FEDERAL COURT OF AUSTRALIA

Hardy v Reckitt Benckiser (Australia) Pty Limited (No 2) [2017] FCA 785

ORDERS

THE COURT ORDERS THAT:

1.    The applicants’ interlocutory application dated 29 June 2017 be dismissed.

2.    The applicants pay the respondent’s costs of the interlocutory application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    Paragraph 41 of the Second Further Amended Statement of Claim is struck out.

2.    By 4.00pm, 13 July 2017 the Applicants are to file and serve a Third Further Amended Originating Application and a Third Further Amended Statement of Claim that gives effect to order 1 hereof.

3.    The Applicants provide a draft Court Book index to the Respondent by 14 July 2017.

4.    The parties agree on an index to the Court Book by 20 July 2017.

5.    The Court Book is to include:

(a)    the pleadings and originating process;

(b)    the parties’ affidavit evidence;

(c)    any joint experts’ report; and

(d)    any documents to be tendered, organised chronologically.

6.    The Court Book is to be duly indexed, tabulated and paginated in both hard and electronic form with:

(a)    2 hard copies and 1 electronic copy (stored on a USB device) to be delivered to the Associate to Nicholas J by 4.00pm, 27 July 2017; and

(b)    3 hard copies and 1 electronic copy (stored on a USB device) to be delivered to the Respondent’s solicitors by 4.00pm, 27 July 2017.

7.    The parties exchange written notices of objections to evidence and provide copies to the Associate to Nicholas J by 28 July 2017.

8.    The parties file and serve written opening submissions limited to 10 pages in length by 28 July 2017.

9.    The Applicants provide a joint bundle of authorities (1 hard copy and 1 electronic copy) to the Associate to Nicholas J by 31 July 2017.

10.    The issues to be determined at the hearing are those identified in Annexure A attached to these orders.

11.    The parties have liberty to apply on 3 days’ notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Annexure A

Schedule of Issues to be the subject of the hearing on 1-3 August 2017

The hearing of this proceeding on 1-3 August 2017 will address the following claims for relief contained in the Second Further Amended Originating Application filed 4 April 2017:

(a)    prayer 2, but only insofar as it concerns the Applicants:

(b)    prayer 3;

(c)    prayer 4;

(d)    prayer 5;

(e)    prayer 6B (whether the Court should grant the declaration); and

(f)    prayer 6C (whether the Court should grant the declaration).

The hearing of this proceeding on 1-3 August 2017 will also address the following questions identified as common questions in the Second Further Amended Originating Application filed 4 April 2017:

(a)    questions 2, 3, 4, 5, 6, 7, 8, 9A & 9B.

The hearing on 1-3 August 2017 will also address the issues raised by paragraph 43 of the Respondent's Defence filed 10 May 2017 (but will not address quantification of any lump sum).

At the hearing of these proceedings on 1-3 August 2017, the Applicants will not read the 27 affidavits served in respect of group members other than the Applicants.

REASONS FOR JUDGMENT

NICHOLAS J:

1    On 11 July 2017 I made orders dismissing with costs an interlocutory application dated 29 June 2017 filed by the applicants seeking leave to amend the second further amended originating application and second further amended statement of claim. These are my reasons for making those orders and a further order striking out para 41 of the second further amended statement of claim.

2    The principal proceeding is a representative proceeding brought pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth). The initial hearing, at which the claims of the applicants and various common questions (“the common questions”) will be heard, is fixed to commence on 1 August 2017. That date was fixed early this year after an initial hearing before another Judge of the Court, which had been fixed for hearing on 8-10 February 2017, was vacated.

3    The applicants and group members are alleged to have purchased products within the Nurofen Specific Pain Range (“NSPR”) products between January 2011 and December 2015 comprising:

    Nurofen Migraine Pain ibuprofen lysine 342 mg tablet blister pack;

    Nurofen Tension Headache ibuprofen lysine 342 mg tablet blister pack;

    Nurofen Period Pain ibuprofen lysine 342 mg tablet blister pack; and

    Nurofen Back Pain ibuprofen lysine 342 mg tablet blister pack.

4    The NSPR products are within a class of medications known as nonsteroidal anti-inflammatory drugs (“NSAIDs”) that are used for pain relief.

5    The product formulation for each of the NSPR products is identical. Each is made using ibuprofen lysine, a lysine salt of ibuprofen, together with various excipients.

