Actial Farmaceutica LDA v Professor Claudio De Simone and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Flaux,Christopher Clarke LJ,Lewison LJ |
| Judgment Date | 21 December 2016 |
| Neutral Citation | [2016] EWCA Civ 1311 |
| Docket Number | Case No: A3/2015/1506 (A) & (B) |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 2016 |
[2016] EWCA Civ 1311
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MR ANDREW HOCHHAUSER QC SITTING AS A DEPUTY HIGH COURT JUDGE
[2015] EWHC 836 (CH)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lord Justice Christopher Clarke
and
Lord Justice Flaux
Case No: A3/2015/1506 (A) & (B)
Mr John Wardell QC and Mr Rory Brown (instructed by Lipman Karas LLP) for the Appellant
Mr Andrew Sutcliffe QC and Mr Gregory Mitchell QC (instructed by Fitz Solicitors) for the Respondent
Hearing dates: Tuesday 13 and Wednesday 14 December 2016
Approved Judgment
Introduction and background
The appellant (to which I will refer as "Actial") appeals against the decision of Mr Andrew Hochhauser QC, sitting as a Deputy High Court Judge in the Chancery Division, that the High Court does not have jurisdiction over the Respondents under Article 5(3) of the Judgments Regulation 44/2001 or Article 5(3) of the Lugano Convention 2007. The learned judge gave permission to appeal in respect of the claims against the first respondent (to whom I will refer as "the Professor") and the second respondent (to which I will refer as "Mendes Italy") but not the claim against the third respondent.
The factual background to this matter is helpfully summarised by Kitchin LJ in [1] to [17] of his judgment of 1 July 2015 giving permission to the Professor to appeal against an order by the judge granting certain interim interlocutory relief to Actial pending the hearing of the present appeal. We gratefully set out and adopt that summary:
"2. The Professor, an Italian professor of medicine, has devised a probiotic food product consisting of live freeze dried pure lactic acid bacteria which is called VSL#3 ("the Product"). It is said to contain eight different strains of live bacteria and have a far higher concentration of beneficial bacteria than any other such product available on the market. It is available over the counter and on prescription from the National Health Service. The Professor claims that he is the owner of valuable confidential information concerning the growth, analysis and precise mix of these eight strains.
3. Some 15 years ago the Professor entered into a joint venture agreement with Paolo and Claudio Cavazza, who were wealthy Italian businessmen. Claudio Cavazza has since died. One of the main purposes of this joint venture agreement was to exploit the Product. The Professor was responsible for its composition and the Cavazza brothers were responsible for its funding, distribution and sale. The Cavazza brothers had considerable experience in the pharmaceutical sector and were, at the material time, majority shareholders in the Sigma Tau group of research based pharmaceutical companies with over 2500 employees across the world.
4. For reasons which are not material to the present dispute, the Cavazza brothers and the Professor did not want the Product to be sold through the Sigma Tau group so they set up a new joint venture company referred to as "CD Luxembourg". It is owned by various companies which represent the interests of the Cavazza family and the Professor. The Professor's interest was originally held by a Luxembourg company referred to as "Mendes Luxembourg" but that was recently dissolved and its shares in CD Luxembourg were transferred to a company referred to as "Mendes Italy", which is another company controlled by the Professor or other members of his family. CD Luxembourg is itself the owner of three operating companies which it controls through its Italian subsidiary referred to as "CD Italy". These three subsidiaries have been referred to as "VSL", "CD India" and the claimant, Actial. They are each responsible for different territories with Actial responsible for most of Europe including the United Kingdom.
5. On 29 May 2006 the Professor and Actial entered into an agreement, referred to as the "2006 UK Know-How Agreement". Actial contends that it is clear from the terms of this agreement that it has the sole right to make and sell the Product in the UK. There can be no doubt that Actial is also the owner of the Community trade mark for VSL#3. The Professor accepts that he signed the 2006 UK Know-How Agreement but argues it was a sham and that it was never intended to have contractual effect. Be that as it may, he has not disputed that he has received substantial payments amounting to several million Euros pursuant to its provisions and similar provisions in various other agreements. For some time Actial has obtained the Product by placing purchase orders with an American manufacturer ("Danisco") which since 2011 has been owned by Dupont. Danisco makes the Product from the eight strains of bacteria and then exports it in bulk to Italy and the Netherlands for packaging. In Italy the bulk packaging is carried out by a company referred to as "SIIT" and in the Netherlands by a company referred to as "Sanico". Once packaged, the Product is supplied by Actial through its distributors across Europe.
