because it will itself be such a tribunal. An appeal on the merits of the case is not needed; judicial review will be fine.
Does Lord Lester think that that might possibly impinge on the independence of the putative Scottish legal complaints commission? Is that it, in a nutshell?
That is Lord Lester's thinking. It is a combination of how the commission is currently to be set up and the lack of external appeal that has troubled him. His is one opinion, but it is not the opinion of our advisers or of the parliamentary authorities. Where there is not conclusive case law on a point, it is inevitable that there can be different opinions. We are carefully considering what Lord Lester has to say from the point of view of risk management.
Would it be possible to transmit to the committee the Executive's reflections on those particular and significant points as soon as possible?
We will do.
How long will "as soon as possible" be?
I would not like to give any absolute guarantee about that. We must decide sufficiently in advance of stage 2 what we are going to do, if anything. We need to be ready in time for that stage. At the moment, we are considering different options and are quite happy to keep the committee informed of how we are getting on with that.
What options are you considering?
The obvious options would be to address the concerns that Lord Lester has raised on the constitution of the new commission; to provide an external appeal route; or to decide that, on reflection, we still do not feel that there is enough in the matter to worry about and not to do anything. There could be other permutations, but those are the major ones.
I am grateful for that.
I suggest to the witnesses that the committee would like—I imagine—to get an understanding of the position on this point before we get to the stage 1 debate.
We will certainly do our best.
Thank you.
I would like to explore the issue of appeals more widely. Do you agree that the public might view it as pretty inconsistent that the bill affords practitioners a right of appeal but does not afford complainants a right of appeal?
I do not really follow.
Is it not the case that a practitioner who is complained against will have the right to appeal to the Scottish Solicitors Discipline Tribunal on the outcome of a judgment, but that the complainant who begins the proceedings will not have the right to appeal the ruling if they are not happy with it?
The Scottish Solicitors Discipline Tribunal exists only to deal with conduct complaints; it will not be involved in service complaints under this system.
Okay, so in conduct cases the practitioner has the right of appeal but the complainant does not. Do you see what I am getting at? We are supposed to be coming up with an independent, open, transparent and fair system, but the public will not understand why a solicitor can appeal if they are unhappy about a judgment when the person who makes the complaint cannot appeal if they are unhappy about the judgment. That seems to be inconsistent.
Perhaps our witnesses could reflect on that point and get back to us in writing.
We will think about that point.
Funds for the new commission will be raised from an annual general levy and a complaints levy. The complaints levy will be payable by practitioners who are the subject of eligible complaints, whether or not those complaints are ultimately upheld. The consultation paper proposed a levy payable by those against whom a complaint had been upheld. What is the thinking behind the change?
That concerns an important issue that we explained to the Finance Committee this morning. The complaints levy is designed as a fee for a dispute resolution service. The overall policy is that complaints should be dealt with at a local level. If they cannot be resolved at that level, they go to the commission and, if they are deemed to be eligible, a fee is charged to the practitioner. It is extremely undesirable for the commission to be perceived as having a financial interest in upholding complaints. You can imagine aggrieved solicitors complaining bitterly about that.
Is the arrangement designed to encourage earlier resolution?
The complaints levy will have the effect of encouraging local resolution.
Why not have a levy against law firms against which a complaint has been upheld? That is what was suggested in the consultation paper.
Since the consultation, we have reflected on the responses that we received and have realised that the complaints levy has to be chargeable irrespective of outcome. If that were not the case, the commission would be placed in a difficult position.
What about the position that individual practitioners are placed in? Heaven forfend that I should defend individual practitioners, of course.
Effectively, the practitioner is paying a charge for a dispute resolution service because he or his firm has been unable to resolve a dispute.
I see what you are saying, but I am not convinced.
Mike West is saying that it would be undesirable for there to be a perception that it was financially useful for the commission to uphold complaints. However, I would have thought that that would be unlikely to happen and that there would be another way around the problem.
The same procedure and funding mechanism has worked well in the financial services industry—it is the basis on which the Financial Ombudsman Service is funded. I can only repeat that the practitioner, even if exonerated, will be charged for the resolution to the complaint.
