Leo Pharma A/S & Anor v Sandoz Ltd

This is an application made by Sandoz Limited (“Sandoz”) pursuant to CPR r. 40.12, also known as the ‘slip rule’, to correct what is said to be an accidental slip or omission in an order which I made in this action on 2^nd June 2009. The order followed the trial of an action for patent infringement. As drawn, it provided for disclosure in accordance with the practice in Island Records v Tring International [1995] FSR 560, followed by an election on the part of the claimants (“Leo”) as to whether to pursue an account of profits or an inquiry into damages. By paragraph 9, the order provided that:

“The Defendant shall pay to the Claimants any sums found due on the taking of said inquiry into damages or account of profits together with interest at the judgment rate (being 8%) from the date of this Order.”

Sandoz maintains that no such order was made, and the inclusion of paragraph 9 in the order as drawn up was an error which can and should be corrected under CPR r. 40.12, “the slip rule”. Sandoz suggests that the words after “account of profits” should be deleted. Alternatively it suggests that the words defining the rate and period of interest should be deleted.

Normally an order made after judgment directing an enquiry or account would not specify the rates or periods of interest. On occasions an order will specify interest under the Senior Court Act or under the inherent jurisdiction of the court without mentioning a rate. Again, in the general case, interest runs from the date on which the cause of action arose. Paragraph 9 specified interest from the date of the order only. It therefore represented interest at a high rate but over a shortened period.

The background to the making of this order was as follows. In the period up to judgment, Leo had the benefit of an interim injunction which restrained the sale of a cream product containing the patented ingredient, but not the sale of an ointment. There was therefore a dispute following judgment as to whether the final injunction to which Leo were on the face of it entitled, and which would have covered both products, should be stayed pending the appeal for which I gave permission. I stayed the injunction on the ointment pending the appeal. In those circumstances, counsel for Leo, did not resist the grant of a stay in respect of delivery up, “damages” and Island Records disclosure.

A draft order was before the court which included the provisions relating to delivery up, disclosure, election and payment, including an order in the terms of paragraph 9 which I have set out above. In their skeleton argument on behalf of Sandoz, counsel had submitted that any order with regard to the account/inquiry should reserve questions of interest. They submitted that there was no justification for ordering the judgment rate in respect of anything before judgment. Leo’s skeleton did not separately discuss the issue of interest or draw attention to any justification for setting the interest at the judgment rate prior to quantification. There was no discussion of any issue in relation to interest on damages at the hearing.

In the light of my decision to stay the injunction, and the concession in relation to the stay of the inquiry/account, I directed the parties to draw up a minute of order to be lodged. There then followed an exchange of emails between counsel. Counsel for Leo first drafted and sent to leading counsel for Sandoz an order staying the final injunction in respect of the ointment, the order for delivery up and the Island Records disclosure. Paragraph 9 was left in place from the draft which had been before the court on 2^nd June 2009. Leading counsel for Sandoz responded by suggesting a draft which provided for the stay of the injunction, but which deleted all the specific orders concerned with disclosure, election, and paragraph 9. Instead it provided a new paragraph 6 and 7 as follows:

“6.

All issues concerning the Claimants’ claim to have delivered up products … be stayed until after the Appeal in this action and any appeal therefrom”

7.

All issues concerning the Claimants’ claim to recover damages or at their option an account of profits including interest be stayed until after the Appeal in this action and any appeal therefrom” (emphasis supplied).

Leo’s counsel replied by saying that Leo did not agree that I made no order as to damages or delivery up, but that I had stayed the order in relation to those matters. At this stage, both parties recognised that if there was no agreement the matter would have to be restored for further argument. However, on 19^th June, after taking his client’s instructions, leading counsel for Sandoz reverted by saying that, to avoid unnecessary costs, Sandoz was prepared to agree to Leo’s form of order. The minute of order, including paragraph 9, was then signed by junior counsel for both parties, lodged in the ordinary way, sealed and sent to the parties.

In paragraph 17 and 18 of his fifth witness statement Mr David Rose, the solicitor acting for Sandoz, says in relation to paragraph 9 of the order:

“17 (a) (having spoken with [leading counsel]) it [i.e. paragraph 9] was never considered or discussed in the emails that passed between counsel following the post judgment hearing. Both [leading counsel] and [junior counsel] (who I have also spoken to) also confirm that they have no knowledge or recollection of discussing the issue of interest on damages with counsel for Leo.

(b)

It was never considered or discussed in any exchanges that my firm had with counsel following the post judgment hearing.

(c)

It was never the subject of any correspondence with [the solicitors for Leo] following the post judgment hearing.

(d)

[Leading counsel] gave no indication to [counsel for Leo] that Sandoz’s objections to the judgment interest part of the order had been withdrawn.

18.

In short, the language of paragraph 9 was not ordered, agreed or discussed. To the contrary, the language proposed by Leo was the subject of an objection by Sandoz. Its inclusion in the Order is clearly an error.”