6. In June 2006 Actial entered into an exclusive distribution agreement with an English company referred to as "Ferring UK". Under the terms of that agreement Actial agreed to sell or have sold the Product to Ferring UK and Ferring UK agreed to purchase all of its requirements of the Product [as] supplied by Actial through its distributors across Europe.
7. In these proceedings Actial contends that in or about June or July 2014 the Professor and Mendes Italy embarked on a dishonest scheme unlawfully to wrest control of the manufacture and distribution of the Product from the joint venture with the intention of channelling sales of the Product through a rival business. Moreover, so Actial contends, the Professor embarked on this scheme while he was still a director of Actial. More specifically, it continues, the Professor sought to cut off supplies of the Product to Actial by preventing it from obtaining supplies from Danisco, removing Actial as a designated supplier and so preventing it from fulfilling its obligations to Ferring UK under the distribution agreement.
8. There is no dispute that by the autumn of 2014 Actial was unable to make further supplies to Ferring UK and as a result Ferring UK became desperately short of stock which it had to ration. Accordingly, and in order to ensure that supplies of the Product to Ferring UK were not unduly disrupted, Actial signed a waiver letter in about November 2014, which permitted Ferring UK to obtain supplies of the Product from its associated company referred to as "Ferring Italy", which in turn obtained them from a Swiss company, referred to as "Mendes Switzerland". Actial maintains that there is compelling evidence that the Professor controls Mendes Switzerland and indeed has appointed that company as the sole authorised distributor of the Product for Europe and Asia. This is disputed by the Professor.
9. Actial maintains that this waiver letter provided it with little comfort. It says that supplies made pursuant to the waiver did not generate any income at all for Actial or its parent, CD Italy. Accordingly, it refused to countenance a second waiver and on 10 December 2014, and believing that Ferring UK was on the verge of running out of supplies again, sought urgent without notice relief, requiring the Professor to reinstate it as an authorised supplier. This application was granted by Mr Kevin Prosser QC sitting as a deputy judge in the Chancery Division and, at Actial's request, he also directed the Professor to inform Danisco that it was entitled to sell to Actial the actual bacterial strains used in the manufacture of the Product.
10. A few days later, the Professor instructed English solicitors and counsel, who wrote to the court apologising for the fact that the Professor had not complied with the mandatory injunction and explaining that to do so would result in the irretrievable loss of trade secrets.
11. On 18 December 2014 the matter came before Norris J who made an order which was designed to hold the ring until the matter could return to court to be fully argued. In broad terms, and upon Actial giving an undertaking to provide security in the sum of 400,000 Euros and not to attempt to clone, reproduce, reverse engineer or otherwise modify the finished Product supplied pursuant to Ferring UK's orders, the order required the Professor to instruct Danisco to supply to the Netherlands and Italian packaging agents (SIIT and Sanico) sufficient Product to enable Actial to fulfil orders placed by Ferring UK which were consistent with its past pattern of trading, including any reasonable growth in such trading. The Professor duly instructed Danisco in those terms and on 8 January 2015 Ferring UK placed an order with Actial for stock worth in excess of 640,000 Euros. This was satisfied by deliveries made in late March 2015.
12. Two further matters arise from the order made by Norris J which I should mention at this stage. The first is that Actial also gave an undertaking to make and serve an affidavit setting out any steps that it had taken to modify the Product. In compliance with that undertaking, an affidavit was made and served which explained that some reverse engineering had been carried out by CD Italy in June and July 2014 because of a concern that the version of the Product being sold in the market might not contain the ingredients detailed on the product packaging, and as a result of an inspection by the Italian health and safety authorities. The second is that the Professor also complained that there had been a breach of this order in that on 12 January 2015 Actial placed an order with Danisco for bulk Product with a direction that this was to be shipped...
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