England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT IN WALES

		Cardiff Civil Justice Centre 2 Park Street, Cardiff CF10 1ET
		11/03/15

Mr Justice Hickinbottom:

Introduction

1. This claim raises important issues concerning who pays for the nursing care of care home residents in Wales.
2. 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.
3. 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.
4. The Claimants challenge those decisions on three grounds (the order being mine):

Ground 1: The decisions to set the FNC rate were based on an erroneous approach to the nursing care costs that LHBs are required to bear under the relevant statutory scheme; and, in particular, an erroneously restrictive interpretation of the term "nursing care by a registered nurse " for which the scheme requires the relevant LHB to pay. As the local authorities are prohibited by statute from paying any such costs, for those residents for whom the State is liable to pay for all reasonable care needs, there exists a "funding gap", i.e. care costs which neither the LHB nor the relevant local authority will pay. Those costs thus have to be borne by the owner/operator of the care home itself. For self-funded residents, the error means that they themselves have to bear the costs of this shortfall in LHB provision.

Ground 2: Having identified a funding gap, the LHBs failed in their obligation to engage in discussions with local authorities and care home providers with a view to resolving the issue by identifying who would be responsible for funding the services in that gap.

Ground 3: The FNC rate was fixed for the year 2014-15, based on a decision in 2013 as to rate with an inflationary uplift; and then subject to an annual uplift in the following four years. It is submitted that the LHBs erred in (i) failing to consult and/or engage in discussions with the service providers with regard to this means of annual review, and (ii) linking those uplifts to the annual increase, if any, in the pay of the lowest grade of nurse employed by NHS Wales.

5. 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.
6. 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:

The 1948 Act: The National Assistance Act 1948. References in this judgment to simply "section 21" are references to section 21 of the 1948 Act unless otherwise indicated.

The 1990 Act: The National Health Service and Community Care Act 1990.

The 2000 Act: The Care Standards Act 2000.

The 2001 Act: The Health and Social Care Act 2001. References in this judgment to simply "section 49" are references to section 49 of the 2001 Act unless otherwise indicated.

The 2002 Regulations: The Care Homes (Wales) Regulations 2002 (SI 2002 No 324).

The 2004 Directions: The National Health Service (Nursing in Residential Accommodation) (Wales) Directions 2004.

The 2004 Circular: The NHS Funded Nursing Care in Care Homes Guidance 2004 (WHC(2004) 024).

The 2006 Act: The National Health Service (Wales) Act 2006.

Relevant NHS and Local Authority Functions

7. 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.
8. 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.
9. 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)).

10. 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.
11. 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.
12. 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.
13. 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.

14. Of this provision, the following are worthy of note:

i) By paragraph 2 of Appendix 1 to Local Authority Circular LAC(93) 10, from 17 March 1993, by direction, the Secretary of State converted the power in section 21(1) into a duty.

ii) The functions of the Secretary of State under the 1948 Act, so far as exercisable in relation to Wales, were transferred to the National Assembly for Wales (by article 2 of Schedule 1 to the National Assembly for Wales (Transfer of Functions) Order 1999 (SI 1999 No 672)); and thence, as I have described, to the Welsh Ministers, in whom they now reside.

iii) Although the primary need addressed by this provision is residential accommodation, by section 21(5) references to "accommodation" include references to "board and other services, amenities and requisites provided in connection with the accommodation except where in the opinion of the authority managing the premises their provision is unnecessary". It is uncontroversial that, under this provision, in appropriate circumstances a local authority may be required to provide care within the accommodation it is bound to provide.

iv) However, it is equally clear that section 21 provides a "safety net", in the sense that, if an individual is able to obtain services that would otherwise be covered by section 21 from elsewhere (e.g. under other statutory provisions), their provision under section 21 will be "unnecessary" and thus the local authority will not be obliged to provide those services under these provisions. In any event, section 21(8) (as amended, particularly by section 66(2) of the 1990 Act) makes the position clear. It specifically provides:

"Nothing in this section shall authorise or require a local authority to make any provision authorised or required to be made (whether by that or any other authority) by or under any enactment not contained in this Part of this Act or authorised or required to be provided under… the National Health Service (Wales) Act 2006."

v) The provision of assistance under section 21 is means-tested. A local authority has no duty to provide section 21 assistance for persons whose capital resources exceed a certain threshold, and may seek a contribution towards the costs of providing section 21 accommodation and care below that. According to income. Regulation 20A(2) and (3) of the National Assistance (Assessment of Resources) Regulations 1992 (SI 1992 No 2977) as amended provides that, in Wales, the capital resources threshold above which no local authority funding will be available is currently £24,000.

vi) Local authorities may make arrangements with private service providers to provide section 21 assistance (section 26 of the 1948 Act).

Care Homes: The Legal Framework

15. 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.
16. 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)).
17. 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."

18. 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."

19. 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]".

20. 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.
21. 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).

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

i) "Relevant authority" is defined in terms of an LHB.

ii) "Relevant premises" includes a care home in respect of which there is a registered person under the 2000 Act.

iii) "Nursing care" is nursing care by a registered nurse as defined in section 49(2) of the Health and Social Care Act 2001 ("the 2001 Act"). The LHBs say – in my view, entirely correctly – that the reference in paragraph 3(1) to providing nursing care "as appears to the [LHB] to be appropriate" is in substance merely a reference back to section 3(1) of the 2006 Act which requires the LHB to provide nursing services "to such extent as they consider necessary to meet all reasonable requirements" (see paragraphs 9-10 above), no more and no less (see Defendants' Detailed Grounds, paragraphs 21-22); although the use of the word "appropriate" underscores the breadth of the discretion that an LHB has in practice. I consider the definition of "nursing care" in the context of section 49 further below (paragraphs 25 and following).

23. 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.
24. 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.

Nursing Care

25. 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.
26. 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).
27. 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.
28. 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)):

i) Nursing care was not the sole responsibility of the NHS, but the relevant NHS decision-maker (in that case, the Secretary of State) can only decline to provide reasonably required nursing services if he forms a tenable judgment that it is not necessary to provide those services.

ii) Nursing care for the chronically sick may in appropriate cases be provided by the local authority as a social service, but only where the nursing services are (i) merely incidental or ancillary to the provision of the accommodation which a local authority is under a duty to provide under section 21, and (ii) of a nature which an authority whose primary responsibility is to provide social services can be expected to provide.

iii) The services required by Mrs Coughlan were not of such a nature. Her primary need was for health services (i.e. CHC), for which the NHS was responsible. The decision to close the home in which she lived was therefore taken on a false premise.

