Commentary on Sections Part 3 – Dealing etc. with third parties and validity of certain transactions
46.Section 23 provides protection for third parties who acquire title to property either directly from a judicial factor, or from a person who derived their title from a judicial factor. Paragraph (a) has the effect that where a judicial factor’s appointment is recalled after a third party has acquired title from the judicial factor (for example, where the judicial factor has sold a house which formed part of the factory estate to the third party), the judicial factor’s recall cannot be used as a ground to challenge the third party’s title. Under paragraph (b), third parties who have acquired title from a person other than a judicial factor, where the title has previously been held by a judicial factor, cannot have their title challenged on the basis that it should not have been transferred to the person from whom they acquired title.
47.Section 24 makes clear that where the judicial factor enters into dealings with a third party, they do so with the full rights and responsibilities which the factory estate would have, were the factory estate to enter into such dealings. This means that judicial factors (in their capacity as judicial factors and not as individuals) are liable for any payment or obligation which the factory estate is due to the third party, and are entitled to receive any payment or enforce any obligation which the third party is due to the factory estate.
48.Section 25 applies where a person is, or ought to be, aware that a judicial factor is acting in the capacity of judicial factor, and the person enters into a contract with the judicial factor on that basis. Subsection (2)(a) offers judicial factors protection by ensuring that when they enter into contracts on behalf of the factory estate, the person with whom they have entered into the contract, or any third party, may enforce their rights only against the factory estate and not against the judicial factor. Subsection (2)(b) has the effect that any court action raised in relation to the contract may only be raised by, or against, the judicial factor as judicial factor, and not as an individual.
49.Section 26 provides for the expenses of any court proceedings which the judicial factor enters into on behalf of the factory estate to be paid by the factory estate. This applies regardless of whether the judicial factor raises the court proceedings, or is defending a claim against the estate.
50.Section 27 makes provision in relation to claims for damages which arise as a result of any actions of the judicial factor or any person appointed or employed by the judicial factor in relation to the factory estate. This includes claims for both delictual liability (civil legal wrongs) and unjustified enrichment (where one party has benefitted without legal justification at the expense of another person). Subsection (2) requires that any claim be raised against the judicial factor in the capacity of judicial factor. Subsection (3) provides that any damages awarded as a result of a claim, including any expenses awarded against the judicial factor, must be paid from the factory estate, unless the damages arose as a result of a breach of duty by the judicial factor and the court considers that the judicial factor should be held personally liable.
51.Section 28 relates to the prescription (or legal time limit) of obligations which are due to or by a factory estate. Subsection (1) makes clear that the appointment of a judicial factor does not affect the prescriptive period (or time limit) of any such obligations, which will continue as though no judicial factor had been appointed. Subsection (2) excludes from that provision any obligations which are owed by the judicial factor to the factory estate, providing that in relation to such obligations, the prescriptive period is paused for the duration of the judicial factor’s appointment.
52.Section 29 applies where the factory estate forms part of a trust, and the judicial factor wishes to exercise a function which the judicial factor would ordinarily be entitled to exercise in relation to the estate, but considers that the terms or purposes of the trust do not allow for the exercise of the function.
53.The process by which the judicial factor must apply for consent, and the Accountant might grant it, is set out in subsections (2) to (5). Subsection (2) requires the judicial factor, in applying for consent, to notify any persons which rules of court require to be notified that the judicial factor intends to exercise the function. Subsection (3) requires the Accountant to be satisfied, before granting consent, that the exercise of the function would be in the interest of everyone with an interest in the trust estate, that the judicial factor has complied with all of the requirements of the application process, including those set out in rules of court, and that if any objection to the application has been made, that the objection does not justify refusing the application. If the Accountant determines that the requirement to give notice under subsection (2) has been complied with only in so far as reasonably practicable, for example a party has not been notified because their address cannot be established, then subsection (3)(b)(i) gives the Accountant flexibility to treat this requirement as satisfied. Subsection (4) allows the Accountant to give consent subject to conditions. Subsection (5) makes provision for the procedure for the notification which must be made under subsection (2). Such notification must be done in the manner specified in rules of court, and set out what the exercise of the function would involve and how the person being notified can object to the application to exercise the function. Subsection (6) prohibits the judicial factor from exercising the function unless the Accountant has consented to the function being exercised. Subsection (7) provides that where the judicial factor has applied for and obtained consent, the judicial factor cannot be treated as having acted at variance with the trust.