FEDERAL COURT OF AUSTRALIA

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556

ORDERS

THE COURT ORDERS THAT:

1.    Until 5.00pm on 26 October 2018, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) and on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a), there be no disclosure (by publication or otherwise) of the reasons for judgment delivered on the date of this order in proceedings VID 195 of 2009, NSD 596 of 2009 and NSD 1124 of 2009 (Proceedings) to any person other than to the external solicitors and counsel for the parties in the Proceedings, including the external solicitors and counsel for the Commonwealth of Australia (despite the discontinuance of its interlocutory application).

2.    By 4.00pm on 26 October 2018 any party wishing to claim that any part of the reasons for the judgment should be subject to a further confidentiality order is to notify the Associate to Jagot J and the other parties, as well as the Commonwealth, by email of the claim including:

(a)    details of the matter claimed to be confidential;

(b)    a short statement of the reasons the matter is said to be confidential; and

(c)    a statement identifying whether the claimant consents to the confidentiality claim being determined by Jagot J on the basis of the email or seeks an oral hearing.

3.    If no notice by email is received in accordance with order 2, the reasons for judgment will be published forthwith.

4.    If notice is received in accordance with order 2, the reasons for judgment will be published forthwith with the claimed confidential matter redacted pending determination of the confidentiality claim.

5.    The parties are to confer and, by 4.00pm on 2 November 2018, are to propose in a joint email (including agreed and disagreed matters) to the Associate to Jagot J further directions to enable the matter to be finalised.

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

ORDERS

THE COURT ORDERS THAT:

1.    Until 5.00pm on 26 October 2018, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) and on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a), there be no disclosure (by publication or otherwise) of the reasons for judgment delivered on the date of this order in proceedings VID 195 of 2009, NSD 596 of 2009 and NSD 1124 of 2009 (Proceedings) to any person other than to the external solicitors and counsel for the parties in the Proceedings, including the external solicitors and counsel for the Commonwealth of Australia (despite the discontinuance of its interlocutory application).

2.    By 4.00pm on 26 October 2018 any party wishing to claim that any part of the reasons for the judgment should be subject to a further confidentiality order is to notify the Associate to Jagot J and the other parties, as well as the Commonwealth, by email of the claim including:

(a)    details of the matter claimed to be confidential;

(b)    a short statement of the reasons the matter is said to be confidential; and

(c)    a statement identifying whether the claimant consents to the confidentiality claim being determined by Jagot J on the basis of the email or seeks an oral hearing.

3.    If no notice by email is received in accordance with order 2, the reasons for judgment will be published forthwith.

4.    If notice is received in accordance with order 2, the reasons for judgment will be published forthwith with the claimed confidential matter redacted pending determination of the confidentiality claim.

5.    The parties are to confer and, by 4.00pm on 2 November 2018, are to propose in a joint email (including agreed and disagreed matters) to the Associate to Jagot J further directions to enable the matter to be finalised.

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

ORDERS

THE COURT ORDERS THAT:

1.    Until 5.00pm on 26 October 2018, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) and on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a), there be no disclosure (by publication or otherwise) of the reasons for judgment delivered on the date of this order in proceedings VID 195 of 2009, NSD 596 of 2009 and NSD 1124 of 2009 (Proceedings) to any person other than to the external solicitors and counsel for the parties in the Proceedings, including the external solicitors and counsel for the Commonwealth of Australia (despite the discontinuance of its interlocutory application).

2.    By 4.00pm on 26 October 2018 any party wishing to claim that any part of the reasons for the judgment should be subject to a further confidentiality order is to notify the Associate to Jagot J and the other parties, as well as the Commonwealth, by email of the claim including:

(a)    details of the matter claimed to be confidential;

(b)    a short statement of the reasons the matter is said to be confidential; and

(c)    a statement identifying whether the claimant consents to the confidentiality claim being determined by Jagot J on the basis of the email or seeks an oral hearing.

3.    If no notice by email is received in accordance with order 2, the reasons for judgment will be published forthwith.

4.    If notice is received in accordance with order 2, the reasons for judgment will be published forthwith with the claimed confidential matter redacted pending determination of the confidentiality claim.

5.    The parties are to confer and, by 4.00pm on 2 November 2018, are to propose in a joint email (including agreed and disagreed matters) to the Associate to Jagot J further directions to enable the matter to be finalised.

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

REASONS FOR JUDGMENT

TABLE OF CONTENTS:

JAGOT J:

The claims

1    These matters concern claims for compensation pursuant to undertakings given as the price of the grant of interlocutory injunctions restraining infringement of a patent ultimately found to be invalid. The patent is referred to as the method patent. It relates to an anti-depressant known as venlafaxine.

2    On 21 December 2011, having found the method patent to be invalid, the Full Court made orders consequential upon reasons for judgment, Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 3) [2011] FCAFC 165 as follows:

NSD 1533 of 2010

8. Any application that has or may be made by any person seeking an order for the payment of compensation pursuant to the undertaking as to damages given by the respondents to the Court on 3 June 2009 be remitted to the primary judge for determination.

NSD 1603 of 2010

8. Any application that has or may be made by any person seeking an order for the payment of compensation pursuant to the undertaking as to damages given by the respondents to the Court on 25 August 2009 be remitted to the primary judge for determination.

NSD 1644 of 2010

8. Any application that has or may be made by any person seeking an order for the payment of compensation pursuant to the undertaking as to damages given by the respondents to the Court on 10 November 2009 be remitted to the primary judge for determination.

3    Six claimants sought compensation pursuant to the undertakings. Three claimants were parties to the original proceedings, Sigma, Alphapharm and Generic Health. Where there is no need to distinguish between them I refer to these parties together as the generics. Three claimants were non-parties. Alembic and Pharmathen were manufacturers and suppliers of generic venlafaxine products to the generics. The Commonwealth was also a claimant but it settled its claim after the hearing. The remaining claimants relied on evidence and submissions of the Commonwealth, so it is necessary to refer to these despite the fact that the Commonwealth is no longer a claimant. Where there is no need to distinguish between the respondents I refer to them together as Wyeth.

Summary of conclusions

4    I have concluded that orders for compensation should be made in favour of each claimant.

5    My principal conclusions are as follows.

6    Each claimant has been adversely affected by the operation of one or more of the interlocutory injunctions. It is just that Wyeth be ordered to pay compensation to each claimant assessed by reference to the adverse effect of the interlocutory injunction or injunctions upon them.

7    The fact that I granted final injunctions on 8 November 2010 does not mean that the interlocutory injunctions were not wrongly granted. I made final orders on the basis of my conclusion that the method patent was valid. The Full Court held that the method patent was invalid. It follows that the interlocutory injunctions were wrongly granted.

8    The primary adverse effect of the interlocutory injunctions is that they prevented the generics from supplying their generic venlafaxine products to pharmacists until 8 November 2010. On 8 November 2010, when I granted final injunctions on the basis that the method patent was valid, the interlocutory injunctions were discharged and thus ceased to operate from that date. Because I granted final injunctions which also prevented supply of the products, the adverse effects of the operation of the interlocutory injunctions ceased on 8 November 2010. No claims on Wyeth’s undertakings beyond that date can be sustained. The claimed loss of opportunity to obtain a stay of my final orders, which was not pleaded, is not compensable as a matter of principle or fact.

9    The claimants claim for lost opportunities. The primary opportunity was to supply venlafaxine products. Because the opportunity to supply depended on a statutory approval which each of the generics held before the interlocutory injunctions were granted, the interlocutory injunctions necessarily deprived the generics of an opportunity of some value. This loss having been proved on the balance of probabilities, the extent of the generics’ losses is to be assessed by reference to the probabilities and possibilities which should be inferred from the evidence.

10    Only possibilities of a less than 1% likelihood may be disregarded. Only possibilities of a greater than 99% likelihood may be treated as certain. Accordingly, it is necessary to assess the possibilities of any generic having sought and obtained PBS listing of its products to enable supply under the PBS and the possibilities of any generic having supplied its products outside of the PBS on the private market if the interlocutory injunctions had not been granted. For the generics, this is the best way of identifying the adverse effect of the interlocutory injunctions upon them.

11    Because the opportunity of the manufacturers/suppliers to supply the products to the generics depended on the generics placing orders (which in turn depended on the generics being able to supply pharmacists), the manufacturers/suppliers had to prove on the balance of probabilities that they would have supplied products if not for the interlocutory injunctions. This having been proved on the balance of probabilities, the losses of the manufacturers/suppliers are also to be assessed by reference to all of the possibilities which should be inferred from the evidence.

12    The kinds of losses claimed were all reasonably foreseeable at the time the interlocutory injunctions were granted. Other than in one respect, the kinds of losses claimed were also the direct and natural consequence of the operation of the interlocutory injunctions. The claims of Generic Health and the derivative claims of Pharmathen for the lost opportunities to supply the products to other generic companies are too remote to be compensable and otherwise should not be permitted on a discretionary basis.

13    By the undertakings Wyeth submitted to such orders as the Court considers just to compensate a person adversely affected by the operation of the interlocutory injunctions. The undertakings do not extend to any adverse effect caused by the existence of the method patent or the litigation including all of the usual exigencies of litigation. Anticipating an interlocutory injunction is one of the exigencies of litigation. The fact that the grant of an interlocutory injunction against one person may lead another to anticipate that they also will be the subject of an interlocutory injunction does not make conduct taken in such anticipation an adverse effect of the interlocutory injunction as granted.

14    The approach which best reflects the terms of the undertakings is to assess what the position would have been if Wyeth had not prosecuted its applications for interlocutory relief on the days it did so and thus had not been granted the interlocutory injunctions. To go further and disregard the mere threat or anticipation of interlocutory relief by the generics would be to expand the scope of the undertaking so as to permit compensation to be granted for the mere existence of the method patent or the litigation which is impermissible. If, however, I am wrong about this, the only material difference from the hypothetical facts as I have found them would be one of timing in relation to the prospects of PBS listing and PBS supply. For Sigma, the relevant date for PBS listing of its products would change from 1 December 2009 to 1 August 2009. For Alphapharm and Generic Health, the relevant date would change from 1 March 2010 to 1 December 2009.

15    Subject to these matters, none of Wyeth’s answers to the claims for compensation should be accepted. In particular, Wyeth’s copyright claims involve an abuse of process and should not be permitted.

16    Discretionary considerations weigh heavily in favour of enforcement of the undertakings.

17    My primary conclusions about the probabilities and possibilities are the result of an evaluative process in which within the range of reasonable inferences from the evidence I have resolved remaining doubts in the claimants’ favour because Wyeth had the benefit and the claimants suffered the harm of the wrongly granted interlocutory injunctions. As a result of this process, and on the basis that at any given time, the probabilities and possibilities for each claimant must equal 100% or 1:

(1)    Sigma’s lost opportunity of supply should be valued on the basis of the following hypothesised facts:

(a)    from 1 May 2009 until 1 December 2009:

    (i) Sigma would have supplied its products on the private market: 100%;

    (ii) Sigma would have supplied its products under the PBS: 0%; and

    (iii) Sigma would not have supplied its products at all: 0%.

(b)    from 1 December 2009 until 8 November 2010:

    (i) Sigma would have supplied its products on the private market: 80%;

    (ii) Sigma would have supplied its products under the PBS: 20%; and

    (iii) Sigma would not have supplied its products at all: 0%.

(2)    Alphapharm’s lost opportunity of supply should be valued on the basis of the following hypothesised facts:

(a)    from 22 July 2009 until 1 March 2010:

(i)    Alphapharm would have supplied its products on the private market: 90%;

(ii)    Alphapharm would have supplied its products under the PBS: 0%; and

(iii)    Alphapharm would not have supplied its products at all: 10%.

(b)    from 1 March 2010 until 8 November 2010 if Alphapharm was supplying its products on the private market (the 90% probability) and assuming the Sigma 20% possibility of PBS listing on 1 December 2009:

(i)    Alphapharm would have continued to supply its products on the private market: 10%;

(ii)    Alphapharm would have supplied its products under the PBS: 90%; and

(iii)    Alphapharm would not have supplied its products at all: 0%.

(c)    from 1 March 2010 until 8 November 2010 if Alphapharm was not supplying its products on the private market (the 10% possibility) and assuming the Sigma 20% possibility of PBS listing on 1 December 2009:

(i)    Alphapharm would have supplied its products on the private market: 0%;

(ii)    Alphapharm would have supplied its products under the PBS: 80%; and

(iii)    Alphapharm would have continued to not supply its products at all: 20%.

(d)    from 1 March 2010 until 8 November 2010 if Alphapharm was supplying its products on the private market (the 90% probability) and assuming the Sigma 80% probability of not PBS listing on 1 December 2009:

(i)    Alphapharm would have supplied its products on the private market: 90%;

(ii)    Alphapharm would have supplied its products under the PBS: 0% and

(iii)    Alphapharm would not have supplied its products at all: 10%.

(e)    from 1 March 2010 until 8 November 2010 if Alphapharm was not supplying its products on the private market (the 10% possibility) and assuming the Sigma 80% probability of not PBS listing on 1 December 2009:

(i)    Alphapharm would have supplied its products on the private market: 0%;

(ii)    Alphapharm would have supplied its products under the PBS: 0% and

(iii)    Alphapharm would not have supplied its products at all: 100%.

(3)    Generic Health’s lost opportunity of supply should be valued on the basis of the following hypothesised facts:

    (a) from 10 November 2009 until 1 March 2010:

    (i) Generic Health would have supplied its products on the private market: 80%;

    (ii) Generic Health would have supplied its products under the PBS: 0% and

    (iii) Generic Health would not have supplied its products at all: 20%.

    (b) from 1 March 2010 until 8 November 2010 if Generic Health was supplying its products on the private market (the 80% probability) and assuming the Sigma 20% possibility of PBS listing on 1 December 2009:

    (i) Generic Health would have continued to supply its products on the private market: 10%;

    (ii) Generic Health would have supplied its products under the PBS: 90%; and

    (iii) Generic Health would not have supplied its products at all: 0%.

    (c) from 1 March 2010 until 8 November 2010 if Generic Health was not supplying its products on the private market (the 20% possibility) and assuming the Sigma 20% possibility of PBS listing on 1 December 2009:

    (i) Generic Health would have supplied its products on the private market: 0%;

    (ii) Generic Health would have supplied its products under the PBS: 80%; and

    (iii) Generic Health would have continued to not supply its products at all: 20%.

    (d) from 1 March 2010 until 8 November 2010 if Generic Health was supplying its products on the private market (the 80% probability) and assuming the Sigma 80% probability of not PBS listing on 1 December 2009:

    (i) Generic Health would have supplied its products on the private market: 80%;

    (ii) Generic Health would have supplied its products under the PBS; 0% and

    (iii) Generic Health would not have supplied its products at all: 20%.

    (e) from 1 March 2010 until 8 November 2010 if Generic Health was not supplying its products on the private market (the 20% possibility) and assuming the Sigma 80% probability of not PBS listing on 1 December 2009:

    (i) Generic Health would have supplied its products on the private market: 0%;

    (ii) Generic Health would have supplied its products under the PBS: 0% and

    (iii) Generic Health would not have supplied its products at all: 100%.

18    Accordingly, I have concluded that the chance of Alphapharm and Generic Health obtaining PBS listing of their products depends on the chance that Sigma would have obtained PBS listing of its products, which I have assessed to be a possibility of 20%.

19    Compensation should be assessed generally as proposed by Mr Samuel in his calculations of 8 July 2018, based on the revised work of Professor Hausman, without any discount for risk, and should include interest at the rates specified in Interest on Judgments Practice Note (GPN- INT).

20    Mr Samuel’s approach needs to be the subject of further calculations by reference to my conclusions about the probabilities and possibilities. I have identified a method for the required calculations based on my conclusions which involves the following:

The probabilities and possibilities may be represented by:

PBS + PM + N = 1

Where:

PBS is the chance of the generic supplying under the PBS

PM is the chance of the generic supplying on the private market

N is the chance the generic would not have supplied its products at all.

Further if:

VPBS means the estimated profits from posited PBS supply.

VPM means the estimated profits from posited private market supply.

VN means the no supply position, which must always equal zero.

VT means the total profits from posited PBS and/or private market supply,

then:

Sigma’s lost profits would be calculated as follows:

Sigma VT for 1/5/09 to 1/12/09 = 1 x VPM + 0 x VPBS + 0 x VN.

Sigma VT for 1/12/09 to 8/11/10 = 0.80 x VPM + 0.2 x VPBS + 0 x VN.

Sigma total VT = Sigma VT for 1/5/09 to 1/12/09 + Sigma VT for 1/12/09 to 8/11/10.

Alphapharm’s lost profits would be calculated as:

Alphapharm VT for 22/7/09 to 1/3/10 = 0.9 x VPM + 0 x VPBS + 0.1 x VN.

Alphapharm VT for 1/3/10 to 8/11/10 = 0.666 x VPM + 0.178 x VPBS + 0.156 x VN.

Generic Health’s lost profits would be calculated as:

Generic Health VT for 10/11/09 to 1/3/10 = 0.8 x VPM + 0 x VPBS + 0.2 x VN.

Generic Health VT for 1/3/10 to 8/11/10 = 0.528 x VPM + 0.176 x VPBS + 0.296 x VN.

21    The calculations for Alphapharm and Generic Health which both involve dependent possibilities (Sigma PBS listing and prior private market supply) are explained in Schedule 5. As this issue of dependent possibilities was not explored in the hearing and my method may be incorrect, the parties will be given an opportunity to be heard in respect of this issue and other outstanding issues as identified.

22    Alphapharm should also be compensated for 90% of the cost of the products it had to destroy due to their limited shelf life when they were ultimately delivered to it. But for the Alphapharm interlocutory injunction Alphapharm would not have suffered this loss.

23    The compensation to the manufacturers/suppliers should be assessed on the same basis having regard to the supply prices from the manufacturers/suppliers to the generics that Mr Samuel proposed and otherwise reflecting the evidence they adduced about their capacity and costs.

24    Alembic should also be compensated for the ingredients it had to destroy as a result of the Sigma interlocutory injunction.

25    I consider that my approach to compensation appropriately reflects the terms and purpose of the undertakings which Wyeth gave as the price for the interlocutory injunctions to which, in the event, it was not entitled.

26    If, however, each lost opportunity of supply must be proved on the balance of probabilities it will be apparent from the conclusions above that each claimant would have succeeded in proving a lost opportunity of supply on the private market and would have failed to prove a lost opportunity of supply under the PBS. In that event, the compensation should be assessed by reference to 100% of the value of private market supply for the relevant periods up to 8 November 2010. As the claims of the manufacturers/suppliers are derivative they cannot do better than the generics.

27    Costs should be determined after all outstanding issues are resolved and in the usual course.

28    It is possible that I have not resolved an issue which needs to be resolved. If that is the case, the parties will be given an opportunity to draw such matters to my attention.

Abbreviations, basic concepts and people

29    Schedule 1 explains abbreviations and basic concepts. It is based on the two statements of agreed facts in evidence. Those statements, excluding annexures, are in Schedules 2 and 3.

30    Schedule 4 identifies the people who are referred to in these reasons for judgment.

Basic facts

31    In this section I record only those facts which set the context for the claims.

ARTG registration

32    The ARTG registrations of the generics’ products obtained before the interlocutory injunctions were granted are fundamental to my conclusions.

33    Details about ARTG registration are set out in the statement of agreed facts in Schedule 2 on which the following section is based.

34    A product containing the active pharmaceutical ingredient venlafaxine hydrochloride must be registered on the ARTG before it can be imported into, manufactured or supplied in, or exported from, Australia.

35    Section 9A(1) of the Therapeutic Goods Act provides that:

The Secretary is to cause to be maintained a register, to be known as the Australian Register of Therapeutic Goods, for the purpose of compiling information in relation to, and providing for evaluation of, therapeutic goods for use in humans.

36    Section 3(1) of the Therapeutic Goods Act contains definitions, including relevantly, of “sponsor” in relation to therapeutic goods.

37    By s 23, a person may make an application to the Secretary for registration or listing of therapeutic goods.

38    By s 25(3), after an evaluation, the Secretary must decide to register or not to register the goods.

39    Division 1 of Pt 3-2 of the Therapeutic Goods Act provides for a range of civil penalties and criminal offences in relation to therapeutic goods.

40    The person or company holding the registration of a pharmaceutical product registered on the ARTG is called the sponsor of the relevant product. A sponsor may offer to supply, and supply, that therapeutic product to pharmacies, pharmaceutical distributors/wholesalers, government authorities and private or public hospitals in Australia when the product has been registered on the ARTG.

41    To register a therapeutic product on the ARTG the sponsor must obtain approval from the TGA.

42    If a pharmaceutical product is approved by the TGA, the brand name and the active ingredient of the product are entered on the ARTG, along with the name of the sponsor, the approved indication(s), the dosage form and the pack sizes for which the product may be supplied.

43    A sponsor wishing to supply a bioequivalent version (generic product) of a pharmaceutical product which is already registered on the ARTG (originator product) may make an application that does not include all the information that was required of the originator to register the originator’s product.

44    A sponsor of a generic product may rely on the safety and efficacy data submitted by the originator in respect of the originator product if the sponsor of the generic product demonstrates that the generic product is “essentially similar” or bioequivalent to the originator product.

45    In order to demonstrate bioequivalence a sponsor of the generic product should normally conduct clinical bioavailability studies comparing the generic product to the originator product. The sponsor of the generic product is required to conduct such a study or studies with the Australian originator product or demonstrate that the comparator used in the studies against which the generic product is compared is identical to the Australian originator product.

46    Once a pharmaceutical product is registered on the ARTG, it can be sold, offered for sale and otherwise supplied in Australia, including to pharmacies.

47    Pharmacists may dispense a generic product registered on the ARTG which is equivalent to the originator product (called a generic equivalent) when a doctor prescribes the originator product by brand name but does not identify on the prescription that substitution is not permitted and the patient consents, prescribes a different generic equivalent by brand name but does not identify on the prescription that substitution is not permitted and the patient consents, prescribes the product by its active pharmaceutical ingredient (API) name, such as venlafaxine, or prescribes the generic equivalent by its brand name.

The PBS scheme

48    It is necessary to understand some aspects of the PBS scheme. The scheme is explained in the statement of agreed facts in Schedule 2 on which the following section is based.

49    The PBS scheme is established in Pt VII of the National Health Act. The existence and management of the PBS by the Commonwealth is fundamental to the health and well-being of all Australians.

50    The PBS Schedule is a list of all of the pharmaceutical products available to be dispensed to patients through the PBS at a Commonwealth-subsidised price. The PBS Schedule is usually updated and published on a monthly basis. A pharmaceutical product can only be listed on the PBS Schedule after the product has been registered on the ARTG.

51    Section 85(1) of the National Health Act provides for the Commonwealth to provide benefits “in respect of pharmaceutical benefits” (defined in s 84(1) to mean, insofar as relevant, a drug the subject of a declaration under s 85(2)). Section 85(2) provides that the drugs and medicinal preparations in relation to which Pt VII applies are those, relevantly, “declared by the Minister, by legislative instrument, to be drugs and medicinal preparations to which this Part applies”. By s 85(3) the Minister may by legislative instrument determine, by reference to strength, type of unit, size of unit or otherwise, the form or forms of a listed drug (listed drug being defined in s 84(1) to mean “a drug or medicinal preparation in relation to which a declaration under subsection 85(2) is in force”). By s 85(6) the Minister may, by legislative instrument, determine a brand of a pharmaceutical item. In practice these declarations and determinations are made by a delegate of the Minister within the relevant branch of the Department of Health.

52    As Efexor-XR had been PBS listed since 1999 (for the 150mg and 75mg strengths) and since 2005 (for the 37.5mg strength), the relevant power for the listing of the generic brands of extended release venlafaxine was s 85(6) of the National Health Act.

53    Division 3C of Pt VII of the National Health Act, inserted in 2007, contains the guarantee of supply provisions. By s 99AEB:

The responsible person for a guaranteed brand of a guaranteed item must supply the guaranteed brand of the guaranteed item during the guaranteed period for the guaranteed brand of the guaranteed item.

54    Section 99AEB applied to the PBS listing of a generic version of Efexor-XR. As a result, by ss 99AED, the responsible person in respect of any such brand “must supply” the brand until the first of 24 months beginning on the day that the brand is listed, the listing of another new brand of the drug, another brand of the drug offering a price reduction is accepted by the Minister, or the delisting of the brand. By s 99AEG, the responsible person must notify the Minister as soon as practicable if the responsible person for a brand subject to a guarantee of supply fails to supply or is unable to supply the brand or forms the belief that they will fail to supply or be unable to supply the brand. By s 99AEH if the responsible person for a guaranteed brand fails to supply, or is unable to supply the brand on one or more occasions, the Minister may cancel the PBS listing for the brand.

55    As the Commonwealth explained in its submissions:

There are no requirements in the NHA [National Health Act] concerning the information that has to be provided in support of an application to list a generic brand of a listed drug on the PBS, although any new therapeutic good (including a generic brand of a drug) must be registered on the ARTG before it can be generally marketed in Australia. At the relevant times, an application for listing a generic brand was not required to be considered by the PBAC [the Pharmaceutical Benefits Advisory Committee established under s 100A], but rather just sent to the Pharmaceutical Evaluation Branch (“PEB”) within the Department.

The administrative requirements of the PEB for applications to list generics that were followed at all material times…have been largely the same since 2007. For any such applications which would result in a change to the price subsidised by the Commonwealth for a drug (i.e. the listing of a first generic brand of a listed drug), there were three application deadlines and three listing dates (1 April, 1 August and 1 December) per year. Once a first generic had been listed, subsequent applications for listing of another generic of that medicine could occur on the first day of any month.

The guidelines provided that applications required: a letter of application (for which there was no specified form); a completed “Application to list a Drug or Medicinal Preparation as a Pharmaceutical Benefit” (“PB11”) form; a completed “Request for Price Alteration” (“PB11a”) form; a copy of the letter from the TGA approving the entry of the product in the ARTG; a copy of the current Certificate of Medicine Registration or Certificate of Listing for the product issued by the TGA; a copy of the current Product Information (“PI”) approved by the TGA, if applicable (but only until 30 August 2009); a copy of the primary pack label or final artwork; and “written assurance” that “sufficient stock of the product to meet anticipated demand will be available at the time of listing on the PBS”.

