FEDERAL COURT OF AUSTRALIA

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

File numbers:

VID 195 of 2009

NSD 596 of 2009

NSD 1124 of 2009

Judge:

JAGOT J

Date of judgment:

19 October 2018

Catchwords:

PATENTS – interlocutory injunctions – undertakings as to damages – enforcement of undertakings – interlocutory injunctions wrongly granted – adverse effects of operation of interlocutory injunctions – losses of opportunity to supply – standard of proof – some loss proved on balance of probabilities – possibilities and probabilities of supply – supply under PBS and on private market – losses reasonably foreseeable – direct and indirect losses – remoteness of damage – illegality of hypothetical profits – abuse of process – assessment of loss – discretionary considerations

DAMAGES – interlocutory injunctions – undertakings as to damages – enforcement of undertakings – assessment of loss

Legislation:

Evidence Act 1995 (Cth) ss 81, 87

Federal Court of Australia Act 1976 (Cth) ss 4, 51A

Federal Court Rules 2011 (Cth) rr 39.06

National Health Act 1953 (Cth) ss 84, 85, 85AD, 98B, 99, 99ACI, 99ADB, 99AEB, 99AED, 99AEG, 99AEH, 99AEI National Health (Pharmaceutical Benefit) Regulations 1960 (Cth) reg 10A, 37, 37D

Patents Act 1990 (Cth) ss 13, 128, 138

Therapeutic Goods Act 1989 (Cth) ss 3, 9A, 9D, 19B, 19D, 20, 23, 25, 26, 26C, 28, 30, 31A, 41JD, 42E

Therapeutic Goods Legislation Amendments (Copyright) Act 2011 (Cth) ss 25AA, 44B

Trade Practices Act 1974 (Cth) s 82

Therapeutic Goods Regulations 1990 (Cth) reg 9A

Cases cited:

Abbey Forwarding Ltd (in liq) v HM Revenue & Customs [2015] EWHC 225 (Ch); [2015] Bus LR 882

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

Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310

Asden Developments Pty Ltd (in liq) v Dinoris (No 3) [2016] FCA 788

AstraZeneca AB v KRKA dd Novo Mesto [2015] EWCA Civ 484

Badenach v Calvert [2016] HCA 18; (2016) 257 CLR 440

Barnes v Forty Two International Pty Ltd [2014] FCAFC 152; (2014) 316 ALR 408

Barratt Manchester Ltd v Bolton Metropolitan Borough Council [1998] 1 All ER 1

Batistatos v Newcastle City Council [2006] HCA 27; (2006) 226 CLR 256

Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618

CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301

Chaplin v Hicks [1911] 2 KB 786

Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-Operative Assurance Co of Australia Ltd [1931] HCA 53; (1931) 46 CLR 41

Columbia Pictures Industries Inc v Robinson [1987] Ch 38; [1986] 3 WLR 542

Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

Commonwealth v SCI Operations Pty Limited [1998] HCA 20; (1998) 192 CLR 285

Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [No 5] [2012] WASC 382; (2012) 92 ACSR 1

Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1

Coshott v Principal Strategic Options Pty Ltd [2004] FCAFC 50

CT Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd [1994] 2 Lloyd’s Rep 567

De Mattos v Gibson (1860) 1 J & H 79

Elsinora Global Ltd v Deputy Commissioner of Taxation [2006] FCAFC 156; (2006) 155 FCR 413

Envirotech Australia Pty Ltd v Enviroclear Co Inc (1987) 10 IPR 657

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

Ex parte Hall; In re Wood (1883) 23 Ch D 644

Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473

Fink v Fink [1946] HCA 54; (1946) 74 CLR 127

Fitzgerald v FJ Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215

Gates v Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1

Graham v Campbell (1878) 7 Ch D 490

Griffith v Blake (1884) 27 Ch D 474

H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795

Hui v Lane [2003] SASC 401

Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125

James v Canadian Trust of the Church of Latter Day Saints [1998] OJ No 3924; (1998) 165 DLR (4th) 227

Jeffree v National Companies & Securities Commission (1989) 15 ACLR 217

Kinsela v Russell Kinsela Pty Ltd (In liq) (1986) 4 NSWLR 722

Les Laboratoires Servier v Apotex Inc [2008] EWHC 2347 (Ch); [2009] FSR 220

Les Laboratoires Servier v Apotex Inc [2014] UKSC 55; [2015] 1 AC 430

Lewis (as liquidator of Doran Constructions Pty Ltd) v Doran [2005] NSWCA 243; (2005) 219 ALR 555

