Customer Service Challenges When Taking on Ongoing Work

Insights from the Legal Ombudsman at the Recovery First panel meeting

At our  panel meeting, Recovery First welcomed Simon Williams, Senior Ombudsman (Complaint Handling & Insight) at the Legal Ombudsman, who delivered a detailed and practical session on the customer service challenges that arise when law firms take on ongoing client matters.

The discussion was timely. Across the sector, firms are restructuring, withdrawing from certain departments, merging, or managing orderly closure. In each of those scenarios, live client files often move from one practice to another. What appears, commercially, to be a straightforward transfer of work can carry regulatory, reputational and insurance consequences if not handled carefully.

The core message from the session was that when work transfers, risk often transfers with it. Understanding how successor practice rules operate, how complaints exposure follows files, and how professional indemnity arrangements interact with closure or acquisition decisions is essential for those involved in the transfer of live files.

Successor practice rules: Substance over form

A central focus of the discussion was successor status under the Legal Ombudsman Scheme Rules.

Where Firm A ceases and Firm B succeeds to the whole or substantially the whole of Firm A’s business, the acts or omissions of Firm A may become the responsibility of Firm B. Outstanding complaints can also transfer, unless it would not be fair and reasonable in the circumstances.

Importantly, successor practice rules are not determined solely by what firms call a transaction. The SRA and the Ombudsman look at substance rather than label. 

The SRA and Legal Ombudsman will conduct their own enquiries and reach their own conclusions on the successor question. While the conclusions already drawn by one body may form part of the overall picture, the enquiries and conclusions themselves are independent.

This means that, in rare cases, different conclusions can be reached.

In practical terms:

• The SRA may assess successor status from a regulatory and authorisation perspective
• The Legal Ombudsman may separately assess successor status when determining complaint liability and what is fair and reasonable

A firm may therefore structure a transaction believing it has avoided successor status from a regulatory standpoint, only to find that the Legal Ombudsman reaches a different conclusion when handling a complaint, or vice versa.

Factors that may be examined include:

• Whether there was a TUPE transfer
• The movement of partners, directors or key fee earners
• The transfer of live client files
• The existence of a sale or asset transfer agreement
• Continuity of branding or trading style
• Transfer of office infrastructure or systems
• Professional indemnity insurance arrangements

For law firms acquiring work from a distressed practice or informal wind-down, these issues go directly to liability exposure. If successor status is established, complaint responsibility may transfer to the new firm. That has implications not only for complaint handling, but also for insurance, reserves and regulatory scrutiny.

Where a firm closes without a successor, it will typically require six years of run off cover. That cover protects against claims arising from past work. However, where a successor is deemed to exist, responsibility may shift to the continuing practice instead. The financial and structural implications of that distinction are substantial.

For managing partners and Compliance Officers for Legal Practice, clarity at the point of transfer is critical.

Practical challenges of inheriting files

Even where successor practice rules are not engaged, taking on ongoing matters presents operational challenges. The Legal Ombudsman highlighted common issues that arise when firms inherit files:

• Untidy or incomplete files.
• Missing documents or correspondence.
• Unclear cost information or estimates.
• Dormant matters where limitation dates are not immediately obvious.
• Previous complaints or unresolved dissatisfaction.
• Inconsistent record-keeping.

These risks are magnified in volume practice areas, particularly where the transferring firm has experienced financial or management strain.

A receiving firm may believe it is taking on a portfolio of live, income-generating work. In reality, it may also be inheriting administrative weaknesses or latent complaints.

Expectation management becomes central as clients may assume seamless continuity. They may not appreciate that they are entering into a new retainer or that fee structures differ. They may already have concerns about delay or communication.

If those expectations are not reset clearly and transparently, dissatisfaction escalates quickly.

The consistent message was that infrastructure and documentation are key to avoiding complaints.

Internal complaint handling

One of the most striking themes discussed by the Legal Ombudsman was the frequency with which complaints escalate because of weaknesses in internal handling. In many instances, the original service issue might have been capable of resolution. Instead, poor communication, defensive tone or procedural missteps turn dissatisfaction into formal complaint.

Firms were encouraged to approach complaint handling with discipline:

• Clearly define what the client is alleging.
• Establish what outcome the client seeks.
• Assess whether that outcome is achievable.
• Explain conclusions transparently, rather than asserting them.
• Address service, detriment and remedy in turn.
• Maintain an appropriate, professional tone.
• Follow the firm’s published complaints procedure.

