Officers of Court – Business Organisation

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A Consultation Officers of Court – Business Organisation

A Consultation

ISBN: 978-1-78045-148-0 (web only)

The Scottish Government St Andrew’s House Edinburgh EH1 3DG

Produced for the Scottish Government by APS Group Scotland DPPAS11506 (03/11)

Published by the Scottish Government, March 2011 Officers of Court – Business Organisation

A Consultation

CONTENTS

Page

Ministerial Foreword 2

Introduction 3

Background 6

Current Developments 8

Legal Profession Experience 9

European Comparators 11

Issues and Conclusions 12

Respondent Form 13

Consultation Questionnaire 14

Annex A 18

Annex B 19

Annex C 20 Officers of Court – Business Organisation

A Consultation

Ministerial Foreword

I am pleased to publish this short consultation about the important issue of the way in which firms of officers of court are organised.

The key priority for the Scottish Government is to develop and enhance a vibrant Scottish economy and generate wealth and prosperity in Scotland. Officers of Court have a key role to play as owners and employees in successful businesses. Their ability to continue making a contribution is even more important in these challenging economic times.

Equally Officers of Court make a vital contribution to the Scottish Justice framework by ensuring that obligations are met and rights can be enforced. We need to have confidence in the integrity of the profession and this extends to the way in which their businesses are organised.

In keeping with our drive for simplification of the public sector we concluded that the establishment of a new Scottish Civil Enforcement Commission was both disproportionate and expensive and would not be set up. Our alternative approach has been to improve the framework for self-regulation within the profession, subject to the oversights of the courts. We have recently regulated to designate a professional association of which all commissioned officers of court must be members. This consultation on the business arrangements for officers of court continues our commitment to improve the regulatory framework of the profession and secure its status and reputation.

MINISTER FOR COMMUNITY SAFETY

1. INTRODUCTION

Purpose of consultation

1.1 This consultation invites comments on proposals to make regulations about the types of business association which officers of court may form; the ownership, membership, management and control of those business associations and the prescription of conditions which those business associations must satisfy, as provided for under section 61(2) of the Bankruptcy and Diligence etc. (Scotland) Act 2007. These provisions have been revised by the Public Services Reform (Scotland) Act 2010. In particular, what sort of business model would best support the need to deliver a professional and impartial service throughout Scotland in what appears to be a shrinking market?

1.2 Messengers-at-Arms have responsibility for the execution of warrants issued by the Court of Session, the High Court of Justiciary and the Court of the Lord Lyon and they may act throughout Scotland. Sheriff officers have responsibility for executing sheriff court warrants and their commissions are restricted to a particular sheriffdom but many hold plural commissions thus covering a number of sheriffdoms.

1.3 The offices of Messenger-at-Arms and Sheriff Officer are of long standing and have responsibility for the exercise of a number of public functions relating to the execution of court business, for example witness citation and service of court orders. Their activities are certified and they owe a duty to the court for which they are exercising functions.

Scope of this consultation

1.4 The Scottish Ministers are required to consult with the Lord President and Sheriffs Principal. Given the nature of the provisions, this consultation will also be sent to a wider audience of stakeholder interests. Annex A provides a list of the bodies or persons to whom this consultation paper has been sent. A copy of the consultation will also be available via the Scottish Government website.

1.5 This consultation covers Scotland only.

Related documents

1.6 The Public Services Reform (Scotland) Act 2010 can be found at the following link: http://www.legislation.gov.uk/asp/2010/8/contents

3 How to respond

1.7 The closing date for comments is 30 June 2011. Please send responses to:

The Scottish Government Legal System Division Floor 2 West St Andrews House Regent Road Edinburgh EH1 3DG

Or by email to [email protected]

1.8 We would be grateful if you would use the consultation questionnaire provided or could clearly indicate in your response which questions or parts of the consultation paper you are responding to as this will aid our analysis of the responses received.

1.9 This consultation, and all other Scottish Government consultation exercises, can be viewed online on the consultation web pages of the Scottish Government website at: http://www.scotland.gov.uk/consultations.

1.10 We need to know how you wish your response to be handled and, in particular, whether you are happy for your response to be made public.

1.11 Please complete and return the Respondent Information Form as this will ensure that we treat your response appropriately. If you ask for your response not to be published we will regard it as confidential and treat it accordingly.

