The Secretary of State for Health & Ors v Servier Laboratories Ltd & Ors

Factual and Procedural Background

This opinion concerns an application heard in May 2016 regarding whether the defendants ("Servier") should be permitted to re-amend their defence to include a new argument ("the prescribing argument"). This argument alleges that the English claimants failed to take reasonable steps to encourage switching from the prescription of Perindopril to cheaper generic ACE inhibitors, thereby failing to mitigate their loss. The English claimants do not oppose certain related amendments but oppose the prescribing argument itself due to concerns about the burdensomeness and expense of disclosure and trial preparation. The Scottish/Northern Ireland and Welsh claimants have consented to similar amendments. The background and procedural history are further detailed in a prior judgment dated 26 February 2016 ([2016] EWHC 3066 (Ch)), which summarized the issues and prior case management conferences.

Legal Issues Presented

1. Whether Servier should be granted permission under CPR rule 17.1(2)(b) to re-amend their defence to plead the prescribing argument as a defence of failure to mitigate loss.
2. Whether the prescribing argument can also support defences of contributory negligence and break in the chain of causation/remoteness.
3. The proper characterization and legal context of the prescribing argument in relation to the causes of action alleged against Servier, including breaches of Articles 101 and 102 TFEU and the economic tort of unlawful interference with economic interests.
4. The relationship between the English claimants' knowledge and the applicability of the mitigation defence.
5. Whether the doctrine of mitigation applies to losses intended by the tortfeasor.
6. Whether contributory negligence is a viable defence in this context.
7. Whether the amendments have a real prospect of success and should be permitted.

Arguments of the Parties

Appellant's (English Claimants') Arguments

• The prescribing argument is not reasonably arguable and should be disallowed.
• The claim involves continuous infringements with fresh causes of action on each purchase of Perindopril, so failure to mitigate cannot arise before each infringement.
• A duty to mitigate requires knowledge of the wrongdoing and loss, which the claimants contend they did not have to the necessary extent.
• The prescribing argument is inconsistent with the nature and purpose of the causes of action, which aim to protect consumers from wrongful inflation of prices; it would be incompatible to reduce liability on the basis that claimants should not have purchased the product at all.
• Failure to mitigate cannot apply to losses intentionally caused by the tortfeasor.
• Contributory negligence does not apply because the claimants' conduct was merely the occasion, not the effective cause, of the loss, and because they acted as the defendant intended.
• The burden and expense of disclosure and trial preparation arising from the amendments are significant, though these are not relied upon as independent reasons to oppose the amendments.

