CO/3653/2002
Neutral Citation No.: [2002] EWHC 2188 (Admin) 
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, 
London, WC2A 2LL

Thursday 17 October 2002
Before:

THE HONOURABLE MR JUSTICE STANLEY BURNTON

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THE QUEEN on the application of

	BIRMINGHAM CARE CONSORTIUM and others	Claimant	
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	BIRMINGHAM CITY COUNCIL	Defendant	

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040,  Fax No:  020 7831 8838
Official Shorthand Writers to the Court)
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Mr Robin Green (instructed by Wood Shawe & Co) for the Claimant
Mr Christopher Baker (instructed by Birmingham Legal Services) for the Defendant

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Judgment
As Approved by the Court

Crown Copyright ©

Mr Justice Stanley Burnton: 

1.	The Claimants in these proceedings are:
(a)	a  consortium of nursing and care homes in Birmingham and the proprietors of a number of such homes; and 
(b)	persons who were entitled to be placed in care homes by the Birmingham City Council and complained that their choice of care home had been unlawfully restricted by it.
Unless otherwise indicated, my references below to “the Claimants” simpliciter are to the consortium and the proprietors of nursing and care homes only.  I shall refer to the Claimants entitled to placements in nursing or care homes as “the individual Claimants”.  Unless otherwise indicated, references in my judgment to care homes include nursing homes.
2.	In 1999 the Council entered into contracts with a large number of care homes on standard terms, including the terms as to charges and duration.  The contract period commenced on 1 April 1999 and expired on 30 June 2002.  The contract included provision for review of the contract price by the Council; the last review took effect in 2001.  It provided that after expiry it would continue to have effect in relation to existing residents whose placements had not been terminated by the Council or the care home, unless it was replaced by a new contract.
3.	In the period before the expiry of the contracts, consultations and negotiations took place between the Council and the care homes with which it contracted, including the Claimants, concerning, principally, the rates to be paid to the homes after expiry of the current contracts.  No agreement was reached: the rates that the Council was willing to pay were unacceptable to the Claimants, who contended that they would not meet their costs and that they would be forced to close.  In a letter dated 19 June 2002, the Council formally offered an extension of the contracts to the end of March 2003, on the basis of a 2 per cent increase in fees from 1 July 2002.  The extension was seen as a temporary measure, presumably to be followed by the offer of a long-term contract.  The letter added:
“If your home chooses not to extend its existing contract, all current residents can remain at your home at your current contract rate.  No new placements can be made until an extension to your contract is agreed.”
4.	The Claimants contend that the refusal of the Council to make placements otherwise than at the rates referred to in that letter is unlawful.  Their principal contention is that the Council’s decision is inconsistent with the provisions of the National Assistance Act 1948 (Choice of Directions) Directions 1992.  They also complain that the Council has unlawfully fettered its discretion to pay greater, and realistic, rates for placements by adopting a comprehensive and inflexible policy.  This complaint is very much a subsidiary complaint: no complaint of fettering of discretion was made in respect of the standard term 1999 contracts, and Mr Green conceded that no such complaint would have been made if the rates offered by the Council had been acceptable to the Claimants.  Their real complaint concerns the rates offered.  It is also submitted on their behalf that the Council failed to take into account that the effect of its decisions is likely to be the further unmanaged closure of care homes, contrary to the intent of the relevant legislation; that in insisting on placements at uneconomic rates the Council is failing to meet the needs of residents for stable, long-term care; that the Council has wrongfully relied on its own lack of resources in deciding to offer rates that do not meet the true cost of care; and that the Council failed to take account of these relevant matters in making its decision; and that in the circumstances the decision of the Council was perverse.
5.	The Defendant disputes that it is offering less than the true cost of care.  It disputes that it has adopted an inflexible policy.  At the opening of the hearing, Mr Green informed me that all of the individual Claimants had been acceptably placed in care homes, and were no longer pursuing their claims.  Mr Baker submitted that this and other evidence showed that the policy of the Council was not inconsistent with its duty to meet the needs of residents for stable, long-term care, if, indeed, there is such a duty.  He relied on the numbers of homes which had accepted the rates offered by the Council as evidence that no long term closures would necessarily follow from its decision; that it had lawfully taken its own resources into account; that it had taken into account the other matters referred to by the Claimants; and that its decision was manifestly not perverse.
