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England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Redcar and Cleveland Independent Providers Association & Ors, R (on the application of) v Redcar and Cleveland Borough Council  EWHC 4 (Admin) (17 January 2013)
Cite as:  PTSR 1096,  WLR(D) 44,  EWHC 4 (Admin)
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QUEEN'S BENCH DIVISION
B e f o r e :
| THE QUEEN on the application of REDCAR AND CLEVELAND INDEPENDENT PROVIDERS ASSOCIATION AND OTHERS
|- and -
|REDCAR AND CLEVELAND BOROUGH COUNCIL
Mr Auburn and Mr Potts (instructed by Redcar and Cleveland Borough Council) for the Defendant
Hearing dates: 26th and 27th November 2012
Crown Copyright ©
His Honour Judge Gosnell:
That the Defendant has failed or failed properly, contrary to relevant guidance, to assess and to take into account the actual cost of care. In particular, the Defendant:
(i) failed or failed properly to assess and take into account local factors relevant to the provision and cost of care, and
(ii) failed or failed properly to balance these factors against budgetary considerations, but was instead driven purely and to an improper degree by budgetary considerations, as a result of which it is
(iii) unable to demonstrate that the fee rates it has set are sufficient to allow it to meet assessed care needs and to provide residents with the level of care services that they could reasonably expect to receive absent the possibility of any resident or third party contributions.
That in failing to equip itself with knowledge of the actual cost of care, the Defendant has not been in a position properly to assess the risks to care homes and their residents contrary to its obligations under Article 8 ECHR and/or common law.
That in failing to equip itself with knowledge of the actual cost of care the Defendant has been unable to give proper consideration to the longer term financial viability of care homes, despite having stated that this was a consideration to which it had regard in the formulation of the fee rates for 2012/13.
That the Defendant failed properly to consult with care home providers.
That the Defendant may not, consistent with the relevant statutory directions, maintain a closed list of care homes in which it will place residents.
The starting-point is section 21(1) of the National Assistance Act 1948, as amended, under which
a local authority may with the approval of the Secretary of State, and to such extent as he may direct shall, make arrangements for providing –
(a) Residential accommodation for persons aged eighteen or over who by reason of age, illness, disability or any other circumstances are in need of care and attention which is not otherwise available to them….
By section 26(1) arrangements under section 21(1)
may include arrangements made with a voluntary organisation or with any other person who is not a local authority where –
(a) that organisation or person manages premises which provide for reward accommodation falling within subsection (1)(a)… of that section, and
(b) the arrangements are for the provision of such accommodation in those premises.
This is the statutory origin of the system under which local authorities fund the care in privately-run establishments of persons who cannot themselves meet the fees charged there.
where it appears to a local authority that any person for whom they may provide or arrange for the provision of community care services may be in need of any such services, the authority –
(a) shall carry out an assessment of his needs for those services; and
(b) having regard to the results of that assessment, shall then decide whether his needs call for the provision by them of any such service.
subject to paragraph 3 of these Directions, make arrangements for accommodation pursuant to section 21 for that person at the place of his choice within the United Kingdom (in these directions called 'preferred accommodation') if he has indicated that he wishes to be accommodated in preferred accommodation.
Paragraph 3 of the Directions limits the core obligation. The local authority
shall only be required to make or continue to make arrangements for a person to be accommodated in his preferred accommodation if
(a) the preferred accommodation appears to the authority to be suitable in relation to his needs as assessed by them;
(b) the cost of making arrangements for him at his preferred accommodation would not require the authority to pay more than they would usually expect to pay having regard to his assessed needs;
(c) the preferred accommodation is available;
(d) the persons in charge of the accommodation provide it subject to the authority's usual terms and conditions.
The cost which the authority usually expects to pay, referred to in (b), is commonly referred to as 'the usual cost.'
"This guidance sets out what individuals should be able to expect from the council that is responsible for funding their care, subject to the individual's means, when arranging a care home place for them. This guidance is intended to describe the minimum of choice that councils should offer individuals. Even when not required to act in a certain way by the Directions… councils should make all reasonable efforts to maximise choice as far as possible within available resources."
"One of the conditions associated with the provision of preferred accommodation is that such accommodation should not require the council to pay more than they would usually expect to pay, having regard to assessed needs (the 'usual cost'). This cost should be set by councils at the start of a financial or other planning period, or in respect to significant changes in the cost of providing care, to be sufficient to meet the assessed care needs of supported residents in residential accommodation. A council should set more than one usual cost where the cost of providing residential accommodation to specific groups is different. In setting and reviewing their usual costs, councils should have due regard to the actual costs of providing care and other local factors. Councils should also have due regard to best value requirements under the Local Government Act 1999".
"When setting its usual cost(s) a council should be able to demonstrate that this cost is sufficient to allow it to meet assessed care needs and to provide residents with the level of care services that they could reasonably expect to receive if the possibility of resident and third party contributions did not exist".
" While "guidance" does not compel any particular decision ….especially when prefaced with the word "general" ,in my view Parliament by section 7(1) has required authorities to follow the path charted by the Secretary of State's guidance ,with liberty to deviate from it where the local authority judges on admissible grounds that there is good reason to do so. "
"Formal guidance issued under section 7(1) of the 1970 Act is to be distinguished from general practice guidance issued by the Secretary of State (see Cross on Local Government Law, paragraphs 21-02, 03). However a local authority is obliged to have due regard to non-statutory guidance and would have to justify any departure from it (see R (Kaur) v Ealing LBC  EWHC 2062 (Admin) at paragraph 22 per Moses LJ.) For reasons which will appear, I am satisfied that the distinction between formal statutory guidance and general practice guidance is of no significance in this case."
