Supreme Court dismissed appeal; unilateral contract change by HSE without consultation clause upheld.

An Chúirt Uachtarach

The Supreme Court

Record number 2010/4478P

Appeal number 275/2011

[2016] IESC

Hardiman J

MacMenamin J

Dunne J

Charleton J

O’Malley J

Between

Martin Reid and James Turner

Plaintiffs/Appellants

and

The Health Service Executive

Defendant/Respondent

Judgment of Mr Justice Charleton delivered on Thursday the 3rd of March 2016

1. Martin Reid and James Turner are self-employed dentists. They claim a breach of their contract with the Health Service Executive

to pay for the provision of dental treatment to medical card holders. Prior to a circular of 26th April 2010, dentists were entitled to

reimbursement for all routine treatments provided to medical card holders; thereafter only emergency treatment qualified. The Health

Service Executive administers the medical card scheme. Those qualified are able to obtain certain forms of medical and dental

treatment. Qualification for holding a medical card changes from time to time, depending on social and political considerations.

Dentists participate in the medical card scheme by offering their services at an agreed rate. Decisions as to who is qualified to receive

treatment, how dentists are to be remunerated and as to what forms of treatment are covered, are administered by the Health

Service Executive. The money for that ultimately comes from central funds through allocation to the Health Service Executive. Given

the numbers of dentists in the scheme, the entitlements of the respective parties are settled through collective negotiation. This

results in a standard contract in writing which must be signed by each dentist. Here, the relevant contract dates from 1994. It was

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. Thereby all routine treatments, apart from emergency cases, were disallowed. The appellant dentists counter that

nothing in the wording permitted such a major unilateral change by the Health Service Executive.

2. As with the provision of other State services by self-employed professionals, disputes will arise from time to time. Initially, dentists’

contracts were with the various health boards set up under the Health Act 1970. The Health Service Executive is the successor. This

particular scheme was introduced in 1994 through collective bargaining. After lengthy negotiations with the Irish Dental Association, a

revision came about in 1999 and the contract was altered accordingly. According to the evidence given in the High Court by Dónal

Atkins, the former secretary general of the Irish Dental Association, the 1999 revision settled issues between the dentists and the

health boards as to fees, access by patient medical card holders and approvals for certain more complex treatments. All participating

dentists worked under that scheme for the next decade. This dispute then arose in the wake of the economic crisis that became

manifest from September 2008. By 2009, the national cost of this scheme had risen to €80 million. A decision was taken to limit the

expenditure for 2010, and for all subsequent years, to €63 million. The decision limiting funding for dental treatments took the form of

a letter dated 26th April 2010 to each participating dentist from the Health Service Executive, under the title ‘Circular No. 008/10’.

Certain treatments were disallowed. Essentially, the Health Service Executive told the dentists that only emergency treatments were

to be funded after April 2010. This was not a negotiated position. It was a decision made solely by the Health Service Executive. As a

result, many treatments were cancelled or did not proceed. This affected the income of the dentists. Martin Reid and James Turner

contend 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 of

the contract.

Decision of the High Court

3. Martin Reid and James Turner had applied to the High Court for an interlocutory injunction to restrain the Health Service Executive

from implementing the change to their contracts. By decision of Laffoy J, dated 16th June 2010, the High Court ordered “that pending

the trial of this action or until further order the [Health Service Executive] its servants or agents or any of them acting howsoever be

restrained from giving effect to or purporting to give effect to Circular No 008/2010 on April 26th 2010”. The Health Service Executive

appealed that judgment and order by notice of appeal dated 18th June 2010, on the grounds: that the injunction sought was

mandatory and not prohibitory, as Laffoy J had held; that Laffoy J had erred in holding the test to be applied was whether there was

a fair issue to be tried; and that the balance of convenience did not favour the grant of the order. A motion was then brought before

this Court to stay the order of Laffoy J. In case 194/2010, on 9th July 2010, this Court ordered that “the motion be refused and that

the defendant do pay to the plaintiffs the costs of this motion when taxed and ascertained.” The outcome of this appeal will govern

the result of any subsisting appeal as to any interlocutory matter.