Love v Thwaites (No 4) [2012] VSC 521

Love v Thwaites [2014] VSCA 56

Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 135

Malec v J C Hutton Pty Limited [1990] HCA 20; (1990) 169 CLR 638

Metwally v University of Wollongong [1985] HCA 28; (1985) 60 ALR 68

National Australia Bank v Bond Brewing Holdings Ltd [1991] 1 VR 386

Nicholson v Permakraft (NZ) Ltd (in liq) [1985] 1 NZLR 242

Norris v Blake (No 2) (1997) 41 NSWLR 49

Norwest Refrigeration Services Pty Ltd v Rain Dawes (WA) Pty Ltd [1984] HCA 59; (1984) 157 CLR 149

Otzen v Beabout [1947] HCA 49; (1947) 75 CLR 116

Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589

Principal Strategic Options Pty Ltd v Coshott [2003] FCA 736

R v Portus, Ex parte Federated Clerks Union of Australia [1949] HCA 53; (1949) 79 CLR 428

Re an Arbitration between Pemberton and Cooper (1912) 107 LT 716

Red Bull Australia Pty Limited v Sydneywide Distributors Pty Limited t/as Sydneywide Bottlers Australia [2001] FCA 1750

Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2009] FCA 595; (2009) 81 IPR 339

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2010] FCA 1211; (2010) 88 IPR 459

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; (2010) 88 IPR 633

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2010] FCA 1258

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2011] FCAFC 132; (2011) 119 IPR 194

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 3) [2011] FCAFC 165

Smith v Day (1882) 21 Ch D 421

Specsavers Pty Ltd v The Optical Superstore Pty Ltd (No 3) [2012] FCA 504; (2012) 290 ALR 263

State Bank of New South Wales v Commissioner of Taxation (1995) 62 FCR 371

State Bank of New South Wales v Commonwealth Savings Bank of Australia [1984] HCA 41; (1984) 154 CLR 579

Sunburst Properties Pty Ltd (In Liq) v Agwater Pty Ltd & Ors [2005] SASC 335

Sykes v Midland Bank Executor & Trustee Co Ltd [1971] 1 QB 113

Tabet v Gett [2010] HCA 12; (2010) 240 CLR 537

Tomlinson v Ramsey Food Processing [2015] HCA 28; (2015) 256 CLR 507

Tranquility Pools & Spas Pty Limited v Huntsman Chemical Company Australia Pty Limited [2011] NSWSC 75

Watson v Foxman (1995) 49 NSWLR 315

Warner-Lambert Company LLC v Apotex Pty Limited [2017] FCAFC 58; (2017) 249 FCR 17

Warner-Lambert Company LLC v Apotex Pty Limited (No 2) [2018] FCAFC 26; (2018) 129 IPR 205

Winkworth v Edward Baron Development Co Ltd [1987] 1 All ER 114

Date of hearing:

4 June 2018 – 13 July 2018

Date of last submissions:

2 October 2018

Registry:

New South Wales

Division:

General Division

National Practice Area:

Intellectual Property

Sub-area:

Patents and associated Statutes

Category:

Catchwords

Number of paragraphs:

1337

Counsel for Sigma Pharmaceuticals (Australia) Pty Ltd:

D Shavin QC with H M J Rofe QC and J J Hutton

Solicitor for Sigma Pharmaceuticals (Australia) Pty Ltd:

King & Wood Mallesons

Counsel for Wyeth:

A J L Bannon SC with S Lloyd SC, C Dimitriadis SC, S J Free, J S Cooke and S Fitzpatrick

Solicitor for Wyeth:

DLA Piper Australia

Counsel for Alphapharm Pty Ltd:

R P L Lancaster SC with P W Flynn

Solicitor for Alphapharm Pty Ltd:

King & Wood Mallesons

Counsel for Generic Health Pty Ltd:

R A Dick SC with D Barnett

Solicitor for Generic Health Pty Ltd:

King & Wood Mallesons

Counsel for Pharmathen S.A:

M Darke SC with F Ashworth

Solicitor for Pharmathen S.A:

Corrs Chambers Westgarth

Counsel for Alembic Pharmaceuticals Limited:

A B D Fox

Solicitor for Alembic Pharmaceuticals Limited:

Bird & Bird

Counsel for the Commonwealth:

P J Brereton SC with B R Kremer and P M Knowles

Solicitor for the Commonwealth:

Corrs Chambers Westgarth

ORDERS

VID 195 of 2009

BETWEEN:

SIGMA PHARMACEUTICALS (AUSTRALIA) PTY LTD (ACN 004 118 594)

First Applicant

AND:

WYETH

Respondent

AND BETWEEN:

WYETH (and another named in the Schedule)

First Cross-Claimant

AND:

SIGMA PHARMACEUTICALS (AUSTRALIA) PTY LTD (ACN 004 118 594) (and another named in the Schedule)

First Cross-Respondent

IN THE INTERLOCUTORY APPLICATION:

BETWEEN:

SIGMA PHARMACEUTICALS (AUSTRALIA) PTY LTD (ACN 004 118 594)

First Applicant

GENERIC HEALTH PTY LTD (ACN 110 617 859)

Second Applicant

ALEMBIC PHARMACEUTICALS LTD (and others named in the Schedule)

Third Applicant

AND:

WYETH

First Respondent

WYETH AUSTRALIA PTY LTD (ACN 000 296 211)

Second Respondent

JUDGE:

JAGOT J

DATE OF ORDER:

19 October 2018

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

NSD 596 of 2009

BETWEEN:

ALPHAPHARM PTY LTD (ACN 002 359 739)

Applicant

AND:

WYETH

First Respondent

WYETH AUSTRALIA PTY LTD (ACN 000 296 211)

Second Respondent

AND BETWEEN:

WYETH (and another named in the Schedule)

First Cross-Claimant

AND:

ALPHAPHARM PTY LIMITED (ACN 002 359 739)

Cross-Respondent

IN THE INTERLOCUTORY APPLICATION:

BETWEEN:

ALPHAPHARM PTY LTD (ACN 002 359 739)

First Applicant

GENERIC HEALTH PTY LTD (ACN 110 617 859)

Second Applicant

PHARMATHEN S.A.

Third Applicant

AND:

WYETH

First Respondent

WYETH AUSTRALIA PTY LTD (ACN 000 296 211)

Second Respondent

JUDGE:

JAGOT J

DATE OF ORDER:

19 OCTOBER 2018

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

NSD 1124 of 2009

BETWEEN:

GENERIC HEALTH PTY LTD (ACN 110 617 859)

First Applicant

AND:

WYETH

Respondent

AND BETWEEN:

WYETH (and another named in the Schedule)

First Cross-Claimant

AND:

GENERIC HEALTH PTY LTD (ACN 110 617 859)

Cross-Respondent

IN THE INTERLOCUTORY APPLICATION:

BETWEEN:

GENERIC HEALTH PTY LTD (ACN 110 617 859)

First Applicant

ALPHAPHARM PTY LTD (ACN 002 359 739)

Second Applicant

PHARMATHEN S.A.

Third Applicant

AND:

WYETH

First Respondent

WYETH AUSTRALIA PTY LTD (ACN 000 296 211)

Second Respondent

JUDGE:

JAGOT J

DATE OF ORDER:

19 OCTOBER 2018

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:

1    The claims

[1]

2    Summary of conclusions

[4]

3    Abbreviations, basic concepts and people

[29]

4    Basic facts

[31]

4.1    ARTG registration

[32]

4.2    The PBS scheme

[48]

4.3    Efexor-XR

[67]

4.4    Evelexa XR

[72]

4.5    Enlafax-XR

[77]

4.6    Generic Health venlafaxine

[82]

4.7    Other events

[87]

4.8    The parties

[104]

4.8.1    Wyeth

[104]

4.8.2    Sigma

[105]

4.8.3    Alphapharm

[111]

4.8.4    Generic Health

[115]

4.8.5    Pharmathen

[116]

4.8.6    Alembic

[117]

5    Principles relating to the undertakings

[119]

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

[152]

7    Principles relating to proof of loss by the manufacturers/suppliers

[206]

8    Coherence of the above approaches

[214]

9    Remoteness of damage

[217]

10    Adverse effect of the interlocutory orders

[229]

11    Interlocutory injunctions not wrongly granted?

[234]

12    The effect of the final orders

[238]

12.1    Facts and contentions

[238]

12.2    Discussion

[242]

13    Some further matters relating to proof

[273]

14    The generics’ preclusion arguments

[287]

14.1    Wyeth’s contentions said to be precluded

[287]

14.2    The copyright issue

[296]

14.3    Supply by the generics

[317]

14.4    The s 19D issue

[331]

14.5    Conclusions

[333]

15    Sigma’s case

[334]

15.1    Sigma’s claim

[334]

15.2    Some uncontroversial facts

[335]

15.3    The competing cases – preliminary points

[355]

15.4    Events between 6 March and 22 May 2009 (and the evidence of Mr de Alwis and Mr Ellis)

[373]

15.5    The effect of the interlocutory injunction on Sigma?

[445]

