Les Laboratoires Servier & Anor v Apotex Inc. & Ors

For the reasons given in my judgment dated 29 March 2011, [2011] EWHC 730 (Pat), I made an order on 7 April 2011 that Apotex should repay to Servier the sum of £17.5 million, together with the interest thereon, which Norris J had ordered Servier to pay Apotex by his order of 17 November 2008.

On 7 April 2011 the parties were not ready to deal with the question of the interest that should be paid on the sum being repaid and that question was accordingly adjourned. I now have to decide the issue as to the interest payable.

Over the period since 7 April 2011, the issues between the parties with regard to interest have narrowed to the point that, in a nutshell, the rival contentions are, on behalf of Servier, that interest should be awarded at a rate of EURIBOR plus 1% and, on behalf of Apotex, that it should be awarded at base rate plus 1%. In the alternative to EURIBOR plus 1%, Servier seeks an award at LIBOR plus 1%.

It is convenient to begin with the question of whether the reference rate should be EURIBOR or LIBOR if it is not base rate. EURIBOR, as its name suggests, is the European Interbank Borrowing Rate and it is a rate applicable to borrowing in euros. As I understand it, it is common ground that there is no EURIBOR sterling rate. Although there are various different LIBOR rates for various different currencies, in the present case the LIBOR rate that is proposed is the LIBOR sterling rate. In my judgment, if the choice is between those two rates, the correct choice is the LIBOR rate. The reason for that is that the currency of the award in this case is sterling. In those circumstances, it seems to me that the correct reference rate should be a sterling rate and not a euro rate.

I turn then to the more substantial dispute, which is whether the correct reference rate is the base rate or the interbank rate. So far as that question is concerned, the applicable principles were reviewed, first, by Jackson J in Claymore Services Ltd v Nautilus Properties Ltd [2007] EWHC 805 (TCC) at [70] to [74] and more recently by Andrew Smith J in Fiona Trust & Holding Corporation v Primalov [2011] EWHC 644 (Comm) at [13] to [16]. It is sufficient for present purposes to quote paragraph

As has been frequently observed, the conventional rate in commercial cases is base rate plus 1%. As is common ground before me, however, it is open to the court to depart from that conventional rate if there is sufficient justification for doing so. It is also common ground, as I understand it, that at the end of the day this is a matter that depends on the evidence before the court.

Before leaving Fiona Trust it is pertinent to note that in paragraph [18] of his judgment, Andrew Smith J recorded, in particular by reference to McGregor on Damages (18th edition) at paragraph 15-116, that LIBOR had been widely used for setting interest rates in commercial cases, particularly cases involving shipping companies as in that case.

I turn then to the circumstances in the present case. The starting point of the argument on behalf of Apotex is the judgment which Norris J gave on the question of interest at [2009] EWHC 3289 (Pat) where he said at paragraph [10]:

“As to those competing interests, the choice lies between base rate + 1% and LIBOR + 1%. As is pointed out in paragraph

7.0.17

of the White Book, the starting point is generally Bank of England rate + 1%. There is no evidence to suggest that this produces an unfair result in the present case. Accordingly, I adopt a cautious approach to the award of interest and I award interest at that rate (rather than the higher LIBOR rate). It is base rate [plus] 1%.”

Counsel for Apotex submits that, given the considerations of symmetry to which I referred in my main judgment in this case, it would be appropriate for Servier now to receive interest at the same rate as Apotex received by virtue of Norris J’s decision.

I acknowledge the force of that argument as reinforcing the selection of the conventional rate. Nevertheless, it is clear from Norris J’s judgment that his decision as to the correct reference rate was based, as it had to be, upon the evidence, or perhaps one might say more accurately the lack of evidence, before him. Furthermore, for reasons I will come to in a moment, it is necessary to bear in mind that that decision was given in November 2008 by reference to the market conditions operating prior to that point in time.

