Chemistree Homecare Ltd and Another v Teva Pharmaceuticals Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BRIGGS |
| Judgment Date | 03 November 2011 |
| Neutral Citation | [2011] EWHC 2979 (Ch) |
| Docket Number | Claim No: HC11C02170 |
| Court | Chancery Division |
| Date | 03 November 2011 |
[2011] EWHC 2979 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Briggs
Claim No: HC11C02170
MISS MONICA CARRS-FRISK QC & MISS EMILY NEILL (Instructed by Messrs Axiom Stone) appeared on behalf of the Claimant
MISS RONIT KREISBERGER & MR OWAIN DRAPER (Instructed by Messrs Charles Russell LLP) appeared on behalf of the Defendant
Approved Judgment
Thursday, 3 November 2011
This is an application by the defendant, TEVA Pharmaceuticals Limited ("TVL"), for security for costs on the grounds that they have reason to believe that the claimant companies, Chemistree Homecare Limited ("CHL") and Blackbay Ventures Limited ("BBVL"), will not be able to pay TVL's costs if ordered to do so at the trial, which has been fixed on an expedited basis for a two-week hearing in mid to late February 2012. The application is opposed on the alternative main grounds that (1) there is no reason to believe that the claimants will not be able to pay when any costs liability falls due and/or (2) that an order for security now in excess of £350,000 will stifle the claim.
The application has been hotly contested over one and a half days, with an additional more than half a day for judicial pre-reading. It has involved detailed consideration of financial information about the claimants, including three successive expert reports for the defendant and evidence about the claimants' business prospects and financial resources served very late, to which the defendant, in particular its expert, now abroad, has been unable to respond. Nonetheless I admitted that late evidence but with due regard to the defendant's inability to respond when assessing its weight.
Happily there has been no dispute about the law, recently comprehensively restated by the Court of Appeal in Jirehouse Capital v Beller [2009] 1 WLR 751. For present purposes the relevant principles are as follows:
(1) the applicant must show that on all the material presently available to the court there is reason to believe that the claimants will be unable to pay the applicant's costs if ordered to do so.
(2) The question is whether the claimant companies will, rather than might, be unable to pay.
(3) Inability to pay means to pay when the costs fall due for payment (see Re Unisoft Group (No 2) 1993 BCLC 532 at 534, approved in Jirehouse Capital at paragraph 23). This calls for an assessment of what the claimants may be expected to have available for payment at the due date or dates in the form of cash or other readily realisable assets (see Longstaff International v Baker and McKenzie [2004] 1 WLR 2917 at paragraphs 17 and 18).
(4) In respect of a costs order made at the end of a two-week trial, where there is no possibility of summary assessment, the relevant due dates, as it seems to me, are (a) the payment date of any order made by the trial judge for a payment on account, and (b) the date when an order for the balance is made upon completion of detailed assessment.
(5) If this ability to pay threshold is passed, then the court has a broad discretion whether to order any, and if so how much, to be paid or secured by way of security. The reported cases have identified specific aspects which have to be taken into account (see for example Sir Lindsay Parkinson and Co v Triplan [1973] QB 609 per Lord Denning, summarised in the White Book at paragraph 25.13.13).
(6) But overall the question is whether the court is satisfied, having regard to all the circumstances of the case, that it is just to make such an order (see CPR 25.13(1)(a)).
A particular consideration much relied upon by the claimants is whether an order for security would stifle the claim. In this respect the onus is on the claimants, see Radu v Houston [2006] EWCA Civ 1575 at paragraph 19 where Waller LJ said:
"One of the most difficult circumstances, I recognise, that courts have to deal with is the assertion by a claimant that if security would otherwise be due, it should not be ordered because there will be a stifling of the claim. Evidence is often suspect and it is unusual to have a trial with cross examination or anything of that kind. Courts have to take a view on the material before them, remembering the onus is on the person resisting security to demonstrate that the claim will be stifled."