That is the case, unless the complaint is screened out as frivolous or vexatious. If the commission deems that the complaint is not genuine or that the complainer acted unreasonably in making it, the levy will not be payable.
I accept that, but did you consider differentiating the fees? There could be a flat-rate fee and a higher fee in cases in which complaints are upheld, which would be a halfway house between the two positions.
That is a possibility. The commission will have the power to charge differential fees. The Financial Ombudsman Service's complaints levy is £300. The first two complaints per year are without charge, but the fee is payable for the third and subsequent complaints.
Will that be the same with the commission?
Again, that will be a matter for the commission.
There is a difficulty with just leaving the matter up to the commission. The financial memorandum contains a breakdown of the costs and levies for illustrative purposes only, but the rule of thumb is that, if 50 per cent of the running costs of £2.4 million were met from the annual general levy, the levy would be £120. The other 50 per cent would come from the complaints levy. Even the financial memorandum does not estimate the cost of administering the mediation services as set out in the bill; it simply assumes a 50:50 split between the complaints levy and the annual general levy. Would it not be better simply to have one flat levy? As, at this stage, you cannot determine what proportion of the commission's costs will arise from mediation and complaints and what proportion will arise from other running costs, would it not be better simply to say that there should be a £240 flat levy to cover the entire costs of the commission? That would get away from the issue of incentives.
The Financial Ombudsman Service is flexible in that regard; it does not say that a certain percentage of its income must come from the complaints levy or the annual general levy. At present, about 70 per cent of its income comes from the complaints levy, which reflects the fact that it has been extremely busy in the past two or three years with complaints about endowment mis-selling. The service's income, therefore, has risen and the annual general levy has been reduced. The matter will be for the commission to determine, although it will be required to publish its proposed budget for the following financial year and to consult the profession on it and its work plan.
You say that there should not be a financial incentive with regard to the complaints levy, but the commission will have an incentive not to sift out cases. If the lion's share of the commission's funding comes from the complaints levy, how on earth can it have a completely objective sifting mechanism, which it has a duty to provide?
There are different possible systems, but almost every one is open to objections. If I understand your suggestion correctly, it is for a flat-rate annual levy for everyone to pay all the commission's costs. That has attractions, but it would provide no incentive to people to reduce the number of complaints that are made against them, whereas the complaints levy will do that. That is what it is for.
Yes, but there is a big danger with regard to incentives—a danger that you said you are trying to avoid. If the sum total has to be collected from levies, the issue is the balance between the annual levy and the complaints levy. As you indicated, you may wish to consider that in the context of the market. For example, most complaints might be made in civil law, in respect of divorces. Someone could say that, given that they are not involved in that kind of legal practice, they should not have to pay the complaints levy at a particular level.
There is some truth in that. It is a reality in a number of walks of life. In negligence cases that could be produced in court, for example, there is no doubt that sometimes people make what they regard as modest payouts in order to avoid the sheer hassle of a court case and the risk of future cost, in the hope that the issue will go away. The power to screen out frivolous and vexatious complaints is intended to protect practitioners against complaints that are unreasonable and that may be part of a campaign of persecution by some embittered individual. By charging for the dispute resolution service for a complaint that is genuine, the complaints levy provides practitioners with an incentive to communicate better with their clients, to reduce the number of complaints and to resolve those complaints at source, where they can.
You have just denied that that is the case by agreeing—
Mr Purvis, I would like to allow other members to comment on the issue. You have made your point clearly.
I was going to put the opposite situation to the witnesses. I refer to cases in which the solicitor who is complained about is willing to discuss with the client how the matter might be resolved, but the client is not willing to engage with the solicitor—possibly quite legitimately, because they are fed up with him or her and want the complaints commission to deal with the matter. As I see it, the complaints levy is about paying for dispute resolution. If a solicitor is willing to have a dispute about a legitimate complaint resolved at local level, but the client refuses for some reason, why should the solicitor be subject to the levy because the complaint has to be referred to the commission for resolution?
