Practice and procedure - Application for joinder - Undertaking as to damages - Usual undertaking contained in practice direction - Whether non-party included in undertaking - Whether undertaking would apply retrospectively

Interpretation Act 1984 (WA), s 44(1)

Supreme Court Act 1935 (WA), s 4

Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249

Bond Brewing Holdings Ltd v National Australia Bank Ltd (No 2) [1991] VicRp 31; [1991] 1 VR 386; (1991) 1 ACSR 445

European Bank Ltd v Evans [2010] HCA 6; (2010) 240 CLR 432

General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125

Ketteman v Hansel Properties Ltd [1987] AC 189

Review Australia Pty Ltd v RedBerry Enterprises Pty Ltd [2003] FCA 1009

Smith Kline & French Laboratories (Australia) Ltd v Secretary Department of Community Services & Health (1989) 89 ALR 366

Smith Kline Beecham Plc v Apotex Europe Ltd [2005] EWHC 1655; [2006] 1 WLR 872

Smith Kline Beecham Plc v Apotex Europe Ltd [2007] Ch 71

Universal Music of Australia Pty Ltd v Cooper [2004] FCA 78

1 LE MIERE J: The plaintiff carried on business providing services to retail pharmacies under or by reference to the name 'Pharmacy 777'. Ian Charles Hamilton and Donna Lorraine Pearson (the applicants) licensed the defendant to use the name 'Pharmacy 777 Mandurah'. In 2006 the defendant started to operate a pharmacy in Dower Street, Mandurah under the name 'Pharmacy 777 Mandurah Car Park Chemist'. The plaintiff commenced this action to restrain the defendant from using the name 'Pharmacy 777' or any similar name and for damages for loss and damage it claims to have suffered by reason of the defendant's conduct.

2 On 6 July 2006, upon the plaintiff giving the usual undertaking as to damages, the court made an order for an interlocutory injunction restraining the defendant from using the name 'Pharmacy 777' or any similar name. The injunction was discharged on 26 October 2009. On 13 January 2010 the applicants and the defendant applied for an order that they be entitled to enforce the interlocutory undertaking as to damages given by the plaintiff and for an order that there be an inquiry as to damages suffered by the defendant and the applicants.

3 The applicants now apply to be joined as defendants. The plaintiff opposes the joinder on the grounds that the applicants are not entitled to enforce the interlocutory undertaking as to damages because the undertaking does not apply to them and it would be futile to join the applicants as defendants because an order joining them as defendants would not operate retrospectively so as to entitle them to enforce the undertaking as to damages.

4 In 1967 Michael Dillon established a business having the name 'Pharmacy 777' at a premises at 777 Canning Highway, Applecross. Since that time Mr Dillon himself, and through various companies and in partnership with various persons, developed businesses with the same name and franchised the use of that name at various locations in Western Australia. At some stage before 1991 Mr Dillon was in partnership with Mr Hamilton in relation to the Pharmacy 777 business activities. Mr Dillon and Mr Hamilton ended their business relationship in 1991. From then on Mr Hamilton conducted a Pharmacy 777 business in Mandurah pursuant to a licence agreement which he entered into with Mr Dillon on 1 April 1991. In the licence agreement Mr Dillon was described as the licensor and Mr Hamilton as the licensee. The agreement provided that Mr Dillon as licensor granted to Mr Hamilton as licensee the exclusive licence to use the business name in the conduct of a pharmacy business within the city of Mandurah.

5 For about 10 years prior to 2006 the defendant worked for Mr Hamilton and his business partner, Ms Pearson. In 2006 the applicants licensed the defendant to use the name 'Pharmacy 777 Mandurah' at the pharmacy located at Dower Street, Mandurah. In January 2006 the defendant commenced her own pharmacy business in Dower Street.

6 The plaintiff commenced this action asserting that the defendant was passing off her business as that of the plaintiff and that she was engaging in conduct which was misleading or deceptive or likely to mislead or deceive contrary to s 10 of the Fair Trading Act 1987 (WA).

