Paragraph 7.1 of the Comptroller and Auditor General's report reads:
Background
Approximately 29,500 people, born since 1930, were committed by the courts to industrial and reformatory schools. In addition, significant numbers, which cannot be accurately quantified by the Department of Education and Science (DOES), were committed by parents.
Widespread concern was expressed in the 1990s about the extent and effect of child abuse at institutions supervised by the State in previous decades. Such abuse included sexual, physical, emotional abuse and neglect.
The Taoiseach, in May 1999, apologised on behalf of the State to the victims of abuse and announced the establishment of a Commission to inquire into this matter (the Laffoy Commission).
The Laffoy Commission was established by legislation in 2000. The Commission operates either by affording victims an opportunity to tell their story without investigating their allegations or to have their allegations investigated.
Addressing the redress issue
In October 2000, the Minister for Education and Science (the Minister), in a memorandum to Government, outlined his general policy position in relation to redress.
The principal points made were that:
· Requiring victims to pursue claims for compensation through the courts would not be consistent with the desire, evident in the Taoiseach's apology, to face up to and deal with the issue of past child abuse
· He was of the opinion that there was a compelling case for setting up procedures outside the court system for dealing with claims from victims of abuse, in order to avoid significant delays and costs in litigation
· Victims could face great difficulties in bringing claims through the courts and it was appropriate to offer a quicker and less demanding process for the award of monetary compensation
· The Government was committed to providing the necessary funding, with a contribution from religious congregations if one could be agreed.
In addition, Judge Laffoy had, by this time, expressed concerns that victims would not co-operate with the Commission in the absence of a compensation scheme.
The Government, following consideration of the matter, agreed, in principle, to establish a redress scheme. It was envisaged that the scheme would compensate people who as children were victims of abuse while resident in institutions where the State had regulatory or supervisory functions.
Compensation would be paid on an ex-gratia basis, without establishing any liability on the part of State bodies but subject to a claimant establishing to the satisfaction of the compensation awarding body that he or she had suffered abuse and resulting damage.
In response to the Government decision the Conference of Religious in Ireland (CORI) indicated their willingness to become involved, in principle, with the Government in setting up and implementing the proposed scheme. In November 2000, the Minister and the religious congregations agreed to enter into formal discussions on the details of the congregations' participation in the compensation scheme.
In February 2001, the Government approved the drafting of the Victims of Child Abuse Compensation Tribunal Bill to provide for a compensation scheme, which would validate claims in a non-adversarial way. At that time, the Government noted that discussions were to continue between the State and the religious congregations with a view to securing agreement on a meaningful contribution to the compensation scheme in advance of the publication of the legislation.
The Bill was enacted into law, on 10 April 2002, as the Residential Institutions Redress Act, 2002 (the Act) and provides for the establishment of the Residential Institutions Redress Board (the Board) and the making of awards to persons who, as children, were resident in certain institutions and have or have had injuries that are consistent with abuse received while resident in the institutions.
In addition to claims from residents of DOES supervised institutions, former residents of certain institutions not under the supervision of the DOES can also apply for redress.
The redress scheme extended to former residents of 123 institutions regulated by the State. 87 of these were under the supervision of the DOES.
82 of the 123 institutions were managed by religious congregations represented by CORI. The remaining 41 institutions were not involved in the negotiations about a contribution nor will they benefit from any indemnity.
In January 2002, the Minister had announced that agreement, in principle, had been reached with the congregations about the level of the congregations' contribution. Further negotiations took place culminating in the approval by the Government, in June 2002, of an agreement under which the congregations would make a contribution of €128m inclusive of some past contributions. In return, the State agreed to indemnify the congregations in respect of all cases where a person would have been eligible to make a claim under the Act, with the indemnity to apply to those cases where litigation was commenced within the following six years. On 5 June 2002, an Indemnity Agreement (the Agreement) to give effect to this was signed between the Minister, the Minister for Finance and eighteen religious congregations.
The Redress Scheme
The Act provides for the making of awards to assist in the recovery of people who have injuries that are consistent with abuse received while resident as children in certain State regulated institutions. The Board has been established to determine awards while a Residential Institutions Review Committee (the Review Committee) has been established to review them.
The Board has two main functions:
· To make awards in accordance with the Act
· To make all reasonable efforts to ensure that those who were resident in the institutions listed in the Act are made aware of the Board's existence so that they may apply for redress.
In order to qualify for redress an applicant must establish, before the Board:
· His or her identity
· That he or she was resident, while under the age of 18, in one of the institutions listed in the schedule to the Act
· That he or she was abused while so resident and suffered injury
· That the injury is consistent with abuse suffered while so resident.
Applications must be made within three years of the establishment of the Board on 16 December 2002. In a case where a person, who would have qualified as an applicant, dies after 11 May 1999 the spouse or children of that person may make an application on his or her behalf. The Board may, in exceptional circumstances, extend the time limit.
The Board makes a preliminary decision as to whether an applicant is entitled to an award. It requests its medical advisers to prepare a report on the injuries received by an applicant and then makes an award in accordance with established redress bands.
If the applicant accepts the award, then he or she must agree in writing to waive any right of action against a public body or a person who has made a contribution under the Act.
An award may be paid by way of lump sum or in instalments, if an applicant requests this and the Board agrees to the request, or in circumstances where, having heard submissions, the Board directs that the award should be paid in instalments or otherwise than by way of a lump sum.
The Board may make an interim award, not exceeding €10,000, where it makes a preliminary decision that the applicant is entitled to an award, that the award is likely to exceed the amount of the interim award and is satisfied, having regard to the age or infirmity of the applicant, that the interim award is appropriate.
An applicant has one month to accept or reject an award or to submit the award to the Review Committee, which is wholly independent of the Board.
An applicant may submit any of the following matters for review:
· The rejection of an application because the criteria laid down in the Act have not been established
· The amount of an award made by the Board
· A direction by the Board that an award is to be paid in instalments, or otherwise than by way of a lump sum, to an applicant deemed incapable of managing his or her own affairs.
Objectives and Scope of the Examination
The principal objectives of the examination were to:
· Estimate the State's contingent liability arising from the establishment of the redress scheme
· Review the negotiation of the Agreement with particular reference to the information, advice and arrangements for approval of the acts of negotiation
· Review the implementation of the Agreement concluded as a result of those negotiations.
It is outside the scope of my audits to comment on policy issues. It is, however, within my remit to examine, and form a view on, the quality of information underlying key decisions in the formulation of a policy.
The scope of the examination included a review of files, including notes of meetings, legal advice, correspondence and records of decisions. Discussions were held with officials of the DOES and the Redress Board.
The Contingent Liability for Redress
The extent of the State's liability for redress is dependent upon a number of contingencies and future events. Consequently, any estimate of future liabilities arising out of the redress scheme is made in circumstances of uncertainty, particularly since the Board has not yet functioned for a full year.
The principal uncertainties inherent in any estimation of liability surround:
· The potential population of claimants
· The number of those potential claimants who will apply for redress
· The extent of any awards which depends, in turn, on the nature of abuse suffered by applicants, its impact and consequences.
The extent of costs which may arise
The liability outlined in this section is, therefore, a contingent one and can only, due to these uncertainties, be treated as a preliminary indication of the extent of the liability.
The possible cost of redress
Between the commencement of the scheme in December 2002 and the end of July 2003 the Board had received 1,662 applications. Applications have been made at a rate of approximately 50 per week to that date and 48 had been rejected as not coming within the terms of the scheme.
The ultimate cost of the scheme to the State will be a factor of the average award made, the number of valid applications and the costs. None of these can be estimated with certainty at this stage.
Level of awards
An Advisory Compensation Committee was established by the Minister in 2001 and brought together expertise from a range of disciplines, including legal, medical, psychiatric and psychological. The Committee considered the experience in other countries in the course of its deliberations. Its report "Towards Redress and Recovery", known as the Ryan Report, was presented to the Minister in January 2002 and included, inter alia, recommendations for the assessment of redress.
The Committee recommended that redress should be assessed under four headings with a weight to be attached to the different elements in accordance with Table 7.1.
Table 7.1 Weighting scale for evaluation of severity of abuse and consequential injury
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Constitutive Elements of Redress
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Severity of abuse
|
Severity of injury resulting from abuse
|
|
|
|
|
Medically verified Physical/psychiatric illness
|
Psycho-social sequelae
|
Loss of opportunity
|
|
Weighting
|
1-25
|
1-30
|
1-30
|
1-15
|
The Committee recommended that, having regard to the cumulative rating, the amount of redress should be determined in accordance with redress bands set out in Table 7.2.
