Case No: CO/6626/2012
Neutral Citation Number: [2012] EWHC 2967 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

Cardiff Civil Justice Centre
2 Park Street Cardiff, CF10 1ET

Date: 07/11/2012

Before :

HIS HONOUR JUDGE MILWYN JARMAN QC
- - - - - - - - - - - - - - - - - - - - -
Between :

THE QUEEN
On the application of 

	SOUTH WEST CARE HOMES LIMITED AND OTHERS	Claimant	
	- and -		
	DEVON COUNTY COUNCIL	Defendant	
	-and-		
	THE EQUALITY AND HUMAN RIGHTS COMMISSION	Intervener	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Richard Clayton QC and Jonathan Auburn (instructed by QS Burroughs- Day) for the claimant
Timothy Straker QC and Charles Bourne (instructed by Devon County Council) for the defendant
Helen Mountfield QC (instructed by the Equality and Human Rights Commission) for the intervener

Hearing dates: 8-10 October 2012
- - - - - - - - - - - - - - - - - - - - -
Judgment
His Honour Judge Jarman QC: 
Introduction
1.	The claimants own and operate care and nursing homes in Devon. There are over 400 such homes in the county, which is the third largest county in England. Each of the claimants’ homes has residents who pay fees and residents who have fees paid by Devon County Council (the council), and each has residents who are elderly and/or who have a disability.
2.	The council, like other local authorities, has an obligation under section 21 of the National Assistance Act 1948 to provide residential care to elderly and infirm persons. In order to assist in the discharge of that obligation the council arranges for some such persons to be placed in private care homes, including those operated by the claimants. Under section 47 of the National Health Service and Community Care Act 1990 the council must carry out an assessment of the care needs of such persons.  
3.	The National Assistance Act 1948 (Choice of Accommodation) Directions 1992, made under powers conferred upon the Secretary of State by section 7A of the Local Authority Social Services Act 1970 provide:
a)	Where a local authority has assessed a person under section 47 of the 1990 Act and has decided that residential accommodation should be provided, the local authority shall, subject to paragraph 3 of the Directions, make arrangements for accommodation for that person at the place of his choice within the UK (ie at his preferred accommodation); see paragraph 2;
b)	The local authority shall only be required to make arrangements for the person to be accommodated at his preferred accommodation if…. 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: see paragraph 3(b).
4.	Section 7 of the 1990 Act requires local authorities in the exercise of such functions to act under the general guidance of the Secretary of State, who has made formal statutory guidance thereunder, namely the Choice of Accommodation Directions in Local Authority Circular LAC (2004) 20.
5.	Paragraph 2.5.4 of the Circular states:
“One of the conditions associated with the provision of preferred accommodation is that such accommodation should not require the council to pay more that they would usually expect to pay, having regard to assessed needs (the usual cost).  This cost should be set by the councils at the start of a financial or other planning period, to be sufficient to meet the assessed care needs of supported residents in residential accommodation.  A council should set more than one usual cost where the cost of providing residential accommodation to specific groups is different.  In setting and reviewing their usual costs, councils should have due regard to the actual costs of providing care and other local factors. Councils should also have due regard to Best Value requirements under the Local Government Act 1999.”

