Napp Pharmaceutical Holdings Ltd v Dr Reddy's Laboratories (UK) Ltd & Ors

A court cannot order fortification of a cross-undertaking in damages after the interim injunction for which it was given has been discharged. Fortification is an adjunct to the undertaking and forms part of the price a claimant may agree to pay for an injunction continuing in futuro. It is not security for damages imposed retrospectively. The application must therefore be made while the injunction remains in force. Separate powers concerning preservation of defined property or freezing orders do not provide an alternative where no defined property, dishonesty or significant risk of improper dissipation is established. Even if jurisdiction exists, relief requires a sufficiently arguable damages claim and a material risk that the claimant will be unable to satisfy the undertaking.

Napp obtained an interim injunction restraining Sandoz from launching transdermal buprenorphine patches and gave a cross-undertaking in damages. The Patents Court later found no patent infringement. Napp’s appeal was dismissed by the Court of Appeal, and the injunction was discharged.

Sandoz and related companies applied to fortify the undertaking after the injunction had ended. They relied on concerns about Napp’s financial position and alleged links with Purdue Pharma, together with procedural powers concerning asset preservation and freezing orders. The central issues were whether the court had jurisdiction to grant fortification after discharge and, if so, whether relief was justified on the evidence.

1. Jurisdiction. The application was dismissed. The court has no power to compel a claimant to give a cross-undertaking in damages. The undertaking is the price which the claimant voluntarily offers for the grant of an injunction. Once the injunction has been discharged, there is no continuing price to be paid for its operation. An application to fortify must therefore be made while the injunction remains in force.
2. This conclusion followed the reasoning in Thai-Lao Lignite (Thailand) Co., Ltd. v Government of the Lao People's Democratic Republic [2013] 2 All.E.R (Comm) 883. Fortification is an adjunct to the undertaking and cannot retrospectively impose an additional burden which the claimant was never asked to assume when seeking the injunction. The court distinguished that relief from an order for security for damages.
3. The applicants could not rely on CPR rule 25(1)(g) concerning identification and verification of assets. The application did not concern defined property. Nor could it properly be treated as an application for a freezing order under CPR rule 25(1)(f), since dishonesty and any significant risk of improper dissipation were not established.
4. Discretionary alternative. Even if jurisdiction existed, the application would be dismissed. Sandoz had no more than a good arguable case for approximately £14 million in damages and £5 million in costs. Napp’s assets substantially exceeded those figures and had improved since the undertaking was given. The alleged connection with Purdue Pharma did not establish a material risk that Napp’s assets would fall below the amount it could pay. The alleged risk of asset transfer was speculation upon speculation.

The judgment records that the Patents Court found in Sandoz’s favour on non-infringement and that the Court of Appeal dismissed Napp’s appeal. The interim injunction was subsequently discharged. This judgment determined the later application to fortify the cross-undertaking.