The Secretary of State for Health & Ors v Servier Laboratories Ltd & Ors

The issue on this application, which I heard on 10 and 11 May 2016, is whether the defendants (“Servier”) should be granted permission pursuant to CPR rule 17.1(2)(b) to re-amend their defence to plead that the English claimants failed to take reasonable steps to encourage switching from the prescription of Perindopril to the prescription of cheaper alternative ACE inhibitors in generic form. This broad contention, which I will call “the prescribing argument”, is set out in paragraphs 83B to 83D of the draft re-amended defence (“the draft RAD”). It gives rise to the following specific defences, which Servier now seeks permission to plead:

the English claimants have failed to take all reasonable steps to mitigate their loss, and Servier is not liable to compensate them in respect of loss suffered by reason of this failure (paragraphs 83A and 83H of the draft RAD);

save in so far as the English claimants’ claim is advanced on the basis of the intentional tort of interference with their economic interests by unlawful means, these matters amount to contributory negligence on the part of the English claimants and the damages recoverable should be reduced or extinguished to the extent just and equitable having regard to their share in the responsibility for the damage (paragraph 83.M of the draft RAD); and/or

these matters broke the chain of causation and/or rendered any damage suffered by the English claimants too remote (paragraph 83.L of the draft RAD).

It should be noted that the English claimants do not object to the introduction by amendment of a further argument, set out in paragraphs 83E to 83G of the draft RAD, that the English claimants failed to act expeditiously in order to move Perindopril into Category M of the Drug Tariff, and to the defences based on that alleged failure. Accordingly, it is only the introduction of the prescribing argument, and the defences based on it, which remain in issue between the English claimants and Servier.

It should also be noted that the Scottish/NI claimants and the Welsh claimants have each consented to Servier’s application to amend its defence to introduce similar amendments, including those based on the prescribing argument, in the Scottish/NI and Welsh proceedings respectively. A prime motivation of the English claimants in opposing Servier’s application to make the amendments based on the prescribing argument is that giving disclosure of all documents formerly held by the English Primary Care Trusts in relation to the prescribing argument, as well as addressing it comprehensively in witness evidence and at trial, would be extremely burdensome and expensive: see the 10^th witness statement of Jonathan Tickner, the partner of Peters & Peters who has conduct of the proceedings on the English claimants’ behalf, dated 19 November 2015. Rightly, however, counsel for the English claimants, Mr David Drake, appearing with Mr Philip Woolfe, have not relied on these alleged consequences of permitting the amendments as an independent reason for opposing them. If the disputed amendments are allowed, careful consideration will need to be given to the resulting disclosure by the English claimants, and the need to keep it within reasonable bounds, for example by confining it to a representative cross-section of Primary Care Trusts and Strategic Health Authorities.

For the general background to these proceedings, and their history down to the last case management conference which I held on 26 and 27 November 2015, reference should be made to the judgment which I handed down on 26 February 2016, dealing mainly with further disclosure to be given by Servier, and various disputed amendments to the particulars of claim of the Scottish/NI and Welsh claimants: see [2016] EWHC 3066 (Ch). In particular, that judgment contains at [13] to [21] a summary of the issues in the English proceedings, and at [10] to [11] a description of the background to Servier’s application to re-amend its defence.

With this introduction, I will now set out the disputed amendments:

The only ground upon which the disputed amendments are opposed by the English claimants is that they are not reasonably arguable. It is common ground that a proposed amendment which does not meet this test should be disallowed: see, for example, Groveholt Ltd v Hughes and Another [2010] EWCA Civ 538 at [37], [39] and [50] per Arden LJ. It is also common ground that the test for this purpose is the same as the test for summary judgment under CPR Part 24, namely whether the amendment has a real as opposed to fanciful prospect of success. This is a matter of simple logic, because if the amendment failed to satisfy the test for summary judgment it could immediately be met by a successful cross-application to strike it out on that ground.

The approach which the court should adopt on an application for summary judgment is well known. The relevant principles were summarised as follows by Lewison J (as he then was) in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15], in a passage which has often been cited and approved:

On behalf of the English claimants, Mr Drake placed particular reliance on the second and seventh of the principles which I have quoted from the Easyair case. For her part, Ms Davies QC, appearing for Servier with Ms Sarah Ford, emphasised principles (i), (v) and (vi). She also referred me to the judgment of Simon J (as he then was) in Arcadia Group Brands Ltd and Others v Visa Inc [2014] EWHC 3561 (Comm) at [19], where the judge said that the court should heed the warning of Lord Collins in AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804, at [84] that:

Ms Davies also rightly reminded me that the court should be slow to grant strike out or summary judgment relief in developing areas of jurisprudence. A warning to this effect was given by Roth J, in a competition law context, in Sel-Imperial v British Standards Institution [2010] EWHC 854 (Ch) at [16].

With particular reference to questions of knowledge, such as the allegations in paragraph 83.I of the draft RAD, Ms Davies cited the recent judgment of Nugee J in Sharp & Others v Blank & Others [2015] EWHC 3219 (Ch), where the judge declined to grant summary judgment in respect of an allegation of knowledge by the directors of Lloyds Banking Group Plc that Halifax Bank of Scotland Plc, prior to its acquisition by Lloyds, was manipulating its Libor submissions. In particular, Nugee J said at [33]:

The English claimants submit that, in order properly to analyse whether the prescribing argument constitutes an arguable defence, whether of failure to mitigate or otherwise, it is first necessary to characterise with accuracy the relationship between the wrongdoing alleged against Servier, the loss that the English claimants are seeking to recover, and the conduct on the part of the English claimants which Servier seeks to criticise by the prescribing argument.