1.12 All respondents should be aware that the Scottish Government are subject to the provisions of the Freedom of Information (Scotland) Act 2002 and would therefore have to consider any request made to it under the Act for information relating to responses made to this consultation exercise.

1.13 Where respondents have given permission for their response to be made public and after we have checked that they contain no potentially defamatory material, we will provide a link to the consultation responses (which are not marked as confidential) on the Scottish Government website within two weeks of the conclusion of the consultation exercise. You will also be able to make arrangements to view the responses by contacting the Scottish Government Library on 0131-244-4552. Responses can be copied and sent to you, but a charge may be made for this service.

1.14 Once the consultation exercise has concluded, all responses will be systematically analysed and considered along with any other available evidence and reported on. Any key messages will also be highlighted in the report to help us reach a decision on the making of regulations under section 61(2) of the Bankruptcy and Diligence etc. (Scotland) Act 2007

1.15 Annex B provides more information about the consultation process.

1.16 If you have any comments about how this consultation exercise has been conducted, please send them to:

The Scottish Government Legal System Division Floor 2 West St Andrews House Regent Road Edinburgh EH1 3DG

Or by email to [email protected]

2. BACKGROUND

2.1 Officers of Court hold public office and have some exclusive rights in the service of judicial documents and the enforcement of court orders. They may also be independent contractors operating in the same way as commercial agents. Where they differ from commercial agents is that they have a duty to act when instructed; they have regulated fees and they fall within the disciplinary authority of the Sheriffs Principal and the Lord President.

2.2 Officers of court may be sole practitioners, a partner in a firm, or an employee of either a self-employed officer or firm of officers. There is a statutory requirement that officer of court firms cannot operate as limited companies or be employed by a limited company.

2.3 The Scottish Government originally consulted on proposals for modernisation of the enforcement system in Scotland as part of the “Enforcement of Civil Obligations in Scotland” (ECOS) consultation of April 20021.

2.4 A summary of the proposals for organisational restructure and related reform was provided at paragraphs 3.110 to 3.111 of the ECOS Paper and these are reproduced below: -

3.110 A Scottish Civil Enforcement Commission should operate as the sole body where all matters relating to enforcement are determined and overseen. Existing judicial responsibility including granting commission, investigation of complaints and discipline of enforcement officers together with existing functions of the Advisory Council of Messengers-at-Arms and Sheriff Officers should transfer to the Commission. Its membership should comprise the judicial and professional interests represented in the former Advisory Council together with lay representation. The Commission should also approve standards of practice, training and continuing professional development programmes, set the level of regulated fees and issue guidance on matters such as advertising practices. It should collect information and statistics, publish an annual report and have responsibility for education and information in this field.

3.111 The existing offices of messenger-at-arms and sheriff officers should be amalgamated into a single office of civil enforcement officers. The Commission should determine the territorial competence of enforcement officers having regard to sheriff court jurisdiction and may impose conditions with regard to remote or outlying areas. All commissioned enforcement officers should have competence to execute Court of Session enforcement within their territory.

2.5 It was the clear view of the Scottish Government that the Scottish Civil Enforcement Commission was not necessary and in 2008 the decision was made not to proceed with its establishment both on the grounds of cost and need.

2.6 Although it wasn’t explicitly addressed in the ECOS consultation, a number of the respondents raised the issue of how officers of court businesses organised themselves.

1 Enforcement of Civil Obligations – A Consultation Document, April 2002, Scottish Executive.

6 A specific query was whether the arrangement of a limited liability partnership (“LLP”) sufficiently safeguarded what are regarded as core principles of the officer of court profession – impartiality and independence.

2.7 Consequently a secondary consultation was undertaken on the ‘Business Organisation of Enforcement Officers’. It sought responses, amongst others, on whether or not the forming of LLPs by officers of court should be prohibited, or what other business restrictions should be placed on officers of court.

2.8 A full analysis of the secondary consultation formed Annex D to the ‘Modernising Bankruptcy and Diligence in Scotland: Draft Bill and Consultation paper which was the pre cursor to the 2007 Act. This analysis is replicated as Annex C to this paper. The policy memorandum to the 2007 Act set out the conclusions from that consultation and the policy intention behind the provisions of section 61 of the 2007 Act.

2.9 In summary, it was considered that the use of LLP was not a problem and no evidence was provided to bear out limited liability arrangements being problematic. Indeed it was considered that officers of court should not be prevented from enjoying arrangements which were open to other professions such as solicitors.

