Case No: HQ13X04072
Neutral Citation Number: [2014] EWHC 1977 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 18/06/2014

Before :

THE HONOURABLE MR JUSTICE DINGEMANS
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Between :

	Barclay Pharmaceuticals Limited	Claimant	
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	OPD Laboratories Limited	Defendant	
	and		
	(1)	Collin Turrell
(2)	Paul Longland	Third Parties	

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Craig Morrison (instructed by Addleshaw Goddard LLP) for the Claimant
Gabriel Buttimore (instructed by Everatts) for the Defendant
The Third Parties did not appear and were not represented

Hearing dates: 13 June 2014
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Judgment
Mr Justice Dingemans : 
1.	This is the hearing of applications to strike out a defence and for summary judgment made by Barclay Pharmaceuticals Limited trading as Trident Pharmaceuticals (“Trident Pharmaceuticals”) against OPD Laboratories Limited (“OPD Laboratories”).  
Background
2.	It is common ground (as appears from paragraphs 1 to 4 of the Particulars of Claim and paragraph 3 of the Defence) that Trident Pharmaceuticals imports pharmaceutical products from abroad, which need to be repackaged to comply with the provisions of the Medicines Act 1968 and the Medicines for Humans Use (Manufacturing, Wholesale Dealing and Miscellaneous Amendments) Regulations 2005.  The repackaging must be carried out by an entity licensed by the Medicines and Healthcare Products Regulatory Agency (“MHRA”).  The relevant entity requires a Manufacturer’s/Importer’s licence (“MIA”) and a Product Licence for Parallel Imports (“PLPI”).
3.	OPD Laboratories did have a MIA and PLPI and it carried out repackaging services.  It is common ground that OPD Laboratories repackaged some pharmaceutical products supplied by Trident Pharmaceuticals.  
4.	It appears that in March 2009 the PLPI for OPD Laboratories for the drug Xatral XL had been withdrawn.  This meant that dealings by OPD Laboratories since March 2009 with Xatral XL had been unlicensed.  It is also common ground that on 1 March 2011 the MHRA suspended the MIA for OPD Laboratories.  It appears that this followed an inspection in January 2011 in which it was discovered that OPD Laboratories had not repackaged products in accordance with its licences.  On 10 March 2011 a recall notice for the products packaged by OPD Laboratories was issued.   It is also common ground that following the recall drugs were returned.  Some of the returned drugs were repackaged where it was lawful to do so.  Some drugs were destroyed.  
5.	Trident Pharmaceuticals claims that total losses are said to amount to £480,557.06 (having claimed £454,434.84 in the Particulars of Claim) and seek judgment in that sum either as damages for breach of warranty or as a debt pursuant to an indemnity clause.  Invoices rendered by OPD Laboratories for repackaging services which have not yet been paid total £60,915.87.
6.	I am very grateful to both Mr Morrison on behalf of the Claimant and Mr Buttimore on behalf of the Defendant for their Skeleton Arguments and submissions.  It now appears that the real issues between the parties are:
(1)	whether the relevant drugs were packaged by OPD Laboratories pursuant to a written contract with Trident Pharmaceuticals, or whether they packaged by OPD Laboratories for AAH Pharmaceuticals plc, (“AAH”);
(2)	whether OPD Laboratories are liable for losses suffered when drugs which had not yet been supplied to them, and which either had to be destroyed or packaged elsewhere;
(3)	whether Trident Pharmaceuticals have suffered losses in the sum of £480,557.06.
Evidence
7.	I have read the first and second witness statements of Wendy Hall (“Ms Hall”), Head of Legal for the Celesio group of companies which includes Trident Pharmaceuticals and AAH.  I have also read the first and third witness statements of Manish Shah (“Mr Shah”), director of OPD Laboratories.
8.	There was a dispute between the parties about whether I should take into account the second witness statement of Mr Shah which was served out of time, and which it was common ground contained argument and submissions and referred to a without prejudice meeting.  In the event Mr Buttimore made it plain that he was only relying on some paragraphs and I have read those paragraphs.
Relevant principles
9.	Under CPR 3.4 a defence may be struck out if it fails to show any reasonable grounds for defending the action.  
10.	Under CPR Part 24.2 summary judgment may be ordered where there is no real prospect of OPD Laboratories succeeding on its defence, and there is no other reason for trial.  An application for summary judgment should not involve an impermissible mini-trial.  There may be a real prospect of successfully defending an action, even it is improbable, although in such circumstances granting conditional leave to defend is a likely order, see generally the White Book at 24.2.3.