6.	Accordingly when each spring the council sets fee rates in respect of persons placed in private care homes, it is obliged by statutory and non-statutory guidance to have regard to the usual cost of care.  The rates are banded according to the care needs. The council had regard to a 2008 report by economists Laing & Buisson entitled “Calculating a fair market price for care- a toolkit for residential and nursing home.” The methodology used in that report is to produce  figures for the cost of care per resident per week, based on inputs such as staff costs, repairs and maintenance, food, utilities and the capital costs of land, buildings and equipment. This methodology is widely used by local authorities when setting such fees.
7.	On 3 April 2012 the council issued a decision letter setting such fees for the financial year 2012-13. It is the claimants’ case that those fees provide for an effective nil rate of return on capital which means that some of the homes will no longer be financially viable resulting in unplanned closures and deteriorating conditions and quality of care. Accordingly they apply with permission for judicial review of the council’s decision.
8.	They do so on three grounds:
i)	The council failed to comply with its duty under section 149 of the Equality Act 2010 to have due regard to (i) the need to eliminate discrimination and/or (ii) the need to advance equality of opportunity among elderly and disabled persons. An equality impact assessment (EIA) carried out by the council in January 2012 to inform the decision is, say the claimants, flawed;
ii)	In coming to its decision the council failed to consult lawfully and failed to provide consultees with sufficient information to enable a proper understanding of the proposal and to make meaningful representations in relation to it;
iii)	The decision is irrational because of specific logical flaws in the calculation and/or the unreasonableness of its conclusion.
9.	There was also a challenge to the decision of the council in respect of the previous financial year.  In April 2011 the council for the second year running decided that there should be no increase in fees.  Some of the present claimants challenged that decision by way of judicial review and on 8 May 2012 Singh J declared that the council had unlawfully failed to consult adequately before setting the fees for 2011-12, but rejected other grounds such as failure to take into account the actual cost of care or to assess the risk of reducing the quality of care. He also found that the council had properly assessed the risk of a breach of Article 8 rights of residents posed by withholding any inflation increase in the usual cost: [2012] EWHC 1867.  However the court did not quash the April 2011 decision because the financial year had finished by the time of judgment. No argument as to breach of the equality duty was raised in that case.
10.	Each of these grounds is disputed by the council. An important part of the council’s case is that the challenged decision was taken by officers of the council to whom Parliament has entrusted the decision within a statutory regime relating to health and social care. The decision maker in this case was Timothy Golby who is the head of social care commissioning for the council. The regime is contained in the Health and Social Care Act 2008 and the Health and Social Care Act 2008 (Regulated Activities) Regulations 2008. Schedule 1 of the latter lists regulated activities which includes the care homes concerned in this claim. Part 3 sets out a regime of requirements.  Part 5 provides for compliance as well as criminal offences. The regime is overseen by the Care and Quality Commission, established by section 1 of the 2008 Act, the functions of which includes registration, review and investigation.
Ground 1-the Equality Duty
11.	It is not in dispute that the equality duty was engaged in arriving at the decision challenged.  The dispute between the parties as to the duty comes down in essence to two issues. The first is how the duty applies to the challenged decision, which involves a consideration of the precise nature of that decision.  The second is whether the duty as so applied has been complied with. Before I deal with those issues I shall make reference to the statutory framework, relevant guidance, the approach of domestic courts, and the international context.
12.	Section 149(1) of the 2010 Act provides so far as material:
“(1)	A public authority must, in the exercise of its functions, have due regard to the need to-
a)	eliminate discrimination….,
b)	advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share  it;
c)	foster good relations between persons who share a relevant protected characteristic and persons who do not share it.
13.	The importance of the public sector equality duty was emphasised by the first case in which the Court of Appeal considered the duty in the context of racial discrimination under the now repealed section 71 of the Race Relations Act 1976. In R (Elias) v Secretary of State for Defence [2006] 1 WLR 3212 Arden LJ said at paragraphs 273 and 274:
“It is the clear purpose of section 71 to require public bodies to whom that provision applies to give advance consideration to issues of race discrimination before making any policy decision which might be affected by them.  This is a salutary requirement, and this provision must be seen as an integral and important part of the mechanisms for ensuring the fulfilment of the aims of anti-discrimination legislation.  It is not possible to take the view that the Secretary of State’s non-compliance with that provision was not a very important matter.”

