South West Care Homes Ltd & Ors, R (on the application of) v Devon County Council & Anor

The claimants, providers of care homes, sought judicial review of Devon County Council's April 2012 decision setting fee rates for 2012-13. The claim was advanced on three grounds: (1) failure to comply with the public sector equality duty under section 149 of the Equality Act 2010; (2) unlawful consultation; and (3) irrationality of the decision-making process and calculations.

The court held that the equality duty applied to the exercise of setting the council's "usual cost" for care because that exercise can affect disabled and elderly residents' rights to choice of accommodation and to avoid isolation. The council's equality impact assessment did not, in the court's view, give due regard in substance, with rigour and an open mind to the need to eliminate discrimination and to advance equality of opportunity (section 149 EA 2010); in particular it failed to reassess or mitigate the identifiable risk of home closures and did not adequately consider staff interaction costs for residents with dementia.

By contrast, the court found the consultation process and the challenged technical financial assumptions were, on the evidence, procedurally fair and not irrational in the public law sense. The claim therefore succeeded on the equality duty ground but failed on consultation and irrationality grounds. The court concluded that the impugned decision should not stand and directed further submissions on the appropriate form of relief.

This is a first instance judicial review of a local authority decision to set banded fee rates for privately provided residential and nursing care for 2012-13. The claimants were care-home owners who said the rates produced an effective nil return on capital and therefore risked unplanned closures and reduced quality of care for elderly and disabled residents.

Nature of the claim and relief sought: The claimants applied for judicial review seeking to challenge the council's fee-rate decision on statutory equality duty grounds (Equality Act 2010 s149), on the lawfulness of consultation, and on irrationality of the decision and its underlying calculations.

Procedural posture: First instance judgment in the Administrative Court following a three-day hearing. The judgment also referred to an earlier judicial review between the parties ([2012] EWHC 1867) in which the court had found inadequate consultation for the prior year.

Issues before the court:

• Whether the public sector equality duty (s149 EA 2010) applied to the council's exercise of determining the "usual cost"/fee rates and, if so, whether it was complied with;
• whether the consultation process met the requirements of a fair consultation (sufficient reasons and information to allow meaningful response); and
• whether the council's decision-making and particular financial assumptions were irrational or otherwise Wednesbury-unreasonable.

Court's reasoning and findings: The court concluded that the fee-setting exercise was part of the decision-making which gave rise to duties under the National Assistance Act 1948 and associated Directions and could affect rights protected by domestic equality law and by international instruments (UN Convention and the European Convention on Human Rights). Consequently section 149 EA 2010 was engaged and had to be addressed during the fee-setting process.

The court examined the council's equality impact assessment (EIA) and related materials and found that, although the council recognised some risks (for example potential closures), it failed to give due regard in substance to the statutory equality needs. The EIA was prepared by a procurement officer without apparent use of internal equality facilitators or external evidence on mitigation; it was not revisited when the Fee Structure Proposal identified some 25 homes at risk; and it did not address mitigation measures or the particular staffing/engagement needs of residents with dementia. On this basis the court concluded the equality duty had not been complied with.

On consultation, the court accepted that whilst one presentation (13 February 2012) contained complex financial material and a slide (EBITDAR) was not published online, the wider consultation process offered a substantial opportunity to comment, and the council engaged with providers thereafter; the consultation was therefore not unlawful.

On irrationality, the court reviewed detailed criticisms of the council's financial methodology (including alleged double-counting of depreciation, tax treatment, capital gains, the admissibility of a volume discount and the resulting low return). The court treated those as disputed professional views and concluded that the council's approach was tenable and within the margin of appreciation of the decision-maker; no irrationality was demonstrated.

Disposition: Judicial review was allowed in respect of the equality duty failure. The court refused relief on the consultation and irrationality grounds. The judge concluded the council's decision should not stand and directed further submissions on the precise form of relief.

The claim was allowed in part. The court held that Devon County Council had failed to comply with its duty under section 149 of the Equality Act 2010 when setting the usual cost/fee rates because the equality impact assessment and decision-making did not give due regard in substance to the need to eliminate discrimination and advance equality of opportunity for elderly and disabled residents. The court dismissed the challenges based on unlawful consultation and irrationality, finding the consultation process gave a sufficient opportunity to respond and the contested financial assumptions fell within the decision-maker's reasonable judgment. The judge concluded the impugned decision should not stand and directed further submissions on remedy.