 Welcome to the 16th meeting in 2023 of the Delegative Powers and Law Reform Committee. I'd like to remind everyone present to switch their mobile phones to silent. Apologies have been received from Oliver Mundell MSP. The first item of business is to decide whether we'll take items 6 and 7 in private. Is the committee content with these items in private? Under agenda item number two, we're considering an instrument subject to the affirmative procedure. No points have been raised on the draft social security residence requirements, Sudan, Scotland regulations 2023. Is the committee content with this instrument? Under agenda item number three, we're considering an instrument subject to the negative procedure. No points have been raised on SSI 2023 141. Is the committee content with this instrument? Under agenda item number four, we're considering an instrument which is not subject to any parliamentary procedure. No points have been raised on SSI 2023 139. Is the committee content with this instrument? Moving to agenda item number five today, we are taking evidence on the trusts and succession Scotland bill. First of all, I'd like to open up to Jeremy Balfour. Just before we are writing tonight, John MacArthur, one of the witnesses, is a personal friend of mine. I, many years ago, was a trainee with Andersons to a phone. Alan Barr, in the second panel, was one of my lecturers at university. For our first panel, I welcome Ross Anderson, a partner at Jones-White, Sandy Lam, a partner at Lindsay's, John MacArthur, a partner at Gillespie McAndrew, Caroline Pringle, a director at Andersons for Therm, and Joseph Slane, an associate at Turfkin Connell. I note that Mercedes VR by MSP is joining us online. First of all, I can remind the panel not to worry about turning on the microphones during the session as these are controlled by broadcasting. If you would like to come in on any question, please raise your hand or indicate to the clerks to do so. There is no need to answer every question, simply indicate that this is not for you to respond. However, please feel free to follow up on writing to any question after the meeting, if you wish. On 2 May, the Scottish Law Commission said to the committee that it is very important that trust law reforms ultimately apply to pension trusts as well as that. The current plan is for that to have effect through a section 104 order, agreed between both Scottish and UK Governments. Do you share the view that the bill should apply to pension trusts in whole or in part? What would the practical impact be for you if there was a gap between the legislation coming to force for most trusts and the legislation coming to force separately for pension trusts? My issues do not deal with pension trusts very often, so I cannot really add any comment to that. I would simply observe that if you had different regimes applying to different types of trusts, it could lead to a degree of confusion, but that is not coming from a position of any particular authority on pension trusts. I would simply echo my colleague's statements here that we do not deal with pension trusts, so it is not something that I can speak to. I am sorry, but I am in exactly the same position. I have done a little bit, but not a huge amount of work with pension trusts, but I just saw an observation. I would have similar concerns about having two different regimes working in parallel and whether there would be any lacuna in the middle that could cause issues going forward. I reiterate the rest here as well. Pension trusts are not an area in which I have experience of practising. My comments would be to be to Caroline and Sandy who said there about having two different regimes at the same time, but that does not come from a position of experience of practising. We did hear last week just in evidence, not saying what you have said, but we did hear that it is quite common for different regimes to apply in-law anyway, although it is beneficial. People certainly want to have the 6.104 order passed as quickly as possible, so it is the one regime that has been utilised, but we did hear last week that it would not be a deal breaker. It would not be overly complicated if there was two different systems to operation. As long as it is well known and there are no surprises, then that would be fine, but ideally just one system would be better. The bill has some new powers for the shower of court, but the court of session remains the main court for trust under the bill. Do you think that we have the balance about right or do you think that more should be done or be allowed to be done within the shower of court rather than come into the court of session? That is around cost, and the cost that it leads to going into the court of session. We are trying to make this more accessible. Obviously, there needs to be judicial oversight over things because those are quite significant powers that you are giving the court. I think that the concern is whether a better balance could be struck so that it is not at the cost of the trust funds that the expenses would be met from. Do you think that anyone can see where would the expenses then or where would you see the expenses coming from? No, I think that they should come from the trust fund, but I am just saying that if we are always having to resort to the court of session on matters, that comes with more cost in general than a shower of court. My position on the matter is that there are powers that are reserved for the courts, which should be delegated to the trustees in relation to particularly removing trustees. I feel that our legislation could be more aligned to the English position, which grants greater powers to the core trustees in terms of appointing and removing trustees, so that would be my comment on that. I agree with Caroline that applications should be, on a greater extent, made to the share of court. From my point of view, there should be a greater tendency to allow the trustees and the trustee to make certain decisions rather than having to rely on the court making that decision. Without any criticism implied or overt of the share of court, the court of session does have a degree more experience and knowledge in relation to complicated trust matters. I do not necessarily have too much of a difficulty with certain things being reserved to the court of session. I would broadly agree with the notion that it should be accessible and that the costs should not be insupportable, particularly for smaller trust funds. I am not involved in a great deal of litigation, but I understand that there is often not a huge amount of difference between costs from court to court, depending on what one is doing or whether it is opposed or not. Choice is important. The trustees will know the basis of litigation that they are about to embark on, and if they can have the choice between the court of session or the share of court, depending on how complicated it is, that allows accessibility, but also accessibility knowing that you are going to court, a court, with the knowledge that it requires to reside on those questions that are being asked. I want to just quickly fill up a point by Mr Lam, and that is in regard to the cost comparatively to self-court and court of session. The evidence that we have taken previously is that there is not much of a difference so now between most costs. Is that your experience? As I said, I am not involved in a great deal of litigation that is mostly from discussion with my colleagues in the court departments. We can maybe move on. We are looking at section 12 and section 7 of the bill. A trustee does not get to participate in trust decisions under section 12 when they are incapable. Trustees can also be removed as fellow trustees from their role under section 7 on the basis that the trustees are incapable of. Do you think that we have got this balance about right? Are you happy that the definitions are up to date enough? What reflections do you have on if we could do it differently? How would we do it differently? There are concerns about the ability for trustees to remove one of their own number extra judicially on the basis of one of the trustees being incapable. The reason for that is based on the inherent subjective element that comes with assessing capacity. Capacity is a spectrum. An individual might have capacity for one act and not another. It is something that we as solicitors and medical professionals deal with on a regular basis, but, nevertheless, it can sometimes find difficult. I think that putting the onus on trustees who may not be as used to making assessments like that could be difficult and create problems and potentially create issues for the trustee who is being removed. One of the trusts where a client is particularly elderly and potentially loses capacity and at the moment that can involve litigation, a court, exercise court application to remove the trustee whereas I feel that, with the correct legal advice and a solicitor of adequate and experienced assessing capacity, the trustees being able to make that decision is advantageous. Up in one point, the ROS is the ability of the trustees to get that evidence because necessarily the evidence is personal to individual trustee concerned and the trustees are at a disadvantage. I mean, there is one section 47 that I think that adequate and capacity act allows a doctor to sign a certificate allowing a treatment and I just wonder if we could extend that slightly so that that certificate could be used with the trustees when they're analysing or assessing the capacity of their fellow trustee. I think also, sorry, Sandy. If we could turn it around slightly, you asked Ms Balfour if we could have other suggestions and I think one thing I think is missing here is the ability of the incapable trustees guardian and power of attorney to sign a minute of resignation. So that actually takes the pressure off the trustees and allows the representatives of the incapable trustee to actually make that decision. I think that that would be a lot easier. I was merely going to observe that in terms of the test for incapacity contained in section 75, it seems to me to be a pretty direct version of what one finds in the Adults Within Capacity Act, which of course has been with us for 23 years and I think most would agree has operated fairly reasonably. If the idea is to align this particular question of what incapacity is with existing law, then I think that's probably to be welcomed. Of course, if there is to be reform to the Adults Within Capacity Act, would there then be reform to the Any Trusts and Succession Scotland Act that falls from those deliberations? I would just maybe take up on the panel last week from academics, which suggests rather than putting the exact wording in to refer it back to the act, so if there was a change in the act or think of that, that would just then immediately change the definition within this. Is that a workable solution in practice, rather than in academic view? I don't see why not. As with many things, our academics are ahead of us. In practice, that would work for you on a day-to-day basis. I see no difficulty with it. If the legislation is linked to another definition, another act, which could change, then it makes sense to link it to that other act. As it evolves, the Trust Act will evolve without an additional requirement to amend the Trust Act. I'd like to move us on to sections 16 and 17 of the bill, which look at trustees' powers of investment. The question will be to the whole panel, so we could start with Ross and work our way around. The Law Society, as well as the academic Yvonne Evans, has suggested that, in view of Scotland's increasing emphasis on net zero goals, section 16 and 17 would be amended to allow trusts to adopt environmentally friendly investment policies, particularly when they might underperform compared to other investments. The committee is interested to hear the panel's views on the policy idea. If you support it in principle, whether you think that the drafting of section 16 and 17 would need to be tweaked or amended to make it clear to trustees that they have the power to make those investments, even when they might underperform compared to other investments. I think that, from a public policy point of view, I can see the merit in that. However, in real life practice, when you are representing trustees who have to endeavour to look after the best interests of the beneficiaries, if a beneficiary sees that an investment is underperforming and the trustees have made that decision on the basis of public policy, I can imagine as a solicitor in practice the feedback that I would get from those beneficiaries. On the balance, I do not think that I would personally support that position. If it were to come into effect, do I think that the wording of that clause is acceptable? Potentially that would have to be altered to make it clear that the trustees were acting in line with public policy and that that had been accounted for in stat 2. I do not disagree with Ross. I would say that the current way that section 16 is drawn does state that trustees have the power to make any kind of investment of trust property, except insofar as the trust need expressly or implication provides otherwise. Perhaps it ought to be left to the settler of the trust to determine whether there ought to be any particular restrictions on investment or particular classes of investment that are more suitable. That would certainly get around any difficulties that the trustees might experience with beneficiaries suggesting that what they have done has properised them or disadvantaged them to whatever degree. There is also, admittedly, the ability to later on, section 17, to take proper advice. If that includes from those skilled investment in greener areas, should we say, renewables, your ESG stuff, I dare say that that could be part of that advice to the trustees, which they may well then be able to rely on. Just picking up on Sandy's point, when you are looking at investment powers, it is the truster who has put this money in trust, apart from an existing trust, but going forward, carbon is a big issue. On balance, I prefer if it was left to the truster to decide in giving the powers to the trustees. Perhaps, with what exception, that is where the trustees could agree with beneficiaries who are of age and can give that agreement. They may agree on investment policy, which is not for maximising growth from the portfolio. It may be more aligned to greener issues, but at the moment, carbon and carbon investment is quite high risk from what I am hearing. I am not an investment manager, so I cannot comment beyond that, but going into carbon and carbon investment is high risk at the moment. Therefore, trustees do put themselves at risk of a claim if those investments do not perform or fail. Do you feel that it allows trustees to make those investments, or does it need to be amended to make it clear that that is an option that is open to them? I think that it needs to be amended to make it absolutely clear. If I was advising a trustee on the basis of this section, I would be saying that there is a risk that you will leave yourself open to a claim by disappointed beneficiaries at some point in the future. Do you have a view on how that amendment should look or what specifically would need to be said to give you that reassurance when you are advising? It allows a wide spectrum of investments, but I think that it would be easier to give advice if the act specifically or the section specifically allowed the investments in assets that might not perform in line with other asset classes that are invested in. I agree with all the comments that I have said previously. In practice, the trustees have obligations to advise the trustees to ensure that they are not breaching their fiduciary duties and their duties to the beneficiaries of the trust to get the best return for them. I think that as currently drafted, I would have concerns about advising trustees to go down that path without anything more specific or set. I like the idea of it being a case-by-case basis where some sort of thought is given to the rights of the trustee and what they want and what they envisaged for how the fund was invested. I think that we maybe need to look and revisit how the power of investment is exercised in the clause. I think that the powers that are drawn under section 16 are quite broad. It gives you broad, flexible powers, but in terms of the exercise of those powers, it is saying that in terms of suitability, you are looking at not just financial performance, you are looking at a broader public policy and giving greater protection to the trustees if they decide to go down that route, which comes with higher risk. Even if it is still possible to allow it to be taken on a case-by-case basis but still have some clarification in the bill that it is an option for those people that are interested or those trustees that are interested? I think it would be helpful to have something in the legislation to provide additional protection and reassurance because trustees are already putting themselves in a position where they should be accountable to the beneficiaries. I think this will allow them a greater discretion to think about investment policies and what they should and shouldn't invest in and give them more freedom in that respect and think about what they actually believe in and what would be right in terms of investment. I think that it would be helpful to have that in there that they are not going to be prejudiced as a result of following a line of investment on the basis of public policy grounds or their own personal preferences. I agree with everything that has been said already. I think that it could be a bit clearer in the legislation if that kind of investment route is to be permitted in the absence of anything expressly provided for in the trustees that favours that or otherwise, where that might slot in. In section 17, when it talks about the exercise of the power of investment and the matters that the trustees are to have regard to under section 17A, one to two talks about the suitability, the need for diversification. I think that that might be an appropriate place to at least begin to consider other types of investment, but