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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Smithkline Beecham Plc & Ors v Apotex Europe Ltd & Ors [2005] EWHC 1655 (Ch) (26 July 2005) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2005/1655.html Cite as: [2005] EWHC 1655 (Ch), [2006] WLR 872, [2006] 1 WLR 872

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		26th July 2005

Mr. Justice Lewison:

Introduction

Background

Procedural history

The issue

The test

The slip rule

The rule

The argument

The development of cross-undertakings

The existence and extent of a cross-undertaking

Imposition of a cross-undertaking

Nature of the cross-undertaking

The benefit of the cross-undertaking

Protection of third parties

The introduction of the CPR

The scope of the slip rule

The joinder application

Estoppel by convention

Restitution

Third party loss

The profit share

Result

Introduction

1. I have to decide three applications. The first is an application to amend a "cross-undertaking in damages" embodied in two orders for interim injunctions. The application is made under the slip rule. The second is to join additional parties to the action in which the interim injunctions were granted, with the objective of giving those additional parties the benefit of the cross-undertaking, with retrospective effect. The third is an unusual application. I have to decide whether certain parts of a draft pleading, if served in the form in which they currently are, would be liable to be struck out as disclosing no reasonable cause of action; or plead a claim that has no reasonable prospect of success.
2. The third application comes about because of an order made by Pumfrey J on 26 May 2005 on the claimants' application for the trial of a preliminary issue. The order provides:

"The Claimants' application for the hearing of the preliminary issues be refused and instead it be directed that the question of whether the case as pleaded in the draft amended Points of Claim raises triable issues in relation to the two Canadian companies (Apotex Inc. and Apotex Pharmachem Inc.) is to be determined according to the criteria under CPR Parts 3.4 and 24 at the hearing currently listed for 3 days floating from 14^th July 2005 all other directions in the enquiry to await determination of these issues."

3. In paragraph 31 of the judgment that led to the making of that order Pumfrey J said that he was satisfied that the purely legal argument that would have to be advanced "on the basis that all the facts pleaded are true" would take three days.

Background

4. The two claimants in the action are members of the GSK group of companies. They manufacture a pharmaceutical product under the brand name Seroxat. It is widely used for the treatment of psychiatric disorders such as depression; and is one of GSK's best selling products. The active ingredient in Seroxat is paroxetine hydrochloride anhydrate. GSK is the proprietor of a patent which claims a process for producing paroxetine hydrochloride anhydrate substantially free of bound organic solvent. GSK had (as one might expect) been protective of their patent. In the two years preceding the current litigation GSK had sought and obtained interim injunctions against two generics companies (Generics (UK) Ltd and Alpharma Ltd) restraining alleged infringements of the patent.
5. The immediate background to the current proceedings was described by Mr Reilly of GSK in his witness statement as follows:

"7.1 The First Defendant ("Apotex") is an affiliate of Apotex Inc., a multinational generic pharmaceutical company with headquarters in Canada. The Second Defendant ("Neolab") is a UK-based distributor of generic pharmaceutical products. The Third Defendant ("Waymade") is a parallel importer of branded pharmaceutical products and a distributor of generic pharmaceutical products.

7.2 In mid-November 2001 it came to GSK's attention that Neolab had announced an intention to sell a generic paroxetine product in the UK. GSK instructed Simmons & Simmons to write to Neolab and, after some correspondence between solicitors, on 28 November 2001 Neolab gave an undertaking through its solicitors not to launch any product containing paroxetine hydrochloride without giving GSK three weeks' advance notice. In late August 2002 it came to GSK's attention that a marketing authorisation for paroxetine 20mg tablets had been granted to Apotex on 30 July 2002, with Neolab named as a distributor of the product. For the reason given in paragraph 8.9 below, this means that Apotex must have applied for its UK authorisation by January 2002. Copies of Apotex's patient information leaflet and Summary of Product Characteristics are now produced to me marked MR-3.

7.3 On 29 August 2002 Simmons & Simmons wrote to Apotex and the solicitors who had earlier represented Neolab, requesting confirmation that the undertakings previously given by Neolab would be adhered to and requesting samples of the product which Apotex intended to market through Neolab. On 06 September solicitors on behalf of Neolab and Apotex confirmed that the undertaking previously given by Neolab would be adhered to by both their clients. On 09 October 2002 the solicitors gave notice on behalf of Apotex and Neolab, as well as on behalf of Waymade,, of their joint intention to launch a paroxetine hydrochloride product in three weeks' time i.e. on 30 October 2002. GSK were also notified of the commencement of proceedings by the Defendants for the revocation of the anhydrate patent and EP (UK) 0 223 403 (which covers paroxetine hydrochloride hemihydrate)."

6. The revocation proceedings were in fact begun on 9 October 2002. In response, GSK began its own proceedings alleging infringement of its patented process. GSK applied in its own proceedings for interim injunctions restraining the defendants from disposing of, or offering to dispose of, any pharmaceutical preparation containing paroxetine hydrochloride anhydrate in the United Kingdom. The three defendants to those proceedings were Apotex Europe Ltd; Neolab Ltd and Waymade Healthcare plc. They were also the three claimants in the revocation proceedings.
7. In fact the paroxetine was manufactured in Canada by Brantford Chemicals Inc (which is now called Apotex Pharmachem Inc and is part of the Apotex group); and some of the finished product was to be supplied by Apotex Inc (another part of the group) to Neolab. The terms of the supply agreement were such that the price that Neolab were to pay Apotex Inc consisted of a fixed price and a percentage share of profit.
8. Neither Brantford Chemicals Inc nor Apotex Inc (which I shall call "the Canadian companies") were claimants in the revocation proceedings or formal defendants in the infringement proceedings. Nor did the interim injunction prohibit the manufacture of paroxetine in Canada; or its import into the United Kingdom (so long as it was not disposed of or offered for disposal).

