Scottish Court of Session Decisions

[1] In June 1996 the petitioner's mother, Mrs. Rhoda Yule, was placed in Kirkknowe Nursing Home, Wishaw. In terms of certain statutory provisions and regulations to which we will refer in due course the respondents, as the local authority, required to carry out a financial assessment of Mrs. Yule as a resident of that nursing home and a person to whom such statutory provisions and regulations applied. Following certain discussions and correspondence the respondents, in a letter dated 12 March 1997, intimated that they had decided that Mrs. Yule was not entitled to public funding in respect of the costs of her stay at that nursing home because she was in possession of notional capital in excess of £16,000 by reason of the value of a dwelling house at 195A Stonelaw Road, Rutherglen. This house had previously belonged to and had been occupied by Mrs. Yule.

[2] The present petition was raised by the petitioner as agent under power of attorney for his mother. It sought reduction of the decision of the local authority intimated in the letter referred to on the ground that the decision was ultra vires et separatim unreasonable et separatim unlawful, all as set out in the first plea-in-law. The question of vires was the subject of a debate before the Lord Ordinary. On 4 February 1998 the Lord Ordinary repelled that part of the first plea-in-law so far as directed to the contention that the decision was ultra vires of the local authority. A motion for review of that interlocutor was dismissed on 1 July 1998. Thereafter, after further debate, the Lord Ordinary on 12 May 1999 repelled the outstanding pleas-in-law for the petitioner and dismissed the petition. It is against that decision that the petitioner has brought this reclaiming motion.

[3] The immediately relevant statutory provisions are to be found in the opinion of the Lord Ordinary dated 4 February 1998 to which we refer.

[4] We start with section 22 in Part III of the National Assistance Act 1948 as amended. This relates to charges to be made for accommodation. It provides as follows:

[5] Section 21 of the Health and Social Services Adjudication Act 1983 concerns the recovery of sums due to a local authority where persons in residential accommodation have disposed of assets. It provides as follows:

[6] Section 87 of the Social Work (Scotland) Act 1968 concerns the charges that may be made for services and accommodation. In particular it provides:

[7] The National Assistance (Assessment of Resources) Regulations 1992 (S.I. 1992/2977) were made under the provisions of section 22(5) of the 1948 Act as amended and were in force at the relevant date. Part III of the regulations is headed "Treatment of Capital" and regulations 20, 21, 23 and 25 in particular and so far as relevant to this appeal provide as follows:

[8] It is further to be noted that section 134(1) of the Social Security Contributions and Benefits Act 1992 provides as follows:

[9] As recorded by the Lord Ordinary in his opinion dated 4 February 1998, the parties are agreed that the payment made by the respondents of the balance of the nursing home charges constituted an income-related benefit, that the accommodation provided to Mrs. Yule is provided under the 1968 Act, that the "prescribed amount" in terms of section 134(1) of the 1992 Act was £16,000 and that when the heritable property disponed by Mrs Yule in 1995 was taken into account her capital exceeded that figure.

[10] The substance of the Lord Ordinary's decision appears in the final passage of his opinion when he says this:

[11] We now turn to the facts as they appear to have been, and to have been known to the respondents, at the time when they came to consider the matter which gave rise to the letter of 12 March 1997.

[12] We begin with a letter of 1 November 1996 addressed by the respondents' Head of Conveyancing, Contracts and Litigation to the petitioner's granddaughter, Miss Deborah Yule. It is convenient to set it out in full:

The terms of the letter make clear that the respondents had already had discussions with members of Mrs. Yule's family about the application made on behalf of Mrs. Yule. The application was submitted by the petitioner and dated 30 April 1996. It advised the respondents that Mrs. Yule was then possessed of assets by way of bank accounts and others amounting to £2,336.68. It was stated that Mrs. Yule was living in a house owned by a member of the family. From the petition and answers it appears that it was also known to the respondents that Mrs. Yule's income was derived from retirement pension, war pension and occupational pension.

[13] It would also appear that at some stage prior to 1 November 1996 the respondents had learnt that the house was one which had been owned by Mrs. Yule but that by disposition dated 27 February and recorded 3 March 1995 Mrs. Yule had disponed the house to her granddaughter. It would also appear that at the time of writing the letter the respondents were unaware that the disposition contained a reservation of a liferent in favour of Miss Yule. It is averred in Answer 2 for the respondents that it was by letter dated 12 November 1996 from the solicitors acting for Miss Yule that the respondents learnt of this and this is not denied by the petitioner.