4. At the substantive trial in the High Court, only very limited testimony was allowed by the trial judge, Murphy J. He ruled that the

parol evidence rule permitted him to consider only the text of the 1994/1999 contract set within the relevant factual matrix which, in

this instance, included a statutory provision as to the budgeting responsibility of the Health Service Executive. The trial judge

included in the background against which the contract was to be analysed, two letters from September 1999; one dated 17th

September from the Irish Dental Association to the Health Services Employers Agency and the other was the reply from that source

dated 21st September. In the High Court, Martin Reid and James Turner disputed that they had been bound by the negotiations

conducted in 1999 by the Irish Dental Association. While Murphy J ruled on that issue, it was pursued on this appeal only as a minor

point. Nonetheless, it must be decided. In any event, by the time this dispute had arisen, both parties had apparently interacted with

each other over a decade by reference to the provisions of the 1999 revision of the 1994 contract. By written judgment, (High Court,

unreported, 28 February 2011) Murphy J ruled against the dentists as follows:

The court is of the view that the [revised] procedures had been negotiated on behalf of all dentists, including the

plaintiffs herein, by their association. The Irish Dental Association is necessarily a contracting party in relation to the

resolution of disputes between dentists and the HSE acting through the Health Services Employers Agency.

The court is satisfied that the emphasis in Circular 008/10 is, despite the limitation, patient oriented. Not alone is the HSE

to provide emergency dental care to eligible patients with the focus on relief of pain and sepsis but also additional care

would be considered in exceptional or high risk cases. It is the practising dentist who must satisfy herself or himself as to

the clinical emergency. The dentist must provide the necessary urgent treatment in accordance with the detailed 11 point

schedule.

The court is also of the view that the acknowledgement by the Irish Dental Association of the Health Board’s right to take

whatever measures are necessary to live within budget and statutory obligations is, as in the previous clause, a term of

the revised procedures. These measures were affected through the circular which implemented what was agreed between

the parties.

In the circumstances the court, having regard to the statutory background to the scheme, is of the view that the circular

is contractually binding upon the plaintiffs.

The defendant, by virtue of the circular of 26th April, 2010 limits expenditure to what the court understands was the

previous budget of [€63 million]. Using the 2009 uptake levels the defendant notified to dentists, including the plaintiffs

that it would provide emergency dental care to eligible persons with a certain focus and, indeed, would consider additional

care in exceptional or high risk cases. It is the individual dentist who must satisfy him or herself as to the clinical

emergency and provide the necessary urgent treatment.

It seems to the court that the circular is within the scope of s. 2 of the Health (Amendment) No 3 Act of 1996.

Accordingly, there is no breach of contract.

Though the circular was dated to have effect on the 28th April, 2010, the plaintiffs had been granted an injunction

restraining the defendant from giving effect or purporting to give effect to the circular until the trial of the action. It

would follow from the decision of the court that the injunction should be discharged.

5. By order of the High Court dated 7th March 2011, the action of the plaintiffs Martin Reid and James Turner was dismissed and the

interlocutory injunction of 16th June 2010 was discharged, with costs to the Health Service Executive.

6. By a notice dated 24th June 2011, Martin Reid and James Turner appealed that decision on the grounds, as argued on this appeal:

that Circular No 008/2010 of April 26th 2010 constituted a breach of contract; that the trial judge had misapplied the appropriate

principle of construction of contracts; and that he had failed to “ascertain the intention of the parties to the 1999” revision of the

1994 contract. This latter point has not been pursued.

The contract documents

7. After setting out particular definitions, the contract of September 1994 recites the mutual obligations as between the parties,

namely the individual dentists and the then relevant health board. Given that the latter party and its successor, the Health Service

Executive, is funded by Government, among the assurances given within the contract are a number from the Minister for Health. The

Minister is, in fact, stated as being one of the negotiating parties. He assures the dentists that he is aware of their professional duty

to their patients. The contract states that in “consideration of the” health board “including a dentist’s name on the dental panel” that

“the contracting dentist … undertakes to provide dental treatment, on the terms and conditions hereinafter appearing, to qualified

persons who may desire to avail themselves of his/her services.” As to who those persons are and as to what the nature of the

treatment is that will be paid for by the health boards is clearly variable. Clause 3 indicates that the scheme would initially “apply to

qualified persons in age cohorts to be phased in on an agreed basis to be negotiated between the Minister and the” Irish Dental

