Ophthalmic Innovations International (UK) Ltd v Ophthalmic Innovations International Inc.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 16 December 2004 |
| Neutral Citation | [2004] EWHC 2948 (Ch) |
| Docket Number | HC 04 C 02071 |
| Court | Chancery Division |
| Date | 16 December 2004 |
[2004] EWHC 2948 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Lawrence Collins
HC 04 C 02071
Mr James Ramsden (Taylor Walton solicitors) for the Claimant
Ms Camilla Bingham (Kendall Freeman solicitors) for the Defendant
(Approved by the Court for handing down)
Hearing: Thursday, December 16, 2004
I certify that pursuant to CPR PD 39 para 6.1 no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic
()
I Background
The claimant, Ophthalmic Innovations International (United Kingdom) Ltd ("the claimant"), a company incorporated in England, and with its principal place of business there, carries on the business of importing and distributing ophthalmic equipment into the United Kingdom, and, through the United Kingdom, to Europe and Asia. The defendant, which is named in the proceedings as Ophthalmic Innovations International Inc but which is now called OII International, Inc ("the defendant"), is a company incorporated in the State of Delaware, with its principal place of business in Ontario, California. The defendant is a manufacturer of ophthalmic surgical products.
The claimant's holding company is Medcorp Europe Ltd ("Medcorp"), an English company. Medcorp entered into a contract with the defendant on October 24, 1994 to act as the sole distributor of the defendant's products in the United Kingdom and the Republic of Ireland ("the Distribution Agreement"). The Distribution Agreement envisaged that Medcorp would incorporate the claimant to market the products. The parties renewed the Distribution Agreement on October 22, 1998 for a further term of five years. Since the expiry of that period on October 22, 2003, the parties have continued to act on the basis of the Distribution Agreement.
Clause 14 of the Distribution Agreement provided: "This agreement shall be construed in accordance with the laws of the State of California."
Between 1999 and 2000 the defendant sold to the claimant a number of "AquaSense" lenses pursuant to the Distribution Agreement. AquaSense lenses are designed to be implanted into patients' eyes to correct cataract and other sight-related problems.
The claimant's evidence is that the defendant launched AquaSense lenses in March 1999, and the claimant began to import these lenses into the United Kingdom and to distribute them to National Health Service and some private hospitals shortly thereafter. The claimant became aware of problems with the lenses in 1999 after a telephone conversation with a Mr Perry, an ophthalmic surgeon who worked at Kidderminster General Hospital. Mr Perry stated that problems with the lenses had led to patients being subjected to steroid treatment for 5–6 weeks. The defendant was notified of these problems and apparently introduced a new form of packaging.
More serious problems became apparent in autumn 2000. Some patients were experiencing opacification (or clouding) of the lenses several months after their implant. The problem was curable only by explanting the clouded lenses, and implanting a fresh lens. Investigations carried out by the defendant on explanted lenses revealed that calcium phosphate had formed on the surface of each lens, thus causing a clouding effect. The claimant says that it now appears likely that the clouding of the lenses was caused by the build up of natural protein on the implanted lense caused by a reaction triggered by residues left on the lense by the new type of sterile packaging used by the defendant's packaging supplier in the United States.
The claimant ceased importing the lenses on November 3, 2000. Its evidence is that Morecombe Bay NHS Trust and 7 other private hospitals/clinics are seeking from the claimant the costs of explant/new implant operations. I was told (although this was not in evidence on the application for permission to serve out of the jurisdiction or on the application before me) that from December 17, 1999 (when the new packaging was introduced for the lenses) until November 3, 2000, the claimant imported 2,219 lenses. 906 of these had been used to implant into patients eyes and 1,313 lenses were returned unused. There have been approximately 283 operations to explant clouded lenses. The defendant has paid for 181 operations. The National Health Service or the patient's own health insurance has paid for approximately 102 operations.
