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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Actial Farmaceutica LDA v De Simone [2015] EWCA Civ 1032 (06 August 2015) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2015/1032.html Cite as: [2015] EWCA Civ 1032

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MRS JUSTICE ASPLIN & MR A HOCHHAUSER QC)

		Royal Courts of Justice Strand London, WC2A 2LL
		6 August 2015

1. LORD JUSTICE KITCHIN: These are appeals by the defendant, Professor Claudio de Simone (the Professor), against (1) the mandatory injunction contained in paragraph 7 of the order of Mr Andrew Hochhauser QC sitting as a deputy judge of the Chancery Division dated 7 May 2015 (the May order) and (2) the order of Asplin J dated 8 June 2015 (the June order) whereby she directed that the application to commit the Professor for failure to comply with the May order be treated as having been duly served upon him pursuant to CPR 6.15(2).
   
2. The appeals are brought with permission granted by me at an opposed hearing on 1 July 2015. In the course of this appeal hearing, we also heard applications for permission to rely upon yet further evidence. The claimant, Actial, sought permission to rely upon the tenth witness statement of its solicitor, Ms Caroline Mattin, dated 23 July 2015. This statement answers allegations of serious misconduct to the effect that Actial has deliberately misled the court to hide the fact that it has breached various undertakings which it has given to the court, which allegations were made in the Professor's third witness statement dated 30 June 2015. It also seeks to correct certain errors made by Ms Mattin in her ninth witness statement dated 29 June 2015. This provoked an application by the Professor for permission to rely upon a fourth witness statement dated 4 August 2015, and this in turn led Actial to apply for permission to rely upon the first witness statement of Mr Ford, its solicitor, dated 5 August 2015. All of this evidence is directed to the central issues on the appeal and much of it has only recently become available. We decided that the interests of justice demanded that that it should be introduced and we gave permission accordingly.
   
3. These appeals arise in the course of hard fought litigation between the Professor and Actial concerning a joint venture agreement entered into some 15 years ago and a know-how and supply agreement entered into in 2006 (the 2006 UK Know-How Agreement). At the permission hearing, I gave a judgment in which I summarised the background in the following terms, with which neither side has taken issue:

"2. The Professor, an Italian professor of medicine, has devised a probiotic food product consisting of live freeze dried pure lactic acid bacteria which is called VSL#3 ("the Product"). It is said to contain eight different strains of live bacteria and have a far higher concentration of beneficial bacteria than any other such product available on the market. It is available over the counter and on prescription from the National Health Service. The Professor claims that he is the owner of valuable confidential information concerning the growth, analysis and precise mix of these eight strains.

3. Some 15 years ago the Professor entered into a joint venture agreement with Paolo and Claudio Cavazza, who were wealthy Italian businessmen. Claudio Cavazza has since died. One of the main purposes of this joint venture agreement was to exploit the Product. The Professor was responsible for its composition and the Cavazza brothers were responsible for its funding, distribution and sale. The Cavazza brothers had considerable experience in the pharmaceutical sector and were, at the material time, majority shareholders in the Sigma Tau group of research based pharmaceutical companies with over 2500 employees across the world.

4. For reasons which are not material to the present dispute, the Cavazza brothers and the Professor did not want the Product to be sold through the Sigma Tau group so they set up a new joint venture company referred to as "CD Luxembourg". It is owned by various companies which represent the interests of the Cavazza family and the Professor. The Professor's interest was originally held by a Luxembourg company referred to as "Mendes Luxembourg" but that was recently dissolved and its shares in CD Luxembourg were transferred to a company referred to as "Mendes Italy", which is another company controlled by the Professor or other members of his family. CD Luxembourg is itself the owner of three operating companies which it controls through its Italian subsidiary referred to as "CD Italy". These three subsidiaries have been referred to as "VSL", "CD India" and the claimant, Actial. They are each responsible for different territories with Actial responsible for most of Europe including the United Kingdom.

5. On 29 May 2006 the Professor and Actial entered into an agreement, referred to as the "2006 UK Know-How Agreement". Actial contends that it is clear from the terms of this agreement that it has the sole right to make and sell the Product in the UK. There can be no doubt that Actial is also the owner of the Community trade mark for VSL#3. The Professor accepts that he signed the 2006 UK Know-How Agreement but argues it was a sham and that it was never intended to have contractual effect. Be that as it may, he has not disputed that he has received substantial payments amounting to several million Euros pursuant to its provisions and similar provisions in various other agreements. For some time Actial has obtained the Product by placing purchase orders with an American manufacturer ("Danisco") which since 2011 has been owned by Dupont. Danisco makes the Product from the eight strains of bacteria and then exports it in bulk to Italy and the Netherlands for packaging. In Italy the bulk packaging is carried out by a company referred to as "SIIT" and in the Netherlands by a company referred to as "Sanico". Once packaged, the Product is supplied by Actial through its distributors across Europe.

6. In June 2006 Actial entered into an exclusive distribution agreement with an English company referred to as "Ferring UK". Under the terms of that agreement Actial agreed to sell or have sold the Product to Ferring UK and Ferring UK agreed to purchase all of its requirements of the Product is supplied by Actial through its distributors across Europe."

4. To this summary, I would simply add that it is Actial's case that all rights to VSL#3 and the know-how associated with it have passed to it under the original joint venture agreement and the 2006 UK Know-How Agreement. This is vigorously disputed by the Professor. Unfortunately, the relationship between the parties finally broke down in the course of 2014. In my judgment at the permission hearing, I summarised the reasons for that background and the events that followed, including the various stages of these proceedings, in these terms, with which once again neither side has taken issue:

"7. In these proceedings Actial contends that in or about June or July 2014 the Professor and Mendes Italy embarked on a dishonest scheme unlawfully to wrest control of the manufacture and distribution of the Product from the joint venture with the intention of channelling sales of the Product through a rival business. Moreover, so Actial contends, the Professor embarked on this scheme while he was still a director of Actial. More specifically, it continues, the Professor sought to cut off supplies of the Product to Actial by preventing it from obtaining supplies from Danisco, removing Actial as a designated supplier and so preventing it from fulfilling its obligations to Ferring UK under the distribution agreement.

