Forge Care Homes Ltd & Ors, R (on the application of) v Cardiff & Vale University Health Board & Ors

This claim raises important issues concerning who pays for the nursing care of care home residents in Wales.

The Welsh Ministers have overall responsibility for the National Health Service in Wales (“NHS Wales”), a function which is largely exercised through local health boards (“LHBs”). If a resident of a care home has a “primary need” for nursing care, the full costs of providing all that resident’s care (nursing and non-nursing) are borne by NHS Wales, the responsibility for funding that care falling on the LHB in whose area the resident lives. This is known as “Continuing Health Care” (“CHC”). However, if the resident requires some nursing care, but nursing is not his or her primary need, the relevant LHB will pay only part of the care costs. This contribution is known as “Funded Nursing Care” (or “FNC”). In such a case, dependent upon means, the resident in question and/or the relevant local authority is responsible for paying for the remainder of the care costs.

The Claimants each own and operate care homes in Wales. The Defendants comprise the seven LHBs which cover the whole of Wales. This claim concerns the FNC rate set by each of the LHBs in 2014 for the following five years.

The Claimants challenge those decisions on three grounds (the order being mine):

Before me, Mathew Purchase appeared for the Claimants, and Fenella Morris QC and Benjamin Tankel for the Defendants. Because local authorities may be liable for any care costs for which the LHBs are not responsible, all of the Welsh local authorities have been joined as Interested Parties. Richard Gordon QC and Emily MacKenzie appeared for all of the authorities except Cardiff, which was not represented before me. Tom Cross appeared for the Welsh Ministers, who were also joined as an Interested Party. At the outset, may I thank all Counsel for their helpful contributions.

The relevant statutory scheme comprises several elements, and it may assist if I set out in chronological order the abbreviations I use in this judgment in respect of the statutory and policy provisions:

This claim concerns the relationship between the statutory functions of (i) LHBs in providing NHS services and (ii) local authorities in providing accommodation for persons in need of care, in the context of care homes in Wales.

Healthcare and local government are both devolved functions under the Government of Wales Acts. Those functions were performed by the National Assembly of Wales until 2006, when they were transferred to the Welsh Ministers by section 162 of, and paragraph 30 of Schedule 11 to, the Government of Wales Act 2006.

Insofar as NHS functions are concerned, the National Health Service (Wales) Act 2006 (“the 2006 Act”) is a direct descendant of the National Health Service Act 1946. By section 1, the Welsh Ministers have overall responsibility for health services in Wales; and, in pursuance of that general obligation, they have powers to provide services as they consider appropriate (section 2(1)(a)) and “do anything else which is calculated to facilitate, or is conducive or incidental to, the discharge of such a duty” (section 2(1)(b)). By section 3(1):

“The Welsh Ministers must provide throughout Wales, to such extent as they consider necessary to meet all reasonable requirements –

(a)

hospital accommodation,

(b)

other accommodation for the purpose of any service provided under this Act.

(c)

medical, dental, ophthalmic, nursing and ambulance services,

….

(e)

such other services or facilities for the prevention of illness, the care of persons suffering from illness and the after-care of persons who have suffered from illness as they consider are appropriate as part of the health service…”.

With some exceptions not relevant to this claim, the services so provided must be free of charge (section 1(3)).

Therefore, by virtue of section 3(1), the Welsh Ministers have a statutory obligation to provide nursing services, free of charge, but only “to such extent as they consider necessary to meet all reasonable requirements”. In considering what services to provide in any particular case, the Ministers (and NHS Wales on their behalf) must consequently decide (i) what are the reasonable requirements; and (ii) what is necessary, in terms of NHS services, to meet the reasonable requirements found to exist including, where the services are purchased in, what it is reasonable to pay for those services. In respect of each of those questions, there is a margin of discretion. In exercising that discretion, NHS Wales is of course able to take into account the fact that these services are publicly funded, public resources are limited, and, in using its finite budget, NHS Wales is generally able (and, indeed, obliged) to choose between competing calls on those resources.

Section 11 of the 2006 Act establishes LHBs, unitary authorities which may be directed by Order of the Welsh Ministers to exercise particular functions relating to the provision of NHS services in their area (section 12(1) and (2)). Many of the NHS functions in Wales are thus in practice exercised by the LHBs.

Turning to the care provision functions of local authorities, section 46(3) of the National Health Service and Community Care Act 1990 (“the 1990 Act”) defines “community care services” by reference to other statutory provisions, notably those found within section 21 of the National Assistance Act 1948 (“the 1948 Act”). Section 47 of the 1990 Act requires a local authority to make an assessment of a person’s need for community care services and, in the light of that assessment, decide whether those needs call for the provision of such services. By section 47(3), if, during that assessment, the local authority considers that the person may need NHS services under the 2006 Act, it is required to notify the relevant health authority (in Wales, the relevant LHB), invite them to assist in the assessment and, in making a decision as to the services needed from the local authority, the authority is required to take into account any services likely to be made available to him by the LHB.

Section 21(1) of the 1948 Act provides, so far as relevant to this claim:

“… [A] local authority may with the approval of the Secretary of State, and to such extent as he may direct shall, make arrangements for providing –

(a)

residential accommodation for persons aged eighteen or over who by reason of age, illness, disability or any other circumstances are in need of care and attention which is not otherwise available to them…”.

In this judgment, unless the context indicates the contrary, references to “section 21” are to section 21 of the 1948 Act.

Of this provision, the following are worthy of note:

Sections 5 and 11 of the Care Standards Act 2000 (“the 2000 Act”) require any person who carries on or manages a care home in Wales to register with the Welsh Ministers. Section 3 defines “care home” as an establishment which “provides accommodation, together with nursing or personal care”, for various categories of persons including those who are ill, disabled or infirm, and those who suffer from a mental disorder. Under those provisions, each of the Claimants is a registered person, carrying on or managing at least one care home in Wales.

Part III of the Care Homes (Wales) Regulations 2002 (SI 2002 No 324) (“the 2002 Regulations”), made under section 22 of the 2000 Act, makes provision for the conduct of care homes in Wales. It imposes various duties upon the relevant registered person, including an obligation to ensure that the care home is conducted so as to make proper provision for the health, welfare, care and (where appropriate) treatment, education and supervision of residents (regulation 12(1)).

Regulation 18 deals with “Staffing”. It provides (so far as relevant to this claim):

“(1)

The registered person shall, having regard to the size of the care home, the statement of purpose and the number and needs of service users –

(a)

ensure that at all times suitably qualified, competent, skilled and experienced persons are working at the care home in such numbers as are appropriate for the health and welfare of service users;

…

(2)

The registered person shall ensure that persons working at the care home are appropriately supervised.

(3)

Where the care home –

(a)

provides nursing to service users; and

(b)

provides, whether or not in connection with nursing, medicines or medical treatment to service users;

the registered person shall ensure that at all times a suitably qualified registered nurse is working at the care home.”

