A recent High Court decision serves as a timely reminder that costs disputes are no longer just a billing issue. They are a regulatory, reputational and risk management concern – particularly when viewed through the lens of the Legal Ombudsman and the SRA’s expectations around transparency and client communication.

For COLPs, COFAs and partners responsible for risk, the case illustrates how perfectly ordinary litigation can evolve into six-figure financial exposure, without any finding of dishonesty or professional negligence.

The Case at a Glance: From Neighbour Dispute to Ombudsman Redress

In R (Knight’s Solicitors) v Legal Ombudsman [2025], the High Court refused permission to judicially review a Legal Ombudsman decision that had:

• Upheld a client complaint about inadequate cost information
• Awarded £50,000 compensation
• Plus a substantial reduction and refund of legal fees amounting to £65,935.08

The underlying matter was a neighbour dispute in which clients alleged they were given an initial cost estimate of £20,000–£30,000 plus VAT. Proceedings ran for almost two years. During that time, costs escalated significantly, but the estimate was not meaningfully revised or contextualised with a costs-benefit analysis.

When the full financial exposure – including trial costs exceeding £70,000 – became clear, the clients discontinued the claim and complained to the Legal Ombudsman.

The Ombudsman upheld the complaint. The High Court declined to interfere.

Why the Judicial Review Failed – and Why Firms Should Pay Attention

The judgment is notable not because it breaks new legal ground, but because it reaffirms the breadth of the Ombudsman’s discretion and the narrow scope for challenge.

Key points for solicitors and compliance officers:

1. The Ombudsman Is Not a Court — and Is Not Expected to Act Like One

The court emphasised that the Legal Ombudsman scheme is:

• Inquisitorial, informal and outcome-focused
• Concerned with what is “fair and reasonable”, not legal correctness
• Entitled to reach conclusions without court-style disclosure or hearings

Attempts to impose litigation standards on Ombudsman processes were firmly rejected.

2. Retrospective Client Decision-Making Carries Real Weight

A critical finding was that had the clients been properly informed earlier, they would have discontinued the litigation sooner.

The Ombudsman was entitled to reconstruct that hypothetical decision – and the High Court accepted that approach as rational and evidence-based.

For risk teams, this is significant:
The question is not what the client did, but what they would have done with better information.

3. Fee Reductions Sit Outside the £50,000 Compensation Cap

Perhaps most alarming for firms was the court’s confirmation that:

• The statutory £50,000 cap applies to compensation and certain remedies
• It does not apply to fee reductions or refunds

In practice, this means total financial exposure under the Ombudsman scheme can far exceed £50,000 – without any negligence finding.

The SRA and Ombudsman Perspective: Transparency Is a Live Risk Issue

Although the case arose through the Legal Ombudsman, its implications align squarely with the SRA Standards and Regulations, particularly:

• The duty to ensure clients receive clear, timely and ongoing cost information
• The obligation to manage matters in a way that enables informed client decision-making
• The expectation that firms identify and mitigate foreseeable risks, including financial ones

For COLPs and COFAs, this case underscores that costs transparency is not static. An estimate given at the outset does not remain compliant simply because it was reasonable at the time.

Where Many Firms Are Exposed — Without Realising It

What makes this case particularly instructive is that it did not involve:

• Dishonesty
• Hidden billing
• A complex negligence claim

Instead, it involved ordinary litigation drift, combined with evolving costs and insufficiently explicit updates.

Many firms will recognise the pattern.

The regulatory risk arises because the Ombudsman assesses conduct with hindsight, informed by evolving expectations and sector-wide standards – not just the firm’s internal view of reasonableness at the time.

The Role of Insight in Preventing Complaints

Once a complaint reaches the Legal Ombudsman, procedural protections are limited and judicial review is rarely a realistic remedy.

This shifts the emphasis firmly towards prevention.

Firms that are better placed to manage this risk tend to be those that:

• Monitor emerging Ombudsman themes and reasoning
• Translate that insight into practical supervision and client communication protocols

This is where structured legal intelligence tools – such as The Legal Lexi – become valuable, not as marketing add-ons, but as risk management infrastructure.

A Practical Takeaway for COLPs and Partners

This judgment reinforces a simple but uncomfortable truth:

If a regulator or Ombudsman can plausibly say “the client would have acted differently”, the firm may already be exposed.

The firms best positioned to avoid disputes are not those who defend complaints most robustly after the fact, but those who anticipate how decisions will be judged later and adjust their behaviour earlier.

Final Reflection

The Knight’s Solicitors case is not an anomaly. It is a clear illustration of how costs, communication and client understanding intersect with regulatory risk.

In a landscape where fairness is assessed pragmatically and retrospectively, open and transparent communication around costs is an essential part of competent, defensible practice management.

Company

About Us

Contact

Company number:

13928925

Registered address:

Knoll House

30 Macclesfield Road

Wilmslow

Cheshire SK9 2AF