Extending the undertaking as to damages in an injunction? A note of caution as Court of Appeal considers appeal from High Court

Speed Read

In a first of its kind decision, delivered on 1 March 2024, in  Bristol Myers Squibb Holdings Ireland Unlimited Company -v- Norton (Waterford) Limited [2024] IECA 49, the Court of Appeal (the Court) dealt with an appeal by Bristol Myers Squibb Holdings Ireland Unlimited Company (BMS) concerning the scope of an undertaking as to damages offered in the context of an application for an interlocutory injunction pending the trial of an action.

The novel issue at the heart of this appeal was whether the High Court should have required BMS to extend the undertaking as to damages, to compensate entities who were not parties to the proceedings, but who may have suffered losses as a result of the injunction sought.

The Court acknowledged that this was the first time that an Irish Court has ever considered a case where an injunction was granted where the undertaking as to damages offered by the plaintiff to the Court extended to the losses which strangers to litigation might sustain.

The defendant in the proceedings and respondent in this appeal, Norton (Waterford) Limited t/a Teva Pharmaceuticals Ireland (Teva) sought to contend that the scope of the undertaking as to damages should extend to all companies in the Teva Group after the High Court granted the injunction sought on the terms of the undertaking as to damages offered by BMS to the Court.

The Court ruled that the High Court erred in considering the issue of the undertaking at a separate hearing which took place pending the full substantive hearing of the patent dispute, but after delivering judgment on the injunction. It stated that the substantive consideration of the undertaking as to damages could not be separated from the substantive consideration of whether to grant or withhold the injunction.

Ultimately, the Court allowed the appeal of BMS, ruling that the High Court should not have extended an undertaking as to damages where:

(i) there was insufficient evidence to support the extending of the undertaking to entities who were not parties to the proceedings.

(ii) there was no objection made to the undertaking before or during the injunction hearing.

It follows that a party contending that an undertaking offered is inadequate must raise that argument while the question of the grant or refusal of the injunction remains live.

Background

In 2021, Teva made plans to launch a generic version of BMS’ drug, Eliquis, the main ingredient of which was the blood thinning anticoagulant Apixaban. Following this, BMS sought an interlocutory injunction restraining Teva from infringing the Supplementary Protection Certificate which covered Apixaban.

The proposed undertaking as to damages was to encompass damages sustained between the granting of the injunction and the trial concerning the validity of the patent, with Teva making no objection to this arrangement at that point in time.

A party seeking an injunction must generally give an undertaking as to damages. It is the practice that an undertaking as to damages is given in a grounding affidavit. In normal course, it is sufficient for counsel to inform the Court that the plaintiff is prepared to give “the usual undertaking as to damages”. If the undertaking must subsequently be honoured, the Court will assess the appropriate damages at an inquiry as to damages.

Following the granting of the injunction in February 2023, Teva made clear its intention to appeal the decision and furnished BMS with a draft order which recast the undertaking as to damages originally offered by BMS and accepted by Teva, extending it beyond the loss and damage suffered by Teva arising from the making of the order, to include any loss and damage suffered by entities related to Teva on the basis that its servants and agents would also be subject to the injunction.

The application in relation to the scope of the undertaking as to damages was heard by the High Court on 21 June 2023 and on 26 June 2023, Barrett J held that the form of undertaking proposed by Teva was the appropriate form of undertaking to be provided in return for the injunction that was granted in February 2023.

Discussion

The Court recognised that the question of an extended undertaking as to damages, as was sought by Teva, was a wholly novel application – being the first time that an Irish Court has ever considered a case where an injunction was granted where the undertaking as to damages offered by the plaintiff to the Court extended to the losses which strangers to litigation might sustain by reason of the restraining of the defendant from taking certain actions. Neither party could identify a precedent in this jurisdiction where the Court required the moving party to give an undertaking as to damages to cover the losses of a non-party.

This was all the more remarkable as the Court acknowledged that:

“the parties accept that a jurisdiction to make such an order has existed since at least the Supreme Court of Judicature Act (Ireland) 1877 (and is set out in O.50 r.6(1) and (2) of the Rules of the Superior Courts).”

Decision

The Court ruled that the High Court erred in considering the extension of the undertaking after judgment granting the injunction was delivered, stating that the issue ought to have been dealt with while the granting of an injunction was still a live issue. The Court stressed that, in line with Irish case law in the area, the undertaking as to damages offered by a plaintiff was “an essential matter to be weighed by the court in deciding whether or not to grant the injunction.”

The Court continued, stating that “substantive consideration of the undertaking as to damages cannot be divorced from the substantive consideration of whether to grant an injunction at all.”

Furthermore, the Court stated that an order extending the scope of an undertaking as to damages was an exception to the general rule of undertakings, and the Court must be satisfied, on the face of the evidence, that there is a justification for a departure from the general rule.

The evidence must be of “sufficient precision” to enable the Court to conclude that the undertaking as to damages offered is inadequate. The onus of demonstrating to the Court that the undertaking would be inadequate in terms of the losses likely to be suffered rests with the party alleging the inadequacy. The Court was of the view that Teva’s evidence fell “far short” of what was required and had thus not discharged the onus of demonstrating that the undertaking was inadequate.

The Court also clarified that English cases in this area were “at most” persuasive authorities given the fact that the Irish position differs from the English position in two key respects:

(i) the Irish position as regards consideration of the adequacy of the undertaking as to damages differs from the English approach. Whereas in Ireland the primary concern is to do justice between the parties, an English practice direction requires the Court to “do justice generally;”

(ii) in Ireland any extension of the undertaking as to damages beyond the normal undertaking must be supported by evidence, whereas this does not appear to be required in the English case law.

Ultimately, the Court held that the High Court had incorrectly given too much weight to the English authorities ahead of the Irish authorities in the area.

The Court ruled that given that the adequacy of the undertaking as to damages must be assessed when the issue of the granting of an injunction is still live, the High Court erred in permitting Teva to file an affidavit in support of its application for an extended undertaking after the injunction had been granted.

BMS was successful in its appeal.

Conclusion

This decision is significant because in the words of Costello J., it raises a “novel issue” in the context of interlocutory hearings and will act as a warning to those who seek to modify or vary undertakings after the fact.

Following this judgment and its recognition of the Court’s jurisdiction to extend an undertaking as to damages to non-parties under Order 50, rules 6(1) and (2) RSC, there is potential that we will see an increase in the time being given as to the precise scope and parameters of the undertaking, at the injunction hearing stage.  

What is clear from this decision is that it is not appropriate to seek to vary the terms of the undertaking in this way, post event.

For more information, please contact Orla Clayton, Knowledge Consultant, Rachel Kemp, Senior Knowledge Lawyer or your usual A&L Goodbody Disputes and Investigations team contact.

Date published: 9 April 2024