Regulation 18(1) is supported by the Welsh Government’s National Minimum Standards for Care Homes for Older People (March 2004), made under section 23 of the 2000 Act, which requires that “Service users’ needs are met by the numbers and skill mix of staff” (Standard 20 Outcome); the relevant standards including:

“20.1

Staffing numbers and skill mix of qualified/unqualified staff are appropriate to the assessed needs of the service users, the size, layout and purpose of the home, at all times.”

Regulation 18(3) is particularly important in the context of this claim. Victoria Warner is the Clinical Board Nurse, Primary Community Immediate Care for the Clinical Board at the First Defendant, Cardiff & Vale University Health Board. She uncontroversially explains (at paragraph 8 of her statement of 23 December 2014):

“In general terms, those requiring nursing care from a registered nurse will have needs that mean they need to be cared for in an environment where a registered nurse is available on a 24 hour basis. This will usually be because of the complexity, intensity or unpredictability of their needs.”

Therefore, the mandatory requirement of regulation 18(3) (that a registered nurse is at all times present and working at any care home which provides nursing services, so that a nurse is always available to deal with nursing or medical issues as and when they arise) directly reflects the nursing care needs of residents in care homes in practice. When the nursing needs of residents in a particular home are such that a single nurse on duty is insufficient to meet them, then regulation 18(1)(a) requires there to be sufficient registered nurses on duty to meet those needs. Any fewer would clearly not be number “appropriate for the health and welfare of service users [i.e. residents]”.

It is a criminal offence to fail to comply with these regulations (regulation 44); and such a failure may also result in a cancellation of registration or other enforcement action by the Care and Social Services Inspectorate Wales, which effectively performs a monitoring and policing role on behalf of the Welsh Government.

By paragraph 3 of the National Health Service (Nursing in Residential Accommodation) (Wales) Directions 2004 (“the 2004 Directions”), made under section 16BB(4) of the National Health Service Act 1977 (another predecessor to the 2006 Act), the Welsh Ministers’ predecessor, the National Assembly of Wales, directed LHBs as follows (so far as material to this claim):

“(1)

Where it appears to a relevant authority that a person for whom it has responsibility may… need to become a resident in relevant premises and may be in need of nursing care in those premises that authority shall carry out, or arrange to have carried out, an assessment of the person’s needs for such nursing care….

(2)

Paragraph (1) shall not apply if the relevant authority, as well as providing the person with nursing care, will also provide that person with accommodation and with other care.

(3)

In the case of a person who is a qualifying person by virtue of paragraphs (4) to (6), the relevant authority shall, having regard to the results of the assessment mentioned in (1), provide the person with such nursing care as appears to the authority to be appropriate.

(4)

… [F]or the purposes of this Direction a qualifying person is a person who… becomes a resident in relevant premises and is a person –

(a)

whose accommodation is provided by a local authority under section 21(1) of the [National Assistance Act 1948], including those persons who make a financial contribution towards their care costs, or

(b)

whose accommodation is not provided by a local authority or a relevant authority.

Those provisions complement section 47 of the 1990 Act (see paragraph 12 above).

For the purposes of the Direction, the following definitions are adopted (paragraph 1(2)):

Therefore, in respect of nursing care in care homes, this Direction broadly reflects the general obligation imposed on the Welsh Ministers by section 3(1) of the 2006 Act. An LHB has an obligation to assess the reasonable nursing needs of a person who is resident in accommodation other than LHB accommodation; and then, having regard to the results of that assessment, it must provide the person, free of charge, with the care by a registered nurse as appears to the LHB to be necessary to meet those needs. Where the accommodation is a care home, in practice, it makes that provision by paying the home for such care to be provided.

Thus, the scope of “nursing care” – and particularly where the line is drawn between nursing care and other care requirements – is important for care homes and their residents, but also for LHBs and local authorities. Whilst, as shall be seen, matters are not straightforward, nursing care is generally provided or paid for by the relevant LHB. Other care services are not: they have to be paid for by the resident himself or herself or, subject to the statutory means test, by the local authority under section 21 of the 1948 Act.

Those in care homes who require nursing care will inevitably have personal care (including social care) requirements. It is equally clear that the line between the two is controversial, and in any event may in practice be difficult to draw.

Until the 1990s, for residents who qualified for assistance under section 21 of the 1948 Act, it seems that all of their care costs – whether relating to nursing care or other care – were borne by the relevant local authority. However, from 1983 to 1999, the number of NHS long-stay beds across England and Wales declined by 38% (a loss of 21,000 beds), whilst the number of private care home beds increased by 900% (an increase of 121,000 beds). Of the additional private care home places, only 8% were paid for by the NHS. The NHS therefore made very considerable savings; but it was recognised that some of the relevant costs had simply been shifted to local authorities and other elements of the social welfare system (see, e.g., With Respect to Old Age: Long Term Care – Rights and Responsibilities: A Report by the Royal Commission on Long Term Care (March 1999) (“the Royal Commission Report”), at paragraphs 4.6-4.7).

As I have already indicated, by a 1990 amendment to section 21(8) of the 1948 Act, local authorities were effectively forbidden from providing services which should or could be provided by the NHS (see paragraph 14(iv) above). The move from care in NHS institutions to care in the community caused local authorities to focus upon those care costs which (they considered) ought properly to be borne by the NHS rather than themselves.

The scope of “nursing care” and who should pay for it was considered by the Court of Appeal in R v North and East Devon Health Authority ex parte Coughlan [2001] QB 213 (“Coughlan”), in which Lord Woolf MR gave the judgment of the court on 16 July 1999. Mrs Coughlan was severely injured in a road accident in 1971, which left her tetraplegic. In 1993, she was moved from hospital to an NHS home for the long-term disabled. In 1998, the defendant health authority decided to close that facility, and to transfer the long-term care of Mrs Coughlan and other residents to the local authority. The Court of Appeal held that (see, especially, paragraphs 30 and 117(a)):

Therefore, following Coughlan, if the care home resident’s primary need was for health care, the whole of his or her care costs (nursing and non-nursing) were borne by the NHS. If the primary need was for accommodation, in practice the whole of his or her care costs (nursing and non-nursing) continued to be borne by the relevant local authority.

However, in the meantime, a Royal Commission had been established to consider the issue of the long-term care of those with chronic conditions; and, in March 1999 (after the first instance decision, but before the Court of Appeal judgment, in Coughlan), the Royal Commission on Long Term Care issued its report. Its main recommendation was that all reasonably required nursing and personal care should be available, free of charge, to those who need it (paragraphs 6.22 and 6.37). However, two Commissioners (Joel Jaffe and David Lipsey) entered a Note of Dissent. By 1999, the costs of nursing care for all those who needed it, except those resident in care homes whose primary need was not for healthcare but for accommodation, had their nursing care provided free of charge by the NHS. The two Commissioners dissented on the issue of whether personal care should be provided free of charge – they said it should not – although they agreed with the majority that that anomaly should cease: all of the Commissioners considered that nursing care should be provided by the NHS, free of charge (Note of Dissent, paragraphs 11(b), and 63-66). However, the dissenters defined “nursing care” narrowly, “… as that care which requires the specific knowledge and skill which only registered nurses can provide” (paragraph 65). They gave examples: the assessment of health-care needs and specific interventions which require technical competences and knowledge of disease states in such matters as tissue and skin care, administration of drugs, complex medication, incontinence, stoma care and parenteral nutrition (also paragraph 65). They envisaged such nursing care being provided, following assessment, as a component of a package of care tailored to the specific individual (paragraph 66).

