Chamber and committees

If the committee would like to write to me to make recommendations at stage 1, I would be happy to take those to the SLC to discuss.

That could be quite difficult to do, but I am willing to consider that and speak to SLC and my officials regarding that.

On the interaction with the Charities (Regulation and Administration) (Scotland) Bill, charity law and trust law are two distinct and well-established areas of Scots law. That point was made separately by Lord Drummond Young and John McArthur in their evidence to the committee. We know that 12 per cent of charities that are registered in Scotland take trust as their legal form, and those charities are subject to both charity law and trust law. Otherwise, there is a range of other legal forms that charities can take, which include a company, an unincorporated association and a Scottish charitable incorporated organisation. Charitable companies, for example, must comply with charity law and company law, and trust law is of no relevance to them.

OSCR has written to the committee and welcomed the bill. It has said of the trustee’s duty of care, for instance, that it fits with

“the standard of care expected of charity trustees when managing the ... charity”.

My view is that the two bills complement each other and work well together, and that the modernisation of trust law is helpful for charities that take trust as their legal form.

The power would not allow a protector to amend the domicile of a trust, but would instead allow a protector to determine, but not thereafter to change, the jurisdiction whose laws shall be used to determine what the governing law of the trust is. Accordingly, where a protector determines that the law of domicile of a trust is in Scotland, the domicile of that trust will be determined in accordance with Scots law. Under Scots law, it may be determined that the domicile of a trust is a jurisdiction other than Scotland. I am happy to work with the committee on that issue.

Yes. As I have said in answer to previous questions, I will consider any recommendation that the committee makes at stage 1, including on alternative time limits.

Yes, I do. That is why I am willing to work with the committee on moving the time limit forward.

Yes.

I am willing to work with the committee on this issue. Under the Recognition of Trusts Act 1987, a truster may determine which law governs a trust that they set up. The proposed example power in the bill would make it clear that the truster may confer their power to determine the law that governs a trust on to a protector. That may be relevant when no applicable law has been chosen by the truster and would prevent the need to rely on the default statutory provisions that narrate how the law governing a trust is to be determined where there is no expense provision.

I have listened to the evidence on the issue, which appears to be causing the committee some concern, and I will work with the committee in the coming months try to reach agreement.

Currently, it is usual for trustees to be personally liable for litigation expenses in order that successful opponents have the right of relief against the trust estate. Section 65 clarifies that the starting point is that a trustee does not incur personal liability and will only do so when certain grounds exist, as set out in sections 65(2) and 65(3) and the court exercises its discretion to make an order for expenses against the trustee personally on one of those grounds.

Section 65 achieves what the Law Society seemed to be asking for by making the default position that trustees are not personally liable for expenses. There are some exceptions to that default position, but they are subject to the court’s discretion, which is widely drawn. That ensures that trustees of underfunded trusts who unnecessarily litigate are not given an unfair advantage in litigation proceedings.

My officials might want to add something further.

The trusters who set up public and charitable trusts almost invariably want the benefits to be provided immediately, so I do not think that that exclusion will create any practical difficulties. The Scottish Law Commission was impressed by the evidence of Dr Patrick Ford from the charity law research unit at the University of Dundee, who pointed out that there was a risk that a trust might direct long-term accumulations for the fulfilment of grand charitable purposes that would not materialise for many years, and that such accumulations could fall foul of the charity tests that are set out in sections 7 and 8 of the Charities and Trustee Investment (Scotland) Act 2005 and the definition of charitable purposes that is applicable for United Kingdom tax purposes and the Charities Act 2006. If there was no statutory limit to accumulation, OSCR would be left to consider every direction or power to accumulate on its own merits under the 2005 act charity test, and HM Revenue and Customs would have to do the same under UK tax legislation.