Table 7.2 Amounts payable for weightings allocated
|
Redress Band
|
Total weighting for severity of abuse and injury/effects of abuse
|
Award payable by way of redress
|
|
V
|
70 or more
|
€200,000 to €300,000
|
|
IV
|
55-69
|
€150,000 to 200,000
|
|
III
|
40 - 54
|
€100,000 to €150,000
|
|
II
|
25 - 39
|
€50,000 to €100,000
|
|
I
|
Less than 25
|
Up to €50,000
|
In December 2002, the Minister, in regulations made under the Act, incorporated the recommendations of the Ryan Report into the redress scheme.
Having determined an award under these redress bands, the Board may make a further payment of up to 20% of the assessed award in exceptional circumstances and may also make a payment for medical expenses and reasonable expense incurred in the making of an application (e.g. legal fees).
Estimates of average awards
The Redress Board commenced hearings in late April 2003. Only a limited number of cases have yet been heard and it may take some time for a definitive trend to emerge. Up to the end of July, the Board had made offers in 108 settlement cases and 25 awards in hearings. Awards ranged from €10,000 to €200,400.
The average award was just over €84,000.
If allowance is made for a variation, in future awards, of 15% of the average awards made to date this would place awards in the range €71,400 to €96,600.
By way of comparison this trend is borne out by the level of average awards from three of the compensation schemes which operated in Canada where awards made were, broadly speaking, based on matrices similar to that recommended by the Ryan Report and adopted in the Irish Regulations.
The relationship between average award levels and the maximum potential award in the three Canadian schemes is set out in Table 7.3.
Table 7.3 Claims and awards in Compensation Programmes relating to Institutional Child Abuse in Canada, 1993 to 1999
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Schemes
|
Final numberof claims
|
Maximumaward
|
Average award as % of maximum award
|
|
Nova Scotia
|
|
|
|
|
(3 institutions)
|
1,260
|
$120,000
|
26%
|
|
Ontario - Grandview
|
329
|
$60,000
|
62%
|
|
Ontario - St. John’s & St. Joseph’s
|
1,200
|
$108,000
|
31%
|
*The average award in Nova Scotia, 26%, includes a separate counselling award.
The trends which can be noted in the Canadian cases are:
· The average award represents something of the order of 32% of the maximum available.
· As the number of cases increases, the average award tends to fall. If only the two schemes with the higher number of applicants are considered the average award is around 28.5% of the maximum available.
This, if replicated in Ireland, would place average awards in the range €85,500 to €96,000.
The Accounting Officer pointed out that awards in army deafness cases may be a more reliable indicator of average awards than the Canadian experience. In furtherance of this view he described army deafness as very much a 'home-grown' class action which, in particular, demonstrated how the amount of awards lessens with time. Army deafness awards are finalised either by loss adjusters or through court hearings. Since redress and deafness claims are very different in nature I do not consider that any adjustment should be made, at this point, in the estimation process because:
· The scheme will only operate for three years
· Awards will be based on formulae
· The disposal of claims during the three years may be as much a factor of the timing of receipt of claims and evidence as of the nature and consequences of any alleged abuse.
Moreover, the average level of award in army deafness cases settled under the Early Settlement Scheme has not materially changed since its introduction in January 2001.
Costs
The regulations provide for the payment of reasonable costs. The awarding of costs will be a matter for the Redress Board to agree with an applicant and his/her solicitor. In the absence of agreement, costs will be decided by a Taxing Master of the High Court. For the purposes of estimating the liability, it is assumed that costs will be approximately 15% of awards.
All-in award levels
Applying this level of costs to the estimated award range calculated on the basis of determinations and to the average award actually made to date by the Redress Board yields the following estimate of the all-in cost of awards:
· The average all-in cost would be around €96,600
· If awards were at the lower end of the scale they might average approximately €82,100
· If awards were at the higher end of the scale they might average around €111,000.
Number of claimants
The ultimate number of claimants will be a factor of the potential population of claimants and the numbers who ultimately apply for redress.
In regard to the population of claimants, information is available from a number of sources:
· Litigation, where victims had commenced or threatened cases against the congregations
· The number of people who had applied to give evidence to the Investigation Committee of the Laffoy Commission
· Freedom of Information requests from former residents of institutions.
I requested the DOES to carry out an analysis of the information available on the number of potential applicants at 30 June 2003. Information was supplied to me on foot of this request, as follows:
· A set of names from the litigation cases and the FOI requests, compiled so as to eliminate duplication
· The overall results of a comparison of this set of names with the names of those who applied to give evidence to the Investigation Committee of the Laffoy Commission in order to give an up-to-date "base population" of possible applicants to the Redress Board, again eliminating duplication.
In addition, the Minister directed the Redress Board, under section 26 of the Act, to prepare a report comparing its applications at mid-July 2003 with a combined set of names, obtained by combining the FOI and litigation data. The Board had received 1,551 applications at that time.
To date, the Redress Board's experience has been that 30% of existing claimants, from former residents of institutions under the aegis of the DOES, have provided evidence without first making a FOI application. Consequently, an allowance must be made for claims which are not supported by evidence obtained under FOI. This would suggest around 778 potential applications from this source at 30 June 2003.
The analysis carried out by the Board also showed that around 6% of its applications are from former residents of non-DOES institutions. This indicates that the non-DOES claimant numbers at 30 June 2003 would have been of the order of 410.
Claimant population - Potential claims at 30 June 2003
The combination of these lists resulted in the derivation of the following base population at 30 June 2003:
|
Potential Redress Applications at 30 June 2003
|
|
|
|
Persons who had instituted cases or FOI requests
|
|
|
|
People who had initiated cases and made FOI requests
|
1,448
|
|
|
People who made FOI requests only
|
3,060
|
|
|
People who instituted cases only
|
884
|
|
|
—
|
5,392
|
|
People who applied to give evidence before Laffoy Investigation
|
|
|
|
Committee but not included above
|
|
270
|
|
Other Claims
|
|
|
|
Claims from DOES supervised institutions not included above
|
778
|
|
|
Claims from residents of institutions not under DOES
|
410
|
|
|
---
|
1,188
|
|
|
---
|
|
Total potential claimants at 30 June 2003
|
|
6,850
|
|
|
---
|
Further potential claims
Further potential claims are likely to arise because:
· Requests for information under FOI continue to be made at a current rate of around 180 per month
· Certain claims may be received without recourse to FOI
· The trend in claims from non-DOES cases is likely to continue at least at the existing level of 6% of all applications
· The experience in Canada has been that the actual creation of a non-confrontational redress scheme induces more victims to come forward and make claims. In the two Ontario schemes the increase in the number of claimants varied between 2.6 and 3.4 times the known likely number of claimants at the start of the schemes.
While, to date, 30% of applications to the Board are not supported by FOI based evidence it has been assumed that, given the fact that the Board is encouraging applicants to use the FOI route, the percentage of non-FOI supported cases will drop to around 20%. In estimating future potential claims under these assumptions, FOI requests have been taken as a key indicator of claims since the information supplied by the DOES is used as evidence of residency. Analysis has been carried out on the basis of two levels of requests - 86 and 140 per month, during the period July 2003 to December 2005.
An estimate based on these levels of requests would suggest that potential future claims might be of the order set out in Table 7.4.
Table 7.4 Potential further claims to December 2005
|
FOI requests of 86 per month
|
FOI requests of 140 per month
|
|
Projected claims based on assumed new FOI requests
|
2,580
|
4,200
|
|
Potential applicants from DOES institutions who do not make an FOI request
|
645
|
1,050
|
|
Potential applicants from non-DOES institutions
|
206
|
335
|
|
Estimated number of potential future claims
|
3,431
|
5,585
|
Total potential claimants
Combining the estimates of claimants at 30 June 2003 with that of future potential claimants would yield a possible range from 10,281 to 12,435 claims.
If a further assumption is made that around 5% of potential applicants who have instituted legal proceedings will not apply for redress and that only around 85% of the remainder will apply, then the estimates indicate that the final number of claimants could lie in the range of around 9,000 to 10,800.
These adjustments are made in an attempt to take account of the fact that the age of claimants may militate against the pursuit of redress in all cases and a certain base level of applications under FOI is for purposes of tracing relatives and gaining insight into the background, family history and circumstances of a referral to institutions regulated by the State.
It is difficult to interpret the initial relatively slow rate of applications to the Board. Only 15% of the 884 litigation cases mentioned previously have claimed to date. Assuming that all of these litigation cases will become claims and that a similar claim pattern applies to non-litigation cases it would suggest that final claims may be of the order of 10,300.