8. There is no dispute that by the autumn of 2014 Actial was unable to make further supplies to Ferring UK and as a result Ferring UK became desperately short of stock which it had to ration. Accordingly, and in order to ensure that supplies of the Product to Ferring UK were not unduly disrupted, Actial signed a waiver letter in about November 2014, which permitted Ferring UK to obtain supplies of the Product from its associated company referred to as "Ferring Italy", which in turn obtained them from a Swiss company, referred to as "Mendes Switzerland". Actial maintains that there is compelling evidence that the Professor controls Mendes Switzerland and indeed has appointed that company as the sole authorised distributor of the Product for Europe and Asia. This is disputed by the Professor.

9. Actial maintains that this waiver letter provided it with little comfort. It says that supplies made pursuant to the waiver did not generate any income at all for Actial or its parent, CD Italy. Accordingly, it refused to countenance a second waiver and on 10 December 2014, and believing that Ferring UK was on the verge of running out of supplies again, sought urgent without notice relief, requiring the Professor to reinstate it as an authorised supplier. This application was granted by Mr Kevin Prosser QC sitting as a deputy judge in the Chancery Division and, at Actial's request, he also directed the Professor to inform Danisco that it was entitled to sell to Actial the actual bacterial strains used in the manufacture of the Product.

10. A few days later, the Professor instructed English solicitors and counsel, who wrote to the court apologising for the fact that the Professor had not complied with the mandatory injunction and explaining that to do so would result in the irretrievable loss of trade secrets.

11. On 18 December 2014 the matter came before Norris J who made an order which was designed to hold the ring until the matter could return to court to be fully argued. In broad terms, and upon Actial giving an undertaking to provide security in the sum of 400,000 Euros and not to attempt to clone, reproduce, reverse engineer or otherwise modify the finished Product supplied pursuant to Ferring UK's orders, the order required the Professor to instruct Danisco to supply to the Netherlands and Italian packaging agents (SIIT and Sanico) sufficient Product to enable Actial to fulfil orders placed by Ferring UK which were consistent with its past pattern of trading, including any reasonable growth in such trading. The Professor duly instructed Danisco in those terms and on 8 January 2015 Ferring UK placed an order with Actial for stock worth in excess of 640,000 Euros. This was satisfied by deliveries made in late March 2015.

12. Two further matters arise from the order made by Norris J which I should mention at this stage. The first is that Actial also gave an undertaking to make and serve an affidavit setting out any steps that it had taken to modify the Product. In compliance with that undertaking, an affidavit was made and served which explained that some reverse engineering had been carried out by CD Italy in June and July 2014 because of a concern that the version of the Product being sold in the market might not contain the ingredients detailed on the product packaging, and as a result of an inspection by the Italian health and safety authorities. The second is that the Professor also complained that there had been a breach of this order in that on 12 January 2014 Actial placed an order with Danisco for bulk Product with a direction that this was to be shipped to an unknown packaging agent called Nutrilinea. Actial responded to this further allegation saying this was not an additional order to the January order to which I have referred but corresponded to it, but in the light of the Professor's concerns, the bulk order to Danisco was re-issued stipulating that Danisco should send the bulk to SIIT.

13. Actial's application for interim injunctive relief came before Mr Hochhauser QC sitting as a deputy judge of the Chancery Division on the 13th, 14th and 16th January 2015. His reserved judgment was handed down on 31st March 2015. He held that the court had no jurisdiction to hear the claims as presently formulated. However, he explained that if he had found that the court did have jurisdiction he would have been willing to grant interim relief in similar terms to that granted by Norris J until trial or further order, subject to putting in place a mechanism to ensure that it would have worked more smoothly and consideration being given to whether to require further fortification of Actial's cross undertakings in damages.

14. On 20th April 2015 there was a hearing before the deputy judge to determine various consequential matters. He gave Actual permission to appeal against his ruling on jurisdiction and also gave directions in relation to a late application by Actial for further interim relief pending that appeal. This further application came on for hearing on 7th May 2015 and at its conclusion the deputy judge gave judgment and made the order (the May order) against which the Professor now seeks permission to appeal.

15. In substance the deputy judge made an order requiring the Professor, within 48 hours of his solicitors receiving notice that Actial had increased the security paid into court to 500,000 Euros, to give an instruction to Danisco to supply to one of Actial's two packaging agents, namely SIIT or Sanico, sufficient bulk Product to enable Actial to fulfil an order placed by Ferring UK on 13th April 2015 for supplies of Product with a value in excess of 1.6 million Euros. Actial gave an undertaking that it would not intercept or take samples of bulk Product delivered by Danisco to its packaging agents pursuant to the order and it would not "attempt to clone, reproduce, reverse engineer or otherwise modify the finished [Product] supplied pursuant to Ferring UK's order referred to in [the body of the order]". Very shortly afterwards, the Professor applied in writing to the deputy judge for permission to appeal and for a stay of his order. Both applications were refused by the deputy judge on 14th May 2015.

16.On the same day, 14th May 2015, Actial's solicitors gave notice that the security had been increased with the result that the May order fell to be complied with by midday on 16th May 2015. Meanwhile, on 15th May 2015, the Professor's solicitors filed an appellant's notice with this court seeking permission to appeal against the May order, a stay pending determination of their application and, if permission was granted, a further stay pending the hearing of the substantive appeal. Four days later, the Professor's solicitors informed Actial's solicitors that the Professor was aware of the May order but was awaiting a decision of this court on the applications for a stay and permission to appeal. The following day, 20 May 2015, Actial issued a committal application against the Professor for failure to comply with the May order.