The client might have entirely legitimate reasons for not being prepared to negotiate further with the solicitor. One can imagine situations in which the relationship has broken down completely. If the complaints levy did not have to be paid, the solicitor could say that they were willing to negotiate as an avoidance device, because they knew that the client would not be prepared to enter such discussions. The issue is difficult. A solicitor might be genuine about being prepared to negotiate, but a client might be equally genuine in believing that that will not work.
Will the levy be imposed at that point? In other words, will it come into effect when everything else has been tried and a case has had to go to the commission?
Yes. If the commission mediates after both parties have agreed that it do so, that will attract the levy, because the mediation process will involve investigation by the commission.
I will approach the issue from a slightly different perspective. The last thing that I want is for practitioners to have to pay out for a body that has a budget of £2.5 million, let us say, when it should probably have a budget of only £2 million. That might be the case because, for example, it has too many staff to deal with the volume of complaints that are made. Will downward pressure be exerted on the commission's budget and workload to ensure that practitioners will not be charged an annual general levy or a complaints levy that could be 20 per cent lower because the monolith that is created has more staff than are required? What will happen if staff productivity is not as high as some of the estimates that underpin the financial memorandum suggest it should be? Will there be a brake on the commission's costs, to keep the levy under control?
Yes, there will be two checks. The first check will be the annual consultation on the budget that we have mentioned already, which will involve the commission seeking the views of the profession and the professional bodies on its proposed budget. The other check will be that the commission will need ministerial approval for the number of staff that it appoints and their remuneration. Scottish ministers will not approve an application for additional staff if they feel that the commission does not have a justifiable case, so that will be an additional pressure.
Colin Fox has a follow-up. I would be grateful if he would ask about compensation levels.
I would be happy to, but first I will deal with the complaints levy. I am sure that the witnesses have picked up the fact that the committee is curious—if I can use that euphemism—about the idea that lawyers should be charged when a complaint is made, which is perhaps the only proposition in the bill that seems to be unfair to lawyers.
There are two issues. The first is whether complaints are made because practitioners operate in an area of law that is particularly susceptible to complaints, even if they do a good job. There is no doubt that complaint rates are higher in some sectors of legal practice than in others. The power to vary the amount of the complaints levy is partly intended to allow the commission to address that. We do not have closed minds on that and we are more than willing to reflect on the detail of how the complaints levy operates.
I will move on to compensation. Why is the ultimate penalty that will be at the commission's disposal for compensation for a service complaint—£20,000—four times higher than that for a conduct complaint, which is £5,000?
That is to deal with negligence. The policy is that the commission is to be used to pursue moderate-value negligence claims as part of its dealing with inadequate professional services. When a person who has a complaint could alternatively go to court with a negligence action, £5,000 would be a pretty low limit. That is why the limit for a service complaint is £20,000.
The commission will be able to make disposals such as ordering solicitors to charge no fees. On the current scale of disposals—can I call them punishments?—for service or conduct complaints that are upheld, what is the ratio of compensation disposals?
Do you mean as a proportion of the total number of all types of disposal?
Yes.
We do not have that information and I do not know whether the Law Society has such statistics, although we could try to find out. If it does not, we might be stuck.
Have you reflected on the suggestion in the evidence that we have gathered that some law firms might withdraw from some parts of legal practice for fear of the £20,000 penalty? Have you reflected on the consequences of that for legal practice in Scotland and access to justice?
We have reflected on that. The policy is to provide complainers with better access to justice than exists at the moment. Many people on moderate incomes find it difficult to contemplate taking legal action about defective service by solicitors because of costs and because of the risks that are associated with costs. At the moment, their only alternative is to claim for inadequate professional services, which limits them to £5,000 compensation, although the sum that they could recover in court might be much greater than that if they were successful. We accept that if complainers have an easier dispute resolution mechanism available to them, they may be able to recover compensation more often than has been the case in the past, but we must bear in mind the fact that the commission will make awards to complainers only if it is justified. There is no punitive element; it is compensation for loss that has been suffered or for distress or inconvenience.
I agree that we do not want good small businesses to close down just because of one big aberration. To a small rural firm of solicitors, £20,000 is a huge amount of money compared with what it would mean to a city practice that has 30 partners. I am concerned about the availability of access to justice in rural areas in any case, so I wonder whether the bill has been rural-proofed.