As part of the estimation process these calculations will need to be revisited by the DOES from time to time as the trends upon which they are based become clearer and if more institutions are added to those listed in the schedule to the Act.
Estimates of the contingent liability
The trends apparent in the Canadian schemes examined suggest that as the number of claimants increases the average award might be towards the lower end of a range.
This would be consistent with the fact that:
· The base population at the date of conclusion of the agreement contained a high proportion of persons who had instituted legal proceedings and were, therefore, committed to the more onerous pursuit of redress through the courts
· It also contained a segment of claimants who had opted to give evidence before the Investigation Committee of the Laffoy Commission
· Even if more recent additions to the population of potential claimants all result in claims, it may be reasonable to estimate the average award on the basis that, taken in the aggregate, additional claims, while valid and genuine, may progressively arise from persons who have coped better with the psycho-social consequences and loss of opportunity that arise from abuse.
In summary, the following assumptions appear relevant to the estimation of the State's contingent liability:
· Claim numbers may lie in the region of around 9,000 to 10,800.
· Average awards would be around €96,600, including costs, but might lie in the range €82,100 to €111,000.
· It is likely that the average award level would be higher at lower claim levels and lower in a situation where claim levels were high.
Taking account of these assumptions the contingent liability might be as follows:
· If the average award level is applied - €869m to €1.04bn
· If the awards vary as assumed with the claim numbers this results in a liability of between €887m and €1bn.
These contingent liabilities must be viewed with caution until the claim and award trend emerges in the light of the further experience of the Redress Board. Consequently, it will be important for the DOES to periodically rework the figures in order to provide the most accurate projection in the light of each new set of claim data.
Department's views on the liability
The DOES takes a more conservative view of the potential liability. It bases its estimate on the Redress Board's caseload to date. The Board is receiving applications at a rate of 50 per week and is now eight months into its operation. If it is assumed that it will continue to receive this level of applications for the next three years it implies a total caseload of 7,800. The Accounting Officer's view is that it is likely that the flow of applications will abate as time goes on, with possibly a flurry of activity in the final months before the closing date in just over two years time. Under this scenario the maximum number of applicants is, in his view, unlikely to exceed 8,000.
Allowing that the average award of just over €84,000 remains static, and taking the total number of applications at a level of 8,000, would imply a cost of awards in the order of €672m. Adding 15% for costs implies a total maximum cost in the order of €772m. However, this is likely to be an exaggerated estimate since it takes no account of diminishing numbers of cases and a diminishing average award as time goes on. The Accounting Officer stressed that the Department will keep the issue under regular review.
The Accounting Officer bases his analysis on the claim experience of the Redress Board to date and his calculation of the likely cost of the redress scheme may indeed be valid. However, the figures produced in my calculations are estimates of the contingent liability or the liability that may arise if the potential population claim in accordance with the pattern set out in the assumptions. It is only as the claim pattern becomes clearer that the DOES will be in a position to assess the liability with a greater degree of precision.
The Agreement and its Negotiation
While internal briefing papers noted that the decision to set up the scheme was not dependent on a contribution from the congregations, the Act provided that a person, with the consent of the Minister and of the Minister for Finance, could make a contribution for awards. This was designed to provide for a situation where the State would reach agreement with the congregations on an indemnity to be provided in return for such a contribution.
Formal discussions on these matters took place throughout 2001 and the first half of 2002.
There were, broadly speaking, three phases in the negotiations.
· During the period up to October 2001, officials conducted the negotiations in the course of which the congregations made their opening offer. These negotiations reached an impasse.
· From November 2001 to January 2002, the Minister was involved in direct negotiations with the congregations, leading to the announcement that agreement, in principle, had been reached.
· Further negotiations between officials took place during the period from February to June 2002 when agreement was reached.
Negotiations to October 2001
In the period up to October 2001, the State's negotiating team comprised representatives from the DOES, the Attorney General's Office and the Department of Finance. Legal advisers accompanied the congregations' representatives.
The congregations were concerned that those negotiating on behalf of the State should have the power to bind the State and at various stages they expressed concerns about the process and how the Cabinet could be kept involved. Both sides accepted that negotiations would be on the basis that nothing is agreed until everything is agreed.
Key issues in the negotiations
While the negotiations covered a range of items, including issues surrounding the validation of claims, two interlinked issues were central. These were:
· The level of the congregations' contribution
· The nature of the indemnity to be provided in return.
The congregations' negotiating stance
The congregations took the view that the level of contribution required from them should be in proportion to the level of validation of allegations decided by the Government and their ability to pay. In their opinion, the contribution should also take account of:
· The fact that it was the State that had decided to proceed with this particular form of redress
· The fact that the State had set the level of validation lower than that of the Courts
· The congregations' own assessment of their liability in a Court situation.
Also, the congregations' maintained that account should be taken of the contributions made by them to the Faoiseamh Helpline and other pastoral services which had been made available to former residents of institutions. In addition, the congregations indicated that any contribution should take into account the ministry which they continue to carry out and, where appropriate, the resources of individual congregations.
In return, the congregations were seeking an indemnity against all claims by persons who would be eligible to make a claim to the Redress Board.
The State's position
The State's estimate of the liability, which would arise from the creation of a redress scheme, had developed during the period February to June 2001.
· In February, the estimated upper limit of the liability was €254m.
· By April, a DOES memorandum indicated that it would be reasonable to operate in terms of a maximum potential cost of €381m.
· In June, a further DOES memorandum stated that the liability might be as high as €508m.
The initial stance taken by the State was that the congregations should pay 50% of the cost of the scheme. The congregations responded that this went far beyond what they had envisaged.
In April 2001, officials sought Ministerial approval for an approach whereby, while a contribution of 50% would be sought, it should be subject to a maximum limit. While the opening figure sought should be €190m, representing 50% of the then estimated liability, in the event that the congregations could provide convincing reasons for resisting this approach, a lower limit of €127m could be set. If not satisfied as to the contribution, the State should be prepared to refuse to accept the participation of the congregations and should, in that case, amend the law to ensure that claimants could, even if compensated through the scheme, pursue their claims independently against the congregations.
A DOES memorandum of 30 April 2001 stated that the congregations had been given a figure of a possible 2,000 claims with a final cost in the region of €254m but that it had been stressed to the congregations that the final cost might be much higher. However, a possible capping of the contribution was not mentioned to the congregations at this time. In March 2001, the DOES had pointed out that the provision of an open-ended indemnity would have significant implications for the State and that the issue would require further detailed discussion.
The initial offer
At a meeting on 26 June 2001, the congregations outlined their proposed contribution. The offer amounted to approximately €108m, €57m in new resources and past property contributions valued at approximately €51m. The offer included:
· Cash payments of €25.4m over a five-year period
· An education trust fund of €12.7m
· Transfers of property worth €12.7m to the State
· €6.35m for counselling and other support services, some of which had already been spent
· Property, valued by the congregations at €51m, which congregations had transferred to the State for little or no consideration over the previous 10 years.
In return, the congregations wanted an indemnity against all claims in respect of institutional abuse of children up to the present.
The congregations maintained that the offer exceeded their exposure in litigation by a considerable margin. The congregations also claimed that, by establishing the scheme, the Government had increased the number of claims far beyond the number the congregations would have been required to meet in litigation.
Figures were submitted by the congregations outlining a number of possible outcomes if cases, approximately 2,500, were taken through the Courts. Various assumptions were made concerning the number of cases that would succeed and the possible range of awards and costs in such circumstances. There was an assumption that between 78% and 89% of the cases would fail.
The congregations estimated that, over a range of different liability apportionment scenarios, their exposure would lie between €21m and €106m. On the basis that each of these scenarios had an equal chance of occurring, and that the expected cost would be an average of the cost in all of the scenarios, the congregations went on to estimate their probable exposure in litigation at around €54m.
The Department's response
DOES officials, in putting the offer to the Minister, noted that the value of the offer amounted to €57m, unless the State was prepared to accept the congregations' approach and include the past property transfers. This fell far short of the State's objective of 50% with a minimum contribution of €127m. The officials noted that the property transfers had occurred without any reference to abuse compensation.
The officials emphasised that the State had no reliable information on the congregations' assets and their ability to pay. In addition, the value of the indemnity requested and the resultant cost to the State were not quantifiable.
The Minister for Finance was informed and wrote to the Minister stating that the offer was quite inadequate and left the State to bear virtually the full cost of the redress scheme.