For this purpose, the English claimants take as their starting point the seminal speech of Lord Nicholls of Birkenhead in Kuwait Airway Corpn v Iraqi Airways Co (Nos. 4 and 5) [2002] UKHL 19, [2002] 2 AC 883. After observing at [67] that the fundamental object of an award of damages for all wrongs “is to award just compensation for loss suffered”, Lord Nicholls continued at [69]:

I would also draw attention to the concurring speech of Lord Hoffmann, where he pointed out at [128] that questions of liability cannot be separated from questions of causation:

The general nature of the claim made against Servier in the present proceedings, submits Mr Drake, is that Servier wrongfully perpetuated a monopoly over the supply of Perindopril in the UK. Servier used a variety of unlawful means (such as improperly obtaining and enforcing patent rights, and buying off potential sources of competition) so as to delay generic entry into the market from 2003 to 2007. Meanwhile, Servier exploited that monopoly by supplying Perindopril at prices higher than those that would have existed in a competitive environment. The loss suffered by the English claimants is therefore the excess cost to them of Perindopril rendered more expensive than it would otherwise have been by Servier’s unlawful conduct.

As to the nature and purpose of the particular causes of action alleged against Servier, it is clearly a core purpose of Articles 101 and 102 TFEU “to protect not only the interests of competitors or of consumers, but also the structure of the market and, in so doing so, competition as such”: Case C-50106P, GlaxoSmithKline Services v Commission [2009] ECR I-9291 at paragraph 63. It is clear from the text of the Articles themselves that the duties imposed by them are intended to ensure that anti-competitive practices should not raise the prices to be paid by consumers, and that undertakings should not be permitted illegitimately to monopolise a market. Thus, Article 101 (1) (a) and (b) state that concerted practices may have an anti-competitive object or effect in particular if they “directly or indirectly fix purchase or selling prices or any other trading conditions” or “limit or control… markets”. Similarly, Article 102 provides that abuse may consist in “directly or indirectly imposing unfair purchase or selling prices” and “limiting… markets… to the prejudice of consumers”.

As regards the economic tort of interference with the English claimants’ economic interests by unlawful means, the relevant duty, they submit, is a duty to refrain from using unlawful means in order deliberately to inflict economic harm. As Lord Hoffmann put it in OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1, at [47]:

I agree with the English claimants that this is the general legal context in which the prescribing argument needs to be considered. The English claimants then make a number of points about the way in which the prescribing argument, and the defences based on it, are advanced.

First, Servier now alleges (in paragraph 83B (b) of the draft RAD) that “there was no clinical difference between Perindopril and the other ACE Inhibitors already available in generic form”, and that, since the reimbursement prices of such generic ACE Inhibitors were significantly less than the reimbursement price of Perindopril, the only reasonable course was for the English claimants to take all reasonable steps to encourage switching from the prescription of Perindopril to the prescription of the cheaper generic alternatives. This contention appears difficult to reconcile with Servier’s pleaded case hitherto, and the considerable efforts made by Servier throughout the relevant period to promote the advantages of Perindopril over other ACE inhibitors. Nevertheless, while maintaining that the argument is untenable, the English claimants realistically recognise that the resolution of factual disputes as to the actual or perceived advantages of Perindopril over other ACE inhibitors must go to trial, and cannot be resolved summarily.

Secondly, the only positive reason relied on by Servier for saying that the English claimants should have sought to ensure such a switch in prescription habits is that they knew, or should have known, that Perindopril was more expensive than other ACE inhibitors. But this fact was true even before any wrongful conduct by Servier took effect: as pleaded by Servier in paragraph 83B (a), alternative ACE inhibitors were available in generic form from December 1999 onwards.

Thirdly, the English claimants say that they are not criticised by Servier because the choice of Perindopril imprudently exposed them to any heightened risk of wrongful anti-competitive overcharging, but rather because the consumption of Perindopril exposed them to the effects of Servier’s overcharging. In other words, Servier’s inflation of the Perindopril price was merely the occasion for the loss of which the English claimants’ conduct in consuming Perindopril was the effective cause. This is essentially a case, they say, of a producer, who is responsible for wrongfully inflating the price of its product, arguing that the consumer acted unreasonably by being a consumer of that product at all.

Building on these points, the English claimants argue that there is a fundamental inconsistency between the prescribing argument and the nature of the causes of action relied upon by the English claimants, which must at this stage of the analysis be assumed to have been made out. The aim of Articles 101 and 102 is to protect consumers from market power being created artificially, or being exploited by producers in order to raise prices above competitive levels. It would be incompatible with that aim to reduce the liability of a producer to compensate consumers for excess prices charged on the basis that the claimants should never have purchased the product at the inflated price. Similarly, in relation to the economic tort claim, it would be inconsistent with the nature of that cause of action for Servier’s responsibility for the loss which it intended to bring about to be treated as eclipsed by the English claimants’ responsibility for those consequences, simply because the claimants failed to thwart Servier’s intended purpose.

It is also relevant to bear in mind, submit the English claimants, that the present case is one where Servier has profited at their expense. True, the present claim is not framed in unjust enrichment, nor is any form of restitutionary damages sought, but in essence the English claimants are still seeking to recover an overcharge made at their expense. Accordingly, this is a relevant factor to take into account when considering whether in the words of Lord Nicholls, Servier “ought fairly or reasonably or justly to be held liable”.

I now turn to the primary way in which Servier relies on the prescribing argument, to found a defence of failure to mitigate their loss by the English claimants.