56    Section 85AD of the National Health Act provided for the Commonwealth and the supplier of a medicine to enter into a supply agreement agreeing the maximum price the supplier would charge a pharmacist. If a price agreement was in force then the maximum price in the agreement was defined by s 98B(3) to be the APP (approved price to pharmacists) of that medicine. By reg 37D of the National Health (Pharmaceutical Benefit) Regulations 1960 (Cth), the maximum price a manufacturer could supply the medicine to a wholesaler was the APP less the amount of the wholesale mark-up. From 1 October 2012 the Approved Ex-Manufacturer Price or AEMP, the maximum wholesale price at which a manufacturer could supply to a wholesaler, replaced the APP. The AEMP was also agreed between the Commonwealth and the supplier of the medicine.

57    Section 99 of the National Health Act provides that a pharmacist who has provided a pharmaceutical benefit “is entitled to be paid by the Commonwealth”:

(a)    where the prescription for the supply of the pharmaceutical benefit was an entitlement card prescription, and the supply was not an early supply of a specified pharmaceutical benefit - an amount equal to the Commonwealth price of the pharmaceutical benefit as at the time of the supply; and

(b)    in any other case - the amount (if any) by which the Commonwealth price of the pharmaceutical benefit, as at the time of the supply, exceeded the amount (without any allowable discount) that the pharmacist or approved medical practitioner was entitled to charge under subsection 87(2) or (3).

58    The PBS Schedule lists the price at which a PBS-listed medicine may be dispensed at retail pharmacy level (the PBS price, also referred to as the Commonwealth price), which is referred to in the PBS Schedule as the dispensed price for maximum quantity (DPMQ) (the maximum quantity is also specified for each product on the PBS Schedule). At all relevant times until October 2012 the PBS price comprised:

(1)    the approved price to pharmacist, which is the maximum price allowed to be charged to the dispensing pharmacist for the medicine under the National Health Act and related legislation (the National Health Legislation) which in turn comprised:

    (a) the ex-manufacturer price, which is the maximum price allowed to be charged by the sponsor or manufacturer of the medicine under the National Health Legislation;

    (b) the wholesaler mark-up, which is the maximum mark-up that can be charged by a wholesaler under the National Health Legislation;

(2)    the pharmacist mark-up, which is the maximum mark-up that can be charged by a pharmacist under the National Health Legislation (giving effect to the Fourth and Fifth Community Pharmacy Agreement between the Commonwealth of Australia and the Pharmacy Guild of Australia); and

(3)    a dispensing fee charged by pharmacies under the National Health Legislation (giving effect to the Fourth and Fifth Community Pharmacy Agreement between the Commonwealth of Australia and the Pharmacy Guild of Australia).

59    When a patient buys a PBS listed medicine they must pay the patient co-payment amount which is different for general patients compared to concessional patients. At 1 August 2009, this was $5.30 for concessional patients and $32.90 for general patients. The PBS scheme also provided for a “safety net” so that if the amount a patient had paid exceeded the safety net threshold in any given year, concessional patients paid $0 and general patients paid the concessional co-payment amount ($5.30) for the remainder of the year. As required by s 99 of the National Health Act, the Commonwealth would pay the pharmacist the difference between the Commonwealth price and the amount the patient had paid. This amount represented the PBS subsidy.

60    Part VII, Division 3A of the National Health Act, sets out price reductions which apply to pharmaceutical products that are already listed on the PBS Schedule, when the first PBS listing of one or more generic versions of that product (first generic equivalents) occurs. For the period between 1 January 2009 and 31 January 2011, a PBS listing of the first generic version of an originator product would have triggered a 12.5% price reduction in the APP of the originator brand provided certain circumstances were met and any exceptions did not apply. In the present case, in respect of generic venlafaxine products, the relevant circumstances were met and the exceptions did not apply. The new APP would also have been applied to any other generic equivalent version subsequently listed unless the APP was otherwise further reduced by the time of their listing.

61    As the Commonwealth explained, there were other potential statutory price reductions once the 12.5% price reduction had occurred. Further 2% price reductions may automatically follow on nominated days. For example, if a generic brand of venlafaxine had been listed on 1 August 2009 or 1 December 2009, a 2% statutory price reduction would have occurred on 1 August 2010 under s 99ACI.

62    There were also price disclosure price reductions. Under s 99ADB and reg 37 information had to be given to the Department which formed the basis for calculation of the Weighted Average Disclosed Price (or WADP) for a pharmaceutical item. The Commonwealth explained:

The WADP was calculated according to a formula which took into account:

(a)    the volume of supplies of the particular brands the subject of price disclosure; and

(b)    the extent to which the responsible persons of those brands offered discounts and other incentives which resulted in the price actually paid by pharmacists being less than the AEMP and the applicable wholesale mark-up.

If the WADP calculated, and recorded in a determination, by the Minister was more than 10% below the current AEMP, then the AEMP was reduced to the WADP. The AP2P was also reduced in accordance with a formula set out in regulation 37C. The effect of the price disclosure regime was, therefore, to effect price reductions to the cost of drugs resulting in the subsidy paid by the Commonwealth under the PBS more closely reflecting the price actually paid for a drug by a pharmacist.

Until 1 December 2010, the responsible person for existing listed brands could elect to comply with the price disclosure requirements for those brands: section 99ADE. Once made, the election could not be revoked by the responsible person (section 99ADE(5)) but the Minister could (at the responsible person's request) determine to revoke the election (with prospective effect) if the listing of the generic brand that triggered the price disclosure regime was varied or revoked: section 99AEL. From 1 December 2010, price disclosure was mandatory for all brands of all drugs listed on the F2 formulary.

PDPRs took effect according to a cycle that depended on when the first generic brand was listed. For venlafaxine:

(a)    if the first generic brand had listed on 1 August 2009, the first PDPR could have occurred on 1 August 2011, and then subsequent PDPRs could have occurred on 1 August 2012 and 1 April 2014; and

(b)    if the first generic brand had listed on 1 December 2009, the first PDPR could have occurred on 1 April 2012, and then subsequent PDPRs could have occurred on 1 April 2013 and 1 April 2014.

63    By operation of Commonwealth policy , there have been only three occasions per year on which a product whose listing on the PBS would result in a reduction in the APP of a pharmaceutical product could be listed on the PBS (that is, included on the PBS Schedule), on 1 April, 1 August and 1 December. To obtain listing on these dates, the application to list must be submitted by certain dates. An application to list a first generic equivalent on the PBS on 1 April must be filed by 1 December of the preceding year. An application to list a first generic equivalent on the PBS on 1 August must be filed by 1 May of that year. An application to list a first generic equivalent on the PBS on 1 December must be filed by 1 September of that year. Thereafter, a second or subsequent generic equivalent could be listed on the PBS on the first day of any month, provided that the application for listing is made by the 15th of the month which is three calendar months before the listing date.

64    A pharmacist may dispense products privately, that is, not through the PBS, even where the products are PBS listed. Prescription products which are not listed on the PBS are dispensed privately. If a pharmacist dispenses a product privately the patient bears the full purchase price of the product as no Commonwealth subsidy is paid under the PBS.

65    The PBS Price and the ex-manufacturer price are maximum values, and a sponsor or manufacturer may elect to reduce the actual price it charges the pharmacist, at any time, by offering its products at a discount to the ex-manufacturer price component of the PBS Price.

66    In the case of PBS listed medicines that are purchased by a pharmacist at the listed APP, the profit made by a pharmacist on the sale of those medicines comprises the set pharmacist mark-up and the dispensing fee. However, where a pharmacist is able to purchase a PBS listed medicine at a price below the listed APP, an additional profit is earned which reflects the difference between their cost of goods and the listed APP. The greater the difference between the actual cost of goods and the listed APP, the greater the profit margin for the pharmacist.

Efexor-XR

67    Wyeth was the patentee of Australian Patent No 567524 for the compound, venlafaxine hydrochloride, a selective noradrenaline re-uptake inhibitor used for the treatment of depression and related illnesses. The compound patent reached the end of its term and expired on 6 December 2008.

68    Wyeth was also the patentee of Australian Patent No 2003259586 granted on 11 May 2007 for an “extended release formulation” of venlafaxine hydrochloride, which is referred to as the method patent. The method patent would reach the end of its term and expire in 2017.

69    Wyeth Australia was the sponsor of pharmaceutical products, Efexor-XR in 37.5mg, 75 mg and 150mg formulations. Efexor-XR is an extended release formulation of venlafaxine hydrochloride. The 75 mg and 150mg formulations of Efexor-XR were listed on the PBS in 1999. The 37.5mg formulation of Efexor-XR was listed on the PBS in December 2005. The Efexor-XR products were the only products listed on the PBS containing venlafaxine hydrochloride as the active pharmaceutical ingredient until 1 April 2012.

70    Efexor-XR was the leading anti-depressant brand in Australia in terms of units sold and value of sales. Annual sales of Efexor-XR were in the order of $114 million.

71    On 1 February 2009 Wyeth’s product Pristiq, in which the active pharmaceutical ingredient was desvenlafaxine (a metabolite of venlafaxine), was listed on the PBS. Desvenlafaxine was the subject of Australian Patent No 2002250058 which will reach the end of its term and expire in 2022.

Evelexa XR

72    Sigma was the sponsor of registrations on the ARTG on 5 March 2009 of Evelexa XR 150 venlafaxine (as hydrochloride) 150mg extended release capsule, Evelexa XR 75 venlafaxine (as hydrochloride) 75mg extended release capsule, and Evelexa XR 37.5 venlafaxine (as hydrochloride) 37.5mg modified release capsule.

73    The Evelexa XR products were registered on the ARTG on the basis of being essentially similar to the corresponding Efexor-XR products and are substitutable (including on the PBS) for those products.

74    Sigma commenced proceeding VID 195 of 2009 on 1 April 2009 against Wyeth and Wyeth Australia challenging the validity of the method patent. On 1 May 2009 Wyeth filed a cross claim in proceeding VID 195 of 2009 alleging infringement and threatened infringement of the method patent including an application for an interlocutory injunction.

75    On 3 June 2009 Sundberg J granted the Sigma interlocutory injunction which was as follows:

Pending the determination of the proceeding or further order the cross-respondent whether by itself, its directors, officers, servants, agents or otherwise be restrained from marketing, taking orders for, selling, supplying, offering to supply or otherwise exploiting in Australia the products listed on the Australian Register of Therapeutic Goods under the name Evelexa-XR or any other product comprising the same generic modified release formulation of venlafaxine hydrochloride, without the licence of or authority of the cross-claimants.

76    The Sigma interlocutory injunction was granted:

Upon the cross-claimants by their Counsel undertaking:

(a)    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 any operation of the order below or any continuation (with or without variation) thereof, and

(b)    to pay the compensation referred to in (a) to the person there referred to.

Enlafax-XR

77    Alphapharm was the sponsor of registrations on the ARTG on 30 April 2009 of Enlafax-XR venlafaxine 150mg modified release capsule and Enlafax-XR venlafaxine 75mg modified release capsule.

78    The Enlafax-XR products were registered on the ARTG on the basis of being essentially similar to the corresponding Efexor-XR products and are substitutable (including on the PBS) for those products.

79    Alphapharm commenced proceeding NSD 596 of 2009 on 19 June 2009 challenging the validity of the method patent. On 23 July 2009 Wyeth and Wyeth Australia Pty Ltd filed a cross-claim in proceeding NSD 596 of 2009 alleging infringement and threatened infringement of the method patent including an application for an interlocutory injunction.

80    On 25 August 2009 I granted the Alphapharm interlocutory injunction which was as follows:

1    Pending the determination of the proceeding or further order, Alphapharm Pty Limited (whether by itself; its directors, officers, servants, agents or otherwise) be restrained from infringing claims 4 and 27 (insofar as claim 27 is dependent on claim 4) of Australian Patent No 2003259586 (the method patent), including without limitation by, during the term of the method patent and without the licence or authority of Wyeth, importing, marketing, taking orders for, selling, supplying, offering to supply in Australia the Enlafax-XR Products or any other product comprising the same generic modified release formulation of venlafaxine hydrochloride for use by persons for the Registered Indications or otherwise exploiting the invention the subject of the method patent.

2    Alphapharm Pty Limited be restrained from applying to list the Enlafax XR Products on the Schedule of Pharmaceutical Benefits.

81    The Alphapharm interlocutory injunction was granted:

UPON the cross-claimants by their counsel undertaking:

(a)    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 any operation of the orders below or any continuation (with or without variation) thereof; and

(b)    to pay the compensation referred to in (a) to the person there referred to; and

(c)    until further order, not to make any application to de-list Efexor-XR from the Pharmaceuticals Benefits Scheme.

Generic Health venlafaxine

82    Generic Health was the sponsor of registrations on the ARTG on 6 August 2009 of (as now known) Venlafaxine Sandoz XR venlafaxine (as hydrochloride) 150mg modified release capsule, (as now known) Venlafaxine Sandoz XR venlafaxine (as hydrochloride) 75mg modified release capsule, Venlafaxine GENERICHEALTH XR venlafaxine (as hydrochloride) 150mg modified release capsule, and Venlafaxine GENERICHEALTH XR venlafaxine (as hydrochloride) 75mg modified release capsule, as well as (as now known) Apo-Venlafaxine XR venlafaxine (as hydrochloride) 150mg modified release capsule and (as now known) Apo-Venlafaxine XR venlafaxine (as hydrochloride) 75mg modified release capsule, and (as now known) Venlexor XR venlafaxine (as hydrochloride) 150mg modified release capsule (as now known) Venlexor XR venlafaxine (as hydrochloride) 75mg modified release capsule.

83    The Generic Health venlafaxine products were registered on the ARTG on the basis of being essentially similar to the corresponding Efexor-XR products and are substitutable (including on the PBS) for those products.

84    Generic Health commenced proceeding NSD 1124 of 2009 on 6 October 2009 challenging the validity of the method patent. On 9 November 2009 Wyeth and Wyeth Australia Pty Ltd filed a cross-claim in proceeding NSD 1124 of 2009 alleging infringement and threatened infringement of the method patent including an application for an interlocutory injunction.

85    On 10 November 2009 I granted the Generic Health interlocutory injunction which, pending further order, was as follows:

(a)    Generic Health Pty Ltd (whether by itself its directors, officers, servants, agents or otherwise), be restrained from infringing claims 4 and 27 (insofar as claim 27 is dependent on claim 4) of the Patent, including without limitation by, during the term of the Patent and without the licence or authority of the respondent, importing, marketing, taking orders for, selling, supplying, offering to supply in Australia any products the subject of ARTG registration numbers 151874, 151875, 151876, 151877,151878, 151880, 151884, 151885 (the GH Products) or any product comprising the same generic modified release formulation of venlafaxine hydrochloride for use by persons for major depression and social anxiety disorder or otherwise exploiting the invention the subject of the Patent;

(b)    Generic Health Pty Ltd (whether by itself, its directors, officers, servants, agents or otherwise) be restrained from selling or assigning its rights in the registrations for the GH Products or any product comprising the same generic modified release formulation of venlafaxine hydrochloride the subject of the Patent without notifying the purchaser or assignee of the restraints placed upon Generic Health Pty Ltd by operation of these orders in relation to the GH Products; and

(c)    that Generic Health Pty Ltd make it a condition of any purchase or assignment of the rights in the registrations for the GH Products, that the purchaser or assignee provides undertakings, without admission of liability, in the following terms to the respondent:

…

(d)    Generic Health Pty Ltd be restrained from applying to list the GH Products on the Schedule of Pharmaceutical Benefits.

86    The Generic Health interlocutory injunction was granted upon:

The respondent’s and Wyeth Australia Pty Ltd’s undertaking, by their counsel:

(a)    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 any operation of the orders below or any continuation (with or without variation) thereof; and

(b)    to pay the compensation referred to in (a) to the person there referred to; and

(c)    until further order, not to make any application to de-list Efexor-XR from the Pharmaceuticals Benefits Scheme.

Other events

87    On 19 August 2009 I listed the proceedings between Sigma, Alphapharm and Wyeth for hearing, on a provisional basis, starting on 8 March 2010. On 28 August 2009 I vacated this order and listed the proceedings for hearing from 12 to 30 April 2010. Although the proceedings involving Generic Health had not been commenced at that time, Generic Health was aware of the hearing dates by no later than September 2009. Subsequently, orders were made by which the proceedings involving Generic Health were also to be heard at the same time as the proceedings involving Sigma and Alphapharm.

88    On 15 October 2009, Pfizer Inc acquired Wyeth and Wyeth Australia Pty Ltd. The sale process had commenced much earlier in or around January 2009. Pursuant to the sale arrangements Pfizer Australia Pty Ltd, a subsidiary of Pfizer Inc, acquired all of Wyeth Australia’s products.

89    Ranbaxy Australia Pty Ltd was the sponsor of registrations on the ARTG on 22 January 2010 of Venlafaxine Ranbaxy venlafaxine (as hydrochloride) 150mg modified release capsules, Venlafaxine Ranbaxy venlafaxine (as hydrochloride) 75mg modified release capsules, and Venlafaxine Ranbaxy venlafaxine (as hydrochloride) 37.5mg modified release capsules.

90    I heard the proceedings between 15 April and 31 May 2010.

91    Spirit Pharmaceuticals Pty Ltd was the sponsor of registrations on the ARTG on 30 July 2010 of Elaxine SR 150 venlafaxine (as hydrochloride) 150mg modified release capsule, Elaxine SR 75 venlafaxine (as hydrochloride) 75mg modified release capsule, and Elaxine SR 37.5 venlafaxine (as hydrochloride) 37.5mg modified release capsule.

92    SC Pharma Pty Ltd was the sponsor of registrations on the ARTG on 30 July 2010 of Stada Venlafaxine SR venlafaxine (as hydrochloride) 150mg modified release capsule, Stada Venlafaxine SR venlafaxine (as hydrochloride) 75mg modified release capsule, Stada Venlafaxine SR venlafaxine (as hydrochloride) 37.5mg modified release capsule, Venlafaxine SR SCP venlafaxine (as hydrochloride) 150mg modified release capsule, Venlafaxine SR SCP venlafaxine (as hydrochloride) 75mg modified release capsule, and Venlafaxine SR SCP venlafaxine (as hydrochloride) 37.5mg modified release capsule.

93    On 23 September 2010 I provided the draft reasons for judgment to the parties to review for the purpose of identifying any confidential information which ought not to be disclosed in the published reasons. These draft reasons were in the same terms as the reasons for judgment published subsequently in which I decided the method patent was valid and that the generic parties should be subject to final injunctions.

94    On 8 November 2010 I made orders consequential on reasons for judgment published on that day, Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2010] FCA 1211; (2010) 88 IPR 459. I dismissed the challenges to the validity of the method patent, made final orders restraining each of Sigma, Alphapharm and Generic Health from infringing the method patent, and discharged the interlocutory injunctions and released Wyeth and Wyeth Australia from each of the undertakings which they had given in order to secure the interlocutory injunctions. I also refused applications by Sigma and Alphapharm to stay the final injunctions pending their foreshadowed appeals: Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212.

95    First Sigma, and then Alphapharm and thereafter Generic Health appealed against the orders I made on 8 November 2010.

96    On 12 November 2010 Jacobson J refused Sigma’s further application to stay the final injunctions against it pending hearing of the appeal which it had filed: Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2010] FCA 1258.

97    Pfizer Australia was the sponsor of registrations on the ARTG on 10 December 2010 of Venlafaxine Wyeth venlafaxine (as hydrochloride) 150mg modified release capsule, Venlafaxine Wyeth venlafaxine (as hydrochloride) 75mg modified release capsule, Venlafaxine Wyeth venlafaxine (as hydrochloride) 37.5mg modified release capsule, Altven venlafaxine (as hydrochloride) 150mg modified release capsule, Altven venlafaxine (as hydrochloride) 75mg modified release capsule, and Altven venlafaxine (as hydrochloride) 37.5mg modified release capsule.

98    On 28 January 2011 Sigma’s ARTG registration for Evelexa XR was transferred to its parent company, Sigma Company Limited. This was done as part of the arrangements for the sale of Sigma to Aspen Asia Pacific Pty Ltd, after which Sigma’s named was changed to Aspen Pharma Pty Ltd. Aspen Asia acquired the shares in Sigma pursuant to a share sale agreement completed on 31 January 2011. Apart from Evelexa XR and one other product, all generic pharmaceutical products owned or in-licensed by Sigma or its subsidiaries (including Arrow Pharmaceuticals Pty Ltd, Chemists’ Own Pty Ltd and Herron Pharmaceuticals Pty Ltd), including the associated intellectual property rights and ARTG registrations were transferred with the shares in Sigma.

99    Generic Health was the sponsor of registrations on the ARTG on 25 March 2011 of Apotex-Venlafaxine XR venlafaxine (as hydrochloride) 75 mg modified release capsule, Apotex-Venlafaxine XR venlafaxine (as hydrochloride) 150 mg modified release capsule, Chemmart Venlafaxine XR venlafaxine (as hydrochloride) 75 mg modified release capsule, Chemmart Venlafaxine XR venlafaxine (as hydrochloride) 150 mg modified release capsule, Terry White Chemists Venlafaxine XR venlafaxine (as hydrochloride) 75 mg modified release capsule, Terry White Chemists Venlafaxine XR venlafaxine (as hydrochloride) 150 mg modified release capsule.

100    On 28 October 2011 the Full Court delivered judgment to the effect that the appeal should be allowed as the method patent was invalid: Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2011] FCAFC 132; (2011) 119 IPR 194. On 11 November 2011 the Full Court made orders allowing the appeal and setting aside the orders I made on 8 November 2010 to the effect that each of Sigma Pharmaceuticals Australia, Alphapharm and Generic Health be restrained from infringing the method patent. On 21 December 2011 the Full Court made further orders including a declaration that claims 1 to 17 of the method patent are invalid and an order revoking those claims. The Full Court also set aside other orders I made insofar as necessary including the release of Wyeth and Wyeth Australia from the undertakings as to damages. The Full Court stayed two of its orders (revoking the claims and requiring rectification of the Register of Patents to reflect the revocation) to permit Wyeth and Wyeth Australia to seek special leave to appeal from the High Court, Wyeth and Wyeth Australia giving certain further undertakings.

101    Wyeth and Wyeth Australia applied for special leave to appeal to the High Court on 2 December 2011.

102    On 1 April 2012, following applications made in November and December 2011, the following generic equivalents to Efexor-XR were listed on the PBS:

(1)    Apotex 75mg and 150mg products under brand names Apo-VenlafaxineXR, ChemmartVenlafaxineXR, and Terry White Chemists Venlafaxine XR;

(2)    Generic Health 75mg and 150mg products under brand name Venlafaxine GENERICHEALTH XR;

(3)    Alphapharm 75mg and 150mg products under brand name Enlafax-XR;

(4)    Spirit Pharmaceuticals Pty Limited 37.5mg, 75mg and 150mg products under brand name Elaxine SR;

(5)    Sandoz Pty Limited 75mg and 150mg products under brand name Venlafaxine Sandoz XR;

(6)    Ascent Pharma Pty Ltd 75mg and 150mg products under brand name Venlexor XR; and

(7)    Ranbaxy Australia Pty Ltd 37.5mg, 75mg and 150mg products under brand name Venla RBX.

103    The High Court refused to grant special leave to Wyeth’s application on 11 May 2012.

The parties

Wyeth

104    On 15 October 2009, Pfizer Inc. completed its acquisition of Wyeth LLC and Wyeth Australia Pty Limited (ACN 000 296 211), the respondents in the proceedings.

Sigma

105    On 19 December 2005, Sigma Company Limited (ACN 004 132 923) merged with Arrow Pharmaceuticals Limited (ACN 008 417 403). The merged company was renamed Sigma Pharmaceuticals Limited (ACN 008 417 403) (now known as Sigma Healthcare Limited) and listed on the ASX.

106    At that time, Sigma Pharmaceuticals Limited became the parent company of Sigma Company Limited (ACN 004 132 923).

107    Sigma Pharmaceuticals (Australia) Pty Ltd (004 118 594), referred to in these reasons as Sigma, is the applicant in proceeding no. VID195/2009. Sigma was the subsidiary of Sigma Company Limited.

108    On 31 January 2011, Sigma Company Limited sold Sigma to Aspen Asia Pacific Pty Ltd (ACN 146 444 484) under a share sale agreement between, Sigma Pharmaceuticals Limited, Sigma Company Limited (as vendor), Aspen Asia Pacific Pty Ltd (as purchaser) and Aspen Pharmacare Holdings Limited (a South African registered company and the ultimate parent company of Aspen Asia Pacific Pty Ltd).

109    Sigma was renamed Aspen Pharma Pty Ltd on 31 January 2011.

110    On 31 August 2015 Sigma’s generic business was sold to Arrow Pharmaceuticals Limited. Sigma’s claims extend to alleged losses up to 31 August 2015.

Alphapharm

111    Alphapharm Pty Ltd is the applicant in proceeding no. NSD596/2009. Alphapharm is an (indirect) subsidiary of Mylan, Inc.

112    Mylan N/V is the ultimate holding company of Mylan, Inc.

113    Mylan Ireland Limited (Mylan Ireland) is also an (indirect) subsidiary of Mylan, Inc.

114    Generics (UK) Ltd is an indirect subsidiary of Mylan, Inc. Mylan Ireland took the place of Generics (UK) Ltd under the agreements for supply to Alphapharm with Pharmathen.

Generic Health

115    Since September 2010, Generic Health Pty Ltd has been a subsidiary of Lupin Limited. Lupin Holdings B.V., which is wholly owned by Lupin, currently holds 100% of the issued capital of Generic Health.

Pharmathen

116    Pharmathen S.A., a company incorporated in Greece, is the holding company of the Pharmathen group of companies and is also known as Pharmathen Pharmaceuticals S.A.

Alembic

117    On 24 January 2011, Alembic Limited was demerged and its obligations in relation to the manufacture and supply of pharmaceutical products were transferred to Alembic Pharma Limited.