A long or emotional complaint does not require a combative response. Nor does a legalistic letter require a mirrored tone. The objective is resolution, not point-scoring.

For law firms inheriting files, this is particularly relevant. The complaint may relate to work undertaken by the previous practice and the client may not distinguish between the two entities. How the receiving firm responds will shape both risk and reputation and avoid the potential to impact negatively on their reputation and their public facing online reviews.

 

With regulatory expectations around complaint management continuing to rise, internal processes must be robust and up to date.

How Recovery First helps law firms manage these risks

Against this regulatory backdrop, structured exit and managed transfer become more important than ever.

Recovery First’s panel-based transfer model is designed to mitigate the risks identified during the Legal Ombudsman’s session, while enabling law firms to withdraw from departments in a controlled and commercially sensible way.

1. Reducing successor practice risk

Recovery First does not operate as a wholesale successor absorbing the entirety of a closing firm’s business.

Instead, matters are transferred through a structured panel allocation process. Work is distributed across appropriately resourced firms, rather than consolidated into a single acquiring entity.

This structure reduces the likelihood of creating a scenario that might engage successor practice rules and concentrates on controlled, documented transfer.

2. Clear and documented client communication

Client communication is managed carefully.

Clients are informed of:

• The proposed transfer of their matter
• Their right to choose whether to proceed
• The identity of the receiving firm
• Any new retainer terms or cost implications

Clear documentation protects all parties. It reduces the risk of later allegations based on misunderstanding and demonstrates transparency.

3. Controlled file review

Files are not absorbed in bulk without oversight.

The process involves structured review and managed allocation. This helps to identify:

• Limitation-sensitive matters
• Documentation gaps
• Dormant files
• Potential complaint history

Receiving panel firms understand the framework within which files are transferred. This reduces the risk of inheriting unmanaged systemic weaknesses.

4. Strategic management of run off cover

For firms contemplating closure, run off cover is a material financial consideration.

Where there is no successor, six years of run off cover can represent a substantial cost. Where a transfer risks creating successor status, exposure may shift in ways that were not anticipated.

Recovery First supports firms in structuring exit in a way that minimises unintended consequences, allowing leadership teams to plan with clarity rather than reacting under pressure.

5. Protecting reputation and governance

Perhaps most importantly, a structured transfer process protects reputation.

A reactive wind-down characterised by hurried file transfers, unclear communication and unmanaged complaints increases regulatory and reputational risk.

A documented, panel-based process demonstrates governance, planning and client care. In an environment where regulators scrutinise supervision, infrastructure and complaint handling closely, that matters.

A structured exit for law firms

The regulatory and commercial environment for law firms remains demanding. Compliance expectations continue to tighten, professional indemnity insurance costs remain elevated, succession planning presents ongoing challenges, and volume-based practice models are facing increasing scrutiny. At the same time, complaint handling standards are rising, with regulators expecting firms to demonstrate clear governance, supervision and documentation at every stage of the client journey.

Against that backdrop, it is entirely rational for some firms to consider departmental withdrawal or even full market exit. Stepping away from a higher-risk practice area, or concluding that long-term continuity plan is no longer commercially viable, is not a sign of failure. In many cases, it reflects prudent and responsible leadership.

What ultimately determines whether that decision protects or damages the firm is the way it is executed.

An unmanaged or reactive closure can compound risk. Files may be transferred without adequate review, client communication can become inconsistent, and complaint exposure may increase rather than reduce.

Insurance implications, including the cost and structure of run off cover may not be fully considered until it is too late to influence the outcome.

By contrast, a structured transfer process allows risk to be identified, managed and contained. It enables clear communication with clients, documented allocation of work, and careful consideration of successor practice implications. Most importantly, it preserves reputation while maximising financial recovery.

The Legal Ombudsman’s recent insights reinforce the importance of early, deliberate action. Firms that plan carefully, document their decisions and communicate transparently are far better positioned than those responding under financial or regulatory pressure. Once issues escalate, the available options narrow quickly.

Recovery First provides a structured route for law firms that have reached a strategic turning point. By managing the transfer of work-in-progress through a controlled, panel-based process, firms can withdraw from a market in a way that protects clients, reduces ongoing exposure and supports regulatory compliance.

For firms reassessing departmental risk and successor practice implications, early and confidential discussion can materially improve the outcome, both financially and reputationally.