29.Section 13(1) provides that the general function of judicial factors is to hold, manage, administer, and protect the factory estate, for the benefit of those who have an interest in that estate. This is a fiduciary duty which is placed on judicial factors, whose actions in respect of the factory estate must always be for the benefit of persons with an interest in the estate. Subsection (2) clarifies that the general function is subject to variation by the court, in the interlocutor appointing the judicial factor (under section 14(1)), or subsequently following an application having been made to the court (section 14(2)).
30.Subsection (3) places judicial factors under a duty, when carrying out either the general function, or any of the factory functions, to exercise care, prudence, and diligence, and to take professional advice, such as from a solicitor or an accountant, when appropriate – consulting with the Accountant as to whether it is appropriate, if required, under subsection (4).
31.Subsection (5) prohibits judicial factors from delegating the general function or any factory function unless that delegation has been authorised in the appointing interlocutor or by the Accountant, or is provided for elsewhere in the Act or any other enactment. The factory functions are defined in subsection (7) as meaning the standard powers and the various functions conferred on judicial factors by virtue of sections 15 to 22 of the Act. These are subject, in either case, to: any variation made by the court in appointing the judicial factor or subsequently following an application having been made to the court; any other provision of law which impacts on the judicial factor’s powers. The factory functions also include any additional function conferred on a particular judicial factor by the court under section 14(1) or (2). The standard powers are defined as meaning all of the powers of a natural person beneficially entitled to the estate. This means that the judicial factor is entitled to do anything in relation to the estate which an individual who owned the estate would be entitled to do. An illustrative list of such powers is set out in schedule 1, but a judicial factor may exercise a power which a natural person entitled to the factory estate would be entitled to carry out even where that power does not appear on the list in schedule 1.
32.Subsection (6) provides that, on the appointment date or the date on which the Accountant confirms that the requirement to find caution has been found (if applicable), the standard powers, as defined in subsection (8), are transferred to the judicial factor.
33.Section 14 sets out the powers that the court has in relation to the conferring of functions on a judicial factor. Subsection (1) relates to the interlocutor issued by a court appointing a judicial factor. Paragraph (a) allows the court to specify in the interlocutor that there is withheld from a judicial factor any function which would otherwise be conferred on the judicial factor by virtue of the Act, while paragraph (b) gives the court the power to confer on the judicial factor any function in addition to those ordinarily conferred.
34.Subsection (2) makes provision for the judicial factor to apply to the court after appointment for the conferral of a further function, or the removal of any function previously conferred (either by virtue of the appointing interlocutor or a previous application under this subsection). Subsections (3) and (4) require the judicial factor to notify the Accountant of any application under subsection (2), and the Accountant to investigate the matter and report to the court as to whether, in the Accountant’s view, the application should be granted.
35.Section 15(1) grants to judicial factors the power to serve notice on any person requesting that the person supply information which the judicial factor reasonably considers relevant to their functions – this might include, for example, requests being made to banks for financial information relating to the estate. Subsection (3) places a requirement on persons receiving notice under subsection (1) to comply with the notice, unless, as set out in subsection (4) they are a reserved body by virtue of paragraph 3 of Part III of schedule 5 of the Scotland Act 1998, a Minister of the Crown, a department of the Government of the United Kingdom, or a public body operating wholly in relation to a reserved matter in accordance with the Scotland Act 1998. Such persons may choose to supply the information requested, but are not required to do so under the Act.
36.Subsection (5) provides that if the information can be obtained by the judicial factor under any other enactment, a person who receives notice sent under subsection (1) can, instead of supplying the information, direct the judicial factor to the other means by which the judicial factor can obtain the information, either free of charge or under another enactment, or both. For example, by accessing publicly available information registered with Companies House. Subsection (6) makes clear that, while this section does not authorise a person to charge a fee for supplying information in compliance with a notice sent under subsection (1), if another enactment authorises the charging of a fee for supplying that information then that fee may be charged. Subsections (7) and (8) make clear that this section does not override the provisions of data protection legislation as defined in the Data Protection Act 2018, meaning that a person is not required to supply information where to do so would be in breach of a provision of that legislation – but the provisions of the Act are relevant in determining whether or not that is the case.
37.Section 16 places judicial factors under a duty to ingather the factory estate, meaning the judicial factor must collect and take possession of all of the property which forms part of the estate. Subsection (2) gives the judicial factor the power to take steps to have the title to such property transferred to the judicial factor – this might include, for example, the registration of a notice of title in the Land Register. Subsection (3) places the judicial factor under an obligation to notify creditors and debtors of the estate of their appointment as judicial factor, and to ensure that in relation to financial assets it is apparent to persons viewing those assets that they are held by the judicial factor in that capacity, to ensure that the assets of a judicial factory do not get mixed up with the personal or business assets of the judicial factor, or of another factory if the factor is appointed to more than one estate. For example, the judicial factor keeping the funds of the factory estate in their personal bank account would be in breach of this provision.
