The Care Act 2014 :
Debt and Enforcement
Tish Hanifan
Barrister
Founder and Jt Chair
Society of Later Life Advisers
Current System Health and Social Services and Social
Security Adjudications Act (HASSASSA) 1983,
• Section 22 Applies where a resident fails to pay an
assessed charge for accommodation and has a beneficial
interest in land.
• This specific power to create a charge is contained in the
Health and Social Services and Social Security Adjudications
Act (HASSASSA) 1983, and so the general powers contained
in section 111 of the Local Government Act 1972 aren’t
used.
• Interest cannot be charged during the resident's lifetime
on a debt which is covered by the creation of a charge on
property under section 22 of HASSASSA.
• HASSASSA requires interest to be charged from the day
after the resident's death
Registration of Charge
• 3.5 It is the Department's view that where one person
owns land then his interest is in the land itself and a charge
can be registered against that interest under section 22 of
HASSASSA.
• However where more than one person owns the same
piece of land then their interest is technically in the
proceeds of sale of that land and not in the land itself. In
this case,
• section 22(8) of HASSASSA has the effect of preventing the
registration of an interest in the proceeds of sale of land.
Registering a caution (which affords less protection than a
registered charge) is the best step an authority can take in
such circumstances.
HASSA and Joint Tenancies
• 22(5) The charge on the interest of a joint tenant in the proceeds of
sale of land held upon trust for sale shall be in respect of an amount
not exceeding the value of the interest that he would enjoy in those
proceeds if the joint tenancy were severed but the creation of such
a charge shall not sever the joint tenancy.
• (6) On the death of a joint tenant in the proceeds of sale of land
held upon trust for sale whose interest in the proceeds is subject to
a charge under this section• (a) if there are surviving joint tenants, their interests in the
proceeds ; and
• (b) if the land vests in one person, or one person is entitled to have
it vested in him, his interest in it, shall become subject to a charge
for an amount not exceeding the amount of the charge to which
the interest of the deceased joint tenant was subject by virtue of
subsection (5) above.
Changes under the Care Act 2014
• The Care Act 2014 consolidates local authorities’ powers to
recover money they are owed for arranging care and support
for a person.
• Key change for Local Authorities
• Section 22 of the Health and Social Services and Social
Security Act (HASSASSA) 1983 is revoked from April 2015 and
no new debts can be recovered under that provision. The
reason for the change is that the powers under HASSASSA are
unilateral. They allow a local authority to place a charge
against a person’s property but do not give the person from
whom the recovery of the debt is being pursued the
opportunity to seek alternative means for payment.
• Brings debt recovery in line with minimum requirements for
other debt recovery
Care Act 2014 Changes
• . From April 2015, local authorities must only use
the debt recovery powers under Section 70 of the
Care Act in order to recover any debts from the
date the Act comes into force, including for debts
that were incurred before that date. Any
arrangements that are already in place, or
proceedings that are already underway, prior to
that may continue to their conclusion, but no
new arrangements can be made under those
routes. The above includes debts being recovered
under Section 22 of HASSASSA (1983)
Care Act 2014 : Recovery of Debts
• The Care Act enables the local authority to institute County
Court proceedings to recover debts where a person does
not pay or misrepresents information relevant to the
financial assessment
• The new provisions bring the balance of power more into
line with other areas of law
• protecting local authorities from potential lawsuits under
Human Rights legislation
• provide increased protection for the person through
improved oversight and due process.
• These will be equivalent to provisions that already exists in
other areas where a local authority may need to seek to
recover a debt.
Process
• The Care Act has Increased emphasis on ensuring that a
fair and transparent process is embedded in the system.
• The process should be viewed in terms of the reduction in
risk of challenge to the fairness of the process itself.
• Extremely important to document actions’ decisions and
their rationale [ particularly DPA refusals]
• Correspondence should set out the potential options for
debt recovery by the LA
• Signposting to debt advice
• Instigating County Court proceedings seen as last resort
• Referral to legal department [ capacity issues]
Recovery and DPA
.
• A local authority
must offer a person the option of a
deferred payment agreement (DPA) in order to recover
the debt wherever the person could be offered a DPA,
and can only make an application to the court should the
person refuse a DPA.
• Local authorities are encouraged to use their discretion
to offer DPAs to people who do not meet the mandatory
acceptance criteria for DPAs. DPAs can only be offered
to people in care homes or supported living
environments, and people must agree to them and be
able to secure the debt. 258 The local authority can exercise
its discretion under the care act to refuse to agree to defer
any further care costs, whilst securing any .
