Scottish Sheriff Court Decisions

SHERIFFDOM OF LOTHIAN & BORDERS AT EDINBURGH

[2016] SC EDIN 10

A353/15

 

JUDGMENT OF SHERIFF PETER J BRAID

 

in causa

 

ARGYLL AND BUTE COUNCIL, a local authority, in terms of the Local Government Etc (Scotland) Act 1995, having its headquarters at Council Headquarters, Kilmory, Lochgilphead, PA31 8RT

Pursuer

 

against

 

JOSEPHINE CLARE LINZEE GORDON

 

Defender

 

 

Edinburgh: 8 February 2016

The sheriff, having resumed consideration of the cause, repels the pursuer’s second plea in law;  allows parties a proof of their respective averments on dates afterwards to be fixed; assigns 2.00pm on 25 February 2016 within the Sheriff Courthouse, Chambers Street, Edinburgh as a hearing on expenses and as a procedural hearing.

 

Note

Introduction

(1)        This is an action brought under section 21 of the Health and Social Services and Social Security Adjudications Act 1983, in which the pursuer, a local authority, seeks to recover from the defender the sum of £42,750  in respect of provision of care accommodation to a third party.  The pursuer’s case, stated briefly, is that the defender is indebted to it by virtue of section 21 of the 1983 Act, having received gratuitous alienation of an asset by the third party, that alienation having been made knowingly and with the intention of avoiding charges for the accommodation.   The defender does not dispute that a gratuitous alienation was made, nor, if she is liable to the pursuer at all, that the sum sued for is the sum which is payable.  Her position is that section 21 does not impose liability on her because the disposition in question was not made knowingly and with the intention of avoiding the accommodation charges.

(2)        A debate on the relevancy of the defence to the action took place before me on 19 January 2016.  Mr Hay, advocate, appeared for the pursuer and Mr Blane, solicitor, for the defender.

 

Agreed factual background

(3)        Most of the factual background is not in dispute.  In particular, the following is agreed.  The third party was in receipt of care accommodation provided by the pursuer from 3 June 2005 until her death on 4 January 2013.  This accommodation was provided at Ardfenaig Residential Home, Ardrisharg, Lochgilphead, in terms of the National Assistance Act 1948.  In terms of that Act, the third party was properly the subject of charges set by the pursuer.  Those charges were met from her resources from 3 June 2005 until 10 January 2010, in the sum of £167,000.  The present action involves the recovery of a proportion of the charges incurred for the period from 11 January 2010 until her death.  The third party owned heritable subjects in Kilmartin, Argyll prior to her taking up residence at the care home and until that time she used it as her principal dwelling house. As at 17 October 2005 the cottage, which was unencumbered, had a market value of £95,000.  On 30 September 2005, the third party disponed the cottage to the defender and her late husband equally for no consideration beyond love, favour and affection conform to missives concluded on 7 June 2005.     

(4)        A copy of the letter concluding the missives, dated 7 June 2005, is lodged as number 5.1.1 of process.  It contains a qualification in the following terms:-

“The seller declares that she is taking up a place in a retirement home.  While she will be fully funded from her own resources for the foreseeable future, it is a possibility, which the purchasers will accept, that the local authority might need to take steps to try to reduce the conveyance in order to recover costs which they have paid for the sellers to stay in residential/nursing home accommodation.  The purchasers will be bound to accept the property in the full knowledge of this risk.  For the avoidance of doubt, any two year limitation of missives will not apply to the terms of this clause”.

 

(5)        As a result of the transfer of the cottage, the third party’s estate was divested of an asset worth £95,000 for no consideration and, after taking sale costs into account, the benefit derived by the defender was £42,750.

(6)        The pursuer having become aware of the transfer and having initiated enquiries, a letter was sent to it by DM Mackinnon, solicitors on behalf of the third party.  A copy of that letter is 5.1.2 of process.  In that letter the solicitors answered various queries which the pursuer had posed about the transfer.

(7)        Thereafter, the pursuer wrote to the firm of Messrs DM Mackinnon by letter dated 8 April 2010, a copy of which is 5.1.3 of process.  That letter is in the following terms:-

 

“Dear Sirs

Mrs Jean Duncan Jones

I refer to your previous correspondence with our Community Services Department in connection with your client’s application for local authority funding to meet the costs of residential care.

