FEDERAL COURT OF AUSTRALIA

PhotoCure ASA v Queen’s University at Kingston [2003] FCA 1508

PRACTICE AND PROCEDURE – discovery of confidential documents – whether an attorney representing a party who is also the corporate secretary of that party should be entitled to inspect the confidential documents

Macquarie Generation v Coal & Allied Industries Ltd [2001] FCA 1349 – applied

Palmer Tube Mills Limited v Tubemakers of Australia Limited (unreported, Federal Court of Australia, Lockhart J, 10 December 1991) - cited

Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 – cited

Arab Monetary Fund v Hashim [1989] 1 WLR 565 - cited

Norbrook Laboratories Limited v G.C. Hanford Manufacturing Company doing business as Hanford Pharmaceuticals (unreported, US District Court for the Northern District of New York, 24 April 2003, LEXIS 6851) - cited

Adam P. Brown Male Fashions Proprietary Limited v Philip Morris Incorporated (1981) 148 CLR 170 - cited

PHOTOCURE ASA (ACN 967 598 593) v QUEEN’S UNIVERSITY AT KINGSTON AND DUSA PHARMACEUTICALS, INC

DUSA PHARMACEUTICALS, INC v PHOTOCURE ASA (ACN 967 598 593) AND GALDERMA S.A.

V 214 of 2002

MERKEL J

18 DECEMBER 2003

MELBOURNE

THE COURT ORDERS THAT the consent order made on 25 November 2003 be varied so that paragraph 1.2(ii) of Schedule 1 to that order reads as follows:

“(ii)     Reed Smith LLP, US attorneys for the Respondents/Cross-Claimant, other than attorneys who are officers of the Respondents/Cross-Claimant;”

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The applicant (“Photocure”) and the second respondent (“Dusa”) are engaged in patent litigation in the Court.  In the course of the litigation, Photocure and Dusa consented to orders which confined access to documents and information, which they claimed to be confidential, to certain independent experts and to the Australian and American legal representatives of Photocure and Dusa.  The access that was to be provided to Dusa’s American legal representatives was described as access to “Reed Smith LLP, US attorneys for the Respondents/Cross-Claimant”.

2                     It now appears that two of the attorneys at Reed Smith LLP to whom access to confidential material would, in the normal course, be provided pursuant to the Court order are also officers of Dusa.  The two attorneys are Ms Nanette Mantell, who is the corporate secretary of Dusa, and Mr Jay Haft, who is a director of Dusa.  Photocure has applied to the Court to vary the orders so that access to the documents and information Photocure has claimed to be confidential is, relevantly, confined to attorneys at Reed Smith LLP who are not officers of Dusa.

3                     Photocure contends that, as Ms Mantell and Mr Haft are officers of Dusa, contrary to the intention of the consent orders, disclosure to them as attorneys is effectively disclosure to Dusa.  Photocure claims that there are other attorneys within Reed Smith LLP, who are not officers of Dusa, to whom disclosure may be made and, in any event, Dusa is represented by experienced Australian counsel and solicitors in the patent litigation, which is governed by Australian law.  Accordingly, Photocure claims that the variation order it is seeking is unlikely to result in any injustice or unfairness to Dusa.

4                     Dusa does not oppose the application for access not to be provided to Mr Haft or to any other person who might be an officer of the respondents, but contends that access should be provided to Ms Mantell.  Photocure contends that Ms Mantell, in her capacity as a member of Reed Smith LLP, fulfils the role of a general legal adviser to Dusa and has provided instructions to Dusa’s Australian solicitors in relation to the conduct of the patent litigation.  Dusa claims that Ms Mantell’s role as corporate secretary of Dusa is purely administrative and does not involve her in active participation in Board meetings with the consequence that disclosure of confidential documents or information to her will not result in disclosure of confidential material to Dusa.  Thus, so it is contended, disclosure should be made to Ms Mantell of the confidential material that is necessary for the proper preparation of Dusa’s case in Australia.

5                     The primary duty of Ms Mantell, as corporate secretary of Dusa, is to maintain the corporate minute book and to attend meetings of the Board of Dusa in order to fulfil that duty.  Ms Mantell states that, generally, she attends meetings of the Board of Dusa on a quarterly basis, records the minutes of those meetings, circulates the minutes to Board members for approval and then files the approved minutes in the corporate minute book.  She also attends the annual meeting of shareholders and records and files the minutes of those meetings.  Ms Mantell explained that she does not “generally actively participate in the meetings” although when specific legal issues arise from time to time, in her capacity as an external legal adviser to Dusa, she provides the Board with legal opinions and advice.

6                     Photocure has filed evidence that suggests that in the United States a corporate secretary is regarded as a senior corporate officer with wide ranging responsibilities, including serving as a focal point for communication with the Board.  There is also evidence that in many corporate matters the corporate secretary is regarded as a central person to whom directors, officers and shareholders turn for practical assistance as well as guidance.  

