“If the Court later finds that this Order or carrying it out has caused loss to the Defendant or the Turkish Supplier (as defined in the confidential schedule to the statement of Mr Aggarwal) and decides that the Defendant or the Turkish Supplier should be compensated for that loss, the Claimants will comply with any Order the Court may make.”
“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: see Smith v. Day (1882) 21 Ch.D. 421, per Brett L.J., at p. 427.”
“Now in the present case there is no undertaking with the opposite party, but only with the Court. There is no contract on which the opposite party could sue, and let us examine the case by analogy to cases where there is a contract with, or an obligation to the other party. If damages were granted at all, I think the Court would never go beyond what would be given if there an analogous contract with or duty to the opposite party.”
“I have much sympathy with the view that the contract basis for assessment is or may be too narrow in some cases. After all, even if the injunctor is no wrongdoer, as compared with the wholly wrongly assailed injunctee, he stands a notch down. It was he who (as it turned out) wrongly assailed the injunctee. He was the ‘voluntary litigant’ as James LJ put it [in Graham v Campbell(1878) 7 Ch D 490 ]. There is a lot to be said for the view that the paying party should pay for all the damage directly caused to the injunctee by the wrongful injunction – that he must take his victim as he finds him. Of course, if, once he knows of the injunction, the injunctee does not spell out to the injunctor any special circumstances causing direct but, to the injunctor, unforeseeable damages, he may not be allowed to recover for that damage. Equity would be apt to blame an injunctee who stood by, letting the injunctor build up a liability on the cross-undertaking of which he had no knowledge. I think that in an appropriate case the courts will have to examine the principles more closely. I do not think it is necessary for me to do so here.”
“15. I should, however, say that even if the contract basis of assessment is correct, I doubt that it would be right to incorporate all the principles which apply in relation to an assessment of damages. The starting point must surely be the true construction of the particular undertaking in question. That is to be judged against the background and purpose of the undertaking which is required by the court to be given in order to ensure that a mechanism is available to make good any detriment suffered by a defendant against whom injunctive relief is obtained when it is subsequently established that there should not be an injunction. … 16. However, I do not need to decide, any more than Jacob J, whether the contract approach is too narrow…”
“First, I am following the obiter guidance contained in the opinion of Lord Diplock in Hoffman-La Roche because, on the evidence and argument presented at trial, it is sufficient to enable me to determine the issues that arise. For my own part, I think it should be recognised that the award is of equitable compensation (not of damages strictly so called) and that there may be occasion to examine whether such equitable compensation should be fettered by rigid adherence to common law rules; and further, that if common law rules are to be applied, whether those relating to contract are more appropriate than those relating to tort or some other breach of duty (in which connection it will be noted that the judgment of Brett L.J. upon which Lord Diplock founded his view referred to ‘[a] contract with or duty to the opposite party’).”
“Although the remedy which equity makes available for breach of the equitable duty of skill and care is equitable compensation rather than damages, this is merely the product of history and in this context is in my opinion a distinction without a difference. Equitable compensation for breach of the duty of skill and care resembles common law damages in that it is awarded by way of compensation to the plaintiff for his loss. There is no reason in principle why the common law rules of causation, remoteness of damage and measure of damages should not be applied by analogy in such a case. It should not be confused with equitable compensation for breach of fiduciary duty, which may be awarded in lieu of rescission or specific restitution.”
“The equitable rules of compensation for breach of trust have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries' rights can be protected is to restore to the trust fund what ought to be there. In such a case the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss. Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee to restore the trust estate: see Nocton v. Lord Ashburton [1914] A.C. 93 2, 952, 958, per Viscount Haldane L.C. If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed: Caffrey v. Darby (1801) 6 Ves. 488; Clough v. Bond (1838) 3 M. & C. 490. Even if the immediate cause of the loss is the dishonesty or failure of a third party, the trustee is liable to make good that loss to the trust estate if, but for the breach, such loss would not have occurred: see Underhill and Hayton, Law of Trusts & Trustees 14th ed. (1987), pp. 734-736; In re Dawson, decd.; Union Fidelity Trustee Co. Ltd. v. Perpetual Trustee Co. Ltd. [1966] 2 N.S.W.R. 211; Bartlett v. Barclays Bank Trust Co. Ltd. (Nos. 1 and 2)[1980] Ch. 515 . Thus the common law rules of remoteness of damage and causation do not apply. However there does have to be some causal connection between the breach of trust and the loss to the trust estate for which compensation is recoverable, viz. the fact that the loss would not have occurred but for the breach: see also In re Miller's Deed Trusts (1978) 75 L.S.G. 454; Nestle v. National Westminster Bank Plc. [1993] 1 W.L.R. 1260. ”
“At p. 160: ‘While foreseeability of loss does not enter into the calculation of compensation for breach of fiduciary duty, liability is not unlimited. Just as restitution in specie is limited to the property under the trustee's control, so equitable compensation must be limited to loss flowing from the trustee's acts in relation to the interest he undertook to protect. Thus, Davidson states [“The Equitable Remedy of Compensation” (1982) 3 Melbourne U.L. Rev. 349] “It is imperative to ascertain the loss resulting from breach of the relevant equitable duty”
‘A related question which must be addressed is the time of assessment of the loss. In this area tort and contract law are of little help. . . . The basis of compensation at equity, by contrast, is the restoration of the actual value of the thing lost through the breach. The foreseeable value of the items is not in issue. As a result, the losses are to be assessed as at the time of trial, using the full benefit of hindsight.’ (Emphasis added.)
‘In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate. By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, i.e., the plaintiff's loss of opportunity. The plaintiff's actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight. Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach.’ (Emphasis added.)