118    On 12 March 2011, Alembic Pharma Limited changed its name to Alembic Pharmaceutical Limited.

Principles relating to the undertakings

119    The terms of the undertakings which Wyeth gave on the grant of the interlocutory injunctions were the same in each case, namely:

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 any operation of the orders below or any continuation (with or without variation) thereof.

120    The undertakings reflect the Court’s then Practice Note No 3 which refers to the “usual undertaking as to damages”. The description, the “usual undertaking as to damages”, in turn, reflects the principles most conveniently described by Brooking J in National Australia Bank v Bond Brewing Holdings Ltd [1991] 1 VR 386 at 599-602 including the following:

When a court of equity is asked to grant an interim or interlocutory injunction it will consider whether it should take steps, as it ordinarily will, to protect the party enjoined against the danger of injury resulting from the injunction. It has been doing this for the past 200 years.

…

The power of a court of equity to require, as a condition of the grant of an injunction, that a bond be given, or that an undertaking (which may or may not be required to be buttressed by security) be given, is an inherent power which derives from the court's discretion to grant or refuse the injunction sought, a power exercised for the purpose of effecting justice between the parties… By giving the undertaking the litigant has put himself under the power of the court; the order later made in an appropriate case for an inquiry and payment of the damages is an appendage to the undertaking…

It is because damage flowing from the act of the court is not - unless one of the recognised causes of action exists - compensable in damages that equity requires its undertaking or bond or other appropriate safeguard. Time and again we are told that this is equity's way of avoiding injustice. It is never said that equity insists on an undertaking or bond merely in order to prevent arguments and provide a summary remedy. Implicit in the judgments is the idea that without the undertaking there will be no remedy, so that injustice will result…

Equity has its own means - an anticipatory one - of avoiding injustice, by refusing to grant an injunction or appoint a receiver by interim or interlocutory order except on terms. The applicant can take the order or leave it, but if he takes it he does so on terms which make clear, once recourse is had to the authorities, the extent to which he is at risk in relation to damages.

121    It was the Court’s making of the interlocutory orders which called forth the undertakings from Wyeth. By the undertakings Wyeth obtained the interlocutory orders and by the undertakings Wyeth submitted to the making of such order, if any, as the Court may consider to be just for the payment of compensation to any person “adversely affected by any operation of the [interlocutory] orders…or any continuation (with or without variation) thereof”.

122    In Coshott v Principal Strategic Options Pty Ltd [2004] FCAFC 50 at [18] the Full Court referred to Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249 as authority for these propositions:

(a)    the court has a discretion not to enforce an undertaking as to damages, but unless the respondent has been guilty of conduct that would render it inequitable to enforce the undertaking it will be just, speaking generally, for an applicant who fails on the merits to recompense the respondent for the damage suffered by him or her as a result of the making of the interlocutory order (see Gibbs J at 311 – 312);

(b)    it is necessary to draw a distinction between results which are caused by the making of the interlocutory order and those which flow from the fact of the litigation itself (see Barwick CJ at 310; Gibbs J at 312 and Stephen J at 315);

(c)    generally speaking, the damages must be confined to loss which is the natural consequence of the interlocutory order under the circumstances of which the applicant for the order had notice (see Gibbs J at 312 and the authorities there cited and Stephen J at 319);

(d)    the making of the interlocutory order must have been a cause without which the damage would not have been suffered (Gibbs J at 313 and Stephen J at 320); and

(e)    the onus of proof in respect of the damage claimed lies on the respondent who asserts that he or she sustained damage by reason of the making of the interlocutory order (see Gibbs J at 313 and Stephen J at 316 and 320).

123    The importance of proposition (b) accords with the fact that the contingency which enlivens the power to award compensation is that a person has been adversely affected by the operation of the interlocutory order. Thus, at 310 in Air Express, Barwick CJ said:

But the adoption of that view makes it the more imperative to maintain the distinction between results which are caused by the grant of an injunction and those which flow from the fact of the litigation itself…

124    The “view” to which his Honour was referring is as stated in Griffith v Blake (1884) 27 Ch D 474 that the damages recoverable on the undertaking relate to the action of a court in granting the injunction, and not the action of a party in seeking the injunction.

125    At 312-313 in Air Express Gibbs CJ said:

However, it is perfectly clear, and it appears from the words of the undertaking themselves, that the only damages to which a defendant is entitled are those which he has sustained by reason of the grant of the injunction. The generally accepted view is that the damages must be confined to loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice.

…

In a number of authorities the court has distinguished between loss which was caused by the injunction and loss which arose from the litigation…

There is no reason to doubt that it is correct in principle to draw such a distinction if the facts warrant it. If the pendency of the litigation, rather than the making of the order, was the cause of the plaintiff's loss, the terms of the undertaking have no application, since the plaintiff has not sustained loss by reason of the order. Moreover, except in certain cases analogous to malicious prosecution, a defendant is not entitled to recover damages for loss resulting from legal proceedings brought against him — the only liability of the unsuccessful plaintiff is to pay costs. The court should no doubt scrutinize with care an assertion by a plaintiff that loss which has been suffered by a defendant has resulted from the litigation rather than from the making of the interlocutory order, since a plaintiff should not be allowed to evade payment of the price which he has agreed to pay for the grant of the injunction. In the end, however, the question becomes one of fact: did the making of the order cause the loss? The onus of proof must, in accordance with general principles, lie on the defendant who asserts that he sustained damage by reason of the order.

It was submitted on behalf of the appellant that it is enough that the making of the order should have been a cause of the damage, so that if both the making of the order and the continuance of the litigation are concurrent causes the undertaking will be applicable. However, in almost every case in which an injunction is granted the injunction will play some part in causing the party bound by it to act in accordance with its terms. To order a plaintiff to pay damages where it appears that the party bound by the injunction would have acted as he did even if the injunction had not been granted, would be to give the undertaking an effect obviously not intended. The party seeking to enforce the undertaking must show that the making of the order was a cause without which the damage would not have been suffered. It was further submitted that the onus lies on the plaintiff, against whom the undertaking is sought to be enforced, to disentangle any damage arising from the litigation from that which was caused by the making of the order. However, the onus of proof does not shift in this way; the defendant, who seeks to enforce the undertaking, must prove that the damage he has sustained was caused by the making of the order.

126    At 320 Stephen J said:

From this it can be seen that it will only be if damage is suffered because of the grant of the injunction, and would not have been suffered but for it, that the court should compensate a defendant who claims damages under the undertaking. Its grant must be shown to be the causa sine qua non of the damage complained of before the defendant can be entitled to be compensated for what turns out to be the erroneous grant by the court of the injunction against it….

It follows that it is for the claimant under an undertaking to establish by evidence, or by inference from evidence, a prima facie case both that the grant of the injunction was a cause of his damage and that, but for it, he would not have suffered that damage.

127    Mason J, in dissent in the result, said this at 324-325:

The distinction between damage caused by the injunction and damage which flows from the litigation is, I think, well founded on the language in which the usual undertaking as to damages is expressed. The party seeking damages must show that he has sustained damage “by reason of the order”. The words connote a causal connection between the damage and the interim injunction.

English law has not adopted a uniform approach to causation. Instead, it has tended to take refuge in the notion that causation is very largely a question of fact. But the many statements to this effect which are to be found in the decided cases do not attempt to deny the fact that the common law has applied a variety of theories and standards of causation in each instance applying that which is in point of policy the most apt or appropriate to the question which arises for decision.

For this reason little is to be gained in the present case from an examination of the myriad authorities which deal with causation of damage in contract, tort and other situations many of which were pressed upon us in argument. We are better advised to look to the purpose which the undertaking as to damages is designed to serve and to identify that causal connection or standard of causal connection which is most appropriate to that purpose. The object of the undertaking is to protect a party, normally the defendant, in respect of such damage as he may sustain by reason of the grant of the interim injunction in the event that it emerges that the plaintiff is not entitled to relief. It is no part of the purpose of the undertaking to protect the defendant against loss or damage which he would have sustained otherwise, as for example, detriment which flows from the commencement of the litigation itself. That is loss or damage which the defendant must bear himself, as he does when no interim injunction is sought or granted. Consequently, it is for the party seeking to enforce the undertaking to show that the damage he has sustained would not have been sustained but for the injunction.

128    A number of the claimants in the present matter stressed the word “sought” in Mason J’s reference to the words “when no interim injunction is sought or granted” to support the proposition that all actions taken in anticipation of the interlocutory injunctions should be disregarded. In some cases, as will be seen, this extended to propositions that anything said or done, even by third parties not the subject of the interlocutory orders, should be disregarded if what was said or done was or might have been “tainted” by anticipation of the interlocutory orders.

129    I do not consider that such an approach reflects either the terms of the undertakings or the principles which are otherwise clear from Air Express. It is the operation of the interlocutory order which is the focus of the undertaking, not events leading up to the making of the interlocutory order. Assume, for example, a person cancelled a shipment of goods anticipating that an interlocutory injunction would be granted but the anticipated interlocutory injunction either was not sought or was not made. The person might well suffer loss, but there would be no undertaking as to damages; without some other cause of action, the loss would lie where it falls. For this reason, I consider that to the extent the claimants approach the matter on any other basis, the approach is wrong in principle. Because most of the claimants claim under each undertaking it is also often difficult to work out what interlocutory order is said to be relevant. As a result, I have dealt with many of the submissions on the facts and within the conceptual framework of the claimants’ submissions, but where I do so it should not be assumed that I accept that conceptual framework.

130    European Bank Ltd v Robb Evans of Robb Evans and Associates [2010] HCA 6; (2010) 240 CLR 432 does not support a contrary proposition. French CJ and Gummow, Hayne, Heydon and Kiefel JJ, after referring to Mason J’s observations about causation, said:

[17]    A party seeking an equitable remedy is required to “do equity” and this is the origin of the requirement that the party giving an undertaking as to damages submit to such order for payment of compensation as the court may consider to be just. Given its origin and application to varied circumstances in particular cases, the process of assessment of compensation cannot be constrained by a rigid formulation.

[18]    These considerations, bearing upon the interests of justice in the particular circumstances of the litigation, support the following statement by Aickin J in Air Express [(1981) 146 CLR 249 at 266–267], made with respect to interlocutory injunctions, but applicable to the interlocutory order made by the Court of Appeal against European Bank. His Honour said:

In a proceeding of an equitable nature it is generally proper to adopt a view which is just and equitable, or fair and reasonable, in all the circumstances rather than to apply a rigid rule. However the view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case.

The phrase “could have been foreseen” should be noted.

131    At [29] their Honours identified the relevant questions as:

(1)    What is the loss that is now alleged?

(2)    Did that loss flow directly from the interlocutory order?

(3)    Could the loss sustained have been foreseen at the time of that order?

132    Their Honours were not suggesting that loss other than that caused by the operation of the interlocutory orders, such as loss caused by the existence of the litigation or mere anticipation of an interlocutory order, would be compensable. The point being made was that in determining the loss caused by the interlocutory orders, reasoning by analogy to the damages recoverable under other causes of action, such as in tort or contract, may be inapt. So much is apparent from the fact that the “purpose which the undertaking as to damages is to serve” has never been to protect a person from the exigencies of litigation which include the risk of acting in anticipation of an interlocutory injunction which might never be sought or made, in which event there will be no undertaking. The purpose is only to protect those who may suffer loss from the operation of an order made by a court before the rights of the parties are able to be fully determined.

133    It follows that for causation, whether it be Wyeth’s approach based on the statements in Air Express at 313, 320 and 325 (“the order was a cause without which the damage would not have been suffered” per Gibbs J, the order must be shown to be “the causa sine qua non of the damage complained of” per Stephen J, or “it is no part of the purpose of the undertaking to protect the defendant against loss or damage which he would have sustained otherwise” per Mason J) or the approach of some of the claimants (a “non-trivial contribution” to the loss will suffice), the relevant contingency is confined to the operation of the interlocutory orders.

134    To be specific to the present case, the purpose of undertaking has nothing to do with protecting any person from loss resulting from the existence of the method patent, decisions taken by a person as a result of the existence of the method patent, the existence of the litigation or decisions taken by a person as a result of the existence of the litigation, which include the anticipation of an interlocutory injunction against them. It does not matter that the reason one claimant (for example, Alphapharm) may have anticipated an interlocutory injunction against it is because of the Sigma interlocutory injunction. That anticipation was not a result of the operation of the Sigma interlocutory injunction which did not bind Alphapharm. It was a result of the anticipation by Alphapharm of the litigation against it, including one of the potential exigencies of litigation, which is an interlocutory injunction. As a result, Alphapharm’s claim based on the Sigma interlocutory injunction is misconceived. The same approach must be taken to Generic Health’s claim based on the Alphapharm interlocutory injunction which did not bind Generic Health and did not affect Generic Health in any way other than in the sense that it caused Generic Health to anticipate the likely course of anticipated litigation against it, including an interlocutory injunction. This anticipation was not a result of the Alphapharm interlocutory injunction but of the anticipated litigation against Generic Health including one of the exigencies of that anticipated litigation which was an interlocutory injunction.

135    One of the many factual complexities in the present matter is that Generic Health was wearing multiple hats. It was a supplier of its own branded generic pharmaceutical products to pharmacists (in common with Sigma and Alphapharm) but was also a supplier to Sigma of Sigma’s venlafaxine products sourced from Alembic and a potential supplier to other generics of venlafaxine products. As such, it is apparent that the operation of the Sigma interlocutory injunction could have had an adverse effect on Generic Health (and thus Alembic). But the same cannot be said in respect of the Alphapharm interlocutory injunction for the reasons given. Mere anticipation of the exigencies of litigation as a result of an interlocutory injunction which binds another party is not causally connected to the operation of the interlocutory injunction in the relevant sense. To adopt such an approach would be to assess compensation not by reference to the operation of the interlocutory injunction but by reference to mere litigation, actual or anticipated. This would be contrary to principle. The undertaking is not given as the price of the capacity to commence or prosecute the litigation.

136    This proposition also explains why I do not accept the approach proposed by some of the claimants that for the purpose of assessing loss I should postulate that “Wyeth sought the injunctions and the applications were refused on the basis that the patent claims were invalid as determined by the Full Court” or that Wyeth is “not permitted to assert (including by seeking the injunctions and threatening and commencing litigation) the invalid patent claims”. These approaches conflict with the purpose of the undertaking which is confined to protecting persons from loss caused by the operation of the interlocutory orders. The effect of the claimants’ approaches would be to assess causation and loss on the basis that the method patent and/or the litigation about the method patent did not exist and, thereby, to compensate the claimants for the mere existence of the method patent and the litigation. As discussed, these approaches are far removed from the terms of the undertakings and their purpose.

137    The claimants submitted that the two reasons Wyeth proposed for a different approach, that there was no appeal against the interlocutory injunctions and it would remove the effect of the method patent and the litigation, were not valid. As to the first, I agree. The fact that there were no appeals against the interlocutory injunctions is immaterial. As to the second, I disagree for the reasons given above.

138    To take one example of the difficulties in the claimants’ approaches, Generic Health submitted that it was “natural” that Wyeth should be taken to have applied for and failed to obtain the interlocutory injunctions on the grounds which ultimately found favour in the Full Court. As Generic Health put it, I should hypothesise, contrary to the fact, that Sundberg J (and then I) refused each of the interlocutory injunctions on the basis that there was not a sufficient prima facie case for Wyeth to obtain interlocutory relief on the same basis as the Full Court ultimately found, that the claims were not fairly based on the document from which the method patent claimed priority. If this approach were to be taken, however, the generics would be attributed with knowledge in 2009 that they did not in fact possess until 28 October 2011, namely that the view of the Court, even if only a prima facie view, was that the relevant claims of the method patent said to be infringed were invalid as they were not novel at the claimed priority date.

139    In my view, this is not a “natural” hypothesis, but is irreconcilable with the authorities to which I have referred. The task is to assess compensation considered to be just (if any) to any person adversely affected by any operation of the orders. The task would be corrupted by positing that, instead of the interlocutory orders being made, the generics obtained the benefit of an interlocutory judgment refusing to grant interlocutory relief on the very ground on which the Full Court held the method patent should be revoked. It is or should be obvious that this would largely remove the method patent and the litigation from the relevant circumstances despite, as Generic Health put it, the judgment being interlocutory only so that the risk on a final hearing remained. The hypothesis bears no resemblance to the position the generics would have been in if the interlocutory orders are disregarded. If this proposed approach were to be accepted, I consider that the generics would be compensated not for any adverse effect on them by the operation of the interlocutory injunctions, but for the adverse effect on them of the mere existence of the method patent and the litigation, which is impermissible.

140    In summary, I do not accept any approach to the present claims which would involve compensating the claimants for anything other than the operation of the interlocutory orders. The fact that the origins of the undertaking as to damages is equitable, and that considerations of fairness mean that a rigid approach to compensable loss would be inappropriate, do not expand the scope of compensable loss beyond the terms of the undertakings. The method patent did exist. Wyeth did threaten proceedings to enforce the rights it claimed under the method patent, including by seeking an interlocutory order. But the focus of the undertakings remains the operation of the interlocutory orders.

141    It may be accepted that the effect of an order revoking a patent under s 138(3) of the Patents Act 1990 (Cth), as for the predecessor provision, means that “the patent registration is revoked ab initio”: Envirotech Australia Pty Ltd v Enviroclear Co Inc (1987) 10 IPR 657 at 659. But this does not mean that causation and loss are to be assessed as if the method patent, and thus the litigation, never existed. To do so would be contrary to principle. Nor can it be the case that the parties are to be attributed with knowledge (specifically, that the Full Court would hold the method patent to be invalid) which they did not have. To do so would have the effect of converting the terms and purpose of the undertakings as to damages from protecting a person from the Court’s act in making the interlocutory order to protecting a person from the existence of the subject-matter of the litigation and the litigation itself. No recourse to notions of equity, justice or fairness can have that transformative effect on the terms or the purpose of the undertakings. My approach to the required analysis, in which I often deal with the claimants’ propositions at the level of fact, should not be understood to be a departure from these principles.

142    Some of the claimants submitted that everything Wyeth said about enforcing its rights under the method patent involved the making of unjustified threats within the meaning of Pt 3 of Ch 11 of the Patents Act and that, accordingly, Wyeth should not be permitted to take the benefit of having made those threats when it comes to assessing compensation. Again, this involves an impermissible attempt to broaden the terms and the purpose of the undertakings, the focus of which begins and ends with the operation of the interlocutory orders. None of the generics brought proceedings under s 128 of the Patents Act for unjustifiable threats. They are also not seeking damages for unjustifiable threats as provided for in s 128(1)(c). They are seeking compensation under the undertakings. The claims are to be assessed in that context alone.

143    There is another unspoken but persistent theme informing many of the submissions for the claimants, to the effect that Wyeth merits some form of punishment for having invoked the jurisdiction of the Court and ultimately failed. This is not so. Wyeth was entitled to come to the Court seeking to enforce its rights under the method patent. Having failed, the method patent was revoked. The concept of punishment of Wyeth is foreign to the purpose of the undertakings. As Barwick CJ said in Air Express at 310, a party in Wyeth’s position is not to be discouraged from nor visited with a penalty for having invoked the Court’s jurisdiction.

144    To return now to the issue of causation, again, the terms of the undertakings must be given effect. To have a claim under the undertaking, the person must prove to the ordinary civil standard of proof that they have been “adversely affected by any operation of the orders …or any continuation (with or without variation) thereof”. If the person would have been in the same position irrespective of the orders then the person has not proved that they are “adversely affected by any operation of the orders”. This is not to suggest that the orders must be the sole cause of the loss, nor that the “but for” test is an exclusive criterion for assessing causation. But it is to say that the subject of compensation is no more and no less than the adverse effect, if any, of the operation of the interlocutory injunctions.

145    Apart from this it may safely be said that compensation should generally be confined to kinds of direct losses which were reasonably foreseeable at the time the interlocutory orders were made. This is another reason for excluding compensation for losses said to result from the mere anticipation of an interlocutory injunction by reason of the grant of an earlier interlocutory injunction. Losses of this kind are not a direct, natural or ordinary consequence of the grant of the earlier interlocutory injunction.

146    Given the admonitions against reasoning by rigid analogy to other causes of action in this area of discourse, I do not consider it appropriate to apply the distinction between reasonable foreseeability for the purpose of tortious liability and reasonable contemplation for the purpose of contractual liability: see the summary in Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 364-366. It is sufficient to say that there must be some limit on the potential liability of a party under an undertaking given that the person’s submission is to “such order (if any) as the Court may consider to be just for the payment of compensation”. It would be unlikely to be just to order compensation for kinds of losses which could not have been reasonably foreseeable by Wyeth at the time it gave the undertakings. Similarly, to subject a party to indeterminate liability for indirect economic losses would be inconsistent with the development of principle in other areas of the law and thus would also be unlikely to be just.

147    These considerations also explain why it is important that the claimed loss be identified with precision. In the present case, the claimants pleaded different kinds of losses.

148    For Sigma and Alphapharm, the primary pleaded loss was the loss of opportunity to supply their products to pharmacists.

149    For Generic Health, one pleaded loss was the loss of opportunity to supply its products to pharmacists. Another pleaded loss was the loss of opportunity to supply the Sigma products to Sigma. A further pleaded loss was the loss of opportunity to supply generic venlafaxine products to other generics. These are different kinds of losses which must be considered separately. As will become apparent, the opportunity for Generic Health to supply its own products was within its own control. Its opportunity to supply Sigma depended on Sigma ordering products under back-to-back supply agreements with Alembic and Sigma which existed before the Sigma interlocutory injunction. Its opportunity to supply other generics depended on the decision of other generics to enter into supply agreements with Generic Health (which Apotex, Sandoz and Ascent did but after the Generic Health interlocutory injunction) and to order products under those agreements. These are important differences.

150    For Alembic, the primary pleaded loss was the loss of opportunity to supply Sigma’s products, which Alembic manufactured, to Generic Health for supply to Sigma under the back-to-back supply agreements between Sigma, Generic Health and Alembic. Alembic’s opportunity thus depended on Sigma placing orders for its products with Generic Health.

151    For Pharmathen, the primary pleaded loss was in three categories. It had a supply agreement with Alphapharm which pre-dated the Alphapharm interlocutory injunction and its opportunity to supply under that agreement depended on orders from Alphapharm. It had a supply agreement with Generic Health which pre-dated the Generic Health interlocutory injunction and its opportunity to supply Generic Health’s branded products under that agreement depended on orders from Generic Health. It had an opportunity to supply to Generic Health other generic venlafaxine products if Generic Health secured supply agreements with other generics and thus its opportunity to supply those products depended on the actions of Generic Health and other generics and those other generics placing orders for the products with Generic Health.

Principles relating to proof of loss by the generics – supply by them to pharmacists

152    All of the parties accepted that the generics had to prove some loss on the balance of probabilities. Thereafter, consensus ended.

153    Wyeth proposed that the generics had to prove on the balance of probabilities that, without the interlocutory injunctions, they would have sought and obtained the listing of their products on the PBS (the agreed effect of which would have been to trigger an automatic 12.5% reduction in the Approved Price to Pharmacist of Efexor-XR) and/or would have sold their products to pharmacists outside the PBS and thus on the private market. Leaving aside an argument about the terms of the Sigma interlocutory injunction, Wyeth’s position about causation was that if the generics (or one or other of them) proved on the balance of probabilities that they would have sought and obtained the listing of their products on the PBS then they would be entitled to compensation of 100% of the loss to them from having been prevented from doing so by the interlocutory injunctions, subject only to discounting for the risks in all of the circumstances. If, however, they did not prove on the balance of probabilities that they would have sought and obtained the listing of their products on the PBS then there can be no compensation on account of not having done so and thus not having made any PBS sales. Further, if the generics (or one or other of them) proved on the balance of probabilities that they would have sold their products outside of the PBS on the private market, they would be entitled to compensation of 100% of the loss to them from having been prevented from doing so by the interlocutory injunctions, subject only to discounting for the risks in all of the circumstances. If, however, they did not prove on the balance of probabilities that they would have sold their products outside of the PBS on the private market then there can be no compensation on account of not having done so and thus not having made any private market sales.

154    In other words, on Wyeth’s approach, the adverse effects of the interlocutory orders, if any, are the inability to supply under or outside of the PBS and each of these opportunities must be proved to have been lost on the balance of probabilities. If neither claimed adverse effect is so proved (not seeking and obtaining listings on the PBS and making PBS sales and/or not selling the products into the private market) there can be no compensation for the possibility that a generic might have sought and obtained listing on the PBS and made PBS sales or might have sold its products into the non-PBS private market.

155    The generics’ approach was ultimately one of having their cake and eating it. They contended, albeit with numerous variations, that they would prove on the balance of probabilities that the interlocutory injunctions prevented them from obtaining PBS listings for their products and thus prevented them from making PBS sales and also prevented them from selling their products on the private market, both or either of which they otherwise would have done, so that they are entitled to 100% of the loss caused by them of not having done so (that is, their estimated losses are to be treated as certain). They also said, however, that if they failed to prove either or both of these matters on the balance of probabilities then, in any event, provided they proved some loss, even if it be only the loss of some opportunity of some value (even the loss of opportunity to decide whether or not to apply to obtain PBS listing and make PBS sales or to sell into the private market), they were entitled to compensation based on an assessment of the possibilities of them having done so. The incoherence of these fundamentally inconsistent approaches is explained below.

156    Much of the debate focused on Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 and Badenach v Calvert [2016] HCA 18; (2016) 257 CLR 440. Sellars was a claim for damages under s 82(1) of the Trade Practices Act 1974 (Cth) (which referred to “loss or damage by conduct of another person that was done in contravention of a provision…”). Mason CJ, Dawson, Toohey and Gaudron JJ held at 348 that an applicant under s 82(1) can only recover for loss actually incurred, in contrast to potential loss. They explained at 349 that, in the law of contract, where the contractual promise is to provide a chance:

…where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat an award of damages. The damages will then be ascertained by reference to the degree of probabilities, or possibilities, inherent in the plaintiff's succeeding had the plaintiff been given the chance which the contract promised.