The legislative scheme
6.	Placements in the care homes are made by the Council pursuant to the provisions of Part III of the National Assistance Act 1948 as amended.  Section 21 provides:
“(1)	Subject to and in accordance with the provisions of this Part of this Act, a local authority may with the approval of the Secretary of State, and to such an extent as he may direct shall, make arrangements for providing
(a) residential accommodation for persons aged 18 or over who by reason of age, disability or any other circumstance are in need of care and attention which is not otherwise available to them …”
The term accommodation is defined in section 21(5) NAA 1948, which provides:
“References in this Act to accommodation provided under this Part thereof shall be construed as references to accommodation provided in accordance with this and the five next following sections …”
Arrangements made by a local authority under section 21 of the 1948 Act may include arrangements made with a third party.  Section 26(1) provides:
“… arrangements under section 21 of this Act may include arrangements made with a voluntary organisation or with any other person who is not a local authority where – 
(a) that organisation or person manages premises which provide for reward accommodation falling within subsection (1)(a) or (aa) of that section, and
(b) the arrangements are for the provision of such accommodation.”
Section 26(2) provides:
“Any arrangements made by virtue of this section shall provide for the making by the local authority to the other party thereto of payments in respect of the accommodation provided at such rates as may be determined by or under the arrangements .…”
7.	Section 7 of the Local Authority Social Services Act 1970 requires local authorities, in the exercise of their social services functions, including the exercise of any discretion conferred by any relevant enactment, to “act under the general guidance of the Secretary of State”.  “Social Services functions” include the provision of residential accommodation under sections 21 to 27 of the 1948 Act: see section 1A and Schedule 1 to the 1970 Act.  Section 7A of the 1970 Act requires local authorities to exercise their social services functions in accordance with any directions given to them under that section by the Secretary of State.  The Secretary of State’s approvals and directions under section 21(1) of the 1948 Act include a direction that local authorities make arrangements under section 21(1)(a) of that Act in relation to persons who are ordinarily resident in their area and other persons who are in urgent need thereof, to provide “residential accommodation for persons aged 18 or over who by reason of age, illness, disability or any other circumstance are in need of care and attention not otherwise available to them”.  The effect of this direction is to make obligatory what would otherwise be a discretion to provide residential accommodation under section 21(1)(a).  
8.	The National Assistance Act 1948 (Choice of Accommodation) Directions 1992 require that where a local authority has decided that accommodation should be provided to a person pursuant to section 21 of the 1948 Act, it must make arrangements for his accommodation at the place of his choice (“preferred accommodation”), if he has indicated that he wishes to be accommodated there, subject, however, to paragraph 3 of those Directions.  Paragraph 3 provides:
“… the local authority shall only be required to make or continue to make arrangements for a person to be accommodated in his preferred accommodation if – 
(a) the preferred accommodation appears to the authority to be suitable in relation to his needs as assessed by them;
(b) the cost of making arrangements for him at his preferred accommodation would not require the authority to pay more than they would usually expect to pay having regard to his assessed needs;
(c) the preferred accommodation is available;
(d) the persons in charge of the preferred accommodation provide it subject to the authority’s usual terms and conditions, having regard to the nature of the accommodation, for providing accommodation for such a person under Part III of the National Assistance Act 1948.”
9.	The 1992 Directions include Guidance in relation to preferred accommodation.  Paragraph 7 of that Guidance is as follows:
“As with all aspects of service provision, there should be a general presumption in favour of people being able to exercise choice over the service they receive.  The limitations on authorities’ legal obligation to provide preferred accommodation set out in the direction are not intended to deny people reasonable freedom of choice, but simply to ensure that authorities are able to fulfil their obligations for the quality of service provided and for value for money.  The terms of the direction are explained more fully below.  Where for any reason an authority decides not to arrange a place for someone in their preferred accommodation it must have a clear and reasonable justification for that decision which relates to the criteria of the direction.”
10.	Under the subheading “cost”, the Guidance states:
“7.4 The test should be whether the cost of preferred accommodation is more than the authority would usually expect to pay for someone with the same assessed needs as the individual concerned.  This is not necessarily the same as the cost that the authority would have in fact have incurred had the particular individual not decided to exercise their right to chose, since that might be either higher or lower than the authority would usually pay.  For example, the cost of a one particular placement at a given time might be determined by the fortuitous availability for whatever reason of a place below the cost that an authority would usually expect to meet, or else by the temporary unavailability of accommodation at the authority’s usual price.  
7.5 The costs being compared should be gross costs before income from charging.  Given the different amounts that authorities will recover from individuals by way of charges it would not be possible to determine a usual net cost an authority would expect to pay.  
7.6 Costs will vary around the country. …
7.7 Costs may also vary according to the type of care.  For example, the cost an authority might usually expect to pay for respite care might be different from its usual cost for permanent care.”