that's just a suggestion. There may be scope within section 16 as well, but it's one for the drafters to consider. As John said, I think it would be better to put it beyond the avoidance of doubt because I, too, would look at the legislation as it is currently provided and be hesitant to advise on that basis. Thank you very much. I'll hand it back over to me. Thank you. Jeremy, you wanted to come in. I would like to just develop this slightly in regard to is there enough clarity for trustees? If you're a charity who has an asset that you want to give to another charity, the general view is yours has to get better value for that sale, but if you're passed on to another charitable which has got similar charitable basis, you might want to sell it to them for a cheaper price. Does that need clarity within this or is there enough clarity already to give trustees with them to do that? I say that when I worked for a charity, previously we were talking to another charity, we were asking if they could sell it to a discount price, so we could use it for a charitable purpose, but they came back and said, no, we've got to get the best price for our beneficiaries. I'm just wondering if the clarity that could be sought around that will benefit to another trust? I think we're in danger of mixing up charity law and trust law here. At one level, I can see arguments for charities agreeing to sell at an undervalue because it's going to another charity. In pure trust law, if you're acting for a trustee in a private trust, you're saying, actually, I've got to get fair value here for the benefit of my beneficiaries. I'm just slightly concerned that if we go down the route of what you're suggesting, Mr Balfour, we have an issue just between charity law and trust law. I think that if you were going to go down that route, you would have to make that expressly clear in the legislation that that exemption would apply. I don't think that the legislation is clear on that point at all. So it would require a further amendment if we wanted to do that? I believe so. I don't have it in front of me, so I apologise. I don't have it. It's looking at the Charities and Trusty Investment Scotland Act as well and how they interact with each other. We'll move to section 19. Section 19 says that, unless you're trusted, it says otherwise, trustees could use a nominee in respect of any of the trustee's powers and a nominee is someone to whom a trustee transfers ownership of trust property, often for investment purposes. The law firm CMS is concerned that section 19 of the bill on nominees is currently drafted. It may not go far enough in capturing the ways in which trusts are used in the financial services sector. Specifically, the firm has said that doubt would remain as to whether trustees can use a nominee custody structures and b sub custodians. Do panel members have any views on that, both in the current scope of section 19 and the risks that are identified by CMS? I think that one of the issues with section 19, particularly one A, is that it says a point A person. I did check and I couldn't see, but A person to me sounds like an individual rather than a corporate. I think that with commercial trusts or the likes of what CMS is talking about, they tend to use corporate nominees. I would be concerned that the definition of person should be extended so that it covers both an individual but also a corporate. Possibly LLP is not an area of specialising in the sort of corporate area of how investments are managed, but that has to be widened to address that concern. It certainly replicates a concern that I have about the section as it is drafted. I would agree with John and I would say that I have just looked at the interpretation section in 74, which does not include person as a defined term. CMS's point, to be honest with you, but in respect of section 19, there has been historically under the 21 act a great debate around the power of nominees and granting powers to others to act on behalf of trustees. I simply want the committee's attention to be drawn to the English position under the trustee act in 1925, which grants the trustees the ability to grant greater powers to another person in respect of the management of the trust. I personally have found that to be helpful in the past when dealing with those types of trusts, whereas clearly grants powers always under the supervision of the original trustees. My preference would be that the power to grant authority to another person or corporate entity would extend to allow that person to use autonomy in respect of managing the trust, but that is just my personal opinion on the matter. One more point is that it talks about the exercise of their powers. In trustees, we talk about administrative powers and dispositive powers or discretionary powers. I think that the point of nominee is really to do with the administration of the trust, not making decisions about where the trust ends up or how it is invested. It is just the route through which investments can be managed. For example, land can be held. I do wonder whether it should perhaps be restricted administrative powers only, as opposed to dispositive or fiduciary powers. That sort of replicates the common opposition that you cannot delegate your discretionary functions as a trustee. Joseph? With regard to the delegation of powers generally, 19 is necessarily linked with 18 as well in delegation and appointment of agents. I am coming back to the distinction between dispositive and administrative powers. I do think that 18 deals with that to some degree and subsection 5 talks about what may or may not be delegated. 19 deals more with the specific scenario of nominees. For that basis, I do not know whether there really needs to be additional distinction between dispositive and administrative powers in that section as well, as John has suggested. Sections 25 and 26 of the bill, section 25, requires trustees at first to tell a beneficiary that they are a beneficiary and, second, to give them all the trustees' names and correspondence details. That is a mandatory element for certain types of beneficiary. For potential beneficiaries, trustees have some discretion as to what information is provided under section 25. In section 26, it is about what information must be made available to beneficiaries and potentials, but the trustees can override section 26, though a court can later review the reasonableness of that override. There is quite a degree of tune and fro in there to put a wee point on it. Various respondents to the committee's calls for views have said that trustees' duties to provide information to beneficiaries and potential beneficiaries under section 25 and 26 are too onerous. There are too many elements to have to take into account. Do you have concerns about how, if you have, how would you think about amending those two sections to address those concerns? My concern is that it is quite woolly as currently drafted. I think that that is done for a reason, because there needs to be a level of flexibility to the rules. From just my practice, the majority of trusts that we are setting up currently tend to be discretionary trusts. I completely understand that there needs to be a level of accountability to beneficiaries and transparency, but at the same time when you have a very broad class of potential beneficiaries, it is where do you draw that line as to your obligations to account to them? Further reading of it, I can come to different interpretations and a lot of it is down to the trustees' discretion, but I think that that could potentially cause problems further down the line where it is really just left at the trustees' discretion as to what their obligations are. Meaning that there could be vast differences in practice in us, ultimately having to go to the court for clarity at a later point anyway. I can see Joseph's got something to say there, actually. No, I agree. I think that it is slightly, the drafting is a little bit woolly there. Following on from what Caroline mentioned, what the impact would be if it came down to a court decision to decide that a decision to not disclose certain information was made, what impact that would have for the trustees generally in their position would they be in breach of trust? Would that be a breach of trust sufficient enough to merit removal? I think that it is just a little bit given the wide discretion that is afforded to trustees by virtue of this, it leaves them in a bit of a slightly grey area. Just on the back of that then, because I do understand exactly what you are talking about and I see how that provides a bit of clarity with those two sections. Is there not a wee bit of a potential issue for the beneficiaries and potential beneficiaries in terms of the trustees having too much power to decide how they might decide how to go forward and the beneficiary who is supposed to benefit from this might not actually get as much out of it as they might otherwise? There is always a balance. That is core to the advice that we give to trustees and indeed to beneficiaries. I personally think that the terms of section 25 and 26 are sensible to be fairly woolly on it because, as Caroline says, there are a number of discretionary trusts where there may be a vast array of beneficiaries, some of whom might not ever have really been intended to be beneficiaries and a lot will be informed by the settler's letter of wishes, which any sensibly drafted trust will have as a sort of backup. That being so, and given that the terms of the letter of wishes are expressly excluded from what is to be provided under I think section 26, the trustees are, although arguably it is an owner's duty, but being a trustee is an owner's duty anyway. My observation would be that, despite not dealing with tax all the time, trust taxation now requires often registration with the HMRC's trust registration service, which requires one to gather information on beneficiaries anyway, so given that a trustee or those acting for a trustee will probably be doing this monitoring and potentially holding that on file for these purposes anyway, arguably it's not a huge extra owner's duty. Although I would echo what was mentioned earlier on, if we're going to be providing the courts with the ability to remove trustees where they've neglected the trustees duties or is purported to carry out the duties but does so in a way inconsistent with or might be inconsistent with the trustees fiduciary duty, then clearly not providing information as grounds for removal. Okay, no, but that makes sense. In section 26, a trustee can in fact override the actual section, a trustee can override section 26, but then a court can later review the reasonableness of that override, so that tends to be looking into whether people are being unreasonable in the manner in which they behave towards the beneficiary. For the trustee to override, that would require the trustee to have specified and one would hope that the trustee would have a good reason for that. Again, perhaps explained in the letter of wishes. I think it's important to remember that the trustee appoints the trustees because he clearly trusts them to manage the assets on behalf of the appointed beneficiaries and there's always a balance to be had between the different powers and responsibilities and it actually depends which side of the camp you're on, so if you're advising a beneficiary and you're not getting enough information then you want as much ability to ask for that as possible, the trustees will know the wider picture in regard of the whole trust, or at least it should do, and therefore they may have a slightly different judgment to be made. So I think willingness here is probably better than being more prescriptive, and bearing in mind the trustee appointed the trustees, the balance slightly in favour of the trustees is probably better as well. Given that if there's failure to perform their duties to invest wise with or else then that's a slightly different route that you would take to challenge the trustees and you might be looking for the removal for example, or claim for loss of expected inheritance and there's different routes to go down for that. So I think having the balance in favour of the trustees is better given the context to which a trust is written. Okay, that makes sense. Thank you very much. In terms of section 493A about domicile, we had Professor Paisley from Aberdeen University speaking to us about this, and he had a few issues. He said that it would be harder to get information about who controls land or property if a trust was later treated as being resident overseas, and in its written submission to the committee, the law society didn't comment on the policy under pinning section 49, but it did say that it thought the drafting of the domicile subsection was unclear in terms of its scope, and also that the scope of the separate power of the protector to determine the trust's administrative centre was also unclear. Do you agree with academics interpretation of section 49? Do you have views on whether protectors should have the power in looking at overseas domicile for trusts in order to sort of challenge issues? The only point is not to answer your questions. I apologise, but I'm just thinking about from a tax point of view and how the UK decides on whether it's UK domicile for tax purposes or not, and that ultimately comes down to the domicile of the settler and the domicile of the trustees. I don't think that that would affect the position here. What I'm trying to get at is surely the transparency that we need is more from a tax point of view in the main rather than any other. I don't think that having that power in would change the current law as to whether it's subject to UK taxation and reporting requirements. That's very clear, considering how really my question was. I'm assuming that the intention here is to allow variations to benefit from various tax regimes, and I think that if that is the intention then that should be clear. I think that the concern that the panel had last week was that if somebody who is a foreign national sets up a trust disappears to another country then the domicile rules could then become a bit unclear. Again, just in practice is that something that you're dealing with. I think that that would be more to do with somebody coming in and not having domicile in Scotland setting up a trust to men, running it from another part of the world for having jurisdiction. As I answer a question with a question, are you talking about the trustee having created a Scottish trust and put Scottish assets in Scotland into a Scottish land and then disappearing abroad? In that situation it's the beneficiary. It's the trustees who would decide. The trust that has set up the trust is appointed trustees and my experience normally is the trustees perhaps of the protector of an offshore trust being able to agree to that or disagree with it but certainly haven't to approve it where they agree to the change of the what I would call proper law of the trust, the law that applies to the jurisdiction and how that trust is operated. That would be the trustees who decide that, not the trustee generally. I don't think I've seen a trust where the trustee has preserved the right to change the proper law. No, I've not seen such a thing. I'd say that the risk of sounding ignorant, which is of course always a risk. The second question is about protectors. Protectors are a feature of, as I think we've sort of alluded to, offshore trusts and do not have a long and illustrious history in Scottish trust law. This section might then introduce the age of the protector into Scottish trust law. It may not. That will depend very much on whether the advice to those setting up trusts in Scotland is to include a protector. There's no requirement to have one, I dare say. In the sense that it adds a further degree of control and complication and potentially expense, it may be that Scottish domiciliaries and residents and citizens who set up trusts for Scottish or English or Northern Irish or Welsh beneficiaries may not use a protector. They might. So, what I'm saying in a roundabout way is that I would agree that it isn't just up to the protector what the domicile is for tax purposes, but is this something to be overly concerned about, I'm not sure. I think that unbalanced protectors will not affix part of Scottish law. I can see a great use for them going forward as a form of protection for the beneficiaries who slightly negates the overriding decision making of the trustees. I can see some uses for them in the Scottish law. Okay, thank you very much. Just then to ask a question on section 61 on the alteration of trust purposes and family trusts, which I think we've dabbled with slightly there, but section 61 says that after such a trust had been in existence a private trust for 25 years, the court of session will have power to alter the trust purposes, the same objectives, etc. So, a short and minimum time period can be specified in a legal document creating a particular trust. In the committee's call for views, six of 12 respondents commenting on section 61 said that they thought that 25 years is too long. I don't want to go too far here, but Alice Pringle of Anderson Struthern has one of those people who actually suggested this. Amongst a number of others, including the faculty of advocates, said that the imposition of such a lengthy period is notable. So, section 61 gives that power to apply to the court to alter the trust purposes of a family trust. Given the views that 25-year restrictions have been mixed, but many have said that it's too long, are you satisfied with that time period? It's too long and probably best left to the discretion of the trustees. They're the ones that are administering the trust, they're the ones that are running into the problems, and if they have the ability to decide at what point the use of the section would be useful, then I think that that would be the best route to follow, in my opinion. I understand the need to ensure the wishes of the trustee when setting up the trust, he set out the purposes, but you can't foresee changes in tax regimes and things like that that might not make the way that the trust is currently set up satisfactory going