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Cite as: [2014] EWHC 77 (QB), [2014] PTSR 888, [2014] WLR(D) 42

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Neutral Citation Number: [2014] EWHC 77 (QB)
Case No: QB/2013/0571

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM THE WILLESDEN COUNTY COURT
HIS HONOUR JUDGE MILLION

Royal Courts of Justice
Strand, London, WC2A 2LL
24/01/2014

B e f o r e :

MRS JUSTICE ANDREWS DBE
____________________

Between:
ASTER HEALTHCARE LIMITED
Claimant and Respondent
- and -

THE ESTATE OF MR MOHAMMED SHAFI (By its Representative MRS BATOOL SHAFI)
Defendant and Appellant

____________________

Peter Knox Q.C. and Asela Wijeyaratne (instructed by Linklaw Solicitors) for the Appellant
John Brennan (instructed by Harrison Clark LLP) for the Respondent
Hearing date: 16 January 2014

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mrs Justice Andrews:

  1. This is an appeal from the decision of HH Judge Million in the Willesden County Court to grant summary judgment to the Claimant in a claim against the Estate of the late Mr Mohammed Shafi for outstanding care home fees. It raises interesting and important issues about the relationship between section 7 of the Mental Capacity Act 2005 and the provisions of Part III of the National Assistance Act 1948, ("the 1948 Act") Part III of the National Health Service and Community Care Act 1990 ("the 1990 Act"), and related statutes, regulations and guidance that concern the obligations or powers of a local authority to provide residential accommodation and care services for persons who by reason of age, illness, disability or any other circumstances are in need of care and attention which is not otherwise available to them.
  2. The Claimant is a company that owns and runs six care homes registered under the Care Standards Act 2000, including Raj Nursing Home, ("the Home") a residential nursing home in Southall, which specialises in caring for elderly persons suffering from dementia. The majority of referrals to the Home are made by the local authority, Brent Council ("Brent"). Mr Shafi was a resident of the Home from 29 January 2010 until his death on 28 March 2012. Fees of 650 per week (up to 4 April 2011) and 700 per week (from 4 April 2011 to 10 March 2012) accrued in respect of his care and accommodation, and there has been no challenge to the reasonableness of those fees. The total amount claimed is 62,199.94.
  3. The key issue is who, if anyone, is legally liable for payment of fees to the Claimant? There are only two candidates; the Estate of the late Mr Shafi (represented by his wife), and Brent. A claim made against Mrs Shafi personally was rightly struck out by District Judge Morris on 27 January 2011, as she has never entered into any contract with the Claimant. Perhaps surprisingly, Brent is not currently a party to these proceedings.
  4. The Judge held that the Estate was liable to pay because there was an unanswerable claim under s.7 of the Mental Capacity Act, and that there was no prospect of it being established that Brent had the primary responsibility to pay. In my judgment he fell into error in both these respects, and the matter must go to trial. However, it is fair to point out that the way in which the case was argued on appeal differed in many respects from the way in which it was argued below. Indeed, the legal arguments became more refined in the course of the appeal. I also had the advantage of being shown far more materials, including a number of relevant authorities and commentaries, which were of considerable help in illuminating the complexities of the legislation.
  5. In the light of the way in which matters developed, and because this case raises issues of wider general importance, I formed the view that in the interests of justice the appeal should be treated as a re-hearing, and that both parties should be allowed to raise whatever legal arguments they wished. It was not suggested that anyone would be prejudiced by my taking this course. Indeed, in the course of the hearing and in further written submissions served subsequent to it, Mr Brennan on behalf of the Claimant made some very sensible concessions which narrowed the issues that I had to decide.
  6. Any fact findings are ultimately going to be a matter for the trial Judge, and I do not wish to say anything in this judgment that might appear to inhibit or pre-empt those findings. I will, however, accede to counsel's request that I determine relevant points of law or points of construction that only affect these two parties. If this claim is pursued, I would expect Brent to be joined as a party. I am conscious that there are aspects of this case which potentially affect Brent, and that Brent has not yet had an opportunity of addressing the Court on such matters, or on any points which might have wider ramifications for local authorities generally. The evidence that is currently available is limited, and in particular I have not seen any relevant documentation emanating from Brent other than a letter from Brent to the Home dated 5 May 2010, on which the Judge placed considerable reliance. In any event there is likely to be an application for disclosure of relevant documents in Brent's possession. Therefore the summary of the factual background which follows is provisional, based upon the Claimant's pleaded case and on the limited documentation that I have seen.
  7. I have tried to confine the factual summary to matters which are unlikely to prove controversial in the long term. I have also tried to avoid deciding any legal issues that might adversely affect the position of Brent. The issues between the parties relating to the scope and interpretation of section 7 the Mental Capacity Act do not fall into that category. Their resolution has no bearing on the question whether or not a valid claim lies against Brent for payment of some or all of the fees.
  8. Factual background