"Providers have become increasingly concerned that some commissioners have used their dominant position to drive down or hold down fees to a level that recognises neither the costs to providers nor the inevitable reduction in the quality of service provision that follows. This is short-sighted and may put individuals at risk. It is in conflict with the Government's Best Value policy. And it can destabilise the system, causing unplanned exits from the market. Fee setting must take into account the legitimate current and future costs faced by providers as well as the factors that affect those costs, and the potential for improved performance and more cost effective ways of working. Contract prices should not be set mechanistically but should have regard to providers' costs and efficiencies, and planned outcomes for people using services, including patients."
By paragraph 5.9 commissioners should ensure that they have in place
"clear systems for consultation with all (and potential) providers
And by Paragraph 6.7
"fee negotiation arrangements that recognise providers' costs and what factors affect them (as well as any scope for improved performance) and ensure that appropriate fees are paid."
Correspondingly, by paragraph 6.8, providers should ensure that they
"are able to provide a full breakdown of the costs of services provided."
Before 2006 there was no meaningful working partnership relationship between the Defendant and the independent residential care sector. There were no grade 1 homes and there was a lack of investment. The Defendant commissioned a report from PricewaterhouseCoopers Accountants (PwC) which became the "Fair Cost of Care" costing model to assess the cost of residential and nursing care for elderly people. In November 2007 the Defendant entered into a contractual framework arrangement (The Framework Agreement) which incorporated a fee matrix produced through the application of the Fair Cost of Care costing model. It included annual review of the fees by the application of an indexation method. The Defendant asserts that the implementation of this model increased fees by 14% in 2007. The model was intended for use for a period of three years but with careful consideration of the input data could possibly be used for up to five years.
In September 2011 a discussion took place between Mr Parvin of the Claimants and Mr MacGladrie and Mr Hames of the Defendant. Mr Parvin indicated that the Claimant wanted to update the Cost of Care data and methodology. Mr MacGladrie set out the Defendant's position in his witness statement when he said as follows:
"20. The consultation process for the 2012/13 fee review started in September 2011.As noted above the PwC model could not continue to be used, given that it was viable for five years at most, and its approach to inflation and borrowing costs was no longer appropriate given changed economic circumstances. As also noted above, not all providers had participated in the PwC data collection exercise, so for this reason too it did not give the complete picture"
The Defendant's position at this stage was that, like many councils, the Defendant had suffered a reduction in its grant from central government over the previous two years and was anticipating further cuts in the future. All areas of council spending were being closely scrutinised and as the cost of residential care was a significant proportion of the expenditure that was included in such scrutiny. Mr MacGladrie's evidence is that no particular figure was being sought by way of a reduction but serious questions had to be asked as the Defendant felt that it was paying higher fees than comparable local authorities in the North East.
- Local factors , if any which differentiate care home costs in Redcar and Cleveland from those in neighbouring authorities
- The potential impact of the council's proposed changes on care homes and their residents.
These bullet points are taken directly from the PowerPoint presentation used at that meeting. The Defendant also served notice to terminate the Framework Agreement which expired on 22nd April 2012. The Claimants' case is that the Defendant was looking to reduce fees by £40 per resident per week but this is denied by Mr MacGladrie.
- "The current fees paid in Redcar and Cleveland are higher than in many other North East Authorities (Appendix 1). The Council, however, has not received any evidence from providers that indicate that there are significant differences in operating costs between Redcar and Cleveland and neighbouring boroughs. At the time the current fee structure was set the Council's priority was to encourage the development of new homes within the borough with the aim of increasing capacity and physical quality. Since that time the direction of national policy has been toward the promotion of more care closer to home and to reduce dependency on traditional models of residential care.
- In proposing the new agreement and fee structure (Appendix 2) the Council has taken into account the longer term financial viability of care homes in the borough and the 2011-12 fees paid in neighbouring north east councils, including some where local providers also operate successful homes. The Council is proposing to set its fees broadly in line with the average for older person's homes across region whilst also seeking to accommodate the views of providers in terms of GLP grades, differential rates for dementia care and quality rewards. No changes are proposed to the basic fee for disability homes"
"What is the model you are using and how is that calculated?"
"Redcar and Cleveland Borough Council have used a benchmarking model by taking the average of the fees /costs across some of the NE areas. The average fee structure has been used to set the base line for the setting the fees for this contract. This is now known as the model"
A further meeting with providers took place on 1st March 2012 where the Claimants sought to persuade the Defendants that benchmarking was inaccurate and unfair and that the best way to ascertain the actual cost of care was to run the PwC model again. The minutes contain this exchange:
"The Council have asked what is the potential impact on the Council's proposed changes on care homes and their residents.
The Association believe that the proposed changes will devastate the R and C care home industry putting many homes out of business create more unemployment and untold distress to residents and families. This has been outlined to the council on many occasions. The effect on residents will be uncertainty of " will my home close, will I lose my friends?". Quality of care will reduce as care homes try to stay in business by cutting costs.
RCBC It comes back to the core question that if other NE councils can operate at these rates why can't R and C?"
