Smithkline Beecham Plc Glaxosmithkline UK Ltd & Ors v Apotex Europe Ltd & Ors

A cross-undertaking supporting an interim injunction benefits only the persons identified in it. It is an undertaking to the court, rather than a contract between the litigants. An identified beneficiary cannot use contractual rules governing third-party loss to recover another person's losses.

A non-party adversely affected by an injunction has no restitutionary claim to profits which the applicant gained through reduced competition. Restitution following reversal of a court order restores property, or its fruits, taken from one party and transferred to another. It does not compensate consequential loss or transfer an unexploited business opportunity.

Estoppel cannot alter the scope of a court order, create a legal relationship where none existed, or provide an essential cause of action. On a summary judgment application, documents may be assessed without a trial where no disputed facts require resolution.

The respondents owned or licensed a patent concerning the manufacture of paroxetine hydrochloride. They obtained interim injunctions preventing three English companies from selling the proposed product and gave cross-undertakings to compensate those defendants if the court later ordered compensation. Two associated Canadian manufacturers were neither parties nor beneficiaries of the undertakings.

After the patent was held valid but not infringed, the English defendants and Canadian companies advanced claims on the undertakings. Lewison J, in [2005] EWHC 1655 (Ch), rejected claims based on restitution and recovery of third-party losses, but held that an estoppel claim had a real prospect of success.

The defendants and Canadian companies appealed on restitution and third-party loss. The patent owners cross-appealed on estoppel. The central issues were whether a non-party could recover profits gained through an unsuccessful injunction, whether a beneficiary could recover associated companies' losses, and whether estoppel could extend the beneficiaries of a court-ordered undertaking.

1. Disposition. The appeals concerning restitution and third-party loss were dismissed. The cross-appeal concerning estoppel was allowed. The Canadian companies' application to advance claims in their own right was refused. Moore-Bick LJ and the Chancellor agreed with Jacob LJ.
2. A cross-undertaking is the price which an applicant accepts for an interim injunction under section 37 of the Supreme Court Act 1981. It is given to the court and obliges the applicant to compensate only the persons identified by its terms. The applicant is not a wrongdoer merely because the injunction is later discharged. The court may require an undertaking protecting affected third parties, but an outsider has no right to compensation unless brought within an undertaking or another recognised cause of action exists.
3. The Canadian companies had no restitutionary claim. Restitution following reversal of a judgment or order restores property, money or the fruits of property taken from one litigant and received by another. It does not compensate every loss caused by an erroneous order. The injunction transferred no property from the Canadian companies to the respondents. A freedom or opportunity to trade was not property or quasi-property, and the respondents' additional profits were not received from the Canadian companies. Extending restitution to affected outsiders would create insoluble problems involving multiple winners, losers, claims and apportionment.
4. The English defendants could not recover the Canadian companies' losses under the cross-undertaking. Lord Diplock's notional-contract analogy concerns the assessment of compensation due to an identified beneficiary. It does not create a contract or enlarge the class of beneficiaries. The third-party loss principles discussed in Linden Gardens and Panatown presuppose an actual contractual obligation and did not cover losses suffered by associated manufacturers.
5. Estoppel could not alter the meaning of the injunction or cross-undertaking. The court was not party to the alleged assumption or representation. Nor could estoppel create a legal relationship or serve as the essential foundation of a claim where none otherwise existed.
6. The pleaded documents were incapable of showing an unequivocal representation or common assumption that the Canadian companies were parties or beneficiaries. Determining that documentary insufficiency required no resolution of disputed evidence and therefore involved no impermissible mini-trial under Part 24 of the Civil Procedure Rules 1998.

1. Court of Appeal (Civil Division): In [2006] EWCA Civ 658 , dismissed the appeals against rejection of the restitution and third-party loss claims, allowed the cross-appeal on estoppel, and refused the Canadian companies' application to advance their own claims.
2. High Court, Chancery Division (Patents Court): Lewison J, in [2005] EWHC 1655 (Ch) , rejected claims based on restitution and third-party loss but held that the estoppel claim was arguable and should proceed to trial.