Chamber and committees

On a point of order, Presiding Officer. I would have voted yes, too.

Moved, Presiding Officer.

I thank the members of the Delegated Powers and Law Reform Committee for their thoughtful and helpful consideration of the Trusts and Succession (Scotland) Bill. I very much welcome their thorough scrutiny of the bill. I also thank the committee clerks for all their hard work and the stakeholders who contributed views and their time as part of parliamentary scrutiny.

This is a Scottish Law Commission bill, so I thank the commission for the considerable work that went into this law reform project. In particular, I thank Lord Drummond Young, who, even though he is no longer chair of the commission, has given his time generously. I know that he is in the public gallery, along with Lady Paton and Charles Garland from the commission.

The Scottish Government has had useful engagement with a number of stakeholders. My officials have met the Law Society of Scotland on several occasions, and they have met the Society of Trust and Estate Practitioners Scotland and the Office of the Scottish Charity Regulator. Those organisations’ practical experience has been especially important in helping me to reach policy decisions on the content of the bill.

Throughout the process, I have listened carefully to the views that have been expressed to the Scottish Parliament and to the committee’s views, and the bill has been amended as a result. I was happy to lodge stage 2 amendments to implement some of the committee’s thoughtful recommendations, particularly on increasing the safeguards for sole trustees, which was a particular concern that the committee raised after hearing evidence directly from trustees. I have also been pleased to support stage 2 amendments that committee members lodged, and I had helpful engagement with Jeremy Balfour on, for example, his amendment that extended—indeed, doubled—the time during which a cohabitant has the right to make a claim on the deceased cohabitant’s estate when there is no will. Today, we have agreed adjustments to other provisions to ensure that they work as intended.

The bill addresses important issues when someone has died without leaving a will, which is, unfortunately, a relatively common occurrence.

I will briefly remind the chamber of some of the bill’s key provisions and what they are intended to achieve. Most of the bill’s provisions relate to the law of trusts and can be found in part 1. The bill makes important changes to trustees’ powers. The current legislation, which dates back to 1921, no longer gives trustees the powers that they need to administer a trust effectively. That makes it difficult for trustees to comply with their paramount duty, which is to give effect to the trust’s purposes in the best interests of the beneficiaries.

An important reform is the conferral of a default general power, which replaces what is an inflexible, complex and restrictive statutory list of powers. As a result, trustees will be able to have all the powers that a competent adult has in relation to their own property.

The bill reforms the duties that are placed on trustees. Those changes better reflect the need for transparency in modern-day trusts. For example, the bill clarifies what information a beneficiary is entitled to expect or request from the trustees. The trustees’ information duties go to the heart of trust law, and the reforms enable beneficiaries to exercise their power to hold trustees to account.

The bill also makes a number of important changes to how trusts are administered, how trustees are appointed or removed and how trustees resign. Many members in the chamber may be aware—perhaps through their constituents—of the fallout from the failure of McClure Solicitors. I am pleased that, collectively, we have been able to make amendments at stages 2 and 3 to respond to the significant practical difficulties that co-trustees may have in removing a trustee who was appointed as a trustee in their professional capacity and is no longer a member of their profession.

The bill cannot resolve the wider issues that the collapse of McClure’s has caused. I know that Stuart McMillan has a keen interest in the matter, and we recently met to discuss what could be done to help those who have found themselves caught up in the situation. I welcome the engagement with him, and I look forward to working constructively with him on it.

Part 2 deals with reforms to the law of intestate succession. The bill implements a Scottish Law Commission recommendation of 2009 so that, when a person dies without a will and is survived by a spouse or civil partner but not by children, the spouse or civil partner will inherit the whole of the net intestate estate. When the Scottish Government consulted on that in 2015, there was agreement with the proposal, and the Scottish Government’s response committed to implementing the recommendation.

I am pleased that we have been able to address the issue, which, depending on the composition and size of the estate, has resulted in the bulk of the estate passing to parents or siblings rather than the surviving spouse. That is not what people expect to happen, and the bill will remedy that situation. We have also taken the opportunity to amend section 2 of the Succession (Scotland) Act 2016 to clarify the drafting so that it is not open to any unintended interpretation.