15.6    Further observations

[471]

15.7    Summary of interim conclusions - Sigma

[473]

16    The sale of Sigma

[474]

16.1    Facts and contentions

[474]

16.2    Discussion

[491]

16.3    Conclusions

[503]

17    Alphapharm’s case

[504]

17.1    Alphapharm

[504]

17.2    Alphapharm’s claims

[505]

17.3    Mr Hurley

[509]

17.4    Evaluation of the probabilities and possibilities

[548]

17.5    Summary of interim conclusions – Alphapharm

[644]

17.6    Value of destroyed products

[645]

18    Generic Health’s case

[648]

18.1    Generic Health’s claims

[648]

18.2    Some uncontroversial facts

[652]

18.3    The competing cases – preliminary points

[661]

18.4    Mr Upiter

[667]

18.5    Generic Health’s own products

[679]

18.6    Generic Health’s supply to Sigma

[796]

18.7    Generic Health’s supply to other generics

[797]

18.8    Summary of interim conclusions

[798]

19    Other generics

[799]

19.1    The competing claims about other generics

[799]

19.2    Evidence

[802]

19.3    Discussion

[806]

19.4    Summary of interim conclusions – other generics

[821]

20    Alembic’s case

[822]

20.1    Alembic’s claim

[822]

20.2    Alembic - facts

[824]

20.3    Application of principles to Alembic’s case

[832]

20.4    Wyeth’s other answers to Alembic’s claims

[838]

20.5    Summary of interim conclusions – Alembic

[846]

21    Pharmathen’s case

[847]

21.1    Pharmathen’s claim

[847]

21.2    Pharmathen − facts

[848]

21.2.1    General

[848]

21.2.2    Agreements with Alphapharm

[851]

21.2.3    Agreements with Generic Health

[854]

21.3    Application of principles to Pharmathen’s case

[857]

21.4    Wyeth’s other answers to Pharmathen’s claims

[865]

21.5    Summary of interim conclusions – Pharmathen

[869]

22    Wyeth’s case

[870]

22.1    Wyeth’s contentions

[870]

22.2    The copyright issue

[874]

22.2.1    PIs and CMIs

[874]

22.2.2    Wyeth’s evidence

[883]

22.2.3    The problems with Wyeth’s evidence

[894]

22.2.4    Other problems for Wyeth about copyright

[901]

22.3    Wyeth’s generic defence strategy

[907]

22.4    The PBS listing issue

[934]

22.4.1    Posited factual context

[934]

22.4.2    Discussion

[938]

22.5    The s 19D issue

[980]

22.5.1    The statutory provisions, facts and contentions

[980]

22.5.2    Discussion

[992]

22.5.3    Conclusions

[1019]

22.6    Delay

[1020]

22.7    Discretion overall

[1030]

22.8    Conclusions

[1033]

23    Overview of approach to market shares

[1038]

24    Contemporaneous evidence relevant to generic market shares

[1041]

25    The econometric evidence

[1063]

25.1    Overview of the econometric evidence

[1063]

25.2    Discussion

[1116]

26    The industry evidence

[1155]

26.1    Ms McTavish and Mr Dick

[1155]

26.2    Mr Heine

[1199]

27    The accounting evidence

[1230]

27.1    General approach of accountants

[1230]

27.2    Supply prices to generics

[1232]

27.2.1    The approaches of Mr Samuel and Mr Meredith

[1232]

27.2.2    Disputes between generics and manufacturers/suppliers

[1240]

27.3    Mr Samuel’s alternatives 1 and 2

[1259]

27.4    Additional discounting for risk

[1268]

27.5    Residual value analysis

[1276]

28    Pharmathen

[1279]

29    The interest issue

[1282]

30    Calculations of loss based on the probabilities and possibilities

[1316]

31    Costs

[1332]

32    Conclusions

[1336]

SCHEDULE 1

SCHEDULE 2

SCHEDULE 3

SCHEDULE 4

SCHEDULE 5

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 originators 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.

363    It is because the notion of the Court refusing Wyeth’s application for the interlocutory injunction gives rise to the question of the grounds of refusal that the better course is to adopt Wyeth’s approach and assume no more than that on 22 May 2009, contrary to the fact, Wyeth did not prosecute its application for interlocutory relief. I accept that this leaves unanswered the question of why Wyeth did not do so. In my view, however, this is exactly the position the generics would have been in had Wyeth not prosecuted its application for interlocutory relief on 22 May 2009. I say generics rather than Sigma here because it is clear that within a relatively short amount of time the generics all knew what was happening about the method patent litigation.

