R(A) 2/96
(Chief Adjudication Officer v. Kenyon)

CA (Butler-Sloss, Simon Brown and Saville LJJ) 	      CA/215/1992
17.10.95
Applicable amount - residential accommodation not paid for wholly or partly out of public or local funds or arranged by local authority - whether accommodation provided pursuant to a Scheduled enactment
This appeal was the lead case of six cases on essentially the same facts and raising the same issues of law.  The claimants resided in accommodation at premises in Lancaster owned by the Lancaster Health Authority.  In terms of regulation  4(1)(c) of the Social Security (Attendance Allowance) (No. 2) Regulations 1975, a payment of attendance allowance could not be made to a claimant the cost of whose accommodation “may be borne wholly or partly out of public or local funds in pursuance of” an enactment contained in the Schedule to the regulations.  There could have been relief from the prohibition if so directed by the Secretary of State under regulation 4(3)(b).  However, the Secretary of State had issued a certificate declining to disapply regulation 4(1)(c).  The adjudication officer had refused to make an award of attendance allowance (or had terminated existing awards on review).  The social security appeal tribunal reversed the adjudication officer’s decisions and ordered, or reinstated, payment.  The adjudication officer appealed to the Commissioner who upheld the decisions of the tribunal.  The adjudication officer then appealed to the Court of Appeal.  Before the Court of Appeal, it was common ground between the parties that (i) the local social services authority had the Secretary of State’s advance approval for the making of arrangements for the provision of residential accommodation for the care of persons like the claimant suffering from illness; and (ii) had such arrangements been made, the local authority could have borne all or part of the cost of such accommodation but that the claimant’s accommodation had not been provided under any such arrangement.
Held, dismissing the appeal, that:
1.	before considering whether or not the cost of the accommodation may be borne out of public funds for the purposes of regulations 4(1)(b) and 4(1)(c), it was necessary to consider the circumstances in which that accommodation was provided.  The possibility of expending public money on accommodation could not sensibly be said to arise in all circumstances as this would deprive the opening words of regulations 4(1)(b) and 4(1)(c) of all meaning and negate the object of introducing attendance allowance;
2.	regulation 4(1)(c) applied where the local authority had power to pay some or all of the cost of accommodation provided by a third party.  It did not have such power unless and until it made arrangements for the provision of the accommodation or, once the accommodation had been provided, for its cost.  Since that had not happened, regulation 4(1)(c) did not apply;
3.	it followed that Jones v. The Insurance Officer [R(A) 3/83] was narrower in scope than had been considered previously.	

DECISION OF THE court of appeal
Mr. J. R. McManus (instructed by the Office of the Solicitor to the Department of Social Security, London) appeared on behalf of the Appellant.
Ms. N. Lieven (instructed by Messrs. Holden and Wilson, 2 Castle Hill, Lancaster) appeared on behalf of the Respondent.

LORD	JUSTICE SIMON BROWN: This is the Chief Adjudication officer’s appeal from a decision of social security Commissioner Walker dated 16 March 1994 holding the respondent, Elsie Kenyon, together with five other claimants in an identical situation, entitled to attendance allowance.

Each of the six suffers from a degree of mental disorder. Each, after some years as a patient in hospital, in June 1987 took up residence at 86, Bowerham Road, Lancaster, a hostel owned, administered and funded by the Lancaster Health Authority. Each, subject to the point raised upon this appeal, would be entitled to attendance allowance, a non‑means‑tested benefit for those in need of care and attention, in the respondent’s case from the date of her application on 5 April 1990.

That entitlement was denied to the claimants by the adjudication officer but accepted on appeal successively by the SSAT and by the Commissioner. Entitlement turns on whether the hostel accommodation in which the respondent was living was provided for her in circumstances in which the cost thereof “may be borne wholly or partly out of public or local funds in pursuance of” paragraph 2 of Schedule 8 to the National Health Service Act 1977. If it was provided in such circumstances, then, under regulation 4(1)(c) of The Social Security (Attendance Allowance) (No. 2) Regulations 1975 (as substituted by regulation 2(3) of the Social Security (Attendance Allowance) Amendment (No. 3) Regulations 1983), payment of the allowance was prohibited.