157    Their Honours noted at 349 that this approach was not confined to games of chance, sporting contests or competitions. Accordingly, at 349-350 they said:

…there can be no doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity. So, in The Commonwealth v Amann Aviation Pty Ltd [(1991) 174 CLR 64], Mason C.J. and Dawson J., Brennan J. and Deane J. concluded that a lost commercial advantage or opportunity was a compensable loss, even though there was a less than 50 per cent likelihood that the commercial advantage would be realised. Damages for breach of contract were assessed by reference to the probabilities or possibilities of what would have happened.

Damages in tort have also been assessed by reference to the probabilities or possibilities of what will happen or what would have happened. That approach has been frequently adopted in the assessment of damages for personal injuries where a court has been called upon to assess future possibilities and past hypothetical situations. In Malec v J.C. Hutton Pty Ltd [(1990) 169 CLR 638], this Court drew a distinction between, on the one hand, proof of historical facts - what has happened - and, on the other hand, proof of future possibilities and past hypothetical situations. The civil standard of proof applies to the first category but not to the second, particularly when it is necessary to determine future possibilities and past hypothetical situations for the purpose of assessing damages. In Malec, Deane, Gaudron and McHugh JJ explained the way in which the matter is to be approached in these terms:

“If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. ... But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability.”

158    At 355 in Sellars, they continued:

Notwithstanding the observations of this Court in Norwest [Norwest Refrigeration Services Pty Ltd v Rain Dawes (WA) Pty Ltd (1984) 157 CLR 149], we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s. 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.

On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.

159    Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 involved the repudiation of a contract under which there was no promise that Amann would obtain a further contract but there was a promised opportunity to seek a further contract which the repudiation prevented. Deane J said this at 118-119, in the context of cases about the loss of a chance:

There are, however, cases where considerations of justice or the limitations of curial method render ultimate findings, about what would have been or will be, impracticable or inappropriate. In such cases, damages must be assessed on some basis other than findings about what would have ultimately happened if the repudiation or breach had not occurred or about the precise ultimate implications of the situation which exists after the repudiation or breach. In particular, it may be appropriate that damages be assessed by reference to the probabilities or the possibilities of what would have happened or will happen rather than on the basis of speculation that probabilities would have or will come to pass and that possibilities would not have or will not. If, for example, what the plaintiff has lost by reason of the defendant's repudiation or breach of contract is a less than 50 per cent but nonetheless real and valuable chance of winning some contest or prize, of being the successful tenderer for some commercial undertaking or of deriving some other advantage, in circumstances where a court can decide that a proportionate figure precisely or approximately reflects the chance of success but can do no more than speculate about whether, but for the defendant's wrongful act, the plaintiff would have actually won the contest, prize or tender or derived the advantage, it would affront justice for the court to hold that the plaintiff was entitled to no compensation at all for the lost chance of competing or striving or for the wasted expenditure which was incurred in obtaining or performing the contract. In such a case, considerations of justice require that the plaintiff be entitled to recover the value of the lost chance itself and that the defendant be not allowed to take advantage of the effects of his own wrongful act to escape liability by pointing to the obvious, namely, that it is theoretically more probable than not that a less than 50 per cent chance of success would have resulted in failure. Thus, for example, a plaintiff whose action against a third party has become statute-barred by reason of a defendant solicitor's breach of contract may recover damages by reference to the court's assessment of what the chance of success in the action against the third party would have been even though that assessment is 50 per cent or less.

160    Fundamental considerations of fairness thus inform the approach to damages in cases of the loss of a chance.

161    Norwest Refrigeration Services Pty Ltd v Rain Dawes (WA) Pty Ltd [1984] HCA 59; (1984) 157 CLR 149 concerned an opportunity to avoid loss by having obtained a different insurance policy. The High Court held that to succeed the plaintiff had to prove on the balance of probabilities that it could have secured effective cover. Whether Norwest would have been decided in the same way after Sellars is unclear. What is clear and relevant is the High Court’s acceptance of (i) the difficulty of proof of past hypothetical facts, (ii) for a loss of opportunity case, the need for proof on the balance of probabilities only of some loss; and that (iii) these principles are not confined to cases of tort, contract or misleading and deceptive conduct.

162    Badenach v Calvert involved the tort of negligence. A solicitor had not advised a client about the risk of a family provision claim relating to a will. The beneficiary sued claiming, at least on appeal, loss of the opportunity to take steps to avoid such a claim. The beneficiary failed because of a failure to prove on the balance of probabilities that the client would have done anything different had the kind of advice contended for been given. French CJ and Kiefel and Keane JJ said that:

[38]    It has been explained that to speak of loss as the loss of a “chance” distorts the question of causation. It involves the application of a lesser standard of proof than is required by the law and, it follows, by s 13(1)(a). It confuses the issue of the loss caused with the issue of assessing damages which are said to flow from that loss. In that assessment a chance may be evaluated.

[39]    The respondent’s case on causation is not improved by seeking to equate the chance spoken of with an opportunity lost. It may be accepted that an opportunity which is lost may be compensable in tort. But that is because the opportunity is itself of some value. An opportunity will be of value where there is a substantial, and not a merely speculative, prospect that a benefit will be acquired or a detriment avoided.

[40]    It remains necessary to prove, to the usual standard, that there was a substantial prospect of a beneficial outcome. This requires evidence of what would have been done if the opportunity had been afforded. The respondent has not established that there is a substantial prospect that the client would have chosen to undertake the inter vivos transactions. Therefore, the respondent has not proven that there was any loss of a valuable opportunity.

[41]    The onus of proving causation of loss is not discharged by a finding that there was more than a negligible chance that the outcome would be favourable, or even by a finding that there was a substantial chance of such an outcome. The onus is only discharged where a plaintiff can prove that it was more probable than not that they would have received a valuable opportunity…

163    The explanation identified in [38] of Badenach v Calvert is provided in Kiefel J’s judgment in Tabet v Gett [2010] HCA 12; (2010) 240 CLR 537 at [142] which was based on these propositions:

(1)    “What cases in contract, such as Commonwealth v Amann Aviation Pty Ltd and Sellars v Adelaide Petroleum NL, have in common is that the commercial interest lost may readily be seen to be of value itself”: at [124]

(2)    “Sellars v Adelaide Petroleum NL confirms that the general standard of proof is to be maintained with respect to the issue of causation and whether the plaintiff has suffered loss or damage. In relation to the assessment of damages, as was said in Malec v J C Hutton Pty Ltd, “the hypothetical may be conjectured.” The court may adjust its award to reflect the degree of probability of a loss eventuating. This follows from the requirement that the courts must do the best they can in estimating damages; mere difficulty in that regard is not permitted to render an award uncertain or impossible”: at [136].

(3)    “Thus in the case of the loss of a commercial opportunity, the plaintiff must first establish the fact of the loss, for example by reference to the fact that it had a commercial interest of value which is no longer available to be pursued because of the defendant’s negligence. The damages assessed of that loss, the estimation of its value, reflect the chance, often expressed in a percentage, that the opportunity would have been pursued to a successful outcome. The award is proportionate in that sense”: at [137].

164    In Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 135 at [18] Basten JA saw no inconsistency between Sellars and Badenach v Calvert. Macfarlan JA at [62], in dissent, found the decisions “difficult to reconcile”. Barrett AJA, having referred to Sellars at [98], said:

[99]    The court’s task, in relation to the issue of causation, is thus to assess the prospects of success of the opportunity had it been pursued. Such an assessment depends on proof by a plaintiff according to the balance of probabilities that he or she has sustained some loss or damage because deprived of an opportunity having value beyond merely theoretical or negligible value. As French CJ, Kiefel and Keane JJ pointed out in Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 at [40], there must be a determination, according to the balance of probabilities, whether there was a substantial prospect of a beneficial outcome; and the plaintiff’s onus in that respect is discharged only by proof that it was more probable than not that an opportunity of value would have been received but for the defendant’s negligence.

[100]    The process just described goes to the issue of causation. It represents the first of what the joint judgment in Sellars v Adelaide Petroleum NL identifies as two distinct stages relevant to the resolution of a case such as the present. At that first stage, causation must be proved on the balance of probabilities… The second stage becomes relevant only if causation is established at the first. The issue at the second stage is the assessment of damages; and the focus then is upon the actual value of the lost opportunity which, to that point, has been appraised only as not merely theoretical or negligible. Value must be ascertained at the second stage by reference to “the degree of probabilities, or possibilities, inherent in the plaintiff’s succeeding had the plaintiff been given the chance” of which the plaintiff has been deprived. These are again words used in the joint judgment in Sellars v Adelaide Petroleum NL.

[101]    At each of the two stages, therefore, attention must be given to a question relevant to the value of the lost opportunity. At the first stage concerned with causation, the task is no more than to confirm that the value is not in the realms of the merely theoretical or negligible - in other words, to establish, according to the balance of probabilities, that there is some colour of value to the lost opportunity. It is only if the second stage is reached (after causation is established at the first) that anything approaching particular quantification is required. An assessment made at the second stage by reference to the degree of probabilities and possibilities of factual hypotheses may require a process of estimation extending even to a degree of guesswork and may lie at any point within a broad range.

165    With these principles in mind, it can be seen that on Wyeth’s approach the generics had two separate commercial opportunities. One to obtain listing of their products on and thereafter to sell their products under the PBS and another to sell their products outside of the PBS on the private market. It is implicit in Wyeth’s approach that the only potential value of either opportunity relates to profits from the acts of supply. Thus, Wyeth’s case is that the generics have to prove on the balance of probabilities the loss of either or of both of these opportunities. For there to be an adverse effect from the interlocutory injunctions, accordingly, the generics must prove on the balance of probabilities they would have listed on the PBS to be eligible for compensation in the form of lost profits from a putative PBS listing and/or prove on the balance of probabilities they would have sold their products on the private market to be eligible for compensation in the form of lost profits from these kinds of sales. If not, according to Wyeth, the position of the generics would be the same irrespective of the interlocutory injunctions.

166    In their primary cases, the generics contend that they will prove both of these matters on the balance of probabilities and thus are eligible for (indeed, entitled to) compensation assessed by reference to 100% of the lost opportunities (PBS listing and private market or private market alone). In their alternative cases, the generics contend that they had an opportunity or opportunities which was or were of value and which they lost because of the interlocutory injunctions. They described the opportunity or opportunities in various ways ranging from an opportunity to sell their generic venlafaxine products to pharmacists generally in which the PBS/private distinction dictates only the size of the market to an opportunity to decide whether or not to sell their generic venlafaxine products to pharmacists. Thus, there is a corresponding range of facts the generics say they must prove on the balance of probabilities from, for example, proof that they would have supplied on the PBS and/or private market, to proof they would have supplied on the private market only which will suffice for all issues to be determined on the probabilities and possibilities (including the possibility of PBS listing and supply), to proof that they had the capacity to supply as that capacity itself carried non-negligible value. Whichever way the opportunity is described, the generics say that the opportunity had real value and, on the balance of probabilities, was an opportunity lost because of the interlocutory injunctions, so that the quantum of loss is to be assessed by reference to the probabilities and possibilities of the opportunity, with all its potential variations (PBS or private market) having been pursued.

167    As noted, however, in their primary case the generics claimed 100% of their putative loss even if they prove only a 51% (on the balance of probabilities) likelihood that they would have obtained PBS listing for their products and sold them on the PBS. Alternatively, they want 49% of their putative loss if they prove a 49% likelihood that they would have obtained PBS listing for their products and sold them on the PBS. And they claim 100% of their putative loss even if they prove only a 51% (on the balance of probabilities) likelihood that they would have sold their products on the private market. Alternatively, they want 49% of their putative loss if they prove a 49% likelihood that they would have sold their products on the private market.

168    It is not necessary to attempt to resolve every permutation of the arguments which were put. Despite the claimants’ submissions that the injunction is akin to a promise, this not a case of breach of a contractual promise to give the claimants an opportunity of value: Chaplin v Hicks [1911] 2 KB 786 and Sellars at 359. Nor is it a case of misrepresentation or negligent failure to advise about the existence of an opportunity of value, both of which could only cause loss if an alternative opportunity could and would have been pursued absent the wrong: Gates v Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1; Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113 and Badenach v Calvert at [34] and [41] (French CJ, Kiefel and Keane JJ) and [97]-[99] (Gordon J). But it is a case in which compensation is sought for the allegedly adverse effect of the operation of the interlocutory orders, a context in which it has been said that the purpose of the undertakings is to be kept in mind, which is to protect people who may be adversely affected by the Court’s act in granting an interlocutory order.

169    As disclosed in the statement of agreed facts in Schedule 2, products approved by the TGA and thus registered on the ARTG may be supplied to pharmacists and others whether or not the product is listed on the PBS. The opportunity to obtain PBS listing may or may not exist for a product once a product is registered on the ARTG. In the present case, the opportunity for PBS listing of the generic venlafaxine products existed because Efexor-XR was listed on the PBS, but it was an opportunity that depended on obtaining ARTG registration of the generics’ venlafaxine products. In 2009, the generics alone possessed that opportunity.

170    As noted, under Div 1 of Pt 3-2 of the Therapeutic Goods Act, it is an offence, amongst other things, to import into, manufacture or supply in Australia therapeutic goods unless, relevantly, the goods are registered or listed goods in relation to the person (see, for example, s 19B). To obtain ARTG registration the generics had to apply under Div 2 of Pt 3-2 of the Therapeutic Goods Act. The goods the subject of an application may or may not be registered, relevantly to the present case, under s 26. To obtain registration, the goods must satisfy a range of requirements, depending on the kind of good in question. As noted in the statement of agreed facts in Schedule 2, clinical studies proving bioequivalence of the generics’ products to Efexor-XR was required to obtain listing. The evidence discloses that to obtain ARTG registrations involved the generics in significant effort, time and expense.

171    Sigma, Alphapharm and Generic Health are in the business of supplying generic products to pharmacists. Once they obtained ARTG registrations of their products (which involved substantial effort, time and expense), the fact of supply to pharmacists on the private market was a commercial decision for them alone. The extent to which pharmacists might have purchased the products may be open for debate, but not the fact that the generics would have been able make their own commercial decision about supply and that some pharmacists would have purchased the products if available. This forms an important part of the context relevant to the kind of loss being claimed and how it must be proved. Similarly, it was for the generics alone to decide if they wished to apply for PBS listing of their products once they had obtained the ARTG registrations. The ARTG registrations meant that the acts of supply, be they on the private market or on the PBS if PBS listing was obtained, would not be a criminal offence, as would otherwise be the case under Div 1 of Pt 3-2 of the Therapeutic Goods Act.

172    The Therapeutics Goods Regulations also enabled the relevant person in relation to whom goods were registered or listed to transfer or assign the registration or listing. In 2009, for example, r 10A provided:

If:

(a)    a person agrees to dispose of a business relating to the manufacture, distribution or sale of therapeutic goods; and

(b)    it is agreed that the disposal of that business is to include a transfer of the registration or listing of therapeutic goods;

then:

(c)    the person who acquires that business is taken to be the person in relation to whom the therapeutic goods are registered or listed; and

(d)    that person must, not later than 3 months after the transfer, notify the Secretary that the person has, by reason of that agreement, become the person in relation to whom the goods are to be registered or listed.

173    In summary, once a generic had obtained TGA approval and thus registration of their products on the ARTG, the generic had all of the rights associated with ARTG registration, specifically the right to supply their products to pharmacists and others in Australia. I consider that rights of this kind have value to the holder which would not be characterised as negligible or theoretical, excluding perhaps some particular circumstance which meant that none of the rights could or would be exercised. And as to the latter potential qualification on value, it cannot be assumed that a decision not to exercise supply rights in one set of circumstances would have been made in another. Nor can it be assumed that a decision, once made, would be irrevocable. This is part of the value of supply rights afforded by ARTG registration. The rights can be exercised as the relevant person in relation to whom the goods are registered sees fit from time to time. Such rights can be held, exercised, or transferred so another person may exercise them in response to circumstances as they develop (such as Sigma’s transfer of its ARTG registrations to its parent company). If held, the rights have value because they can be exercised or transferred so another person may exercise them.

174    On the reasoning in Sellars and Badenach v Calvert, which I do not consider to be inconsistent, my view is that the generics will have proved on the balance of probabilities that they lost an opportunity of some value as a result of the interlocutory injunctions if before the interlocutory injunctions they could exercise the rights afforded by ARTG registration and after the interlocutory injunctions they were prevented from exercising these rights.

175    I do not accept Wyeth’s characterisation of the alternative cases as involving “the loss of an opportunity to consider whether or not to pursue an opportunity”, which Wyeth described as a “second generation loss of opportunity case”. To oversimplify, the generics’ basic opportunity was to supply their products and make a profit doing so. This opportunity was not one shared by the world at large in 2009 or 2010. It depended on ARTG registration of the products and the generics’ own decision-making. ARTG registration gave rise to a valuable opportunity, assuming the rights associated with ARTG registration could be exercised. If an interlocutory injunction removed that opportunity so that the products could not be supplied, the valuable opportunity is necessarily lost. The value of the ARTG registrations, be it from holding, exercising or transferring them, was necessarily eliminated or substantially reduced for the period during which the interlocutory injunctions operated. On this construct, the operation of each interlocutory injunction has adversely affected the generic bound by the injunction. Further, on this construct, the question whether a generic would have supplied its products does not relate to the existence of the loss of opportunity of some value but, rather, the extent of the value of the opportunity lost. In other words, the alternative cases do not involve a loss of opportunity to pursue an opportunity, but the loss of a valuable opportunity in which the extent of the value of the lost opportunity will depend on a wide range of circumstances including the probability or possibility of supply having been pursued.

176    To my mind, this approach accords with what was said in Badenach v Calvert at [40] that it is “necessary to prove, to the usual standard, that there was a substantial prospect of a beneficial outcome”. For a generic, an ARTG registration of its product, excluding some circumstance which meant that it could not exercise the rights afforded by ARTG registration, involves a substantial prospect of a beneficial outcome, being the prospect of supply of its product for the purpose of making a profit.

177    I thus accept the generics’ submissions about their alternative cases. Alphapharm’s reply submissions conveniently summarise those submissions which apply equally to all the generics, namely:

[10]    At WWCS [Wyeth’s closing submissions] [133], Wyeth impliedly seeks to characterise, so as to dismiss, the generics’ contention on loss of opportunity as “nothing more than the opportunity to consider whether or not it will pursue a new opportunity”. That is not a fair characterisation of Alphapharm’s submission. Alphapharm accepts that it is required to prove on balance probabilities that it has lost a valuable opportunity, not merely an opportunity to consider a valuable opportunity.

[11]    However, Wyeth’s criticisms of Alphapharm’s submissions on the appropriate approach to proof of loss (including the specific criticism in WWCS [135]) are not warranted. First, the criticisms do not appreciate the way in which Alphapharm’s submissions are advanced in the alternative.

[12]    Secondly, as Alphapharm submitted in AWCS [Alphapharm’s closing submissions] [2.13] – [2.14], in the circumstances of this case there can be no real doubt that a loss of opportunity analysis (that is, where causation of some loss is established and the estimation of loss may be carried out by assessing the probabilities and possibilities) is readily available because it is clear that the claimants have shown (on the balance of probabilities) an actual loss, in the nature of a lost commercial advantage or opportunity. Actual loss was occasioned by injunctive orders that explicitly removed any potential for the opportunity described in the orders to be taken up. The principles in Sellars at 349 and 355 apply. In other cases there might be more reasonably contestable evidence about whether an applicant has proven on the balance of probabilities that it has suffered “some loss or damage” by way of “the loss of a commercial opportunity which had some value (not being a negligible value)”; but here Alphapharm’s loss of opportunity is very clear. The Court may therefore address damages by reference to the degree of probabilities or possibilities inherent in Alphapharm succeeding if it had been given the chance to supply Enlafax XR.

178    This being so, none of the parties can or should be permitted to escape the effect of the fact that the claims are to be assessed as lost opportunities. Alphapharm noted that in AstraZeneca AB v KRKA dd Novo Mesto [2015] EWCA Civ 484 at [14], because the trial judge found on the balance of probabilities that the generic would have entered the market with “full force and effect”, the English Court of Appeal concluded that it was not necessary for the trial judge to “assess the loss of the chance of the defendants taking this course or of taking it in a particular way”. Rather, the trial judge was required to evaluate “the degree of success they would have achieved and the profits they would have made but for the injunction, and in carrying out that exercise to take into account all significant factors but to ignore speculative possibilities” and if necessary, to “apply a discount to reflect the various uncertainties inherent in the assessment of this counterfactual scenario”.

179    It may be that whether the uncertainties are weighed as part of the hypothetical analysis or as an overall ultimate single discount, the result is the same. But, assuming a loss of a valuable opportunity is proved, it is because the common law treats a finding on the balance of probabilities about a past event as a certainty one way or another (that is, 100% or 0%), that the High Court in Malec v J C Hutton Pty Limited [1990] HCA 20; (1990) 169 CLR 638 at 643 considered that an assessment of loss by reference to “hypothetical events” required a different approach, referring to the need for a court to assess “the degree of probability that an event would have occurred, or might occur”.

180    There are other statements of principle to the same effect. In Tranquility Pools & Spas Pty Limited v Huntsman Chemical Company Australia Pty Limited [2011] NSWSC 75 at [380] Einstein J summarised principles relevant to the assessment of damages on the basis of a hypothetical, what would have occurred in the pools business of the claimant but for the wrong, including the following:

…

(2)    The process of weighing the many possibilities involves the assessment of many variables. The court is nevertheless, by the nature of the task, required to form a single view about the quantum of loss. As has been repeatedly recognised this will involve a degree of speculation.

(3)    Once causation is established, although the plaintiff retains an evidentiary onus, the balance of probabilities has no role to play and assessing the facts upon which the hypothetical (whether past or future or, as in this case, both) on that basis would be an error of law: Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at [137]–[144] per Sheller, Stein & Giles JJA.

(4)    In the great majority of cases, a scientific or actuarial approach is, given the imponderables, an exercise in spurious precision, and the proper approach is for the court, having weighed all the possibilities, to settle on a single hypothesis on a qualitative and intuitive basis…

181    Consistent with these observations, a finding of a 51% probability that a generic would have obtained PBS listing and supplied their products under the PBS does not mean that the generic is eligible for compensation assessed by reference to 100% of the profits it would have obtained if it had done so. Despite having proved the loss of that opportunity on the balance of probabilities the generic would be eligible for compensation assessed by reference to the 51% probability of that opportunity being taken and the likely results of it being taken. The generic would only be eligible for compensation quantified by reference to 100% of the lost profits if it is a practical certainty (99% or higher) that it would have obtained PBS listing and supplied their products under the PBS. To the same effect, however, if there is a 49% possibility that a generic would have obtained PBS listing and supplied their products under the PBS, compensation is not to be assessed as zero. The generic would be eligible for compensation assessed by reference to the 49% possibility of that opportunity being taken. The reference to a generic being “eligible” here is because there are numerous arguments in play in this matter and these observations are directed only to the questions of causation and assessment of loss as a matter of principle, and not to the facts of any particular claim.

182    I should say that Sigma, at least, recognised the force of these observations by noting in its closing submissions that:

Sigma has pleaded damages on a loss of opportunity basis as well as on a balance of probabilities basis. Indeed, even if Sigma had not pleaded such damages, on one view of the authorities the only appropriate approach to assessing loss in this type of claim is to do so by reference to the chances of particular future hypothetical events occurring and reflecting those chances in the damages award.

183    There are other reasons to consider this approach best accords with the purpose of the undertaking.

184    As will become apparent, once they discovered the method patent, the generics assumed they would be subject to applications for interlocutory injunctions and ordered their affairs accordingly. In the event, their beliefs proved well founded as interlocutory injunctions were granted. By so observing I am not suggesting that the generics are to be compensated for the way in which they ordered their affairs before the interlocutory injunctions by which they were bound were granted. As discussed above, any compensation must relate to the operation of the interlocutory injunctions. The issue, however, is one of evidence and proof. What the generics would or might have done had the interlocutory injunctions not been granted necessarily involves proof of a hypothetical fact. Given the complexity of the circumstances in which actions of one person and their timing necessarily affect the actions of others, the question of what the generics would or might have done had they not been enjoined is not well suited to the all or nothing approach which ordinarily applies to proof. But without the interlocutory injunctions, what the generics would have done in the face of the method patent and the litigation would be known. Having taken the benefit of the interlocutory injunctions at the price of the undertakings, it is not for Wyeth to rely on the necessarily evaluative character of the required exercise as a reason for resisting the claims against it. Provided that it is proved on the balance of probabilities that the interlocutory injunctions prevented the generics from exercising or realising the value of the rights afforded by the ARTG registrations of their products when but for the interlocutory injunctions they could have exercised those rights, an approach based on an evaluation of the inferred range of possibilities to which the evidence gives rise (excluding mere speculative possibilities) better reflects the purpose of the undertakings than the primary approaches of any of the parties.

185    The primary approaches of the parties would also be unlikely to yield a result just to either the party which gave the undertakings (Wyeth) or the claimants restrained by the interlocutory injunctions.

(1)    From the perspective of the generics, in a world of multiple possibilities given their businesses, they will succeed or fail by reference to two questions (on the balance of probabilities would they have listed on the PBS and/or on the balance of probabilities would they have supplied their products on the private market) when the interlocutory injunctions, from their grant, meant that these decisions were no longer theirs to make. Leaving aside an issue about the Sigma interlocutory injunction (which did not in terms prevent Sigma from seeking to list its products on the PBS), no generic had the occasion to decide what it would do about PBS listing and supply after the interlocutory injunctions were granted. What they would have done would inevitably have been affected by a range of circumstances, including hypothesised circumstances. Once we are in the realm of hypothesised action inferred from hypothesised circumstances, as we shortly will be given the inter-relationship between the claims, then the artificiality of an exercise which might depend on the difference between a 49% and 51% probability of what the generics would have done seems obvious.

(2)    From the perspective of Wyeth, in the same world of multiple possibilities, a 51% chance of a PBS listing would make the generics eligible for 100% of the potential profits from a PBS listing in circumstances where one thing is clear – it was supply under the PBS which involved by far the greatest potential profits. On a rough and ready basis, it is apparent that the private market claims of the generics range are about one third of their PBS market claims.