Appellee's (Defendant "Servier") Arguments

• The prescribing argument is a reasonably arguable defence of failure to mitigate loss, contributory negligence, and causation/remoteness.
• The claim is properly characterized as alleging specific infringements producing a series of losses, not fresh causes of action on each purchase, allowing mitigation to apply.
• The claimants had or ought to have had knowledge that Perindopril was more expensive than generic alternatives and that there was no clinical difference, which grounds the mitigation defence.
• The doctrine of mitigation applies even to intended damage; there is no absolute rule excluding mitigation where loss is intended by the defendant.
• Contributory negligence is a viable defence in respect of the breaches of Articles 101 and 102 (statutory duties), excluding the intentional tort claim.
• The claimants' failure to encourage switching to cheaper alternatives is causally connected to their loss and is not merely part of the history.
• The amendments have a real prospect of success and should be permitted under the applicable summary judgment test.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Groveholt Ltd v Hughes [2010] EWCA Civ 538	Test for permission to amend: amendment must have a real prospect of success (summary judgment test).	Confirmed the applicable test for allowing amendments to pleadings.
Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch)	Principles governing summary judgment applications and assessment of realistic prospects of success.	Guided the court’s approach to evaluating the amendments’ prospects of success.
Swain v Hillman [2001] 2 All ER 91	Definition of "realistic" prospect of success as more than merely arguable.	Used to clarify the threshold for allowing amendments.
ED & F Man Liquid Products v Patel [2003] EWCA Civ 472	Claims must carry some degree of conviction; court may scrutinize evidence but not conduct a mini-trial.	Supported the court’s caution in assessing the strength of the defence without full trial evidence.
Royal Brompton Hospital NHS Trust v Hammond (No.5) [2001] EWCA Civ 550	Evidence at summary judgment includes evidence reasonably expected at trial.	Informed the court’s approach to evidence evaluation at this stage.
Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co [2007] FSR 63	Court should hesitate to decide without a trial where fuller investigation might alter outcome.	Supported refusal to exclude the amendments without trial.
Arcadia Group Brands Ltd v Visa Inc [2014] EWHC 3561 (Comm)	Warning against deciding difficult legal questions on interlocutory applications where facts may affect legal issues.	Reinforced the court’s caution in summary decisions on complex legal issues.
Sel-Imperial v British Standards Institution [2010] EWHC 854 (Ch)	Court should be slow to grant summary judgment in developing areas of law.	Applied to the evolving competition law context of the case.
Sharp & Others v Blank & Others [2015] EWHC 3219 (Ch)	Summary judgment on knowledge allegations requires some material making case not fanciful or unrealistic.	Guided the court’s approach to knowledge-related defences at summary stage.
Kuwait Airway Corpn v Iraqi Airways Co [2002] UKHL 19	Twofold inquiry for liability: causation and extent of loss for which defendant is liable.	Provided the legal framework for assessing loss, causation, and scope of liability.
Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191	Importance of identifying scope of defendant’s duty in liability assessment.	Supported analysis of the ambit of the causes of action.
Reeves v Commissioner of Police of the Metropolis [2000] 1 AC 360	Intentional acts do not negate liability where duty is to guard against such acts.	Addressed the relationship between intention and liability.
OBG Ltd v Allan [2007] UKHL 21	Definition and essential elements of economic tort of unlawful interference.	Clarified the intentional nature of the tort relevant to the case.
British Westinghouse Electric Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673	Doctrine of mitigation of loss: plaintiff must take reasonable steps to mitigate damages.	Established foundational principle for mitigation defence applied here.
The Liverpool (No 2) [1963] P 64	Mitigation doctrine applies mutatis mutandis to tort claims.	Supported application of mitigation principles beyond contract claims.
Berezovsky v Abramovich [2011] EWCA Civ 153	Distinction between new losses and new causes of action in tort claims.	Used to reject claimants’ argument about fresh causes of action on each purchase.
Aldi Stores Ltd v Holmes Buildings Plc [2003] EWCA Civ 1882	Additional facts may be necessary to establish causation but do not create new causes of action.	Supported analysis of causation and loss quantification.
Bernard Crehan v Courage Ltd [2001] ECR I-6300	Community law permits principle of mitigation of loss even in competition law context.	Supported applicability of mitigation defence under EU law.
Youell v Bland Welch & Co Ltd [1990] 2 Lloyd's Rep 431	Failure to mitigate bars recovery where plaintiff acts unreasonably with knowledge.	Used to support the relevance of claimant’s knowledge to mitigation defence.
Smith New Court Ltd v Scrimgeour Vickers [1997] AC 254	Duty to mitigate damages applies once plaintiff is aware of fraud.	Reinforced knowledge requirement for mitigation to arise.
Payzu Ltd v Saunders [1919] 2 KB 581	Reasonableness of mitigation steps is a question of fact.	Affirmed that knowledge and circumstances affect mitigation assessment.
Schering Agrochemicals Ltd v Resibel N.V. S.A. (1992) unreported	Mitigation may apply even where plaintiff unaware of breach at time of omission.	Illustrated fact-sensitive nature of mitigation and knowledge.
Jones v Livox Quarries Ltd [1952] 2 QB 608	Distinction between effective cause and mere occasion of loss in contributory negligence.	Applied to assess causal role of claimants’ conduct in loss.
St George v Home Office [2008] EWCA Civ 1068	Contributory negligence must be sufficiently connected with defendant’s negligence to reduce damages.	Considered in context of claimants’ conduct and causation.
Calvert v William Hill Credit Ltd [2008] EWCA Civ 1427	Contributory negligence may be excluded where claimant acted as defendant intended.	Considered but distinguished on facts.
Reeves v Commissioner of Police of the Metropolis [2000] 1 AC 360	Contributory negligence defence unavailable in intentional torts.	Applied to exclude contributory negligence defence to economic tort claim.
Arkin v Borchard Lines Ltd [2003] EWHC 687 (Comm)	Contributory negligence not a defence to breaches of Articles 101 or 102 EC (obiter).	Not relied upon by claimants; defence conceded available.
Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158	Doctrine of mitigation applies to damages for deceit, including intended damage.	Rejected claimants’ argument that mitigation cannot apply to intended damage.
Courage v Crehan [2001] QB 507	Mitigation defence can be raised in competition law claims under Articles 101 and 102.	Supported availability of mitigation defence in EU competition law context.
Standard Chartered Bank v Pakistan National Shipping Corp [2001] CLC 825	Causation and mitigation are closely related concepts limiting liability.	Used to analyse interplay between causation and mitigation.
Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360	Guidance on issues of causation and remoteness in tort claims.	Supported that causation and remoteness issues are fact-sensitive and for trial.

Court's Reasoning and Analysis

The court considered whether the proposed amendments to plead the prescribing argument as defences of failure to mitigate, contributory negligence, and causation/remoteness had a real prospect of success. It applied the established summary judgment test requiring more than a fanciful prospect. The court analyzed the nature of the claim, concluding that it involved specific infringements producing a series of losses rather than fresh causes of action on each purchase of Perindopril, making the doctrine of mitigation applicable.

Regarding knowledge, the court held that the question of what knowledge is required to trigger mitigation is a question of fact, not law, and that the allegations of knowledge or constructive knowledge in the draft defence were sufficient to ground the mitigation defence at this stage.

The court rejected the claimants' argument that the prescribing argument was inconsistent with the nature and purpose of the causes of action, finding no clear basis to exclude mitigation or contributory negligence defences categorically, especially given relevant EU and domestic authorities.

On contributory negligence, the court found it reasonably arguable that the claimants' failure to encourage switching to cheaper alternatives could amount to contributory negligence in respect of the statutory claims under Articles 101 and 102, though not for the intentional tort claim.

Issues of causation and remoteness were acknowledged as fact-sensitive and unsuitable for summary determination, but the court found that the defences were not without real prospect of success and should be allowed to proceed to trial.

The court emphasized that the doctrines of mitigation, contributory negligence, causation, and remoteness are tools to limit liability and their application depends on the facts found at trial.

Holding and Implications

The court granted permission to the defendants ("Servier") to amend their defence to include the prescribing argument and the related defences of failure to mitigate loss, contributory negligence, and break in the chain of causation/remoteness.

Holding: The disputed amendments are allowed as they have a real prospect of success and are not doomed to fail at trial.

Implications: The amendments will be included in the defence, requiring the English claimants to address these arguments at trial. This decision does not establish new legal precedent but confirms the applicability of established principles of mitigation, contributory negligence, and causation in the context of claims under Articles 101 and 102 TFEU and related torts. The factual and evidential issues raised by the prescribing argument will be resolved at trial, where the burden of proof and detailed evidence will be fully examined.