11.	Lastly, the 1992 Directions give guidance on their effect on tendering and block contracting.  Paragraph 16 is as follows:
“For example, where authorities are conducting, or have completed, exercises designed to draw up closed lists of approved suppliers they will need to make it clear that as a result of this direction such a list cannot now be regarded as an exhaustive statement of those providers with whom the authority will contract.  It would not be reasonable for an authority to use as a test of the suitability of accommodation its presence on or absence from a previously compiled list of approved suppliers.  The direction does not, however, prevent an authority having a list of preferred providers with which it will contract where a potential resident expresses no preference for particular accommodation, nor from recommending such providers to prospective residents.”
Discussion
12.	Mr Green’s principal argument focused on the reference in paragraph 3 of the 1992 Directions to “more than (the local authority) would usually expect to pay”.  He submitted that these words refer to, and are equivalent to, the true cost of providing care to a resident in a care home; and that by refusing to place persons in homes that require payment of the true cost of care, the Defendant is refusing to provide preferred accommodation on a ground other than one of those specified in Direction 3.  He also submitted that since the Defendant’s policy was bound to lead to further home closures, it would lead to its being unable to fulfil its duty to individuals in need under section 21 of the 1948 Act.
13.	These submissions relate to the true construction of the Directions and require an examination of the basis of the Defendant’s offer.
14.	The wording of paragraph 3(b) of the 1992 Directions is unusual, but it is significant that they do not use such obvious and well-understood terms as “reasonable price” or “fair price” or “fair cost” or the like.  The reason must be speculative, but it may be connected with the difficulties of determining what is a fair or reasonable price or rate and what is to be taken into account in determining it, particularly if a rate is to be arrived at that is applicable to a number of possibly disparate care homes.  The Direction assumes that the rate payable by a local authority will be relevant to a number of homes and will be based on what it pays or expects to pay to a number of homes, having regard to the assessed needs of the resident in question.  I see no reason to depart from the literal wording of the Direction.  It does not require a local authority to determine whether the cost of arrangements for accommodating a person is fair or reasonable.  It simply entitles it to refuse to comply with an indication of preferred accommodation if the cost of it is more than the local authority would usually expect to pay, having regard to assessed needs.
15.	The Defendant’s evidence is that the majority of care homes have accepted the offer made in its letter of 19 June 2002.  The written evidence gives figures for the position at 16 August 2002, some 2 months after the letter was sent out, but Mr Baker was able to bring the figures up to date.  As at the date of the hearing, 83 per cent of Birmingham nursing homes, representing 85 per cent of the beds in such homes, and 74 per cent of all homes, representing 79 per cent of the beds, had accepted the offer.  In addition, homes outside Birmingham providing a further 710 beds had accepted the offer.  The evidence is that the Defendant is able to place persons to whom it owes a duty under Part III of the 1948 Act at the rates offered in the letter of 19 June 2002, as illustrated by its successful placement of the individual Claimants. In these circumstances, the Defendant has established that a rate higher than its offer, assuming similar needs, would be “more than they would usually expect to pay” and under the terms of the 1992 Directions would justify their refusal to comply with an indication of preferred accommodation.  
16.	Mr Green sought to compare the present position in Birmingham with the example given in the last sentence of paragraph 7.4 of the Guidance given in the 1992 Directions.  That example is of an exception that does not prove the rule.  The figures given by the Defendant preclude their placements at the rates offered in the letter of 19 June 2002 being considered as exceptional.
17.	The contention that the letter of 19 June expressed an inflexible policy, depriving the Defendant of its discretion, was made for the first time in the Claimants’ skeleton argument, and the Defendant’s evidence did not address it.  Mr Baker was able to give an example of a placement at a different rate, which indicates that the policy is not operated inflexibly, and that discretion to depart from it is exercised in particular cases: I refer to the decision in relation to Mr and Mrs Hatton in the letter of 30 August 2002.  I should in any event be reluctant to grant relief under this head.  As mentioned above, no objection was taken to the previous standard arrangements of the Defendant, and no complaint would be made now if the standard rates offered were acceptable to the Claimants.  The complaint is as to the level of the offer, not the failure to make exceptions to the rates generally offered.  Secondly, any relief granted on this basis would do no more than require the Defendant to exercise its residual discretion.  That would not assist the Claimants, who require every new placement with them to be treated as outside the general rule.  In addition, the Defendant cannot lawfully make a placement with a third party pursuant to its section 21 duty without having in place arrangements for payment for the accommodation and services provided at rates determined by those arrangements: see section 26(2) of the 1948 Act and Chief Adjudication Officer v Quinn [1996] 1 WLR 1184, per Lord Slynn of Hadley (with whom the other members of the Judicial Committee of the House of Lords agreed) at 1192B-E.  The expressions “arrangements” and “rates” indicate that the local authority should have standard terms and charges.  The 1992 Directions are consistent with this: paragraph 3(d) entitles a local authority to refuse to comply with an indication of a wish to be accommodated in preferred accommodation “if the persons in charge of that accommodation do not provide it subject to the authority’s usual terms and conditions”.  To strike down the general arrangement made by the Defendant would render it incapable of carrying out its duty under Part III of the 1948 Act by making placements with independent care homes.  