Procedural history

9. The first hearing of GSK's application was disposed of on 29 October 2002 before Jacob J on the basis of undertakings and cross-undertakings. The defendants undertook that they would not until the determination of GSK's application or further order whether acting by themselves or through their employees, directors or agents or otherwise howsoever dispose or offer to dispose of, any pharmaceutical preparation containing paroxetine hydrochloride in the United Kingdom. In return GSK gave a cross-undertaking in the following terms:

"AND UPON the Claimants (and each of them) undertaking by their Counsel to comply with any order this court may make if the court later finds that the undertaking recorded in the following paragraph has caused loss to the Defendants and decides that the Defendants should be compensated for that loss"

10. On 28 November 2002 Jacob J granted an injunction in substantially the same terms as the undertaking until trial or further order. This time GSK's cross-undertaking was in the following terms:

"AND UPON the Claimants agreeing to comply with any order this court may make if the court later finds that this order for an injunction has caused loss to the Defendants and decides that the Defendants should be compensated for that loss"

11. The trial of the action resulted in a judgment of Pumfrey J given on 8 December 2003. He dismissed the action and revoked the patent. On the handing down of the judgment Pumfrey J continued the injunction until the effective hearing of a further application on the following cross-undertaking:

"AND UPON the SmithKline Beecham Parties undertaking to comply with any order this court may make if the court later finds that the order for an injunction in paragraph 1 of this Order has caused loss to the Apotex Parties and decides that the Apotex Parties should be compensated for that loss"

12. The "Apotex Parties" were defined in the order as Apotex Europe Ltd; Neolab Ltd and Waymade Healthcare plc.
13. The contemplated further application was an application for permission to appeal. That was due to be heard on 18 December 2003. On 16 December 2003 GSK wrote to say that it would not seek to maintain the interim injunction in force during the pendency of any appeal. Thus it became inevitable that the injunction would be discharged two days later. On 17 December 2003 the Canadian companies applied to be joined as defendants to the action. So far as I can see the only purpose of the application was to obtain the benefit of the cross-undertaking. In a witness statement made in support of the joinder application Mr Cohen (the Defendants' solicitor) said:

"4. I have reviewed the Witness Statement of [Mr Freeland] in relation to GSK's licensing arrangements and their application to add a further Glaxo company to this action. We have also reviewed this issue to ensure that all the appropriate parties are in the action.

5. I consider that it would be appropriate for BCI and Apotex Inc (AI) to be joined as parties to this action in addition to Apotex Europe. BCI is a company in the Apotex group.

6. The bulk active Paroxetine is manufactured by BCI in Ontario Canada. This was the site of the lengthy inspection carried out by GSK. BCI send the active to Apotex Inc for tableting and packaging.

7….

8. Both BCI and AI have abided by the terms of the interim injunction granted and "voluntarily" provided disclosure in the case. In addition the process inspection which was ordered in the action took place over several weeks at BCI's facility. Further if, which my clients deny, Apotex's products have been an infringement of the patent in suit, both BCI and AI would have been joint tortfeasors."

14. On a subsequent appeal to the Court of Appeal that court reversed Pumfrey J's revocation of the patent; but held that it had not been infringed.
15. The cross-undertakings given by GSK on the grant of the various interim injunctions have now become enforceable. In so far as the court has a discretion whether or not to permit enforcement, that discretion has already been exercised by Pumfrey J in the defendants' favour. An inquiry into damages will, therefore, take place.

The issue

16. In their draft Points of Claim the Defendants seek to enforce the cross-undertaking in favour of the Canadian companies. The Points of Claim allege that the cross-undertakings can be enforced by them or for their benefit on four separate grounds:

i) the cross-undertakings in the orders of 28 November 2002 and 8 December 2003 should be amended under the "slip" rule so as to conform with the Practice Direction to CPR Part 25 on interim injunctions;

ii) GSK is estopped by convention from denying that the Canadian companies are entitled to claim their own losses under the cross-undertakings;

iii) the Canadian companies are entitled to recover the losses they have sustained by virtue of a restitutionary cause of action

iv) Apotex Europe is entitled to claim the losses of the Canadian companies as "third party" losses recoverable by them.

17. GSK alleges that even on the assumption that the facts alleged in the Points of Claim are true, none of these claims is legally sustainable.
18. The Canadian companies also apply to be joined as additional Defendants to the infringement action.

The test

19. It is common ground that, as regards the first two applications (amendment under the slip rule and joinder of additional parties) I must decide the applications, rather than merely decide whether they are arguable.
20. Pumfrey J's order requires me to apply the criteria under CPR Part 3.4 and Part 24 to the remaining applications. Under CPR Part 3.4 the court may strike out a statement of case if it "discloses no reasonable grounds for bringing the claim". Under Part 24 the court may give summary judgment against a claimant on a claim or issue if it considers that the claimant "has no real prospect of succeeding on the claim or issue".
21. The power to strike out should be sparingly exercised in a case which involves developing areas of law. It is better for novel points of law to be decided on real, rather than assumed, facts. On the other hand, it is no part of the function of a first instance judge to apply the law as it might one day become. His job is to apply the law as it is (or arguably is).
22. In order to defeat an application for summary judgment, the claim must be shown to have a real prospect of success; that is to say one that is more than merely arguable. But an application for summary judgment must not be allowed to become a mini-trial. The purpose of Part 24 is to dispose of cases that are not fit for trial at all.

The slip rule

The rule

23. CPR Part 40.12 (1) says:

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

The argument

24. The Defendants' argument runs as follows:

i) The Practice Direction (PD 25A para 5.1) dealing with the grant of interim injunctions says that:

"Any order for an injunction, unless the court orders otherwise, must contain:

(1) an undertaking by the applicant to the court to pay any damages which the respondent(s) (or any other party served with or notified of the order) sustain which the court considers the applicant should pay,…"

ii) The cross-undertakings given by GSK do not, on their face, extend beyond the defendants to the action;

iii) This was because the judge's attention was not drawn to the contents of the Practice Direction on either of the two occasions on which interim injunctions were granted, and the Practice Direction had been overlooked by solicitors and counsel for both sides;

iv) In the absence of an express order of the court ("unless the court orders otherwise") the cross-undertakings should have extended to anyone (whether or not technically a party to the action) who was served with or notified of the order;

v) No such express order having been made, because of the accidental omission to draw the judges' attention to the Practice Direction, the cross-undertaking should be amended under the slip rule.

The development of cross-undertakings

25. It seems that what is conveniently called the cross-undertaking in damages was invented by Knight-Bruce LJ when he was Vice-Chancellor, and was originally inserted only in ex parte orders for injunctions. From there the practice developed of requiring a plaintiff to give a cross-undertaking in damages as the price of any interim injunction. There are two related reasons why the court requires the giving of a cross-undertaking in damages as the price of an interim injunction. The first is that at the time when it grants the injunction the court has not finally determined the rights of the parties. The modern practice is to decide whether there is a serious issue to be tried. If there is; and if damages would not be an adequate remedy, the court proceeds to determine the balance of convenience. Of course, when the facts are finally investigated, the claim may fail; with the consequence that the defendant may have been temporarily stopped from doing something that he was entitled to do all along. That is why the grant of an interim injunction has sometimes been called a "damage limitation exercise". The second, and related, reason is that if an injunction is discharged at trial, the court has no power to award damages to the successful defendant for any loss he may have suffered while it was in force.

