The decision has been welcomed by mental health campaigners and Age Concern, who want the government to publish clear guidance over the issue.

Wednesday's ruling relates to four former pscyhiatric patients who were released from hospital into specialist accommodation for their own and the public's safety.

The local authorities involved - the London Borough of Richmond, Redcar and Cleveland Borough Council, Manchester City Council and the London Borough of Harrow - argued that the cost of paying for their accommodation could be "potentially catastrophic".

Their counsel, Richard Lissack QC, said almost half of local authorities in England and Wales could have to find "at least £50m a year - and possibly up to £120m extra" as a result of the ruling.

But judge Mr Justice Sullivan said it was unfair that mentally ill people should have to pay for specialist accommodation which they were forced to live in.

"It would indeed be surprising if such a person could be required to pay for accommodation in which he was being compelled to live," he stated.

Free aftercare

The local authorities argued that the cost of funding accommodation did not come under the Mental Health Act 1983, which provides for free aftercare services.

They said this only covered care provided by health and social services.

Mental health charity Mind said: "The Act does not say whether 'aftercare services' include accommodation, home care and other services.

"We are pleased that the judgement makes it clear that the legal duty extends to providing free accommodation and other services, which are a vital part of community care services."

The four complainants were:

• A 66-year-old Surrey woman with dementia. She was charged £137 a week for her accommodation which had to be paid for out of benefits and some money from her son
• A 28-year-old schizophrenic man, dicharged into residential accommodation in Cleveland
• A Manchester patient with a long history of mental illness who was asked to pay £114 a week for accommodation, leaving him with just £28 from his state benefits
• A 69-year-old Harrow woman admitted to hospital after a suicide bid. She sold her family home and was asked to pay £21,198 in arrears for her residential home