  9. On 13 November 2009, Mr Shafi, who was 81 and suffering from dementia, was admitted to the Park Royal Centre for Mental Health in North London pursuant to s.2 of the Mental Health Act 1983 for an assessment of his condition. He was detained in the hospital under that section. Mr Shafi needed assistance with his personal care and was doubly incontinent. He also needed the aid of a zimmer frame to walk. According to his hospital records, his wife said that she had found it increasingly difficult to cope with him at home for the past six months. His behaviour had become increasingly erratic, he had been irritable and aggressive (and on occasion violent) and non-compliant in taking his medication, and was leaving the front door open at night. He had also been ripping up all the bills and would not give his wife any money to pay them. His wife was worried that he might wander out of the house and be assaulted by someone, but she also said that she was very frightened of him. She said that she did not wish him to return home but to be placed into continuing care.
  10. Again according to the hospital records, Mr Shafi was reviewed in the ward round on 11 December 2009, and it was concluded that he lacked capacity to make decisions regarding his future care. Dr Mughal, the psychiatrist who interviewed Mr Shafi on 2 December 2009, recorded that he lacked insight into his condition, he did not understand the extent of his wife's distress, and that he had said that he would like to go home and that he did not want to be placed in a nursing home.
  11. Following that review, Mr Shafi was referred for placement. A specialist social worker then employed by Brent, Nick Ferrier, contacted the Home. The Particulars of Claim describes the standard practice whenever a potential referral is made to the Home by Brent. After the initial contact between the specialist social worker and the Home, Mrs Veronica Singh, the Home's manager, who is also a registered nurse, would carry out an admission assessment. If the assessment meets the criteria set by the Home, and in accordance with Healthcare Commission guidelines, the Manager will agree a fee with the relevant social worker, and a placement will be confirmed either in writing, (in a formal contract or by email) or through verbal agreement with the social worker. The individual will then be admitted to the Home.
  12. In this particular case, after Mr Ferrier contacted the Home with regard to carrying out an admissions assessment on Mr Shafi, it is pleaded by the Claimant that Mrs Singh attended the hospital on 19 January 2010 to complete an assessment of his needs and his suitability to be placed in the Home. Mr Ferrier was present at the assessment. Mrs Singh concluded that Mr Shafi's needs were suited to the care that the Home provided. Her assessment also contained an evaluation of the Claimant's fees for providing the necessary care to Mr Singh.
  13. The Particulars of Claim are silent as to whether Mr Ferrier made a verbal agreement with Mrs Singh, or whether there was any written confirmation of the placement by Brent. However, the admission sheet which was completed by Mrs Singh and dated 29 January 2010, the day of Mr Shafi's admission to the Home, describes the duration of his admission as "longterm". The gross weekly fee is stated to be 650, and Mrs Singh has filled the boxes under the heading "funding source" in a way that makes it clear that she believed at that time that the local authority was the funding source and that the invoices should go to Brent Adult Social Services.
  14. The hospital records state that Mr Shafi was transferred to the Home on what was described as "extended leave" on 29 January 2010. The hospital formally discharged him from the specialist ward on 19 February 2010. The evidence of Mrs Shafi (as reported in a witness statement from her solicitor, served in response to the summary judgment application) was that she had no knowledge that her husband was being admitted to the Home, and that had she been consulted she would have objected to his going there, given the distance between it and the family home, which made visiting more difficult.
  15. The Claimant's pleaded case is that "in or around February 2010" it contacted Mr Ferrier with regard to invoicing Brent for the fees. Mr Ferrier then stated that a financial assessment had been carried out on Mr Shafi and that this had determined that he was capable of paying for his fees and was to be termed a "private payer". However, the letter of 5 May 2010 from a Ms Rosaleen Brown of Brent's Older Adults Mental Health/Care Management and Review Team 2 to the Home, addressed to a Mrs Namale, indicates that a letter had been written by someone from the Home to Mr Ferrier on the 13 April 2010 concerning payment of outstanding fees. That letter has not yet been disclosed. It is surprising that the Home would be corresponding with Mr Ferrier on this topic in April 2010, if it had had the alleged conversation with him in February, or if in consequence of that conversation the Claimant had clearly understood that Brent was not going to pay. There is currently no evidence as to when the alleged financial assessment was carried out, or what information was used by Brent to make that assessment, and no witness statement from Mrs Shah, Mrs Namale or from Mr Ferrier. The letter of 5 May indicates that Mr Ferrier had ceased to work for Brent by that date.
  16. The letter of 5 May states, so far as is relevant:
  17. "Mr Shafi had a financial assessment completed and it indicated that he had in line with fairer charging criteria enough money readily available in bank accounts to pay for his care. Mr Shafi is thus considered to be a self funder and as such should be charged for his care accordingly.
    Should access to Mr Shafi's accounts be frustrated as appears is the case a member of his family, or indeed on certain occasions a care home can apply to the Office of Public Guardian in respect of an appointeeship. As such management of Mr Shafi's finances can be taken over. I am sorry I cannot be of any further help, however please do contact me again if you do feel any other issues need to be explored. I have copied this letter to Mrs Shafi also for her information." [emphasis added].

    Although the words "cc Mrs Shafi" appear on the bottom of the letter there is no other evidence, besides the statement I have quoted from the letter itself, that it was sent to her, let alone received by her. The Particulars of Claim are silent on this matter.