29. 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.
30. 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).
31. 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".

32. 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.
33. 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.

34. 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".
35. 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.
36. 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.
37. 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).
38. 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".
39. 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).

40. 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."

41. 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.
42. 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."

The Challenged Decisions

43. 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.
44. 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.
45. 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.
46. 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.
47. 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.
48. 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".
49. 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).
50. 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.

51. 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.
52. 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".
53. 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…".

54. 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.
55. 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…".

56. 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.
57. 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.
58. 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 receiving clinical 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."

59. 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.
60. 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.
61. 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.
62. 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".
63. 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).
64. 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.

65. 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.
66. 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.
67. 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.
68. 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):

i) With regard to stand-by time, Laing & Buisson said (at page 18):

"We argued that as the FNC legislation talks of 'nurse services' rather than time specifically, if this specific service is defined as 'providing overnight cover', then there is some merit in the argument that this time and related costs should be eligible to be considered to be covered within the FNC payment. However the time to be included, over and above specific nursing time spent, would only be the 'stand-by' time. To the extent that nurses on overnight shifts are actually providing personal/other social care support (as they are available, with spare capacity to do so, to avoid excessive overall time and cost for the home), then this would still not be eligible.

The argument for definitely including non-productive 'stand-by' time specifically within the FNC scope was not accepted by the FNC Review Group, during initial discussion. We therefore included an instruction to homes for this to be classified as 'any other time'…."

ii) With regard to the time nurses spent receiving clinical supervision, Laing & Buisson said (at page 19):

"The instructions requested that time which nurses spend receiving clinical supervision from the manager or clinical supervisor (other than that which relates to discussions about residents' care specifically) be recorded under ['any other time']. This is certainly essential time, over and above training, for the nurses to be able to undertake their roles effectively, so there is an argument for including it within nursing care time on these grounds, even if it only indirectly contributes to their support. " (emphasis in the original)

iii) With regard to breaks within shifts, Laing & Buisson said (at page 19):

"Arguably all paid time on breaks ought to be treated as part of nursing care."

Therefore, broadly, whilst not querying the exclusion of time spent on personal care, Laing & Buisson did raise some concerns over the exclusion of the time in the "Any other time" category. However, in respect of each of these sub-categories, Laing & Buisson followed the instruction of the FNC Review Group to exclude.

69. 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).
70. 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.
71. 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.
72. 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.
73. 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.
74. 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).
75. 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.
76. 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.
77. 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.
78. 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.
79. 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.
80. 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).

81. 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).
82. 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…".

83. 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."

84. CFW representatives continued to meet LHBs; but, as I have described, by November 2013 each LHB had approved the Peer Group's recommendation.
85. 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).

86. 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."

87. 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".
88. 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.

89. 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."

90. 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."

91. 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.
92. 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%.
93. 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.
94. 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.

Ground 1: The Scope of FNC

The Claimant's Case

95. As his first ground, Mr Purchase (supported by Mr Gordon) submitted that, in making the 2013 LHB Decisions with regard to the FNC rate (and therefore the 2014 LHB Decisions which were based upon that rate), the LHBs misunderstood and consequently misdirected themselves as to the scope of "nursing care by a registered nurse" in section 49, and thus the care for which they were liable which section 49 effectively defined.
96. The essential contentions were as follows.

i) Where an individual care home resident, who is entitled to section 21 assistance, requires both nursing care and other care, all of that resident's reasonable care requirements have to be met by either the relevant LHB or the relevant local authority, although there is a discretion as to how that provision is made.

ii) Section 49 draws the dividing line as to where the respective responsibilities lie, by prohibiting the local authority from providing (or arranging for any person to be provided with) "nursing care by a registered nurse". "Nursing care by a registered nurse" must be provided by the LHB. The rest of the resident's care requirements must be provided by the local authority.

iii) "Nursing care by a registered nurse" is a term of art defined in section 49(2), as:

"… 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."

iv) "Nursing care by a registered nurse" is thus defined primarily by reference to the status of the provider of the services as a registered nurse, rather than the tasks done, expressly including any and all services provided by a registered nurse other than those set out in the exception. That directly reflects the historical context (see paragraph 25 and following above). In particular, it reflects paragraph 2.11 of the United Kingdom Government's response to the Royal Commission Report (quoted above, at paragraph 31). Section 49 was promoted to deal with the mischief concerning care home nursing care costs identified by the Royal Commission, in the manner set out in the Government's response to that Report.

v) The fact that the draftsman did not simply say that local authorities were prohibited from providing any services that only a registered nurse could provide – rather providing for a general prohibition, subject to an exception – is informative. So is the use of the word "services", rather than (say) "tasks".

vi) The exception does not simply include any work of a registered nurse in a care home that, looked at as discrete tasks, might be performed by someone without the skills and experience of a registered nurse. It catches only 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".

vii) For services provided by a registered nurse in a care home, a vital circumstance is that a nurse is in practice required to be present and working at the home all of the time, because residents require the working presence of a registered nurse at all times to be available for any specific tasks for which only a nurse is competent, as and when such tasks might arise. That practical need is reflected in the requirement of the statutory scheme that a care home must have a registered nurse working on site at all times (regulation 18(3) of the 2002 Regulations). Therefore having a registered nurse present and working on site at all times must be a reasonable (and, indeed, necessary) nursing care requirement within the meaning of "nursing care by a registered nurse", for which the LHB is responsible.

viii) Thus, properly construed, "nursing care by a registered nurse" includes all of the services provided by any registered nurse whilst working as a registered nurse at a care home. The exception merely ensures that, in line with the intention of the legislation described above, the time of registered nurses with different roles within a care home – for example, the manager of some care homes is a registered nurse – are not paid for by the LHB.