The United Kingdom Government responded to the Royal Commission Report in July 2000 (The NHS Plan: The Government’s Response to the Royal Commission on Long Term Care). It rejected the majority recommendation that personal care should be universally free; but it accepted the unanimous recommendation that the anomalous situation of the minority of people in care homes paying all or part of their nursing costs (which it regarded as unfair) should cease (paragraph 2.5). However, it went further than the Royal Commission in respect of the scope of such services. The Government said:

“2.10

There can be no justification for charging people in care homes for their nursing costs. We will make nursing care free under the NHS to everyone in a care home who needs it. Both the report of the Royal Commission and the Note of Dissent to it supported this. It will require primary legislation and we will introduce this as soon as possible. The change cannot apply retrospectively but we intend to introduce free NHS nursing care in all nursing homes by October 2001.

2.11

In the future, the NHS will meet the costs of registered nurse time spent on providing, delegating or supervising care in any setting. This is a wider definition of nursing care than proposed in the Note of Dissent to the Royal Commission report, which suggested it should include those tasks that only a registered nurse could undertake.

2.13

Therefore people identified as needing nursing home care will no longer have to meet any of the costs for the registered nurses involved in their care, or for specialist equipment used by these nurses. Instead, the NHS will meet these costs. People who can afford to do so will still have to make a contribution towards their personal care and accommodation costs while in a nursing home.” (emphasis added).

It is clear from the italicised passage that, in respect of “nursing care” to be provided free of charge to residents in care homes, the Government intended to include more than “those tasks that only a registered nurse could undertake”.

The Government was true to its word, and brought forward proposed legislation to cure the care home anomaly identified in the Royal Commission Report which, on 11 May 2001, was enacted as section 49 of the 2001 Act. It is not suggested by any of the parties before me that this statutory provision was not enacted other than in response to the Royal Commission Report, and in pursuance of the Government’s July 2000 formal response to that report. Indeed, paragraphs 3 and 4 of the Explanatory Notes to the 2001 Act confirm that to have been the case.

Section 49 provides:

“(1)

Nothing in the enactments relating to the provision of community care services shall authorise or require a local authority, in or in connection with the provision of any such services, to –

(a)

provide for any person, or

(b)

arrange for any person to be provided with

nursing care by a registered nurse.

(2)

In this section ‘nursing care by a registered nurse’ means any services provided by a registered nurse and involving –

(a)

the provision of care, or

(b)

the planning, supervision or delegation of the provision of care,

other than any services which, having regard to their nature and the circumstances in which they are provided, do not need to be provided by a registered nurse.”

In this judgment, unless the context indicates the contrary, references to “section 49” are to section 49 of the 2001 Act.

The meaning of “nursing care by a registered nurse” in this context is an issue at the heart of the Claimants’ Ground 1. For the time being, it is sufficient to note three aspects of the wording used in the statutory definition, which reflect the Government’s response to the Royal Commission Report. First, it is not defined simply in terms of tasks that only a registered nurse could undertake. Second, it is not defined simply in terms of the provision of nursing care, but rather all care subject to the exception after the words “other than”. Third, it is not defined simply in terms of the provision of that care, but rather “services involving the provision of care”.

I will have more to say about the definition of “nursing care by a registered nurse” in the course of this judgment; but, whatever falls within its scope, a local authority is expressly prohibited from making any provision for such care. By the end of the hearing, it was, rightly, common ground between the parties that, in Wales, such care must therefore be the responsibility of the relevant LHB. That was confirmed in R (St Helens Borough Council) v Manchester Primary Care Trust [2008] EWCA Civ 931, another case in which the relevant NHS body (the defendant English primary care trust, “the PCT”) concluded that the needs of a particular individual were not primarily health care needs and it should not therefore fund her care, the burden of that provision therefore falling on the relevant local authority. The court held that the primary decision-maker for determining whether the individual’s needs were primarily health care needs was the PCT under delegated powers from the Secretary of State; and, under the relevant scheme, the PCT was bound to take into account whether the individual’s need fell within or outside the statutory competence of the local authority; so that the PCT’s decision would define the services the local authority was bound to provide under section 21 because, for those reliant on the State, there could be no gap in the provision by the State of care needs. There could be no gap, if the PCT and the local authority acted properly and lawfully, because, in determining the care it would provide, the PCT was bound to take into account the statutory competence of the local authority to provide care; and the local authority was bound to provide reasonably required care that the PCT did not provide. Although the Court of Appeal were at pains to stress that its decision was under the regime then pertaining to England, all parties before me accepted that, on the same analysis, there could be no “funding gap” in the current regime in Wales. They were right to do so.

Section 49 thus saw the advent of FNC: it transferred responsibility for nursing care of residents in care homes who had healthcare needs (but only such needs subservient to their need for accommodation) from local authorities to the NHS, which paid for that provision by means of an FNC contribution to the full care costs. So far as Wales is concerned, section 49 was introduced in tranches, so that, by April 2004, section 49 had been extended to all care home residents. The transitional provisions are of no relevance to this claim.

To reflect the transfer of responsibilities, a transfer of funds from local government to NHS Wales was made (paragraph 14 of the statement of Gaynor Williams dated 29 December 2014. Ms Williams is the National Director for Complex Care for NHS Wales and is responsible for coordination of CHC and FNC related policy and strategy implementation on behalf of NHS Wales. She was involved in the FNC policy process from its inception in 2000).

As I have already indicated (paragraphs 21-22 above), by paragraph 3(3) of 2004 Directions, the Welsh Government directed LHBs to assume responsibility for FNC and to provide care home residents “with such nursing care [as defined in section 49] as appears to the [LHB] to be appropriate”.

The Welsh Assembly Government provided assistance to LHBs in implementing section 49 by way of a circular, namely NHS Funded Nursing Care in Care Homes Guidance 2004 (WHC(2004) 024) (“the 2004 Circular”), which is still current. Reflecting authorities to this effect (including Coughlan), guidance in the Circular confirms that LHBs had the lead responsibility for implementation of the FNC arrangements; but it emphasises that arrangements had to be developed in conjunction with all key stakeholders (paragraphs 23 and 27). LHBs, local authorities and service providers are expressly encouraged “to make good use of these opportunities for extending a partnership approach to their responsibilities for the provision of care” (paragraph 4). The guidance says (paragraph 37):

“Providers, local authorities and [LHBs] will need to agree a total funding package that takes into account the NHS contribution. When making arrangements for residential care for an individual under [section 21], local authorities are responsible for the remaining costs of accommodation and personal care. There should be no gap between local authority and NHS provision.”