7 The plaintiff applied for an interlocutory injunction. On 6 July 2006, upon the plaintiff giving an undertaking as to damages in the usual form, Templeman J granted an interlocutory injunction restraining the defendant, whether by herself, her servants or agents or otherwise, from using the name 'Pharmacy 777' or any name including the name 'Pharmacy 777' and from holding out that the business conducted by her in Dower Street has any connection with the Pharmacy 777 group of pharmacies. The defendant appealed against the grant of the interlocutory injunction. On 26 September 2006 the Court of Appeal dismissed the defendant's appeal.

8 In or about June 2009 the defendant and Mr Hamilton formed a partnership to operate the Dower Street pharmacy. The defendant applied to discharge the interlocutory injunction on the ground that she was entitled to trade in partnership with Mr Hamilton under the name 'Pharmacy 777 Mandurah'. On 17 September 2009 I made orders by consent varying the interlocutory injunction so as to permit the defendant to operate the Dower Street pharmacy in partnership with Mr Hamilton under the name 'Pharmacy 777 Mandurah'. On 26 October 2009 I discharged the injunction.

9 The plaintiff applied for leave to discontinue the action with no order as to costs on the ground that there was no benefit to the plaintiff to continue with the action because of the changed circumstances. The changed circumstances were that the defendant had entered into partnership with Mr Hamilton and the plaintiff accepted that whilst she operated the Dower Street pharmacy in partnership with Mr Hamilton the defendant was entitled to do so under the name 'Pharmacy 777 Mandurah'. The plaintiff said that the damages that might be ordered in favour of the plaintiff if it succeeded at trial were not likely to be commensurate with the costs of proving those damages. On 24 May 2010 I ordered that the action be discontinued with the costs of the action to be reserved.

10 In the meantime, on 13 January 2010, the defendant and the applicants had applied for orders that they be entitled to enforce the interlocutory undertaking as to damages given by the plaintiff and that there be an inquiry as to the damages suffered by the defendant and the applicants.

11 The present application is by chamber summons entitled 'chamber summons for joinder of parties'. The orders sought by the applicants are:

1. The applicants have leave to join in these proceedings for the purposes of enforcing the undertaking as to damages.
2. The applicants are persons affected by the restraints imposed by the injunctive relief and are entitled to enforce the undertaking.
3. There be an enquiry into damages suffered by the applicants by reason of the restraints imposed by the injunction.

12 Counsel for the applicants submitted that it is unnecessary to determine whether they are entitled to the benefit of the undertaking as to damages for four reasons. The first is that there is already an inquiry underway as to damages and that inquiry includes the applicants. The second is that there is no need for any joinder. The third is that even if there was a need, any question of that kind should be determined at the inquiry itself rather than at this earlier stage. The fourth is that the applicants are entitled to be part of the application for an inquiry as to damages because they either are parties otherwise affected within the terms of the undertaking or in any event that is sufficiently arguable for the application to proceed.

13 The applicants say that they are part of the application for an inquiry as to damages brought by them and the defendant and hence there is no need for them to be joined as defendants. However, it is the applicants who have brought this application to be joined as defendants and notwithstanding the submission that it is unnecessary they have pursued it and I will determine it.

14 Counsel for the applicants, Mr Willinge, submitted that refusing to join the applicants as parties at this stage is to summarily dispose of the matter which is analogous to summary judgment on a preliminary issue. Mr Willinge said that before taking that step the court should bear in mind two well known warnings. The first is against deciding preliminary issues and the second is that summary judgment is to be exercised with caution, particularly in potentially developing areas of the law, and in accordance with the test in General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125. Mr Willinge submitted that at the hearing of the application for an inquiry as to damages the court will be required to determine two things. The first is whether the defendant or the applicants fall within the scope of the undertaking, which will include an assessment of whether they were affected or restrained. The second part of the inquiry will be, in accordance with the decision of the High Court in European Bank Ltd v Evans [2010] HCA 6; (2010) 240 CLR 432, to determine whether the persons within the undertaking suffered loss or damage by reason of the injunction.