“If the pendency of the litigation, rather than the making of the order, was the cause of the plaintiff's loss, the terms of the undertaking have no application, since the plaintiff has not sustained loss by reason of the order. Moreover, except in certain cases analogous to malicious prosecution, a defendant is not entitled to recover damages for loss resulting from legal proceedings brought against him - the only liability of the unsuccessful plaintiff is to pay costs. The court should no doubt scrutinize with care an assertion by a plaintiff that loss which has been suffered by a defendant has resulted from the litigation rather than from the making of the interlocutory order, since a plaintiff should not be allowed to evade payment of the price which he has agreed to pay for the grant of the injunction. In the end however the question becomes one of fact: did the making of the order cause the loss? The onus of proof must, in accordance with general principles, lie on the defendant who asserts that he sustained damage by reason of the order. It was submitted on behalf of the appellant that it is enough that the making of the order should have been a cause of the damage, so that if both the making of the order and the continuance of the litigation are concurrent causes the undertaking will be applicable. However, in almost every case in which an injunction is granted the injunction will play some part in causing the party bound by it to act in accordance with its terms. To order a plaintiff to pay damages where it appears that the party bound by the injunction would have acted as he did even if the injunction had not been granted, would be to give the undertaking an effect obviously not intended. The party seeking to enforce the undertaking must show that the making of the order was a cause without which the damage would not have been suffered. It was further submitted that the onus lies on the plaintiff, against whom the undertaking is sought to be enforced, to disentangle any damage arising from the litigation from that which was caused by the making of the order. However, the onus of proof does not shift in this way; the defendant, who seeks to enforce the undertaking, must prove that the damage he has sustained was caused by the making of the order. The present case is in a number of respects exceptional. …”
“It is appropriate enough, in claims under such undertakings, to rely upon analogies drawn from the common law in matters of remoteness of damages, the concern of Brett L.J. in Smith v. Day, as Lindley L.J. points out in Schlesinger v. Bedford(1893) 9 TLR 370 . It is quite a different thing to seek to apply common law rules of causation to a claim made under such undertakings; there is no such analogy as Lord Reid in Baker v. Willoughby(1970) AC 467 , at p 492 found to exist in the case of workers' compensation. The reason for this is plain enough. In both contract and tort it is enough that the breach of contract or of duty is one direct cause of whatever damage a plaintiff has suffered - McGregor on Damages, 13th ed. (1972), pp. 69, 118. The breach is a wrongful act on the defendant's part and the common law visits him with liability for the consequences to the plaintiff, subject always to rules as to remoteness. But a plaintiff who sues for an injunction and obtains interlocutory relief, giving an undertaking to the court as the price of that relief, commits no wrongful act, no breach of contract or of duty when, at the trial, he fails to obtain any perpetual injunction. If, as a result of the grant of interlocutory relief, the defendant has been harmed there will, however, have been injustice and, an undertaking having been given, the court will thereby have been armed with jurisdiction, otherwise lacking, to right that injustice and compensate the defendant for the harm done to him. From this it can be seen that it will only be if damage is suffered because of the grant of the injunction, and would not have been suffered but for it, that the court should compensate a defendant who claims damages under the undertaking. Its grant must be shown to be the causa sine qua non of the damage complained of before the defendant can be entitled to be compensated for what turns out to be the erroneous grant by the court of the injunction against it. Only then will the defendant have suffered, from the grant of the injunction, such ‘real harm’ as Cussen J. spoke of in Finnigan's Case what North J., in Attorney-General v. Albany Hotel Co. (1896) 2 Ch, at p 699 described as ‘the damages which were really sustained’. It follows that it is for the claimant under an undertaking to establish by evidence, or by inference from evidence, a prima facie case both that the grant of the injunction was a cause of his damage and that but for it he would not have suffered that damage.”
“English law has not adopted a uniform approach to causation. Instead, it has tended to take refuge in the notion that causation is very largely a question of fact. But the many statements to this effect which are to be found in the decided cases do not attempt to deny the fact that the common law has applied a variety of theories and standards of causation, in each instance applying that which is in point of policy the most apt or appropriate to the question which arises for decision. For this reason little is to be gained in the present case from an examination of the myriad authorities which deal with causation of damage in contract, tort and other situations many of which were pressed upon us in argument. We are better advised to look to the purpose which the undertaking as to damages is designed to serve and to identify that causal connexion or standard of causal connexion which is most appropriate to that purpose. The object of the undertaking is to protect a party, normally the defendant, in respect of such damage as he may sustain by reason of the grant of the interim injunction in the event that it emerges that the plaintiff is not entitled to relief. It is no part of the purpose of the undertaking to protect the defendant against loss or damage which he would have sustained otherwise, as for example, detriment which flows from the commencement of the litigation itself. That is loss or damage which the defendant must bear himself, as he does when no interim injunction is sought or granted. Consequently, it is for the party seeking to enforce the undertaking to show that the damage he has sustained would not have been sustained but for the injunction.”
“Air Express bears the onus of showing the necessary causal connexion in the sense already explained between the damage and the injunction, that is, that the damage would not have been sustained but for the injunction. The crucial question is whether by establishing the sequence of events it has done enough to discharge that onus by making out a prima facie case. Unless the circumstances indicate otherwise, when it appears that damage flows from the non-performance of an act and the performance of that act has been restrained by an interim injunction, the inference will generally be drawn that the damage has been occasioned by the injunction.”
“Hansen J noted a submission on behalf of Bonz that Mrs Cooke had closed her business down to prepare for trial. He accepted that that was ‘part of the motivation’, but was satisfied, on the balance of probabilities, that it was the effect of the interim injunction that caused the business to close. ‘Although the variation of the order was intended to assist Mrs Cooke to continue running her business, that proved to be impossible.’”
“In part, the decision to close the business may have been motivated by the need to devote time and money to the litigation, which was complex and expensive. But we are of the view that Hansen J was right to conclude that a significant determinant of that decision was the injunction. … Hansen J made allowance for the impact of the litigation generally - apart from the injunction - on Mrs Cooke's finances but it was on the evidence open to him to conclude that the existence of the injunction was an operating cause of the closure of the business”
“The Receivers must not only establish causation on a "but for" basis; they must show that, prima facie, the giving of the undertaking was the exclusive cause of the loss. This does not mean, however, that they must deal with every conceivable or theoretical cause of the damage (Tharros Shipping v. Bias[1994] 1 Lloyds Rep 577 ).”
“I find [the reasoning of Mason J] convincing. However, in my view this approach does not mean that a party seeking to enforce an undertaking must deal with every conceivable or theoretical cause of the damage claimed, however unlikely this may be. Once a party has established a prima facie case that the damage was exclusively caused by the relevant Order, then in the absence of other material to displace that prima facie case, the Court can, and generally would, draw the inference that the damage would not have been sustained but for the order. In other words, the Court seeks to approach and deal with this question of causation in a commonsense way.”
“In my view, it is right to approach the undertaking in damages question as it was approached by the Australian Judge and by Saville J, but one must take care in so doing. …. In my judgment, a party must be able to show that he would not have suffered the damage ‘but for’ the injunction …”
“The same would, in my opinion, be true of any anticipatory breach the acceptance of which had terminated an executory contract. The contractual benefit for the loss of which the victim of the breach can seek compensation cannot escape the uncertainties of the future. If, at the time the assessment of damages takes place, there were nothing to suggest that the expected benefit of the executory contract would not, if the contract had remained on foot, have duly accrued, then the quantum of damages would be unaffected by uncertainties that would be no more than conceptual. If there were a real possibility that an event would happen terminating the contract, or in some way reducing the contractual benefit to which the damages claimant would, if the contract had remained on foot, have become entitled, then the quantum of damages might need, in order to reflect the extent of the chance that that possibility might materialise, to be reduced proportionately. The lodestar is that the damages should represent the value of the contractual benefits of which the claimant had been deprived by the breach of contract, no less but also no more. But if a terminating event had happened, speculation would not be needed, an estimate of the extent of the chance of such a happening would no longer be necessary and, in relation to the period during which the contract would have remained executory had it not been for the terminating event, it would be apparent that the earlier anticipatory breach of contract had deprived the victim of the breach of nothing. In Bwllfa and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co[1903] AC 426 , the Earl of Halsbury LC, at p 429, rejected the proposition that ‘because you could not arrive at the true sum when the notice was given, you should shut your eyes to the true sum now you do know it, because you could not have guessed it then’ and Lord Robertson said, at p 432, that ‘estimate and conjecture are superseded by facts as the proper media concludendi’ and, at p 433, that ‘as in this instance facts are available, they are not to be shut out’. Their Lordships were not dealing with a contractual, or tortious, damages issue but with the quantum of compensation to be paid under theWaterworks Clauses Act 1847 (10 & 11 Vict c 17). Their approach, however, is to my mind as apt for our purposes on this appeal as to theirs on that appeal.”
