Callinan v Vhi

• Jurisdiction: Ireland
• Judge: Keane J.
• Judgment Date: 22 April 1993
• Neutral Citation: 1993 WJSC-HC 3124
• Docket Number: 1991/13916P.
• Court: High Court
• Date: 22 April 1993

CALLINAN v. VHI

BETWEEN

ANNE CALLINAN, MARY DEANE, NORA CRONIN, KATHLEEN WALSH AND ANNE CODY

PLAINTIFFS

AND

THE VOLUNTARY HEALTH INSURANCE BOARD

DEFENDANTS

1993 WJSC-HC 3124

1991/13916P.

THE HIGH COURT

Synopsis:

CONTRACT

Formation

Negotiations - Failure - Parties - Business - Continuance - Services - Payment - Demand - Plaintiff's claim for payment on basis of ~quantum meruit~ - Measure of compensation - Statutory corporation being a monopoly - Whether corporation abused dominant position in trade for services - Voluntary Health Insurance Act, 1957, s. 4 - Competition Act, 1991, ss. 3, 5 - (1991/13916 P - Keane J. - 22/4/93)

|Callinan v. Voluntary Health Insurance Board|

INSURANCE

Corporation

Monopoly - Statute - Powers - Dominant position - Abuse - (1991/13916 P - Keane J. - 22/4/93)

|Callinan v. Voluntary Health Insurance Board|

DAMAGES

Assessment

Basis - Contract - Negotiations - Failure - Plaintiff - Services rendered during negotiations - Services rendered in anticipation of concluded contract - Plaintiff's claim to payment on ~quantum~ meruit basis - (1991/13916 P - Keane J. - 22/4/93)

|Callinan v. Voluntary Health Insurance Board|

WORDS AND PHRASES

"Dominant position"

Corporation - Business - Insurance - Monopoly - Abuse - Proof - Failure - (1991/13916 P - Keane J. - 22/4/93)

|Callinan v. Voluntary Health Insurance Board|

WORDS AND PHRASES

"Gain"

Corporation - Monopoly - Business - Insurance - Illness - Expenses - Indemnity - Statutory limit on corporation's income - Income not to exceed moneys necessary to meet charges and to provide proper reserves - Whether corporation engaged for gain in supply of service - (1991/13916 P - Keane J. - 22/4/93)

|Callinan v. Voluntary Health Insurance Board|

Citations:

HEALTH ACTS 1947 – 1991

IRISH LIFE ASSURANCE CO LTD V DUBLIN LAND SECURITIES LTD 1986 IR 772

EAST CORK FOODS V O'DWYER STEEL 1978 IR 103

FOLENS & CO V MIN FOR EDUCATION & ORS 1984 ILRM 265

WILLIAM LACEY (HOUNSLOW) LTD V DAVIS 1957 2 AER 712

BREWER STREET INVESTMENTS LTD V BARCLAYS WOOLLEN CO LTD 1954 1 QB 428

ROVER INTERNATIONAL LTD & ORS V CANNON FILM SALES LTD (NO 3) 1989 3 AER 423

VOLUNTARY HEALTH INSURANCE ACT 1957 S3

VOLUNTARY HEALTH INSURANCE ACT 1957 S4

VOLUNTARY HEALTH INSURANCE ACT 1957 S4(1)

HEALTH ACT 1970 S54

VOLUNTARY HEALTH INSURANCE ACT 1957 S22

VOLUNTARY HEALTH INSURANCE ACT 1957 S23

AG V GREAT EASTERN RAILWAY CO 1880 AC 473

COMPETITION ACT 1991 S5

COMPETITION ACT 1991 S3(1)

DEANE & ORS V VOLUNTARY HEALTH INSURANCE BOARD UNREP SUPREME 29.7.92 1992/6/1609

VOLUNTARY HEALTH INSURANCE ACT 1957 S4(4)

COMPETITION ACT 1991 S10

COMPETITION ACT 1991 S4

TREATY OF ROME ART 85

TREATY OF ROME ART 86

TREATY OF ROME ART 90

MASTERFOODS LTD V HB ICE CREAM LTD 1993 ILRM 145

HOFFMAN-LA ROCHE V EC COMMISSION 1979 3 CMLR 274

ITALIAN REPUBLIC V COMMISSION OF THE EUROPEAN COMMUNITIES 1985 ECR 873

CENTRE BELGE D'ETUDES DE MARCHE - TELEMARKETING (CBEM) SA V COMPAGNIE LUXEMBOURGEOISE DE TELEDIFFUSION SA 1984 ECR 3261

COMPETITION ACT 1991 S5(1)

VOLUNTARY HEALTH INSURANCE ACT 1957 S4(2)

COMPETITION ACT 1991 S3

TREATY OF ROME ART 7

TREATY OF ROME ART 87

TREATY OF ROME ART 88

TREATY OF ROME ART 89

TREATY OF ROME ART 91

TREATY OF ROME ART 92

TREATY OF ROME ART 93

TREATY OF ROME ART 94

Keane J.

1 The greatly increased cost of providing health care has confronted a number of countries, including Ireland, with major problems since these trends began to accelerate in the 1980's. Those problems are at the root of the troubled relationship between the St. Francis Medical Centre in Mullingar and the Defendants which has led to the present proceedings.