[14] Mr. Mitchell for the petitioner did not seek to criticise the terms of the letter of 1 November 1996, accepting that it was proper for the respondents to seek further information. In that letter the respondents were, in our opinion, properly seeking information concerning the transaction which gave rise to the disposal of the single capital asset of value which had been possessed by Mrs. Yule. They were also making clear the provisions of the relevant regulations which were being applied to the question. At the same time they were entitled to advise Miss Yule of the preliminary view that they had formed upon such information as was possessed by them at the time.

[15] The reply for Miss Yule in the letter dated 12 November 1996 was in the following terms:

[16] In the face of that letter the respondents then sought information as to why a lifetime gift had been made rather than a testamentary bequest. This request was made in their letter dated 29 January 1997 addressed to Miss Yule's solicitors. The letter stated:

[17] The response was given in the letter from the solicitors dated 4 February 1997 and was as follows:

[18] It remains only to note that Mrs. Yule had been the subject of a community care assessment which had been completed on 1 May 1996. It gave details of the fractures which were sustained by Mrs. Yule when she fell and broke her arm on 6 January 1996 and was admitted to hospital. The averments in the petition and answers set out that the petitioner and his wife were involved in the care of Mrs. Yule after her discharge from hospital in about April 1996 and that, with the assistance of the respondents' social work department, an application was made to have her admitted to Kirkknowe Nursing Home. In the community care assessment it was noted that the petitioner had reported that there had been a gradual change in Mrs. Yule

[19] The respondents' decision intimated in the letter of 12 March 1997 was taken at a time when it was reasonable to assume from the terms of the letter of 4 February 1997 that no further information would be provided by members of the family of Mrs. Yule. It is accepted that it would not have been possible to approach Mrs. Yule herself for information. We consider that it must have been plain to the family that the respondents were looking to make a final decision as to whether or not they would be funding Mrs. Yule's place at the nursing home. In the light of the letter of 4 February 1997 the respondents proceeded to do so.

[20] At the time when they came to consider the question for the purpose of reaching a decision the respondents would know that Mrs. Yule had little by way of capital at the time of the application made on her behalf, that a year before at the age of 78 she was "putting her affairs in order" and that in doing so she made a lifetime gift of her house, her sole capital asset of any substantial value, while reserving to herself the liferent of that house, that she did so for no consideration other than "for the love, favour and affection" that she had for Miss Yule, and that there was no material provided to them to indicate that there was then any prior legal obligation or any other apparent need for Mrs. Yule to provide such a capital asset for her granddaughter instead of making such provision by way of testamentary bequest.

[21] We would add that it was not made clear before us whether or not the respondents were then aware that a power of attorney had been granted to the petitioner contemporaneously with the disposition of the house to Miss Yule. However, we note that the application form was submitted by the petitioner because, as would be known to the respondents, Mrs. Yule was by then suffering from mental illness and dementia and for that reason was being provided with accommodation in the nursing home. The Lord Ordinary appears to have proceeded upon the basis that the respondents knew that the power of attorney had been granted at the same time as the disposition. This may not have been the case, so we were advised. But, in any event, the respondents were told that the disposition was executed in the context of any elderly lady putting her affairs in order. Furthermore they were given no information about the making of a will on her part.

[22] The Lord Ordinary also makes reference to "conflicting evidence" about Mrs. Yule's state of health. No specific mention of this is made in the decision letter. But it is the case that the community care assessment made at the time of Mrs. Yule's admission to the nursing home does suggest a deterioration in health over a period of years prior to 1996 which does not sit happily with the assertion in the letter of 12 November 1996 that albeit that Mrs. Yule was elderly, "for her age" her health was "excellent". Furthermore, the accident suffered by Mrs. Yule on 6 January 1996 resulted in a fracture of her arm. It is said in the letter of 4 February 1997 that Mrs. Yule's dementia was brought on by the accident. But this would appear to be in conflict with her mental state prior to January 1996 reported in the community care assessment. While it is not explicit in the respondents' letter intimating their decision, we consider that this background would be known to the respondents and would serve to underline the reference in the letter to the decision of Mrs. Yule to begin putting her affairs in order in May 1995.

[23] For the petitioner counsel took no exception with the Lord Ordinary's opinion where he says this:

Nor was there any dispute between parties that the effect of the disposition was to deprive Mrs. Yule of capital. The question which remained was whether it had been shown that she had done so "for the purpose of" decreasing the amount that she might be liable to pay for her accommodation.

