Case No: A2/2014/0499
Neutral Citation Number: [2014] EWCA Civ 1350
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, QUEEN’S BENCH DIVISION
MRS JUSTICE ANDREWS
[2014] EWHC 77 (QB)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Friday 24th  October 2014
Before:

MASTER OF THE ROLLS
LORD JUSTICE BEATSON
and
LORD JUSTICE BRIGGS
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Between:

	Aster Healthcare Limited	Appellant	
	- and -		
	The Estate of Mr Mohammed Shafi, Deceased (By its Representative Mrs Batool Shafi)	Respondent	

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(Transcript of the Handed Down Judgment of
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John Brennan (instructed by Harrison Clark Rickerbys Ltd) for the Appellant
Peter Knox QC and Asela Wijeyaratne (instructed by Linklaw Solicitors Limited) for the Respondent

Hearing date: 7 October 2014
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Judgment
Master of the Rolls: 
1.	The claimant owns and runs six care homes registered under the Care Standards Act 2000.  These include the Raj Nursing Home (“the Home”).  This is a residential nursing home in Southall, which specialises in caring for elderly persons suffering from dementia.  The majority of the referrals to the Home are made by 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 until 10 March 2012) accrued in respect of his care and accommodation.  The total fees were £62,199.94.  There has been no challenge to their reasonableness.   In these proceedings, the claimant seeks recovery of its fees from the estate of Mr Shafi (“the Estate”).  On 26 September 2013 in the Willesden County Court, HH Judge Million granted the claimant summary judgment for these fees.  On 24 January 2014, the Estate’s appeal was allowed by Andrews J in a careful and comprehensive judgment.  The claimant was granted limited permission to appeal by Arden LJ.
2.	The following facts are not controversial.  On 13 November 2009, Mr Shafi who was 81 years of age and suffering from dementia was admitted to the Park Royal Centre for Mental Health (“the Hospital”) for an assessment pursuant to section 2 of the Mental Health Act 1983.  On 11 December, the Hospital concluded that he lacked capacity to make decisions regarding his future care.  A specialist social worker employed by Brent, Nick Ferrier, contacted the Home with a view to carrying out an admissions assessment on Mr Shafi of his needs and his suitability to be placed in the Home.   He was assessed as suitable.  An assessment sheet was completed by Mrs Veronica Singh, who was the manager of the Home.  The duration of his admission was described as “longterm” and the sheet described Brent as the “funding source”.  
3.	The claimant appears to have written to Brent (Mr Ferrier) on 13 April 2010 concerning the payment of outstanding fees.  On 5 May 2010, Brent wrote a letter to the claimant which included the following: 
“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 it 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 apointeeship (sic). As such management of Mr Shafi’s finances can be taken over.”
4.	Andrews J held that it was likely that some time after receiving this letter, the claimant tried to get Mrs Shafi to sign a “Service User Agreement” (“the Agreement”), but she refused.  Someone did, however, sign for Mr Shafi.  The judge held that the Agreement (which bears the date 29 January 2010) was “obviously backdated”.  She also held (in agreement with Judge Million) that it was “difficult to conceive of any other result being arrived at after a trial than a finding that [Mr Shafi] lacked capacity from January 2010 if not earlier”.
The legal framework
5.	Section 47 of the National Health Service and Community Act 1990 provides for the assessment by a local authority of a person’s needs for community care services.  It is not in dispute that the services provided by the claimant for Mr Shafi were “community care services”.  Section 47(5) provides that nothing in the 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 needs if in its opinion the condition of that person requires those services as a matter of urgency.
6.	Section 21 of the National Assistance Act 1948 provides:
“(1) 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 may direct shall, make arrangements for providing —
(a) residential accommodation 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;”
7.	Section 26 gives a local authority the power to make arrangements with the manager of a registered Care Home for the provision of accommodation under section 21, together with nursing or personal care to persons, including those who have a mental disorder.  Section 26(2) provides: 
“(2) Any arrangements made by virtue of this section shall provide for the making by the local authority to the other party thereto of payments in respect of the accommodation provided at such rates as may be determined by or under the arrangements 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. ”
8.	The effect of section 26(3A) was accurately described by the judge at para 31 of her judgment in these terms: 
“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.”
9.	Section 7(1) of the Local Authorities Social Services Act 1970 (“LASSA”) provides:
“Local authorities shall, in the exercise of their social services functions, including the exercise of any discretion conferred by any relevant enactment, act under the general guidance of the Secretary of State.”