Finally, in respect of reforming the law of succession, I was pleased to lodge stage 2 amendments that addressed the unacceptable prospect of a convicted murderer continuing to act as executor of their victim’s estate. There is some uncertainty about the current position on that in Scots law, but the amendments will place it beyond any doubt that an executor who is convicted of, or is being prosecuted for, the murder or culpable homicide of the deceased will be regarded as unfit for that office and can be removed by the court, and that a sheriff must refuse any application for appointment as an executor dative in the same circumstances.

Those amendments fulfil a previous commitment that the Scottish Government made. They also implement a recommendation that the committee made, and I hope that they bring the necessary legal certainty to those who are experiencing that difficult situation. I am convinced that the bill will result in reforms to the law that will benefit all those who are involved in trusts.

I move,

That the Parliament agrees that the Trusts and Succession (Scotland) Bill be passed.

The amended section 5 provides that a sole trustee must have

“accepted office in writing”

or otherwise have

“acted in a way which indicates that they have accepted office”.

I understand that the policy intention behind the stage 2 amendment was to make sure that the office of sole trustee is not forced upon someone against their wishes. Amendment 1 provides flexibility in the way that the office can be accepted but does not fundamentally alter the policy intention. A sole trustee would still have to accept office, but that could be done verbally, in writing or by some other means.

Moving on, I support Stuart McMillan’s amendments 2 and 2A. Amendment 2, if amended by amendment 2A, will mean that, where two or more professional trustees have been appointed who are each no longer a member of the regulated profession or are not entitled to practise, when it comes to a decision to remove either of them, neither of those trustees is to be regarded as able to make the decision. That will prevent a potential and undesirable impasse.

I understand that Mr McMillan, in the light of comments from the Law Society of Scotland, has decided not to proceed with the provisions in amendment 2 that would have built on the stage 2 amendment that I lodged that allowed co-trustees to remove one of their own where the trustee being removed has been appointed in their capacity as a member of the profession but has ceased to be a member of that profession. The relevant provisions in amendment 2 would have extended that to professional trustees who provide their services through a company or partnership. I understand that, although the Law Society agrees with the principle, it has concerns about potential unintended consequences. It is therefore sensible to take more time to look at the issue, and I am happy to continue to work with Mr McMillan to consider how further changes might be made to other legislation.

Amendments 3 and 4 are in my name. A person who has been removed from office as a trustee may require to take certain actions after being removed. That might include updating information that is held in statutory registers, and failure to do so may result in criminal liability. Although I believe that, in the overwhelming majority of cases, trustees would take the sensible action of informing removed trustees of their date of removal, I understand that that would not always be the case. For example, in a small family trust, relationships between trustees might be so strained that what appears to be sensible and practical to us would not be to them.

My amendments provide a clear statutory statement that will be of assistance to professional and non-professional trustees. When a trustee is removed from office, they must be given notice of their removal as soon as is reasonably practicable after the decision is made.

I ask members to support the amendments in the group.

I move amendment 1.

No, thank you.

Amendment 7 agreed to.

One specific issue that surfaced during stage 1 proceedings concerned the use of nominees and sub-custodians in certain situations. Amendment 13 is a response to the view that section 19, as drafted, might not go far enough in capturing the ways in which trusts are used in the financial services sector. That is an extremely technical matter involving financial regulatory arrangements and how trustees can use (a) nominee custody structures and (b) sub-custodians.

My officials have been discussing the matter, but it has not been possible to reach a conclusion in time for stage 3. Clarification may nevertheless help to alleviate concerns that trustees will not be complying with trust law when they use custodian arrangements in practice. Accordingly, amendment 13 introduces a narrow power to allow Scottish ministers, by regulations, to

“specify particular circumstances which may constitute a good cause for the purpose of”

section?19(8).

No, I have nothing to add.

Amendment 1 agreed to.

Section 7—Removal of trustee by co-trustees

Amendment 2 moved—[Stuart McMillan].

Amendment 2A moved—[Stuart McMillan]—and agreed to.