It is convenient at this early stage to set out the main legislative provisions in play:
The Social Security Act 1975 
Section 35(6):
“Regulations may provide that an attendance allowance shall not be payable in respect of a person for any period when he is a person for whom accommodation is provided-
(a) 	in pursuance of Part III of the National Assistance Act 1948, section 12 of the Health Services and Public Health Act 1968 or Part IV of the Social Work (Scotland) Act 1968; or
(b) 	in circumstances in which the cost is, or may be, borne wholly or partly out of public or local funds, in pursuance of those enactments or of any other enactment relating to persons under disability or to young persons or to education training.”

The previous subsections of section 35 set out the circumstances in which entitlement to attendance allowance generally arises.

Regulation 4(1) of the 1975 Regulations (as amended in 1983):
“Adults in certain accommodation other than hospitals
4. ‑ (1) Except in the cases specified in paragraphs (2) and (3) and subject to regulation 5, attendance allowance shall not be payable in respect of a person who has attained the age of 16 for any period during which that person is living in accommodation-
(a) 	provided for him in pursuance of Part III of the National Assistance Act 1948, paragraph 2 of Schedule 8 to the National Health Service Act 1977, or Part IV of the Social Work (Scotland) Act 1968; or
(b) 	provided for him in circumstances in which the cost of the accommodation is being borne wholly or partly out of public or local funds in pursuance of a Scheduled enactment; or
(c) 	provided for him in circumstances in which the cost of the accommodation may be borne wholly or partly out of public or local funds in pursuance of a Scheduled enactment.”
Para 2(1) of Schedule 8 to the National Health Service Act 1977 (the 1977 Act) (para. 2 being a “Scheduled enactment”)
“Prevention, care and after‑care 
2. - (1) A local social services authority may, with the Secretary of State’s approval, and to such extent as he may direct shall, make arrangements for the purpose of the prevention of illness and for the care of persons suffering from illness and for the after‑care of persons who have been so suffering and in particular for-
(a) 	the provision, equipment and maintenance of residential accommodation for the care of persons with a view to preventing them from becoming ill, the care of persons suffering from illness and the after care of persons who have been so suffering;” 
It is common ground on this appeal (a) that the respondent’s local social services authority had the Secretary of State’s advance approval for the making of arrangements for the provision of residential accommodation for the care of persons (like the respondent) suffering from illness, (b) that had such arrangements been made, the local authority could have borne all or part of the cost of such accommodation, but that (c) the Lancaster Health Authority’s hostel accommodation was not in fact provided for the respondent under any such arrangements.

Put shortly, the appellant’s argument on appeal is that it matters not that the accommodation here was not provided under any arrangements made by the local authority; it could be, and, if it were, then it could be wholly or partly paid for out of local funds. This, submits Mr. McManus, raises the prohibition.

The respondent’s contrary argument is that, because the accommodation was not provided under any arrangements made by the local authority, the local authority has no vires to make any payment towards the cost and so the disqualification does not apply.

Before turning to that issue, the sole issue now arising, it is appropriate to indicate something of how the matter proceeded below. Before the Commissioner it was by no means common ground that the local authority had the Secretary of State’s approval under paragraph 2 of Schedule 8 to the 1977 Act to make arrangements for the provision of accommodation for those suffering illness. On the contrary, the claimants’ contention below was that there was no approval given for any arrangements. That contention succeeded and, indeed, was found determinative. The Commissioner put it thus:
“I cannot understand how a power to bear the cost could have existed until or unless the Secretary of State had given approval or a direction: in short the power of the local authority was subject to a suspensive condition. If that is correct then in principle I do not see how it could be said to have been conferred upon the local authority until the suspension of the condition had been released. A potential power they may have had; it may well also have been in their power to seek release of the suspensive conditions, but until such release they were not clothed with the power.”
That is now rightly conceded by the respondent to have been mistaken. The Secretary of State’s approval was contained in local authority circular 19/74 and it remained in being. True, the circular related to section 12 of the Health Service and Public Health Act 1968. But paragraph 1(1)(b) of Schedule 14 to the National Health Service Act 1977 provided that any approval given under any enactment repealed by that Act continued to have effect as if it could have been given under the corresponding enactment in the 1977 Act. Section 12 of the 1968 Act was repealed by section 129 and Schedule 16 but re‑enacted in paragraph 2 of Schedule 8 of the 1977 Act.

There was accordingly approval to make arrangements but, no arrangements having been made, the respondent’s argument has now shifted further along paragraph 2 of Schedule 8, to the significance of the lack of arrangements, an issue which was not considered by the Commissioner below.

