This case focuses on the power of a local authority to recover charges it has incurred for the provision of residential care where a gift is made by a patient to another in order to decrease the amount he may be liable to pay for accommodation It also examined the right of a person receiving care to raise a public law argument against a local authority as a defence to an authority’s claim to recover its charges.
The claimant (A) suffered a heart attack and stroke and was admitted to hospital before being transferred to a nursing home. The defendants, Derbyshire County Council (DCC) were obliged under the National Assistance Act 1948 to provide him with residential accommodation. Local authorities are obliged to make a charge for such accommodation and DCC made a provisional assessment of A’s resources. At this time DCC were not aware that A had given his house to his children shortly before entering the nursing home. Other than his house, A had no other assets. DCC therefore assessed A as not being liable for the costs of his residential care. DCC later discovered that the Benefits Agency, in disallowing a claim by A for income support, had taken into consideration his home as an asset in making their decision. DCC then revised their assessment of A, relying on the National Assistance (Assessment of Resources) Regulations 1992 which permitted them to take into account capital of which a resident “has deprived himself for the purposes of decreasing the amount that he may be liable to pay for his accommodation.”(Regulation 25) This meant that he was treated as if he still owned his own home at the time he entered residential care and was therefore liable for the full costs.
DCC commenced proceedings to recover these costs and used s423 Insolvency Act 1986(IA) as a means of transferring A’s home back to his estate. The court permitted this claim. In doing so it refused to consider A’s defence, that DCC had acted contrary to public law principles by making an irrational second assessment of his resources which was not a decision that any reasonable authority would have made. A then appealed against this decision based on 2 grounds:
(1) the court erred in law by refusing to consider his public law defence and
(2) s423 IA should not have been used to transfer A’s property back to his estate.
With regard to the public law defence, the Court of Appeal decided that the county court should have considered this issue based on the dicta in Rhondda Cynon Taff County Borough Council v Watkins  which held that as general principle a litigant is entitled to raise as a defence an alleged breach of public law if it affects the basis of the claimant’s claim. The court should have considered the defence, and the Court of Appeal remitted the claim back to the county court for proper consideration. Appeal allowed.
With respect to s423 of IA, the Court of Appeal held that the judge had been quite correct on his application of this section of the Act. This section relates to transactions entered into at an undervalue or where a gift is made to another for which he receives no consideration. Where the intention of the transaction is to put assets beyond the reach of a person whom may make at some time a claim against him, or to otherwise prejudice that person in his claim, the court is provided with certain powers contained in s424. This section allows it to make an order in respect of a ‘victim’ of such a transaction. The Court of Appeal held that the judge had correctly determined that the substantial purpose of A’s transaction was to put the house beyond the reach of a party who might make a claim against him in respect of the costs of his residential care. It was not necessary to identify a ‘victim’ in more specific terms than that. It was therefore correct to make an order restoring the position to what it would have been had the transaction not been entered into and to protect the interest of the ‘victim.’ This allowed DCC to recover its charges and there was no basis for the Court of Appeal to interfere with this decision. Appeal dismissed.
This approach left A entitled to argue, again (at the county court level), that the means assessment was irrationally flawed, whilst preserving the asset base against which the local authority could enforce whatever lawful outcome was achieved, by an assessment of means, eventually, if A succeeded in his defence.