Good afternoon. The first item of business this afternoon is stage 3 of the Succession (Scotland) Bill.
In dealing with the amendments, members should have the bill as amended at stage 2, which is SP bill 75A, the marshalled list, which is SP bill 75A-ML (Revised), and the list of groupings, which is SP bill 75A-G (Revised). The division bell will sound and proceedings will be suspended for five minutes for the first division of the afternoon, and the voting period after that will be 30 seconds. Thereafter, I will allow a voting period of one minute for the first division after a debate.
Members who wish to speak in the debate on a group of amendments should press their request-to-speak buttons as soon as possible after I call the group. I would be grateful if members could now refer to the marshalled list of amendments.
Section 6—Death before legacy vests: entitlement of issue
Group 1 is on survivorship. Amendment 1, in the name of the minister, is grouped with amendments 7, 9 and 10.
Section 31 of the Succession (Scotland) Act 1964 provides that, in a common calamity, the younger person is regarded as having survived the older. As recommended by the Scottish Law Commission, section 9 of the bill replaces that presumption with a new survivorship provision that provides that, in a common calamity, neither person is presumed to have survived the other.
We have identified a small number of statutory provisions that need to be brought into line with the new “failed to survive” terminology to ensure that they work properly. They are the provisions that allow direct descendants to inherit if a child predeceases a parent. Under the existing law, those provisions are not relevant to a common calamity involving a parent and child because the child, as the younger person, would always be regarded as surviving the parent.
Dr David Nichols from the Law Society of Scotland highlighted the tension between sections 6 and 9 through the following example. A father leaves the residue of his estate to his daughter, and then both father and daughter die in circumstances in which the order of deaths is uncertain. Section 9 says that the daughter fails to survive her father, but her children cannot inherit under section 6 because the daughter did not die before the date of vesting. A similar point arises in sections 5, 6 and 11 of the 1964 act, which rely on the primary beneficiary predeceasing.
The amendments in group 1 replace the references to “predeceased” in those sections with “failed to survive” so that all the provisions in the bill and the 1964 act are in line with, and get the benefit of, the new survivorship provision in section 9 of the bill. Direct descendants of a child will therefore be able to take the child’s share of an estate should the child and the parent die in a common calamity.
TrustBar gave written evidence on the matter to the Delegated Powers and Law Reform Committee without the benefit of sight of the amendments. I hope that it is reassured by the focus in the amendments on the terminology that is used in survivorship provisions.
I move amendment 1.
Amendment 1 agreed to.
Before section 18
Group 2 is on executors. Amendment 2, in the name of the minister, is grouped with amendments 3 to 5, 5A, 5B, 6 and 8.
Currently, all executors dative except spouses whose prior rights exhaust an estate are required to find caution. An executor dative is usually appointed by the court because there is no will for the administration of an estate. The Scottish Law Commission recommended that the statutory requirement on executors dative to obtain a bond of caution should be abolished. A bond of caution is an insurance policy that protects the beneficiaries and creditors from loss caused by maladministration, negligence or fraud. The SLC made that recommendation on the basis of the financial and administrative burdens that are created and the difficulties that exist in obtaining bonds of caution, the cost, the limited number of providers, delays in issuing caution and the conditions that providers sometimes attach to the bond.
We consulted on the abolition of bonds of caution along with the other provisions in the bill. There was support for their abolition, but it was clear that, at the least, alternative safeguards would be needed in some circumstances, so we said that we would not abolish bonds of caution without further consultation on such safeguards. The bill therefore did not include any provision on bonds of caution.
However, since that decision was made, Zurich Insurance—one of the two institutional providers of caution—has said that it will, from 1 February 2016, stop issuing bonds of caution to executors. The only provider of caution is RSA Insurance Group, which requires that a solicitor be appointed in each case; Zurich does not. That will impact adversely on estates that could be wound up without the involvement of a solicitor. In particular, under section 3 of the Intestates Widows and Children (Scotland) Act 1875 confirmation in uncontentious small estates—currently under £36,000—can be applied for under a simplified procedure in which the sheriff clerk prepares the inventory and takes the oath. That supported process means that an executor dative does not have to engage a solicitor unless he or she wishes to do so, which means that the estate does not have to bear legal costs.