2.10 The paper did conclude however, that there were other areas of business practice that could stand reform. The ownership or control of either a limited company or a LLP by non-officer investors had the potential to result in a conflict of interests and lowering of standards, nor are non-officer investors accountable for the way in which they behave, individual officers of court are subject to regulations but firms of officers of court are not. This was seen as a weakness and that such firms should, in the public interest, be subject to a greater level of scrutiny.

2.11 The main conclusions which were to be enacted in the 2007 legislation were the intention to introduce a requirement that each partner in a firm of officers of court must hold a commission as such and that standards of accountability and professionalism in firms of officers of court should be improved through regulation with a specific role for the proposed Scottish Civil Enforcement Commission (SCEC) to develop and monitor accounting standards for these types of business.

2.12 In its evidence to the Scottish Parliament Justice Committee as part of the scrutiny of the 2007 Act, the Society of Messengers-at-arms and Sheriff Officers (SMASO) reiterated the concerns it had expressed previously about the control and accountability of firms coming under the ownership non-officer investors. This is on the basis that SMASO considers its members do not carry out ordinary business functions but, rather, perform essential responsible functions within the Scottish court system. Their view was that it is in the public interest that ownership and control of these businesses should be in the hands of accountable officers of court.

3. CURRENT DEVELOPMENTS

Legislative

3.1 The original ECOS consultation is now 8 years old and since that time there have been inevitable changes in the wider operating environment. The Scottish Government has subsequently made clear through the Public Services Reform (Scotland) Act 2010 that the legal framework for the creation of the new national public organisation – the Scottish Civil Enforcement Commission is no longer necessary. As part of the Scottish Government’s commitment to organisational simplification the implementation of the SCEC was subject to review in 2008 and it was considered that existing bodies could in fact deliver most of the proposed functions of the SCEC, with other functions no longer being required. For example, the Debt Arrangement and Attachment (Scotland) Act 2002 (“the 2002 Act”) had delivered improvements for the debtor and it was considered that standards within the profession had risen. Stakeholders agreed that the remit and functions originally envisaged of the SCEC could be delivered at a reduced cost by utilising existing resources and frameworks.

3.2 In December 2008 at the Annual General Meeting of the Society of Messengers-at-arms and Sheriff Officers Conference, the Minister for Community Safety, Mr Ewing, made clear that the regulation of the ownership of officer of court firms will require further consultation. At that time the Scottish Government were considering alternative business structures for the legal profession where it was recognised that many of the same issues arose particularly when third parties might hold a stake in a legal practice and it was seen as essential to make sure that those who own a firm employing officers of court live up to the same standards as are required of the individual office holders. It was acknowledged that this was a complex issue and that the Scottish Government would need to work closely with the profession.

Ownership

3.3 As set out in paragraph 2.2, currently, officers of court may be sole practitioners, a partner in a firm, or an employee of either a self-employed officer or firm of officers. There is a statutory requirement that officer of court firms cannot operate as a limited company or be employed by a limited company.

3.4 In 2002 one of the larger officer of court firms in Scotland was sold to Intrum Justitia – a Swedish business established in 1923 which describes itself as one of Europe’s leading credit management services. This highlighted not only the issue of non-officer investors’ ownership and control but also foreign ownership of an officer of court business. In 2009 the firm was bought back by the original owners and now operates as a LLP.

3.5 Currently a small number of Sheriff Officer firms are either owned or controlled by non-officer investors. This includes 2 of the larger firms.

8 4. LEGAL PROFESSION EXPERIENCE

4.1 The consideration of alternative business structures for the legal profession as referred to by the Minister for Community Safety in his 2008 speech has since been provided for in the Legal Services (Scotland) Act 2010.

4.2 Solicitors were restricted in the ways that they could organise their businesses. They were not allowed to form partnerships or incorporated practices with non- solicitors and non-solicitors could not own or control legal practices or share fees or profits.

4.3 “Which”, submitted a super-complaint to the Office of Fair Trading in May 2007 claiming that the current regulation of Scottish legal firms restricts choice to consumers and prevents the formation of alternative business structures (ABS). The lack of ABS in turn reduced consumer choice and the potential for consumer savings.