14.	The duty to give due regard to the three linked but distinct statutory equality needs identified  in s149(1)(a), (b) and (c) EA 2010 goes beyond the need to avoid formal non-discrimination. As Dyson LJ, as he then was, explained (again in the context of the race duty) in his judgment in R(Baker) v Secretary of State for the Environment [2008] EWCA (Civ) 141 at [30]: 
“… promotion of equality of opportunity … will be assisted by, but is not the same thing as the elimination of racial discrimination … the promotion of equality of opportunity is concerned with issues of substantive equality and requires a more penetrating consideration than merely asking whether there has been a breach of the principle of non-discrimination…” 

15.	Subsection (3) provides that having due regard to the need to advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it involves having due regard, in particular, to the need to-(a) remove or minimise disadvantages suffered by person who share a relevant protected characteristic that are connected to that characteristic; (b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it; (c) encourage persons who share a relevant protected characteristic to participate in public life or in any other activity in which participation by such person is disproportionately low. The relevant protected characteristics in this case are age and disability as set out in section 149(7) and as identified in the council’s EIA.
16.	Subsection (6) provides that “Compliance with the duties in this section may involve treating some persons more favourably than others; but that is not to be taken as permitting conduct that would otherwise be prohibited by or under this Act.” 
17.	Section 149(6) EA 2010 should be read in conjunction with section 158 EA 2010. S158 provides, so far as material: 
"(1) This section applies if a person (P) reasonably thinks that - 
a)	persons who share a protected characteristic suffer a disadvantage connected with that characteristic, 
b)	persons who share a protected characteristic have needs that are different from the needs of persons who do not share it, or 
c)	participation in an activity by persons who share a protected characteristic is disproportionately low. 
(2) This Act does not prohibit P from taking any action which is a proportionate means of achieving the aim of - 
d)	enabling or encouraging persons who share the protected characteristic to overcome or minimise that disadvantage, 
e)	meeting those needs, or 
f)	enabling or encouraging persons who share the protected characteristic to participate in that activity. 
18.	The council has adopted three relevant policies to assist it in complying with its section 149 duty, namely Supporting Guidance for Social Equality Analysis (2011); Impact Assessment Guidance; and Equality Policy 2012. The council accepts that it must follow such policies unless there are good reasons for not doing so. 
19.	Guidance on the statutory duty has also been issued by the Equality and Human Rights Commission (the commission) both on the draft specific duties (Equality analysis and the equality duty: A guide for public authorities, January 2011) and then on the final version (Meeting the equality duty in policy and decision-making; January 2012). 
20.	The following key points may be distilled from this guidance and it is not in dispute that so far as is material in this case that of the council properly reflects that of the commission:
i)	Regard must be had to the purpose of the policy in question, the context in which it will operate and what results are intended.
ii)	Understanding the impact on different groups is a key step in identifying whether a policy might unlawfully discriminate and modern public services should be shaped by evidence-based policy-making.
iii)	Analysing equality information will involve asking what steps can be taken to mitigate any negative impacts on people with particular characteristics.
iv)	Choosing a course of action may involve making changes.
21.	The parties (including the commission which has intervened in this case) each cited a number of authorities as to the principles to be applied when considering whether a public authority is in breach of its duty under section 149.  The general principles are well established and were set out by Atkins LJ giving the judgment of the Divisional Court in R (Brown) v Work and Pensions Secretary [2008] EWHC 3158 (Admin), as the parties in this claim accept.  The issue here is how the principles are to be applied to the decision which the council had to make.  Accordingly the principles set out in that judgment at paragraphs 90-95 can here be summarised briefly as follows:
i)	Decision makers in public authorities whose decisions might affect persons with a disability must be aware of the duty to have due regard to the goals specified in the 2010 Act;
ii)	The duty must be consciously fulfilled before and at the time that a particular policy which might affect such persons is being considered;
iii)	The duty must be exercised in substance, with rigour and with an open mind;
iv)	The duty cannot be delegated;
v)	The duty is continuing;
vi)	It is good practice for such decision makers to keep an adequate record showing the consideration given to such a duty.