forward, and 25 years just seems a bit prescriptive. I think that the court oversight in that regard gives that protection. They are going to be looking at it in each case, rather than setting a minimum of 25 years. They can consider each case on its merits at each time. A material change in circumstances sounds quite dramatic. If it's something dramatic, why do you have to wait 25 years as well? That covers that point. Everyone here seems to be of, broadly speaking, the same mind, so that's very useful for our information going forward, so thank you very much indeed. I'd like to move us on to section 65 and 66, expenses of litigation. The law society, while supportive of the bill overall, seems very concerned about the current policy underpinning section 65, which provides principles to determine how legal bills are paid for in trust cases. The law society thinks that section 65 will deter people from becoming trustees and may lead trustees to unfavorably settle or abandon legal proceedings for fear of personal liability. It would be useful for the committee to hear the panel's views whether you share the concerns of the law society or whether you can offer the committee any reassurance on that point. A related question, do you think that the availability of insurance helps to mitigate against the risks identified by the law society? I don't know if either we can start with Ross again and work round because I'm remote. It's not easy for you to catch my eye, so I can believe it's the convener to bring you in if that's referable. I personally think that the wording of the legislation is that it could potentially be off-putting to potential trustees. I think that as soon as you say the words personal liability, then people immediately have concerns. The point of insurance is something that we've looked at previously in respect of various matters that we've come across, and I think that that does require to be an option for these circumstances. Ultimately though, in terms of the guidance that was published with the act, the personal liability of trustees, as you would hope, would be in circumstances of fraud or a complete lack of good faith. Ultimately, that could be off-putting and it would be good to have some clarity as to the extent of circumstances where personal liability would apply. I am not a litigator and I don't deal with expenses in such matters, as I mentioned before, but I would echo Ross's comments that any heightened likelihood or heightened perception of the likelihood of personal liability would undoubtedly put a number of trustees off, notwithstanding the ability to ensure against that kind of risk. As I'm sure that we're all aware, insurance always has conditions and the cost of premiums for insurance will presumably be a trust expense as well, which again, given the requirement if this stays as it is, will be a drag on the trust fund. I do think that it's a balance. I think that there has to be the ability to find trustees personally liable and certain parts of subsection 3 are fine. Subsection 2 is a little alarming. I think that from a professional trustee point of view, this is concerning, because quite commonly either solicitors, firms or our trustee companies might be appointed as trustees and it's managing that risk for business requirements and our insurances, but I did notice that there is the power to us to apply to court to get personal relief. I don't really know how that would work in practice, but I see that it's a way of protecting the trustees to stop them from avoiding taking any action that their position would be covered in that event. Ultimately, where do those costs fall then in that case? I think that it would be dangerous just to always rely on insurance because in many cases insurance can't be obtained if litigation is in contemplation. That might be one of the questions asked in the application for insurance, in which case the premium may be sky high and unaffordable, or just that the trust will be uninsurable. The danger here is that it's back to the balance that I talked about earlier, balancing the trustees and the beneficiaries. You've got to be quite clear where the balance lies. My concern with Ross is that you may find yourself in a situation where the trustees are looking down the barrel of personal liability but they're doing the best for the trust and that therefore skews their perception and their decision making. A decision is made by the trustees that might not be to the best benefit of all of the beneficiaries but only those who are agitating via this court action. I think that that does cause me concern as far as personal liability is concerned. No, I have nothing to add to that. As Sandy mentioned, I'm not a litigator either and therefore I'd be reluctant to comment with any certainty as to how I feel or with any particular views on that. If I could move on now to section 67 of the bill, the Faculty of Advocates and others have said that they think that the power in section 67 of the bill to give directions to the court needs to be much wider than the power that is counting the appeals in the bill. Again, it's being trusted to get your views of whether you agree that it needs to be wider if it's about rights or anything around that. Or are you happy with that as it is? I think that in balance wider, ultimately, it's going to the court that the court can draw back what's being asked for but if they can't go further than what's being asked for then that may in turn cause a problem. So I would agree with the Faculty of Advocates that wider would be better here on the basis that ultimately the court will decide and that's your supervision of the trustees and what they're asking for. Is everyone in agreement? Thank you. Okay, thank you. And back to Mercedes. Thanks, Camila. So moving on to section 72 in part 2 of the bill on the right of a spouse or civil partner to inherit, so this is obviously the part of the deal, the bill dealing with succession law. So various stakeholders, including the law society, have said that a distinction drawn between spouses or civil partners who were living with the deceased person at the time of their death and those spouses or civil partners who had previously separated from the deceased person but hadn't actually divorced or had the partnership dissolved. So it would be helpful for the committee to hear the panel's views on this policy idea of this distinction and whether you agree with good drafting of the provision, it's possible to describe and define what is separation and what is not because, obviously, we're aware that there's circumstances when people may be living separately but their relationship is very much still. Together, through reasons out with their control, they might be in prison, they might be working overseas, so do you think it's possible to draft a clear distinction in those circumstances and would it be helpful? In that distinction and also specifically relate to people that might be in care or something like that where you're covering the eventualities where the relationship hasn't broken down but they're no longer living together, I think it's a welcome change because I think it reflects what people probably think would happen if they died without a will, this change, but I can also see the negative downside if we don't specifically clarify what the position is where you have a case where someone is estranged from their spouse or civil partner and where they are then in line to inherit their estate when that is not their intention at all. I think drawing a distinction would be helpful but I don't think it would be possible. I think in practice if there was a distinction about separation or timescale for being apart then I can imagine a potential beneficiary saying that that wasn't the case or that it didn't happen or that we weren't doing those things, so I think it would be really difficult to draw that distinction. I think the position should be that if you are separated you have a separation agreement where you forfeit certain rights as I say it would be helpful but I don't think it would be possible to do in a way that would give sufficient clarity. Often people in this situation they're cohabiting, there's nothing in writing, there's unlike any in writing when they stop cohabiting and therefore I think if we are to proceed with this we have to come up with some sort of wording which shows the difference between people who are living together cohabiting or husband wife and those who are separated. Now we have it for tax purposes and if we're going to proceed with this it should be included. Another minor point I just slightly concerned that we've got tacked on to the back of a trust bill, a succession section and I do wonder whether it might be better to just separate them. I know it's different than other act but it just seems where it's kind of tacked on at the back and it would be nice to have a kind of full succession bill that covers everything and not just tacking things on but that's just an observation that's not a criticism. That's helpful to know. I know it's certainly something that obviously others around the room, even the 4% behind you are actually nodding their head and they give it to that point as well. Caroline, do you want to come back in? No, no, I agree completely with that comment. I think there are two quite separate matters and there's also quite a lot of change or consolidation happening in terms of trust that to put the two together is a little bit confusing. Whatever decision has taken with regard to section 72 I think that public awareness could be made of how that will operate in practice for those that don't have a will, it would be really beneficial. My experience, what is being proposed to change is what the general public thinks is the case anyway and telling them that is not the case at the moment can produce incredulity occasionally. Certainly I agree I think broadly that it's something that is to be welcomed subject to what was stated about some kind of provision for separated spouses and whilst I understand Ross's position I think I'll fall more on to John's view that there needs to be some kind of provision to take into account this, notwithstanding that it is difficult to avoid those who are through choice or necessity living separately but are still married, there must as John says be some way of putting something together that works because I think that that would be essential for it and the curiosity and again it is sufficiently common that one comes across it in practice fairly regularly that people are separated but have not divorced so I think it needs to be. In terms of how that would work practically I guess I'm putting you all on the spot now I mean would it require some kind of formal separation agreement or I mean it cut out slightly when Ross was speaking but I thought I heard him say it would be helpful but impossible so I'm interested to understand how we might be able to to make it work to have that distinction. Yeah I think my point was it would be helpful but I'm not sure it would be possible and that the waiving or forfeiture of those rights should come by way of separation agreement so that there is clarity on that point. I just in practice if you tell someone no you are not getting this thing because this is what the rule says then they will come at us with ways of trying to skirt that and I'm not sure you could draft in a way that would address all of those possibilities and therefore I think a separation agreement would be would be the preference here. I mean I don't disagree at all that that would be ideal but if someone hasn't got a will then it seems perhaps unlikely that they may and they haven't you know they are cohabiting they haven't thought to regularise it with a cohabitation agreement for instance it seems also unlikely that they may not have a formal separation agreement so I think some form of attempt to address it within a law would be desirable. I'm going to put you on the spot then just in this would you have any form of wording that you think could be useful? That is a matter of fact in my back now. It might be worthwhile to me and if there is anything also after today maybe just to send something in? I think it's always dangerous to make up wording on the hoof so I'm certainly not suggesting that. We're happy to come back to you with some suggested wording but it might not be acceptable but we will apply our minds to it. I'm not saying that it's wording in particular but I was talking with John and Alan Barr outside earlier on and I recalled the provisions of the old marriage by cohabitation with habit and repute which Axie Grins are in the room with lawyers who will remember this from there but partly it's to do with what people know you as are you known as to your friends and family as being in a relationship or are you not? And that there can be evidence in that respect, I suppose. Respect, if I'm saying a couple and one goes into a care home for a very long period of time what happens in practice at the moment? Is there any thought of having to put something in writing you know so someone's been in a care home for three or four years, the other buttons living at home? How in practice do you deal with that so that people don't lose out? I think it depends on the circumstances. I mean the chances are on that situation as you've outlined the partner who's still at home most will be visiting their spouse in the home probably regularly and I suppose it comes down to capacity as well is the person in the home in Cape all therefore they can't decide to separate at one level so I think it just we have to be very careful and that's down to the intention of the parties it's down to the reality of their life which is different for different people but nevertheless I think legislation should be able to cope with that hopefully not too woolly. Because I think the other one that was raised with us last week by clearly academics is if someone goes on to a submarine for a long length of service that type of issue or someone goes away again for a long period of time is that an issue that concerns you in practice? Again it would come down to intention of the parties you know someone in a submarine is clearly is there because they have to be there they didn't intend to leave their spouse it's just they're forced to be there as part of their duties so you know if they don't intend to be separated then I think that would be fine if the other end of spectrums those who have separated and back to sanny's point about marriage who haven't repute if you know it's accepted to their friends that they are no longer partners or cohabiting or spouses then I think that's a different interpretation and result that can come from that. Okay that's helpful if I make you mean to just I appreciate we probably don't want to rewrite the law of succession on a Tuesday morning but the bill does open within a worm slightly and the one area that we looked at again last week with academics was around legal rights and whether there should be a greater restriction on the law of legal rights and I understand in some continental European countries I think Poland and Germany you can write into your will to almost not completely get rid of them but certainly delete them even further than we have I appreciate again continuing my spot to ask you to comment on this but is that an area that you think is worth pursuing or do you think we've got the balance about rights around legal rights for discussion but I don't think personally I could sit here today and say I think this should be the rule on legal rights or I think that should be the rule on legal rights I think it's beneficial that we have clarity at the moment the the English position on this matter which is kind of where I would draw comparisons is is very vague if you can demonstrate that you were dependent on someone and they ought to have made provision for you in respect of their estate then it basically you can make a claim but that will fall down to the court and their discretion and that can lead to long drawn out protracted litigation which which really benefits nobody but lawyers so I think the fact that we have clarity is beneficial but I think your question of is it worth exploring potentially yes but I don't think that any of us not to speak for my colleagues could say it should be this or it should be be that at this stage I think reform of legal rights has been something that's being mooted for for years and years and years and I don't think anyone has come up with an answer to what would be the ideal scenario it's sort of balancing the sort of the freedom of the test stator with sort of obligations and you know things have been mooted about you know giving a limit to to children that are say under the age of 25 in full-time education or you know are actually dependent on on the on the test stator and that type of thing I don't know the answer in today's probably not the day because I think it's a whole act in itself and it's all bill in itself and a lot to kind of consider you've also got to think about the people that this any changes it would affect because a lot of strategies that are put in place currently around the current things to ensure that especially the sort of unthinking farming and landed states that things can pass on to heirs and things like that so it's very very tricky area to kind of navigate whilst at the same time understanding why that principle is there in the first place also 20 years is a long time to claim legal rights echo what caroline says there that it's a balance the to a stator things they have entire freedom to deal with their estate as they wish and are outraged to find out that they actually have to leave a portion of their estate to their their children or or their spouse on the other hand the the beneficiary deserves protection from capricious or or abusive treatment from those on whom they are perhaps entitled to depend both can be true it's about balancing the two and i think where scots law has an advantage in a way is that there is a degree of certainty as to what anyone is due and one can advise on that i would again as as ross mentioned i'd i'd be very keen to avoid the possibility of oh well let's leave it up to the court to decide because