It is convenient to begin by referring to the classic statement of principle by Viscount Haldane L.C. in British Westinghouse Electric and Manufacturing Company Ltd v Underground Electric Railways Company of London Ltd [1912] AC 673, at 689. Speaking of the general measure of damages for breach of contract, he said:

It follows from this statement of principle that the doctrine of mitigation cannot come into play before the relevant breach of contract has occurred. Although British Westinghouse was a case of breach of contract, it is well established that the same rule applies to claims in tort: see, for example, The Liverpool (No 2) [1963] P 64 at 77-78, where Lord Merriman P. said it was common ground that the classic statement about mitigation of loss in British Westinghouse “applies equally, mutatis mutandis, to tort”. Similarly, therefore, no question of failure to mitigate can arise in a tort claim before the relevant breach of duty has occurred. Before then, there may be scope for the doctrine of contributory negligence to operate, but mitigation can only come into play once there has been an actionable infringement of the claimant’s rights.

This point provides the background to the first of five separate arguments advanced by the English claimants for saying that Servier’s mitigation defence based on the prescribing argument has no real prospect of success. I will now deal with these five arguments in turn.

The essential issue here, as refined in the course of argument, is whether the case pleaded by the English claimants against Servier involves (a) allegations of a series of separate infringements of their rights occurring on each and every occasion when they purchased branded Perindopril, or (b) allegations of certain specific infringements of their rights at specific times which produced a series of losses stemming from those infringements on each occasion that Perindopril was subsequently bought.

The English claimants argue that the former characterisation of their claim is correct, with the consequence that there is no scope for operation of the doctrine of failure to mitigate. Servier says that the second characterisation of the claim is correct, or at the lowest the question is highly fact-sensitive and unsuitable for summary determination.

The English claimants submit that each time Perindopril was prescribed, dispensed and reimbursed at prices wrongly inflated by Servier, the conduct criticised by the prescribing argument pre-dated any infringement of their rights. They argue that the prescribing argument is, in substance, an allegation of (if anything) contributory negligence, rather than a defence of failure to mitigate. It is central to the correct analysis, submits Mr Drake, that Servier continued to charge inflated prices throughout the period from 2003 until February 2009 in respect of which losses are claimed, and each supply by Servier generated a fresh cause of action. He submits that the infringements of Articles 101 and 102 TFEU were continuous in nature, as was the conduct relied upon in support of the economic tort claim. Every supply by Servier involved fresh causal input, and cannot be regarded as the mere accrual of losses flowing from an earlier infringement.

For a number of reasons, I am unable to accept this argument. In the first place, at a fairly high level of generality, it strikes me as an artificial and unrealistic way in which to characterise the English claimants’ claim. Perhaps revealingly, there is no hint of such an analysis in the summary of their claim which the English claimants provided for the CMC in November 2015, and which I largely reproduced in my judgment of 26 February 2016 at [13] to [16]. On the contrary, that summary refers to specific alleged acts of infringement of the English claimants’ economic interests, and of Articles 101 and 102. Thus, for example, it is said that Servier tortiously interfered with the English claimants’ economic interests by unlawful means, in that it procured, defended and enforced the 947 patent in the European Patents Office (“the EPO”) and the English courts in reliance on claims that it knew to be untrue or as to the truth of which it was reckless. The unlawful interference began in 2001 when the application for the 947 patent was filed, and effectively continued until 6 July 2007 when the 947 patent was found to be invalid in the Apotex proceedings. Again, in relation to the Article 102 claim, it is alleged that Servier enjoyed a dominant position on a market for the supply of Perindopril or for the supply of ACE inhibitors in the United Kingdom, which it abused between 2001 and 2007 in various specified ways, such as the supply of misleading information to the EPO and the English courts in respect of the 947 patent, the entry into an agreement dated 9 November 2004 for the purchase of intellectual property from Azad Pharma AG, and the conclusion of agreements with several other generic suppliers of Perindopril in 2005 and 2006. Those agreements form the subject matter of the Article 101 claim.

Secondly, Ms Davies was able to satisfy me, by detailed reference to the English claimants’ particulars of claim, that this summary accurately reflects the way in which their claim is pleaded. There is simply no clearly pleaded foundation for the proposition that each and every supply of Perindopril to the English claimants involved the accrual of a fresh cause of action. In particular, she pointed out that the claim is not formulated in terms of a fresh decision by Servier to charge an inflated price on every occasion when it fulfilled an order, but rather on the proposition that the specific infringements alleged against Servier had the result that generic entry into the market was unlawfully delayed, with the consequence that Servier was able to continue charging its normal price for branded Perindopril without the wider competition from generic alternatives which should have occurred.

For the avoidance of doubt, Ms Davies of course accepted that fresh causes of action accrued on each occasion when (for example) Servier entered into a separate agreement with a generic supplier, or allegedly took active steps to mislead the EPO or the English court in relation to the 947 patent. Her point was, rather, that each of these causes of action generated, or played its part in generating, a sequential series of losses as and when Servier continued to supply Perindopril in the anti-competitive market which it had created.

The distinction between the accrual of fresh causes of action, on the one hand, and the incurring of sequential or different losses flowing from an original breach of duty, on the other hand, is well established in the authorities, even if its application in particular cases can give rise to difficulties. To illustrate the distinction, Ms Davies referred me to the decision of the Court of Appeal in Berezovsky v Abramovich [2011] EWCA Civ 153, [2011] 1 WLR 2290, where Longmore LJ said at [64]:

A further potential cause of confusion lies in the need for a claimant in tort to prove not only breach of duty, but also causation of the loss which is said to flow from the breach. It may well be necessary for the claimant to plead and prove additional facts in order to establish causation, but it does not follow from this that there is a fresh cause of action: see Aldi Stores Ltd v Holmes Buildings Plc [2003] EWCA Civ 1882, [2005] P.N.L.R. 9, at [26] to [27] per Dyson LJ. It is thus in no way decisive that the English claimants have to rely on the placing and fulfilment of a series of orders from Servier in order to identify and quantify the losses which they seek to recover. See too the full discussion of this aspect of Aldi Stores by Warren J in Harland and Wolff Pension Trustees Ltd v Aon Consulting Financial Services Ltd [2009] EWHC 1557 (Ch), [2010] ICR 121, at [50] to [65], to which I was referred by Mr Drake.