22.	In dealing with the application of the duty under section 149, the Court of Appeal in R (Greenwich Community Law Centre) v Greenwich London Borough Council [2012] EWCA Civ 496 at paragraphs 29 to 30 approved the approach summarised by Cranston J at first instance in which he said that:
"Clearly the duty applies not only to the formulation of policies, but also to the application of those policies in individual cases: Pieretti v Enfield LBC [2010] EWCA Civ 1104; [2011] HLR 3". 

23.	Elias LJ at paragraph 30 summarised the approach of the Court of Appeal and Divisional Court in other recent cases thus: 

"The relevant legal principles are now well established ... I would emphasise the need for the court to ask whether as a matter of substance there has been compliance, it is not a tick box exercise. At the same time the courts must ensure that they do not micro-manage the exercise.. It is only if a characteristic or combination of characteristics is likely to arise in the exercise of the public function that they need to be taken into consideration. I would only add the qualification that there may be cases where that possibility exists in which case there may be a need for further investigation before that characteristic can be ignored ..."

24.	Moreover, as Pill LJ observed in Harris v London Borough of Haringey [2010] EWCA Civ 703 at paragraph 40, "due regard" to the statutory equality needs means analysis of the material available to the decision maker "with the specific statutory considerations in mind". 
25.	The commission draws attention to relevant provisions of International and European Conventions in the field of disability discrimination, and in particular those relating to preferred choice of accommodation and to social inclusion. It is not in dispute between the parties that such conventions, to which the UK is a signatory, are relevant in construing domestic legislation, but given the importance which has been attached to such conventions in this field by the higher courts of this jurisdiction, the relevant provisions deserve consideration in some detail.
26.	The Court of Appeal in Burnip & Ors v Secretary of State for Work & Pensions [2012] EWCA Civ 629 confirmed that the UN Convention on the Rights of Disabled Persons 2006 (the UN Convention) is relevant in illuminating what was meant by disability discrimination and justification for it (see per Maurice Kay LJ at paragraphs 19-22). Moreover, where a group recognised as being in need of protection such as the severely disabled is significantly disadvantaged by the operation of ostensibly neutral criteria for enjoyment of a benefit, discrimination was established, subject to justification (paragraph 13).  
27.	In AH v West London Mental Health Trust & Secretary of State for Justice [2011] UKUT 74, Lord Justice Carnwarth, presiding in the Upper Tribunal, observed that by ratifying a convention, a state undertakes that wherever possible its laws will conform to the norms and values that the Convention enshrines.  He further observed, as did the Court of Appeal in Burnip, that the European Court of Human Rights also regards the UN Convention as highly material to interpreting the provisions of the European Convention.  
28.	Amongst the most pertinent provisions of the UN Convention for present purposes are Article 4, 5 and 19. Article 4 requires states parties to “ensure and promote the full realization of all human rights and fundamental freedoms for all persons with disabilities without discrimination of any kind on the basis of disability”, and to take a number of specific steps to this end. Article 5(3) provides that “in order to promote equality and eliminate discrimination, States Parties shall take all appropriate steps to ensure that reasonable accommodation is provided”.
29.	Article 19 provides that :
“States Parties to this Convention recognise the equal right of all persons with disabilities to live in the community, with choices equal to others, and shall take effective and appropriate measures to facilitate full enjoyment by persons with disabilities of this right and their full inclusion and participation in the community, including by ensuring that 
a.	Persons with disabilities have the opportunity to choose their place of residence and where and with whom they live on an equal basis with others and are not obliged to live in a particular living arrangement; 
b.	Persons with disabilities have access to a range of in-home, residential and other community support services, including personal assistance necessary to support living and inclusion in the community, and to prevent isolation or segregation from the community; 
c.	Community services and facilities are available on an equal basis to persons with disabilities and are responsive to their needs.”