It stresses that LHBs need to have in place procedures for dealing with disputes between agencies arising from assessments, funding decisions and arrangements, requiring joint arrangements to be developed with local authorities and care home providers (paragraph 30).

All of that is guidance, so there is an obligation on LHBs to take it into account in the discharge of its functions and, if departing from it, a duty to give clear reasons for doing so. But, in paragraphs 5-8, the 2004 Circular also gives the LHBs directions – headed as such – with which the LHBs are bound to comply (see R v North Derbyshire Health Authority ex parte Fisher (1997) 38 BMLR 76 at 81, per Dyson J as he then was). Paragraph 6 provides:

“It is a fundamental requirement of this guidance that [LHBs] work closely together with key stakeholders, to maintain and/or develop integrated and streamlined arrangements for the commissioning, arrangement, and provision of care in care homes. The underlying principle is that the arrangement and provision of care for service users are not in any way affected negatively by the new funding arrangement.”

Thus, the Circular makes the policy of the Welsh Government very clear: in the complex area of caring for those in care homes in Wales, LHBs and local authorities (which had complementary responsibilities for the care of residents) should cooperate and work closely together with each other and with other stakeholders, including providers. That is a “fundamental requirement”. Both the 2004 Circular and the 2004 Directions emphasises that the LHBs have the lead responsibility for such arrangements.

Before leaving the 2004 Circular, I should refer to one further part of it, relevant to Ground 3. Paragraph 45 states:

“The weekly payment for NHS [FNC] will be subject to review prior to 1 April 2004 and yearly thereafter.”

I will need to consider the definition of “nursing care provided by a registered nurse” further in the context of section 49 when I consider the Claimants’ Ground 1; but, before I do, it would be helpful to set out how the LHBs in this case arrived at the challenged decisions.

From its inception in 2001 until the year 2007-8, the FNC was set by the National Assembly of Wales, the Assembly allocating to each LHB budget an amount representing the cost of funding registered nursing care for residents in their area who were eligible for FNC.

The amounts paid by LHBs to care home providers in respect of CHC are calculated on the basis of a minimum amount set by each LHB, which is then “topped up” in response to the assessment of the particular resident’s needs. On the other hand, FNC rates have always been flat-rate across Wales. In 2001, a rate of £100 per week was set by the Welsh Government, to include an allowance for continence and equipment costs. That rate was increased to £105 in 2004-5, £107.63 in 2005-6 and £111 in 2006-7.

In 2006, the Welsh Government considered a complaint by Care Forum Wales (“CFW”), a body representing a number of care home providers in Wales, that the rate was inadequate. Howard Gilchrist is the Assistant Director of Finance for the Second Defendant, Abertawe Bro Morgannwg University Health Board. He has been involved in NHS finance since the 1990s, and has been closely involved with FNC rate setting. He explains (paragraphs 9 and following of his statement dated 24 December 2014) that a toolkit developed by William Laing of the firm Laing & Buisson was used after 2006 to check the appropriate FNC rate. The toolkit assumed that a registered nurse would be on duty in a care home at all times, with a 25% hours allowance, giving a total of 210 registered nurse hours per week; which it applied across a notional 28 residents to produce an average weekly requirement of 7.5 hours. An hourly rate of £10.72 was applied, that rate being the mid-grade 5 NHS nurse salary of £24,970 for a 37.5 hour week. That produced a wage cost per FNC resident per week of £80.40. To that was added 25% provider on-costs, and an allowance for continence supplies, to give a total of £106.50; which was rounded up to £111. That rate was thus maintained. It is noteworthy that the toolkit calculation was on the basis that all registered nurse working time should be included.

As I have already indicated (paragraphs 21-22 and 38 above), the assessment of FNC was delegated by the Welsh Government to the LHBs. The first financial year for which that delegation was effective was 2007-8. However, the LHBs continued to act in concert, setting a fixed rate for all of Wales. The rate for 2007-8 was £114.90; for 2008-9, £118.09; for 2009-10, £119.66; and for 2010-11, £120.56. These increases directly reflected the inflation-only percentage increase applied by the Welsh Government to the whole of the NHS Wales budget in those years. Because there was no increase in the overall budget for the years 2011-12 and 2012-13, neither was there an increase in the FNC rate.

The Chief Executives of the LHBs meet regularly in what is known as “the Peer Group”. As a result of the renewed expression of concerns by care home providers that the FNC rate was inadequate (notably in correspondence from Alison Castrey, the solicitor now acting for the Claimants), at a meeting in March 2012, the Peer Group endorsed a proposal of their Directors of Finance that a task group should be set up to consider whether the process whereby the FNC rate was fixed remained valid and appropriate. The task group was called “the FNC Review Group”.

The Group was chaired by Ms Bernadette Rees (a Primary, Community and Mental Health Director of one of the LHBs), and comprised NHS employees. However, it sought input from local authorities and providers, to which I shall return (see paragraphs 61 and following below).

The FNC Review Group took a clear and firm view on their approach to the assessment of the FNC rate. At the time, Robert Mahoney was Senior Finance Manager (and is now Assistant Finance Director) at the First Defendant, Cardiff & Vale University Health Board. He explains (in his statement dated 24 December 2014) that they took the view that they were “paying for the care provided by registered nurses, not the costs of a registered nurse…” (paragraph 11, emphasis in the original). He says (at paragraphs 12 and 25):

“… [W]e were not trying to assess the time spent by registered nurses, but were trying to assess the time spent by registered nurses providing the care they were obliged to deliver either themselves (direct care) or, where they were able to delegate properly, those to whom they delegated (indirect care)….

… [I]t was the physical task based elements requiring registered nurse skills alone that were supported by the FNC payment.”

The evidence of other members of the FNC Review Group confirms that that was the Group’s approach (see, e.g., paragraph 47 of the statement of Ms Williams dated 29 December 2014, and paragraphs 17 and 33 of the statement of Claire Aston dated 23 December 2014). The Group (Mr Mahoney said) considered that this approach would “produce for [them] details of what might reasonably and logically be included within the statutory definition of registered nursing care” (paragraph 27), i.e. “nursing care by a registered nurse” as defined in section 49 and thus the 2004 Directions.

I emphasise that it was the FNC Review Group’s aim to assess what fell within their understanding of the statutory definition of “nursing care by a registered nurse” in section 49, namely the tasks performed by registered nurses for FNC residents that only a registered nurse could perform, because of the skill and experience required. The Group wished to identify the average or typical time spent by registered nurses on those tasks; and, by costing that time by reference to the rate which care homes were in fact reasonably paying registered nurses, calculate an appropriate FNC weekly rate.