38.Section 17(1) places an obligation on judicial factors to compile and send to the Accountant an inventory of the property comprising the factory estate, within 6 months of appointment. When sending the inventory to the Accountant, the judicial factor must also send any additional documents specified in rules of court. Subsections (2) and (3) set out the process for review of the inventory by the Accountant, and subsequent modification and approval. When the inventory has been approved, both the judicial factor and the Accountant must sign it, and the inventory is then treated as a definitive statement of the property within the factory estate as at the date the judicial factor was appointed. However, if additional information is discovered after that date, then under subsection (5) the judicial factor and the Accountant may take that into account in their dealings with the factory estate.
39.Section 18(1) requires judicial factors to send to the Accountant a plan setting out how the judicial factor intends to hold, manage, administer and protect the estate. The plan must be sent within 6 months of the date on which the judicial factor is appointed, and must be accompanied by any additional documents specified in rules of court.
40.Subsections (2) and (5) set out the process for review of the plan by the Accountant, and subsequent modification or approval. Under subsection (2), the Accountant must approve a plan submitted by a judicial factor, either without modification or subject to modifications specified by the Accountant. Subsection (3) allows the Accountant to request any further information from the judicial factor prior to determining whether to require modifications to a plan. If the Accountant has required modifications under subsection (2), then under subsection (4) the Accountant must require the judicial factor to resubmit the plan with those modifications made. Subsection (4) also allows the judicial factor to make their own modifications, in addition to those required by the Accountant, before submitting the plan. The effect of subsection (5) is that, where a plan has previously been modified and resubmitted and the Accountant requires further modification, the Accountant does not need to require the judicial factor to resubmit the plan. In such cases, subsection (8)(a) places the judicial factor under a duty to administer the estate in accordance with directions issued by the Accountant.
41.If a management plan is approved by the Accountant with no further modifications required, then under subsection (6) the judicial factor must review the plan at least annually, and at other times on the direction of the Accountant, and may modify the plan with the approval of the Accountant. In granting that approval the Accountant may specify further modifications that must be made. If the judicial factor does not make those modifications then under subsection (8)(b) the judicial factor must manage the estate in accordance with the directions of the Accountant. Subsection (7) requires the judicial factor to administer the estate in accordance with an approved plan. Subsection (9) places a reporting duty on the judicial factor in relation to dealings with the estate in accordance with the plan. Subsection (10) provides for references in this section to “holding, managing, administering and protecting the estate” to apply to the extent that the individual judicial factor is required to perform those actions by virtue of the interlocutor appointing the judicial factor and any subsequent variation made to the judicial factor’s duties by the court.
42.Section 19 requires judicial factors to report to the Accountant in relation to the judicial factor’s dealings with the estate to which the judicial factor is appointed. Subsection (2) requires that such reports include accounts, and provides for the judicial factor and the Accountant to agree on the format of reports and the way in which they are to be submitted. If the Accountant and the judicial factor are unable to reach agreement, then the Accountant may direct the format and manner of submission of the reports, and the judicial factor will be required to comply with that direction. Reports are to be submitted as soon as possible following the end of each reporting period. The reporting period is defined in subsection (3) and will be fixed by the Accountant for each individual judicial factor, with the first period starting on the date that the judicial factor is appointed. Subsection (4) provides that reporting periods will normally be between one and two years, although in exceptional circumstances the Accountant may specify in relation to a judicial factor a reporting period of less than one year. Subsection (5) allows the Accountant to extend a reporting period if the judicial factor can demonstrate why the extension is required, but such extension is in relation to the reporting year in which the application is made – subsequent reporting periods will revert to the previously fixed duration.
43.Section 20 places judicial factors under a duty to consider whether it would be appropriate to invest funds which form part of the factory estate and, if so, how such funds should be invested. If, following that consideration, the judicial factor is of the view that investment would be appropriate, they are placed under a further duty to make the appropriate investment.
44.Section 21 places judicial factors under a duty to enforce any claim which it is competent to raise on behalf of the estate, or to defend any claim which is raised against the estate, if the judicial factor believes that it would be reasonable and prudent to do so. This will include claims in relation to breach of contract and delictual liability (where a civil legal wrong has been committed). Subsection (2) allows a judicial factor to seek the Accountant’s views as to whether it would be reasonable and prudent to enforce or defend any particular claim, where the judicial factor requires advice on the matter.
45.Section 22 creates a specific duty where the sole or main reason for a judicial factor’s appointment to a factory estate was that the factory estate was not being properly managed as a result of disagreement between the persons responsible for managing it as to how to do so. In these circumstances, the judicial factor must encourage the responsible persons to agree how the estate is to be managed. Subsection (3) authorises the judicial factor to act as a mediator or arbitrator, or to appoint a mediator or arbitrator, if the judicial factor considers one of these methods of dispute resolution to be the appropriate way to facilitate agreement. Subsection (4) places the judicial factor under a further duty, where agreement between the relevant parties is not reached, to prepare a scheme, which the judicial factor considers fair, for either the ongoing management or the distribution of the estate – subsection (5) clarifies that this scheme might require the division and sale of the estate, or a part of the estate.