David Norris (Independent) | Oireachtas source

I move amendment No. 27:

In page 17, between lines 34 and 35, to insert the following:

“(7) In respect of financial affairs managed by the court, particular consideration of management and oversight in accord with the principles herein are stated in section 121.”.

Amendment No. 27 deals with the question of the special visitor to be appointed to supervise the affairs of a ward of court. One of the items that gives particular difficulty is the question of financial management. This has been a real thorn in the past. I know that it has been said that, taken overall, the results have not been as bad as might have been expected but in some cases they have been spectacularly horrible and we want to ensure that the financial interests of somebody who is not capable of directing those financial interests themselves is properly addressed.

Amendment No. 239 also deals with the qualifications of this particular person. The suggested wording is: "is a person who, although not a registered medical practitioner, is, in the opinion of the Director, a person who has particular knowledge, expertise and experience of financial matters,". In other words, we want somebody who is actually qualified, who has a knowledge of the markets, who will be able to give advice. There is no point in having a medical quack there. They may very well know what to prescribe in terms of medication but they do not know what to prescribe in terms of investments in stocks, shares and bonds. What is required is a person who has financial expertise. The amendment includes a reference to "selected under paragraph (c), will be a representative of the NTMA,". The National Treasury Management Agency has a terrific record, a superb record in safeguarding the interests of this country. It is one group on which we can rely. The amendment also makes reference to the ability to "provide expert guidance on reinvestment of the financial portfolio to sustain costs necessary to the relevant person,". That is the whole point. One invests in order to get the money to provide for the sustenance, well-being and financial security of the person who is a ward of court. In addition, there is a requirement to "provide annual reports to the relevant person".There was a period of many years during which no reports were provided, which meant there was no account whatsoever of stewardship. It is necessary that annual reports be provided in order that trustees or families can urge that a decision be made.

Amendment No. 244 deals with financial powers of oversight and management by the court and provides for what would happen in the absence of a suitable person to act as co-decision maker, or any other condition under which the court retains or assumes responsibility for the relevant person’s funds. In other words, where a question arises about the investment of the funds of a ward of court, the primary purpose of court management of the relevant person’s funds would be the provision of adequate financial support to provide for medical and sundry expenses, which is more or less what I have said. We need to ensure the correct personnel are put in place, which is the purpose of the first two amendments. We then need to set out what they will be required to do, which is the purpose of the third amendment, in ensuring the provision of adequate financial support in the investment of funds.

Subsection (3)(a) of amendment No. 244 is extremely important. It reads, "Assets must be invested in a manner designed to ensure the security, quality, liquidity and profitability of the portfolio as a whole, so far as is appropriate, having regard to the nature and duration of the expected liabilities". In other words, there would be a requirement for prudent investment. In the past this was not done and investment portfolios collapsed. There was an almost arbitrary and care-free approach to investment of the funds of persons who were not in a position to do it themselves.

Subsection (3)(b) provides that assets would have to be invested predominantly in regulated markets and so on. In other words, they would have to invested in safe areas. It would also provide that "investment in assets which are not admitted to trading on a regulated market must in any event be kept to a prudent level". I do not know to what exactly this refers. Perhaps it might relate to property folio investments such as investment in a block of apartments and so on. However, such investments would have to be kept to a prudent level. In other words, all of the eggs should not be put in the one basket.

Subsection (3)(c) reads, "Assets must be properly diversified in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings and so as to avoid accumulations of risk in the portfolio as a whole. Investments in assets issued by the same issuer or by issuers belonging to the same group must not expose the scheme to excessive risk concentration". In other words, where possible, risk would have to be avoided. The average person in the street can be as careful as he or she likes and invest on speculative grounds, in which case he or she may make a killing or lose everything. That is his or her decision, but a person who is incapable of making these decisions is reliant on another person to invest prudently and diversify in such a way as to avoid excessive reliance on a particular asset.

Subsection (3)(d) would constrain those making investments, in most circumstances, from investing in derivative instruments. It was derivatives that caused the collapse of western European economies and the collapse started in the United States. The toxic bundles were put together by the clever stockbrokers and financial advisers who are still being consulted by the Government and appointed as advisers. Nobody knew what was in the bundles: they were just derivatives. The amendment would provide for constraint against excessive investment in such instruments which could only be made in so far as they would contribute to a reduction of investment risks or facilitate efficient portfolio management.