17.On 21 May 2015 Actial issued a further application for an order under CPR 6.15(2) deeming service of the committal application on the Professor's solicitors by email and courier as good service on the Professor himself, rather than having to serve him under the provisions of the Hague Convention. That application came before Asplin J on 8th June 2015. She granted the application, made the June order and refused the Professor's application for permission to appeal. She also adjourned the hearing of Actial's committal application to 12th June 2015 in order to give the Professor an opportunity to apply for expedition of his application to this court for a stay of the May order. Then, on 9th June 2015, the Professor's solicitors applied to this court for permission to appeal against the June order and a direction that the application for permission be determined prior to the hearing of the committal application. On 11th June 2015 Ryder LJ made an order on the papers granting a stay of the May order pending an expedited hearing of the Professor's applications for permission to appeal and a continuation of the stay until the outcome of those applications was known."

5. Shortly afterwards, I gave a further direction that the application for permission to appeal and the application for a stay should be referred to an oral hearing which, as I have said, came on before me on 1 July 2015. Both parties were represented by counsel and they each sought and were granted by me permission to rely on further evidence. It was largely in the light of that further evidence that I came to the conclusion that an appeal against the May order and the June order would have a real prospect of success and accordingly I granted permission to appeal.

The May order

6. That brings me to the May order. By way of further background, Ferring UK had placed the order with Actial for stock worth in excess of 1.6 million Euros because Ferring UK's business was growing and because it had recently entered into an agreement with Lloyd's Pharmacy pursuant to which all of its 1,600 pharmacies would stock VSL#3. The deputy judge explained that by this time it was common ground that he did have jurisdiction to make the mandatory order sought. As for the approach to be adopted, his attention was drawn to the decision of this court in Novartis AG v Hospira UK Limited [2013] EWCA Civ 583, [2014] RPC 3. At paragraph 41, Floyd LJ, with whom Lewison LJ and I agreed, summarised the principles to be applied in considering whether to grant an interim injunction pending appeal where the claimant has lost at first instance. In directing himself by reference to these principles, the deputy judge observed that he had found that the appeal against his order in relation to jurisdiction had a real prospect of success and that it was not appropriate to attempt to form a view as to how much stronger the prospects of success on an appeal might be. He then proceeded to consider all of the relevant circumstances, including the relevant timescales and the balance of hardship to each party if the injunction sought were to be refused or granted. In so doing, the deputy judge referred first to the concern expressed by Actial that, if the supply of VSL#3 were to be interrupted and Actial were to fail to deliver this product to Ferring UK for a sustained period, it would be open to Ferring UK to treat that as a repudiation of the agreement and thereby bring it to an end. Indeed, said Mr Wardell QC, who appeared on behalf of Actial on that occasion, it was likely that not only would Actial lose its UK distributor and its UK market for VSL#3, but that Actial would itself have to cease trading. Moreover, he continued, there was a real concern that patients who relied on VSL#3 would not be able to access supplies. Mr Wardell also referred to and relied upon the undertaking given by Actial to Norris J not to attempt to clone or reverse engineer the finished VSL#3 supplied pursuant to Ferring UK's orders. He submitted that there was no evidence to date that there had been any breach of that undertaking and pointed to the existence of the application itself as evidence that Actial needed to source bulk from elsewhere because they were unable themselves to produce it. Mr Wardell also offered to increase the fortification of the cross undertaking in damages to 500,000 Euros.
7. The deputy judge then proceeded to consider the various points made by Mr Sutcliffe QC, who appeared on behalf of the Professor, as he has on this appeal, in opposition to the grant of relief. At the forefront of these submissions was what Mr Sutcliffe described as a serious risk of cloning by Actial. He referred the deputy judge to the evidence given by the Professor to the effect that Actial and those associated with it were making every effort to produce a fake product which they could sell under the trade mark VSL#3. The deputy judge was not very impressed by this submission because, first, there had to date been no successful attempt by Actial to clone VSL#3 and second, these fears had not prevented Mr Mitchell QC, on behalf of the Professor on 14 January 2015, the second day of the first substantive hearing before the deputy judge, from making an open offer to authorise Danisco to supply bulk VSL#3 to SIIT to be made up into final product to be shipped directly to Ferring UK. In the deputy judge's view, had such an offer been accepted, that would have exposed the Professor to the very risk which he now sought to avoid, namely covert interception at the port of delivery by agents of Actial.
8. The second point relied upon by Mr Sutcliffe was that Ferring UK could obtain supplies from one of its associated companies, Ferring Italy, provided that Actial gave a similar waiver to that which it had given towards the end of 2014. Ferring Italy could then secure its supplies from Mendes Switzerland. In this connection, the deputy judge referred to two significant disputes between the parties. The first was whether the Professor had any interest in Mendes Switzerland and the second was whether Ferring Italy had paid royalties to CD Italy, Actial's parent. As for the first, the Professor denied that he had any interest in Mendes Switzerland and maintained that this company was in fact owned by a Dr Orlando. However, Actial disputed this and this is a matter to which I must return. As for the second, the Professor maintained that Ferring Italy had indeed paid royalties to CD Italy, but again this was disputed by Actial. The deputy judge found this position somewhat puzzling because, if it were correct that the Professor had no interest in Mendes Switzerland, he would get no profit from the distribution, nor would he receive any royalties from Actial under the 2006 UK Know-How Agreement.
9. The final matter relied upon by Mr Sutcliffe concerned the size of the order. This was, he said, suspicious and that it was to be inferred that Ferring UK was, to use his expression, in cahoots with Actial. The deputy judge was not greatly impressed by this submission. In that regard, he noted that the size of the order was due in large part to the addition of Lloyd's Pharmacy as a customer, that Mendes Switzerland seemed willing to fulfil this order in its entirety despite the Professor's fears and finally, that the size of the order did not increase the likelihood of covert interception for the purpose of cloning, which was said to be the Professor's major concern.
10. The deputy judge then carried out his final evaluation and in so doing had careful regard to Mr Sutcliffe's submission that any cloned product would not be subject to the rigorous controls that are applied to VSL#3, and that this could present a risk to the public health and had the potential to cause huge damage to the Professor's reputation. The deputy judge considered that these submissions required careful scrutiny, but he was sceptical that they were well-founded, essentially because he was not satisfied that there was a real risk that Actial would act in breach of its undertaking and also because he was doubtful that Ferring UK would be prepared to sell a product which was in any way substandard. Having regard to all of the matters to which I have referred, the deputy judge reached the conclusion that, applying the principles explained by Floyd LJ in the Novartis case, greater harm would be incurred by failing to grant the interim relief than by granting it. He continued that he was, therefore, willing to grant the relief subject to the provision of greater security and the giving of undertakings in similar form to those given to Norris J.
11. The Professor now appeals against the May order and contends that the judge fell into error for three main reasons. He contends, first, that the fresh evidence now before this court demonstrates that Actial has acted in breach of the undertakings that it has given to the court and that it has misled the court as to its activities and intentions with the result that the May order was made on an erroneous basis. Second, the deputy judge fell into error in failing to have any or any sufficient regard to the fact that he was being asked to make a mandatory order when he had already held that the court had no jurisdiction to hear the claim and that he therefore did not have, nor could have had, a high degree of assurance that Actial would establish its right at trial. Third, the deputy judge fell into error in failing to take any or any sufficient account of the waiver route which remained available, had previously been adopted by Actial without difficulty and which, if adopted, would have eliminated any risk of Actial suffering irremediable harm pending the hearing of its appeal. I will deal with these various grounds of appeal in turn.
12. Mr Sutcliffe has developed his submission on the first ground in the following way. He points first of all to the application made by Actial to Mr Kevin Prosser QC on 10 December 2014 and the Professor's response to the order made by the deputy judge on that day. As I have explained and having been served with that order, the Professor instructed English solicitors and counsel who wrote to the court stating that the Professor had not complied with the mandatory injunction it contained because he feared that to do so would result in the irretrievable loss of trade secrets relating to VSL#3. Further, one day later, Mr Laxman, the Professor's English solicitor, made a witness statement expressing the Professor's concern that Actial was endeavouring to obtain access to the bulk VSL#3 in order to reverse engineer the key bacterial strains it contains and thereby manufacture an alternative fake product. Then, on 18 December 2014, the matter returned before Norris J and in the course of the hearing Mr Wardell, on instructions, indicated that some work had indeed been done by Actial to reverse engineer VSL#3 when seeking an alternative solution to the lack of supply. In the end, Norris J made the order to which I have referred and which was designed to hold the ring until the matter could be fully argued. Importantly, Actial undertook:

"2. Not to attempt to clone, reproduce, reverse engineer or otherwise modify ("Modify")the finished VSL#3 product supplied pursuant to Ferring UK's orders ("Product").

3. To file and serve by 4.00 pm on 23 December 2014 an affidavit setting out all steps so far taken to Modify the Product but not the results thereof."

13. On 23 December 2014, Mr Ford, Actial's solicitor, made and swore his fifth affidavit setting out and confirming the information Actial had undertaken to provide. He explained that CD Italy and not Actial had taken steps to analyse and reverse engineer VSL#3 and that it had done so for two reasons, namely because CD Italy wanted to ensure that the version of VSL#3 being sold in the market contained the ingredients that were being stated on the packaging in the light of the Professor's sudden departure from Actial and CD Italy in the summer of 2014; and also for quality control purposes, having regard to an inspection carried out by the Italian public health and safety authorities.
14. On 8 January 2015 and shortly before the hearing before Mr Hochhauser QC, Mr Ford made and swore a sixth affidavit in which he provided further information about Actial's plans in the light of the Professor's continued anxieties about the risk of cloning and its inability to secure an alternative source of supply. He explained at paragraphs 34 to 41 that Actial had been selling VSL#3 for the best part of eight years and that throughout this period it had had access to the formula and that if it had wanted to produce its own version of VSL#3, it could have done so. By way of further elaboration, he continued that the Cavazza family, through Sigma Tau, sold a product called Yovis which had an almost identical formula to that of VSL#3 and contained the same bacteria and that if the Cavazza family had wished to create a clone of VSL#3, then they could have done so by making arrangements for the manufacturers of Yovis, Centro Sperimentale del Latte(CSL), to produce such a product. However, since Actial had the rights to the know-how as well as the trade mark VSL#3 and had regular supplies, it was difficult, if not impossible, to think of a commercial reason why Actial would want to produce a clone of the real thing. There then followed this important paragraph as to Actial's position in the light of the cutting off of supplies:

"42. The reason why Actial was unable to switch production of VSL#3 to the manufacturers of Yovis when faced with the unlawful cutting of supplies was because of both legal and technical issues which meant that CSL would not be able to deliver bulk VSL#3 for many months. The legal issues relate to the need for CSL, which is a worldwide well-established company (with whom Professor de Simone has worked in the past), to be satisfied that, if it was to replicate the current bacterial strains, it would not be breaching any intellectual property rights (for example, over one or more of the bacterial strains used in VSL#3). The technical issues arise out of the fact that its strains, while the same as those used by Danisco, do not have identical DNA. As a result, while it is assumed that CSL's strains would be equally efficacious, there is a need for it to undertake research to satisfy itself that its working hypothesis is correct. So while I understand from Mr Dini that CSL will be in a position to take over the role of Danisco in due course, it was yet in a position to do so and it may be some months before it can be formally appointed."

15. The Professor's concerns were expressed once again at the May hearing. It is clear from the written submissions filed on his behalf in advance of the hearing that he was particularly concerned that Actial or its agent might intercept the bulk VSL#3 on its way to the packaging agents and remove a sample for the purposes of analysis and the creation of a fake product. This risk was then naturally the focus of submissions at the hearing and so was dealt with expressly in the deputy judge's ruling. Moreover, and at the suggestion of counsel for the Professor, Actial offered the following undertakings embodied in the order:

"(B) It will not (by itself, its servants or agents or otherwise howsoever) intercept or take samples of the bulk VSL#3 which is to be delivered to its packaging agents pursuant to this Order.

