Recovering social care debt

Caroline Sanders analyses some of the legal complexities that can affect a social care debt recovery case, such as the overlap with care provided under mental health legislation, NHS funded continuing healthcare, deprivation of assets and estate administration.

The duty for local authorities to provide residential care is set out in the National Assistance Act (NAA) 1948, with sections 21, 22 and 26 being the key points of relevance. Whether care is provided by a council owned care home, or through a private provider, the Act requires LAs to meet the cost of providing the care in the first instance, before carrying out a financial assessment of the resident to determine what proportion of the costs the resident is liable to pay themselves.

The process for assessing the charges that an individual is liable for is, in itself, technically complex. Assessment is governed by the National Assistance (Assessment of Resources) Regulations 1992, and detailed guidance on the process is contained in the Charging for Residential Accommodation Guide (CRAG), which runs to over 120 pages and is subject to review on an annual basis.

In terms of domiciliary care services - more commonly known as ‘home care services’ - section 17 of the Health & Social Services & Social Security Adjudications Act (HASSASSAA) 1983 is the relevant statutory provision. This allows LAs to charge what they consider to be a ‘reasonable sum’ from the individual receiving care. Whilst this makes for a level of inconsistency between the approaches adopted by LAs, guidance on charging for non-residential social care services is set out in the Fairer Charging for Home Care and Other Non-residential Services (LAC 2001/32).

However, whilst the temptation can be to treat any social care debt recovery case as one in which the provisions of the above charging regimes apply, this is not always the case. Two instances in which, what looks to be, social care services on the face of it will not be chargeable are aftercare services provided under section 117 of the Mental Health Act (MHA) 1983 and NHS Funded Continuing Healthcare.

Aftercare and the Mental Health Act (MHA)

Section 117 of the MHA places an obligation on LAs to provide aftercare services to individuals who have previously been detained under section 3 of the Act, following their discharge. This aftercare often includes residential care services which, on first sight, appear to be identical services to those provided to other individuals under section 21 of NAA. Despite this, LAs are not legally allowed to charge for these aftercare services.

With no strict definition as to what constitutes ‘aftercare’, there is an inevitable grey area as to when services provided should be classed as aftercare rather than residential care under section 21 NAA. This is a significant issue for debt recovery cases, of course, as any residential care following the end of a period of aftercare can be charged for, and validly pursued, while residential care under a package of MHA aftercare cannot. The basis upon which residential care is being provided can be unclear even to those LA employees who arrange and provide the care, let alone the individual tasked with recovering unpaid charges years down the line, making it difficult to know exactly what debts should be pursued.

The position can be particularly difficult given that the period of an individual’s detention under the MHA may well have occurred many years in the past and not be immediately obvious when a debt recovery case is initiated. In fact, any mental health aspect to the case may only come to light upon review of historic archived files, which will likely take place some way down the line of debt recovery.

The key thing to note in any case with reference to section 117 aftercare or a potential mental health aspect to it is to make enquiries at an early stage. It is fundamental to ascertain the status of the care being provided and, if it was at any time provided under section 117, whether there has been a formal discharge from that aftercare. Evidence of a formal date of discharge from aftercare will be needed before seeking to pursue what is showing on the system as an outstanding debt. Only charges raised after a formal discharge can be pursued. Needless to say, if an end date to the aftercare cannot be proven and the case is pursued regardless, there will likely be a valid defence to that claim and the LA could find itself facing an adverse cost order.

NHS funded continuing healthcare

Another issue to consider is NHS funded continuing healthcare. Unlike social and community care services, this form of healthcare is provided to individuals free of charge. However, the eligibility for this funding is an area of much debate and common misunderstanding – it is not easy to define who meets the criteria and when the funding becomes available.

For that very reason, all too frequently, where an individual is in receipt of care and has a medical condition which requires nursing intervention, that individual – or, more commonly, their family on their behalf – will challenge the liability to meet any cost of their care, on the basis that the NHS should be funding it. The terms of the availability of the funding is not as straightforward as people often perceive, and this has made for heated disputes in many a case and seen cases fought through to trial on this very issue.

The reality is that only those meeting very specific criteria will be eligible for NHS continuing healthcare funding, usually individuals with complex medial conditions that require constant and / or specialised nursing support. To determine eligibility, a detailed assessment process is carried out involving both medical and social care professionals. In cases where that assessment has taken place and the position determined, any challenge about availability of NHS funding will generally hold little weight.

However, there are many less clear cut, borderline, cases where the challenge raised should not be dismissed out of hand and will require careful consideration. Retrospective, and even posthumous, assessments have increasingly taken place in recent years and concluded that NHS funding should have been provided at an earlier stage, but was not made available. Indeed, there has been recent press coverage of vast sums being repaid by the NHS for periods of care where, years down the line, it is concluded by way of retrospective assessment that NHS funding should rightfully have been available and no charge made for the care provided.

