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My understanding is that more information has been requested for the relevant committee. I will bring in Michael Paparakis, who has been corresponding.

The personal injury discount rate is the rate by which an award of damages for personal injury, which includes future loss in the form of a lump sum, is adjusted to reflect the fact that the injured person can invest the money. The way in which the discount rate is calculated was reformed in 2019 by the Damages (Investment Returns and Periodical Payments) (Scotland) Act 2019. Under that legislation, the current discount rate is 0.75 per cent.

The legislation requires a statutory review of the rate every five years, and a review is therefore required to begin on 1 July 2024 and to be completed within 90 days. Ahead of the review, the Scottish ministers must consider whether the factors to be used in that review continue to meet the needs of the hypothetical investor. That consideration is now complete, and the draft regulations before you amend some of the factors that the Government actuary must use in reviewing the personal injury discount rate.

The factors that are being amended are as follows. The index for impact of inflation will change from the retail prices index to the average weekly earnings index, and the standard adjustment for tax and costs will change from 0.75 per cent to 1.25 per cent. The period of investment will change from 30 years to 43 years.

Those amendments have been informed both by consultation carried out last year with stakeholders and by work that we have commissioned jointly with the Northern Ireland Executive in the form of a report from the Government Actuary’s Department. I am happy to take any questions.

In May last year the Scottish Government invited views on the need or otherwise to adjust any of the statutory factors, and it requested any evidence to support those views. In addition, we invited views and evidence on whether a single or multiple rate should apply, and a total of 24 responses were received, including from all the key stakeholders.

The Scottish Government has asked GAD to consider those responses and other available evidence and to provide advice to the Scottish Government. As I said, the consultation was carried out in consultation with the Northern Ireland Executive.

I will bring in Michael Paparakis regarding any further evidence.

The GAD analysis suggests that the current further 0.5 per cent margin remains applicable, and it is probably worth reiterating that that margin broadly results in a 30 to 35 per cent chance of undercompensation. It is impossible to ensure that no one in receipt of damages to which the discount rate applies will ever be undercompensated or overcompensated, but we can reduce the likelihood of pursuers being undercompensated through that important protection on the further margin.

Historically, there is a very fine balance between overcompensation and undercompensation, which is hard to determine specifically. Do you want to add anything to that, Michael?

We have seen an increase in all insurance premiums since the cost of living crisis—every household has been impacted. I do not know whether the decision will increase insurance premiums specifically.

Currently, only some kinds of appointments of judicial factors need to be publicised and most respondents to the SLC’s consultation were of the view that some form of publication of appointments was necessary. The SLC consulted with the keeper of the registers and concluded that registration in the register of inhibitions was inappropriate.

I do not know whether Michael Paparakis wants to add anything to that.

We will talk to stakeholders, and I will then get back to you on that. I appreciate the points that you have made.

From reading the bill as a whole, I think that it is clear that the nature of the judicial factor’s role is fiduciary. While the term “fiduciary duty” is not used in the bill, the Government considers that the bill will achieve the same effect.

A fiduciary duty is essentially a duty to act in good faith in the interests of another, rather than in one’s own self-interest. Section 10 of the bill makes it clear that judicial factors have

“to hold, manage, administer and protect the factory estate for the benefit of persons with an interest in the estate.”

It also requires judicial factors to

“exercise care, prudence and diligence”

and

“take professional advice when appropriate.”

The Scottish Law Commission told the committee that it had set out

“very clearly in”

its

“report that the essence of the institution was that it was fiduciary”—[Official Report, Delegated Powers and Law Reform Committee, 16 April 2024; c 16.]

and that it was not considered “necessary” to include a specific reference to that in the bill.

I understand that some stakeholders have suggested that the matter should be clarified, but others, such as the SLC and the Faculty of Advocates, have pointed out that to add even a simple statement to that effect could have unintended consequences. However, it might be possible to add something to the explanatory notes to the bill in order to make that point clearer for users of the legislation, and I am willing to consider that further.

Section 23 of the bill contains a general rule that any costs of litigation that is pursued by the judicial factor

“on behalf of the factory estate”

are

“to be met from the factory estate.”

The general rule is, however, “Subject to section 24” of the bill. Under section 24, the court is given the power to find a judicial factor personally liable if they have breached their duty and the court finds it “appropriate” to hold them “personally liable”.

We need to strike the right balance to allow a judicial factor reasonable space to manage an estate in good faith. I do not think that a judicial factor should be found personally liable if, with the benefit of hindsight, their actions are found to have been unreasonable but there has been no breach of duty.

Given the continuing need for competent judicial factors, we must be careful, and we do not necessarily want to put blocks in the way of people wanting to be appointed. Allowing for judicial factors to be held personally liable for taking actions that do not amount to a breach of duty would, in my view, be likely to discourage judicial factors from pursuing litigation that is in the interests of the estate, and perhaps even discourage individuals from acting as judicial factors altogether.

I consider that the bill and the 1977 act work alongside each other. The bill allows for the appointment of a judicial factor to manage the estate of a missing person. If the missing person is subsequently declared dead by way of an application under the 1977 act, the purpose for which the judicial factor was appointed would no longer exist and the judicial factory would be terminated. As the committee heard, families of missing people may not want to apply immediately for a declarator, and the appointment of a judicial factor to manage the missing person’s estate is an alternative.