Council defends High Court claim over care accommodation rates

The claimants in Mayfield Care Ltd & Anor v St Helen's Council [2015] EWHC 1057 (Admin) (21 April 2015) each owned and operated a care home in St. Helens.

They were dissatisfied with the care home payment rates set by the council and by the judicial review proceedings sought an order quashing the decision to set those rates.

The claimants argued that St Helens’ decision was flawed because of its treatment of a particular element of their actual costs of running their care homes, most commonly known as "return on capital".

Their grounds of challenge were:

Because the model on which the decision was based contained a flawed approach to return on capital (as a component of the actual cost of residential care accommodation), the decision was irrational and/or failed to take into account relevant considerations and/or took into account irrelevant considerations.  
By reason of ground 1 the defendant failed to pay due regard to the actual cost of care, contrary to the relevant statutory guidance, thus rendering itself unable to demonstrate that fee levels were sufficient to meet assessed care needs, also contrary to the statutory guidance.  
By reason of ground 1 the defendant failed to comply with its public sector equality duty.

The council disputed all three grounds, contending that its approach to return on capital was entirely proper and in accordance with the relevant statutory guidance, and that it fully complied with its public sector equality duty.

His Honour Judge Stephen Davies rejected the claimants’ challenge. On the first two grounds, the judge concluded:

He did not accept that the defendant was obliged to adopt an either/or approach (either precise quantification by arithmetical modelling exercise or assessment solely by the exercise of judgment and experience). The judge found that St Helens was perfectly entitled to adopt the hybrid approach which it did (placing such weight as they properly concluded that they could on sources of information such as reports from Laing & Buisson, but also placing weight on their own investigations and their own judgment and experience, and to have regard to the actual costs of care in that manner). In the circumstances of this case, which were fundamentally different from the circumstances in the Mavalon and Forest Care Homes cases, there was no public law obligation either to adopt the mathematical modelling approach throughout, or to provide a detailed and rational justification for not doing so.
A 2012 report clearly explained why the council had decided not to adopt the rates of return on capital included in reports by Chameleon and Laing & Buisson. “In circumstances where it had not committed to use those reports, and in circumstances where in any event their opinion as to the appropriate rate of return on capital was not part of the modelling exercise as such, but no more than their own opinion as to the figure to be inserted into the modelling exercise, the defendant was perfectly entitled to depart from their suggested rates.” An explanation for not accepting the Chameleon and Laing & Buisson figures was clearly given, and insofar as the defendant needed to justify its explanation as rational, it did so in that section.
It was clear that St Helens had taken the decision as to which rate(s) of return on capital to use on the basis that it was a decision for it to take on the basis of its judgment, applying its expertise and experience. “That was a perfectly justifiable approach in the circumstances, where it had decided not to accept the Chameleon or Laing & Buisson opinions, and where there was no other compelling ‘hard’ evidence as to the appropriate rate of return on capital.” It was quite clear that the council’s Assistant Director, Commissioning and Business Support for Adult Social Care and Health was “eminently well qualified, by reason of her professional knowledge and her experience and investigations in relation to costs in the care home sector in St Helens and surrounding areas, to make this judgment”.
The defendant council was not obliged to undertake an entirely separate and standalone exercise of inquiring into and ascertaining all of the separate components of the actual costs of care, including therefore rate of return on capital, and then to go on, separately and subsequently, to consider whether or not to depart from those actual costs of care when setting the usual costs of care. “All that the defendant had to do was to have due regard to the actual costs of care.”
St Helens plainly inquired into, and did have due regard to, the actual costs of care as regards operating and capital costs, and the claimants did not have permission to contend to the contrary. “The question as to the appropriate rate(s) of return on capital to be applied to the capital costs was not one which could be answered, or which the defendant was obliged to answer, by some precise mathematical exercise. The defendant did have regard to such evidence as was before it as to the rate of return on capital, and it cannot be said that it did not have due regard to that evidence, insofar as relevant to actual costs, because it had decided not to accept the Chameleon or Laing & Buisson opinions in that respect.”
It was apparent from a proper reading of the 2012 report that St Helens decided to set its usual costs of care by reference to rates of return on capital which it arrived at by an exercise of judgment and experience, taking into account all of the factors mentioned, which were all relevant to that question. “It did not purport to, nor was it obliged, to undertake what would in any event have been a completely artificial exercise in the context of this case, namely to seek to ascertain some notional actual rate of return on capital and then to have regard to all of the other relevant factors when deciding what usual rate(s) of return on capital should be employed.”
The council was not obliged to set out in its report or decision some detailed justification as to the process by which, applying its judgment and expertise, it had arrived at the rate(s) of return on capital adopted, “still less to state what its starting point had been from which it had arrived at the individual rates of return on capital employed”.
St Helens had plainly been able to demonstrate in 2014, by reference to the 2012 report, that the usual costs which it had set were sufficient to allow it to meet assessed care needs and to provide a reasonable level of care service without top-ups. “The defendant was entitled to have regard to its own experience of what had happened in its area since then, in particular the absence of widespread provider failure.” It was also entitled to have regard to the absence of any response through the consultation from the majority of care home owners or other relevant parties to the effect that the usual rates were not sufficient to cover assessed needs or provide reasonable care services. It was also entitled to have regard to the results of its benchmarking exercise.
In 2014, by reference to the factors identified in the 2014 report, the defendant was entitled to conclude that it was reasonable to stand by its approach of using the 2012/13 usual costs as fixed as a baseline figure for the following year. More specifically, the judge was “satisfied” that no significant further information had been provided such as would have caused it to conclude that it needed to revisit its approach to the appropriate rate(s) of return on capital to use. “The limited financial information provided by the first claimant was not sufficient reason to do so; as Hickinbottom J made clear in Forest Care Homes at [47-49], a submission by an individual care home owner that it is unable to maintain its business on the usual rates set by the local authority will not, no matter how justified, in itself oblige the local authority to reconsider its decision.”

The judge said that, in the circumstances, the challenge under grounds 1 and 2 must fail.

On the third ground, HHJ Stephen Davies said there was no reasonable basis for criticising the council’s fulfilment of its public sector equality duty.

“The EIA [equality impact assessment] was detailed and comprehensive, and the report clearly demonstrated that the defendant had due regard to the equality implications of its decision, not just as a ‘back-covering’ exercise but as a substantive exercise,” he said.