There are probably limits to what we can do in that regard. The power to vary the complaints levy is designed to allow the commission to deal with problems in that context, to acknowledge that there might be a need to reduce the relative financial burden on firms in more remote areas or less profitable areas of work, and to have cross-subsidy in the system. However, when you are talking about the level of compensation you are talking about the level of loss to the client. Cases in which £20,000 is awarded will be pretty rare, but it will happen. For example, a conveyancing transaction might have been messed up, and the client would be able to justify the claim that that amount of loss had been caused to them. Although it might be hard for a practitioner who has to pay out a large sum of money, we must also consider that the client who has received the poor service will have sustained a large amount of financial loss.
Forgive me for asking, but would those payments be covered by the guarantee fund or by the master policy?
In principle, negligence is covered by the master policy. The guarantee fund is there for dishonesty on the part of solicitors, which is much more likely to be a conduct issue.
So the £20,000 in compensation could be covered by the master policy?
That is right—negligence is in principle covered by professional indemnity insurance. There might be issues about the effect that that could have on the cost of professional indemnity cover; it could mean a modest rise in premiums because of the increased access to justice and the resulting potential increase in complainers' ability to go as far as getting awards.
Section 8(2)(d) of the bill states that the maximum compensation of £20,000 will include
What you describe is not necessarily the case. The scale of loss that has been caused to the client does not necessarily bear much relation to the gravity of what the practitioner might have done; for example, failure to read a deed properly in a conveyancing transaction or failure to notice the existence of a clause that seriously prejudiced the client's interests are not professional misconduct but are just human error. However, the consequences of such actions in respect of loss to the client could be serious.
What is the evidence base for setting the compensation maximum at £20,000?
It is simply an attempt to ensure that negligence cases of moderate value can go before the commission as an alternative to going to court. We think it reasonable that cases in which large amounts of damages are potentially awardable should continue to be heard by a court.
Forgive me, but you have not answered my question about the evidence base for the £20,000. You have evidence from the Law Society in its annual report about the compensation that is paid out in various areas, but why is the maximum compensation for a service complaint £20,000? It is coincidental that it is the same level in England and Wales, but surely that is not the reason for the Scottish solution.
It is probably not entirely coincidental. The current limit in England and Wales is £15,000, but there has been discussion about raising it to £20,000. The reason behind the limit in England and Wales is the same as the reason behind ours—it is to allow lower-value negligence cases up to a reasonable limit to be progressed by the complaints handling body rather than through the courts. It is essentially the same policy in both places, so it would be surprising if there were not at least a rough correspondence between the figures.
The bill provides that the new commission will monitor the effectiveness of the guarantee fund that the Law Society operates—and which provides protection for people—and the operation of the master policy. As you said earlier, that policy is the professional indemnity insurance that the Law Society requires of, and provides for, its members. In the consultation, there was an even split between those who were in favour of and those who were against giving the new commission monitoring powers on the guarantee fund and the master policy. Why did you decide in the end that the commission would do the monitoring?
In the end, the decision came as a result of the inquiry that the Justice 1 Committee undertook in the previous session of Parliament. In its report, that committee articulated its concerns and others that arose in evidence. Although its recommendations ultimately extended to both, it is fair to say that its concerns were about the master policy rather than the guarantee fund.
I assume that you are aware that some people who have complained against solicitors feel that the master policy is not a good idea; they say that it removes the incentive to follow best practice. People have spoken about the lack of incentive to make early settlements in disputes. The very fact that the master policy is in place and that every solicitor comes under its umbrella means that solicitors may not be as careful as they should be. People have said that a better system would be for each solicitor to find his or her own insurance because that would make them more careful about how they practise the law. Have you given any thought to that?
All such arrangements have their various pros and cons. One argument says that the maximum incentive that a solicitor needs to be ultra careful about the way in which he or she works would be for them not to have professional indemnity insurance—every time they caused damage to someone, they would have to pay them in full. However, as the member rightly suggested, a firm could be bankrupted for what may have been a one-off error. The insurance is in place to protect against that.