  18. The Claimant tried to get Mrs Shafi to sign a "Service User Agreement" which someone signed in the name of her husband. Mr Knox QC, who represented the Estate on this appeal together with Mr Wijeyaratne, informed me that there was still an issue as to whether the signature was that of Mr Shafi, but he submitted that very little turned on it, because even if it was Mr Shafi's signature, the evidence that he lacked capacity to contract was overwhelming. On that point, I concur in the Judge's observation that "I find it difficult to conceive of any other result being arrived at after a trial than a finding that he lacked capacity from January 2010 if not earlier". Mrs Shafi refused to sign the Service User Agreement, but I have no information as to when that occurred.
  19. The "Service User Agreement" bears the date 29 January 2010 but it has obviously been backdated, since the admission sheet makes it clear that the Claimant expected Brent to pay for Mr Shafi's care at the time when he was admitted. It seems likely that the attempt to get Mrs Shafi to sign the Agreement came after the 5 May letter and not before, since the inference can be drawn from that letter that until then the Claimant was still trying to get Brent to pay, and that this was the purpose of sending the missing April letter to Mr Ferrier.
  20. The invoices addressed to Mrs Shafi for the period 29 January to 31 March 2010 and for the period 1 April to 30 April 2010 ostensibly bear the dates 29 January and 1 April respectively, but they have sequential invoice numbers (400332 and 400333) which indicates that they must have been issued at the same time as each other; and if the Home wrote to Mr Ferrier about payment on 13 April, it seems highly unlikely that it would have issued an invoice to Mrs Shafi on 1 April, or indeed at any time before it received a response to that inquiry. The May invoice is missing from the bundle, but if it bears the number 400334 it would support the argument that all three invoices were issued in May 2010. The June invoice bears a completely different number, 400392. There was nothing sinister about the backdating; the Claimant was no doubt seeking to ensure that its records covered all relevant periods. However, it is possible that prior to the 5 May letter at least one invoice for the payment of fees for Mr Shafi had been sent to Brent. All these matters will have to be fully investigated at trial, though by then, with further disclosure, the factual history may have become much clearer.
  21. It is perhaps worth noting that the primary way in which the claim against Mr Shafi's Estate is put (and the only way in which it is currently put on the face of the claim form) is as a claim for breach of contract, the alleged contract being the Service User Agreement. The alternative claim under the Mental Capacity Act was introduced by way of Reply in answer to the plea of lack of capacity in the Defence. I was told by Mr Brennan that it had been intended to amend the Particulars of Claim (and no doubt the Claim Form), but that due to an oversight this had not occurred. The statements of case will need to be revisited in any event, since in my judgment the contract claim was doomed to failure regardless of how the point on capacity is resolved. The reason for this is that properly construed, the "Service User Agreement" does not contemplate that Mr Shafi would incur any personal liability to make payment of fees to the Claimant. On the contrary, it provides that those fees will be paid by Mrs Shafi, and by Mrs Shafi alone.
  22. Mr Shafi is defined in the agreement as the "Service User". Clause 7, so far as is relevant, states that he has an obligation to pay the Fee monthly in advance "except where the Fee is payable by the Payer if different from the Service User". Likewise he is obliged to pay the cost of the provision of Additional Services on receipt of an invoice issued by the Care Home "except where the Fee is payable by the Payer if different from the Service User". Clause 8 provides that the Fee is payable by the Payer in advance on the first day of each month and that the Home may review the fee and any costs for Additional Services on 4 weeks' notice. Clause 3.2 recites that "the Payer has made arrangements with the Care Home to secure accommodation dementia and nursing care and support for the Service User at the Home". "Payer" is defined as "the person(s) or body responsible for paying fees as stated in the Particulars on Page 3 of this Agreement". The "Particulars" describe Mr Shafi as the Service User and on page 2 under "Payee details" (this must be a typing error for Payer details) it states:
  23. Private Payer
    Fees payable by: Representative
    Name Mrs Batool Bagem Shafi

    It then sets out Mrs Shafi's address and telephone number.

  24. Mr Brennan submitted that it was plain that the parties intended that Mrs Shafi would be acting as agent for Mr Shafi in making payment of the fees and that this was obvious from the use of the word "Representative" to define her. I cannot accept that submission. "Representative" is just a convenient contractual label, describing the person apparently representing Mr Shafi's interests in dealing with the Home. It is neutral so far as the question of who bears responsibility for payment is concerned. Clause 7 is unambiguous and it makes it plain that Mr Shafi is not to be liable for making payment if someone else is defined as the Payer. If Mr Shafi were the Payer's principal then he would be liable for making payment despite someone else being defined as the Payer, and on ordinary agency principles, the Payer would bear no personal liability for making the payment. There is no provision anywhere in the Service User Agreement for Mr Shafi to pay if Mrs Shafi does not, or if Mrs Shafi does not enter into the Agreement, and no such term can be implied to that effect because it would fly in the face of the express language of Clause 7, Clause 3, and the definition of "Payer". Thus, the claim in contract against the Estate is bound to fail. It should either be struck out or summary judgment should be entered for the Defendant on that aspect.
  25. It is hardly surprising that Mrs Shafi refused to sign up to a contract which recited that she had made arrangements for the admission of her husband to the Home and the provision of services to him, when she patently had done no such thing, and which would have given rise to a personal liability on her part to pay his fees.
  26. In the light of the terms of the draft Service User Agreement it would appear that there is, at the very least, a strong argument the Claimant never intended Mr Shafi to be responsible for making payment of its fees, or at the very least it had no such intention whilst it intended that Mrs Shafi should pay them, which it plainly did throughout the time when it sought to pursue her personally for the fees on the basis of an alleged contract (i.e. until that claim was struck out). For reasons that I shall explain, there is a significant possibility that this peculiar feature of the case will be fatal to any claim the Claimant wishes to continue to pursue against the Estate of Mr Shafi under s.7 of the Mental Capacity Act.
  27. The relevant legislative framework

  28. An extremely helpful and admirably succinct exposition of the relevant statutory framework is to be found in the judgment of Henriques J in R (Batantu) v London Borough of Islington (Case No CO/2260/2000, 8 November 2000), at paragraphs 9-23, with which I respectfully agree. However, as certain of the provisions of the legislation and guidance relevant to this appeal are not referred to in that case, I cannot avoid setting some of them out in full in this judgment. As Lord Woolf observed in R v Sefton Metropolitan Borough Council ex parte Help the Aged [1997] (unreported, 31 July 1997) WL 1106105, the convenient starting point is Part III of the 1990 Act. Section 47 deals with the assessment of needs for community care services. Section 47(1) provides:
  29. "Subject to subsection (5) and (6) below, where it appears to a Local authority that any person for whom they may provide or arrange for the provision of community care services may be in need of such services, the Authority
    Shall carry out an assessment of his needs for those services; and
    Having regard to the results of that assessment, shall then decide whether his needs call for the provision by them of any such services."

