Chamber and committees

Good morning committee, and apologies for my voice.

The Judicial Factors (Scotland) Bill seeks to implement the Scottish Law Commission’s recommendation in its 2013 report on judicial factors. If passed, the bill will put in place an updated and comprehensive regime that will bring clarity, accessibility and efficiency to this vital but outmoded area of law. Reform of the law of judicial factors is perhaps not particularly high profile, but the bill will make important and practical changes for those who are involved with judicial factors in one way or another.

A judicial factor is a person who is appointed by the court to gather, hold, safeguard and administer property that is not being managed properly. Common examples of appointments include where there has been a breach of Law Society of Scotland accounting rules, where a sole practitioner dies and where there is no executor who is willing to carry out the administration of an estate. There are also circumstances in which a judicial factor could usefully be appointed but that does not happen for a number of reasons—say, where the estate of a missing person needs to be managed.

The overall modernisation of the office should make the appointment of a judicial factor more suitable in cases that involve missing persons, but I understand the complexities and difficulties that come with dealing with a loved one’s estate in such circumstances. That is why I have agreed to work with the charity Missing People on the preparation of guidance for those who are considering applying to appoint a judicial factor.

The SLC recommends that some of the bill’s provisions be extended to the whole of the United Kingdom, and my officials have started the process of engaging with the UK Government on pursuing a section 104 order to that end. The order would include provisions to allow the judicial factor to exercise their functions in relation to the whole estate, regardless of where in the United Kingdom the property is situated, and provisions with regard to a judicial factor’s powers to obtain information from UK bodies and UK Government departments.

The Law Society of Scotland has highlighted the problem of the operation of the Solicitors (Scotland) Act 1980 with regard to incorporated practices, and it has asked for that act to be amended to extend the existing intervention powers in relation to sole practitioners to such practices. Amendments that have been lodged to the Regulation of Legal Services (Scotland) Bill will address those concerns.

The bill introduces a statutory framework that sets out clearly the essential features of the office of judicial factor and the broad parameters within which it should operate, and it will be to the benefit of all those who are involved in any capacity in judicial factories. I know that a number of areas of detail came up during the committee’s stage 1 evidence sessions. I have worked with the committee and MSPs on another SLC bill in the current session in order to address the issues that have been identified, and I will continue to do so as the bill progresses through Parliament.

I look forward to answering the committee’s questions.

Section 10 of the bill is clear that judicial factors must

“hold, manage, administer and protect the ... estate for the benefit of persons with an interest in the estate.”

I consider that most judicial factors will be expected to manage the estate in the interests of the missing person. The considerations that a judicial factor will take into account when making decisions—for example, whether they can take into account assumed preferences of the missing person—will depend on the purpose of the appointment and the specific circumstances of each individual case.

The bill is flexible, and the person who is seeking the appointment of a judicial factor may ask for additional powers to be conferred on them, such as the power to make gifts. It would be possible for a judicial factor to manage the estate in the interests of the missing person and to make payments to or take actions to benefit family members of the missing person, such as their children.

I understand that some concerns have been raised about the interaction between the bill and the charities legislation, which I have taken away to consider.

The bill is concerned with the general approach to the appointment of judicial factors. A judicial factor can also be appointed under more specific legislation, such as the charities legislation, when that is provided for, and the bill does not change that. The requirements under the bill will exist alongside any requirements in other areas of law such as charities law, trust law and company law, depending on the particular circumstances of the case, and a judicial factor might be required to comply with the relevant requirements in such areas. Section 10 of the bill makes it clear that the functions of a judicial factor under the bill are subject to provisions in other legislation.

The SLC has suggested some specific areas for possible amendment and it is important that we take time to explore those further, as well as the suggestions of other interested stakeholders including the Office of the Scottish Charity Regulator. I will write to the committee ahead of the stage 1 debate to set out my thoughts on the matter.

The powers under sections 12 and 39 operate within the framework and are consistent with the data protection legislation. Sections 12(7) and 39(6) simply clarify, for the avoidance of doubt, that those provisions are not intended to override the data protection legislation. Provisions that make it clear that data protection is not overridden are not unusual. For example, section 12 of the Redress for Survivors (Historical Child Abuse in Care) (Scotland) Act 2021 and paragraph 24 of schedule 1 to the Elections Act 2022 make similar provisions. It is considered that such provisions can be useful in clarifying the interplay with data protection legislation.

As members know, data protection legislation is a reserved matter. There is information on the Information Commissioner’s Office website, if people are seeking it. At this stage, we do not think that we need anything on the face of the bill regarding that.

I am happy to take that point away and consider it.

The assessment would be based on the applicant, and not on the missing person. The applicant would be able to get legal aid for advice and guidance from the solicitor initially, to work out whether they should go for a judicial factor or not and whether doing so would be relevant for them. If a person is on benefits, they would have their court fees paid by legal aid, and the applicant is the person who would be assessed.

The process for appointment is such that the accountant is not involved at the initial stages of an application. At that stage, it is a matter for the court alone. It would be open to the court to make inquiries that it considers appropriate to assist in deciding whether the person seeking appointment is suitable, and that might include whether they are currently bankrupt.

The accountant acts as a supervisor to factory estates, and such checks might be helpful in making sure that the function is carried out appropriately. It seems that the accountant already carries those checks out, so I do not think that anything further is needed.

Yes, my officials have.

Yes, of course. Thank you for the question, Mr Mundell. There has been some confusion about what the Trusts and Succession (Scotland) Act 2024 allows in this area. To clarify, if there is no contrary intention in the trust deed, the 2024 act allows trustees properly to take non-financial considerations into account when choosing between investments for the trust. However, that is only in situations where the environmentally friendly investment, for example, has the best financial prospects or has financial prospects that are equally as good as those of another investment. In other words, trustees are not always bound to maximise financial returns where a suitable investment would be consistent with the purposes of the trust or where they have taken proper advice. Rather, the investment policy that trustees adopt should reflect the purposes of the trust.

The questions put to stakeholders by the committee included whether judicial factors should have a power to invest in lower-performing investments if they meet specified ESG criteria. That is different from the provision in the 2024 act, and I do not agree that there is a need expressly to confer such a power on a judicial factor. Not all judicial factors will need to make investment decisions, and the bill requires judicial factors to consider whether it would be appropriate to invest. That is not likely to be the case for all judicial factories.

The bill is not prescriptive as to how to invest, and it leaves it up to the judicial factor to decide on that, taking professional advice where appropriate. I am willing to look into the matter further, however, and I have asked my officials to write to stakeholders in the coming months, asking them for their views on whether an express power similar to those available to trustees would be welcome. I am happy to write to the committee ahead of the next stage with my thoughts on that.

I consider that an additional power that would allow judicial factors to seek directions from the court is not necessary, given the nature of the office and the fact that there are other options available.

Judicial factors accept offers on the understanding that they are there to use their judgment, take professional advice where appropriate and make decisions in relation to the estate. If they have any doubts as to whether they have the necessary powers to take a particular course of action, they can apply to the court for additional powers under section 11 of the bill. That can be done at any time after the initial appointment.

While the court directions might be useful in respect of trust estates and executries, that is because there is no equivalent to the Accountant of Court, and the only option is to go to court. Judicial factors, on the other hand, are supervised by the Accountant of Court, and if they are unsure about what they should or can do, they should consult the Accountant of Court and agree on a way forward. As such, I do not think that we need to add another route for directions, in particular as that would add a significant cost to the factory estate, given that seeking directions from the court comes with court fees and legal expenses. Before the committee reaches any conclusion on the issue, however, I urge you to seek the views of the Lord President in that regard.