SCTSPRINT3

Judicial Factors

What is a Judicial Factor?    

A Judicial Factor is an Officer of the Court, who is appointed by the Court in complex or difficult cases, where a particular problem has been identified and where the estate (known as the Judicial Factory Estate) is without any other legal protection or administration.

Their role is to preserve and protect the estate and where appropriate, realise and distribute the estate amongst those entitled to it.

A Judicial Factor is independent to the case, and is normally a professionally qualified individual, such as a Solicitor or Accountant.


Types of Judicial Factory                                       

There are many circumstances where a Judicial Factory may be required and appointed, these include:

Section 41 of the Solicitors (Scotland) Act 1980

Applications for the appointment of a Judicial Factor over a solicitors firm are normally made by The Law Society of Scotland where there has been a breach of Law Society Accounting Rules or where a sole practitioner dies. A Factor will normally be appointed to investigate the position of the firm and deal with client claims, and usually over the estate of the individual partners of the firm.

Section 11A of the Judicial Factors (Scotland) Act 1889

These appointments relate to the estate of a deceased person. It may be that the person nominated to be the executor of the estate is unable or unwilling to act, or where the executor has failed to carry out their duties. It can also be in situations where no one has been nominated as executor and no one is prepared to be appointed by the Court.

A Judicial Factor in these cases will ingather anything that may be due to the deceased’s estate, settling any lawful debts and thereafter distributing the estate to anyone deemed to be a beneficiary.

Section 35 of the Partnership Act 1980

These appointments relate to the winding up of a partnership. They normally arise where the partners are unable to agree on how the partnership will operate or wound up. The Judicial Factor is responsible for determining how the partnership will be concluded and how the partnership assets will be distributed.  

Section 9(5)(a) of The Children (Scotland) Act 1995

These appointments can be made where a child is due to receive funds in excess of £20K and/or where the child’s estate is large or complicated. The Accountant of Court can seek to have a Judicial Factor appointed by the Court to administer the estate, until the child turns 16 (the age of legal capacity).

 Appointments on Trust Estate

These appointments can be made if the last Trustee has died without appointing a successor, or where Trustees are in disagreement. In these types of cases the Judicial Factor will take control of the estate and operate it in accordance with the trust provisions until such times as the purpose of the trust is fulfilled, or the estate is exhausted. These normally represent the longest running types of Judicial Factory, with the oldest active case relating to a trust drawn up in 1826.

Appointments relating to Limited Companies

In rare occasions a Judicial Factor can be appointed on an interim basis over a limited company, where the relationship between the directors is adversely affecting the running of the company.

Appointments relating to Bankruptcy

When someone dies with outstanding debts then one of the creditors may apply to have a Judicial Factor appointed, to wind the estate up and arrange for payments of the debts. This will only happen when there is no one willing or able to wind up the deceased person’s estate. A Factor in these cases will be required to take control of the estate, investigate the debts due from the estate, and make payment of any debts. If the estate is insolvent then the Factor will arrange to pay all creditors a proportionate share of the available estate in settlement of the total debt due to them.

Appointments relating to Charities

Applications for the appointment of a Judicial Factor over a charity are normally made by The Office of the Scottish Charity Regulator (OSCR). These applications normally arise where there are concerns that a charitable organisation is not being run for the benefit of the charity or where the trustees are otherwise acting inappropriately. A Factor will normally be appointed to investigate the position and take steps to safeguard the assets of the charity. In some cases were the charity is insolvent then it may be necessary for the Factor to apply to have the charity sequestrated.

Miscellaneous appointments

This covers cases not mentioned above and may also include “Loco Absentis” cases. A Judicial Factor will be appointed in a “Loco Absentis” case where an individual goes missing and has not made any provision for their affairs to be managed on their behalf. A Judicial Factor will be appointed to administer their estate until the absentee returns, or is declared dead. It should be noted that a Judicial Factor is restricted to preserving the estate in these types of cases.

Other miscellaneous types of Judicial Factory may include, for example a Commissary Factor.



The Appointment Process               

A Judicial Factor is appointed by either the Court of Session or the Sheriff Court within the jurisdiction of the estate. In order to consider an application, a Petition at the Court of Session or Summary Application at the Sheriff Court will require to be lodged by the person or organisation seeking the Judicial Factor’s appointment.

Upon receipt of a new application, the relevant Court will grant warrant to have the application intimated on anyone that they consider have an interest in the case/estate. This allows parties the opportunity to object to the application or make such representations as may assist the Court in making an appointment.

At this time the Accountant of Court will also be notified of the application, and will set Caution (a form of insurance insert link to caution section of website). The Judicial Factor will obtain same (within a calendar month of their appointment) at which point the Court will issue a Certified Copy of the Court Interlocutor (CCI) which will allow the Judicial Factor to begin administering the estate.



Bonds of Caution

Caution (pronounced “kayshun”) is a form of insurance that will reimburse the estate in the event of any financial loss, as a result of the Judicial Factor's mismanagement.

A Bond of Caution can be obtained from the following providers:

  • Royal & Sun Alliance
  • Insolvency Risk Specialists

This list is not exhaustive, other bond providers may be available.



The AoC Role                                   

The Accountant of Court is responsible for supervising all Judicial Factors whilst they are in office. In doing so, we review and approve the Judicial Factor’s Inventory of Estate and Annual Accounts.

The Accountant of Court is also responsible for setting the Judicial Factor’s commission in each case.

The Accountant of Court will generally superintend the actions of a Factor and provide them with the necessary guidance and direction required progress a case. This may for example involve giving the Judicial Factor authority to raise legal proceedings or to dispose of assets and/or property.