    Section 46(3) provides that in that section "community care services" means services which a local authority may provide or to be provided under, inter alia, Part III of [the 1948 Act].

    Section 47(5) provides that:

    "nothing in this section shall prevent a local authority from temporarily providing or arranging for the provision of community care services for any person without carrying out a prior assessment of his needs in accordance with the preceding provisions of this section if, in the opinion of the authority, the condition of that person is such that he requires those services as a matter of urgency."

    Section 47(6) provides that in circumstances where temporary provision is made under subsection (5), the assessment of the needs of the person concerned shall be made so soon as is practicable.

  30. The function of section 47(5) is to make it clear that if someone needs community care services to be supplied to him as a matter of urgency, the local authority is not to be inhibited from providing those services by the statutory requirement for it to carry out a full assessment of the needs of the individual concerned under s.47(1). However, the power or duty to provide those urgent services is not derived from s.47(5), but from other legislation, primarily from part III of the 1948 Act, which includes sections 21 to 26.
  31. Section 21 of the 1948 Act is entitled "Duty of local authorities to provide accommodation". It provides, so far as is relevant, as follows:
  32. "Subject to and in accordance with the provisions of this Part of this Act, a local authority may with the approval of the Secretary of State and to such extent as he shall direct shall, make arrangements for providing
    Residential accommodation for persons who by reason of age, illness, disability or any other circumstance are in need of care and attention which is not otherwise available to them." (emphasis added)

    As Henriques J. records in paragraph 13 of his judgment in Batantu, the Secretary of State has made approvals and directions for local authorities to provide such services to persons over 18 years old who are ordinarily resident within their area. Thus the Judge was wrong to describe the local authority's obligations under s.21 as a "power" rather than a duty. In cases to which the Secretary of State's directions apply there is an obligation provided that the individual concerned meets the relevant criteria i.e. the care and assistance required is "not otherwise available" to him or her.

