Where poor judgement becomes a liability

The Court of Session has delivered a detailed and pragmatic judgment on the liability of a judicial factor, providing useful guidance for insolvency practitioners and others acting in a court-appointed capacity. While the case arose from a highly contentious estate, its central message is broader and familiar: not every decision that proves unsuccessful will result in liability. Instead, claimants need to show a clear link between any breach and a measurable financial loss.

Lord Sandison delivered his Opinion in the case of Cockburn & Ors v Hope [2026] CSOH 60 in a lengthy (nearly 300 pages) but well-structured judgment. While the case focused on the work of a judicial factor, the key points are also relevant to insolvency practitioners and anyone else with fiduciary duties.

Background

Scott Cockburn died suddenly in 2015, leaving a will under which three of his children were residuary beneficiaries. His estate included two construction companies (roofing and scaffolding), two properties and various personal assets.

After his death, some family members took control of the estate without being formally confirmed as executors. Concerns were then raised about possible misuse of assets, questionable transactions and how the businesses were being run. This led to court action and the appointment of a judicial factor to manage the estate.

Several years later, the residuary beneficiaries brought an action against the judicial factor, alleging that mismanagement had caused the loss of their inheritance and seeking substantial damages of £1 million each.

How the court approached liability

Lord Sandison didn’t attempt to judge the administration of the judicial factory as a whole. Instead, he assessed each allegation individually by asking:

• Was there a breach of duty?
• Did that breach cause loss?
• Is that loss quantifiable?

Liability only arose when all three points were proven.

This structured approach highlights that courts will distinguish between decisions that may be open to criticism and conduct that gives rise to liability.

Early control: Delay and its consequences

A key issue was the continued involvement of an individual already considered unsuitable to manage the companies. The court found that the judicial factor should have acted more quickly to remove him and that the delay exposed the companies to continued financial risk.

Unlike many other parts of the claim, this delay had clear consequences. The court found that financial loss had occurred during the period when no action was taken and awarded damages as a result.

In addition, there were also concerns that the judicial factor had failed to adequately take control of moveable property or make attempts to recover moveable property which had been removed by certain family members without authority. The court accepted that the judicial factor hadn’t taken legal action to recover money for the estate because there were no meaningful assets or income to make recovery worthwhile. However, liability did arise where the judicial factor failed to take steps to recover assets that had been offered back to the estate.
This highlights that where there’s a clear risk to an estate or business, delay in taking control can create liability if losses continue or if sufficient steps are not taken which creates a loss to the estate.

Business management: Judgement not hindsight

Much of the pursuers’ case focused on how the companies were run. This included concerns about the appointment of directors, the decision not to bring back an experienced former manager, and reliance on people whose conduct later became a concern.

The court accepted that some of these decisions were open to criticism. However, it treated them as matters of professional judgement in a difficult environment. Critically, the pursuers couldn’t demonstrate that alternative decisions would have preserved the businesses or avoided loss. As a result, no damages were awarded.

It’s important to note that the court will resist hindsight analysis. Even flawed decisions won’t result in liability unless the claimant can prove they caused loss.

Director misconduct: Breach without loss

The judicial factor became aware of alleged misconduct by a director involved in unauthorised “cash jobs”. Their response wasn’t immediate. The court held that this amounted to a breach of duty. However, the funds were ultimately recovered and as a result no financial loss flowed from the delay. No damages were awarded.

Even where a breach is clear, liability will depend on whether the breach caused a measurable loss.

Valuation errors: Where liability crystallised

The most significant liability arose from the treatment of director’s loans and the valuation of estate assets. The judicial factor treated certain balances as effectively “neutral” on the basis that they were both amounts due from and by the estate.

The court rejected this approach, finding that it overstated the value of the estate. The error 
enabled non-cash assets to be treated as the equivalent of cash assets for the purpose of the 
calculation of legal rights entitlement when there was in fact no such equivalence. This led to excessive payments to legal rights claimants. This wasn’t simply an error of judgment, it was a fundamental misapplication of valuation principles, with direct financial consequences. Damages were awarded to reflect the resulting overpayment.

This highlights that valuation errors, particularly in estates involving companies, can have significant consequences elsewhere in a process. 

Property strategy: Delay and cost exposure

The judicial factor faced criticism in relation to a development property that required substantial remedial work. Rather than proceeding immediately to sale, she explored whether works could enhance value. The court accepted that this was a legitimate strategy in principle.

However, in practice the process delayed disposal and the estate incurred ongoing mortgage, maintenance and holding costs. The court held that liability arose not from the eventual sale price, but from avoidable costs caused by delay.

Even where reasonable strategies are pursued, this may expose practitioners if delay leads to identifiable costs.

Other administrative failings

The court also identified other more discrete errors, including legal costs relating to company matters being wrongly met from estate funds, tax paid on transactions that didn’t reflect genuine distributions and misallocation of certain expenses.

These resulted in modest but recoverable losses.

Outcome

The pursuers succeeded in part. Damages were awarded where specific losses could be demonstrated. However, the awards were significantly lower than claimed (ranging from £999 to £33,101), reflecting the court’s strict application of causation and loss.

The judgment makes clear that while the administration of the judicial factory wasn’t without fault, only a limited subset of those faults gave rise to liability.

Key lessons

1. Breach alone isn’t enough. Claimants must prove that a breach caused a specific, quantifiable loss.
2. Courts won’t judge decisions with hindsight. Difficult decisions taken in good faith won’t be second-guessed without clear evidence that a different approach would have avoided loss.
3. Act promptly where risk is clear. Delay in taking control, particularly in trading entities, can expose practitioners if losses continue.
4. Get valuations right. Errors in valuation, especially involving intercompany balances or loans, can materially distort the estate and have unintended consequences elsewhere.
5. Manage delay carefully. Even where a strategy is commercially reasonable, delay may create avoidable costs for which the practitioner may be liable.
6. Keep clear records. While not a decisive issue in this case, the ability to evidence decision-making remains critical in defending allegations of mismanagement.

Cockburn v Hope is a timely reminder that the courts recognise the complexity of administering distressed estates. Judicial factors, and practitioners more broadly, aren’t expected to achieve perfect outcomes. However, where errors translate into real financial loss, liability will follow.

The dividing line is clear: it’s not what went wrong, but what loss resulted. That determines liability