Care Act 2014 Section 69
• Recovery of charges, interest etc.
• This section replaces sections 22 and 24 of the Health and
Social Services and Social Security Adjudications Act 1983 and
section 45 of the National Assistance Act 1948.
• This section allows authorities to recover as a debt any sums
owed, such as unpaid charges and interest.
• The exception to this is cases where an authority could enter
into a deferred payment agreement, (in accordance with
regulations under section 34) unless the authority offers
someone this option and they refuse (subsection 2).
• This exception is to ensure that a local authority cannot use
the debt recovery power as an alternative to entering a
deferred payment arrangement.
Section 69
• All administrative and other costs are fully
recoverable through the County Court and a
local authority can apply to receive interest.
The maximum amount of interest that can
currently be applied is 8%, which is higher
than the level of interest that may be applied
for a deferred payment agreement or the
current costs of debt financing.
Capacity Issues
• Ensure person has capacity or they have
someone who is appointed to make decisions for
them
• Where a person lacks capacity to make financial
decisions, for example because they have severe
dementia, and they have substantial debts to the
local authority or are likely to accrue them, then
the local authority should ask the family to apply
for a deputyship. Where there is no family or they
choose not to, the local authority should apply
for one before they proceed to the County Court
• Bear in mind the risks of a conflict of interest
Discretion
• Even if there is a debt, the local authority will need to consider
whether it is appropriate to recover it. The local authority does not
have to recover the debt – it can choose not to do so. The local
authority should consider not recovering a debt where:
• (a) The amount of the debt is small and the costs of recovery would
be disproportionate.
• (b) The impact of recovering the debt would adversely affect the
well-being of the person receiving care and support.
• (c) The person or their representative could not reasonably have
been aware that the asset in question needed to be included
The local authority should contact the person and assess if there has
been a change in capacity, i.e. does the person now lack capacity to
make financial decisions, and take action appropriately
Care Act 2014
• Local authorities are bound by the public law
principle of acting reasonably at all times and
must act in accordance with human rights
legislation, as well as the wellbeing principle, so
they should consider taking legal advice before
instituting recovery proceedings.
• This was true with HASSSA which stated
3.4 If the LA is considering placing a charge on a
resident's interest in land, the resident should be
advised to or assisted to consult a solicitor about
this procedure.
Recovery from Third Party
• Recovering charges from a third party 20. Where the person has
transferred the asset to a third party to avoid the charge, the third
party is liable to pay the local authority the difference between
what it would have charged and did charge the person receiving
care. However, the third party is not liable to pay anything which
exceeds the benefit they have received from the transfer. 21. If the
person has transferred funds to more than one third party, each of
those people is liable to pay the local authority the difference
between what it would have charged or did charge the person
receiving care in proportion to the amount they received. 22. As
with any other debt, the local authority can use the County Court
process to recover debts, but this should be as a last resort. When
pursing the recovery of charges from a third party, a local authority
must read Annex D on debt recovery.
• Annexe E Statutory Guidance
Recovery from an Estate
• In most cases this will make recovery a
straightforward process as property and other
assets are liquidated by the executors as part of
the probate process
Possible Problems
• Delay due to executor failing to carry out their
obligations and/ or not taking out a grant of
Representation
• Insolvent estate
• Applications may be made by a creditor using
Non-contention Probate Rules 1987
Alternatives to County Court
• Emphasis on Dispute Resolution
• Statutory Guidance specifies that all other avenues
must have been exhausted before County Court Action
Commences
• DPA
• Negotiating a settlement [ could be done by LA or
through a 3rd party – solicitor /Independent advocate
• Some charities have will act on behalf of a person who
had debt problems eg CAB, AGE UK, Step Change
• Mediation
• Arbitration
Deferred Payments
• A local authority must have adequate security in
place when entering into a deferred payment
agreement i.e. have enough security to be
confident of the person’s ability to pay back the
amount deferred in the future. Otherwise they
can refuse the DPA. The regulations set out some
forms of security that local authorities must
accept in all circumstances. They also provide
discretion for local authorities to accept other
forms of security as they see fit.
Other Forms of Security
• Consumer credit Issues
• Risk Profile of the Authority
• Imperative to have a Policy which includes consideration of other
options for security
• A solicitor’s undertaking letter. This offers low security as on paper
there is considerable risk, ultimately security is based on the
assumption that solicitors want to retain their professional
accreditation and do not want to be reported to the Law Society.