6    The respondent is the manufacturer of the NSPR products.

7    The packaging for each product bore the statement “FAST TARGETED RELIEF FROM PAIN” and also included a further statement that referenced the four pain conditions at which the particular product was directed. For example, in the case of the migraine pain product, the packaging included the following statement:

NUROFEN MIGRAINE PAIN IS FAST AND EFFECTIVE IN THE Temporary RELIEF OF PAIN ASSOCIATED WITH: MIGRAINE HEADACHE

8    The applicants allege that these statements were misleading or deceptive or likely to mislead or deceive because each product had the same formulation and one was no more or less effective than the others in treating any of the four pain conditions. On this basis the applicants allege that the respondent contravened s 18 and s 33 of the Australian Consumer Law (“the ACL”). Both applicants claim damages under s 236 of the ACL for loss and damage they are alleged to have suffered because of the respondent’s conduct.

9    The respondent has admitted in its defence that the packaging of the NSPR products supplied in the period 1 January 2011 and 31 December 2015 was misleading or deceptive or likely to mislead or deceive because the product formulation for each of the NSPR products was the same and that none was any more or less effective than the others in treating any of the symptoms referred to on the packaging. It has also admitted that it contravened s 18 and s 33 of the ACL in supplying the NSPR products in packaging that conveyed representations to the contrary effect.

10    The applicants also allege that the respondent failed to comply with statutory guarantees imposed by s 54, s 56 and s 59 of the ACL. It is sufficient for present purposes to focus on s 54.

11    Section 54(1), (2) and (3) provide:

54    Guarantee as to acceptable quality

(1)    If:

(a)    a person supplies, in trade or commerce, goods to a consumer; and

(b)    the supply does not occur by way of sale by auction;

there is a guarantee that the goods are of acceptable quality.

(2)    Goods are of acceptable quality if they are as:

(a)    fit for all the purposes for which goods of that kind are commonly supplied; and

(b)    acceptable in appearance and finish; and

(c)    free from defects; and

(d)    safe; and

(e)    durable;

as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3).

(3)    The matters for the purposes of subsection (2) are:

(a)    the nature of the goods; and

(b)    the price of the goods (if relevant); and

(c)    any statements made about the goods on any packaging or label on the goods; and

(d)    any representation made about the goods by the supplier or manufacturer of the goods; and

(e)    any other relevant circumstances relating to the supply of the goods.

12    The application for leave to amend arises out of the applicants’ desire to claim damages for breach of the statutory guarantees pursuant to s 271 assessed in accordance with s 272(1)(a) of the ACL.

13    Section 272 provides:

272    Damages that may be recovered by action against manufacturers of goods

(1)    In an action for damages under this Division, an affected person in relation to goods is entitled to recover damages for:

(a)    any reduction in the value of the goods, resulting from the failure to comply with the guarantee to which the action relates, below whichever of the following prices is lower:

(i)    the price paid or payable by the consumer for the goods;

(ii)    the average retail price of the goods at the time of supply; and

(b)    any loss or damage suffered by the affected person because of the failure to comply with the guarantee to which the action relates if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of such a failure.

(2)    Without limiting subsection (1)(b), the cost of inspecting and returning the goods to the manufacturer is taken to be a reasonably foreseeable loss suffered by the affected person as a result of the failure to comply with the guarantee.

(3)    Subsection (1)(b) does not apply to loss or damage suffered through a reduction in the value of the goods.

14    The damages case presently pleaded by the applicants is wholly reliance based and does not plead any reduction in the value of the goods supplied resulting from a failure to comply with a statutory guarantee. Nowhere in the existing pleading is it alleged that the NSPR products had a value that was less than what the applicants paid for them. The applicants’ pleaded case is that they relied on the relevant representations and, but for the respondent’s misleading conduct, they would have purchased less expensive products, including other products manufactured by the respondent such as the standard Nurofen tablets (“Standard Nurofen”) and Nurofen Zavance tablets (“Nurofen Zavance”) which could be purchased at significantly lower prices.

15    The case the applicants now seek to advance based upon s 272(1)(a) is apparent from their proposed new paragraphs 41C-41H which alleges:

41C.    Due to the failure of the Respondent to comply with each, or any, of the pleaded statutory guarantees, the Applicants and Group Members have suffered loss or damage.

41D.    Due to the failure of the Respondent to comply with each, or any, of the pleaded statutory guarantees, the value of each of the Nurofen Specific Pain Range products during the period between 2011 and 2015 was worth the equivalent of the value of a similar sized packet of Standard Nurofen Caplets.

41E.    The value of a packet of the Standard Nurofen caplets was its recommended retail price.

41F.    At all material times each of the Nurofen Specific Pain Range products and Standard Nurofen were not materially different in that they all provided pain relief.

