(SCOT LAW COM No 233) Report on Judicial Factors report Report on Judicial Factors Laid before the Scottish Parliament by the Scottish Ministers August 2013 SCOT LAW COM No 233 SG/2013/152 EDINBURGH: The Stationery Office £30.00 © Crown copyright 2013 You may re-use this information (excluding logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit http://www.nationalarchives.gov.uk/doc/open-government-licence/ or email: [email protected]. Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned. Any copyright enquiries regarding this publication should be sent to us at [email protected]. ISBN: 978-0-10-888273-9 Printed in the UK for The Stationery Office Limited on behalf of the Queen's Printer for Scotland. 08/13 Cover and text printed on 100% recycled paper ii The Scottish Law Commission was set up by section 2 of the Law Commissions Act 19651 for the purpose of promoting the reform of the law of Scotland. The Commissioners are: The Honourable Lady Clark of Calton, Chairman Laura J Dunlop, QC Patrick Layden, QC TD Professor Hector L MacQueen Dr Andrew J M Steven. The Chief Executive of the Commission is Malcolm McMillan. Its offices are at 140 Causewayside, Edinburgh EH9 1PR. Tel: 0131 668 2131 Fax: 0131 662 4900 Email: [email protected] Or via our website at http://www.scotlawcom.gov.uk/contact-us NOTES 1. For those wishing further copies of this paper it may be downloaded from our website or purchased from TSO (http://www.tsoshop.co.uk/). 2. Please note that all hyperlinks in this document were checked for accuracy at the time of final draft. 3. If you have any difficulty in reading this document, please contact us and we will do our best to assist. You may wish to note that the pdf version of this document available on our website has been tagged for accessibility. 1 Amended by the Scotland Act 1998 (Consequential Modifications) (No 2) Order 1999 (SI 1999/1820). iii SCOTTISH LAW COMMISSION Item No 3 of our Eighth Programme of Law Reform Report on Judicial Factors To: Kenny MacAskill MSP, Cabinet Secretary for Justice We have the honour to submit to the Scottish Ministers our Report on Judicial Factors. (Signed) LYNDA CLARK, Chairman LAURA J DUNLOP PATRICK LAYDEN HECTOR L MACQUEEN ANDREW J M STEVEN Malcolm McMillan, Chief Executive 24 June 2013 v Contents Paragraph Page Chapter 1 Introduction Our remit 1.1 1 Background to this Report 1.4 1 What's in a name? 1.6 2 Ward/beneficiary 1.7 2 Structure of the legislation 1.12 3 Transitional arrangements 1.16 4 Legislative competence 5 Devolved and reserved powers 1.21 5 Order under section 104 of the 1998 Act 1.22 5 European Union Law and the European Convention on Human 1.30 6 Rights Relationship with Scottish Law Commission project on trusts 1.33 7 Structure of the Report 1.35 7 Business and Regulatory Impact Assessment ("BRIA") 1.37 7 Acknowledgements 1.38 8 Chapter 2 The current law Introduction 2.1 9 Origin of the office 2.4 9 Legislative developments 2.9 11 Acts of Sederunt 2.10 11 Judicial Factors Act 1849 2.12 11 Bankruptcy (Scotland) Act 1856 2.15 12 Court of Session (Scotland) Act 1857 2.16 12 Titles to Land Consolidation (Scotland) Act 1868 2.17 12 Judicial Factors (Scotland) Act 1880 2.18 12 Trusts (Scotland) Amendment Act 1884 2.19 13 Judicial Factors (Scotland) Act 1889 2.20 13 Trusts (Scotland) Act 1921 2.21 13 Conveyancing Amendment (Scotland) Act 1938 2.22 13 Trustee Investments Act 1961 2.23 13 Trusts (Scotland) Act 1961 2.24 13 Law Reform (Miscellaneous Provisions) (Scotland) Act 1980 2.25 14 Bankruptcy (Scotland) Act 1993 2.26 14 Charities and Trustee Investment (Scotland) Act 2005 2.27 14 Nature of the office 2.28 14 Supervision 2.32 15 Fiduciary character 2.34 15 Should judicial factors be "trustees" (within the meaning of the law of trusts)? 2.37 16 vii Contents (cont'd) Paragraph Page Office sui generis 2.41 17 Relationship with bankruptcy legislation 2.43 17 Conclusion 2.44 18 Chapter 3 Appointment of judicial factor Introduction 3.1 19 Process 3.2 19 Jurisdiction 3.4 19 Appointments under other legislation 3.8 21 Appointments under the 1980 Act 3.11 21 Appointments "in the course of other proceedings" 3.12 22 Interim judicial factors 3.15 22 Intimation 3.23 24 Interest 3.24 24 Qualifications for appointment as a judicial factor 3.25 24 Caution 3.28 25 Previous discussion in relation to succession 3.29 25 Caution in relation to judicial factories 3.30 26 Grounds for appointment of judicial factor 3.37 27 Possible 3.40 28 Practicable 3.41 28 Sensible 3.42 28 Future developments? 