 

I would advise that the Head of Service for adult care has considered the information provided by you in connection with the transfer of the property … to Mr James Gordon and Mrs Josie Gordon on 30 September 2005 for no consideration and has concluded that your client has deprived herself of the value of the property, at that time namely £90,000, and that the transfer was made for the purpose and with the intention of avoiding or decreasing the amount that she may be liable to pay for her accommodation.  

 

            In reaching this decision, the Head of Service has considered the terms of your letter (sic) of 14 December 2009 and 17 February 2010.   He has also taken into account the fact that, at the time of the transfer, your client had been resident in a care home since June 2005.

 

            I would advise that the Council intend to proceed in terms of section 21 of the Health and Social Security and Adjudication (sic) Act 1983 and hold Mr James Gordon and Mrs Josie Gordon liable to pay the Council the difference between the amount assessed as due to (sic) for the accommodation by Mrs Duncan Jones and the amount we received from her for it as the transfer took place while Mrs Duncan Jones was residing in residential accommodation.

           

Further, the Head of Adult Care has advised that the Council will assess Mrs Duncan Jones’ contribution on the basis of the notional capital of £90,000 plus capital held by her and an account will be issued to Mr and Mrs Gordon and to your client via yourselves on the basis of the proportion of the cost assessed as due to be paid relative to the capital held by Mrs Duncan Jones and the capital she transferred to Mr and Mrs Gordon.

 

            If you do not agree with the terms of this letter, you have the right to ask for a review by the Executive Director – Community Services.

           

Yours faithfully”

 

(8)        Finally, it was common ground that following that letter there had been consistent correspondence between solicitors acting for the third party, the defender’s solicitors and the pursuer in which the liability of the defender, in particular, had been disputed, but that since the letter had been written, no steps had been taken to challenge the pursuer’s position by means of judicial review. 

 

Section 21 of the Health and Social Services and Social Security Adjudications Act
(9)        The pursuer’s claim, as has already been pointed out, is founded upon section 21 of the Health and Social Services and Social Security Adjudications Act 1983 (the “1983 Act”) which provides: 

“(1)… where –

1. a person avails himself of part III accommodation; and
2. that person knowingly and with the intention of avoiding charges for the accommodation –
   1. has transferred any asset to which this section applies to some other person or persons not more than six months before the date on which he begins to reside in such accommodation; or
   2. transfers any such asset to some other person or persons whilst residing in the accommodation; and
3. either –

1. the consideration for the transfer is less than the value of the assets; or
2. there is no consideration for the transfer,

 

the person or persons to whom the asset is transferred by the person availing himself of the accommodation shall be liable to pay to the local authority providing the accommodation or arranging for its provision the difference between the amount assessed as due to be paid for the accommodation by the person availing themselves of it and the amount which the Local Authority receive from him for it.

 

1. This section applies to cash and any other asset which falls to be taken into account for the purpose of assessing under section 22 of the National Assistance Act 1948, the ability to pay for the accommodation of the person availing himself of it.

   …

   (4)  Where a person has transferred an asset to which this section applies to more than one person, the liability of each of the persons to whom it was transferred shall be in proportion to the benefit accruing to him of the transfer.

    

   (5)   A person’s liability under this section shall not exceed the benefit accruing to him from the transfer.

    

   (6)   Subject to subsection 7 below the value of any asset to which this section applies, other than cash, which has been transferred shall be taken to be the amount of the consideration which would have been realised for it if it had been sold on the open market by a willing seller at the time of the transfer.

   …

   (8)   “Part III Accommodation” means accommodation provided under section 21-26 of the National Assistance Act 1948, the Social Work (Scotland) 1968 or the Mental Health (Care and Treatment) (Scotland) Act 2003.

    

    

   Section 22 of the National Assistance Act 1948

   (10)        Section 22 of the National Assistance Act 1948 (the “1948 Act”) provides:-

   “(2) Subject to the following provisions of this section, the payment which a person is liable to make for any such accommodation shall be in accordance with a standard rate fixed for that accommodation by the authority managing the premises in which it is provided and that standard rate shall represent the full cost to the authority of providing that accommodation.