97. However, if he were wrong and the LHBs were right to consider the definition of "nursing care by a registered nurse" in section 49 to be task-based, Mr Purchase submitted in the alternative that the LHBs' application of that basis in this case was wrong: they ought not to have excluded all (or, indeed, any) of the categories of time they did in fact exclude. In relation to the relevant categories, he made the following submissions.

i) Stand-by time: Regulation 18(3) of the 2002 Regulations, reflecting the actual nursing requirements of residents, requires a registered nurse to be present and working on site at a care home at all times. Being on stand-by, awaiting any requirement for a task which only a registered nurse can perform, is itself a service which only a registered nurse can perform.

ii) Time receiving clinical supervision: He submitted that, even if the receipt of clinical supervision is not referable to a specific clinical intervention with a resident, it is intrinsic to the provision of nursing care by a registered nurse. By definition, it requires the involvement of the relevant registered nurse.

iii) Breaks: Although the Working Time Regulations 1998 (SI 1998 No 1833) do not require employers to pay for breaks, (a) over a shift, it is necessary for nurses to have breaks to ensure a proper standard of service is maintained; (b) the evidence before me was that NHS nurses are entitled to a 10 minute paid break per 6 hour shift, any additional time taken being unpaid (paragraph 46 of Miss Warner's Statement); and (iii) the evidence appears to establish that care homes do pay for breaks (ibid) and, certainly, there is no evidence that they do not.

iv) Personal care: Both Mr Purchase and Mr Gordon emphasised the practical difficulties of separating out tasks that are properly personal care rather than nursing care. For example, taking a resident to the toilet or giving him or her a drink gives a nurse an opportunity to assess that resident's medical condition and to build up a relationship with that resident which is crucial and intrinsic to the nurse's job. Whilst a nurse might deliberately manufacture such an opportunity, the opportunity also might arise during the course of the nurse performing a task that would otherwise be simple personal care; and so the allocation of such time involves difficult judgments and can only be made retrospectively. However, leaving that aside, (a) the Defendants' evidence before me accepts that, if a nurse, in the course of specific interventions or otherwise, comes across a resident who needs personal care assistance (e.g. to have a drink, or go to the toilet), that nurse should provide that assistance (paragraph 25 of Miss Warner's statement; the Claimants' evidence is to the same effect, see, e.g., paragraph 11 of the statement of Alexandra Kelleher, the Director of Nursing at the Summerhill Group); and (b) if the nurse were not to provide that assistance, leaving the task to a care assistant, that nurse time would fall into another category (e.g stand-by time) which would itself likely fall within nursing hours in any event.

Thus, Mr Purchase submitted that, even if the LHB's own approach of breaking down a nurse's time is appropriate, the categories they used excluded time that ought to have been included in "nursing care by a registered nurse".

The LHBs' Response

98. The response of the LHBs to the primary argument in Ground 1 is found in paragraph 4(b) of Miss Morris's skeleton. She submitted that the Claimants' focus on section 49 – and the definition of "nursing care by a registered nurse" – is misconceived, because that is not determinative of the obligations of the LHBs. The LHBs provide NHS services under section 3 of the 2006 Act, which gives them a broad discretion as to the services they consider reasonable or appropriate to provide. A decision as to the nursing services to provide is a matter of judgment, involving a myriad of technical, medical and economic factors, which Parliament has assigned to the LHBs through the Welsh Ministers. Such a decision is one which is subject only to the Wednesbury unreasonableness test, i.e. the court should only interfere with the decision if it falls outside the wide boundaries of the decision-maker's discretion. That broad discretion, in effect, overrides whatever section 49 might mean or require. Miss Morris went so far as to say that, even if the LHBs' interpretation of section 49 is incorrect, that would not vitiate the 2013 LHB Decisions or the 2014 LHB Decisions based upon them.
99. But, she says, the LHBs' interpretation of section 49 is not wrong. The use of the word "services" (in the plural) strongly suggests that the draftsman did not mean to cover just the single nurse service of being present at the care home; but that each task is considered a separate "service" that the nurse provides. The exception in section 49 excludes from the statutory local authority prohibition services which "do not need to be provided by a registered nurse", i.e. each and every task that could be performed by someone without the skill and experience of a registered nurse. The Claimants' interpretation effectively denudes that last part of section 49(2) of any meaning or purpose: because, given that last clause in that section (which must be given some meaning), on the true construction of section 49 as a whole, local authorities are only prohibited from providing or paying for those tasks performed by a registered nurse that no other person can perform, because they require a person with the skills and experience of a registered nurse. Thus the LHBs were correct in identifying (as well as they could) the tasks performed by registered nurses in care homes that could only be performed by them, and then calculating the FNC as the costs of that time at a reasonable rate – indeed, section 49 positively required them to do so.
100. Further, in the skeleton argument (from paragraph 43 onwards), she submitted that each of the categories of time which had been excluded was properly excluded, the decision in respect of each being within the bounds of legal reasonableness.
101. These submissions therefore focused on the broad discretion given to an LHB by section 3(1) of the 2006 Act to determine the services it will provide, free of charge, under the NHS. A decision as to the services it will provide will be amenable to challenge only if it strays beyond the boundaries of legitimate decision-making. It is implicit in the submission – and, during the course of debate, expressly accepted by Miss Morris – that other authorities might, properly and lawfully, have drawn the line in a different position, e.g. they might have included some of the tasks and time that the LHBs here excluded. But, she submitted, the LHBs' decisions took into account all material factors (including the limited nature of available NHS Wales resources), and its decision as to the tasks and time to be included is unimpeachable in law, falling within the broad acceptable boundaries of legitimate decision-making.

