CIE chief executive Mr Michael McDonnell yesterday failed to get a High Court order entitling him to the benefits of a new £193,000 (€245,059) a year contract pending the outcome of legal proceedings over his pay and conditions.

Mr Justice Kearns said he believed damages would be an adequate remedy should Mr McDonnell (58) be successful in his action. He directed the legal action be heard in May next year. Mr McDonnell's contract with the company was amended last year from a permanent posting in CIE at £109,000 to a one year "revolving" contract with a salary of £193,000.

Mr McDonnell claims he is entitled to the improved salary and conditions. CIE claims the new contract was never formally approved by either the Department of Public Enterprise or the Department of Finance.

It is understood Mr McDonnell had indicated a willingness to take early retirement on the terms of the disputed contract. The conditions sought by Mr McDonnell would, it is claimed, given him a pension of more than £90,000 a year. Mr Bill Shipsey SC, for Mr McDonnell, said the new pay and conditions were contingent on satisfactory performance with no expectation beyond 2003. Following the resignation of the chairman, the new part-time executive chairman had queried Mr McDonnell's revised contract, claiming he did not have a copy. It was provided by Mr McDonnell and, after further correspondence, it was claimed the Department of Public Enterprise and Department of Finance had not approved the revised agreement. This was not known to Mr McDonnell.

Mr Shipsey said the company had made the case with increasing stridency from July this year that there was no formal sanction by the Departments of Public Enterprise and Finance of Mr McDonnell's contract and that it needed to be regularised. That situation continued to October and in November matters came to a head. At that stage, it was maintained in correspondence that the contract was beyond the powers of CIE on the basis that the formal consent of the two Ministers had not been obtained.

Mr Shipsey said a meeting had taken place between representatives of Mr McDonnell and CIE and a proposal was put to Mr McDonnell, which would amount to a termination package at the old salary scale and a requirement that he refund to CIE the £100,000-odd of increased salary he had received, which had been back-dated to July 1999.