7                     In Macquarie Generation v Coal & Allied Industries Ltd [2001] FCA 1349 (“Macquaire Generation”) Beaumont J, citing authority, outlined the principles that are applicable in a case such as the present.  His Honour (at [23]) stated the issue as one of “devising a mechanism to deal with the process of disclosure…which ensures that no more is disclosed than is necessary for the proper conduct of the litigation, so that fairness in the litigious process is preserved vis-á-vis both parties” (original emphasis).  Earlier in his Honour’s reasons, in discussing the relevant authorities, Beaumont J referred to the matters that are relevant to how the Court might resolve the problem of disclosure of confidential information in circumstances where the person to whom the information is to be disclosed might be in a position of conflict as a result of being an officer of, or otherwise not being truly independent of, the party to whom access to confidential information is not, in the first instance, to be provided.  The matters included:

·               in each case the Court must decide the measure of disclosure that is appropriate, to whom it should be made and in what terms that disclosure should be made: see [12] of Macquarie Generation;

·               while a person in a position of conflict can be assumed not to intend to use the confidential information it is important that the court endeavour not to place that person in a situation of conflict as justice must not only be done but be seen to be done: see Palmer Tube Mills Limited v Tubemakers of Australia Limited (unreported, Federal Court of Australia, Lockhart J, 10 December 1991) (“Palmer Tube Mills”) at [10], referred to at [17] of Macquarie Generation;

·               arrangements for access should strike a fair balance between the competing interests of the party seeking inspection and the party claiming confidentiality, but that balance may need to be reviewed as the matter progresses: see Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 at 40, referred to at [18] of Macquarie Generation;

·               it is important, however, that there be sufficient disclosure to enable the party seeking inspection to effectively deal with the issues arising in the litigation: see Arab Monetary Fund v Hashim [1989] 1 WLR 565 at 577, referred to at [20] of Macquarie Generation.

8                     Mr Anthony Muratore, a partner of Freehills, who has the conduct of the patent litigation on behalf of Dusa, claims that he considers it essential for the proper conduct of the case on behalf of Dusa for him to obtain instructions from Ms Mantell, including in relation to the confidential documents and information discovered by Photocure.  However, it is not self evident that, if Ms Mantell is not given access to all of the confidential material, that that would impede Dusa from effectively dealing with the patent litigation.  Dusa is represented in Australia by experienced and competent counsel and solicitors in respect of a matter governed by Australian law.  There is also evidence that another member of Reed Smith LLP, Mr William J McNichol, has been involved in the patent litigation on behalf of Dusa.  Mr McNichol, who is not an officer of Dusa, specialises in intellectual property matters including patent litigation.  While Dusa is correct in contending that it is for it, rather than Photocure, to determine who should be Dusa’s advisers in relation to the present matter the fact remains that, in addition to Dusa’s Australian legal representatives, it also has available to it advice that can be given by Mr McNichol who, unlike Ms Mantell, specialises in patent litigation.  Indeed, Ms Mantell is a general corporate and securities lawyer and does not appear to have had extensive involvement in intellectual property matters.  Thus, while it can be accepted that her exclusion from the persons who might have access to the allegedly confidential material might be inconvenient, I am not satisfied that her exclusion will impede Dusa’s conduct of the patent litigation.

9                     Dusa has also relied upon the extent of the material claimed by Photocure to be confidential.  It contends that it covers “the substantial majority of discovered documents”.  However, at this stage the Court has not been called upon to rule on whether any of the material claimed by Photocure to be confidential is in fact confidential material and should be protected by the Court as such.  It is common in patent litigation, in the first instance, for the parties to agree on a procedure that will protect the confidentiality of the documents they claim to be confidential.  However, it is also common that, in the course of the litigation, the Court does not accept that such documents are necessarily confidential.  Thus, it is open to Dusa to challenge the confidentiality claimed by Photocure in respect of any particular documents or information.  If that challenge is successful there would be no reason why Ms Mantell would not have access to that material.  Accordingly, at this stage I am not satisfied that access should be provided simply because of the extent of the information claimed to be confidential.

10                  If the situation does arise where, for some special reason, it is desired that Ms Mantell have access to some of the documents and information Photocure claims to be confidential there is no reason why specific application cannot be made to the Court for such access to be provided to her.  I do not perceive there to be any difficulty in Dusa’s legal representatives, including its American attorneys, seeking to make out a case for access to be given to Ms Mantell in respect of particular material if it can be established that the access sought is necessary or appropriate for the proper conduct of the litigation in Australia.  My finding at the present time goes no further than that I am not satisfied that such a case has been made out in respect of all of the documents and information which Photocure claims are confidential.

11                  Although I accept that Ms Mantell’s function and duties as corporate secretary of Dusa involve her primarily in administrative matters there is a position of potential conflict in her dual role as legal adviser and corporate secretary.  It does appear that there may be occasions where her role as corporate secretary and attorney may call upon her, in the course of her communications with Board members, to inform the Board of matters that travel beyond her purely administrative functions.  While I accept that Ms Mantell will be conscientious in endeavouring to ensure that she does not disclose confidential information acquired as an attorney in the present patent litigation, as was pointed out by Lockhart J in Palmer Tube Mills at [10], in such circumstances fairness to the person concerned (which in the present case is Ms Mantell) and the importance of the party claiming confidentiality having confidence in the integrity of the confidentiality involved in the discovery process, can militate against the grant of access.  It is relevant to note that a similar approach has been taken by courts in the United States: see Norbrook Laboratories Limited v G.C. Hanford Manufacturing Company doing business as Hanford Pharmaceuticals (unreported, US District Court for the Northern District of New York, 24 April 2003, LEXIS 6851).

12                  For the above reasons I have concluded that it is appropriate to vary the consent order made on 25 November 2003 by varying paragraph 1.2(ii) of Schedule 1 so that it reads:

“(ii)    Reed Smith LLP, US attorneys for the Respondents/Cross-Claimant, other than attorneys who are officers of the Respondents/Cross-Claimant.”

13                  There is no difficulty in varying the consent order as the present case is one in which new facts have been discovered which would render the order in its original form unjust: see Adam P. Brown Male Fashions Proprietary Limited v Philip Morris Incorporated (1981) 148 CLR 170 at 178.

Associate:

Dated:              17 December 2003