The LHBs' Concessions

102. Thus were the lines of argument drawn.
103. However, in the course of the hearing, after considering the oral submissions of Mr Purchase and Mr Gordon and after taking specific instructions on the point, Miss Morris on behalf of the LHBs conceded that, in calculating "nursing care by a registered nurse" within the meaning of section 49, the LHBs erred in law in excluding stand-by time. As, for the 2013 LHB Decisions, each LHB adopted an FNC rate on the basis of the nursing time within the meaning of section 49 as construed by the FNC Review Group and calculated by Laing & Buisson – and the amount of time and money involved in respect of stand-by time is far from negligible – it seems to me that that concession alone would inevitably make the 2013 LHB Decisions (and the 2014 LHB Decisions, which were based upon those earlier decisions) materially wrong, and prima facie unlawful. Indeed, in her submissions, Miss Morris conceded that too.
104. But the concession concerning stand-by time was part of a broader raft of concessions which, upon being pressed further, the LHBs made during the course of Miss Morris' submissions. Miss Morris conceded that having a registered nurse working on site at all times as specifically required by regulation 18(3) of the 2002 Regulations is a reasonable requirement for "nursing care", that particular requirement of course only being capable of being fulfilled, by definition, by a registered nurse. Miss Morris also conceded that, as this service fell within "nursing care by a registered nurse", NHS Wales (through the LHBs) were responsible for providing that service. She did not seek to argue that the LHBs had a residual discretion to avoid responsibility for that care. However, she made no concession other than in respect of a single nurse working on site at all times, as required by regulation 18(3).
105. In my respectful view, those concessions were well made; and, indeed, inevitable, given the terms of regulation 18(3) of the 2002 Regulations.
106. Following those concessions, Miss Morris realigned the focus of her submissions from the services which fell within the LHB's responsibility to provide, to the cost in terms of price the LHBs should pay for the provision, in respect of which (she submitted) the LHBs had a substantial discretion. This was emphasised again in paragraph 7 of the written submissions dated 3 March 2015 which Miss Morris lodged after the hearing. In assessing how much it would be reasonable to pay for FNC, she submitted that the LHBs could properly take into account the way in which the providers' businesses are run and the businesses' other sources of income. In particular, they could take into account the fact that the local authorities did in fact bear the costs of registered nurses' time when they (for example) provided personal care, because all personal care costs were borne by those authorities. The LHBs were entitled to reduce the FNC rate to take into account that fact, to avoid care home providers being paid twice for the same nurse time. This, she submitted, justified the exclusion of those elements of registered nurses' work from the FNC assessment.

Discussion

107. Miss Morris's submissions were put boldly and lucidly; but I cannot accept the proposition that is their main foundation. In my judgment, the services that LHBs are required to provide by way of FNC are effectively defined by section 49.
108. The use of the plural ("services") is, in my view, of no moment: as Mr Purchase submitted, as a matter of interpretation, the plural includes the singular, and section 49 covers all residential care, including care in an individual's own home where successive visits may better be described as "services" rather a "service".
109. More substantively, the section defines the services which local authorities are prohibited from providing; and, as the LHBs accept, if local authorities and LHBs act properly, all reasonable care requirements of care home residents who have the benefit of section 21 assistance must be met by either one or the other (i.e. there can no funding gap). Therefore, the care services that section 49 prohibits local authorities from providing must be provided by the relevant LHB. Section 49 requires a line to be drawn, and that line is not subject to some general discretion in the relevant LHB: as Mr Gordon submitted, the care services which a local authority is required to pay for cannot be dependent upon the exercise of such a discretion, one way or the other. Indeed, following Coughlan, it is clear that section 49 was designed to avoid such discretion. There is a discretion as to how they provide the relevant services; but that is a different question, to which I shall return when I deal with Miss Morris's post-concessions submissions.
110. There can be no doubt that the section was intended to alter the relevant responsibilities of LHBs and local authorities, by drawing a line between them in a place different from that which had applied before. That is apparent from the wording of section 49 – even more clearly so when that provision is considered in the context of the already extant section 21(8) of the 1948 Act (quoted at paragraph 14(iv) above) – but made clear beyond peradventure when considered in the historical context and the mischief that Parliament sought to address by it, i.e. the anomaly and unfairness of care home residents (and, where the relevant financial threshold was met, local authorities on their behalf under section 21) having to bear the costs of "nursing care by a registered nurse" as particularly defined in section 49(2). For LHBs to use the general discretion under section 3(1) of the 2006 Act intending to defeat – or merely inconsistently with – the clear specific intention of both the United Kingdom Parliament (which enacted the 2006 Act) and the Welsh Government (which adopted the same definition in the 2004 Directions) with regard to LHBs' responsibilities for nursing care would be a clear abuse of power. The cases of Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1 and Crédit Suisse v Allerdale Borough Council [1997] QB 306, to which Mr Gordon referred, whilst very different on their facts, are helpfully illustrative of the general principle that an overriding discretion cannot be used to bypass the particular requirements of a comprehensive statutory scheme.
111. However, there is here, in my respectful view, in any event a mismatch between Miss Morris's submissions and what the LHBs actually did in this case; because the LHBs did not (as Miss Morris's submission suggests) use their broad power under section 3 of the 2006 Act to determine the services they were going to provide by in some way overriding section 49. Far from it. As I have described, the FNC Review Group had section 49 well in mind; and they did regard it as definitional in respect of the services that the LHBs were required to provide. Had they used the general discretion of section 3 to override the requirement to provide nursing services by a registered nurse as a result of section 49, the LHBs would have erred in law. But, clearly, they did not do so.
112. Rather, the issue is one of statutory construction, namely whether, in defining the services they had to provide as a result of section 49, the LHBs erred in adopting a task-based approach and restricting the "services" to the tasks which only a registered nurse could perform because of the skills and experience required. In my judgment, they did err, much for the reasons relied upon by Mr Purchase and Mr Gordon.
113. In this regard, Miss Morris's concessions are noteworthy: indeed, in my view, they are fatal to her argument. She conceded – rightly – that the provision of a nurse working at a care home at all times was a reasonably necessary requirement for "nursing care by a registered nurse" for which the LHBs were responsible. Mr Gordon submitted, with force, that such a concession effectively conceded that the statutory interpretation of section 49 for which he and Mr Purchase contended was correct; and that the LHBs are thus responsible for providing/paying for all of the time of registered nurses working as such in a care home.
114. However, whilst Miss Morris consequently conceded that the LHBs were responsible for any nurse stand-by time, she did not concede that the LHBs were responsible for the costs of all registered nurse time; because (she submitted):

i) The LHBs have a discretion as to how to provide for relevant services, including the provision of a registered nurse in a care home at all times. That includes a discretion as to what should be paid, as a reasonable amount, for the services.

ii) In assessing the reasonable price for that provision, the LHBs can properly have regard to the fact that local authorities are funding the totality of personal care. Where a registered nurse, whilst being available for nursing care, in fact provides personal care, she is dual tasking. If LHBs were to pay for the nurse being available for nursing when she was in fact involved in personal care tasks, the care home providers would recover her costs twice over, because they would receive both (i) the costs of the nurse for being available as a registered nurse (from the relevant LHB), and (b) the costs of the nurse for providing personal care (from the relevant local authority). The LHBs are therefore entitled to take into account the fact that the care home providers will receive payment from the local authority for the time a nurse spends delivering personal care; and reduce the payments they make to the providers for FNC accordingly.