um at least with certainty you know where you're going with administering an estate if you have to then worry about six months a year two years five years 20 years of litigation um i'm not convinced that's in anyone's interests thank you thank you merseri is anything i want to come in on okay thank you and um so we move to part two of the bill the committee has heard suggestions of three policy proposals which could be added to to the part two so first of all the creating of exceptions until legal rights is the currently applied to protect from disinhertances that was from professor paisley in last week secondly amending the current strict six month time limit which applies in the context of the cohabitants power to apply to the court for a share of the deceased estate that was from the faculty of advocates and if on evans thirdly the clarifying that the law does not permit an unlawful killer to be an executor of the victims estate that was from professor paisley and gretin so what are your views on the on these three proposals and do you think they should be added to part two of the bill and do you think that there are any other changes that should be made to part two of the bill on the do you mind the order in which we deal with it or can i just say about the no take take the the cohabitation section i mean i think that six months is rather a short period and i'm pretty sure most practitioners agree it ought to be a bit longer do you might find strange given that i just said that you don't want to be waiting too long for litigation but i do think six months is quite short for such matters given given that these section 29 claims can only come about during an intestacy and where there is a cohabitant i don't think there's any harm in extending the period it's not as if it's going to be every estate one deals with i think more broadly though i would welcome routine branch reform of section 29 and i would point the committee to the comments of i think lady smith and lord drummond young in curr against mangan from 2014 where they said this really needs to just be you know changed so there's much more clarity on what the court is to take into account when coming to our decision on section 29 matters okay thank you john i think the unlawful killer not me exactly makes imminent sense there's nothing worse than not being a beneficiary state where the person who has killed your beloved spouse whatever child is then in charge of administering the estate i think that just seems to add insult injury quite frankly so it makes sense give any views on the other two suggestions legal rights obviously legal rights is being part of public policy it's it's been a part of scots law forever and therefore i think that we have to as a professional look to use politicians to to say what you think is best now we'll come back and probably say it's it's maybe wrong or it could be done better but that's our role and you have your role and i'll leave it at that i think okay culley relation to the cohabitants i can understand why the six month period was included when the legislation was drafted it sort of ties in when you're ascertaining the debts of the deceased estate and that's probably why that that figure was it was reached but as sandy alluded to you know this is probably not in every scenario it's only in intestate cases and in practice it will occur relatively rarely so to extend that period in those circumstances would seem favourable i suppose i want to go one step further and again it's probably too much to cover in this current bill is my concern is with modern family dynamics and situations there is just so many more people cohabiting and not living and not marrying or entering civil partnerships that to restrict this only to matters of intestacy how you legislate for the other side presents a whole other problem but i do think it is quite limit the rights of cohabitants remain very very limited okay thank you and joseph how do you believe carline there about the the six month timeline i can sort of see the logic and how that links to the ascertaining debts on the estate but in reality getting an executory started can take a few months in itself depending on what's happening particularly in intestate scenarios ascertaining if there is a will or not before you know it you can be a couple of months down the line and you know so i do think extending that is a good start and i think reviewing rights cohabitants generally as carline suggested in line with modern times is a good idea as well whether that and the other suggestions can be added to this bill i'm not i'm not sure if it's the right bill to do it on similar to what john i mentioned earlier it does feel that the succession elements of this particular bill have been slightly there there's more to add on and if there are to be further changes to succession law i think maybe a separate bill i'm dealing with this would be would be beneficial for clarity sake if nothing else i think i'm kind of hopefully made my point in the legal rights position which is a far greater discussion is needed and i agree with sandy in terms of the section 29 applications it's changing from six months to 12 months there's really just slightly changing what we have at the moment whereas actually there needs to be a more thorough review of that particular policy because it isn't always appropriate for family life as it is at the moment there can be wills from 30 years ago and then cohabiting or cohabiting for 30 years and ultimately that cohabiting misses out and that isn't necessarily what the person the deceased would have intended so i think by all means change the time limit but i don't think that actually addresses the public policy point on this is which is what do the general public want or what would they expect in those circumstances and as far as unlawful killers is concerned i think that that's simply common sense that that it doesn't apply okay okay thank you um do we have any other questions for the panel okay so with that i'd like to thank the panel for your helpful evidence this morning and and certainly the committee may follow up by letter with any additional questions stemming from what has been discussed this morning but also i think that there'll be a couple of points that will come back that yourselves will come back to us on and certainly not about redrafting a whole section but any potential hints would be quite useful so thank you so with that um is that anything that the panel would like to highlight that's not being covered or anything that they'd like to be put on the record if i may um i think the the definition of beneficiary could be clearer to come back to caroline's point earlier primarily the types of trusts that my firm deal with our discretionary trusts in which the trustees effectively have unfettered discretion as to how they benefit those beneficiaries and we've had quite a number of cases where there are discretionary slash potential beneficiaries seeking to disrupt the actions of the trust to use the distribution of the trust estate and the powers contained within the act depending on how it's interpreted potentially give those beneficiaries powers that the trustor may not have intended so i think greater clarity around the the rights of purely discretionary beneficiaries would be helpful okay well thank you sandy i want to say that there is um the second eight of the the bill talks about the removal of trustee by beneficiaries where all beneficiaries are of age and capable and are absolutely entitled to the trust property they can remove a trustee um i do wonder should there be the ability to add a further trustee if the property needs to be administered and remains in the name of trustees section 68 um allows completion of title by beneficiaries uh a beneficiary absolutely entitled to property um title which has been taken in the name of a trustee who has died or become incapable without having executed a conveyance but that's not the same as the trustees having been removed by beneficiary under section eight so if we're going to look at tying up the ability to actually move property from the name of trustees to beneficiaries presumably is the idea of section eight does that need to be tied together okay thank you john thank you from my perspective section 40 has to be looked at i'm slightly concerned that sexuality particularly when dealing with the sale of land and the disposition being signed by trustees and it's to be executed by a majority of such of the body of trustees are both capable and traceable and i think we will come into questions from and quite rightly so by convencers on the other side who are buying property where they're saying we'll prove the trustee the other trustee shouldn't be signing and certainly under the existing trust act the majority of trustees sign and you've actually sorted all the problems out problems out beforehand so if you've got an incapable trustee or untraceable trustee you sort that out before you sell the land so at the points of selling generally that you have a kind of clean decision making processes at where there may be advantages but i think on balance the other side who are buying will want to make sure they've got a good title and if you've then got to prove that the trustee is incapable or the trustee is untraceable then that creates more problems and i think this section solves i was going to mention accumulation periods and the fact that i won't have retrospective effect i think in the majority of my scenarios i think actually it would be welcome to many people ministering trusts if they did have retrospective effect but i can completely understand if it was something specifically stipulated in the document at the time i think i just get another degree of flexibility to be able to to reinvest that some i think obviously it depends on the type of trust and whether you know subject to vesting of beneficiaries and things like that but where it's a fully discretionary trust i don't know whether we'd necessarily need to limit it to trusts that are coming into existence following the passing of the act i think the other point that i've made picking up on accumulation is i think it's surprising it doesn't apply to charities as well so you could have a situation where a charity one year let's say has been going for 21 years and there's no power to accumulate so one year it might not spend all its money and the trustees may think actually be useful just to capitalise that to reinvest it to provide for the future and i'm slightly surprised that the accumulation period has not been abolished for charities as well on the basis it would ease charities administration i think okay no thank you and joseph how to agree about the accumulation periods both with what adrona carline said i think it would be beneficial for it to have retrospective effect particularly when the trustee itself has a wording that is flexible enough to account for changes in lawful accumulation periods similarly i think you should i'm not quite sure of the reason why it doesn't apply to charity so i do think that could be looked at other than that there are just small sort of more drafting and more sort of word specific tweaks that probably don't matter going into a huge amount of depth in this form but they are part of our written submission anyway and there will be time to sort of flesh those things out in more detail but other than that i don't think there's anything that i would that's clearly missing that could be added other than perhaps we were talked earlier about the duty to account to beneficiaries generally and what information they should receive i think clarification on the duty to provide accounting specifically trust accounts to beneficiaries this is an opportunity to clarify the the parameters of that duty whether that's part of section 25 and 26 or otherwise i think that could be added in here okay okay no that's helpful thank you very much so thank you once again and with that i'll now suspend the session briefly to allow for the change of the panel thank you and for our second panel can i welcome allen bar the convener of trust succession law the subcommittee at the law society of scotland laura than lock casey a convener of the faculty's law reform committee at the faculty of advocates serigio mcdonald the committee member of step scotland and kenswinton a council member of the scottish law agents society but beforehand to the jerry is anything you want to you know first if you want to anything want to declare i declared other the same as i did okay okay thank you so also once again i know to my city's variable we'll be joining us online shortly and we have received apologies from oliver mendell so what can i remind the panel to not worry about turning on the microphones during the session that sees a control by broadcasting and if you would like to come in on any question please just raise your hand or indicate to the clerks and that there is also no need to answer every question simply indicate that this is not for you to respond to however please feel free to fall upon writing to any question after the meeting if you wish so i'll open the questions so on the second of may the scottish law commission said to the committee that it's very important that the trust law reforms ultimately apply to pension trusts as well the current plan is for this to have effect through section 104 order agreed between both scottish and uk governments and do you share the views that this bill should apply to pension trusts in whole or in part and what would the practical impact be for you if there was a gap between the legislation coming into force for most trusts and then the legislation coming into force for pension trusts i think that it would not be a disaster if if there was that gap the one that i think is born to distinguish between two different types of pension trusts the ones that are excluded here by the definition is pension schemes established under trust as opposed to private trusts which contain elements of pension rights and and they will be affected by the act if it becomes an act in the normal way as with other private trusts i think that the pension scheme trust is a large and specialised area i don't think it would be a disaster if the act did not affect them the companies that are running such pension trusts are big bruising and able to look after themselves and i suspect that the vast majority of what would be covered as a default by this act is already covered in such pension scheme trusts so while as a matter of consistency trusts under scott's law will include pension scheme trusts and therefore they should be covered i don't think it would be absolutely awful if they were not already there was a delay in that coverage happening okay thank you yeah i think i agree i mean there's a distinction drawn between sort pension scheme trusts and and general trusts that deal with sort of pension payouts things like that for trust registration and our sort of anti money laundering rules that we have we certainly have those that were registered under the finance act back in 2004 various scheme arrangements they're treated as trusts but aren't necessarily trust in the classic sense so i think as alan said they'll have their own sort of rules and regulations i don't tend to deal with those myself it's more the the classic type of trusts i deal with but i think the main driver here is to actually just get trust law reform and i think as my colleagues were saying earlier it's not necessarily a deal breaker to have this bill dealing with trusts and then have pensions dealt with separately thank you to the others on that the faculty is not involved in the technicalities of these matters so my colleagues have much more experience than i do okay thank you all right ken the last time i was involved in a pension scheme trust was in the 1970s so i think i'm well out of touch on i don't know thank you um Jeremy thank you good morning to the panel you have the advantage that you know the questions that we asked to the previous panel so uh hopefully um we can make progress um as i said to the previous panel you'll be aware of our new powers for a self court but predominantly the main powers still are lying in the court of session um i wonder whether you have a view on this and maybe to start with lord and lop on behalf of the faculty um i would i think associate myself with the comments that lord drum and jung made when he gave evidence i wouldn't see the faculty as differing from him on what he said about the court of session but there are plainly pragmatic reasons for having some powers capable of exercising the share of court the only point which struck me when i was preparing for today's session and this is very much just um i think it is a drafting point but it's probably worth mentioning here that uh i know you are interested in the provision about the expenses of litigation in which trusts are involved and i've listened to the discussion about that with the previous panel it did strike me that the definition of court in section 74 doesn't include section 65 which is the new litigation expenses section i'm not sure if that has been mentioned but i would have thought that if there is to be this highly nuanced approach to the expenses of litigation you would want that section to cover litigation involving trusts in the share of court as well as in the court of session so i was wondering if um it might be a good idea to include section 65 in the definition of court in section 74 um so i apologize if that's been mentioned already it's just something that struck me so um it may be that there's a reason why it isn't but i couldn't think what that reason would be no i think that had you been raised before so that's helpful we can pursue that do you have a view on this i think one of the key things that struck me when i was reading it and discussing it with some of our colleagues was in relation to being able to obtain a power from the court so historically that was done with the the sheriff court rather than the court of session and we come across as a lot in practice um where if you don't have a power in a trust deed you can request it under the current 1921 act the one that i see most often is in relation to wills that say i