15 The plaintiff treated the application as an application that the applicants be added as parties pursuant to O 18 r 6(2)(b) of the Rules of the Supreme Court 1971 (WA). Order 18 r 6(2) provides that at any stage of the proceedings the court may order that any person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon be added as a party. The applicant on a joinder application must show that there is an arguable case sufficient to resist the entry of summary judgment by the parties sought to be joined: Universal Music of Australia Pty Ltd v Cooper [2004] FCA 78, [6] (Tamberlin J). The test is that stated by Barwick CJ at 128 - 129 in General Steel Industries Inc v Commissioner Railways (NSW); Universal Music of Australia Pty Ltd v Cooper, [7] (Tamberlin J); Review Australia Pty Ltd v RedBerry Enterprises Pty Ltd [2003] FCA 1009, [5] (Heerey J). It would be futile to order that a person be joined as a defendant if the material before the court disclosed that if the person, having been joined as a defendant, applied for summary judgment the application would succeed.

16 In General Steel Industries the defendants by summons sought to set aside the writ and statement of claim, or alternatively, to stay further proceedings upon the ground that the plaintiff had no viable cause of action against them. Barwick CJ held that the plaintiff's lack of a cause of action being demonstrably clear the statement of claim should be struck out and the action dismissed. Barwick CJ said:

The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. There is no need for me to discuss in any detail the various decisions, some of which were given in cases in which the inherent jurisdiction of a court was invoked and others in cases in which counterpart rules to Order 26, r 18, were the suggested source of authority to deal summarily with the claim in question. It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'.

At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or 'so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument'; 'so to speak apparent at a glance'.

...

Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed (128 - 130).

17 I will first consider whether there is a sufficiently arguable case that the applicants are entitled to the benefit of the undertaking.

18 On 26 June 2006 the plaintiff gave the following undertaking:

The plaintiff undertakes to the court that it will pay to any party restrained or affected by the restraints imposed by this interlocutory injunction, or any interim continuation thereof, such compensation as the court may in its discretion consider in the circumstances to be just, such compensation to be assessed by the court, or in accordance with such directions as the court may make and to be paid in such manner as the court may direct.

19 The order for an interlocutory injunction made by Templeman J on 6 July 2006 stated that it was made 'Upon the plaintiff undertaking to the court that it will pay [compensation] to any party restrained or affected by the restraints imposed by this interlocutory injunction, or any interim continuation thereof'.

20 The authors of the fourth edition of Meagher, Gummow & Lehane's Equity Doctrines & Remedies say at [21-410] that the importance of an undertaking is immense, as in the absence of an undertaking a defendant who is ultimately victorious at the final hearing has no recourse to recover the damages he may have incurred from complying with an interlocutory injunction: Chisholm v Rieff (1953) 2 FLR 211; Bond Brewing Holdings Ltd v National Australia Bank Ltd (No 2) [1991] VicRp 31; [1991] 1 VR 386; (1991) 1 ACSR 445. In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249 Gibbs J said that the object of requiring a plaintiff who seeks an interlocutory injunction to enter into an undertaking as to damages is to attempt to ensure that a defendant will receive compensation for any loss which he suffers by reason of the grant of the injunction if it appears in the event that the plaintiff was not entitled to obtain it (311). His Honour said that the insistence upon the giving of an undertaking 'is a very important, if not an essential, means of preventing injustice from being done by the court' when it makes an order at an interlocutory stage before the rights of the parties have been finally determined. Gibbs J said that the appellant could not obtain damages for any loss which resulted to it by reason of the injunction because at the time it was not a defendant and was not entitled to the benefit of the undertaking (314). Stephen J said that a plaintiff who sues for an injunction and obtains interlocutory relief, giving an undertaking to the court as the price of that relief, commits no wrongful act when, at the trial, he fails to obtain any perpetual injunction but, if as a result of the grant of interlocutory relief, the defendant has been harmed there will have been an injustice and, an undertaking having been given, the court 'will thereby have been armed with jurisdiction, otherwise lacking' to right that injustice and compensate the defendant for the harm done to him (319 - 320).

