Aster Healthcare Limited v The Estate of Mr Mohamed Shafi [2014] EWHC 77 (QB) (Andrews J)

Mental capacity – finance

Summary

The Claimant company owned and ran six care homes registered under the Care Standards Act 2000, including Raj Nursing Home, (‘the Home’) a residential nursing home in Southall, which specialised in caring for elderly persons suffering from dementia. The majority of referrals to the Home were made by the local authority, Brent Council (‘Brent’). Mr  Shafi, who  suffered  from dementia, was detained under the MHA 1983 for a period of time in a hospital. He was assessed as lacking the capacity to make decisions regarding his future care; he was referred to Brent for placement. Brent, in turn, referred him to the Home. The precise basis upon which he entered the home was a matter of some considerable dispute. In any event, he lived at the Home from 29 January 2010 until his death on 28 March 2012, incurring total fees of £62,199.94. The Claimant  company  initially looked  to Brent  for  payment,  but  then  to  Mrs Shafi, who refused to pay.

The Claimant company sought recovery of the fees by way of a claim against Mrs Shafi personally; this was struck out by a District Judge on the basis that she had never entered into any contract with the company. The same District Judge held that the Estate was liable to pay because there was an unanswerable claim under s.7 of the MCA 2005, and there was no prospect of it being established that Brent had a primary responsibility to pay. The Estate (by Mrs Shafi) appealed the decision.

In setting aside the decision and setting the matter down for trial, Andrews J examined the factual and legislative position in some detail. After a lengthy examination of the relevant provisions of the community care legislation and the facts as they appeared (hampered in some measure by the fact that, as matters stood, Brent was not a party to the proceedings), she found that such evidence as there was tended “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 [National Assistance Act] 1948…” (paragraph 40).

For reasons that need not detain us here, Andrews J concluded that – contrary to the conclusion reached by the District Judge – there was insufficient evidence to enable the Court to conclude upon a summary judgment application that Brent was not liable to make  payment  of fees to the Claimant, or that its duties under Part III of the National Assistance Act 1948 did not continue to be engaged after it had sent a letter which purported to suggest that Mr Shafi was a self-funder and the Home should make appropriate arrangements thereafter to ensure payment of the fees.

Andrews J then came on to consider the relevance of s.7 MCA 2005. This had not been pleaded by the Claimant initially, but was then pleaded in response to the contention in the Defence that Mr Shafi had at all material times lacked capacity to contract.

The answer to the question of what, if any, bearing any duty on Brent to pay the Home’s fees had on the claim against Mr Shafi’s Estate under s.7 MCA 2005, Andrews J found, depended on a proper understanding of what s.7 was intended to achieve. In order to reach that understanding, she undertook a historical tour d’horizon, starting with the Court of Appeal’s decision Re Rhodes [1890] 44 Ch Div 94, and the process by which the common law rule on the supply of “necessaries” set down in the case became enshrined into s.7 MCA 2005. She noted that the definition of ‘necessary’ precisely mirrored that given over a century earlier by the Court of Appeal in Re Rhodes.

Andrews J rejected the submission made on behalf of the Claimant company that it was arguable that the services supplied by the Claimant 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. At paragraph 54, Andrews J held that “[t]he 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.” (emphasis added).

She continued:

55. 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.

56. 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.

57. 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.”

Andrews J rejected the submission that Wychavon DC v EM (HM) [2012] UKUT 12 (AAC) was 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.” She noted that 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...” (paragraph 58, emphasis in original)

Andrews J therefore concluded that:

59. 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.

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.”

In the circumstances, Andrews J found that – given the limited evidence available that any arrangements in respect of the  provision of services to Mr Shafi by the Home were made by anyone other than Brent – she could not say that there was 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. She noted that “[t]he possibility remain[ed] that Brent may be liable for all the fees, subject to its right to recoup them in whole or in part from the Estate.” (paragraph 61). She concluded by noting that it seemed inevitable that the legal costs of the action would exceed the amount in issue, and urged settlement or mediation on the parties.

Comment

This judgment provides a helpful summary of the relevant legislative framework in relation to the charging of accommodation arranged by a local authority for a person lacking capacity. Ensuring that those unable to decide whether to enter a care home are not disadvantaged, in terms of liability for care home fees, compared to those with capacity is welcome. The outcome illustrates the importance of being able to identify the legal basis upon which a person is so accommodated, the financial intentions of the parties at the time, and identifying the correct debtor and debtee.