10.	The Secretary of State gave guidance in Circular LAC(98) (“the Circular”).  The Circular included the following: 
“9.The legislation regarding Part III residential accommodation provides for authorities to assess under section 21 of the National Assistance Act 1948 whether anyone requiring residential care services is "in need of care and attention which is not otherwise available to them". 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. Under the NHS and Community Care Act 1990 local authorities are required to provide information to the public. The Department's 1991 publication of Practice Guidance and Care Assessment identified that published information as the first stage of the care management process.
10. 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.
11. Once a LA 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. Where it is foreseen that there will be a delay the authority should ensure that suitable arrangements are in place to meet the needs of the individual and of their carer if appropriate. Similarly, where a self-funder in a care/nursing home has capital that has reduced to the £16,000 upper capital limit it is the Department's view as soon as reasonably practicable, the local authority should undertake an assessment and, if necessary, step in to take over arrangements so as to ensure the resident is not forced to use up capital below £16,000. Reference was made to this in the 1996 circular (LAC(96)9) in paragraphs 3 and 4 which give guidance on forecasting the point at which a resident's capital reaches £16,000. 
12. Concern was also expressed about the position of people that had been placed by local authorities who subsequently became self funding e.g. through the sale of property. 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. A person placed in a residential care home directly managed by a local authority cannot become a self funder by entering into a private contract with the care home manager, as in an independent sector home. They remain under contract under the National Assistance Act 1948 as a full payer.”
11.	Further guidance was given by the Charging for Accommodation Guide (CRAG) in support of The National Assistance (Assessment of Resources) Regulations 1992 (SI 1992/2977).  The version issued in April 2010 included the following: 
“1.020  In all cases, the LA should find out if a resident has any of the following:
•	Enduring Power of Attorney (EPA)
•	Lasting Power of Attorney (LPA) for Property and Affairs
•	Property and Affairs Deputyship under the Court of Protection
•	Any other dealings with the resident’s affairs….
……..
1.022  If there is no one acting in this capacity, and if, following an assessment of capacity to make financial decisions, it is considered that the person does not have the capacity to manage some or all of their finances, the LA should satisfy itself under its duty of care that there are arrangements put in place which meet the needs of the Mental Capacity Act 2005.  Provision of services should not be delayed whilst applications are made to register an EPA/Property and Affairs LPA or to appoint a Property and Affairs Deputy or an Appointee” 
12.	Finally, I should refer to the Mental Capacity Act 2005 (“MCA”) which provides at section 7:
“(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.”
The proceedings
13.	The claimant issued proceedings against the Estate claiming that the unpaid fees were due under the Agreement.  It alleged that Mr Shafi was liable to pay the fees under clause 7.2 of the Agreement and the cost of the provision of additional services under clause 7.3.  The Estate denied that Mr Shafi had signed or was bound by the Agreement and asserted that, if he did sign the Agreement, it was void and/or unenforceable because he lacked capacity, alternatively his signature was procured by the undue influence of the claimant.  By its reply, the claimant denied the alleged incapacity of Mr Shafi and pleaded inter alia that, if he lacked capacity, he would have been liable to pay a reasonable sum for the services provided by virtue of section 7 of the MCA.  
14.	In granting summary judgment, Judge Million held that the claim under section 7 of the MCA was bound to succeed.  On appeal, Andrews J dismissed the application for summary judgment and set aside the order of Judge Million.  She also declared that, on the proper construction of the Agreement, Mr Shafi would not have been personally liable to make payment to the claimant if he had contracted on those terms.  She therefore ordered that summary judgment be entered for the Estate on the claimant’s claim for breach of contract.
The Agreement
15.	The Agreement is expressed to be between the claimant, Mr Shafi and Mrs Shafi.  It is sufficient to cite para 20 of the judgment which summarises the material parts of the document: 
“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: 
Private Payer
Fees payable by: Representative
Name Mrs Batool Bagem Shafi
It then sets out Mrs Shafi's address and telephone number.”    (emphasis added).

Summary of the judgment of Andrews J
16.	Having set out the factual background and the legislative framework, Andrews J analysed the terms of the Agreement at paras 20 to 23 of her judgment.  She said that it was plain that Mrs Shafi was to be the “payer”.  She concluded at para 23 there was 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….”