The existence and extent of a cross-undertaking

26. In some cases the court will be able to say that a cross-undertaking has been implicitly given. In The Bank v. A Ltd (unreported 23 June 2000) the bank was suspicious about the propriety of a number of large transfers into the account of A Ltd in its books. The bank was concerned that the transfers represented the proceeds of fraud and that, if such activity were permitted to continue, it might be held liable to the beneficiaries as a constructive trustee of the funds. On the other hand, the bank felt unable to raise the issue with A Ltd for fear that it might thereby commit the offence of tipping off under the relevant legislation. Accordingly, the bank applied without notice to A Ltd and in private for directions from the court as to what it should do. It did not apply for an injunction. The judge suggested that an order freezing A Ltd's accounts would be the best way forward and the bank took up the offer. The freezing order, as originally granted and subsequently varied, did not contain an express cross-undertaking in damages. When the case subsequently came back to court Laddie J said that a cross-undertaking was demanded as of course. He approved the following passage in the then current edition of Mr Gee QC's book on Mareva Injunctions and Anton Piller Orders:

"Whenever the court grants an Anton Piller order or an interlocutory injunction, unless the contrary is expressly said, the plaintiff will be taken to have given the usual undertaking in damages by implication. In the Queen's Bench Division it is usually the responsibility of the plaintiff to provide a draft order to the court. That order ought to contain the usual undertaking in damages. If, through inadvertence, it is not included, the plaintiff could not resist an application by the defendant to rectify the order either under RSC Ord 20 r 11 or under the inherent jurisdiction of the court."

27. Laddie J then referred to Colledge v Crossley The Times, 18 March 1975 in which the Master of the Rolls was reported as saying:

". that it was unfortunate that the undertaking in damages was not put into the original order. It was an automatic undertaking which was invariably inserted when an interim injunction was granted. If afterwards at the trial there was shown to be no right to the injunction the plaintiff would have to pay damages as the price of getting the interim injunction. Undoubtedly the failure to include the undertaking came within the slip rule. The undertaking should be inserted."

28. I would infer from this quotation that the case concerned a cross-undertaking that was in fact given, but which for one reason or another was not recorded in the order. However, it is not possible to be sure from the brief report in The Times; and it may well be a case in which no cross-undertaking was expressly offered and accepted. However, I do not think that this matters.
29. Laddie J concluded as follows:

"When an ex parte injunction or order is made other than against the Crown, it is automatically subject to a cross-undertaking in damages. So that the parties are made fully aware of their respective rights and liabilities, that cross-undertaking should be set out in terms in the order, but if it is not, it is to be implied none the less. It is difficult to imagine any circumstances in which it would be appropriate for a court to refuse to impose a cross-undertaking when it is making an order in the absence and without the knowledge of the target of the injunction, not least because the imposition of such a cross-undertaking does not mean that the court will inevitably enforce it against the claimant if he fails at the trial. The cross-undertaking only requires the claimant to compensate the defendant if, in its discretion, the court decides that such compensation is appropriate. In the unlikely event that a court, after argument from the claimant, decides not to impose a cross-undertaking, that should be stated expressly. The failure of the court to expressly deal with this issue in the November and January orders was not because of an unwillingness to impose a cross-undertaking but because the necessity of such an undertaking was so obvious that it did not need to be stated.

… Any party who seeks interlocutory relief must be taken to know and appreciate that a cross-undertaking in damages will be the price it is expected to pay and the advocate appearing on his behalf will be taken to have authority to give the undertaking. Even in a case like this, where the November order was offered by the court rather than asked for by the party, acceptance of the offer subjects the party to exactly the same conditions and obligations as if he had asked for it in the first place. He has to pay the same price. The need to protect the interests of the absent party are the same wherever the idea for the injunction came from. If the offer of more than was asked for places the party's advisers in difficulties they should either ask for a short adjournment to seek instructions or decline the offer. If neither of these courses are adopted and the offered injunction is accepted, the automatic obligation to submit to a cross-undertaking must be explained to the client as soon as possible. If he is not prepared to pay that price, he must return to court at the earliest opportunity – particularly before the order is served or executed – to ask for it to be modified either by expressly excluding the cross-undertaking or removing the injunction."

30. Although Laddie J was dealing with an application for an injunction made without notice, I do not consider that his observations were intended to be confined to such a case, since the rationale for the requirement of a cross-undertaking applies equally to the grant of an interim injunction on notice. However, I do not read his observations as suggesting that the court can impose a cross-undertaking on a party unwilling to give it; merely that it is implicit in an application for an injunction (or, on the unusual facts of that case, the taking of the benefit of an injunction) that a cross-undertaking will be given. As Laddie J himself recognised in the last of the quoted sentences, if the claimant is not willing to pay the price he must ask for the cross-undertaking to be removed or for the injunction to be discharged. To hold otherwise would be contrary to authority which does not appear to have been cited to Laddie J. I will develop this point later.
31. The principle that the offer of a cross-undertaking is taken for granted has a long history. As long ago as 1896 North J said in A-G v. Albany Hotel Co [1896] 2 Ch 696 at 699:

"Upon drawing up an order for an interlocutory injunction the registrar invariably inserts such an undertaking on the part of the plaintiff, even though, as frequently happens, it has not been mentioned in court, but has been taken for granted. Of course such an undertaking must be voluntary: the Court cannot compel a person to give an undertaking; and, if the plaintiff declines to give it, either in court or before the registrar, the order will not be made, or, if pronounced, will not be drawn up. If in the exercise of his discretion a judge should think fit to dispense with such an undertaking he could of course do so, and there are cases in which judges have done so; but this would only be under special circumstances. In the absence of any express direction of the judge to the contrary, the undertaking will always be inserted in the order."

32. In consequence, the court would enforce an implied cross-undertaking for damages even if it had not been included in the order, unless the contrary had been agreed and expressed at the time: Oberrheinische Metallwerke GMBH v. Cocks [1906] WN 127 (see W v. H (Family Division: without notice orders) [2001] 1 All ER 300, 319 where Munby J sets out the history of the practice).
33. These are cases in which no cross-undertaking was expressly given or recorded in the order. What if a limited cross-undertaking is given and accepted by the court?
34. In Tucker v New Brunswick Trading Company of London (1890) 44 Ch D 249, an action was brought against three defendants, Matthews, Lamplough and the New Brunswick Trading Company of London, to restrain the company from confirming in general meeting certain agreements between the company and Matthews and Lamplough. An interim injunction was granted against Matthews and the company. Matthews asked for the usual undertaking in damages, to which the plaintiff's counsel replied that it would of course be given. Lamplough had not been served and did not appear. When the order was drawn up, the undertaking it contained was confined to damages sustained by the company, and it was passed and entered in this form. Matthews and Lamplough appealed, asking that the undertaking might be extended to damages sustained by them respectively. The Court of Appeal held that since Matthews had applied for an undertaking, which had in fact been given, the order was wrong in not extending the undertaking to damages sustained by him and could be corrected. Indeed that correction could have been made by the first instance judge under the slip rule; and did not require an appeal. However, the same did not go for Lamplough, who had not applied for an undertaking and not received one. Cotton LJ said (252):

"As regards Lamplough, I am of opinion that his appeal fails; for we cannot impose on the Plaintiff any undertaking which he has not given. If a defendant applies for an undertaking, the plaintiff may decline to take any order. The Court only makes the undertaking a condition of granting an injunction; if the plaintiff refuses to give it the Court can refuse the injunction, but it cannot compel the plaintiff to give an undertaking. As a general rule, I think that when an injunction is granted the undertaking as to damages ought not to be confined to the persons restrained. In Pemberton on Decrees, it is said: "The undertaking applies to all the Defendants, although one or more only may be restrained." Mr. Pemberton does not refer to any authority for this; but I consider it to be a correct statement of the practice."