4.4 A main policy aim of the 2010 Act was to enable outside investment in solicitor firms ending the solicitor monopoly of the ownership of firms that provide legal services. When the Bill was introduced to the Scottish Parliament it made provision for 100% external ownership of legal firms.

4.5 This particular aspect of the Bill generated a significant amount of debate not least amongst the profession itself. Different co-ownership models were considered and at Stage 2 the Bill was amended to create a cap of 49% external ownership thus ensuring that solicitors retained ownership and control over external investors.

4.6 One of the concerns raised in connection with outside investment/ownership of solicitor firms was that there was the potential for those concerned in criminal activities to own such a firm. The Scottish Government introduced amendments at Stage 2 (Definitional reference to non-solicitor investors and exemption from fitness test) to address the concerns about criminals or other inappropriate individuals gaining control of a solicitor firm. Further amendments (ban for improper behaviour) were introduced to enable the disqualification of non-solicitor investors where they are deemed to have acted improperly.

4.7 The Scottish Parliament Justice Committee also concluded that in the legal profession sector, by increasing competition, alternative business structures, one-stop shops and multi disciplinary practices, could actually be a risk for local or rural firms and that competition could actually be diminished in the longer term as small traditional businesses may be unable to sustain their businesses against larger new business model organisations.

4.8 There is not a direct comparison between the legal profession and the officer of court profession. For example, officers of court must charge standard fees as set out in an Act of Sederunt there may be little if any scope to make the market more competitive through driving down costs which may be passed on to the user/consumer. Another important difference is that an officer of court is independent of the parties, whereas a solicitor can represent one party only. That an officer may properly accept instructions to act for all of the different parties in a court action shows the special and impartial character of the office.

9 4.9 Similarly, the officer of court profession is not currently subject to the same restrictions in terms of the business arrangements it may form, as the legal profession were prior to the Legal Services (Scotland) Act 2010.

4.10 Nevertheless, some of the considerations about ABS in respect of the legal profession are relevant to this consultation particularly in relation to the appropriateness of who or what other type of business organisation may have ownership or control of an officer of court business, with a view to ensuring that the officer is not placed in a position of conflict of interest and that their impartiality, transparency and accountability are not breached.

4.11 Would the public interest be undermined if officer of court businesses were driven mainly by profit and the need to satisfy shareholders? SMASO have argued that if profit is the main driver, commercial firms would inevitably concentrate on more lucrative work such as debt collection at the expense of other vital court work.

10 5. EUROPEAN COMPARATORS

5.1 Across Europe most countries have their own distinct judicial system. They also all have officer of court equivalents similarly responsible for the service of judicial documents and the enforcement of court orders.

5.2 The ways in which officers of court are organised also varies from country to country. Of the 25 EU countries who are members of or who are affiliated to the International Union of Judicial Officers, 9 of the countries appoint their judicial officers as civil servants. Of those where the profession is independent of Government (even where the appointments are made by the government or courts, most (12) may only operate as individuals and in only 5 countries may officers of court operate as individuals or form partnerships. Only one country allows a company structure to be adopted by one type of officer of court.

5.3 The majority of countries do not permit their judicial officers to engage in other activities beyond the judicial officer functions (17) whilst 8 do, although often these other activities are prescribed and are also carried out on the instruction of the court.

5.4 Nearly all officers of courts operate within strict territorial limits which are usually the extent of the jurisdiction of a court or courts. In 3 countries, officers of court may operate on a national basis. In 2 countries, there is a mix of territorial/national competence which depends upon which court the officer has received their authority from, if, for example, the court is a national court then their scope is also national.

5.5 According to a study entitled ‘Regulation of Enforcement Agents in Europe: A Comparative Study’ officers of court have traditionally operated on an individual basis because the fact that they would bear direct legal responsibility for their actions was an incentive to good conduct as opposed to acting as a representative of a company.

5.6 Some countries also place a restriction on the number of officers of courts there may be at any one time. In these circumstances, new appointments may only be made when an existing office holder retires or otherwise leaves. In other countries a completely free market operates with few barriers to entry and no restrictions on numbers.

11 6. ISSUES AND CONCLUSIONS

6.1 Officers of Court provide an important service and contribute to the wider Safer and Stronger agenda by ensuring that wherever possible, court decisions in relation to civil matters are enforced effectively. As a profession they should be able to operate in ways that ensure those who need the services of an officer of court have ready access to one in their locality.

