Law Report: Care home contracts unlawful: Regina v Cleveland County Council, Ex parte Cleveland Care Homes Association and others. Queen's Bench Division (Mr Justice Potts), 12 November 1993

The conditions in the council's proposed contract with residential care homes for the provision of residential community care would defeat the legislative purpose of involving the private sector in the provision of residential care and were therefore unreasonable.

Mr Justice Potts granted an application by Cleveland Care Homes Association for judicial review of the council's decision to require residential care home owners to submit to certain contractual conditions for the provision of residential care.

Under the National Health Service and Community Care Act 1990 and the Community Care (Residential Accommodation) Act 1992, local authorities are required to make arrangements for the accommodation of persons in need of care, and may make arrangements with a voluntary organisation, including registered homes.

The council sent residential care homes within its area draft contracts for those wishing to be included in the council's list of approved homes. The contracts' specifications included requirements for facilities such as lifts, minimum room sizes and services for residents.

The applicant, a residential care homeowner, contended that some of the terms of the contract were impossible to comply with without considerable expense, were inappropriate and impracticable and 50 per cent would cease to trade if the council insisted on the contractual terms. The council refused to phase in the more onerous terms over a period of time.

Philip Engelman (Donne Mileham & Haddock, Brighton) for the applicants; Richard McManus (County Solicitor) for the council.

MR JUSTICE POTTS rejected the council's submission that it had not made a reviewable decision which altered the rights and obligations of the applicants. The legislation made changes to the existing law regarding the provision of accommodation to those in need. The principal one was that funding for new residents in need passed from central government to local authorities. Local authorities now assessed the need for residential accommodation, made arrangements for such accommodation and paid for such accommodation. One of the purposes of the legislation was to involve the private sector in the provision of residential care.

The council's decision not to negotiate the terms of the draft contract was susceptible to judicial review because the consequences of the decision sufficiently related to the purpose of the legislation so as to provide statutory underpinning. A sufficient public law element was raised so as to make judicial review appropriate.

There was no statutory requirement which imposed a duty on the council to consult the applicants as to the contractual arrangements and there was no material from which a legitimate expectation to consult could be construed.

His Lordship agreed with Mr Justice Auld in R v Newcastle-upon-Tyne, Ex p Dixon, the Independent, 20 October 1993, that there was no reason in law why a local authority could not impose stricter contractual terms on a residential home than was provided for by the Registered Homes Act 1984.

The applicants submitted that the council's refusal to negotiate the terms of the proposed contract was an abuse of power or unreasonable.

Having regard to all the material adduced, the council's decision was likely to defeat the purpose of the 1990 legislation so far as it applied to Cleveland. In consequence of it, homes in the private sector faced closure and potential residents' choice would be curtailed. On the evidence, the council had acted unreasonably in requiring the home owners to submit to the terms of the proposed contract, given those consequences.

Although there was no statutory requirement to do so, the duty to act reasonably required the council to consult, and if necessary negotiate, with home owners on those terms and conditions. The council's decision would be quashed.