Impasse in the negotiations
The negotiations slowed in the months following the offer by the congregations. There was some publicity which caused discord between the two sides.
A further meeting was held in October 2001. Handwritten DOES notes from this meeting indicate that a contribution of €127m was mentioned but the notes also show that the State negotiators considered past contributions to be of no value.
Following this meeting, the congregations wrote to the DOES. The letter indicated that the congregations felt that the June proposal had not been taken seriously by the State and that the leaders of the congregations were going to meet to decide on their future participation in the negotiations.
The Negotiations - November 2001 to January 2002
On 6 November, prior to the first meeting involving the Minister, the DOES wrote to the congregations. This letter marked a significant change in the stance being adopted by the State in relation to past contributions. Included among the points made in the letter were the following:
· The State would provide a permanent indemnity against litigation in cases which would come under the remit of the Redress Board.
· A package involving cash, an education trust and property transfers could form the basis for the congregations' contribution.
· The DOES would like to see the congregations contribute 50% of the cost of the redress scheme. While the State estimated the likely cost at €254m to €508m, the congregations contribution could be capped at €127m, which represented 50% of the lowest cost estimate.
· A problem existed with the proposed inclusion of past property transfers to the State, given that they occurred without reference to a redress scheme, but the issue could be re-examined in the context of the date of the State's apology.
· The congregations' proposed contribution, when past transfers are excluded, represented only 10% to 20% of the likely cost.
Negotiations took place in the period from November 2001 to January 2002. No contemporaneous records of these negotiations were available during my examination. On 12 March 2002, the DOES prepared a retrospective memorandum on the negotiations conducted by the Minister.
The memorandum, which was prepared by the Secretary General who accompanied the Minister during this phase of the negotiations, stated, inter alia, that:
· The negotiations had reached stalemate after the June offer and the congregations were also concerned about confidentiality. In the interests of seeking a final resolution, the Minister agreed to meet the congregations accompanied only by the Secretary General.
· Two meetings were held between the Minister and the Secretary General of the DOES, for the State, and the representatives of the congregations. These meetings were held on 7 November 2001 and 7 January 2002. The legal representative for the congregations attended the second meeting.
· The discussions centred on the amount of the contribution and how it was to be structured. Agreement was reached, for a contribution of €128m, and announced on 30 January 2002.
· The indemnity was only discussed to the extent that the congregations indicated that a draft they had proposed should form the basis for the final indemnity. The Minister and the Secretary General indicated that they did not have the legal expertise required to deal with this subject.
· The congregations also sought amendments to the Bill that would focus on injury rather than abuse or would give a right of reply to accused people.
· Prior to the matter going before Government, the congregations sought written assurances in relation to the proposed indemnity. However, the DOES informed the congregations it could not be recommended that the Minister be bound legally to the agreement without the formal involvement and advice of the Attorney General's Office.
The papers indicate that the Minister made an oral report to Government on the outcome of the negotiations at the end of January 2002 and this was followed by the Minister's announcement that the Government had agreed, in principle, to a set of proposals. The agreement, as announced, would see the congregations contributing €128m to the redress scheme - €38m in cash including €12.7m for an education trust, €80m in property transfers including transfers made since 11 May 1999 and €10m in counselling and other services. In return, the Government would indemnify the congregations concerned against all present and future claims arising from past child abuse which would be covered by the redress legislation.
The Negotiations - February to June 2002
Following the announcement by the Minister, on 30 January 2002, that the Government had agreed in principle to the proposals, negotiations resumed in March. At the first meeting, the congregations' representatives were accompanied by their legal representatives. Thereafter, the legal representatives attended alone. The DOES represented the State. The first two meetings had representation from the Chief State Solicitor's Office. From the third meeting, which was held in April, a representative from the Attorney General's Office joined the negotiations.
Two items dominated proceedings:
· The nature of the indemnity to be provided
· Whether or not previously transferred property could include property transferred to Non-Government Organisations (NGOs).
The nature of the indemnity
The issue of the indemnity had not been agreed in the previous discussions with the Minister. The Minister had said that the detailed terms of the indemnity could only be finalised with the involvement of the Attorney General's Office. The congregations' stance was that agreement in principle had been reached that the indemnity would cover all cases which could come within the remit of the Redress Board and that the indemnity should be open-ended.
In the preparation by the State side, for negotiation on the indemnity, it was necessary to conclude on the State's stance. The Attorney General's Office, in correspondence, noted that their understanding, when the Office was previously involved in negotiations during 2001, was that the indemnity would only extend to cases which would actually go before the Redress Board. The Minister, in a letter to the Attorney General's Office, clarified the policy objectives - that the indemnity would cover all cases which would come within the remit of the Board but that the indemnity would be time-limited.
Agreement was reached. The indemnity would cover all cases which could potentially come within the remit of the redress scheme and would operate for any related litigation which had commenced within three years of the last day for applications to the Redress Board.
The indemnity applies only in cases where the State has full control over the defence. Where a congregation or an individual wishes to adopt a course with which the State does not agree then the indemnity will not apply.
Previously transferred property
The agreement in principle provided for property previously transferred to be included as part of the congregations' contribution. The issue arose as to whether this could include property transferred to NGOs. The DOES took the view that only property transferred to the State could be accepted, as it was important that non-cash assets would be capable of being realised by the State. The Department of Finance took the same view. A note from a meeting held in April states that the Secretary General had confirmed that there was no agreement on the inclusion of properties transferred to NGOs. The congregations were adamant that the agreement reached with the Minister provided for the inclusion of such property.
The State, following further consultations, agreed to accept property transferred to the State or a public body (e.g. local authority or health board) in the period from 11 May 1999 to the date of the signing of the agreement. In addition, property previously transferred to a registered charity would be accepted, subject to a restriction on the sale or disposal of the property for a period of 25 years. The DOES would not accept the inclusion of any property transferred to a body owned or controlled by any religious congregation or other Church body. In cases where the 25-year restriction could not be provided, the congregations would replace the property with another or with cash, at their discretion.
Other adjustments agreed
Other adjustments were agreed, at this stage, including an increase in the cash element of the contribution and a corresponding reduction in the property element.
In the course of the negotiations, the congregations sought to extend the number of institutions in the schedule to the Bill, with the additional institutions (e.g. hospitals and special schools) being included without any increase in the contribution. The DOES accepted that additional institutions could be added to the schedule.
General views of the DOES on the negotiations
The Accounting Officer has pointed out that a fundamental element of Government policy in respect of the redress scheme was that the Government decided to set it up with or without a contribution from the congregations. The Government also decided to set it up notwithstanding that the final cost was not quantifiable. This in itself is not unusual in respect of Government programmes. As regards the contribution from the congregations, the Government's policy was that such a contribution was a desirable, but not an essential, element of a redress scheme. It was desirable as a factor in bringing closure to the issue of abuse for victims. Leaving them in a situation where they could sue the congregations in the courts for part of their compensation provided no such closure for them, or indeed society more generally. There was also, of course, a financial consideration - a contribution from the congregations meant that the State would not have to provide all the funding required. The objective of the negotiations was to achieve the highest possible contribution that the congregations were prepared to make. There was no capacity to coerce them into any agreement and, in all probability, if they were not part of the scheme then they would have avoided most, if not all, the costs of compensation.
Negotiations commenced and proceeded for a time on the basis of a 50/50 split of cost. However, negotiators for the State realised early on that if the congregations were to be persuaded to make a contribution they would not do so on the basis of an open-ended 50/50 split and would not do so without an indemnity. As early as April 2001 the Minister and the Minister for Finance had agreed that the State would accept a capped contribution amounting to €127m. This was not related to any proportion of likely minimum or maximum cost. The discussions continued on the basis of seeking a 50/50 contribution as a means of seeing how far the congregations could be persuaded to go.
The Accounting Officer accepted that there is a reference, in correspondence with the congregations, that €127m represented only 50% of the DOES's lowest estimate, but this was intended as underlining that it was a line below which the DOES would not go in seeking agreement. What was at issue in seeking that agreement was a contribution that could be considered by the Government to be satisfactory.
The Final Agreement
The final agreement, signed on 5 June 2002, quantified the contribution and outlined the indemnity.
Contribution
The agreed contribution of €128m to be made by the congregations to the redress scheme comprised the following:
· Cash payments amounting to €41.14m, of which €12.7m will be used by the State for educational programmes for former residents of institutions and their families.
· Transfers of real property which have been made (previously transferred property) to the State, State agencies, local authorities or voluntary organisations since 11 May 1999 to the aggregate value of €40.32m.