Health professions have their own policies, often with the same company, and there is obviously a record of claims so that people's difficulties can be traced back. I presume that you have considered other professions.
We have probably not done so in a great deal of detail. The bill is relatively minimalist. We wanted to give the commission a power to monitor but not a power to wade in and disrupt the entire master policy. There was a balancing act to perform. The master policy and collective insurance are, in principle, good things; but that had to be weighed against the concerns that were expressed by the previous session's Justice 1 Committee on what had happened in a few individual cases. We wanted to ensure that such things did not happen again and settle into a pattern.
Maureen Macmillan mentioned the evidence base that has prompted the creation of a monitoring power for the commission. You have cited the views of the Justice 1 Committee in the previous session of Parliament. What other evidence has the Executive received that has led it to create the power?
Mike West may know of information that came out of the consultation.
The Scottish Consumer Council reported a lot of complaints that had been made to it about the master policy and payments. There was also an investigation by the Office of Fair Trading last year. Within the master policy, differential premiums are charged for solicitors who have higher rates of findings against them.
From your comments, the Executive obviously gives some weight to that evidence and has concluded by putting provisions into the bill.
I will move on to a subject that may or may not be completely different, which is the right of audience of other professionals. Sections of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 that have not yet been commenced set out arrangements by which rights to conduct litigation and rights of audience in the Scottish courts can be granted to members of a professional or other body, other than the Law Society of Scotland or the Faculty of Advocates, when that is approved by Scottish ministers and the Lord President. When the bill was introduced, the Scottish Executive announced that those provisions were to be commenced at a future date. When does the Executive intend those sections of the 1990 act to be commenced?
The first step towards commencement will be to remove a defect in the existing statutory provisions that creates a nonsensical position. A person might be a member of a professional body that has been approved and has acquired rights to conduct litigation on the part of its members, but if that member sought to exercise those rights, the member would be guilty of a criminal offence. That is a nonsense—it was an oversight when the 1990 bill was drafted—and section 42 of the Legal Profession and Legal Aid (Scotland) Bill corrects it. The Executive feels that that must be the first step. It will be for ministers to decide when commencement will be but, if we assume safe passage of the bill, it should happen early next year.
Do you know which professions will be enabled to practise in court?
Interest has already been expressed by three professional bodies—the Institute of Trade Mark Attorneys, the Chartered Institute of Patent Agents and the association of commercial attorneys. Those three bodies have been in dialogue with us about commencement of the powers. It might be that other professional bodies acquire an interest after commencement of the provisions of the 1990 act has been announced, but we do not know which other bodies might be interested. Not many professional bodies have sought rights of audience under equivalent provisions in England and Wales, but what will happen in Scotland remains to be seen.
I am interested in the matter in the context of legal aid reform. The fact that a person must be represented in court by a solicitor has always been a sticking point, because legal representation is the most expensive part of the legal aid service. Will social workers and the staff of voluntary organisations eventually gain the right to address the courts? Where will the line be drawn?
That will depend on the demand for rights of audience from professional bodies. Applications for such rights will be approved by the Lord President after consultation of Scottish ministers, who will consider safeguards. People who secure rights of audience will, for example, have to understand court procedure such as pleading procedures, and will have to have the usual safeguards of professional indemnity and complaints handling procedures, so that clients are protected.
It has been suggested to me that rights of audience are what makes a solicitor a solicitor and that all other work could be done by a paralegal—although that might be using too broad a brush. The distinctions between solicitors and other professions will be blurred, but the bill will regulate solicitors extremely strictly. What is to prevent a solicitor from saying, "I will give up my solicitor's practising certificate because I can get lots of paralegal work and appear in court as another kind of professional. I can carry on my business without being regulated as strictly as I am regulated as a solicitor"?
It is unlikely that solicitors will discontinue their practising certificates and seek to register with another professional body.
The definition of "practitioner" in the bill includes people who will exercise the new rights of audience, so such people will be subject to the same complaint-handling regime.
Yes. Such practitioners will fall within the remit of the new commission.
Will such people come under the umbrella of the Law Society of Scotland's regulations if they do work that is similar to solicitors', even if they are not a solicitor with a practising certificate?