Finally, I am not impressed by the point that the breaches of Articles 101 and 102 are pleaded as giving rise to a single and continuous infringement. This merely reflects the fact that a single infringement may produce continuing effects. Moreover, as Ms Davies pointed out, if it were the case that no duty to mitigate could arise until the continuing infringement came to an end, this would be difficult, if not impossible, to reconcile with the approach adopted by the ECJ in Case C-453/99, Bernard Crehen v Courage Ltd and Others [2001] ECR I-6300, [2002] QB 507: see the opinion of Advocate General Mischo at paragraphs 70 to 76, and the judgment of the Court at paragraphs 31 to 33. As it was put by Advocate General Mischo:

For these reasons, I consider that the proposed amendments do not amount in substance to a defence of contributory negligence, but are properly advanced as a failure to mitigate.

The second main argument advanced by the English claimants starts from the proposition that a duty to mitigate can arise only where a claimant has knowledge (actual or, at the very least, constructive) of the wrongdoing and/or the loss suffered in consequence of it. In his oral submissions, Mr Drake made it clear that he was advancing his proposition as one of law, which had to be satisfied for the doctrine of mitigation to be engaged. The relevant knowledge, he said, had to extend to the facts constituting or disclosing the relevant breach of duty or the loss. If a claimant knows, or ought to have known, those facts, it is not also necessary for him to know that they constitute a legal wrong or found a cause of action. That is because the doctrine has to be applied in the real world, by people who are not lawyers and probably at a time before any legal advice has been sought.

Some apparent support for this proposition may certainly be found in the authorities. Mr Drake referred me to the decision of Phillips J (as he then was) in Youell v Bland Welch & Co Ltd (the “Superhulls Cover” case) [1990] 2 Lloyd’s Rep 431, where the negligent defendant insurance brokers argued that the claimant insurers could and should have sought extensions of reinsurance cover on the expiry of the relevant 48 month construction periods. The brokers sought to advance this defence as either negligence breaking the chain of causation, or contributory negligence, or failure to mitigate damage. In this context, Phillips J said at 461:

The judge then said that the insurers were unaware of the brokers’ breach of duty until after they suffered the damage in respect of which they claimed. Their ignorance was due, in part, to their own negligence. What, then, was the position “where a plaintiff has failed to mitigate because he has negligently failed to discover the breach”? Phillips J answered this question as follows, at 462:

Similarly, in the context of assessment of damages payable where the claimant has been induced by a fraudulent misrepresentation to buy property, Lord Browne-Wilkinson said in Smith New Court Ltd v Scrimgeour Vickers [1997] AC 254 at 266 G:

Nevertheless, despite the obvious force of these dicta, the underlying principle of the law of mitigation remains whether the claimant has taken “all reasonable steps to mitigate the loss consequent on the breach”, as Viscount Haldane said in the British Westinghouse case. In Payzu, Ltd v Saunders [1919] 2 KB 581, the Court of Appeal held, per Bankes LJ at 588, that:

In my view, the decision in Payzu, Ltd v Saunders constitutes binding Court of Appeal authority that the question of the steps which a claimant should take in order to mitigate his loss is always one of fact, to be decided in the light of all the circumstances. Self-evidently, the claimant’s knowledge of the circumstances giving rise to the breach will always be a highly material factor, and in the absence of any relevant knowledge, it is difficult to see how in practice the doctrine of mitigation could come into play. But the extent of the knowledge required may vary from case to case, and cannot in my judgment safely be formulated as a proposition of law. As so often, everything will depend on the full facts as found at trial. Furthermore, the inclusion of constructive knowledge (“ought to have known”) in the formulation propounded by the English claimants is itself an acknowledgment that the inquiry may have to go beyond the actual subjective knowledge of the claimant. Any further inquiry of that nature is likely to be heavily dependent on the oral evidence given at trial.

If an illustration is needed of a case where at least some judges have found that there was a failure to mitigate, without full knowledge of all the facts which constituted the relevant breach, it may be found in an unreported decision of the Court of Appeal, Schering Agrochemicals Ltd v Resibel N.V. S.A, 26 November 1992. The claimant, Schering, occupied a factory in Cambridgeshire where they were engaged in the manufacture and marketing of agrochemicals. The case concerned a claim for damages for breach of contract arising from the supply of defective equipment to be used in a bottling line for a highly inflammable substance. Due to a design defect in the heat sealing equipment, there was a major fire in the factory which caused considerable damage and gave rise to the claim. Three weeks before the fire, a relatively minor incident had occurred, which was not itself causative of the subsequent fire, but, as the trial judge (Hobhouse J) found, did give “rise to an opportunity, which reasonably ought to have been taken, to avoid the situation which did cause the fire”. He therefore concluded that there had been a failure on the part of the relevant operator to mitigate the loss, and limited the damages recoverable by Schering to the reasonable costs of adapting the system so that it worked properly following the first incident, with no damages being awarded in respect of the loss occasioned by the subsequent fire.