Subsection (4) reads, "Annual financial reports on the condition, progress, and management of relevant person’s funds; both liquid funds and investments; will be made available to (a) the court, and (b) relevant persons". Accountability is important.

Subsection (5) reads, "If an endowment as individual principal value falls by 10%, or more, within one financial quarter, the portfolio will be liquidised into cash...". I would like to give an example of where this would come into play, but I will, first, make some general remarks on the question of wardship. Where the High Court approves an award for personal injuries suffered and a plaintiff who is deemed to have a capacity deficit is made a ward of court because he or she does not have the capacity to make appropriate decisions for himself or herself, in respect of which he or she has no choice, funds are not released to meet his or her needs until such time as the process has been completed.

There have been many difficulties with ward of court funds which are held in investments by the Courts Service. Following a Committee of Public Accounts review in 2000, it was determined that no audits had been carried out for two decades. The Bill seeks to address that issue. The amendments to which I am speaking seek to strengthen and reinforce what is provided for in the Bill in that regard. Even after it was discovered that there had been no audits for 20 years, there was no look-back or review carried out. The Courts Service was then established and the accounts of the courts were computerised. The management of funds was put out to tender. The new structure provided for four strands of investment, some of which involved greater exposure to equities and bonds than others. Those that were heavily exposed fared poorly during the financial crisis and some wards' funds suffered serious losses. The Courts Service states the funds have performed well overall compared to similar funds. In this regard, key is the word "overall" because not all funds performed well and there are no similar funds. We are speaking not about regular investors but about vulnerable people under the protection of the State. There were no cash reserves held for wards of court to meet emergencies. It is extraordinary that a person would gamble on the Stock Exchange and not hold back a little to look after people in this position. There is a concern about the management, investment, auditing and accountability of funds. Funds were audited internally, but errors were not always picked up. An audit is instigated by the Courts Service, but as funds are not audited by the Comptroller and Auditor General, there is no accountability. There is a sum of €1.5 billion in the funds.

I would like to outline a specific case which was brought to my attention by parents whose son, as far as I can recollect, had been injured, in respect of which he received compensation. In a two year period between May 2007 and April 2009 the fund diminished from €510,685.02 to €280,145.71; in other words, it was halved, but that is not the end of it. The last statement the parents received showed that the value of the fund at the end of 2014 was €186,490.85. This means that the fund had decreased from almost €511,000 to €186,000, which was an astonishing collapse and worse than the cut in my income as a Member of Seanad Éireann. According to the parents, a further €40,000 can be deducted from this amount for expenses in 2015. With little earnings, the fund will be down to almost €150,000 by the end of the year. The officials say the ward's fund will only last a few years. If it had been managed appropriately. he would not be in this position. In other words, the fund will have reduced from €510,000 to €150,000. In view of what it costs per year to care for this young man, €46,000, the money will be gone in less than four years. What is he to do then?

Quite apart from understanding the complex nature of these investments in unitised funds which have a strong exposure to equities, if one does simple maths, one will see that these funds have not recovered. When one takes the figure of €510,685, the value of the fund in May 2007, and deducts from it €186,490, the amount at the date of the last statement, one is left with a figure of €324,194.17. When this figure is divided by seven, the seven period 2007 to 2004, one gets a figure of €46,313 per annum. The moneys drawn down during these years would not have reached this amount every year, but the point the parents of this young man make is that if they had kept the money in a drawer and drawn down only what was needed, their son would not be any worse off, yet the funds are in the Courts Service for their protection. In other words, had they kept the money under a mattress, they would be in at least as good, if not a better, position than they are having had the money invested. For this reason, the safeguards contained in the three amendments are vitally necessary to protect the welfare and interests of wards of court.Our contention is that the Courts Service has failed in its duty of care to those vulnerable people and has been covering this up by saying that overall funds have performed well. It is no excuse and it is not good enough. We need good governance for these funds. I am sorry if I have taken a while but it is a complex matter and is at the kernel of the welfare of wards of courts because they are financially vulnerable. If we do not ensure that best practice is followed for these people, we are abandoning them to their fate. I urge the Minister of State to take on board the content of these amendments.