    

2. Where a person for whom accommodation in premises managed by any local authority is provided, or proposed to be provided, under this Part of this Act satisfies the local authority that he is unable to pay therefor at the standard rate, the authority shall assess his ability to pay… and accordingly determine at what lower rate he shall be liable to pay for the accommodation.

…

(5) In assessing as aforesaid a person’s ability to pay, a local authority shall give effect to regulations made by the Secretary of State for the purposes of this subsection”.

 

 

The National Assistance (Assessment of Resources) Regulations 1992/2977

(11)        The National Assistance (Assessment of Resources) Regulations 1992/2977 (the “1992 Regulations”) provide:-

“(20) Capital Limit -

No resident shall be assessed as unable to pay for his accommodation at the standard rate if his capital calculated in accordance with regulation 21 exceeds £26,250.

…

(25) Notional Capital –

(1) A resident may be treated as possessing actual capital of which he has deprived himself for the purpose of decreasing the amount that he may be liable to pay for his accommodation except –

(a)  where that capital is derived from a payment made in the consequence of any    personal injury and is placed on trust for the benefit of the resident; or

(b) to the extent that the capital which he is treated as possessing is reduced in accordance with regulation 26;

…

(5) Where a resident is treated as possessing capital under paragraph (1) …, the foregoing provisions of this Part shall apply for the purposes of calculating this amount as if it were actual capital which he does possess”.

 

 

The defences

(12)   The defence to the pursuer’s claim is found within answer 8 of the defences which insofar as material is in the following terms:-

“The possibility of transferring [the heritable property in question] to the defender and her late husband was first considered by Mrs Duncan Jones in late 2004 and again in early 2005, all before Mrs Duncan Jones was admitted to hospital and thereafter to residential care.  Mrs Duncan-Jones and her late husband were extremely close to the defender and her family.  [The property]  forms part of Poltalloch Estate, owned by the defender’s family.  Mrs Duncan-Jones wished the cottage to be returned to the estate.  Robert James Nicholas Linzee Gordon was diagnosed as suffering from multiple sclerosis in November 2002.  His condition deteriorated quickly and he and the defender considered moving to Poltalloch.  Mrs Duncan-Jones wished to make [the property]  available to them to live in and the transfer of the property was effected for that purpose.  At the time of the transfer Mrs Duncan-Jones was 85 years old.  She had substantial capital resources in addition to the cottage.  It was not envisaged by Mrs Duncan-Jones or her advisers that she would require to remain in residential care for such a period that her capital would be exhausted.”

 

The pursuer’s submissions

(13)   Against the foregoing background, the parties’ competing submissions can be stated relatively succinctly.  Counsel for the pursuer submitted that the defence was irrelevant because the pursuer had fixed the rate to be paid by the third party in the exercise of a statutory function.  The above statutory provisions, to which he referred, formed part of a single scheme.  The pursuer having made a determination that the heritable property had been disposed of for the purpose and with the intention of avoiding or decreasing the amount that the third party may be liable to pay for her accommodation, that was effectively an end to the matter.  That determination could be challenged, whether by the service-user or the defender, only by judicial review in the Court of Session.  The sheriff court had no power to exercise any supervisory jurisdiction in respect of the pursuer’s decision.  Accordingly this court could not interfere with the pursuer’s decision and decree de plano should be granted.

