Smith Kline & French Laboratories Ltd v Bloch

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE ACKNER,LORD JUSTICE O'CONNOR
Judgment Date13 May 1982
Judgment citation (vLex)[1982] EWCA Civ J0513-1
Date13 May 1982
Docket Number82/0199

[1982] EWCA Civ J0513-1

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

(SIR DOUGLAS FRANK, Q.C., sitting as a

Deputy High Court Judge)

Royal Courts of Justice.

Before:

The Master of the Rolls

(Lord Denning)

Lord Justice Ackner and

Lord Justice O'Connor

82/0199

1980 S. No. 6514

Smith Kline and French
Laboratories Limited
(First Plaintiffs) Respondents

and

Smith Kline Corporation
(Second Plaintiffs) Respondents
and
Maurice Bloch
(Defendant) Appellant

MR. ANTHONY WALTON, Q.C. and MR. DAVID EADY (instructed by Messrs. Woodham Smith) appeared on behalf of the Respondents.

MR. COLIN ROSS-MUNRO, Q.C. and MR. ROBERT ENGLEHART (instructed by Messrs. Manches & Co.) appeared on behalf of the Appellant.

THE MASTER OF THE ROLLS
1

As a moth is drawn to the light, so is a litigant drawn to the United States. If he can only get his case into their courts, he stands to win a fortune. At no cost to himself: and at no risk of having to pay anything to the other side. The lawyers there will conduct the case "on spec" as we say—or on a "contingency fee" as they say. The lawyers will charge the litigant nothing for their services but instead they will take 40 per cent of the damages—if they win the case in court—or out of court on a settlement. If they lose, the litigant will have nothing to pay to the other side. The courts in the United States have no such costs deterrent as we have. There is also in the United States a right to trial by jury. These are prone to award fabulous damages. They are notoriously sympathetic and know that the lawyers will take their 40 per cent before the plaintiff gets anything. All this means that the defendant can be readily forced into a settlement. The plaintiff holds all the cards. If you wish to know how it is all done, you should read the Castanho case (1980) 1 Weekly Law Reports 833; (1981) Appeal Cases 557. There a Portuguese sailor was badly injured at Great Yarmouth in England. It was an American ship. He started an action in England but was persuaded by American lawyers to take proceedings in the United States. I was against it, see (1980) 1 Weekly Law Reports 833 at pages 849–858. But when it got to the House of Lords they allowed the litigant to go ahead in the United States, see (1981) Appeal Cases 557. His American lawyers won a huge settlement to the profit of the litigant and of course for themselves as well. You should also read the Piper Aircraft Co. v. Reyno case decided on the 8th December, 1981 by the Supreme Court of the United States. A small commercial aircraft crashed in Scotland, killing all six Scottish people on it. The propellers had been manufactured in the United States. The widows and children were persuaded by lawyers in the United States to bring proceedings there against the manufacturers of the propellers, alleging that they were faulty. No doubt the lawyers had their eyes on the heavy damages and their contingency fees. The Supreme Court of the United States refused to allow the proceedings to continue in the United States. They should have been brought in Scotland which was the only appropriate forum, see Piper Aircraft Co. v. Reyno (1981) 42 CCH S. Ct. Bull. 543.

2

Now we have another case of that ilk. Dr. Maurice Bloch lives in England. He has a complaint against an English company. He says that they broke their contract with him. It was an English contract governed by English law. The obvious place where it should be tried is in England. Yet he has gone to American lawyers and they have found an excuse for bringing it in the United States. It is because the English company was a wholly-owned subsidiary of an American corporation. So the American lawyers for Dr. Bloch have brought an action in the United States courts against the English subsidiary and its American parent, hoping, no doubt, to get a good settlement out of it—both for themselves and Dr. Bloch—at no cost to him.

3

Now here is the twist in the story. The English company and its American parent wish to stop the proceedings in the United States courts. They want to nip them in the bud. They have applied to the United States courts to stop them. But with no success so far there. An American judge has made an order allowing Dr. Bloch to go ahead with the proceedings in the United States court.