With a view to ascertaining the types and levels of registered nurse input into the care of residents, the FNC Review Group initially looked at eight care homes. However, they concluded that the sample was too small to provide effective data; and so they commissioned Laing & Buisson to conduct a wide mapping exercise of care homes across Wales, to give the Group and thus the LHBs “a robust evidence base… to determine ‘typical levels’ of registered nursing care input in order to inform the decision-making process going forward”.

It was clearly understood at the time that this was a challenging project, because the scope of nursing care and personal care respectively was the subject of ongoing debate among medical professionals, with many considering nursing should include physical, social, emotional and spiritual elements; and it was in any event recognised that nurses would in practice struggle with the differentiation (see, e.g., email from Lynda Chandler to Laing & Buisson dated 3 April 2013: Ms Chandler provided support for the FNC Review Group). Mr Mahoney said that:

“The appropriate identification of time spent with patients that legitimately required the skills of a registered nurse was always going to be the biggest challenge” (email to Laing & Buisson dated 3 April 2013).

Laing & Buisson themselves acknowledged in their final report (at page 23) that “to meet the exacting definitional requirements of the legislation [i.e. the requirements as given to them by the FNC Review Group], in splitting nurses’ time and costs in so much detail, is always likely to prove challenging”; and, indeed, said (at page 21) that “the complexity of the analysis… undertaken, together with areas of potential unreliability for the future, beg the question as to whether this approach is sustainable…”.

However, despite these misgivings, Laing & Buisson conducted the project required of them, which they did on the basis of the interpretation of legislation (i.e. section 49) and related guidance (i.e. the 2004 Directions) as to what constitutes “nursing care” as given to them by the FNC Review Group, i.e. restricting it to those tasks which only a registered nurse could perform.

They sent a survey form to every care home provider in Wales. The aim of the survey, as mandated by the commissioning Group in pursuit of the methodology described above, was set out in the covering letter:

“The broad aim is to ascertain what ‘typical’ levels of registered nurse input are being provided to FNC patients in nursing care homes throughout Wales, in terms of average hours support per week, and to then also identify the current costs of providing this support, based on registered nurse salaries and related ‘on-costs’.

The exercise will have regard to the legislation and guidance relating to FNC payments, which indicates that the FNC payments are intended to make a ‘contribution’ to the costs of nursing care, restricted to direct involvement by registered nurses in nursing specific interventions for patients, as well as indirect involvement spent in planning, mentoring and supervision relating to nursing activities delegated to care assistants. In addition, the FNC payment also needs to cover the cost of continence products utilised each week.

For this first year, the approach agreed is a pragmatic one, which is geared to analysing how nurses actually spend their time, in broad terms, across the range of FNC patients supported. So, time spent supporting [CHC] patients, who are separately funded, will be split out and excluded…”.

I pause there to note that, in this covering letter, Laing & Buisson say that the statutory scheme “indicates that FNC payments are intended to make a ‘contribution’ to the costs of nursing care…”. There are several such references in the documents ultimately emanating from the LHBs, some suggesting that this at some stage derived from the Welsh Government. The earliest reference in the documents before me is a briefing note dated March 2012 prepared by Ms Williams, which refers to the original £100 rate as being “described by [the Welsh Assembly Government] as a ‘contribution’ to the costs of nursing care…”; and such references appear in the FNC Review Group documents from its inception (e.g. in the notes of meeting on 10 July 2012). No specific source is identified.

Mr Purchase and Mr Gordon submitted that this indication was wrong, if and insofar as it meant that the LHBs were to pay for anything less than the costs of “nursing care by a registered nurse” as defined in section 49, whatever that might mean. Paragraph 6 of the statement of Lisa Dunsford (the Deputy Director of the Integration, Policy and Delivery Division, Department for Health and Social Services in the Welsh Government) seems to confirm that the rate was set in respect of the whole “nursing element of the costs”. However, I am unconvinced that the FNC Review Group and (on their instruction) Laing & Buisson erred by believing that the LHBs were only obliged to contribute to the costs of “nursing care by a registered nurse”, as Mr Purchase and Mr Gordon suggested they did. Indeed, the Group’s methodology was clear, as was the task upon which Laing & Buisson were engaged. They were producing data from which the time taken on the task-based elements of a registered nurses’ work that the FNC Review Group considered fell within the section 49 definition of “nursing care by a registered nurse” could be identified in average hours per week, and the current direct costs of doing those tasks could be calculated to form the basis of the FNC rate. That is also the firm thrust of the evidence of those who were on the FNC Review Group (e.g. the statement of Robert Mahoney dated 24 December 2014 to which I have already referred, especially at paragraphs 12 and 15). Although the final recommendation would be made by the Peer Group – and the final FNC rate decisions by the respective LHB Boards – despite the odd and largely unexplained wording of the survey covering letter, and the other documents similarly phrased – there is no substantial evidence that the FNC Review Group were performing this exercise with a view to the LHBs paying only a contribution to the costs assessed thus.

In line with the Group’s intention and methodology, the Laing & Buisson survey involved the completion of a registered nurse’s time analysis form, for each registered nurse on shift during a “typical” 24 hour period. The nurse had to split his or her time between five categories, one of which (Column 2) was time with CHC patients which, for FNC rate purposes, was discarded, because the exercise was to ascertain the total nurse care hours per FNC resident per week. The other four categories, relating to FNC residents, were described thus (all emphasis as in the original):

“Column 1…. The DIRECT NURSING TIME you spend on nursing tasks provided to individual patients…. ‘Nursing care’ tasks are those that relate to an assessed care need that requires an intervention to be conducted by a registered nurse, including individual care planning and updating clinical assessments.

….

Column 3. INDIRECT NURSING TIME is nursing time which it is not possible to relate to individual FNC or CHC patients, and needs to be entered here (so that it can be apportioned between them, based on relative numbers of these patients in the nursing home). Indirect nursing includes time spent with care workers to prepare them to undertake nursing tasks delegated to them, as well as in subsequent mentoring and supervision, to ensure that the nursing care is delivered effectively in practice e.g. relating to management of continence, medication, nutrition, behaviour and hygiene standards. It also includes activities on behalf of a group of patients, or shared between them, such as overall planning. Time spent with the manager, matron in clinical supervision in relation to direct care (specific case assessments and other nursing care matters relating to patients) should also be included. In addition, as an exception, there might be also some direct time spent with each patient, which is too small to identify separately, and should be recorded here, such as medication round, providing direct support to many patients, but involving just a few minutes each.

Column 4 and 5. There may also be some ‘NON-NURSING CARE’ tasks, which do not need to be undertaken by or delegated by a registered nurse. Column 4 covers PERSONAL and other SOCIAL CARE tasks. Time spent directly or in supervision of ‘routine’ personal care which has no specific nursing connection (such as helping patients with washing, dressing and other aspects of personal hygiene), and social care (such as supporting patients in eating, daily lining and social activities), should be recorded here. ANY OTHER TIME (other non-nursing and non-personal/social care time) should be recorded in Column 5. This includes time not spent directly or indirectly in supporting patients, such as nurses receivingclinical supervision not relating to direct care, or receiving other management supervision, or being involved in general home management and administration (broader than nursing). Any spare time on night shifts which cannot usefully be used in specific nursing or personal/social care tasks (stand-by time) should also be entered here.”

