High Court of Ireland Decisions
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Cite as: [2015] IEHC 44
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Judgment
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Neutral Citation: [2015] IEHC 44 THE HIGH COURT [2013 No. 3499S] BETWEEN DAVID GUNNING PLAINTIFF AND
COILLTE TEORANTA DEFENDANT JUDGMENT of Kearns P. delivered on the 6th day of February, 2015 The plaintiff’s claim in these proceedings is for the sum of €299,001, together with interest, in respect of performance related bonus payments to which he had been deemed entitled by the Remuneration Committee of the defendant by whom he was employed as Chief Executive Officer until the 19th March, 2013. The plaintiff claims he is entitled to this sum pursuant to the terms of his contract with the defendant made on the 1st February, 2006, and in particular clause 5.12 thereof. However, it is pleaded in the defence that the defendant was precluded from making the payment by virtue of a purported directive contained in a letter dated the 8th April, 2013 sent to the defendant by the Minister of Agriculture, Food and the Marine pursuant to the provisions of s.36 of the Forestry Act 1988. Given that the plaintiff’s contract with the defendants had by that time expired, this directive, if effective, would amount to a forfeiture of accrued performance bonuses to which the plaintiff had been deemed entitled by the Remuneration Committee of the defendant at a meeting held on the 5th March, 2013. Accordingly, it may be seen that a very net issue arises for consideration in this case, namely, whether the so-called directive contained in the letter of the 8th April, 2013 was one which could have the effects contended for by the Minister in this case. THE FORESTRY ACT 1988 Section 35 of the Act provides that there shall be a Chief Executive of the company and in relation to such Chief Executive it is provided as follows at s.35(6):-
FACTS His responsibilities were to act a Chief Executive of the company and to carry on, manage and control the administration of the company subject to the lawful directions of the Board. It is clear from the documentation before the Court that the plaintiff was conspicuously successful in the performance of his duties under the contract. In addition to his basic pay, he earned significant performance related bonuses during the currency of his contract. When the economic downturn took place, an issue arose as to whether Mr. Gunning’s remuneration should be reduced by the non-payment of bonus payments. This “appeal” was not unlike appeals made to other public service employees who had contractual arrangements which fell outside the scope of the FEMPI legislation. On the 23rd June, 2009, the then Minister for Agriculture wrote to the Chairman of the defendant in relation to the non-payment of bonuses to Mr. Gunning, stating:-
I do not wish to enter into what are private contractual matters between you and the Chief Executive Officer, indeed it would be very wrong of me to do so. It would however be remiss of me, as the Government Minister to whom the Board reports annually, not to highlight the very negative impact such a large bonus payment would have for both Coillte, which is a State body and, I suggest, your Chief Executive Officer. While there may be no specific legal reason why this bonus of some 20.5% of Mr. Gunning’s annual salary, which is currently fixed at a figure of some €294,027, should not be paid, I take the view that both the Board and Mr. Gunning should strongly consider the current economic position that the country finds itself in and the best interests of Coillte, Mr. Gunning and the overarching wider public interest, in deciding to cancel the proposed bonus for 2008. If the bonus is paid out, and that is for Coillte to decide, I have to make it clear that it will be for Coillte to publicly defend its decision in this regard and I will, if asked, indicate that I strongly request to the Board, notwithstanding the obvious legal and contractual obligations, not to make the bonus payment for 2008. As I say this is a matter for the Board, but it is a decision that is closely related to the quality of its governance of Coillte and while there may be clear legal reasons why the bonus should be paid, these reasons could by a simple voluntary agreement be easily be put to one side, resulting in a positive and realistic decision in tune with the financial times Ireland finds itself in and one which shows strong fiscal corporate governance on the part of Coillte and its CEO.” In a further letter to the Chairman of the defendants dated the 26th January, 2011, the previous Minister restated the position:-
Mr. Gunning elected not to seek the renewal of his contract on the terms offered which prompted the letter from the present Minister dated the 8th April, 2013 wherein he recorded that he and his department were strongly opposed to the payment of any performance related bonuses to CEOs of State companies. In that letter, the Minister went on to state:-
