This fourth function of the PTO is a more or less straightforward banking service, receiving, investing and administering funds deposited in Court. The majority of cash assets are invested for the Court Funds Office by the National Investment and Loans Office of the Treasury. Its operational costs are deducted from the earnings and all surplus income is surrendered each year to the Treasury: in 1998/99 this amounted to £6m. The Chief Executive of the Agency holds the position of Accountant General. This Review has established that there is considerable scope for changing practices in the payment of funds into Court that are based on assumptions made in the dim and distant past. The results could significantly reduce the money coming in and would reduce the size of the Court Funds Office accordingly. The changes should be either welcomed or unobserved by the parties concerned.
To begin with, half of the current Court Funds comprise payments in satisfaction (a procedure which enables a defendant to make an offer of payment to the plaintiff without prejudice to settle the action; it also protects the defendant against costs from the time of the payment into court should the plaintiff be awarded the same or a lesser amount). Modern financial services and business practices offer alternatives which are at least as watertight as the current requirement to actually pay money into the Courts Funds Office. No interest on the first 21 days the payment stays in Court accrues to the defendant.
It is recommended that the LCD make the necessary amendments to Court Funds Rules and Regulations to allow the requirement to make actual payment of in satisfaction offers into Court to cease. Alternatives, which must of course provide claimants at least as much reassurance in the existence and ready availability of the payment on offer as the present arrangement does, can include payment into escrow accounts or bankers' orders.
The new arrangements must be consistent and offer quick settlement if the payment is accepted no matter where the claimant lives. The Court could still order a cash payment into the Court Funds Office if it did not believe any alternative could be relied upon in a particular instance, but such situations should only occur rarely; after all, if a defendant or respondent promises to make a payment in and does not do so, they lose their case by default.
The current supporting IT system needs to be enhanced if the present payment in satisfaction arrangements continue: a cost that this recommendation would remove. Moreover, the PTO and the Court Service estimate that between them nearly 130 staff are occupied solely in administering payments in satisfaction which currently total some £0.7 billion. Such payments already seem to be reducing in the wake of the Civil Justice Reforms that were implemented in both the High Court and County Courts in April 1999. The PTO told this Review they could not estimate the reduction and as they did not routinely identify this income stream they had not tracked the effect of the latest change. But they undertook a special exercise for this Review to record the number of such payments received in two sample periods, one before and one after April. The result showed a drop of 50% but the PTO cautioned that for various reasons this figure could not be relied upon: nevertheless, it should be indicative of a downward trend. For all these reasons any loss to the Treasury resulting from this recommendation would be offset to a fair extent.
Secondly, about £780m of monies in the Court Funds Office are in minors' accounts, including personal injury awards and criminal injuries compensation payments. Some minors are also mental health patients under the Court of Protection and some of their individual damages payments consist of relatively small sums. It is recommended that the PTO formally agree with the Court of Protection that it should continue its recent trend in suitable cases of allowing awards of relatively small sums (eg below £10,000), either to be paid direct to the family or executors of the patients concerned or to be made the subject of a private trust, with the offer of financial advice if necessary. Suitable existing awards could also be reconsidered.
Even where larger sums are involved (say up to £20,000) the Court might still consider appointing private trustees, supported if necessary by an expert, to administer the money for the minor, rather than order it to be paid into the Court Funds Office and controlled by the PTO. The accredited panel of solicitors to be formed to carry out Receivership and Trust work would be an obvious source of such professional appointments. Costs involved would be transparent, rather than the current obscure arrangements, and could if necessary be allowed for when awards were made: they would of course be subject to the regular reviews between the PTO and the Law Society.
Stopping payments in satisfaction and minimising minors' awards held in Court would be likely to reduce the sums in the Court Funds Office significantly and the staff employed in it, with further staffing and running cost savings in the Court Service. Assuming that as previously recommended responsibility for the reduced Court Funds Office staff and operations transfers to the Court Service, it is recommended that consideration then be given to the possibility of removing or minimising the remaining sources of funds in to that office. PTO and LCD have some earlier operational studies which clearly indicate there is further scope for reducing such payments and the administration to support them.
Currently funds held by the Court Funds Office include some £33 million of unclaimed balances. Some of the individual amounts are quite small, and many go back over decades. Attempts over the years, including much hard work by PTO staff have failed to locate the parties who might have a legitimate claim to these outstanding amounts. They have recently been the subject of a specific Comptroller and Auditor General's Report, not least because of continuing shortcomings in their recording systems and they present a continuing difficulty for the Agency. The Report contains several recommendations which should help resolve these longstanding difficulties, but this Review has identified another possible avenue to be explored.
It can reasonably be assumed that anyone who is traced and enabled to put in a valid claim for one of the sums involved would regard the work entailed as a welcome piece of public service for which they should not object to paying a charge, commensurate with the sum involved. It is therefore recommended that the PTO test the market and see if a private agency eg a debt collecting or credit rating company would take a contract on a pilot basis and try and trace any of the parties. To start with, larger sums (say, over £500) outstanding for less than 10 years could be made available, with an appropriate percentage paid over to the tracing agency on successful identification of a claimant. In the light of experience it may be possible to offer other tranches of the unclaimed balances for resolution. Such proactive efforts coupled with auditable recording systems should help form an acceptable basis for allowing unclaimed balances to pass reasonably quickly out of Court Funds and on to HM Treasury, eg within say 10 years. An effective recording system would ensure that subsequent successful claims could still be met, so no individual or their estate or any organisation would suffer a financial loss. By definition such late claims would not amount to significant sums or happen very frequently, so the Court Funds Office should have no difficulty in absorbing them from its surplus income in any particular year.