direct you to hold this house during the lifetime of x so you don't have a power to sell without going to the court because that's at variance with the trust deed now at moment that can be done at sheriff court but this would actually put that into the court of session and again i think one of the points that was made earlier by my colleagues is actually to have a choice between the court of session or the sheriff court would be useful as again as one of the points said earlier there's not much of a difference in cost these days between the two and sometimes you will want a sort of court session case to have the more learned judges perhaps in this area but sometimes it's for ease swifter to get it done through the sheriff court and i've certainly seen instances where we wanted to sell quickly the reasons for going to the sheriff court in that scenario so i think having the choice again would be really useful particularly in circumstances like that thank you and Jeremy again trustee as you'll be aware does not get participation in trust decisions under section 12 when they're incapable trustee can also remove a fellow trustee from the law on the basis that the trustee is incapable there's a risk of abuse of these provisions being highlighted both by the law society and by other legal stakeholders the academics who appear before the committee last week were more relaxed about this possible risk i wonder again from a more for practitioners perspective are you concerned about this are you happy with it is there anything you would want to add to it i think that the law society we're among those concerned i think it's a broader concern of the definition of incapable which i know perhaps will come up again later is tied to but is not exactly the same as and certainly there's not of the same kind of nuances as the adults within capacity act and i think that it would be good that it were more closely tied and just picking up on a point made earlier i think that kind of future proofing it for further work that is going on in that definition would be extremely helpful i think that there are dangers particularly in the removal of a trustee deemed by his or her fellow trustees to be incapable and because i don't think there's anything that said that it's simply that if they are incapable other trustees can remove them and that i think is dangerous because those wishing to remove of a vested interest in it therefore have a vested interest in defining somebody as incapable albeit with the with the benefit of a definition but is that definition is by its very nature subjective to a significant extent and the protection for the alleged incapable person seems to me somewhat limited in what is there so i think that there needs to be to be further thought on that i know that adrian ward he may well have written to the committee separately has concerns about the definition of incapable notably that it's a kind of free-floating in limbo definition whereas in the law more generally on incapacity it's a question of incapable of what in incapacity being a spectrum rather than an on off switch and therefore that needs to be taken account of in other words it would have to be incapacity in relation to acting as a trustee or even to some parts of acting as a trustee and i think that that does require further work it may well get it through other legislative meetings that are happening anyway but it then needs to be tied back to this change because incapacity features on one or two occasions within the the bill i just want to pick up on a couple of things there when i was speaking with various people one of the issues that came up around the definition of incapacity was whether it should be within this act or with reference as was suggested earlier to the adults within capacity scotland act that we have and i think one of the suggestions that was mentioned when i was speaking to various practitioners is actually if you tie it to the act you're then suggesting that scots law applies to trustees of scottish trust even if they are not scots law jurisdiction persons and that can cross its own problems as well and i think having it in the act at least means that we are saying this is the definition of incapacity that applies to trustees of scottish trusts otherwise you would need to say something like if they are incapable in terms of the adults with incapacity scotland act or within the mental capacity act england or within the mental capacity act northern Ireland or within their own jurisdiction and i think if you start going that far you're then also having to say well what is their jurisdiction are they incapable in that jurisdiction needing to get an opinion on law in that jurisdiction and it creates more barriers whereas having it within this act and saying actually this is the definition we are using for scottish trustee then that sort of circumvents those issues so yes you're you can future proof by having reference to external acts but you've then got added barriers to actually being able to define what capacity is if you're doing that so it's sort of got other practical hopes that you've got to jump around but i definitely share Alan's concerns and the law society's concerns around the ability for abuse here and i think the point is that it's a very subjective view as to what is incapacity and the example that i've come across in practice and discussed with various other people is where someone perhaps has a mental health issue or something like that that gives them difficulties in making decisions and whether or not that would prohibit them from being a trustee and i think if they are excluded as a trustee on the basis of that there's risks there of discrimination claims if they're saying well i've been discriminated against because i have a mental health problem or this health issue and i've been excluded on that basis but there's also other risks there where actually it could be used in the wrong way in contentious situations so particularly if you've got say two warring family members and one thinks that their say sibling is incapable because of one reason or another if they make that view and they do some sort of minute of trustee saying i am now so trustee because my sibling is incapable they could then appoint the whole trust fund to members of their family and completely exclude the other and there's a lot of risk there for abuse around actually not just excluding that person when they might take issue with that but also having the trust fund paid out to other parties so i think some form of protection in the act would be really useful whether it's just intimating to the person that they're being removed so that they then know that's happening and that if they want to take issue with it or argue it they can take legal advice on that but the moment there's no requirement to even tell them that they're being removed there's nothing in the bill that makes that a necessity so the other trustee could remove them crack on wind up the trust and that person would never even know that that's happened and that just seems a very risky thing to have particularly because then the remedy for the other beneficiaries who've potentially lost out would be really difficult to try and undo all of that i did want to say something about this whole area this morning i'm not sure if we're taking it out of order you know if there's an intention to come back to it or should i just go for it now we've kind of started on this i was a commissioner at the law commission when the trust's report was coming to a conclusion and i can remember the discussions we had around this and to some extent you know i was in favour of moving away from the definition that we currently have in scots law of incapable which as everyone knows is in the two pieces of mental health legislation the adults within capacity act 2000 and the mental health care and treatment act 2003 so far in scots law we've just had one definition of incapable and we have one definition of mental disorder there is a nesting phenomenon here so that you have someone is incapable and that that is as a result of mental disorder so both these terms are specifically defined and as i say at the moment we work across scots law with one definition it's actually it would be very unusual to have different definitions of the same term in different areas of law although it occasionally happens and this might be an area in which one would move into having a different definition of incapacity so i wanted to make that point what we did or what was done at the law commission was that actually it was the then current definition in English law that was to some extent not quite copied but you know whatever the opposite of putting a kilt on something is we looked at the English definition in the mental health legislation of 2007 in England and took that although it slightly reworked and the other thing that was done was to drop the reference to acting so it's the reference in this legislation to what you're incapable of is all decision related it doesn't also add that you're incapable of acting there is as everyone knows a lot of work going on in relation to reform in mental health and in capacity law and actually i was at a meeting to discuss where that is headed last week and i think the bill team for this bill are liaising with people who are knowledgeable about that project as well it's certainly possible to have a definition for the time being in this legislation and then for it to be changed as part of reform in mental health and incapacity law generally there are with the the definition of mental disorder in the 2003 act there are currently sensitivities around what's included in that definition and there are sensitivities around what's not included in that definition so this is very delicate and sensitive work and you know talking about future proofing well certainly making it flexible seems to me a very important goal but we will need something for the time being i think finally to say i would be i think less concerned about claims for discrimination because under the equality act there are only claims in relation to specific areas of activity it's not as though there is a kind of general prohibition on taking into account what will be a cognitive impairment there are some situations in which necessarily cognitive impairment has to be taken into account and that does not necessarily give rise to any claim for discrimination okay thank you there was suggestion i think made in the first panel about getting some kind of medical evidence which would give you evidence around that would that be something you would be think would be helpful in regard to giving protection maybe to the trustee that's being challenged or not that we would have to provide medical evidence yes i think medical evidence is almost always helpful there would be i think related questions on what kind of medic you're talking about you know there is i think an increasing awareness that it isn't just psychiatrists who can give useful medical evidence about this and then you would also want to consider whether psychologists could be involved so that would be one comment i would make in relation to medical evidence and the other comment i would make is that it shouldn't be solely a question of medical evidence i don't think because there are other professionals and other people who are involved with someone who can give very cogent evidence and in in my work in the mental health tribunal we frequently receive information from mental health officers who are specialist social workers which is very valuable in assessing capacity as well i think that the medical evidence bit is important just as part of other evidence conceivably and may indeed give some comfort but i agree entirely it must not be the binding thing as it is not in relation to other legal acts now because again coming back to capacity is not an on-off switch it's capacity in relation to a trust just as when i am drawing up a will for somebody it's in the end my judgment perhaps with input from medical evidence of the person being capable of understanding the legal act for which i'm responsible for providing the ammunition as it were so i think as long as it's not thought to be binding medical evidence is helpful should not be required and must not be the same binding in the end on that one thing that we always need to keep in mind is also being practical if there's things that need to be done and moved on i mean the reason for having this in here was to stop people going to court just to remove someone because of incapacity and to focus on situations where you've got say two trustees and one's incapable because they have dementia or something like this and they aren't able to sign documents or understand them if you're needing to sell a house going to court to have that trustee removed just to then have one trustee left to be able to action that it adds a lot of cost to it so i think being practical is key here as well so i think as alan said there shouldn't be a requirement to get medical evidence i think in those cases where there is a clear trustee who's incapable being able to do it quickly and being able to get house on the market things like that need to be done swiftly if you were to require a mental health officer's report or something like that you could add months to your your timescale of getting things done so i think there are 90% of the scenarios probably where there's not an issue with a trustee that's incapable all parties will know that is what is happening and you'll be able to proceed i think it's just those few and far between cases where there is an opportunity there for abuse that causes the problem which is why perhaps just having a requirement to intimate the intention to remove a trustee would then allow that person to argue it if they want and obviously if they don't want to then things can just proceed as normal and it avoids that requirement for court or requirement for medical evidence and things like that that may add delays or barriers to actually being able to progress the trust and and do what's necessary I've got a supplementary just to allen allen earlier on you indicated that in terms of also incapacitated spectrum and in terms of trusts we could look at excluding people from specific aspects of the decision making of specific aspects of a trust how easy or difficult would that actually be no i wasn't if i said i apologize i didn't intend to indicate that people should be excluded from specific aspects all i was saying is that people's capacity over different things that they may do will vary considerably and it may well be that people are perfectly capable of managing their own affairs but not the affairs of a trust with the nuances and the interests of third parties that that brings so there's perhaps a difference in capacity to do different things you're right of course within a trust within acting as a trustee there will again be things that people are capable of doing and not capable of doing and i just think that the account needs to be taken over that spectrum in other words capacity needs to be judged in the terms in which the act um i don't mean this act in terms of the juridical act the legal act that is intended to be carried out okay thank you it's okay sorry i just want to come in and say the incapability may not be permanent so removing a trustee may be a remedy that is a step too far in that situation where there is a prospect of their recovering capacity say following a stroke or something like that is it section 12 deals with that in the sense that it means that a quorum for trustees for making decisions is a majority for the time being of those who have capacity so there's not a requirement to remove someone if they don't have capacity for a specific time and i do think as ken said that removing them may be a step too far if there is that prospect of them having capacity again in the future just another point i was going to mention before we move on under section five which deals with the resignation of trustees it says that a trustee can't resign if there's the sole trustee but i wonder if that should be the sole capable trustee just to avoid scenarios where someone resigns and leaves just incapable trustees which then means that the trust can't then be administered just whilst we're talking about incapacity Oscar can appoint interim trustees if there are no trustees capable of working if there was a trustee that somebody stepped down and there was a trustee who was incapable of doing that we're just going to appoint an interim trustee temporary to keep it going well i'm talking about the sort of non charitable trusts here so there's remedies in terms of this act for certain situations to have incapable trustees removed by the court or other beneficiaries to do it under section eight if the beneficiaries invested in it but my understanding is there wouldn't be an interim in this situation no i mean i think that the big difference is that with charitable trustees there is a third party body such as oscar automatically involved in supervision in more general trusts we only have the courts or the trustees themselves we don't have as it were a third party supervisor who could appoint an interim trustee thank you thank you and Mercedes thank you convener good morning panel so as you will have heard from the previous panel we have a similar section so i'd like to move us on to section 16 and 17 trustees powers of investment and some of you may have heard earlier on me ask a question related to this so the law society and we also heard from the academic Yvonne Evans last week and both of them have suggested that in view of Scotland's increasing emphasis on net zero that section 16 and 17 could be amended to allow trusts to adopt environmentally friendly investment policies particularly when these investments might underperform compared to other investments so as i asked the previous panel would be helpful for the committee to hear your views on this idea if you support it in principle if you think section 16 and 17 could be amended or tweaked to make it clearer that investments of that sort are possible for trustees to make it clear to them that they do have the power to make those investments i don't know if it would