35. Lindley LJ said (253):

"The cases of the two Appellants are distinguishable. Matthews asked for an undertaking and got it. An undertaking is the price of an injunction, and if a man gets an injunction he must pay the price. Lamplough did not ask for an undertaking, and for anything we can tell, if he had done so the Plaintiff would have declined to take the injunction. I think, therefore, that the undertaking can only be extended to Matthews."

36. Lopes LJ agreed.
37. It is noteworthy that although Cotton LJ agreed with the statement in Mr Pemberton's book that a cross-undertaking ought to extend to all defendants, whether or not restrained, the cross-undertaking given in that case did not in fact extend to Lamplough. In the light of that fact, the Court of Appeal decided that the cross-undertaking could not be extended to him. Thus the Court of Appeal did not elide the two questions: what should the cross-undertaking contain and what did the cross-undertaking contain. Even though the cross-undertaking should have extended to Lamplough, it was not retrospectively extended. It seems very unlikely that the practice of the court had changed radically between 1890 (Tucker) and 1896 (Albany Hotel Co); and no one suggested that it did. In the light of Tucker, it seems to me that if a limited cross-undertaking is offered and accepted by the court, there is in general no room for implying some further offer of an undertaking beyond that which is expressly offered and accepted.

Imposition of a cross-undertaking

38. The cross-undertaking has been described as the "price" of an injunction. If the applicant is unwilling to pay the price, he does not get the injunction. But as the Tucker case demonstrates the court has no power to compel the giving of a cross-undertaking. Its only choice, if no cross-undertaking is given, is to withhold the injunction.
39. This is borne out by a number of cases. In F Hoffmann-La Roche v Secretary of State for Trade and Industry [1975] AC 295 at 341B Lord Reid said that a claimant "cannot be compelled to give an undertaking but if he will not give it he will not get the injunction". In the same case Lord Diplock said at 361F that "The court has no power to compel an applicant for an interim injunction to furnish an undertaking as to damages."
40. In The Mito [1987] 2 Lloyd's Rep 197 Hirst J said:

"When such security is originally sought it is sought as a condition for the grant of the injunction, in other words the plaintiff is told if you want this injunction you have to pay the price by fortifying the undertaking to damages. The plaintiff can then either agree or disqualify himself in obtaining the injunction…Mr McClure says that the plaintiff has already paid a price here when the cross-undertaking was given, which is perfectly correct as far as it goes. The plaintiffs did not ever agree nor were they ever asked to pay the extra price that is the fortification of the undertaking. If they had been asked to do so, it may very well be that they would…have declined to take an injunction. Of course, Mr McClure accepts, as he must, that the court has no power to impose an undertaking on the plaintiffs and herein I think if I were to make this order I would in essence ex post facto be imposing a conditional term to the undertaking without any knowledge one way or the other as to what the situation would have been if it had been sought by the defendant in the first place. That is something which I think is wrong in principle to do."

41. Since a cross-undertaking cannot be imposed, it follows that a fortiori it cannot be imposed retrospectively.

Nature of the cross-undertaking

42. It is important to recall at the outset that a cross-undertaking is not given to a party to the proceedings; it is given to the court. As Lord Diplock explained in Hoffmann La Roche at 361:

"The undertaking is not given to the defendant but to the court itself. Non-performance of it is contempt of court, not breach of contract, and attracts the remedies available for contempts, but the court exacts the undertaking for the defendant's benefit. It retains a discretion not to enforce the undertaking if it considers that the conduct of the defendant in relation to the obtaining or continuing of the injunction or the enforcement of the undertaking makes it inequitable to do so, but if the undertaking is enforced the measure of the damages payable under it is not discretionary. It is assessed on an inquiry into damages at which principles to be applied are fixed and clear. The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction."

43. It follows from this that the proper interpretation of a cross-undertaking is not a question of divining the mutual understanding of the parties to the litigation, for the terms of the cross-undertaking are a matter for the court. Equally, because the cross-undertaking is given to the court, it may be enforced by one who is not a party to the action, if the cross-undertaking is given for his benefit. I will return to the question of the protection of third parties. It also follows from the nature of the cross-undertaking that a claim to recover on the cross-undertaking is not a claim for damages at all (even though the cross-undertaking is conveniently referred to as a cross-undertaking "in damages"). The modern form of cross-undertaking rightly describes it as "compensation for loss".
44. There is another piece of judicial shorthand which also requires some explanation. Judges have said from time to time that a cross-undertaking is needed to guard against injustice that might result if at trial it is decided that the interim injunction was granted "wrongly" or "in error", or "improvidently". These and similar adverbs do not, in my judgment, imply that the court's decision to grant an interim injunction was wrong or unjust when it was made. If it was, then it could have been the subject of a successful appeal. Rather, what is meant is that with the benefit of hindsight and after investigation of all the facts, the court at trial may decide that the claimant (in whose favour the injunction was granted) is not entitled to the relief that he claimed. Had it known all the facts when it made the order for the interim injunction it would have refused the injunction; but equally it would not have exacted the cross-undertaking. The cross-undertaking is an integral part of the whole package. The package as a whole cannot fairly be described as erroneous or wrong. The Points of Claim describe the injunctions as the "Wrongful Injunctions" but that, in my judgment, is a misconception.

The benefit of the cross-undertaking

45. Tucker shows that a cross-undertaking might not extend to one of several defendants to the proceedings. However, this is not the modern practice. For many years, the conventional cross-undertaking has been given to "the Defendants". Even in Tucker itself, Cotton LJ said that the undertaking ought to extend to all defendants, even though not all of them were restrained.
46. In Berkeley Administration Inc v. McClelland [1996] IL Pr 772 Scott V-C referred to a note in the then current Supreme Court Practice and said:

"These statements of principle justify, in my judgment, the proposition that (subject to any direction to the contrary a court may in a particular case give):

(i) advantage can be taken of a cross-undertaking in damages by every defendant who was party to the action when the undertaking was granted;

(ii) advantage cannot be taken of the cross-undertaking by persons who are not parties to the action, or, at least, do not become parties until after the order has been discharged.


[68] That leaves outstanding the position regarding defendants who are joined as parties during the currency of the order. That state of affairs does not apply in the present case. I do not regard the correct answer as being clear from the decided cases, although I would, for my part, wish to extend the benefit of a cross-undertaking in damages to all defendants who became parties while the undertaking was in force."