“Following on from our conversations either yesterday or today regarding the recent UK customs seizure of 150kg medicines at Birmingham airport in which all our products are involved. Our lawyers are considering action to prevent the action from being released. If your lawyers are willing to consider similar action I hope to bring them all together to maximise out efforts, avoid duplication and reduce costs. Please liaise with your lawyers to establish whether they are considering similar action, advise them to liaise with Wendy Pang at Baker and McKenzie in London.”
“I have now been informed that the Consignment contains over 1000 packages addressed to individual patients some of which appear to be in the United States, including: 24 packages of EVISTA, 42 of CIALIS, three of HUMALOG, and six of HUMULIN.”
“… these products appear to have originated from Turkey, been imported into the UK and then some at least are apparently intended to be posted the United States.”
“I am informed by Mr Moore and verily believe that Customs indicated to Mr Moore that the shipment was imported into the United Kingdom with a view to the individual packages within the Consignment being sent to individual patients many of whom appear to be located in the United States.”
“The main argument between the parties will be as to consent. Although Lilly only need satisfy the court of an arguable case, it can be seen that the Respondents are unlikely to make out a defence of consent… Anticipating a further defence which the First Respondent may seek to run, parties sometimes seek to argue the goods will be exported outside the EEA and therefore that no infringing act will be committed in the relevant jurisdiction. In fact this is a non-runner. First, although some of the drugs were clearly destined for North America, this may not be true of the entire consignment. In any event, section 10(4)(c) provides that it is an infringement of trade mark to export goods under the sign…. ”
“It would appear that the consignment was import for export and contained addressed packages for posting in the UK on behalf of ‘Canadian’ internet pharmacies.”
“When the court makes an order for an injunction, it should consider whether to require an undertaking by the applicant to pay any damages sustained by a person other the respondent, including another party to the proceedings or any other person who may suffer loss as a consequence of the order.”
“Following on from the phone calls. The official version of what I have written below will be circulated at 4pm. Please do not forward this email on and wait for the official version which will come from PSI at 4pm today. This is just to give you a heads up. Last Friday in the High Court in the Strand our lawyers obtained an interim injunction against the customs not to release our products. They also obtained an interim injunction against the consignee (not named) and an order against the customs to name the consignee. The injunction has been served on the customs and they have supplied the consignee’s details in a way that we can now name them in any future court hearing. Our lawyers are serving a claim against the consignee to inform them that we are applying for a full injunction against them. We are hoping to be back in court on Friday of this week. Our lawyers are using the Trade marks Act 1994 Sec 10 sub sec 1 and Counsel [sic] Regulation 40/94 Article 9(1) sub sec 1 sub sec a. The above may not be correct legal terminology but it gives you the gist of what is happening. Our lawyers are Baker & MacKenzie [sic]. The lawyer dealing is Wendy Pang. … If you need anything else please call me.”
“Ashley How of the Pharmaceutical Security Institute (‘PSI’) co-ordinates training to Customs on brands owned by a significant number of pharmaceutical companies. This has enabled him to develop good relations with Customs, such that various UK customs authorities use him as the unofficial central point of contact for all the pharmaceutical companies. In practice, when a UK Customs authority intercepts a consignment of pharmaceutical products, it will usually notify Ashley How first on an informal basis who would in turn informally notify the relevant pharmaceutical companies.”
“The main argument between the parties will be as to consent. Although Pfizer only need satisfy the court of an arguable case, it can be seen that the Respondents are unlikely to make out a defence of consent… Anticipating a further defence which the First Respondent may seek to run, parties sometimes seek to argue the goods will be exported outside the EEA and therefore that no infringing act will be committed in the relevant jurisdiction. There are a number of reasons why Pfizer say that this is a non-runner. (1) First, although some of the drugs were clearly destined for North America, this may not be true of the entire consignment. We will not know where the individual packages were to be sent until each of them is inspected or the First Respondent explains what its intentions were. (2) Secondly, this does not appear to be a transit zone case where the goods are simply in customs warehouses. Although on the basis of the information which Pfizer are permitted to use under the Regulation, this is not something that can be investigated in any detail. (3) Thirdly, this does not appear to be case where a consignment is simply in transit. … The consignment was, it appears to be broken down in the United Kingdom and the individual packages were to be re-posted to other countries. There are acts in the United Kingdom which Pfizer will say amounts to export. Section 10(4)(c) provides that it is an infringement of trade mark to export goods under the sign…. (4) Fourthly, … Pfizer asks why the importer is going to the lengths of the cost and delay in importing pharmaceuticals into the United Kingdom, breaking them down into individual packages, and re-sending them elsewhere, rather than simply sending the packages from Turkey which would be quicker and cheaper … what Pfizer believe (although they have no evidence, is that, in the case of pharmaceuticals not destined for the UK or elsewhere in the EEA but destined for North America, the purpose of entry into the UK of the pharmaceuticals, the separating of the consignment and the re-export from the UK in individual packages is that the goods are less likely to be searched by US customs…”
“Anticipating a further defence which the First Respondent may seek to run, parties sometimes seek to argue the goods will be exported outside the EEA and therefore that no infringing act will be committed in the relevant jurisdiction. In the ECJ in Colgate v Palmolive qualification it was held that as the products were in transit they were not imported into the EEA. There are a number of reasons why Pfizer say that this is a non-runner…”
“The label [on a sample packet] refers to the Complete Care Pharmacy and gives an address at a PO Box in Slough and a 1-800 number. I understand from a Google search that this is a telephone number for an online pharmacy website called www.canadadrugs.com. Below the Complete Care Pharmacy text appears an Rx number (i.e. Rx: 14749018). Rx is a commonly used abbreviation for ‘prescription’. A name also appears, presumably this is the name of the patient. Below this is a price in dollars and a date and immediately below this is a description of the product, in this case ‘8 tablets Fosamax 70mg’. Below this is the generic name of the product, a ‘DIN number’, the manufacturer (which is said to be MSD) and the dosing instructions, which in this case instruct the patient to ‘take half a tablet weekly’. I am informed that DIN is an acronym used by Canadia [sic] pharmacies and the Canadian regulatory agency as the Drug Identification Number…. Based on the information which appears on the over-stickered label, namely the 1-800 number which appears on the www.canadadrugs.com website … it seems likely that at least some of these drugs may be headed to final destinations in the USA or Canada. … A price in dollars does appear on the labels and on this basis we suspect that the Merck Drugs may go to the USA or Canada, however there is no guarantee that they have not been paid for in dollars via a website but are to be delivered to patients within the EEA. I do not know whether any of the Turkish Drugs or Malaysian Drugs are destined for end users in the UK market. I do not know why the unnamed consignee has decided to arrange for these products to be imported into the UK, unless the intention is to supply the Merck Drugs in the UK. It is my understanding that Merck have been told by HMRC that at least some of the products were contained in small ‘boxes’ or ‘packs’ … which … had the patient name and postal address labels applied. They were ready to be either franked or stamped for posting or to be put in express courier envelopes for onwards mail. HMRC have not told Merck which country or country these addresses are in… For those packages which appear to be destined to the USA, it may be that US Customs would look less stringently at packages arriving from the UK than from other countries. Unless there is such an advantage in shipping via the UK, it would appear to me that it would make more commercial sense to ship the Merck Drugs direct from Turkey or Malaysia to the their final destination.”
