F. Hoffmann-LA Roche & Company A.G. and Others v Secretary of State for Trade and Industry

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Reid, Lord Morris of Borth-y-Gest, Lord Wilberforce, Lord Diplock, Lord Cross of Chelsea
Judgment Date03 Jul 1974

[1974] UKHL J0703-2

HOUSE OF LORDS

Lord Reid

Lord Morris of Borth-y-Gest

Lord Wilberforce

Lord Diplock

Lord Cross of Chelsea

F. Hoffmann-LA Roche & Co. A.G. and Others
and
Secretary of State for Trade and Industry
Lord Reid

My Lords,

In recent years a number of very successful new drugs have been discovered and put on the market. The discovery of a new drug is generally unpredictable. Several large international companies have engaged in extensive research. Most of it is unproductive but occasionally a valuable discovery is made. The practice of these companies is to recover the cost of their unproductive research by increasing the selling price of their successful products. No one objects to that system in principle but obviously there is room for much difference of opinion as to how far it can fairly be carried. And there is also the question of what is a fair profit on such sales.

The Appellants are related companies some of which spend very large sums on such research. They discovered and have marketed since about 1963 two new tranquillisers which they sell under the names Librium and Valium. These drugs are obtainable from chemists on doctors' prescriptions. They became very popular and we are informed that before the proceedings to which I shall later refer sales in this country brought in some £10,000 per day.

A very large proportion of these sales is under the National Health Service. The patient is only charged a small fee by the chemist and he recovers from the Department of Health and Social Security the balance of which he has to pay for the drugs plus his profit. So if the manufacturer overcharges for his drugs the Department is the loser.

For years before 1971 the Department thought the selling price of these drugs much too high but they were unsuccessful in getting a sufficient reduction. So the machinery of the Monopolies and Mergers Acts, 1948, and 1965, were set in motion. There was a reference to the Monopolies Commission in September, 1971, and after long enquiries the Commission reported in February, 1973.

In paragraph 217 of their Report the Commission say:

"We conclude, therefore, that the determination of the level of prices at which chlordiazepoxide and diazepam are supplied (which we have found in paragraph 205 to be a thing done by Roche Products as a result of, and for the purpose of preserving, the conditions) operates and may be expected to operate against the public interest."

In paragraph 235 they say:

"Among the points we bear in mind in reaching a conclusion on the appropriate level of prices in future are the following:

In paragraph 237 they say:

"We recommend that Roche Products' selling prices for the reference drugs should be reduced (i) as regards Librium, to not more than 40 per cent of the selling prices in 1970, (ii) as regards Valium, to not more than 25 per cent of the selling prices in 1970, (iii) as regards other drugs covered by the reference, by corresponding proportions as may be determined by DHSS."

The Acts provide for Orders being made consequent on a report of the Monopolies Commission and accordingly the Regulation of Prices (Tranquillising Drugs) Order, S.I. 1973, No. 720, was made and came into operation on 23rd April, 193. By virtue of provisions in the Acts such an Order ceases to have effect after 28 days unless there have been affirmative resolutions of both Houses of Parliament. The Order was sent to the Special Orders Committee of this House and the Appellants were heard at some length. So the Order ceased to have effect for want of an affirmative resolution in due time and so did a second Order. But a third Order, S.I. 193, No. 1093, which came into operation on 25th June, 1973, was duly approved by both Houses.

The No. 3 Order narrated, as did the earlier Orders, that it appeared to the Secretary of State on the facts found by the Monopolies Commission that the prices charged are or have been such as to operate against the public interest. It then adopted the recommendation of the Monopolies Commission and prohibited the Appellants from charging more than the prices set out in the Schedule.

On 25th June, 1973, the Appellants brought the present action against the Respondent claiming declarations that the Monopolies Commission had proceeded unfairly and in a way contrary to natural justice, that the findings, conclusions and recommendations in their Report were invalid and of no effect and that the Order to which I have referred was ultra vires invalid and of no effect.