  33. Section 22 provides for the person to whom accommodation is provided under Part III to be charged for it. The local authority must fix a standard rate for any accommodation it supplies itself, and if the individual concerned is unable to pay the standard rate, the local authority must assess their ability to pay and decide what lower amount should be charged. Section 22 requires local authorities to set the standard rate, for local authority homes, at a rate equivalent to the full cost to the local authority of providing the accommodation.
  34. Section 26 empowers the local authority to make arrangements with the manager of a Care Home registered under the Care Standards Act 2000 for the provision of accommodation under s.21, together with nursing or personal care, to persons within the ambit of s.3 of that Act, including persons who are disabled or infirm and persons who have or have had a mental disorder. In such event, the standard rate to be charged will be the gross cost to the local authority of providing or purchasing the accommodation under a contract with the Care Home.
  35. Section 26(2) provides that any such arrangements:
  36. "shall provide for the making by the local authority to [the other party thereto] of payments in respect of the accommodation... and subject to subsection 3A below the local authority shall recover from each person for whom accommodation is provided under the arrangements the amount of the refund which he is liable to make in accordance with the following provisions of this section".
  37. In Steane v Chief Adjudication Officer [1996] 1 WLR 1195, the House of Lords decided that in order for accommodation to qualify as accommodation provided under Part III of the 1948 Act, it was essential that the arrangements made under s.26 complied with subsection (2) by providing for payments by the local authority to the other party at the rates agreed. However the situation which the House of Lords addressed in that case did not involve the provision of urgent community services in the circumstances contemplated by s.47(5) of the 1990 Act. As Mr Brennan helpfully conceded, and as appears to be consistent with the reasoning of Forbes J in R(AA) London Borough of Lambeth [2001] EWHC Admin 741, it is at least arguable that the statutory duty under s.21 will be engaged in that scenario notwithstanding that an assessment of needs has not yet been carried out under s.47, and notwithstanding that no contract has yet been entered into between the local authority and the service provider.
  38. Section 26(3A) allows the local authority, the provider of services (in this instance, the Claimant) and the individual concerned to enter into an arrangement (which has been described as an "administrative easement") whereby it is agreed by all three parties that the individual will pay his share of the fees directly to the care home instead of reimbursing the local authority. Any balance must still be invoiced to and paid by the local authority. However, even when such an arrangement is made, the liability for payment of the fees remains with the local authority, and thus if the individual fails to pay, the responsibility is on the local authority to make such payment and recover it from the individual. In this way, the care home is afforded a measure of protection if the individual becomes unable or unwilling to pay.
  39. The fact that the care home must look to the local authority for payment is emphasised by the Charging for Residential Accommodation Guide (CRAG) issued in support of the National Assistance (Assessment of Resources) Regulations 1992 (SI 1992/2977). The passage commentating upon s.26(3A), paragraph 1.031, states that "local authorities should note that they remain responsible for the full amount should the resident fail to pay the home as agreed. In such a case the authority will recover the charge from the resident in the normal way. It is not good practice to expect the care home to recover any debt owed to the local authority." I would add that in the absence of an assignment of the cause of action, it is difficult to see on what legal basis the care home would have any status to seek the recovery of that debt, since the scheme envisages that under such an agreement, the individual concerned will not undertake a personal liability for the fees, but is simply agreeing to discharge the local authority's obligation to pay the fees by paying the care home directly.
  40. I next refer to the Local authority Circular number LAC (98)19 from the Department of Health. This Circular was issued under section 7(1) of the Local authority Social Services Act 1970, which requires local authorities to exercise Social Services functions under the guidance of the Secretary of State. The Circular gives binding guidance to local authorities on how they should exercise their statutory duties and powers under, inter alia, part III of the 1948 Act. It explains the Community Care (Residential Accommodation) Act 1998, updates the CRAG, and provides additional guidance on good practice on the capital limits and assessment of need.
  41. As the Circular explains, the 1998 Act clarifies the law relating to the amount of a person's capital which a local authority should take into account when determining whether the person should be provided with residential accommodation under s.21 of the 1948 Act. The effect is that the local authority, when determining whether care and attention are "otherwise available" to a person under the terms of s.21, must disregard the person's capital up to the limit prescribed in the regulations made under s.22 of the 1948 Act. At all times material to this appeal that limit was 16,000. The 1998 Act is also relevant to those who are self-funding in a care or nursing home.
  42. The key passages in the Circular for the purposes of this Appeal are paragraphs 8 to 12. In paragraph 8 the Department of Health expresses the view that the law does not allow local authorities to refuse to undertake an assessment of care needs (under s.47 of the 1990 Act) for anyone on the grounds of the person's financial resources, e.g. because they have capital in excess of the prescribed capital limit for residential accommodation. Even if someone may be able to pay the full cost of any services, or make their own arrangements independently, they should be advised about what type of care they require, and informed about what services are required.
  43. Paragraphs 9 and 10 begin with a reference to s.21 of the 1948 Act, and the obligation on the local authority to assess whether anyone requiring residential care services is "in need of care and attention which is not otherwise available to them". The Circular continues:
  44. "Once the LA has completed a financial assessment of a resident's resources and their capital is above 16,000, this means that the resident has to pay the full charge, and may be in a position to make their own arrangements. However, that does not exempt Social Services Department from its duty to make arrangements for those people who are themselves unable to make care arrangements and have no-one to make arrangements for them.... it is the Department's view that having capital in excess of the upper limit of 16,000 does not in itself constitute adequate access to alternative care and attention. Local authorities will wish to consider the position of those who have capital in excess of the upper limit of 16,000 and must satisfy themselves that the individual is able to make their own arrangements or has others who are willing and able to make arrangements for them, for appropriate care. Where there is a suitable advocate or representative (in most cases a close relative) it is the Department's view that local authorities should provide guidance and advice on the availability and appropriate level of services to meet the individual's needs. Where there is no identifiable advocate or representative to act on the individual's behalf it must be the responsibility of the LA to make the arrangements and to contract for the person's care."