“36. If 8PM is unable to handle Lilly Products, in effect this means that we lose all of the business which includes, amongst the products ordered, any Lilly Products. In any event I understand other pharmaceutical companies are seeking injunctive relief similar to that being sought by Lilly and are being represented by the same solicitors. 37. If 8PM is unable to handle Lilly and other Products, the Turkish Supplier will be in an extremely difficult position. All of the products it supplies are shipped through the UK. As mentioned above, there are good shipping and insurance routes as regards the UK. It is not reliable to ship directly from Turkey to the US, and insurance is difficult to obtain. I believe that to maximise commercial success, the Turkish Supplier would have to ship via a first world country. I know of no other country which would be acceptable to both the Turkish Supplier and US patients. Possibly some exist -- I just do not know. I do not believe that, if the Turkish Supplier were to lose the ability to ship via the UK, it would be able to organise transport through any other country fast enough to insure that its business survived. 38. If interim relief were granted there is a serious risk that at least in the short to medium term the Turkish Supplier would not be able to deliver product promptly to the US. In such circumstances I would expect the Canadian Pharmacies would seek other sources of supply. I would expect such damage to commercial relations to occur in one to two months. This would cause unquantifiable loss to the Turkish Supplier and 8PM…. 39. If we are stopped from handling Lilly products other companies operating in this sector will take our business. If we stop operating, even for a short period, there will be a knock-on effect for our future business which will be unquantifiable. … 42. In the event that 8PM was injuncted for more than one or two months, I believe the Turkish Supplier would have to close, for the reason given above. I do not think that the Turkish Supplier would be able to arrange suitable alternative transport and insurance routes…. 43. Turkish Supplier has around$1 million of stock. If it was unable to supply goods, that stock, which has a limited shelf life, would begin to deteriorate.”
“47. I should like to comment on paragraphs 34-44 of Mr Aggarwal’s statement regarding the harm which the Defendant might suffer in the events that an injunction was granted until the trial of this action. 48. I have not seen the confidential annex to which Mr Aggarwal refers in paragraph 34. However, he confirms that the number of products of the Claimants in which the Defendant deals is ‘very small’. I believe this makes it quite easy to calculate the loss that the Defendant might suffer as a result of an injunction being granted as, equally, small and, I would submit, quantifiable…. 50. Mr Aggarwal refers to the fact that there are related actions pending of which I am also aware. However, I also understand there are a large number of pharmaceutical companies’ products involved in this Consignment. I believe that this Court is only concerned with the impact of an injunction on the parties to this action but, even if there is a wider concern of the impact of more than one injunction, I believe that the potential harm in terms of loss of sales is quantifiable… 56. I should like to refer to paragraphs 48-52 of my First Witness Statement referring to the damage to the Claimants and, I reiterate, the damage that might be suffered by the Defendant and my undertaking on behalf of the Claimants of an undertaking in damages.”
“54. This is [a] case where the balance of convenience heavily favours the grant of an injunction: Longbottom 2nd, paras 47 to 59. 55. … There is no question that Lilly are good for the money and any damage that 8PM may suffer (should it turn out the injunction was wrongly granted) can readily be quantified. … 58. Mr Aggarwal has raised in his statement the possible damage to the Turkish supplier. However, there is no application made on behalf of the Turkish supplier, and it is a stranger at present to the proceedings. What seems clear is that any losses that it suffers are likely to be quantifiable in financial terms…. ”
“I should also observe that I have been informed that three other drug companies or groups are interested in the overall consignment which was originally treated as suspicious by HMRC. Those other three companies, or perhaps there are four, have launched their own proceedings. Those proceedings are stayed pursuant to some form of agreement or pattern of agreements and they await the result of these proceedings.”
“Although it is something of a movable feast at present, there are some restrictions on the importation of drugs into the United States. The US Food and Drug Administration (FDA) has the function of policing this or supervising it. The strict requirements are probably in the course of being formally relaxed and there are a number of de facto informal concessions made in favour of individual customers who import for their own purpose. The extent of all this is a matter of dispute in this action. However, it appears that the position is as follows. Strictly speaking, the importation of all or most of these drugs would be illegal. However, US Customs announced that from October 2006 they would not confiscate drugs mailed from Canada. Nevertheless, the position about drugs mailed from other countries is more fluid. [8PM]'s evidence is that the strict legal position is in the course of likely modification as a result of legislation, subject only to presidential veto, which no one has any reason to suppose will be forthcoming.”
“73. … I next need to consider whether if I stop this trade in this particular manner, pending a trial, and it turns out that I should not have done so which is definitely arguable in this case, then the defendant and the Turkish supplier can be adequately compensated in damages. So far as 8 PM is concerned, I consider that it can. The damage will be quantifiable. Lost trade can be calculated by reference to past trade and I see no great problem about that. The level of trade in terms of 8 PM's business is undetermined because 8 PM has decided not to disclose the profitability to it of this trade. It is not apparent there will be any loss but if there is a loss I am satisfied it can be adequately compensated on the [cross] undertaking in damages and Eli Lilly are plainly good for that. 74. The Turkish supplier is slightly different. I consider it right to take the position of the Turkish supplier into account because it is the Turkish supplier who will be the person mainly affected by this. Whether or not the transit of the goods through this jurisdiction is technically importation for the purposes of the Act, nevertheless the goods are effectively merely sent in transit through this jurisdiction and the business is really that of the supply of these drugs by the Turkish supplier either to Canadadrug or to the US end users. It matters not which view one takes for these particular purposes. 75. Accordingly, since the grant of an injunction will shut off this particular route available to the Turkish supplier, it seems to me to be right and inevitable that I should take the position of the Turkish supplier into account. The Turkish supplier is more financially at risk because it is the person with the commercial risk in the sales. Whether it will lose sales or not depends on whether it can find a substitute route. Various routes were suggested in the evidence. It is not clear to me that no such route is available and it is possible that another route will be found at least temporarily. 76. However, even if that is wrong, the loss which the Turkish supplier will sustain in this respect is not apparently the whole of its business and even if it is it will be only a relatively short-term because I propose to make an order for a speedy trial. Since the parties have told me that they think they can be ready for trial in three months, that is an objective for achieving a speedy trial. One is, therefore, only looking at a three month disruption of business. 77. I bear in mind that it has been submitted to me that one is not talking about the mere loss of three months of business. It may be that business lost is not entirely business that can be regained if the tap is turned back on. I accept that may be the case but to the extent that is the case again that is something which sounds in damages.”
“We refer to the telephone conversations between us yesterday…. In those conversations you stated that at your client had agreed in principle to stay the above action and accept undertakings, in a form essentially following the injunction to trial granted in the Lilly action, to restrain it from importing products bearing the marks belonging to our clients which are the subject of this action until the trial of the Lilly action. Our client is also in principle agreeable to this approach and we therefore enclose a draft consent order for your consideration. We should be grateful if you would discuss this with your client as a matter of urgency and indicate that your clients are agreeable to its terms….”