18.	The more complex issue is whether the rates offered in the letter of 19 June represent the fair cost of the provision of accommodation.  The determination of a fair cost is by no means straightforward.  Assumptions have to be made as to occupancy rates and returns on capital.  Occupancy rates will depend in part on the local authority’s placement policy: a policy to use out of town placements will of course tend to lower occupancy rates in town.  Where there is no finance charge incurred by the home, the fair return on the value of the property itself may be controversial, given that in current economic conditions its capital growth may provide a substantial return of itself.
19.	The Defendant’s Director of Social Services produced a report dated 28 February 2002 addressing the proposed purchasing strategy for care home places over the next 2 years.  It referred to the financial pressures on care homes and the closures within the sector.  Paragraphs 5.5.2 and 5.5.3 were as follows:
“5.5.2	It is now well documented nationally that home owners within the sector are facing increasing financial pressures due to the legislative changes which are taking place.  The new Care Commission standards are placing additional obligations on providers and for some home owners the likely costs of meeting the new national minimum standards are prompting their decision to leave the sector.  Issue 10, February 2002 of the ‘Care and Health’ publication indicated that approximately 50,000 or 10% of care home places have ‘reportedly disappeared since 1997 as a result of the mismatch between fee levels paid and what homes estimate as their costs’.  In Birmingham, the Service Contracts section recently produced a report on home closures (See Appendix three).  This showed that a net reduction of 314 independent sector residential beds had occurred in Birmingham since April 1999 – this mirrored the national trend as it represented 10% of the overall provision.
5.5.3	There have been consultation sessions with providers over the past 12 months in which providers have discussed their financial position in the light of new legal obligations facing them.  Homeowners from the Birmingham Care Consortium (which is an amalgamation of Private Sector Trade Associations in Birmingham) have recently provided the Department with a proposal for fees based on their current actual costs.  These have been developed by Burgess and Bullock (Chartered Accountants and Business Advisors) and state that fee levels should be set at £326 and for nursing provision at £487.  To reflect the possible impact on the Department’s budget the Finance section have advised that a £50.00 uplift on current prices would incur an additional £9 million pounds expenditure in the year 2002/3.  The Department proposes that negotiation with providers on fee levels will be informed by objective information about the predicted costs of care given factors such as Care Commission Standards.  The Department would seek to establish a member led, Joint Working Group with providers to consider this issue.  Working closely with other Local Authorities some of whom have already commissioned work on this matter.  Through this means a realistic price and modelling of the impact of standards should be achieved.”
20.	In the course of the negotiations and consultations between the Council and the owners of care homes, it sought advice from Laing & Buisson, who I was told are experts on the matters addressed in their reports produced for the Council.  Their report dated 27 March 2002 addressed issues of demand and supply, and concluded that there was a need to increase fees paid to care homes to, which were insufficient to maintain a viable independent care home sector.  However, they also advised that the demand for care home places and other services for older people was projected to reduce over the next 10 years; that there was an apparent over-supply of care home accommodation; that occupancy rates in Birmingham had deteriorated to well below the national average (although that might be due to local budget constraints); and that homes had closed due to low occupancy rates and the level of fees paid by the Council.  
21.	Laing & Buisson considered the question of a fair price for accommodation in care homes in Birmingham in their report dated 26 April 2002.  This report is the basis of the Claimants’ case.  Their summary stated:
“The table below summarises the results from the spreadsheets.  It should be noted that these apply to a care home that meets all of the national minimum standards and any additional ones that the Council imposes.  We expect very few, if any, of Birmingham’s current homes to meet these standards, and so the Council should devise a formula to reduce the rate payable based on the degree of falling short.  This deduction will be a percentage of the weekly allowance for the capital value of the home, and would reduce the fair price for care by up to £108.” 
