Golden Eye (International) Ltd v Telefónica UK Ltd (Court of Appeal)

The Court of Appeal dismissed the challenge to the respondent local authority's decision to fix care home rates for a three year period. The principal legal issue was whether the council had failed to have "due regard to the actual costs of providing care" as required by Local Authority Circular LAC 2004(20) (paragraphs 2.5.4 and 3.3) and by the National Assistance Act 1948 Directions concerning choice of accommodation. The court held that guidance in the Circular and the non‑statutory document "Building Capacity" places no prescribed methodology on a local authority and does not impose a statutory requirement to adopt a particular structured or arithmetic model when setting "usual costs". The judge's findings of fact that the authority had compared rates regionally, considered market capacity, examined management accounts supplied by a provider and explained its refusal to adopt the PWC model were unchallenged and supported the conclusion that the authority had had due regard.

Subsidiary findings: the court treated the 2001 "Building Capacity" guidance as adding nothing material to the Circular; earlier authorities in different statutory contexts were not directly transferrable; and where claimants supply limited cost information a local authority may be entitled to rely on other relevant inquiries and its own judgment.

Background and parties: The appellant was an unincorporated association representing proprietors and managers of care homes in Northumberland (CNEN). The respondent was Northumberland County Council. The council fixed residential care home payment rates for the period from 1 April 2012 for three years. The appellants sought judicial review of that decision.

Nature of claim and relief sought: The claim challenged the lawfulness of the council's rate‑setting decision. The principal ground alleged failure to have "due regard to the actual costs of providing care" contrary to Local Authority Circular LAC 2004(20) (paragraphs 2.5.4 and 3.3) and to the Directions made under the National Assistance Act 1948. A related allegation concerned departure from the non‑statutory "Building Capacity" guidance (paragraph 6.2).

Procedural history: The claim was dismissed by Supperstone J in the High Court (see [2013] EWHC 234 (Admin)). The appellants appealed to the Court of Appeal.

Issues for the court:

• Whether the council failed to have due regard to the actual costs of providing care when setting its "usual costs" in breach of the Circular and the Directions;
• Whether the council was required, as a matter of law, to adopt a particular "structured" or arithmetical methodology (for example the PWC model) to demonstrate sufficiency; and
• Whether the council improperly failed to engage with or consider providers' cost information.

Reasoning and conclusion: The Court of Appeal upheld Supperstone J. The court confirmed that the Circular (LAC 2004(20)) and the Directions require a local authority to have regard to actual costs but do not prescribe a single methodology or require a statutory, structured arithmetic exercise. It is generally for the decision‑maker to determine the manner and intensity of inquiry to obtain relevant information. On the judge's unchallenged factual findings, the council had compared its fees with neighbouring authorities, examined market capacity and the evidence and management accounts actually provided by at least one provider, and explained why it would not adopt the PWC model. The court also held that the 2001 "Building Capacity" guidance added nothing material to the Circular and rejected attempts to import stricter requirements from other statutory contexts.

Wider comment: The court emphasised that many contested cases turn on their facts and expressed caution about reading observations from other administrative law contexts into the present statutory framework.

The appeal was dismissed. The Court of Appeal agreed with Supperstone J that the respondent had had due regard to the actual costs of providing care as required by LAC 2004(20) and the Directions; guidance did not impose a mandatory structured or arithmetical methodology, and the judge's unchallenged factual findings showed sufficient inquiry and consideration of providers' information.

Appeal from the High Court of Justice, Queen's Bench Division (Supperstone J), judgment in the High Court reported at [2013] EWHC 234 (Admin); appeal heard in the Court of Appeal resulting in this judgment [2013] EWCA Civ 1740.