21 Dr Spry in the eighth edition of The Principles of Equitable Remedies says that the requirement of an undertaking before damages can be awarded appears to be a matter of practice rather than jurisdiction and although it has been held that damages cannot be awarded to a defendant in the absence of an undertaking, the preferable view is that this limitation arises not from any lack of power but by virtue of the practice of the court. In 'The Undertaking in Damages' (2006) LMCLQ 181 S Gee QC says that the High Court of Chancery had no general jurisdiction to award compensation against a plaintiff who had obtained an interlocutory injunction but then failed in his substantive claim or was shown to be not entitled to the order. Mr Gee writes that the solution has been one designed by the judges to take undertakings to the court which would result in proper payments being made, and which, if broken, expose the undertaker to being held in contempt. Whether the undertaking is the source of the court's jurisdiction to award compensation or a rule of practice, it is established that an Australian court will not award damages to a successful defendant in the absence of an undertaking. In this case the applicants claim to be entitled to compensation by reason of the undertaking given by the plaintiff.

22 As the source of the entitlement to compensation is the undertaking, the terms of the undertaking are critical in determining whether the applicants may recover compensation for loss or damage resulting from the interlocutory injunction. The terms of the undertaking given by the plaintiff are that it will pay compensation 'to any party restrained or affected by the restraints imposed by this interlocutory injunction'. The applicants are entitled to enforce the undertaking if, and only if, they are 'any party who is restrained or affected by the restraints imposed' by the interlocutory injunction.

23 The plaintiff gave the undertaking in accordance with the practice direction then in force. The practice direction stated:

1. Where a party is subjected to a restraint imposed by an interlocutory injunction ... the party having the benefit of the restraint will generally be required to give to the court the usual undertaking as to damages in the terms set out hereunder ...

1. ... In appropriate cases, the court may relieve a party from the requirement to give the usual undertaking or may require modification or extension of the usual undertaking.

1. The form of the usual undertaking is as follows:

The plaintiff or defendant (as the case may be) undertakes to the Court that he will pay to any party restrained or affected by the restraints imposed by this interlocutory injunction ... such compensation as the court may in its discretion consider in the circumstances to be just ...

24 The critical question is whether 'any party' includes a person restrained or affected by the restraints imposed by the injunction who is not a party to the action. In general usage the word 'party' has a range of meanings. The Macquarie Dictionary definition of 'party' includes 'a person immediately concerned in some transaction or legal proceeding' and 'a person in general'. The word 'party' must take its meaning from its context. In this case it appears in a formal undertaking given to the court in the form required by the Practice Note.

25 By virtue of s 44(1) of the Interpretation Act 1984 (WA) words used in the Rules have the same meaning as is given to them by s 4 of the Supreme Court Act 1935 (WA). Section 4 of the Supreme Court Act provides that unless the context otherwise requires 'party' includes every person served with notice of or attending any proceeding, although not named on the record. Practice directions are one means by which the court regulates its procedure. Practice directions must be read in conjunction with the relevant legislation, including the Supreme Court Act and the Rules, and words in practice directions should be given the same meaning as is given to them in the Supreme Court Act or the Rules unless the context otherwise requires. There is nothing in the context of the practice direction that requires the word 'party' to be given a different meaning.

26 If 'party' is given its meaning in s 4 of the Supreme Court Act then neither of the applicants is a 'party'. The applicants were not served with any notice of and did not attend any proceeding before the court made the interlocutory injunction. The applicants were not served with notice of and did not attend any proceeding prior to their application for an inquiry as to damages. By that time the injunction had been discharged.

27 In Smith Kline & French Laboratories (Australia) Ltd v Secretary Department of Community Services & Health (1989) 89 ALR 366 the applicants had been granted an interlocutory injunction upon the applicant's undertaking 'to pay to any party adversely affected by the interlocutory injunction ... such compensation (if any) as the court thinks just'. Alphapharm Pty Ltd was not a party to the proceedings and was not enjoined by the interlocutory injunction but was affected by the interlocutory injunction. Alphapharm applied for an order that the interlocutory injunction be varied so as not to interfere with its application for approval of a pharmaceutical brand. On the hearing of Alphapharm's motion it became apparent that Alphapharm would accept the continuation of the interlocutory injunction without amendment provided that it was assured that it had the benefit of the undertaking as to damages. Alphapharm sought a ruling from the court that it was already the beneficiary of the undertaking because it was, within the meaning of the undertaking, a 'party'. If that transpired not to be the true position then Alphapharm sought an extension of the undertaking so as directly to extend to it. Gummow J first considered the question whether Alphapharm was already the beneficiary of the undertaking given by the applicants because it was to be identified as 'any party'. His Honour said:

One meaning of the term 'party' in ordinary usage is one individual considered in some relation to another individual or individuals. In that wide sense, Alphapharm may be a party adversely affected by the interlocutory injunction. However, I am satisfied that that is not the meaning to be given to the term in question as it appears in Practice Note No 3 or in the express terms of the undertaking given on 10 November 1987. In my view, in order to be a party there referred to, one must be a party to the proceedings in question. The term 'party' is used in this sense in the Rules of Court; see, for example, O 6 (369).

28 Gummow J considered that construction to be consistent with the course of development of the undertaking as to damages over the previous century. His Honour went on to refer to a provision of the then current New South Wales Supreme Court Rules which provided that the 'usual undertaking as to damages', if given to the court in connection with any interlocutory order or undertaking, is an undertaking to the court to submit to such order (if any) as the court may consider to be just for the payment of compensation, to be assessed by the court or as it may direct, to any person, whether or not a party, affected by the operation of the interlocutory order or undertaking or of any interlocutory continuation, with or without variation, of the order of undertaking. Gummow J said:

This stands in plain contrast to the terms of Practice Note No 3 in this court, and, in my view, indicates the measure of the plain words that would have been necessary if Alphapharm successfully were to bring itself within the operation of the undertaking given in the terms of that accepted by the court in these proceedings on 10 November 1987. For these reasons, I concluded that Alphapharm should not succeed on the first branch of its argument (371).

29 In determining the meaning of a word or phrase in a document the court is not bound by the interpretation placed on the same word or phrase in another document by another court. Since the latter court was only saying what the words before it meant, its decision cannot be conclusive as to the meaning of another similar provision. Nevertheless, Gummow J was considering the same words, 'any party', in a similar context and the decision is of assistance in determining the meaning of those words in the undertaking given by the plaintiff in this case.

30 Counsel for the applicants sought to distinguish Smith Kline & French Laboratories on the ground that the terms of the undertaking in this case are different from the terms in Smith Kline & French Laboratories. In that case the undertaking was to pay compensation 'to any party adversely affected by' the interlocutory injunction. In this case the undertaking is to pay compensation to 'any party restrained or affected by' the restraints imposed by the interlocutory injunction. The terms of the undertakings are different but the difference is not material to the point in issue. The undertaking given by the plaintiff in this case extended to any party 'restrained' by the restraints imposed by the injunction as well as any party 'affected' by the restraints imposed by the injunction, whereas in Smith Kline & French Laboratories the applicants had undertaken to pay compensation only to any party 'adversely affected' by the injunction. The injunction did not restrain the applicants in this case from doing anything. It restrained only the defendant. For the purposes of the argument I assume that the applicants were 'restrained or affected by' the restraints imposed by the injunction just as Alphapharm was 'adversely affected' by the injunction granted in Smith Kline & French Laboratories. The crucial point is not whether the applicants were restrained or affected by the restraints imposed by the injunction, it is whether they are to be identified as 'any party'. The reasoning of Gummow J applies equally to the undertaking in this case as it did to the undertaking in Smith Kline & French Laboratories.

31 Counsel for the applicants submits that the proper or preferable interpretation of the words 'any party restrained or affected' in this case is that they include persons other than a party to the proceeding. Counsel submits that, apart from the plaintiff, there was only one party and that party was expressly restrained by the injunction. So, counsel submitted, in ordinary grammar the form of the undertaking extended beyond simply parties restrained. There was a disjunctive 'or affected' counsel submitted. Counsel submitted that that interpretation was supported by the circumstances of the application for an interlocutory injunction and the evidence before the court in support of it. There was evidence that the applicants had licensed the defendant to use the Dower Street pharmacy. So, it was submitted, it was foreseeable that some loss may be occasioned to the applicants by the defendant not being able to occupy or use the pharmacy under the name 'Pharmacy 777 Mandurah'.

