Irish Pharmaceutical Union v Minister for Health and Children, Ireland and another

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 29 June 2007
• Neutral Citation: [2007] IEHC 222
• Court: High Court
• Date: 29 June 2007

[2007] IEHC 222

THE HIGH COURT

[No. 4573P/2005]

IRISH PHARMACEUTICAL UNION & ORS v MIN FOR HEALTH & ORS

BETWEEN

THE IRISH PHARMACEUTICAL UNION, MARK GOULDSON, GOULDSON PHARMACY LIMITED, HUNTERS PHARMACY WINDY ARBOUR LIMITED, BELMIRE LIMITED TRADING AS BRITTON'S PHARMACY, CORR'S PHARMACY (CLONSHAUGH LIMITED)

PLAINTIFFS

AND

THE MINISTER FOR HEALTH AND CHILDREN, IRELAND AND THE ATTORNEY GENERAL

DEFENDANTS

HEMPENSTALL & ORS v MIN FOR ENVIRONMENT 1994 2 IR 20 1993/3/645

GORMAN & ORS v MIN FOR ENVIRONMENT & ORS 2001 2 IR 414 2001/11/2930

ROTHMANS OF PALL MALL (NZ) LTD v AG 1991 2 NZLR 323

O'KEEFFE v RYANAIR HOLDINGS PLC 2002 3 IR 228 2003 1 ILRM 14 2002/22/5610

UNITED DOMINIONS CORP (JAMAICA) LTD v SHOUCAIR 1969 1 AC 340 1968 3 WLR 893 1968 2 AER 904

CONTRACT LAW

Terms

Parties - Incorporation of terms by reference to collateral agreement - Construction - Declaration sought - Unilateral variation - Whether intended to create contractual relations - Whether enforceable contract subsisting - Whether government policy could affect variation - Rothmans of Pall Mall (NZ) Ltd v Attorney General [1991] 2 NZLR 323 considered - Plaintiff granted relief (2005/4573P - 29/6/2007) [2007] IEHC 222

Irish Pharmaceutical Union v Minister for Health

As part of a reform of health services it was provided that free medicines would be dispensed by pharmacists generally where the pharmacist would not charge the patient but would be reimbursed by the State as part of the General Medical Service. The Minister proceeded to freeze these advance payments as a decision of government. The IPU claimed that the Minister was in breach of the agreement originating in 1996 as well as the individual contracts with the pharmacists. Issues arose when the Minister changed the contractual terms between the HSE and the individual pharmacists which gave rise to the proceedings.

Held by Clarke J that an individual pharmacist was entitled to an advance payment in accordance with the terms that had already been agreed between the Minister and the IPU Negotiating Committee. There was no factual basis for a complaint based on delay. There was no basis on which the pharmacists could insist that the current contract continue. The Minister’s decision to discontinue advance payments amounted to a unilateral variation in the contractual terms.

Reporter: E.C.

1 JUDGMENT of Mr. Justice Clarke delivered on the 29th June, 2007.

1. Introduction

2 2 1.1 In the early 1970s a major change occurred in the way in which health services and, most especially for the purposes of this case, pharmaceutical services, were provided free of charge to eligible members of the public. Up to that time persons who were entitled to free medicine were able to obtain prescribed medicines from public dispensaries. However, as part of a major reform of the health services at that time, it was decided by Government that, from then on, free medicines would be dispensed by pharmacists generally in circumstances where the pharmacist concerned would not charge the patient but would be reimbursed by the State. The proposed arrangements formed part of the so-called General Medical Service ("GMS").

3 3 1.2 It was obvious that the agreement of pharmacists would be necessary in order for the scheme to operate and with that in mind negotiations took place between representatives of the first named plaintiff ("IPU") and representatives of the first named defendant ("the Minister"). Those negotiations resulted in an agreement which was recorded in a memorandum of October 1971. On the basis of that memorandum pharmacists voted to accept the arrangements and, thereafter, individual contracts were entered into between participating pharmacists and Health Boards for the provision of pharmacy services. Those individual agreements were in a form subsequently agreed between the Minister's officials and a committee of the IPU.