In order to minimise the impact of the change in the caution market with the attendant costs on uncontentious small estates, amendment 2 will amend the Intestates Widows and Children (Scotland) Act 1875 and the Confirmation of Executors (Scotland) Act 1823 to remove the requirement for executors dative in those estates to find caution. The amendment expressly provides that it will apply to on-going applications that have not been determined by the time the change comes into force.
I turn to amendment 3. Section 2 of the Confirmation of Executors (Scotland) Act 1823 requires caution to be found in all cases except where there is an executor nominate or the executor dative is the intestate’s spouse and has right, by virtue of sections 8 and 9(2) of the Succession (Scotland) Act 1964, to the whole estate. Civil partners have the same rights under the 1964 act but are still required to find caution.
Amendment 3 will extend the spousal exemption to civil partners whose prior rights under sections 8 and 9(2) of the Succession (Scotland) Act 1964 exhaust the whole estate.
Amendment 3 also provides powers to Scottish ministers to modify section 2 of the Confirmation of Executors (Scotland) Act 1823 to add to the cases in which caution is not required to be found.
Having only one provider of caution is undesirable, and although the remaining provider has given us assurances that it has no intention of withdrawing from the market, we are not able to say what business decisions that remaining provider may make in the future. Therefore, we need a solution to deal with the possibility of the remaining provider withdrawing, otherwise we will be in the position in which a bond of caution is required as a matter of law before confirmation can be granted but there is no ability to obtain it. Given that uncertainty, we need to be able to deal with a range of potential matters. Amendment 4 therefore provides a power for Scottish ministers to abolish the requirement for caution altogether.
I turn to amendments 5, 5A and 5B. In the light of that uncertainty, and in order to ensure that we can deal with the fullest range of situations in the most appropriate way, including the issues that were raised in the consultation about the need for safeguards, amendment 5 will provide broad powers for ministers to be able to make regulations setting out conditions that must be met before courts may appoint an executor dative. The conditions might include the court’s being satisfied that the person is suitable for appointment, or that the court be provided with particular information about the person seeking appointment, or the estate.
The regulations may apply to all executor dative appointments or to particular types of executors dative. If the regulations make provision that requires the court to determine the suitability of an executor dative, the regulations may set out factors or information that the courts should have regard to in determining if the person is suitable for appointment; they may require that the court should be satisfied that the individual is suitable if certain conditions are met; or they may allow or require the court to impose its own conditions, which must be satisfied before a person is suitable for appointment. To provide further flexibility, the regulations may make different provision for different executor datives.
I would like to acknowledge the helpful suggestions that were made by Eilidh Scobbie at this week’s Delegated Powers and Law Reform Committee evidence session. We have taken on board her comment in relation to amendment 5, as set out in manuscript amendments 5A and 5B, which are intended to make clearer the intention of the provision.
Amendment 6 provides that regulations made in exercise of the powers under amendments 3, 4 and 5
“may include ... supplementary, incidental, consequential, transitional, transitory or saving provision“
as required and will be subject to affirmative procedure. The regulations may also modify enactments. Where regulations are made to abolish the requirement for caution, they may modify the act resulting from this bill. For example, if the requirement for caution was abolished completely, the power to make exceptions would no longer be necessary and would be repealed.
Amendment 8 provides that amendments 2 to 6 will come into force on the day after royal assent in order to minimise any delays in confirmation that might be caused by Zurich Insurance’s withdrawal.
By virtue of the specific wording in amendment 2, the abolition of the requirement of caution will apply in relation to any applications under the proceeding applying to small intestate estates that have not been determined before the amendments come into force. The Scottish Courts and Tribunals Service has assured us that the small gap between the withdrawal of Zurich Insurance and the coming into force of the amendments can be managed by it administratively.
We did, of course, look at a number of alternatives, ranging from doing nothing to making wholesale changes with regard to bonds of caution, but for the reasons that I have already outlined the former option would not have been acceptable, and complete reform would have been neither practicable nor possible, given the many issues that were raised in response to our first consultation that have yet to be addressed with the benefit of our second consultation. Nor would emergency legislation have been an ideal option, given that the amendments lie within the scope of the bill.