The Court of Appeal (Purchas, Nolan and Scott LJJ) unanimously dismissed Schering’s appeal against this judgment, although they reached this common conclusion by different routes. For present purposes, the relevant judgment is that of Nolan LJ, because he followed Hobhouse J in analysing the question in terms of mitigation. On page 12 of the transcript, he said:

Nolan LJ continued:

Nolan LJ then concluded:

In the last two sentences of this quotation, Nolan LJ must have been referring to an evidential burden of proof which the claimants failed to discharge, because the legal burden of establishing the defence of failure to mitigate lay of course on the defendant. For present purposes, however, the relevant point is not whether Nolan LJ was correct in his analysis of the unusual facts of the case, but rather that he approached the question of mitigation (as did Hobhouse J) on the footing that it involved a duty to act reasonably, and that the question should be answered “having regard to the state of knowledge of the person or entity whose act or omission is in question”. Knowledge is thus a relevant factor, but its relevance is to the question of fact whether the claimant acted reasonably in all the circumstances. In my view, it is at least arguable with real prospects of success that this correctly states the relationship between knowledge and mitigation, and that the absolute proposition of law for which the English claimants contend is therefore mistaken.

What, then, is the state of knowledge on the part of the English claimants alleged by Servier? The critical allegations, in paragraph 83B of the draft RAD, are that they either were aware, or should have been aware, that alternative ACE inhibitors were available in generic form, that there was no clinical difference between the generic alternatives and Perindopril, and that their reimbursement prices were significantly lower than that of Perindopril. It is not suggested by the English claimants that there is no evidence capable of supporting these allegations of knowledge or constructive knowledge. In my judgment, they are clearly sufficient to ground a plea of failure to mitigate, once it is appreciated that the relevant knowledge does not necessarily have to extend to every ingredient of the relevant causes of action. In short, it seems to me reasonably arguable that, armed with this knowledge, the English claimants ought to have taken steps to promote the prescription of generic alternatives to Perindopril, and that their failure to do so constituted a failure to mitigate their loss flowing from Servier’s breaches of duty. I express no view on the likelihood of such a defence succeeding at trial. The question at this stage is simply whether the argument has a real prospect of success.

This conclusion makes it unnecessary for me to deal in any detail with the further allegations of knowledge contained in paragraphs 83.I to 83.K of the draft RAD. Again, it is not suggested that any of these matters is inherently incapable of finding support in the evidence at trial; and I have already dealt with the objection that, even taken at face value, they do not necessarily allege knowledge of all the ingredients of the causes of action now pleaded against Servier. At least arguably, the right view is that these particulars form part of the relevant factual matrix in which the question of mitigation will have to be determined.

The English claimants’ third argument rests on the proposition that whether reasonable mitigation has occurred involves an inquiry into whether a claimant has responded reasonably to a particular wrong and the loss flowing from it. The argument is that the prescribing argument is not concerned with any response to Servier’s alleged wrongdoing and the loss flowing from it, so it cannot be a defence of failure to mitigate.

I will deal with this argument briefly, because it seems to me to cover essentially the same ground as the second argument relating to knowledge. The English claimants say that their alleged knowledge upon which the mitigation defence relies is that pleaded in paragraph 83B of the draft RAD, namely knowledge that Perindopril was significantly more expensive than the available generic alternatives. But, submit the English claimants, their loss does not consist of the extent to which the price of Perindopril exceeded the price of other ACE inhibitors, but rather the extent to which the wrongfully inflated price of Perindopril exceeded the lower prices for Perindopril that would have existed in a competitive environment. Furthermore, knowledge that the price of Perindopril was relatively high is not the same thing as knowledge that its price was wrongfully inflated, or that payment of it involved a wrongful anti-competitive overcharge.

In my judgment, this argument fails to distinguish between the nature and degree of knowledge which may arguably suffice to found a defence of mitigation, that is to say a defence which limits the English claimants’ recoverable loss, and the basis upon which the English claimants seek to quantify their loss. If I am right in my analysis of the second argument, it is at least reasonably arguable that the knowledge required for the former purpose need not coincide with knowledge of all the necessary ingredients of the English Claimants’ case on liability and loss. Further, as Ms Davies submits for Servier, if the English claimants establish their case that Perindopril was subject to an overcharge during the relevant period, then at least a proportion of the discrepancy in price between Perindopril and the available generic alternatives would be referable to Servier’s alleged wrongdoing. It is that price discrepancy which, according to Servier, should have triggered the English claimants’ reasonable response to encourage the prescription of cheaper alternatives.

The English claimants seek to support their third argument with a number of examples, of which I will mention one. Suppose the largest electricity suppliers in a Member State were to form a cartel in respect of the electricity prices to be charged to consumers, and their customers were consequently charged more then they would otherwise have been, thereby increasing the profits of the participants in the cartel. Upon the cartel being discovered, could the participants in it argue that they should escape liability to compensate their customers for the overcharge on the basis that the customers should in any event have purchased electricity from smaller undertakings, which were not part of the cartel and offered cheaper rates? The answer to this question, it is submitted, is that any such contention would be novel and outrageous. The English claimants say they are not aware of any reported case in which consumer compensation had been reduced on such a basis, and the fact that cheaper prices were available elsewhere does not diminish the causal effect of the anti-competitive conduct in relation to the customers’ loss.

In my view the facts of this example are too far removed from the present case to provide a helpful analogy. Every case turns on its own facts, and as I have explained it is always a question of fact whether a claimant has acted unreasonably in failing to mitigate its loss. Any suggestion that the doctrine of mitigation is ruled out in principle by EU law would appear to be contrary to the approach of the European Court in Crehan v Courage, and is certainly not a question suitable for summary determination.

I would accordingly reject the English claimants’ third argument.

The English claimants argue that a plea of failure to mitigate cannot be made in respect of consequences intended by the tortfeasor.