(14)   In elaboration of his basic submission, counsel further submitted that three points could be taken from section 22 of the 1948 Act.  First, the rates to be charged were to be fixed by the authority managing the premises, in accordance with subsection (2).  Second, the local authority had the power to determine ability to pay in order to fix a rate lower than the fixed rate (subsection (3)).  Third, the local authority must give effect to any regulations made by the Secretary of State for the purpose of assessing ability to pay (subsection (5)).  Turning to the 1992 Regulations, the effect of regulation 20 was that no resident could be assessed as unable to pay for his accommodation if his capital exceeded £26,250[1].  By virtue of regulation 25, where a person had deprived himself of an asset he may be treated as notionally still holding it for the purpose of assessment of his ability to pay.  The foregoing provisions set out the charging mechanism and regime against which the local authority operated when it was assessing ability to pay.  Section 21 of the 1983 Act then dealt with the question of liability of others and four points could be taken from it.  First, liability arose for charges in respect of care accommodation when the service-user transferred an asset whilst residing in accommodation, or within six months prior thereto, for no consideration where the service-user did so knowingly and with the intention of avoiding charges for the accommodation.  Second, liability was in proportion to the benefit accruing to each person.  Third, liability did not exceed the value of the benefit.  Fourth, the value was taken to be the consideration it could have realised on the open market.

(15)   Taking all of the foregoing provisions together, counsel submitted that a local authority, when presented with information which might suggest deprivation of an asset, may make a determination as to what the intention of the service-user was.  Having made such a determination, there was no statutory mechanism for any form of appeal.  The only method by which any person could take issue with any determination was by means of judicial review. 

(16)   In support of this submission, counsel referred to the case of Yule v South Lanarkshire Council 2001 SC 203.  That case had involved the same statutory provisions as were relevant in the present case, and the facts were similar.  The local authority had made a decision that the service-user was not entitled to public funding in respect of the cost of nursing home accommodation because she was in possession of notional capital in excess of the then-prescribed limit by reason of the value of a dwelling house which she had disponed in fee to her granddaughter for no consideration under reservation to herself of the life-rent.  A petition for judicial review was brought by the service-users’ son, as her attorney, challenging the decision.  The Inner House held that in considering whether there was notional capital the local authority must look to the information before it in order to determine whether a purpose of decreasing the amount payable for accommodation could be deduced.  It must have material before it from which it could reasonably be inferred that deprivation took place deliberately and with a purpose of the nature specified.  The local authority could not look into the mind of persons involved in the disposal but could only look at the nature of the disposal within the context of the time and circumstances in which it took place.  It was further held that it was open to a local authority to reach a view as to the purpose of a disposal transaction without any specific finding as to the exact state of knowledge or intention of the applicant so long as to the primary facts were such as reasonably to lead the inference that the purpose was at least in part that of decreasing the amount the applicant might be able to pay for accommodation.

(17)   While the decision in Yule had focussed on the 1948 Act, the same approach, submitted counsel, should be taken in relation to section 21 of the 1983 Act, as in substance, it was the same decision which was being made.  It would be anomalous if there could be a different outcome under the two provisions when they formed part of the same scheme.

(18)   Counsel further referred to the case of West v Secretary of State for Scotland 1992 SC 385 in support of his argument that the decision which was taken by the pursuer in this case was one which was subject to the supervisory jurisdiction of the Court of Session.  (He also referred to further authorities in support of his submission that the sheriff court did not have a supervisory jurisdiction.  I do not propose to refer to those, since it is not disputed, nor could it be, that the sheriff court does not have a supervisory jurisdiction.)    

 

The defender’s submissions

(19)   In responding to counsel’s submission, Mr Blane for the defender submitted that Yule was clearly distinguishable from the present case since different statutory provisions were involved.  In Yule, the local authority had reached a decision in terms of the 1948 Act and that decision was properly challengeable only by means of judicial review.  By way of contrast, section 21 of the 1983 Act did not confer on a local authority the power to make a decision.  While Yule may be informative and may provide guidance as to the approach to be taken by the court in deciding whether liability was established under section 21, it did not amount to authority for the proposition that the only means by which a person could challenge a claim under section 21 was by means of a judicial review.  While a local authority might form a view under section 21 as to whether a third party was liable to make payment, it was not exercising any jurisdiction to make a decision.  Accordingly, the supervisory jurisdiction of the court was not being invoked.  Rather, section 21 imposed liability where the various criteria laid out in subsection (1)(a), (b) and (c) were satisfied.  Those were all questions of fact which it was open to a sheriff to decide.  Had the legislature wished to confer on a local authority the power to make a decision, then it could have said so.  However, the provision was notable for its lack of any provision such as “in the opinion of a local authority” or “a local authority may determine that…”.

