Supreme Court dismisses appeal where soldier discharged due to policy change despite no medical deterioration.

THE SUPREME COURT

Appeal Nos. 239 & 349/06

Geoghegan J.

Fennelly J.

Kearns J.

BETWEEN/

JAMES McGRATH

Plaintiff/Respondent

and

THE MINISTER FOR DEFENCE, IRELAND

AND THE ATTORNEY GENERAL

Defendants/Appellants

JUDGMENT of Mr. Justice Geoghegan delivered the 28th day of July 2009

The respondent in this appeal was a member of the Defence Forces for 26½ years. He was discharged from the army on

the 12th May, 1996 and these proceedings arise from that discharge. In 1977, the respondent sustained an injury to his right

knee as a consequence of which he was excused from “regimental duties” which essentially meant duties that included

carrying weaponry. The evidence in the High Court established that there were various medical grades assigned to soldiers

depending on their fitness. The highest of these grades was A1 which the respondent enjoyed before his injury and the

lowest was Category E which almost invariably meant discharge. Following on the injury, the respondent was classified at

Category C but permitted to carry out all duties except regimental duties. As it turned out, this included a tour of duty

abroad. As the learned trial judge (Laffoy J.) points out in her judgment, the respondent, in the period from 1987 to 1996 in

fact performed a wide range of duties. In 1992, the respondent required an extension of his service and he was duly granted

a two-year service extension from October, 1992 to October, 1994. There was no material change in his medical condition.

Again, in April, 1994, he sought a further extension of two years from October, 1994. Whenever an extension of service

was under consideration there was a routine medical examination and he underwent that examination on the 27th April,

1994. He was again graded Category C and there was a recommendation that he be continued in service and his conduct

was assessed as very good. There was no material change in medical or in any other circumstances from the time of his

previous extension or indeed from the period right back to his injury. The respondent was granted the two-year extension

terminating on the 29th October, 1996.

In consequence of what the learned High Court judge correctly characterised as a policy change which followed a report

commissioned from Mr. Dermot Gleeson, S.C. on various matters including numbers in the army, the respondent was given

a separate special medical examination and he was downgraded to category E even though it was accepted in evidence that

there was no material change in his medical condition. A policy change, however, required that all soldiers in Category C

should be able to carry out regimental duties.

The respondent, faced with a choice of appealing against the regrading or applying for an extension of time before discharge

so that he would qualify for a new voluntary retirement scheme, opted on advice, for the latter. The extension was refused.

The respondent instituted these proceedings in which he sought invalidation of the discharge on what might loosely be

described as judicial review grounds and also damages “for breach of duty, breach of contract and unlawful interference

with the plaintiff’s rights.”

As the case was argued in the High Court, it was submitted (inter alia) that the respondent was entitled to damages for

breach of his legitimate expectation. This concept would seem to me to come within the general heading of “Unlawful

Interference with the Plaintiff’s Rights”.

In the event, the learned trial judge found in favour of the respondent on the sole ground of breach of contract and awarded

damages accordingly. The judge did not find it necessary to deal with the other issues.

My position on this appeal is quite simple. I am in agreement with almost the entire of the judgment of Laffoy J. and I will

return in due course to the salient aspects of her judgment. I have had the benefit, however, of reading the judgment

proposed to be delivered by Fennelly J. and he takes a different view, not as to the correct outcome of the appeal but as to

the basis on which the appeal should succeed. Fennelly J., in his judgment, has taken the view that as the respondent was an

“officer” in the legal as distinct from military sense, he did not have a contract of employment with the Minister and that

therefore no breach of contract claim could lie. On the other hand, he believes that the respondent is entitled to succeed on

the basis of legitimate expectation.

I also believe, that if I am wrong in my view that the respondent is entitled to succeed on a contractual basis, which was the

view of the trial judge, I would certainly agree with Fennelly J. that the respondent is entitled to succeed in his claim for

damages for breach of legitimate expectation. In other words, I consider that both causes of action are valid. Although

Laffoy J. declined to decide the issue of legitimate expectation, I believe that it would be costly and unnecessary to send the

case back to the High Court for trial on that issue, as, for all practical purposes, the arguments have been made in this court.

I intend now to address the contractual issue. Before I do so, I would make this preliminary comment. Legitimate

expectation is a relatively newly established cause of action especially in the context of substantive law as distinct from

procedure. If that is the only basis on which the respondent is entitled to succeed, it means that prior to that concept being

known to the courts, the respondent would have had to fail. Despite a crystal clear agreement that his service in the army

could be extended for a precisely defined two-year period that decision could legally be reversed with no change of

circumstances and no new relevant statute or statutory regulation within say a month of or at any time during the two-year

period. This seems to me inherently improbable and unless I was compelled to take that view by virtue of the statutory

provisions, I would not do so. I do not believe that I am so compelled and clearly that was the view also of Laffoy J.