30.	Section 2 of the Human Rights Act 1998 requires case law of the European Court of Human Rights to be taken into account whenever relevant to determining an issue before the domestic court. Section 3 requires public authorities to read and give effect to all legislation which is compatible with rights under the European Convention on Human Rights (the European Convention) so far as it is possible to do so. Section 6 provides that it is unlawful for a public authority to act in a way which is incompatible with a European Convention right unless required to do so by a provision made by or under primary legislation which cannot be read compatibly with the European Convention.
31.	Article 8 of the European Convention which has been interpreted as including the right to develop a personality in conjunction with others and the 'zone of interaction' with other people (see Niemietz v Germany [1992] 17 EHRR 97) provides: 
"Everyone has the right to respect for his private and family life, his home and his correspondence. 
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others." 

32.	Moreover, disability is a protected 'status' for the purposes of Article 14 of the European Convention which provides:  

"The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status". 
. 
33.	I turn now to consider the application of the duty to the decision challenged.  There was disagreement between the parties as to the precise nature of the function which the council was carrying out in this case. Mr Clayton QC for the claimants and Miss Mountfield QC for the commission submitted that the function in question was the provision of accommodation and care under section 21 of the 1928 Act and the arrangements for accommodation of choice under the 1992 Regulations. Although the decision was to set fee rates, such rates may adversely affect residents. Section 149 of the 2010 Act requires identification of the function in question and that is the provision of care under section 21 of the 1948 Act.  The question is whether there has been a discriminatory effect. The costs which the council would usually expect to pay are set under the 1992 Directions which are concerned with choice of accommodation. The Circular refers to councils having “due regard” to the actual costs of care in setting and reviewing their usual costs.
34.	On behalf of the commission it is submitted that the setting of a usual cost for care which does not properly differentiate between the needs of different potential groups of users may discriminate against those with particularly acute forms of need. If the usual cost of providing care to such persons is not factored into the process of determination of usual cost then the choices for a person to live as they wish to in accommodation of their own choosing without isolation or segregation may be curtailed in comparison with others. Accordingly, this failure may amount to a lack of due regard to the need to eliminate discrimination and to advance equality of opportunity.
35.	The commission submits that there is no justification for saying that the equality duty has no application to a policy planning context from further individual decisions which may follow and that it is at the stage of policy design that the duty has its most obvious application and relevance.
36.	Mr Straker QC, for the council, whilst accepting that the section 149 duty is engaged in the exercise of setting usual cost, submits that that exercise is remote from the provision of accommodation and care.
37.	The council relies upon a decision of HH Judge Raynor QC in R (Sefton Care Association) v Sefton Council [2011] EWHC 2676 (Admin) handed down on 9 November 2011.  Judge Raynor held at paragraph 100 that if the usual cost of care had been properly determined, the local authority could proceed on the basis that its equality duty was discharged by the preparation of individual needs assessments and care plans, in particular because its decision as to the usual cost involved no change in the criteria for residential care. He did so for a number of reasons as follows:
a)	The circumstances in which the relevant decision was made and the precise nature of the decision must be carefully examined;
b)	The fixing of fees (as in the present case) involves the determination of the usual cost of care in accordance with the 1992 Directions and Guidance.
c)	The usual cost must be sufficient to meet the assessed care needs of supported residents in residential accommodation and the local authority should be able to demonstrate that this is the case.
d)	Each of the supported residents has an individual care plan under section 47 of the 1990 and a local authority in assessing the care needs of the individual is required to have regard to its equality duty;
e)	Such a decision does not involve the restriction or termination of services or changes in eligibility criteria.
f)	Rather the decision (if there is compliance with the Guidance) is that the fees are sufficient to enable the assessed care needs of supported residents to be met.
38.	In that case Judge Raynor found that the actual cost of care had not been adequately investigated or determined, and he made it clear that he was not quashing the order on the basis of a breach of equality duties. Accordingly the above observations were not necessary to decide that case.  In R (East Midlands Care Limited) v Leicestershire County Council [2011] EWHC 3096 (Admin) HH Judge Langan QC in a judgment handed down on 2 December 2011 at paragraph 64 endorsed that approach, although he also found in that case that there was affirmative evidence from the local authority that the duty was expressly attended to.
39.	The claimants and the commission submit that the observations of Judge Raynor in Sefton should be confined to the particular context in which they were made. The fact that a council is purporting to meet it duties under section 21 of the 1948 Act and/or section 47 of the 1990 Act cannot relieve it of its further obligation to comply with its duty under section 149, and has no relevance to the implications of managing the impact of home closure on disabled or aged residents. Compliance with the former two duties does not mean compliance with the latter duty which is cast in different terms.  
40.	In R(Eisai) v National Institute for Clinical Excellence (The Alzheimer's Society & another as interested parties) [2007] EWHC 1941 (Admin) a challenge was made, on equality duty grounds, to general guidance as to the availability of a drug which slowed the advance of communication difficulties associated with Alzheimer's disease. NICE argued that there had been no failure to give due regard to the need to promote equality of opportunity for those with particular disabilities or from particular racial groups, because these were general guidelines which could be disapplied by individual doctors exercising individual discretion in particular cases.
41.	 Dobbs J criticised the failure of NICE to consider what it could itself do to eliminate unlawful discrimination and promote equal opportunity. The case went to the Court of Appeal, but this criticism was not the subject of appeal. At paragraph 89 the judge said:

"Instead of looking at how NICE as a public body could itself promote equal opportunity, having accepted that the Guidance could have a discriminatory effect if applied slavishly, the approach taken was to leave it to others to sort out in the hope and expectation that they would. That, in my judgment, is not good enough".

