Court Determines Quantum of Damages in SciPharm Sarl v Moorfields Eye Hospital Case

Citation: [2024] EWHC 5 (Comm)
Judgment on

Introduction

In the High Court of Justice case “SciPharm Sarl v Moorfields Eye Hospital NHS Foundation Trust,” heard before MR ANDREW HOCHHAUSER KC, the court grappled with determining the quantum of damages following a breach of a pharmaceutical drug development agreement (DA). This article will dissect the key topics, legal principles, and quantification of damages that were central to the judgment, signifying the legal components integral to the dispute and their broader implications for commercial contract law in the UK.

Key Facts

SciPharm Sarl (the Claimant) entered into a DA with Moorfields Eye Hospital NHS Foundation Trust (the Defendant) on December 20, 2011. The Defendant was contracted to manufacture validation batches of a pharmaceutical drug, comply with Good Manufacturing Practices (GMP), and contribute to the Marketing Authorisation Application (MAA). The Defendant failed to complete the development, leading to non-compliance with GMP and the subsequent closure of its facility. The Claimant sought damages for costs incurred in contracting a third-party manufacturer to complete the stability testing and validation process necessary for the MAA. The court had previously determined the Defendant’s liability, and this judgment concerns the quantum of losses suffered by the Claimant due to the Defendant’s breach.

The judgment revolves around interpreting contractual obligations and establishing the consequential losses directly attributable to the breach of those obligations, invoking principles well-known in contract law, such as direct damages and benefit of the bargain. The Claimant is entitled to the financial equivalent of what they would have received had the Defendant complied with the contractual terms.

The case explores the duty of the Claimant to mitigate its losses and how costs must be substantiated by invoices or other evidence of payment. The principles from the case of Gestmin v Credit Suisse (2013) are applied, emphasizing reliance on documentary evidence over the testimony of witnesses, due to the nature of human memory being unreliable over long periods.

A significant point of contention was whether the Claimant should give credit for costs the Defendant would have charged – proposition rejected by the court since the Claimant’s obligation was to redo the validation process accurately, and Defendant’s hypothetical charges in this emergency were speculative.

The judge also considers whether the incurred costs attributed to production and documentation alongside stability studies were a direct consequence of the Defendant’s failure to fulfill its obligations under the DA.

Outcomes

The court awarded damages to the Claimant under various heads of claimed losses. The judgment meticulously inspected each claimed item, distinguishing between those directly linked to the breach from those that were either unsubstantiated or went beyond the obligations outlined in the DA. The court reduced the quantum claimed by the Claimant by eliminating costs that were not convincingly demonstrated to be payable or actually paid by the Claimant or were beyond the original scope of the DA.

The damages were calculated based on:

  • The technical transfer from Moorfields
  • Testing of Active Pharmaceutical Ingredient (API)
  • Production and documentation
  • Validation
  • Stability studies (both initial and finalisation)
  • Costs associated with producing an emergency drug batch.

However, certain amounts were dismissed due to the Claimant’s inability to present invoices or other proof of payment, showing strict adherence to evidentiary standards.

Conclusion

In this meticulous judgment, MR ANDREW HOCHHAUSER KC adjudicated the complex task of quantifying losses from a breach of a pharmaceutical development agreement. The court underscored the nexus required between the breach and the incurred costs, scrutinizing each claim to ensure validity in the context of commercial exigencies and contractual stipulations, thereby maintaining a careful balance between the redressal of actual losses and preventing unjust enrichment. The case reaffirms the essence of contract law principles in commercial disputes and sets a precedent for the level of detail and substantiation required in claiming damages through the courts.