6.2 We know that there has been a reduction in available instructions, for a variety of reasons. For example in 2010 there was almost a 27% reduction in the number of small claims and summary decrees in the Scottish Courts compared to 2009. One reason is the reduction in lending by major financial institutions and a withdrawal of credit resulting in a reluctance on the part of creditors to incur further costs in pursuing bad debt as a consequence of the economic downturn.

6.3 We also know also that the number of officer of court firms (whether sole practitioner or LLP) have reduced over the past 20 years from 34 in 1990 to 25 in 2010.

6.4 There is a question mark over the sustainability of the profession in Scotland given the lack of growth and lack of opportunity for growth. In addition, officers of court are restricted in terms of their extra official functions.

6.5 Officers receive their commission as an individual; the wider regulatory framework including the conduct and disciplinary arrangements apply to individual officers; and membership of the designated professional association is as an individual officer of court.

6.6 This focus on the accountability of the officer of court as an individual has not been altered in the most recent legislation. It may be argued that this creates a potential dichotomy between the accountability of an officer of court as an individual and the functioning of officers of court in a business arrangement where neither the Lord President or sheriffs principal have any authority in terms of the non-officer investors in an officer of court business.

6.7 There would be concerns about simply making the gathering of debts open to market forces. Are there examples of ownership models which would be inappropriate for officer of court businesses – because there could be an actual or implied conflict of interests?

6.8 What sort of business model would best support the need to deliver a professional and impartial service throughout Scotland in what appears to be a shrinking market.

Officers of Court – Business Organisation A Consultation

RESPONDENT INFORMATION FORM Please Note this form must be returned with your response to ensure that we handle your response appropriately

1. Name/Organisation Organisation Name

Title Mr Ms Mrs Miss Dr Please tick as appropriate

Surname

Forename

2. Postal Address

Postcode Phone Email

3. Permissions - I am responding as…

Individual / Group/Organisation Please tick as appropriate

(a) Do you agree to your response being made (c) The name and address of your organisation available to the public (in Scottish will be made available to the public (in the Government library and/or on the Scottish Scottish Government library and/or on the Government web site)? Scottish Government web site).

Please tick as appropriate Yes No

(b) Where confidentiality is not requested, we will Are you content for your response to be made make your responses available to the public available? on the following basis Please tick ONE of the following boxes Please tick as appropriate Yes No Yes, make my response, name and address all available or Yes, make my response available, but not my name and address or Yes, make my response and name available, but not my address

(d) We will share your response internally with other Scottish Government policy teams who may be addressing the issues you discuss. They may wish to contact you again in the future, but we require your permission to do so. Are you content for Scottish Government to contact you again in relation to this consultation exercise? Please tick as appropriate Yes No

13 CONSULTATION QUESTIONNAIRE RESPONDENT FORM

CONSULTATION QUESTIONS

Question 1

Do you consider that the current business arrangements are satisfactory? If not, why not?

Yes □ No □

Please explain your answer.

Question 2

Do you consider that the existing organisation of officers of court serves remote or outlying areas well?

Yes □ No □

Please explain your answer.

14 Question 3

Can non-officer investors improve the standard of service that the public receives from officers of court?

Yes □ No □

Please explain your answer

Question 4

Should officer of court businesses be wholly owned by officers of court? Yes □ No □

If not, what level of ownership for non-officer investors should be allowed?

Please explain your answer

15 Question 5

Is foreign ownership or control of an officer of court business appropriate? Yes □ No □

Please explain your answer, in particular, if not, why would it be inappropriate?

Question 6

Are there examples of ownership or control of an officer of court business by other business types/sectors or professions which would be inappropriate?

Yes □ No □

Please explain your answer, in particular, if yes, please detail what these business types are and in what way they would be inappropriate

16 Question 7

Is a fitness test and/or a disqualification for improper behaviour necessary in relation to the ownership and control of officer of court businesses? (See paragraph 4.6 for details)

Yes □ No □

Please explain your answer

Note

This Questionnaire is provided for the convenience of consultees. Responses to the consultation, however, will be accepted in any format and consultees are not required to use this form when commenting on the proposals set out in the consultation document.