This is of course a somewhat contentious way of putting the matter. The language of paragraph 9 was plainly agreed by Sandoz: leading counsel indicated his agreement to the wording and junior counsel signed the agreed minute, both acting on Sandoz’s instructions. The fact that there was no discussion of the matter does not mean that an agreement was not reached. It is not correct to say that Leo was given no indication that the objection to paragraph 9 was withdrawn. The entirety of Leo’s wording was subscribed to, from which Leo was entitled to infer that the objection had indeed been withdrawn.

Sandoz’s appeal to the Court of Appeal was dismissed by an order dated 17^th November 2009, leaving my order in place. Subsequently, Sandoz was plainly conscious of the fact that the original order relating to interest at the judgment rate had been made. It relied in correspondence on the fact that it was liable to pay such interest as a reason why Leo should not delay the prosecution of the damages inquiry for which Leo elected. In response to this, Mr Rose says in his sixth witness statement that he did not appreciate until June 2010 (that is to say a year after the order was made) that the order about interest “had not in fact been the subject of an order” by the court. This is again a contentious way of putting the matter: it had been the subject of an order, although he is correct that the subject of the rate and period of interest had not been debated in court. He obviously accepts that he or his firm was aware that the order as drawn had contained the paragraph now sought to be corrected.

CPR r. 40.12 provides as follows:

“(1)

The court may at any time correct an accidental slip or omission in a judgment or order.”

The rule is described in the White Book notes as “one of the most widely known but misunderstood rules”. The notes point out that the rule is essentially there to correct typographical or other careless errors, but goes on to point out that it can be used by the court to make the intention of the court plain.

For example, in Bristol Myers Squibb v Baker Norton Pharmaceuticals [2001] EWCA Civ 214, the Court of Appeal had allowed a cross-appeal concerned with a restriction placed by the trial judge on the recovery of more than one set of costs by two defendants. The effect of the order made in consequence by the Court of Appeal would have been to deprive the defendants of a right to accrued interest. The court rejected a submission that there had simply been a mistake as to the legal effect of the order. It considered that it had not been the intention of the court to deprive the defendants of interest at all. At [26] Aldous LJ (with whom Laws LJ and Blackburne J agreed) said this:

“In the present case the only issue raised on the cross–appeal was whether the restriction placed by the judge was appropriate. At no time was that part of the judge's order that required Bristol Myers to pay the defendants' costs challenged and it was not the intention of this Court to alter that part of the order. The intention of this Court was to remove the restriction; not to alter the general right to costs that had been ordered. Thus the correct order allowing the cross-appeal should have left the part of the order of the judge which was not challenged in the form in which it existed.”

The order made in that case had been contained in an agreed form of order placed before the court (see the judgment at [8]). The order was correctable under the slip rule because, when the court made the order, it was not its intention to deprive the defendants of accrued interest: yet, inconsistently, the order had this effect.

By contrast, in SmithKline Beecham and others v Apotex Europe Limited and others [2005] EWHC 1655 Lewison J refused to allow the slip rule to be used to expand a cross-undertaking given in an order to cover third parties affected by an injunction. It was said that the court must have intended to make an order following the form in the Practice Direction supplementing CPR Part 25. At [63] he said this:

“The slip rule allows the court to correct an "accidental" error or omission. Was the form of the cross-undertaking an accidental error? At first blush the answer must be "No". It was a cross-undertaking deliberately given in the form in which it was intended to be given. It was embodied in an order settled by junior counsel for each party; and approved by the judge.”

One ground on which Lewison J refused to correct the order was that it was not clear what order would have been made if the alleged “accidental slip” had not occurred:

“… if the Practice Direction had been drawn to the attention of the judges who granted the interim injunctions, I do not feel able to say with confidence what cross-undertaking they would have required; or GSK would have been willing to give. As I have said, I do not consider that at the time these injunctions were granted, it would have been implicit in any application for an interim injunction that the form of undertaking in the Practice Direction was being offered; and even if it was, any implied offer must, in my judgment, have been displaced by the express offer that was accepted both by the Defendants and by the court. If I were now to amend the form of the cross-undertaking, I would be retrospectively imposing on GSK an undertaking that they did not give; and could not have been made to give."

It is important to note that it is not every failure of an order to give effect to the intention of the court which can be corrected under the rule. The operation of the rule is limited to accidental slips or omissions. It is common for the court to encourage parties to agree matters of detail in the drawing up of its order with the proviso that the parties may mention the matter again to the court in the event of disagreement. Whilst in such circumstances it could be said that the court had no specific intention at the time it spoke its order, a subsequent agreement as to the form of order would plainly be within the intention of the court, and such an agreement could not, as it appears to me, be corrected under the slip rule. There is neither a failure to reflect the intention of the court, nor any accident or slip. Another quite common case is where the parties agree to a minute of order which is inconsistent with an order spoken by the judge: for example a longer period of time than the judge allowed for some act to be performed. A party who had agreed such a variation cannot seek to revert to the original time on the basis that it had not been the intention of the court to extend the time. There is no accidental slip or omission in the order.