[24] The submissions of Mr. Mitchell for the petitioner started from the proposition that the respondents had in effect placed an onus upon the applicant, in this case the petitioner on behalf of Mrs. Yule, to satisfy them that she was entitled to assistance. In doing so, he said, the respondents had failed to apply their minds to the test which was to be derived from decisions in relation to the regulations relating to the provision of supplementary benefit. The scheme of the regulations concerned with the assessment of capital in relation to applications for supplementary benefit, was in all material respects the same as that to be found in regulation 25 of the 1992 regulations.

[25] In passing, we take note that in the first debate before the Lord Ordinary the issue which he was called upon to determine was whether the power to recover payment of charges, where persons in residential accommodation have disposed of assets, was conferred upon the respondents by virtue of the provisions of the Health and Social Services Adjudication Act 1983 or in terms of the 1992 regulations. In the former case section 21(1)(b) of the Act strikes where a person who avails himself of Part III accommodation, "knowingly and with the intention of avoiding charges for the accommodation" has transferred any capital asset to some other person or persons not more than six months before the date on which he began to reside in such accommodation. The Lord Ordinary rejected a submission for the petitioner that the six month period was the only period during which Mrs. Yule's intention was relevant so that in seeking to assert that an intention to avoid charges for accommodation could arise outside that period, the respondents were acting ultra vires. The Lord Ordinary held, and this has not been further challenged on appeal, that the respondents were well-founded in their submission that the provisions of the 1948 Act as amended, the 1968 Act and the 1992 regulations when regarded together, constituted a self-contained scheme for the payment of accommodation charges and for the assessment of ability to pay. Regulation 25 made no reference to a time limit of six months and none fell to be implied.

[26] Mr. Mitchell accepted that the present issue is concerned with whether the respondents correctly identified the question which had to be addressed by them and, if so, whether there was material before them upon which they could reasonably decide the question as they did. He accepted that the statutory provisions from which the respondents' function in making the assessment was derived, came from a statutory source, namely the 1948 Act as amended, different from the system which applied in the case of income-related benefit. As a consequence there was not to be found a statutory adjudication and appeal system of the kind which applied in the latter case. Nevertheless, he said, the general approach of the adjudicating body in each case must be the same, namely, to ask whether there had been a deprivation of capital and, if so, whether it was for the purpose specified in the regulation. Mr Mitchell did not demur from the Lord Ordinary's view that in practical terms the respondents' task of deciding whether they were satisfied of Mrs. Yule's inability to pay the full rate and the task of assessing her ability to pay, merged into a single exercise. He also accepted that "the purpose" need not be the sole or predominant purpose. But, Mr. Mitchell said, it had to be shown that the transferor, as the claimant for the benefit of not paying the standard charge because of inability to pay, must have known, and be proved to have known, of the capital limit. Mr. Mitchell made reference to Ogus on the Law of Social Security (4^th ed.) p. 590: also R(SB) 12/91. He also referred to Mesher's Commentary on the Income Support (General) Regulations 1987 as amended. In relation to the word "purpose" in regulation 51, the commentary states that the adjudication officer must show that the person's purpose was one of those mentioned in paragraph (1) of the regulation. Therefore there had to be some basis of fact from which the inference of purpose could be drawn. It had to be established, as a matter of fact, that Mrs. Yule knew that there was a means-tested requirement for charges in residential accommodation provided through a local authority and a capital limit to it. In the absence of any further information, the facts before the respondents at the time of reaching their decision were neutral on these matters. The burden of finding the purpose lay on the respondents. No evidence had been provided to the respondents that the reason for the disposal of her house by Mrs. Yule to her granddaughter had been with a view to decreasing the amount that she might be liable to pay for her accommodation in residential care. Accordingly there was no basis in fact for the inference which the respondents had drawn as to the purpose for which the disposal was undertaken. Suspicion was insufficient, not least because there was nothing in the material before the respondents to indicate that Mrs. Yule anticipated any need on her part for such residential care. At best for the respondents, they had speculated on these matters. The mere fact of disposal to her granddaughter did not render Mrs. Yule's purpose other than an innocent one. What the respondents had done was, in effect, to place an onus upon the petitioner, in making the application on behalf of his mother, to satisfy them that his mother was entitled to assistance. Reference was made to Reg. v. Legal Aid Assessment Officer ex parte Saunders Q.B.D. 10 November 1989 (unreported) for the proposition that the respondents, as the assessing authority, had to be satisfied that Mrs. Yule must at least have foreseen the probability that she would make application for such residential care and therefore have disposed of her property with the intention of bringing her assets down below the specified capital limit. In the circumstances and in the absence of any information