  45. Paragraph 11 provides that once a local authority has determined that care and attention are not otherwise available and that they will make arrangements for residential accommodation, they should do so without undue delay. Paragraph 12 addresses a specific concern about the position of people who have been placed by local authorities who subsequently become self funding, e.g. through the sale of property:
  46. "It is the Department's view that if an authority is to end a contract and make the person "self funding" they should satisfy themselves that the person is able to manage their own affairs or has someone who can take over the arrangements on their behalf. Where the person is unable to manage their own affairs or has no one to act on their behalf it would be for the authority to continue to manage the contract and the person should remain a Part III placement. If the person is capable or has someone to act on their behalf for them, then if the authority decides to terminate its involvement, they must inform the resident or representative in writing, explaining why."
  47. Paragraph 1.020 of the CRAG requires the Local authority to find out in all cases if a resident has an Enduring Power of Attorney (EPA), a Lasting Power of Attorney for Property and Affairs (LPA), or a Property and Affairs Deputyship under the Court of Protection. Paragraph 1.021 provides that social work staff should establish at the time of the assessment of care needs whether a resident has the capacity to consent to the care plan and any following financial assessment. If he lacks capacity and there is no registered EPA or LPA and no Deputy, paragraph 1.022 of CRAG makes it plain that "the LA should satisfy itself under its duty of care that there are arrangements put in place which meet the requirements of the Mental Capacity Act 2005. Provision of services should not be delayed whilst applications are made to ... appoint a Property and Affairs Deputy".
  48. R v Sefton Metropolitan Borough Council ex parte Help the Aged and R (Batantu) v London Borough of Islington, to which I have already referred, were both cases concerned with the extent to which the Local authority is entitled to take into account limitations on its own financial resources when making a decision about provision of residential accommodation to an individual. They make it clear that the initial assessment of whether there is a need for community care under s.47(1) of the 1990 Act must be carried out irrespective of resources implications. The only time at which resources can be taken into consideration is at the second stage, namely, when the Local authority is considering whether the care and attention required by the individual concerned are "otherwise available to him" and thus whether a duty arises under s.21 of the 1948 Act. The Sefton case established that, at that stage, it is unlawful for a local authority to refuse to provide care and assistance to someone who qualifies for it and who passes the relevant statutory means test (i.e. has capital of less than 16,000) on the grounds of its own lack of resources, even if that person is financially capable of purchasing residential accommodation privately. Once the duty is engaged, the authority cannot refuse to carry it out because of its own limited funds.
  49. Leaving aside, for the present, the provisions of the Mental Capacity Act, such evidence as there is points towards the conclusion that the admission of Mr Shafi to the Home on 29 January 2010 was probably made pursuant to a contractual arrangement between Brent and the Claimant, under s.21 and s.26(2) of the 1948 Act. Mr Brennan submitted that the admission sheet was merely evidence of the basis on which it was anticipated that a future contract would be entered into. However that does not sit easily with the "standard practice" pleaded in the Particulars of Claim, which required there to be at least a binding verbal agreement with the relevant social worker on the fees and the local authority's liability to pay them before the resident was admitted to the Home. In the absence of further evidence from the individuals concerned, I cannot accept that the evidence of a contractual arrangement is nebulous or "shadowy".
  50. Even if Mr Brennan were right, and the standard practice was not followed before Mr Shafi was admitted into the Home, and the admission sheet recorded the expectations of the Home regarding a future contract with Brent, because this was an "urgent" case falling under s.47(5), there is sufficient argument that s.21 was engaged, at least on a short-term basis, as Mr Brennan accepted. Mr Brennan conceded that it was at least arguable that Mr Shafi was admitted to the Home temporarily as a matter of urgency, as permitted by s.47(5) of the 1990 Act, pending determination by Brent of whether the care and attention he needed in the long term were "otherwise available" to him or whether it was under a duty to continue to provide it under s.21 of the 1948 Act. I agree that is one way in which the trial judge may resolve the issues when all the evidence is available, but it is not the only possibility. Moreover, that factual scenario would not necessarily improve the Claimant's claim against the Estate. The arrangements for Mr Shafi's admission were made with the Home by Brent, not by his family, in circumstances in which it would appear that neither Mr nor Mrs Shafi would have agreed to the placement in this Home. On the face of it, it was not envisaged by the Claimant at the time of his admission that Mr Shafi would be paying for the accommodation and care, but only that Brent would. As I shall go on to explain, this has important ramifications for any claim under s.7 of the Mental Health Act.
  51. If the facts pleaded by the Claimant are correct, the initial assessment of Mr Shafi's need for community care services under s.47(1) appears to have been carried out at the hospital and completed at the latest on 19 January 2010. It is at least equally conceivable that the trial judge may find that the second stage of the assessment process leading to a decision to provide care under s.21 took place on or around the time when Mrs Singh attended at the hospital to carry out the "admission assessment", in Mr Ferrier's presence, in order to determine whether the Home could provide him with the care he required. That was over a week before he was transferred to the Home for what was described on the admission form as "longterm" (not temporary) care. Thus it is arguable that Brent had already determined that the requisite care and attention was "not otherwise available" to Mr Shafi by the time when he was admitted to the Home.
  52. It is not known at present when Brent carried out the financial assessment, save that it seems likely to have taken place after Mr Shafi's placement at the Home, and before Mr Ferrier is alleged to have spoken with someone at the Home and told them that Mr Shafi was a "private payer". As I have said, it is pleaded that that conversation took place sometime in February 2010. The Guidance set out in the CRAG and in the Circular indicates that since, prior to the placement, Mr Shafi was known to lack capacity, in the absence of any evidence that Mrs Shafi or any other relative held a registered EPA or LPA, Brent was obliged to have regard to whether there were arrangements in place for a Deputy to be appointed (when determining whether its duties under s.21 were engaged or as the case may be, would continue to be engaged). It is currently unknown what, if any, investigations Brent carried out in this regard.