"In determining what a reasonable fee level would be, a benchmarking exercise was undertaken by comparing the fees paid by all authorities in the North East. All of these authorities manage to sustain an active range and choice of providers at the fee levels that they pay. The Council has on a number of occasions during this process, invited providers to identify local factors which differentiate the cost base of residential care homes
in this borough from neighbouring authorities in the North East, in the Council's view no reasonable argument has been put forward…
The Council has considered very carefully the representations put forward by providers in relation to the proposed fee structure for 2012/13. The Council maintains that an average based on the benchmarked rates is reasonable; however it has decided to set its fees at a level above the benchmark. The new fees will still be in excess of the regional average and will therefore ensure the continued long-term viability of providers and the co-operative working enjoyed between the two parties. The fee structure for next year is summarised below.
It is essential that the Council considers the reasonable costs of providing care when setting its fees. The Council believes that by paying its providers significantly more than the average paid to providers in local boroughs, it is paying a more than adequate fee"
The rates were then set out with the basic rate for a grade one home being £468.00, an increase on what had been proposed on 26th January 2012 but £14.32 per week per resident less than had been paid the previous year.
"Should a contract not be in place for any care home once the existing contracts
end on the 22nd April 2012 the following action will be taken from the 23rd
• It is proposed that the care home will no longer receive any form of quality payment.
• The care home will be removed from the Council's provider list and so will receive no new placements from the Council.
• Should the Council have an issue in terms of available capacity in the coming period as the move to a new contract takes place, the Council will actively seek to place new residential care admissions in care homes in neighbouring boroughs."
54 The new residential fee rates are set out in the letter. The Council had regard both to the 2011/12 fee rates and to the fees paid by other local authorities in the area. Benchmarking was only one among a number of factors considered, and the figures set are not simply a function of the average in the area. Applying the average fee in the North East would have suggested a reduction of around £40 per bed per week (lower if the average in the Tees Valley were used). Applying the existing PwC model would have resulted in a reduction of around £9 per bed per week. The new fee rates amount to a reduction of around £14 per bed per week.
The Claimant's case is that an analysis of the contemporaneous documents reveals that benchmarking was the only real consideration taken into account by the Defendant in fixing the usual cost of care, save perhaps for a consideration of how far they could safely reduce the rate without provoking a judicial review claim from the providers.
The Defendant has submitted that the issues in this case are not amenable to judicial review firstly because it concerns the terms upon which a party is willing to enter into private law contractual arrangements and secondly because, whilst statutory duties are owed to the recipients of community care provision no such duty is owed to care home providers and so they have no standing. These are somewhat surprising submissions given the number of times the fee setting issue has been considered by other courts and on only one occasion, so far as I am aware has the first point been raised.
38. Thus, the mere fact that the party alleged to be in breach of contract is a public body plainly cannot, on its own, transform what would otherwise be a private law claim into a public law claim. There are, of course, circumstances where, in a contractual context, a public body is susceptible to public law remedies. However, where the claim is fundamentally contractual in nature, and involves no allegation of fraud or improper motive or the like against the public body, it would, at least in the absence of very unusual circumstances, be right, as a matter of principle, to limit a claimant to private law remedies.
39. Mr Knafler referred to a passage in the sixth (1999) edition of de Smith, Woolf and Jowell's Principles of Judicial Review, at paragraph 3-019, which includes the following three sentences:
"If a public function is being performed, and contract law does not provide an aggrieved person with an appropriate remedy, then action taken under or in pursuance of a contract should be subject to control by judicial review principles. Where a public body enters into a contract with a supplier, a dispute about the rights and duties arising out of the contract will often be determined by private law. However, the decision of a public body to enter, or not [to] enter, into a contract may be subject to judicial review."
In the same case Lord Justice Mummery said:
Thirdly, in order to attract public law remedies, it would be necessary for the applicant for judicial review to establish, at the very least, a relevant and sufficient nexus between the aspect of the contractual situation of which complaint is made and an alleged unlawful exercise of relevant public law powers
It was common ground at the hearing that Hickinbottom J's summary of the statutory provision and guidance by the UK Government and, in respect of devolved functions, the Welsh Ministers, in paragraphs  –  and  –  of his judgment in the Forest Care Homes case, and his summary at  of the propositions derived from the legislation, guidance and caselaw accurately set out the position. It was also common ground that those summaries are applicable to the present proceedings. After the hearing, on 21 November, in the light of a submission by Neath Port Talbot County Borough Council, the defendant in CO/5985/2011, another challenge to a decision fixing the level of fees to be paid to providers of residential care, that such decisions are matters of private law and not amenable to judicial review, or only amenable on limited grounds, I invited Pembrokeshire to consider whether it wished to make submissions on this point. Mr Phillips informed me that Pembrokeshire did not wish to adopt the argument advanced by Neath Port Talbot. He was right not to do so. Significant parts of the relationship between the parties are contractual but, in the particular circumstances of this case, in the light of the positions taken by Pembrokeshire and the relevant guidance (see ), the relationship has sufficient public law "underpinning" to bring it within the supervisory jurisdiction by way of judicial review.
46. "The question whether a particular function is a public function has been the subject of considerable analysis and differences of approach by courts: see for example YL v Birmingham CC  AC 95 (Lord Bingham of Cornhill and Baroness Hale of Richmond dissenting) and R (Weaver) v London and Quadrant Housing Trust  EWCA Civ 587  1 WLR 363 (Rix LJ dissenting). In those cases the context was whether the bodies were public bodies within section 6 of the Human Rights Act 1998. Weaver's case considered whether, when terminating a tenancy, a registered social landlord, a "hybrid" rather than a "core" public body for the purposes of the 1998 Act, was subject to section 6 and to public law principles.
