Council wins appeal over residential care payments and revenue streams

The Court of Appeal has allowed a council’s appeal over whether it could lawfully take into account three revenue streams – private fees, top up payments and NHS payments – when making an evaluative judgement of what it would expect to pay for residential care for the elderly.

The Torbay Quality Care Forum, an association representing independent care homes in Torbay, had successfully challenged the decision of Torbay Council dated 5 February 2014 setting the fees it was prepared to pay for providing care to care home residents who were eligible under the National Assistance Act 1948 and related legislation for council-funded care for the year 2014–15.

Torbay set four banded weekly fee rates of £358 and £431 respectively for "standard" and "standard plus" care, and £464 and £504 respectively for "standard" and "standard plus" nursing care. These fees were referred to as "the usual cost(s)".

In the High Court HHJ Lambert declared that the council's decision was unlawful by having regard, in its calculations to fees received by care homes from third-party top-ups, from privately-paying residents, and/or in respect of residents with enhanced needs or on Continuing Healthcare and quashed it.

The unlawfulness was declared to be in departing without good reason from the guidance in Circular LAC (2004) 20 on the National Assistance Act 1948 (Choice of Accommodation) Directions 1992 ("LAC (2004) 20").

Torbay appealed against this part of the order. The order had also declared that Torbay had relied on a calculation of weighted average staff hours which was significantly flawed but the council did not seek permission to appeal against that declaration or the order quashing the decision.

Lord Justice Beatson noted that the sole issue before the Court of Appeal was whether a council setting the "usual cost" of providing care to care home residents was entitled to take into account the three other revenue streams received by care homes, and to deduct an amount representing an assumed fee from the actual cost of meeting the assessed care needs of the individual in question.

In Torbay Council v Torbay Quality Care Forum Ltd [2017] EWCA Civ 1605 the Court of Appeal ruled by 2-1 in favour of the local authority.

Sir Ian Burnett, the Lord Chief Justice, said: “The issue is whether Torbay acted unlawfully in taking account of the three revenue streams (private fees, top up payments and NHS payments) when making the evaluative judgement of what it would expect to pay for residential care for the elderly.

“In my opinion, there is nothing in the Directions or 2004 Guidance which precludes them from doing so. That judgement was informed by a complex model which took account of a very large range of considerations and worked on the best, albeit incomplete, evidence available. We were shown aspects of the evidence and the model but this appeal is not concerned with any criticism of the model or Torbay's approach, save as regards the high level points.”

The LCJ said he accepted the arguments advanced on behalf of the appellant council that the judge misconstrued the 2004 Guidance as requiring it to disregard the effect on care homes' profitability and return of capital of all income streams other than fees paid by local authorities and would allow the appeal.

Lady Justice King, who also gave a judgment, agreed with Sir Ian’s reasons.

Lord Justice Beatson, however, considered that there were two bases for upholding the judge's order that the council's decision was unlawful.

“The first, a broader basis, is that the language of the circular as a whole, and in particular that of §2.5.4, precludes using additional income sources to set a ‘usual cost’ that is necessarily insufficient to meet the assessed care needs,” he said.

“The second, a narrower basis, is that it is wrong to use a model which expressly includes third-party top-ups, when those top-ups are excluded by § 3.3 of the circular. However, since the Lord Chief Justice and King LJ disagree with my interpretation, the appeal will be allowed.”

Lord Justice Beatson noted that the legal regime governing local authorities’ care provision was the one that applied to the time of the challenged decision (ie before the Care Act 2014 came into force).