UK: Care Act: Deprivation Of Capital - Is The Local Government Ombudsman Getting It Right On Deprivation Decisions?

Is the LGO making the right call with complaints around deprivation of capital? We look at two recent decisions which have raised concern.

Two recent Local Government and Social Care Ombudsman (LGO) decisions allow us an insight into current thinking at the LGO about the right approach to deciding whether a person has deprived themselves of capital for the purpose of reducing their care fees liability. Analysis of these cases appears to expose some weaknesses in the Care & Support statutory guidance

Sefton Metropolitan Borough Council (19 016 142) - severing a joint tenancy can amount to a deprivation of capital

In July 2017, Mr & Mrs C instructed solicitors to prepare Wills and sever the joint tenancy. The severance was completed on 1 Dec 2017.

Mr C's Will provided that his share should pass to a Will Trust for the benefit of his children with a life interest for Mrs C. Mr C died in April 2018.

In June 2017 Mrs C was admitted to hospital after a fall. She had a series of health complaints and was awaiting dementia screening. She became a permanent resident in a care home in mid-October 2018.

The LGO decision explains that council decided Mrs C should be treated as possessing the full value of the house and not just her own half share. The LGO report says:

"Noting the timing of the severance of tenancy and Mrs C's health and care needs [the council] considered care home fees must have formed part of financial planning of the family at the relevant time, forming part of the decision-making process. It said the question for it was whether it could be determined that it was in the reasonable contemplation of Mrs C in transferring the property that placement in long-term care was a foreseeable consequence of her care needs: it considered the proximity of the property transfer to the admission to the care home was relevant."

The LGO found no maladministration. It explained its reasoning as follows:

"The Council took account of Mrs C's health and support needs and of the timing of the severance of the tenancy, and it did not make its decision in ignorance of any material facts. I am satisfied the Council acted without administrative fault in deciding to treat Mrs C as having deprived herself of assets."

This decision by the council and by the Ombudsman is plainly wrong.

Whether or not Mr & Mrs C consulted together on whether to sever the joint tenancy to avoid care fees, a joint tenancy is severed unilaterally. It does not require both joint owners to agree. Mr C decided to sever the joint tenancy. It was his act and intention that upon his death, his share in the property should pass into a Will Trust. He signed a Will to that effect. The council's decision therefore offended the basic principle that it is the resources of the resident that are taken into account, not the resources of a couple. The council appears to have considered that Mrs C could and should have stopped Mr C from taking this action. There is no obligation upon a resident or prospective resident to influence another person who holds assets beneficially, to benefit the resident.

Secondly, Mrs C cannot be said to have deprived herself of a resource. Whilst Mrs C owned Mr C's part of the house legally, this was upon a trust.¹ She never owned her husband's share beneficially. Therefore she had no resource to deprive herself of.

The council's argument was presumably that if she hadn't planned with her husband to split the joint tenancy, she would have inherited his share. Clearly however, the prospective benefits of one's spouse dying first are a matter for the person with the beneficial interest. They are not capital, nor income, nor notional capital or income within the meaning of the charging regulations.

This case shows the danger for the LGO or local authorities deciding cases based on the very limited support given in the statutory guidance. The statutory guidance assumes a certain level of basic legal training for the local authority departments that use it. It is not and cannot be a comprehensive statement of the law. A decision maker who relies solely upon the statutory guidance may go badly wrong, as in this case.

Tameside Metropolitan Borough Council (19 014 246)

Following a fall at home resulting in an admission to hospital, 98 year old Mrs X executed an LPA and also transferred her home to her daughter. The trust document stated that the reason for the transfer was to ensure Mrs X's mother's wishes for the property were followed and to provide her with peace of mind about the settlement during her lifetime.

Mrs X moved into residential care and requested assistance with her fees in November 2018. The council determined that she had deprived herself of capital being the value of the property transferred to the daughter.