  53. Even if Brent concluded that Mr Shafi had more than 16,000 available in a bank account, it needed to be satisfied that there was someone who could take over the care arrangements on his behalf and make the payments. That conclusion does not follow from the mere fact that Mr Shafi was married. Even if that "someone" does not necessarily mean a Deputy, Brent would have to have formed a view about whether Mrs Shafi was capable of making the necessary arrangements, a view which may have depended on her own age and state of health. Again there is as yet no disclosed material to indicate what steps Brent took to investigate the position. The letter of 5 May 2010 states that it "appears to be the case" that access to Mr Shafi's bank accounts was being frustrated. The basis for that view is unknown, but if that is what Brent believed at that time, then there is at least a viable argument that the Department of Health Guidance obliged it to continue to exercise its duties under Part III of the 1948 Act, and not to wash its hands of the matter. Under that regime, even if Brent was bound to pay the fees in the first instance, if Mr Shafi had more than 16,000, Brent was entitled to look to him or his Estate for reimbursement of its initial outlay. However, it could not make Mr Shafi pay the fees directly especially since there was no arrangement under s.26(3A), and could be no such arrangement unless and until a Deputy was appointed, at which point the Deputy could decide whether to make a direct agreement with the Claimant.
  54. The Judge took the view that the letter of 5 May 2010 made it perfectly plain that Brent was not providing services under the 1948 Act, and that Brent had notified everyone that, at least from May 2010 onwards, the necessary care would not be provided under any responsibility that it had. I would agree that it is implicit in the letter of 5 May that Brent did not intend to pay the fees, at least from that time onwards, though that is not stated expressly. Whether Brent was entitled to take that stance is another matter. If it had already contracted with the Claimant on a long term basis, that was arguably a repudiatory breach, particularly as the statutory regime envisages that a local authority may take on the contractual responsibility for making payment even when it is entitled to 100% reimbursement. If it had contracted on a temporary basis only, pending assessment of whether its s.21 duty was engaged for the long term, then it may have been entitled to say the contract was now at an end (or to refuse to enter into a contract, as the case may be). However, the letter did not instruct the Home that Mr Shafi should now cease to reside there and it did not state, in terms, that the arrangements it had made were at an end and that fresh arrangements would have to be made with Mrs Shafi or a Deputy. It is arguable (I put it no higher than that) that Brent did not satisfy the requirements of the Guidance in paragraph 12 of the Circular.
  55. One possible analysis is that Brent was trying to do what the Guidance said that it should not do, namely, terminate its future involvement in the arrangements it had made for Mr Shafi's care forthwith, without first being satisfied that there was someone who could take them over and organize the payments. In a case such as this, because Mr Shafi was known to lack capacity, that person would have to be a Deputy or a person with a registered EPA or LPA. Arguably, in this case it would not be enough that Brent knew Mr Shafi had a wife (or other relatives) who might be able to organize the appointment of a Deputy in due course, because the Home could not be left in limbo, not knowing who would pay the fees.
  56. An alternative analysis is that on the materials before it, Brent was properly and reasonably satisfied that there was someone who could make the necessary arrangements, if need be by seeking the appointment of a Deputy, and that it provided the information which was necessary to enable those arrangements to be made, thereby discharging any remaining statutory duties. At this juncture it is impossible to say which of these analyses, (if either) will find favour with the trial judge. Much will depend on what Brent knew and what Brent did. Suffice it to say that I do not consider that the 5 May letter in and of itself is enough, for summary judgment purposes, to enable the Court to conclude that Brent was not liable to make payment of the fees to the Claimant, or that its duties under Part III of the 1948 Act were not engaged after that letter was received. There is plainly an arguable case that they were engaged before that time, as Mr Brennan has very fairly accepted.
  57. The letter of 5 May did provide the information that the Home or Mrs Shafi could seek the appointment of a Deputy. Had that happened, the Deputy would either have taken on responsibility for payment of the fees or terminated the contract and made arrangements with another care home, perhaps one situated somewhere more convenient for Mrs Shafi. However no Deputy was appointed and it would appear no steps were taken to get one appointed. Instead, the Claimant tried without success to get Mrs Shafi to agree to pay the fees herself.
  58. The next question that arises is what, if any, bearing does any duty on Brent to pay the fees have on a claim against Mr Shafi's Estate under s.7 of the Mental Capacity Act? In my judgment, the answer to that question depends on a proper understanding of what that section was designed to achieve. The common law rule on "necessaries" was designed to cure the unfairness that a supplier might suffer by reason of the unenforceability of a contract for the supply of "necessary" goods or services to a person who, to his knowledge, lacked the capacity to contract, by providing that the supplier has the right to recover a reasonable price from that person. "Necessaries" are goods or services which are suitable to the position in life of the recipient and suitable to his or her actual requirements at the time of their supply. Someone, either the recipient of the goods and services, or more likely a third party acting on his behalf, would have made the arrangements with the supplier for their supply.
  59. The leading authority prior to the enactment of s.7 was Re Rhodes [1890] 44 Ch Div 94, a decision of the Court of Appeal. The issue in that case was whether certain relatives of a lady who had lacked the mental capacity to contract, who had paid the supplier of necessaries to her out of their own funds, could claim repayment from her Estate. The Court of Appeal held that they could not, because on the facts of that case there was no evidence that the payments were made in circumstances giving rise to an implied obligation to repay (and indeed, evidence to the contrary). Section 8 of the Mental Capacity Act now makes statutory provision for such outlay by third parties to be recouped from the incapacitated individual or his or her Estate.
  60. So far as the position as between the supplier of the necessaries and the incapacitated recipient is concerned, Re Rhodes makes it clear that the right to a reasonable price only arises in cases where the supplier "intends to be repaid" (for the supply) and "to constitute a debt" against the person who is incapacitated. The rule does not cover supplies which are, vis a vis the recipient, gratuitous. This much is clear from the opening sentences of Lopes LJ's judgment on page 198 and from the following passage in the judgment of Lindley LJ:
  61. "the law is well established that when the necessaries supplied are suitable to the position in life of the lunatic an implied obligation to pay for them out of his property will arise. But then the provision of money or necessaries must be made under circumstances which would justify the Court in implying an obligation." (emphasis added)
  62. The Law Commission Report on Mental Incapacity (Law Com No 231) which recommended the changes implemented by the Mental Capacity Act considered the common law rule on the supply of "necessaries" in paragraphs 4.8 to 4.9. At the time of the Law Commission Report, the rule had been given statutory form, but only in relation to goods. It was recommended by the Law Commission that the rule be given statutory force in relation to services as well. In accordance with that recommendation, section 7 was enacted. Plainly the purpose of section 7 was to enact into statutory form the common law rule as it was then operated, not to expand it or to derogate from it.
  63. Section 7 provides that:
  64. (1) If necessary goods or services are supplied to a person who lacks capacity to contract for the supply, he must pay a reasonable price for them.