(C) It will not (by itself, its servants or agents or otherwise howsoever) attempt to clone, reproduce, reverse engineer or otherwise modify the finished VSL#3 product supplied pursuant to Ferring UK's order referred to in paragraph 7 below (Product);

(D) It will instruct the relevant packaging agent to deliver the Product directly to Ferring UK."

16. Mr Sutcliffe then turns to the new evidence and in particular refers to the witness statement of Florence Pryen, the third defendant, dated 23 June 2015, the eighth witness statement of Mr Laxman dated 24 June 2015 and the Professor's third witness statement dated 30 June 2015. The evidence given by Ms Pryen and Mr Laxman is to the effect that Actial, in association with its parent, CD Italy, is indeed preparing a cloned product which it proposes to launch. In his written submissions, Mr Sutcliffe particularly focuses on a letter from Actial to its Swiss lawyers dated 25 June 2015 which asserts:

"The entire know-how relating to the VSL#3 product, including the composition of the mixture of the 8 bacterial strains at issue was owned by our clients [i.e. Actial, CV Italy or VSL Pharmaceuticals Inc] since 2000 as it was sold by [the Professor] and transferred to our client through various agreements.

There is therefore no doubt that our clients are entitled to decide to have the 8 bacterial strains mixture that composes the VSL#3 probiotic product supplied to them by any suppliers they deem suitable for this purpose and to package and to commercialise such product under their trademark VSL#3 as they have always done in the past. There is therefore no reason why only the probiotic sourced from Danisco Du Pont can be marketed under the VSL#3 trademark."