47. It is clear that, because the purpose of attaching liability under section 6 of the 1998 Act is different to the purpose of subjecting a body to public law principles, "it cannot be assumed that because a body is subject to one set of rules it will therefore automatically be subject to the other": Elias LJ in Weaver's case at . However, the approach taken by the majority of the court in Weaver's case to the section 6 issue is, in its broad thrust, of analogical assistance in the present context. Elias LJ (at ) indicated that he agreed with the Divisional Court's view that the landlord's decision to terminate a tenancy was governed by public law principles and susceptible to judicial review on conventional public law grounds. See also the discussion of Weaver's case and the approach taken by the Deputy High Court Judge (Mr John Howell QC) in R(McIntyre) v Gentoo Group Ltd  EWHC 5 (Admin). At  the learned judge stated that "… if the act was one to which section 6 of the 1998 Act applied, it was also one also governed by public law and thus susceptible of judicial review on conventional public law grounds".
48. For Elias LJ (at  and ) the starting point is "to focus on the nature of the act in the context of the body's activities as a whole". The act in the present case is the fee-setting decision of the Council. In respect of that decision, the wider context is the function of a local authority under the 1948 Act in providing care or making arrangements for others to provide care for those who need it. That is a public function. While the fee-setting function of the Council is less closely regulated than those of a registered social landlord, the statutory and regulatory framework shows that a Council does not have the freedom that a private individual would have to use its bargaining power to drive down the price as far as possible. The mere fact that the decision concerns the setting of a fee under a contract does not mean that it is to be characterised as a private act. In Weaver's case Elias LJ (at ) distinguished acts necessarily involved in the regulation of what is a public function, which he considered to be public acts, from those which are purely incidental or supplementary to it. The decision in this case cannot be characterised as purely incidental or supplementary to the function of making arrangements for the provision of care in care homes operated by third party providers for those who qualify under the 1948 Act. "
"While there are aspects of the Commissioning Guidance which may be characterised as aspirational or as indicating "best practice", the guidance was issued by the Welsh Ministers under section 7 of the Local Authority Social Services Act 1970. The relevant legislative authority, here the UK Parliament in section 21 of the 1948 Act and section 7 of the 1970 Act, and the Welsh Assembly Government in section 26 of the 1948 Act, has entrusted responsibility for providing or making arrangements for care and accommodation for those who by reason of age, illness or disability need it. The Commissioning Guidance makes it clear that, in performing these functions, a Welsh local authority such as the Council in these proceedings, must actively consult providers. Providers themselves are under a duty to "carry on" the care homes they run in such manner as are likely to ensure they "will be financially viable": Care Home (Wales) Regulations 2002 SI 2002 No. 324, reg. 26. I reject Miss Laing's submission that the purpose of the Commissioning Guidance and its terms mean that its sole effect is to provide a framework of standards against which the effectiveness of a local authority's commission could be measured by the Annual Council Reporting Framework and each local authority's scrutiny committee."
52Miss Laing had two "fallback" submissions. The first was that any public law duties owed by the Council are owed to those for whom it arranges accommodation and not to those who own or manage the homes in which the accommodation is provided. She relied on the decision of Turner J in R v Cumbria CC, ex p. Cumbria Professional Care Ltd (2000) 3 CCLR 79. She also submitted that the evidence is that there has been no impact on the residents for whom the Council has made the arrangements. As to the Cumbria Professional Care case, there was no guidance similar to the Commissioning Guidance. As to impact, contrary to Miss Laing's submission, in the present context there is an impact on residents. The fee which (see ) local authorities are willing to pay providers is relevant to the setting of the "usual price" under the Choice Directions and therefore to whether individuals will have to pay "top-up" fees in order to live in a home they have chosen where its charges are above the "usual price" and how much those "top-up" fees will be. In this way the fee set may have an impact on individual residents. Additionally, if the Council's decision to set the fees to be paid to providers of care is amenable to judicial review by residents of care homes, the question becomes whether the claimants have standing ("sufficient interest") to bring a claim. They clearly would because the decision affects their rights under existing placement agreements and their ability to meet their duty under regulation 26 of the Care Homes (Wales) Regulations 2002 is affected by it.
53. Miss Laing's second fallback submission was that if fee setting is amenable to judicial review by providers, in the light of the contractual context, the scope of review is narrow and (see Mercury Energy Ltd v Electricity Corporation  1 WLR 521 at 529) normally confined to fraud, corruption or abuse of power. It is said (claimants' supplementary skeleton argument, paragraph 2) to be common ground that none of those exists in the present case. This may certainly be true as far as fraud and corruption are concerned. But "abuse of power" is an umbrella term that is often used (see Wade and Forsyth, Administrative Law, 10th ed., 292-3) to refer to the conventional grounds of failure to take account of relevant considerations or to exclude irrelevant considerations, propriety of purpose, and perversity, Wednesbury unreasonableness or Diplockean irrationality. The claimants' grounds rely on a number of these.
Whilst the Judge referred to the Welsh statutory regulatory system the basic principles apply to this case and there can be no doubt that care home providers have sufficient interest to bring a claim as affects their rights under existing placement arrangements and their ability to meet their duties under the Care Quality Commission ( Registration ) Regulations 2009. This case is based mainly upon an allegation of failure to take account of relevant considerations which is one of the issues mentioned as coming within the phrase "abuse of power" as an umbrella term. It follows from this analysis that I find that the Defendant's decisions are amenable to judicial review for the reasons I have given.