Therefore, of the total time of a registered nurse on shift, that spent on CHC residents (including the appropriate proportion of indirect time) was simply discarded. The particular time that was captured for FNC residents was “direct nursing time” and “indirect nursing time”. That excluded time spent on (i) personal care, (ii) stand-by, (iii) receiving clinical supervision, (iv) breaks within shifts and (v) other unspecified time including general management and administration.

Although it was made clear that only an approximate split of time was expected, completing the form was a fairly formidable task. In the event, responses were received from 80 out of 256 care homes. 63 responses were deemed reliable to include in the final analysis, which appeared in a Laing & Buisson report dated 8 July 2013.

During the course of this exercise, as I have indicated (see paragraph 49 above), the FNC Review Group engaged with both providers and local authorities.

On 2 May 2012, on behalf of the Group, Ms Williams wrote to the Chair of CFW, Mario Kreft, inviting him to represent the independent sector providers for the purposes of the review, and asking for his particular advice on the mapping exercise. There were a number of meetings between the Group and CFW representatives (often Mike Kemp), at which progress with the review was discussed, including the intention to capture various categories of registered nurse time by means of a survey. CFW also had the opportunity to make – and, in fact, made – written submissions. For example, on 22 June 2012, Mr Kreft wrote to Ms Williams expressing concern that there was a financial gap between the provision made by the LHBs and that made by the local authorities which was “currently being picked up by cross-subsidisation of one sort or another, often by self-funders subsidising others” which was (he said) “obviously not acceptable”. On 24 October 2012, Mr Kreft provided the Group with an internal CFW report, which (amongst other things) complained about the then-current FNC rate (i.e. £120.56), and that the review process was “going off track and going too slowly”.

CFW were also contacted by Laing & Buisson directly in respect of the tender proposal to carry out the wider survey, in the week that they were asked to make a bid for the work; and CFW were sent the proposal (which included some details of the data collection proposed) for comment. Mr Kemp considered the approach from Laing & Buisson to be “excellent” (email of 13 March 2013).

On 24 April 2013, Mr Kemp emailed the Group with further representations, to the effect that the FNC rate should reflect the fact that a registered nurse had to be working on site at all times. Later that month, there were further discussions as to the definition of “nursing time” to be used by Laing & Buisson for the purposes of their report; and, on 10 May 2013, Ms Castrey wrote to the solicitors for the LHBs saying that her clients (i.e. providers) did not agree a “narrow” definition of FNC, and asked the LHBs to consult with the local authorities to ensure that they would fill any “gap” left by reason of this narrow interpretation. That letter, directed particularly to the Sixth Defendant (Hywel Dda University Health Board), said:

“Whilst the issue may ultimately have to be resolved by a Direction or other decision of the Administrative Court (or by way of legislation), my clients request that if there is any prospect that Hywel Dda Health Board will make its 2012-13 and 2013-14 decisions… or any future FNC rate decision on the narrow basis [i.e. the basis set out in the Laing & Buisson survey forms], the Board must at the same time as making such a decision ensure that there is no ‘gap’ between the local authority and Health Board funding…”. (all emphasis in the original).

That letter said that, to ensure there was no gap, consultation between the LHB and the relevant local authorities was essential.

Looking at all of this evidence – of which I have only referred to a fraction – it is clear that the care home providers, through CFW, participated in the development of the tender specification and Laing & Buisson’s proposals for the survey (which effectively revealed the methodology being adopted), as well as the survey itself.

In the meantime, also on 2 May 2012, Ms Williams wrote to the President of the Association of Directors for Social Services Cymru (“ADSS Cymru”), inviting him to represent his association’s members (effectively, the local authorities) for the review. Ms Williams met the President (by then Albert Heaney) on 6 August 2012. Although the local authorities did not play a great part in the discussions, it seems from the evidence I have seen that they were given a sufficient opportunity to do so.

Once Laing & Buisson had produced a draft report, a meeting was held on 12 June 2013 to discuss it, attended by representatives of the FNC Review Group, CFW and ADSS Cymru, before their final report was published on 8 July.

Laing & Buisson’s misgivings about the approach adopted by the FNC Review Group had not relented. In their report, they raised issues about the exclusion of certain aspects of nurses’ work/time that they had been instructed to exclude (see paragraphs 58-59 above):

The report calculated the average “total nurse care hours per FNC resident per week” to be 7.62 (the aggregate of 3.73 direct and 3.89 indirect nurse care hours). The average salary rate per FNC nursing care hour was £13.29 (which took into account the time which managers who were also registered nurses on higher salaries spent on these activities increased); so the direct salary cost per FNC resident week was £101.27 (7.62 x £13.29). A standard allowance for on-costs of 27% was added, to give an average direct salary cost plus on-costs of £128.61; to which continence products costs of £11.88 per week was added, to give a total figure of £140.49. That was compared with the then-current FNC rate of £120.55 (£110.55 for FNC nursing costs, plus £10 for continence products). On this basis, the increase in the FNC rate excluding continence products would be £18.06 (i.e. £128.61 compared with £110.55).

Of the non-nursing care, 0.77 hours per week was allocated to personal care; and 0.85 hours per week (including 0.47 hours per week night stand-by time) to “any other time”. For the reasons I have given, none of that was included in the nursing care which the LHBs should provide/pay for.

On 16 July 2013, Ms Chandler (on behalf of the FNC Review Board) prepared a report for the Peer Group, summarising the Laing & Buisson report. It confirmed that the FNC Review Group had used the definition for nursing care as set out in section 49, as the Group considered it to be; but said that the Laing & Buisson report “indicates that the strict criteria applied potentially creates the funding gap which the Welsh Government Guidance states that the NHS and Local Authorities must work together to avoid”. However, it said that, if the time spent on excluded categories were included within FNC, this would represent a policy shift and transfer of responsibility from local authorities to the NHS, which would require an appropriate transfer of funds.

The report set out three options, namely (i) no rise at all, (ii) a rise to reflect inflation only or (iii) apply the findings, and accept the conclusions as to FNC rate, in the Laing & Buisson report. Ms Chandler’s report indicated that there were substantial risks with (i) and (ii), because the process by which they were derived had been acknowledged to be flawed and it would be to ignore the findings and conclusions of Laing & Buisson. Those were regarded as “robust and reasonable”, the key risk with (iii) being identified as the potential financial consequences on other areas of the NHS service given the money it would cost and the strong indication from the Welsh Government that no additional funding would be available. Her report also noted that the providers had concerns about the interpretation of nursing care as used in the review especially as Laing & Buisson had indicated that it created a potential funding gap.

The Peer Group agreed that continence products should be left out of the calculation, and dealt with separately. They play no part in this claim, and I need not say anything further about them.

