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Court dismisses appeal in dispute over payments for use of private hospitals in pandemic

While some €53.7 million was paid, Oval Topco claimed a failure to pay some €6.6 million was a breach of a legally binding agreement

The Court of Appeal upheld a decision by the High Court that Oval Topco Ltd and its operating firms had to repay to the HSE €673,000 for interest on loans held by the private hospital company

Fri Mar 1 2024 - 18:37

A court has dismissed an appeal over a dispute related to an alleged €6.6 million shortfall in some €53.7 million paid by the Health Service Executive (HSE) for the Mater private hospital group to make its facilities publicly available during the Covid-19 pandemic.

The Court of Appeal (CoA) upheld a decision by the High Court that Oval Topco Ltd and its operating firms had to repay to the HSE €673,000 for interest on loans held by the private hospital company.

The court also ruled they were not entitled to some €830,600 for depreciation and dismissed the remainder of Oval Topco’s monetary claim.

Oval Topco, whose parent is Luxembourg firm Oval Healthcare Infrastructure Sarl, acquired the hospitals in the Mater group for some €603 million in 2018. Oval Healthcare is in turn majority owned by InfraVia IV Invest Sarl and by Oval Co-Investment Fund SCSp.

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Oval Topco, along with its subsidiary companies Mater Private Hospital, Mater Private Cork Ltd and Spireview Equipment Unlimited Co, which operates the Limerick Radiotherapy Centre, sued the HSE in 2020.

The HSE had agreed with Oval Topco that the group would make their hospitals’ “full capacity and services” available to the HSE for the treatment of public patients, both those suffering from Covid-19 and otherwise.

While some €53.7 million was paid, Oval Topco claimed a failure to pay some €6.6 million was a breach of a legally binding agreement in which its facilities were made available in the early months of the pandemic. This meant none of its normal private work was available, it was claimed.

The HSE denied the claims and counterclaimed for the return of just over €1 million it had paid towards interest costs which Oval Topco claimed for on its financing arrangements to buy the hospital group.

The HSE claimed the finance costs were “a mechanism for value extraction for Mater Private’s shareholders or represent a distribution to shareholders”. Oval Topco denied that claim.

The arrangement with the HSE was for the first three months of the pandemic, extendable at the option of the HSE, with the plaintiffs providing monthly detailed costs statements.

The HSE failed to make payment in 2020 relating to €4.6 million for June along with a balancing payment of just over €2 million for May, it was claimed. High Court proceedings followed.

In September 2022, the High Court dismissed most of Oval Topco’s claims. It did find in favour of the company regarding a claim that the HSE had breached another clause in the agreement by refusing to agree to refer the dispute for expert determination.

Oval Topco and its co-plaintiffs appealed on some 50 grounds. They included that the High Court judge had erred in failing to address the expert evidence, in his interpretation of the word “service” in the agreement, in failing to allow interest on a loan in the context of the acquisition of a business, and in his interpretation of “operational costs”.

On behalf of the three-judge CoA, Mr Justice Donald Binchy upheld the High Court judge’s decision.

Oval Topco had argued the High Court judge had erred in deciding about the “use of infrastructure” or an allowance for normal wear and tear.

The CoA said the exercise undertaken by the High Court judge in his analysis of this issue had been undertaken in a manner entirely consistent with the well-established principles of contractual interpretation and with the guidance of a 2017 Supreme Court decision.

Oval Topco had also disputed the High Court decision concerning interest payments.

The CoA said the Oval Topco plaintiffs had failed to establish that the interest costs incurred by them under their acquisition loans were related to “the ongoing provision and operation of the service”.

It followed that the High Court judge had been correct in his conclusion that those interest costs were not operational costs within the meaning of the agreement with the HSE, it said. They were therefore not entitled to reimbursement for them.

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