47. However, he continued:

"There is, in my judgment, no legally acceptable basis on which the benefit of an undertaking, to which a member of a group of companies is entitled, may be claimed on behalf of the group as a whole."

48. Roch and Potter LJJ agreed.
49. Scott V-C did not expressly consider the question whether the benefit of a cross-undertaking would operate in favour of an added defendant prospectively from the time at which he was added as a defendant, or retrospectively from the time at which the cross-undertaking was given to the court. Mr Watson accepted that if a non-party applied to be joined as a defendant, the claimant could elect to have the injunction discharged; in which case the cross-undertaking would not apply to the would-be defendant. But, he said, if the claimant chose to maintain his injunction, the cross-undertaking would have retrospective effect. However, he could find no authority to support that submission; and it seems to me to be contrary to the statements of principle that I have already quoted. In addition, in my judgment Mr Watson's submission is inconsistent with the repudiation of the "relation back" theory of joinder of parties by the House of Lords in Ketteman v. Hansel Properties Ltd [1987] AC 189. In my judgment, on the assumption that the benefit of a cross-undertaking given in favour of the "defendants" would extend to those who are added as defendants during the period when the injunction is in force, it has only prospective, rather than retrospective effect. The injunction itself could not have been enforced directly against added defendants until they became defendants; and their previous acts would not retrospectively become contempt of court. If, as I think, the cross-undertaking is aptly described as the price of the injunction, one would expect the two to correlate temporally. In addition, in the facts, of this case, the application for joinder was made after judgment at first instance and after GSK had indicated that it would not seek to maintain its injunction pending appeal. It is, therefore, on all fours with the situation in which Mr Watson accepted that the cross-undertaking would not have retrospective effect. I hold, therefore, that if the Canadian companies are joined as defendants to the infringement action, they will only be entitled to the benefit of the cross-undertaking (at best) for two days.

Protection of third parties

50. It is common ground that the origins of the requiring of undertakings to be given to the court for the benefit of third parties can be traced to the development of freezing orders. Within a few years after the jurisdiction to make such orders (then known as Mareva injunctions) was discovered (or invented) it had become standard practice for the court to require cross-undertakings to be given by applicants in favour of banks and others who would be put to expense by the execution of the order.
51. The jurisdiction of the court to require undertakings to be given for the benefit of third parties is not confined to freezing orders. In Allied Irish Bank v. Ashford Hotels Ltd [1997] 3 All ER 309 the question arose whether the court had power to require a cross-undertaking in favour of third parties as a condition of appointing a receiver. Phillips LJ said at 316:

"The Mareva injunction is a comparatively recent addition to the armoury of the court. Having discovered the existence of, or some would say invented, this weapon, the court went on to invent the ancillary weapon of the cross-undertaking in damages for the benefit of third parties (see Z Ltd v A [1982] QB 558). In that case the cross-undertaking approved by the court was one designed to protect third parties from the consequences of compliance with the injunction but the scope of the protection of the undertaking has since been expanded to embrace third parties adversely affected by the injunction.

For myself, I cannot accept that the jurisdiction of the court to require such an undertaking only exists where a Mareva injunction is ordered. Once the cross-undertaking for the benefit of third parties became a recognised feature of the court's jurisdiction in that context, it necessarily followed that the court could make use of it when granting other discretionary relief, at least where that relief was empowered under the same statutory provision."

52. However, the court decided on the facts of the case that, as a matter of discretion, such a cross-undertaking should not be required. It cannot be said, in my judgment, that on the basis of this case it had become standard practice (at least in 1997) for such cross-undertakings to be required in cases that were not cases of freezing orders.

The introduction of the CPR

53. At the heart of the Defendants' case is that all this was radically changed by the introduction of the Practice Direction supplementing CPR Part 25. The CPR came into force in April 1999, and the Practice Direction was issued at the same time. The Practice Direction does not explain why what had hitherto been the standard form of cross-undertaking was to be expanded so as to include "other parties". Nor is it clear from the terms of the Practice Direction whether "other parties" means other parties to the litigation, or other persons who are not parties to the litigation at all. It may be that the Rules Committee would consider clarifying the scope of the required cross-undertaking. However, I am content to assume (without deciding) that the Practice Direction requires that a non-party to the litigation is entitled to the benefit of the cross-undertaking unless the judge otherwise orders.
54. In Miller Brewing Co v. Mersey Docks & Harbour Co [2004] FSR 5 an injunction had been granted in 2002 preventing the movement of beer which was aboard a ship. A company which was liable to pay demurrage while the injunction was in force applied for compensation under the cross-undertaking. The cross-undertaking had not been given for the benefit of third parties; but the company argued that, by analogy with the standard practice in freezing order cases, it should have been. Neuberger J dealt with the point as follows:

"None the less, while this court should not be over-indulgent to a person seeking an interlocutory injunction, it seems to me that it would be a strong thing to require him to sign not merely a blank cheque in favour of the defendant, if it turned out that he should not have been granted the injunction, but a series of blank cheques in favour of third parties of whose very existence and interest he may be unaware and for whose losses he may find himself liable even though he is entitled to his injunction.

45 As Mr Howe says, if a third party is detrimentally and unfairly affected by an interlocutory injunction, his interest can either be put before the court by the defendant, as happened in Galaxia, or he can himself make an application to the court to vary or discharge the interlocutory injunction or to extend to him the benefit of the cross undertaking.

46 If it could be said that the court was overburdened with such applications by third parties or that there were many cases of injustice to third party because of the absence of such a wide cross undertaking, then there might be more in this point. However, I have not had my attention drawn to any case which has led to a procedural problem, nor any reports, whether in the law reports or legal commentaries, of a perceived injustice in this connection.

47 Accordingly, I am not persuaded that it would be appropriate to impose the sort of wide cross undertaking indemnities on a claimant seeking an interlocutory injunction. That is not to say that the court should never consider imposing a wider cross undertaking in damages than that usually extracted from an applicant for an interlocutory injunction. It is fair to say that the argument in this case has ensured that I will henceforth think a little more carefully about the terms of any cross undertaking in damages to be extracted from a claimant in return for the grant of an interlocutory injunction.

48 Quite apart from this, it seems to me that Miss Heal's contention suffers from a further problem, namely whether the effect of the wider cross undertaking which she seeks can properly be imposed. The fact that it may have been open to Bahr Behrend to apply for an extension of the cross undertaking, or even if the court could and should have imposed a wider cross undertaking on January 11 or 25, 2002, it does not mean that the court can impose such a cross undertaking retrospectively."