32 I do not accept that argument. The undertaking given by the plaintiff was in the form of the usual undertaking as to damages prescribed in the then current practice direction. The practice direction provided that the party having the benefit of a restraint imposed by an interlocutory injunction will generally be required to give to the court the usual undertaking as to damages in the terms set out in the practice direction. The plaintiff gave an undertaking in the form of the usual undertaking set out in the practice direction. The words in a standard or prescribed form should be given the same meaning and not vary according to the circumstances of each case. The undertaking was given by the plaintiff to the court. Whatever passed between the plaintiff, the defendant and other persons could not affect the scope of the undertaking given to the court. The proper interpretation of an undertaking is not a matter of ascertaining the mutual intention of the parties. In Smith Kline Beecham Plc v Apotex Europe Ltd [2005] EWHC 1655; [2006] 1 WLR 872 Lewison J said:

It is important to recall at the outset that a cross-undertaking is not given to a party to the proceedings; it is given to the court. As Lord Diplock explained in Hoffman La Roche at 361:

'The undertaking is not given to the defendant but to the court itself. Non-performance of it is contempt of court, not breach of contract, and attracts the remedies available for contempts, but the court exacts the undertaking for the defendant's benefit. ...'

It follows from this that the proper interpretation of a cross-undertaking is not a question of divining the mutual understanding of the parties to the litigation, for the terms of the cross-undertaking are a matter for the court [42] - [43].

33 The court has jurisdiction to require a party seeking an injunction to give an undertaking for the benefit of third parties affected by the injunction: see Smith Kline Beecham Plc v Apotex Europe Ltd [2007] Ch 71, [31] (Jacob LJ, Sir Andrew Morritt C & Moore-Bick LJ concurring). Practice note CM14 issued by the Federal Court Chief Justice on 25 September 2009 provides that the usual undertaking as to damages if given to the court in relation to any interlocutory order made by it is an undertaking to submit to such order (if any) as the court may consider to be just for the payment of compensation to be assessed by the court or as it may direct, to any person, whether or not a party, adversely affected by the operation of interlocutory order. Rule 25.8 of the Uniform Civil Procedural Rules 2005 of New South Wales is in similar terms and refers to the payment of compensation to 'any person (whether or not a party) affected by the operation of the interlocutory order'. In the United Kingdom practice direction 25A - Interim Injunctions provides in [5.1] that any order for an injunction, unless the court orders otherwise, must contain an undertaking by the applicant to the court to pay any damages which the respondent sustains which the court considers the applicant should pay. Paragraph 5.1A provides that when the court makes an order for an injunction, it should consider whether to require an undertaking by the applicant to pay any damages sustained by a person other than the respondent, including another party to the proceedings or any other person who may suffer loss as a consequence of the order. Prior to the making of practice directions in jurisdictions that require a party seeking an interim injunction to give an undertaking for the benefit of third parties or providing for the court to consider whether to require such an undertaking, it had always been assumed that a person who is not a party to the proceedings does not have a claim as of right against a party who obtained a 'wrongful' interim injunction which caused him expense or damage: Smith Kline Beecham Plc v Apotex Europe Ltd, [30] (Jacob LJ).

34 The practice direction current when the plaintiff gave its undertaking stated that in appropriate cases the court may require modification or extension of the usual undertaking. However, the court did not do so. The applicants could have, but did not, apply to the court for the undertaking to be modified or extended so as to apply to them. The applicants could have applied to the court whilst the injunction was in force for them to be made defendants so that the undertaking would apply to them, at least from the time they were joined as defendants. The applicants did not do so.

35 An undertaking as to damages in favour of a 'party' should not be interpreted to confer a benefit on a person who is not a party to the proceedings unless the form of the undertaking or order makes it clear that it is intended to do so. On its proper interpretation the undertaking by the plaintiff in this case to pay compensation to 'any party restrained or affected by the restraints imposed by this interlocutory injunction' applied only to the defendant. The undertaking given by the plaintiff cannot be interpreted or construed as though the reference to 'any party' includes a reference to the applicants. An argument that 'any person' in the undertaking includes the applicants cannot succeed, it is manifestly groundless. To join the applicants as defendants for the purpose of allowing the argument to be made on the hearing of the application for an inquiry as to damages would involve useless expense.