On 28th June, 1973, the Respondent sought an injunction restraining the Appellants from charging prices in excess of those specified in the No. 3 Order and also sought an interim injunction. Walton J. on an undertaking given by the Appellants refused to grant an interim injunction but the Court of Appeal allowed an appeal by the Respondent.

Section 11 of the Act of 1948 provides for the enforcement of Orders made under this legislation.

"11.—(1) No criminal proceedings shall lie against any person by virtue of the making of any order under the last preceding section on the ground that he has committed, or aided, abetted, counselled or procured the commission of, or conspired or attempted to commit, or incited others to commit, any contravention of the order.

(2) Nothing in subsection (1) of this section shall limit any right of any person to bring civil proceedings in respect of any contravention or apprehended contravention of any such order, and, without prejudice to the generality of the preceding words, compliance with any such order shall be enforceable by civil proceedings by the Crown for an injunction or for any other appropriate relief."

It will be seen that there is no reference in this section to interim injunction, but it is not disputed that the Court has power to grant interim injunctions. The question in this appeal is in what terms such an injunction should be granted.

An interim injunction against a party to a litigation may cause him great loss if in the end he is successful. In the present case it is common ground that a long lime—it may be years—will elapse before a decision can be given. During that period if an interim injunction is granted the Appellants will only be able to make the charges permitted by the Order. So if in the end the Order is annulled that loss will be the difference between those charges and those which they could have made if the Order had never been made. And they may not be able to recover any part of that loss from anyone. It is said that the loss might amount to £8 million. The Appellants' case is that justice requires that such an injunction should not be granted without an undertaking by the Respondent to make good that loss to them if they are ultimately successful.

The Respondent's first answer is that when an interim injunction is granted to the Crown no undertaking can be required as a condition of granting it. It is not in doubt that in an ordinary litigation the general rule has long been that no interim injunction likely to cause loss to a party will be granted unless the party seeking the injunction undertakes to make good that loss if in the end it appears that the injunction was unwarranted. He cannot be compelled to give an undertaking but if he will not give it he will not get the injunction.

But there is much authority to shew that the Crown was in a different position. In general no undertaking was required of it. But whatever justification there may have been for that before 1947 I agree with your Lordships that the old rule or practice cannot be justified since the passing of the Crown Proceedings Act of that year. So if this had been a case where the Crown were asserting a proprietory right I would hold that the ordinary rule should apply and there should be no interlocutory injunction unless the Crown chose to give the usual undertaking.

But this is a case in a different and novel field. No doubt it was thought that criminal penalties were inappropriate as a means of enforcing Orders of this kind, and the only method of enforcement is by injunction. Dealing with alleged breaches of the law is a function of the Crown (or of a Department of the Executive) entirely different in character from its function in protecting its proprietory right. It has more resemblance to the function of prosecuting those who are alleged to have committed an offence. A person who is prosecuted and found not guilty may have suffered serious loss by reason of the prosecution but in general he has no legal claim against the prosecutor. In the absence of special circumstances I see no reason why the Crown in seeking to enforce Orders of this kind should have to incur legal liability to the person alleged to be in breach of the Order.

It must be borne in mind that an Order made under statutory authority is as much the law of the land as an Act of Parliament unless and until it has been found to be ultra vires. No doubt procedure by way of injunction is more flexible than procedure by prosecution and there may well be cases when a Court ought to refuse an interim injunction or only to grant it on terms. But I think that it is for the person against whom the interim injunction is sought to shew special reason why justice requires that the injunction should not be granted or should only be granted on terms.

The present case has a special feature which requires anxious consideration. As I have already indicated the Crown has a very large financial interest in obtaining an interim injunction. The Department of Health will reap a large immediate benefit from the lower prices set out in the Order at the expense of the Appellants. If in the end it were decided that the Order is ultra vires those prices ought never to have been enforced, the Department ought never to have had that benefit and the Appellants would have suffered a large loss....

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1 firm's commentaries
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    ...as the approach to assessment that set out in the obiter observation of Lord Diplock in Hoffmann-La Roche v Secretary of State for Trade [1975] AC 295, namely: "The assessment is made upon the same basis as upon which damages for breach of contract would be assessed if the undertaking ......
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