Abbeyfield Newcastle Upon Tyne Society Ltd v Newcastle City Council
2014
CHANCERY DIVISION
United Kingdom
CORAM
- MR JUSTICE NORRIS
Areas of Law
- Contract Law
- Administrative Law
2014
CHANCERY DIVISION
United Kingdom
CORAM
AI Generated Summary
Newcastle City Council was obligated to provide residential care and had an agreement with Abbeyfield to fulfill this duty. Upon the expiration of their agreement, rates proposed by the Council were disputed by Abbeyfield. The court found the Council's rates unreasonable and held that Abbeyfield is entitled to reasonable remuneration under an implied term of the User Agreement. The case included principles on the interpretation of contract terms and obligations of public bodies in contracts.
Judgment
Mr Justice Norris :
Newcastle City Council (“the Council”) is under a statutory obligation to make arrangements for providing residential accommodation for those who by reason of age, disability or any other circumstances are in need of care and attention which is not otherwise available to them. By section 26(1) of the National Assistance Act 1948 the Council can make those arrangements with a voluntary organisation. The Abbeyfield Newcastle upon Tyne Society Limited (“Abbeyfield”) is a registered charity established to run care homes and supported sheltered homes in the Newcastle upon Tyne area. It has two residential care homes at “The Grove” (32 beds) and at “Castle Farm” (24 beds). Abbeyfield was one of (at the relevant time) 52 care providers which the Council used to enable it to discharge its statutory obligation. Some of these providers (of which Abbeyfield was one) belonged to an association called “Care North East” (“CNE”) which supported providers.
Historically the Council had paid a single fee per resident whatever the quality of service or standard of accommodation supplied by the provider. In 2005 the Council began to focus on the quality of provision with the inevitable consequence that the question of graded fees arose. In 2007 the Council commissioned a report from PriceWaterhouse Coopers (“PwC”) into the cost of residential and nursing care for older people in Newcastle upon Tyne. The resulting report dated 25 April 2007 (“the PwC Report”) was prepared solely on the instructions of the Council and with only the Council’s interests in mind. It utilised two separate methodologies to work out costs and to recommend a fair rate: PwC’s own methodology and what was called “Rowntree 2004”, a data analysis used in the care sector. The authors of the report created a financial model into which they fed financing costs, occupancy rates, operating costs, staff costs, capital value per bed and number of beds, and from which they derived a notional payment rate per occupied bed per week. So far as the “capital value” element was concerned the assumption on which the 2007 PwC report proceeded was that:-
“The key principle of the fair cost of care is that efficient operators running at efficient occupancy levels should be able to recover all reasonable costs and achieve a reasonable return”.
The application of this principle led to this conclusion:-
“It is clear from the results that the cost of care varies significantly between homes du