A judge has ordered a council to rethink its decision to freeze fees to residential care providers.
Sefton Council was told it had failed to pay due regard to the true costs of providing care, had failed to carry out "meaingful consultation" and was ordered to "reconsider" its decision to take into account the true costs of care.
At the High Court in Manchester, Judge Philip Raynor, said the council had failed to demonstrate the fees would allow providers to meet assessed care needs or provide residents with the level of care services they could reasonably expect.
Nor was it appropriate, he said, for Sefton to have benchmarked itself against the fee levels of neighbouring authorities.
The judge added that the council had failed to carry out a study of the links between costs and quality and that it was invalidating its own risk assessments by setting fees below the true cost of delivering care.
However, he did not agree that Sefton had put budgetary considerations over meeting its care and accommodation obligations.
The action was brought by the Sefton Care Association after providers faced a second year in succession of a freeze in fee rates paid by the council.
David Collins Solicitors, which acted on behalf of the association, said the judgement set an important precedent for providers in similar situations by forcing councils to pay due regard to the true costs of providing care. Mr Collins said: "The court is saying if there's an imbalance [in fees and costs] that's unlawful."
However, a Sefton Council spokesman said: "The judgement does not say that we have made the wrong decision. It is merely critical of some elements of the process we went through. The proposal not to increase fees for care homes has not been criticised.
"This has been a very complicated legal process. It shows that the speed at which we needed to make cuts last year has meant we did not consult with care home providers early enough about the possible freeze in their fees. We accept that."
Sarah Pickup, vice-president of the Association of Directors of Adult Social Services, said the case outlined the importance of local decision-making and consultation.
"Providers will be looking at whether they should be taking some action and local authorities will be looking carefully at the implications. It doesn't mean this is a one rule for all judgement. It will be on a case-by-case basis," she said.
Colin Angel, policy and campaigns director for the United Kingdom Home Care Association, said: "The judicial review's finding against Sefton Council will interest providers from across the entire range of social care settings.
"Sefton's apparent disregard for providers' concerns about unsustainable fees in residential care will sound remarkably familiar to homecare providers across the country."
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