17 ANNEX A

List of those to whom the consultation paper has been sent

The Lord President

Sheriffs Principal

The Society of Messengers-at-arms and Sheriff Officers

Officer of Court Firms in Scotland

Law Society of Scotland

Faculty of Advocates

Committee of Scottish Clearing Banks

Citizens Advice Scotland

Money Advice Scotland

COSLA

ICAS

IRRV

Accountant in Bankruptcy

ANNEX B

THE SCOTTISH GOVERNMENT CONSULTATION PROCESS

Consultation is an essential aspect of the way in which the Scottish Government works. The Scottish Government encourages consultation that is thorough, effective and appropriate to the issue under consideration and the nature of the target audience. Consultation exercises take account of a wide range of factors and no two exercises are likely to be the same.

Typically the Scottish Government consultations involve a written paper inviting answers to specific questions or more general views about the material presented. Written papers are distributed to organisations and individuals with an interest in the issue, and they are also placed on the Scottish Government web site enabling a wider audience to access the paper and submit their responses.

Consultation exercises may also involve seeking views in a number of different ways, such as through public meetings, focus groups or questionnaire exercises.

Copies of all the written responses received to a consultation exercise (except those where the individual or organisation requested confidentiality) are placed in the Scottish Government Library at Saughton House, Edinburgh (K Spur, Saughton House, Broomhouse Drive, Edinburgh, EH11 3XD, Telephone 0131 244 4565).

All Scottish Government consultation papers and related publications (e.g. analysis of response reports) can be accessed at: Scottish Government consultations (http://www.scotland.gov.uk/consultations).

The views and suggestions detailed in consultation responses are analysed and used as part of the decision making process, along with a range of other available information and evidence. Depending on the nature of the consultation exercise the responses received may:

• indicate the need for policy development or review; • inform the development of a particular policy; • help decisions to be made between alternative policy proposals; and • be used to finalise legislation before it is implemented.

Final decisions on the issues under consideration will also take account of a range of other factors, including other available information and research evidence.

While details of particular circumstances described in a response to a consultation exercise may usefully inform the policy process, consultation exercises cannot address individual concerns and comments, which should be directed to the relevant public body.

ANNEX C

ANALYSIS OF RESPONSES TO THE SECONDARY CONSULTATION ON BUSINESS ORGANISATION OF ENFORCEMENT OFFICERS2

Introduction

The consultation invited views on whether Sheriff Officers and Messengers-at-Arms who organise their businesses as Limited Liability Partnerships safeguard the established core principles of the profession as such partnerships allow non-officer control of their business.

Of the 169 consultation papers issued, 24 responses were received. While a number of responses were from bodies representing more than one officer, in order to be consistent with other consultations, the joint responses were counted once only. The numbers from these bodies totalled 17, 39, and 7 respectively.

Analysis of Questionnaire

1. In like manner to the prohibition in relation to companies, would you support an amendment to the 1991 Rules as has been proposed to the Executive (paragraphs 17 and 28 refer) to prohibit officers from: a. forming a limited liability partnership for the purpose of exercising official functions or from doing so as an employee of a limited liability partnership,

Yes No 8 15

There was a strong majority view that there should not be any restrictions on partners in officer firms forming limited liability partnerships and enjoying the same protections in similar organisations, such as solicitors and accountants. or

b. forming part of any type of business organisation which is not accountable under the regulatory regime for officers in Scotland for the purpose of exercising official functions or from doing so as an employee of such an organisation?

Yes No 18 3

Reasons given for supporting an amendment to the 1991 rules included principally that officers should at all times be accountable whilst exercising official functions and properly regulated by an independent body and that this would be difficult to maintain if the managing partner of the firm was not subject to the same constraints.

2 Modernising Bankruptcy and Diligence in Scotland: Draft Bill and Consultation July 2004.

It was also pointed out that there are inherent dangers to the judicial process if the organisation of firms of officers is not regulated.

Dissenters argued that the rules of court currently apply to the individual commissioned officers, reflecting the personal nature of the officer's commission and believe it would be entirely inappropriate for the rules of court to attempt to police or judge the commercial decision making process of a business organisation. It was also considered that firms have wider accountability to the courts and OFT if they act unlawfully.

(3 respondees, not included in the no category, do not support an amendment if the LLP is comprised entirely of commissioned officers).