However, I do concede that there is a problem of terminology. The language of the learned trial judge would seem to

indicate a finding by her of an ordinary contract. In support of this finding, reliance is placed by the respondent on a

reference by Henchy J. in his judgment in The State (Gleeson) v. The Minister for Defence [1976] I.R. 294 to a member

of the Defence Forces having a “statutory contract” for a period of three years “which carried with it the statutory

benefits and liabilities attaching to his rank in the army.” It is difficult to know what exactly Henchy J. meant by that

expression. I am not relying on it for the purpose of this judgment because I do not think he was referring to an ordinary

private contract. He was using the phrase in the context of the ordinary terms and conditions of service in the army. On the

other hand, Henchy J., as everybody knows, was extremely careful about words and I do not believe he used the word

“contract” in a merely loose metaphorical sense. It is trite law that the expression “agreement” does not necessarily mean a

legally enforceable agreement or contract. On the other hand, I can think of no legal context in which the word “contract” is

used and where it does not involve some kind of legal liability connotation. Fennelly J., of course, makes an additional

objection to any idea that there could have been a contract. He invokes the well-known principle that for the purpose of

vicarious liability in a tort action, where the tort is committed by a state employee, the Minister (subject to one well known

statutory exception) cannot be vicariously liable as both the Minister and the staff member are fellow servants of Ireland. On

my understanding of the law, however, I think there is a distinction between potential tortious liability of a Minister and

potential contractual liability. There is nothing conceptual in law to prevent a Minister entering into an intra vires contract

with a state employee. Even if Laffoy J. was wrong in considering that there was a contract with the Minister for Defence

(and I do not think she was) once she was of the view that there was a contract at all, I cannot see why it cannot be

regarded as a contract with Ireland which is also a named defendant.

Returning to the more important point as to whether there could in any sense have been a contract, I will start by drawing

attention to what the learned trial judge actually said. She said the following:

“In my view, the plaintiff’s claim in contract is well-founded. The continuance of the plaintiff in

service for the two-year term expiring on the 29th October, 1996 created a contractual relationship

between the first defendant and the plaintiff. That contractual relationship was, of course, subject to

the provisions of statute law and regulations then in force governing the Defence Forces. It is

undoubtedly the case that, if something had occurred during the two-year extension which, in

accordance with that regulatory regime, gave rise to an entitlement to discharge the plaintiff from

the army, such discharge would not have constituted a breach of contract. However on the evidence

nothing occurred other than the reclassification of the plaintiff to medical category E. That

reclassification resulted from a change of policy rather than any material change in the plaintiff’s

medical condition since his extension of service medical examination in April, 1994 and the

continuance of his engagement in October, 1994. In my view that is the only reasonable inference

to be drawn from the certificate of the medical board, which rationalised his reclassification on the

ground that the plaintiff had been suffering from ‘chronic ineffectivity’ since 1987. In those

circumstances, I do not think that the discharge of the plaintiff prior to 29th October, 1996 was

justified and, accordingly, I find that it was in breach of contract.”

The learned judge’s use of the word “created” would seem to support the view that the type of contract she had in mind

was an ordinary private contract rather than the “statutory contract” characterised as such by Henchy J. Apart from one

particular aspect, I would have no problem with the judge’s approach because, as I understand the law, the mere fact that

an employee is an “officer” in legal terms rather than a “servant” does not mean that there cannot also be side contracts.

This principle is made clear in the judgment of Kenny J. in the High Court in Glover v. BLN Limited [1973] I.R. 388 at

414 where he says the following:

“The characteristic features of an office are that it is created by Act of the National Parliament,

charter, statutory regulation, Articles of Association of a company or of a body corporate formed

under the authority of a statute, deed of trust, grant or by prescription; and that the holder of it may

be removed if the instrument creating the office authorises this. However, the person who holds it

may have a contract under which he may be entitled to retain it for a fixed period: see the decision

of the Supreme Court in O’Brien v. Tipperary Board of Health I.R. 761 and in Carvill v. Irish

Industrial Bank Limited [1968] I.R. 325.”

There is no doubt that the two-year extension granted by the Minister could have been refused irrespective of the medical

condition of the respondent. Furthermore, the discretion to grant or refuse arises under statutory regulations made under

section 65 of the Defence Act, 1954. It makes no sense to me that it could have been intended by the Oireachtas in 1954

(when legitimate expectation was unheard of) that having granted a precise extension with fixed dates, the Minister could

renege on that promise without there being any relevant change of circumstances whether medical or otherwise or any

superimposed statutory regulation. I am, therefore, in agreement with Laffoy J. that the Minister did assume a contractual

obligation but one limited in the manner described by her. This does not seem to me to be inconsistent with the Minister not

being the employer for the reasons indicated by Fennelly J. in his judgment. The Minister in granting the extension would

not be entering into a contract of employment but he would be guaranteeing that for the two-year period (other things being

equal) the statutory employment would be allowed to continue. The expressions “public law” and “private law” somewhat

like “legitimate expectation” are relatively new to common law jurisdictions. A contract entered into between two private

persons is exactly the same as a contract entered into between a public authority and a private person. In each case it is a

“contract” I do not think that in any meaningful sense in the context of the general law of contract, contracts can be

categorised into “private law contracts” and “public law contracts”.

