Smithkline Beecham Plc & Ors v Apotex Europe Ltd & Ors

A cross-undertaking in damages is the price of an interim injunction. The court cannot compel an applicant to give one, and cannot retrospectively enlarge an undertaking that was deliberately offered and accepted in limited terms. A third party may benefit only where the undertaking extends to that person; joinder after the injunction has ended cannot create retrospective entitlement.

Recovery is confined to loss suffered by the person entitled under the undertaking. Restitution cannot be used to circumvent that limit, and a claimant cannot recover affiliated companies’ losses. A genuine estoppel by convention raised on pleaded facts should not ordinarily be determined by summary judgment where doing so would create a mini-trial.

The claimants obtained interim injunctions restraining the defendants from disposing of pharmaceutical preparations containing paroxetine hydrochloride. The injunctions were supported by cross-undertakings in favour of the defendants. The action ultimately failed, and an inquiry into damages was to take place.

Two Canadian companies involved in manufacturing and supplying the product sought to be joined and to enforce the cross-undertakings. The defendants also sought to amend the undertakings under the slip rule, relied on estoppel by convention, restitution and third-party loss, and claimed that a profit-sharing arrangement affected the loss recoverable by Neolab. The court considered whether those pleaded claims disclosed a reasonable basis or had a real prospect of success.

1. Slip rule and scope of undertaking. The applications to amend the cross-undertakings under CPR Part 40.12 were dismissed. The undertakings were deliberately offered, settled and accepted in limited terms. The omission of a wider form was not an accidental slip or omission. The court could not retrospectively impose an undertaking which had not been given.
2. Third parties and joinder. The court assumed, without deciding, that the Practice Direction to CPR Part 25 could entitle a non-party to the benefit of an undertaking unless the judge ordered otherwise. However, the express limited undertakings displaced any wider implication. An added defendant could benefit only prospectively during the currency of the injunction. The Canadian companies’ joinder application was therefore dismissed.
3. Nature and measure of recovery. A cross-undertaking is given to the court, although enforced for the defendant’s benefit. It is not a contractual damages claim, but compensation assessed on contractual principles. The undertaking covers loss suffered by the person to whom it extends. It does not permit recovery of another company’s loss. The restitution claim was struck out because it was in substance a claim for the claimants’ own lost profits and sought to circumvent the established absence of a damages remedy without a cross-undertaking.
4. Estoppel. The pleaded estoppel by convention was not struck out and summary judgment was refused. Whether the parties had communicated and acted upon the alleged assumptions required examination of the evidence. Determining that issue summarily would amount to the mini-trial prohibited by CPR Part 24.
5. Third-party loss and profit share. The claim for the Canadian companies’ losses through Apotex Europe was legally unsustainable. The undertaking promised compensation for loss suffered by the defendants, not loss suffered by others. The authorities on contractual recovery of a third party’s loss did not alter that contractual foundation. Neolab could recover its own loss of profit, but not amounts payable to Apotex Inc under an arm’s-length supply agreement, whether calculated as a fixed price or by a profit formula.
6. Parts of the Points of Claim founded on the slip rule, restitution, third-party loss and recovery of amounts payable to Apotex Inc were struck out, or judgment was given for GSK. The estoppel claims remained. The court dismissed the joinder application and reserved the form of order and further directions for the inquiry.

The judgment records that Pumfrey J dismissed the infringement action and revoked the patent on 8 December 2003. The Court of Appeal later reversed the revocation but held that the patent had not been infringed. The present judgment concerned the cross-undertakings and the pleaded claims arising from them.