2. Would it be acceptable for officers to be organised: 3. (a) within limited liability partnerships (paragraphs 6 and 19 to 25 refer) if that entity was held jointly and severally accountable for its officers

Yes No 12 11

There was a more equal balance of positive and negative responses to this question though the differences of meaning in enhancing accountability in officer LLPs to protect the pubic nature of the office appeared to be confused on occasion with limiting liability for the negligence of one partner to that partner's share in the business. The latter disagreed to entities being held jointly and severally accountable for its officers on the grounds that liability limitation in terms of the Limited Liability Act 2000 was adequate.

Those in agreement considered that whilst officers have professional indemnity, there must also be accountability by the people running the firms and they must be responsible.

Others supported only on the premise that the LLP should be comprised entirely of officers. and

(b) if so, in order to be in keeping with the overarching principles applicable to the conduct of officers' business, what accounting or other conditions should apply in addition to those specified in the 1987 Act and 1991 Rules?

Those who responded that no further conditions need to be applied did so on the basis that all partners in a firm should be sheriff officers.

Mention was made that there is currently no provision in Rule 13 of the Act of Sederunt 1991 to examine the full accounts or solvency of any practicing officer of court or company employing an officer of court. As LLPs are required to lodge their accounts with Companies House, there should be a requirement for any officer of court or company employing an officer of court to submit a return annually by an

accountant to either a Sheriff Principal or SCEC certifying their solvency and a certificate of confirmation that they operate within the confines of any such legislative framework that may be set. There should also be a requirement for all bodies involved in these activities to be licensed by OFT or other appropriate body and to adhere to set codes of conduct. A suggestion was made that the accounts provisions in Part V of the 1991 Rules relating to accounts kept by every officer and the obligations of the rules could be extended so as to apply to the LLP partnership as a separate party.

In the event of non-officers continuing in charge of officers of court they should also be liable to disciplinary proceedings in the same manner as officers of court for their own actings including any directions given to an officer of court to act in such a way that gives rise to disciplinary proceedings such as fines and censure. Rules should be in place to suspend or prohibit non-officers' rights to maintain a partnership interest in the Sheriff Officer firm as an ultimate sanction. Rules should also be put in place to ensure non-officers are fit and proper persons to be partners in a Sheriff Officer firm.

3. Should any alternative or additional restrictions, in relation to business organisation, be placed on officers?

Yes No 16 6

The majority of respondents agreed that there should be compulsory membership of SMASO with one suggesting that in addition it should be subject to the right of individual officers to trade through any form of business organisation which they view as the most efficient means of conducting their business. A number suggested that all partners should be commissioned sheriff officers subject to the same level of accountability and regulation. One proposal suggested additional restrictions on Principals of firms if not practising officers of court.

One respondent suggested firms incorporated as LLPs should be a "stand alone" entity and not be associated with or be a subsidiary of a larger organisation. It should be a requirement that LLPs are Scottish based and have no "ties" to foreign companies. Members of LLPs should also devote their whole time and attention to the official functions of the firm, unless permission to carry out "extra official" functions within the current meaning of the Rules has been obtained from the Sheriff Principal.

Another suggestion recommended extending Rule 12 of the Messengers-at-Arms and Sheriff Officer Rules 1991 to include the following requirements:

• confirmation that the client bank account is reconciled on a monthly basis • ensure at all times the sums at credit of the client account is no less than the total of clients money held by the officer • in addition to the above it should be stated that clients' money must be held in such a way that it is not available for ordinary trading purposes of the firm,

nor used as security for any lien nor for meeting any personal or business liabilities

A further suggestion recommended that a minimum financial resource be maintained at all times.

Those who considered there should be no alternative or additional restrictions suggest that officers of court are very well regulated under the current legislation.

4. Should any additional conditions, in relation to the exercise of official or extra-official functions, be placed on officers?

Yes No 8 14

Additional conditions suggested were that the Scottish Executive should consider extending official functions to include all areas of debt recovery and that, in relation to extra official functions, conditions should be imposed along the lines of the current practice of Sheriffs Principal. One respondent considered that with the creation of SCEC, there should be an annual audit which would include a certificate from a third party accountant to verify that the firm's clients' account and other financial records are in order while another considered it should be necessary to declare if a principal owns a sizeable national debt collecting agency which purchases debt portfolios involving the transfer of title. In this situation it should be required to give an undertaking that where enforcement on these debts is necessary in Scotland, it is carried out by a neutral firm of sheriff officers. A further suggestion was made that the voluntary programme of Continuing Professional Development should be made mandatory.

