Mayfield Care Ltd & Anor v St Helen's Council

When setting usual costs for publicly funded residential care, a local authority must have due regard to the actual costs of care but need not adopt a prescribed methodology or calculate every cost element precisely. It may use a hybrid approach combining evidence, benchmarking, market information, judgment and experience. Affordability is relevant to setting usual costs, but not to identifying actual costs as such. The court reviews the legality of the decision-making process, not the merits or economic wisdom of the rate selected. It should intervene only where there is irrationality or another significant public law error. A local authority may also rely on experience of market viability and provider responses when deciding whether previously adopted rates remain sufficient.

The claimants operated care homes and sought judicial review of St Helens Council’s residential care fee rates for 2013/14. They challenged the Council’s treatment of return on capital, alleging irrationality, failure to comply with statutory guidance concerning actual costs and assessed care needs, and breach of the public sector equality duty.

The Council had used the previous year’s rates as a baseline, with an inflationary increase and an additional uplift. The central issue was whether the Council had unlawfully assessed return on capital by departing from figures in accountancy reports and by taking account of affordability, benchmarking, market capacity and commissioning intentions.

1. Disposition. The claim failed on all three grounds. The Council’s decision was not quashed. Costs were left for agreement or determination at a further hearing.
2. The statutory guidance required due regard to actual costs of care, but did not require a particular methodology, an arithmetical calculation, or a separate exercise identifying every constituent cost. The Council had a broad discretion over the manner and intensity of its inquiry, subject to ordinary public law principles.
3. Return on capital was a constituent element to which the Council had regard, but the court was not required to decide whether any particular allowance or rate was substantively correct. The authorities relied on by the claimants concerned the legality of the decision-making process and did not establish a mandatory allowance or minimum rate.
4. The Council was entitled to adopt a hybrid approach. It could consider the Chameleon and Laing & Buisson reports, local data, benchmarking, market capacity, commissioning intentions, affordability and its own judgment and experience. It was not obliged to adopt the reports’ suggested rates or to justify a departure through a detailed mathematical model.
5. Affordability was irrelevant to the ascertainment of actual costs, but relevant to the wider decision on usual costs. The guidance did not require an artificially separate sequence in which actual costs were first calculated and only then adjusted for other relevant factors.
6. Judicial review was not an appeal on the merits. The Council had sufficiently demonstrated that its rates were adequate to meet assessed needs, having regard to market experience, the absence of widespread provider failure, consultation responses and benchmarking. Its equality impact assessment showed due regard to equality implications.

The judgment was a first-instance judicial review decision. Permission had previously been refused and was granted on oral renewal by HHJ Pelling QC, sitting as a High Court Judge.