Corporate arrangements
11.	It is necessary to say a bit about corporate arrangement relating to both Trident Pharmaceuticals and to OPD Laboratories.  
12.	Trident Pharmaceuticals is part of a group of companies ultimately owned by Celesio AG.  Another company in the group is AAH.  Ms Hall stated in paragraph 24 of her second witness statement that AAH was a full line wholesaler and did not import products or deal in parallel imports.  
13.	It appears, from paragraph 34 of Ms Hall’s first witness statement, that the Celesio group, including Trident Pharmaceuticals and AAH, share invoice and payment facilities.  It is common ground that OPD Laboratories invoiced AAH for its repackaging services.  Ms Hall says that was to be done as an “administrative matter”, but that the relevant services were performed by OPD Laboratories for Trident Pharmaceuticals.
14.	OPD Laboratories is wholly owned by Orion Trust, which is a shareholder in Sigma Pharmaceuticals plc (“Sigma”).  
15.	There is evidence, addressed below, which shows that the names of Sigma and OPD Laboratories were used on an interchangeable basis, even though it was common ground that the relevant services were provided by OPD Laboratories.  There is also evidence showing that AAH was invoiced for some of the pharmaceutical products which were imported from other jurisdictions, including Greece.
No strike out
16.	I can deal with this matter first.  The Defence pleads a reasonable ground for defence, by alleging that there was no contractual relationship between Trident Pharmaceuticals and OPD Laboratories at all, see paragraph 4 and 6(3) of the Defence, and no duty of care.  This may not be a sustainable defence on the evidence, but if it is true, it would be a reasonable ground for defence.  
17.	Mr Morrison submitted that that part of the defence which pleaded a failure to mitigate losses was liable to be struck out, because the claim was made under an indemnity clause, and there is no obligation to mitigate losses for claims under an indemnity clause.  However the application notice did not specify any particular paragraphs of the defence, and Mr Morrison recognised that this submission could be addressed under the application for summary judgment.  In these circumstances the application for striking out part of the defence was not pursued, and I dismiss that application.  
Contract with OPD Laboratories
18.	According to Ms Hall there had been dealings between OPD Laboratories and Trident Pharmaceuticals for a number of years, but in 2009 it was decided to put matters on to a formal basis.  According to Mr Shah the dealings started between AAH and Sigma.  AAH had wanted to be involved in parallel importing, the order would be placed by AAH overseas, the drugs delivered by the overseas company to Sigma, who would pay for them, the drugs would be packaged by OPD Laboratories, and then supplied to AAH who would pay for the drugs and packaging.  Mr Shah said that the arrangement changed over the years, and in the end AAH ordered their own products, delivered it to OPD Laboratories, who repackaged it, and invoiced AAH.
19.	The evidence before me clearly establishes that there was a contract between Trident Pharmaceuticals and OPD Laboratories, as appears from paragraphs 17 to 26 of the first witness statement of Wendy Hall.  
20.	On 6 November 2009 Sam Goodier (“Ms Goodier”) of Trident Pharmaceuticals emailed Colin Turrell (“Mr Turrell”) of OPD Laboratories talking about a forthcoming meeting and raising the issue of a contract, and attaching a draft contract.  After the meeting the contract was left with Mr Turrell who discussed it with Mr Shah.  Emailed comments were made on the contract on 10 November 2009, and a revised contract was sent on 13 November 2009.  On 17 November 2009 Mr Turrell emailed Ms Goodier to say “Manish has signed the contract”.  The signed contract has been exhibited.    
21.	I therefore find that there was a contract between Trident Pharmaceuticals and OPD Laboratories.  It is fair to note that, by the time of the hearing before me, OPD Laboratories accepted that there was a contract between Trident Pharmaceuticals and OPD Laboratories.  
Relevant contractual provisions
22.	In the contract the company was defined as Barclay Pharmaceuticals Limited trading as Trident Pharmaceuticals.  It is common ground that the reference to TF in the contract is a reference to “Transfer Form”.  Material terms of the contract were: 
“1.1(a) company means Barclays Pharmaceuticals trading as Trident Pharmaceuticals;
…
(c) contract means the contract between the company and the repacker for the re-packing of goods consisting of the Technical Agreement, the TF, these conditions, any other documents (or parts thereof) specified in the TF and the repacker’s acceptance of the TF;
…
2.1 All goods delivered by the company to the repacker for re-packing are delivered subject to these conditions, which shall be the sole terms and conditions of any re-packing by the repacker for the company.  … the acceptance of the goods by the repacker shall indicate unqualified acceptance of these conditions.