17.	At para 40 she said that, leaving aside the provisions of the MCA, the evidence pointed to 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 section 21 and 26(2) of the 1948 Act.  At para 41 she said that it was at least arguable that Mr Shafi was admitted temporarily as a matter of urgency as permitted by section 47(5) of the 1990 Act.   
18.	At paras 45 to 48 she said that it was implicit in the letter of 5 May 2010 that Brent did not intend to pay the fees from that time onwards.  Whether it was entitled to do so was another matter.  If it had entered into a long term contract with the claimant, then this was arguably a repudiatory breach of contract which the claimant did not accept.  If it had entered into a short term arrangement pending an assessment under section 21, then the letter might have brought the contract to an end.  But the letter did not instruct the claimant that Mr Shafi should now cease to reside in the Home.  Nor did it state in terms that the arrangements it had made were at an end.  One possible analysis was that Brent was trying (in breach of para 12 of the Circular) to terminate its involvement without being satisfied that there was someone who could take over from it.  In a case such as this, because Mr Shafi was known to lack capacity, that person would have had to be a Deputy or a person with a registered power of attorney.  An alternative analysis was that Brent was properly satisfied that there was someone who could make the necessary arrangements.  The judge said that it was impossible on the material before her to say which of these analyses would find favour with the trial judge.  She did 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”.
19.	The judge then considered what bearing any duty on Brent to pay the fees had on a claim against the Estate under section 7 of the MCA.  She held at para 55 that section 7 mirrored the common law rule on “necessaries” and said that, as Re Rhodes [1890] 44 Ch Div 94 made clear, the section did not come into play where it was not intended by the supplier that the recipient should pay for the goods and services.  As she put 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.”
20.	At para 59 she said:
“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 function 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.”
21.	She continued:
“60.  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. 
61.  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. 
62.  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.” 
22.	Accordingly, she allowed the appeal.
The grounds of appeal
23.	Mr Brennan concedes that the Estate has an arguable defence to the claim for fees in respect of the period up to 5 May 2010 when Brent notified the claimant that it should look to Mr Shafi for payment of the fees, but he submits that the Estate has no defence to the claim for the fees in respect of the period after that date, or alternatively from the expiry of a reasonable period after that date.  The two grounds of appeal as formulated in the draft grounds of appeal on which permission to appeal was sought were as follows.  The first ground (for which permission to appeal was granted by Arden LJ) was that the judge “erred in law in that she proceeded on the basis that the claimant would be entitled to enforce a contractual right to recover payment of its fees from the local authority if it were to be proved that the local authority was under a statutory duty to provide Mr Shafi with residential care”.  The second ground was that the judge erred in law in that she proceeded on the basis that the claimant would not be entitled to rely on section 7 of the MCA if it were proved that its intention to do so was contingent upon its not being able to procure or recover payment from Mrs Shafi.
The first ground
24.	As finally developed, the first ground was rather differently formulated.  In a supplemental skeleton argument (amplified orally before us), Mr Brennan submits that Brent placed Mr Shafi at the Home either (i) on a temporary basis under section 47(5) of the 1990 Act or (ii) pursuant to sections 21 and 26(2) of the 1948 Act after having carried out an assessment of his needs.  In the former case, he says that the letter of 5 May 2010 brought to an end (apparently with immediate effect) any private law rights the claimant might have against it for the fees.  In the latter case, the letter gave the claimant reasonable notice of the termination of the contract:  Mr Brennan submits that a reasonable period expired no later than 30 June 2010.   
25.	I would reject this ground largely for the reasons given by Mr Knox QC.  There was clear evidence that any contract between Brent and the claimant was a “longterm” one (see the admission sheet) and not a temporary one pending an assessment of needs or one that was terminable on notice.  If the agreement was temporary or terminable on notice, one would have expected to see clear evidence of this from the claimant, but there is none.  There is no challenge to the judge’s holding at para 40 that such evidence as there was pointed towards the conclusion that the admission of Mr Shafi was probably pursuant to a contractual arrangement between Brent and the claimant under sections 21 and 26(2) of the 1948 Act.
26.	Looked at purely as a matter of contract, and without regard to the statutory background, the judge was right to say that there was no basis for saying that it was clear that the letter of 5 May of itself terminated the contract.  At its highest, it was a repudiatory breach of contract, but there is no evidence that the claimant accepted the repudiation and treated the contract as being at an end.  At the very least, it is arguable that the contract continued beyond 5 May 2010.  
