Les Laboratoires Servier & Anor v Apotex Inc & Ors

The ex turpi causa rule applies to a claim under a cross-undertaking in damages where the claimant’s unlawful conduct is sufficiently serious and the claimed loss substantially depends on that conduct. Seriousness is fact-sensitive. Relevant factors include the claimant’s knowledge of the material facts, intentionality, negligence and whether the illegality was induced by the defendant. Dishonesty is not an essential requirement. A cross-undertaking is not an unconditional promise to pay every loss caused by an injunction. Proper objections, including illegality, remain available unless expressly waived.

Servier obtained interim injunctions restraining Apotex from importing and selling generic perindopril erbumine in the United Kingdom. The European patent was later held invalid, and Apotex obtained judgment for £17.5 million under the cross-undertakings. The Canadian courts subsequently held that Apotex had manufactured the product in Canada in infringement of Servier’s valid Canadian patent.

Servier amended its defence to contend that Apotex could not recover losses founded on the hypothetical manufacture and export of infringing goods. The issue before the court was whether the public-policy rule expressed by ex turpi causa non oritur actio barred the claim.

1. Claim barred. Apotex’s claim under the cross-undertakings was barred by the ex turpi causa rule. Apotex was required to repay Servier the money paid pursuant to Norris J’s judgment. The precise form of order was reserved.
2. The rule is a policy applied according to the circumstances. It is not confined to criminal conduct or dishonesty. Relevant considerations include the claimant’s knowledge of the material facts, whether the conduct was intentional or negligent, and whether the defendant induced the illegality. An act may be sufficiently serious without involving dishonesty.
3. In the context of a cross-undertaking, the court’s equitable jurisdiction is directed to doing justice after an injunction has been wrongly granted, having regard to wider considerations as well as the fact of the injunction. The unlawfulness must be sufficiently serious. It may also need to be personal rather than vicarious, although that issue was left undecided.
4. Substantial reliance on unlawful conduct remains necessary in this context. Apotex’s claimed profits depended on manufacturing perindopril erbumine in Canada, exporting it and selling it in the United Kingdom. The Canadian courts’ findings established that the manufacture would infringe Servier’s valid Canadian patent. The lawful importation and sale in the United Kingdom could not by themselves generate the claimed profits.
5. The case was materially different from Lilly Icos LLC v 8PM Chemists Ltd [2009] EWHC 1905 (Ch). There, the defendants’ own business was not unlawful and the claim did not substantially rely on their own illegality. Here, the claimed loss was founded on Apotex’s own unlawful manufacture. Servier had not represented to Mann J that the Canadian manufacture was unlawful or that compensation would nevertheless be recoverable. Its cross-undertakings therefore did not prevent reliance on illegality.

The judgment records that Norris J had awarded Apotex £17.5 million under the cross-undertakings. The Court of Appeal later permitted Servier to amend its defence and ordered that the payment stand as an interim payment. The present judgment determined the remaining public-policy issue.