…
3.1 The repacker warrants to the company that: (b) the repacker holds and will continue to hold all relevant and required parallel import licences and permits in order to carry out the re-packing (“the licences”).
…
4.9 The repacker shall notify the company as soon as reasonably practicable if for any reason whatsoever it is unable to repack the goods as set out in the TF and shall await further instructions from the company before carrying out any re-packing of goods which is not consistent with the instructions in the TF.
…
6.2 Unless otherwise agreed in writing, the company shall make payment for the re-packing in full not later than the end of the month after the month in which the statement for the re-packing is dated. 
…
11.1 The repacker shall indemnify the company against all … costs, charges, … losses and expenses suffered or incurred by the company, whether or not reasonably foreseeable, arising, whether directly or indirectly, from or in connection with: (a) the … omissions of the repacker, its servants, agents or contractors in supplying, delivering, packaging … the goods or performing the services; … (c) any … failure of the services to comply with any law or regulation applicable to them.”
 
	  Effect of terms
23.	In the light of these contractual terms if Trident Pharmaceuticals establish that it delivered pharmaceutical products to OPD Laboratories for repacking, and OPD Laboratories packed them without the relevant licences, OPD Laboratories would have acted in breach of the warranty set out in paragraph 3.1(b) of the contract.  
24.	The proper interpretation of the indemnity clause is more difficult.  The literal wording of clause 11.1(a) provides that OPD Laboratories should indemnify Trident Pharmaceuticals for any loss suffered by Trident Pharmaceuticals caused by any omission of OPD Laboratories.  This is regardless of whether the omission was unlawful or otherwise wrongful.  On behalf of Trident Pharmaceuticals Mr Morrison submitted that there would have been an implied limitation that the omission had to be wrongful, and OPD Laboratories had wrongfully omitted to obtain, or retain, the relevant licence.  The proper extent of the indemnity raises matters which are arguable on both sides.
Abandoned defences
25.	It is relevant to record, as noted in paragraph 16 above, that it had been pleaded on behalf of OPD Laboratories in the defence that there were no contractual relationships between Trident Pharmaceuticals and OPD Laboratories.  It might also be noted that other, and different defences, no longer pursued, had been raised in correspondence or the evidence on behalf of OPD Laboratories.  These included claims of frustration, and unreasonable contract terms.  
26.	The continuing, and changing basis on which OPD Laboratories has justified its refusal to pay Trident Pharmaceuticals is obviously capable of adversely affecting the reliability of what is now said on behalf of OPD Laboratories.  However this is not the trial of the action, and, in the end, Mr Buttimore’s points did not depend on the credibility of witness evidence to be adduced on behalf of OPD Laboratories, and I turn therefore to address the issues.
Some relevant drugs were packaged by OPD Laboratories pursuant to a written contract with Trident Pharmaceuticals, and some might have been packaged by OPD Laboratories for AAH
27.	OPD Laboratories submit that, although it is now accepted that there was a contract between Trident Pharmaceuticals and OPD Laboratories, the documents do not show that all of the pharmaceutical products were delivered and packaged for Trident Pharmaceuticals.  Reliance is placed on documents, exhibited by Trident Pharmaceuticals, showing that AAH apparently had paid for some of the pharmaceutical products which were packaged.  
28.	Trident Pharmaceuticals submit that there is nothing in this new point.  Mr Morrison noted that it would be unusual for parties to have gone to the effort of concluding a contract providing for repackaging services and not to deliver pharmaceutical products pursuant to the contract.  I accept this point as a general proposition, but it provides only a starting point for an assessment of what occurred, and does not enable me to determine whether the point made on behalf of OPD Laboratories is arguable.
29.	Clause 2.1 of the contract is relevant.  That provides that all goods delivered by Trident Pharmaceuticals to OPD Laboratories for repacking would be subject to the conditions of the contract.  The conditions of the contract include the relevant warranty.  This means that the critical question is whether the goods were delivered by Trident Pharmaceuticals to OPD Laboratories for repacking.