3.43 28 Property 3.46 29 Companies 3.47 29 Effect of appointment in relation to control over property 3.51 30 Warrant to intromit with the estate 3.65 35 Completion of title 3.66 35 Repeal of existing provisions relating to completion of title 3.68 36 Property held in fiduciary capacity 3.75 37 Registration of appointment 3.84 40 Chapter 4 Duties of judicial factor Introduction 4.1 41 Duties 4.2 41 General duty 4.4 41 Nature of general duty 4.10 42 Duty to manage diligently? 4.13 43 Obligations to be met out of judicial factory estate 4.15 44 Specific duties on appointment 4.17 45 Management plan 4.20 46 viii Contents (cont'd) Paragraph Page Other specific duties 4.26 47 Accounts 4.27 47 Delegation 4.28 47 Taking professional advice 4.29 47 Investment of funds 4.30 48 Litigation 4.32 48 Duty to promote resolution of disputes 4.34 49 Chapter 5 Powers of judicial factor General 5.1 51 Power of judicial factor on a trust estate to act at variance with trust purposes 5.8 52 Additional powers 5.14 53 Power to require information 5.16 54 Chapter 6 Termination, recall and discharge Introduction 6.1 55 Termination 6.2 55 Recall 6.7 56 Discharge 6.8 56 Application to part of the estate 6.9 56 The present law – petition for recall of appointment and discharge 6.10 57 Administrative discharge 6.12 57 Discussion 6.13 57 Disputes over disposal of the estate 6.19 58 Uniform procedure for termination, recall and discharge 6.26 61 Writing off 6.28 61 Recall in the course of a judicial factory 6.30 62 Registration 6.44 66 Judicial factor not to be accountable following discharge 6.45 66 Chapter 7 Miscellaneous matters Introduction 7.1 67 Remuneration of judicial factor 7.2 67 Accountant to fix rates and frequency of remuneration 7.7 68 Outlays 7.10 68 Relations with third parties etc 7.12 69 Expenses of litigation 7.13 69 Personal liability of judicial factor 7.14 70 Judicial factor as representative of the estate 7.15 70 ix Contents (cont'd) Paragraph Page Persons acquiring title from judicial factor 7.16 70 Prescription 7.18 71 Judicial factor to be accountable to the Accountant 7.22 72 Accountability of judicial factor to persons with an interest in the estate 7.23 73 Judicial factors and curators bonis 7.30 74 Wider functions of the Accountant 7.38 76 Section 37 of the 1849 Act 7.42 76 Chapter 8 The Accountant of Court Introduction 8.1 77 Function 8.3 77 Appointment 8.7 78 Powers and duties 8.9 78 Initial powers and duties 8.10 79 Continuing management 8.12 79 Directions to judicial factor 8.13 79 Fees 8.15 80 Information 8.18 81 Particular duties 81 Misconduct by judicial factor 8.21 81 Accounts 8.24 82 Diversity of judgment or practice 8.27 83 Accountant's annual review 8.29 83 Chapter 9 Summary of recommendations 85 Appendix A Draft Judicial Factors (Scotland) Bill 98 Appendix B Draft section 104 Order 138 Appendix C List of respondents to Discussion Paper 140 x Abbreviations and glossary "The 1849 Act" - the Judicial Factors Act 1849 (c. 51). "The 1880 Act" - the Judicial Factors (Scotland) Act 1880 (c. 4). "The 1889 Act" - the Judicial Factors (Scotland) Act 1889 (c. 39). "The 1980 Act" - the Solicitors (Scotland) Act 1980 (c. 46). "The 1998 Act" - the Scotland Act 1998 (c. 46). "The Accountant" – The Accountant of Court. "Addison" – D Addison, Judicial Factors (1995). "Bankton" – Institute (1754). "Bell" – Commentaries (7th Edition, 1870) "Campbell Irons" – J Campbell Irons, Law and Practice in Scotland Relative to Judicial Factors (1908). "Caution" (pronounced "kay-shun") is a guarantee by a third party, normally a financial institution, that it will make good any loss to the factory estate arising through the intromissions of the judicial factor. "The Discussion Paper" – Discussion Paper on Judicial Factors (Scot Law Com Discussion Paper No 146, 2010), available at http://www.scotlawcom.gov.uk/index.php/download_file/view/600/130/ "Erskine" – Institute (1773). "RCS" – Act of Sederunt (Rules of the Court of Session 1994) 1994 (SI 1994/1443) (as amended). "Stair" – Institute (1693). "SME" - The Laws of Scotland (Stair Memorial Encyclopaedia) (1989). "Thoms" – H J E Fraser, Thoms on Judicial Factors, 2nd Edition (1881). "D M Walker" – D M Walker, A Legal History of Scotland Vol III: The Sixteenth Century (1995).