The Mater Private Hospital group says the HSE unilaterally decided to withhold €6.6 million it was owed under an agreed scheme to make the group's full capacity publicly available when the Covid-19 pandemic broke out, the High Court has heard.
Oval Topco Ltd, along with its subsidiary companies Mater Private (Dublin) Unlimited Company, Mater Private Cork and Spireview Equipment Unlimited Co, which operates the Limerick Radiotherapy Centre, says that decision breached a legally binding agreement in which the group made 100 per cent of its capacity available to the State during the early months of the pandemic, meaning none of its normal private work was available.
In its action seeking orders and declarations that the €6.6 million payment should be made, the Mater Private/Oval Topco group says the payments are entirely related to "cost only" operational matters incurred in making their services available and provided with the heads of terms of the agreement.
The HSE, which is also counterclaiming for more than €1 million for breach of contract, denies the Mater Private claims. It says it is entitled to a set-off against previous payments which it claims included "dis-allowable costs" including interest costs arising from the Mater Private/Oval Topco financing arrangements.
The Mater Private group strongly disputes the HSE's assertions that the finance costs "are a mechanism for value extraction for Mater Private's shareholders or represent a distribution to shareholders".
The HSE also says it is not liable for the costs of the Mater business relating to debts due on the cost of funding loans for the acquisition of the Mater Private group in 2018.
The court heard the group was acquired by the Oval Topco parent group through Luxembourg fund, Infravia Capital Partners, from private equity firm CapVest.
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 on June 19th, 2020, last relating to €4.6 million for June and a balancing payment of just over €2 million for May, it is claimed.
Opening the case on Tuesday on behalf of the Mater Private side, Paul Sreenan SC said, at the time of the agreement with the HSE which came into effect in March 2020, the group did not know for how long it was handing over all its business to the HSE.
It could have been three or six months, or longer, but the longer it went on the greater the risk of the group losing their customer base, which was essentially the privately insured, he said.
The agreement provided that no private work would be admitted to the group's hospitals, which was a very significant commitment, counsel said.
Mr Sreenan said the HSE would say the agreement was good for both sides because, in the light of Covid, the Mater Private group might not get much business anyway.
That might be true of some providers, he said, but not the Mater Private group which largely provides essential surgery and treatment, rather than elective treatment, which would have continued throughout.
Earlier, Mr Sreenan said the agreement provided for “operational costs” and contained various legally binding heads of terms.
In the third month, the Mater Private was "watching, not just day by day but hour by hour" whether the money would come through so that it could maintain its cash flow, counsel said, as it was in a situation where its entire capacity had been sold to one customer.
The dispute arose when, counsel added, the HSE unilaterally decided to withhold payment due under heads of terms on the basis of the executive's interpretation of what it said were dis-allowable costs.
The court should be careful in evaluating the terminology of the HSE, counsel warned, which the Mater Private claims are in some cases inaccurate and in others, tendentious.
The case continues before Mr Justice Denis McDonald.