With regard to FNC rate, after some further consideration of on-costs, on 20 August 2013 the Chief Executives agreed to recommend to each LHB that the FNC rate calculated by Laing & Buisson (£128.61) be accepted, and implemented by applying 50% of the uplift (£9.03) for the 2013-14 financial year (backdated to 1 April 2013) and, for 2014-15, the full uplift (£18.05: I do not know why this was one penny short of the Laing & Buisson figure, nor is it material).

I need to consider briefly the circumstances in which, following the Peer Group recommendation, the 2013 LHB Decisions were made, which are potentially relevant to Ground 2. In the period September to November 2013, each LHB approved the Peer Group recommendation at a Board Meeting. I was particularly referred to the documents relating to the decision of the Sixth Defendant, Hywel Dda University Health Board (“Hywel Dda UHB”). The terms and circumstances in which the decisions of the other LHBs were made were materially similar, and I shall use the Hywel Dda UHB as an illustrative example.

During the consideration of the FNC rate by the FNC Review Group, CFW maintained correspondence with the Group and Laing & Buisson as I have described; and, more formally, Ms Castrey continued to write to the LHBs and their solicitors. Indeed, from August 2012, she sent a series of pre-action protocol letters.

It seems that CFW were aware of the Peer Group’s recommendation very soon after 20 August 2013. On 23 August 2013, Mr Kreft wrote to the Chief Executive Officer (“CEO”) of Hywel Dda UHB (copying in the CEOs of all the other LHBs, the Chief Executive of NHS Wales and the Minister and Deputy Minister for Health and Social Services) indicating that the current FNC rate was wholly inadequate, and saying that “the prompt and proper resolution of the FNC rate” was a matter of importance for public safety as well as the commercial viability of the providers. He pressed for the technical information behind the Laing & Buisson report; but did not suggest that the methodology used was inappropriate. The response to that letter (from Mrs Karen Howell, Hywel Dda UHB’s Deputy Chief Officer), dated 27 August 2013, gave no comfort in respect of any of the matters raised.

The Hywel Dda UHB Board were due to consider the recommendation at its meeting on 26 September 2013. Prior to that, the agenda for that meeting and a report which Mrs Howell had prepared for the meeting were placed on the Health Board’s website. In response, Ms Castrey wrote to Hywel Dda UHB’s CEO on 23 September 2013 outlining five areas of concern that her clients had. None related to the methodology used by the FNC Review Group to calculate the FNC rate; although concern was expressed that the proposals produced a funding gap because (i) the 2012-13 rate had not been retrospectively uplifted, (ii) the costings used by Laing & Buisson related to 2013 and were therefore out of date, and (iii) there was to be a year’s delay in implementing 50% of the proposed rate increase.

The Hywel Dda UHB Board duly met on 26 September 2013. Representatives of CFW attended the public meeting. The Board had before it (amongst other things) the Peer Group’s recommendation, the Laing & Buisson Report, Ms Castrey’s letter dated 23 September 2013 and of course Mrs Howell’s report. It is clear from the section of that report headed “Description of Proposals being Assessed” that Board members were well aware that the recommendation was made on the basis of the FNC Review Group’s understanding of the definition of nursing care in section 49, and the figures proposed potentially created a funding gap in the form of a shortfall between the total costs of care and the aggregate amount paid to care home providers by the LHB and local authorities for care of a resident receiving section 21 assistance; but the Board did not accept that that funding gap resulted from a failure by them to meet their statutory obligations in fixing the FNC rate (see, e.g., email from Morgan Cole (by then acting for the Hywel Dda UHB, and indeed all but one of the LHBs) to the Claimants’ solicitor dated 7 March 2014). During the course of the meeting, the concerns set out in Ms Castrey’s letter of 23 September 2013 as to funding gap were expressly raised and discussed.

In the event, the Board approved the recommendation before it to accept the uplift proposed on the basis of the Laing & Buisson conclusion in two stages for 2013-14 and 2014-15. They rejected any uplift for 2012-13. The minutes of the meeting say, immediately below those resolutions:

“Members noted that the decisions of the Board are made without prejudice to any further discussions between the interested parties (including other Health Boards in Wales), and the Board, AGREED that it would revisit these decisions if alternative proposals emanated from this process.” (emphasis in the original).

On 14 October 2013, Ms Castrey sent Hywel Dda UHB a pre-action protocol letter on behalf of four care home providers. It was expressly sent on the basis of an assumption that the other LHBs would consider the Peer Groups’ recommendation on much the same basis as Hywel Dda UHB, which in the event they did. It is fair to say that the main thrust of the letter was that the rates approved were simply too low (see, e.g., paragraphs 57-60); but the issue raised in Ms Castrey’s letter of 2013 (quoted at paragraph 64 above) was also firmly raised again, i.e. that the exclusion of some nursing costs meant that there would be a funding gap and the Health Board had made no attempt to agree with the relevant local authorities as to how the costs falling in that gap should be paid (paragraphs 42 and 62).

The letter sought confirmation that the decisions taken for each of the three years (2012-13, 2013-14 and 2014-15) were “interim only”; and that the LHB would “agree that formal consultation will be undertaken as to the final rates [for each of those years]”, to include consultation with nursing homes and local authorities in the LHB’s area in relation to eight identified matters. The significant matters listed for the purposes of this claim were:

“(a)

The nature and extent of any ‘gap’ between total costs of nursing accommodation and care, the proposed FNC rate/s and the amount paid by local authorities (‘gap costs’);

(b)

What agreement is to be reached between [Hywel Dda UHB], the three local authorities and providers (e.g. through self-funding residents, or through legitimate ‘top ups’ that do not fall foul of the rule that NHS care is to be provided free of charge at the point of delivery) to make provision to pay the gap costs during 2012-13, 2013-14 and 2014-15, in accordance with paragraph 37 of the [2004] Circular;

…

(d)

The likely effect of inflation and other foreseeable increases during 2014-15 on the costs heads examined by [Laing & Buisson] during 2013;

…

(g)

The mechanism proposed for reviewing FNC after 31 March 2015 …”.

An agreement was also sought that a final decision for the three years would be taken no later than 31 March 2014, “conscientiously taking into account the results of the consultation described…”.

Morgan Cole’s letter dated 29 October 2013 responded to the substantive points made. In particular, it said:

“Our client would reiterate that it was agreed by the All Wales FNC Review Group that FNC is confined to the cost of providing direct and indirect nursing care (as defined by the [Laing & Buisson] report)… to those eligible for FNC. Our client accepts that these are the correct parameters for the consideration of the cost of FNC and that no other matters fall to be considered as FNC.

We also reiterate that [CFW] was involved in the All Wales FNC Review Group process and was consulted about the parameters of the [Laing & Buisson] report, the findings of that report and the additional work undertaken. While the Claimants may not have had direct access to this process, the views of care home providers were represented

…

In any event, our client’s Board decision of 26 September 2013 was clearly stated to have been made without prejudice to any further discussions which may take place between interested parties, with an agreement to revisit the decision if alternative proposals are forthcoming. Some preliminary discussions have since occurred and it is understood that further engagement is planned, although the form that this engagement will take is yet to be agreed.