364    If Wyeth had not sought the interlocutory injunction on 22 May 2009 Wyeth would not have been obliged to explain itself. The mere fact of Wyeth not prosecuting its interlocutory application would have given the generics no clue as to why Wyeth had so decided. One thing that cannot be doubted is that Wyeth would not have said or done anything which might have given the generics any comfort. If it had not prosecuted its interlocutory application on 22 May 2009 Wyeth would have made it clear, as it otherwise had always maintained, that in its view the method patent was valid and it intended to enforce its rights. The generics all had legal advice. The lawyers all would know that there are a multitude of reasons why a party might not seek interlocutory relief. At the least they would know that by not seeking interlocutory relief Wyeth was not waiving its rights to claim that the method patent was being infringed and seek relief in the form of final injunctions and for damages.

365    The difficulty with the contrary approach of hypothesising that the Court refused Wyeth’s application is exposed in some of the evidence. For example, Mr de Alwis said in an affidavit that he had been asked “what Sigma would have done if the Federal Court refused to grant an interlocutory injunction against Sigma”. Mr de Alwis said:

If the Federal Court refused to grant an interlocutory injunction against Sigma and Sigma was free to launch both on the private and PBS markets, I would have perceived this as a very strong indication from the Judge that he considered the Patent was invalid and that Sigma had excellent prospects of revoking the Patent in the substantive proceeding. This is because I understood that the balance of convenience was weighted strongly in favour of the originators due to the introduction of the mandatory price reduction in 2005, and that since then, courts had routinely granted interlocutory injunctions in favour of originators.

366    In other words, Mr de Alwis has assumed a judgment which disclosed that Sundberg J considered the method patent to be invalid so that Sigma had excellent prospects of revoking the patent. This hypothesis would have the impermissible effect of removing the existence of the method patent and the litigation from the analysis. This also exposes the artificiality of the exercise the witnesses were asked to undertake. Presumably because the question lacks context (why was the application refused) Mr de Alwis has taken it upon himself to supply the most favourable context he can conceive of which was that Sundberg J concluded that there was such a strong case the method patent was invalid interlocutory relief had to be refused. This confirms my view that for this and many other reasons inferences about commercially rational behaviour from objective circumstances are a far better guide to the probabilities and possibilities of what might have occurred but for the interlocutory injunctions.

367    The hypothetical starting point I prefer is that on 22 May 2009 Wyeth did not prosecute its application for interlocutory relief. The method patent existed. The litigation existed. Everything that had occurred up until 22 May 2009 had occurred. The generics could surmise as much as they might wish as to why Wyeth did not prosecute its interlocutory application on 22 May 2009 but any such surmise would be in the context of the fact that Sigma had filed its application for revocation of the method patent on 1 April 2009, Wyeth had filed its cross-claim including an application for an interlocutory injunction on 1 May 2009 and on the scheduled hearing of the interlocutory injunction application on 22 May 2009 Wyeth did not prosecute its interlocutory application. Wyeth’s cross-claim against Sigma for infringement and final relief including an injunction and damages otherwise remained.

368    It is necessary to consider the events leading up to 22 May 2009 to test Wyeth’s proposition that Sigma decided to withdraw its application to list its products on the PBS because it feared triggering the 12.5% price reduction and/or because if as Sigma contended it was attempting to avoid a complete interlocutory restraint on supply and was thus prepared to give up PBS supply to increase its chance of private market supply then Sigma would have realised on 22 May 2009 that its strategy had worked and would not thereafter have risked prompting a further application for interlocutory relief by changing its mind and again seeking PBS listing. To the extent Wyeth’s submissions rely on Sigma’s attempts to avoid an interlocutory injunction it would be wrong to assume that Wyeth in not prosecuting its interlocutory application did anything more than not prosecute its interlocutory application. Wyeth’s submissions in this regard appear to assume that it would be common ground between it and Sigma that it was not prosecuting its interlocutory application because Wyeth had accepted Sigma’s offer not to list its products on the PBS and to confine its launch to the private market only.

369    The first point is that this is part of a hypothetical analysis. In fact, Wyeth did not accept Sigma’s proposal and was not prepared to risk Sigma being permitted to supply on the private market. The second point is that once the point at which the hypothetical analysis starts there is no better reason to assume in Wyeth’s favour that it did not seek interlocutory relief because it was prepared to accept Sigma’s offer than there is to assume that Wyeth did not seek such relief because it considered the method patent to be weak and likely to be declared invalid. Both assumptions skew the analysis in favour of one party or the other whereas, in my view, the better starting point is as neutral as possible. Wyeth had not accepted Sigma’s offer. Thus Wyeth is not to be assumed at the start of the hypothetical to have communicated that it was not prosecuting its application for interlocutory relief because it was content for Sigma not to PBS list its products and instead supply them on the private market. Wyeth was not so content. Nor is to be assumed that Wyeth communicated any concern about the validity of the method patent. It simply did not prosecute its application for interlocutory relief on the day it was listed.