Association. In the first appendix to the contract, a scale of fees is set out. Clause 24 provides for payment to dentists “by reference

to a scale of fees agreed between the Minister and the” Irish Dental Association. This scale is to be reviewed six months after the

contract. The contract could be terminated by either of the parties giving to the other three months notice under clause 29. An

argument was addressed on the appeal to this being the only method whereby the contract might be amended, namely by termination

and the negotiation of a new contract, but that point was not pressed. Clear words would be needed within a contract whereby no

alteration by agreement to its terms would be possible. Sometimes a situation might arise whereby the contract specifically provides

that the entirety of the bargain between the parties is expressed in the text, stating that the contract is excluding any prior oral

representations or subsequent oral variations. That is not this contract. It is clear that this contract is within the category of one

which may be renegotiated. It is not necessary for that to happen that every contract be terminated with every dentist participating

in the scheme and a fresh contract entered into thereafter on mutually agreed terms. A variation agreed to the existing contract is

sufficient provided that assent by participating dentists is proven either individually or through a collective bargaining mechanism.

That 1994 contract has minute technical details as to what range of services may be demanded by a patient, or seen as necessary

by the dentist and which may be pursued straightaway with financial sanction, meaning an entitlement of the medical professional to

be paid. In certain of the documents relevant, these are referred to as “above the line” and “below the line” treatments. Appendix 1

indicates that such routine treatments “above the line” will apparently ordinarily attract payment, although at that stage it seems

authorisation, while perhaps routine, was needed. These are set out above a physical line appearing at page 2 of Appendix 1. This

includes oral examination, prophylaxis, restorations irrespective of the number of fillings or surfaces, composite fillings of up to 6

anterior teeth, extraction under local anaesthetic, surgical extraction and certain other payments for such interventions as secondary

haemorrhage, biopsy and pulpotomy. Procedures for which payment cannot be guaranteed without the dentist first obtaining special

sanction include such “above the line” work as root canal therapy, the amputation of roots, protracted periodontal treatment, x-rays

and such prosthetics as dentures and the care thereof.

8. There are also detailed provisions in the 1994 contract in relation to timescale, the keeping of records, applications for sanction,

response thereto and visits by examining dentists appointed by the health boards where a treatment plan to estimate cost has been

lodged outside the category of what has carefully been delineated as routine, or otherwise within the contract. Under this contract, a

monitoring committee was set up to ensure that it worked fairly. There is but one reference to any budgetary issue which the paying

party, namely the health boards as funded by the Minister for Health, might have and that is contained at clause 7, which reads thus:

The [Irish Dental] Association acknowledges the statutory responsibility of the [h]ealth [b]oards for the provision of

dental services under the Act and to ensure the management of such services.

9. The 1999 revision of that contract again contemplates that the range of patients to whom free dental treatment might be afforded

can be extended. The contract provides that the parties “comprehend that all eligible adult medical card patients who become eligible

due to recent changes in the eligibility criteria for medical card holders are included in the” scheme. Reference is made to extra

“funding … to be allocated to cover the costs of introducing the final cohort.” The monitoring committee mentioned in the 1994

contract is continued and further qualified as to its function. The examining dentists from the 1994 contract are ascribed a new range

of functions under the 1999 contract and these are specifically described in an appendix. Review of the contract is again provided for,

this time within a year. As in the 1994 contract, termination may take place on three months' notice and there is now specific

provision for the cancellation of the proposed treatments. Certain disciplinary and retraining provisions are contained in clause 30 and,

under clause 31, what is described as a 'dental appeals tribunal' is established. There are new detailed provisions as to the completion

of forms and the filling in of dental charts and for record-keeping in relation to the repair of dentures. Validation requirements in

relation to patients are described in detail. The distinction between the kind of treatments which are above or below the line do not

appear to have been altered by the 1999 contract revision, nor is there any change to the provisions in the 1994 contract in relation

to emergency dental treatment, a term which remains undefined through both contracts. From 1999, however, routine treatments did

not require prior sanction as they had under the 1994 contract. The appeals mechanism was also strengthened and while this is

described as applying to “penalties, non-approval issues and payment issues” it is not fully described.