2 The Plaintiffs are trustees of a community known as the Congregation of the Franciscan Missionaries of our Lady and are the owners of the St. Francis Medical Centre which is a private hospital located at Ballinderry, Mullingar. The Defendants (whom I shall refer to as "the V.H.I.") are a statutory body established under the Voluntary Health Insurance Act1957for the purpose of providing schemes of voluntary health insurance.

3 For a significant part of the period to which these proceedings relate a large proportion of the patients attending the Plaintiffs” hospital were V.H.I. patients. While the figure would obviously have fluctuated, it was generally about 70 per cent. For many years, patients who were treated at the hospital paid the bills themselves and then sought reimbursement from the V.H.I.. That method of billing V.H.I. patients, which was also in use in the other private hospitals throughout the country, was changed in 1989. In that year, the financial problems being encountered by the V.H.I. as a result of escalating health costs, led to the introduction of what was called the V.H.I. Recovery Programme. A feature of that programme was the conclusion of agreements between the V.H.I. and the individual private hospitals, one of the objects of which was to ensure that the fees charged by the private hospitals were frozen at the level obtaining at that time for a specified period, i.e. the period of 16 months ending on June 30th 1990. The manner in which the V.H.I. has sought to implement that agreement and the events which occurred since it expired on June 30th 1990 have given rise to three different areas of dispute between the Plaintiffs and the V.H.I. which constitute the subject matter of the proceedings.

4 1. The agreement incorporated two elements which were at the heart of much of the subsequent controversy between the parties, i.e. a "cash limit" and an "inclusive daily rate", the latter generally being referred to as theper diem rate. In the case of every hospital participating in the agreements, the payments made by the V.H.I. to the relevant hospital were under no circumstances to exceed the cash limit. Subject to a crucial qualification in the case of the Plaintiffs” hospital, the figure representing the cash limit was the estimated total of the benefits paid by the V.H.I. in respect of the hospital for the period of 12 months immediately preceding the 16 months period. The hospital could opt for one of two methods of payment: option A, which was chosen by the Plaintiffs, substituted a system of direct payment on a fortnightly basis by the V.H.I. to the hospital for the previous method under which the patients paid the bills themselves and were reimbursed by the V.H.I. Under the old system, the patients were billed separately in respect of maintenance and what were called the "Ancillary Charges", e.g. drugs, theatre, pathology and X-ray fees. Under option A, they were to be paid the daily inclusive orper diem rate already referred to. The crucial qualification in respect of the cash limit figure in the case of the Plaintiffs” hospital was that it embodied a reduction of 15% in the total of benefits paid by the V.H.I. for the preceding 12 months period. The Plaintiffs say that they were never told by the V.H.I. that the cash limit had been reduced by 15% in this manner and that, in the result, the payments made by the V.H.I. to them in respect of the 16 months period fell short of what they would have been entitled to, had this 15% reduction not been applied, by a sum of £281,629.00. The V.H.I. say that the Plaintiffs were aware of the 15% reduction and that, in the result, there was no shortfall in the payments made. That is the first issue which has to be determined.

5 2. Following the expiration of the 16 months period on the 30th June, 1990 negotiations went on between the Plaintiffs, the V.H.I. and their respective financial advisers with a view to reaching a new agreement for the period of 18 months ending on December 31st 1991 which would apply retrospectively to the period from the 30th June 1990 to whenever the agreement was concluded. In the event, no such agreement was ever concluded between the Plaintiffs and the V.H.I. in respect of this period, but V.H.I. patients continued to be treated at the Plaintiffs” hospital. Bills were regularly presented by the Plaintiffs to the V.H.I. in respect of these patients and the V.H.I. made from time to time what were called “interim payments” to the Plaintiffs. The Plaintiffs say that the amounts paid by the V.H.I. during this period fall short substantially of the charges actually made by the Plaintiffs in respect of the patients concerned and which the Plaintiffs say were, in the circumstances, reasonable charges. The Plaintiffs say that the amount due by the V.H.I. to them in respect of this period is the sum of £483,931.00, the claim being made on aquantum meruit basis. The V.H.I. say that these are not reasonable charges and that they have overpaid the Plaintiffs in respect of this period by a sum which they calculate at £109,737.00. That is the second issue which has to be resolved.

6 3. The negotiations between the Plaintiffs and the V.H.I. broke down in June 1991 and the former instructed their Solicitors to take legal proceedings for the recovery of what they claimed were the sums due to them by the V.H.I.. On the 6th September 1991, the Hospital Administrator of the Plaintiffs, Sister Gregory, told the General Manager of the V.H.I., Mr. Tom Ryan, that the Plaintiffs proposed to commence billing patients directly with effect from September 9th. Mr. Ryan in a letter of 14th October 1991 informed the Plaintiffs that, with effect from the 21st October, 1991 the Plaintiffs” hospital would no longer be a "fully participating hospital" as defined in the rules of the V.H.I. and that notice to their subscribers to that effect would be published, in accordance with the rules, on the 15th October, 1991. The Plaintiffs having failed to obtain an interlocutory injunction to restrain the V.H.I. from giving any such notice to their subscribers, the V.H.I. published an advertisement in the national press on the 6th November, which stated...