County council in rare High Court win against care home providers

A county council has achieved a rare success in defeating a High Court challenge by a group of care home providers over its proposed fees.

Care North East Northumberland, which represents providers in the North East, challenged two decisions by Northumberland County Council to fix care home rates from 1 April 2012 to 31 March 2015.

There were four grounds of challenge in Care North East Northumberland, Members of the Committee of, R (on the application of) v Northumberland Care Trust [2013] EWHC 234 (Admin):

1. That the county council failed to comply with its duties of consultation;
2. That the council failed to inform itself of the costs to care home operators of providing services before setting its rates and so acted contrary to the relevant guidelines;
3. That Northumberland acted irrationally and/or failed to take into account relevant considerations, including by imposing ‘efficiency savings’ on care home providers in certain bands without making any assessment of how those efficiency savings might be generated;
4. By refusing to make new placements with care home providers who had not signed the contract terms issued in March 2012, the council had abused its dominant position in the market and acted contrary to paragraph 3 of the National Assistance Act 1948 (Choice of Accommodation) Directions 19992 and Local Authority Circular LAC (2004) 20.

During the course of the hearing, it became clear that the principal issue – part of the second ground – was whether the council failed to have “due regard to the actual costs of providing care”, contrary to the circular.

Counsel for the claimants argued, amongst other things, that Northumberland was bound to adopt some means of determining the actual costs of care in order to put itself in a position to pay due regard to those costs. She said the council could have informed itself and reached some form of figure as to the costs of care by conducting a survey of a sample of providers.

The claimants' barrister also argued that the county council had erred in setting the fees from 2012 on the basis of a benchmarking exercise by which it decided that the fees paid were relatively high in Northumberland by comparison with those of other local authorities and imposed a three-year contract designed to reduce in real terms the fees paid in respect of provision without reference to considerations of actual costs.

She insisted that the council’s approach to benchmarking was selective, with no regard had to the fact that Northumberland rates for EMI care were far from the highest in the North East, and pointed out that there was no reference to the guidance in the council’s contemporaneous documentation.

But Mr Justice Supperstone ruled in the county council’s favour. He said a sentence in the circular on which the claimant relied – "In setting and reviewing their usual costs, councils should have due regard to the actual costs of providing care and other local factors” – had to be read in its context.

Agreeing with Northumberland’s counsel, the judge said: “As such it means no more than that, when determining what they are usually prepared to pay for residential care, authorities should bear in mind, amongst other matters, the providers' need to recover their costs.

“Usual fee rates should not be set by authorities without any consideration being had to the question of whether it is viable to provide care at those rates. However, even if ‘having due regard to the actual costs of providing care’ should be understood as requiring a more specific consideration of actual costs, the circular does not require authorities to calculate or ascertain the actual cost of care.”

Reviewing the evidence, the judge said he was entirely satisfied that Northumberland did have due regard to the actual costs of care as required by the circular.

He also concluded that the council was entitled to depart from Building Capacity, non-statutory guidance issued by the Department of Health in 2001. “The guidance was taken into account, and clear reasons were given by the council for departing, in so far as it did, from it. The reasons given for the departure are plainly rational.”

Mr Justice Supperstone rejected the three other grounds put forward by the claimants.

On the third ground, he said Northumberland “did have regard to relevant considerations, and reached a conclusion that was well within the ambit of its legitimate judgment”.

As regards consultation, he said the council was not required to quantify costs in the way contended for by the claimants. “That being so, the absence of a quantification of costs could not invalidate the consultation process,” Mr Justice Supperstone said, adding that the claimants could have requested a quantification of actual costs, but they did not do so.

He concluded that, on the evidence, proper consideration occurred when the proposals were at the formative stage.

Finally, the judge said the allegation of abuse of dominant position and that the county council had acted in breach of the Directions and the circular had not been made out.

Ian Lindley, Executive Member for Adult Care and Wellbeing at Northumberland County Council, said he was pleased that the judge had confirmed that it was "for local authorities not the courts to make difficult decisions about priorities".

He added: "In troubled financial times, we still need to make sure there is a range of services to meet everyone’s needs – including care homes – but we decided to set the fees for care homes at levels which would enable us to use as much as possible of our limited funding to support people to stay living independently in their own homes.”

Daljit Lally, Corporate Director of Adult Services and Housing at the local authority, said: “The view of the trade association Care North East Northumberland appeared to be that court cases in other areas gave them a legal right to have fees set in the way they preferred...

“There have been legal challenges over fees in a number of areas of the North East and elsewhere. The situation is different in each area, and the courts have made specific decisions in each case. But the judge in our case has clarified the law in some helpful ways, and I hope that this will help to reduce the number of legal disputes in future. It was never our choice to end up in court.”

Northumberland follows Neath Port Talbot Council in successfully defending a claim from care home providers. However, most local authorities involved in similar High Court battles over the last two years have lost.

The most recent case saw Redcar and Cleveland Borough Council lose a case after it proposed a cut in rates for 2012/13 below the level the authority paid the previous year.

HHJ Gosnell ruled that, on the facts, Redcar and Cleveland had failed or failed properly to assess and have due regard to the actual costs of care, in particular in relation to local factors.

The council expressed disappointment at the ruling, claiming that it paid the highest rate of any other authority in the North East.

The case was seized on by the Registered Nursing Home Association, which claimed that councils were engaging in “bully-boy tactics” over the fees they are deciding to pay providers.

Philip Hoult

See also: On taking care – cautionary tales and lessons to be learned - Stephen McNamara's analysis of the case law.