10. It is, of course, the provisions in relation to finance and eligibility for treatment which are of most relevance on this appeal. In

that regard, it has not been argued by either side that the two September letters from 1999, which predate the contract revision of

that year, do not form part of the necessary factual matrix within which the terms of the contract are to be construed. Whatever the

negotiating position of the parties, which ordinarily are not admissible in evidence and were not sought to be introduced in testimony

before the High Court, a specific acknowledgment of budgetary constraints was given by the Irish Dental Association in its letter to

the head of industrial relations in the Health Services Employers Agency. That assurance appears in a letter dated 17th September

1999 in the context of a relaxation of the requirement to obtain prior sanction for routine treatments, or those above the line, while

those treatments below the line would continue to require approval. Parity of fees with another grade of workers and the backdating

of such payments had already, apparently, been assured in the context of the negotiations on the part of the health boards. These

details are incidental and unnecessary to this decision, save as a matter of context. What is important, however, is that the following

was stated at paragraph (3) of the letter:

We recognise that the Health (Amendment) Act 1996 governs the provision of health services. Health [b]oards are obliged

to live within their monetary obligations. The [Irish Dental Association] acknowledges that, in the light of the above,

[h]ealth [b]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.

The Health Services Employers Agency replied by letter dated 21st September 1999 thus:

I can confirm that your proposals, which will be recommended to your members for acceptance, are acceptable to health

service management. The agreed position will be included in the ‘Revised Procedures for Dental Treatment Services

Scheme’. In the light of the foregoing I take it that the industrial action will now be called off. Finally, I confirm my

availability to finalise arrangements in relation to the matter of [t]erminations/[d]isputes.

11. Whereas the written submissions on both sides of this appeal have tended to focus on only the initial two clauses under the

heading in the 1999 agreement ‘TREATMENT CEILING/PATIENT CARE PLAN’, the entirety of that section should be quoted with a view

to construing the disputed words within the overall context of the 1994/1999 contract as a whole. The relevant section reads:

"TREATMENT CEILING /PATIENT CARE PLAN

Treatment can be carried out treatments without prior approval.

A patient care plan to be completed and submitted for each patient. In cases where prior approval is not required the

patient care plan will be submitted with the claim. Where prior approval is required the patient care plan will be submitted

in advance.

Prior approval will continue to be required to treatment on all below the line treatments and dentures in accordance with

the above. While awaiting approval, above the line treatments can be carried out.

APPROVAL

The Health (Amendment) Act Nineteen Ninety-Six governs the provision of health services. Health boards are obliged to

live within their monetary allocations.

The [Irish Dental Association] acknowledges that, in the light of the above, [health boards] have the right to take

whatever measures are necessary to live within budget and statutory obligation.

Prior approval will be necessary in all cases of below the line treatment (including dentures) and delivery.

Within one month, participating dentists will be granted approval for below the line denture treatment. In the event of

approval being turned down the specific clinical reasons will be given. The [health board] reserves the right to defer

approval in certain limited circumstances, in accordance with the provisions of the Health (Amendment) Act 1996.

Where a dentist identifies below the line or denture treatment, patient care plan must be prepared and submitted to the

[health board] for approval, this will be granted within a one month period.

The [health board] will complete in stamp the form indicating the [patient care plan] approval. The form will then be

returned to the dentist. A separate approval will not be a feature of the new arrangements.

12. This constitutes relevant extracts from the 1994/1999 contract. The statutory provision referenced on both sides is from the

Health (Amendment) (No. 3) Act, 1996. This requires, 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.

As to the actual fees payable to dentists under the scheme, for each tooth restoration or extraction for example, it was mentioned on

the appeal that these were adjusted downwards pursuant to the Financial Emergency Measures in the Public Interest Act 2009. That

reduction was not part of this appeal. From the point of view of the relevant statutory background, section 9(1) thereof may be

contrasted with the forgoing provision in the Act of 1996:

Notwithstanding any other enactment, contract, arrangement, understanding, expectation, circular or instrument other

document, the Minister for Health and Children may, with the consent of the Minister for Finance, by regulation, reduce,

whether by formula or otherwise, the amount or the rate of payment to be made to health professionals, or classes of

health professionals, in respect of any service that they rendered to or on behalf of a health body from the date of the

regulation.