(20)   Further, Mr Blane submitted that the letter of 8 April 2010 number 5.1.3 of process could not be viewed as a decision in any event.  At least in so far as the defender was concerned, it amounted to no more than a statement of intention to proceed under section 21 of the Act. 

(22)   Finally, Mr Blane submitted that the pursuer’s plea in law, which referred to liability existing by reason of section 21 (and not by reason of any decision reached) underlined that the supervisory jurisdiction of the court was not in fact being invoked by the pursuer.  The point being put in issue by the defender, and the short question for the court, was whether she was liable under section 21 or not.  That was a matter for proof and the pursuer’s preliminary plea should be repelled.

 

Discussion
(23)      In my view the defender’s submissions are to be preferred.  In the first place, viewing section 21 of the 1983 Act in isolation, and applying normal principles of statutory construction, there is nothing about its language that suggests that a local authority is entrusted with a jurisdiction to make a determination as to whether or not a person to whom an asset has been transferred is liable to make payment to the local authority.  All that the section does is to set out three conditions which, if satisfied, render such a person liable to make payment, and limit the amount for which he is liable to the value of the asset.  The conditions are all questions of fact, namely, (paraphrasing) (a) that the service-user has availed himself of Part III accommodation, (b) that the service-user has knowingly and with the intention of avoiding charges for the accommodation transferred the asset not more than 6 months before the date on which he began to reside in the accommodation, or so transferred it whilst living in the accommodation and (c) that there was either no consideration or consideration for less than the value of the asset.  If a local authority considers that those conditions are all met, then it is open to it to request payment from the transferee.  If the transferee denies his liability under the section, then it is open to the local authority to seek redress in the courts in the usual way, leaving it to the court to decide whether or not the conditions are indeed satisfied.  That this is the correct analysis is borne out by the pursuer’s plea in law which is that the defender is indebted to the pursuer in terms of section 21 of the 1983 Act (and not by virtue of any decision reached).

(24)      The pursuer, of course, argues that section 21 should not be viewed in isolation but as part of a unitary regime for charging.  While the statutory provisions relied upon by the pursuer are all relevant to a local authority’s ability to recover charges, I disagree that they are all part of a unitary regime.  On the contrary, section 22 of the 1948 Act and the 1992 Regulations do form part of the same charging regime, and section 22 specifically confers the power on a local authority to determine the amount to be paid by a service-user for the provision of accommodation.  In the course of reaching such a determination the local authority is empowered in terms of regulation 25 to treat a resident as possessing actual capital of which he has deprived himself for the purpose of decreasing the amount that he may be liable to pay for the accommodation.  The local authority is thus charged with the function of determining how much a service-user should pay, and in reaching that decision may treat capital which has been disposed of as still being the capital of the service-user, if the disposal was done for the purpose of decreasing the liability of the service-user.   It is easily seen that any determination under section 22 is challengeable only by judicial review, since a local authority, in making such a determination, is exercising a function conferred upon it by the 1948 Act.  However, the charging regime under which the authority makes such a determination applies only in a question between the local authority and the service-user.  There is no compelling reason why the separate question of which other person(s), in addition to the service-user (who is the primary debtor), may be liable to pay for charges which are imposed should form part of the same unitary regime.  The wording in regulation 25 –“for the purpose of decreasing the amount that he may be liable to pay” – is different from that in section 21 – “knowingly and with the intention of avoiding charges”.  The two formulations might usually result in the same outcome, but need not do so.  A further indication that the two provisions do not form part of a single unitary scheme is that the section 21 liability arises only where the transfer has been made while the service-user is residing in the accommodation or within six months before he began to reside there; whereas there is no such limitation in respect of regulation 25.  Moreover, section 21 specifically raises the issue of no, or inadequate, consideration whereas regulation 25 simply refers to the deprivation of an asset.  In short, the issues which are raised by the two provisions are not the same.  It is noteworthy, too, that in Yule the Lord Ordinary had held that the local authority was well founded in its submission that the 1948 Act and the 1992 Regulations (together with the Social Work Scotland Act 1968, which was not referred to in the present case) when regarded together did constitute a self-contained scheme for the payment of accommodation charges and for the assessment of ability to pay; and so, by necessary implication, section 21 (which had been relied upon by the petitioner in that case) did not form part of that scheme (see Yule at pages 211/212).  That admittedly arose in the context of an argument by the petitioner that section 21 did form part of the same scheme and that consequently the only period that could be looked at in assessing the intention of the service-user was the six months prior to her admission to the accommodation.  That particular argument was not relevant here, but it seems to me that either section 21 is part of a self-contained scheme or it is not, and the Lord Ordinary’s view that it was not was not challenged before the Inner House, nor was his view the subject of any adverse comment.