Both parties accept in this case that the Defendant had an obligation , when setting fees to have due regard to the actual costs of providing care and other local factors as set out in statutory guidance in Circular LAC (2004) 20. The Defendant is obliged to comply with this guidance unless there is good reason to depart from it. Both parties agree that due regard is "the regard that is appropriate in all the circumstances" as said by Dyson LJ in Baker v Local Government Secretary EWCA Civ 141. Similarly it is accepted that this case is authority for the proposition that it is a duty to take the relevant matter into account "not a duty to achieve a result" (paragraph 31). Where the parties differ is whether the failure to have due regard is a matter for the court or is a merits based challenge only able to succeed if the Defendant is Wednesbury unreasonable.
53. The claimants contend in their Amended Grounds and submitted during the course of oral argument that "the court must review whether 'due regard' has been paid, not merely consider whether the absence of due regard was Wednesbury unreasonable". This is a false contrast which could lead to a mistaken conclusion. That the court must review whether due regard to the relevant needs has been had says nothing about the basis on which such a review may be carried out. If no due regard has been had to such needs, then the duty has not been complied with regardless of whether a reasonable authority would have failed to have regard to it but that does not mean that in determining whether the regard which was had to such needs was appropriate in all the circumstances the court does not consider whether or not a reasonable authority could have thought it appropriate: it does.
54. In so far as the claimants pursue their interpretation of the test, I have come to the conclusion that I agree with the defendants that the claimants' submissions are based on a misreading of paragraph  of the judgment of Davis J in R (Meany & Ors) v Harlow DC  EWHC 559 (Admin) where all that the learned judge was doing was to reject a false choice being presented to him by counsel in that case. Regrettably, in my respectful opinion, the misreading also appears to have been adopted by the court in R (Boyejo) v Barnet LBC  EWHC 3261 (Admin) at  –  without citation of the relevant authorities. Even if the 5 authorities cited by the defendants in support of their interpretation (see above at paragraph 48) are limited by their facts or the different statutory schemes with which they were concerned, they are relied upon simply for the description of a principle which is well known and which needs no further elaboration by this court.
Mr Holbrook submitted that Mr Wolfe either had to show that no regard was had to the statutory criteria or that the decision was irrational. Since Mr Wolfe disclaimed the latter, he was, said Mr Holbrook, left with the former. I do not agree with that submission of Mr Holbrook for two reasons. First, the statutes require that the public body has "due regard" to the specified matters; and what is "due" depends on what is proper and appropriate to the circumstances of the case. Therefore, if a challenge is made, the question of due regard requires a review by the court. It is not simply a question of determining whether no regard at all was had to the statutory criteria. Second, if the submission of Mr Holbrook were right it would be contrary to the authorities, which indicate that a tick box approach may not necessarily in any given case give a complete answer. It is true that, as Baker and Brown make clear, how much weight is to be given to the countervailing factors is a matter for the decision maker. But that does not abrogate the obligation on the decision maker in substance first to have regard to the statutory criteria on discrimination.
In my view this passage supports the contention that the question of due regard requires a review by the court first and , only if the court is satisfied that there has been due regard, then the question of how much weight is given to that and countervailing factors is a matter for the decision maker.
18.The one legal issue upon which there has been a dispute is whether the question whether the Defendant has had "due regard" is a matter to be determined by the Court deciding what amounts to "due regard", or whether that is a matter for the Defendant to determine, subject only to a challenge on the "Wednesbury" grounds
19 There have been a number of expressions of judicial view at first instance on this question. It is fair to say that the preponderance of those views has been in favour of the former rather than the latter approach. The first decision which grappled with this issue was that of Mr Justice Davis (as he then was) in R(Meany) v Harlow District Council  EWHC 559(Admin) in a passage that runs from paragraph 72 - 85.
20 In my judgment, a proper reading of his judgment is that he was expressing the view that the question whether there has been "due regard" is a matter for the Court to determine. By way of contrast, once there has been due regard, the question whether the decision ultimately taken is lawful, having regard to the weight to be given to that factor as well as to any countervailing factors, is a matter which can only be determined by the Court applying the "Wednesbury" principles.
21.That approach has been followed in a number of first instance decisions such as R (Boyejo) v LB Barnet  EWHC 3261 (Admin), R (Hajrula) v London Councils  EWHC 448 (Admin) and JM (see above).
22 By way of contrast, in R(D) v Manchester City Council  EWHC 17 (Admin), Mr Justice Ryder decided that the question whether "due regard" has been had to the equality duty is to be determined by the Court solely on the basis of "Wednesbury unreasonableness.
24 In my judgment that exposition of the two stage process of the Court considering: first whether the statutory obligation to give "due regard" has been discharged; and second, (if it is sought to review it) the decision which flows from it, involves the Court, at the first stage, deciding whether the authority has, in fact, surmounted the threshold required by the statute. That is not, on my reading of it, a Wednesbury based exercise. However, once the authority has surmounted the threshold of "due regard," the lawfulness of the decision which emerges from the consideration of those matters and all the other relevant (possibly countervailing) factors, is a matter which the Court has to approach on the Wednesbury basis.
Mr Justice Wilkie had the opportunity of reading the decision of Mr Justice Ryder and also of being able to review a number of other relevant cases on the same issue. I find myself in agreement with Mr Justice Wilkie as to the interpretation of the Judgement of Mr Justice Davis in Meany and therefore, for the same reasons, I find that the correct approach is that set out in paragraph 24 above of Williams.