Amendment 2, as amended, agreed to.

Amendment 3 moved—[Siobhian Brown]—and agreed to.

Section 8—Removal of trustee by beneficiaries

Amendment 4 moved—[Siobhian Brown]—and agreed to.

Section 12—Making of decision

Yes.

Section 12 is generally a default section that applies to a trust unless the trust deed provides otherwise. At stage 2, my amendment to this section was accepted. It provided that, in a public trust, a trustee should not be disqualified from taking part in the decision-making process because they are part of the section of the public that the decision is intended to benefit. Stakeholders have since pointed out that public trusts may be intended to benefit the public at large rather than a particular section of it. My amendments 5 and 6 take that into account and clarify the matter. Those amendments would not allow a trustee to participate in decisions in which they have a particular interest that is specific to them as an individual.

Amendments 14 and 15 pick up on a concern that was raised at committee at stage 2, amendments on which were voted on but defeated. Having discussed the matter further with the Law Society and the Scottish Law Commission, I decided to lodge amendments 14 and 15, which are slightly adjusted from those that were lodged at stage 2. My view is that the amendments deal with the issue that was identified by the Law Society without unnecessarily widening the protection that section 30 offers to beneficiaries.

Section 32 provides that, as a default provision, a trustee is personally liable for any loss to a beneficiary that arises from the trustee’s own acts or omissions or for any loss to a beneficiary that arises from a co-trustee’s breach of trust or breach of fiduciary duty in certain circumstances. Some questions have been asked about how section 32 interacts with other sections of the bill on trustee liability, and I think that that matter can be usefully clarified. Therefore, amendments 16 and 17 make it clear that a trustee’s personal liability under section 32 is to be read together with the bill as a whole. Section 32 will not impose an unqualified personal liability for losses that are sustained by a beneficiary as a result of a trustee’s actions or omission.

Amendment 18 is a minor amendment to ensure consistency of terms used in certain sections of the bill imposing personal liability on trustees. In some sections, the bill has been drafted using the term “private property”; in others, the term “personal property” is used. Amendment 18 means that the term “private property” will be used throughout the bill.

Amendment 19 replicates changes that were made to section 35(3) at stage 2 so that the bill is consistent.

Finally, amendment 20 is a minor amendment to ensure consistency in the drafting. Although the amendment substitutes some wording, it does not affect the underlying policy intention.

I ask the chamber to support the amendments in the group.

I move amendment 5.

Amendment 5 agreed to.

Amendment 6 moved—[Siobhian Brown]—and agreed to.

Section 17B—Charitable trusts: sale of property

I am sorry. Are we moving on to the next group?

Section 17B was added by Jeremy Balfour’s amendment 47 at stage 2. That amendment allows a charitable trust to sell heritable property—such as an old church building or a town hall—at less than best value if the purchaser is another charitable trust. At stage 2, I expressed my concerns about the drafting of section 17B and the concerns of the Office of the Scottish Charity Regulator.

Amendments 7 to 10 and 12, in my name, are an attempt to bring the section more into line with similar provisions in the bill on trust law and to link the section more closely to charity law. First, my amendments make sure that the charitable trust selling the property must have the power to do so and that charity trustees must have regard to their statutory duties under charity legislation. That will help to prevent situations where charitable trustees sell heritable property that is essential to delivering the trust’s purposes.

Those amendments also seek to widen the scope of section 17B so that all kinds of charities in Scotland and elsewhere in the UK can benefit from Jeremy Balfour’s amendment. Currently, the purchasing charity must take the legal form of a trust, but only 12 per cent of registered charities in Scotland do so at present. My amendments will allow a charity registered in Scotland or elsewhere in the UK, taking any legal form, to benefit from the section. I understand that charities often work across different jurisdictions in the UK, and this provision will be of benefit to them. The amendments also include a power to broaden the provision out in the future.

Amendment 11 is a transitional amendment that applies section 17B to all charitable trusts created after the section comes into effect and is without prejudice to any current common law position.

I pay my thanks to Jeremy Balfour for engaging constructively with me on this issue, and I ask the chamber to support all the amendments in the group.

I move amendment 7.