‘Law unto themselves’ Judicial Factors to be modernised as Scottish Law Commission reviews ‘Victorian’ Scots laws on court appointed administrators

The Scottish Law Commission’s latest consultation on the work of Judicial Factors. THE SCOTTISH LAW COMMISSION has announced a consultation with the aims of modernising yet another part of Scotland’s ‘Victorian’ justice system, the one hundred year old plus legislation of the Judicial Factors (Scotland) Act 1889 which governs Judicial Factors, who are more often than not solicitors or accountants appointed by the court to ‘look after’ or to gather in & distribute property belonging to someone else, living or more usually dead, in cases such as where disputes rage between beneficiaries & executors over the progress of a deceased’s estate being wound up, or if someone died without leaving a will.

The Scottish Law Commission’s announcement described the legislation relating to Judicial Factors as being “extremely old and is no longer fit for purpose”. The role & duties of Judicial Factors are featured in many well used if antiquated & sometimes heavily abused pieces of legislation such as the Trusts Act (Scotland) 1921.

Judicial Factors fees for their work, particularly when brought in to deal with a will have been known to be almost limitless, and near impossible to challenge in terms of regulation when things go wrong, therefore it is certainly in the interests of consumers there is as much public input into this consultation as possible, rather than simply allowing the legal & accountancy professions & their regulators to play the usual game with reforms being mostly directed in their members favour, rather than consumers and the public, who, in quite a few cases over the years, have been extremely ill served by Judicial Factors.

Indeed in certain cases, where allegations or evidence of corruption on the part of solicitors & accountants who have themselves mishandled, fleeced or plundered the estates of dead clients has been made by families & beneficiaries, the appointment of a Judicial Factor has sometimes been used as a threat against beneficiaries, accompanied with a letter from a solicitor reminding anyone the fees of appointing a Judicial Factor and the subsequent costs of their work may well make mincemeat of any assets left in the estate after the solicitor & accountant have helped themselves.

Unsurprisingly the Law Society of Scotland & Institute of Chartered Accountants hardly ever take action on complaints against members appointed as Judicial Factors. Given the self regulating Law Society of Scotland & Institute of Chartered Accountants of Scotland stand by, ever eager to whitewash any complaints which may impugn their members reputations, it is often the case solicitors or accountants who are alleged to have plundered deceased client’s estates are almost never brought to justice for their misdeeds after a Judicial Factor has been appointed.

Two options for reform of Judicial Factors are are being put forward by the Scottish Law Commission, although more proposals of reform of the regulatory framework which govern their duties would have been welcome in a more consumer protection oriented society as we are now supposed to be.

The first proposal is to keep the existing structure but to modernise it and make it more efficient by means such as updating the powers and duties of judicial factors as well as the procedure by which they are discharged.

The second option proposes a new public official, the Official Judicial Factor, who would carry out all judicial factory work unless the court wished to appoint someone else. An existing public official would become the Official Judicial Factor so that the functions would be part of the functions of an existing public office. Costs would generally be recovered from the property being managed.

Patrick Layden QC, the lead Commissioner for this project, said: “The office of judicial factor is a useful institution which needs to be brought up to date. If it were properly modernised, it could be very helpful in a wide range of situations, from looking after the property of people who cannot do it themselves to taking charge of assets confiscated under the Proceeds of Crime legislation."

Mr Layden continued : "We would welcome comments on this Discussion Paper. The Discussion Paper is available on the Commission’s website at http://www.scotlawcom.gov.uk/ and comments on the proposals are welcome by 15 April 2011. The Commission would also be grateful for suggestions as to an appropriate alternative for the name “judicial factor”.

The Scottish Law Commission’s discussion paper on their proposals to reform Judicial Factors can be downloaded here : Discussion Paper on Judicial Factors (DP 146). The Commission state they would be most grateful to receive comments on our proposals, or any part of them, by 15 April 2011. Where possible, we would prefer the electronic submission of comments, for example by using the electronic response form, and more information if required is available from gillian.swanson@scotlawcom.gsi.gov.uk.

Judicial Factor was appointed to wind up Valerie Macadam’s (now Valerie Penny) law firm in 2003 after embezzlement of £130K client finds was detected. A classic example somewhat related to recent events, of a Judicial Factor being appointed to wind up a law firm came after breaches of accounts rules and discrepancies in client accounts were uncovered during an inspection by the Society of law firm Macadams SSC in 2003, owned by the then Valerie Macadam, who was jailed in 2008 for three years for embezzling £130,000 of client funds. However, Valerie Macadam recently returned to fame with a new name, Valerie Penny, after being exposed by a Sunday Mail newspaper investigation into her new ‘will writing’ company, which I reported on, here : Former lawyer jailed for stealing clients £130K returns to run will-writing business as Law Society protects its own will rip-off solicitors

It should be noted while there are cases of complaints regarding the work of Judicial Factors with it coming as little surprise very few are ever resolved, equally the work of Judicial Factors can sometimes be invaluable, if pricey, when appointed in roles such as administration of a charity when allegations of fraud or misconduct emerge.

Equally, not all Judicial Factors appointed to handle the estates of deceased persons mishandle their work, however, as the circumstances of some appointments of Judicial Factors can leave much to be desired, it is well past time for a review and inquiry into the laws which permit their office & work, along with how they are regulated and how the affected persons can challenge their activities should the need arise.

Currently, the supervision of the work undertaken by Judicial Factors falls to The Accountant of Court, who is an Officer of Court appointed to :

• supervise the actings of individuals appointed by the Courts as Judicial Factors or Administrators to manage estates under the Judicial Factors Act 1849 and the Proceeds of Crime (Scotland) Act 1995
  
• administer or supervise the administration of property belonging to children under the age of 16 years as required by the Children (Scotland) Act 1995
  
• administer Child Trust Fund accounts where there is no person who has parental responsibilities for a child under the age of 16 where the child is in care and accommodated in Scotland, all in terms of the Child Trust Fund Act 2004
  
• manage funds consigned with the Accountant of Court in accordance with a Court of Session interlocutor or in the process of liquidation proceedings.

Perhaps an extra layer of independent scrutiny may be required, especially when the Judicial Factor turns out to be a solicitor or indeed any person who is a member of a self regulating profession such as an accountant.

While the Scottish Government have a track record of not always paying attention to consultations carried out by the Scottish Law Commission, I would encourage readers to participate in this consultation, to ensure all aspects of the one hundred year old laws which relate to Judicial Factors be looked at and brought into line with our times. Its in your interests as consumers and members of the public to do so.