The Defendant asserts in its skeleton argument that in judicial review, where there are factual issues between the parties, the Court must proceed on the factual basis as put forward by the Defendant, or resolve any disputes of fact in the Defendant's favour. This is particularly important, the Defendant asserts, as the Claimant seeks to dispute the contents of paragraph 54 of the statement of Mr MacGladrie which I have set out in paragraph 27 of this Judgement. In essence Mr MacGladrie states that the Defendant took into account the previous year's PwC rates and comparative data from neighbouring authorities. The Claimant disputes this and says the court should examine contemporaneous documents and other sources of evidence to see what the Defendant actually took into account. The Defendant in a post-hearing note submitted that the court must proceed on the factual position as stated by Mr MacGladrie and that if the court proceeds on a different factual basis, given that Mr MacGladrie has not been cross-examined it will have fallen into error. The Claimant's position is that while the Defendant's submission describes the general rule there can be exceptions where there is objective evidence inconsistent with the witnesses' account.
18 It is a convention of our litigation that at trial in general the evidence of a witness is accepted unless he is cross-examined and is thus given the opportunity to rebut the allegations made against him. There may be an exception where there is undisputed objective evidence inconsistent with that of the witness that cannot sensibly be explained away (in other words, the witness's testimony is manifestly wrong), but that is not the present case. The general rule applies as much in judicial review proceedings as in other litigation, although in judicial review proceedings it is relatively unusual for there to be a conflict of testimony and even more unusual for there to be cross-examination of witnesses.
19 In fairness to the Defendant and its staff, and particularly Dr Kehoe, whose decisions and actions are criticised, I think that I should adhere to the general rule, except where the contemporaneous documents dictate that a witness statement must be incorrect.
The Claimants claim that the Defendant has failed, or failed properly to have due regard to the actual cost of care in particular local factors that relate to the same. It is claimed that the Defendant has failed to properly balance these factors against budgetary considerations and been influenced by budgetary considerations to an improper degree and as a result cannot demonstrate that the rates it has set are sufficient to allow it to meet assessed care needs and to provide residents with the level of care services that they could reasonably expect to receive absent third party contributions. These obligations are set out in Circular LAC (2004) 20 and the Building Capacity Agreement details of which have been given previously. The Claimant contends that the Defendant has an obligation to comply with both statutory and non statutory guidance unless there is good reason not to do so. This was confirmed by His Honour Judge Raynor QC in R ( Sefton Care Association ) v Sefton Council  EWHC 2676 ( Admin ) when he said :
" In my judgment the Agreement was not intended to be, and did not state that it was, formal statutory Guidance, unlike what seem to have been identical provisions issued as formal Guidance in Wales and referred to in the Forest Care Home case. However, I am also of the view that Mr Bartley Jones was right to accept that it made little difference whether the Agreement constituted such Guidance. The Defendant, as previously stated, would have to justify departure from it: as I understand it, not only does it not seek to do that but it contends that in substance it complied with the Agreement by taking reasonable steps to ensure that "appropriate fees are paid"."
" In my view, taken as a whole, the statutory Guidance and the Agreement do not contemplate that there will be any significant imbalance between the usual cost of care and the actual cost. If a local authority consciously fixes the usual cost in a sum significantly less than actual costs, then I do not see how it could be said to be having "due regard to the actual costs of providing care" as required by paragraph 2.5.4 of the Guidance. Furthermore, such action by a local authority would in my judgment amount to a breach of the guidance contained in paragraphs 6.2 and 6.7 of the Agreement, namely to take account in fee setting of the legitimate, current and future costs faced by providers, as well as the factors that affect those costs, and to ensure that appropriate fees are paid. If fee levels are set significantly below actual cost, then, in the words of paragraph 6.2 of the Agreement, there will be "inevitable reduction in the quality of service provision", which "may put individuals at risk"."
On the topic of benchmarking he said:
"Whilst it is true that these fees are not out of line with those of other authorities, that does not mean that the fees are adequate, or indeed that these other authorities had due regard to the actual cost of the provision of care"
" In my judgment, this case comes down to quite a short point. EMCARE drew to the attention of the Council the gap between the actual cost of providing care and the Council's banded rates. The point was made explicitly by Ms Cowley at the meeting of 7 February 2011. If it was not made explicitly before that day (and it would be strange if it were not), it was implicit in the observations in Ms Cowley's letter of 13 December 2010 and in her sending the Laing & Buisson report to the Council on 10 January 2011. The gap, if it existed, was clearly of importance, given the freeze imposed in 2010, the complaints made by EMCARE about that freeze, and inflation occurring since the 2009 increase. Once the matter had been raised, it was, in my judgment, incumbent on the Council to ascertain what the actual cost of care was. So long as it remained in ignorance on that cost, it could not possibly pay due regard to it."
The Claimant does not suggest that the Defendant was obliged to apply the PwC model but the Defendant does need to show that its method of assessment was sufficient to inform itself as to the actual costs of care so that it could then give due regard to it. The third limb of ground one , that the Defendant is unable to demonstrate that the fee rates it has set are sufficient to allow it to meet assessed care needs is also dependent on the quality of enquiry into what actual costs are in the local area.