13. Here, the relevant adjustment was to be made not to fees for doing particular dental work but to the class of eligible treatments

for which dentists were entitled to reimbursement under the scheme. That was done under the contract and not pursuant to any

statutory power. Hence, Circular No. 008/10 of 26th April 2010 effectively stopped the provision of payment by the Health Service

Executive for every form of treatment given by dentists to medical card holders save for emergency treatment. The circular reads in

part:

The Budget 2010 decision limited expenditure under the Dental Treatment Services Scheme (DTSS) €63 million. To protect

access to emergency dental care for medical card holders and to safeguard services for children and special needs

groups, the HSE will prioritise the range of treatments available under the DTSS.

Using 2009 uptake levels, HSE will provide emergency dental care to eligible patients with a focus on relief of pain and

sepsis. Additional care will be considered in exceptional or high risk cases. Were an eligible person seeks emergency dental

treatment, the contracting dentist must satisfy her/himself as to the clinical emergency and provide the necessary urgent

treatment in accordance with the following schedule …

Details then followed. One oral examination per year with x-rays was allowed. Prophylaxis treatment was suspended. Two restorations

as part of an emergency treatment were allowable with additional restorations only in “approved emergency circumstances.”

Exodontics would be reimbursed “where the contracting dentist is satisfied as to the clinical emergency.” There was a similar

restriction on surgical extractions. Presentation with an abscess or irreversible severe pulpitis qualified. These are indeed painful.

Denture repair, however, would be reimbursed in emergency circumstances only and a similar rule applied to endodontic treatment.

Save for cases such as diabetes, pregnancy and immuno-compromising conditions, among others, protracted periodontal treatment

approvals were suspended. Prosthetics would only be allowed in approved emergency circumstances.

Outline of the arguments of the parties

14. For the Health Service Executive, the argument centred on the words within the 1999 revision of the contract which

acknowledged the entitlement of the funder to take not just a wide range of measures but whatever measures were necessary to

meet its budget constraints. This acknowledgement was contended to be one entitling the Health Service Executive “to unilaterally

amend the contract … during the currency of the contract and because of budgetary considerations to vary the range of public

health treatments covered by the” scheme. In so far as it was a settled principle of law that a power to unilaterally vary a contract

must be expressed in clear and unequivocal terms, it was contended that these words could not be ignored and to construe the

contract as a whole as requiring that the 1994 and 1999 arrangements as to funding must always be left in place would be to remove

an essential component that had been agreed in negotiation by both parties. In order to do that, the argument went; a principle

would have to be evolved whereby certain sections of a contract could be downgraded. One such inadmissible approach, the funder

declared, would be merely to regard clauses of a contract not to the liking of the other party as recitals, as opposed to binding terms.

Such an approach was not mandated by law, it was contended. Further, in written submissions, it was stated that every dentist

entered into the 1994/1999 contract and that through working the contract over a decade these particular dentists had become

bound by the collective agreement entered into by their union.

15. For Martin Reid and James Turner it was argued that the clearest possible words were necessary in order for one party to a

contract to be given the power to unilaterally vary its terms. In terms of the meaning of this contract, it was said that the words as

to budget were clearly qualified by the limited circumstances, within the meaning of the contract, within which a health board might

defer treatment. This therefore meant, the argument went, that no health board had the right to refuse to fund treatment which was

clinically necessary in accordance with the arrangements set out. The statutory wording referenced in the contract, the Health

(Amendment) (No. 3) Act, 1996 section 2(1)(a), was contended to be so weak in terms of the conferring of authority as to not

support such extreme measures as fundamentally changing the entire nature of the arrangements between health boards and

dentists. The contract was said to have discretionary elements in favour of health boards within it. These elements included an

entitlement to defer treatment or to not approve more complex treatments on clinical grounds. Consequently, the argument went, the

health boards could not unilaterally change the nature of the agreement so that an entire range of treatments that were agreed for

funding would be denied to patients as this was not within their discretion. From 1999 on it had been agreed that a range of “above

the line” treatments would be funded and it was said that the contract did not give the power, however much discretion had been

vested in the Health Service Executive, to replace that distinction with one whereby only emergency dental treatment was fundable.