make sense perhaps to start with Alan and go around thank you well the law society did say it deliberately said it'd be useful as a confirmation because i think it's there both in the current law and in what the bill currently says after all it starts the trustees of the power to make any kind of investment of trust property that's a pretty broad start governed by the trust deed as a kind of fallback or perhaps possible restriction so i think it's there anyway and i think possibly in contrast to some of my colleagues i think it's already the case that you do not have to maximise financial returns there can be other benefits from purposes there is absolutely no absolute duty to maximise financial returns after all if we could all do that we would all be marvelous financial advisers maximisation is not often the case indeed it might well be the case that maximum investment in what might be described as sin investments like gambling and armaments and tobacco might well have produced much better returns than others over the years i don't think anybody suggesting that trustees in particular are driven always to maximise in that way so i think the power is there anyway as some of my colleagues were saying earlier all that might be welcome if it is a public policy in relation to environmental or climate change driven investments was thought to be very good public policy that the trustees should not be exposed to kind of any form of challenger criticism on the basis of such investments i personally think that that would be a step too far and is unnecessary and such a policy would be defensible in most cases anyway within trusts but as a confirmation if it is thought to be good public policy then perhaps this would be a good place to put it okay because yeah there has been different views which makes me question whether some clarification or just a kind of explicit line to say that it is perfectly permissible it is with it and then the powers would you agree with that sir well yes i can't see a downside to doing that and the only basis on which i can contribute to this is wearing my hat as a trustee because i'm a trustee of one or two trusts and i agree with what alan says that i think in practice it does already exist to some extent that trustees regard certain types of investment as not aligning with the the nature of the trust of which they are trustees therefore not appropriate and i mean you've just mentioned gambling and so on so for example and this is not anything that is part of my trusteeship but if you were a trust for people who had suffered through gambling addiction or similar you would not expect that the trustees of that trust would invest in betting companies no matter how high the expectation of gain might be so i think in practice people are already doing that and that expectation of financial gain is not the sole consideration but if it were thought helpful to have some kind of actual clarification that that's permissible then i can't see a drawback to that the only i suppose counter balancing point is that you would not want to go so far that the investment decisions reflected the personal values of the trustees you know that that's probably where your line needs to stop so that there aren't investment policies about things that the trustees themselves are interested in thank you okay serigine yeah i was actually just going to say the same thing that as long as it's not the trustees own personal views that are driving it and it is actually taken from financial advice and i mean trustees do have the requirement to take advice then as long as it's what they think is the best for the trust fund like allen says i think that is permitted there already i think with the sort of esg type investments at the moment there's different ways of looking at it there's a sort of exclusionary view of the i'm not going to invest in gambling oil tobacco that type of thing but there's a lot of people that take the view that actually it's more of a an activist type role where they want to invest in the sort of bad companies if you will and actually try and drive the policy changes within them so different groups of people have different views on what esg is and i think trying to have a blanket approach is really difficult because actually it's not a one-size-fits-all anyway and i think it's just as long as that's what's best for the trust fund whichever route that takes with the esg i should say as allen says that it's permissible at the moment and again the other thing is it can be the trust or if they put it into the trust deed at the outset that this can be done that sort of overrules what's in the the bill to some extent anyway at the moment we've got the ability in a trust deed to say trustees can invest in a single investment which isn't necessarily allowed under the act so there's the sort of flexibility there as it stands i don't think there's any need to include anything and i agree with allen that section 16 one is sufficiently broad to allow investment and we're thinking about a piece of legislation that's going to last perhaps another hundred years from looking at the 1921 act if we start seeing something that looks at policy now it might look a little odd to our successors in 20 30 50 years time um as laura said there is there is in fact case law about trustees acting out of their own interests in refusing to invest in particular areas um but equally it's competent and regular i think to give instructions to create a policy as to how you wish to invest when you are instructing advisors and i don't think there's a problem about having esg attitudes built into your policy and saying no armament no armaments alcohol and gambling as well so i think it's happening already and i don't think there is a an issue and i don't think there's any need to include anything here so i think will the proposal as i understood it was not to instruct but to have a kind of clarification and a for the avoidance of doubt um but it sounds like are you saying you don't think that would be necessary or would it be unhelpful if it was in there i think it's completely unnecessary and i don't know how helpful it is because trustees can establish their own policies and in my experience trustees are thinking about these things now thank you laura just to add you know listening to ken that there is a kind of again a general drafting problem that if you've got an apparently unlimited permission to do something and then you go on to say and you can particularly do the following thing it necessarily creates uncertainty as to all the stuff that isn't specified so there's no such thing as a free extra clause i think you you know you create ripples that might be my only reservation i guess i suppose the argument is that because it's such a crucial part of the future life on the planet that that it warrants a specification but um i can see your point i'll hand back to the convener thank you okay thank you we'll move on to section 19 that's the section regarding nominees and it's as indicated to the previous panel that the law firm cms is concerned that a section 19 of the bill on nominees is currently drafted it may not go far enough and specifically the firm has said doubt what would remain as to whether trustees can use first of all nominee custody structures and secondly sub custodians what are the panel members refusing on both of these aspects both on the current score of section 19 and also the risks identified by cms i think section 19 is drafted in a satisfactory way i don't see the particular problem i must say i hadn't considered sub custodians but uh i don't see there's anything wrong with the drafting okay thank you now and serigene i think the problem john mcarthur identified earlier is the definition of person so i mean whilst we could say that a corporate has legal personality perhaps actually a trust doesn't have separate legal personality in scotland so if your nominee or something like that was a different structure i think having some form of definition in there would be useful because while while person could be taken to mean potentially a corporate i don't think it could mean a trust okay thank you laura i'm going to defer to my colleagues on this okay i think actually i think it with ken that it's okay i think in response to the i mean i think a person does include a legal person uh and therefore does include a corporation and in response to serigene's point um while a trust of course is not a person trustees are by definition person it's the trustees your point not the trust there may be kind of nominal nominal gaps in terminology but i think it is just in terminology um i would certainly think that a person would extend to any delegated agent in uh legal entity form but i mean if confirmation was thought to be necessary again perhaps it won't do any harm that the problem as indeed laura has adverted to if you start to list the things that are there's a danger of excluding things that it's not and that kind of thing i'm quite happy with person as it stands the only thing about the the clause more generally um is one has to be clear about trustees delegating their powers as trustees the it was adverted to in the earlier session the difference perhaps between administrative and dispositive powers um and while i think that investment management is a classic example that most non-specialist trustees are quite rightly not able to carry out their own investment management therefore not only can but should delegate it to those who are more capable of doing so than them um they must not delegate their as it were trustee duties entirely um and i think that as long as that is clear then the clause that stands is reasonable sergeant i think there's a distinction between sections 18 and 19 so 19 is the one just relating to the sort of nominees and the delegation to nominees whereas what alan was alluding to there is obviously the section 18 delegation to agents and i do think there needs to be some consideration about what can be delegated in those situations because under subsection 5 of section 18 there's obviously certain things that are excluded from being delegated including the decision as to where trust funds should go but at the the start of that section it says unless the trustees says otherwise which would mean a trustee could actually say actually trustees can delegate all powers including the ones excluded under the bill and in that situation you could potentially see scenarios where trustees could delegate absolutely every power under under their position as trustee and that seems to go a lot further than what was actually intended i think with the bill okay okay thank you for that bell kid thank you very much convener and thank you panel looking at section 25 and 26 of the bill section 25 requires trustees first of all to tell a beneficiary that they are a beneficiary which didn't really surprise me but there you go and second give them all the trustees names and correspondence details and this is mandatory for certain types of beneficiary for potential beneficiaries trustees have some discretion as to what information is provided under section 25 and section 26 covers the information that must be made available to beneficiaries and a trusted can override section 26 but a court can later review the reasonableness of that override so the various correspondence including the previous panel have said that trustees duties to provide information to beneficiaries and potential beneficiaries under the sections of the bill are too onerous do you have any ideas about whether these are too onerous and would you amend the sections to address these concerns at all please anyone who's dead interested in this okay okay well i go first on this occasion now where you've got a fully discretionary trust you may have what three generations specified in that trust of potential beneficiaries telling a five-year-old that they're a beneficiary doesn't add particularly to the situation so i can see it being quite onerous and cascading out quite quickly to a significant number but i don't know how you control it it surely is best practice to let potential beneficiaries know that they are potential beneficiaries but how far do you go when there are long-stop beneficiaries who may never inherit so i think it's a difficult question to strike any sort of balance with i think it's good practice to tell beneficiaries and it's good practice to give information um how much information is always the difficulty to decide i think i can actually remember discussion at meetings in the commission around this because what i remember was being anxious when i was listening to it because by that point i already was a trustee of various trusts and i was thinking how is this going to impact me and what duties am i going to have so from that kind of self-interested perspective i remember the discussion but i think i would just i suppose refer to what the faculty has said about this in its response that i hear what colleagues are saying about it being good practice and the faculty has said that it's probably not as alarming as it might seem because of the absence of a sanction and the final point that the faculty made was the need for publicising of the duty and perhaps providing even i suppose guidance or you know certainly something to draw attention to these duties that are going to be imposed on trustees for a start i think it's great that we're getting something because scots law has been been absolutely lacking in any clear guidance as to what you have to tell want to tell need to tell actual potential beneficiaries so to have something is an improvement from where we are now and having said that i think there are there are difficulties there are potential difficulties with it and both small and large perhaps i think some of the smaller in our written response maybe leave them to that the large is that the potential beneficiary situation there are many trusts where the potential beneficiaries are the entirety of the world population because they include anybody nominated by the trustee after the trust has been set up now you know i therefore i think there has to be something to discourage fishing expeditions to people who are running trusts to say am i a potential beneficiary well yes you are yes everyone in this room is if the trustee chose to nominate them that of course is not a real potential beneficiary even in family trusts there's often very real but unlikely provisions for fall backs should generations die out so you go up the family tree and then back down again where the clear intention the actual beneficiaries are immediate family either across in terms of siblings spouses and civil partners or down more commonly in terms of children grandchildren so the actual core beneficiaries if i can invent a term are very clear but the potential beneficiary class is necessarily very wide and i think it will develop picking up on the the potential beneficiary situation is that it will not be unreasonable for trustees to refuse to supply information to such people on such fishing informations i also know that there's provision for charging for supplying such information and i think that's useful too as a discouragement as i say to such fishing expeditions in terms of what i'll call the real core beneficiaries i think it's i say it's a very good start one tiny drafting point in 25 to a it refers to a beneficiary who has a vested interest in the trust property and i'm not sure that beneficiaries ever have interest in the trust property as such the definition of beneficiary later in the act makes it clear is that the beneficiaries as against the trustees as it were but they don't have rights in the trust property and perhaps that should be clarified there's a better property lawyer than me in this panel who i hope will agree with that point the other point on this section that i thought was interesting is there's nothing that's been put in around the duty to account now obviously trustees duty to account beneficiaries is imprescribable under the prescription limitation act which is a separate piece of legislation but there's been various case law about what actually needs to be provided to beneficiaries with the accounting whether any voucher needs to be given or anything like that and i know in the consultation there was various suggestions that in addition to the accounts also the voucher behind the accounts would need to be given for a beneficiary to actually be able to meaningfully understand the account effectively and know whether or not there was anything in it that caused them concern and i think the duty to to provide an account as i say is an absolute duty it's just whether or not there's a missed opportunity here for actually clarifying what a trustee does need to give a beneficiary in that sense a couple of other points again it goes to the detail because this is very new law and if the beneficiary is under the age of 16 the duty is to inform their their parent or guardian but it's not made clear does that change on the 16th birthday are you then meant to inform them as well directly and in some cases i have absolutely no doubt parents or guardian don't tell their under 16 year olds or even their 16 year olds that they are beneficiaries in trusts so the trustees might be worried that they don't know at that point and the second point is a much more general one in that as far as i can see that this is retrospective in the sense that it applies to existing trusts so perhaps it also needs to be made clear and this may be kind of explanatory notes territory rather than legislative territory that beneficiaries who are already aware of their rights under existing trusts you don't the trustees are not obliged to set out when this becomes law to tell all beneficiaries throughout scotland they are beneficiaries if they know already okay thank you very much can i just ask on the back of that then the position about section 61 in the alteration of trust purposes in family trusts because i think that follows on to the back there and section 61 of the bill gives a power to the beneficiaries and others to apply to the court to alter the trust purposes of a family trust and it sets out the default default position that this power cannot be used for 25 