It is convenient at this stage to refer to Jones v. The Insurance Officer, R(A) 3/83, a decision of the Court of Appeal in 1984 upon which Mr. McManus heavily relies. Albeit the court there was concerned with regulation 4(1) of the 1975 Regulations in its unamended form, no one suggests that for present purposes it was materially different. (The supposedly crucial change brought about by the 1983 amendments was, as we shall see, the introduction of a new regulation 4(3)(b)).

The position in Jones was that the claimant lived in a privately owned residential home, his admission there having been arranged by the local social services authority who had thereafter for a time made what were called supplementation payments to the proprietor of the home, under the provisions of paragraph 2(1)(a) of Schedule 8 to the 1977 Act. These payments were later stopped specifically in order to facilitate a claim for attendance allowance. The insurance officer argued that the circumstances of the claimant’s accommodation was such that its cost clearly “may be borne wholly or partly out of public or local funds” within the meaning of section 35(6) of the 1975 Act and regulation 4 of the 1975 Regulations, precisely as it had been partly borne in the past. The appellant’s contrary argument was that regulation 4 only disentitled from benefit those in accommodation provided directly by the local authority itself. It was a hopeless argument and inevitably it failed.

Although the facts of the present appeal are different from those in Jones and although the argument raised is altogether less extreme, Mr. McManus seeks to rely upon the terms as well as the result of the decision there. Browne‑Wilkinson LJ said this:
“The powers of the local authority in cases of severe disablement under paragraph 2 of Schedule 8 of the National Health Service Act 1977 are very wide, and it is difficult to think of any case in which such power is not potentially exercisable in favour of a claimant who would otherwise qualify for an attendance allowance. Therefore the view which the Commissioner has formed and which the Department now supports is one which limits the ambit of attendance allowance very closely indeed. It is that draconian effect of the construction adopted by the Commissioner which really lies at the root of the appellant’s case.”

A little later, having rejected the appellant’s argument, Browne‑Wilkinson LJ added:
“I reach this conclusion with considerable regret since, as I think is accepted by the Department, the result of construing the section in the way in which I have defeats what was the intention of the draughtsman of the regulations and runs contrary to the way in which the regulation has in the past been administered. But I can see no way to escape from clear words. Nor can I see what was in fact intended to be achieved either by the section or the regulation. We have been told that a new regulation was made after the date of the Commissioner’s decision, which one hopes in the future will be rather better directed than the one that we have considered.”

That final paragraph needs a little explanation. The way the regulation had been administered by the Department in the past was that, before the disqualifying words “may be” were applied, there had to be a real possibility in the particular case that there would be a subsidy from local funds. Given the court’s judgment, however, that was not a proper application of the exclusion rule so that in truth, from its inception in 1975 until 1983, there should have been imposed a virtually total statutory bar on the payment of the benefit. As to the “new regulation”, this was a reference to a new regulation 4(3) (inserted by the 1983 amendments) which provided:
“Paragraph (1)(c) shall not apply in respect of the following accommodation-
(a) 	temporary accommodation provided for the homeless;
(b) 	accommodation in such other case or class of case as the Secretary of State may direct.”

In other words the Secretary of State was given absolute discretion to direct when the catch‑all qualifying provision (regulation 4(1)(c)) should be disapplied. Such directions were given informally in 1983; these were replaced by formal directions in 1985. These in turn were replaced and, indeed, the 1975 Regulations, including the new regulation 4(3), were themselves repealed, by the Social Security (Attendance Allowance) Regulations 1991. Regulation 7(1)(c) of the 1991 Regulations essentially reproduces regulation 4(1)(c) of the 1975 Regulations. Regulation 7(3) of the 1991 Regulations reproduces much of the earlier directions given pursuant to regulation 4(3)(b) of the 1975 Regulations. In broad terms the effect of all this was that since 1983 the “may be” provision has been disapplied so as to enable attendance allowance to be paid in cases where the claimant himself pays the whole cost of his accommodation or, in certain circumstances, where he is living in a private dwelling. (It is perhaps worth noting that, since April 1992, attendance allowance has been replaced by disability living allowance. The regulations governing this, however, are in essentially identical terms to those with which this appeal is concerned. Our decision, therefore, will be of continuing relevance.)