17. Ms Mattin, in her ninth witness statement, says that Actial never made a secret of the fact that it was exploring the possibility of sourcing VSL#3 from other manufacturers. Having a second manufacturer is, she continues, not only common in the pharmaceutical industry, but is best practice and is designed to cater for situations where the primary manufacturer is, for whatever reason, unable to deliver product. She also says that CSL has made bulk VSL#3 in the past for the Professor, but that there were two possible issues preventing CSL from manufacturing VSL#3 for Actial: first, it needed to satisfy itself that there was no issue about the ownership of the strains it comprises and secondly, it needed to ensure that it could replicate VSL#3. She also explains that CD Italy can prove that it is the owner of the eight bacterial strains that VSL#3 comprises, that the DNA in the strains currently being used by CSL can best be described as the DNA of an identical twin and that the bulk VSL#3 will be, to all intents and purposes, identical to the bulk produced by Danisco. Accordingly, she says, as and when CSL is ready to proceed, the product it will produce will be genuine VSL#3.
18. In her tenth witness statement, dated 23 July 2015, Ms Mattin responds to the Professor's third witness statement and also corrects two mistakes in her ninth witness statement. First, she explains that CSL has never manufactured bulk VSL#3. Second, she says that, contrary to what she and Mr Ford had understood to be the position, she has been told by Mr Gori, a director of CD Italy, that CD Italy has only retained CSL to grow individual bacterial strains which have been isolated from natural sources and not taken from the Danisco bulk. Further, the task of mixing the strains has been out sourced to Nutrilinea, a manufacturer of food supplements, including medical foods. In short, she says, CSL and Nutrilinea are not working backwards from Danisco's VSL#, but are starting from the beginning using CD Italy's know-how and intellectual property rights. Further, it will not be possible to produce product suitable for sale in the UK until the end of this year.
19. The Professor, in his fourth witness statement, says that all of this further evidence of Ms Mattin is misleading, that Ms Mattin's ninth and tenth witness statements are inconsistent, that Actial and CD Italy, not having the know-how, have analysed VSL#3 and are now attempting to start from the beginning of the assembly process. He continues that the only scientifically sound conclusion is that the natural sources to which Ms Mattin refers in her tenth witness statement must be the bulk VSL#3 produced by Danisco. He also exhibits an interim judgment of the Swiss court delivered after a hearing on 17 July 2015 in which Actial is recorded as submitting that its new product will be manufactured with the same strains and the same procedures as the original VSL#3 and that the only material change will be the name of the supplier.
20. Drawing the threads together, Mr Sutcliffe submits that it is clear that both Norris J and the deputy judge accepted undertakings from Actial on the assumption that Actial had not made and would not be making any attempt to clone VSL#3 other than to the limited extent or for the specific purpose explained by Mr Ford in his affidavit. Further, Actial did not reveal to Mr Prosser QC, Norris J or Mr Hochhauser QC its intention to make a reproduction of VSL#3 whether from the original bacterial strains or in any other way. Indeed, its evidence was designed to give the opposite impression, namely that it had no intention of embarking on any kind of cloning exercise. However, it is now clear, Mr Sutcliffe continues, that Actial has acted in breach of its undertakings and has deliberately abused the court's processes in order to obtain relief to which it was never entitled.
21. These are powerful submissions and it seems to me that they fall into three parts: first, whether Actial has acted in breach of the undertakings which it gave to Norris J and the deputy judge; second, whether Actial has misled the court; and third, whether the deputy judge fell into error when approaching the matter as he did on the evidence before him or whether his order should be set aside in the light of all of the evidence now before this court.
22. I have set out the background in some detail earlier in this judgment and from this I think it is apparent that the undertakings embodied in the order of Norris J were given to meet the Professor's concern that, if he was ordered to instruct Danisco to supply VSL#3 in bulk to Actial's packaging agents, SIIT and Sanico, Actial would intercept the bulk VSL#3 and then attempt to reverse engineer it and so produce an alternative fake product for itself. This concern and Actial's attempt to meet it are then reflected in the two specific undertakings which it offered and which I have recited. Importantly, by its second undertaking, Actial promised not to attempt to clone, reproduce, or reverse engineer the finished VSL#3 product supplied pursuant to Ferring UK's orders. It is to be noted that this is not an undertaking not in any way to seek to develop a replacement product in the light of the circumstances in which it found itself following the Professor's intervention, namely an inability to secure further supplies of bulk VSL#3 from Danisco and so meet its obligations to Ferring UK. Pursuant to the third undertaking given by Actial, Mr Ford made and swore his fifth affidavit to which I have referred. This set out the specific steps that Actial and CD Italy had taken to reverse engineer or otherwise modify the finished VSL#3 supplied pursuant to Ferring UK's order. It is also to be noted that this fifth affidavit was, shortly afterwards, followed by Mr Ford's sixth affidavit in which he dealt with the cloning allegation in more detail. Here, Mr Ford explained that, prior to the Professor's intervention, Actial had no need to secure an alternative source of supply but, faced with the cutting off of its supplies of VSL#3 from Danisco, was now seeking to develop an alternative product from its own strains. I recognise that there may be said to be a discrepancy between, on the one hand, the contents of Ms Mattin's ninth witness statement, the letter from Actial's Swiss lawyers and the submissions recorded in the Swiss interim judgment and, on the other hand, the substance of Mr Ford's sixth affidavit and Ms Mattin's tenth witness statement, but I do not accept that this court can be satisfied in the light of all of the evidence now before it that Actial has acted in breach of its undertaking not to deal in a prohibited way with the finished product supplied pursuant to Ferring UK's orders. To the contrary, Mr Ford and Ms Mattin had given evidence on behalf of Actial that CD Italy and Actial, in association with CSL, are in the course of developing a replacement product by growing the necessary bacterial strains and then, in conjunction with Nutrilinea, blending them into a final product. For my part, I feel quite unable to reject this evidence at this stage, although I fully accept that the account these witnesses give is one with which the Professor profoundly disagrees. Moreover, I am not persuaded on the material before this court that the disclosure made in Mr Ford's fifth affidavit was so inaccurate or incomplete as to constitute a breach of the third undertaking which Actial gave to Norris J. It dealt properly with the specific information which Actial had undertaken to provide.
23. Turning now to the undertakings embodied in the May order, these must be seen against the background that Mr Ford had by this time made it clear that Actial was seeking to secure an alternative source of supply and would be using CSL for that purpose. Nevertheless, the Professor was still concerned that Actial would attempt to intercept the supply of bulk VSL#3 by sending agents covertly to the port of delivery to take samples of that bulk for the purposes of cloning. This concern was raised on behalf of the Professor in written submissions before the hearing and is expressly referred to by the deputy judge in his judgment. Against this background, it can readily be appreciated how the undertakings contained in the May order came to be worded as they are. It is to be noted that Actial undertook not to intercept or take samples of bulk VSL#3 which is to be delivered to its packaging agents pursuant to this Order; and that it would not attempt to clone, reproduce, reverse engineer or otherwise modify the finished VSL#3 supplied pursuant to Ferring UK's order. Importantly, neither of these undertakings prohibits Actial from developing its own alternative product provided that it does not do so by intercepting or in any way attempting to reproduce or modify the VSL#3 supplied pursuant to Ferring UK's order, and as I have said, on the evidence now before the court, I am not satisfied that this is what Actial has ever intended to do. It follows that I do not accept that it has been established that Actial has acted or indeed threatens to act in breach of the undertakings which it gave either to Norris J or to the deputy judge.