186    Nothing I have said in this section should be understood as proposing that a claimant is eligible to be compensated under the undertakings if the claimant is in the same position the claimant would have been in irrespective of the undertakings. In any such case, the claimant would not be a person who has been adversely affected by the operation of the interlocutory injunctions. Nor am I suggesting that it is not necessary for a loss of some valuable opportunity to be proved on the balance of opportunities. Nor should mere speculative possibilities be compensable. I am saying, however, that in the context of the present case and insofar as the generics’ claims concern their lost opportunity to supply their products to pharmacists:

(1)    there is not a loss of a valuable opportunity to a generic only if a generic proves on the balance of probabilities that they would have obtained PBS listing and supplied under the PBS and/or would have supplied their product on the private market;

(2)    excluding some circumstance such as an irrevocable decision not to supply or seeking withdrawal of a product from the ARTG, there is a loss of a valuable opportunity of supply to a generic if a generic proves on the balance of probabilities that, before an interlocutory injunction, they could have exercised the supply rights given by ARTG registration and, as a result of an interlocutory injunction, they could not exercise those supply rights;

(3)    the value of the opportunity lost under (2) is then to be determined as a matter of the probabilities and possibilities. The generics do not get to choose between their primary and alternative cases opting for the primary case if they happen to prove what they would have done at a percentage above 50% and the alternative cases if they do not; and

(4)    this approach best reflects the purpose and the terms of the undertakings, whereas the primary approaches of the generics runs the risk of real injustice to Wyeth and Wyeth’s approach runs the risk of real injustice to the generics.

187    This said, I propose to make findings in a way which will disclose whether or not I consider that the various hypothesised facts have been established on the balance of probabilities (that is, with a probability of greater than 50%).

188    I should also record that if my approach is wrong, and what must be proved on the balance of probabilities is that the generics would have supplied their products under the PBS or on the private market, then I would not accept the submissions of some of the claimants that if they prove on the balance of probabilities that they would have supplied only to the private market then they can nevertheless recover compensation assessed by reference to the possibility that they would have supplied under the PBS. This is because, on this construct, the opportunity is only capable of being lost if, but for the interlocutory injunctions, the generics would have supplied their products. Of necessity, the question then concerns how they would have supplied their products. The evidence establishes (and it was not in serious dispute) that there are fundamental differences between supply in the private market and supply under the PBS. Supply under the PBS involves contingencies and considerations which do not come into play for supply in the private market. The generic must decide to seek PBS listing knowing that, if listed, there would be an automatic price reduction of 12.5% on the price for supply of Efexor-XR to pharmacists (which, in the present case, each generic believed it would most probably be liable for if it was the first to obtain PBS listing and the method patent was valid). The product must be listed on the PBS, which involves a decision of the Minister or Minister’s delegate which is not under the control of the generic. The generic must also be able to provide the guarantee of supply at the time of PBS listing.

189    Sigma submitted that the difference between the private market and PBS market was comparable to the different markets considered in Norris v Blake (No 2) (1997) 41 NSWLR 49 and Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473. Those cases involved an actor and a boxer who were already successful in Australia and had substantial prospects of success in the USA. They had each already pursued opportunities in the USA. The circumstances are not comparable to the present case. The generics had not entered the PBS market at all. They could not do so without PBS listing. The first generic to do so would trigger the 12.5% price reduction in Efexor-XR and all of the generics proceeded on the basis that the first generic to obtain PBS listing would be liable to Wyeth for the price reduction if the method patent was valid. PBS listing depended on a Ministerial decision.

190    For these reasons, if my approach to proof of loss as a result of the operation of the interlocutory injunctions is wrong, the loss of the distinct opportunities represented by the private market and PBS market would each have to be proved on the balance of probabilities. As Wyeth said:

If the commercial opportunity which the generics have been deprived of is found to be launching on the private market – because not engaging in that activity is the “difference” (see Tabet v Gett per Hayne and Bell JJ) between how they behaved in the real world and how they would have behaved if the Interlocutory Injunctions had not been made – then the assessment of damages should involve quantifying the value of that lost opportunity. Adding an amount to reflect the possibility of those generics also listing on the PBS would be to compensate the generics for a loss which they did not suffer.

191    The same considerations do not arise on the approach which I consider should be applied.

192    I said above that it will not be possible in this matter to settle on “a single hypothesis”: Tranquility Pools at [380]. This is because of the inter-relationship between the claims. For example, we know that Alphapharm would not have been the first generic to apply for and obtain PBS listing of its generic venlafaxine products. Alphapharm was not prepared to take the risk of being liable for the 12.5% price reduction in Efexor-XR under any circumstances so that, even if none of the interlocutory injunctions were granted, Alphapharm was not going to seek PBS listing until another generic had obtained PBS listing and triggered the 12.5% price reduction in Efexor-XR (for which it assumed that generic, and not Alphapharm, may then be liable). It follows that the assessment of the degree of probability that Sigma or Generic Health would have sought and obtained PBS listing of their products, and when they would have done so, necessarily affects what Alphapharm would have done.

193    I made clear to the parties that compensation could not be assessed on the basis of inconsistent hypotheses. There could be disputes about the construction of the applicable hypotheses but, once constructed, the hypotheses must be consistent across all claims. Otherwise no determination of compensation could be just, at least not to Wyeth. To give an example, the generics and the manufacturers/suppliers did not agree about hypothetical supply prices. Because the claims of the manufacturers/suppliers depend on the generics, there cannot be inconsistent hypothesised supply prices between them.

194    Another matter needs to be considered. In its closing submissions Wyeth contends that the generics did not plead its case in this way. Wyeth referred to Barnes v Forty Two International Pty Ltd [2014] FCAFC 152; (2014) 316 ALR 408 at [119]-[123] in which Beach J (with whom Siopis and Flick JJ agreed) concluded that an alternative scenario which had not been “pleaded, opened or run” could not found relief. The pleaded case was that the claimant would not have entered into an agreement but for the alleged wrong. The alternative scenario was that the claimant lost the opportunity to negotiate a different agreement.

195    The present case is different.

196    Sigma pleaded the interlocutory injunction in terms (para 11). It pleaded its ARTG registrations (para 28). It pleaded that it was restrained from supplying (etc.) its products by reason of the interlocutory injunction (paras 36 to 41). Each of these paragraph is expressed by reference to what Sigma “would have” done but for the interlocutory injunction (e.g. listed on the PBS and supplied its products). Sigma pleaded that it suffered loss by, amongst other things, the operation of the interlocutory injunction, as particularised in the Appendix to the statement of claim (para 43) and that such loss flowed directly from the operation of the interlocutory injunction (para 44). In the Appendix the loss is said to be a “loss of opportunity”, amongst other things, to continue to sell its products in the private market, to obtain PBS listing, and to sell its products under the PBS.

197    Alphapharm’s pleading is to the same general effect insofar as it alleges that the interlocutory injunctions caused it loss as particularised in the Appendix to its statements of claim which identifies the loss as a “loss of opportunity”, amongst other things, to sell its products in the private market, to obtain PBS listing, and to sell its products under the PBS.

198    Generic Health’s pleading also characterised its relevant loss in this regard as a “loss of opportunity” to supply its products, be it on the private market or under the PBS.

199    Accordingly, the generics all pleaded their loss as a loss of opportunity to supply. Wyeth’s point, as I understand it, is that the opportunities said to be lost, in the body of the pleading, are framed by reference to what the generic “would have” done so the opportunity claimed to be lost is confined to that which the generics would have done. The difficulty with this is that the pleading’s purpose is to identify the material facts. By the pleadings Wyeth was on notice that the generics claimed that they lost the opportunity, in effect, of supply (including supply on the PBS). The fact that the pleadings are framed by reference to what the generics would have done is unremarkable. But in so framing their pleadings the generics could not have been binding themselves to any particular legal proposition about causation and proof. Provided the opportunities said to be lost remain the same, causation and proof involve legal principles. In their alternative cases, the generics do not suggest any new kind of opportunity lost. They say only that given the nature of the pleaded opportunities and of the effect of the interlocutory injunctions they need not prove on the balance of probabilities that they would have taken those opportunities. This is because, whether or not the rights would have been exercised, the rights prevented from being exercised by the interlocutory injunctions had value in and of themselves.

200    Perhaps most importantly, in Barnes the alternative scenario (the loss of the opportunity to negotiate a different agreement) was different from the pleaded case (the claimant would not have entered into the agreement). In the present case, loss of opportunity to supply was pleaded. The generics are not contending in their alternative cases that they would have done something different from what they pleaded. They are contending that those same pleaded facts and the same pleaded loss can be determined by reference to different legal principles from those identified in their opening submissions. And I am saying that the generics were right to plead their loss as a loss of opportunity. Further, having done so, the first legal question is whether they have proved on the balance of probabilities the loss of the opportunity to supply because of the interlocutory injunctions. The first legal question is not whether they have proved on the balance of probabilities that they would have supplied their products but for the interlocutory injunctions (as their primary cases and Wyeth would have it).

201    It is this distinction, whether they have proved on the balance of probabilities the loss of the opportunity to supply because of the interlocutory injunctions as opposed to whether they have proved on the balance of probabilities that they would have supplied their products but for the interlocutory injunctions, which is critical. Conceived of as a loss of opportunity case, as pleaded, provided a loss of opportunity having some value is proved to the civil standard, that standard is exhausted and has no further work to do in the analysis. It is not surprising that this distinction is not disclosed in the pleadings. It is not orthodox to identify in a pleading the standard of proof. There is also no difference in the material facts relevant to the different conceptions of the opportunities lost.

202    Of course, the question of the degree of probability that the generics would have supplied their products is still relevant. It is that degree which will inform the assessment of the amount of compensation. But the proper starting point of the legal analysis, in my view, is better reflected by the generics’ alternative cases rather than their primary cases.

203    It is true that the generics did not open their cases by reference to Sellars or similar authorities. It would be fair to say that despite their pleadings referring to their loss as the loss of opportunity to supply their products, the opening submissions appeared to assume that the generics needed to prove on the balance of probabilities that they would have taken the opportunities claimed to be lost. However, the matter was heard from 4 June to 13 July 2018. The openings occurred on 4 and 5 June. The first witness, Mr Heine (Sigma’s then sales manager), gave evidence on 7 June. Before the next witness, Mr Ellis, gave evidence, I said that I had forgotten to say three words at the close of opening submissions, those three words being “loss of opportunity”. I then said:

I wouldn’t want to get to the end of this case without hearing from people about the relevance of any loss of opportunity doctrines and things like loss of a chance, all those sorts of things. I am just not sure they really are grappled with in the opening submissions.

204    While it appears from this part of the transcript that Wyeth may have had a different view from the conclusions I have reached above about the authorities (specifically, what opportunity must be proved to be lost on the balance of probabilities), Wyeth did not suggest that the generics had not pleaded a loss of the opportunity to supply their products by reason of the interlocutory injunctions. Wyeth did not make that contention until its closing submissions and, in so doing, Wyeth did not suggest that they had been taken by surprise by some new fact. Its submissions were directed at issues of legal principle.

205    Finally, I should note that I gave Wyeth leave to amend its defences after the hearing had started. I did so on the basis that I did not consider that there would be any irremediable prejudice to the other parties from Wyeth being granted leave (and I refused leave to some amendments where I considered that there would be irremediable prejudice if leave to amend were granted). If greater clarity was required in the generics’ pleadings then I would have permitted amendments by the generics provided that the identified opportunities said to be lost remained the same. In my view, the generics’ alternative cases do not introduce any new opportunity said to be lost. The alternative cases merely take a different view of the principles relevant to causation and loss in respect of the same opportunities as pleaded.

Principles relating to proof of loss by the manufacturers/suppliers

206    As noted, in addition to its claims relating to the supply of its products to pharmacists, Generic Health also claims for the loss of opportunity to supply Sigma’s products to Sigma and the loss of opportunity to supply Pharmathen’s venlafaxine products to Apotex, Sandoz and Ascent. These claims also differ from each other in that Generic Health had an existing supply contract with Sigma and Alembic relating to supply of the Sigma products at the time of the Sigma interlocutory injunction. Generic Health did not have a contract with Apotex, Sandoz or Ascent (or with Pharmathen in respect of Apotex, Sandoz or Ascent) before the grant of any of the interlocutory injunctions.

207    Alembic was the contracted manufacturer of and supplier to Generic Health of Sigma’s generic venlafaxine products which Generic Health was then to supply to Sigma. Alembic claims for the loss of opportunity to make profits by supply of Sigma’s products to Generic Health.

208    Pharmathen was the contracted manufacturer of and supplier to Alphapharm and Generic Health of their respective generic venlafaxine products. Pharmathen claims for these lost opportunities of supply (which were the subject of contracts entered into before the interlocutory injunctions), as well as the lost opportunity of Generic Health supplying Apotex, Sandoz and Ascent (which were not the subject of contracts before the interlocutory injunctions).

209    Alembic and Pharmathen contended that their opportunity was a single opportunity to supply their customers under the contracts of supply. From their perspective, the question whether the generics would have applied for and obtained PBS listing and supplied under the PBS or would have supplied on the private market alone is relevant only to the value of the opportunity lost. Provided they prove on the balance of probabilities that they would have sold some (or some additional) venlafaxine products to the generics, their quantum of loss is to be determined by reference to the probabilities and possibilities including of both PBS listing and supply and private market supply.

210    However, there is an important difference between Alembic and Pharmathen (and Generic Health to the extent its claims relate to supply to Sigma and other generics) and the generics. Alembic and Pharmathen (and Generic Health to the extent its claims relate to supply to Sigma) did not have the rights associated with ARTG registration. The interlocutory injunction did not prevent them from exercising such rights. Their only opportunity was to supply under the contracts. As they accepted, they must prove some loss on the balance of probabilities. For the commercial opportunity represented by the existing contracts to have any value, they must prove on the balance of probabilities that they would have supplied some product or some additional product if not for the interlocutory injunctions. As they submitted, if some loss is proved on the balance of probabilities, the magnitude of the value lost is to be assessed as a matter of the probabilities and possibilities. To prove that they would have supplied some product or some additional product if not for the interlocutory injunctions on the balance of probabilities requires proof to that standard that the generics would have sold their products or more of their products if not for the interlocutory injunctions whether that be by supply on the private market or the PBS.

211    It will be apparent that the different opportunities of the generics and the manufacturers/suppliers (and Generic Health to the extent its claims relate to supply to Sigma and other generics) means that different considerations will apply to their claims of loss.

212    For those claims where there was no existing contract of supply (of Generic Health and Alembic in relation to Apotex, Sandoz and Ascent), the same conclusion must follow. Without proof on the balance of probabilities that there would have been some supply a loss of opportunity of some value has not been proved.

213    Wyeth submitted that this difference, which it seemed to accept was difficult to escape from given the principles identified in the authorities, exposed that the alleged losses of the manufacturers/suppliers were indirect consequential economic losses which are not or should not be recoverable under the undertakings for that reason alone. I will deal with this issue shortly.

Coherence of the above approaches

214    I consider that the different approaches discussed above are the result of the terms of the undertakings which are concerned with the adverse effect (if any) of the operation of the interlocutory injunctions. In all cases, the claimed adverse effect must be identified with precision. Once identified, if it is apparent that the claimed adverse effects are different, as I consider to be the case here, then a principled approach may well require different putative facts to be proved to different standards.

215    For the generics, if (as I consider) they held valuable rights by reason of ARTG registration which the interlocutory injunctions prevented them from exercising then loss is necessarily proved on the balance of probabilities, and the extent of the loss is to be assessed with reference to the possibilities and probabilities that the rights could be exploited for profit in the hypothetical future whether through private market or PBS supply.

216    For the manufacturers/suppliers, what is being claimed is the lost opportunity to supply venlafaxine. This opportunity depended on the generics actually going to market; a hypothetical fact relevant to causation which must be proved to the usual civil standard. If no generic would have gone to market irrespective of the interlocutory injunctions then no supply would have been made in any event so the loss could not be said to be caused by the injunctions. But if venlafaxine would have been supplied then the question becomes how much and at what price, and that depends on the possibilities and probabilities associated with private market or PBS supply.

Remoteness of damage

217    Wyeth contended that the losses claimed by the manufacturers/suppliers were not reasonably foreseeable and are too remote to support an order for compensation. I will consider the issue of reasonable foreseeability separately on the facts. In this part of the reasons I will deal only with issues of principle about remoteness of damage.

218    Wyeth’s essential contention was that the claimed losses of the manufacturers/suppliers did not “flow directly” from the interlocutory injunctions. The contention reflects the words of Aickin J in Air Express at 266-267 (see above) that the “view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case”. As also noted above, the High Court endorsed this view in European Bank at [29], framing the second of the three necessary questions as “[d]id that loss flow directly from the [interlocutory] order?”

219    The concept of loss flowing directly from an interlocutory injunction reinforces the necessity of focusing on the allegedly adverse effects of the interlocutory orders alone, rather than the potentially adverse effects of the litigation. Wyeth’s submissions, however, suggest that the concept does more than this. I say “suggest” because Wyeth’s submission on this point were not straightforward. On one view, it was contending that claimable losses are confined to those losses suffered by the party against whom the interlocutory order was made. On another view, it was contending that claimable losses are confined to those losses suffered by a person who, if not a party, was bound by the interlocutory orders. Leaving aside the fact that it is arguable that the suppliers/manufacturers would have been bound by the orders not to arrange or facilitate the importation of the generic products into Australia (as to which see Warner-Lambert Company LLC v Apotex Pty Limited (No 2) [2018] FCAFC 26; (2018) 129 IPR 205), Wyeth’s contentions are inconsistent with the terms of the usual undertakings which Wyeth gave which refer to “any person, whether or not a party, adversely affected by any operation of the order below”. The interlocutory orders may have had a foreseeable and direct adverse effect on a person who was neither a party nor bound by the orders.

220    Wyeth’s final alternative submission focused on the elusive concept that the losses claimed by the manufacturers/suppliers were merely consequential upon the effect of the orders on the generics and thus could not be said to be losses flowing directly from the orders. The description of the manufacturers/suppliers’ losses as consequential is accurate. If the generics are right that the orders prevented them from supplying their products when they otherwise would have done then the orders necessarily had consequential impacts on the manufacturers/suppliers. But this description does not answer the question whether the claimed loss of the manufacturers/suppliers flowed directly from the interlocutory orders or are too remote to be the subject of a just order for compensation.

221    Other causal metaphors have been used to describe the requisite relationship between the interlocutory orders and the claimed loss. As noted above, both Gibbs J and Mason J in Air Express (at 312 and 323 respectively), referring to Smith v Day (1882) 21 Ch D 421, framed the causal requirement in terms of loss which is the natural consequence of the injunction. The concept of “natural” loss, as explained in European Bank at [13], is derived from the law of contract and focuses attention upon damages “as arise naturally, that is, according to the usual course of things, from the breach of contract, or such damages as may reasonably be supposed to have been in the contemplation of both parties concerned at the time they made the contract as the probable result of the breach”.

222    It is apparent that losses which may fairly be described as unexpected, unanticipated or out of the ordinary course of business given the circumstances as they existed when the interlocutory injunctions were granted or which would depend on future negotiations have been held to be too remote. Aickin J reviewed a number of cases giving examples of this principle in Air Express. Accordingly, in Smith v Day the lost benefit of a potential lease was held to be too remote. The lease would have been over part of a building that an injunction prevented from being built as planned but it was still being negotiated when the injunction was granted. Even if the lease had existed when the injunction was granted, the lessee would not ordinarily have required a building of the kind the injunction prevented. At 428 Brett LJ said:

If any one obtains an injunction preventing another from proceeding with a building, he must be taken to have notice of everything in the building contract, and all liabilities which the person stopped incurs to his contractor by reason of the stoppage, are a natural and immediate consequence of the injunction. But the fact that the injunction prevents the carrying out of an entirely independent agreement as to the property is too remote.

223    At 430 Cotton LJ said:

It is not proved that there was a binding agreement to take a lease, and I agree with Lord Justice Brett that if there had been one, damages could not be recovered on that ground. I think that the damages must be confined to loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice, as for instance a claim by the builder in consequence of the injunction compelling the Defendant to break his contract with him.

224    In Ex parte Hall; In re Wood (1883) 23 Ch D 644 it was held that damages could not be claimed for wrongful acts of a receiver outside of the scope of restraining orders, even though the wrongful acts could not have occurred but for the restraining orders.

225    In Re an Arbitration between Pemberton and Cooper (1912) 107 LT 716 two farmers claimed on an undertaking for the lost profits they would have gained from ploughing up pasture land and planting corn, which an interlocutory injunction sought by their landlord restrained, and for the deterioration in a flock of sheep they kept on the pasture land instead of allowing the land to go derelict. At 718 Banks J held that both kinds of loss “necessarily and naturally flowed from the course which the landlord compelled them to adopt”.

226    Reasoning by analogy, to the extent that the claims of the manufacturers/suppliers are based on contracts for supply of the products to Sigma, Alphapharm and Generic Health which existed before the interlocutory injunctions were granted, I am unable to characterise the claimed loss from the generics not having ordered products as anything other than loss which is the direct and natural consequence of the interlocutory orders which prevented supply. The products as supplied to the generics were the complete products in packages ready for supply to pharmacists. The fact of supply to the generics or not was a natural and ordinary consequence of and directly related to their sales to pharmacists. If restrained as they were by the interlocutory injunctions, it was inevitable that the generics would not place orders with their suppliers.

227    However, to the extent that Generic Health and Pharmathen claimed for loss of the opportunity to supply other generics with the products pursuant to potential contracts which did not exist at the time the interlocutory injunctions were granted and which would have depended on future negotiations, the position is different. Even if those contracts would have existed at an earlier time but for the injunctions, the loss was not a direct or natural consequence of the injunctions. The putative contracts remained dependent on the future negotiations and the unrestricted choices of Generic Health and those other generics.

228    I will explore the facts relating to these claims in greater detail separately but, for present purposes, it is sufficient to say that the cases indicate that alleged losses of this kind are too remote to be recoverable.

Adverse effect of the interlocutory orders

229    There is another aspect of the matter which should be considered. It is that while Sigma has claimed under the Sigma interlocutory injunction alone, Alphapharm and Generic Health have claimed under each of the interlocutory injunctions. To the extent that Generic Health was Sigma’s supplier of the Sigma products, this makes sense. Otherwise, the claims are of a different kind. The claims are to the effect that the interlocutory injunctions which were granted but which did not bind them caused Alphapharm and Generic Health to anticipate that they too would be the subject of an interlocutory injunction by Wyeth and modified their conduct accordingly, as a result of which they suffered loss.

230    I do not accept that action taken in mere anticipation of an interlocutory injunction application can engage the undertaking which in terms concerns only whether a person has been “adversely affected by any operation of the order”. An order cannot operate before it is made. Things done in mere anticipation of an interlocutory injunction application are part of the ordinary exigencies of the existence of litigation and losses which result are therefore not within the scope of the undertaking. Nor do I accept that a person merely anticipating an interlocutory injunction because an interlocutory injunction has already been granted againt another person can be an adverse effect of the operation of that earlier granted interlocutory injunction.

231    This said, the fact that the Sigma interlocutory injunction was granted first, the Alphapharm interlocutory injunction second, and the Generic Health interlocutory injunction third raises a different issue. Is it necessary or appropriate to disregard the grant of Sigma interlocutory injunction when considering Alphapharm’s position had the Alphapharm interlocutory injunction not been granted? And is it necessary or appropriate to disregard the grant of Sigma and Alphapharm interlocutory injunctions when considering Generic Health position had the Generic Health interlocutory injunction not been granted?

232    In my view, these two questions must be answered yes, as otherwise it is not practically possible to construct consistent hypotheses of what would or might have occurred in any case. For example, if when considering Sigma’s position it is taken that Sigma would not be subject to the Sigma interlocutory injunction but when considering Alphapharm’s position it is taken that Sigma was subject to an interlocutory injunction, then the inevitable consequence is that the hypothesised market for Alphapharm is distorted from the outset. The hypothesised market on this latter approach would contain only Alphapharm when, in fact, it is known that Sigma was and would have been the first to market.

233    The parties all assumed this approach to be necessary (correctly in my view) but it has practical consequences. It means that the initial probabilities and possibilities are fixed by Sigma’s position because it was first to obtain ARTG registrations and first to the market. What Alphapharm and then Generic Health would or might have done is to be assessed by reference to the probabilities and possibilities for Sigma. Accordingly, if there are two possibilities for Sigma from any time, private market supply or PBS supply, which have different probabilities of having occurred, then the probabilities and possibilities for Alphapharm and then Generic Health should be assessed by reference to both possibilities for Sigma. This approach does not mean, however, that conduct in mere anticipation of litigation or even an interlocutory injunction may be treated as an adverse effect within the scope of the undertakings given that the undertakings are confined to the adverse effect of the interlocutory orders themselves.

Interlocutory injunctions not wrongly granted?

234    Wyeth submitted that because it succeeded at first instance it could not be said the interlocutory injunctions were wrongly granted and that:

If the result of the trial justifies the making of the interlocutory injunction (and assuming there is no separate challenge to the initial process of making the injunction), the injunction will not have been wrongly granted in the relevant sense and damages will not be payable under the undertaking.

235    Sigma described this submission as “startling”. I agree. It is without merit and not much needs to be said about it.

236    The applicable principle in this regard is identified in Abbey Forwarding Ltd (in liq) v HM Revenue & Customs [2015] EWHC 225 (Ch); [2015] Bus. L.R. 882 at [85]:

In determining whether the order was wrongly made, the court uses the full benefit of hindsight and asks itself in effect whether in the light of subsequent events it can be seen that the order was wrongly made. The court is not asking itself whether the order was wrongly made in the sense of whether, on the evidence and submissions available at the time, the judge making the order was then wrong to do so. Nor is an order for an inquiry in any sense dependent on the existence of any fault on the part of the applicant at the time. It is a matter of justice that where there has not been a final determination of the matters on which the order is made the applicant should compensate the respondent in the event that it transpires that the order was wrongly made.