(25)      Counsel for the pursuer argued that it was anomalous that a local authority should be able to make a decision which was binding quoad the service-user, but not binding quoad the transferee.  Various responses can be made to that.  First, as the provisions are not, as I have just concluded, part of one unitary scheme, such a result cannot be seen as anomalous.  Second, as I have pointed out, different (albeit similar) tests fall to be applied.  The application of different tests may, on occasion, lead to different outcomes.  Third, it is not necessarily anomalous that the court should be the arbiter in relation to a third party’s liability to pay for costs incurred by a service-user.  The reverse could be argued, namely that it could be seen as anomalous, or at the very least, surprising, that any person, even a local authority, should be given the power to determine conclusively that a person with whom it had no contract and to whom it had provided no service, should be liable to make payment for a service provided to somebody else.  Similarly, it is hard to see why a local authority rather than the court should be the final arbiter as to whether or not consideration was adequate or not (the adequacy of consideration is not in issue in the present case, but if the pursuer’s argument is correct, the defender would not be entitled even to challenge the adequacy of consideration other than by judicial review, which would be a surprising outcome).  Finally, even if it is anomalous, that anomaly is for Parliament to resolve.

(26)      Furthermore, I agree with Mr Blane that not only does section 21 not confer any jurisdiction on the local authority to make a decision, examination of the pursuer’s letter of 8 April 2010, no 5.1.3 of process, does not disclose that the local authority purported to reach any determination under that section viz a viz the defender.  The letter does refer to a decision having been reached but the language used:  “your client has deprived herself of the value of the property” and the reference to “the transfer having been made for the purpose and with the intention of avoiding or decreasing the amount that she may be liable to pay for her accommodation” mirrors the language of regulation 25 but not of section 21 and strongly points to the decision being one under section 22 of the 1948 Act.   The fact that the letter was addressed to solicitors acting for the service-user, rather than to the defender, also strongly suggests that the decision was confined to one under section 22.  Beyond that, the letter amounts to no more than a statement of intention to proceed in terms of section 21 against the defender and her husband, as of course the pursuer was entitled to do (and has done).  While, as I have already acknowledged, it is trite law that only the Court of Session may exercise a supervisory jurisdiction, I do not consider that the supervisory jurisdiction is being invoked.  There is no decision which the defender (as opposed to the service-user) could have challenged by means of judicial review and, by not having done so, she is not deprived of her entitlement to defend the present action on the straightforward ground that the conditions in section 21 have not been satisfied and that she has no liability thereunder. 

(27)       Finally, it should be obvious from the foregoing reasoning, but for the avoidance of doubt, I agree with Mr Blane that Yule is clearly distinguishable.  Stated simply, that case involved the review of a decision by the local authority under section 22 of the 1948 Act; whereas this case does not involve the review of any decision, let alone one under section 22.  If anything, I derive support from Yule given the Lord Ordinary’s views as to which provisions were part of a unitary charging scheme and which were not.  As Mr Blane acknowledged, the court’s comments in Yule as to the approach to be taken by a local authority in ascertaining the service-user’s intention may inform the approach to be taken by the court in a case such as the present, but that is a question for another day.

 

Decision

(28)      I have therefore repelled the pursuer’s preliminary plea, and the action must now proceed towards a proof (the defender’s preliminary plea having previously been repelled).  I have allowed a proof on dates afterwards to be fixed, in order that the parties might consider how long will be required.  I have also assigned a procedural hearing to call before me at 2.00pm on 25 February 2016, to fix the dates and duration of the proof, and to deal with the expenses of the debate.