115. However, in my view, that submission is flawed in fact and in law.
116. In respect of the facts, there is again a mismatch of the submission with the evidence.
117. First, the FNC Review Group (and, in their turn, the LHBs themselves) did not approach the FNC calculation in this way. They did not consider the services they were bound to provide, find them to include the provision of a working registered nurse at all times, but then conclude that a reasonable price to pay for those services could properly reflect money being obtained by providers from local authorities for personal care services provided at the same time. Their approach was dictated by the care which they considered fell within the section 49 local authority prohibition, not a wish to avoid double recovery by the care home providers. Such an aim never entered the equation. Indeed, entirely contrary to the proposition that they took into account the contribution local authorities were making towards this time, the FNC Review Group and LHBs worked on the basis that no or no sufficient contribution was in fact being made, so that there would be a potential funding gap.
118. Furthermore, the evidence of the local authorities before me was to the effect that the authorities calculate appropriate section 21 payments, not on a task-basis (i.e. for hours of personal care etc), but on the basis of personnel employed; and none of the authorities in fact pay for any of the costs of registered nurses employed as such in nursing homes (see paragraph 8 of and Annex A to the statement of Megan Walters dated 23 December 2014: Ms Walters is the Service Manager in the Finance Division of the Social Services Department of Ceredigion County Council, who collated the local authorities' responses to this claim).
119. Ms Walters (at paragraph 10) accepts that there is some double-counting; but only in respect of the time of care home managers who are registered nurses and who may from time-to-time provide direct and/or indirect nursing services (which, under the approach adopted by the LHBs in setting the FNC rate, would also be paid for by the LHBs). During the course of debate, Mr Gordon accepted that there was some such double payment – i.e. the LHB and the local authority each in effect paid for the same registered nurse time – on this basis. The evidence before me as to the extent of such overpayment is inconclusive. Mr Gordon, on instructions, suggested that such managers only performed nursing care on an emergency and infrequent basis. The note of 3 March 2015 prepared by Miss Morris on instructions from her LHB clients suggests that managers sometimes act as the registered nurse on site at night on more than an emergency basis, but nevertheless relatively rarely. The Laing & Buisson report suggests that it is sufficient to raise the average rate per FNC nursing care hour rate (see paragraph 69 above), as I understand their report by the equivalent of £4.35 per week. .
120. However, it does appear clear (a) such double payment/recovery should not occur, because if the LHB pays for registered nurse services then the local authority should not be (indeed, is prohibited from) paying for them; (b) in determining the FNC rate, the LHBs failed to take into account (or, apparently, appreciate) that the local authorities paid the whole costs of registered nurse managers; and (c) in determining the section 21 rate, the local authorities failed to take into account (or, apparently, appreciate) that the LHBs paid for the tasks performed by registered nurse managers when performing direct or indirect nursing services as defined by the FNC Review Group. Given the Welsh Ministers' exhortations to LHBs, local authorities and providers to "extend the partnership approach to their responsibilities for the provision of care" and "work closely together" (paragraphs 4 and 6 of the 2004 Circular: see paragraphs 38-41 above), (b) and (c) are, to say the least, disappointing. The 2004 Directions and paragraph 27 of the 2004 Circular impose the "lead responsibility" for the implementation of FNC arrangements upon the LHBs (again, see paragraphs 39 and 41 above). There is no suggestion before me that the providers have contributed in any way to the situation in which they are being paid twice for providing some registered nurse time; and it is no answer that they might not be paid at all for other registered nurse time for which they should properly be paid.
121. I consider Miss Morris's submissions also flawed as a matter of law.
122. The power of local authorities under section 21 is residual: section 21(8) (quoted at paragraph 14(iv) above) makes clear that section 21 does not give a local authority any power to make any provision "authorised or required to be provided under [the 2006 Act]". As the LHBs now accept, because of section 49 and regulation 18(3) of the 2002 Regulations, LHBs are required to provide a registered nurse on site at all times. As Mr Gordon submitted, for an LHB not to pay the full reasonable costs of that provision (because the local authority in fact essentially makes a contribution to those costs), effectively subverts the whole statutory scheme. Under that scheme, the LHB is the primary decision-maker, the local authority only being responsible for any services not provided by the LHB or other agencies. The fact that, by the LHB providing the service they are required to provide, the local authorities may obtain a benefit in terms of their not having to pay for services that they would otherwise have to pay for, is simply not to the point. It is not properly regarded as a "windfall" for them. The transfer of funds from local government to NHS Wales upon the introduction of section 49 (see paragraph 37 above) appears, rightly, to have been based on the premise that the NHS (later, in the form of the LHBs) would bear the costs of a registered nurse on site at all times: certainly, the Laing toolkit (which was used to assess or check the rate until the FNC Review Group's deliberations (see paragraph 46 above)) was based upon that premise; indeed, it was based upon having one registered nurse on site per 28 residents.