Before leaving Jones, the following points fall to be made. First, Mr. McManus’ point that the Court of Appeal there appears clearly to have assumed, as indeed did regulation 4(3)(b) of the 1983 Regulations, that virtually no claimant in fact qualified strictly for attendance allowance until the new regime of Secretary of State’s directions was introduced. I say “virtually no claimant” because, even before 1983, regulation 4 did not disqualify certain claimants in temporary accommodation in Scotland. Second, Miss Lieven’s point that on any view the claimant in Jones was rightly held disqualified: The local authority had made arrangements under paragraph 2 of Schedule 8 to the 1977 Act. It was accordingly simply not useful to the appellant to argue there, as the respondent does here, that no disqualification can arise unless and until arrangements are made.

I come now, therefore, to the critical issue, which arises directly for the first time before us: in a case like this, do arrangements for the claimant’s accommodation have to be made before the prohibition arises under regulation 4(1)(c)?

In contending that they do, Miss Lieven lays stress on the opening words of regulation 4(1)(c) (and, indeed, regulation 4(1)(b)), the words “provided for him in circumstances in which”. Those words are to be contrasted with regulation 4(1)(a) which is satisfied merely upon the provision of the accommodation under any of the stipulated enactments (including paragraph 2 of Schedule 8). The same contrast of language exists under section 35(6) of the 1975 Act.

Under regulations 4(1)(b) and 4(1)(c), before considering whether or not the cost of the accommodation “may be borne” out of public funds, one must first consider the circumstances in which that accommodation was provided. One must ask what it is about those circumstances which legally authorises the expenditure of public money on the cost of the accommodation. Miss Lieven submits, powerfully to my mind, that the possibility of thus expending public money on accommodation cannot sensibly be said to arise in all circumstances. This would deprive the opening words of regulations 4(1)(b) and 4(1)(c) of all meaning and indeed negate the whole object of introducing attendance allowance in the first place. And yet that is the construction for which Mr. McManus contends and which he suggests was accepted by the Court of Appeal in 1984. It applies equally, he contends, to, for example, the case of elderly disabled parents housed without subsidy by their children, as to this case, indeed to all cases save some involving temporary accommodation. That is why, Mr. McManus submits, the 1983 directions were necessary before any such claims could be lawfully paid.

I would reject Mr. McManus’ construction. It seems to me absurd and to give effect neither to the language of regulations 4(1)(b) and 4(1)(c) (and section 35(6)(b), the enabling provision), nor to any apparent purpose of the legislature. Rather I would accept Miss Lieven’s submissions as to how the regulation should be construed and applied. Regulation 4(1)(a) is to be regarded as confined to cases of direct public authority provision of residential accommodation, as, of course, is possible under paragraph 2 of Schedule 8. It is noteworthy that no one seems to have suggested that the claimant in Jones was disqualified under this provision. Regulations 4(1)(b) and 4(1)(c), however, apply where, as is also possible under paragraph 2 of Schedule 8, the local authority either pay (4)(1)(b)) or have the vires to pay (4)(1)(c)) some or all of the cost of accommodation provided by a third party. An essential function of regulation 4(1)(c) is to prevent local authorities, with a view to attendance allowance being paid, declining or ceasing to pay the cost of accommodation for which they themselves should be responsible, just as in Jones.

The local authority, however, does not have the vires to pay unless and until it makes arrangements for the provision of the accommodation or, once the accommodation has been provided, for its cost. That, of course, is precisely what happened in Jones so that that case was rightly decided. It has not, however, happened here and the mere existence of paragraph 2 of Schedule 8 on the statute book is not of itself sufficient to prohibit the claim.

Mr. McManus submitted at one stage of the argument that it was a logical impossibility to make arrangements for the provision of accommodation and thereby create the vires for paying its cost (the respondent’s suggested role for regulation 4(1)(c)) without the claimant at the same time falling foul of regulation 4(1)(a) or 4(1)(b). I disagree. Jones itself, indeed, clearly illustrates the possibility.

It follows from all this that I for my part believe that Jones can and should be seen as a narrower decision than was perhaps thought at the time, that many if not all of the claims paid in the period 1975 to 1983 were properly rather than wrongly paid, that the 1983 directions and the 1991 Regulations which replaced them were not as all-important as they have hitherto been regarded, and that the Commissioner’s decision in the present case was correct, albeit for the wrong reason.

I would dismiss this appeal.

LORD JUSTICE SAVILLE: I agree.

LADY JUSTICE BUTLER‑SLOSS: I also agree.

Order: Appeal dismissed with costs. Legal aid taxation to the respondent. Application to appeal to the House of Lords refused.