In any event, it was urged by the dentists that the Health Service Executive had failed to prove that this collective agreement

entered into in 1999, if it granted such unilateral power, was in fact a term of the individual contract between them as dentists and

the funder: in the absence of such proof, there was no privity of contract.

Binding nature of a collective contract

16. Both Martin Reid and James Turner have been members of the Irish Dental Association over many years. Each disputes the

applicability of the 1994/1999 contract to them, particularly the 1999 revision. The grounds for that contention are weak. Martin Reid

entered the scheme in January 2001 and the version of the contract which he exhibits in the affidavit which he placed before the

High Court includes the 1999 revision. James Turner first entered the scheme on 8th November 2005 but withdrew from it on 2nd

August 2007. He then re-entered the scheme from 10th January 2008 and remained within the scheme from then on. His contract is

the same in substance as that of Martin Reid and a slightly different wording on a few clauses makes no legal difference. Once the

1999 revision was agreed with the Irish Dental Association, the affidavit evidence on behalf of the Health Service Executive was that

the new forms of the contract were sent to all participating dentists on 23rd December 1999. Thereafter, all participating dentists had

to submit forms in a new and revised format that was in line with the 1999 revision of the contract. Further, and as a matter of

ordinary sense, as to what form of treatment, whether extraction, restoration or tackling gum disease, were allowable was applied for

by participating dentists on the basis of the 1994/1999 contract. Refusal, interactions with appointed officials, from the point of view

of validation and querying of bills or inspection, likewise took place within a frame of reference which was solely applicable to that

revised contract. Thus it is difficult to see how it can be argued that neither dentist was bound by the 1999 revision. The contract

had been affirmed multiple times by these dentists in the most practical way.

17. 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. In general, collective agreements bind the union and bind the employer in the ordinary way. They are a contract

between two bodies and enforceable as such. But, the membership of a union, or of an employers’ group, may be at one remove from

such a contract and not privy to it. When an agreement is negotiated with the intention of having a particular effect on relations

between two bodies, it is difficult to argue that no legal effect was intended as between them, as opposed to their membership. As

Megaw LJ held as to disproof of the binding nature of such agreement between unions and employers in Edwards v Skyways [1964] 1

WLR 349 at 355, “in a case of this nature the onus is on the party who asserts that no legal effect was intended and the onus is a

heavy one.” Terms in a collective agreement may be so aspirational as opposed to practical, however, as to lack legal substance;

Ardmore Studios v Lynch [1965] IR 1. On the micro level, as between an individual employer whose representative association has

entered into a collective agreement with the union or group of unions and as between a union member whose union has purported to

change the terms and conditions of employment with a particular employer on his or her behalf, any analysis as to whether the

contract is individually applicable or not is heavily fact dependent. It may be that a representative association accepts into

membership only those who will agree to the binding authority of their negotiations on behalf of members. That may affect the

individual employment contract between each worker and their employer. If that is so, it will be a matter of construction of a contract

as to whether there is authority to bind individual employees through union negotiation with an employer. An individual employment

contract may contain an express provision that it may be altered under the terms of a stated negotiating procedure or through

collective agreement with the union representing the employee. That is, again, a matter as to how contracts may be differently

constructed so as to enable alteration through negotiation of a collective kind. Some agreements, on the other hand, of their nature

may be essentially collective to the bodies involved, may impose obligations which are outside the scope of whatever authority has

been given to the representative body to negotiate or may confer rights on persons outside the individual employment relationship;

see Hepple and O’Higgins - Individual Employment Law (London, 1971), chapter 7 and McDermott – Contract Law (Dublin, 2001)

13.63-13.67. There may also be statutory intervention in the preservation of conditions of employment or for their alteration through

collective negotiation, in which case, the issue may be the effect of legislation on individual contracts. This most often happens on

the sale of a State enterprise to the private sector with rights reserved to, or defined in respect of, transferred workers by statute.