Particulars

See Australian Register of Therapeutic Goods Certificate (ARTG Certificate) for each of the products identified above

41G.    Alternatively, due to the failure of the Respondent to comply with each, or any. of the pleaded statutory guarantees, the value of each of the Nurofen Specific Pain Range products during the period between 2011 and 2015 was worth the equivalent of the value of a similar sized packet of Nurofen Zavance Caplets.

41H.    The value of a packet of the Nurofen Zavance caplets was its recommended retail price.

16    It is necessary to say something more concerning the Standard Nurofen and Nurofen Zavance products referred to in these paragraphs and another product called Nurofen Zavance liquid capsules (“Nurofen Zavance LC”).

17    The active ingredient of Standard Nurofen is ibuprofen in a formulation consisting of ibuprofen propionic acid (“ibuprofen acid”) together with various excipients. The active ingredient of Nurofen Zavance is ibuprofen in a formulation consisting of ibuprofen sodium dihydrate (“ibuprofen sodium”) together with various excipients. Nurofen Zavance LC has the same active ingredient in the form of ibuprofen potassium hydroxide (“ibuprofen potassium”). These are different from the formulation for the NSPR products which, as previously mentioned, consists of ibuprofen lysine and various excipients. However, all of these Nurofen products include the same active ingredient (ibuprofen) in one form or another.

18    The respondent submits that the proposed amendments give rise to three new issues:

(a)    whether the NSPR products were more valuable than Standard Nurofen (para 41D)?

(b)    whether the NSPR products were materially different from Standard Nurofen (para 41F)?

(c)    whether the NSPR products were more valuable than Nurofen Zavance (para 41G)?

(d)    whether the NSPR products were materially different from Nurofen Zavance (para 41i)?

19    The evidence relied upon by the applicants in support of the present application consists of an affidavit of Mr Milan Cakic. There are two points to make in relation to his affidavit, the first of which is that it does not include any explanation as to why the amendment application was not made much sooner than this. I will say something more in relation to this topic later in these reasons. The second point relates to the expert evidence to be given by the respondent’s expert, Mr Professor Dworkin, and the applicants’ expert, Professor McLachlan. Mr Cakic’s affidavit states at paras 9-10:

9.    Professor Dworkin’s expert report dated 10 December 2016, citing an academic article by Moore et al of 2014, states at paragraph 10:

    The greater effectiveness of ibuprofen lysine, arginine, and sodium appears to be a result of these drugs providing faster onset of pain relief, which is consistent with median maximum plasma concentrations for ibuprofen lysine, arginine, and sodium occurring within 29-35 minutes but not until 90 minutes for standard formulations of ibuprofen acid. (emphasis added)

10.    The Joint Expert Report of Professors Andrew McLachlan and Robert Dworkin dated 27 January 2017, jointly agree at paragraph 3 on the first page of that report that:

    fast acting formulations of NSAIDs include arginine, lysine and sodium ibuprofen salts, as well as liquid-filled soft capsules, solutions, and effervescent preparations

20    On the basis of this material it would appear that the allegation in proposed para 41F does not take account of the faster acting action of ibuprofen lysine used in the NSPR products when compared to ibuprofen acid used in Standard Nurofen. The expert evidence relied on by the applicant in support of the present application as quoted in Mr Cakic’s affidavit suggests that the two formulations exhibit different absorption (or dissolution) characteristics.

21    The respondent’s solicitor, Mr Michael Shepherd, has made an affidavit on which the respondent relies in its opposition to the proposed amendments. He says most of the applicants’ affidavit evidence was served by December 2016. He also says that if the claims now sought to be relied on by the applicants had been included in the applicants’ pleadings as they then stood, he would have investigated the following matters:

    what evidence it might be possible for the respondent to prepare to quantify the reduction (if any) in the value of the NSPR products attributable to the non-compliances with the statutory guarantees alleged in the statement of claim;

    what evidence it might be possible for the respondent to prepare in order to prove that the value of the ibuprofen lysine product was higher than the value of the ibuprofen sodium, ibuprofen potassium and acid ibuprofen products and by how much;

    what evidence it might be possible for the respondent to prepare in order to quantify the value attributable to the faster speed of absorption and longer product life of ibuprofen lysine (as compared to ibuprofen sodium, ibuprofen potassium and acid ibuprofen). He would also have investigated what evidence it might be possible for the respondent to prepare in order to quantify any value attributable to differences between the excipients for the NSPR products, Nurofen Zavance and standard Nurofen;

    the manner in which ibuprofen lysine had been marketed by the respondent and other manufacturers overseas, and the relative prices at which ibuprofen lysine, ibuprofen sodium, ibuprofen potassium and acid ibuprofen had been sold in Australia and overseas;

    what evidence it might be possible for the respondent to prepare to prove that the faster absorption of ibuprofen lysine over ibuprofen potassium delivers a quantifiable therapeutic benefit to consumers and investigated the same issue in relation to each of ibuprofen sodium and acid ibuprofen. For that purpose, he would have consulted a pharmacologist with a view to possibly obtaining an expert report; and

    what documents are held by the respondent that might assist the respondent in addressing the above matters, including whether the respondent held documents that would tend to show that ibuprofen lysine is more efficacious in providing fast relief from pain than ibuprofen sodium, ibuprofen potassium and acid ibuprofen.