The only authority relied upon in support of this contention is a passage in Professor Glanville Williams’ 1951 monograph on Joint Torts and Contributory Negligence, where in his discussion of the differences of legal effect between contributory negligence and the duty to mitigate damages he expressed the following views, at pp. 284-285:

As Professor Glanville Williams himself acknowledged, there was one case which might be “somewhat against” his conclusion. In Jewelowski v Propp [1944] KB 510, the claimant had been induced by the defendant’s fraudulent misrepresentation to advance £1000 to a company. In an action for damages for deceit the question arose whether the claimant had to allow in mitigation of his damages a certain profit that he had made by buying assets from the receiver on the company’s liquidation which he subsequently resold for a higher sum. Lewis J decided that no allowance should be made, on grounds criticised by Professor Williams, but he approached the question on the footing that “the duty of a person to minimise his damages” was in principle applicable.

Whatever the position may have been in 1951, the decision of the Court of Appeal in Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 made it clear that the doctrine of mitigation applies to the computation of damages in an action for deceit: see per Lord Denning MR at 167D-E, Winn LJ at 168G-169D and Sachs LJ at 171G-H. There is no hint in any of the judgments that the doctrine would not apply in relation to damage intended by the defendant, even though in a case of deceit the damage caused will in the nature of things usually be intentional. Similarly, in Smith New Court Ltd v Scrimgeour Vickers the House of Lords approved Doyle v Olby (Ironmongers) Ltd and held that the doctrine of mitigation applies to the measure of damages where the contract is induced by fraudulent misrepresentation: see [1997] AC 254, per Lord Browne-Wilkinson at 266G-267D and Lord Steyn at 284F-285D. Again, there is no suggestion in any of the speeches that a different rule applies to intended damage.

In my judgment it is clear from these authorities that the proposition laid down by Professor Glanville Williams cannot be correct, or (at the very lowest) is strongly arguable to be incorrect. I am reinforced in this view by the consideration that the suggested exclusion of intended damage would in many cases make the doctrine impossible to operate with any certainty. How is a claimant supposed to know, at the time when the doctrine of mitigation comes into play, whether the loss which he has suffered was intended by the defendant? The answer to that question will often be unclear, and it is absurd to suppose that the claimant may have to make enquiries of the tortfeasor before deciding whether he is obliged to take reasonable steps to minimise his loss.

Ms Davies had a number of other arguments under this heading, but I do not need to rehearse them. In my view this argument is plainly unsuitable for determination in favour of the English claimants on a summary basis.

Finally, the English claimants submit that Servier’s duties under Articles 101 and 102, and its duty at common law not to inflict economic harm intentionally by the use of deceit, extend to protect them from the wrongful inflation of the price of Perindopril by Servier, even if the English claimants could have avoided incurring the overcharge, in whole or part, by promoting the prescription of cheaper alternatives. It is central to Articles 101 and 102, submit the English claimants, that consumers should be protected from the wrongful use of anti-competitive means to inflate market prices. Similarly, it is of the essence of the common law tort that claimants should be protected from the intentional infliction of loss. The ambit of the tort therefore extends to loss which was intended, even if it was in fact avoidable. Servier cannot say that it is unfair to be asked to compensate for loss which it intended to cause, especially in circumstances where it has made a corresponding gain. For these reasons, it would be fundamentally inconsistent with the nature of the causes of action alleged to permit Servier to rely on a failure to mitigate based solely on the prescribing argument.

I can again deal with this contention briefly, because it covers very much the same ground as the English claimants’ fourth argument. If, as I have held, it is at least reasonably arguable that the doctrine of mitigation extends to intended damage, there would need to be something very special in the relevant causes of action if that general rule were to be excluded as incompatible with them. I am unable to discern any features of the English claimants’ causes of action which would lead to such a conclusion with sufficient clarity to justify summary determination of the question in their favour. To begin with the English economic tort, it is true that the intentional infliction of loss is a requirement of the cause of action; but it simply does not follow from this that the English claimants should be entitled to recover damages for loss which reasonable conduct on their part would have avoided. It is relevant to note, in this context, that mitigation has often been said to be an aspect of causation. See, for example, The “Elena d’Amico” [1980] 1 Lloyd’s Rep 75 at 88 per Robert Goff J, and Standard Chartered Bank v Pakistan National Shipping Corp & Others [2001] CLC 825 (CA), where at [41] Potter LJ said:

So far as concerns the causes of action founded on Articles 101 and 102, it is enough to say that, if the English claimants’ argument were correct, a defence of failure to mitigate could never be raised in response to a claim for breach of those Articles; but in the light of Courage v Crehan such a proposition is clearly unsustainable, at least on a summary basis.

Having now reviewed the arguments advanced by the English claimants, and decided that they are either wrong or unsuitable for summary determination, I conclude that Servier’s defence of failure to mitigate based on the prescribing argument cannot be dismissed as having no real prospect of success. The relevant amendments must therefore be allowed.

Servier’s defence of contributory negligence is set out in paragraph 83M of the draft RAD. The defence relies on all of the matters pleaded in paragraphs 83B to 83.I, but it is only in relation to the prescribing argument that the English claimants say that the defence is bound to fail. They accept that it is reasonably arguable in relation to their alleged failure to act with reasonable expedition in moving Perindopril into Category M of the Drug Tariff (paragraphs 83E – 83G).

Some further preliminary points may be noted:

First, at common law contributory negligence, if established, provided a complete defence to the claim. The jurisdiction of the court to apportion damages in claims which would previously have been defeated by the defence was conferred by the Law Reform (Contributory Negligence) Act 1945. In cases which do not fall within the scope of the 1945 Act, the defence is still unavailable.