370    The problem with Wyeth’s approach is that it assumes contrary to the fact that it had accepted Sigma’s offer not to list on the PBS and to confine its supply to the private market pending the final hearing. The terms of this offer, specifically whether it was conditional on a cross-undertaking from Wyeth as to damages, were in dispute. But irrespective of any confusion about the terms, Wyeth did not accept the offer. Wyeth’s approach then assumes that, in the hypothetical analysis, it said that it was not seeking interlocutory relief because it accepted Sigma’s offer not to list on the PBS. The path of potentialities then opens up. Would Sigma have insisted that its offer was conditional on a cross-undertaking from Wyeth? If so, we have a hypothetical cross-undertaking under which Wyeth would be exposed to the same claims as Sigma now brings. If not, why not? Whatever the reason, the hypothetical would be skewed immediately in Wyeth’s favour.

371    From the as neutral as possible starting point I consider appropriate, the following matters are reasonably clear. Having not accepted Sigma’s offer and not prosecuted its application for interlocutory relief for alleged infringement of the method patent on the day it was listed for hearing, Wyeth and Sigma would both assume that Wyeth would not again apply for interlocutory relief based on the method patent. Wyeth had had its chance to do so and had not taken it. They would operate on the basis that at least insofar as the method patent was concerned, the litigation would run its course to final hearing. Sigma would make its decisions about its products in the context of the existence of the method patent and the litigation. Wyeth would make its decisions about what it should do on the basis that it had decided not to prosecute its application for interlocutory relief based on the method patent when it had the opportunity to do so.

372    For these reasons I consider much of the debate about the terms of Sigma’s offer not to list its products on the PBS immaterial. No aspect of Sigma’s conduct between 6 March and 22 May 2009 irrevocably bound it not to exercise the full range of rights which ARTG registration of its products gave it. This said, it is time to move to those events.

Events between 6 March and 22 May 2009 (and the evidence of Mr de Alwis and Mr Ellis)

373    To recap briefly, Sigma had placed its first order for its products from Generic Health on 4 September 2008 and was invoiced by Generic Health for that order on 24 October 2008. It placed its second order on 12 February 2009 and was invoiced for its second order on 23 February 2009.

374    The TGA advised Sigma that it has approved registration of Sigma’s products on the ARTG on 26 February 2009. On 27 February 2009 Sigma applied for PBS listing of its products. On 2 March 2009 Sigma informed the Department of Health that it wished to obtain PBS listing on 1 August 2009. Sigma’s products were registered on the ARTG on 5 March 2009. On 6 March 2009 Sigma informed the Department that it wished the Department to consider listing its products on the PBS before 1 August 2009. On 6 March 2009 Sigma also became aware of the method patent.

375    It may be assumed that the discovery of the method patent was a significant blow to Sigma. The Sigma group was under serious financial pressure by 2009. As Wyeth noted from the annual financial report of Sigma Pharmaceuticals Limited for the year ending 31 January 2010 the Sigma group had:

(a)    a loss of net profit before tax of $389 million (even taking into account $237 million raised by SPL through a capital raising in September 2009 to improve or secure its financial stability ) (pp. 3, 4);

(b)    the loss of net profit was primarily driven by an impairment of goodwill of $424 million. This was due to “a progressive deterioration in competitive conditions and a changing regulatory environment … [a]dditionally, the synergies expected from the merger of Sigma Pharmaceuticals Limited and Sigma Company Limited in 2005 have not been achieved… (p. 4)”.

376    For Sigma itself, referred to as the pharmaceuticals division, the report showed an EBIT (earnings before interest and tax) amount excluding a goodwill impairment of $59.8 million and a goodwill impairment of $184.4 million. The EBIT reflected Mr de Alwis’s criminal conduct in what would colloquially be described as “cooking the books” of Sigma Pharmaceuticals Limited (and having cooked them Mr de Alwis then lied to the auditors when asked about the falsifications).