32 "Out of deference to the arguments put before me, however, I mention some general considerations. First, this case concerns the affordability of social services provided by the local authority. Absent a statutory duty compelling the expenditure in issue at the amount contended for, questions of affordability and of the allocation of resources are for the democratically elected executive and legislature, not for the Courts. Secondly, affordability is in general a highly relevant consideration to be taken into account by any local authority in making its decisions on rates to be offered to service providers, subject to the local authority being able to meet its duties at the rates it offers. As Auld J said in R v Newcastle-upon-Tyne City Council, ex parte Dixon (20 October 1993, unreported but cited in the Cleveland Care Homes Association case):
"… where a local authority has a statutory duty to provide services and to fund them in part or in whole out of monies provided by its taxpayers it must balance two duties one against the other. On the one hand it must provide the statutory services required of it; on the other, it has a fiduciary duty to those paying for them not to waste their money. It must fairly balance those duties one against the other."
Thirdly, the Court should be slow to intervene where, as in the present case, there has been a long process of consultation and the local authority and the service providers are, in effect, engaged in a contractual negotiation with the local authority."
These considerations would clearly become important if the Defendant satisfied the court that it had given due regard to the actual costs of care. The balancing of competing factors is thereafter a merits based test which can only be impugned on Wednesbury grounds.
- Local factors , if any which differentiate care home costs in Redcar and Cleveland from those in neighbouring authorities
- The potential impact of the council's proposed changes on care homes and their residents
In the Defendant's letter of 26th January 2012 setting out the council's proposals in response to the consultation the reasons for proposing the new fee structure are set out fully: see paragraph 21 of this Judgement. It is fair to say that other than a passing reference to the need to take into account the longer term financial viability of care homes in the borough the Defendant indicated it was proposing to set its fees broadly in line with the average for older person's homes across the region. The Claimants wrote to the Defendant to question this approach and in the Defendant's reply dated 1st February 2012 it was stated:
"The fee structure was not based on any particular model but instead took account of the average paid across the region; this is believed to represent a sustainable and reasonable fee. The council believes that the PwC model is out of date, as demonstrated by the issue you refer to in your letter and a fee structure based on average payments in the North East is a more accurate reflection of a reasonable fee"
The question of comparison with other North East councils was again referred to in Mr MacGladrie's letter of 17th February 2012 and at the meetings on 20th February and 1st March 2012 (summarised at paragraph 23 above) the only consideration mentioned was benchmarking with other authorities. It would be fair to say that in its communications with the Claimant and other providers the only consideration that seems to have been mentioned as instrumental in setting fees is benchmarking.
"Both providers and the Council recognised at a meeting in August 2011 that it would be costly to repeat the Fair Cost of Care exercise and that the outcome could represent a financial risk on both sides as the recommended fee levels would be uncertain until the exercise had been run"
The briefing paper then considered three options: to repeat the PwC Fair Cost of Care exercise; to "tweak" the current PwC Fair Cost of Care model; and for the Defendant to develop its own model to set fees. The third option was chosen for further exploration. Under the title "Developing the Model" it stated:
" In determining what a reasonable fee level would be as a starting point for negotiating a benchmarking exercise was undertaken using the fees paid by all authorities in the North East - taking into account the highest fees paid in the area. All of these authorities manage to sustain an active range and choice of providers at the fee levels that they paid. The exercise showed that RCBC pay the highest fees in the region".
The paper points out that benchmarking is a recognised tool in costing and legal judgements do not appear to favour any one model over another in establishing a point from where to start negotiations. No other consideration or potential consideration is mentioned. The paper goes on to explain that the proposed fee structure was created by taking an average of the fees paid by a number of neighbouring local authorities. The responses of two providers were included in the paper and the implication was that both would support a legal challenge if there was a substantial reduction in fees. The briefing paper then set out three options: to accept the proposals made by the providers; to offer a fee reduction of between £10-£15 per resident per week for two years; and to reduce by £15 per bed in the short term with a new PwC cost of care model to be implemented from 1st October 2012. The potential savings for each scheme were then set out in tabular form together with the proposal which the Defendant had already made in January 2012.
"In determining what a reasonable fee level would be as a starting point for negotiating , a benchmarking exercise was undertaken by comparing the fees paid by all authorities in the North East"
There followed a table showing the rates paid by 11 neighbouring authorities for each of the four grade of homes. This was then compared with the fees the Defendant had paid the previous year and the current proposal made in January for substantial savings between £34-£40 per bed per week. It pointed out that the providers felt that an inflationary increase of £14.96 was required to keep pace with inflation and that they would accept a zero increase if a new Fair Cost of Care Exercise was implemented. The fact that certain providers might accept a modest fee reduction was also mentioned. The briefing paper proposed two options; firstly to keep to the proposal which had originally been made in January; or secondly to offer a revised fee structure. The advantage of maintaining the original offer was that this would achieve a higher cost saving but the higher the reduction imposed the more likely a legal challenge would be. In trying to decide on the figures for a revised fee structure consideration had to be given to what level of reduction would attract a significant proportion to sign up to the deal. In was felt that the maximum fee reduction that would generate enough providers to sign up to the deal was a flat rate fee reduction of £12 per resident per week. The Executive Management Team appears to have decided on a flat rate deduction of £14 per resident per week according to the figures in the letter of 16th March 2012 communicating the decision to providers.
The Claimant claims that by failing to equip itself with knowledge of the actual costs of care, the Defendant has not been in a position properly to assess the risk to care homes and their residents contrary to its obligations under Article 8 ECHR and /or common law. I indicated during the hearing that I could not envisage circumstances where the Claimant could succeed on this ground if they failed on the first ground. As the Claimant has succeeded on the first ground I see no reason to determine this ground conclusively. I remain troubled by the need for the Claimants to establish victim status under s 7(1)(b) of the Human Rights Act 1998 although I recognise the theoretical argument outlined by Mr Justice Singh in South West Care Homes v Devon CC  EWHC 1867 at paragraphs 37-40. He did not feel the need to determine the issue in that case and as the Claimant has succeeded on Ground One, I do not feel the need to do so in this case either.
