Part 4 – Distribution of factory estate, termination, recall, and discharge of judicial factor
54.Section 30 sets out the basic procedure for the distribution of the factory estate on the basis of a scheme formulated by the judicial factor. This will apply where the judicial factor is of the view that either the purpose for the appointment of a judicial factor has been fulfilled or has ceased to exist, or that there are not sufficient funds in the factory estate to meet the cost of the judicial factory continuing. By virtue of subsection (1)(b), this section also applies in relation to a scheme for the distribution of the factory estate under section 22, where the estate is the object of dispute.
55.Section 30(2) requires the judicial factor to send a copy of the proposed distribution scheme, together with an up to date inventory of the factory estate, to the Accountant for approval. Subsection (3) provides for the Accountant to either approve the scheme, subject to any modifications which the Accountant requires, or reject it. If the Accountant approves the scheme, then subsection (4) requires the judicial factor to intimate the scheme to OSCR, where the estate is that of a charity, and to every person who has an interest in the estate, sending to each such person a copy of the scheme and the inventory. Subsection (5) provides that where the estate is that of a charity, the judicial factor must give notice to the general public that a scheme for distribution has been approved. Subsection (6) gives the Accountant the power to determine that the requirements to notify interested persons, or to advertise to the general public, do not apply in a particular case. Subsection (7) allows those persons to submit to the Accountant an objection to the scheme within 21 days of receipt of intimation under subsection (4). Subsection (8) provides that if no objection is received, or if any objections are received but then withdrawn, the judicial factor is under a duty to distribute the estate in accordance with the scheme.
56.Where an objection is made to the scheme, subsection (9) requires the Accountant to refer the matter to the court which appointed the judicial factor, and to notify the judicial factor and the other relevant parties that the referral has been made. Subsection (10) obliges the court to which a referral is made under subsection (9) to require the person who submitted the objection to lodge caution for the expenses of the court, except where the court considers that it would not be in the interests of justice to do so. Subsection (11) requires the court to give the judicial factor, the person who submitted the objection, and any other interested person, the chance to present the arguments in favour of the scheme or the objection to it. After hearing those arguments, the court may reject the objection and direct that the estate be distributed in accordance with the scheme. Alternatively, the court may instruct the judicial factor to distribute the estate in a different way, or make a different order which the court considers appropriate. Subsection (12) makes clear that a scheme for distribution under this section may relate to part only of an estate.
57.Section 31 sets out the process by which a person with an interest in the distribution of a factory estate can apply to the court for distribution. Subsection (2) sets out the notification requirements which a person who lodges such an application must comply with – subsection (3) gives the court the power to determine that this requirement does not apply in a particular case. Subsection (4) sets out the parties to whom the court is required to give the opportunity to make representations about the application and why it should or should not be granted. Subsection (5) sets out the options which are available to the court after hearing those representations – the court can either instruct the judicial factor to distribute the estate as the court directs, or the court can refuse the application, in which case no distribution will take place and the judicial factory will continue.
58.Subsection (6) sets out further conditions which apply if the application is made to the court by a person other than the judicial factor. The court must be satisfied that the applicant has tried to persuade the judicial factor to prepare and submit a scheme for distribution of the factory estate to the Accountant under section 30, and that the judicial factor has not done so and does not intend to do so. Alternatively, the court must be satisfied that the judicial factor has previously submitted a scheme to the Accountant under section 30, but that scheme has been rejected by the Accountant.
59.Subsection (7) sets out further requirements which apply if the applicant under subsection (1) is the judicial factor. Before instructing any distribution of the estate, the court must be satisfied that the judicial factor has prepared and submitted a scheme for the distribution of the estate under section 30, and that scheme has been rejected by the Accountant.
60.Subsection (8) obliges the court to require the applicant to find caution for the expenses of court proceedings under this section, unless the applicant is the judicial factor, or the court considers that it would not be in the interests of justice to impose such a requirement.
Termination, recall and discharge after distribution
61.Section 32 makes provision for the termination of the judicial factory, the recall of the judicial factor’s appointment, and the discharge of the judicial factor, where the factory estate has been distributed in accordance with section 30(8) or (11) or section 31(5)(a).
62.Subsection (2) places the judicial factor under a duty to apply to the Accountant for termination, recall and discharge, and subsection (3) requires the application to be accompanied by the final accounts for the factory estate. Section (4) requires the Accountant to audit the final accounts and grant the termination, recall and discharge, unless subsection (5) applies. Subsection (5) applies if, having audited the accounts, the Accountant is of the view that there has or may have been misconduct or failure by the judicial factor. If the Accountant is of that view, section 41 will apply. Section 41 makes provision for the Accountant to take action where the Accountant believes that there has been, or might have been, misconduct, a failure to discharge duties, or a failure to comply with an instruction by the judicial factor.
63.Subsection (6) requires the Accountant to send a copy of the certificate of termination, recall and discharge, if granted, for recording in the Register of Inhibitions.
64.Section 33 sets out the process where a judicial factor dies or ceases to carry out the functions of judicial factor and no application has been lodged with the court for the appointment of a replacement judicial factor.
65.Subsection (2) applies where the judicial factor dies. The Accountant must determine whether the purpose for which a judicial factor was appointed still exists and, if it does, apply to the court for the appointment of a replacement judicial factor.
66.Subsection (3) applies where the judicial factor ceases to carry out the functions of judicial factor. The Accountant must apply to the court for the recall of the original judicial factor and the appointment of a replacement judicial factor.