The court must therefore guard against an uncritical acceptance of a mere assertion to that effect and deal with the issue objectively on the evidence as it stands. It is not enough, to make good an assertion of stifling, for the claimants' directors to say that, if faced with an order for security, they will decide on commercial grounds to discontinue the claim and put the company's money to better use elsewhere. That much is implicit from paragraph 18 of Waller LJ's judgment in Radu where he said this:
"The obtaining of an order for security for costs is a rather special form of order. It is intended, if it is right to make an order at all, to give a claimant a choice as to whether he puts up security and continues with his action or withdraws his claim. That choice is meant to be a proper choice."
The claimants do not have, in support of the stifling submission, to go so far as to prove that they could not in any circumstances raise the money. The claimants are expected to show that there is after due inquiry no available external source of funds to pay security, for example, from shareholders, stakeholders or associated companies. It may be enough, especially where the enforcement of EU rights are sought by the claimant, to show that an order for security would make pursuit of the claim virtually impossible or excessively difficult. That is not, in my view, a separate test to be applied wherever, as here, EU rights are in issue. It is a part of the question whether an order for security would stifle the claim.
The present claim is brought by the claimants in an attempt to prevent TVL, which is a supplier of the multiple sclerosis drug Copaxone, from (in effect) rationing its supply of that drug to the claimants, which operate a UK based dispensing pharmacy business, to amounts sufficient to serve their customers in the UK and denying the claimants the supplies which they wish to make at advantageous prices to customers elsewhere in the EU. That rationing is alleged to involve serious breaches of UK and EU competition law, including abuse of dominant position. For a fuller description of the claim and a very preliminary judicial view as to its merits, reference may be made to Mann J's judgment on an interim application in this claim. It is sufficient for me to say that it is neither a very strong nor a very weak claim. Counsel were agreed that its merits were not material to the grant or the withholding of an order for security.
Of undoubted relevance to this application is the likely expense of litigating this claim to trial. On the basis of a detailed schedule TVL estimates its likely total costs at just over £1.7 million for a two-week trial involving heavy disclosure, including electronic disclosure, seven TVL witnesses, heavy expert evidence and serious legal argument in what the claimants assert, but TVL does not accept, is a serious test case and where the claimants say that they have been ganged up on by a number of their pharmaceutical suppliers in rationing supplies to exclude cross-border trading of their own. It is plain from the evidence that the claimants wish to pursue the claim with the utmost vigour and regard its outcome as vital to their future prosperity.
The claimants offer no costs estimate of their own, although their solicitors must, if they have complied with their professional obligations, have supplied one to the claimants. The claimants asserted, with some help from a witness statement from a costs draftsman, that TVL's costs estimate was inflated in certain respects, and in particular that TVL had embarked upon an unnecessarily expensive process of electronic disclosure without properly co-operating in the choice of suitably focused search words. As to the last point, the party and party correspondence to which I was referred rather suggested that it was the claimants who were pressing TVL to widen its search rather than the other way round. I did not find the claimants' attempt to use as a comparable costs estimates given in their pending claim against Roche to be persuasive.
The following matters are relevant to my assessment of the likely amount of TVL's recoverable costs by the end of the trial.
(a) The costs of litigating serious EU competition issues, especially where cross-border market dominance is an issue, is notoriously high.
(b) TVL has already incurred costs liabilities to its own solicitors and disclosure experts of some £434,000, including one interim hearing, statements of case, some disclosure and some evidential preparation.
(c) Witness statements, the rest of disclosure, expert evidence and the full preparation of conduct of a two-week trial lie ahead.
(d) The vigour of the dispute, including the large costs of this application, suggest that the parties are unlikely to co-operate in narrowing the issues.
(e) This may well be a case in which more than the usual or typical one-third will be disallowed on detailed assessment. TVL is entitled to adopt a Rolls Royce approach to what it regards as an important case, but not necessarily to recover it all from the claimants. In this respect the claimants' costs...
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