Mavalon Care Ltd & Ors, R (on the application of) v Pembrokeshire County Council

A local authority setting fees for contracted residential care must comply with its statutory duties, applicable guidance and the requirements of rational public-law decision-making. Where it has adopted an economic model as the basis for calculating fees, the model is a starting point, but departure from it requires cogent and transparently stated reasons. The authority must properly consider sustainability, legitimate provider costs, service quality and residents’ welfare. The court reviews the decision-making process, not the merits or economic weighting of the decision. Material errors in the assumptions underlying the rate, failure to investigate relevant information, or failure to explain departure from the adopted model may require the decision to be quashed and remitted.

The claimants operated care and nursing homes in Pembrokeshire. The defendant Council paid fees for a substantial proportion of the beds. Following an earlier judicial review in which the Council’s fee decision was held unlawful, the Council reconsidered the rate for 2010–2011 and increased it to £464 per resident per week.

The claimants challenged the reconsidered decision. They alleged errors in the rate of return on capital, failure to consider sustainability and residents’ interests, failure to provide an adequate quality incentive, and failure to follow relevant guidance. The central issue was whether the Council had lawfully departed from the 12% return on capital contained in the adopted Laing and Buisson toolkit and had adequately explained the resulting rate.

1. The claim succeeded. The Council’s decision was quashed and remitted for reconsideration and redetermination of the 2010–2011 rate.

2. The court reviewed the legality of the decision-making process, not the merits of complex economic or technical questions. The Council retained a wide discretion under section 21 of the National Assistance Act 1948, but that discretion was constrained by applicable guidance.

3. The Council had chosen to use the Laing and Buisson toolkit. Its 12% return on capital therefore formed the starting point. The Council could depart from it, but only for rationally justified reasons communicated with sufficient transparency to providers.

4. The Council made material errors. It treated the absence of a policy to incentivise new building as a reason for reducing the capital return, although that distinction had previously been identified as erroneous. It also treated a fall in market values as supporting a lower return without investigating whether the two were linked. The material lacked sufficient detail and analysis, and there were arithmetical errors and no adequate investigation of relevant cost information.

5. The Council also unlawfully removed the toolkit’s quality incentive. The fact that providers met minimum standards and that no alternative scheme had been devised did not justify abandoning that part of the adopted model.

6. The accumulated-deficit challenge was too late. Although the issue had not been considered, it had not been raised in the earlier judicial review, and the Council was not required to raise it of its own motion within the short remaking timetable.

7. The court could not conclude that the Council would necessarily have reached the same decision without the errors. The size of the increase and the decision-maker’s expertise did not cure the defective process.

First-instance judicial review. The court quashed the Council’s reconsidered fee decision and remitted the matter to the Council for further consideration and redetermination.