Secondly, it has been clear since the decision of the House of Lords in Reeves v Commissioner of Police of the Metropolis [2000] 1 AC 360 that the 1945 Act has no application to intentional torts. The reason for this, shortly stated, is that the defence was never available at common law in the case of intentional torts, and on its true construction the 1945 Act was intended only to relieve claimants whose actions would previously have failed: see Standard Chartered Bank v Pakistan Shipping Corporation [2002] UKHL 43, [2003] 1 AC 959, at [12] per Lord Hoffmann. This is accepted by Servier, which does not plead contributory negligence in relation to the claim based on the intentional tort of interference with the economic interests of the English claimants. Servier’s pleaded defence is therefore confined to the alleged breaches of Articles 101 and 102.

Thirdly, in Arkin v Borchard Lines Ltd [2003] EWHC 687 (Comm), [2004] 2 CLC 242, Colman J held at [537], obiter, that contributory negligence is not a defence to a claim of breaches of Articles 101 or 102 (then Articles 81 and 82 EC). The English claimants do not, however, seek to support the apparent reasoning of Colman J on this point, which seems to have been based on a misunderstanding of the approach adopted by Hobhouse J in Forsikringsaktieselskapet Vesta v Butcher [1986] 2 Lloyd’s Rep. 179 at 196, and approved by the Court of Appeal at [1989] AC 852, 860. Servier agrees that the English claimants are right to make this concession, so it is common ground that the defence is potentially available in respect of these claims.

Fourthly, breaches of Articles 101 or 102 are classified under English law as breaches of statutory duty, and as such fall within the definition of “fault” in section 4 of the 1945 Act, which says that it means “negligence, breach of statutory duty or other act or omission which gives rise to a liability in tort…”

According to the English claimants, the prescribing argument cannot provide a defence of contributory negligence in the present case for two reasons. First, contributory negligence does not provide a defence where the alleged negligence is not the effective cause of the loss, but is merely the occasion for it. Secondly, it is also not available as a defence where the claimant acts as the defendant intended. I will now consider these reasons in turn.

As a preliminary comment, I would observe that a highly fact-specific issue of this nature is unlikely to be suitable for summary determination. At the best of times, the distinction between the occasion for, and the effective cause of, a loss can be an elusive one, and the answer will normally depend on a careful review of all the evidence at trial.

In their skeleton argument, counsel for the English claimants argue that in situations where a legal duty is imposed on the defendant for the protection of those in the position of the claimant, and the claimant is found to have been imprudent in getting into that position in the first place, that imprudence is treated as eclipsed by the defendant’s breach of duty as the effective cause of the resulting loss, with the consequence that a defence of contributory negligence cannot run. This is particularly so, they submit, where there is an insufficiently direct or proximate link between the reason for characterising the claimant’s conduct as imprudent and the nature of the loss actually suffered. They illustrate this distinction by reference to three authorities: Jones v Livox Quarries Ltd [1952] 2 QB 608; St George v Home Office [2008] EWCA Civ 1068, [2009] 1 WLR 1670; and Calvert v William Hill Credit Ltd [2008] EWCA Civ 1427, [2009] Ch 330.

In Jones v Livox Quarries Ltd, the claimant (contrary to instructions) was riding on the towbar of a traxcavator operated by the defendant. Another of the defendant’s vehicles negligently drove into the back of the traxcavator, and he suffered injuries. The trial judge found that the claimant had deliberately put himself into a position which exposed him to the danger of the collision, and reduced his damages by 20% under the 1945 Act. This decision was affirmed by the Court of Appeal. Denning LJ emphasised that the question did not depend on foreseeability, but on causation. As he said, at 615-616:

By way of contrast, Denning LJ then gave a further example. If the claimant, while riding on the towbar, “had been hit in the eye by a shot from a negligent sportsman, his negligence would not have been a cause of his injury. It would only be the circumstance in which the cause operated. It would only be part of the history.” A similar example was given by Singleton LJ at 612, where he instanced:

The English claimants rely upon these examples to submit that, in the context of the prescribing argument, their position should be regarded as analogous to that of a claimant hit in the eye by a negligent sportsman, or injured while sitting on an unsafe wall. They argue that any negligence on their part in failing to promote the prescription of cheaper alternatives to Perindopril did not expose them in a way they should have foreseen to the specific risk of overcharge as a result of Servier’s anti-competitive conduct. But as Jones v Livox Quarries Ltd explains, foreseeability is not the decisive test. The relevant question is, rather, whether the claimant’s imprudence is a sufficiently potent cause of the loss, or whether it should merely be regarded as “part of the history”. In answering this question, the full factual context has to be examined, as does the nature and scope of the duty which the defendant has infringed.

Viewed in this way, it seems to me clearly arguable with a reasonable prospect of success that the imprudent conduct of the English claimants, assuming it to be established, had a sufficiently close factual and temporal connection with Servier’s breaches of competition law to operate as an independent cause of the English claimants’ loss. It is not possible to say, at this early stage, that the argument is doomed to failure. Put simply, I agree with counsel for Servier that it is reasonably arguable that the ongoing levels of purchase of Perindopril at a high price were caused in part by the English claimants’ own conduct in failing to encourage switching to other ACE Inhibitors. There is a causal link between the English claimants’ imprudent conduct and their exposure to loss.

Neither of the other cases relied on by the English claimants seems to me to take the argument on this point any further. St George v Home Office concerned a 29 year old prisoner who had been addicted to alcohol and drugs from the age of 16. He informed the prison staff of his alcohol and drug abuse, and that he had previously had epileptic seizures when in withdrawal. He was nevertheless assigned a top bunk in an ordinary open dormitory, and suffered injury following a fall caused by an epileptic seizure. On his claim in negligence against the Home Office, seeking damages for personal injury, the judge found on a preliminary issue that liability in negligence was established, but the claimant was guilty of contributory negligence and any damages awarded should be reduced by 15%. In the Court of Appeal, the claimant’s cross-appeal from the finding of contributory negligence was allowed, on the basis that his fault in becoming addicted to alcohol and drugs was too remote in time, place and circumstance, and was not sufficiently connected with the negligence of the prison staff, to be properly regarded as a potent cause of his injury: see the judgment of Dyson LJ, with which Lloyd and Ward LJJ agreed, at [51] to [59]. In other words, the claimant’s addiction was simply part of his history, like that of a patient seeking medical treatment whose condition has been caused by his own life-style choices (such as smoking or excessive consumption of alcohol).