67.Subsection (4) makes provision for a situation where a judicial factor has died or ceased to perform their duties, no application has been lodged for the appointment of a replacement judicial factor, and the Accountant is of the view that the purpose for which the judicial factor was appointed no longer exists but that the factory requires to be formally wound up. In that case, a duty is placed on the Accountant to apply to the court for the appointment of a judicial factor, for the specific purpose of bringing the judicial factory to an end.
68.Subsection (5) sets out duties that apply to a replacement judicial factor appointed as a result of an application made under subsection (2), (3) or (4). Paragraph (a) requires the factory accounts pertaining to the period of appointment of the original judicial factor to be brought up to date, and paragraph (b) requires those accounts to be closed with effect from the date of appointment of the replacement judicial factor. Paragraph (c) requires the replacement judicial factor to apply to the Accountant for the discharge of the original judicial factor, if the replacement judicial factor considers it to be appropriate to do so. Subsection (6) provides for the Accountant to grant an application for discharge of the original judicial factor made under subsection (5)(c) if the Accountant is satisfied that it would be appropriate to discharge the original judicial factor.
69.Subsection (7) provides for the expenses of applications under subsection (2), (3) or (4) to be paid from the factory estate, but gives the court discretion to direct otherwise.
70.Section 34 makes provision for the recall and discharge of judicial factors, in circumstances other than where the purpose for which the judicial factor was appointed has been fulfilled or there are not sufficient funds in the factory estate to meet the ongoing costs of the judicial factory.
71.Subsection (1) allows the court to recall and discharge a judicial factor on an application being made to the court by the judicial factor. Subsection (2) provides for the court to recall a judicial factor on an application being made by a person other than the judicial factor.
72.Subsections (3) to (7) set out more detail around the procedure that applies in relation to applications under subsection (1) by the judicial factor for recall and discharge, and to applications under subsection (2) by another party for recall of the judicial factor. Subsection (3) requires that applications also request the appointment of a replacement judicial factor, and subsection (4) requires that the appointment of a replacement judicial factor takes place at the same time as the original judicial factor is recalled. Subsection (5) sets out the requirements for intimation of an application made under subsection (1) or (2), while subsection (6) gives the court the power to determine that such requirements do not apply in a particular case. Subsection (7) provides that when the court grants the application to recall the judicial factor, the judicial factor must send the Accountant the accounts relating to the factory estate.
73.Subsection (8)(a) allows the judicial factor to apply to the court for discharge in the event recall is granted following an application made by another person under subsection (2). Subsection (8)(b) makes provision for applications under subsection (2). Subsection (8)(b)(i) requires the court to be satisfied that a person making an application under subsection (2) has an interest in the factory estate, and subsection (8)(b)(ii) requires the court to require the person making the application to find caution for the court expenses, unless that requirement would not be in the interests of justice.
74.Subsection (9) places an obligation on the Accountant to review the accounts for the factory estate when the court has granted a recall under subsection (1) or subsection (2). The Accountant must send to the court a report setting out the results of the audit and the Accountant’s view as to whether, if an application has been made for the judicial factor to be discharged, the judicial factor should be discharged. Subsection (10) requires the court to consider the report from the Accountant and make any further inquiry it considers necessary before granting any application for discharge under this section.
Inventory and balance sheet
75.Section 35(1) applies in any circumstances where a replacement judicial factor has been appointed under section 33(2), (3)(b) or (4), or where a replacement judicial factor has been appointed under section 34(4) provided that the original judicial factor has not been discharged. The new judicial factor and the Accountant are required to agree the inventory and balance sheet for the estate, with effect from the date of appointment of the new judicial factor.
76.Subsection (2) applies if a replacement judicial factor has been appointed under section 34(4) and the outgoing judicial factor has been discharged. A new inventory and balance sheet do not need to be agreed, and the new judicial factor can proceed on the basis of the final inventory and balance sheet of the outgoing judicial factor.
Termination of judicial factory where insufficient funds
77.Section 36 makes provision for situations where the Accountant considers that, were the judicial factor to formulate a scheme for the distribution of the estate under section 30(1), there would not be sufficient funds in the factory estate to meet the cost of that formulation or the associated process of the judicial factor seeking approval of the scheme and thereafter distributing the factory estate.
78.Subsection (2)(a) requires the Accountant to direct the judicial factor to distribute the factory estate in the manner specified by the Accountant. Subsection (2)(b) to (c) require the Accountant to terminate the judicial factory, and recall and discharge the judicial factor. Subsection (3) provides for recording of the termination, recall and discharge in the Register of Inhibitions and subsection (4) provides that any fee for recording is to be paid from the factory estate. Subsection (5) creates an exception to subsection (2), by providing that if the Accountant is of the view that there has been, or may have been, misconduct or failure by the judicial factor, then subsection (2) will not apply, and section 41 will apply instead.
Ending of judicial factor’s accountability on discharge
79.Section 37 sets out more detail about the legal effect of the discharge of a judicial factor. Subsection (1) provides that when the court issues an interlocutor containing an order for discharge, or the judicial factor is discharged by the Accountant, then the judicial factor is no longer legally accountable for anything done by the judicial factor in relation to any part of the factory estate in their capacity as judicial factor. Subsection (2) makes clear that if the judicial factor has incurred any criminal liability in the course of their actings as judicial factor, both civil liability, to the extent tied to the activities relating to that criminal liability, and the criminal liability continue following the judicial factor’s discharge. The Accountant will not be able to take action against a judicial factor under section 41 once a judicial factor has been discharged.
