In a case which illustrated the pitfalls which so often arise in contractual relationships between the private and public sectors, care home owners have triumphed in their High Court fight to overturn a cap on the fees they receive from a local authority.
The council was prey to severe budgetary restraints and the fees structure it adopted was based upon a ‘complicated and convoluted’ mathematical formula which was used to assess the ‘usual cost’ of looking after a resident in the seaside resort which had a very high concentration of more than 100 privately run care homes.
In setting the fees structure, the Court noted that the council had tried its best to balance the needs of those requiring care against its duty to protect public funds. However, a group of care home owners argued that the council’s formula seriously under-estimated required staffing levels; did not reflect the true cost of providing care and ultimately threatened the viability of their businesses.
In upholding their judicial review challenge, the Court found that the formula was ‘mathematically flawed’ and that the council’s calculations simply ‘did not add up’. In taking into account ‘top-up fees’ paid by privately paying residents, the council had also disregarded central government guidance. Although recognising the difficulty and inconvenience the council would inevitably suffer, the Court quashed the fees structure and directed a complete reconsideration of the issue.