237    The “full benefit” of hindsight in the present case includes the Full Court’s decision that the method patent was invalid. The question whether an interlocutory injunction was wrongly granted is not answered by reference to the outcome of the trial if, on appeal, orders are made setting aside the orders at first instance. The orders made on appeal are then the orders of the Court. There can be no doubt that, having regard to the Full Court’s decision, all of the interlocutory injunctions were wrongly granted because they effectively assumed the method patent was valid when it was invalid.

The effect of the final orders

Facts and contentions

238    On 8 November 2010 I made final orders. In the Sigma proceedings I made orders 6 and 7 that:

6.    Orders 1 and 2 made on 25 August 2009 be discharged and the Respondents / Cross-Claimants be released from the undertakings given by them to the Court in relation to those orders, being undertakings:

…

7.    The Applicant / Cross-Respondent (whether by itself, its directors, servants, agents or otherwise) be restrained from infringing claims 1, 4, 5, 8, 9, 10, 15, 16 and 27 of the Patent, including, without limitation, by, in Australia, during the term of the Patent and without the licence or authority of the First Respondent / First Cross-Claimant:

(a)    importing, marketing, taking orders for, selling, supplying or offering to supply the Evelexa XR Products (or any other product comprising the same generic extended release formulation of venlafaxine hydrochloride) for use by persons in need of venlafaxine;

…

239    In the Alphapharm and Generic Health proceedings I also made orders 6 and 7 to the same effect as orders 6 and 7 in the Sigma proceeding, albeit referring (as relevant) to the Alphapharm and Generic Health interlocutory injunctions and to Alphapharm and Generic Health.

240    On 21 December 2011 the Full Court, amongst other things, set aside order 7 in each proceeding and set aside order 6 “in so far as it releases the respondents from the undertakings as to damages given by them to the Court on” the relevant dates: Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 3) [2011] FCAFC 165.

241    The issues in dispute are sufficiently exposed through Wyeth’s contentions as follows:

(1)    the only relevant periods of time for assessing whether or not the claimants have established loss or damage are the periods of the interlocutory injunctions which ended on 8 November 2010;

(2)    any loss suffered by the claimants during the period of operation of the final injunctions was not a loss that could be said to “flow directly” from the operation of the interlocutory injunctions, but was loss caused by the final injunctions;

(3)    the terms of the interlocutory injunctions are clear. In particular, the words “pending the determination of the proceeding” mean the first instance proceeding and not the appeal proceeding as submitted by the claimants;

(4)    given the purpose of an interlocutory injunction and the associated undertaking as to damages, it would be wrong in principle to infer, speculate or assume that but for the interlocutory injunctions the generics would or might have obtained a stay of the final injunctions so that the claimed adverse effect of the interlocutory injunctions may be said to have continued after 8 November 2010;

(5)    alternatively, the generics would not have obtained a stay because Wyeth would have been entitled to the fruits of its victory, the generics’ infringing conduct would have been undertaken with their “eyes wide open” to the risk that they would be restrained on a final basis if they failed at the trial, and as the Court found when rejecting Alphapharm’s application for a stay, a stay would have permitted other generics to enter the market: Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; (2010) 88 IPR 633 at [35]; and

(6)    the generics’ evidence about applying for a stay did not consider that they would have had to “be prepared to assume liability for the damage that could be caused to Wyeth not only by their own conduct during the period of any stay, but also by the conduct of each other and any other generic suppliers in the venlafaxine market during that period”.

Discussion

242    I will deal with the construction issues first.

243    The interlocutory injunctions were each made “[p]ending the determination of the proceeding or further order”. Wyeth’s undertakings operate in relation to any person “adversely affected by any operation of the order below or any continuation (with or without variation) thereof”.

244    One argument the generics put is that “the proceeding” includes any appeal so that they are entitled to claim compensation under the undertakings up to the date on which the High Court rejected Wyeth’s application for special leave to appeal.

245    I disagree. It is not to the point that s 4 of the Federal Court of Australia Act 1976 (Cth) defines “proceeding” as follows:

proceeding means a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal.

246    The relevant issue is the meaning of the interlocutory injunctions which is to be considered having regard to the purpose of an interlocutory injunction. As Wyeth submitted, the only reason interlocutory injunctions exist is because it is not always possible for a court to make final orders on the day that a proceeding is commenced. If, for example, it had been possible for Sundberg J to hold a final as opposed to an interlocutory hearing on 22 May 2009, then there would have been no interlocutory injunction against Sigma and no undertaking from Wyeth. The final orders would have had effect pending an appeal. If the final orders were wrong, Sigma could have had no claim against Wyeth for the effect of the final orders. Final orders which are subsequently overturned on appeal are part of the exigencies of litigation for which there is no remedy except for costs.

247    Construed against this background, the generics’ construction of the interlocutory injunctions is not open. “Pending the determination of the proceeding or further order” meant nothing more than pending the grant or refusal of final relief. This occurred on 8 November 2010. It is apparent that Sigma, Alphapharm and I assumed this to be the case in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; (2010) 88 IPR 633 when I said this:

[10]    … Accordingly, if Sigma and Alphapharm succeed in the foreshadowed appeals the undertaking as to damages Wyeth gave in respect of the interlocutory injunctions will operate in respect of loss by reason of those interlocutory orders, but no such undertaking will be in place in respect of loss by reason of the final orders pending the appeal.

[11]    Wyeth also refuses to undertake not to market and sell a generic extended release venlafaxine hydrochloride product of its own in Australia. Sigma and Alphapharm, in these circumstances, are concerned that they will be exposed to a change in position from the time at which they were enjoined (when there were no generic extended release venlafaxine hydrochloride products on the market, with Sigma being the first and Alphapharm the second to obtain ARTG registration). In short, they contend that without undertakings or orders to protect them from a hiatus in Wyeth’s undertaking as to damages and what may be described as a change in the circumstances in which they otherwise would have entered the market except by reason of the interlocutory injunctions against them, they are exposed to an injustice which the Court should not permit.

…

[23]    Continuing the interlocutory injunctions and refusing to release Wyeth from its undertakings will not assist because Wyeth’s undertakings relate only to the consequences of the interlocutory orders.

248    If the interlocutory injunctions and undertakings operated as the generics now contend then the argument before me could not have been that there would be an hiatus in Wyeth’s undertaking as to damages.

249    It seems that the Full Court must have been operating on the same assumption because the Full Court’s orders of 11 November 2011 set aside my order 6 only to the extent that it released Wyeth from the undertaking as to damages. My order 6 in each proceeding discharged each interlocutory injunction. If the generics’ submissions are right, the interlocutory injunctions should never have been discharged at all. Further, given that my order 6 in each proceeding discharging the interlocutory injunctions has never been set aside, it is not clear how the generics can maintain that those orders continued after that date.

250    Contrary to the generics’ submissions nothing the Full Court said in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 3) [2011] FCAFC 165 should be understood as suggesting to the contrary. The Full Court disagreed with the substantive conclusions I reached and disagreed with my view that, given the discharge of the interlocutory injunctions, Wyeth should be released from its undertakings. It also disagreed (as do I) with Wyeth’s proposition that there could be no claims on the undertaking merely because I made final orders in Wyeth’s favour. This is Wyeth’s argument to the effect that because I made final orders in Wyeth’s favour the interlocutory injunctions were not wrongly granted and could not be called upon irrespective of my final orders being overturned on appeal. It is this argument that the Full Court said was unsupported by authority: at [13]. It is this argument I also have rejected above.

251    The Full Court at [10]-[14] was not suggesting that the interlocutory injunctions could or did operate after 8 November 2011. The Full Court’s point was only that the order releasing Wyeth from its undertakings had to be set aside so they “may operate in accordance with their terms”; at [14]. The terms of the undertakings relate to any operation of the order below or any continuation (with or without variation) thereof” and the “order” in question is the interlocutory injunction in each case which operated pending the determination of the proceeding. It is consistent with the Full Court’s reasoning and orders that the “proceeding” means the first instance proceeding only.

252    As Hely J succinctly put it in Red Bull Australia Pty Limited v Sydneywide Distributors Pty Limited t/as Sydneywide Bottlers Australia [2001] FCA 1750 at [9]:

The undertaking is required in the case of an interlocutory injunction, as interlocutory relief is granted on the basis that there is a triable issue, before any determination of the merits: American Cyanamid Co v Ethicon Ltd [1975] AC 396, 406, 409.

253    Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618 at 623 is not authority to the contrary. The High Court there said:

It is of course to be remembered that if an injunction be granted it will be upon terms of the plaintiff submitting, in the event of his ultimately failing, to such order as to damages as the Court may make in order to compensate the defendant for any injury caused by the injunction

254    The word “ultimately” here does not support the generics’ argument. It means only a determination on the merits.

255    Another argument that the generics put is that my order 7 in each matter made on 8 November 2010 was a “variation” of the interlocutory injunction orders which thereafter continued as varied. Again, I do not consider this construction to be open. The final interlocutory injunctions were new orders, not a variation or continuation of the interlocutory orders. The interlocutory injunctions were not varied and did not continue. I discharged them. Once a matter has been heard and determined, there is no scope for the continuation of interlocutory orders pending that determination. This is so irrespective of the determination. Parties may agree or the Court may decide that other interlocutory orders should be made, for example pending the determination of an appeal, but whatever the form those orders take they are new orders and any undertaking given in exchange for those new orders would be a new undertaking.

256    Sigma submitted this:

The authors of Spencer, Bower and Turner “The Doctrine of Res Judicata” [2nd Ed] note at p.59 that, where an appellate tribunal reverses the order of the court of first instance, and refuses the relief granted below, the former decision, until then conclusive, disappears altogether, and is replaced by the appellate decision.

Accordingly, the effect of the Full Court’s order was as if Jagot J had not discharged the undertaking on 8 November 2010 nor granted the permanent injunction on that day in lieu of the interlocutory injunction granted on 3 June 2009.

257    The submission proceeds on the false premise that the Full Court set aside my orders discharging the interlocutory injunctions. It did not. The terms of the Full Court’s orders in this regard are clear. The orders were:

Sigma proceeding

3.    Order 6 made by the primary judge on 8 November 2010 in the Sigma Proceeding be set aside in so far as it releases the respondents from the undertakings as to damages given by them to the Court on 3 June 2009.

Alphapharm proceeding

3.    Order 6 made by the primary judge on 8 November 2010 in the Alphapharm Proceeding be set aside in so far as it releases the respondents from the undertakings as to damages given by them to the Court on 25 August 2009.

Generic Health proceeding

3.    Order 6 made by the primary judge on 8 November 2010 in the Generic Health Proceeding be set aside in so far as it releases the respondents from the undertakings as to damages given by them to the Court on 10 November 2009.

258    The inescapable fact is that the interlocutory injunctions were discharged on 8 November 2010. They were not revived by the Full Court. The Full Court’s orders are consistent with the orthodox principle that once final relief is determined at first instance the function of an interlocutory injunction pending the determination of the proceeding is exhausted. The interlocutory injunctions also would have been discharged if the generics succeeded before me. The generics did not succeed until the Full Court’s decision, the consequence of which was that the final orders I made had effect until the Full Court’s orders. Apart from the stay issue discussed next, it is not suggested that the interlocutory injunctions had some adverse effect after 8 November 2010. If the final injunctions had not been made, it is possible to conceive of circumstances in which the discharged interlocutory injunctions continued to have an adverse effect after 8 November 2010. But that is not what occurred.

259    The generics’ other argument, based on the posited stay, involves different considerations. The argument is that if not for the interlocutory injunctions they would have been selling their products on the market so when they came to apply for a stay of the final orders I made on 8 November 2010 the relevant status quo would have been different from what it was when, in fact, Alphapharm applied for such a stay before me (which I refused in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; (2010) 88 IPR 633) and Sigma applied for a stay before Jacobson J pending the determination of Sigma’s appeal which he also refused: Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2010] FCA 1258. The argument is that the operation of the interlocutory injunctions had an adverse effect on the generics within the meaning of Wyeth’s undertakings in that the generics were not supplying their products which deprived them of the opportunity to apply for a stay on the basis of a different status quo from the status quo in fact.

260    I do not consider this kind of lost opportunity can or should be the subject of an order for compensation.

261    No such lost opportunity was pleaded.

262    Further, as a matter of principle, the kind of adverse effects which may result in compensable loss are those which were reasonably foreseeable at the time the interlocutory orders were made and which may fairly be characterised as the direct and natural consequence of the operation of the interlocutory orders. The adverse effects which the generics are claiming in this respect, in my view, cannot fairly be characterised as the direct and natural consequence of the operation of the interlocutory orders. To explain, as will be apparent, I accept that a direct and natural consequence of the operation of the interlocutory orders was that the generics could not supply their products. I have concluded that it is highly likely that, but for the interlocutory injunctions, the generics would have supplied their products on the private market. It follows from what I have said that it was a direct and natural consequence of the operation of the interlocutory orders that the generics were not supplying their products as at 8 November 2010. It is after this point that, in my view, the steps in the chain of reasoning break down.

263    I do not consider that it can be said that a direct and natural consequence of the operation of the interlocutory orders was that the generics were deprived of an opportunity to obtain a stay that they might otherwise have obtained. There are simply too many other imponderable factors in play to reach this conclusion. The grant of a stay involves an exercise of judicial discretion in all of the relevant circumstances. The need to speculate about what I might have done or Jacobson J might have done or some other hypothetical judge might have done discloses that we are dealing with claimed loss of a kind which might arise other than as a direct and natural consequence of the interlocutory orders. The claimed loss depends on a contingency, the grant of a stay of final orders, which depends on a decision of a judge. The case is not like Air Express in which the posited decision of the Secretary of the relevant department was itself the subject of the interlocutory order.

264    I am not even persuaded that loss of the kind claimed would have been reasonably foreseeable at the time the interlocutory injunctions were granted. On what basis could Wyeth have foreseen that if it succeeded before me and obtained final orders the generics would be able to claim that as a result of the interlocutory injunctions (i) they lost the opportunity to supply their products; (ii) but for the interlocutory injunctions they would have been supplying their products; (iii) had they been supplying their products they would have applied for and obtained a stay of the final orders so that they could continue to supply their products despite it having been found that in so doing they were and would be infringing the method patent (which are necessary aspects of this hypothesis); and (iv)  as a result, Wyeth’s undertaking would extend to the value of the lost opportunity to obtain a stay of the final orders? To my mind, the steps in this asserted causal chain indicate that this kind of alleged loss is outside the boundaries of reasonably foreseeable kinds of loss.

265    Nor do I consider that rational speculation about the generics’ prospects of having obtained such a stay is possible. Their arguments to the effect that fact of supply would have involved a different status quo which the Court would then have preserved by ordering a stay are deceptively simple. The reality is more complex.

266    For example, to foreshadow some matters dealt with later in these reasons, the conclusions I have reached will involve compensating the generics for their lost opportunity of supply on the hypothesis that they alone would or might have been supplying generic venlafaxine products to pharmacists before the Full Court’s decision. It is apparent that the prospect of other generics being able to enter the market if the claimant generics were not restrained was an important factor to both the grant of the interlocutory injunctions and the refusal of the applications for a stay. In Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; (2010) 88 IPR 633 at [35] I noted that if the stay Alphapharm sought was granted then Generic Health and other generics would be able to enter the market and the undertaking Alphapharm offered was confined to loss Wyeth might suffer as a result of Alphapharm being able to sell its products and did not extend to other loss Wyeth might suffer from other generics being able to enter the market. The evidence is no different at the present time about what would or might have occurred if Alphapharm had been supplying its products. That is, the evidence does not suggest that Alphapharm might have been willing to offer an undertaking of any broader scope than that which it in fact offered. If this is so it is by no means certain or almost certain, as the generics would have it, that they would have obtained a stay if they had been supplying their products. And if an allowance was made for this possibility, it would also be necessary to factor that consideration into the resolution of the prospect of supply by other generics (which I have not done). The compensation to the generics would thus be reduced because I have accepted that the size of the market would have remained the same and, on the necessary hypothesis this approach requires, the other generics would be inferred to be in the market taking their market share from all other market participants.

267    Further, Sigma’s position in both Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; (2010) 88 IPR 633 and Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2010] FCA 1258 is another confounding factor. Sigma, apparently recognising that Wyeth’s undertaking did not operate after 8 November 2010, sought a regime in which Wyeth would undertake not to de-list Efexor-XR (which Wyeth was willing to do) and would undertake not to release its own generic product (which Wyeth was not willing to do) and Sigma would give an undertaking as to damages but only in exchange for Wyeth giving a fresh undertaking as to damages for the period up to determination of the appeal. Wyeth refused to do so. See [2010] FCA 1212 at [35] and [2010] FCA 1258 at [2], [10], [15], [21], [27] and [31]. It is apparent that Sigma was never willing to offer an unconditional undertaking as the price of a stay. Why would it be inferred, speculated or assumed that Sigma’s position would or might have been any different had it been supplying its products and was seeking a stay of the final orders on that basis? Again, this is not confronted in Sigma’s evidence but undermines the submission that it would have been certain or almost certain that Sigma would have obtained a stay if it had been supplying its products.

268    Generic Health’s position is even more difficult. It did not seek a stay of the final orders. The idea that it would have been willing to give an undertaking as the price of a stay is irreconcilable with all of its conduct. Its evidence does not suggest any chance existed that it would have been willing to give the kind of undertaking that would have been required as the price of a stay.

269    All of these matters may be another way of saying that I am unable to escape the conclusion that the generics’ arguments would have the effect of compensating them for the fact that final orders were made against them which were subsequently overturned on appeal. Wrongly granted final orders are part of the exigencies of litigation. The undertaking required to obtain an interlocutory order does not extend to compensation for the adverse effects of the litigation, yet the effect of what the generics seek is compensation for the effect of my final orders. While characterised by the generics as a loss of an opportunity to obtain a stay (which was not a pleaded loss of opportunity in any event), it is the operation of the final orders which caused the generics loss after 8 November 2010. I am unable to see how it could be just to impose liability for those losses upon Wyeth.

270    Generic Health submitted that:

The prospect of the trial judge being overturned on appeal is and was an ordinary incident of litigation; it was part and parcel of the risks that Wyeth took on when it gave the undertakings. By giving the undertakings, Wyeth obtained court orders which prevented the generics from entering the market up to the decision at trial, irrespective of what that decision was. Moreover, by obtaining that relief and keeping the generics from the market in that period, it increased the prospect that irrespective of the decision at first instance, it would still be able to keep the generics from the market up to resolution of the appeal. If the first instance decision was against Wyeth, the fact that the generics had not entered the market would tend in favour of a continuation of the interlocutory injunctions pending the appeal. If the first instance decision was in favour of Wyeth, the fact that the generics had not entered the market would tend against a stay of the final injunction. In other words, irrespective of the outcome at trial, the status quo would be no generic entry and the likelihood is that the status quo would be maintained up to resolution of the appeal.

Having obtained a benefit which extended beyond trial and all the way to the resolution of the appeal, it is not just and equitable to restrict the quid pro quo given by Wyeth to the outcome at first instance.

271    In my view, this submission exposes that the generics are seeking compensation for the effect of the wrongly granted final orders when their claims must be confined to the adverse effect of the operation of the interlocutory injunctions. In particular, Wyeth did not undertake to pay compensation if the Court’s final orders at first instance turned out to be wrong. That was not part of the risks Wyeth took on when it gave the undertakings. It is not the case that the interlocutory injunctions might have continued if Wyeth had failed at first instance. If Wyeth had failed it could have sought interlocutory injunctions pending the determination of the appeal but to do so it would have had to offer undertakings as the price for those interlocutory orders. It could have decided if it was willing to pay that price in all of the circumstances at the time. But whatever the form of the order, in substance, it would not have involved a continuation of the existing interlocutory injunctions or of the existing undertakings. Any benefit Wyeth obtained from the operation of the interlocutory injunctions which extended beyond 8 November 2010 was subsumed by the final orders.

272    As a result, in the present case no compensation should be ordered for the period after 8 November 2010.

Some further matters relating to proof

273    To the extent that the evidence concerned what people would have done had circumstances been different from what they were, some general observations apply.

274    In another context, dealing with people’s attempts to recall what was said when the outcome of litigation might depend on the precise words used, McLelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 at 319 said:

…human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

275    The wisdom of these observations has been repeatedly proved.

276    What then does ordinary human experience tell us about people’s attempts to give evidence, on which litigation may depend, not about what they recall, but about what they say they would have done in circumstances different from those which actually occurred? In Asden Developments Pty Ltd (in liq) v Dinoris (No 3) [2016] FCA 788 Reeves J summarised the observations from the authorities in these terms:

[156]    A plaintiff’s subjective evidence about what he or she would, or would not, have done if the negligent conduct in contention had not occurred is now inadmissible under the Civil Liability legislation in force in many jurisdictions in Australia: see s 5D(3)(b) of the Civil Liability Act 2002 (NSW); s 11(3)(b) of the Civil Liability Act 2003 (Qld); s 5C(3)(b) of the Civil Liability Act 2002 (WA); and s 13(3)(b) of the Civil Liability Act 2002 (Tas). The hindsight bias inherent in such evidence was one of the main reasons underpinning the introduction of these provisions. So much appears from the Final Report of the Review of the Law of Negligence (Commonwealth of Australia, Canberra, September 2002), where the authors observed (at para 7.40):

The enormous difficulty of counteracting hindsight bias in this context undermines the value of such testimony. In practice, the judge’s view of the plaintiff’s credibility is likely to be determinative, regardless of relevant circumstantial evidence. We therefore recommend that in determining causation, any statement by the plaintiff about what they would have done if the negligence had not occurred should be inadmissible.

(Emphasis added)

[157]    Similar reservations about the value of such evidence have been expressed in medical negligence cases involving a doctor’s failure to warn a patient about the risks of surgery. For example, in Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18 (Rosenberg), Callinan J observed (at [221]):

It is perfectly understandable that a person who has suffered what the respondent suffered here would say, and might also even have come to believe implicitly that she would not have had the operation had she known of the risk which has in fact materialised. That would usually be, and it probably was here an honest belief on the part of the respondent at the time that she gave her evidence. However, the true position is much more likely to be, no matter what a plaintiff may have honestly come to believe, that she cannot really say, in an absolute way, that she would have not had the operation. The much more likely position is that perhaps she might not have.

See also [15]–[17] per Gleeson CJ; [44]–[45] per McHugh J; [86]–[87] per Gummow J; and [157]–[158] per Kirby J.

277    These cautionary observations have particular significance for the assessment of evidence about asserted past hypothetical facts in the present matter. Irrespective of the credibility of any witness the following matters must be acknowledged.

278    The hearing was in 2018. The witnesses were being asked about what they think they would have done or would have occurred between 2009 and 2011. The amount of time which has passed is a sufficient reason, of itself, to cast significant doubt on the reliability of the evidence no matter how honest and careful the individual witness.

279    For reasons which need not be identified here, this matter took a long time to get to hearing. Many of the affidavits in which the witnesses gave their principal evidence date from 2015 and 2016. Even the period from 2009 to 2015/2016 would exceed the bounds of ordinary human recall beyond generalities and exceptional events. And the period between 2015 and 2018 itself might be sufficient to infer that what was most likely occurring was some witnesses were giving evidence about what they thought they had said in their affidavits (and, even then, it was unsurprising that a few witnesses had lost the logical underpinnings of their own affidavit by reason of the passage of time).

280    To add to the overall likelihood of such evidence being inherently unreliable, the key affidavits were all based on alternative scenarios which had been expressed in a form which managed to be simultaneously general, de-contextualised and extraordinarily compressed. For example, Sigma witnesses were asked “what Sigma would have done if the Federal Court refused to grant an interlocutory injunction against Sigma”. Wyeth witnesses were asked the same question. But no context, either of time or circumstance, qualified the questions, leaving the witness to fill in or assume the context, presumably from their own memory (as it existed in 2015 or 2016) of the situation in 2009. This observation involves no criticism of those who posed the questions or of the witnesses who answered. It is simply that the task which was given to the witnesses was artificial in the extreme and fraught with the risk of hindsight being brought to bear even from the most scrupulous and cautious of witnesses.

281    Other aspects of ordinary human experience must be factored into the equation. There are many kinds of pressures to which a person may be subject in giving evidence, whether consciously or not. These pressures are likely to hold less sway if the person is being asked to recall what happened. When a person is being asked instead to conjecture what would have happened, the constraints imposed by the usual nature of a witness’s task, to recall things, are removed. When this is combined with the magnitude of the claims in this case it does not take much to infer that a more reliable guide to what would or might have happened is inference from available contemporaneous material and objective contemporaneous circumstances assuming rational commercial decisions rather than the evidence of witnesses speaking many years later in the context of litigation.

282    For the witnesses called by the generics, there was an added risk. For the generics, the expiry of the compound patent on 6 December 2008 presented a rare opportunity. Venlafaxine was PBS listed and the biggest selling anti-depressant in Australia worth more than $100 million a year to Wyeth. Before they became aware of the method patent, the generics planned to seek PBS listing after ARTG registration and to supply their products on the PBS. They had each expended significant amounts in order to fulfil this intention. Then they discovered the method patent and their plans were thrown into chaos. They all received some kind of legal advice, of varying degrees of formality, which, whatever its details and howsoever it may ultimately be characterised, gave them reason to believe that the method patent might well be invalid. They were each the subject of an interlocutory injunction which prevented them from supplying their products until 8 November 2010 when I granted the final injunctions. It was not until 28 October 2011 and the Full Court judgment that the generics knew they would be able to supply their products albeit that Wyeth’s application for special leave to the High Court remained for determination. From 28 October 2011, in effect, the generics were vindicated. The method patent was invalid. They had been held out of one of the apparently most valuable generic opportunities of its time for more than two years. As a result, from 28 October 2011 until the date the witnesses provided their affidavits, they knew of their ultimate vindication.