24. The next issue is whether Actial has persistently misled the court by falsely telling the court that it had no intention of embarking on a cloning exercise for the purpose of making a replacement product. I have given this issue my most anxious consideration and having done so have reached the conclusion that this court cannot at this stage be satisfied that Actial has indeed misled the court in the manner for which Mr Sutcliffe contends. I have reached that conclusion for the following reasons. First, Actial has never made any secret of its fundamental claim that all rights to VSL#3 passed to it under the terms of the joint venture agreement entered into been the parties in 2000 and that all rights to the know-how associated with VSL#3 were sold to it under the terms of the 2006 UK Know-How Agreement and further, that the Professor has unlawfully cut off supplies of bulk VSL#3 by removing Actial as a designated supplier and in so doing has acted in plain breach of his fiduciary duty. Second, it must have been apparent to the Professor since the service upon him of Mr Ford's sixth affidavit, if not before, that once Actial's supplies of bulk VSL#3 had been cut off, it would have to source a replacement product. Third, the Professor nevertheless continued to express his concern that if he was required to instruct Danisco to supply to Actial's packaging agents bulk VSL#3 to enable Actial to fulfil orders placed by Ferring UK, Actial would seek to intercept that bulk product. Fourth, the undertakings offered by Actial were given in response to that concern and they cannot have reasonably have been understood to extend beyond the VSL#3 to be supplied under the terms of the orders in which they were embodied. Finally, as I have said, I accept that there may be an inconsistency between, on the one hand, the contents of Ms Mattin's ninth witness statement, the letter from Actial's Swiss lawyers dated 25 June 2015 and the interim judgment of the Swiss court and, on the other hand, the contents of Mr Ford's sixth affidavit and Ms Mattin's tenth witness statement. This is a matter which this court cannot resolve on this appeal. But, importantly, I am not persuaded on the evidence before this court that Actial has ever acted in breach of its undertakings by intercepting bulk VSL#3 or attempting to clone the bacteria it contains or acted other than in the manner Mr Ford has described in his sixth affidavit.
25. The third issue is whether the deputy judge was wrong to make the order he did on the evidence before him or whether the order should now be set aside in the light of all of the evidence now before this court. Here Mr Sutcliffe submits that the deputy judge attached no or no sufficient weight to the risk of cloning and that he took no or no proper account of the Professor's unchallenged evidence as to Actial's intentions as expressed in threats made to him by Mr Paolo Cavazza and his managers. He submits that only Actial knows how far advanced its owners' plans to clone VSL#3 are and that the existence of a clone will only come to light when patients become sick and infected, by which time it will be too late. Further, continues Mr Sutcliffe, on the evidence now before the court it is perfectly clear that Actial is attempting to produce cloned VSL#3 and accordingly the order ought never to have been made and ought now to be set aside.
26. I am not persuaded by any of these submissions. As I have said, it has been clear for a long time that Actial would have to seek an alternative source of supply in the light of the Professor's actions. So far as the risk of inception is concerned, the deputy judge was fully conscious of the Professor's anxieties but, in assessing them, was entitled to and did properly take into account that, up to that point, there had been no successful attempt to clone in this way. Moreover, the order which the deputy judge was invited to make mirrored the order made by Norris J and further, as the deputy judge also observed, the Professor's fears did not prevent Mr Mitchell QC, on behalf of the Professor, on the morning of 14 January 2015, from making an open offer to authorise Danisco to supply bulk VSL#3 to SIIT for making up into final product for onward supply to Ferring UK. It is true to say that the offer sought to tie Actial's purchase order to the quantities required by Ferring UK and to provide that Actial would never have access to the unfinished VSL#3 and that SIIT would ship directly to Ferring UK. However, if the Professor's fears had substance, there would still have been a risk of interception since SIIT would have been Actial's agents. I therefore detect no error in the way the deputy judge approached the risk of cloning. He properly had regard to all of the matters advanced on the Professor's behalf by Mr Sutcliffe and he carried out a fair and appropriate evaluation of them. Nor, it seems to me, is the position substantively different now. I recognise that this court cannot be entirely satisfied as to precisely how Actial is developing its own replacement product, but I am not persuaded that it will try to do so by intercepting bulk VSL#3 supplied by Danisco. To the contrary, there is evidence before the court in the form of Ms Mattin's tenth witness statement which elaborates upon the evidence given by Mr Ford in his sixth affidavit that is to the effect that CD Italy and Actial, in association with CSL, do have the expertise to develop a replacement product by using the various kinds of bacteria which VSL#3 contains and that the bacteria will then be blended by Nutrilinea in accordance with the formula given to it by CD Italy to produce and package the finished product. I have also taken full account of the Professor's concern as to the risk to the public health that would arise from the supply by Actial of a replacement product under the same trade mark VSL#3. This is, of course, a matter which was considered by the deputy judge. He was not persuaded that Actial would supply to Ferring UK for onward supply to members of the public an inferior product and it seems to me that he was entitled to take that view and that he afforded this concern appropriate weight. Moreover, and as I rather understood Mr Sutcliffe was disposed to accept, Actial is now clearly well on the way to developing a replacement product and will continue to do so irrespective of the outcome of this appeal.
27. That brings me to the second ground of appeal. Mr Sutcliffe contends that the deputy judge failed to have adequate regard to the fact that the May order was a mandatory order and that he had found that the court had no jurisdiction to hear the claim. In that connection, Mr Sutcliffe has referred us to the decision of Chadwick J, as he then was, in Nottingham Building Society v Euro Dynamics Systems [1993] FSR 468 at 474. There Chadwick J explained that, in considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take a positive step at an interlocutory stage may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo. Further, it is legitimate, where a mandatory injunction is sought, to consider whether the court feels a high degree of assurance that the claimant will be able to establish its right at trial.
28. Founding himself upon this decision, Mr Sutcliffe submits that the deputy judge did not have, nor could he possibly have had, a high degree of assurance that Actial would establish its right at trial, particularly having ruled that the court did not have jurisdiction to try Actial's claim.
29. I find myself unable to accept these submissions. First, the principles explained by this court in the Novartis case are of general application. No doubt the nature of the relief sought will, in most if not all cases, be a relevant consideration and if an order is of a mandatory nature, then, as Chadwick J indicated, it may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action. But in all cases, the critical question is whether the risk of injustice if the injunction turns out to have been wrongly refused sufficiently outweighs the risk of injustice if it turns out to have been wrongly granted.
30. In this case, it seems to me that the deputy judge carried out the task that was required of him. He plainly had well in mind the nature of the relief sought, including the size of the order which Actial wished to fulfil. He gave careful consideration to the various matters relied upon by each side in support of their respective positions. Throughout, he sought to determine which course was likely to involve the least risk of injustice if it turned out to be wrong. I do not think that the deputy judge can be criticised for approaching the matter in the way that he did. Indeed, it seems to me that the approach he adopted was plainly the correct one.
31. The final ground of appeal against the May order is that the deputy judge was wrong to attach no or no sufficient significance to the waiver route. Mr Sutcliffe submits that, if Actial's application for interim relief is refused, there is no risk that Actial will cease to trade or that customers will suffer because Ferring UK will still be able to obtain supplies of VSL#3 via the waiver route. Mr Sutcliffe continues that the unchallenged evidence of both the Professor and Dr Orlando is that Mendes Switzerland would have no problem making supplies of VSL#3 to Ferring Italy for onward transmission to Ferring UK, just as it has done in the past. Further, he continues, the deputy judge paid no sufficient regard to the evidence of the Professor that CD Italy was paid a royalty on sales of VSL#3 to Ferring UK which had been channelled through Ferring Italy and that CD Italy was perfectly capable of passing this income on to Actial if it so chose. Further, the fact that the Professor received no income from Mendes Switzerland was, so Mr Sutcliffe maintains, irrelevant. The Professor has not in fact received any royalties in respect of supplies of VSL#3 since July 2014 and his primary concern is that the safety of consumers should not in any way be jeopardised.
32. Once again, I have no doubt that the deputy judge had all of these matters well in mind. He also had proper regard to Actial's case that any further waiver would threaten its survival. Its concern was that if it was unable to maintain its position and ability to supply Ferring UK then Ferring UK would terminate the distribution agreement. Further, there was a real risk that it would source all of its future supplies from Mendes Switzerland. In this connection, the deputy judge had evidence before him that Mendes Switzerland is in fact controlled by the Professor, contrary to both his and Dr Orlando's protestations. Specifically, there was evidence before the court that Mendes Switzerland had applied for a competing trade mark, "VSL#3 by De Simone"; that Mendes Switzerland had been appointed by the Professor as an authorised distributor of VSL#3 for Singapore, India and Korea in substitution of Actial; that Mendes Switzerland had applied for the cancellation of Actial's trade mark VSL#3; and that Mendes Switzerland was said to be the owner of a competing brand of product called Vivomixx, which has the same ingredients as VSL#3. If, as Actial believes, Mendes Switzerland is a vehicle controlled by the Professor, then the effect of requiring Actial to adopt the waiver route would have been to deliver to the Professor precisely what, on Actial's case, he had set out to achieve and would have had the result that the aim of the conspiracy would have been fulfilled and Actial would have suffered irremediable prejudice.
    
