Chamber and committees

Absolutely. We will take that away and consider it.

That is fine.

I do not see any difficulties with the report on serious misconduct by a solicitor acting as a judicial factor being sent to the Law Society, because my understanding is that, if there was a complaint, it would be sent to the Law Society in the first instance and then to the SLCC.

The Law Society advised my officials that, under the provisions of bill, if the accountant were to report serious misconduct by a solicitor, the Law Society would pass that on to the SLCC as a matter of practice, and there is nothing in the bill that would prevent the accountant from sending a copy of the report to the SLCC as well.

However, I will consider the matter further to see whether what would happen in practice could be more accurately reflected in the bill.

Currently, if someone has a complaint against a judicial factor, they can raise that directly with the judicial factor or with the Accountant of Court, given the accountant’s supervisory role. That will continue under the bill, with the accountant being required to investigate any concerns in relation to judicial factors acting.

The bill also gives the accountant a power to issue directions to the judicial factor and, further, if the accountant concludes that there has been serious misconduct or material failure, they must refer the matter to the court to be dealt with. Most judicial factors are members of a regulated profession, and that is another way for complaints to be heard.

The committee has heard from a number of stakeholders, and there does not seem to be any support for a new complaints procedure to be set out in the bill. I consider the current approach to be a practical and sensible way to deal with complaints at the moment.

Does Michael Paparakis want to add anything?

Yes. The Regulation of Legal Services (Scotland) Bill team is working on amendments with the Law Society and other MSPs to address that concern. I am comfortable that that bill will address the specific issue.

I note that we recently hosted Lady Paton, who came here with people from all over the UK to show them around the Parliament. They were really impressed that we had the committee, which enables scrutiny of the proposals that are put forward. That is positive.

Currently, only some kinds of appointments of judicial factors need to be publicised and most respondents to the SLC’s consultation were of the view that some form of publication of appointments was necessary. The SLC consulted with the keeper of the registers and concluded that registration in the register of inhibitions was inappropriate.

I do not know whether Michael Paparakis wants to add anything to that.

We will talk to stakeholders, and I will then get back to you on that. I appreciate the points that you have made.

From reading the bill as a whole, I think that it is clear that the nature of the judicial factor’s role is fiduciary. While the term “fiduciary duty” is not used in the bill, the Government considers that the bill will achieve the same effect.

A fiduciary duty is essentially a duty to act in good faith in the interests of another, rather than in one’s own self-interest. Section 10 of the bill makes it clear that judicial factors have

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

It also requires judicial factors to

“exercise care, prudence and diligence”

and

“take professional advice when appropriate.”

The Scottish Law Commission told the committee that it had set out

“very clearly in”

its

“report that the essence of the institution was that it was fiduciary”—[Official Report, Delegated Powers and Law Reform Committee, 16 April 2024; c 16.]

and that it was not considered “necessary” to include a specific reference to that in the bill.

I understand that some stakeholders have suggested that the matter should be clarified, but others, such as the SLC and the Faculty of Advocates, have pointed out that to add even a simple statement to that effect could have unintended consequences. However, it might be possible to add something to the explanatory notes to the bill in order to make that point clearer for users of the legislation, and I am willing to consider that further.

Section 23 of the bill contains a general rule that any costs of litigation that is pursued by the judicial factor

“on behalf of the factory estate”

are

“to be met from the factory estate.”

The general rule is, however, “Subject to section 24” of the bill. Under section 24, the court is given the power to find a judicial factor personally liable if they have breached their duty and the court finds it “appropriate” to hold them “personally liable”.

We need to strike the right balance to allow a judicial factor reasonable space to manage an estate in good faith. I do not think that a judicial factor should be found personally liable if, with the benefit of hindsight, their actions are found to have been unreasonable but there has been no breach of duty.

Given the continuing need for competent judicial factors, we must be careful, and we do not necessarily want to put blocks in the way of people wanting to be appointed. Allowing for judicial factors to be held personally liable for taking actions that do not amount to a breach of duty would, in my view, be likely to discourage judicial factors from pursuing litigation that is in the interests of the estate, and perhaps even discourage individuals from acting as judicial factors altogether.