“Following the judgement in the claim number HC 07C02877 Lilly Icos LLC and Eli Lilly and Company v 8PM Chemist (the ‘Eli Lilly Case’), we assume that your client would be amenable to consenting to an order with our clients on the same lines as the Order entered on30 November 2007 in that case (the ‘Eli Lilly Order’) pending the Eli Lilly trial decision. We therefore enclose for your review a draft consent order that the return date be adjourned to a date after the trial in the Eli Lilly Case and that the above proceedings be stayed in the meantime. As we are not aware of the identity of the Turkish Supplier, our clients are unable to give a cross undertaking in damages in relation to the Turkish Supplier. If your client consents to the terms the draft consent order, we would be grateful if you would to sign this letter and the draft consent order and send copies to us by fax or e-mail.”
“there be an enquiry as to damages under the cross undertakings recorded in schedule 1 of the order of19th October 2007 and in the subsequent interim orders, including the orders of 26th and31st October 2007 and23 November 2007 .”
“I took the decision in order to hedge my bets against one or more of what were to be the 23 November injunction and Additional Injunctions being granted. If they were, so that the business would be stopped while an alternative shipping route was found, the Employees would have worked at least some of their notice periods by that time. If not, the Employees could be asked if they would like to stay on. … The date of the redundancies just reflects the precautionary measure I took to reduce staff costs quickly should the injunctions be granted.”
“As you are now aware that we will sadly be loosing all of the workers (except Urgas) at the end of November and also Idil at the end of December. This situation was unavoidable due to difficulties in BHX [i.e. Birmingham airport] and the resulting decrease in order volumes in Turkey.”
“Q. You say you took the decision in order to hedge your bets against one or more of what were to be the 23rd November and additional injunctions being granted. I have to suggest to you that, having looked at the e-mails that passed between you and your operatives in Turkey, that it is quite plain that decision to make those employees redundant was because of the incident in Birmingham and the commencement of the litigation? A. No. I do not agree with that, because by 31st October we can see that order volumes which had declined as a result of the detentions had already started creeping back up again and Mr. Sigurdson was moving a significant number of products back to CCP. Q. That is not what you say in the e-mails? A. I have already commented that Mr. Dolek was probably getting confused between the facts of the detention and the litigation. It may not be clear to him that two things are distinct. Q. Mr. Dolek may be getting confused but on page 436 you wrote at the bottom, that you will be losing all of the workers at the end of November and Idil at the end of December. This situation was ‘unavoidable due to difficulties in Birmingham and the resulting decrease in orders.’ A. I already qualified that reference to BHX was shorthand to the litigation. Q. Exactly. Therefore, you were asking the people to leave because of firstly the detention and secondly the existence of the litigation? A. I think by 2nd November or 31st October I had gotten over the detention, if I can put it that way, because I knew that there was nothing wrong, HMRC were simply doing their job. Having done their job the business had resumed to normality or some form of normality. Obviously the orders volumes were still not where they should be but I was confident they were going to get there. Q. If they were going to get there why did you need to dispense with these people's services? A. Because of the threat of litigation. Q. The last time you were thinking of making someone redundant in April/May time you did not tell the operative and you were able to countermand the instruction before he had been told? A. Correct. Q. On this occasion the employees were told and you put a transfer of responsibility into place with immediate effect? A. Umm hmm. Q. So those people were going to be made redundant come what may? A. No, because we knew what date the Lilly hearing injunction was for so we knew that had things turned in our favour we could still get those workers to not leave at the end of November.” against one or more of what were to be the 23rd November and additional injunctions being granted. I have to suggest to you that, having looked at the e-mails that passed between you and your operatives in Turkey, that it is quite plain that decision to make those employees redundant was because of the incident in Birmingham and the commencement of the litigation? A. No. I do not agree with that, because by 31st October we can see that order volumes which had declined as a result of the detentions had already started creeping back up again and Mr. Sigurdson was moving a significant number of products back Q. That is not what you say in the e-mails? A. I have already commented that Mr. Dolek was probably getting confused between the facts of the detention and the litigation. It may not be clear to him that two things are Q. Mr. Dolek may be getting confused but on page 436 you wrote at the bottom, that you will be losing all of the workers at the end of November and Idil at the end of December. This situation was ‘unavoidable due to difficulties in Birmingham and the resulting decrease in orders.’ A. I already qualified that reference to BHX was shorthand to the Q. Exactly. Therefore, you were asking the people to leave because of firstly the detention and secondly the existence of the litigation? A. I think by 2nd November or 31st October I had gotten over the detention, if I can put it that way, because I knew that there was nothing wrong, HMRC were simply doing their job. Having done their job the business had resumed to normality or some form of normality. Obviously the orders volumes were still not where they should be but I was confident they were going Q. If they were going to get there why did you need to dispense with these people's services? Q. The last time you were thinking of making someone redundant in April/May time you did not tell the operative and you were able to countermand the instruction before he had been told? Q. On this occasion the employees were told and you put a transfer of responsibility into place with immediate effect? Q. So those people were going to be made redundant come what may? for so we knew that had things turned in our favour we could still get those workers to not leave at the end of November.”