4 4 1.3 In general terms the way in which the scheme operated was that the pharmacist was reimbursed to an agreed amount for the cost of acquiring the medicine concerned and supplying it to the relevant patient. In addition the pharmacist was paid a dispensing fee. An important part of the original arrangements agreed at that time was the making of a so called "advance" payment. It is clear that the purpose behind the making of an advance payment to pharmacists was a recognition of the fact that it was anticipated that there would be a reasonably significant delay in the administration of claims by pharmacists for reimbursement and payment of their fees for dispensing under the scheme. In those circumstances the advance payment would appear to have been intended to compensate pharmacists for the cash flow difficulty that that delay would give rise to. Obviously, in the corresponding case of the same pharmacist dispensing medicine to a private paying patient, the pharmacist would receive immediate payment.

5 5 1.4 It will be necessary to deal, in due course, and in slightly more detail, with the circumstances in which the relevant memorandum was negotiated. It should also be noted that the relevant agreements were renegotiated in 1996 both as to the arrangements between the IPU and the Minister and as to the form of contract to be entered into between individual pharmacists and the Health Boards Thereafter, the functions of the Health Boards were taken over by the Health Services Executive ("HSE"). It should also be noted that, from time to time, a number of additional schemes came into being whereby pharmacists provided services to patients who were entitled to full or partial state funding in respect of their medicinal requirements. However each additional scheme was separately arranged and agreed.

6 6 1.5 The events which give rise to these proceedings start with a statement by the Minister, in December 2002, to the effect that it was intended to freeze the system of advance payments to pharmacists participating in the GMS. It is of some note that the Minister's statement recorded a decision of the Government to give effect to that freezing of advance payments. The individual contracts between pharmacists and the State were, of course, by that time, with the HSE. However despite the fact that those contracts were with the HSE, it seems that at all times the terms of such contracts were determined, so far as the interests of the State were concerned, by the Minister. In any event the Minister, despite complaints by the IPU, implemented the Government decision and proceeded to freeze the advance payments system. The IPU claims that the actions of the Minister were in breach of the then current agreement, that is to say the agreement negotiated in 1996. In addition the other plaintiffs ("the individual pharmacists") maintain that there has been a breach of their individual contractual entitlements. In some respects the issues which I have to decide narrowed in the course of the hearing and in that context it is appropriate to turn first to the issues which remain for decision.

2. The Issues

7 2 2.1 I will deal firstly with matters which, while raised in the pleadings and/or in the written submissions, are no longer in issue by virtue of the position adopted by, in particular, the plaintiffs at the hearing before me. Firstly it needs to be noted that the legal entitlement of both the IPU and the individual pharmacists was pleaded on a number of bases. However at the hearing it was made clear that the only claim being pursued was one based on contract. It is, therefore, accepted on behalf of all of the plaintiffs that the only legal entitlement which they may have, is to be found in what they contend are the contracts between the various parties. Any claim based on legitimate expectation was expressly abandoned.

8 3 2.2 In addition the plaintiff's abandoned any claim in respect of damages. As I will set out in more detail later in the course of this judgment, the precise decision made by the Government and implemented by the Minister was, in effect, to freeze the amount of advance payments which each pharmacist within the GMS system was entitled to obtain. The scheme, as it had evolved, provided that the advance payment was to be based on the current level of turnover of the pharmacy concerned. In circumstances where, therefore, pharmacy turnover was increasing, so too would the amount of the advance payment increase in line with that increase in turnover. In practical terms, therefore, pharmacists who were already within the GMS scheme have had their advance payment frozen as of the 2002 level. In addition new entrants since that time have received no advance payment. Pharmacies which changed ownership (even where the beneficial ownership remained the same) or location, were treated as "new" and were no longer entitled to any advance payment. It had been suggested that, as a result of that action on the part of the Minister, losses had accrued to the individual pharmacists by virtue of their not having had the use of larger advance payments to which they would have been entitled had the Minister not taken the actions which she did in 2002. However any claim in respect of such losses was expressly abandoned.

9 4 2.3 In those circumstances the only relief sought by the plaintiffs, in substance, was directed towards appropriate declarations to the effect that the Minister had acted in breach of contract in implementing the Government decision to freeze the advance payments in December 2002. The issues which arise are, therefore, about the nature and extent of the relevant contractual relations between the parties and the construction of the relevant contractual documentation.

10 5 2.4 In the order in which it appears to me to be appropriate to deal with the questions which have arisen, the issues seem to be as...