Kerman & Co Llp, R (On the Application Of) v Legal Ombudsman

Section 132(2) of the Legal Services Act 2007 is a consumer-protection provision ensuring continuity of complaints when an authorised legal practice ceases and another person succeeds to its business. “Ceases to exist” refers to the cessation of the firm or regulated authorised entity, rather than the death or disappearance of an individual sole practitioner. A successor practice that acquires the goodwill and substantially the whole of the business may therefore become the respondent to outstanding complaints, even where the successor did not perform the original work. The statutory scheme is concerned with consumer redress, not professional discipline. Its provisions must be construed purposively, while respecting the language Parliament used.

Kerman & Co LLP sought judicial review of the Legal Ombudsman’s decision that it was the successor to PS Levy & Co and responsible for dealing with a complaint concerning services provided by Peter Levy while he practised as a sole practitioner.

PS Levy & Co ceased business and transferred its goodwill, files and business arrangements to Kerman & Co LLP. The claimant argued that the firm was merely Mr Levy’s trading name and that section 132(2) of the Legal Services Act 2007 could apply only if Mr Levy himself had ceased to exist. The central issue was whether the Ombudsman had jurisdiction to treat Kerman & Co LLP as the respondent under section 132(2) and rule 2.10 of the Scheme Rules.

1. Claim dismissed. The Legal Ombudsman had jurisdiction to investigate the complaint with Kerman & Co LLP as the appropriately named respondent.
2. Section 132(2) of the Legal Services Act 2007 must be read in the context of Part 6, the heading “Continuity of complaints”, and the statutory objectives of consumer protection and public interest. It was designed to prevent a complainant losing a remedy because the original respondent ceased to exist and another person succeeded to its business.
3. The expression “authorised person” is deliberately broad. It can include a sole practitioner’s firm or regulated practice, which is distinct for regulatory purposes from the individual human being operating it. The definition of “person” in section 207(1) is not confined to a natural person.
4. “Ceases to exist” therefore means cessation of the firm or legal entity subject to the regulatory regime, or, where there is no distinction, cessation of the authorised practice. It does not require the sole practitioner to have died. Reading the provision otherwise would produce the artificial result that a sole practitioner could cease practising, transfer the business and avoid continuity of complaints unless death occurred.
5. PS Levy & Co had ceased to exist when it closed on 30 July 2012. The merger agreement took effect on 1 August 2012 and transferred its goodwill and business to Kerman & Co LLP. The claimant had received the benefit of that business and could fairly bear the corresponding responsibility for outstanding complaints, although it had not performed the original work.
6. The ombudsman scheme addresses consumer complaints and redress, not professional discipline. Potential disciplinary matters may be referred to the relevant regulator. The claimant’s reputational concerns did not deprive the Ombudsman of jurisdiction, particularly because publication of decisions was discretionary.