55. It does not seem, from the terms of Neuberger J's judgment, that his attention was drawn to the terms of the Practice Direction. Mr Watson QC argues that this is a fatal flaw in the judge's decision; and that I should not follow it. He buttresses his submission by referring to Mr Gee QC's book on Commercial Injunctions (5^th ed) para. 11.015 where the learned author says that Miller was wrongly decided. He also referred me to the decision of Sir Andrew Morritt V-C in Imutran Ltd v. Uncaged Campaigns Ltd [2002] FSR 2 in which the Vice-Chancellor said that the cross-undertaking in the form contained in paragraph 5.1 of the Practice Direction should be incorporated into the standard form of interim injunction. This has now been done in the latest revision to the form in March 2005. However, I think, with respect, that the Vice-Chancellor was in error in saying that the continued use of previous forms was merely the "suggestion" of the editors of Civil Procedure. In fact it seems that use of the previous forms was prescribed by Part 4 of the CPR (at least as regards the "N" forms used in the county court, which do not contain the wider form of cross-undertaking). It is also the case that although the Vice-Chancellor said that the standard form should contain the wider form of cross-undertaking, he did not say that the use of that form was already standard practice; and he expressly rejected the suggestion that the order of Hart J (which did not contain it) was "defective".
56. It seems to me therefore, that at least as at 2002:

i) The court had jurisdiction even in non freezing order cases to require cross-undertakings to be given for the benefit of third parties;

ii) Such cross-undertakings, although routinely required in freezing order cases, were not in fact routinely required in other cases, even though the Practice Direction appeared to require it unless the judge otherwise ordered;

iii) If no such cross-undertaking was given it should not be imposed, let alone imposed retrospectively;

iv) A third party adversely affected by an injunction could apply to the court for the discharge of the injunction, unless the cross-undertaking were extended for his benefit.

57. It follows from my conclusions thus far that, at least as at 2002, it could not be said that it was implicit in any application for an interim injunction (other than a freezing or search order) that the applicant must be taken to have offered a cross-undertaking in favour of third parties who were not defendants to the proceedings. I might also add that in the present case Pumfrey J himself described the cross-undertaking that was in fact given as the "standard" form. The Chancery Guide (para 5.22) describes the implied form of cross-undertaking as an "undertaking by the party applying for the injunction in favour of the other". Snell's Equity (31^st ed para. 16-25) also describes the undertaking as one "to pay damages for any loss to the defendant if at the trial it appears that the injunction was wrongly granted". It seems to me, therefore, that the position in 2002 remained substantially unchanged during 2003. I rather suspect that the existence of the wider form of cross-undertaking embodied in the Practice Direction has been overlooked by the profession. It may be that, following the March 2005 revision to the standard form of order the practice will change; but I do not consider that it can realistically be said to have changed when the interim injunctions is the present case were granted. That, no doubt, is why the wider form of cross-undertaking in the Practice Direction never occurred to either party.
58. Moreover, this is not a case in which no undertaking was offered. It is a case where a limited form of undertaking (in what indisputably used to be the conventional form) was offered and accepted both by the Defendants and the court. In such a case Mr Waugh submits, that an express offer must displace any implied offer: expressum facit cessare tacitum. I agree.
59. In addition, it seems to me that the more limited form of undertaking was what the judge in fact ordered on both occasions; and consequently the judge did "otherwise order", so as to displace the presumption in the Practice Direction.

The scope of the slip rule

60. In his book on Commercial Injunctions (5^th ed) Mr Gee QC is critical of Tucker. He says in para. 11.015:

"That case [i.e. Tucker] depended on the practice then followed in providing undertakings. The scope of an undertaking depends upon what would reasonably have been understood by the court which heard the application. The prevailing practice provided the context for understanding the words used by counsel. If the same case happened today, the assumption would be that, unless counsel clearly excluded the undertaking set out in para. 5.1 of the Practice Direction, this was impliedly being offered by the claimant. … The order could therefore be amended under the slip rule."

61. In view of Cotton LJ's statement of "the correct practice" as described by Mr Pemberton in his book, I am not convinced that this explanation of Tucker is correct. I am also not convinced by Mr Gee's assertion that a court hearing an application to-day (or at least in 2002 or 2003) would inevitably understand a cross-undertaking as being offered in the form of paragraph 5.1 of the Practice Direction.
62. Mr Watson QC fastened on the judgment of Lindley LJ in Tucker and his statement that the plaintiff might have declined to take the injunction. Here, he said, it was obvious that GSK would have given the extended cross-undertaking, rather than decline the injunction. However, it does not seem to me that the court should embark on a hypothetical inquiry of this kind. The point is that the hypothesis did not arise. In the present case, Mr Waugh QC also says with force that although it is possible that GSK might have agreed to extend the cross-undertaking to the Canadian companies, they would not have agreed to the cross-undertaking in the form of the Practice Direction; at least not without very careful consideration of who might be covered by it.
63. 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.
64. Mr Watson relies on the decision of Morton J in Re Inchcape [1942] Ch. 394. In brief, what had happened was that Morton J had decided the question of the domicile of Lord Inchcape at the date of his death. At the conclusion of the hearing counsel had asked for a direction that the costs of all parties should be paid out of the estate. However, costs had been incurred before the issue of proceedings; and these were not covered by the order. An application to amend the judge's order was made under the slip rule; and the slip was said to be counsel's accidental omission to ask for the costs in question to be paid out of the estate. Morton J referred to Fritz v. Hobson (1880) 14 Ch D 542, a decision of Fry J, and continued:

"In the course of the argument before Fry J., counsel submitted: "O. XLI.A does not apply. This is not an accidental slip or omission. Those words mean only an accidental slip or omission to embody in the order something which the court in fact ordered to be done; they do not apply to an accidental omission of counsel or solicitor to ask for, or of the court to provide for, something which ought to have been provided for." That argument precisely expresses the doubt which I felt when the case first came before me and before this authority had been cited. The error which it is now sought to set right, if it can be properly described as an error, did not arise from an omission to embody in the order something which I in fact ordered to be done, but it arose from an accidental omission of counsel to ask that a particular thing might be done. However, Fry J., after dealing with the other grounds on which he had power to correct the order, said: "There is another ground on which, in my opinion, I have jurisdiction to make the order asked for, namely, under O. XLI.A. In my view the error in the present case has arisen from the accidental omission of counsel to call my attention to the adjourned motion when I pronounced my judgment, an omission very natural at a time when counsel's attention was directed to matters of greater importance. In substance, the motion was before me at the trial, for my attention was called to the affidavits made upon it. I recollect quite enough of what took place, and I am confirmed in my recollection by the notes which I made at the time, to know that all the affidavits upon the motion were in substance before me at the trial, and that the various witnesses who made those affidavits were examined in the course of the proceedings. On this ground, therefore, I think I have jurisdiction to make the order." It might be said that there is a distinction between Fritz v. Hobson and the present case in that in Fritz v. Hobson Fry J. was dealing with the costs of a motion which, as he says, was in substance before him whereas I am asked now to deal with costs incurred before the issue of the summons, but I think that the reasoning in Fritz v. Hobson can be applied to the present case. It would appear that Fry J. had sufficient recollection of the whole matter in Fritz v. Hobson to feel sure that he would have made the order if he had been asked to do so. So, in the present case, I have a sufficiently clear recollection of the evidence which was produced before me as a result of those researches to feel sure that I would have made the order if I had been asked to do so."