“66. … during the week commencing26 November 2007 , I telephoned the CEO of CanadaDrugs.com, Kris Thorkelson, to inform him of the 23 November injunction. I telephoned him first because CanadaDrugs.com was the Turkish Supplier’s major supplier accounting for about 88% of the orders being fulfilled. He asked what our next steps were andI said that we were thinking about appealing the decision but were not sure yet. In terms of order processing, I told him that the 23 November injunction affected products of the Lilly group but that it was highly likely that the Additional Injunctions would follow affecting products of the Pfizer, Merck and AstraZeneca groups as well as potentially Novartis and Schering-Plough. He commented that this was quite a list. I explained my understanding that, technically, we could still dispense and ship non-Lilly products, at least for the time being in respect of Pfizer, Merck and AstraZeneca products, but that it was something we would be reluctant to do in respect of these 3 companies in case it turned out that shipping their products through the UK did amount to trade mark infringement. 67. The CEO agreed with me that continuing to supply products from other manufacturers was risky and suggested that anyway the majority of the orders from CanadaDrugs.com would relate to products of the companies that had sought injunctions against 8PM and it would be difficult for CanadaDrugs.com to carry on using the Turkish Supplier for dispensing a minority of the products …. This also affected orders from single patients that consisted of products of both the Claimants and other companies because CanadaDrugs.com was not keen at all to split orders between two suppliers (i.e. for ‘partial fulfilment’ by each). It is only where there is no option at all to consolidate orders that internet pharmacies will split them or agree to partial fulfilment. This is because it increases costs, is administratively more complex and also customers do not like receiving part of their order only - often when they get the first part they believe there has been a mistake over the rest of it and ring up the CIP to complain. It was for this reason that, as I said in paragraph 35 of my first Witness Statement, the Turkish Supplier if it could not ‘satisfy one element of a particular prescription, it does not seek to satisfy any element’ but would notify the CIP so the patient could be asked if he or she wanted partial fulfilment. That procedure was feasible for occasional occurrences but not long-term or where there is an inability to supply any of a given company’s products and so, in paragraph 36, I anticipated that, because of knock-on effects it would have, ‘If 8PM is unable to handle Lilly products, in effect this means that we lose all of the business’. I was therefore not surprised by the CEO’s position on partial fulfilment. The conversation then ended by the CEO wishing me luck with the litigation and requesting that I keep him informed. I thanked him for his understanding and apologised for the inconvenience this would inevitably cause to his business. I added that we would also investigate alternative shipping routes which would avoid the UK and keep him informed of progress on this front too. I will discuss the alternative shipping routes investigated below. 68. In the same week that I spoke to CanadaDrugs.com I also spoke to the president of BBG, Dr Simon Barclay. I informed him of the 23 November injunction, the likely Additional Injunctions and those companies’ products concerned (the same companies as I had mentioned to CanadaDrugs.com). The president’s reaction was that we should keep in touch and let him know if we became able to supply again. He was sympathetic but did not ask that we carry on with partial fulfilment only. BBG had fulfilment facilities other than the Turkish Supplier, for example in Singapore, and so I assume it would have channelled all of its orders through them. It could also have fulfilled orders with drugs from the New Zealand market although that would have had costs implications as that market is more expensive than, for example, Turkey. 69. Still in this same week, I spoke to the owner of JanDrugs, David Janeson, to give him the same information about the 23 November injunction and Additional Injunctions and their implications as I had given to CanadaDrugs.com and BBG. He replied that JanDrugs was not currently using the Turkish Supplier much anyway and that he would switch what business had been coming to the Turkish Supplier to Canada or New Zealand with other pharmacy partners. The reason he was not using the Turkish Supplier much was that he preferred non-Turkish drugs but he would switch from other suppliers to the Turkish Supplier depending on how he wanted to position his website (balancing the source of a particular drug against its cost) or when other suppliers could not fulfil JanDrugs’ orders. However, he asked me to keep him informed as he wished to keep the Turkish Supplier as an option and also factors such as price and availability of drugs could change in the future which would make Turkey more favourable as place for the fulfilment of JanDrugs’ orders.”
“98. On5 February 2008 , the day that the Court of Appeal’s judgment in the Lilly Action was delivered, I received an email from Mr Thorkelson of CanadaDrugs.com congratulating me on the outcome. The email showed that he had been told by CanadaDrugs.com’s legal counsel who, I think, must have found the judgment on the internet as I had not by that stage notified CanadaDrugs.com of it. 99. But that afternoon, I spoke to the CFO at CanadaDrugs.com first to inform him of the Court of Appeal decision (which he already knew) and secondly to ask whether, in light of the decision, CanadaDrugs.com would resume the fulfilment business with the Turkish Supplier. His reply was that the alternative arrangements were going well, but he would keep us in mind if the need arose. However I had the impression that he was just being polite and that there was no intention to resume business with the Turkish Supplier. The conversation then moved on to discuss the possibility of selling a batch of the Turkish Supplier’s stock to CanadaDrugs.com. He requested a list of the remaining stock to review. I will discuss the sales of stocks to CanadaDrugs.com below. 100. During the same week, I also spoke to the owner of JanDrugs and the president of BBG to tell them of the lifting of the 23 November injunction and our ability to resume trade. I also informed them that the scale on which we could recommence business would depend on whether or not CanadaDrugs.com would go back to using the Turkish Supplier and the extent of any resumed business. This was because the Turkish Supplier could not offer the same level of service as it had prior to the Injunctions without the large volume of orders CanadaDrugs.com had been assigning to the Turkish Supplier. In particular, without the volume of orders from CanadaDrugs.com it would not be financially justifiable to send 2 consignments per week. I knew that only offering 1 consignment per week would not be attractive to JanDrugs or BBG as it would mean delays in the US patients receiving their pharmaceuticals. Also, although I did not mention it to BBG or JanDrugs, there would not be the same economies of scale and so the Turkish Supplier would have to charge increased fees and drugs costs. This is because of the reduced bargaining power with wholesalers due to lower purchase volumes and also because of the various fixed costs of the business, such as premises expenses. I ended the conversations by saying that I would keep JanDrugs and BBG informed of discussions with CanadaDrugs.com.” “94. I spoke to Mr Sigurdson, the CFO of CanadaDrugs.com, by telephone in the week commencing25 February 2008 to find out how things were going with the alternative fulfilment arrangements and the possibility of doing business again with the Turkish Supplier. He replied that things were going well and therefore CanadaDrugs.com did not want to start re-using the Turkish Supplier. He then went on to say that CanadaDrugs.com had decided to stop using 8PM as well. I asked the reasons for these decisions. He replied that CanadaDrugs.com had been left with no choice but to set up alternative arrangements because, when the 23 November injunction was first granted, we could not say for certain if the Turkish Supplier would be able to operate again and in what time-frame. He also observed that the Additional Injunctions had been obtained and that 8PM was looking at the prospect of a full blown trial in May 2008. He added regarding 8PM that the decision was nothing to do with its performance or the service that it was providing but was an internal decision.”
“If they have the same expertise, then I only need one expert on each topic. It is contrary to the good administration of justice that there should be duplication. … There is no need to have two accountants, one is enough.”
“GENERAL GUIDANCE The statements in this chapter are intended only to provide operating guidance for FDA personnel and are not intended to create or confer any rights, privileges, or benefits on or for any private person. FDA personnel may use their discretion to allow entry of shipments of violative FDA regulated products when the quantity and purpose are clearly for personal use, and the product does not present an unreasonable risk to the user. Even though all products that appear to be in violation of statutes administered by FDA are subject to refusal, FDA personnel may use their discretion to examine the background, risk and purpose of the product before making a final decision. Although FDA may use discretion to allow admission of certain violative items, this should not be interpreted as a license to individuals to bring in such shipments. … Drugs, Biologics and Devices When personal shipments of drugs and devices that appear violative are brought to FDA’s attention by CBP. FDA personnel will use their discretion to decide on a case by case basis whether to detain, refuse or allow entry of the product. Generally, drugs and devices subject to Import Alerts are not amenable to this procedure. Devices to be used by practitioners for treating patients should not be viewed as personal importations subject to this chapter. Drugs subject to Drug Enforcement Agency (DEA) jurisdiction should be returned to CBP for handling. In deciding whether to exercise discretion to allow personal shipments of drugs or devices, FDA personnel may consider a more permissive policy in the following situations: 1. when the intended use is appropriately identified, such use is not for treatment of a serious conditions, and the product is not known to represent a significant health risk; and 2. when a) the intended use is unapproved and for a serious condition for which effective treatment may not be available domestically either through commercial or clinical means; b) there is no known commercialization or promotion to persons residing in the U.S. by those involved in the distribution of the product at issue; c) the product is considered not to represent an unreasonable risk; and d) the individual seeking to import the product affirms in writing that it is for the patient’s own use (generally not more than 3 month supply) and provides the name and address of the doctor licensed in the U.S. responsible for his or her treatment with the product, or provides evidence that the product is for the continuation of treatment begun in a foreign country.”