Conclusion

123. Miss Morris submitted, correctly, that an LHB provides nursing services to a care home resident pursuant to section 3 of the 2006 Act. That imposes a duty on the LHB (through the Welsh Ministers) to meet reasonably required nursing care needs. As Coughlan emphasised (see paragraph 28(i) above), an LHB can only refuse to meet such needs if it comes to a tenable judgment that it is not necessary to do so. Because of regulation 18(3) of the 2002 Regulations and the recognition by the Defendants of such needs in fact, Miss Morris accepted, rightly, that an LHB could not properly have concluded that it was not necessary to meet care home residents' needs to have a registered nurse on site at all times, to deal with specific nursing and medical requirements that might arise from time-to-time. To meet such needs was necessary. They could only be met by having a registered nurse working on site at all times. The relevant LHB is responsible for providing (and, if provided by the care home itself, paying for) such a nurse. That responsibility is not diminished simply because the nurse may not be performing all of the time specific tasks which only a registered nurse can perform.
124. I appreciate that some registered nurse time may be used in caring for CHC residents and, of course, any FNC rate calculation has to avoid double counting; but that does not affect the principle that the relevant LHB must pay the costs of registered nurses working as such in a care home, one way or another. None of their costs should fall on residents themselves or, because of their section 21 responsibilities, on the relevant local authority in the shoes of residents.
125. Where the reasonable needs of residents are such that more than one registered nurse is required to satisfy them, again the relevant LHB cannot properly conclude that it is not necessary to provide those additional services. They are required both in practice, and as a result of regulation 18(1)(a) of the 2002 Regulations; and the relevant LHB will be liable to pay for the whole of those additional nurses' services and thus time. However, they will be liable only where, and insofar as, it is necessary to have more than one registered nurse working on site. If it is not necessary, then the LHB does not have to provide them under section 3 of the 2006 Act: and they fall within the exception in section 49, because any services provided by such a nurse "having regard to their nature and the circumstances in which they are provided, do not need to be provided by a registered nurse". If and the extent to which such additional nurse services and thus time are necessary are essentially matters of judgment for the LHB.
126. In restricting the services which section 49 prohibits local authorities from providing to those individual tasks which, by virtue of her expertise and experience, only a registered nurse can perform, the approach of the FNC Review Group was therefore fundamentally flawed. The Peer Group recommendation for realigning the FNC rate adopted that approach; as did the LHBs individually when making their respective 2013 LHB Decisions. Whether they simply adopted the approach and the Laing & Buisson conclusion (as appears to have been the case), or merely relied upon the Laing & Buisson findings (that were themselves based on that approach) as a material consideration, does not matter so far as the lawfulness of the resulting decisions is concerned. On either basis, each of the 2013 LHB Decisions is unlawful. The 2014 LHB Decisions were made on the basis of the same approach and findings. Therefore, each of those decisions too is unlawful.
127. For those reasons, Ground 1 succeeds.
128. Ground 1 turns entirely upon statutory interpretation. However, although not relevant to that, the following matters give me comfort in my conclusion.

i) Miss Morris submitted that the sort of exercise performed by Laing & Buisson was necessary for the proper working of the statutory scheme. Both Mr Purchase and Mr Gordon emphasised the practical difficulties of such an exercise – as the FNC Review Group and Laing & Buisson themselves acknowledged. The proper interpretation does not require such an exercise.

ii) The Laing toolkit – used to calculate or check the FNC rate prior to the FNC Review Group review – calculated the FNC on the basis that all registered nurse working time in a care home should be included (see paragraph 46 above).

iii) Although I did not have specific evidence as to the position in England (where, broadly, the same statutory scheme applies), the FNC Review Group meeting note of 12 June 2013 suggests that, in England, FNC is calculated on the basis of all registered nurse working time.

iv) Miss Morris relied upon various extracts from Hansard. I do not regard it necessary to resort to Hansard, because I do not consider the construction of section 49 to be ambiguous, obscure or such as to lead to absurdity, nor do I consider most of the statements in Hansard to which I was referred to be unambiguous. However, it comes as some comfort that in the course of the Standing Committee E consideration of what became section 49, in respect of "nursing care by a registered nurse, the Minister Presenting the Bill (John Hutton MP) said, unequivocally (Hansard Standing Committee E, 6 February 2001, cols 431-432):

"Our definition is wider, not narrower, and goes beyond the definition proposed by the minority report by the two Commissioners who signed it, in that it provides a more expansive definition of what nursing care involves….

Our definition is not task-based."

129. My findings in relation to Ground 1 make it unnecessary to consider whether the LHBs acted unlawfully in any other way, notably on the basis of either of the other grounds – and inappropriate to do so because the criticisms in Grounds 2 and 3 are procedural, and my findings on Ground 1 has swept away the entire substantive basis for the challenged decisions.
130. However, in deference to the arguments made in respect of the other two grounds, it is right that I say something about them, albeit relatively briefly.

Ground 2: The Failure to Engage in Discussions with regard to the FNC Rate

131. Mr Purchase rightly accepted that the LHBs had no statutory obligation to consult with local authorities or care home providers about the proposed FNC rate in 2013. Further, there is no general common law duty to consult persons who may be affected by a measure before it is adopted (R (BAPIO Action Limited) v Secretary of State for the Home Department [2007] EWCA Civ 1139 at [43]-[47] per Sedley LJ; and R (Moseley) v Haringey London Borough Council [2014] UKSC 56 ("Moseley") at [35] per Lord Reed JSC): a duty to consult can only arise if the common law demands it, and then in circumscribed circumstances (e.g. if a failure to consult would give rise to conspicuous unfairness: see paragraphs 140 and following below, in relation to Ground 3).
132. Mr Purchase does not contend that any duty to consult the Claimants or other care home providers arose in relation to the 2013 LHB Decisions; and he expressly renounced reliance upon any inadequate engagement by the LHBs with the Claimants on the means by which the LHBs intended to ascertain the costs of care; as I have described above (paragraphs 61 and following), the Claimants, through CFW, were fully engaged.
133. However, he submitted that the LHBs had a duty to engage with local authorities and care home providers to resolve issues such as those arising in this case, notably to ensure that there was "no gap between local authority and NHS provision", such an obligation arising from (i) the 2004 Circular and/or (ii) the common law. With regard to the 2004 Circular (see paragraph 39 above), he submitted that the LHBs failure to engage was an unlawful departure from that guidance, without the LHBs giving any reason for such a departure. With regard to the common law, he submitted that (i) the assurances given by the LHBs in 2013 gave rise to a legitimate expectation that there would be such engagement or (ii) without such engagement the Claimants suffered conspicuous procedural unfairness. In particular, in respect of all of these bases of claim, Mr Purchase relied upon the LHBs' failure to have any significant engagement with the local authorities concerning the funding gap.
134. In the light of my findings on Ground 1, this ground has become empty. It is now common ground between all parties that, if the LHBs and local authorities act properly, then there is – can be – no funding gap. The LHBs must, first, properly identify the "nursing care by a registered nurse", and they must provide that, by paying the care home a reasonable amount for that provision. The relevant local authority is bound to provide all other care services a care home resident reasonably requires, by paying the care home a reasonable amount for that provision. For the reasons I have given, the LHBs did not properly identify the nursing care for which they were required to pay when making their FNC rate decisions. They substantively misconstrued and thus misapplied the relevant provisions of the statutory scheme. Had they identified the nursing care for which they were responsible properly, there is no suggestion that the local authorities would not have borne the costs of the balance of care services, as they are legally required to do. Consequently, this is not a "failure to consult" or "failure to engage" case, in that the LHBs' legal error was substantive and not procedural. In the light of my Ground 1 findings, Ground 2 has become empty, because it complains of a procedural failure to engage on something (i.e. the funding gap) which could not occur if the LHBs had in fact construed the relevant statutory scheme properly.
135. However, Mr Purchase referred to two matters which, even if not now forming the basis of an extant ground of challenge, are of concern.
136. First, he submitted that, despite the exhortations of the Welsh Government that the LHBs and local authorities work together in respect of care home care costs, the evidence revealed a general lack of mutual interest, cooperation and engagement. For example, paragraph 56 of the statement of Ms Warner (who, it will be recalled, is the Clinical Board Nurse, Primary Community Immediate Care for the Clinical Board at Cardiff & Vale University Health Board) states:

"In my experience, local authorities are not very interested in FNC and, similarly, the Health Board is less interested in the local authorities' rates."

This appears to be inconsistent with the Welsh Government's patent desire for the two types of public authority (LHBs and local authorities) to work closely together in this field, in which they have interlocking and complementary responsibilities. In this case, there is little evidence of such close working together.

137. Second (and, Mr Purchase submitted, a result of the failure to engage to which I have just alluded), it is unfortunate that, despite their work in respect of setting the FNC rate (which was, on any view, considerable), the LHBs did not accept that they were responsible for registered nurse stand-by time (and, indeed, for at least one registered nurse being on site at a care home at all times) until the third day of the substantive hearing for judicial review. Indeed, it seems that, in setting the FNC rates that they did, the LHBs not only misunderstood the requirements of the statutory scheme as to the services they (the LHBs) are required to provide/pay for, but also misunderstood the services for which local authorities in fact provided/paid for. Mr Purchase submitted that that evidenced a failure on the part of the LHBs to engage properly with the local authorities, as they were required to do by (especially) the 2004 Circular. Without being required to rule on that, it certainly suggests that the engagement between the two sets of public authorities was less than optimal.

Ground 3: The Inflationary Uplift Mechanism

138. Again, in the light of my findings on Ground I, I can deal with this final ground relatively briefly.
139. The FNC base rate was fixed by the 2013 LHB Decisions. By the 2014 LHB Decisions, that rate was subject to an annual uplift for 2014-15 and the following four years. Mr Purchase submitted that that the LHBs erred in (i) failing to consult and/or engage in discussions with the care home providers with regard to this means of annual review, and (ii) linking that uplift to the annual increase, if any, in the pay of the lowest grade of nurse employed by the NHS.
140. The nature of a public authority's duty to consult (and, in particular, the relationship between that duty and public law fairness) has recently been considered in two cases, namely by the Supreme Court in Moseley at [23] and following per Lord Wilson JSC and, especially, at [34]-[41] of the judgment of Lord Reed JSC with which Baroness Hale DPSC and Lord Clarke JSC expressly agreed (at [44]), and by the Divisional Court in the proceedings concerning the remains of Richard III (R (Plantagenet Alliance Limited) v Secretary of State for Justice and Others [2014] EWHC 1662 (Admin) ("the Richard III case") at [83]-[98]). These cases emphasise that there is no general duty on a public body to consult, that duty arising only (i) by reason of statutory provision (including, of course, that imposed in statutory guidance), and (ii) if common law fairness requires it, i.e. if there has been a promise or established practice to consult, or where a failure to consult would result in conspicuous unfairness. However, if and howsoever the obligation to consult arises, the full panoply of the well-known Gunning requirements apply, i.e. the requirements set out by Stephen Sedley QC in R v Brent London Borough ex parte Gunning (1985) 84 LGR 168, approved in that case by Hodgson J, and specifically endorsed in innumerable cases thereafter including the Court of Appeal in Coughlan at [112] and the Supreme Court in Moseley at [25].
141. In this case, Mr Purchase submitted that the LHBs owed a duty to the Claimants as care home providers to consult on the proposed IUM, because (i) the 2004 Circular required such consultation, and (ii) the absence of consultation resulted in conspicuous unfairness to the Claimants as care home providers.
142. With regard to the 2004 Circular, he relied upon the direction in paragraph 6 requiring LHBs to "work closely with key stakeholders", including care home providers (quoted at paragraph 40 above). However, this does not refer to "consultation". A duty to consult may arise from statutory provisions that do not include the word "consultation" (see, e.g., R (Breckland District Council) v Electoral Commission [2009] EWCA Civ 239 in which the statutory scheme obliged the Commission to inform persons interested of any draft proposals and take into account any representations they made). However:

i) Generally, the Welsh Ministers favour continuous engagement rather than formal consultation (see, e.g., "Guidance for Engagement and Consultation on Changes to Health Services" issued by the Welsh Ministers, reflected to a considerable extent in the 2004 Circular).

ii) Where formal consultation is required, the statutory regime makes specific provision for it (e.g. section 183 of the 2006 Act requires a LHB to consult persons to whom services are provided in respect of planning and changes to those service; and regulation 27 of the Community Health Councils (Constitution, Membership and Procedures) (Wales) Regulations 2010 (SI 2010 No W37) (made under section 182(4) of, and Schedule 10 to, the 2006 Act) requires an LHB to consult its Community Health Council in respect of relevant matters). In paragraph 6 of the 2004 Circular, the Welsh Government steered clear of the concept of "consultation". It has to be assumed that that was deliberate.