I was also told that, in addition, a number of individual claims have been made against the claimant: there were three claims with which the defendant's insurers were dealing; there had been a claim which the claimant settled for £2,500 plus costs; there was a claim on which no action had been taken; and there had been an unsuccessful application for a group litigation order pursuant to CPR 19.11.
By a complaint dated April 9, 2003 the claimant commenced proceedings against the defendant in the Superior Court of the State of California, County of Saint Bernardino, in which it sought damages for negligence, breach of warranty, and strict liability regarding the sale of the lenses between December 1999 and December 2000. The damages sought were in respect of the claimant's loss of business and loss of reputation, and in respect of third party claims. The claims for loss of business and loss of reputation have been settled through a payment of $43,500 by a way of a credit to the claimant's account. Consequently the only live issue in the Californian proceedings relate to the defendant's liability to compensate (i.e. indemnify) the claimant in respect of claims by third parties.
The defendant filed an answer on June 11, 2003 and an amended answer on September 29, 2004, in which the defendant contended that any defect in the lenses occurred as a result of a defects in their packaging. The packaging was designed and manufactured by Limtech Inc, a Wisconsin corporation, and in a cross-complaint by the defendant against Limtech Inc dated April 13, 2004 the defendant seeks a contribution or indemnity. The uncontested evidence is that the trial is due to take place in 2005.
II The Indemnification Agreement
On December 4, 2003, the defendant executed under the hand of Mr Aguilera (its President) and Mr Rezanoor (its secretary) what was described as an "Indemnification Agreement." It reads in its entirety:
"Ophthalmic Innovations International, Inc. will indemnify and hold harmless Ophthalmic Innovations International (UK) LTD., ("OII UK") each affiliate of OII UK, and their respective officers and directors against any and all claims, suits, proceedings, demands, recoveries or expenses, including without limitation, expenses of total or partial recalls and reasonable attorney's fees that may be brought or instituted against OII UK or any such affiliate, officer or director based on or arising out of the use or sale of the products where such claim or action results from defects in manufacture and/or materials of the products, unauthorised changes to the design of the products or specifications or the failure of the product to conform with the specifications, except to the extent such failure is due to any fault or neglect of OII UK.
Ophthalmic Innovations International, Inc. shall maintain product liability insurance in the amount of at least one million dollars ($1,000,000) and shall provide OII UK with evidence of this coverage, and the naming of OII UK as an additional insured under such policy. OII UK shall promptly notify Ophthalmic Innovations Inc. of any such demand or claim, which comes to its attention.
Effective Date: December 4, 2003"
The defendant says that the background to the Indemnification Agreement is that the claimant has for several years purchased lenses from the defendant for distribution in Korea (pursuant to a licence which is not before the court). In about late 2003 a question appears to have arisen as to whether the claimant wished to renew its existing licence with the defendant relating to sales of the defendant's "BioVue" lenses to Korea and as to whether those lenses had passed certain safety tests.
On November 5, 2003 Ms Cathey Ellis, the regulatory affairs coordinator of the defendant, e-mailed Mr Rowswell in connection with sales to Korea, and asking him to execute letters certifying that the BioVue lenses had undergone certain tests, and that test reports were rue and accurate copies of the originals. On November 12, 2003 Mr Rowswell replied to Ms Ellis to say that because of all the problems which had been encountered with the AcquaSense lenses, they needed to be particularly careful that BioVue lenses were truly free of defects. He said that he was concerned that the lenses that were being sold in Korea were being manufactured by the defendant but sold under the claimant's name. If the lenses were defective, he needed to be indemnified from harm by the defendant as the manufacturer. A draft Indemnification Agreement was enclosed. According to the defendant, the discussions and surrounding correspondence leave no doubt that the indemnity was intended to apply to a prospective sales of lenses in Korea. It was signed only by the defendant because it was a unilateral contract.
It was in this context, according to the defendant, that the Indemnification Agreement the subject of the English proceedings was granted. The reference to "effective date" was inserted by the defendant consistently, as the defendant says, with the parties' intention that the indemnity should relate to prospective sales of lenses to Korea, and not, as the claimant now...
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