Furthermore there is nothing to stop the client from instructing a
new solicitor therefore nullifying the undertaking. However, in
practice they very rarely result in bad debt, but it is high risk and
not recommended for a long term undertaking. They are usually
used for individuals if they have debts but are assured of funds
coming to them shortly
County Court Action
• Where all other reasonable avenues have been
exhausted, a local authority may wish to proceed
to the County Court in order to recover the debt
owed.
• The County Court has been chosen to enable all
the parties involved to have an equal say
regarding the debt that has accrued.
• Before making a claim, local authorities should
read the HM Courts and Tribunal Services
(HMCTS) leaflet EX302
County Court Process
• It is important to remember to check the dates set by the court for
response at each stage of the process. If a date is missed, your
claim may be stopped – known as ‘stayed’ – and the only way to
continue the claim after this period is to apply to the court for an
order to lift the stay, for which there may be a fee. This is known as
a relief from sanctions which comes with strict criteria and may not
always be granted. A local authority will therefore want to ensure it
does not miss these dates.
• NB Once a final judgment or order has been made, it is not possible
to add any further debts that may have accrued. Local authorities
will therefore need to think carefully about what steps can be put in
place to ensure that a person is able to meet their assessed
contribution towards the cost of their care and support. Should
debts continue to accrue, a local authority will need to begin the
debt recovery process afresh
Interest on Debt
• This can be claimed form date the debt feel due
and continuing to date of judgement
• Important to use correct wording:
The claimant claims interest under section 69 of
the County Courts Act 1984 at the rate of [8]% a
year from [date when the money became owed to
you] to [date you are issuing the claim] of
£[amount] as well as interest, at the same rate, up
to the date of judgment or when the money is paid
(if this is earlier) at a daily rate of [daily rate of
interest].’
Enforcement Options
• A ‘warrant of execution’ empowers a County Court bailiff to attend a
judgment debtor’s address to take goods to sell at a public auction[ over
£5k LA can apply for enforcement in High Court.
• Under a ‘third party debt order’ money owed to the judgment debtor is
paid directly to the creditor from their bank or building society account.
• Under an ‘attachment of earnings order’ money is stopped from the
judgment debtor’s wages to pay a debt (obviously, this order will only help
if the debtor is in paid employment).
• A ‘charging order’ turns an unsecured debt into a secured one. Under this
order a legal charge is placed on the judgment debtor’s property (usually
the debtor’s home) to the value of the debt owed to the judgment
creditor (plus interest). If the property subject to a charging order is sold,
the full amount of the charge (i.e. the outstanding debt) has to be paid
before any of the proceeds of the sale can pass to the judgment debtor.
• Each option has its own benefits but consideration might need to be given
both to the general principles of the Care Act and to public policy in
terms of prioritising enforcement
Recovery Time Limits
• )A sum is recoverable under this section—
• (a)in a case in which the sum becomes due to
the local authority on or after the
commencement of this section, within six
years of the date the sum becomes due;
• (b)in any other case, within three years of the
date on which it becomes due.
Financial Assessments and Pensions
• Annex C: Treatment of Income:
• Where a person is in a care home and paying
half of the value of their occupational
pension, personal pension or retirement
annuity to their spouse or civil partner the
local authority must disregard 50% of its
value.
Pension Income
• Notional income should also be applied where a person who has
reached retirement age and has a personal pension plan but has
not purchased an annuity or arranged to draw down the maximum
income available from the plan. Estimates of the notional income
can be received from the pensions provider. 35. Where notional
income is included in a financial assessment, it should be treated
the same way as actual income. Therefore any income that would
usually be disregarded should continue to be so. 36. Notional
income should be calculated from the date it could be expected to
be acquired if an application had been made. In doing so, a local
authority should assume the application was made when it first
became aware of the possibility and take account of any time limits
which may limit the period of arrears.
• P.34 Annexe C Treatment of Income
Financial Assessments and Pensions
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Annex C: Treatment of Income:
The rules for how to assess pension income for the purposes of
charging are:
(a) If a person has removed the funds and placed them in another
product or savings account, they should be treated according to the
rules for that product;
(b) If a person is only drawing a minimal income, then a local
authority can apply notional income choosing not to draw income, or
according to the maximum income that could be drawn under an
annuity product. If applying maximum notional income, the actual
income should be disregarded to avoid double counting;
(c) If a person is drawing down an income that is higher than the
maximum available under an annuity product, the actual income that
is being drawn down should be taken into account.