377    Mr de Alwis, the CEO and a board member of Sigma Pharmaceuticals and managing director of Sigma in 2009, committed four offences to which he later pleaded guilty which Wyeth summarised as follows:

(a)    first charge: conduct in connection with the purchase of Livial and products and the accounting treatment thereof that resulted in the falsification of Sigma’s financial report for the half year ended 31 July 2009 in that Sigma’s revenue and income for that half year was overstated by $3,500,616.43 and inventories were overstated, contrary to section 1307(1) of the Corporations Act 2001 (Corporations Act);

(b)    second charge: conduct in connection with the purchase of Livial, Ozmep, Sozol and Clovix products and the accounting treatment thereof that resulted in the falsification of Sigma’s full year financial report for the financial year ended 31 January 2010, and that Sigma’s other revenue and income for that financial year was overstated by $15,500,616, inventories were overstated by $11,313,224, prepayments were overstated by $2 million, and total equity and profit after tax were overstated by $9,599,000, contrary to section 1307(1) of the Corporations Act;

(c)    third charge: giving information to PricewaterhouseCoopers, the auditor of SPL, which he knew was false or misleading in a material particular, or had omitted from it matters the omission of which rendered the information misleading in a material respect contrary to section 1309(1) of the Corporations Act;

(d)    fourth charge: giving information to the directors of SPL which he knew was false or misleading in a material particular, or had omitted from it matters the omission of which rendered the information misleading in a material respect, contrary to section 1309(1) of the Corporations Act.

378    There were seven directors on Sigma Pharmaceuticals’ board apart from Mr de Alwis who were given the false financial information by Mr de Alwis. In 2015 Mr de Alwis was convicted. As Wyeth recorded, “[i]n relation to the first charge, Mr de Alwis was sentenced to imprisonment for nine months; for the second charge he was sentenced to imprisonment for nine months; for the third charge he was sentenced to imprisonment for one year; and for the fourth charge he was sentenced to imprisonment for one year. He was, however, released on a recognisance release order with a good behaviour bond and payment of a pecuniary penalty of $25,000.

379    So we have Sigma under substantial financial pressure, a CEO who was falsifying the accounts to overstate revenues, Sigma anticipating making substantial money out of its generic venlafaxine products, and Sigma having ordered and paid about $3 million for its generic venlafaxine products from Generic Health (327,000 units) when it discovers the method patent. To this might be added that, as Mr de Alwis said in one of his affidavits from the interlocutory injunction proceeding in 2009, this stock had a two year shelf life. It does not take much to infer that threatened with an interlocutory injunction which if granted would preclude supply of any stock at least until final judgment at first instance, Sigma knew it was at serious risk of being stuck with $3 million worth of stock it could not sell and presumably ultimately would have to destroy. Mr de Alwis said this in his principal affidavit in 2009 as a reason against the grant of an interlocutory injunction. Against this, Sigma’s plans for launch were tied to expiry of the compound patent. Sigma was not intending to launch at risk of infringement and liability for damages when it made its plans. It was intending to launch without risk based on the expiry of the compound patent.

380    Wyeth emphasised that this reflected Sigma’s overall policy recorded in one of Sigma’s documents that:

Sigma’s policy and history is not to infringe any patents. R Beveridge stated the policy was launch generics as soon as possible legally. For example, Sigma and Arrow intend to go to market as soon as a relevant known patent has expired, engineer their products around other patents.

381    That this was Sigma’s policy may be accepted. But it would be wrong to assume that the policy automatically meant that Sigma would simply shelve its plans and do nothing for the eight years until the method patent expired (and Wyeth does not suggest this to be the case, as it accepted that Sigma would have continued with its private supply). Sigma did not do nothing. This is not unexpected. It was confronted with a difficult, perhaps unprecedented, situation. Whatever its general policy it could not take the same approach it did with the compound patent, simply to await is expiry, and it did not do so. Accordingly, this policy is of limited weight because it reflects a general approach only. The same applies to Mr Ellis’s evidence that Sigma’s policy was to launch when “it was legally free to do so or with negligible legal risk.” A general policy is one thing. Being confronted with unexpected and exceptional circumstances is another.

382    Sigma’s concern about being stuck with $3 million of stock it could not sell because of Wyeth obtaining an interlocutory injunction becomes immediately apparent. Mr Ellis contacted a solicitor and then emailed Mr de Alwis saying:

If we launch now Wyeth are likely to seek an injunction on the basis of this patent. The “advantage” of launching now (pre-PBS) is that they are less likely to get an injunction particularly as there appears to be reasonable grounds to mount an invalidity action and the 12.5 % has not been triggered. Once the 12.5 % is triggered it is most likely an injunction would be granted as this is currently irrevocable and not considered by the courts to be remedied by undertakings or guarantees. If we launch and were unsuccessful in a revocation action the worst case outcome would be all costs (approx. $1M each side) and damages/accounting of profits, significantly more than $3M (emphasis added).