The LGO decision reports the view of the council as being:

"it was reasonable for the family to expect that further care may be required. Mrs X's mother's circumstances and the fact that care was provided to her from the point she sustained a fall in January 2018 led to its decision that it was reasonable to expect her mother may have needed to contribute towards her care costs in future. The Council accepted the transfer of the property was not completed with the intent to deprive Mrs X's mother of capital to avoid paying a larger contribution to her residential care. But it concluded there was a reasonable expectation of the need for care and support."

The LGO analysis is set out in the Box A

On these facts the decision is clearly correct but the LGO's reasoning again suggests over-reliance on the statutory guidance with a lack of understanding of the underlying legal principles behind a deprivation decision.

Regulation 17 of the Charging Regulations² sets out the council's power in relation to deprivation of assets. It says:

"The adult is to be treated as possessing income of which the adult has deprived themselves for the purpose of decreasing the amount they may be liable to pay towards the cost of meeting their needs for care and support, or their needs for support."

So the legal question the council had to answer was whether Mrs X made the transfer into trust for the purpose of avoiding her liability for care fees?

The Statutory Guidance is clear that the mischief that the regulation is attempting to counter is whether Mrs X deliberately disposed of her assets in order the get the council to pay for her care. At Annex E it says:

4)         ..... A local authority should therefore ensure that people are not rewarded for trying to avoid paying their assessed contribution.

5)         But deprivation should not be automatically assumed, there may be valid reasons why someone no longer has an asset and a local authority should ensure it fully explores this first. However, the overall principle should be that when a person has tried to deprive themselves of assets, this should not affect the amount of local authority support they receive.

6)         Deprivation of assets means where a person has intentionally deprived or decreased their overall assets in order to reduce the amount they are charged towards their care. This means that they must have known that they needed care and support and have reduced their assets in order to reduce the contribution they are asked to make towards the cost of that care and support.

In placing emphasis upon an actual intention to avoid paying care fees, the approach of the statutory guidance in these cases is clearly correct.

However, paragraph 11 Annex E statutory guidance then states:

11) There may be many reasons for a person depriving themselves of an asset. A local authority should therefore consider the following before deciding whether deprivation for the purpose of avoiding care and support charges has occurred:

(a) whether avoiding the care and support charge was a significant motivation in the timing of the disposal of the asset; at the point the capital was disposed of could the person have a reasonable expectation of the need for care and support?

(b) did the person have a reasonable expectation of needing to contribute to the cost of their eligible care needs?

The LGO appears to have construed the statutory guidance as setting out a 3 part test as follows:

• whether avoiding the care and support charge was a significant motivation in the timing of the disposal of the asset;
• at the point the capital was disposed of could the person have a reasonable expectation of the need for care and support?
• did the person have a reasonable expectation of needing to contribute to the cost of their eligible care needs?

On the other hand the council appears to have read the guidance as a 2 part test comprised of (a) & (b). It is an understandable reading of paragraph 11 that the matter of motivation is decided by considering the adult's reasonable expectation.

In fact both the LGO and the council are incorrect about this.

Paragraph 11 attempts to construe the underlying case law in as simple a matter as possible. Unfortunately, in doing so it appears to be misleading local authorities and the LGO.

In requiring the council to have regard to the question of what a reasonable person would have expected when addressing the question of what the adult actually intended, it is following the decision in the well-known case of Yule v Lanarkshire.³ This case addresses circumstances where the council finds there is very little evidence of actual intention. In Yule it was held that absent any such evidence, all the council can do is see if it can make a reasonable inference from the overall facts. The court said:

"Before the council can reach such a view, it must have material before it from which it can reasonably be inferred that the deprivation of capital took place deliberately and with the purpose of the nature specified."⁴

If there is little or no direct evidence, then the council has to rely on what the surrounding facts suggest a reasonable person would have expected.

