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Care home briefing 117 – Fees and judicial review update

In our care home briefing 104 (March 2012) we reported another successful challenge in the High Court by a group of care homes against a decision of a County Council (Pembrokeshire) in connection with care home fees. On 18 October 2012, His Honour Judge Gosnell in the Administrative Court in Leeds made yet another decision in favour of a group of care home providers.

The Committee of Care North East Newcastle and Newcastle City Council

Reading the judgment in this latest decision induces a strong sense of déjà vu, particularly the opening paragraphs which outline the legal framework, the statutory guidance issued by the Department of Health, and the directions given under section 7(A)(I) of the Local Services Act 1970. Inevitably, the judge refers also to earlier decisions including the Sefton case (reported in our care home briefing 103).

Newcastle City Council had proposed a three year contract intending to expire at the end of March 2013. No increases in fees were offered and the council relied on a report from the well known accountants, KPMG, to argue that ‘efficiency opportunities’ could be exploited to keep prices down. Various meetings took place between council officers and care home providers and a desktop analysis was prepared by the council. At a meeting on 11 January 2012, care homes representatives made it clear to the council that fee rates had fallen badly behind the actual cost of care.

The Four Grounds

The application to quash the council’s decision was made on four grounds. The first was that the council had not informed itself properly of the actual costs of providing care home services before setting rates and so had acted contrary to the relevant guidance. The second ground was that the council had not acted rationally or had failed to take into account all relevant matters when cutting the amount allowed to care home providers as return on equity and, additionally, imposing a further 2% efficiency saving on top of savings already individually agreed. The judge held that the council had indeed failed to inform itself properly of the actual costs to care home providers of providing their services before setting the rates and that this was contrary to the relevant guidance. In addition, he found that the council had acted either irrationally or failed to take into account relevant matters in both stripping out return on equity and imposing a 2% efficiency saving.

The third ground of the challenge relied on an alleged failure by the council to consult properly with care home providers. The judgment makes clear that the council were aware of the obligation to consult, possibly influenced by earlier court judgments. The judge found that although there had been consultation, the views of the care home providers had not been reported accurately to the decision makers in the council and so that again the care homes succeeded on this ground.

Finally, the fourth ground was that by imposing terms on providers at enforced discounts from the so-called ‘usual rate’ and by refusing to place residents other than at these discounted rates, the council had acted contrary to paragraph 3 of the National Assistance Act 1948 (Choice of Accommodation) Directions 1992, issued on 23 December 1992. It was alleged also that the council was in breach of circular LAC(2004) 20 paragraph 2.5.4. The judge considered it unlawful for the council to refuse to place new residents with any care home who had not agreed to the discount that the council was demanding.

He considered that the council were abusing their dominant position in the market to drive down fees in the way criticised in paragraph 6.2 of the Building Capacity Agreement, issued in October 2001 by the Department of Health.


In judicial review cases, a claimant may succeed on one or more of the grounds of challenge but still be denied any remedy since this is subject to the discretion of the court. In this case, the judge decided it was right to grant a remedy. He quashed the council’s decision on 26 March 2012 to fix the usual rates to care home providers for 2012/13. He ordered the council to reconsider its decision fixing rates. Finally, he made a declaration that the council could not refuse to place residents with providers (chosen by the residents) if those providers declined to accept placements at rates discounted without agreement from the usual rates.


This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.