27.	But the statutory background cannot be left out of account.  Brent was always (or at least arguably always) under a duty to provide assistance to Mr Shafi whatever his resources, because (i) he lacked mental capacity; (ii) no-one had been appointed as his Deputy or otherwise to act on his behalf with the result that (iii) accommodation was “not otherwise available” to him within the meaning of section 21 (1)(a) of the 1948 Act.  This is because the Circular requires local authorities to “make arrangements for those people who are themselves unable to make care arrangements and have no-one to make arrangements for them” even if they have sufficient capital to pay for themselves.  Para 1.022 of CRAG is to similar effect.  
28.	It follows that Brent was always under a statutory duty to provide assistance to Mr Shafi unless and until a Deputy or other person was appointed to act on his behalf.  Either (i) it had to take him back to premises of its own and look after him there (which it did not try to arrange), or (ii) if it left him at the Home (continuing the existing arrangements), it remained under a statutory obligation to continue to pay the claimant for this service under section 26(2) and (3) of the 1948 Act and to continue to “manage the contract” as required by para 12 of the Circular. 
29.	 In other words, on the material currently available, it is at least arguable that, if Brent purported by its letter of 5 May 2010 to terminate its contract with the claimant, it would have acted in breach of its statutory obligations.   The court will not lightly impute to Brent an intention to abrogate its statutory obligations.   In the absence of a clear contrary indication, the court should construe the letter on the footing that Brent intended to comply with those obligations.  So whatever the precise arrangements between Brent and the claimant, Brent remained at least arguably liable for the claimant’s fees after 5 May 2010 (and indeed after 30 June 2010).  
30.	For these reasons, the judge did not err in proceeding on the basis that the claimant would arguably be able to enforce a contractual right to payment of its fees from Brent after receipt of the letter of 5 May 2010.
The second ground of appeal
31.	The application for permission to appeal on this ground was adjourned to this court by Arden LJ.   As explained in his supplemental skeleton argument (and amplified orally), Mr Brennan submits that (i) section 7 of the MCA would  avail the claimant unless it were held at trial that the services it provided to Mr Shafi were rendered by way of a gift; and (ii) there is no real prospect of such a finding since the claimant is a company carrying on business for profit.   The first of these submissions is based on such common law decisions as Re Rhodes.  It is not in dispute that the definition of “necessary” in section 7(1) of the MCA precisely mirrors the common law rule.  
32.	In Re Rhodes, a lady of unsound mind was confined in a private lunatic asylum at a cost of £140 a year.  Part of this cost was met by payments made by her relatives.  The question was whether they could claim repayment from her estate.  The Court of Appeal held that they could not do so, because there was no evidence that payments were made in circumstances giving rise to an implied obligation to pay.  The fact that the legal analysis of claims in restitution has undergone considerable refinement since then is not material for present purposes.  At p 106, Cotton LJ said:
“But we must look at the facts of the case to see whether the payments for the lunatic were made with the intention of constituting thereby a debt against the lunatic’s estate”.
33.	At p 107, Lindley LJ said:
“Now, in order to raise an obligation to repay, the money must have been expended with the intention on the part of the person providing it that it should be repaid.  I think that that intention is not only not proved, but is expressly negatived in the present case.”
34.	I agree with what Andrews J said at para 55 of her judgment (see para 19 above).   I accept the submission of Mr Knox that the question is not whether the claimant provided its services as a gift.  Rather, it is whether it provided its services to Mr Shafi on terms that he was not to pay for them.  It is a question of fact whether the claimant supplied services to Mr Shafi in circumstances in which it intended that Mr Shafi or Brent or Mrs Shafi should pay for them.  I cannot improve on the reasons given by the judge at paras 61 and 62 for concluding that it was not possible to determine the answer to this question in advance of the trial.  It is at least arguable that the claimant intended that Brent should make the payments, alternatively that Mrs Shafi should do so.  It is impossible at this stage to make the finding sought by Mr Brennan that the claimant intended that Mr Shafi should pay if Brent or Mrs Shafi were unwilling to do so.  The only evidence as to the claimant’s intention at the time is that the Agreement provided that Mr Shafi should not be the payer, but that Mrs Shafi should be.  
35.	I do not consider that the second ground of appeal raises a point which has a real prospect of success, still less one which satisfies the requirements for a second appeal.  I would, therefore, refuse permission to appeal on the second ground.
Conclusion
36.	For the reasons given above, I would dismiss this appeal.
Lord Justice Beatson:
37.	I agree.
Lord Justice Briggs:
38.	I also agree.