Section 65(2) of the Defence Act, 1954 provides that where “a man of the Permanent Defence Force is continued in

service for a fixed period ‘he may be continued as a man of the Permanent Defence Force for that period in the same

manner in all respects as if his term of service were still unexpired.” In my opinion, that subsection refers to the day to

day incidents of his employment which are entirely governed by statute or statutory regulation but it does not mean that

where the Minister as the designated person to do so, grants an extension for a fixed period, the Minister or arguably the

State assumes no legal liability. Like the learned High Court judge, I take the view that the liability is contractual. There is

benefit passing to the Minister and/or the State in the continued service of the soldier.

If the learned trial judge and I are wrong for the reasons indicated by Fennelly J. in invoking the ordinary law of contract as

the basis of ministerial or state liability for reneging on an extension officially granted where no new relevant factor has

arisen, then I think the remedy should be fashioned out of the statute itself. I have already indicated my view that Henchy J.

has always used language in a careful and deliberate fashion. He had in mind some particular meaning in using the

expression “statutory contract”. The very word “contract” implies rights and liabilities between two parties. Whatever was

precisely meant by the expression “statutory contract” it would seem to me that Henchy J. clearly had in mind that a

member of the Defence Forces could have some enforceable rights as well as duties. In the passage quoted by Fennelly J.,

Henchy J. said the following:

“Subject to the statutory provisions for discharge, he had a statutory contract for a period of three

years which carried with it the statutory benefits and liabilities attaching to his rank in the army.”

Costello P. in his judgment in Gilheany v. The Revenue Commissioners [1996] E.L.R. 25 throws some light on the dicta

of Henchy J. In that case, the former President of the High Court was dealing with the legal status of a civil servant. That

status is quite different from the status of a member of the Defence Forces. Employment in the civil service is governed by

section 5 of the Civil Service Regulation Act, 1956. That section reads:

“Every established civil servant shall hold office at the will and pleasure of the Government.”

Costello P. gives an interesting historical survey how the status of a civil servant came about. Although, since the

independence of the State, the status is statutory, the statutory status itself derived from the pre-independence prerogative.

Whilst in practice, a civil servant has traditionally had a very safe tenure, he or she is not employed under a contract

whether private or one that could be characterised as a “statutory contract”. In that case, The State (Gleeson) v. Minister

for Defence referred to above was cited. Costello P. had this to say about it:

“The situation I am considering is entirely different to that in The State (Gleeson) v. Minister for

Defence [1976] I.R. 280 which was a case dealing with an express statutory provision (absent in

the 1956 Act) that Privates in the army could enlist for a minimum period of three years and a

maximum period of 12 years and in which reference was therefore permissible to a Private having

a ‘statutory contract’ relating to his employment in the army.”

In that passage, Costello P. appears rightly or wrongly to be interpreting a “statutory contract” referred to by Henchy J. as

conferring some actionable statutory rights against the Minister for Defence in the case of members of the Defence Forces.

If I am wrong therefore in my view that the respondent has a good cause of action in ordinary contract, I think it at least

arguable that he would have rights under the statute itself. I cannot accept that he would have no legal remedy when no

change of circumstances took place. The importance of such a remedy is vividly illustrated by a simple question and a

simple answer in the cross-examination by Mr. Harold Whelehan, S.C., counsel for the plaintiff of Lieutenant Colonel

Ronan Concannon, an army officer called by the State. It is question 373 on day 2 and the transcript reads as follows:

“Q. So to use the awful cliché, the goalposts shifted so far as he was concerned?

A. As far as he was concerned, yes, they did.”

At the risk of repeating myself, I query that it could have been the intention of the Oireachtas in 1954 that if the

“goalposts” were moved at any time after the extension was granted with no objective change of circumstances or

supervening statutory regulation, the soldier would be without a remedy.

I am also in agreement with the learned trial judge that the actual circumstances which gave rise to a change of position was

a policy directive within the army arising out of the report of Mr. Dermot Gleeson, S.C.

As I have taken the view that the learned High Court judge was correct in holding that the Minister had entered into what I

have described as a “side contract” with the respondent and as, at any rate, even if I am wrong in that, I am in agreement

with Fennelly J. about legitimate expectation. I do not find it necessary to explore further what exactly Henchy J. had in

mind when using the expression “statutory contract” or the interpretation put upon it by Costello P. I would simply again

point out that the status of a member of the Defence Forces is not the same as an ordinary civil servant and that may have

implications in relation to his rights and liabilities under his statutory employment.

I would, therefore, dismiss the appeal. I am in full agreement with the approach to damages set out in the judgment of Mr.

Justice Fennelly.

McGrath v. The Min. for Defence & Ors.