30.	In order to show that the goods were delivered by Trident Pharmaceuticals, reliance is placed on proof of delivery notes, such as at p. 206 of the bundle.  These are on Trident Pharmaceuticals note paper, and are headed “Trident – Proof of Delivery”.  They give a TF (Transfer Form) number, and details of the load, for example 1 pallet.  ODP Laboratories make the proper point that the name for the delivery is “Sigma Pharms”, and not OPD Laboratories, but it is common ground that the pharmaceutical products were delivered to OPD Laboratories, and nothing turns on the point that “Sigma Pharms” is used.  
31.	The TF (transfer forms) are also relied on by Trident Pharmaceuticals.  These show, for example p.199 of the bundle, the pharmaceutical products actually delivered.  The name Trident appears in the top left corner of the TF.  It is fair to note that the supplier is again noted to be “Sigma Pharms”.  There are order references given, beginning with “FSG” followed by a number, but these have not been cross referred to orders.  
32.	Trident Pharmaceuticals also rely on a Technical Agreement between OPD Laboratories and Trident Pharmaceuticals dated 24 February 2012.  This provides for OPD Laboratories to receive product and handle it in accordance with licence requirements.  The contract dated 17th November 2009 does refer to a technical agreement, but the Technical Agreement before me is dated 24 February 2012 and therefore post dates the relevant recall and the contract dated 17th November 2009.  It does not appear that the Technical Agreement for the contract dated 17th November 2009 has been located.
33.	There is contemporaneous evidence that the deliveries were made by Trident Pharmaceuticals.  In an email dated 10 March 2011, the day on which the recall was announced, Mr Shah responded to an email from Nia Evans of AAH in which it was noted that a recall had been issued, and that standard fees would be charged.  Mr Shah said “Stock was labelled by OPD for Trident under a technical agreement and in most cases we will be able to rework on the lines and return the packs to Trident …”.  
34.	 In later correspondence Everatts, solicitors acting on behalf of OPD Laboratories, in a letter dated 7 June 2013, recorded that “the arrangement between the parties … was that all labelling undertaken on behalf of Barclays Pharmaceuticals Limited was … to be invoiced to AAH Pharmaceuticals plc”.  In a further letter dated 12 July 2013 Everatts expanded on their instructions stating “the arrangement between our respective clients was that whilst the labelling was undertaken on behalf of Barclay Pharmaceuticals Limited, OPD were requested to submit all invoices for the work undertaken to AAH Pharmaceuticals plc.  We have provided you with the full details of the amounts owed to OPD under this arrangement …”.  These statements provide strong support for the proposition that the pharmaceutical products were delivered by Trident Pharmaceuticals to OPD Laboratories, albeit that invoices for the work done by OPD Laboratories were to be delivered to AAH.
35.	OPD Laboratories highlight invoices showing that AAH Pharmaceuticals paid for some of the pharmaceutical products.  This includes p.228 of the bundle where there is an invoice from El-Pharm Ltd, pharmaceutical wholesalers in Greece, addressed to AAH.  There is a TF number and FSG number in manuscript on the top of the document, and it appears that the invoice relates to some of the relevant pharmaceutical products.  Some of the invoices from the suppliers appear to be addressed to Trident Pharmaceuticals (p.231 of the bundle), and some are addressed to “Trident Pharmaceuticals (AAH)” (p.241 of the bundle) and “AAH Pharmaceuticals Ltd – Trident Pharmaceuticals” (p.257 of the bundle).  There are others showing that delivery is to be made to Trident Pharmaceuticals but the invoice is to AAH (p.278 of the bundle).  
36.	OPD Laboratories submit that, in the light of some of the original invoices being addressed to AAH, there is therefore confusion about whether this was AAH’s pharmaceutical product, and not Trident Pharmaceutical’s pharmaceutical product.  Mr Buttimore notes that, although the explanation might be agency, that is not the explanation offered.  Mr Morrison properly makes the point that this issue has only been raised at the very last, and that Trident Pharmaceuticals have not had an opportunity to deal with it fully on the evidence.
37.	In my judgment there is clear evidence that some of the pharmaceutical products were invoiced and supplied to Trident Pharmaceuticals, who then delivered it to OPD Laboratories for repackaging.  In these circumstances, for those products, OPD Laboratories were packing pursuant to the contract, and were in breach of warranty by failing to have the relevant licence.
