Court of Appeal: High Court erred in extending undertaking as to damages to non-parties

About this case:

• Citation:
  [2024] IECA 49
• Judgment:
  External link
• Court:
  Court of Appeal
• Judge:
  Ms Justice Caroline Costello

Delivering judgment for the Court of Appeal, Ms Justice Caroline Costello stated that “if a party contends that the undertaking as to damages offered is inadequate because it does not encompass all of the damage that will be caused by the grant of the injunction – specifically because it is confined to the loss which the enjoined party alone may sustain – it is equally incumbent on that party to raise that argument to the trial judge while the issue whether or not to grant the injunction remains live.”

Background

The appellant (BMS) challenged the decision of the respondent (Teva) to launch a generic version of the appellant’s drug, Eliquis. Having received four weeks’ notice of Teva’s intention to launch the generic, BMS issued a motion seeking an interlocutory injunction restraining Teva from inter alia infringing its Supplementary Protection Certificate (SPC) in respect of Eliquis.

The appellant’s application was grounded on an affidavit which stated that “I understand that an undertaking to be responsible for any damages sustained by the Defendant between the grant of the pre-trial injunction and the trial of the action or other order is generally required in an application such as this. I confirm that the Plaintiffs [sic] is willing to give such an undertaking in this case.”

The respondent making no objection regarding the undertaking, the High Court granted the injunction in February 2023. The respondent’s solicitors furnished the appellant with a draft order which recast the undertaking as to damages, extending it beyond the loss and damage suffered by the respondent arising from the making of the order, to include any loss and damage suffered by entities related to the respondent on the basis that its servants and agents would also be subject to the injunction.

The matter came before the High Court on 23 March 2023 for the purpose of finalising the order. The court perfected the order while reserving the determination of the scope of the undertakings as to damages in order to allow the respondent to expedite its appeal from the injunction. The injunction was upheld on 29 June 2023, with the undertaking as to damages not featuring in that appeal.

The High Court directed the respondent to file an affidavit in support of its application in relation to the scope of the undertaking as to damages, and on 26 June 2023, Mr Justice Max Barrett determined that the form of undertaking proposed by Teva was appropriate and ordering BMS to give an extended undertaking as to damages. BMS appealed to the Court of Appeal.

The Court of Appeal

Ms Justice Costello set out that the jurisdiction of the court to require parties to give undertakings which extend to losses sustained by parties other than the enjoined parties is found in s.28(8) of The Supreme Court of Judicature Act (Ireland) 1877 and is set out in and is set out in Order 50, rules 6(1) and (2) of the Rules of the Superior Courts.

Highlighting that this was the first time that the courts would address the principles which ought to apply in such applications, Ms Justice Costello highlighted the judgment in Nolan v. Dildar Limited. [2020] IEHC 243 as setting out the legal principles in relation to undertakings as to damages generally.

Observing that in principle, it is possible to apply to the court to revisit the adequacy of an undertaking as to damages, the court emphasised that the failure to challenge the adequacy of the undertaking at the hearing of the application for an injunction and the evidence supporting the claim that the undertaking is insufficient are matters to be taken into account when exercising its discretion.

The judge considered inter alia caselaw from England and Wales, agreeing with SmithKline Beecham plc v. Apotex Europe Ltd. [2007] Ch 71 that the court has jurisdiction to require a party seeking an interim injunction to give a cross-undertaking as to damages for the benefit of third parties affected by the injunction, and that a party identified in a cross-undertaking as one who the injunctor would compensate could claim compensation for having been himself prevented from doing the restrained act but not also on behalf of others who had been adversely affected by the injunction.

Declining to address the appellant’s argument that the order of the High Court was contrary to Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, Ms Justice Costello opined that the High Court erred in considering the issue of expanding the undertaking after it had delivered judgment, noting that “Substantive consideration of the undertaking as to damages cannot be divorced from the substantive consideration of whether to grant an injunction at all.”

The court continued, “it appears that it was always Teva’s intention, if it was unsuccessful in opposing the injunction, to seek to extend the undertaking as to damages to all companies in the Teva Group. This emerges from the terms of the first draft order which was tabled as a form of order which would reflect the judgment but which recast the undertaking as to damages to be offered by BMS to the court. It was deliberately and materially changed from that offered to extend to an undertaking by BMS to pay all losses arising from the grant of the injunction, not merely losses sustained by Teva as a result of the injunction. When asked why the undertaking offered had been expanded in this way, counsel could only say she could not comment on the genesis of the draft order.”

The court considered that an order extending an undertaking is the exception to the rule, and “the evidence must be such as to justify a rare departure/exceptional order. The evidence must be of “sufficient precision” to enable the court to conclude that the undertaking as to damages offered is inadequate. The court must be able to “rationally” assess the contention that the undertaking as to damages offered will not properly compensate that party. The onus of demonstrating to the court that the undertaking as to damages provided is or would be inadequate in terms of the losses which would be likely to be suffered as a result of the granting of the injunction rests with the party alleging such inadequacy.”

Noting that the respondent’s evidence fell short of what was required, Ms Justice Costello found that any departure from the normal undertaking must be supported by evidence warranting an extension, a position she stated as differing to the law in England as expressed in Actavis Group PTC EHF v. Boehringer Ingelheim Pharma GmbH & Co. KG [2013] EWHC 2927 and followed in Warner-Lambert Company LLC v. Actavis Group PTC EHF [2015] EWHC 485.

The court also decided that the High Court erred in admitting evidence from the ‘losing party’ to be adduced on issues that it failed to raise before or during the hearing of the injunction application some seven weeks after its judgment on 17 February 2023, and that the form of the High Court’s order of 28 July 2023 was inappropriate in that the curial part should not have contained any “commentary, gloss or explanation.”

Conclusion

The court concluded that as the adequacy and extent of the undertaking was not raised during the hearing of the application for the injunction, and on the basis that the evidence adduced would not have established that the undertaking was inadequate, the appeal was allowed.

Bristol Myers Squibb Holdings Ireland Unlimited Company v. Norton (Waterford) Limited [2024] IECA 49