· Transfers of real property which are to be made to the State, or its nominees, as soon as practicable, to the aggregate value of €36.54m.
· Counselling and other support services for former residents of institutions and their families, already provided or to be provided, to the value of €10m.
The amount of past contribution included in the final agreement would be between €40.32m and €50.32m, depending on what proportion of the counselling contribution had been spent prior to the signing of the Agreement.
Indemnity
In return for the contribution, the State agreed to indemnify the contributing congregations in respect of liability in litigation which had commenced within three years of the last day for applications to the redress scheme and which would qualify to be dealt with under the Act.
Information, Advice and Approval Arrangements
In negotiating the agreement, the following information and advice would be critical to the adoption of an informed negotiating position by the State:
· Information about the possible liability, which would inform any demand in relation to the amount of a meaningful contribution by the congregations.
· The possible costs facing the congregations if all cases went to Court, as this was the figure underpinning the congregations' negotiating stance.
· Legal advice on the implications of any indemnity agreed.
Information about the Liability
Information was directly available to the DOES from a number of sources to estimate the possible liability.
Number of claimants
Information was available from the number of litigation cases, those applying to give evidence to the Investigation Committee of the Laffoy Commission and the Freedom of Information requests from former residents of institutions. In addition, information was available on a number of compensation schemes in Canada.
Litigation
It would be reasonable to assume that individuals who were prepared to pursue a case through the courts would avail of the right to seek redress.
When the Government approved the drafting of the Victims of Child Abuse Compensation Tribunal Bill in February 2001, the memorandum noted that 865 cases were pending against the State in November 2000. It had been estimated, in 1999, that the number of litigation cases would be of the order of 2,000 and, the memorandum further noted, there was nothing to indicate that this estimate would be significantly wide of the mark.
In June 2001, the congregations had based the calculation of their exposure in the courts on a likely 2,500 cases and in June 2002, the congregations notified the State that there were 2,551 cases where court proceedings had been issued, or litigation was threatened, in respect of alleged abuse at institutions covered by the Agreement. The State was named as co-defendant in 2,460 of these cases.
Laffoy Commission
The Commission comprises two committees:
· A committee to investigate allegations of abuse (the Investigation Committee) before which individuals and institutions implicated in allegations of abuse would have full legal rights available to them, including the right to cross-examine witnesses. The committee will produce a report identifying institutions where abuse took place and, possibly, naming perpetrators. The committee may report on individual complaints but will not name individual victims.
· A committee which gives victims an opportunity to tell their story (the Confidential Committee) but which does not investigate any allegations.
The Ryan Report, published in January 2002, noted that there had been 1,957 requests to give evidence to the Investigation Committee of the Commission and 1,192 requests to give evidence to the Confidential Committee. 1,375 former residents of Industrial and Reformatory institutions made 1,695 of the requests to the Investigation Committee with the balance coming from people who attended other schools and institutions.
While details of the complainants to the Confidential Committee are not available, if the same ratios applied, approximately 835 former residents of Industrial and Reformatory institutions would have made requests to this Committee giving a total of just over 2,200.
Freedom of Information
The DOES had, from the coming into force of the Freedom of Information Act, 1997 (FOI), received requests from former residents of institutions for personal information from the Department records.
There had been 62 FOI requests to the end of May 1999. The Taoiseach's apology and increasing publicity surrounding the issue, both on TV and in the print media, appeared to trigger an increase in the number of requests. The number had grown to 386 by the end of 1999, 1,020 at the end of 2000, 2,245 at the end of 2001 and 2,840 by the end of May 2002.
While individuals may seek information for reasons other than to obtain evidence to support a claim in litigation or to the Redress Board, it is plausible to suggest that there will be a strong correlation between the number of FOI requests and applications for redress.
Amount of awards
Information was available on award levels as follows:
· Experience in the courts of award levels in a major case involving abuse in a family setting
· The Ryan Report recommendations.
Use of the information
During the initial phase of the negotiations, the State was seeking a contribution of approximately 50% of the possible liability. In order to pursue this demand, a best estimate of the liability, using the available information, should have been available at all times.
Claimant numbers
The overall information available on potential claimants included the list of litigants, the FOI requests and those applying to give evidence before the Investigation Committee of the Laffoy Commission.
During the course of the negotiations the State agreed with the congregations that additional institutions could be included. This would also impact on estimates of claimant numbers.
While the Department produced estimates at various points it based them only on the number of litigation cases and the likely number of claimants in excess of this, which might arise due to the creation of the non-confrontational compensation scheme. The earliest estimates had put the potential claimants at 2,000. By November 2001 the DOES was estimating that the number of claimants was likely to exceed 3,000 and might rise to 4,000. By June 2002 it was being estimated that the number of claimants could be 5,200 or more.
As a consequence of basing estimates solely on litigation cases the trend in FOI requests was not fully taken into account. By the end of 2001 FOI requests were being made at the rate of approximately 100 per month. This trend continued during the first half of 2002 and it would have been reasonable to assume that the trend provided some indication of the likely effect of the compensation scheme on claimant numbers.
The experience in Canadian schemes suggests that more claimants are likely to pursue a claim in a nonconfrontational compensation scheme, than would through the courts.
In any event, once the decision was taken, in November 2001, to cap the contribution demanded from the congregations it effectively meant that the contribution being sought, assuming a 50:50 liability split, was based on the equivalent of 2,000 claims.
Cost of awards
Estimates were informed by the results of a leading law case. The memorandum to Government, in February 2001, noted that in this case the damages to victims of abuse in a family setting were agreed at €190,000 each, by the State, in a settlement. This figure was used as a basis for estimating the likely award based on an assumption that approximately one third of awards would be in the region of the €190,000 and that average awards in the other cases might be around €51,000 with costs around 25% of awards.
The Ryan Report, which was presented to the Minister in January 2002, was not available to inform liability estimation in the earlier part of the negotiation process.
The evidence from Canada suggests that average awards in a compensation scheme are likely to fall with increases in the number of claimants and that the working estimate used at all stages by the State may be slightly high.
Implications for the liability
As additional information comes to hand it would be reasonable to expect that the full range of potential costs, including the lower estimate, would be revised. In fact, no revision of the lower estimate of the potential cost, €254m, was made, at any stage, despite evidence that the minimum number of claimants was likely to be greater than the 2,000 upon which the estimate was based.
When the State agreed, in November 2001, to cap the congregations' contribution at €127m, this represented 50% of the lowest estimated cost.
However, by this time the Department was estimating that the number of claimants would probably exceed 3,000. Using the Department's estimate of the average award this have would put the minimum liability at €381m.
For purposes of the calculation of the contribution no allowance was made for adjustment on the basis of any increase in numbers after the agreement of a scheme. The Canadian experience was that the number of applicants might increase by a multiple of approximately three times the known number of likely applicants at the start of a compensation scheme.
While the DOES did not carry out detailed analysis of the information on known likely applicants, the underestimation of the likely minimum cost of the scheme could have been identified by using the Department's own estimate of the likely cost of awards and its information from any one, or a combination, of the available sources for identification of potential applicants.
· An estimated 2,200 former residents of Industrial and Reform institutions applied to give evidence to the Laffoy Commission.
· In June 2001 the congregations estimated the number of litigation cases at approximately 2,500.
· There were 2,840 FOI requests at the end of May 2002.
Using a more conservative multiple than that suggested by the Canadian schemes and assuming only a doubling of any one of these figures would have indicated that the minimum number of applicants might be in the region of 4,400 to 5,700. Even without combining the populations and eliminating overlaps, using the DOES's estimate of the average cost of an award of €127,000 would have put the likely minimum liability in the range of almost €560m to €720m.
The DOES has stressed that, once the decision to cap the demand was taken, no relationship was made thereafter between the contribution and the minimum cost of the scheme. Consequently, minimum cost levels were not a factor in the ultimate negotiations of the congregations contribution.
Information about the Congregations' Exposure in Litigation
In the course of the negotiations, the congregations asserted that any contribution should not exceed their exposure if all the cases were to go before the courts.
· In June 2001, the congregations said that their best estimate of their likely exposure in litigation was €54m with their highest estimate at €108m.
· On 30 May 2002, a DOES document prepared for discussion with the Minister in advance of the proposal going to Government stated that the congregations estimate of their exposure in the courts might be correct. Plaintiffs could face formidable legal obstacles. On the other hand, the document points out, it could be expected that the courts might take a benign view of plaintiffs in many cases and juries might be sympathetic and the costs for all concerned could be much greater than the congregations anticipated.