42.	In my judgment, the immediate exercise upon which the council was engaged was the reviewing of the usual cost of providing residential accommodation for a person whom it has assessed under section 47 of the 1990 Act and decided that residential accommodation should be provided. The assessment is required to be carried out in order to discharge the duty imposed by section 21 of the 1948 Act to provide residential care to elderly and infirm persons.  The 1992 Directions require the council to make arrangements for accommodation for that person at a place of his or her choice. That requirement however only arises when the cost of making such arrangements would not require the council to pay more than the council would usually expect to pay having regard to the assessed needs.  The Circular refers to this latter provision as “one of the conditions associated with the provision of preferred accommodation.”
43.	I am unable to accept the council’s submission that this exercise is remote from the duty under section 21 of the 1948 Act. It is an exercise which the council carry out in order to ascertain whether there is a requirement to provide preferred accommodation to a person in respect of whom the duty to accommodation under section 21 applies. Rights for people with disability, such as the right to choose where they live and to have support so as to prevent isolation or segregation from the community, are enshrined in the UN and European Conventions. The result of the exercise might affect those rights, and in my judgment should be carried out having regard to the specific provisions of section 149 in mind so as to have due regard to the need to eliminate discrimination and to advance equality of opportunity.
44.	The observations of Judge Raynor in Sefton were made obiter without apparently being referred to some of the authorities to which I have been referred and in particular Eisai and without the  benefit, as I have had, of argument from the commission.  The decision in Eisai involved leaving fulfilment of the equality duty to others, whereas in the present case the assessment of needs under section 47 of the 1990 Act is a function also entrusted to the council. In my judgment however compliance with that duty in the case of any individual cannot obviate the need for the council in setting fees to have regard to the specific equality duties.
45.	The second main issue is whether the duty, as I have found it to apply to the challenged decision, has been complied with.  The claimants submit that the council’s EIA identifies only one adverse discriminatory impact on the aged or the disabled and that is the need to relocate if homes fail. No mitigation measures are identified in respect of the impact of such relocation, although it is well known that this impact can give rise to adverse health consequences for elderly and disabled residents. Indeed most local authorities have agreed protocols for home closures (see for example the Personal Social Services Research Unit 2003 study “Guidelines for the closure of care homes for older people: prevalence and contents of local government protocols” funded by the Department of Health). The council had no such protocol in place, and although its decision maker Mr Golby had regard to a note of a social worker in respect of the closure of a home in its area in April 2011, that was a planned closure which followed 18 months of safeguarding work.
46.	The EIA was carried out by a procurement officer of the council, Nicola Tribble. The claimants point to the lack of any reference to any particular equality training undertaken by her, and the lack of any reference in the EIA to the guidance of either the council or the commission. The former referred to a network of facilitators who are trained to give assistance in equality issues. In carrying out the EIA, assistance was not sought from such facilitators or from other authorities. No evidence was sought, for example on how to manage or mitigate the effects of home closures, in contrast to the local government protocol which identifies a number of considerations including need to prepare residents for any move, to consider alternative accommodation, and the fee structure of such accommodations.
47.	Secondly, the claimants submit that the council ignored the risk that the proposed fees would impact adversely on the quantity and quality of care given to some residents, for example staff interaction and engagement with residents suffering with dementia. The stimulation of such residents is not the subject of the statutory regime.  The commission, in giving general support to the claimants’ criticisms of the EIA, emphasised in particular that the list of information which the council took into account in setting the usual costs for 2012-13 expressly indicated that the figure for nursing care in respect of dementia was based on only one response and it was possible that such a figure may need to be higher and “as such is worthy of further more extensive research.”  No further such research was carried out during that exercise.
48.	Thirdly, in the Fee Structure Proposal report, which was considered by Mr Golby shortly before making the decision, some 25 homes were identified as being at risk of closure. Despite that, the EIA was not reconsidered or amended.
49.	The commission cites an example, where although adequate regard had been given to the actual cost of providing care, the lower bands are set higher and the higher band lower than in previous years. This may result in under provision of services or accommodation to residents who have greater disability needs and an over provision to those whose needs are less. The commission makes the further point that no consideration is given to taking the sort of action contemplated by section 158 of the 2010 Act.
50.	On behalf of the council, whilst it is accepted that the duty under section 149 was engaged when it was carrying out the exercise, it is nevertheless maintained that if the usual cost of care is properly and lawfully considered, then equality issues do not arise from that decision. That was not a decision which would cause care homes to close.  Rather the council formed the view that in the present state of the market closures were likely.  This was referred to as “rebalancing” in the EIA, which stated that such a rebalancing was not a direct consequence of the proposed decision.  Ms Tribble, in her witness statement in these proceedings, says that in the EIA she considered that there is currently an oversupply of beds in Devon and that there are more entrants to the market than those leaving. She concluded that as all care home residents were “of a similar age,” there was no impact between people of different ages.
51.	As for residents with a disability, once an individual meets the criteria for receiving assistance from the council, he or she is assessed as to the level of need and placed into the appropriate band within the fee structure. Ms Tribble considered that there is equality of opportunity between residents with different disabilities and those without a disability.  She concluded that any negative impact on residents would be mitigated by steps the council’s operational managers take to safeguard residents when a home closes.
52.	Accordingly the council submits there was sufficient regard to impact on elderly and disabled residents. The Fee Structure Proposal report merely put a figure on the homes which were at risk of closure, a risk which in general terms had already been considered in the EIA. The exercise in which it was engaged did not involve the assessment of needs or the cutting of services or curtailment of choice but merely the calculation of cost.
53.	In my judgment that approach fails to have due regard, in substance or with rigour or with an open mind, to the need to eliminate discrimination and to promote equality of opportunity amongst elderly or disabled residents.  The council in carrying out this exercise failed to ask itself what it could do in respect of those needs.  It is not good enough to say that the needs of individual residents had been or would be assessed under section 47 of the 1990 Act. In particular, even if most if not all homes identified in the Fee Structure Proposal report as at risk of closure would close in any event, there was no proper consideration of mitigation measures or proper management of such closures in setting the fees. The EIA should have been reconsidered having regard to this information. Having regard to the procedure adopted in the case of the structured closure of one home is not a sufficient regard to deal with this identified risk.  Furthermore, there was no proper consideration in my judgment of the staff costs of engaging and interacting with those residents suffering from dementia.
Ground 2- consultation
54.	Singh J in his judgement in the previous claim between these parties cited the well known passage in the judgment of the Court of Appeal on the requirements for a fair consultation in R v North and East Devon Health Authority ex parte Coughlan [2001] 1 QB 213 at paragraph 108.  The particular requirement which it is said has not been met in this case is the second one namely:
“To be proper, consultation must ….. include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response…”