The Accountant of Court is also responsible for investigating any concerns or complaints that are raised against a Judicial Factor. Any complaints should be addressed directly to the Judicial Factor in the first instance. If their response is unsatisfactory or does not resolve the issue then the complaint should be made to this office, in writing, to allow us to investigate and fully respond.

 

If the complaint is upheld or the investigation has highlighted a concern, the Accountant of Court will take any steps necessary to remedy the situation. This could involve directing the Judicial Factor to alter their actions; increased supervision or in the most serious cases the matter could be reported to Court to have the Judicial Factor removed or replaced.

 

The Judicial Factor’s Role                          

Having been appointed and obtained Caution, the Judicial Factor’s first action will be to take control of the (Factory) estate. They will begin their initial investigations into the particular issues of the case and may need to take specialist action, such as raising legal proceedings. They should always seek the consent of the Accountant of Court prior to taking these actions.

A Judicial Factor is required to submit an Inventory of Estate to the Accountant of Court within six months of being appointed by the Court. The Inventory of Estate forms the starting point of all future supervision by the Accountant of Court.

Depending on the type of case they are dealing with a Judicial Factor may have to carry out a wide range of actions which may include:

  • Disposing with or purchase of Heritable assets;
  • Investing funds held by the estate;
  • Pursuing or defending legal action;
  • Carrying on or disposing of a business interest;
  • Making payments to Creditors or recovering funds from debtors;
  • Adjudicating on claims made on the estate;

Whilst the case is ongoing a Judicial Factor is required to lodge annual accounts of their intromissions with the estate which are audited by the Accountant of Court.

Once the purpose of the Judicial Factory has been concluded, the Judicial Factor will be instructed to apply for their discharge.


Case Volumes by Type       

2016 Number of active JF's (by type) at year end.

CASE TYPE  ACTIVE  PERCENTAGE
Bankruptcy  4  4.8%
Charity  2  2.4%
Children Scotland Act  1  1.2%
Executry  15  17.9%
Limited Co  1  1.2%
Partnership  10  11.9%
Solicitor Act *  42  50%
Trust  9  10.7%
 TOTAL  84  100%

  *  Includes if appropriate the individual personal estates of the partners of the firm.


2017
Number of active JF's (by type) at year end.

cASE TYPE ACTIVE   PERCENTAGE
Bankruptcy  4  5.6%
Charity  2  2.8%
Children Scotland Act  1  1.4%
Executry  12  16.7%
Partnership  11  15.3%
Solicitor Act *  35  48.6%
Trust  7  9.7%
TOTAL   72  100%

   *  Includes if appropriate the individual personal estates of the partners of the firm.

 

Statutory Fees

There are various fees payable for submitting documentation to the Accountant of Court, at different stages of the judicial factory process.

Fees are set out in Scottish Statutory Instruments (referred to as a Fee Order). These are regularly updated by Fee Amendment Orders,  please refer to PART II - http://www.legislation.gov.uk/ssi/2018/83/made

 

FEES IN THE OFFICE OF THE ACCOUNTANT OF COURT

 

1. Registering case and receiving and delivering up bond of caution.

£23

2. Examining factor’s inventory – 0.333% of the value of the estate as disclosed:

 

(a) minimum fee payable;

£31

(b) maximum fee payable.

£738

3. Auditing each account, based on estate value—

 

(a) £0 - £30,000;

£115

(b) £30,001 - £50,000;

£230

(c) £50,001 - £250,000;

£575

(d) £250,001 - £500,000;

£864

(f) £500,001 and above.

£1,152

4. Reporting with regard to discharge, special powers,

£57

other special matters, surplus estate or scheme of division.

 




Commission

The Accountant of Court reviews and sets the level of commission (remuneration) payable to Judicial Factors, on an annual basis.

The hourly rate for the commission paid to a Judicial Factor takes account of their professional qualifications, experience and the hourly rate which would routinely be paid to them in the exercise of their normal duties (for example as a Solicitor or Accountant).

Annual increases will reflect increases to this amount, as well as current rates of inflation.

The hourly rates payable (from 1 April 2018) are:

  • Partner - £246.84
  • Manager - £178.50
  • Support Staff - £89.25



The Legislation                                

There are various pieces of legislation governing the judicial factory process, some dating back as far as the Judicial Factors Act 1849. However there have been numerous Acts and subsequent amendments, since then.

Quite often you will see reference to the Judicial Factor having been given the “usual powers” or “general powers” within the court order. This links back to the Trusts (Scotland) Act 1921 http://www.legislation.gov.uk/ukpga/Geo5/11-12/58/contents where the definition of a “trustee” includes a judicial factor. The General Powers of Trustees can be found at Part 4 of the above Act.

As the various pieces of legislation which govern the judicial factory process is now dated and no longer fit for purpose, Scottish Government have given an undertaking to review same. A Draft Bill is expected to go to out for consultation in 2018.

Right-hand Menu


Back to the Accountant of Court

Should you have any queries please contact us at: judicialfactories@scotcourts.gov.uk 
or please visit our contact page.
 
 
 
QUICK LINKS
Commission (Remuneration)
Statutory Fees (AoC)
Caution
 

DOWNLOAD SECTION
 
FORMS
JF Inventory Form (PDF)
 
SAMPLE DOCUMENTS
Account Sample - Charge & Discharge (EXCEL)
Scheme of Division - Sample (EXCEL)
 
GENERAL GUIDANCE NOTES
What is a JF? (PDF)
Section 11A (PDF)
Partnerships (PDF)

WORKFLOWS
Deceased Person's Estate (PDF)
Partnerships (PDF)
Insolvent Partnerships (PDF)
Section 11A Appointments (PDF)
Sufficient Funds (PDF)
Insufficient Funds (PDF)
Surplus Estate (PDF)
Judicial Discharge (PDF)