· While the DOES made no detailed assessment of the congregations' figures or of the likely apportionment of liability by the courts, the Government, in considering the agreement, noted that its approval reflected the understanding of evidence which could be produced in any court proceedings as to liability by the State. Subsequently the Secretary General of the DOES provided the Secretary General to the Government with the available information which the DOES had on the issue of State liability.
Legal Advice
Participation in negotiations
While the teams of negotiators were meeting, in the series of meetings which reached an impasse in October 2001, the State's team included representation from the Office of the Attorney General.
However, from October 2001 to April 2002, the Office of the Attorney General was not represented at meetings with the congregations and had no contact with those negotiating on behalf of the State. The Accounting Officer has pointed out that there were only two meetings between officials and the congregations in the period. Neither meeting focused in detail on legal issues and the first on 13 March 2002 specifically agreed to refer the matter of the indemnity to a group comprising the solicitors for the congregations and representatives of the Attorney General's Office and the Department.
In order to be in a position to offer further advice, following the oral report of the Minister to the Cabinet and the announcement of the agreement in principle, in January 2002, the Office of the Attorney General sought information on the detailed negotiations, including the extent of the indemnity. A letter requesting information was sent to the Minister by the Attorney General on 31 January 2002 and this letter was followed by a further letter from his office on 1 February 2002. As no reply had been received by 13 March 2002, the Attorney General advised the Department that his Office could not participate in negotiations or offer legal advice in the absence of the requested information. As the negotiation details had not been documented the Secretary General prepared a retrospective memorandum on the negotiations conducted by the Minister up to that point.
On 13 April 2002, the Minister wrote to the Attorney General outlining the policy approach he proposed to adopt in the further negotiations in relation to the indemnity. He proposed that the indemnity should extend to all the persons who could apply for redress and that the period should not be any longer than 10 years.
Senior Counsel's Opinion
The Office of the Attorney General sought advice from Senior Counsel in late May 2002 on the terms of the Indemnity Agreement.
The Senior Counsel addressed the issue of cases which go to court and where a congregation (or an individual) has an established constitutional right to defend his or her good name and advised that while the intent to indemnify was clear he was not sure that indemnity of every party could be compelled or assured in circumstances where there are individually named defendants who are separately represented and whose interests might not converge with the interests of the congregations.
He raised the question of the risk of a substantial award in a case, perhaps due to the way in which the congregation conducted the defence, and the possible implications for other cases including those which might have gone to the Redress Board.
Attorney General's advice/observations to Government (June 2002)
The Attorney General, in June 2002, noted that the draft Indemnity Agreement reflected the policy position adopted by the Minister in relation to the extent and breadth of the indemnity. He pointed out that an estimate of the doubling of the number of cases to 5,200, based on the number of litigation cases, might be conservative and pointed out that the highest estimate of the liability, €508m, was based on an estimated 4,000 claims. In addition, he pointed out that the contribution of €128m might be regarded as insufficient and highlighted the lack of a mechanism for increasing the contribution from the congregations if the number of cases increased greatly.
In relation to the defence of litigation to which the indemnity applied the Attorney General pointed out that the State would have to be mindful of possible subsequent defamation proceedings, numerous actions having been undertaken in Canada by individual members of congregations on the basis that the resolution of a claim by way of payment to the claimant was damaging to the reputation of the individual referred to in the claim. The Attorney General suggested a related amendment to the agreement and the relevant clause was amended to incorporate the change.
Approval Arrangements
The lines of communication during the negotiations were that memoranda were sent to the Secretary General for discussion with, and direction from, the Minister. Approval was sought from the Government at certain stages.
Key milestones in the supervision of the negotiation process were:
· Government approval for the redress legislation in February 2001
· Ministerial approval for the negotiating approach in April 2001
· Consideration of the congregations' offer in June 2001
· Direct Ministerial involvement from November 2001 leading to the announcement of the agreement in principle
· Ministerial clarification of the extent of the indemnity in April 2002
· Briefing in advance of approval for the Agreement in May 2002
· Government approval for the Agreement in June 2002.
Implementation of the Agreement
The DOES has established the Residential Institutions Redress Unit. The responsibilities of the unit include overseeing the implementation of the Agreement. The following progress has been made in collecting the contribution agreed and bringing any funds to account.
Cash Payments
The Agreement stipulated that the cash payments should be made as follows:
· €12,654,000 to be paid on execution of the Agreement
· The balance to be paid in four equal instalments (€7,121,500 each instalment) on 5 September 2002, 5 December 2002, 5 February 2003 and 5 May 2003.
The Congregations duly made the payments as stipulated.
Application of the proceeds
Up to 5 June 2003, the total value of the funds was €41.77m. This was made up of contributions from the congregations of €41.14m and interest of €0.63m. The contributions and interest are held in two funds as set out in Table 7.5.
Table 7.5 Investment and deposit of contributions
|
Investment/Deposit
|
Redress Fund €m
|
Educational Fund €m
|
Total €m
|
|
National Treasury Management Agency (Exchequer Notes)
|
23.91
|
12.86
|
36.77
|
|
Paymaster General
|
5.00
|
-
|
5.00
|
|
Total
|
28.91
|
12.86
|
41.77
|
Strictly, under the Act, the part of the proceeds pertaining to awards to be made by way of redress should be lodged in an account with the Paymaster General. In fact, only €5m has been so lodged. The remainder was invested directly in Government securities through the National Treasury Management Agency. I will be auditing this account, in due course, after it has been prepared and presented for audit.
Transfers of Property
There are two categories of property provided for in the Agreement:
· Property transferred between 11 May 1999 and the date of the Agreement (previously transferred property)
· Property to be transferred in the future (future property transfers).
Previously transferred property
The Agreement stipulated that property previously transferred to the State, State agencies, local authorities or voluntary organisations providing health or social services could be included in the contributions.
In May 2002 the Congregations supplied the State with a schedule of 37 properties which the Congregations claimed had been transferred after 11 May 1999. The valuations, as of the date of transfer, submitted by the Congregations put an aggregate value of €40.97m on the properties.
The recipients of the property, which the Congregations claimed to have transferred since 11 May 1999, are set out in Table 7.6.
|
Transferee
|
Properties
|
Congregation Valuation €
|
|
DOES
|
11
|
10.24m
|
|
Voluntary Organisations
|
18
|
22.12m
|
|
Local Authorities
|
4
|
6.98m
|
|
Health Boards
|
1
|
0.12m
|
|
Unidentified
|
3
|
1.51m
|
|
Total
|
37
|
40.97m
|
The Agreement set a target of €40.32m under this category.
The DOES put a process in train to review the schedule to determine if the properties represented qualifying properties under the terms of the agreement. Discussions are ongoing with the legal representatives of the Congregations.
The key validation steps required for these properties are:
· Determining whether the properties qualify, in principle, under the Agreement
· Agreeing the value of the properties
· Determining the value of any previous State grants in respect of these properties
· Confirming that property transferred to voluntary bodies will not be alienated for at least 25 years
· Taking account of any consideration paid
· Confirming good and marketable title.
Qualifying properties
The DOES sought to establish that the properties listed had been transferred to a qualifying body during the designated period. Arising from this the DOES has informed me that it has rejected, or is likely to reject, eight properties, valued by the congregations at €8.11m. Two further properties, valued at €0.76m, have been transferred to the schedule of future property transfers.
Valuation
The congregations submitted professional valuations for each property. The DOES selected a sample of 10 properties for valuation by the Valuation Office. Prior to the valuations being carried out the DOES had rejected two properties in the sample as not qualifying under the terms of the Agreement and the Valuation Office did not value two further properties, as it did not have maps of the sites.
For one property, a site of 7.4 acres in Co Galway, there was a major difference between the valuation of €3.5m submitted by the Congregations and the value of €1.85m per the Valuation Office. In the event that agreement cannot be reached, either party can apply to have the matter determined by an independent valuer.
In the remaining five cases, the opinion of the Valuation Office was that the valuations submitted were reasonable.
Grants or other payments provided by the State
The Agreement stipulates that a valuation of any property must take account of any grants or other payments provided by the State. The State has not yet accepted, in principle, any of these properties. Consequently, it has yet to investigate and determine whether, and to what extent, any such grants have been paid.
Restriction on transfer or alienation of a property
The implementation of this provision has given rise to difficulties. The religious congregations do not appear to be in a position to provide evidence that there is a legal 25-year restriction on the transfer or alienation of properties previously transferred to voluntary organisations. In order to address this issue, the Congregations have obtained letters from the transferees stating that they will not further alienate or transfer properties without the consent in writing of the Minister for Finance. The matter has been referred to the Chief State Solicitor's Office for its observations.