38.	The exact relationship between AAH and Trident Pharmaceuticals is not clear on the evidence before me.  It is also arguable, although improbable, that some of the pharmaceutical products were invoiced and supplied to AAH, and then delivered by Trident Pharmaceuticals on behalf of AAH to OPD Laboratories for repackaging.  It may be that AAH was acting as an agent of Trident Pharmaceuticals throughout, for the purposes of paying invoices, but, on the evidence as it presently stands, it is arguable that, at least for some of the product, Trident Pharmaceuticals might have been acting only as a delivery agent to OPD Laboratories of AAH’s product.  
39.	It is not possible, on the evidence before me, to determine the extent to which this potential defence extends.  I note that Mr Buttimore submitted that it applied to about half of the pharmaceutical products supplied, and that Mr Morrison did not dissent from that figure.  I will address the effect of these findings below.
Arguable issues relating to product not yet supplied
40.	Although the Particulars of Claim is pleaded, at paragraph 10, on the basis that all of the pharmaceutical product had been delivered by Trident Pharmaceuticals to OPD Laboratories, it became clear at the hearing that claims were being made for costs incurred on products yet to be supplied to OPD Laboratories that had to be repackaged elsewhere at additional costs (said to be £27,271.85) and for the loss of products yet to be supplied to OPD Laboratories that could not be repackaged before the relevant expiry date (said to be £5,439.60).
41.	This gave rise to a point that arose only at the hearing, namely whether OPD Laboratories are liable for breach of warranty in respect of product which has not yet been delivered.  OPD Laboratories point to the express terms of clause 2.1 of the contract, which states that “all goods delivered … are delivered subject to these conditions” and make the point that the conditions do not apply to product yet to be delivered.  Trident Pharmaceuticals say that OPD Laboratories are in breach of warranty by failing to have the relevant licence for previous products supplied, and that the losses for product not yet supplied are a foreseeable loss caused by the breach of warranty.
42.	In my judgment these points are arguable on both sides.  I will address the effect of this finding below.
Extent of the losses
43.	Mr Morrison made the point that liabilities for sums under an indemnity clause is a debt, and that all of the sums claimed by Trident Pharmaceuticals had been proved, and should be ordered to be paid as a debt.  As an alternative he submitted that I should order damages to be assessed for breach of warranty, and require an interim payment to be made.  I have noted above that the interpretation of the indemnity clause raises arguable issues.  
44.	There are some arguable issues about the extent of the losses claimed.  For example there is a claim for loss of management time, and there are decided cases showing some of the difficulties of proving recoverable losses in that area.  However the overwhelming majority of the losses claimed by Trident Pharmaceuticals appear to be well-founded.
Conclusion 
45.	Although I have found that there is clear evidence that some of the pharmaceutical products delivered by Trident Pharmaceuticals were invoiced and supplied to Trident Pharmaceuticals, who then delivered it to OPD Laboratories for repackaging, and that OPD Laboratories were in breach of warranty by failing to have the relevant licence, it is also arguable, although improbable, that some of the pharmaceutical products were invoiced and supplied to AAH, which were then delivered by Trident Pharmaceuticals to OPD Laboratories for repackaging on behalf of AAH.  In the light of this finding it is not desirable to determine the points about: the proper interpretation of the indemnity clause; and whether the claim for breach of warranty extends to cover products not yet delivered to OPD Laboratories.
46.	In these circumstances, and given: (1) my finding that the main ground of defence is improbable; (2) my finding that the main arguable ground of defence does not extend to the whole of the claim; and (3) the abandoned defences advanced by OPD Laboratories; I will only grant OPD Laboratories conditional leave to defend.  
47.	It appears, following discussions at the hearing, that OPD Laboratories will be able to comply with any condition that I impose.  I should reduce the amount of any condition that I minded to impose to reflect the £60,915.87 which is owed to OPD Laboratories for outstanding invoices.  In the light of my finding that the defence related to the product yet to be supplied (amounting to £32,711.45) is arguable, it seems to me fair to take out this sum from the amount that might be otherwise ordered to be paid as a condition of granting leave to defend.  This leaves a total of £386,929.74.  
48.	In the light of the arguments properly raised on quantum, including those relating to staff time, and to take an overall approach, I will order a payment into Court to be made of £360,000, by 4 pm on Friday 11 July 2014 as a condition of granting OPD Laboratories leave to defend this claim.  The parties are to attempt to agree a form of order to reflect this judgment, failing which I will hear further submissions.