22.	 Laing & Buisson discussed the question of return on capital costs in section 3.3 of this report.  They proposed a return of 16 per cent per annum.  In section 3.3.4, they addressed the fact that many, and indeed the great majority, of care homes do not meet national minimum standards.  They made the point that rates payable to homes with lower standards should be discounted.  They stated:
“Clearly, however, Birmingham Council should not reimburse sub-standard homes at the same rate.  To avoid this, a formula needs to be developed for discounting the building and equipment allowance for each home by a factor that represents the degree to which the home falls short of the required physical standards. …
Such an adjustment factor would be very important in reducing the cost consequences of any decision in principle for local authorities to allow for a return on capital 16% in fees.  For a new build or existing home which is fully compliant with all physical standards and ‘valued’ at £32,500 per bed excluding land, such a return on capital allowance would account for £108 per week in fees at an assumed occupancy rate of 92.5%.  If a sub-standard home were ‘valued’ it would halve that figure, which is not out of line with current care home market values, it would imply a halving of the return on capital allowance (at the same rate of 16%), i.e. a saving of £54 per week for the local authority.”
	Section 4 of the report set out a summary of care home costs.  It began:
“The following 4 tables summarise the results from the spreadsheets.  It should be carefully noted that these apply to a care home that meets all of the national minimum standards and any additional ones that the Council’s care purchasers impose.  We expect very few, if any, of Birmingham’s current homes to meet these standards, and so the Council should devise a formula to reduce the rate payable (deduction for non-compliance with physical standards) based on the degree of falling short.”
23.	Table 5 set out “A fair price for nursing home places for older people with or without dementia that meet all NMS and local standards in Birmingham”.  On the basis of a land cost per acre of £700,000, Laing & Buisson gave a return on capital of £143, of which £108 was attributable to “Buildings & equipment meeting all physical NMS and any additional commissioners’ requirements”.  The total cost per week per resident, comprising staff costs, non-staffing costs and return on capital, at a land cost of £700,000, was given as £461.
24.	The Council did not accept the entirety of the report.  In his witness statement dated 30 August 2002, Mr Stephen Wise, the Interim Assistant Director of Finance of the Defendant’s Social Services Department, stated:  
“8.	At the time when the Laing & Buisson April report was provided to the Defendants, they did not make available the material which supported their recommendation that a 16% per annum return on capital should be allowed for (see paragraph 3.3.1).  This was the reason why my paper referred to the report being incomplete.  The basis of this calculation was eventually provided in a national report they prepared for the Joseph Rowntree Foundation.  No further work, however, has been done to analyse this calculation because it was based upon the implementation of the new higher national minimum care standards which the government then announced were themselves to be reviewed.  My colleague, David Jones, refers to this in his witness statement.  It should also be noted that central government has not approved the findings of Laing & Buisson report for the Joseph Rowntree Foundation. 
9.	We disagreed with Laing & Buisson about their assumed rate of return on capital investment, which they themselves recognised ‘may seem high’ (paragraph 3.3.1).  Our work on this area suggested that a lower rate of return was reasonable, which is why the resulting figures which we proposed (i.e. £401 pw for nursing home care, £284 pw for low dependency residential care, £343 pw for high dependency residential care) were lower than Laing & Buisson’s.  I understand that this aspect of the Defendants’ decision is not under challenge.  These figures were based on the assumption that a home met the new higher national care standards.  
10. 	For present purposes, the key feature of the Defendants’ proposal was the phasing in of the increase over the period up to 2007.  This was when the new higher national minimum care standards were (as it was then understood) to be implemented.  As Laing & Buisson stated, very few if any homes in Birmingham were expected to meet these standards currently, and the value placed by Laing & Buisson on the difference between current and future standards was as much as £108 per week.  Accordingly, there was considerable investment and change required before these significantly higher levels of payment could be justified, as reflected in the substantial 5 year implementation period.”
25.	The Claimants did not file evidence in reply to Mr Wise’s evidence; nor did they contradict in writing Mr Wise’s understanding that they did not take issue with the Defendant’s position on the fair rate of return on capital.  Mr Baker therefore submitted that the evidence showed that the Defendant had reasonably arrived at the rates set out in paragraph 9 of Mr Wise’s statement, and reasonably considered that they represented fair rates.  To take the figure for nursing care as an example, Laing & Buisson gave a figure of £461 per week based on a land cost of £700 per acre (which Mr Green did not suggest was an inappropriate figure for the Claimants’ homes); Birmingham considered an appropriate figure for capital return was £83 instead of £143; and from this was to be deducted £54 on account of non-compliance with standards.  This would produce a weekly rate of £347, which is less than the current offer.  The rate sought by the Claimants is £401 per week, which is the equal to the sum recommended by Laing & Buisson less the Defendant’s reduction on return on capital, if all applicable standards are met, which in general they are not.