Yes.
The "Strategic Review on the Delivery of Legal Aid, Advice and Information" and the more recent consultation paper "Advice For All" favoured grant funding as the mechanism for funding non-lawyers. I am confused that the bill runs contrary to the weight of opinion by opting to make advice and assistance available on a case-by-case basis.
The two approaches are not mutually exclusive. We certainly do not propose that non-lawyers should not be funded by grant funding. The strategic review made it clear that the principal source of funding for local non-lawyer advice services should be grant funding through local authorities, but the bill provides additionally for case-by-case funding in specific circumstances.
I am clear that you already accept the principle of grant funding, as you have pilots with projects under part V of the Legal Aid (Scotland) Act 1986, as well as in-course advice pilots covering homelessness and a variety of other issues. If, however, you accept the principle of grant funding, why are you not putting it into operation just now?
It was simpler, from both the legislative and the administrative points of view, to put the case-by-case funding into position now because we already had a model for handling it. More consideration would be required of how the grant funding of non-lawyer advisers would be compatible with the existing grant-funding mechanisms for local authorities.
I do not want to put words into your mouth, but if I have understood you correctly the desire is to get to a grant-funding mechanism, but you just have not worked out how to do that in a simple way in the bill.
Yes.
That is disappointing. Are you aware of the criticisms that have been made by credible sources, which suggest that grant funding on a case-by-case basis will be bureaucratic and that agencies that are not geared up to do that will be asked to change almost the entire basis of their operation and to introduce means testing of clients? You will be aware that most advice agencies are not keen to do that before they consider whether they will provide their clients with a service. Is not this an opportunity lost? Cannot we take some time to get it right just now?
We are taking the time to get it right. We have scheduled, over the next three to four weeks, a series of consultation meetings with the advice agencies to which you referred, and we will discuss the issue with them in detail.
Excellent. You might want to reflect on whether amendments that you will lodge at stage 2 might please the committee. I am sure that the committee will, equally, be minded to help you out, given that we all want to get to a different position but have perhaps not had the time to do so.
Before you do, I suggest that our witnesses read the comments that were made in last week's debate on civil law. The issues of getting advice timeously and the costs and the bureaucracy that are involved in obtaining grant aid for individual cases were raised by several members, to whom the minister gave a partial response. I offer that as a point of information.
Thank you, convener.
Some of the other proposals do not require a change to primary legislation, so they will be taken forward either through secondary legislation or through administrative changes.
Are those proposals the severe hardship test and the new financial eligibility criteria? I want to get a handle on the specifics of how you want to move forward.
Most of the provisions to enable the Scottish Legal Aid Board to have flexible powers to secure and fund the provision of publicly funded legal aid in criminal and civil cases—it is the same issue—can be put in place through existing powers in the primary legislation; through changes to secondary legislation; or through administrative change in the procedures of the Scottish Legal Aid Board. Unfortunately, the proposed provision to relax the severe hardship test in section 19 of the 1986 act has not made it through to the bill due to an administrative oversight on my part, I am afraid. We agree that it should be included, and it was a provision on which we had prepared instructions; for some reason, however, they did not transfer through to our legal people at the time.
We can look forward at stage 2 to an amendment that will introduce that provision.
Yes.
Excellent.
Is it a case of inadequate professional services?
Or negligence?
That is very cheeky.
Fortunately—or unfortunately—I am not a solicitor.
My final question—before the committee members descend on our witnesses—is about the new financial eligibility criteria. Is that an administrative change?
Are you referring to the clear and fixed financial eligibility criteria for criminal legal aid?
Yes.
We will consider that further because it is not an issue on which we got a very clear picture from the consultation responses. Relatively few respondents addressed that question, and many of those did not come up with a consistent position. It is a matter that we will consider in more detail.
Are you going to lodge an amendment on that?
We do not have that in mind for stage 2.
Okay. Thank you.
I thank our witnesses for their forbearance and openness in what has been almost a two-hour meeting. The clerks will copy to you questions on which you have said you will get back to us with written comments. That may be helpful to you, unless you already have somebody scribing for you at the back of the room. Thank you for attending today's meeting.