In Calvert v William Hill Credit Ltd the claimant was a pathological gambler who had an account with William Hill, but entered into a self-exclusion agreement with them whereby his account would be closed and no telephone bets would be accepted from him for six months. Seven days later, the claimant asked William Hill to close his account forever. These instructions were not properly implemented, and the claimant continued to place large bets with William Hill as a result of which he lost a large amount of money. He sought to recover his losses in an action for negligence, but his claim was dismissed by the trial judge (Briggs J), on the basis that although William Hill had been guilty of negligence, and the claimant’s losses had been caused by their negligence, the claim nevertheless failed on the issue of causation, because even if William Hill had complied with his instructions, he would probably have ruined himself anyway by placing bets with one or more other bookmakers. The judge also held that, if liability had been established, there would have been a “very large reduction” of any award on the grounds of contributory negligence.

The Court of Appeal upheld the judge’s decision on liability, so the question of contributory negligence did not strictly arise. The court nevertheless dealt with the issue at [61] to [72] of the judgment of the court (Sir Anthony May P, sitting with Lloyd and Etherton LJJ). The court declined to reduce the claimant’s damages on the ground that he was a pathological gambler, because to do so would contradict the duty which William Hill undertook to exclude him from further telephone betting. As the court said, at [70]:

In the present case, there has been no assumption of a specific duty of care by Servier to the English claimants in relation to their failure to take reasonable steps to encourage the prescription of cheaper alternatives to Perindopril, so it would not negate any duty owed by Servier to characterise such conduct as contributory negligence. I therefore agree with Servier that (like the St George case) the Calvert case does not assist the English claimants.

Although the breaches of statutory duty relied on by the English claimants are not intentional torts, and are therefore within the scope of the 1945 Act, the English claimants argue that a closely related exclusion should apply in situations where the defendant’s wrong is not intentionally committed, but is intended to bring about particular circumstances. They support this argument by reference to Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560, where Sir Donald Nicholls V.-C. held that, although in principle the defence of contributory negligence was available to a claim under the Misrepresentation Act 1967, where it was intended by the defendant that the claimant should act in reliance on the accuracy of a false statement, it would “need to be a very special case” before carelessness by the representee would make it just and equitable (within the meaning of the 1945 Act) to make any reduction in the damages payable: see 574 C-E.

I accept that this passage can be read as providing some support for the English claimants’ submission, but it does not do so in a sufficiently clear or comprehensive fashion to justify summary determination of this question in the English claimants’ favour. It is far from clear that Sir Donald Nicholls was intending to lay down any absolute rule, as opposed to one which applied in the case of pre-contractual misrepresentations; and even in that limited context he allowed for the possibility of exceptions in a “very special case”. Nor have I been referred to any other authority which supports the wider proposition for which the English claimants contend. Finally, the question whether Servier had the requisite intention is, in any event, one which cannot safely be answered before all the relevant evidence has been considered at trial.

For these reasons, I am unpersuaded by the two arguments advanced by the English claimants and I conclude that Servier has a reasonably arguable defence of contributory negligence in relation to the prescribing argument.

I come finally to Servier’s defence in paragraph 83.L of the draft RAD, that the matters pleaded in paragraphs 83B to 83.I broke the chain of causation and/or rendered any damage suffered by the English claimants too remote. I will deal with this contention briefly, for two main reasons. First, questions of causation and remoteness share with many of the points I have already discussed the quality of being fact-dependent and in general unsuitable for summary determination. Secondly, since I have already decided that Servier’s defences of failure to mitigate and contributory negligence need to go to trial, it would seem paradoxical to exclude the concepts of a break in the chain of causation and remoteness from the “toolbox” available to the court at trial, unless it were overwhelmingly clear that they had no prospect of being successfully deployed. In my view that stringent test is not satisfied, and cases like Schering Agrochemicals Ltd v Resibel provide a vivid illustration of the fact that, in these difficult areas, different judges will use different tools in the box in order to reach their conclusions. As Scott LJ said, at page 15 of the transcript:

In these circumstances, I will content myself with saying that I am unable to accept the English claimants’ submission that their failure to encourage the prescription of cheaper alternatives to Perindopril is incapable of amounting to a break in the chain of causation. This is a question of fact to be determined at trial, in the light of the guidance given in the authorities, including the decision of the Court of Appeal in Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360.

So far as remoteness is concerned, the parties are agreed that the right test is one of reasonable foreseeability, in the sense that the loss caused to the English claimants would not be too remote, even if they acted unreasonably in continuing to purchase Perindopril at inflated prices, if it was reasonably foreseeable by Servier that the English claimants would continue to do so. Once more, this is in my view a question of fact which needs to go to trial. There is clearly much force in the English claimants’ contention that Servier will be found to have had the requisite foresight, particularly in relation to the alleged breaches of Articles 101 and 102. But the question is one of fact, and certainty at this early stage of preparations for trial is impossible. The tool should therefore be left in the box, even if it is one which I suspect will have little part to play in the eventual outcome.

For these short reasons, I conclude that Servier should be permitted to rely on paragraph 83.L of the draft RAD in relation to the prescribing argument.

In the result, despite the interesting and well-sustained arguments advanced by the English claimants, I will grant Servier permission to make the disputed amendments.