“The effect of illegality on a contract may be threefold. If at the time of making the contract there is an intent to perform it in an unlawful way, the contract, although it remains alive, is unenforceable at the suit of the party having that intent; if the intent is held in common, it is not enforceable at all. Another effect of illegality is to prevent a plaintiff from recovering under a contract if in order to prove his rights under it he has to rely on his own illegal act; he may not do that even though he can show that at the time of making the contract he had no intent to break the law and that at the time of performance he did not know that what he was doing was illegal. The third effect of illegality is to avoid the contract ab initio, and that arises if the making of the contract is expressly or impliedly prohibited by statute or is otherwise contrary to public policy.”
“This country should not in my opinion assist or sanction the breach of the laws of other independent States.”
“The ground upon which I rest my judgment that [a partnership formed for the main purpose of deriving profit from the commission of a criminal offence in a foreign and friendly country] is illegal is that its recognition by our Courts would furnish a just cause for complaint by the United States Government against our government (of which the partners are subjects)”, and would be contrary to our obligation of international comity as now understood and recognised, and therefore would offend against our notions of public morality.”
“It is … nothing else than comity which has influenced our courts to refuse as a matter of public policy to enforce, or to award damage for the breach of, a contract which involves the violation of foreign law on foreign soil, and it is the limits of this principle that we have to examine. … Just as public policy avoids contracts which offend against our own law, so it will avoid at least some contracts which violate the laws of a foreign state, and it will do so because public policy demands that deference to international comity.”
“In the present case I see no escape from the view that to recognise the contract between the appellant and the respondent as enforceable contract would give a just cause for complaint by the Government of India and should be regarded as contrary to conceptions of international comity.”
“However, the absence of a reported decision clearly demonstrating the point ought not in my view to deter this court from affirming that the carrying out of prohibited acts within the territory in question is an essential and necessary element of the principle stated by Sankey LJ in Foster v Driscoll[1929] 1 KB 470 , 521, and approved by the House of Lords in Regazzoni v Sethia [1958] A.C. 301. Apart from the formidable weight of judicial opinion behind that formulation of the principle, there are to my mind two compelling reasons against regarding as irrelevant the place where the prohibited acts are carried out. One reason is that international comity is naturally much readier to accept that a country’s laws ought to be obeyed within its own territory, than to recognise them as having extraterritorial effect. The other reason is that the Ralli Brothers principle, although now regarded as a distinct principle, grows from the same rootstock. In the Ralli Brothers line of authority it is clear beyond argument that it must be the law of the place of performance that prohibits the act of performance. For that I need refer only to Kleinwort Brothers v Ungarische Baumwolle Industrie[1939] 2 KB 678 , in which MacKinnon LJ (at p.694) regarded the alternative as leading to preposterous results.”
“28. … It is common ground that there are cases in which public policy will prevent a claimant from recovering the whole of the damages which, but for the rule of public policy, he would otherwise have recovered. The principle can perhaps be stated as a variation of the maxim so that it reads ex turpi causa non oritur damnum, where the damnum is the loss which would have been recovered but for the relevant illegal or immoral act. A classic example is the principle that a person who makes his living from burglary cannot have damages assessed on the basis of what he would have earned from burglary but for the defendant's negligence. 29. To my mind the authorities support that approach. They seem to me to support the proposition that where a claimant has to rely upon his or her own unlawful act in order to establish the whole or part of his or her claim the claim will fail either wholly or in part. In the present context the principle can be seen from the decision of this court in Hunter v Butler [1996] RTR 396, although it has to be said that the case does give rise to some difficulties of interpretation. … 33. … The principle applied by Hobhouse LJ is, as I see it, that stated at p 405B, namely: ‘If a plaintiff comes to court and asserts as part of her case that she would have committed criminal acts and bases her claim on such an assertion she cannot recover in a court of law on that basis.’ That appears to me to be substantially the same test as that adopted in the ex turpi causa non oritur actio cases, as stated in the passage from the judgment of Beldam LJ in the Clunis case[1998] QB 978 , 986–987 quoted above. 34. I am not sure whether it is quite the same principle as that applied by Waite LJ but it does not seem to me necessary to consider that question further because, since Hirst LJ agreed with the judgment of Hobhouse LJ and since the principle just stated is part of the ratio decidendi of Hunter v Butler, we are bound to follow it … 36. … In my opinion Hobhouse LJ must have had in mind a case where the claimant bases his or her claim upon his or her unlawful act in a substantial way. It is not, however, in my opinion sufficient that he or she has been party to some collateral or insignificant illegality or unlawful act. Thus, as Kemp & Kemp (2000) put it in para 13–080, a claimant is entitled to be compensated for his loss of earnings even though he had in the past failed to disclose them to the Inland Revenue: see Duller v South East Lincs Engineers [1981] CLY 577, a decision of Mr Edwin Jowett QC on2 May 1980 .”
“The position at law is well illustrated by the decision in Bowmakers Ltd. v. Barnet Instruments Ltd. [1945] K.B. 65. In that case Barnet acquired three parcels of machine tools which had previously belonged to Smith. The transaction was carried through by three hire-purchase agreements under which Smith sold the goods to Bowmakers who then hired them to Barnet. All three agreements were unlawful as being in breach of Defence Regulations: it is important to note that in the case of at least two of the parcels the illegality lay in the contract under which Bowmakers acquired the machine tools from Smith: see p. 69. Bowmakers succeeded in an action for conversion against Barnet. Even though it appeared from the pleadings and the evidence that the contract under which Bowmakers acquired the goods was illegal, such contract was effective to pass the property in the goods to Bowmakers who could therefore found their claim on the property right so acquired. The position at law is further illustrated by Ferret v. Hill(1854) 15 C.B. 207 where A, with intent to use premises as a brothel, took a lease from B. B, having discovered that the premises were being used as a brothel, ejected A. A was held entitled to maintain ejectment against B notwithstanding that A entered into the lease for an illegal purpose. In Taylor v. Chester, L.R. 4 Q.B. 309 the plaintiff had deposited with the defendant half a£50 note as security for payment due under an illegal contract with the defendant. The plaintiff was held unable to recover the half note as a special property in it (i.e. the security interest) had passed to the defendant. In Alexander v. Rayson [1936] 1 K.B. 169 the plaintiff had leased a property to the defendant. For the purpose of defrauding the rating authorities, the plaintiff had carried through the transaction by two documents, one a lease which expressed a low rent the other a service agreement providing for additional payments sufficient to bring up the annual payment to the actual rent agreed. The plaintiff failed in an action to recover rent due under the agreements but the Court of Appeal, at p. 186, said that if the plaintiff had let the flat to be used for an illegal purpose, the leasehold interest in the flat would have vested in the defendant who would have been entitled to remain in possession of the flat until and unless the plaintiff could eject her without relying on the unlawful agreement. From these authorities the following propositions emerge: (1) property in chattels and land can pass under a contract which is illegal and therefore would have been unenforceable as a contract; (2) a plaintiff can at law enforce property rights so acquired provided that he does not need to rely on the illegal contract for any purpose other than providing the basis of his claim to a property right; (3) it is irrelevant that the illegality of the underlying agreement was either pleaded or emerged in evidence: if the plaintiff has acquired legal title under the illegal contract that is enough.”