26.	Before me, Mr Green submitted that the Court should reject Mr Wise’s evidence, and find that the Defendant’s offer does not represent a fair rate. In addition to the Laing & Buisson reports, he pointed to a number of the Council’s own documents in which it conceded in unambiguous terms that an insufficient rate is paid and offered, and that the decision to make the offer contained in the letter of 19 June 2002 was based on the Defendant’s contention that it could not afford to pay a fair cost.  
27.	However, if Mr Wise had been warned that the Defendant’s case on return on capital was in issue, he would have been able to explain and to seek to justify his statement on the point.  Cross-examination might have been appropriate.  Given:
(a)	that Mr Wise specifically stated his understanding that this point was not in issue;
(b)	that his witness statement was served, I assume, shortly after it was signed, i.e. over a month ago, so that there was plenty of time for the issue to be properly explored if the Claimants had stated that it was in issue;
(c)	that the internal briefing paper dated 23 May 2002 prepared by Mr Wise specifically referred to this issue, and stated that “our initial assessment … is £83 per resident per week”, i.e. £60 less than the Laing & Buisson figure, so that his witness statement is consistent with his own contemporaneous internal memorandum;
(d)	that by failing to alert the Defendant to the fact that issue was taken, it was deprived of the opportunity of justifying its position on this point;
I do not think it right or fair to Mr Wise and the Defendants now to permit them to challenge what he said in paragraph 9 of his witness statement.
28.	The Claimants do not dispute that their homes do not, in general, meet the standards assumed by Laing & Buisson in arriving at their figures, or the amount of the allowance thought appropriate for homes that do not meet those standards.
29.	It follows that the Claimants have failed to establish that the rates offered by the Defendant in the letter of 19 June 2002 are less than fair rates.  
30.	I suspect that much of the confusion concerning the figures put forward in some of the documents results from a failure to specify clearly the assumptions behind the figure or statement in question.  The scope for confusion is increased by the fact that there are current minimum standards and ones that until recently were expected to come into effect in 2007.  I take as an example the statement in the letter of 24 May 2002 from Defendant’s Director of Social Services that:
“Councillor McCorry, the Cabinet Member, and myself acknowledge the gap between current fee levels and a ‘Fair Cost of Care’ in the context of the Care Standards Act and other legislative pressures on the care sector.”
The “Fair Cost of Care” referred to may well have been the cost for care in a home that satisfies both the current and anticipated minimum standards, and not merely the current standards.
31.	It also follows that the Claimants have failed to establish that the position taken by the Defendant in the letter of 19 June 2002 is bound to lead to insufficient capacity, or to a failure to provide for stable, long-term care for those in need.  No perversity has been shown.  Lastly, it is clear from the Defendant’s internal documents that it took into account the need to make such provision and the risk of loss of capacity to meet demand for care homes (involving the possibly of its inability to comply with its duties under Part III of the 1948 Act) in the future.  In these circumstances this case is to be distinguished from the decision of Potts J in R v Cleveland County Council, ex parte Cleveland Care Homes Association (1994) 158 LG Rev 641, 645.
32.	Out of deference to the arguments put before me, however, I mention some general considerations.  First, this case concerns the affordability of social services provided by the local authority.  Absent a statutory duty compelling the expenditure in issue at the amount contended for, questions of affordability and of the allocation of resources are for the democratically elected executive and legislature, not for the Courts.  Secondly, affordability is in general a highly relevant consideration to be taken into account by any local authority in making its decisions on rates to be offered to service providers, subject to the local authority being able to meet its duties at the rates it offers.  As Auld J said in R v Newcastle-upon-Tyne City Council, ex parte Dixon (20 October 1993, unreported but cited in the Cleveland Care Homes Association case):
“… where a local authority has a statutory duty to provide services and to fund them in part or in whole out of monies provided by its taxpayers it must balance two duties one against the other.  On the one hand it must provide the statutory services required of it; on the other, it has a fiduciary duty to those paying for them not to waste their money.  It must fairly balance those duties one against the other.”
Thirdly, the Court should be slow to intervene where, as in the present case, there has been a long process of consultation and the local authority and the service providers are, in effect, engaged in a contractual negotiation with the local authority.  Lastly, the extension offered in the letter of 19 June 2002 was for a relatively short period and was expressly indicated to be an interim proposal: see the first and second bullet points on the first page, and penultimate sentence.  I should have been reluctant to impeach that offer on the basis of alleged long-term effects of the rate offered for a period of 9 months.
33.	For the reasons set out above, the Claimants have failed to establish any ground for judicial review of the decision contained in the letter of 19 June 2002.
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 MR JUSTICE STANLEY BURNTON:  My judgment has been distributed in draft.  The finalised copies are available for the parties, members of the public and the press.  For the reasons set out in it the claim will be dismissed. 
 MR BAKER:  My Lord, in that event the defendants ask for their costs in the usual way. 
