Supreme Court finds Health Service Executive’s changes to dental treatment policy not a breach of contract

About this case:

• Judgment:
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Mr Martin Reid and Mr James Turner brought the appeal against the Health Service Executive.

Decisions as to who is qualified to receive treatment under the medical card scheme, how dentists are to be remunerated and as to what forms of treatment are covered, are administered by the Health Service Executive.

Prior to a circular of 26th April 2010, dentists had been entitled to reimbursement for all routine treatments provided to medical card holders; thereafter only emergency treatment qualified.

Given the numbers of dentists in the scheme, the entitlements of the respective parties are settled through collective negotiation, resulting in a standard contract.

In the present case, the relevant contract dates from 1994, as revised in 1999. Under the terms of the 1999 revision, the Health Service Executive claim to be entitled to have made the unilateral change in 2010.

However, Messrs Reid and Turner challenged this, claiming that the alterations unilaterally made by the Health Service Executive were not authorised by the terms of the 1994/1999 contract.

They also claim not to have been party to the 1999 contract revision and thus not bound by it but only by the 1994 form. The High Court originally ruled against the plaintiffs.

The Supreme Court outlined the contract documents as being a contract of 1994 which contains the mutual obligations of individual dentists and the Health Service Executive.

It was found that this contract was one within the category of those which may be renegotiated.

A revision occurred in 1999, accompanied by a specific acknowledgment of budgetary constraints given by the Irish Dental Association in its letter to the head of industrial relations in the Health Services Employers Agency.

This letter stated that: “The acknowledges that, in the light of the above, ealth oards have the right to take whatever measures are necessary to live within budget and statutory obligations. Prior approval will be necessary in all cases of below the line treatment and delivery.”

This was confirmed by the Health Services Employers Agency, and the 1999 agreement.

The Health (Amendment) (No. 3) Act 1996 was also cited as noting at section 2(1)(a) that a health board, in performing the functions conferred on it by or under this Act or any other enactment shall have regard to: (a) the resources, wherever originating, that are available to the board for the purposes of such performance and the need to secure the most beneficial, effective and efficient use of such resources.

On 26 April 2010, the Health Service Executive distributed Circular No. 008/10, which noted the 2010 budget decision to limit expenditure under the Dental Treatment Services Scheme to €63 million, and the decision to prioritise emergency treatments, and limited additional treatments.

The Supreme Court first considered whether the collective contract was binding on the plaintiffs.

Noting that both had been members of the Irish Dental Association over many years, and that both of their contracts contained the 1999 revision, the Supreme Court found that it was difficult to see how it could be argued that they were not bound by it.

It was noted that privity of contract can be a valid defence against the binding nature of a collective agreement entered into between an employer and a trade union.

However, citing Edwards v Skyways 1 WLR 349, the “onus is on the party who asserts that no legal effect was intended and the onus is a heavy one”.

The Court noted the case of Goulding Chemicals Ltd v Bolger IR 211, in which a minority group of workers successfully dissented from a deal reached by their union.

That situation was contrast with the current case, in which Martin Reid and James Turner worked this contract over a decade and made no complaint as to the applicability of the 1999 terms.

The Court therefore concluded that the full terms of the 1994/1999 contract were accepted.

Turning to the contract, the Court cited UPM Kymmene Corporation v BWG Limited (unreported, High Court, 11 June 1999) IEHC 178as containing the basic rules of construction for contracts.

That case stated that: “The Court’s task is to ascertain the intention of the parties, and the intention must be ascertained from the language they have used, considered in the light of the surrounding circumstances and the object of the contract.

“Moreover, in attempting to ascertain the presumed intention of the parties, the Court should adopt an objective, rather than subjective approach and should consider what would have been the intention of the reasonable persons in the position of the parties.”

Applying these principles, the Court found that it was difficult to accept the plaintiffs’ contention that the reference in the contract to the Health Service Executive having “the right to take whatever measures are necessary to live within budget and statutory obligation” were to be regarded as a recital of circumstance which must be disregarded.

It was found that the new agreement in 1999 would not have been entered into but for the acknowledgment by the Irish Dental Association of this right to take whatever measures necessary.

Thus, “The change introduced was unequivocal as to the effect which it might have, even though the nature of the change that was brought about thereby was as unexpected in 1999 as the economic crash through property inflation which necessitated these extreme measures by the Health Service Executive in 2010.”

The Court found that while it was clear that the power to unilaterally alter a contract in the form agreed between parties was unusual, there was no basis upon which a court could change an unambiguous meaning through the application of any principle which contradicts express words.

As a result, the appeal was dismissed.