At the outset it strikes the Court as extraordinary that a letter with such far reaching consequences from Mr. Gunning’s point of view (given that it purported to forfeit and confiscate accrued entitlements) stopped short of describing the Minister’s letter as a “directive” as required by s.36 of the Act itself. Nor has there been any evidence to show that this decision or directive was arrived at or issued with the consent and agreement of the Minister for Finance as required by the terms of the section. A number of cases were cited in support of the arguments advanced on behalf of Mr. Gunning. Reference was made to the decision of the High Court in Clancy & Anor. v. Ireland [1988] I.R. 326 which found that the Offences Against the State (Amendment) Act 1985, while it amounted to a permissible delimitation of property rights in the interests of the common good, could not amount to a confiscation of property or deprive a claimant of the entitlement to a fair hearing in respect of monies over which he asserted a claim. Similarly in Cox v. Ireland [1992] 2 I.R. 503, the plaintiff complained that having been convicted in the Special Criminal Court, the effect of s.34 of the Offences Against the State Act 1939 was that he immediately forfeited his employment as a community school teacher and was disqualified from holding any like office or employment for a period of seven years. Barr J. found that the section caused the loss of pension rights already earned prior to conviction. In the Supreme Court it was found that the unilateral variation and suspension of contractual rights, including rights which may involve the entitlement to a pension to which a contribution over a period has been made, constituted a major invasion of those particular property rights. The Supreme Court found that it was established that notwithstanding the fundamental interest of the State which the section sought to protect, the provisions of s.34 of the Act of 1939 failed insofar as practicable to protect the constitutional rights of the citizen and were, accordingly, impermissibly wide and indiscriminate. Given that s.36 does not provide in any way for the forfeiture of vested property rights, and given further that in construing s.36 the Court must apply the presumption of constitutionality and in this regard must apply the double construction rule, the construction contended for by the defendant would offend Article 40.3.2 of the Constitution which requires the State to vindicate the property rights of every citizen. DECISION Quite why events took the course they did may perhaps be gleaned from the Minutes of the Remuneration Committee meeting held on Tuesday, the 5th March, 2013, a meeting which was attended by Mr. Kevin Smyth, Assistant General Secretary from the Department of Agriculture. The minutes record that Mr. Smyth, in his contribution to the meeting, said that:-
The defendants have been unable to cite a single authority which would support the confiscation sought in this case. The submissions filed on the Minister’s behalf are stated to represent the culmination of a four year long “battle” between the Minister and his department on the one hand and the Chairman and Board of Coillte on the other in relation to the question of whether the plaintiff should be awarded and paid bonus payments for that period. It is submitted on behalf of the defendants that as the Act contemplates performance related bonuses not being awarded or paid in light of a change of Government policy, the Court should not enforce the plaintiff’s claim herein. An interesting point arose during discussion at the hearing in this case as to whether the Minister was precluded or estopped from arguing the case contended for by reference to the letters sent by his predecessor which clearly acknowledged the absence of any legal basis for non-payment of bonuses provided for by the contract. In ease of the defendants, I do not propose to determine the case on this basis, satisfied as I am that on any proper construction of s.36, it cannot be applied retrospectively so as to deprive a citizen of already accrued remuneration entitlements. It would have been a different story altogether if a directive, such as that contemplated by s.36, had been given during the currency of the plaintiff’s contract of employment, with regard to as yet unearned and unpaid bonuses. There could be no complaint about a prospective measure of this sort and there clearly is a statutory basis for such an intervention. However, for the reasons already indicated, such an intervention could never be justified as a retrospective exercise in forfeiture. Even if I am mistaken in so holding, it is quite clear that the purported confiscation did not comply with the requirements of s.36 of the Act. Having regard to the penal nature of the measure sought to be imposed upon the plaintiff, the letter would have to have been expressed as a directive and would further require to be accompanied by some evidence that the same had been issued with the consent of the Minister for Finance. No such evidence was forthcoming in this case. For all these reasons I am satisfied that the plaintiff is entitled to recoup and to be paid the sums which he earned during the period of his employment with the defendants or, to put it another way, I find that the defendants are not entitled to deprive him of these accrued entitlements which had been earned prior to the letter of the 8th April, 2013. At the conclusion of the hearing I invited brief submissions from both sides on the question of interest on the monies due to the plaintiff, which had been claimed on his behalf at the 8% rate of Court interest. Having regard to the true rate of interest payable over the last two years, the Court will, in the exercise of its discretion, award the sum of 2% interest on the sum due and owing to the plaintiff |