55.	At paragraph 46 of his judgment, Singh J held that in 2011-12 the council failed to issue an invitation to the claimants or other care providers to give advice on the issue of whether fees should be increased for that year.  Permission to bring that claim was given on 8 February 2012, just days before the presentation for the present year.
56.	The consultation process included three meetings in autumn 2011 between the council and care home providers and an open meeting on 4 November 2011. No proposals as to fees or the methodology used to calculate them were put forward at that time. 
57.	Accordingly the claimant’s challenge under this ground is focused on a meeting held on 13 February 2012 when council officers met with about 50 such providers and gave a power point presentation intended to explain the ways in which the council intended to depart from the Laing & Buisson report in relation to its approach to return on capital.  The claimants say that the information presented was complex, sophisticated and technical and that they requested clarification as to the assumptions contained in the proposals. Many statements have been filed on behalf of the claimants from witnesses who attended the presentation and who say that they could not understand the proposals as so presented.
58.	In essence it is the claimants’ case that the council failed to explain what economic models it was using (including a capital asset pricing model or CAPM), to explain its methodology or rationale or to set out the figures used in calculations. One of the calculations presented was a figure for the overall return earnings before interest, taxes, depreciation, amortisation and rent (EBITDAR) of 10-20%. Care home providers at the meeting were concerned that this figure was low. There was, it is submitted a failure to identify the bottom line figure which was the return on capital.
59.	E-mails just before the presentation from the council’s head accountant for financial planning and strategic commissioning, Alex Hosking, show that he feared that the model was “too complex” to explain quickly to everyone and thought it best to cost up some scenarios. He referred to the fact that some variables were interdependent and that the only way accurately to cost multiple changes is to recalculate the model each time. Accordingly he planned to bring the model installed on a computer to the presentation.
60.	In his witness statement Mr Hosking accepts that feedback given at the presentation suggested that the providers present did not understand the concepts which the council were proposing to use, but goes on to say that they were only interested in the final figure. He says it was explained that in respect of cost of capital the council were proposing to use a recognised model for calculating the weighted average cost of capital which dealt with the return which was required to service debts and to give a fair return to the owner of the business. He says that each component was explained including CAPM.
61.	The power point slide used at the presentation were shortly afterwards placed on the council’s website but that relating to EBITDAR was omitted. On 16 February 2012 the claimants’ solicitors sent substantial information to Mr Golby, which included the Laing and Buisson toolkit information in respect of the claimants’ homes, a report by accountants Bishop Fleming on behalf of the Torbay Quality Care Forum, and information relating to the council’s own homes.
62.	There were also several e-mails sent by providers, and in particular by Alan Beale on behalf of the first claimant, raising queries relating to slides which had not been published online, the calculation of the EBITDAR return, figures for land values and other matters. On 27 April 2012 an attempt was made on behalf of the council to answer these queries but the next day Mr Beale responded saying that he did not think the majority of his questions had been answered at all. On the 5 March 2012 the council made another attempt by setting out at length Mr Beale’s outstanding queries with the replies in blue text under each point. However e-mails continued to pass, focusing on the EBITDAR return and whether the council were using the Laing and Buisson model or an entirely different model.  On 9 March 2012, the last day of the consultation period (as extended because of the delay in responding to queries), the council stated that having taken advice the council would not supply an EBITBAR calculation as this would “compromise the consultation process” and repeated that as such a calculation is an output not an input it was not needed by the providers to complete the process.  A request was also made by the council for the supply of assumptions and supporting data and an invitation to comment on the resultant EBITDAR.
63.	Later that evening Mr Beale emailed two files to the council.  The first was a document dated 8 March 2012 comprising feedback from the claimants and other providers calling themselves the Devon Quality Care Forum.  The second comprised forms signed by 39 members of that forum representing some 55 care homes.
64.	The feedback document began by saying that it had been very difficult to provide meaningful feedback because of two principal factors. First, the council published on the website a version of the presentation which had at least one critical slide missing and did not indicate that any slides had been removed.  Secondly, providers’ questions raised before and since 13 February 2012 had gone answered “or have received very slow and cursory replies.”  The slide which, it is not disputed, was not put onto the website, was that relating to EBITDAR. The document continued that the signatories accepted that a correct working of the Lang & Buisson model would give a fair return on capital but that the council, whilst saying that it had used another approach, had failed to make clear its reason for departing from that model.
65.	The document then went on to comment on each side, saying that it was agreed that a number of the slides proposed a fair and reasonable method for ascertaining providers’ usual costs in Devon, including those relating to care costs, property and business costs, and investor returns. Then detailed comments were made on slides which were disagreed with because “they propose methodologies that fail properly to ascertain providers’ usual costs.”  The slides within this category included those relating to return on capital, capital employed and weighted average cost of capital. It was stated that the percentage rate used was too low and the council was urged to investigate the correct figure which was “ a simple reciprocal of the profit multipliers used in valuing a care home business.” The missing EBITDAR slide was also referred to and two problems were raised.  First, that the return of 10-20% was not an adequate level for a care home to be financially viable.  It was stated that the necessary level of EBITDAR was easily identifiable because all banks and valuers use a standard EBITDAR measure to confirm such viability.  Secondly, it was said that the council’s calculation were incorrect and that “our calculation” is that the council’s model could only provide an EBITDAR of 0%.
66.	The claimants say that fuller information only came in the Fee Structure Proposal report, which the claimants saw for the first time on 21 June 2012. Had this been shown as part of the consultation process, there could be no complaint about consultation. 
67.	The decision letter from Mr Golby dated 3 April 2012 set out proposed fee increases for each rate band.  It was indicated that the two lower rate bands would not be used and that residents currently at those rates would migrate to band 3 which showed  a percentage change of 15.5% on the current rate. The percentage change for band 4 was shown as 6.5%.  No complaint is made as to this decision (taken because of the low number of residents in the lower two bands) or the banding itself.  The decision letter continued that the changes from the original proposals reflect revised assumptions about return on capital care hours and local wage rates in light of feedback received during the consultation exercise. The percentage changes were higher, although not by a substantial margin, than those proposed at the meeting on 13 February 2012.
68.	The council submits that the presentation was balanced having regard to the fact that the audience was of business owners. Reference was made to application forms for licences to run care homes in which providers were required to set out business plans, including financial information and viability, for running the homes.
69.	The council emphasises that at the end of the presentation it was stated that an amended version of the slide show presentation and a glossary of terms would be presented on an online forum for consultation. The glossary included a definition of CAPM as a mathematical model which is standard in the investment industry for deriving the cost of equity (the expected shareholder return). A value used in that model, known as the beta value and referred in the presentation slides, was also defined as a value representing the systematic risk of an entity compared to the overall market of all entities.
70.	The presentation was published online on 15 February 2012 in a format which allowed providers to comment on the council’s assumptions and provide their own methodologies and their own costs data. No providers used that forum to challenge the assumptions made by the council in calculating return on capital or to give costs data which would have allowed empirical calculations rather than assumptions. 
71.	In my judgment, the claimants’ criticisms of the consultation process focus unduly on the presentation made on 13 February 2012.  I accept that that presentation, given as it was by financial planners, attempted to convey complex financial information in a way that was perhaps oversimplified and not readily understood then by many attending. However, having regard to the reminder of the consultation process in my judgment the process had moved substantially from that which Singh J had criticised in respect of the previous year and amounted to a substantial invitation to provide advice and information.
72.	In my judgment the process was a fair one which gave a sufficient opportunity for a meaningful response, notwithstanding the complexities involved and notwithstanding the concerns which Mr Beale retained at the end of the process.  The feedback document which he and 39 other providers signed was in my judgment such an intelligent response.