36 I will now consider whether the benefit of the undertaking as to damages would be retrospectively conferred on the applicants if they are joined as defendants to the action.

37 In Smith Kline Beecham Plc v Apotex Europe Ltd Lewison J said:

The cross-undertaking has been described as the 'price' of an injunction. If the applicant is unwilling to pay the price, he does not get the injunction. But as the Tucker case demonstrates the court has no power to compel the giving of a cross-undertaking. Its only choice, if no cross-undertaking is given, is to withhold the injunction.

This is borne out by a number of cases. In F Hoffman-La Roche v Secretary of State for Trade and Industry [1975] AC 295 at 341B Lord Reid said that a claimant 'cannot be compelled to give an undertaking but if he will not give it he will not get the injunction'. In the same case Lord Diplock said at 361F that 'the court has no power to compel an applicant for an interim injunction to furnish an undertaking as to damage.'

...

Since a cross-undertaking cannot be imposed, it follows that are a fortiori it cannot be imposed retrospectively [38] - [41].

Counsel for the parties seeking to be joined in that case accepted that if a non-party applied to be joined as a defendant, the claimant could elect to have the injunction discharged, in which case the cross-undertaking would not apply to the would-be defendant; but, counsel argued that if the claimant chose to maintain his injunction then the cross-undertaking would have retrospective effect. Lewison J considered that proposition to be contrary to the statements of principle in cases to which he had referred. In addition, his Honour considered the submission to be inconsistent with the repudiation of the 'relation back' theory of joinder of parties by the House of Lords in Ketteman v Hansel Properties Ltd [1987] AC 189. Lewison J concluded that, on the assumption that the benefit of a cross-undertaking given in favour of the 'defendants' would extend to those who are added as defendants during the period when the injunction is in force, it has only prospective, rather than retrospective effect. The injunction itself could not have been in force directly against added defendants until they became defendants; and their previous acts would not retrospectively become contempt of court. If, his Honour thought, the cross-undertaking is aptly described as the price of the injunction, one would expect the two to correlate temporally.

38 In Smith Kline Beecham Plc v Apotex Europe the third parties appealed to the Court of Appeal but did not appeal against the finding of Lewison J that the third parties could not be joined as defendants with retrospective effect. Jacob LJ, with whom Moore-Bick LJ and Sir Andrew Morritt C agreed, discussed the nature of a cross-undertaking and concluded that the court cannot impose a cross-undertaking on a claimant against his will - it is the 'price' he must 'pay' for the grant of the injunction [24].

39 In Smith Kline & French Laboratories Alphapharm alternatively sought an extension of the undertaking so as to directly extend to it. The applicants were prepared to proffer an undertaking as to damages to extend to Alphapharm with effect from 31 July 1989. Alphapharm sought an undertaking with effect from an earlier date. Gummow J held that there was no reason why the applicant should be required to submit to a retrospective increase in what they described as the price they are called on to pay for the grant and continuation of interlocutory relief and held that no case had been made out which called for the provision of an undertaking extending to a time earlier than that offered by the applicants.

40 If the applicants are joined as parties the benefit of the undertaking given in favour of 'any party' would extend to them during the period when the injunction is in force, it has only prospective, rather than retrospective effect. As the injunction has been discharged, the benefit of the undertaking would not extend to the applicants at all. It would be futile to add the applicants as defendants. The argument that the applicants should be joined as defendants because if they were joined the undertaking would apply to them from the time the undertaking was given cannot possibly succeed, it is manifestly groundless. It would involve useless expense to join the applicants as defendants to permit them to mount that argument.

41 Mr Willinge submitted that I should not summarily dispose of a claim based on a developing field of jurisprudence. But the issues arising in this application are not the subject of any developing law. The first issue is the proper interpretation of the undertaking. The second issue is whether the benefit of an undertaking would operate in favour of an added defendant retrospectively from the time at which the undertaking was given to the court. Neither of those issues concern any developing area of the law. I conclude that the applicants' argument is legally unsustainable. The applicants claim to be entitled to the benefit of the undertaking because the undertaking applied to them when it was given or would apply retrospectively to them if they were added as defendants. Those claims are manifestly untenable. The applicants' application to be joined as defendants will be dismissed.