33. Stepping back and looking at the matter as a whole, I am satisfied that the deputy judge approached the matter correctly. He gave careful consideration to the evidence before him and the submissions of the parties made in relation to it. He properly directed himself in law and carried out an appropriate evaluation in the light of the relevant principles. He neither took into account irrelevant matters, nor did he fail to take into account relevant matters. He made no error of principle. In my judgment, it cannot be said that the new evidence materially alters the position. I would therefore dismiss the appeal against this order.

The June order

34. As I explained when giving permission to appeal, this order was made upon the application by Actial for an order under CPR 6.15(2) for permission to serve the application for committal on the Professor by an alternative method of service. The application was resisted by the Professor on the basis that, under the Hague Convention, service upon him should have been effected in Switzerland where he resides.
35. Asplin J was referred to the decision of this court in Knauf UK GmbH v British Gypsum Ltd [2002] 1 WLR 907 and the judgment of the Supreme Court in Abela v Ahmad Baadarani [2013] 1 WLR 2043. She considered that, in the light of these authorities, Actial had to show a good or possibly exceptional reason for making the order which it sought and so she proceeded to consider the application on that basis. In the end, she concluded that exceptional reasons had indeed been shown. She considered that the delay of two months whilst service was affected under the Hague Convention would seriously undermine the deputy judge's order, if not render it worthless. Further, the Professor was throughout fully aware of the committal application. Moreover, the Professor had made it clear that he did not intend to comply with the order and had made no effort to expedite his application to this court for permission to appeal despite the refusal by the deputy judge either to grant permission or to grant a stay. Finally, there was no suggestion that the order sought would be in any way contrary to the law of Switzerland and in the light of the deputy judge's judgment, failure to comply with the May order presented a serious threat to Actial's business and that VSL#3 would not be available to those who needed it. Overall, the order itself would be rendered all but useless if it was necessary to serve it under the Hague Convention.
36. Mr Sutcliffe now submits that there was no good reason, let alone any exceptional reason, for circumventing the Hague Convention. Specifically, he continues, the judge failed to consider the principal matter addressed in the Professor's evidence and the submissions made on his behalf, namely that Ferring UK was able to obtain supplies of VSL#3 by the waiver route that had already been adopted by Actial and Ferring UK without difficulty, and that this waiver route avoided the possibility of Actial gaining access to the bulk VSL#3 and creating a cloned product which, as the Professor had made clear in his evidence, was the principal reason why he would not comply with the May order.
37. I am not persuaded by any of these submissions which seem to me to go primarily to the question of whether or not the May order should have been made in the first place, rather than whether it was appropriate to order substituted service. I believe that the judge rightly approached the matter on the basis that the May order was properly made and I have come to the conclusion that there is no reason now to set it aside.
    
38. Mr Sutcliffe next submits that none of the reasons given by the judge amounted to a good reason, let alone an exceptional reason, for making the order that she did and thereby depriving the Professor of his right to be served under the Hague Convention. In particular, he continues, this court explained in the Knauf case that there cannot be a good reason for ordering service in England by an alternative method on a foreign defendant where such an order subverts, and is designed to subvert, in the absence of any difficulty about effecting service, the principles on which service and jurisdiction are regulated by agreement between the UK and its Convention partners. There is, he says, no difficulty in effecting service on the Professor in Switzerland and there was no good reason why he could not have been served under the Convention.
39. Again, I find myself unable to accept these submissions. The judge was fully conscious that delay was not in and of itself a good reason for not effecting service under the Convention. But here it was never Actial's intention to subvert the Convention or simply to avoid the delay associated with service under it. Actial's concern was rather that the deputy judge made the order he did on the basis that he was satisfied that, without it, Actial would suffer irremediable harm. Moreover, the Professor had indicated that he did not intend to comply with it. In all of these circumstances, I believe that the judge was entitled to conclude that, unless she granted the application, the effectiveness of the order would be seriously undermined.
40. Mr Sutcliffe also submits that the judge was wrong to attach weight to the fact that the Professor was fully aware of the committal application. He continues that, although the Professor was aware of the application, he was not aware that the English court had the power retrospectively to deem service of such application on his English solicitors as effective service upon him, thereby depriving him of his right to be served in Switzerland and impairing his rights and ability to defend himself.
41. I do not accept that the Professor's ability properly to defend himself has been in any way impaired by the judge's order. If the Professor needs time to deal with the committal application then no doubt that will be a matter which the judge will take into account in giving directions. Moreover, it seems to me that the fact that the Professor was at all times fully aware of the committal application was plainly a relevant matter for the judge to take into account. Further, the fact that the Professor may not have been aware that the English court had power retrospectively to deem that service on his solicitors as effective service upon him is not, to my mind, a material factor in all the circumstances of this case.
42. Finally, Mr Sutcliffe submits that the judge was wrong to take into account that the Professor took no steps to expedite his application to this court for permission to appeal against the May order. I accept that this point would in and of itself have provided too slender a basis for the order that she made, but this was simply one of a number of matters which she took into account and properly so. It was of a piece with the Professor's general approach to the May order.
    
43. Overall, I have no doubt that the judge carried out a fair evaluation of the circumstances and that she made no error of principle. Orders of the High Court are meant to be obeyed. Wilful refusal to obey them is a very serious matter. I would dismiss this appeal.
44. LORD JUSTICE RYDER: I agree.
45. LORD JUSTICE JACKSON: I also agree.