The University of Sheffield v Kudos Pharmaceuticals Limited & Ors

Expert evidence on market practice may assist contractual construction where it explains market shorthand or enables the court to understand relevant factual background. It is not admissible merely because a contract concerns a specialist commercial sector. Where professionally drafted contractual wording uses ordinary language and no relevant market practice or specialist shorthand is identified, expert evidence is inadmissible if its purpose is to inform the court what construction accords with commercial purpose or business common sense. In any event, expert evidence must be restricted to what is reasonably required to resolve the proceedings. Evidence that is neither necessary nor capable of assisting the court should be refused.

The University of Sheffield claimed against KuDOS Pharmaceuticals Limited and three AstraZeneca companies in relation to alleged deceit during negotiations for a 2017 Letter Agreement. The underlying dispute included the construction of the definition of Net Lump Sum Revenues in a professionally drafted 2004 patent licence concerning pharmaceutical development and commercialisation.

At the first case management conference, the University sought permission to adduce expert evidence concerning pharmaceutical licensing practice and the extent to which the parties’ competing constructions reflected commercial purpose and business common sense. The application raised the admissibility and case-management control of expert evidence in a contractual construction dispute.

1. Application refused. The proposed expert evidence was not admissible on the material advanced. The 2004 Licence was drafted by skilled professionals, used ordinary language, and contained no shorthand terms requiring explanation. The claimant identified neither a relevant market practice nor any aspect of the factual background that the court would have difficulty understanding without expert assistance.
2. Evidence of market practice may be admitted to assist contractual construction where it explains shorthand terms used in a market or enables the court to understand the factual background. A contract’s connection with a specialist sector, including pharmaceuticals and patent licensing, does not by itself justify expert evidence.
3. The proposed evidence concerning the usual form of pharmaceutical licensing agreements and the commercial factors influencing their terms was not material to determining the meaning of carefully chosen contractual words. The other proposed issues invited the expert to determine whether competing constructions accorded with commercial purpose, business common sense and the surrounding facts. That would usurp the court’s function.
4. Even if admissible and subject to Civil Procedure Rules 1998, rule 35, the evidence should not be permitted. Applying the three-stage analysis in British Airways PLC v Spencer, the court should ask whether the evidence is necessary, whether it would assist if not necessary, and, if so, whether it is reasonably required to determine the proceedings. The proposed evidence was neither necessary nor capable of assisting the court.
5. The fact that the trial judge would have experience of patent cases reinforced the conclusion that the proposed evidence would burden, rather than assist, the trial. There was no proper basis for permission to adduce it.