The Court Funds Office (CFO), an associated office of the Ministry of Justice, provides a banking and investment service for funds held in court. The work is governed by the Administration Act 1982, the civil procedure rules and the court funds rules. CFO manages some £4.5 billion in a mixture of cash and equity holdings. Investment on behalf of children is generally made into the equity index tracker fund, which is managed on behalf of the Ministry of Justice by Legal & General, who are one of the largest managers of index tracker funds in the UK.
A recent review of children’s damages awards that are held in court and administered by the CFO identified a requirement to correct a number of children’s accounts, to ensure that the award is appropriately invested as originally directed by the court. Where the award is more than £5,000 and the child is under 13 years of age, part of the award would usually be placed in an index tracker fund. In a number of cases this investment in equities did not take place.
Prompt action is now being taken to identify all affected cases and where the consequence has been a lower rate of return, to pay the balance necessary to ensure beneficiaries are not disadvantaged. The administrative failures, which led to this situation, have been addressed to ensure cases are invested in accordance with the courts’ directions without delay.
The process for calculating the correction payments has been reviewed by a city firm of accountants and also by the strategic investment board, which is a panel of appointed financial experts that provides generic investment advice to the Ministry of Justice in respect of its clients.
It is estimated that approximately 4,000 current and closed cases have been affected and that the full cost of corrective payments will be approximately £12.5 million. This is out of a total of 90,000 current children’s cases holding nearly £650 million in cash and investments, and 1.1 million closed cases.
Letters providing full details of the corrected accounts are being sent to all litigation friends who represent the children involved.