[27] For the respondents, Mr. Hodge invited us to refuse the reclaiming motion. The respondents had, as the correspondence made clear, addressed themselves to the right question. Under reference to the decision in R(SB) 38/85, the "purpose" did not have to be the predominant purpose of the applicant in depriving herself of a capital asset. Standing the information available to the respondents there was sufficient in it to entitle them to conclude that there had been a deliberate deprivation by Mrs. Yule of her capital for the purpose defined in the statutory regulations. The disposition of the house inter vivos with a reservation of the liferent brought about an irrevocable deprivation of that capital asset. The donee got an immediate and gratuitous benefit. When application was made to the family for information, no reason was advanced as to why the gratuitous alienation could not have been secured by way of a testamentary bequest. The transaction was an unusual one in that there was the reservation of the liferent notwithstanding the gift of the fee. The transaction took place against the background of an elderly lady putting her affairs in order. The family had been invited to explain why this unusual course had been adopted and had been unable to advance any reason. It was reasonable to assume that the respondents would have been aware of the terms of the community care assessment. The circumstances were such that in the absence of any reasonable explanation for the adoption of such an unusual course, it was open to the respondents, acting reasonably in their function as the assessing authority, to infer that the purpose behind the transaction on the part of Mrs. Yule was, at least in part, to secure that she did not require to meet any charges if she were to be admitted to residential care in a nursing home. The Lord Ordinary had, therefore, been correct in holding that on the basis of the information before them, the respondents were entitled to take the view that the purpose of the transfer of the house was to decrease the amount that Mrs. Yule might be liable to pay for the nursing home accommodation provided to her. Accordingly, the respondents were entitled to conclude that the petitioner was not unable to pay for the accommodation provided at the standard rate.

[28] We start with the terms of section 22(3) of the 1948 Act as amended. This provides that it is for the person for whom accommodation is provided, or proposed to be provided, to satisfy the local authority that he is unable to pay therefor at the standard rate. In those circumstances where he does so, the local authority shall then assess his ability to pay and accordingly determine at what lower rate he shall be liable to pay for the accommodation. In the assessment process, the local authority is bound to give effect to the regulations made under subsection (5) of section 22. Regulation 20 of those regulations provides that where a resident has capital, calculated in accordance with regulation 21, which exceeds £16,000, he shall not be assessed as unable to pay for his accommodation at the standard rate. An element in that calculation of capital is capital which a resident is treated as possessing under regulation 25(1). The amount of that capital is to be calculated as if it were actual capital which a resident possesses as set out in Part III of the regulations. The process of assessment, therefore, begins with the requirement for the resident or prospective resident to provide information to the local authority from which the local authority can be satisfied that he is unable to pay the standard charge for the accommodation. The local authority cannot be so satisfied if the capital, both actual and notional, exceeds the specified sum. In determining the matter of notional capital, the local authority can only proceed upon the material which is available to them either from their own sources or upon that material as supplemented by material from the applicant and from such other sources as the local authority can reasonably be expected to apply to. We agree with Mr. Mitchell that in considering whether there is notional capital to be added to the actual capital of an applicant, the local authority must look to the information before them to determine whether a purpose to the effect specified in the regulations can be deduced. But, in our opinion, this is not a matter of onus of proof. Rather, before the local authority can reach such a view, it must have material before it from which it can be reasonably inferred that the deprivation of capital took place deliberately and with a purpose of the nature specified. The local authority cannot look into the mind of the person making the disposition of capital or of others who may be concerned in the transaction. It can only look at the nature of the disposal within the context of the time at which and the circumstances in which that disposal took place. In relation to this issue, we have in mind what is said in Mesher's Commentary cit. supra at p. 184 under the heading "Deprivation", as follows:

Again with regard to the word "purpose", the commentary is as follows:

In Ogus cit supra at p. 590 the matter is put thus, again in relation to calculation of notional capital for assessment of an individual's eligibility for income-related benefit:

[29] These expressions of view are, in our opinion, indicative likewise of the approach that an assessing authority properly requires to take when considering the issue of the calculation of capital in relation to whether or not the applicant is unable to pay the standard charges for residential accommodation. However, we do not consider, as was urged by Mr. Mitchell, that it is necessary that the claimant should know of "the" capital limit above which, in terms of the relevant regulations applicable at the time, the local authority is bound to refuse the application, if it is a reasonable inference, looking to the transaction in the whole surrounding circumstances relating to the applicant, that it must have been a purpose of the transaction to avoid having to pay any charges in the event of becoming a resident in residential accommodation provided by the local authority. In this respect we consider that the 1992 regulations have to be looked at in a different light to those concerned with provision for income-related benefits, not least because the purpose of the individual may have been formed possibly some time ahead of the prospect that he or she might require to enter such residential accommodation. We note, as is set out in Ogus cit. supra p.588, that in the case of income-related benefits, different capital limits apply to particular forms of income support. We would also add that we do not find the case of R. v. Legal Aid Assessment Officer ex parte Saunders of assistance. As was pointed out in that judgment, the regulations with which the court was there concerned, were set in an entirely different context from those which related to social security benefit to which reference was made. The court did not consider the latter regulations and their construction to be of assistance in determining the question before the court.