…

As the minutes make clear, the Board’s decision of 26 September 2013 was taken without prejudice to any further discussions. It is proposed that the Board will be appraised of the discussions which have subsequently occurred at its next meeting in November 2013.”

CFW representatives continued to meet LHBs; but, as I have described, by November 2013 each LHB had approved the Peer Group’s recommendation.

On 26 November, Ms Castrey wrote to all of the LHB CEOs, identifying three areas of dispute, including the LHBs’ decision that “FNC is to pay only for direct and indirect registered nursing costs” and had specifically excluded personal care time and any other time as defined in the Laing & Buisson report. The letter set out various communications there had been between the parties (including the Morgan Cole correspondence referred to above), concluding:

“These statements, taken together, amount to unequivocal and express promises and plain assurances to my clients that give rise to a legitimate expectation that (i) the FNC decisions taken to date are provisional; (ii) the further discussions proposed will be open discussions (that is, they can be referred to in Court if necessary) that are directly addressed to the three areas of dispute; and (iii) there will come a time when those discussions have concluded (or be deemed to have concluded), such that any further or final decisions (or failures to make such decisions) will be amenable to review by the Court if the position remains unsatisfactory.

My Clients’ Proposed Course of Action

On the basis of the Boards’ express commitment, above, and the legitimate expectation to which it gives rise, my nursing home clients are prepared to step back from the proposed imminent litigation (which would resolve the three issues, one way or the other) and CFW is prepared to recommend to its nursing home members that they do likewise, pending the outcome of the further discussions (although CFW cannot bind its members).

You must, however, inform me by return if your Health Board’s position is materially different from that set out above.” (all emphasis in the original).

Morgan Cole responded substantively on 12 December 2013. That letter acknowledged the difference in view between the LHBs and the providers in respect of “what is and what is not to be included in the definition of nursing care under section 49…”. In respect of the suggested legitimate expectation, the letter said this:

“Whilst I note you suggest… that the statements taken together constitute a legitimate expectation, with respect that is not the case, if, by that, you suggest that your clients have a right of action as a result…

The decisions which have been taken by the Health Boards are perfectly clear in their terms. As we have been at pains to stress in previous correspondence, the process which has been adopted by our clients is not one where it is either obliged to or has agreed to proceed by way of formal consultation pursuant to any statutory obligation in that regard. Steps are being taken to facilitate discussions about wider issues you have raised with providers in the sector, including your clients and it is expected that both Welsh Government and local authorities will join those discussions. The outcome of the discussions may cause the Health Boards to review their recent decisions. There can however be no legitimate expectation on the part of your client that the decisions will be amended, as that would prejudge the outcome of the proposed discussions.

Your clients’ proposed course of action

You will appreciate from what is set out above that it is not accepted – if it is being alleged – that the Health Boards’ participation in the proposed discussions, properly gives rise to a legitimate expectation that the decisions taken will be reviewed.”

In the meantime, the FNC Review Group was not disbanded, but continued its work by looking at how future reviews should be conducted. Paragraph 45 of the 2004 Guidance required annual reviews (see paragraph 43 above). A proposal was prepared by the Group and considered by the Peer Group at meetings in January 2014; and, on 4 February 2014, Morgan Cole notified Ms Castrey that “a proposal for an inflationary funding mechanism for FNC is currently with the CEOs Group for consideration”.

Ms Castrey responded to Morgan Cole’s letters on 10 February 2014:

“I repeat that my clients have a legitimate expectation that what have been referred to as ‘non nursing care costs’ will be provided for, either by the Health Boards (whether through FNC or otherwise) or by local authorities, in their respective fee setting, for the three years in question and beyond. It is not the Boards’ ‘participation in the proposed discussions’… that gives rise to that expectation, but the combined requirements of the 2004 Directions as to the provision of nursing care, section 21 [of the 1948 Act] (in relation to local authorities), and paragraph 37 of the [2004 Guidance].”

She also asked for confirmation that the inflationary uplift mechanism referred to in the letter of 4 February would deal with inflation for the year 2014-15, because Laing & Buisson had undertaken their survey in 2013.

Morgan Cole wrote back on 7 March 2014. That letter made clear that the 2013 LHB decisions were final decisions, and were not “under active review”; although the Health Boards were:

“… committed to establishing whether further progress can be made on those matters you have raised by participating in discussions between those involved in the sector, rather than through formal consultation, which as you are aware, Health Boards are not obliged to undertake in the current circumstances.”

It also explained what had happened in relation to the proposed “inflationary uplift mechanism”:

“I can confirm that the CEOs have now agreed to the proposal put to them recently, which I mentioned in my letter of 4 February…. [T]he mechanism provides an uplift to the FNC rate by the same average uplift as is applied to an A4C pay band of a scale five grade. The uplift is to be applied from 1 April 2014 and will apply for the next 5 years, after which consideration will be given to whether a further review is necessary. Because the direct research with care homes was undertaken in April 2013 or thereafter and therefore the Laing & Buisson report reflected cost levels prevalent in 2013-2014, there will be no inflationary adjustment in addition to the rate fixed for that year.”

A word of explanation of that is required. Recognising that the process used to derive the rate in 2013 was resource intensive in terms of NHS staff time and involved substantial external consultant costs, having identified the registered nurse hours involved and a reasonable base FNC rate, the FNC Review Group had proposed that, for a period of five years, the rate should be uplifted by the same average uplift applied to Agenda for Change (“A4C”) pay band scale 5 grade (the lowest band level for a qualified nurse), to be applied from 1 April 2014 and to be in addition to the increase for 2014-15 approved in the 2013 LHB Decisions (the “Inflationary Uplift Mechanism” or “IUM”). A4C scales applied to NHS nurses, but not to those engaged privately e.g. by a care home. The Peer Group appear to have accepted that IUM proposal some time before 7 March 2014: certainly, the evidence is that they had done so by May 2014.

From 1 July to 20 August 2014, each of the LHBs approved the proposal “to implement an [IUM] on the basis… related to A4C pay band scale 5 grade” for the next five years (“the 2014 LHB Decisions”). At that time, the pay award for such NHS nurses was that year expected to be in the region of 1%.

To complete the chronology, the Welsh Ministers did not make a percentage pay award for NHS nurses from April 2014. Instead, they made an award of £160 across the board, irrespective of grade or hours. At their September 2014 meeting, the Peer Group considered how that could most appropriately be translated into the IUM – if it had been applied, it would have amounted to a 0.65% increase – but did not make any further recommendation in relation to the rate to be adopted for 2014-15 over and above the uplift inherent in the 2013 LHB Decisions.

It is, of course, the 2014 LHB Decisions which the Claimants challenge in this claim, on the three grounds set out above (paragraph 4). I now turn to those grounds of challenge.