Properties previously transferred where the State paid consideration at the time of transfer
Where property was transferred below open market value, the difference between the consideration paid and the open market value at the date of transfer should be taken into account when assessing the value of the contribution.
There were three previously transferred properties which the State had purchased for consideration. The Congregations claimed that the consideration paid was below the open market value and claimed credit for the difference. The State has rejected two of these properties as not qualifying under the terms of the Agreement. The DOES took the view that the difference between the consideration paid and the open market value could not, in the circumstances, be considered as a contribution under the scheme.
The first of these properties was a 5.5 acre playing field purchased in 2000 by a Vocational Education Committee from a congregation. A condition of sale was that, in the event of the VEC disposing of the lands within 10 years, the congregation would receive 50% of any increase in price. The DOES rejected the property as not qualifying under the terms of the agreement.
The second property was in Dublin. A religious order had sold a convent and an adjoining residence to a voluntary housing association for €6.98m in 2000. An independent valuation put the open market value of the site at the time of the sale at €10.2m. The congregations claimed credit for the difference. The contract of sale included a restrictive covenant in favour of the order recognising the fact that the property was being sold for less than open market value and entitling the order to 25% of the proceeds in the event of the property being sold within 21 years for any purpose other than for social or affordable housing.
The aggregate credit sought by the congregations for these two properties was €4.62m.
The third property where the State paid consideration was a property in Co Mayo, which a religious order had sold to the Western Health Board for €275,000 in November 1999. The sale included a restrictive covenant that the property was to remain in community use for the benefit of locals. The valuers for the order put the loss of market value due to this covenant at €125,000. The DOES is seeking further information from the congregations' legal representatives about this property.
Good and marketable title
The State has not yet accepted any of the previously transferred properties. Consequently, the matter of the title has not yet been clarified.
Summary
To date the State has not accepted any of the properties listed as previously transferred property on the schedule provided by the Congregations. The DOES says that this is mainly due to deficiencies in the information supplied by the Congregations' and has raised the matter with the Congregations' legal representatives.
The following is the DOES's position at the end of June 2003:
· One property, valuation €0.57m is likely to qualify under the terms of the Agreement
· A further twelve properties, with an aggregate valuation of €17.29m are likely to qualify if the State is satisfied that undertakings about the 25-year restriction are legally enforceable. There is disagreement about the valuation of one of these properties
· Further details are being sought by the DOES in regard to ten properties with a total valuation of €8.89m
· Two properties, with an aggregate valuation of €0.76m, have been transferred to the schedule of future property transfers
· The DOES has rejected, or is likely to reject, ten properties with an aggregate valuation of €12.73m
· The congregations have withdrawn two properties, valuation €0.73m.
Future property transfers
In May 2002, the Congregations provided the State with a schedule of 43 properties to be transferred. The valuations submitted by the Congregations put an aggregate valuation of €38.74m, as of the date of the agreement, on 42 of the properties. No valuation was submitted for one property which is the subject of a Compulsory Purchase Order (CPO). Two properties were transferred from the schedule of previously transferred property bringing the total to 45 properties with an aggregate valuation of €39.5m, excluding the unvalued property which is the subject of a CPO.
The Agreement set a target of €36.54m under this heading.
The DOES reviewed this schedule to determine if the properties being offered were qualifying properties under the terms of the agreement. Discussions are ongoing with the legal representatives of the Congregations.
The principal considerations in the review are:
· Determining whether the properties offered will be of use or benefit to the State
· Agreeing the value of the properties
· Determining the value of any State grants
· Confirming good and marketable title.
Use or benefit to the State
The State had nine months under the Agreement in which to refuse to accept a property if in its reasonable opinion it will be of no use or benefit to the State. This period was subsequently extended to 30 April 2003.
The DOES circulated details of the properties to Government Departments to identify Departments or State agencies that could benefit from a transfer. Those that expressed an interest were provided with details of the property. Many of the properties were already being used by Health Boards and the Boards indicated their interest in acquiring a fee simple interest in those properties.
The DOES has rejected eight properties, with an aggregate value of €9.85m, taking the view that the properties will be of no use or benefit to the State. Decisions are pending on five further properties. The total value of four of these properties is €10.18m while no valuation has yet been supplied for the remaining property.
By the end of June 2003, the DOES had accepted 32 of the properties offered, conditional on good and marketable title being established and their valuation being agreed. Subject to this, these properties will be transferred to public bodies as set out in Table 7.7.
Table 7.7 Property transfers accepted in principle by DOES
|
Transferee
|
Properties
|
Congregation Valuation €m
|
|
Eastern Regional Health Authority
|
3
|
1.97
|
|
Southern Health Board
|
19
|
12.24
|
|
South-Eastern Health Board
|
5
|
1.80
|
|
Mid West Health Board
|
2
|
0.61
|
|
Office of Public Works
|
1
|
1.20
|
|
DOES
|
2
|
1.65
|
|
Total
|
32
|
19.47
|
Valuation
The congregations submitted professional valuations for properties. The DOES has requested the transferees to treat the transfer of a property in the same way a prudent purchaser would. The transferees have been requested to obtain an independent valuation of the property. The DOES will seek a copy of all independent valuations.
By the end of May 2003, ten of the Southern Health Board properties had been valued by the Valuation Office. The aggregate valuation given by the Valuation Office was €2,600,000 while the aggregate valuation according to the Congregations was €2,666,600.
At 23 July 2003, the DOES had not received any other independent valuations.
Grants or other payments provided by the State
The DOES has written to the Health Boards, who are the transferees for a number of the properties to be transferred, requesting them to inform it if any grants have been paid in respect of the properties being transferred.
Good and marketable Title
The DOES takes the view that it is the responsibility of the transferee to establish that a transferor holds a good title to a property.
Summary
To date, the State has accepted, in principle, 32 properties, subject to good and marketable title and agreement about the valuations of the properties. The aggregate value attributed to these properties by the Congregations is €19.47m.
The DOES has rejected eight properties with an aggregate value of €9.85m.
Decisions are pending on four further properties whose aggregate value is €10.18m and a fifth property for which no valuation has been submitted.
Replacement Properties
The agreement stipulates that, in the event of the State refusing to accept a property, the congregations have the right to replace it with cash or other property at the congregations discretion. Replacement properties are to be valued at the date of the Agreement. The Agreement does not stipulate the timeframe within which the Congregations must offer a replacement property or cash.
The Agreement also provides that if the aggregate value of the properties contributed by the congregations falls short of the aggregate value of the properties which they have committed to provide, then the contributing congregations will be entitled to make up the shortfall in cash or property as soon as possible but not later that 6 months from the date the shortfall is ascertained and notified in writing to the congregations by the State.
As the State has rejected a number of properties, the aggregate value of the remaining properties is likely to fall short of the value which the Congregations have committed to provide.
The DOES prepared a schedule of locations where it wishes to acquire sites for the development of primary and post-primary school facilities. This schedule of sites was sent to the legal representatives of the congregations in October 2002 and subsequently updated to include a number of properties being sought by Health Boards. There are currently 21 locations and properties on the list. The Congregations have been asked to focus further offers of property on these areas.
Arising from this, the DOES was offered, and has accepted, land for school building development inCo. Kerry. The value attributed to this site by the congregations is €2.6m. The DOES is of the view that further properties may be offered arising from the schedule. The congregations have also submitted a list of 14 alternative properties. The Department is considering this list.
Counselling and other Support Services
The Agreement states that the Congregations contribution shall include counselling and other support services for former residents of institutions and their families, already provided or to be provided, to the value of €10m.
Previously delivered counselling
In 1997, CORI established an organisation called Faoiseamh with the aim of providing a confidential listening service and face-to-face counselling for adults who, as children were abused by religious or diocesan clergy. Under the Agreement, the Congregations may spend money on counselling and other support services other than through Faoiseamh.
Claims for contributions to date per the Congregations
In the course of the negotiations the congregations stated that much of the €10m contribution related to counselling and other services which had already been provided. The DOES wrote to the legal representatives for the congregations on 10 March 2003 requesting them to forward a further report detailing expenditure incurred in respect of counselling and support services for former residents of institutions and their families.
A reply from the congregations' legal representatives in March 2003 stated that the amount spent on counselling and other support services to that time was just over €11m. The information supplied, however, did not indicate the precise amount attributable to the provision of counselling and support services to former residents of the institutions and their families. The DOES, therefore, sought clarification.