This inevitably places debt recovery action in these borderline cases in some jeopardy; it is clearly not in the taxpayers interest to see legal costs incurred in pursuing a debt only to find at a later date that NHS funding should have been available rendering the action taken void. The rule of thumb has to be where there is any doubt at all, investigate early and seek the Primary Care Trust’s input. That being said, as of March 2012, the position has become far less precarious, with the timeframe for retrospective review applications being narrowed considerably. Now, for care episodes between 1 April 2004 and 31 March 2011, the deadline for applications for retrospective review is 30 September 2012, and for care episodes between 1 April 2011 and 31 March 2012, the cut-off date will be 31 March 2013.

Deliberate asset transfers

An area of particular difficulty in social care debt recovery cases is when individuals, or their families, take active steps to seek to avoid their liability to pay for care through the transfer of their assets. These cases range from the elderly client gifting his or her life savings to the grandchildren before entering care “rather than see the Council get it”, to more sinister planned transfers of property in an attempt to evade paying for care.

In residential care cases of this nature, section 21 of HASSASSA 1983 provides an effective route for LAs to pursue the care recipient, or indeed the relevant family member/s. This route applies where a person has knowingly, and with the intention of avoiding charges, transferred an asset/s, including cash, to another person within the six months of the care episode commencing. What’s more, the intention to avoid charges does not have to be the sole intention of the transfer; it is sufficient for this to be significant purpose (see Yule v South Lanarkshire CC).

Likewise, section 423 of the Insolvency Act 1986 can apply in such cases. The transfer of an asset which places it out of the reach of an LA makes the LA a ‘victim’ for the purposes of the Act. Again, placing assets out of the reach of the LA need not be the sole purpose of the transaction, or even the main purpose.

Determining the reason behind an asset transfer may not be straightforward. However, in the absence of reasonable explanation and justification for a dissipation of assets, particularly at a time when care services were being provided or likely to be required in due course, an action under section 21 HASSASSA and/or section 423 IA should certainly be given careful consideration.

Dealing with estates

Pursuing the estate of a deceased individual brings its own sensitivities and technicalities. Nevertheless, such claims can be perfectly valid and should be pursued as and where it is appropriate to do so.

While the death of a debtor, either part way through debt recovery action or prior to recovery proceedings commencing, does not bring matters to a close, it can take the case on a slightly different course.

In straightforward cases, with a solvent estate, executors in place under a Will, and no dispute from those executors, the LA will ultimately receive payment as a creditor of the estate. However, not every case will be that routine; indeed, in cases where liability has been challenged prior to the care recipient’s death, the family member who took the lead in disputing the debt will more often than not become the executor of the estate. In such instances, the case will likely proceed as before the care recipient’s death, the only difference being that the executor/s will be pursued as representatives of the estate.

Where the estate is represented by executors, the recovery action needs to be addressed to those executors, by way of amendment in a commenced action or from the outset if a claim has yet to be brought. The actions of an executor are governed by the Administration of Estates Act (AEA) 1925, and any failure to comply with the provisions of the Act can add a further cause of action to the LA’s claim. A failure to take into account unpaid care contributions in the estate’s administration will see an executor fall foul of section 25 of the AEA 1925, and become personally liable for the debt.

It is worth bearing in mind that formal appointment under a Will is not the only basis upon which personal liability can arise; if a family member takes some action towards administering the estate in the absence of a grant of probate, this can be classed as ‘intermeddling’. An individual who intermeddles in an estate can be held personally liable for his actions.

In cases of intestacy where no family member steps in to proceed with administration, or indeed where executors are appointed but are unwilling to act and renounce their position - which is often the case where the estate will ultimately be insolvent - the LA, as creditor, is in a position to apply for a grant of probate and deal directly with the deceased person’s affairs. In many cases, this will be the only means to recover any outstanding debt and it is frequently a worthwhile course of action. Even though the estate may well be insolvent, recovering a proportion of the outstanding debt may well merit this step being taken and has to be a worthwhile consideration before a write-off is considered. The procedure for any LA considering this is set out in the Non Contentious Probate Rules 1987.

Conclusion

The recovery of social care charges is certainly not straightforward. Disputed cases are rife with sensitivities, procedural peculiarities, legal and technical complexities. Nevertheless, this is far from being a reason not to pursue such cases; with appropriate handling and due care and consideration, they can be pursued effectively with a significant proportion of debts successfully recovered.

Caroline Sanders is a senior solicitor at DWF.

See also: What can local authorities do to tackle social care debt? by Caroline Sanders and Jacky Edwards.