“In my judgment, the explanation for this departure from Lord Eldon's absolute rule is that the fusion of law and equity has led the courts to adopt a single rule (applicable both at law and in equity) as to the circumstances in which the court will enforce property interests acquired in pursuance of an illegal transaction, viz., the Bowmakers rule [1945] K.B. 65. A party to an illegality can recover by virtue of a legal or equitable property interest if, but only if, he can establish his title without relying on his own illegality. In cases where the presumption of advancement applies, the plaintiff is faced with the presumption of gift and therefore cannot claim under a resulting trust unless and until he has rebutted that presumption of gift: for those purposes the plaintiff does have to rely on the underlying illegality and therefore fails. The position is well illustrated by two decisions in the Privy Council. In the first, Singh v. Ali [1960] A.C. 167 a plaintiff who had acquired legal title to a lorry under an illegal transaction was held entitled to succeed against the other party to the illegality in detinue and trespass. The Board approved the Bowmakers test. Two years later in Palaniappa Chettiar v. Arunasalam Chettiar [1962] A.C. 294 the Board had to consider the case where a father, who had transferred land to his son for an illegal purpose, sought to recover it under a resulting trust. It was held that he could not, since he had to rely on his illegal purpose in order to rebut the presumption of advancement. … In my judgment these two cases show that the Privy Council was applying exactly the same principle in both cases although in one case the plaintiff's claim rested on a legal title and in the other on an equitable title. The claim based on the equitable title did not fail simply because the plaintiff was a party to the illegal transaction; it only failed because the plaintiff was bound to disclose and rely upon his own illegal purpose in order to rebut the presumption of advancement. The Privy Council was plainly treating the principle applicable both at law and in equity as being that a man can recover property provided that he is not forced to rely on his own illegality.”
“Finally, I should mention a further point which was relied on by Miss Tinsley. It is said that once the illegality of the transaction emerges, the court must refuse to enforce the transaction and all claims under it whether pleaded or not: see Scott v. Brown, Doering, McNab & Co. [1892] 2 Q.B. 724. Therefore, it is said, it does not matter whether a plaintiff relies on or gives evidence of the illegality: the court will not enforce the plaintiff's rights. In my judgment, this submission is plainly ill founded. There are many cases where a plaintiff has succeeded, notwithstanding that the illegality of the transaction under which she acquired the property has emerged: see, for example, Bowmakers Ltd. v. Barnet Instruments Ltd. [1945] K.B. 65 and Singh v. Ali [1960] A.C. 167. In my judgment the court is only entitled and bound to dismiss a claim on the basis that it is founded on an illegality in those cases where the illegality is of a kind which would have provided a good defence if raised by the defendant. In a case where the plaintiff is not seeking to enforce an unlawful contract but founds his case on collateral rights acquired under the contract (such as a right of property) the court is neither bound nor entitled to reject the claim unless the illegality of necessity forms part of the plaintiff's case.”
“The defendants seek damages under the cross-undertaking given by the plaintiffs. In view of my findings as to the manner in which the order was obtained and executed, the defendants are, in my judgment, prima facie entitled to damages. The problem is quantum. Damages for breach of a cross-undertaking ought, in my judgment, to be primarily compensatory. But I do not think, in the present case, that is the whole of the basis on which damages can be granted. It is well settled that an increased level of damages, sometimes described as aggravated damages, can be awarded where trespass to land or trespass to goods has been accompanied by circumstances of contumely or affront: see McGregor on Damages, 14th ed. (1980), paras. 1082 and 1127. That has been so in the present case by reason, in my judgment, of the excessive and oppressive manner in which the Anton Piller order was executed. … I have given thought to whether I should order an inquiry as to damages in order that the damage done by the order to the defendants' businesses at 8, Frederick Street and at the Mill Street shop may be properly assessed. I have concluded that I ought not to order an inquiry as to damages for the following reasons. First, the compensatory element of any damages should compensate the defendants for damage to their legitimate interests. They cannot expect to be compensated for damage to the illicit part of the businesses carried on at the Mill Street shop and at 8, Frederick Street. The stock of video tapes at the Mill Street shop was, as I have concluded from the evidence in this case, composed largely of pirate tapes. It is true that a substantial number of the tapes were not copies of films in which any of the plaintiffs is entitled to copyright or an exclusive licence. Nonetheless, to the extent that the tapes were pirate tapes, they belonged, undersection 18 of the Copyright Act 1956 , to the owners of the copyright. Further, every sale of every video tape from the Mill Street shop of which evidence has been given in this case seems to have been the sale of a pirate tape. The prospect of an inquiry as to the damage caused by the Anton Piller order to such a business brings to my mind the application by the highwayman against his partner for an account. The court would not countenance that application and I do not think I should countenance an inquiry into the damage caused by the order to the business of the Mill Street shop. Mr. Robinson will not of course suffer the fate of the highwayman, nor will Mr. Beveridge suffer the fate of his counsel. As to the business carried on from 8, Frederick Street, I find it easy to accept that the business was, in part, legitimate although, as I have found, in part concerned with the reproduction of tapes in flagrant breach of copyright. But so far as the legitimate side of the business is concerned, it was, in my view, for a time carried on by Mr. Wickenden. I was presented in evidence by Mr. Robinson with a series of falsehoods regarding the business allegedly carried on by Mr. Wickenden. He was I think, no more than a front for Mr. Robinson. The business carried on at 8, Frederick Street after the execution of the Anton Piller order terminated in July 1983 or thereabouts on account of, first, the collapse of Centre Video Ltd. and, secondly, the floods which damaged the majority of the video machines. The cesser of that continued business was not attributable, directly at least, to the Anton Piller order or its aftermath. In view of these circumstances, and particularly in view of the false evidence given me by Mr. Robinson, I am not prepared to order an inquiry into the damage caused to the 8, Frederick Street business by the Anton Piller order. I propose, therefore, to make an assessment here and now of the sum that the plaintiffs ought to pay the defendants under the cross-undertakings in damages. In spite of what I have said, there must be some compensatory element in the damages to be awarded. The combination of Anton Piller order and Mareva injunction made it impossible for the defendants to obtain credit. The retention by Hamlins of all the documents of the businesses made any continuity of business very difficult. There was a legitimate part, both of the 8, Frederick Street business and, perhaps to a very small extent, of the Mill Street shop business. The defendants' chance to continue on a small scale a legitimate business was impaired by the ex parte order being obtained and executed. In addition, this is, in my judgment, a case in which aggravated damages are justified. I propose to order that damages of£10,000 be paid by the plaintiffs to the defendants under the cross-undertakings in damages. If it is relevant to split the sum between the defendants, I would allow£2,500 to the company and£7,500 to Mr. Robinson. This split recognises that contumely and affront affect individuals, not inanimate corporations. The damages are awarded against the plaintiffs jointly.”
“There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude that you adopt. A man cannot adopt two inconsistent attitudes towards another: he must elect between them and, having elected to adopt one stance, cannot thereafter be permitted to go back and adopt and inconsistent stance.”
“A decision that the undertaking should be enforced is a precondition for the making of an order of an inquiry as to damages.”
“Points on illegality are taken by the court of its own motion, not because of any consideration of fairness as between the two parties to the dispute but on wider considerations.”