Further letters on behalf of the congregations in May and June 2003 stated that in addition to contributions to Faoiseamh of €4.53m to date, there was also a further €7.1m of qualifying expenditure for counselling and other support services.
The Department continues to seek evidence from the legal representatives for the Congregations that the expenditure claimed has, in fact, been spent on providing counselling and other support services for those envisaged in the Agreement.
In regard to the service generally, the congregations maintain that they are committed to the continuation of counselling services for as long as they are required.
The Agreement allocates €12.7m of the cash contribution to be used by the State for educational programmes for former residents of institutions and their families.
Administration of a scheme
The overall administration of the fund will be by the DOES and the initial administrative costs were met by the Department. The fund, including investment income, was valued at €12.86m at 5 June 2003.
The DOES stated that it was not possible, within the time constraints to develop a scheme for the 2002-2003 academic year.
The National Office for Victims of Abuse (NOVA) has been approached to establish if it would be prepared to administer an application process on behalf of the DOES. An ad-hoc committee was formed comprising one representative each from Further Education Section of the DOES and NOVA, one representative from each of the four support groups affiliated to NOVA, the Adult Education Officer at City of Dublin VEC and the Education Facilitator at NOVA. The committee was to develop an application process and Framework Document in order to have a grant scheme in operation for the forthcoming academic year.
Following a number of meetings the ad-hoc committee has advised on how the fund should be administered and developed a draft application form together with a document entitled criteria for eligibility.
In order to include those victim support groups that operate outside the umbrella of NOVA, individual victims and other interested parties, the committee decided to circulate a copy of the draft documents and invite observations in writing. This exercise covered both Ireland and the UK-based Outreach centres.
The Department's initial proposal was to issue payments for the 2003-2004 academic year through the City of Dublin VEC. However, victim support groups have expressed concern about this procedure and the Department is to examine the possibility of setting up an Education Trust with a view to having the Trust in operation for 2004.
Section 7.1 records the results of my examination of the redress scheme established by the Government to compensate persons who suffered abuse as children in residential institutions, including the agreement concluded with the religious congregations for a contribution towards the cost of the awards made. The principal objectives of the examination are listed in the report. However, it might be no harm to repeat them. The first objective was to estimate the State's potential financial liability arising from the redress scheme; the second, to review the negotiation of the agreement with the religious orders to establish if proper use had been made of the available information and appropriate approval arrangements were in place, and the third, to review the implementation of the agreement concluded.
In the light of comment in the media and elsewhere, perhaps it is important to point out that the report does not express an opinion on the merits of policy issues surrounding the scheme of redress or the nature of the agreement with the religious congregations on the amount of their contribution. However, in line with public financial procedures, I have a role in establishing if an Accounting Officer - the Civil Service head of a Department - has ensured all relevant financial considerations were taken fully into account and, where necessary, brought to the attention of Ministers in the preparation and implementation of policy proposals relating to expenditure or income for which he or she is Accounting Officer. It is self-evident that being aware of the indicative cost of policy proposals or, where appropriate, the range of possible costs is a prerequisite to prudent decision-making by Government. The report addresses this issue.
To turn to the first of the audit objectives, that is, the potential financial liability, trying to estimate the extent of the State's liability for redress is dependent on a number of contingencies and future events. Consequently, any estimate of the potential liability is made in circumstances of uncertainty such as an unknown number of successful applicants for redress, the level of awards and the extent of expenses, in particular legal costs.
By using the data available on the number of claims to the redress board, the incidence of litigation commenced or threatened against the congregations, freedom of information requests and the level of applicants to give evidence to the Laffoy investigation committee, we came up with an estimate of the potential claimant base at something around 10,000. By applying this number to the estimated average award and taking account of experience of similar schemes in Canada, an indicative figure can be derived for the possible cost of compensation, to which legal costs have to be added. In the absence of reliable data at this stage on the level of costs being allowed by the redress board, a figure of 15% of awards was used. That was the general basis for the calculation of the potential financial liability. There were some adjustments reflecting technical and other refinements. These are set out in the body of the report.
According to our calculations, the bottom line is that the ultimate cost could lie somewhere between €869 million and €1 billion. In the light of the obsession with the headline "€1 billion", it is important to reiterate what I stated in the report, that the calculations are estimates of the contingent liability, that is, the liability that may arise, if the potential population claim in accordance with the pattern set out in the assumptions. To be absolutely clear, the computed figures must be viewed with caution until the claim and award trend emerges in the light of further experience of the redress board and also the courts.
As I stated in the report, the Department of Education and Science takes a more conservative view of the potential financial liability. The Accounting Officer is of the view that the maximum number of applicants is unlikely to exceed 8,000. Using the average award of €84,000, plus a figure of 15% for legal costs, this puts a ceiling of €772 million on the potential liability. He believes - I am sure he will elaborate - that the final liability will be somewhat less than this. He could well be right but, again, we will not be able to get a clearer picture until the pattern of claiming and awards settles down.
Turning to the second point, the negotiation of the agreement was the culmination of meetings between the two sides from the beginning of 2001 up to June 2002. In broad terms, there were three phases in the negotiations. During the period up to October 2001 officials conducted the negotiations in the course of which the congregations made their opening offer which they deemed to be worth €108 million. These negotiations reached an impasse.
The next phase covered the period November 2001 to January 2002 during which there were two meetings with the congregations involving only the Minister and the Secretary General of the Department on the State side. The outcome of these meetings was an announcement on 30 January 2002 that the Government had agreed, in principle, to proposals that would see the congregations contribute €128 million to the redress scheme comprising cash, past and future property transfers and counselling services. In return, the Government would indemnify the congregations concerned against all present and future claims arising from past child abuse covered by the redress legislation.
The third phase of the negotiations covered the period February to June 2002 when the main issues were the nature of the indemnity to be provided and whether property previously transferred by the congregations to NGOs could be reckoned as part of the contribution.
Let me make just a few observations on the negotiations. First, as I saw it, the Department did not appear to carry out any detailed analysis of the State's potential financial liability to support it in its dealings with the congregations. When it indicated in November 2001 that it would be prepared to accept 50% of the lowest cost estimate of €254 million as the capped contribution, the information available at the time suggests that this was an underestimation of the likely minimum cost of the scheme. Second, it had no way of knowing the financial standing of the various congregations, which clearly put it at a disadvantage in trying to push for a larger contribution. Third, no effort was made to stress test the congregations' assessment of their financial exposure in litigation which was closely tied to the amount they were willing to pay. Fourth, the papers suggest that the Attorney General's office was not kept fully informed of the detailed negotiations during the period November 2001 to April 2002.
It is difficult to gauge whether any of these matters would have made any difference to the nature of the final agreement but it is fair to say greater diligence in these areas would have, at least, added extra rigour to the State's negotiating stance. We can only speculate as to whether it would have led to a more favourable outcome. The Accounting Officer makes the point that the objective of the negotiations was to achieve the highest possible contribution that the congregations were prepared to make. He states there was no capacity to coerce them into any agreement and that, in all probability, if they were not part of the scheme, they would have avoided most, if not all, of the cost of the compensation.
Turning to the implementation of the agreement, the cash element has been met by the congregations. A sum of €41.14 million has been paid over as agreed. At the date of finalising my report the State had not accepted any of the properties listed as previously transferred property in the schedule provided by the congregations. Further information was being sought from their legal representatives. As regards future property transfers, at the same date the State had accepted, in principle, 32 properties subject to a good and marketable title and agreement about their valuation.
The agreement stipulates that in the event of the State refusing to accept the property, the congregations have the right to replace it with cash or other property at their discretion. It does not stipulate the timeframe within which they must offer a replacement property or cash. Although the Department has been proactive in this area, including preparing a schedule of locations where it wishes to acquire sites for schools, it is likely to be a long drawn out process.
To tidy up the two last elements of the agreement, part of the congregations' contribution was the equivalent of €10 million worth of counselling and other support services for former residents of institutions and their families. The value of counselling already provided can be taken into account as per the agreement. The congregations hold that they have already provided such services to a value in excess of €10 million. The Department is continuing to seek evidence of this from their legal representatives.
The agreement provided that €12.7 million of the cash contribution would be allocated to an education fund which would be used for educational programmes for former residents of institutions and their families. There is yet to be agreement between the interested parties on the arrangements for using the money for the intended purposes.
I should say my staff received extensive co-operation from the Department in doing this work and putting the report together. It is only fair that this should be recorded.