The majority of those who considered there should be no additional conditions were of the opinion that the measures in place regarding the actual conduct of business by officers are satisfactory with one adding the proviso that appropriate and effective monitoring is in place.

5. Should the proposed Scottish Civil Enforcement Commission have a monitoring role in ensuring the compliance of the decision making of officer of court firms with its regulations and guidance, whether in traditional or in limited liability partnerships and should the sanction for non compliance be withdrawal of an officer's commission, as considered in paragraph 30?

Yes No 18 5

6. The majority agreed the ultimate sanction of withdrawal of an officer's commission should be in place while one respondent reasoned this would only have a real affect if it is mandatory for partners or members to be commissioned officers. Three respondents agreeing to the sanction considered the authority to withdraw

commission should be restricted to the Sheriff Principal who granted it, possibly with some kind of official referral from SCEC.

Two considered powers should include the monitoring of compliance with accounting requirements and, in particular, compliance with the Table of Fees.

One suggestion was that the SCEC promulgate a model form of constitution on which firms and LLPs could base their own and have mandatory provisions relating to the decision making process which would require to be incorporated into the Members' Agreement. It was also suggested there could be sanctions for non- compliance which could take the form of a financial penalty imposed on the LLP or partnership on the basis that, as one of the mandatory conditions, the LLP/partnership was also required to comply with the rules.

Of those disagreeing, one considered SCEC having a monitoring role may result in a slightly more complicated regulation of officers, given the role of the Sheriff Principal in relation to sheriff officers and Court of Session for messenger-at-arms and the officers own society as matters currently stand. Another considered that monitoring the decision making process within a business organisation is not realistic, practicable or necessary.

7. Have you comments on the assessment of officers' activities in relation to increased level of debt collection as mentioned in paragraph 25?

There was a general view that extra-judicial debt collection should be considered as an official duty of sheriff officers with further suggestions from two respondents that officers should be considered for such work as the serving of witness citations and the collection of unpaid court fines as well as debts not constituted by decree.

One respondent commented that while the current rules prohibit officers from undertaking certain business in which they themselves have an interest, a conflict may arise when an officer's business is owned by an organisation with its own business at heart, particularly where those interests relate to the collection of debts which they have purchased. Whilst Section 83 of the Debtor (Scotland) Act 1987 would prevent an officer from enforcing debt that was due to a debt collection company which was a member of an LLP in a case where the officer was also either (i) a member of the LLP, or (ii) had an interest either as a director or shareholder in the debt collection company, the prohibition would not appear to apply in a situation where the officer was simply an employee of the LLP in which the debt collection company was a member. It was therefore recommended that the existing rules be carefully examined and extended where necessary.

8. Should the regulatory regime for enforcement officers be extended to debt collection activities irrespective of whether debts are legally constituted, as discussed in ECOS 3.101-3.107?

Yes No 20 3

There is almost universal agreement to extending the regulatory regime to debt collection activities irrespective of whether debts are legally constituted. This would benefit debtors and creditors in clarifying what can and cannot be done and having some kind of governance. Two respondents considered the regime should not only be restricted to officers of court but should be extended to cover anyone involved in the collection of debts in Scotland, whether legally constituted or not. One respondent foresaw difficulties in jurisdiction over companies from England and Wales, notwithstanding the difficulty of policing underground debt recovery practices.

A respondent against extending the regulatory regime considered OFT guidelines governing the behaviour of organisations involved in debt collection activities are actively enforced and the introduction of further regulations into this area of activity may result in conflict and confusion.

9. Should the legislation be amended to make it clear that the undercutting of statutory fees is prohibited, as suggested in paragraph 32?

Yes No 16 5

Sheriff officers universally agreed that there was no known problem involving the undercutting of statutory fees as under General Regulation 7 to the Act of Sederunt (Fees for Sheriff Officers) 2000 discounting of fees is permitted only between sheriff officers. The area for amendment to legislation is work for which there is no statutory fee e.g. collection of local authority taxation under summary warrant where local authorities' collections are placed out to tender whereby the percentage charge for successful recovery is reduced to a minimal amount by firms to try to obtain the work. Suggestions for overcoming this included introducing a prescribed commission fee and requiring local authorities to pass summary warrants to sheriff officers to execute within a set time.

ISBN: 978-1-78045-148-0 (web only)

APS Group Scotland DPPAS11506 (03/11)