years now you might have heard the previous panel speak somewhat on this given the views that have on the 25 year restriction have been mixed as i say there and it's a default power only are you satisfied that this is the right policy decision to retain the 25 year restriction in the bill yep i think there's a bigger issue there that is that the trust also has to be dead so if a trust sets a trust up when they're 25 and they live to 100 you've actually got a period of 75 years which actually makes it much longer than the 25 so i think that possibly needs to come out as well that's another angle right thank you very much laura i just wanted to say when you listed earlier you included the faculty of advocates as not being in favour of the 25 year period i suppose i didn't choose the particular wording in the response but i was actually amused when i saw that we'd said that the imposition of such a lengthy period of 25 years is notable i think that constitutes the faculty sitting on the fence actually which we do try to do about these kind of policy matters so i'm not going to say too long too short whatever that's a policy point and there are you know there are nearly 500 advocates they might all have different views okay that's an interesting angle as well ken did you i know when we discussed this in our committee that there was an even split on the whether the 25 years was appropriate hi yep there's there's a differentiation in view obviously yeah but well no if there has been a material change is 25 years too long right and is it too easy to call it a material change and therefore bring an action what is the material change and i know the previous panel was looking at change in tax regime which is an obvious one but it could be a change in a beneficiary situation where they had become incapable um and a life rent for example had become irrelevant when they'd moved into supported accommodation so that could happen at any stage so that would argue for a shorter period i think it's even i think it's fairly evenly balanced whether 25 years is appropriate to give effect to the trusters wishes i can see it being 10 years is equally appropriate um i think it's a policy issue i don't think it's a legal issue and yes i'll yeah i think i think i mean i think that 25 years is is way too long because of the other protections because there has to be a material change i don't actually see the need for much of a of a length of period as at all if there is sufficient change and it's under the supervision of the court on the trustor is dead point i suspect this might be under some kind of misapprehension in that the point of the trustor being dead is that he or she is no longer in control of the situation but they weren't anyway once they've created their trust then it may well be that the material changes circumstances occur they can do nothing about the trust and it may be thought that they could but they can't therefore um i think that again that shouldn't be a relevant consideration to take into account if there's going to be this power i think that the shorter the period the better because i don't think it will be used frivolously it's it'd be expensive to do this you wouldn't do it for minor things but it's capable of not just coping with material circumstances changes changing but but frankly to some extent with oh i hadn't thought of that and look that circumstances occurred please can we now change it which i don't think is a bad thing under the supervision of the court okay so there is some range of disagreement and agreement it's wide ranging sort of thing and um it's something that policy as you say rather than um the lawyers are going to have to sort out so the lawyers can argue about it later we can argue about it first thank you very much indeed um so i'll just get the one personally the one last thing to talk about and um that is a bit domicile of the trust uh where it is based and um we had um in the academics panel professor paisley professor gretin andybon evidence uh all were pretty much agreed that the protector should not be able to move the permanent residence of a trust outside of scotland um so on that basis do you think that the academics were correct in this thought of section 49 of the bill permitting the protector of a trust to move the domicile outside of scotland they said was undesirable in policy terms would you agree with that and if so what are your views and whether protectors should be allowed to do that or shouldn't please if that makes sense yes i think it i mean it's a it's a broader point um i think that powers to change the domicile the residence of the trust by the trustees are commonly included in deed's as drafted um so i don't necessarily think there's a particular point that may have been made about the protector's power to do so if the trustees can do it under well or at least widely drafted trustees i don't think it adds anything or takes anything away to whether a protector should able to do so i don't think it's something specific to the protector side um if there is a view that that people should not be able to change the domicile of the trust despite what the trustees said that's a much broader thing and as far as i'm aware there is nothing in the bill that prevents that happening in terms of the trust deed already um so i don't think it is a particular concern in relation to protectors can i just say to lauridon law please the law society didn't comment on the policy underpinning section 49 however it did say that it thought the drafting of the domicile subsection was unclear in terms of its scope and it thought also that the scope of the separate power of the protector to determine the trust's administrative centre was also unclear do you think there needs to be work done in terms of whether that should be allowed to take place continued please sorry i'm not sure i think that these are the comments of the law society i'm not oh right bigger part i apologize actually i was i was misreading that and i don't know if i had the response from the law society anyway right but i mean how would you think laura do you think that it's something that well i'm going to i'm going to pass to allen to answer because i think he's got the text of the law society's response oh right yeah i think that the toll has been requested is the clarification of exactly how wide the power is i mean is it an absolute power within the protector to just determine or indeed going back to my earlier point perhaps within the trust he's just to determine that the domicile of the trust shall now be Sri Lanka or whatever they want to say and if that is intended well i think that's probably where it is now i think that protectors as was said in the earlier panel are new beasts in the zoo of scotish trusts there are i don't think there's anything to stop them being appointed now indeed i've seen one or two where they have at least been purportedly appointed in scotish trusts so i think they exist already i think the as it were sanction provided for them to exist under the act will encourage their use some some trusters i can see very much liking this kind of power beyond to somebody else than their trustees but i think it will develop as to how much including in the domicile question the the new powers now sanctified by the bill will be used it's all kind of watch this space area right well thank you very much for that sorry for throwing that out you know what i mean okay anyone else any comment on yes sir again i think i would just add as alan said protectors are relatively new sort of creatures in scotish trust it's not something that a lot of people use but going back to the discussions i've sort of had with the sort of step hq side of things one of the things they are looking at is generally making trust more attractive in the uk and in scotland and having protectors there is really useful particularly if you've got offshore trusts where they are looking at potentially making a scotish trust and moving the jurisdiction to scotland at the moment there isn't a lot of law around protectors and so having some clarity and having something for protectors there is really useful it brings us in line with a lot of the other jurisdictions and will as alan says develop in the future so i think having something there is good it's just whether or not this will evolve essentially as as the law with protectors does in the future okay thank you thank you very much indeed for that i don't know if you want sense and can you okay no i our members had no experience at all of protectors so we weren't really concerned with this part of the act at all okay well that's that's perfectly understandable thank you very much indeed to everyone for that thank you thank you and Mercedes Villalba thank you convener i'd like to move us on to section 65 and 66 which covers expenses of litigation and so it's been raised with the committee by the law society that there's concerns about the current policy underpinning section 65 which provides principles to determine how legal bills are paid for in trust cases and the law society has said that section 65 will deter people from becoming trustees and may lead trustees to unfavorably settle or abandon legal proceedings for fear of personal liability some of the panel members might have heard our discussion around this with the previous panel we'd be interested to hear from the other panel members whether they share the concerns that the law society has raised with us or whether you can offer the committee any reassurance and then for all panel members we'd be interested to hear whether the availability of insurance might help mitigate against the risks identified by the law society but i don't know if Laura would like to kick us off i think i would be pretty brief on this because i when i looked at section 65 in preparation for today i thought it was very carefully drafted and it it seems to be a kind of on the one hand this on the other hand that to an extent that almost runs out of hands and it seemed to me to create the possibility for the court to do pretty much anything about the expenses of a litigation involving a trust that does not seem inappropriate to me because the range of of practical situations of factual situations will be very wide and as speaking as a litigator i think you can trust the court on matters of expenses the only other point i would make is that in general terms i think those of us who have worked in litigation are not particularly enthusiastic about people who can litigate with an absolute guarantee that they are incurring no risk to their own pocket thank you very much i am not a litigator so i don't really have a view on the question of expenses the law society who raised it so i suppose i'd better defend it but i will defend it i don't think that the balance is quite as nuanced as laura has suggested notably in 652 what 652 is saying is that the trust to use a non-personal term has been found liable on expenses and this of course could be in unsuccessfully either pursuing or defending and the trust has no funds left and the starting point is that the trustees jointly and severly even ones who have been against this are personally liable now that is fundamentally i think unfair i appreciate that they can go back to court which is ironic in the circumstances and ask not to be found liable now this is not the normal case in litigation if i am unable to recover my expenses in a successful litigation from a company because it lacks resources or from an individual because they themselves are bankrupt i can't i it doesn't go to any individual director other than extreme circumstances or some other individual who because they happen to have personal money of their own this seems to me to go against the the notion of the separate patrimony of a trustee's position and and therefore i i don't think it's appropriate that the starting point in unsuccessful litigation where the trust fund has run out should be the different pocket of the trustee as an individual and if that doesn't stop people in certain circumstances becoming trustees or at least considering it very carefully then there's a gap in their understanding of what they might find themselves liable for and so allen how would you propose to tackle this well if i can put you on the spot yes i i i would propose i can absolutely understand laura's point that the vexatious litigants you should not be able to go off with the kind of sure and certain knowledge that you will never be personally liable but i think that the courts control over that would be would be quite sufficient that that they can already deal with that in relation to personal awards it's the bankrupt trustee the bankrupt trust i'm sorry that particularly bothers me and then i think that that unless there has been an element of gross negligence and i appreciate the difference between negligence and gross negligence in the trustee in prosecuting the action then the starting point should be no liability for expenses rather than personal liability for expenses it means a successful litigant doesn't have somebody to recover from but as i say that is not uncommonly the case in such circumstances thank you very much i'll hand back to the convener sorry can i just come in mercedes the allen mentioned trustees being liable jointly and severely if they don't like the decision to go ahead with litigation they can resign office at that stage i think that's their remedy at that point okay serigin of that that does leave the potential soul trustee holding the bag who's then going to have to pay for all of the expenses so i don't think that necessarily solves that problem if everybody else gets their resignation in first i was going to come back to this later the the resignation clause under section five doesn't require any intimation to the co trustees either so on receiving papers saying that a court action has been raised every trustee could potentially just resign on the same day and that could cause issues as well so i don't think that's necessarily the answer but i agree with allen that the starting point of having trustees personally liable if there's no funds in the trust seems to go far beyond what what we would have anticipated one of the questions there was trustee insurance would that if that became mandatory then would that resolve the issue in regard to individual liability against every possibility of what could potentially come up as a litigation so and if you know that a litigation is coming i think it was john mccarthur earlier that said where there is pending litigation your insurance is then less likely for a provider to actually give you it or if they are going to give you it the premiums could be so excessive that actually you're not going to be able to pay it out of the trust fund or it's actually more economical to litigate or to try and settle i think that insurance is to some extent a bit of a red herring where it is most likely it's a bit of will offer you an umbrella except if it's going to rain because that is often the case when it is most wanted i think making compulsory compulsory trustee insurance is a very big and interesting separate point that should trustees be insured in their capacity as trustees as opposed to perhaps some other professional insurance that fortunately many of us have but is a separate point i think from from the litigation point and the expenses in litigation point my experience at trusting insurance as it tends to be called an errors and omissions policy it doesn't necessarily cover you for positive facts where you make a decision to do something i don't envy you because this is one of these situations where you're choosing between two deserving parties you know you've got the person who's sued the trust and who's been successful and normally therefore would be recovering expenses but then you've also got the trust that's run out of funds and these are always difficult situations i think in support of my earlier comments that the section seems to me to be quite flexible there is also subsection six about the court being able to relieve a trustee for personal liability so you know in the types of situation that are being described then one would imagine that that jurisdiction of the court would be invoked i think just one other point to mention in relation to this is there is in law generally a sort of move towards alternative dispute resolutions like mediation and things like that and there isn't really anything in the bill that suggests mediation as a method of actually resolving it before it goes to court or anything like that i know mediation is a separate policy and all the rest of it but it was just whether or not that was also a missed opportunity for considering something else before going to court because again if it's going to be a scenario where actually the trust fund is going to be depleted and someone who would otherwise be successful perhaps going to something like mediation or arbitration in advance and actually dealing with it in another way so that expenses and things like that can be dealt with outside of court might be useful okay thank you thank you i mean i think just picking up a final point i think we did raise that with the law commission when we took evidence a couple of weeks ago and they were slightly skeptical of the concept but i think it's worth maybe having a look at again if i can just move us on quickly to section 67 of the bill and the fact of advocates and others have said that they think of power in this section of the bill to give directions to the court needs to be much wider than power which currently appears in the bill and i'm just wondering if the other panel members would like to comment on that and then perhaps ask law to defend the position at the end i'm i think our committee will be with the faculty of advocates in that i think that a wider power to seek directions with the dangers and expenses is not a bad thing to have and i think that this is quite narrow or at least could be interpreted quite narrowly so i would be in favour of a broader power to seek directions said i think broader is not a bad thing in this scenario a broader power wouldn't do any harm let's put it that way it can only it can only do good subject as Alan says to expenses excellent