This blog post provides an update on what happened at Stages 1 and 2 of the Judicial Factors (Scotland) Bill (‘the Bill’). This is in advance of Stage 3 consideration of the Bill on 10 December.
Background to the Bill
This technical piece of legislation is a Scottish Government Bill, introduced on 5 December 2023. It originated in the work of the Scottish Law Commission (‘the SLC’). This is the statutory body which makes recommendations for law reform to Scottish Ministers.
What the Bill does
The Bill would substantially reform the law relating to judicial factors.
A judicial factor is a person that the court can appoint to manage property which is not being appropriately managed, or otherwise would not be appropriately managed. The property in question is usually referred to as the estate. At present, most individuals appointed to the role of judicial factor are legal and financial professionals.
Currently, individual statutes set out specific circumstances in which judicial factors can be appointed. However, appointments of judicial factors are currently relatively rare in practice. One Scottish Government policy aim is to make the appointment of a judicial factor more attractive as an option in a wider range of circumstances. Another policy aim is to clarify the law, including the extent of a judicial factor’s powers, an area where there appears to be particular uncertainty.
The Bill is split into six parts, as follows:
- Part 1 coves a range of topics associated with the appointment of a judicial factor
- Part 2 and schedule 1 cover the functions of a judicial factors, with the term ‘function’ covering both powers and duties
- Part 3 covers some issues associated with the judicial factor’s legal relationships with third parties, that is individuals and organisations not otherwise directly connected with the estate
- Part 4 makes provision on topics associated with the end of the judicial factoring arrangement and a judicial factor’s role in the estate
- Part 6 is a miscellaneous and general part of the Bill, which includes section 50, where some (but not all) of the legal terms used in the Bill are defined.
A SPICe Briefing, published in advance of Stage 1 consideration of the Bill, looks at Part 1 and 2 of the Bill in detail.
Stage 1
The Delegated Powers and Law Reform Committee (‘the Committee’) was the lead committee for Stages 1 and 2 of the Bill.
The Committee’s Stage 1 consideration took place in April and May 2024 and its Stage 1 report was published on 14 June 2024. Issues covered in the Stage 1 report included the Bill’s applicability to judicial factors appointed to the estates of missing people and to the estates of charities. The Scottish Government’s response to the Committee’s report, dated 5 September, accepted some key policy recommendations from the Committee on these and other policy areas.
The Stage 1 debate was held on 19 September, where the general principles of the Bill were agreed to.
Stage 2
Stage 2 consideration took place on 19 November. There were government amendments lodged and agreed to, a number of which were based on the Committee’s earlier recommendations.
The main amendments at Stage 2
The remainder of this blog post sets out in more detail what happened at Stage 2, with useful background from Stage 1, where appropriate. This section focuses on the main policy issues, rather than an exhaustive coverage of Stage 2.
The description is of government amendments agreed to, as no non-government amendments were lodged, and no amendments were disagreed to.
Charities
In its Stage 1 report, the Committee said that it wished to ensure that the Bill effectively meets the needs of judicial factors appointed to charities. It asked the Scottish Government to reflect on ideas from the Charity Law Association and from the SLC in this regard.
Amendment 4 inserted section 1A into the Bill. Section 1A covers ‘intimation’, that is the process by which those with an interest in a court application or other process are officially notified of it. Section 1A covers intimation where there is a court application to appoint a judicial factor to the estate of a charity. It ensures notification in this context extends to OSCR, the Scottish charities regulator, and the public (by way of advertisement).
Amendments 19 and 20 amended section 27 of the Bill in a similar fashion. Section 27 covers intimation by the judicial factor of a scheme which has been approved by the Accountant of Court to distribute the estate.
Register of Inhibitions
Section 6 of the Bill creates a new requirement that the notice of appointment of a judicial factor must be registered in an existing public register. This register is called the Register of Inhibitions. It is overseen by the public body Registers of Scotland.
At Stage 1, there was some debate as to whether the new registration requirement should relate to this register or whether a specific register should be created relating to judicial factors only.
Ultimately, the Committee in its Stage 1 report supported the Register of Inhibitions as the option offering best value for money. However, the Committee considered that the Bill should be flexible enough to allow for this to change in the future. This was if circumstances then led to a different conclusion from a cost-benefit perspective.
Amendment 8 amended section 6 of the Bill. There is now a requirement in section 6 to periodically review the continuing appropriateness of the Register of Inhibitions. It enables Scottish Ministers to give effect to any findings of such reviews via regulations (subject to the affirmative procedure).
Missing people
On missing people, the Committee recommended in its Stage 1 report that the Bill should be amended to make it clearer that that the new legislation could be used by those aiming to manage the estate of a missing person.
Amendment 12 inserted section 9A into the Bill. This imposes a requirement on the Scottish Ministers to produce guidance about the appointment of a judicial factor for the estates of missing people.
Data protection issues
Sections 12 and 39 of the Bill confer powers on judicial factors and on the Accountant of Court to request information in relation to estates from individuals and organisations. This might include, for example, requests being made to banks for financial information relating to the estate.
During Stage 1, some stakeholders expressed concern about section 12(7) and 39(6). These set out that sections 12 and 39 do not authorise disclosures which contravene data protection legislation. The fear of some stakeholders was these sub-sections might be used to unjustifiably block legitimate information requests. The concerns were echoed by the Committee in the Stage 1 report. It recommended that the Scottish Government consider clarifying the provisions further in the Bill or removing them.
Amendment 16 and 36 adjusted sections 12(7) and 39(6) as they describe the interplay between sections 12 and 39 and data protection legislation. The amended provisions state that when a holder of information is considering whether a disclosure would contravene data protection legislation, the holder must consider the provisions in the Bill that authorise or require disclosure.
Criteria for the appointment of the Accountant and depute Accountant
Sections 35 and 36 of the Bill requires that the person appointed to the office of the Accountant of Court and to the office of depute Accountant must be “appropriately qualified or experienced in law and accounting”.
However, the Policy Memorandum to the Bill (at para 105) also confirmed that the Scottish Government does not consider it necessary for the Accountant “to be formally qualified in both, or either, discipline.”
The Committee received a variety of evidence on the issue of the appropriate qualifications and skills for the roles concerned. For example, the Law Society of Scotland was concerned that there had been a ‘watering down’ of what was required in terms of legal and accountancy knowledge compared to the SLC’s original proposals.
On the other hand, the organisation, Missing People, said that softer skills, such as empathy, and understanding the needs of people, were important aspects of the Accountant’s role.
Mirroring a recommendation in the Stage 1 report, Amendments 32 and 33 amended sections 35 and 36 of the Bill. Scottish Ministers are now required to periodically review the criteria relating to the Accountant and depute Accountant’s qualifications. The revised provisions also enable Scottish Ministers to give effect to any findings of such reviews via regulations (subject to the affirmative procedure).
Complaints
Under section 38(4)(b), if the judicial factor is a member of any professional body, the Accountant of Court is required to report to that professional body any serious misconduct or material failure by the judicial factor.
Inspired by recommendations in the Stage 1 report, Amendments 34 and 35 amended section 38. The policy aim is to better reflect the regulatory arrangements in place for certain professions. Section 38 now states that, if arrangements are in place for a body other than the professional body to deal with complaints, the Accountant must report the serious misconduct or material failure to that other body. For example, if the judicial factor is a solicitor, the effect of the amendment is to require the Accountant’s referral to be made to the Scottish Legal Complaints Commission rather than the Law Society of Scotland.
Sarah Harvie-Clark, Senior Researcher (Civil Law), SPICe