18. In contrast to this situation, where Martin Reid and James Turner worked this contract over a decade and made no complaint as

to the applicability of the 1999 terms, is the case of Goulding Chemicals Ltd v Bolger [1977] IR 211. There, a factory producing

fertiliser was to be shut down. The relevant unions negotiated redundancy payments on behalf of their members, which included the

nominal defendant. He was part of a minority group of workers. This dissenting group at all times protested the closing of the factory

and vehemently disavowed the nature of the deal reached with the employer by their union. In the Supreme Court, Parke J at page

242 regarded the stance taken by that minority as a “defiance of the normal democratic procedures” and one which was a “strike at

the whole principle of ordered collective bargaining under the authority of properly elected union representatives.” Nonetheless, there

was held to be no privity of contract between the dissenting workers and what had by now become their ex-employer. O’Higgins CJ,

at page 231, gave his view that through negotiation “a valid contract was thereby created between these unions and the plaintiffs.”

That union-employer contract, however, did not bind the dissenting employees, though members of that union. The submission of lack

of privity on behalf of the minority group was considered from the point of view of fact. While it might be convenient for dissenting

members to be bound by a collective agreement, as the plaintiff suggested was so, that was not the law:

This submission must be considered in the light of the evidence, which was uncontradicted, that the defendants at all

times opposed the conclusion of any agreement with regard to the closing of the plant and made it abundantly clear, both

inside the union and to the plaintiffs, that they would not accept any agreement to this effect. I find it hard to accept

that in such circumstances the defendants can be bound by an agreement which they have expressly repudiated and

opposed. It seems to me to hold them bound would be contrary to all principle. The only basis put forward for suggesting

that they should be banned was that they did not resign and continued to be members of the union. The rules of the

union were not put in evidence but I would find it very difficult to accept that membership of an association like a union

could bind all members individually in respect of union contracts merely because such had been made by the union. I

cannot accept for these reasons that this ground of appeal as well founded.

19. In this instance, the dentists working the detailed procedures and conditions of this contract without protest correctly gives rise

to the inference, as the trial judge held, that the full terms of the 1994/1999 contract were mutually accepted. There is, in

consequence, no basis for disturbing that finding of Murphy J.

Construction of this contract

20. The basic rule for the construction of a contract is that stated by Laffoy J in UPM Kymmene Corporation v BWG Limited

(unreported, High Court, 11 June 1999) [1999] IEHC 178 thus:

The basic rules of construction which the Court must apply in interpreting the documents which contain the parties’

agreements are not in dispute. 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.

21. This statement mirrors the restatement of the law by Lord Hoffmann in the House of Lords in ICS v West Bromwich BS [1998] 1

WLR 896 at pages 912 to 913, which has been approved any number of times in this jurisdiction especially in Analog Devices BV v

Zürich Insurance Company [2005] 1 IR 274. Contracts must be given business efficacy, since negotiations take place for a purpose,

most commonly to render certain the obligations of the parties in language which makes it mutually clear what each expects the other

to do. Thus, the objective meaning of words within a contract are informed by an objective consideration of the background

knowledge of the parties to whom the contract is addressed; The Starsin [2004] 1 AC 715 at 731. Thus interpretation is “not a

question of what one party actually intended, or what the other party actually understood to have been intended, but rather what a

reasonable person in the position of the parties would have understood the words to mean”; Treitel – The Law of Contract, 13th ed.

(London, Peel ed, 2011) 6.009. Where there is disconnect in accord, mistake or rectification may offer remedies in particular and well-

defined circumstances. These are not argued for here. This is not a question of whether the background is more important than the

words but, rather, what objectively the words would have been taken to mean by a reasonable person in the position of the parties

at the time of making the contract and with knowledge of the factual circumstances into which it was designed to fit. In this regard,

it is less than helpful to reference other decided cases as to the meaning of a particular clause: if what is in question is an individual

contract in consequence of negotiation, then every section of the text must be given meaning in the light of the wording used.

