Les Laboratoires Servier & Anor v Apotex Inc & Ors

This is an appeal from a decision of Norris J given on 9 October 2008. In June 2008 over a period of five days he heard an inquiry as to what damages if any should be paid to the parties (whom I will call “Apotex”) who had been the subject of an interlocutory injunction for a period of 11 months before the patent was held to be invalid by Pumfrey J, a decision confirmed with considerable emphasis by a decision of this court. The patent was one that should never have been granted, not through the fault of the Patent Office, but because the patentees must have known that it was invalid.

Norris J had to wade through masses of accountancy and other evidence and had come to the conclusion that the appropriate sum payable was £17.5 million. No-one suggests that he got his calculations wrong. But shortly before he gave his judgment and after all the evidence and argument had taken place, Servier made an application to amend its pleadings. It came about in this way. The Apotex product was made in Canada, or would have been made in Canada, where Apotex's headquarters are. A cross-undertaking had been given at the interlocutory stage not only to the United Kingdom Apotex company but also to a number of other Apotex companies including the Canadian company. Apotex had learnt from past experience that you need such a cross-undertaking if you are to be able to claim any damages if it turns out the injunction is wrongly granted.

As I say, Servier made an application. The basis of the application was that the Federal Court in Canada had held that the manufacture in Canada of the material, perindopril, was an infringement of the Canadian patent. It was not the same patent or corresponding patent to that which had been the subject of the English proceedings. It was the basic patent for perindopril, not merely a crystalline form of it. We were told that under some quirk of Canadian law the basic patent can last a very long time indeed, and on 2 July the Federal Court held the patent valid and infringed in Canada. It followed that the perindopril which would have been supplied to the United Kingdom would have been made in infringement of the Canadian patent.

Servier asked the judge for leave to amend its pleadings to put forward two distinct defences: firstly, one essentially of law, that Apotex could not claim damages for being prevented to sell a material whose manufacture would have been unlawful; secondly, more as an accounting matter, Apotex Canada could not claim that it would have lost profits of the amount decided by the judge, because it would not have made those profits, because it would either have to pay damages in Canada or hand over the profits, depending on which Servier elect in Canada and so that these sums which are claimed in England are too high to deduct whatever it is that has to be handed over to Servier in Canada.

The judge was told about this application and heard it and dealt with it at the end of his judgment at paragraphs 61 through to 64. He refused the amendments, essentially because they were too late, and I will turn to the detail in a moment. It was not argued before the judge that if the amendments were allowed they had no realistic prospects of success. By the respondent's notice before us, there were such arguments but, wisely I think, Mr Watson did not press them too hard. I am quite satisfied that the points are well arguable and I do not believe it is necessary to go into the detail of them.

The judge's exercise of discretion took into account a number of matters. His reasons are really in paragraph 63. He took into account the fact that prejudice could be compensated in costs. He took into account that there is a public interest in the administration of justice or if these amendments were allowed then it may well be that all the time spent on the inquiry was a waste of time and that court resources had been allocated unnecessarily and he took into account that it might affect settlement and he particularly referred to the observations of Lord Griffiths in Kettleman v Hansel Properties [1987] 1 AC 189 at 220. Some of those observations, namely those about the anxiety of a case, do not really apply to hardened litigants like these parties, but the last sentence on page 393 at F can still potentially apply. Furthermore, to allow an amendment before a trial begins is quite different from allowing it at the end of the trial to give an apparently unsuccessful defendant an opportunity to renew the fight on an entirely different defence, which is what is happening here.

The judge was impressed by the fact that Servier had not raised this point earlier when they clearly could have done. Mr Watson realistically accepted that if Servier had raised the point earlier and asked for a stay of the English inquiry and the cross-undertaking, his clients would have fought it. One thing, however, is missing from the judge's exercise of discretion. It is what the overall effect of refusing the amendments might well be. Servier in Canada will doubtless be able to seek financial compensation for all the manufacture that did happen in Canada, including exports, but it is by no means clear that the Canadian proceedings would result in any return of money handed over to Apotex as a result of the order in this country, because that money is in respect of manufacture which did not happen because of this interlocutory injunction. Mr Watson fairly accepted that there was a very real prospect that if this amendment is not allowed, his clients will get the benefit of the sums awarded by Norris J as a total windfall. That to my mind is a very serious factor in the exercise of discretion and, although the judge mentions the argument, he does not appear to take it into account at all when exercising his discretion as to whether or not to allow the amendment. For English proceedings to give a party £17.5 million which might well be wholly unjustified is a very serious matter. I think the judge's failure to weigh that affects his exercise of discretion, wide though it is, in such a way that one can say that it is flawed.

Accordingly I have come to the view that the judge made a mistake there and it falls to us to re-exercise the discretion. Since the matter was before the judge, the Federal Court of Appeal in Canada has affirmed the decision, which makes it even more likely than it was before the judge that the Canadian proceedings would mean in the end that Apotex got an unjustified benefit here. I would exercise the discretion by allowing the amendments. There would have to be a consequential amendment to Norris J's order which currently simply orders payment of the £17.5 million plus interest, although it is only provisional. Mr Purvis made it clear he is not asking for the money back at this stage, but in essence it would be regarded as an interim payment. But I would only do so on the basis that Servier have to pay the entire costs of the inquiry to date. They should have raised this from the outset and they did not. Whether those costs should be on a standard or indemnity basis remains to be discussed and quite what would happen as a result of allowing this amendment I think also remains to be discussed and I would allow the appeal.

I agree.

I also agree.