65. There are, however, two reasons why, in my judgment, the principle thus stated does not apply to the present case. First, while forgetting to ask for an order which one intended to ask for can (just) be described as an accidental error, I do not consider that the same can be said of a case where it did not occur to anyone that a particular form of relief might be available. Second, 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.
66. I therefore dismiss the application under the slip rule. It follows that those parts of the Points of Claim that rely on the slip rule must, likewise, be struck out.

The joinder application

67. Mr Watson said that in the event that I concluded that a cross-undertaking in favour of an added defendant would not have retrospective effect, he would not press the application to join the Canadian companies. I have so concluded. Accordingly, I dismiss the joinder application.

Estoppel by convention

68. The species of estoppel on which Apotex relies is estoppel by convention. I can take the principle (which is sufficient for present purposes) from the speech of Lord Steyn in The Indian Endurance [1987] AC 878, 913:

"It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption: K. Lokumal & Sons (London) Ltd. v. Lotte Shipping Co. Pte. Ltd. [1985] 2 Lloyd's Rep. 28; Norwegian American Cruises A/S v. Paul Mundy Ltd. [1988] 2 Lloyd's Rep. 343; Treitel, The Law of Contract, 9th ed. (1995), pp. 112-113. It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention."

69. Apotex relies on a number of documents (including correspondence and orders of the court) to support one of two alternative estoppels:

i) That there was a common communicated assumption that, despite the fact that the Canadian companies were not defendants to the infringement action, they were nevertheless entitled to the benefit of the cross-undertaking; or

ii) That there was a common communicated assumption that the Canadian companies were to be treated as if they were in fact defendants to the infringement action with the consequence that they fell within the description "Defendants" in the cross-undertaking.

70. Mr Waugh submitted that, on examination, none of the documents relied on supported the existence of the alleged assumptions; still less that the assumption had been communicated. All were explicable on other grounds. He relied strongly on Mr Cohen's statement that the Canadian companies had given "voluntary" disclosure. This, he said, demonstrated that the Canadian companies did not regard themselves as bound by any order of the court to give disclosure, otherwise the disclosure could not have been described as "voluntary".
71. I have considerable sympathy with this submission; and Mr Waugh's submissions on the detailed contents of the documents on which Apotex relied were powerful.
72. In the end, however, I have come to the conclusion that the legal basis of the plea is one that is sustainable. If I were to go down the route of examining in detail the particular documents on which Apotex relies, I would be conducting the mini-trial which current practice under CPR part 24 forbids. Nor, as it seems to me should I be tempted by Mr Waugh's submission that since the common assumption must be communicated, disclosure and oral evidence can produce nothing more of any value. I say this, not because he is necessarily wrong; but because to travel down that road would be to go behind Pumfrey J's refusal to order the trial of a preliminary issue. That decision has not been appealed, and binds the parties.
73. Accordingly, I am not prepared to strike out those parts of the Points of Claim which rely on the alleged estoppel; or to give summary judgment in favour of GSK on that issue. That being so, I think that it would be inappropriate for me to express any views on the details of the submissions, since to do so might embarrass the trial judge.

Restitution

74. It is common ground that, in the absence of a cross-undertaking, a person against whom an interim injunction is granted has no claim to recover damages for loss suffered during the currency of the injunction if that injunction is discharged at trial. But Mr Watson submits that this does not preclude the Canadian companies from advancing a restitutionary claim to recover a benefit enjoyed by GSK which it would not have enjoyed if the injunction had not been granted. He accepts that such a claim is novel; and relies on no authority in support of it; other than general statements to the effect that the categories of restitution are not closed.
75. Mr Waugh submitted that this claim was no more than an attempt to outflank the well-established principle that damages are not recoverable for loss suffered as a result of the grant of an interim injunction. That principle is the very foundation for the practice of requiring a cross-undertaking in damages. If Mr Watson's submission is correct, there is not (and never has been) any need for such a cross-undertaking. In addition, Mr Waugh submitted that the so-called claim for restitution is simply a claim for damages under another name.
76. I accept Mr Waugh's submission. Suppose that during the currency of the injunction GSK had made profits of, say, £2 million in selling Seroxat to a multiple pharmacist. Part of the profit would have been due to the effect of the injunction in enabling GSK to keep up the price of its branded product. Suppose that, absent the injunction, Apotex would have sold paroxetine to the same pharmacist, but at reduced prices such that it would have earned profits of £1 million. Apotex does not claim £2 million (which is GSK's benefit). It only claims £1 million which is its own claimed lost profit. In other words, the claim is not measured by GSK's gain (which is the hallmark of a restitutionary claim); but by Apotex's own loss (which is the hallmark of a claim for damages). Apotex's own loss, moreover, is not the loss of some identifiable piece of property, but simply the loss of an opportunity to compete in the market. This is quite different to the power of an appeal court, on reversing a judgment of a lower court, to order the repayment of money paid under a judgment that has been set aside. The payment of such monies, or the return of property transferred under an order that is later set aside, could be enforced through a writ of restitution; but that is not the same as a restitutionary claim, as that concept has developed in the modern law.
77. It is also inherent in Mr Watson's submission that the court's order was itself unjust. For the reasons I have explained, I do not accept this premise. It is well established that a person who acts on an order of the court (even if it is later set aside) commits no wrong while the order is in force: Hillgate House v. Expert Clothing & Sales Ltd [1987] 1 EGLR 65. The purpose of requiring the cross-undertaking in damages was to prevent injustice. In addition the injunction as granted did not bind the Canadian companies, so the direct causal link is missing.
78. I was referred to the very learned judgments of the Supreme Court of Victoria in National Australia Bank Ltd v. Bond Brewing Holdings Ltd [1991] 1 VR 386. The case concerned the appointment of a receiver. The court had made an order for the appointment of a receiver without requiring a cross-undertaking in damages. The order was subsequently set aside, and the question was whether compensation could be awarded in the absence of a cross-undertaking. The court plainly considered that if it had any power to award compensation it should do so: see in particular per Murphy J at 582. Nevertheless, after an exhaustive review of authorities from three continents, the court unanimously concluded that the court had no such power; and that a person against whom an injunction is granted but later discharged is "without remedy" in the absence of a cross-undertaking. Had there been a remedy available through the means of a restitutionary claim, there is no doubt in my mind that the court would have found it.
79. Mr Watson urged on me that I should not strike out a claim based on a developing field of jurisprudence. However, I must apply the law as it is; and not as it one day might become. In my judgment this claim is legally unsustainable; and should therefore be struck out.