283    In these circumstances, the generics having each planned to seek PBS listing and supply under the PBS before they became aware of the method patent and the witnesses having known the ultimate vindication achieved on 28 October 2011, to ask the witnesses to project themselves backwards to 2009 or 2010 and say what they would have done or recommended but for the interlocutory injunctions is to invite inherently unreliable evidence, tainted by hindsight. To say now what the person would have done and recommended is effectively risk free. And, as noted, apart from the extent to which witnesses could recall what was going on at the time, the evidence is virtually context free. But at the time in 2009, acting and recommending would have occurred in highly specific and ever changing circumstances and would have carried all kinds of potential risks and rewards, not just the risk of a 12.5% automatic price reduction of Efexor-XR for which the generics assumed they would be liable if they were the first to obtain PBS listing and the method patent was valid. Many years later, insofar as liability for patent infringement from mere PBS listing alone is concerned, this assumption would be falsified by the decision in Warner-Lambert Company LLC v Apotex Pty Limited [2017] FCAFC 58; (2017) 249 FCR 17 but that is beside the point. The assumed exposure existed at the relevant time.

284    These observations underpin my approach to much of the evidence about alleged past hypothetical facts.

285    There is another observation which it is convenient to make now. In Les Laboratoires Servier v Apotex Inc [2008] EWHC 2347 (Ch); [2009] FSR 220 Norris J said this at [9]:

…whilst it is for Apotex [the generic] to establish its loss by adducing the relevant evidence, I do not think I should be over eager in my scrutiny of that evidence or too ready to subject Apotex' methodology to minute criticism.

That is so for two reasons, quite apart from an acceptance of the proposition that the very nature of the exercise renders precision impossible. (a) Whilst, in order to obtain interlocutory relief, Servier will not have had to persuade Mann J. that it was easy to calculate Apotex’ loss in the event of the injunction being wrongly granted, it will have had to persuade him that that task was easier than the calculation of its own loss in the event that the injunction was withheld. The passages I have cited from its skeleton argument and evidence show that it did so. Having obtained the injunction on that footing it does not now lie in Servier’s mouth to say that the task is one of extreme complexity and that the court should adopt a cautious approach. Having emphasised at the interlocutory stage the relative ease of the process, it should not at the final stage emphasise the difficulty. (b) In the analogous context of the assessment of damages for patent infringement, in General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd (No.2) [1975] 1 WLR 819; [1975] FSR 273; [1976] R.P.C. 197 HL at 212 Lord Wilberforce said:

“There are two essential principles in valuing the claim: first, that the plaintiffs have the burden of proving their loss: secondly, that the defendants being wrongdoers, damages should be liberally assessed but that the object is to compensate the plaintiffs and not to punish the defendants.”

The principle of “liberal assessment” seems to me equally applicable in the present context. Although a party who is granted interim relief but fails to establish it at trial is not strictly a “wrongdoer”, but rather one who has obtained an advantage upon consideration of a necessarily incomplete picture, he is to be treated as if he had made a promise not to prevent that which the injunction in fact prevents. There should as a matter of principle be a degree of symmetry between the process by which he obtained his relief (an approximate answer involving a limited consideration of the detailed merits) and that by which he compensates the subject of the injunction for having done so without legal right…

286    It must immediately be acknowledged that it is not the law in Australia that compensation under this kind of undertaking is assessed as if the undertaking contained a contractual promise not to prevent that which an interlocutory injunction presents. Nor is Wyeth a wrongdoer in any sense and, as Barwick CJ noted in Air Express at 310, it is no part of the process to discourage persons from invoking the jurisdiction of the Court including to seek interlocutory relief. Wyeth had the method patent. It was entitled to exercise rights under it just as the generics were entitled to challenge the method patent’s validity. But the fact that Wyeth had the benefit of the interlocutory injunctions based on what it believed would happen if it did not obtain them and the generics were the subject of the interlocutory injunctions is relevant for a number of reasons. One, it suggests that the need for estimation of the value of the proven lost opportunity is not a reason to refrain from ordering compensation. Two, it suggests that the traditional liberal approach to the assessment of the quantum (in contrast to the right to) compensation should be kept in mind. Three, it suggests that contemporaneous evidence is a more reliable source of evidence than subsequent conjecture in the context of making and resisting claims under the undertakings.

The generics’ preclusion arguments

Wyeth’s contentions said to be precluded

287    Alphapharm took the helm on these arguments on behalf of the generics. It sought orders at the start of the hearing to the effect that Wyeth be prevented from adducing evidence about or cross-examining in relation to the following matters:

(a)    Alphapharm would have been prevented from selling its generic venlafaxine products on the private market and/or on the PBS market by Wyeth seeking and obtaining an interlocutory injunction against Alphapharm based on alleged infringement of copyright in the Efexor-XR PI and CMI.

(b)    Alphapharm would not have made sales of Enlafax XR on the private market in the period between 27 August 2009 and 11 November 2011.

(c)    Sigma/SPAL and/or Generic Health would not have caused their generic venlafaxine products to list on the PBS and would not have sold their venlafaxine products on the PBS market.

(d)    Alphapharm would not have caused its venlafaxine products to list on the PBS and would not have sold its venlafaxine products on the PBS market (following the listing of another generic company’s venlafaxine products on the PBS).

288    I declined to make these orders. Any such application had to be made well in advance of the hearing to be the subject of a separate order as Alphapharm proposed. The issues involved were too complex to deal with on the run during the hearing. Alphapharm submitted that in any event Wyeth should not be permitted to make these contentions.

289    Sigma and Generic Health submitted to the same effect that Wyeth was precluded from putting these arguments. They also submitted that Wyeth should not be permitted to contend against them that Generic Health’s importation and supply to Sigma of Sigma’s products was (and would have been) in contravention of s 19D of the Therapeutic Goods Act so that Generic Health and Sigma should not obtain compensation for lost profits that would have been tainted by illegality.

290    To explain further, issue (a) above, the copyright issue, is described in this way in Wyeth’s submissions:

First, Wyeth contends that the Generics would not have launched their products or listed them on the PBS due to the risk of being held liable for infringement of copyright in the Efexor-XR PI and CMI documents. In this regard, Wyeth contends that, in the counterfactual world, if there had been no interlocutory injunctions based on the Method Patent, it would have brought claims against the Generics for infringement of copyright in those documents on a final basis.

Secondly, Wyeth contends that, in the counterfactual world, if there had been no interlocutory injunctions based on the Method Patent, it would have sought and obtained interlocutory injunctions against the Generics on the basis of their threatened infringement of copyright in the Efexor-XR PI and CMI.

Thirdly, Wyeth contends that it would not be reasonable or equitable to compensate the Claimants having regard to the fact that, if the Generics had launched their products or listed them on the PBS, this would have involved, inter alia, the Generics infringing Wyeth’s copyright in the Efexor-XR PI and CMI.

291    Issues (b) to (d) above concern the supply by generics to pharmacists of their products either on the PBS (as a result of PBS listing) or on the private market. Wyeth contended that if not for the interlocutory injunctions none of the generics would have sought or obtained PBS listing of their products, Sigma’s private market supply would have continued but failed over time, and Alphapharm and Generic Health would not have supplied their products at all (or, if they did, their supply also would have failed over time).

292    The s 19D issue is put by Wyeth against Sigma and Generic Health in this way:

(1)    As to Sigma:

… any counterfactual sales made by SPAL in the PBS or private markets would have been in respect of generic venlafaxine products imported by Generic Health and supplied by it to SPAL in contravention of s.19D of the TG Act. These sales would, therefore, have been made by SPAL as a consequence of conduct that was “illicit” or “illegal” in the sense referred to in the authorities, including Columbia Picture Industries [[1987] Ch 38] and Servier [Les Laboratoires Servier v Apotex Inc [2014] UKSC 55; [2015] AC 430]. In this regard, such conduct meets the requirements imposed by the Supreme Court in Servier. Section 19D is directed at enforcing the public interest and creates significant civil penalties. It involves quasi-criminal conduct of a kind that comes within the principles espoused by the Supreme Court. A fortiori, of course, such conduct is also relevant to the exercise of the Court’s discretion to grant relief pursuant to the Undertakings…

(2)    As to Generic Health:

In April/May 2009, Generic Health imported 326,919 units of generic venlafaxine products manufactured by Alembic and supplied them to SPAL in May 2009. For the reasons outlined …above in relation to SPAL, in doing so, Generic Health contravened s.19D of the TG Act. Generic Health received payment for that order, and Wyeth understands that it does not form part of Generic Health’s claim.

However, any counterfactual sales made by Generic Health of additional product sourced from Alembic would similarly have been in contravention of s.19D of the TG Act, and thereby ought not attract an order for compensation for the same reasons.

293    The generics submitted that various legal doctrines, abuse of process, Anshun estoppel (Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589), the principles against approbation and reprobation, and/or the principle that a person seeking equity must do equity, operated to prevent Wyeth from making any of the contentions described above.

294    It is helpful to group Wyeth’s contentions so that the generics’ preclusion arguments against them can be better understood. The following groupings may be helpful:

(1)    The copyright issue has two aspects:

(a)    the first aspect, said to be relevant to the hypothetical analysis, concerns what Wyeth would or might have done if not for the interlocutory injunctions. Wyeth said if not for the interlocutory injunctions it would have sought and obtained interlocutory and final relief in 2009 and 2010 respectively based on the generics infringing its copyright in the Efexor-XR PI and CMI documents. As a result, the generics would not have been able to supply their products in any event; and

(b)    the second aspect, said to be relevant to the question whether it is just that the undertakings be enforced against Wyeth, concerns the character or nature of the hypothesised profits of the generics. Wyeth said that any such profits would be tainted by illegality because they would have been obtained as a result of infringement of Wyeth’s copyright in the Efexor-XR PI and CMI. This second aspect does not depend on proof that Wyeth would or might have done anything if not for the interlocutory injunctions. It depends on Wyeth now proving that the generics’ hypothetical profits would have been illegal due to copyright infringement.

(2)    The s 19D issue is said to be relevant to question whether it is just that the undertakings be enforced against Wyeth and concerns the character or nature of the hypothesised profits of the generics. Wyeth alleged that hypothesised profits of Sigma and Generic Health in respect of the Sigma products would be tainted by illegality because they would have been obtained as a result of contravention of s 19D of the Therapeutic Goods Act.

(3)    The supply issue concerns what the generics would or might have done if not for the interlocutory injunctions. The generics’ argument is that in order to obtain the interlocutory injunctions Wyeth contended that, if interlocutory orders were not made, the generics (variously) would apply for and obtain PBS listing of their products and/or supply their products on the private market. Having obtained the interlocutory injunctions on that basis, the argument is that Wyeth should not now be permitted to put arguments to the contrary.

295    A risk with the way in which the generics dealt with these arguments is that the essential difference between the copyright issue and the other issues might be overlooked. It is easy to succumb to the idea that as it is necessary to work out what the probabilities and possibilities would have been if not for the interlocutory injunctions, all of Wyeth’s potential hypothetical actions are of the same character and all may be raised by Wyeth in defence of the claims for compensation. However, it is necessary to consider the copyright issue separately because, assuming Wyeth has copyright in the Efexor-XR PI and CMI, copyright was a legal right of Wyeth’s to assert or not against the generics when it had the opportunity to do so, which was before the first instance final hearing in April to May 2010. I turn to this issue below.

The copyright issue

296    The generics submitted:

(1)    given that Wyeth would have been the subject of an Anshun estoppel or other procedural preclusion (in effect, by operation of ordinary principles of case management) had it attempted to raise new causes of action to seek to obtain an interlocutory or final injunction on different causes of action, Wyeth should not now be permitted to run those allegations indirectly as steps it says it would have taken in the hypothetical world;

(2)    Wyeth ought not now be in a better position because it seeks to rely on those claims in these very proceedings indirectly, in the hypothetical analysis, still without providing any explanation as to why they were not brought earlier; and

(3)    alternatively, as Wyeth cannot now prove the new claim could have been brought due to various procedural preclusions (be it Anshun estoppel if the claims had been made in separate proceedings or case management principles if the claims had been attempted to be made in these proceedings), Wyeth cannot now be permitted to advance those claims in the hypothetical world.

297    In its reply submissions Alphapharm also made a different point in these terms:

The sense in which the counterfactual differs from the real world must be related to the purpose for which the counterfactual is employed. Here, the counterfactual is designed to determine what loss was suffered by the generics as a result of the injunctions in the real world. The counterfactual that the interlocutory injunction was neither sought (in the sense of filed) nor obtained, is closely correlated to the event which created legal liability (the seeking and granting of the interlocutory injunction). It is a common form of analysis to create a counterfactual by removing the event creating the legal liability…

But Wyeth’s introduction of its copyright claim seeks to make the counterfactual differ from the real world in a way which has nothing whatsoever to do with the event creating legal liability. It introduces a supervening, unrelated counterfactual event. If Wyeth’s approach to counterfactuals were correct, it would be open to a negligent bus company in a case for personal injury to a pedestrian to attempt to prove that, had the plaintiff not been injured by the defendant bus company driving negligently, and then been taken to hospital, he would have continued on his journey to work, and then fallen down the stairs when he arrived at work and suffered the same injury. Of course, such a plaintiff [sic] would not be permitted to attempt to prove that matter, because rather than simply removing the event creating a legal liability (the negligent driving), it adds a new supervening event to the counterfactual. That is what Wyeth effectively seeks to do here by adding its copyright claim to the counterfactual.

298    Wyeth submitted that the copyright issue arises as part of a consideration of what would have occurred in the ongoing proceedings, if the interlocutory injunctions had not been granted. According to Wyeth it does not offend principles of finality or fairness for Wyeth to now make contentions as to what it would have done had it been confronted with a different set of circumstances from those which in fact existed.

299    The generics’ submissions over-complicate the critical point. The critical point is that these are the same proceedings as the proceedings against the generics for interlocutory and final relief which were heard and decided at first instance in 2010 and were the subject of an appeal in 2011. Wyeth knew about but chose not to assert its alleged copyright in the Efexor-XR PI and CMI against the generics at any time other than in response to the generics’ claims for compensation under the undertakings. In this context, the issue is not about what Wyeth would or might have been confronted with had it tried to assert copyright at any time after 22 May 2009 (when the Sigma interlocutory injunction was granted) and before the first instance final hearing in 2010. Wyeth did not do this when it had the chance to do so and thus the issue is whether a party which made a deliberate forensic decision not to assert a legal right (which the evidence will show Wyeth did) in a proceeding against parties can conduct an interlocutory and final hearing and an appeal on the basis of that forensic decision and subsequently in the same proceeding against the same parties assert that legal right for any purpose. It may be accepted that the claim is now for compensation but the claims are in the same proceedings and are made under the undertakings in those proceedings. To enter into debates about supervening causes and Anshun estoppel or case management principles as part of the hypothetical analysis involves the wrong framework of reference. The relevant framework of reference is that these are the same proceedings and as between Wyeth and the generics involves the same parties and that Wyeth has had a full hearing on the merits of its legal claims against the generics in respect of their venlafaxine products both at first instance and on appeal without asserting copyright against them.

300    Unlike the other issues which Wyeth is seeking to raise as relevant to the hypothetical analysis and the justice of any order being made against it, the copyright issue involves a legal right of Wyeth. Assuming Wyeth owned the copyright in the Efexor-XR PI and CMI (which is disputed except by Generic Health), no-one but Wyeth could bring the claim for copyright infringement. Copyright was Wyeth’s right alone to assert. Wyeth, as the evidence will show, chose in 2009 not to seek interim or final relief based on copyright. Wyeth thus made a forensic decision in these proceedings. It maintained that forensic decision throughout the first instance proceedings and on appeal to the Full Court and when it tried and failed to get special leave to appeal to the High Court. Now, in the context of these same proceedings, Wyeth is asserting claims based on copyright. In my view having made forensic decisions to seek interlocutory injunctions and final relief on the basis only of patent infringement Wyeth cannot now assert in the same proceedings legal claims which it had available at the relevant time but deliberately chose not to assert.

301    Wyeth’s response that the necessary analysis is hypothetical is no answer to the problems with the copyright issue. The claims for compensation are under the undertakings. They are claims in the same proceedings in which the undertakings were given. The so-called “counter-factual” approach is merely a tool to assess whether the operation of the interlocutory injunctions has caused loss. The proceedings, however, are the same proceedings. As between the generics and Wyeth, the parties are also the same, the other claimants’ claims deriving from those of the generics. In these proceedings, Wyeth chose to assert some legal rights (patent) and not others (copyright) for the purposes of interlocutory and final relief. All issues of relief have been finally determined. The remaining issue in these proceedings is the compensation claims under the undertakings but the context remains these proceedings and the task is to assess compensation in that context. The task is not to assess compensation in the hypothesised context of some other litigation in which Wyeth asserted different rights and succeeded rather than failed. Accordingly, a wrongly granted interlocutory injunction on the basis of the legal rights actually asserted cannot be transformed into a correctly granted interlocutory injunction on the basis of legal rights never asserted.

302    Wyeth must remain bound by its forensic decisions. It cannot assert legal claims against the generics which it did not assert when it had the opportunity and the time was ripe to do so. Describing the claims as being part of the required “counter-factual” analysis or as relevant to the issue of illegality or discretion does not change the fact that these are the same proceedings in which Wyeth, at the time when it was able to seek interlocutory and final relief against the generics based on copyright infringement, chose not to do so.

303    The nature and purpose of the undertakings supports these conclusions. The undertakings were given as the price of the interlocutory injunctions. These undertakings are able to be called upon only because the interlocutory injunctions were wrongly granted. Whether or not the interlocutory injunctions were wrongly granted depends on the legal rights the moving party chose to assert. To ascertain loss for the purpose of a claim under undertakings of this kind it will generally be necessary to consider what the position would have been if not for the interlocutory injunctions. If the party who gave the undertaking and had the benefit of an interlocutory injunction and a full hearing on the merits in respect of the legal rights the party chose to assert can later assert in the context of a claim for compensation under the undertaking that if not for the interlocutory injunction the position would have been the grant of an interlocutory injunction on the basis of some other right (as Wyeth seeks to do) the entire history of the proceedings is set at naught. The fundamental premise of the wrongly granted interlocutory injunction is undermined. Apart from this being wrong in principle, there are other undesirable consequences. The first is regression because it would also have to be posited that undertakings would have been given as the price for those hypothetical interlocutory injunctions based on other legal rights never asserted. The second is that to escape from regression there must be a case within a case (or, worse, as here, cases within a case). Thus, in the present matter, Wyeth seeks to prove that it owned copyright in the Efexor-XR, the generics infringed that copyright, and that all of the generics’ profits would have been payable to Wyeth in the form of damages. It also seeks to prove that but for the interlocutory injunctions it would have sought and obtained interlocutory and final relief based on copyright. The first case involves a determination now. The second case involves a projection back into 2009 and 2010. As a result, it is even possible that the outcomes of these cases within the case might be different. That Wyeth’s conduct relating to its copyright claim, if permitted, would place the other parties and the Court in an untenable position should be readily apparent.

304    In any event, the inescapable fact is that these are the same proceedings and as against the same parties Wyeth is now seeking to assert its alleged copyright deliberately chose not to make that assertion when it had the opportunity to do so. Had Wyeth made its copyright claims when it had the opportunity to do so (be it for interlocutory and final relief or only final relief) then all of the complex issues of fact and law to which the copyright issue gives rise would have been decided in the ordinary course of the litigation. Having chosen not to do so, if Wyeth is permitted to assert copyright now the same complex issues now arise indirectly in two potentially inconsistent exercises, hypothetical and actual. The issues arise, moreover, in circumstances where it can never be known what the generics could, would or might have done had Wyeth asserted copyright against them in the context of its claims for interlocutory and final relief.

305    This may be contrasted with the other issues raised by Wyeth. All of those other issues, including what the generics would have done, Wyeth’s generic defence strategy, and whether the Minister’s delegate would have listed the generics’ products on the PBS given the litigation, never arose because of the interlocutory injunctions, not because of a forensic decision by Wyeth about what rights it would and would not assert. Because the interlocutory injunctions were granted, how those issues would have played out is necessarily unknowable. The copyright issue is different. The copyright issue did not arise before or after the interlocutory injunctions because Wyeth decided not to raise the issue. Had it chosen differently we would have known whether it would have obtained interim or final relief based on copyright infringement allegations. The copyright issue was not necessarily unknowable. Wyeth made it so by its forensic choice.

306    It may not be necessary to characterise these circumstances as giving rise to an abuse of process to conclude that Wyeth should not be permitted to raise the copyright issue but I would be prepared to reach that conclusion. The doctrine of abuse of process is not confined to the commencement of proceedings. It extends to any step in the proceedings having the effect of bringing the administration of justice into disrepute or imposing unjustifiable oppression on other parties: Batistatos v Newcastle City Council [2006] HCA 27; (2006) 226 CLR 256 at [14]-[15].

307    It would bring the administration of justice into disrepute for a party in Wyeth’s position to make a forensic decision not to assert its alleged copyright for the purpose of interlocutory and final relief and then in the same proceedings years later to assert copyright for the purpose of defeating a claim on the undertaking as to damages by parties in the position of the generics who were bound by the interlocutory orders in exchange for which Wyeth gave the undertakings. To permit this course would make a mockery of principles essential to the administration of justice including the finality of litigation. That principle has many manifestations of which one is that parties are bound by their forensic decisions. It is difficult to imagine a case which calls for the application of this principle more powerfully than the present in which Wyeth chose in 2009 what right it wished to assert against the generics, being the method patent, and chose not to assert another right, copyright in the Efexor- XR PI and CMI, obtained interlocutory injunctions on the basis of the patent right and had a full hearing on the merits both at first instance and on appeal on that basis.

308    In Tomlinson v Ramsey Food Processing [2015] HCA 28; (2015) 256 CLR 507 at [24] the High Court (per French CJ, Bell, Gageler and Keane JJ) said that the doctrine of abuse of process is informed by considerations of finality and fairness. While the context of claimed abuses of process is often an attempt to re-litigate an issue which was litigated in earlier proceedings or should have been so litigated, it is the same considerations of finality and fairness which underlies the principle that in a proceeding a party is generally bound by its forensic decisions. For example, in Metwally v University of Wollongong [1985] HCA 28; (1985) 60 ALR 68 at 71 the High Court said:

It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.

309    In Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 7-8 Gibbs CJ, Wilson, Brennan and Dawson JJ said:

It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this court has firmly maintained the principle that the point cannot be taken afterwards

310    While the context of Metwally was an application to vary a perfected order and of Coulton v Holcombe was raising a new issue in an appeal the guiding principles of finality and fairness are the same.

311    Further, it almost goes without saying that, analysed in what I consider to be the proper context, it would be “unjustifiably oppressive” to the generics to permit Wyeth to now make the copyright claims in these circumstances: Tomlinson at [25]. They responded to Wyeth’s assertion of its patent right in 2009 by claiming that the method patent was invalid. They defended Wyeth’s infringement claims. They did so at first instance, on appeal to the Full Court, and in respect of Wyeth’s application for special leave. They were vindicated. The right Wyeth chose to assert against them did not exist. Now, when they claim compensation under the wrongly granted undertakings, Wyeth chooses to assert against them copyright in the Efexor-XR PI and CMI. They not only have to defend against copyright cases within a case but are burdened by having to both dispute what Wyeth contended it would have done but for the interlocutory injunctions and by attempting to prove what they and the Commonwealth would have done in response. It is difficult to overstate the degree of prejudice, vexation and oppression which this involves to the generics.

312    The same conclusions apply to both aspects of the copyright issue. Whether it be for the purpose of the hypothetical analysis or assessing the justice of enforcing the undertakings, Wyeth is asserting copyright against the generics in circumstances where it chose not to do so at any time before the final resolution of its case against the generics. In my view having had its case against the generics based on the asserted patent rights heard on the merits and ultimately decided against it on appeal Wyeth cannot now assert copyright in these proceedings for any purpose. To do so involves an abuse of process which must not be permitted. If not an abuse of process, it is nevertheless an exercise which would undermine the principles of the finality of litigation and that a party must be bound by its forensic decisions. As a matter of discretion this should not be permitted.

313    No different conclusion applies to the other claimants. Their claims derive from the generics’ claims. They were not parties to the proceedings as originally constituted. But if as I consider to be the case Wyeth cannot assert copyright in these proceedings then it cannot do so for any purpose. In any event given the derivative nature of the other claimants’ claims, copyright is irrelevant as against them.

314    Equitable principles provide another perspective about the same issue. The interlocutory injunctions are the result of the fact Wyeth wanted to keep the generics out of a market it believed was protected by the method patent. For that purpose Wyeth had both the patent and copyright infringement claims available to it at all times. It could have sought interlocutory orders on both grounds. It chose not to do so. Further, after the grant of the interlocutory injunctions, Wyeth could have applied to amend its claim to include the copyright infringement case but again chose not to do so. Having taking the benefit of the equitable remedy of interlocutory injunctions as against the generics why would Wyeth still not be bound to do equity to the generics in the context of the generics’ claims for compensation under the undertakings given as the price for the interlocutory injunctions? If so bound is Wyeth not acting against good conscience by now contending that it would have made a claim that it had an opportunity to make and which it did not make? In my view, it is not.

315    Wyeth’s submissions do not grapple with these abuse of process issues other than to assert that because the question is hypothetical the fact that it decided not to raise the copyright issue is immaterial, the question being what it would have done if not for the interlocutory injunctions. This approach disregards the actual course of the litigation (contrary to Wyeth’s correct insistence that this cannot be disregarded for the purposes of causation) and treats the required hypothetical analysis as if it is its own separate cause of action when it is nothing more than a tool to assess if the interlocutory injunctions caused loss and, if so, to what extent.

316    Whatever way in which the issue is approached I consider that Wyeth should not be permitted to assert copyright in the Efexor-XR PI or CMI in these proceedings. The time for doing so was 2009 or 2010. That time has long since passed.

Supply by the generics

317    The generics’ argument is that to obtain the interlocutory injunctions in 2009 Wyeth contended and proved to the requisite standard for interlocutory relief that the generics would have sought and obtained PBS listing of their products and then supplied their products on the PBS and that, if their products were not PBS listed, they would have supplied on the private market. The corollary is said to be that Wyeth cannot now be permitted to attempt to prove or submit to the contrary.