Counsel for Sandoz suggested that the answer to this is that matters of detail such as this could be worked out between the parties, but that it was not open to the parties to include a new matter of substance which is not part of the intention of the court. I reject that submission. Matters deliberately included by the parties in an order drawn up and sealed by the court do not constitute accidental slips or omissions within the rule. It is different where, as in Bristol Myers, the order had an unexpected and unintended effect inconsistent with the court’s intention.

Counsel for Sandoz submitted that the Court did not intend to make any order about the rate and period of interest. The agreement to the incorporation of paragraph 9 into the order was therefore an accidental slip or omission which was correctable under the slip rule. He also submitted that there had been a genuine mistake by counsel in agreeing to the terms of the order: he had never had any intention to agree the rate or period of interest.

Counsel for Leo submitted that the order had been made in two stages. As there had been no discussion about interest at the hearing, the court did not have a definite intention, but had left it as one of the matters to be settled in the drawing of the order. When the agreed minute of order was put before the court, the court then had a definite intention to make the order in those terms. The mistake by counsel, if there was one, did not mean that the order contained an accidental slip or omission of the kind correctable under the rule. If it were otherwise, orders drawn up in this way would be liable to alteration in a whole variety of circumstances, leading to uncertainty.

Neither side accordingly suggests that the court had a definite intention at the hearing to make an order about the precise rate or period of interest. The stay of the financial remedies was dealt with globally, and without the dispute about the rate and period of interest being brought to my attention as requiring resolution.

Putting aside for the moment what is said to be the mistake in agreeing to the order, I do not think that the order as made is inconsistent with the intention of the court at any stage. Firstly, when the order was spoken, the precise form of order about interest was one of the matters to be settled between counsel, and was, at least on the face of it, so settled. The case is therefore not within the principle enunciated in Bristol Myers where the order had an unintended effect inconsistent with the court’s intention. Secondly, there would on this scenario be no accidental slip.

Should I view the matter differently because of the mistakes suggested in Mr Rose’s evidence and by counsel? Nothing in the evidence of Mr Rose persuades me that I should do. The substance of that evidence is that he appreciated in June 2010 that the court had not said anything specific about interest. That does not establish that the order as drawn is in error, or that there was any relevant slip or omission.

As I have indicated, counsel for Sandoz valiantly accepted the blame for the mistake in agreeing to paragraph 9. But on what basis was agreeing to the order a mistake? There are two possible mistakes to be considered. If it is said that it was a mistake because paragraph 9 was inconsistent with the intention of the court, then I have already rejected that contention. It was entirely within the scope of the court’s intention for the parties to agree the precise terms of the order as to interest. But the way in which counsel for Sandoz puts the mistake is that he never intended to agree to judgment rate interest. Put in this way, he is saying that he had not realised that Leo’s form of order involved abandoning his client’s objection to the judgment rate interest, something preserved by his form of order but needing to be dealt with if Leo’s form was reverted to.

The court should be very cautious before going behind an apparent agreement between counsel, and for obvious reasons. The court relies on the signature of counsel on a minute of order as conclusive of an agreement on their part and that of their clients. Whilst naturally I accept counsel’s statement, the evidence as a whole does not suggest that Sandoz or their junior counsel were not aware that they were agreeing to the provision about interest. Indeed Sandoz subsequently relied on the fact that the order contained such a provision. It was throughout open to Sandoz to pursue its objection to this provision, either by persuading Leo to accept a different form of order, or by restoring the matter for argument in court or on paper. Sandoz did not take any of these options. It expressly elected for the form of order in Leo’s draft.

Moreover, as counsel for Leo pointed out, if Sandoz had pursued its objection, Leo would have had the opportunity to persuade the court to make the immediate order which it sought (and obtained by agreement). The outcome of that argument is not so obvious that I would feel confident in saying that the correct order should be either of those which Sandoz seeks. I think this is a strong indication that the particular mistake relied upon by counsel for Sandoz is not within the slip rule.

In my judgment, Sandoz compromised its original objections to the form of order in the interests of saving costs. I believe counsel for Leo is right when he suggested that Sandoz were at that stage optimistic about their chances of success on appeal. If successful, the contents of the order about interest would have been academic. None of this amounts to a sound basis for suggesting that the order contains an accidental slip or omission which is capable of correction under CPR r. 40.12.

It follows that I will make an order dismissing the application. I should record that counsel for Sandoz did not pursue a secondary argument that paragraph 9, in setting the judgment rate at this stage, was beyond the jurisdiction of the Court. That argument was not accepted by Leo, and it is not necessary for me to resolve it or express any view on it.