 MR GREEN:  My Lord, that is opposed for this reason.  Your Lordship identified in your Lordship's judgment a number of unambiguous representations that the Council was not paying the true cost of care, and that was the fundamental factual basis on which the claim was brought.  It then became clear at the end of August that that was not the Council's position and that it was paying the true cost of care.  In my submission, any order for costs should take account of that, no costs payable up to 30th August, when Mr Wise's statement waswas produced, but I accept that costs, in the ordinary way, should follow from that date when the Council's position was made clear.  I say "made clear", no explanation had been given to the claimant or this court as to why those representations were made.
 MR JUSTICE STANLEY BURNTON:  I have the point. 
 MR GREEN:  As to quantum, my learned friend and I are agreed that there should be a detailed assessment. 
 MR BAKER:  My Lord, we certainly agree on that last point.  As to the form of the order, I would make four points very quickly.  
First of all, the factual issue was not the only issue in the case.  There were other points that the claimants pursued, including the question of fetter and discretion, which was an additional point taken at the last moment.  There is no indication that they would not have pursued the case but for the factual issue.  
Secondly, the correspondence reveals that both the key points as to the amounts that were to be paid were evident from the correspondence.  First of all, the Laing & Buisson reduction of £108 a week was evidence on the face of the report.  Secondly ‑‑ 
 MR JUSTICE STANLEY BURNTON:  That was £180 for the ‑‑ 
 MR BAKER:  The care standards. 
 MR JUSTICE STANLEY BURNTON:  And they were suggesting £54. 
 MR BAKER:  Yes.  That was known to the claimants in any event.  As to the difference between Laing & Buisson and the defendants as to the rate of return on capital, that also was made plain in the correspondence.  Your Lordship will see that from page 63, the largest of the paragraphs, about a third of the way down the page:

"However, (reading to the words).  Consequently my accountants have undertaken work to estimate this element as detailed in the attachment."

My instructions that are that the attachment was Mr Wise's paper ‑‑ 
 MR JUSTICE STANLEY BURNTON:  It does not take anyone very far forward though, does it?
 MR BAKER:  It indicated that there was an issue as to that.  The claimants never sought to clarify those points in the correspondence prior to commencing proceedings, and the way in which they commenced proceedings with huge urgency was not merited on the facts of this case.  Having launched the proceedings, the claimants then received the acknowledgement of service from the defendants, and, as your Lordship will see from page 22, in that acknowledgement of service, which was served on 8th August, that is two days after the commencement of proceedings, the final sentence at paragraph 6 referring to the higher level for payment in forthcoming years, "such high levels, however, are dependent upon the providers meeting higher standards than is presently the case".
So it was made clear from the off, we would say, that those increased payments were linked to the attainment of those higher standards in precisely the same way as Laing & Buisson had themselves identified previously.  That point was made good in the evidence that the defendants then put forward from Mr Wise in particular.  
For those reasons, we respectfully say that the claimants had sufficient information at least to have sought to have clarified the position, which in any event they never did, even when they were provided with the clear evidence from Mr Wise.  That is an indication ‑‑ 
 MR JUSTICE STANLEY BURNTON:  They are not disputing their liability for costs after the service of Mr Wise's evidence. 
 MR BAKER:  No. 
 MR JUSTICE STANLEY BURNTON:  The real question is whether to some extent the Council were responsible for the commencement of proceedings.  I have your point that proceedings were commenced in the degree of urgency which was not, it would seem, entirely merited.  But nonetheless there was document after document in which the Council was saying, we cannot afford to pay the fair costs of care. 
 MR BAKER:  But at the same time we respectfully say that the information was before the claimants ‑‑
 MR JUSTICE STANLEY BURNTON:  I have that point. 
 MR BAKER:  ‑‑ sufficient to identify what the issues were and they could have clarified that.  The fact that even when provided with the evidence from Mr Wise they never reviewed the position or sought to challenge it is an indication, in our submission, that this claim would have been commenced regardless of the factual issue, because the clarification of that point made no difference, on the face of it, to the claimants' intention to pursue the proceedings.  
My Lord, for those reasons we would respectfully say that there should be no departure from the ordinary order for costs. 
 MR GREEN:  My Lord, this claim would not have been brought, as I indicated at the hearing, if it had been the Council's position throughout that they were paying the true costs of care.  My learned friend has taken you to one document, over the page, at page 64, there is the assertion: "The City Council accepted that at the present time it was not meeting the real cost of care at home". 
 MR JUSTICE STANLEY BURNTON:  I remember that. 