[30] In the present case, it was clear that the respondents could look for information no further than the members of the family to whom they applied for information. Furthermore, it was clear that the family were indicating that they were not able to throw any further light on the purpose of the transaction by which Mrs. Yule deprived herself of her capital asset in the house beyond what was contained in the correspondence up to and including the letter of 4 February 1997. It may have been the case that the respondents only learnt some time after they made their determination that, at the same time as executing the disposition of her house, Mrs. Yule had also granted a power of attorney to her son, the petitioner. However, the respondents cannot be faulted for proceeding to make their assessment on the information available to them at the time. Mr. Mitchell appeared to suggest that in looking to the family for information, the respondents were placing an onus of proof upon the family to provide a reason for Mrs. Yule acting as she did, being a reason which did not contravene the provisions of regulation 25 (1). We do not agree. The respondents could not look to Mrs. Yule herself for any explanation. They were bound to look to the family for information on the matters which concerned them. They were careful to make clear in the first letter what was required of the local authority in considering the application made to them and what was the particular problem that faced them. Nothing said in correspondence by the respondents, in our judgment, can be said to have placed an onus of proof upon the family of Mrs. Yule.

[31] When regard is had to the letter in which the respondents' decision was conveyed to the family, the respondents properly set out the question which they required to ask themselves, when they said that

We do not consider that in substituting the word "motive" for the word "purpose" which appears in regulation 25 (1), the respondents were misdirecting themselves. The letter went on to note, correctly, that Mrs. Yule had "deprived herself of her beneficial interest in the property." The respondents thereafter set out the material on which their decision was founded.

[32] In our opinion, looking to that material, a number of primary facts stand out. This was an elderly woman with no substantial capital assets other than her house. She was putting her affairs in order. She elected to dispone her house while retaining a limited interest in it, by way of a liferent, giving her the right to occupy it during her lifetime. This would protect her while she remained able to do so. The fee in the house was disponed out of her hands for no consideration, other than the love, favour and affection that she had for her granddaughter. There was nothing suggested to the respondents to the effect that the granddaughter had need at the time to succeed to any interest in the house or to live in it in the future, or that there was any prior legal obligation to that effect. The suggestion that Mrs. Yule was in good health ran counter to the information that was before the respondents prior to the letter of 1 November 1996 in which they first applied to Miss Yule for information. That was a factor which, it would appear from the pleadings, was in mind at the time that the decision was taken. From what was put before the respondents in regard to all these matters, we consider that there were sufficient primary facts to entitle the respondents reasonably to conclude that Mrs. Yule had deliberately determined to denude herself of her one substantial asset because, by doing so, she might thereby avoid the prospect that if she were to enter residential care in her lifetime, her house would require to be sold and the proceeds, at least in part, would require to be devoted to payment for that care, to the detriment of her family's interest in the succession to her estate on her death. It is sufficient to say that such an inference would have been fortified if the respondents had also been aware of the fact that Mrs. Yule, as part of the dispositions she was making in putting her affairs in order, had also granted a power of attorney to the petitioner. That additional information would reasonably suggest that it was contemplated that a time could come during which Mrs. Yule would not be able to conduct her own affairs. That would also be consistent with an anticipation that she might require to enter residential care during her lifetime.

[33] We agree with the Lord Ordinary that it is open to a local authority to reach a view as to the purpose of a transaction such as the present, without any specific finding as to the exact state of knowledge or intention of the applicant, so long as the primary facts are such as reasonably to lead to the inference that the purpose was at least in part that specified in regulation 25(1).

[34] For all these reasons the respondents were, in our opinion, entitled to reach the decision that they did and to hold that they were not satisfied that Mrs. Yule was unable to pay for accommodation charges for her residential care accommodation at the standard rate for the reasons which they gave. We therefore agree with the Lord Ordinary in his disposal of the petition. Accordingly, the reclaiming motion will be refused.