Ground 3-irrationality
73.	The claimants next submit that there are a number of logical flaws in the decision of the council, each of which robs the decision of its logic and renders it irrational.  They rely upon the decision of the Supreme Court in R (KM) v Cambridgeshire CC [2012] UKSC 23 which dealt with the calculation of the annual cost of meeting the needs of a very seriously disabled individual. Lord Wilson at paragraph 36 said that in community care cases the intensity of review will depend on the profundity of the impact of the determination and that by reference to that yardstick “the necessary intensity of review in a case of this sort is high.”
74.	Lord Wilson however went to say that on the other hand respect must be afforded to the distance between the functions of the decision maker and of the reviewing court which has to strike a “difficult, judicious, balance.”  On the facts of that case the Supreme Court found that the rationality challenge could “quickly be rejected.”
75.	The claimants have commissioned reports from Price Waterhouse Cooper (PWC) which are critical of five factors in the council’s reasoning, almost all of which they say go in one direction to reduce the expected rate of return.
76.	The council submits that differences of view between experts (some of the evidence of which was served by the claimants about a working week before the hearing) does not give rise to the irrationality challenged.
77.	The first and main specific criticism of the claimants is that there has been double counting of depreciated building values. The council’s figures use building values which contain an adjustment for depreciation (thereby reducing the figure for capital) but also include annual capital maintenance expenditure.  This, the claimants say, counts the cost of building upkeep and maintenance twice, and depresses the capital value of the home in the calculation.  This is something which is warned against in the Laing & Buisson report at paragraph 48. The figures reduce building values by 2.5% per annum which means that in 40 years time the building will have no value at all. To allow a care home to deteriorate is contrary to Care Quality Commission policy and regulations, for example regulation 15 of the Health and Social Care Act 2008 (Regulated Activities) Regulations 2010.
78.	In response the council submits that it is important to bear in mind in considering each of these specific criticisms that the purpose of the exercise is to determine what the council could expect to pay. The approach is set out in the witness statements of the council’s accountants, including that of Mr Hosking, whose professionalism is not challenged, together with an independent report from Grant Thornton.  The approach in respect of the first criticism allows an amount of expenditure per week per resident on maintenance and repair of buildings. In considering the values of such buildings, which affect the amount received on a rate of return, the council has taken into account that buildings depreciate, and although the required maintenance and repair of care homes may slow depreciation, it cannot prevent it. That, the council maintains, is not double counting.
79.	In my judgement this first criticism of the claimants fails to reach the level of irrationality that merits review by the court. The approach of the council’s accountants, although it marks a departure from the well recognised financial model, it is based on tenable reasoning.
80.	In my judgment the same can be said for the council’s approach in the other points of disagreement between the parties.
81.	The claimants’ second criticism is that there is double counting by the council in respect of taxation, by taking into account taxation in calculating the weighted average cost of capital but then failing to deduct taxation as an expense in the overall proposition. In response the council accepts that it did not treat tax as an expense as the tax position of individual providers is not its concern.  What it did do, in calculating a reasonable rate of return for providers, was to make an allowance to recognise that providers need income in order to pay tax expenses.
82.	Thirdly, it is illogical submit the claimants to include an assumption that capital gains are made on the land on which the buildings sit, as the council have done, when such a gain is not a source of revenue unless there is a sale. In the opinion of PWC, to adjust the capital values downward now for a sale that might take place many years in the future and might generate income is not logical when calculating the fair, reflective or usual cost of care. The council accepts that capital gains have been taken into account and submits it is not illogical, when considering what the council may be expected to pay, to  take into account that the payee by continuing to hold assets, and in particular the land on which buildings sit, will make a capital gain.  This is one of a range of factors which may influence the price.
83.	Fourthly, the PWC reports conclude that the councils’ figures produce a rate of return on capital of 6.65% and that after the cost of servicing debt is taken into account, the rate is so low that it is not rational to set rates of return. The claimants rely upon a report of valuers obtained some two weeks before the hearing which says that an experienced valuer would consider the profits method of valuation to be the only reasonable choice when valuing trading care homes.  The council, it is not disputed, did not require Grant Thornton to advise on the rate of return. In his witness statement, Mr Hosking observes that the PWC approach assumes that all care home businesses are financed to the extent that there is no equity in the business at all, whereas as PWC recognise the market is split in the way that it is financed. Again, it is emphasised on behalf of the council that the exercise in which it was engaged was not the purchase of a trading care home but the determination of a figure in each band which is not more than it expects to pay for accommodation.
84.	Finally, the claimants submit that the council’s figures include a volume discount which is irrational in this context as it assumes volume purchasing in circumstances where there is neither agreement nor any guarantee from the council of a minimum level of purchasing. Again, the Laing & Buisson 2008 report notes that local authorities purchase care home places as spot purchases rather than block contracts. The council does not seek to argue that there was any such guarantee, but accepts it took into account that it funds on average some 40% of care home residents in Devon, although of course the precise figure varies from home to home. A model was used therefore to calculate the usual cost which the council would expect to pay if it purchased 50% of residential care beds and 65% of nursing care beds. That means that the council pays more towards overhead costs then it would expect to if it applied the average bed purchased percentage to the model.
85.	Very often a court has to decide which of two opposing professional views, sometimes strongly and genuinely held, is to be preferred in making a determination which it has to make. In the present case, the function of this court is that of a reviewing court. The decision on these issues is not that of the court but that of the decision maker.  Having regard to the respect which must be afforded to the functions of the decision maker and attempting to strike a judicious balance, I am not persuaded that a lack of logic or irrationality, over and above professional disagreement, has been demonstrated.
86.	Accordingly in my judgment the decision was a rational one which was proceeded by a fair consultation, but one which was arrived at without the necessary due regard to the need to eliminate discrimination against and to promote equality amongst elderly or disabled residents.
Relief
87.	In deciding whether to grant discretionary relief the council invites the court to consider the delay which there has been since the decision was made on 3 April 2012 and the difficulty which would be caused if the decision were now re-taken and proved to be significantly different. Conversely, the council submits, it is questionable whether a new decision which was not substantially different would achieve anything.
88.	In my judgment, having regard to the importance of fulfilling the equality duty in carrying out the exercise upon which the council was engaged, and the difficulties in the court attempting to assess what decision may be arrived at once that duty is complied with, the decision should not stand. I shall hear further submission on the precise form of relief in the absence of agreement.