 MR GREEN:  It is those representations that have caused the trouble.  The fact that the Council, through Mr Wise, have sought to correct the position, the misapprehension that they created, does not answer the point.  The claim was brought on that understanding, an understanding that was only, in my submission, clarified, or at least purportedly clarified, by Mr Wise at the end of August. 
 MR JUSTICE STANLEY BURNTON:  Thank you very much.
In my judgment there is substance in the claimants' assertion that the repeated and apparently clear statements by the defendant that it could not afford to pay the fair costs of care in the residential homes which the claimants represented was a, and probably the most important, factor which led to the commencement of these proceedings.  Had the Council made its position clearer before proceedings began it may be that there would have been no proceedings.  Against that, one has the fact that once the position had been made relatively clear the proceedings did continue.  
I think that I should reflect the fact that the Council, to a significant extent, brought these proceedings on itself, while also taking into account the fact that the position of the Council, so far as its meeting a proper cost of care, was not clarified or sought to be clarified before proceedings began.  
It is not disputed on behalf of the claimants that the defendant is entitled to its costs from 30th August 2002, and it will pay those costs.  So far as the earlier costs are concerned, it seems to me that justice will be done if Birmingham received one third of its costs to that date.  That third seeks to balance the responsibilities of both sides in the circumstances and takes into account the fact that, to a significant extent, there was a rush to proceedings on the part of the claimants which was not in the event justified. 
 MR GREEN:  My Lord, I am obliged.  The only other issue is that I am instructed to ask for permission to appeal on the two principal findings, first as to the construction of the (inaudible) direction and, secondly, the finding of fact that your Lordship made that the Council was indeed paying the true cost of care.
If I could take the second first, because they are both necessarily linked.  Your Lordship found that it was not fair to disregard Mr Wise's evidence given that he was not, as it were, put on notice.  In my submission, the defendant has known throughout the claimants' understanding of the position that it, the defendant, was not paying the true cost of care.  That was an understanding based on the defendant's own evidence, its representations.  It subsequently provides a different account.  There were conflicting accounts, but not as between the claimant and the defendant but between the defendant's own representations.  There was no further evidence that the claimant could have put forward to counter the evidence of Mr Wise, otherwise the defendant was aware of the position taken by the claimants. 
 MR JUSTICE STANLEY BURNTON:  You could have called on the defendants to provide the calculations or the paper on which their calculation of an appropriate return to capital was based, and had you done so I would have expected to see rather than more than Mr Wise's assertion. 
 MR GREEN:  I accept that, but nonetheless there has been no explanation as to why the defendant said, we are not paying the true cost of care in July, but now say that they are. 
 MR JUSTICE STANLEY BURNTON:  I have put forward a reason for that.  There we are. 
 MR GREEN:  That is the finding of fact.  As to construction, if it were found that the defendant was not paying the true cost of care, then, in my submission, it cannot take account of that fact in the construction of the choice of direction.  I am not going to rehearse the argument that your Lordship has already heard, but it is a matter of some importance. 
 MR JUSTICE STANLEY BURNTON:  I appreciate it is a matter of some importance.  
In my judgment, the wording of the directions and guidance is clear.  On that wording, irrespective of the issue as to fair cost of care, the claimants would have failed, and so far as the fair costs of care is concerned and Mr Wise's evidence, it seems to me that the conclusions I have reached in the circumstances were ones which I was really bound to draw.  Therefore I do not give leave to appeal.  The claimants can seek leave from the Court of Appeal. 
 MR GREEN:  I am obliged. 
 MR BAKER:  My Lord, there is one other matter which is, as your Lordship will recall, your Lordship adjourned the application for permission in the case of Lily Broom. 
 MR JUSTICE STANLEY BURNTON:  Permission will be refused in that case. 
 MR BAKER:  I am much obliged.  The defendants have an application for costs in that case in the sum of £700 occasioned by the service of the proceedings, writing to the court on the question of expedition and the attendance. 
 MR JUSTICE STANLEY BURNTON:  Do you have a schedule?
 MR BAKER:  I do not have a costs schedule, I am afraid. 
 MR JUSTICE STANLEY BURNTON:  What do you say as to that?
 MR GREEN:  I am not entirely sure what has been done by the defendant to incur those costs.  They have written a letter telling the court that they were attending anyway for the main hearing.  I am not entirely sure what further costs have been incurred. 
 MR JUSTICE STANLEY BURNTON:  I would be more sympathetic if there were a schedule, but there is not a schedule.
 MR BAKER:  I am sorry, I cannot assist. 
 MR JUSTICE STANLEY BURNTON:  I am not going to award a detailed assessment.  In those circumstances I think I should make no order as to costs. 
 MR BAKER:  So be it.