Redcar and Cleveland Independent Providers Association & Ors, R (on the application of) v Redcar and Cleveland Borough Council

The claim challenged the borough council’s decision-making in setting residential care home fee rates for 2012/13 and its proposal to remove providers who did not accept a new contractual framework from its provider list. Central legal principles were the duties in the National Assistance Act 1948 (section 21 and section 26), the assessment duty in section 47 of the National Health Service and Community Care Act 1990, and the requirement for local authorities to have due regard to the actual cost of care and local factors under statutory and practice guidance (including LAC (2004) 20 and related non‑statutory guidance).

The court held that fee‑setting is in principle a public function amenable to judicial review and that the authority must first ascertain (even if only by a broad estimate) the actual costs of providing care in its locality in order to have due regard to them. The council relied principally on benchmarking against neighbouring authorities; the judge found that, as implemented, the council had used benchmarking largely to identify what reductions might be imposed or negotiated without provoking litigation rather than to determine local actual costs. On that basis the decision setting the 2012/13 fee rates was unlawful for failure to have due regard to actual costs. The claim on consultation failed (the consultation met the required standards) and the complaint about maintaining a closed provider list succeeded only to the limited extent that the council cannot lawfully prevent contracting in principle but may require providers to contract on its standard terms and usual fee (subject to exceptional cases).

The claimants were an association of independent care home providers and individual providers who challenged two decisions made by Redcar and Cleveland Borough Council following the 2012 fee review: (1) the decision to fix fee rates for 2012/13 at the levels communicated on 16 March 2012 (a net reduction overall compared with the previous year) and (2) the decision to remove from the council’s provider list homes that refused to sign the new Framework Agreement.

Nature of the application: an application for judicial review seeking declarations that the fee‑setting decision was unlawful and relief preventing removal from the provider list.

Issues framed by the court:

• Whether fee‑setting by a local authority in this context is a public function amenable to judicial review and whether providers have standing;
• Whether the council complied with its obligation to have due regard to the actual costs of providing care and local factors as required by LAC (2004) 20 and related guidance;
• Whether the council adequately assessed risks to residents and to the financial viability of homes (including Article 8/Common law considerations);
• Whether consultation with providers was proper; and
• Whether the council could maintain a closed provider list linked to acceptance of the Framework Agreement.

Court’s reasoning and conclusions: The judge followed authority holding that fee‑setting is capable of public law review and that providers have sufficient interest. The court explained the appropriate two‑stage approach to a duty to give due regard: first the court reviews whether the statutory duty to have regard has been discharged (a non‑Wednesbury threshold), and, if it has, any challenge to the weight given to considerations is for Wednesbury review of the ultimate decision. Here the contemporaneous briefing papers and consultation materials showed that the council relied heavily on benchmarking against neighbouring authorities and the previous year’s rates but did not undertake an enquiry sufficient to establish the actual local cost of care. Benchmarking alone, without local cost evidence, was inadequate to satisfy the statutory guidance requirement to have due regard to actual costs and local factors. On that ground the court found the fee‑setting decision unlawful. The court rejected the challenge that consultation was inadequate and found the council had consulted sufficiently; it also held that while a council cannot lawfully refuse in principle to contract with a provider chosen by a resident if conditions are met, the council may require providers to contract on its standard terms and usual fee (with exceptional cases considered).

Remedy: the judge declared the 12 March 2012 decision (communicated 16 March 2012) unlawful for failure to have due regard to actual costs and ordered the council to make a fresh decision about fees for 2012/13. The court indicated the claimants should not be excluded from the provider list in principle (subject to the council’s standard terms).

The claim succeeded. The court held that: (1) local authority fee‑setting for residential care is a public function amenable to judicial review and providers have sufficient interest; (2) the authority had a statutory and guidance‑based duty to have due regard to the actual costs of care and local factors and the court must first determine whether that duty was discharged; (3) the council’s reliance primarily on benchmarking—used as a vehicle to calculate negotiable reductions and to avoid litigation—was inadequate and the council had not properly ascertained the actual costs in its area, so the fee‑setting decision of March 2012 was unlawful; (4) the council’s consultation was adequate; and (5) the council cannot in principle exclude providers from contracting with it where residents choose those homes, although it may insist upon its standard contractual terms and usual fee and consider exceptional cases. A declaration of unlawfulness was ordered and the council required to make a fresh fee decision for 2012/13.