Private healthcare company’s claim for payment against Scottish heath board dismissed

Lord Bannatyne
Lord Bannatyne

A private healthcare provider which sued a Scottish health board claiming it was “contractually obliged” to pay for a mental health patient’s continuing care at a hospital in England has had its case dismissed.

A judge in the Court of Session upheld an argument by Highland Health Board that the case against it brought by Priory Healthcare Limited was “irrelevant”.

‘Vulnerable adult’

Lord Bannatyne heard that the patient, Mrs AB, from Nairn, was under the care of the local social work department and the community health team in terms of section 25 of the Mental Health (Care and Treatment) Scotland) Act 2003, when, in October 2016 on her own volition she took a taxi to Cambridge.

She was initially admitted to Addenbrookes Hospital in Cambridge and detained under the Mental Health Act 1983, having been assessed at the time as being a “vulnerable adult” at risk of self-neglect due to non-compliance with medication and delusional beliefs. 

On 7 October 2016 she was transferred by NHS Cambridgeshire, which managed Addenbrookes Hospital, to a hospital and rehabilitation facility in Woking, which was run by the pursuer.

NHS Cambridgeshire and Priory Healthcare entered into a funding agreement in respect of the patient and sometime after the transfer to the pursuer’s facility the defender started paying the pursuer’s invoices for the patient’s care, which amounted to £540 per day.

This continued until 25 April 2017, when the defender advised the pursuer that it would not pay fees incurred by the patient after 31 April 2017.

‘Contractual relationship’

The pursuer raised an action claiming that the defender was contractually obliged to meet the continuing cost of Mrs AB’s care, but the defender denied that it was contractually bound to meet the charges.

The pursuer’s primary case, based on agency, was that the contract was entered into by HNS Cambridgeshire on behalf of Highland Health Board.

It was submitted that when the patient was resident in Nairn, the defender provided care and support to the patient for her mental disorder under and in terms of section 25(1)(a)(i). 

Thereafter, the patient moved to the pursuer’s facility, the defender secured the provision of care and support services by the pursuer in accordance with section 25(1)(a)(ii) of the 2003 Act. 

Although NHS Cambridgeshire entered into the funding agreement with the pursuer, the defender continued to accept responsibility for the patient and paid all invoices for her care until 25 April 2017 in fulfilment of the duties imposed upon it by section 25 of the 2003 Act. 

Accordingly, it followed that there must have been a “contractual relationship” between the pursuer and the defender in respect of the patient. 

The pursuer’s fall-back argument, based on adoption, was that the defender “adopted and ratified the funding agreement by accepting all of the obligations imposed by the contract” and by paying the agreed cost of care for the patient without challenge until 25 April 2017.

The final fall-back position was that the defender was “personally barred” from now disputing its contractual liability to pay for the cost of Mrs AB’s care.

It was an “implied term” of the contract that the agreement could not be terminated by the defender, as such termination would breach the statutory duties it owed to the patient under section 25 of the 2003 Act and place her at “material risk of harm”.

Moreover, the defender’s payment of the invoices until April 2017 was in accordance with the provisions of the Care Act 2014.


However, on behalf of the defender, it was submitted that the pursuer’s pleadings on contract formation were “irrelevant”.

It was argued that Mrs AB’s admission to Addenbookes was compulsory and that her detention there was in fulfilment of Cambridgeshire NHS’s obligations in terms of sections 2 and 3 of the Mental Health (Scotland) Act 1983.

Further, in terms of section 25 of the 2003 Act there was no absolute obligation for a locals authority such as the defender to provide care and support services to relevant Pearson such as the patient who is in hospital.

And it was submitted that 2014 Act applied where a local authority made a decision to fulfil its obligations under section 25 of the 2003 Act by securing accommodation in England and transferred the patient to that accommodation, but the legislation did not cover the situation in the present case.

Therefore, it was argued that the statutory background did not support the relevancy of the pursuer’s position on contract formation.

On the issue of agency, it was argued that the pursuer’s failed to make any agreements supporting the contention that NHS Cambridgeshire was the defender’s agent.

As to the argument that there was an implied admission that a contract had been formed, the pursuer denied the formation of a contract.

‘Fundamentally flawed’ 

Dismissing the action as irrelevant, the judge ruled that there were a number of “fundamental flaws” in the pursuer’s arguments.

In a written opinion, Lord Bannatyne said: “Cambridge on its own volition decided that it was required to act in terms of the above provisions of the 1983 Act to safeguard the patient. It was not, in any sense, acting in terms of section 25 of the 2003 Act on behalf of the defender.”

The judge also rejected the argument that by making payments that defender had accepted a contract was formed.

He said: “The defender has denied outright any contract based on the funding agreement. In the course of its answer it makes it apparent that none of the bases of contract formation advanced by the pursuer are accepted. In its note of argument and in oral submissions the defender has expanded upon that position. 

“The defender has explicitly answered the pursuer’s case regarding contract formation. It has accepted making payments and not disputing these and advanced a clear argument in law that such payments could not amount to formation of a contract.”

Lord Bannatyne added that even if he was wrong on the issue of formation of contract, he did not believe that the implied term would be implied into the contract.

He said: “ am unable against the above statutory background to envisage circumstances in which the hypothesised situation which underpins the alleged necessity for the implied term could occur. The patient is fully protected by the statutory safety net which is in place.”

© Scottish Legal News Ltd 2019

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