In a recent fee dispute case against a local authority, Ridouts was able to successfully argue a point of law which meant that the Local Authority was obliged to pay outstanding fees dating back three years.
Fee disputes can be costly, stressful and time consuming for providers. Issuing proceedings at Court should normally be a last resort and should not be started when a settlement is being actively explored. In this particular case, the dispute with the Local Authority was settled during the pre-action stage of litigation outside of Court. Ridouts successfully claimed a large settlement sum for our client plus interest on the outstanding sum and 50% of our client’s legal costs. This amounted to over £120,000.00, which was a great result for our client.
This case draws attention to a very important issue that all providers should take seriously – the recovery of fees.
What should providers do if they have not been paid for their services?
Providers should keep detailed records which clearly set out when a local authority has been invoiced and when the invoice has been paid or, in the case of a fee dispute matter, not paid by the local authority.
If a local authority has not paid an invoice within a set period of time, typically 28 days from the date of an invoice, providers should chase payment of the invoice from the local authority’s accounts department immediately and any attempts made to chase payment should be clearly recorded. Withholding service payments to providers which are legitimately due to them is a breach of contract and any losses suffered by a provider should be reclaimed from the local authority.
Some providers are concerned about pursuing debt claims against local authorities because they are worried about the impact it might have on their future relationship with the local authority. However, in our experience at Ridouts, the detrimental impact of not being paid for a period of time far outweighs the impact on any future relationship with a local authority.
If a provider needs to pursue a debt claim against a local authority in order to recover fees, we advise that providers seek legal advice at an early stage. This is because lawyers can carefully review contracts between providers and local authorities to determine what terms are contained within the contract in relation to fees and consider potential remedies for breach of contract. Providers should also be aware that they have six years to bring a debt claim under the Limitation Act 1980 and after this time the claim is statute time barred.
Funding agreements between providers and local authorities generally
Funding agreements between providers and local authorities are often favourable towards local authorities, with local authorities failing to consider the actual cost of a placement and relying on the argument that they have assessed the cost of the placement and offered a package which meets the needs of the service user.
Local authorities are constrained by tight budgets which means that they are reluctant to increase fees for placements and providers often feel bullied into accepting low rates because they are anxious to secure placements.
The social care sector has been poorly funded for many years and this has most recently been highlighted during the COVID-19 pandemic. The future viability of care homes is at risk and now more
than ever, it is crucial for providers to review their fees and assess if they are being paid enough by local authorities. Fees which may be sustainable in the short term may not be sustainable longer term. If providers determine that they are not being paid enough, they should consider what a reasonable fee increase might be and approach the relevant local authority about this.
If providers disagree with fees proposed by local authorities, they should challenge this immediately and if the fees proposed cannot realistically meet the costs of the placement, providers may want to consider the option of terminating a placement. This of course should normally be a last resort but at times it may be the only realistic option.
Providers should remember that if a local authority has failed to pay them for their services and these payments are legitimately due, this is a breach of contract and loses suffered should be reclaimed from the local authority.
With regards to funding agreements, providers should not feel scared about challenging local authorities in relation to low fee rates. It is important for providers to take action at an early stage before a placement becomes unviable.
Ridouts has a vast amount of experience in providing advice to clients in relation to fee dispute matters and advising on their prospects of success. If you have any queries in relation to the above, please contact us on 0207 317 0340 and one of our specialist lawyers will be happy to help.