But what if there is other direct (rather than circumstantial) evidence? Where there is an account of what happened, the council must address what that evidence says about the adult's actual intention. This point was made by Mr Justice Richards in Beeson⁵ where he said:

1. The present case differs materially on its facts from Yule v. South Lanarkshire Council, given the existence of evidence from Mr Beeson's son about his and his father's state of mind at the relevant time.  This constituted input from the family of a kind that was lacking in Yule.  True it is that the key question related to Mr Beeson's own state of mind rather than his son's state of mind and that that still had to be a matter of inference.  Nonetheless his son's evidence that funding of residential care did not come into his or his father's thoughts and that the transfer took place at a time when his father intended to live in and ultimately to die in his home was evidence of central importance.  If accepted as truthful and reliable evidence, it negatived the existence of a regulation 25 purpose on the correct, subjective test. Conversely, a finding that a regulation 25 purpose existed on the correct test required a rejection of his evidence and an adverse credibility finding.  The surrounding circumstances provided material capable of supporting the rejection of his evidence, but any decision whether to reject or accept it required an overall assessment of that material and of the impression created by Mr Beeson's son himself in the course of stating his case and answering questions at the panel hearing.

The proper consideration of reasonableness helps the decision maker in two main circumstances.

1. If there is no direct evidence of what the person was actually thinking, then the overall surrounding circumstances, including whether the person had a reasonably foreseeable need for residential care, may be sufficient to found a determination regarding their actual intent.
2. If there is direct evidence of what the person thought, then the reasonableness of their stated view is a consideration in determining whether it is a true account of what they thought. If a statement of an otherwise competent adult flies in the face of common sense and known facts about their state of knowledge, then that might be grounds for disbelieving it.

It can be seen from this that when considering the reasonableness of the witness account,  the test is not whether the adult acted reasonably by the standard of the objective reasonable person, but whether the account is credible in its own terms.

The consideration of reasonableness is ancillary to and does not derogate from the legal principle that it is the actual intention of the resident that matters. The statutory guidance does not establish as the test of a deprivation, what the adult should reasonably have expected.  

This is clearly the error that the council made.

The LGO therefore correctly states that the council must make a finding about the actual motivation of the Mrs X. But in stating that: "All three parts of the test must be satisfied" it confuses the correct test of deprivation with secondary considerations intend to assist them in applying the correct test.

Knowledge of the means test

The third "test" set out in the statutory guidance is whether the person had a reasonable expectation of needing to contribute to the cost of their eligible care needs? Again, this formulation is likely to draw decision makers into error.

In Beeson, the resident's son asserted that neither he nor his father understood that care was means tested. Again, referring to Yule, HHJ Richards dealt with the issue of knowledge of the means test stating:

11.       Although the court held that it is not necessary for the claimant to know of "the"⁶ capital limit and that no specific finding is required as to the exact state of knowledge or intention of the applicant, I do not see how an applicant could be found to have the relevant purpose unless he was aware of the possibility that he might be provided with accommodation and that he might be liable to pay for it."

It necessarily follows from the requirement to find that it was the actual intention of the resident to deprive themselves of capital, that they knew the asset they disposed of was required to pay for their care.

The reference to "accommodation" in this passage from Beeson is significant. The father had gifted the house. It is only in the means test for residential care that the issue of the former home becomes relevant. The means test for domiciliary care does not take account of the capital value of the home. It cannot necessarily be inferred that because a person understands that they have to pay towards domiciliary from their income, that they understand that wider test of capital for residential care includes their house.

The LGO decision misses this point. Its comment that: "Indeed she was already in receipt of domiciliary care at the point the Trust was drawn up" suggests this is sufficient to infer that she would understand that the house, which is disregarded for domiciliary care, would be taken into account if she had to move into residential care. This is irrational.

The disposed of asset must have been placed at risk by the particular need for care. In the case of the disposal of a house, it is residential care that must be expected.

It is hard to know how it can be determined that a person should have a reasonable expectation of needing to contribute to the cost of their eligible care needs? Either they know enough about means testing, or they don't.

