Successful Challenge to Local Authority’s Funding for Care Homes

04 February 2015

Author: Anna McCarthy
Practice Area: Healthcare
Sector: Healthcare


R (on the Application of Torbay Quality Care Forum Limited) v Torbay Council [2014] EWHC 4321 (Admin)

A local authority’s approach to calculating funding rates for care homes has recently been successfully challenged.  The claimant was an association of independent care home operators who challenged the local authority’s “usual figure” in respect of the costs of care.  The “usual figure” is the amount which the local authority assesses as the normal cost of providing services for care home residents, and becomes the figure that the local authority is prepared to pay to providers.  The local authority had calculated the usual figure by developing an economic model. 

The claimant contended that:

  1. The economic model on which the decision was based, specifically with regard to a staffing ratio calculation, was mathematically flawed, and therefore unreasonable.  The staffing ratio significantly underestimated the number of hours of staff time required for each resident.  Furthermore, the local authority had used an average of publicly advertised fees for residential care, weighted for the proportions of standard to standard plus residents, and no explanation had been provided for the use of this weighting. 
  2. The decision was unreasonable as the model took into consideration top-up fees paid by privately paying residents, which were not relevant.  This was contrary to government guidance which advised against “cross-subsidisation”, where private payers effectively subsidise other residents. It was also submitted that payment of top-up fees was not a proper consideration as the number of private payers could vary significantly between each home, and taking this into consideration would therefore distort the assumed cost of running a home.   

The defendant argued that:

  1. No mathematical errors had been made, and the challenge to the staffing ratio simply represented a difference of opinion and approach.
  2. The local authority was entitled to take into account fees paid by privately paying residents.

Decision of the Court

Government Guidance

Attention was drawn to government circulars on the exercise of social service functions by public authorities, which there is a legislative requirement for local authorities in England to follow.  The guidance stipulates that the “usual cost” should be set with due regard to the “actual costs” of providing care.  The judgment of Sedley J in R v London Borough of Islington ex parte Rixon was referred to.  This affirmed, with reference to the Local Authority Social Services Act 1970, that local authorities are obliged to follow such government guidance, with liberty to deviate from it only where the local authority judges on admissible grounds that there is good reason to do so.  It was found that the public authority had not provided any justification for departing from the wording of the circular, and had not had proper regard to the actual costs of providing care. 


It was emphasised by Judge Lambert that the courts would always be reluctant to engage with the conclusions of primary decision makers in relation to complex and technical questions. However, it was stated that if a decision maker decides to use economic modelling, they cannot be allowed to proceed with a mathematical model which is fundamentally flawed.  No explanation was provided by the Council for the formula used to calculate the staffing ratio, and, in particular, an unnecessary weighting was adopted, which no one from the local authority could explain.   


It was suggested, on behalf of the defendant, that as there had been delay in bringing judicial review proceedings, the court should use its discretion to refuse a remedy to avoid a significant detriment to good administration, which would be caused by allowing a quashing order.  However, the court found that although such an order would be difficult and inconvenient for the local authority, there was no evidence that there would be an exceptional detriment.  The court also stated that the delay in the case had not been undue, due to the “fiendish complexity” of the matters in issue.  It was, therefore, held that the decision made by the local authority should be quashed, and remitted to them for further consideration and redetermination of the rate to be applied. 

Should you have any queries arising out of this judgment, please contact Anna McCarthy or another member of the Healthcare Team.