Third party loss

80. The claim under this head depends, among other things, on there being no direct route of recovery for the Canadian companies. Mr Watson argues that in this situation Apotex Europe Ltd is entitled to recover, under the cross-undertaking, losses suffered by its affiliated Canadian companies. He runs into the difficulties that:

i) In Berkeley Administration Inc v. McClelland Scott V-C said that there is no legally acceptable basis on which the benefit of an undertaking, to which a member of a group of companies is entitled, may be claimed on behalf of the group as a whole; and

ii) That an argument to precisely this effect was rejected by Jacob J in R v. Medicines Control Agency ex p Smith & Nephew (Primecrown Ltd intervening) [1999] RPC 705.

81. Nevertheless, he says that the claim falls within the principle established by the House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 and Alfred MacAlpine Construction Ltd v. Panatown Ltd [2001] 1 AC 518. Both these cases concerned the fact-situation where A entered into a building contract with B. B failed to do what he promised to do, with the result that there was a breach of contract. But, by the time of the breach, A no longer owned the land on which the building stood; because he had transferred it to C. So although there was a breach of the contract between A and B, the resulting loss was suffered by C. The question for the House was whether, in those circumstances, A was entitled to sue B for damages for breach of contract whose quantum was to be measured by C's loss. The House held that, under some circumstances, A could maintain this claim.
82. However, the claim that Apotex wishes to advance on behalf of the Canadian companies comes nowhere near this principle. The principle is predicated on a breach of contract. No cause of action arises at all unless B has broken his promise. If B has not broken his promise, discussion of what the cause of action might encompass if he had done is pointless. So the first question must always be: what has B promised to do?
83. In the present case, GSK promised to abide by any order of the court requiring them to compensate the Defendants (or the "Apotex parties" as defined) for any loss that they had suffered. They did not promise to pay the Defendants for loss that other people had suffered. This is the reason why Jacob J rejected a similar argument in Primecrown; and in my respectful opinion, he was right to do so. As Jacob J put it:

"Whether the recoverable damage is that which is foreseeable by the plaintiff or that which is directly caused by the injunction is not in point. None of the differing views expressed in the cases go so far as to say that the injunctee can claim for damage not suffered by him. Nor do the very words of the undertaking (which is the foundation of the jurisdiction) suggest that he can recover more than that which he has suffered, whether that damage is foreseeable by the injunctor or not. Thus while I have sympathy with Mr Howe's "flexible approach" I do not think it can go so far as to require the "wrongful injunctor" to pay for damage not suffered by the injunctee at all.

I think this consideration also disposes of Mr Howe's Linden Gardens point. In that case the House of Lords held that damages for breach of a contract between a developer and a builder should include the damage suffered by the purchaser from the developer. The parties could be treated as having entered into the contract on the basis that the developer would be entitled to enforce its contractual rights on behalf of purchaser who suffered the actual damage. The case depended on the parties having full knowledge that the developer was going to pass the property on to the purchaser, so the builder knew exactly who would be suffered if his work was inadequate. Mr Howe suggested that in this case there is a parallel in that S&N expected to have to pay for trading losses. So they did, but they did not undertake to pay for trading losses, they only undertook to pay for Primecrown's losses. The analogy with Linden Gardens breaks down."

84. Mr Watson did not argue that the cross-undertaking could be construed as though the reference to the Defendants included a reference to the Canadian companies; and in my judgment he was right not to do so. Again Mr Watson urged on me that I should not strike out a claim based on a developing field of jurisprudence. But in my judgment no amount of development in the law relating to the scope of damages that can be awarded for breach of contract can result in a party to a contract recovering damages for something which is not a breach of contract at all. I conclude therefore that this argument is also legally unsustainable and should be struck out.

The profit share

85. This part of the dispute relates to Neolab. As I have said, the arrangement under which Neolab was to supply paroxetine involved its purchase from Apotex Inc. The purchase price was in part a fixed price; and in part a percentage of profits. The cross-undertaking requires GSK to compensate Neolab for the loss that it has sustained by reason of the making of the order for the injunction. Is the loss its loss of profit or is it some other loss?
86. Mr Waugh's argument is a simple one. Neolab is entitled to be compensated for its loss of profit. Its loss of profit will be measured by its assumed turnover (on the footing that the injunction had not been granted) minus its cost of sales. One of the costs of sale will be the price for the goods that it sold that it had to pay Apotex Inc. It does not matter whether that price is a fixed price or a price based on a percentage of profits. What matters is that Neolab's loss is what it would have kept in its own corporate pocket if the injunction had not been granted. Any money that it would have had to have passed on to others (whether they were suppliers of product or suppliers of services necessary to get the product to market) is not loss that it has suffered itself.
87. Mr Watson's response was that that part of the agreement that required Neolab to share profit with Apotex Inc was in the nature of a partnership. Had the cross-undertaking been expressed in favour of a partnership, it would have been irrelevant what were the profit shares of each partner. The purpose of the injunction was to keep Apotex's product off the market; and it was entirely foreseeable that if the injunction were discharged, it would cause loss to Apotex Inc. The loss that Neolab suffered was in effect its loss of turnover; and that is what would be recoverable on the inquiry. Moreover, even if I were attracted by Mr Waugh's submission, the case was not so clear as to justify striking out or summary judgment.
88. In my judgment one must be careful not to confuse questions of foreseeability with the scope of the promise. GSK's promise was to compensate Neolab for its own loss; not to pay compensation for someone else's loss. So foreseeability can, in my judgment, be put to one side. Is the cost price that Neolab had to pay its supplier part of its own loss? In my judgment no. I cannot see that it matters whether the price is expressed as a fixed price or a price calculated by means of a formula, even if that formula is a percentage of profit. Neolab is not part of the Apotex group; and the arrangement between it and Apotex Inc is one at arms' length. The case is not one of partnership in the true sense; and I do not consider that the principles of partnership can be applied by analogy.
89. In my judgment there is no real prospect of Neolab succeeding on this issue; and GSK is entitled to summary judgment.

Result

90. Accordingly:

i) I dismiss the application under the slip rule, and strike out those parts of the Points of Claim that depend on it;

ii) I dismiss the joinder application;

iii) I strike out (or give judgment in favour of GSK on) those parts of the Points of Claim that depend on the argument relating to third party loss;

iv) I strike out (or give judgment in favour of GSK on) those parts of the Points of Claim founded on restitution;

v) I strike out (or give judgment in favour of GSK on) those parts of the Points of Claim that seek to claim the amounts that Neolab would have had to pass on to Apotex Inc;

vi) I decline to strike out (or give judgment in favour of GSK on) those parts of the Points of Claim that rely on estoppel.

91. I will hear counsel on the form of order I should make to give effect to this ruling; and on what (if any) directions I should give for the future conduct of the inquiry.