22    Mr Shepherd also includes in his affidavit information obtained by him from Ms Janie Heywood, the respondent’s Regional Regulatory and Medical Affairs Director for Australia and New Zealand. According to Ms Heywood the respondent’s records include a report of a study that compares the relative speeds of absorption of various ibuprofen formulations. The study report is said by Ms Heywood to be “in the nature of a summary or synopsis” and there is further research that formed part of the study which is currently being peer reviewed prior to publication. According to Ms Heywood, the study report shows that:

(a)    ibuprofen lysine was absorbed 5.75 times faster than ibuprofen acid;

(b)    ibuprofen sodium was absorbed 3.66 times faster than ibuprofen acid; and

(c)    ibuprofen potassium was absorbed 4.52 times faster than ibuprofen acid.

23    There are other differences to which Ms Heywood refers. She says there are differences in the shelf lives for each of the relevant formulations and in the excipients used in their manufacture. Ms Heywood also says that ibuprofen lysine costs more to manufacture than the other formulations.

24    Mr Shepherd says that if the claims now sought to be relied on by the applicants had been included in the applicants’ pleadings he would have consulted an economist with a view to possibly obtaining an expert report. He says that since the interlocutory application has been filed, he consulted Dr Christopher Pleatsikas, an expert economist, who informed him that there are accepted methods that economists can, in some circumstances, apply to estimate the value of a product even if there is no market data about pricing for that product. Dr Pleatsikas informed Mr Shepherd that he would require 6-8 weeks from the date he received the briefing material to prepare any report on questions of value.

25    I agree with the respondent that the proposed amendments raise questions as to the value of the respondent’s NSPR products. Although the expert evidence and joint expert report touches on the differences in the performance characteristics (including the rate of absorption) for NSPR products, Standard Nurofen and Nurofen Zavance, this evidence does not venture into questions of valuation.

26    Returning to the matter of delay, the applicants proffered no explanation, either in any affidavit or from the bar table, as to the reasons why the amendment application was first made when it was. Dr Cashman (who did not appear on the present application) acknowledged when this matter was first before me on 10 February 2017 that the applicants’ and group members’ damages case was reliance based (see transcript pages 17-18). The evidence does not disclose when the applicants decided that they would seek to advance a damages claim based upon a reduction in the value of the goods supplied and the applicants’ submissions did not shed any light on that matter.

27    During the course of argument I raised with the applicants’ counsel what his clients’ attitude is to the proposed amendments if I came to the view that the hearing dates would have to be vacated if they were to be allowed. Counsel informed me that the applicants wished to preserve the hearing dates and that the proposed amendments would not be pressed in the event I considered that the hearing date would need to be vacated if the amendments were to be allowed.

28    That concession is most significant. I say that because I am clearly of the opinion that it would be unjust to require the respondent to meet the new damages case that the applicants wish to advance at a trial that is scheduled to commence on 1 August 2017.

29    It was in those circumstances that I was satisfied that the application for leave to amend should be refused and that the interlocutory application filed by the applicants on 29 June 2017 should be dismissed with costs.

30    During the course of the hearing of the interlocutory application I raised with counsel for the applicants my concerns with respect to para 41 of the existing statement of claim. In para 39 it is alleged that, had the applicants and group members known of the pleaded contraventions (presumably this refers to the pleaded contraventions of s 18 and s 33 of the ACL), they would not have purchased the NSPR products. Paragraph 41 then alleges:

The amount of loss or damage suffered by the Applicants and each Group Member is the price paid by them for the purchase of a Nurofen Specific Range product during the relevant period.

31    Neither of the applicants allege that, but for the contraventions, they would not have purchased any other pain medication in lieu of one of the NSPR products or that the NSPR products which they purchased were of no value. As counsel for the applicants accepted, the case they will seek to establish at trial is that, but for the alleged contraventions, they would have purchased a different pain medication at a lower price and that their loss is reflected in the difference in price. In my view, the allegation in para 41 has a tendency to cause prejudice, embarrassment and delay and should not be permitted to stand in the absence of any allegation that the NSPR products were of no value. It is for those reasons I ordered that para 41 of the second further amended statement of claim be struck out.

Associate:

Dated:    12 July 2017