Context of wording informs the meaning of particular clauses. As to whether something may be regarded merely as aspirational, or as

a preliminary introduction intended to have no legal effect, or as a crucial clause around which the entire meaning of the contract

turns – all of this must be a matter for individual interpretation. Clauses are to be judged as to their efficacy and meaning as part of

an overall written document. As Griffin J observed in the context of an insurance policy in Rohan Construction and Rohan Group PLC v

Insurance Corporation of Ireland PLC [1988] ILRM 373 at 377, the “whole of the policy must be looked at and not merely a particular

clause.” If ambiguity exists in relation to the meaning of language, then is right to choose that meaning which fulfils the commercial

purpose of the agreement as ascertained from the entire text seen in the light of the background facts; Cooperative Wholesale

Society Ltd v National Westminster Bank Plc [1995] 1 EGLR 97 at 99.

22. No complaint is made on the appeal as to the exclusion by the trial judge of extrinsic evidence beyond the background facts,

including the September 1999 exchange of letters referred to above. Part of the background to a series of contracts, however, may

be the form in which the relevant text stood at the time of an earlier iteration before being changed by negotiation. Changes to

commercial contracts are not easily to be understood as having been made purposelessly.

23. In the light of those principles, it is difficult to accept the contention on behalf of Martin Reid and James Turner 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” is merely to be regarded as a recital of circumstance, and one which must, at that, be disregarded.

In entering into the specific obligations in 1999, the Health Service Executive declares that it is “obliged to live within … monetary

allocations.” It is possible that taking that last statement on its own might be argued to have only bound the Health Service

Executive into deferring approval “in certain limited circumstances, in accordance with the provisions of the Health (Amendment) Act

1996.” But this is a contract where both sides entered into negotiations from the point of view of improving access to dental services

within the context of a funder, as party to the contract, which has unilaterally reserved all measures necessary to comply with its

spending obligations under the delegated budget. That wording cannot be regarded as merely aspirational in the context of the

admitted background documents. It is clear, from the exchange of letters in September 1999, that a revision of the contract was only

possible on the basis of undermining what had been, pursuant to the 1994 version of the contract under clause 7, a mere

acknowledgement of “the statutory responsibility” of the health boards for “the provision of dental services … and to ensure the

management of such services.” It has to be significant, therefore, in construing this contract, that this provision was entirely

overridden. It was replaced in 1999 by a clause which is not to be downgraded or ignored through any description of it as a recital or

otherwise. This gave the funding party virtually untrammelled choice in withdrawing funding from particular forms of dental

treatments. The new agreement in 1999 would not have been entered into but for the acknowledgment by the Irish Dental

Association in the letter of 17th September 1999, which replaced the wording of that old clause 7 from 1994, with an entitlement from

1999 onwards to act on the basis of budget constraints. This clause was expressed in the widest possible form.

24. 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. While it is clear that while the power to unilaterally alter a contract in the

form agreed between parties is unusual, there is no basis upon which a court can change an unambiguous meaning through the

application of any principle which contradicts express words. From the point of view of the fundamental principle of accord, contracts

without unilateral alteration clauses require consultation and agreement prior to being changed, but a term against unilateral

alteration is not to be read into a contract merely because that approach might seem beneficial. A court cannot override express

terms but must affirm them. In Hickey v Health Service Executive [2009] 3 IR 156, it was expressly required that before the Minister

for Health might direct change in the rates payable to community pharmacy contractors, first there had to be a consultation with the

relevant committee of the Irish Pharmaceutical Union. Such a clause had to be construed in its ordinary sense. That was the meaning

of that particular contract. There is no such requirement in this contract. At the opposite end of the spectrum are cases where an

economic crisis may demand alterations to contracts entered into by the State at a time when resources were more readily available,

but in the absence of enabling contractual provisions or statutory intervention, binding contractual relations must remain in place;

Irish Pharmaceutical Union v The Minister for Health and Children and Another [2007] IEHC 222 per Clarke J at 3.13, 7.3, 7.4.

25. Finally, it might be commented that while Murphy J was invited to enter into an analysis of the construction of statutes on the

basis of the relevant section of the Act of 1996, the legislative wording in question is not as strong as that which is contained in the

contract revision of 1999. Therefore, and correctly, it was not thought necessary by the parties on this appeal to engage that issue.

Result

26. In the circumstances, no error has been identified in the judgment of the High Court and this appeal against the judgment of

Murphy J must therefore be dismissed.