Policy documents addressing the perennial question of how to fund social care often refer to the poor knowledge amongst the public of how social care is funded. For example in 2017 an IPSOS Morri poll found that:

"There is also widespread lack of awareness about how and who provides social care services – the majority think the NHS provides social care services and just under half (47%) wrongly think social care is free at the point of need. Meanwhile, only a third of people (35%) are preparing financially to a some or great extent for their social care needs in the future, yet 55% people think it is their own responsibility to do so." ⁷

The Yule case is ambiguous on the issue of actual knowledge of means testing stating that:

"we do not consider...that it is necessary that the claimant should know of "the" capital limit above which in terms of the relevant regulations applicable at the time, the local authority is bound to refuse the application,  if it is a reasonable inference, looking to the transaction in the whole surrounding circumstances relating to the applicant that it must have been a purpose of the transaction to avoid having to pay any charges in the event of becoming a resident in residential accommodation."

It is submitted that the logic of the Court here is analogous to arguing; 'when you see an elephant you don't need to determine whether it has a tail and tusks.'

However, an elephant is a thing and cannot easily be mistaken for anything else. A deprivation decision is an explanation and we all know that there can be many explanations of any particular event.

In that respect, the problem with the practical application of this approach is bias. Decisions about property dispositions by the elderly can be a complex matrix of family dynamics. It is local authority decision makers in means testing departments who are predisposed to see elephants where none exist, precisely because their job is to see elephants. Hence, they start with the question, "does this look like care fees avoidance?" The right starting point for a decision maker is "what does the evidence suggest motivated this?"

For this reason, the statutory guidance rightly states: "...deprivation should not be automatically assumed, there may be valid reasons why someone no longer has an asset and a local authority should ensure it fully explores this first."8

This requirement for a full investigation is often more honoured in the breach than the observance, precisely because the decision maker thinks that they see an elephant and because financial incentives militate against such an investigation. A proper investigation of what the decision maker sees as an elephant can only cost the local authority time and money and deprive it of a resource. 

Amending the statutory guidance

It is admirable that the statutory guidance is now so clear about the intention of the deprivation regime. Amendments should be made to more clearly give this effect.

Paragraph 11 of the statutory guidance should be rewritten, clarifying that to make a deprivation finding, the council must be able to justify a finding that the adult disposed of the resource to avoid paying for residential care.

In making that finding it must be satisfied on the material obtained further to an effective and proportionate investigation that the adult:

• Expected to need care for which the resource would be taken into account

and

• Expected to have to use the resource to pay for it.

In the interests of fair process, the guidance should make it clear that the adult should not in any circumstances be found to have an expectation of needing care if they did not have any health conditions that were likely to require the relevant care. This sets a back stop preventing a local authority querying long past transactions for which little or no direct evidence is now available and as a result of which the adult would be prejudiced in defending their position. This is especially important since from experience it appears that local authorities give very little weight to verbal testimony.

In my substantial experience of advising clients on this subject, no other area of public service provides so little protection and redress for vulnerable people against a decision with such significant financial consequences. It remains questionable whether local authority practice is this area is compliant with Article 6 ECHR which reads materially:

"In the determination of his civil rights and obligations ....everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law."

Those who make up the system of decision making and redress, including those who write the guidance, need to do far better to ensure that the public can have reasonable confidence that these decisions are properly made.

Footnotes

1. See Part 1:  Trusts of Land and Appointment of Trustees Act 1996

2. Care and Support (Charging and Assessment of Resources)Regulations 2014

3. (2000) Scot CS 227

4. Paragraph 29

5. Beeson v Dorset (2001) EWHC Admin 986

6. The reference here to "the" capital limit appears to refer to the numerical capital limit, in England currently £23,250

7. IPSOS Morri: Public perceptions of austerity, social care and personal data 26 October 2017. Can be viewed at: https://www.ipsos.com/ipsos-mori/en-uk/public-perceptions-austerity-social-care-and-personal-data

8. Annex E paragraph 5

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.