143. The courts will be slow to add to the burden of consultation which the relevant democratically elected or otherwise accountable body has decided to impose (see, e.g., the Richard III case at [98]). In my judgment, although paragraph 6 of the 2004 Circular is in the form of a direction, rather than mere guidance, it does not impose an obligation to consult. It imposes an obligation to "work closely together", which is a far more nebulous and ill-defined concept.
144. With regard to a common law obligation, Mr Purchase accepted that, in relation to the IUM, there was no representation or established practice that would have obliged the LHBs to consult. However, he submitted that, in all the circumstances, it was conspicuously unfair to the Claimants as care home providers not to have consulted them. Those circumstances included:

i) Paragraph 45 of the 2004 Circular requires annual reviews of the FNC rate (see paragraph 42 above). Annual reviews were avoided by tying the rate to inflation. The IUM thus departed from this guidance. However, an "annual review" is, in my view, capable of including a review each year on the basis of pre-determined criteria. It does not necessarily require the sort of full survey performed by Laing & Buisson. However, I return to this point below.

ii) The fact that the decision has direct impact upon the existing private contractual interests of the providers, affecting the price they are paid for caring for residents already in their care for a substantial period, namely five years. However, Moseley makes clear that a public authority does not have a duty to consult simply because its decision will affect private interests; and, here, the only issue is how much to pay for identified services (in respect of which the LHBs have considerable discretion). The IUM was designed merely to fix the rate at which identified services were to be provided for a fixed period. At its highest, it was to confer a commercial benefit upon care home providers, not remove or derogate from a right or interest.

iii) The evidence is that the LHBs did not have adequate information to make a decision. The Equality Impact Assessment dated 16 July 2013 suggested that there was further work to be done to understand the market and the business impact of models being considered. In paragraph 18 of her statement dated 23 December 2014, Ms Warner accepted that the LHBs generally do not have information from the providers in respect of the differentials of nurse pay between the NHS and private market. In fact, there is evidence that the inflationary pressure on the pay of care home nurses is greater than that on NHS nurse pay (see below). However, it was for the LHBs to determine whether they did have sufficient information about such matters to enable them to make an informed decision, and their discretion as to that matter was broad. In this case, in my judgment, there is no proper basis for the contention that the LHBs were under a duty to consult properly to acquaint themselves with information concerning the private market for nurses as submitted by Mr Purchase (relying on Secretary of State for Education and Science v Tameside Metropolitan Borough Council [1977] AC 1014 and R v Secretary of State for Education ex parte London Borough of Southwark [1995] ELR 308). Furthermore, prior to these proceedings, when CFW made representations about inflation, they were not on the basis that inflationary pressures were greater in the private market than in the NHS (see, e.g., the 19 June 2012 submission). In my view, the LHBs were entitled to conclude that they had sufficient information before them as to the likely inflationary pressures and that these were closely aligned to such pressures in the NHS.

iv) The decision did not take into account the fact that NHS Wales had substantially increased the number of nurses it employed, which would inevitably have had an adverse impact on care homes' ability to recruit and keep nurses at the same level of pay. But, again, it was for the LHBs to assess the nature of the market, and for it to determine whether it had sufficient information to make an informed decision. I am not convinced that they erred in law in deciding they had sufficient information to make such a decision.

v) Although the LHBs did not consult on the issue, they took a handful of random soundings, without full information, which compounded the sense of unfairness. Taking a random sample is of course not consultation; but I do not understand how it could compound any unfairness.

145. I am not greatly impressed by the submission on the basis of those factors. I deal with the substantive issue of whether the IUM was legally rational below; but I would have found it difficult to conclude that the Claimants had suffered conspicuous unfairness by a failure to consult, on the basis of these elements alone.
146. There is one further factor upon which Mr Purchase relied, namely that the recommendation of the Peer Group was purportedly made on the basis that it was in the best interests of all parties, including the providers, when it was not. What the May 2014 report for the Peer Group in fact said was this:

"It was… agreed by the [LHBs] that it would be in the best interest of all parties in the Care Home Sector to find an acceptable mechanism to ensure that the weekly rate is maintained at an acceptable level over the medium term, rather than repeat this exercise on an annual basis."

Therefore, the IUM was adopted as an uplift mechanism for five years, because (as I understand it) it was considered that it would be disproportionate for the exercise in which the FNC Review Group and Laing & Buisson had engaged to be conducted every year. However, as I have explained, that exercise was misdirected. Whether the FNC Review Group and Peer Group would recommend, and the LHBs adopt, a similar mechanism if the FNC rate had been ascertained by a different, lawful process can only be speculation.

147. Therefore, whilst the failure of the LHBs to mention to the care home providers its intention to adopt an IUM appears odd when set against the backcloth of very considerable communication and discussion between them on how the FNC rate should be set in 2013, the procedural sub-ground in Ground 3 has also become empty as a result of my findings in respect of Ground 1; because it concerns a mechanism for future years adopted by the LHBs only on the basis that the procedure for determining the base rate FNC was appropriate. As I have found in Ground 1, it was not appropriate.
148. With regard to the substantive sub-ground, whether a mechanism will be unlawful will depend upon all the circumstances of a particular case. In this case, the base rate upon which it applies is unlawful, which necessarily makes consideration of the IUM proposed – it has never been effected – hypothetical.
149. However, as I have explained, the Laing toolkit adopted an hourly rate of a grade 5 NHS nurse as applicable across the board to nurses working in care homes (paragraph 46 above). An inflation uplift was adopted by the LHBs from 2007 to 2013, the rate applied being the percentage rise applied by the Welsh Government to the whole of the NHS Wales budget (see paragraph 47 above). As I understand it (from Miss Morris's written submission dated 3 March 2015), the FNC rate in England is uplifted by a percentage increase every year. On the evidence before me, had I been required to do so, I would have found it difficult to find that a percentage increase mechanism would of itself, in all circumstances, be unlawful.
150. Nor would it have been any easier to have found that a percentage increase linked to the yearly award to grade 5 nurses would of itself, in all circumstances, be unlawful. Mr Purchase relied on evidence that the wages of care home nurses are considerably lower than for nurses in NHS Wales, and they are subject to different economic pressures. There is evidence that, whilst the wages of NHS nurses have not increased at all, the wages of care home nurses have risen very substantially over the last few years, possibly as a result of the additional call for nurses NHS Wales has made. However, prior to these proceedings, CFW representations were apparently made on the basis that inflationary pressures were no greater in the private market than in the NHS; and previous uplifts were based upon a comparison with inflation within NHS Wales.
151. Therefore, had I been required to do so, on the evidence before me and in the circumstances of this case, I would have been slow to find that the inflationary pressures upon the salaries of nurses in private care homes bear no relationship at all with the salaries of NHS nurses, or no sufficient relationship so that the link proposed in the IUM would have been legally irrational or otherwise unlawful. Given the hypothetical nature of the issue, it would not be appropriate to say anything further than that.

Conclusion

152. For the reasons set out above in relation to Ground 1, each of the 2014 LHB Decisions is unlawful; and I order that they be quashed.