Ground three alleges that in failing to equip itself with knowledge of the actual cost of care the Defendant has been unable to give proper consideration to the longer term financial viability of care homes, despite having stated that this was a consideration to which it had regard in the formulation of the fee rates for 2012/13. Neither party addressed this issue at any length during the hearing but I accept that factually the Defendant did not do this under the methodology they adopted. It may be a moot point whether they had any statutory obligation to do so although there is some support for such an obligation in the Building Capacity Agreement. However, given the success of the Claimant under ground one and the fact that if on appeal I am found to be wrong in relation to ground one this ground would also stand and fall with that decision and there is no need to determine it.
Ground Four alleges that the Defendant failed to properly consult with care home providers. It seems to be common ground that the Defendants had a duty to consult. This was set out in paragraph 5.9 of the Building Capacity Agreement where it was said that commissioners should ensure that they have in place "clear systems for consultation with all (and potential) providers". The Defendant's case is that it accepts it had a duty to consult and did in fact do so.
108 It is common ground that, whether or not consultation of interested parties and the public is a legal requirement, if it is embarked upon it must be carried out properly. To be proper, consultation must be undertaken at a time when proposals are still at a formative stage; it must include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response, adequate time must be given for this purpose, and the product of consultation must be conscientiously taken into account when the ultimate decision is taken: R v Brent London Borough Council, Ex p Gunning (1985) 84 LGR 168."
In paragraph 112 of the judgment the Court stated:
"It has to be remembered that consultation is not litigation: the consulting authority is not required to publicise every submission it receives or (absent some statutory regulation) to disclose all its advice. Its obligation is to let those who have a potential interest in the subject matter know in clear terms what the proposal is and exactly why it is under positive consideration, telling them enough (which may be a good deal) to enable them to make an intelligent response. The obligation, although it may be quite onerous, goes no further than this"
This ground is based on the assertion that the Defendant may not, consistent with the relevant statutory directions maintain a closed list of care homes in which it will place residents. The issue became somewhat simpler however during the course of the hearing. There were three consequences of failing to sign the framework contract spelt out in the Defendant's letter of 16th March 2012 which are set out in paragraph 25 of this Judgement. In the light of my comments the Defendant agreed to withdraw two of them: the decision that non-signatories would not receive any quality payments for existing residents; and the potential decision to withdraw the offer of a new contract to non-signatories after a period of time. The only issue remaining is whether the Defendant is entitled to remove non-signatories from their approved provider list so that they would receive no new placements from the Defendant.
(d) Terms and conditions
2.5.16 In order to ensure that they are able to exercise proper control over the use of their funds, councils need to be able to impose certain contractual conditions, for example, in relation to payment regimes, review, access, monitoring, audit, record keeping, information sharing, insurance, sub-contracting, etc.
2.5.17 The contractual conditions required of preferred accommodation should be broadly the same as those councils would impose on any other similar operation. Stricter conditions should never be used as a way of avoiding or deterring a placement. As with suitability, account should be taken of the nature and location of the accommodation. There may be occasions where it would be unreasonable for a council not to adapt its standard conditions and others where it would be unreasonable to expect it to do so. For example, councils should take into account the fact that care homes in other areas, or those that take residents from many areas, may have geared themselves to the normal requirements of other councils. Councils should be flexible in such circumstances and avoid adding to the administrative burden of care homes.
"It had already been stated in evidence on behalf of the Defendant Local Authority that it does not maintain an approved care home providers list in other words a list of care home providers who are the only care home providers with which it will contract. (iii) I accept the contention that as a matter of law it would be prohibited from maintaining any such list, because of the choice of accommodation directions, which require the Defendant to enter into arrangements with any care home chosen by a prospective resident, providing the relevant conditions are met at the time. I respectfully consider that there is nothing in this point."
This proposition was clearly obiter in the above Judgement but I agree that the choice of accommodation directions do require the Defendant to enter into arrangements with any care home chosen by a prospective resident, providing the relevant conditions are met at the time. The Defendant however is entitled to insist that the provider enters into contractual arrangements on its standard terms and the provider cannot expect to recover more than the usual fee unless exceptional arrangements are made. I therefore agree that at least in theory the Defendant cannot exclude the Claimants from a list of care home providers with whom it will contract. It can however reasonably only agree to contract on its standard contractual terms including the usual fee rates. The effect would be that the Claimant's homes might be on a list that the Defendant was prepared to contract with but contracts would only be actually entered into if the Claimants were prepared to sign the framework agreement. This would at least leave the choice open to the Claimants in the future should they decide to accept the usual rates. This ground therefore succeeds to this limited extent.
Neither party specifically addressed me as to remedy but I accept I have discretion. Fortunately the Defendant, very fairly and with the benefit of hindsight, wisely, decided not to put in place their decision to reduce payments by £14 per week. The obvious remedy is for a declaration that the decision to set the fee rates for 2012 /13 on 12th March 2012 in the rates specified in the letter of 16th March 2012 is unlawful. The Claimants would also be entitled to a declaration that they should not be excluded from any list of care homes with whom the Defendant is prepared to contract ( on its own terms) . The court will order the Defendants to make a new decision to fix fees for the 2012/13 period and is prepared to hear representations as to how long this process is likely to take.