4

Having been thus rebuffed in America, the English subsidiary (and now its American parent) have applied to the English court. They ask us to issue an injunction against Dr. Bloch to restrain him from proceeding in the United States. They say that he is quite at liberty to sue them in England if he is so advised—in which case they will defend themselves. But he should not be allowed to go on in the United States. I may say that, even in England, Dr. Bloch is "sitting pretty" anyway. He has got legal aid with the result that all his costs here will be paid by the Legal Aid Fund.

5

At the moment the English High Court has acceded to the request of the English subsidiary and its American parent. It has issued an injunction against Dr. Bloch stopping him from going on with his proceedings in the United States court: he now appeals to this court.

6

Now there is yet a further twist. Dr. Bloch has asked the United States court to issue a counter-injunction against the American parent to stop it from coming to the English court: and an American judge has made the order.

7

It is apparent from this account of proceedings that there is a conflict of jurisdiction between our courts here in England and the courts in the United States. This is much to be regretted. In the interests of comity, one or other must give way. I wish that we could sit together to discuss it. But as that is not possible, I propose to put the case forward, as we see it here, in the hope that we may come to an agreed solution.

8

Let me first give the background. It arises out of the use of drugs in medicine. Doctors prescribe drugs for diseases of all kinds. These drugs are made by pharmaceutical multi-national companies. One of them is the Smith Kline Group. The parent company is incorporated in Pennsylvania with its head office in Philadelphia. It has wholly-owned subsidiaries all over the world. One of them is the English subsidiary, Smith Kline and French Laboratories Limited.

9

In order to keep ahead, the Smith Kline Group are much. concerned to promote research and development into new drugs. One of the drugs they developed was called "Dyazide" in America. Another drug they developed was called "Tagamet" in England. It has proved very successful in treating stomach ulcers.

10

Now in England there is a research workers called Dr. Maurice Bloch. He has worked in hospitals and for drug companies. From 1971 to 1973 he was employed by the well known firm of May & Baker on clinical research. After leaving them, he approached the English subsidiary of Smith Kline. He told them that he had a good idea. It was to use magnesium compounds for treating stomach complaints. The English subsidiary thought he was worth a trial. So they engaged him as a medical adviser. They agreed to treat all his ideas and information as confidential. He showed such promise that he ceased to be their employee and became a consultant. By a written agreement of the 10th April, 1974 he gave them a licence to use his information world-wide. They agreed to pay him a royalty of 2 per cent on world-wide net sales for 15 years from the date of first marketing of any drugs. They paid him £10,000 cash down as an advance against future royalties. The agreement contained this important provision:

11

" Registration and Marketing. All decisions on registration and marketing of products will be the exclusive responsibility of SK&F [the English subsidiary].

12

"If SK&F [the English subsidiary] make a decision not to proceed with further development in the U.K. or not to apply for a product licence under the Medicines Act, they will hand over to M.B. [Dr. Bloch] the development work to date, and give up their exclusive rights under this agreement".

13

From 1973 to July 1976 Dr. Bloch did research work for the English subsidiary. He developed many drugs made of magnesium compounds and arranged for them to be tried out in leading hospitals in London, Bristol, Southampton, Manchester, Salisbury, Glasgow and Dundee. Dr. Bloch was himself in control.

14

In July 1976 there was an important meeting in Philadelphia of a committee which advised the group on the development of various products. They decided that Dr. Bloch's products were not likely to be a success. The managing director of the English subsidiary told Dr. Bloch that

"the Committee had decided that the development of the products should not be supported financially and that the products were not a commercial proposition. After this…I ceased to work for the English subsidiary".

15

The English subsidiary did, however, continue the trials in hospitals.

16

After leaving the English subsidiary, Dr. Bloch went back to May & Baker. He worked for them as a senior clinician from October 1976 to November 1979. He was then dismissed by May & Baker because he did not apply himself to the tasks allotted to him. He spent too much time in lengthy argument. He complained to an industrial tribunal that he had been unfairly dismissed by May & Baker. The hearing took nine days. The tribunal rejected his complaint. They held unanimously that

"having given him very great latitude over a long period, his conduct was sufficient to justify his dismissal".

17

Meanwhile the English subsidiary had been receiving reports of the trials. They proved disappointing. So on the 5th February, 1980 the English subsidiary wrote...

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