318    The generics submitted in support of these arguments that:

(1)    the interlocutory character of the decisions which led to the interlocutory injunctions is insufficient to deprive Wyeth’s present contentions of the character of an abuse of process;

(2)    it would tend to bring the administration of justice into disrepute for the Court to permit Wyeth to escape liability to pay compensation under the undertakings on the basis that the generics have not proven they would have supplied their products as such a decision would be directly inconsistent with the decisions which led to the grant of the interlocutory injunctions;

(3)    Wyeth making one submission to achieve one result and being able to now make another submission as to witnesses’ faulty recollections after nine years have passed in an attempt to achieve the opposite result is oppressive and unfair, particularly given that the generics now only find themselves in the “in the position of needing to bring [their] present claim in these long and complicated proceedings, is the fact that Wyeth incorrectly asserted an invalid patent against [them] and obtained an interlocutory injunction on the basis of that invalid patent”;

(4)    the finality of judicial determination will be undermined in that the Court will be put in a position where the Court is asked to embark on a process of reaching and recording a different result from that previously the subject of a considered and published judgment;

(5)    Wyeth took the benefit of the interlocutory injunctions and cannot now controvert a fundamental premise upon which the interlocutory injunctions were given; and

(6)    it would be inequitable and unjust to allow Wyeth to defend this application on a basis that departs from its cases for the interlocutory injunctions.

319    I do not find these submissions persuasive to the extent that they are relied upon to preclude Wyeth from making these contentions. This is not to say that a party such as Wyeth should be permitted to say one thing to obtain an interlocutory injunction and then another to defend against a claim under the undertakings should it fail to obtain final relief. Inconsistent assertions of that kind would justify close scrutiny and a degree of scepticism because inconsistency may involve permitting a party who has obtained equity not to do equity. In this sense, the concept of symmetry to which Norris J referred in Les Laboratoires Servier v Apotex Inc [2008] EWHC 2347 (Ch); [2009] FSR 220 at [9] is apt. The present issue, however, involves other more complex considerations. As will become apparent, there was considerable forensic manoeuvring occurring between Wyeth and the generics in 2009 including about the question of the generics supplying their products and how they might do so. In this context, the assertion of inconsistency is not straightforward. Other considerations are also engaged.

320    First, the supply issue is different from the copyright issue. The supply issue does not concern a right which Wyeth had and could have asserted against the generics in 2009 but chose not to assert. It concerns what the generics would or might have done if not for the interlocutory injunctions which is a necessary component of assessing whether and to what extent the interlocutory injunctions caused them loss. To preclude Wyeth from responding to the generics’ claims about what they would or might have done if not for the interlocutory injunctions would be for the mere grant of the interlocutory injunctions to determine the issues of causation and loss.

321    Second, in 2009 Wyeth could only act on the evidence it had which consisted of representations by the generics about their intentions. The Court also determined the interlocutory injunctions on that basis. The context of a claim for an interlocutory injunction is different from the present context. In the context of the interlocutory injunctions Wyeth would not have been permitted to attempt to go behind the generics’ representations about their intentions. It could only take what the generics said at face value and decide to apply for interlocutory relief or not on that basis. No discovery or cross-examination seeking to challenge the generics’ representations would have been permitted.

322    Third, the generics which defended against the interlocutory injunctions, Sigma and Alphapharm, did not choose simply to rely on their evidence from 2009. Their claims for compensation are based on further evidence from them about what they would or might have done but for the interlocutory injunctions. The generics also chose to tender additional documents to advance their claims for compensation. Having done so it is not apparent to me as a matter of principle why Wyeth would be precluded from doing the same. The result is that the evidentiary landscape of the current claims is different from and far more extensive than the evidentiary landscape in 2009 for the purpose of the interlocutory injunctions. The evidentiary landscape shows the extent to which the parties’ conduct was affected by forensic considerations.

323    Fourth, there was no evidence, hearing or judgment in respect of the Generic Health interlocutory injunction. Wyeth and Generic Health consented to the orders being made. Accordingly, in my view, none of the principles on which the generics relied can be engaged in respect of Generic Health.

324    Fifth, insofar as Sigma is concerned, whatever the true positon about Sigma’s offer not to seek PBS listing (that is, whether it was conditional on Wyeth giving an undertaking as to damages or not), that issue was not part of the dispute between the parties in the context of the Sigma interlocutory injunction. It is apparent that the balance of convenience was decided in the context of Sigma’s private market supply only, not any potential PBS listing and PBS supply. As such, there can be no inconsistency or inequity or the like about that issue.

325    Sixth, insofar as Alphapharm is concerned, there was no issue in the context of the Alphapharm interlocutory injunction about Alphapharm’s evidence that it would not be the first generic to obtain PBS listing of its products. The Court was not required to decide whether Alphapharm would have applied for PBS listing. Again, there can be no inconsistency or inequity or the like about that issue. The issue of forensic manoeuvring is also particularly acute in respect of Alphapharm’s private supply.

326    Seventh, for the issue of supply by the generics, the relevant context is hypothetical. The question is the degree of probability or possibility of something occurring which did not or could not occur because of the interlocutory injunctions. In that context I cannot see how the doctrines of abuse of process, Anshun estoppel, approbation and reprobation or the like have any role to play. One circumstance is factual (the interlocutory injunctions were granted) and one is hypothetical (the interlocutory injunctions were not granted). There is no relationship between the two circumstances upon which these legal doctrines can operate. Again, however, I stress that contemporaneous evidence is likely to be the best or at least useful evidence for various purposes. Wyeth’s evidence from 2009 about what it thought the prospects of Sigma and Alphapharm successfully obtaining market share from the supply to the private, non-PBS market, is evidence of this kind.

327    Further, I accept Wyeth’s submissions as follows, subject to a few additional comments as noted in parentheses:

(1)    when an interlocutory injunction is granted, a court does not decide any right, but only determines on what footing matters shall stand until the trial. At the trial the rights of the parties are finally determined;

(2)    at the interlocutory injunction stage, a court’s assessment of the balance of convenience involves an assessment of the likelihood or risk of certain eventualities, by reference to the evidence which is then available;

(3)    the issues arising for determination at the interlocutory injunction stage and the issues arising for determination when there is a later claim pursuant to an undertaking as to damages, while related, are different and proceed by reference to different bodies of evidence (albeit that I would add that the evidence adduced in respect of the interlocutory injunctions is relevant);

(4)    there is nothing unorthodox about a court revisiting the question of whether conduct enjoined by an interlocutory injunction would in fact have occurred if the injunction had not been granted; and

(5)    by the generics’ reasoning, the mere grant of an interlocutory injunction would be treated as giving rise to a final entitlement to damages based on a hypothesis of adverse affectation rather than any factual reality (although I would not adopt the phrase “factual reality” but say instead the “assessment in all of the circumstances as now known of the degree of probability that asserted events would have occurred”).

328    These submissions support my conclusion that principles which the generics called in aid of their preclusion arguments are not engaged in respect of the issue of supply.

329    In these circumstances I consider that there is no unfairness, oppression, inconsistency or potential embarrassment to the administration of justice, still less any form of impermissible approbation or reprobation or even any lack of symmetry arising from Wyeth responding to the current claims about what the generics would have done in terms of supply of their products by reference to all of the available material and on the necessary hypothesis that the interlocutory injunctions had not been granted. I am unable to see how excluding Wyeth from testing the generics’ contentions and adducing evidence relevant to what it says the generics would have done if not for the interlocutory injunctions can be reconciled with the terms of the undertakings which require the Court to make such order as it considers just for compensation.

330    Otherwise, I agree that the approach to the assessment of compensation should be liberal, provided that it has been proved on the balance of probabilities that the operation of the interlocutory injunction had an adverse effect on the claimant.

The s 19D issue

331    I do not see the s 19D issue in the same way as the copyright issue. Wyeth’s contention is not that it would have asserted against the generics any right it had under s 19D of the Therapeutic Goods Act. The section did not vest any right in Wyeth. It is a provision which creates a contravention of the law attracting a civil penalty. Wyeth could not have raised s 19D against the generics at any earlier time. It is only potentially relevant to the claims for compensation by Generic Health and Sigma.

332    The present issue is not whether the issue has any merit. It is whether Wyeth should be permitted to raise the issue at all. I am unable to discern any principled basis for concluding that Wyeth should not be permitted to contend that the importation and supply of Sigma’s products by Generic Health for the purpose of supply to Sigma contravened and would have contravened s 19D so that their hypothetical profits from such conduct was and would have been tainted by illegality so that it would not be just to order compensation in their favour on that account.

Conclusions

333    In my view all of Wyeth’s contentions against the generics involving copyright constitute an abuse of process or conduct which should not otherwise be permitted as a matter of discretion. Wyeth’s other contentions do not engage any of the principles of preclusion on which the generics relied.

Sigma’s case

Sigma’s claim

334    Sigma’s claim is made under Wyeth’s undertaking in respect of the Sigma interlocutory injunction. Sigma claims compensation for the value of Sigma’s lost opportunity to supply the Sigma products to pharmacists by way of wholesale.

Some uncontroversial facts

335    The following summary includes extracts from Sigma’s closing submissions to the extent that they record facts which appear to be uncontroversial and otherwise includes undisputed facts apparent from other parts of the evidence.

336    Sigma entered the Australian generic pharmaceuticals market after Sigma Company Limited, the parent of Sigma, merged with Arrow Pharmaceutical Limited in December 2005. The merger enabled Sigma Company Limited to take over Arrow’s substantial generic product portfolio and establish a new generic division within Sigma Company Limited conducted by Sigma as a subsidiary of Sigma Company Limited.

337    In the 2008/2009 financial year Sigma was the third largest supplier of products, by script volume, to the PBS. Sigma offered a range of over 12,000 product lines and distributed products to over 4,000 retail pharmacies daily from its 15 Australian distribution centres. It had external sales revenue of over $3 billion and employed over 1800 people in 19 locations across Australia.

338    In 2008-2009 Sigma was the “first-line” generics supplier to about 1,500 of around 5,000 retail pharmacies in Australia, in the sense that those pharmacies stocked most or all of Sigma’s generic pharmaceutical range and over-the-counter ranges. Approximately 1,000 of the 1,500 pharmacies to whom Sigma was the “first-line” generics supplier were members of Sigma’s “Embrace” support and loyalty program. This program worked so that the more of Sigma's products and services a pharmacy used, the better its trading terms were across all areas of Sigma’s business. Pharmacies who participated in the Embrace program could access benefits such as preferential trading terms, prioritised delivery runs, preferential access to scarce stock, preferential treatment of credits and returned stock, a brokerage service, free catalogue deliveries and the like. About 1,500 further pharmacies stocked some, but not all, of Sigma’s products.

339    Sigma had a team known as the Generics Team headed by Mr Heine, as National Sales Manager, Generics, consisting of about 40 sales representatives including seven managers who reported directly to Mr Heine. The primary target for the generics team was retail pharmacies. Members of the generics team personally visit around 4000 pharmacies per month across Australia.

340    By May 2009 Sigma and Arrow had been the first to market with generic versions of five so-called “blockbuster” drugs (a product with Australian sales in excess of $100 million per year) because this facilitated Sigma establishing a market share that it considered other generics would have difficulty eroding and increased its overall sales.

341    Sigma also had experience in selling generic versions of drugs which were not PBS listed. Given that there was no PBS listing for the originator drug, such sales had to be private market sales. Most of the 3,000 to 3,500 retail pharmacies to whom Sigma sold products purchased both “generics” (that is, generic versions of PBS listed drugs) and “privates” (that is, drugs not listed on the PBS).

342    Where an originator drug had a PBS listing, Sigma had previously launched a number of generic products in two stages with a private market launch and supply first to be followed by supply under the PBS once PBS listing had been obtained. Other evidence discloses that this two stage approach is not uncommon for generics but the time period between the private supply and the PBS supply commencing is usually in the order of up to but no longer than three or four months. Neither Sigma nor any other generic had supplied a generic version of a PBS listed drug on the private market without also anticipating PBS listing of the generic product within the immediately foreseeable future. It would be fair to describe such an approach as revolutionary or unprecedented.

343    In 2007 Sigma and Arrow Group ApS, a Danish company which through various subsidiaries operated an international generic pharmaceuticals business, entered into a further agreement in respect of 80 “pipeline” drugs which Arrow Group was developing for launch including an extended release formulation of venlafaxine hydrochloride. Sigma’s intention was to launch its generic venlafaxine hydrochloride products in Australia after the expiry of the compound patent in December 2008. Sigma was unaware of the method patent when it made these arrangements and formed this intention.

344    Sigma relied on patent clearance searches conducted by Arrow Group for “pipeline” products and other generic products that originated with Arrow Group. These searches did not disclose the existence or relevance of the method patent to Sigma’s plans for generic venlafaxine hydrochloride products.

345    Sigma took steps after 2007 to ensure it could launch its generic venlafaxine hydrochloride products as soon as possible after expiry of the compound patent. As summarised in Sigma’s closing submissions:

(a)    in August 2007 “Venlafaxine SR” was recorded in Sigma’s “Product Pipeline” with a patent expiry date of 16 December 2008, a TGA estimated approval date of 1 December 2008, a “product available” date of February 2009, and a PBS listing estimate of 1 April 2009;

(b)    from about 2007 onwards Sigma took steps to have a generic venlafaxine hydrochloride XR product registered by the TGA on the ARTG, including licensing data from other companies and retaining a consultant to conduct, prepare and submit a bioequivalence study;

(c)    on 8 July 2008 Sigma amended its agreement with its supplier, Generic Health, to include the manufacture, packaging and supply of Evelexa XR, and in October 2008 and February 2009, in anticipation that it would obtain ARTG registration, Sigma placed significant orders for Evelexa XR with Generic Health amounting to about $3 million;

(d)    from late 2008 Mr Heine undertook various tasks to prepare Sigma’s launch strategy for Evelexa XR, including reviewing trends for sales of the Efexor-XR Products, developing marketing support materials and programs, preparing internal budget forecasts, developing sales strategy and tactics, training Sigma’s generic sales team, establishing incentive programs for the generic sales team, developing aids to assist in communicating the benefits to a pharmacy of switching to Evelexa XR, and actively selling Evelexa XR to key national retail pharmacy groups;

(e)    by the end of 2008 the design of the external packaging and blister packs for Evelexa XR had been finalised;

(f)    In February and March 2009 Sigma prepared a dispensing history for Efexor-XR Products for a large number of retail pharmacies across Australia, so that Sigma’s generic sales team could tailor offers to pharmacies based on their actual historical dispensing of Efexor-XR;

(g)    Sigma encountered difficulties in obtaining ARTG listing for Evelexa XR in late 2008 and early 2009… but on 6 February 2009 the TGA notified Sigma that …approval would be recommended. Mr de Alwis described the TGA’s decision to recommend approval as “great news for us” and Mr Smith described it as “awesome news”.

346    Sigma’s strategy was to be the first generic entrant on the market which Sigma expected would enable it to obtain at least a three month first mover advantage before another generic entrant.

347    In order to get Evelexa XR onto the market as quickly as possible (rather than waiting for PBS listing to launch the product) and enjoy a first-mover advantage for the maximum possible period, Sigma planned a marketing strategy for Evelexa XR. This was to launch the product on the private market to non-concessional (or general) patients for a period of 3 months commencing on 1 May 2009 before it was listed on the PBS on 1 August 2009. To secure its first mover advantage Sigma’s strategy involved:

(a)    getting Evelexa XR on to the market as quickly as possible by launching first on the private market and not waiting for PBS listing; and

(b)    maximising Sigma’s first mover advantage by achieving a forward sell-in to the pharmacies so that they had so much stock on hand that when a competitor entered the market, the pharmacy would have no need to order more venlafaxine hydrochloride XR. A further benefit of the forward sell-in was that Sigma would sell as much product as it could in the first month, to avoid the statutory price disclosure requirements, which do not operate during the first month of the first reporting period.

348    Sigma believed that the private market for venlafaxine hydrochloride XR was close to 50% of patients taking Efexor-XR. Sigma considered that it was well placed to capture 50% of the available sales to general patients and, therefore, about 20-25% of the overall Australian market for venlafaxine hydrochloride XR.

349    On 26 February 2009 the TGA notified Sigma by letter that it had approved Evelexa XR for registration on the ARTG. The ARTG records that Evelexa XR 150, Evelexa XR 75, and Evelexa XR 37.5 were entered on the Register on 5 March 2009, in each case on the basis that it was bioequivalent to one of the Efexor-XR products, and was indicated for treatment of the same range of depressive illnesses. In his affidavit in 2009 Mr de Alwis explained that Sigma had taken approximately three years to demonstrate bioequivalence of its products with Efexor-XR in order to obtain these ARTG registrations. The ARTG registrations thus represented the culmination of a substantial investment of time and money by Sigma and put Sigma in a unique position as at 5 March 2009, it then being the only generic which could lawfully supply its venlafaxine products in Australia.

350    In early 2009, Sigma Company’s Group Commercial Manager (Finance Division), Mr Paul Meulblok, forecast the total expected gross profit to be generated by Evelexa XR for the 2009/2010 financial year (from 1 February 2009 to 31 January 2010) on the basis of Sigma listing Evelexa XR on the PBS on 1 August 2009. Mr Meulblok estimated that:

(a)    the total market for venlafaxine hydrochloride XR was $105,000,000;

(b)    Sigma would obtain 20% of the market for venlafaxine hydrochloride XR;

(c)    Sigma would achieve sales totalling $10.5 million in that year, with a 40% margin; and therefore

(d)    Sigma would achieve a gross profit of $4.2 million.

351    In February 2009 Mr de Alwis presented to Sigma Company’s board its budget for the 2009/2010 financial year, which included revenue and profit forecasts in respect of anticipated sales of Evelexa XR. Consistent with Mr Meulblok’s forecast, the budget assumed a PBS listing date of 1 August 2009 and forecast revenue of $10.5 million and profit of $4.2 million for the relevant financial year (being 1 February 2009 to 31 January 2010) making Evelexa XR Sigma’s most profitable generic product.

352    On 2 March 2009, Sigma applied for listing of the Evelexa XR Products on the PBS. It requested to the Department of Health that the products be listed on the PBS effective on 1 August 2009. On 6 March 2009, Sigma sent a further letter to the Department in which it requested that the Evelexa XR Products be listed on the PBS before 1 August 2009.

353    Sigma then became aware of the method patent on or about 6 March 2009.

354    Apart from these undisputed matters, it is apparent that on 29 April 2009 Sigma decided to proceed only with its planned private launch of its products to general patients and took steps to ship its stock of Evelexa XR which was being held in Singapore to Australia. Sigma also substantially revised its launch strategy and budget on the basis that its launch should be confined to the private market. Sigma subsequently launched its products on the private market. The launch process involved the following:

(a)    The extensive Sigma generics sales team visiting pharmacies to inform them of the availability of Evelexa XR. The material highlighted that Sigma was “first-to-market” and the only generic registered with the TGA.

(b)    On 4 May 2009 Sigma sent a fax to 4500 pharmacies announcing the availability of Evelexa XR, noting it to be the “first-to-market Generic” and its availability in 37.5mg, 75mg and 150mg doses.

(c)    The Sigma generic sales team approached pharmacies in order of importance. Sigma’s most important customers were visited first. The detail aid which Sigma’s generic sales team used to detail Evelexa XR to the pharmacies set out the two phase launch process. Phase 1 being the launch on the private market – “prescription launch now” and Phase 2 “PBS launch” at a later date.

(d)    In early May 2009, the Sigma generic sales team commenced taking orders for Evelexa XR, on the basis that the product would be delivered to pharmacies for sale by 1 June 2009.

(e)    By 12 May 2009, the generics team had visited approximately 800 pharmacies and received orders from 550 pharmacies for Evelexa XR products.

(f)    On 22 May 2009, Sigma wrote to the TGA providing Commencement of Supply forms in relation to Evelexa XR indicating that the products would be made available as private prescriptions on 1 June 2009.

(g)    On 22 May 2009, Sigma notified the TGA that it had begun marketing production batches of Evelexa XR on 1 May 2009.

(h)    By 3 June 2009, Sigma had received orders from 2,300 pharmacies for over 53,000 units of Evelexa XR.

The competing cases – preliminary points

355    Much was said by Sigma and Wyeth about what occurred between Sigma discovering the method patent and the grant of the Sigma interlocutory injunction on 3 June 2009.

356    Sigma’s principal case can be boiled down to these propositions. While Sigma considered that it had good arguments the method patent was invalid it anticipated that the prospect of a 12.5% price reduction from PBS listing of its generic product would make an interlocutory injunction almost an inevitability. It decided to take that risk out of play and thus withdrew its PBS listing application in an attempt to increase its prospects of resisting an interlocutory order preventing it from supplying at least on the private market. Had there been no interlocutory injunction it would have reverted to its original plan for private market sales from 1 May 2009 and PBS listing by 1 August 2009 to enable supplies under the PBS thereafter. Neither the existence of the method patent nor the litigation would have deterred it from implementing its plans because it believed it had good prospects of having the method patent declared invalid.

357    Sigma said that its conduct in anticipation of being restrained by an interlocutory injunction does not reflect what would have occurred but for the interlocutory injunctions and thus must be disregarded. Further, Wyeth’s conduct threatening an interlocutory injunction application must also be disregarded. I have rejected these submissions above because I consider that they do not reflect the terms of the undertakings and would eliminate the existence of the method patent and the litigation from the assessment, which is impermissible. If I am wrong about this, the only material difference would be one of timing in relation to the prospect of PBS listing and PBS supply in that instead of that prospect relating to the date of 1 December 2009 for Sigma it would relate instead to the date of 1 August 2009. This would have a consequential effect for the prospect of PBS listing and PBS supply by Alphapharm and Generic Health – the relevant date for them for PBS listing and PBS supply would become 1 December 2009 rather than 1 March 2010.

358    To return to Sigma, however, Wyeth’s principal case can be boiled down to these propositions. When it discovered the existence of the method patent Sigma decided to withdraw its application for PBS listing. Whether it did so in anticipation of an interlocutory injunction or for fear of being liable for a 12.5% price reduction in Efexor-XR is immaterial as the position would have been the same if no interlocutory injunction had been granted. If the PBS listing was withdrawn to ensure that Sigma would at least be able to supply the private market then assuming no interlocutory injunction Sigma would have achieved that objective of ensuring it could supply on the private market. It would not then be inferred that having achieved its objective Sigma would change its mind and re-apply for PBS listing at the risk of prompting the very thing it has successfully avoided, an interlocutory injunction preventing supply at all. If it was done for fear of being liable for a 12.5% price reduction in Efexor-XR, that fear would have remained operative at all times pending the final injunctions being granted. It is also convenient to record here that insofar as Sigma’s private market launch is concerned, Wyeth accepted that Sigma would have continued with its private market supply but contended that Sigma achieved its sales based on an anticipated PBS listing which would not have been forthcoming. Pharmacists would not have been able to sell the stock, the stock would have been returned to Sigma, and Sigma’s private market supply would have been unsuccessful.

359    As a matter of principle Wyeth said that as the undertakings are concerned with allegedly adverse effects of the interlocutory injunctions it is not legitimate to disregard what actually occurred leading up to the making of the interlocutory injunctions. All of what in fact occurred must be taken to have occurred. The only thing that is removed from the analysis is the grant of the interlocutory injunction. Insofar as Mason J in Air Express at 325 described the postulate as the injunction not being sought or granted, this cannot be understood as requiring actual events occurring before the injunction was granted to be disregarded. This would broaden the scope of the undertaking beyond its terms which focus on any adverse effect by operation of the interlocutory order. Accordingly, Mason J’s reference to “sought” is best understood as meaning sought or applied for on the day the Court was asked to make the interlocutory orders. On this basis everything that occurred up to 22 May 2009 (the date on which Sundberg J heard Wyeth’s interlocutory application against Sigma) is to be taken into account. The difference commences only with the hypothesis that on that day Wyeth did not apply for the interlocutory injunction.

360    As discussed above, I consider that Wyeth’s approach to the start of the hypothetical analysis is to be preferred because it ensures that the terms of the undertaking, which focus on whether a person has been “adversely affected by any operation of the order”, remain the relevant contingency. This said, and also as noted above, I do not accept submissions that were put, for example by Generic Health, that this approach means that it should be assumed the injunctions were sought but not granted on the same basis that the Full Court found the method patent to be invalid, more than two years later. Generic Health’s submissions were in these terms:

Hypothesising that the injunctions were not sought leaves unanswered the question of why they were not sought. In the real world, Wyeth was not prepared to not to seek the injunctions because it did not want to take the risk of erosion of its monopoly position. It is far from axiomatic that the hypothetical world should be constructed so that Wyeth takes the very risk it was not prepared to take in the real world.

The other option is that Wyeth seeks the injunctions but they are refused. There is no reason why the outcome of the injunctions applications in the hypothetical cannot be different to the outcome in the real world. What is involved is a hypothesis that the judges hearing the injunction applications in the hypothetical world reach a view on the strength of the patent (ie prima facie case), consistently with the ultimate decision of the Full Court, which means that the injunction applications are refused.

That second option would… provide an appropriate counterbalance to the damages threat which Wyeth relies upon…

361    As explained, I disagree with these submissions. Wyeth had the benefit of the method patent. The method patent gave Wyeth the exclusive rights of exploitation provided for in s 13 of the Patents Act (to exploit the invention and to authorise another person to exploit the invention). Unless and until the method patent was revoked Wyeth continued to have those rights. Threats to seek interlocutory relief are part of the ordinary exigencies of the existence of litigation. If Wyeth had withdrawn its interlocutory application on 22 May 2009 its only exposure to liability would have been to costs. It would not have been liable to Sigma for any loss Sigma might have suffered as a result of Sigma taking steps in anticipation of the hearing of the interlocutory application. It also would not have given the undertaking and would not be exposed to a claim for compensation under the undertaking by Sigma. These considerations support the view that everything that occurred up to 22 May 2009 is taken to have occurred for the purposes of the analysis.

362    Apart from this, as I have said, the notion that it is to be assumed contrary to the fact that the interlocutory injunction was refused let alone that it was refused on the ground that founded the Full Court’s orders is irreconcilable with the repeated emphasis in Air Express on the requirement that any compensation relate to the effect of the interlocutory orders, not the litigation. To assume otherwise would effectively remove the majority of the risk which the method patent presented to the generics. If the analysis proceeds on that basis, the inevitable tendency would be to compensate the generics for the existence of the method patent and the litigation which is impermissible.