In considering the evidence, the committee asked whether we had considered a state-funded alternative to bonds of caution that are provided by insurers and pointed to the possible model of the guarantee that is provided by the keeper of the registers of Scotland. When registering an application, the keeper will warrant to the applicant that the title sheet is accurate and might be liable to pay compensation to the applicant if the title sheet is inaccurate and the inaccuracy is rectified. That state guarantee of title was continued under the Land Registration etc (Scotland) Act 2012. Registers of Scotland operates as a trading fund and is entirely self-funded, which ensures flexibility in managing its income and expenditure. Given the funding position and the keeper’s involvement in the registration process, we do not think that the model could translate into protecting beneficiaries and creditors from maladministration by an executor. A key difference with the keeper’s guarantee is that the applicant for registration is compensated, not a third party relying on the register.
Overall, therefore, I do not believe that such a solution is desirable. Apart from the existing legal impediment, there would, in any case, be many considerations with regard to budget and potential state-aid tests that would need to be resolved.
I move amendment 2.
It is strange for the convener of the Delegated Powers and Law Reform Committee to get on his hind legs for a stage 3 debate, but I want to talk briefly about the processes that were used to examine the amendments, because I think that they are instructive.
As the minister has made clear, the matter has come upon us rather suddenly. Just over a week ago, on Tuesday 19 January, officials briefed us on the need to look at the amendments; at that point, my committee decided that it would like to take evidence on the proposals, so I am grateful to the clerks—who should be mentioned in dispatches—for the speed with which they managed to put together the panel of witnesses who addressed us on Tuesday 26 January.
The minister has already referred to Eilidh Scobbie, who is a partner in Burnett & Reid LLP, and we also heard from Dr Dot Reid from the University of Glasgow and from John Kerrigan, who is a partner in Morisons Solicitors LLP, who represented the Law Society of Scotland. They gave us a fascinating insight into how they see the issue and provided us with a great deal of reassurance. However, they also raised one or two questions that I am grateful to the minister for answering—he has just addressed several of the points that were highlighted—and, as he pointed out, Eilidh Scobbie suggested a couple of amendments that have been lodged as amendments 5A and 5B. I am grateful to the Presiding Officer for accepting the amendments in manuscript form.
I say all this simply to demonstrate that Parliament is capable of being very swift on its feet when it is forced to be. I am grateful to everyone involved, particularly the witnesses who came across Scotland to give evidence, and for the forbearance of my clerks and my committee in ensuring that we got a great deal of reassurance about the proposals that are before Parliament this afternoon.
I, too, welcome the amendments, which were precipitated by the insurance company Zurich’s withdrawal from providing bonds of caution. I also welcome the minister’s comments, some of which, as Mr Don has already made clear, address the outstanding questions that were left hanging in the air after our committee met on Tuesday.
We think that the Government did the correct thing in lodging the amendments, and we as a committee were reassured when our expert witnesses agreed. We are also aware of the very tight timescale that the taking of evidence and the drafting of amendments have been compressed into, and we know that, should the amendments have any unforeseen consequences or turn out to be deficient in some way, they can be looked at in the next succession bill, which we hope will be introduced in the next parliamentary session.
There appear to be three ways of dealing with wills: first, there is an executor or executrix nominate, who is decided by the person making the will. Secondly, there is an executor or executrix dative in cases in which an executor has to be appointed. Thirdly—this applies in the overwhelming number of cases where there is no confirmation whatever—there is an informal winding up of the estate itself.
The issue that we are discussing with regard to this group of amendments relates to cases in which people die intestate or the executor who has been nominated by the person in question is not available and the court needs to appoint another.
If one message comes out of the debate that I hope people will read, it is that this will not touch them at all if they make a will. I am not giving legal advice, but apparently a will can be as short as 10 words: “I appoint X as executor. I leave everything to Y.” It is not difficult to do. Please, everyone: get a bit of paper, write it down and make sure somebody has that bit of paper. Then, none of this complication will touch what happens after you die.
I am happy to support the minister’s proposal.
14:45Amendment 2 agreed to.
Amendments 3 and 4 moved—[Paul Wheelhouse]—and agreed to.
Amendment 5 moved—[Paul Wheelhouse].
Amendments 5A and 5B moved—[Paul Wheelhouse]—and agreed to.
Amendment 5, as amended, agreed to.
Amendment 6 moved—[Paul Wheelhouse]—and agreed to.
Section 24—Consequential provision
Amendment 7 moved—[Paul Wheelhouse]—and agreed to.
Section 26—Commencement
Amendment 8 moved—[Paul Wheelhouse]—and agreed to.
Schedule—Repeals
Amendments 9 and 10 moved—[Paul Wheelhouse]—and agreed to.
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