The evidence before me is different to the evidence which was before Norris J. Looking first at the evidence served on behalf of Apotex, this consists of a third supplemental statement of Mark Bezant, Apotex’s forensic accountancy expert. As counsel for Servier submitted, on analysis Mr. Bezant does not actually put forward any positive evidence as to the correct reference read. The most he does is to say at paragraph 2.29 what in his experience the correct margin is, namely 1%. He says it is 1% over a suitable reference interest rate. He does not, however, put forward any positive evidence as to what would be a suitable reference rate. Rather, what he does is to proceed on the basis that Servier’s expert (Mr. Andrews) has not justified any departure from the reference rate selected by Norris J in his decision.

In his third report, served in reply to that statement, Nicholas Andrews (Servier’s forensic accountancy expert) has addressed the question of the appropriate reference rate. There are two particular passages in that report which seem to me to be of importance.

The first is at paragraphs 2.2.2 and 2.2.3. In those paragraphs Mr. Andrews says, in summary, that a market interest rate such as EURIBOR or LIBOR more correctly reflects a commercial lending rate than base rate. In particular, he says in paragraphs 2.2.2:

He goes on in the remainder of that paragraph, and in paragraph 2.2.3, to say that, following the collapse of Lehman Brothers in September 2008, there have been, particularly at certain periods, significant divergences between the interbank rates and the Bank of England base rates. That evidence is particularly pertinent in the circumstances in the present case because of course the period with which we are concerned is the period since November 2008.

Secondly, Mr. Andrews goes on in paragraphs 2.3.3 and 2.3.4 to consider the position of a company in the position of Servier. His evidence in summary is that, as he puts it in paragraph 2.3.3, the position of a company like Servier, a private company in the pharmaceutical sector with significant assets, is that it would have been likely to have been able to borrow the sums involved at the relevant time at a rate close to EURIBOR plus 1%.

Counsel for Apotex criticises that evidence on the basis that Mr. Andrews does not in terms say that a company in the position of Servier could not have borrowed less than that. Read in context, it seems to me that is the clear meaning of what Mr. Andrews says, however.

My conclusion, based on all of the evidence before me, is that in the present case Servier has demonstrated that, having regard to the period with which we are concerned, it would be correct to depart from the conventional reference rate of base rate. On the evidence, it seems to me that the more appropriate reference rate is a commercial interbank lending rate as reflecting the likely reference rate for a company in the position of Servier. Although it can be seen from the quotation from paragraph 2.3.3 of Mr. Andrews’ report that he expressed himself by reference to EURIBOR, it seems to me the logic of his analysis applies equally to LIBOR. Indeed, in paragraphs 2.2.2 and 2.2.3 he also referred to the position in respect of LIBOR.

For the reason I gave earlier, I consider that LIBOR is the more appropriate reference rate than EURIBOR. Accordingly, I will award interest at LIBOR plus 1%. MR. PURVIS: Just a couple of points. For clarity, we should say a three month LIBOR, which is the rate that has been taken throughout, I think the parties have been using LIBOR and EURIBOR as shorthand for that. MR. JUSTICE ARNOLD: Yes, indeed. MR. PURVIS: The amount of interest on damages has been calculated, and I do not think is disputed, on the basis of three month LIBOR plus 1 as £1,001,594. MR. JUSTICE ARNOLD: Is that to today? I was not totally clear as to what date the calculations were taken. MR. PURVIS: That is down to the payment which now has been made, as I understand it. MR. JUSTICE ARNOLD: Fine. MR. PURVIS: We are talking historically only. There is no need for complicated calculations. We will put that figure in the order, but the rate we will record as three month LIBOR plus 1 for the purpose of interest on costs, which is the other element. The obviously the adjudication of the amount will have to depend on ---- MR. JUSTICE ARNOLD: I would hope that can be agreed. MR. PURVIS: Yes, absolutely. That only leaves the costs. MR. JUSTICE ARNOLD: The costs have not been assessed. If it cannot be agreed, the costs judge can always deal with that anyway. MR. PURVIS: We need to record that, and we will to do in a draft order. The only thing left outstanding then are the costs incurred on this part of the inquiry since the order of your Lordship of 7th April, because you only awarded costs up to and