almost conscientious thank you and Mercedes thanks convener um if i could move us to part two of the bill to section 72 on the right of a spouse or civil partner to inherit it um we had a discussion about this with the previous panel as well so um various stakeholders including the law society have said that a distinction should be drawn between spouses or civil partners who were living with the deceased person at the time of their death and spouses or civil partners who had previously separated from the deceased person but hadn't actually divorced or had the partnership dissolved so the committee is interested to hear from other members of the panel what you think of of this policy idea whether you agree with it and whether you think it's possible with good drafting of the provision to describe what is separation and what isn't separation um and it would also be helpful then if if Alan if you'd like to come in um and if you want to add any points of clarification on the law society some submission to us thank you okay the 64 act night the succession scotland act 1964 the rights of succession in section two will only apply after prior rights in sections eight and nine and legal rights have kicked in which are common law so under section eight of the act a spouse or civil partner will get an interest in a dwelling house up to 473,000 provided they were resident in the the property that they're claiming they will also get a cash entitlement of either 58 or 75,000 depending on whether or not there are children and they'll get the replenishings in the house as well so this section only operates after that and the house would pass on the basis of whether or not they survived whether or not they were resident then we've got legal rights kicking in which would be one third or one half of the movable estate depending on whether there are children or not so this is a long-stop provision that comes in after these other provisions take effect and my view is we don't need any definition of cohabitation inserted into what is section 72. I think this is one of those things that was discussed earlier which is essentially there's one little bit of succession law that has been tacked on to the end of what is a trust bill and with succession law there's been various consultations the last one in 2019 looking at various things around the rights of cohabitants, legal rights, things like that and after the last consultation there was a couple of bits they said they were going to legislate on this point being one just to bring it in line with obviously public policy but I think if we're going to start looking at what the rights of cohabitants should be and go further what effectively the consultation said before was that they were going to do further investigation further consultation before legislating on it and I think to try and do that as part of a trust bill would delay the trust bill from moving forward and I think I speak for the step committee when I say we're all very keen to get the trust bill given we're already over a hundred years since the last substantive law change on it and so from my point of view looking at that side of things I think the driver here would be getting the trust bill moved forward and if anything more is to be done on succession law that would hopefully be a separate bill or a separate act on its own and further consultation and views would be taken on that rather than looking at it as part of a trust bill. I think I just make a couple of comments on both form and substance. I've seen a lot of proposed reforms over the years where something that's quite simple and straightforward is put in quite early in the process and then people say oh well let's wait till we're doing a much bigger piece of reform and do it all then and what happens is that the straightforward and simple things that you could do now get lost sight of and don't come in for years so on the hypothesis that this has been included because it was thought to be a fairly straightforward consensual change that could be made now and it's not an inappropriate vehicle in which to do it I don't take any issue with this being included. With substance of it however having read previous comments at previous sessions and listened today I think I would recognise the merit in having an exception for people who are separated and I am with George Gretton who said and others who said that capturing that in a statutory definition is possible. I mean actually the conversation that was taken place earlier today in the previous panel if you were to suggest that the touchstone of a separated couple would be people who have a separation agreement that actually would be a form of definition I mean I wouldn't favour that and I think that Sandy Lam gave very good practical reasons why that's far too high a touchstone but I'm an optimist I think some workable definition could be found. I tend to agree that it would be better if succession was returned to more substantially because there's still a lot of course about the general law of interstate succession the balance between spouses, civil partners, indeed cohabitants on the one hand and children have to be sorted out but I also agree with what Laura has said if there's a relatively simple change that can happen quickly and it appears to have wide public support then let's do it and we may come back to that in the final part of this session so I am in favour of it but very definitely with the safeguard of some kind of living together now I don't think this is as difficult as people have suggested in tax law my other part my day job the concept of a couple living together as husband and wife and receiving certain tax treatment of there has existed for many many years and is dealt with picking up on examples that have been given to my pretty certain knowledge it has never caused a problem with the couple who are separated because one is living in a care home and in the earlier panel session Mr Balfour's submariner would not have been considered to be separated from his or her spouse or civil partner by means of being necessarily a way for that period so I do not think it is beyond the wit of a draft person to come up with a wording that covers separation other than separation because they've intended to get separated I certainly wouldn't go with a separation agreement that's being the trigger because this is the couples affected are exactly the kind they want to have a separation agreement because they've not around to dealing with the will to start with things I mean this is great news for lawyers in a way it just adds emphasis to the when people separate for goodness sake make a new will is really crucial in these circumstances but people don't people want we still have a majority of people who don't make wills so in testisee is really important here I think it can also this has been put to me well really the dealing with rights of separated spouses is a matter of family law not succession law this can only deal with succession law in terms of the separated spouse unless there's some qualification what in testisee is meant to do I think is to represent what the deceased would have done if they had thought about it now in most cases 100 percent to your continuing spouse or civil partner meets that definition perfectly where however there has been separation it's a reasonable bet that if this came in in the force it was for the separated spouse it in testisee would bring the result least on earth that the deceased person would have wanted the very last person they would want to inherit would inherit so I think that some attempt at a definition of when spouses are still or civil partners are still in that as it were almost spiritual state to extend that it should should be included and I don't think it's that hard to do thank you I'll maybe just say as the convener said to the previous panel if if any panelist have suggestions or ideas or thoughts they'd like to follow up with the committee would be very grateful to receive them I think so sorry to say I was just going to say in terms of what Laura said I agree that actually just putting the one little bit on at the end of this makes sense just to get it done since it was one of the bits from the last consultation that was agreed on the point I was making is that in terms of broader rights of cohabitants and things like that I think should be separate I think in terms of when people are separated again as Alan said having a separation agreement is not necessarily a good definition in the sense that not everyone will go and do it but also if someone has started a separation agreement but not signed it at the time of death it can cause issues around whether or not they did intend to complete it or were they actually intending or was the reason it was stopped or not finished because they were actually considering reconciliation because that can also happen in various situations and things like that so actually a more practical definition and I think someone mentioned it earlier sandy lamb I believe mentioned the marriage by cohabitation and repute sort of scenario of looking at whether or not parties were known as being in a relationship so regardless of whether they are living together or not because again you might have parties who were married and have moved apart and are living separately but actually they are still known as being a married couple or in a civil partnership or whatever their relationship status is so I think that a more practical view would need to be taken thank you and the final question is on once again part two of the bill and it's as you'll have heard from the previous session that the committee has had some suggestions of three policy proposals which could actually be added to part two of the bill to assist it the first of all the creating exceptions of legal rights as they currently apply to protect from disinherenters that was from Professor Paisley secondly remaining the current strict six month time limit which applies in context sorry in the context of the cohabitants power to apply to the court for a share of the deceased's estate that was from the faculty of advocates and Evelyn Evans and thirdly the clarifying of the law does not permit an unlawful killer to be an executor of the victims estate that was from professors Paisley and Gretin so we're keen to hear your views on those three points start yourself first Alan no yes and yes I think is this would be the answer in the legal rights I think and the possible restriction on them is part of this big broad unfinished succession work and I think to try and tack something into this a little unlike the thing we've just been talking about would be wrong the other two fit perfectly into that I think there'd be no objection to getting rid of unlawful killers as executors and it would be a quick and short win I think and the only difficulty about the extension of cohabitants rights to claim under section 29 is possibly the period involved in that it's been suggested I think six months should be 12 months that solves many of the problems perhaps in practice but not in principle in that executors can delay getting themselves appointed if this is thought so there is perhaps more thought required on that one but certainly the third one on unlawful killer executors I think could be a thing that was readily tacked in here we wouldn't often get the opportunity so let's do it on the first one legal rights I absolutely agree with what Alan has said there is much work to be done in the wider area of succession law and in earlier consultations going back several years I have taken part in writing the faculty's response in two of them and it was a lot of work so there's there's still unfinished business and I think the whole legal rights question belongs in that project whenever it comes along I do recognise that succession law is a particularly perhaps uniquely difficult area in which to reform I went to an excellent event about consultation in Glasgow University Law School pre-pandemic and one of the obvious points that was made is that succession law is an area where the entire population are the stakeholders so it's extremely difficult to consult the people who are affected you know in any straightforward way I don't have any answers to that but I think it's probably worth that acknowledging much shorter in relation to issues two and three the question of the appointment of an executor who has been in some way responsible for the death of the person I looked at the response that the faculty wrote on that very topic in 2019 we sent a response to a consultation and our answers to questions 20 to 25 were on this topic and I would simply adopt and repeat what we said then we haven't I think changed our position on that at all and I can copy that in further correspondence if that makes it more straightforward in relation to section 29 of the 2006 act we have covered that in our current response to the current bill and I don't have anything to add to what was said in writing on the section 29 limit I think in terms of extending it instead of it being from date of death I wonder if it's just a time limit from date confirmations obtained so that that then means that it can't be done until confirmation the time limit won't start until confirmation has at least granted and at least at that point in time that a time limit would start then so if it was six months from confirmation rather than six months from date of death it extends it a little bit and then you won't have the the executor is delaying in their actions necessarily because it's just delaying the time limit on legal rights I just reiterate what's been said already I think that's part of a larger consultation but in terms of the unlawful killers my view was that the removal of trustees under this would also apply to executors actually so there was provisions there for removing trustees who are convicted of an offence imprisoned on conviction of an offence imprisoned for contempt of court for not having paid a fine so there is provisions there for removal of trustees off an offence which would include an unlawful killing that's either by co trustees or by a beneficiary with a vested interest I believe the only question on that is whether we would also want to extend it to cover any other offences I think that was discussed in previous panels and the only one I had considered was or in discussions with other colleagues in relation to people who have been struck off their register of their relevant profession so first listed struck off from the law society or accountants who have been struck off from their profession because of their point in a professional capacity and there is a higher bar for professional trustees whether or not there should be similar provision for removing them okay thank you and finally Ken okay on unlawful killing I don't see any difficulty in removing the executor I think that's a sensible reform to adopt um the only slight caveat is um you can get into a situation where um the person confirms to the estate you're not aware that they are the killer at that stage and they only become the executor could be complete before any charges are brought um I'm simply seeing that from um that possibility does exist on legal rights it's a huge policy issue as to what you're trying to do with the law of succession um do you give people fixed shares which we've had for hundreds of years um people have an expectation then that they will get something out of the estate as a result of legal rights so you've got to change public perceptions if you're going to change the law as well what is the purpose of legal rights is it to allow some of the estate to pass down generations some of the family wealth to pass down generations or is it something where there is a principle that um people who have need should get more uh if you start looking at need you start looking at discretionary remedies you start looking at court actions um which slows down executories increases the expense so there are very difficult policy choices and I note when the commission looked at it in its report in 2009 on succession it came up with two different schemes option A and option B because the commission could not reach a single view on it either so I think it is quite a difficult thing it's not something to embark on in a bill that's already in process on section 29 um I think it's well known that section 29 is poorly drafted in a number of ways um it's perfectly acceptable to increase the time limit Sarah Jane makes the point about confirmation although a number of estates will pass without there being confirmation granted so you're not doing anything with the time limit but for those cases and smaller estates will certainly be in that situation um the the principle difficulty is that the court is given a vast array of things to take into account in reaching its decision but it's not given any guidance as to what it's giving money for is it right or is it future dependence um the the tendency in the court decisions is towards future dependence and if we look at the law commission's report in 2009 when they suggested a redraft of the provisions of section 29 I've noted here paragraph 4.10 a cohabitant has to earn her right to a share of an intestate estate which seems to me entirely inappropriate language to use um and suggest that you look at the length and you look at the interdependence of financial and other relations and um the contribution to the household which is a very very old fashioned way it seems to me of looking at cohabitation um so I don't think that sort of formulaic approach resolves matters and I think the approach that the courts have adopted in terms of section 29 is is preferable that it's a a future needs-based formula okay no thank you for that so um so with that I'd like to thank the panel for your helpful evidence today and the committee may fall up by a letter with any further points so that are questions that stemming from today's evidence but also if there are any points that you would like to highlight to the committee that haven't come up today if you could please do so in writing I think we'd greatly appreciate that so with that this concludes the public part of the meeting and I'll move the committee into private