    (2) "Necessary" means suitable to a person's condition in life and to his actual requirements at the time when the goods or services are supplied."

    As one might expect, the definition of "necessary" precisely mirrors the common law rule as articulated in Re Rhodes.

  65. Mr Knox submitted that it was arguable that the services supplied by the Claimant in this case did not fall within the scope of the definition of "necessaries" because it could not be said that they were either suitable or fulfilled Mr Shafi's actual requirements, because the Home was not readily accessible by his family. I reject that submission. The services were suitable to his condition in life, being specialist services having regard both to his dementia and to his other physical disabilities, and fulfilled the requirements for care and accommodation to which his physical and mental condition gave rise. The definition relates only to the nature of the services themselves. The word "requirements" does not extend to the recipient's subjective wishes, however reasonable, as to the location at which those necessary services are to be provided.
  66. Section 7 was intended to, and did, enact the common law rule. It was designed to cure the hardship that would otherwise arise where a supplier who intended the person under a mental incapacity to pay for necessary goods or services would be unable to recover payment from him under a contract, if there was one. There is no need to show that there was any purported contract between them. The Law Commission Report expressly refers to the fact that the common law rule may be engaged when the arrangements with the supplier have been made by third parties. However, as Re Rhodes makes clear, it does not come into play in circumstances in which it was not intended by the supplier that the recipient should pay for those goods and services, but that the person making those arrangements, or someone else, should. That restriction on the common law rule must apply equally to the statutory enactment of it. Parliament did not intend to create a situation in which the supplier could recover payment for the supply of necessaries to a person under a mental incapacity in circumstances in which he never intended that person to make that payment.
  67. It is well established that if A contracts with B to provide services to C on the express basis that B will pay A for those services, and B fails to do so, A has no cause of action against C. The rules of unjust enrichment are not engaged in those circumstances. See the commentary in the 8th edition of Goff & Jones on The Law of Unjust Enrichment, Chapter 4 at 4-32 and Chapter 17 at 17-11 and 17-12 and Burrows, The Law of Restitution, 3rd Edition, pages 74-75, and the cases there cited.
  68. If Mr Shafi had been of full mental capacity but was physically disabled, and the Claimant had provided him with necessary services pursuant to a contract made with a third party under which the third party was to pay for them, or in any other circumstances in which it was not intended that he should pay, then there would be no legal or equitable basis for pursuing him or his Estate for payment if the intended payer failed or refused to pay. Section 7 of the Mental Capacity Act cannot be construed in such a way as to put a person under a mental incapacity in any worse position than a person in identical circumstances suffering from a physical incapacity.
  69. I reject Mr Brennan's submission that the case of Wychavon DC v EM (HM) [2012] UKUT 12 (AAC) is authority for the proposition that s.7 is applicable in circumstances where the supplier never intended to impose a liability on the person without capacity and only ever intended that a third party should pay for the "necessaries". Wychavon was a case in which the provider of the accommodation did intend to impose a liability to pay rent upon the incapacitated party (his daughter) under the ostensible tenancy agreement even though, on the facts, by reason of the nature of her incapacity the agreement was void and not merely voidable, and was made purely in order that she could claim housing benefit. If Wychavon had decided that s.7 applied in circumstances in which there was no intention on the part of the supplier to impose liability for the debt on the incapacitated party, it would have been contrary to the common law principle expressed in Re Rhodes, a decision of the Court of Appeal, to which the statute gives effect, and thus wrong in law. Moreover although decisions of the Administrative Appeals Chamber are to be afforded the greatest respect by this Court they are not binding upon it.
  70. It follows that s.7 of the Mental Capacity Act is not, and cannot be engaged in circumstances in which the services in question are being provided to the mentally incapacitated individual pursuant to an arrangement made by the service provider with a local authority exercising its statutory duty under Part III of the 1948 Act. In those circumstances, even if an arrangement is in place under s 26(3A), it is never intended that the individual will be indebted to the service provider for those services. The debt, if any, is owed by the individual or his Estate to the local authority. That is the position even if the local authority has a right to recoupment of 100% of the costs. There is no unfairness in this. Indeed it would be invidious if the statutory scheme under the 1948 Act and 1990 Act could be bypassed by a direct claim in debt against the individual concerned merely because he suffers from a mental incapacity. Matters would be different if the local authority had no obligation to pay; in those circumstances it is still possible that the service provider could recover under s.7 of the Mental Capacity Act, provided that he could establish, on the balance of probabilities, that it was his intention at the time of making the arrangements for the supply of the services that the individual should pay the fees if the local authority had no obligation to do so.
  71. If the services are not being provided under an agreement with the Local authority exercising its duties under s.21, but pursuant to an arrangement made with a third party, then the question whether s.7 of the Mental Capacity Act is engaged will depend on the facts and circumstances and in particular whether the arrangement made with the third party contemplated that payment would be made by that person (and possibly recouped by him or her in due course under s.8 of that Act) or by the person under the incapacity.
  72. One of the problems facing the Claimant in this case is that there is no evidence, at least presently, that any arrangements in respect of the provision of services to Mr Shafi by the Home were made by anyone other than Brent. When those arrangements were initially made in January 2010, it is strongly arguable that there was no intention that he should pay for the services but that Brent should. It is arguable that if Brent was under no obligation to pay, the Claimant intended that Mr Shafi should pay and that S.7 would be engaged in those circumstances. However, when Brent refused to pay (or continue to pay) in May 2010 the Claimant continued to supply Mr Shafi with the services whilst seeking to get his wife to undertake a contractual liability to pay for them personally under the terms of a draft Service User Agreement which make it clear that Mr Shafi was not intended to pay for them. That draft Agreement alleged that Mrs Shafi was contractually liable and the Claimant pursued a claim against her on that basis even after a defence was served denying personal liability, until that claim was struck out on 27 January 2011.
  73. The trial judge will have to determine whether there ever came a time at which those services were supplied in circumstances in which any statutory duty on Brent to make such payment had ceased (assuming that it ever arose), and it was intended by the Claimant that Mr Shafi should pay for them. I am not persuaded by Mr Brennan's submission that there is an unanswerable claim against the Estate under s.7 at least in respect of the fees that fell due after the date when Mrs Shafi refused to pay them, or even after the date when the claim against her was struck out. The possibility remains that Brent may be liable for all the fees, subject to its right to recoup them in whole or in part from the Estate.
  74. For those reasons I shall allow this Appeal and set aside the order for summary judgment in its entirety. The issue concerning the rate of interest to be awarded on the judgment debt for the period to judgment therefore no longer arises, and I do not need to consider argument on it. If the Claimant eventually succeeds in recovering the fees from the Estate, or Brent, or both, the question of the appropriate interest rate will be a matter for the trial Judge to determine on the evidence then before the Court.
  75. Regrettably, it seems inevitable that the legal costs of this action will exceed the amount in issue, particularly given the probability that Brent will be joined as a party. Even if Brent has to pay in the first instance it is likely to be entitled to recoup its payment from the Estate. In those circumstances, the parties may be well advised to give serious consideration to seeking to achieve a settlement (directly or by mediation) instead of pursuing the matter to trial. However, that is entirely a matter for them.


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URL: http://www.bailii.org/ew/cases/EWHC/QB/2014/77.html