383    In other words, Sigma was weighing the risk of costs and damages against the $3 million it had paid for stock. Mr Ellis confirmed in oral evidence that he had estimated Sigma’s exposure if it listed its products on the PBS and caused the 12.5% reduction in the price of Efexor-XR as in the order of in excess of $100 million (that is, he assumed Sigma was likely to be liable for this amount if the method patent was valid). This amount reflects a 12.5% price drop on Efexor-XR over the remaining eight years of the method patent on the basis Wyeth was selling around $110 million of Efexor-XR annually. Mr de Alwis, in contrast, agreed at one point that he was aware that the PBS listing could expose Sigma to a damages claim in excess of $100 million. Later, Mr de Alwis said “I don’t agree with the $100 million. If you are saying it’s what Sigma would have had to pay Wyeth, it may be correct. If you’re saying that’s the cost to Sigma, it’s completely wrong. And then there was this exchange:

And ..... eight times about $100 million plus market is causing a loss on that scenario – if you lose the revocation case, you have in excess of $100 million? In calculating what it would have cost the company, that is certainly one factor I would have taken into account. It wouldn’t have been 100 million; it would have been discounted back. I wouldn’t have paid for ..... million for eight years out. It would have been discounted back to today’s value. And I would have also offset against that the benefits that we would have gained as a result of launching Evelexa.

384    Sigma submitted that Mr de Alwis was not challenged about this evidence, but he was. The exchange continued:

You say discounted back to today’s date. When did you think a final hearing on damages would have been heard and determined? Whenever it was.

It could be five or six - - -? 2010 was mentioned.

Yes. Well, that would be just be the revocation suit, wouldn’t it? Yes. Well, it didn’t matter. The principal is still the same. It doesn’t matter the date.

So about five years down the track, you might have a damages – the damages hearing would be heard. Correct? Yes, but as I said, I would have offset that. I did offset against the potential payment the benefits that Sigma would have achieved, not just from the sale of Evelexa, which was significant, but from all the other benefits that we would have accrued as a result of being first to market with a blockbuster drug.

And where were the calculations of that you made? I certainly made them myself.

In your head? Well I don’t know that’s in my head. I’m sure it was – my mental arithmetic probably isn’t that up to speed, but I would have run pen on paper.

385    This is unconvincing evidence. It had the hallmarks of Mr de Alwis (who holds accounting and finance qualifications) attempting to claw back ground from an admission (Sigma would be exposed to in excess of $100 million in damages of the method patent was valid and Sigma listed on the PBS) he realised would weigh against his evidence that he would not have been deterred from PBS listing Sigma’s products. It is apparent that Mr de Alwis was attempting to convey that Wyeth’s potential loss over eight years would be assessed in 2010 or before the method patent expired and its loss would therefore be calculated on a net present value basis. If Mr de Alwis had actually done such a sophisticated exercise in 2009 and could now recall what he had done as he was suggesting then he would have known that the 2010 date was the date for hearing of the revocation and infringement claims. He would know that damages would be assessed at a later time if the method patent was valid and was infringed (and, in this regard, Sigma was effectively assuming its products did infringe the method patent, which was a proper assumption in the circumstances). He would know that whatever loss Wyeth would have suffered before judgment on damages would not be discounted back to the date of judgment and that only future losses would be discounted back. Holding accounting and finance qualifications, he also would have anticipated liability for interest. In my view, Mr Ellis’s evidence is far more likely to be reliable than that of Mr de Alwis in this regard. Accordingly, Sigma estimated that if it listed its products on the PBS and the method patent was valid it would be liable for damages to Wyeth in the excess of $100 million.

386    In these circumstances and given the $3 million it had paid for stock it is not unexpected that Sigma’s immediate focus was to ensure it could avoid an interlocutory injunction. Mr Ellis met with Griffith Hack on 10 March 2009. Mr Ellis sent Mr de Alwis a note about the meeting which recorded:

Will probably have to give an undertaking not to list on the PBS to avoid injunction being granted …

worst case, avoid injunction but loose [sic] revocation case – costs against us and damages or accounting of profit. If we are marketing as a private and case runs for 18 months and we gained 10% of the market this could be in the order of $15M.

387    For what it is worth, there is no suggestion that the undertaking would be conditioned on a cross-undertaking from Wyeth, which I find unsurprising because what was being proposed was a strategy to avoid an interlocutory injunction altogether on the basis that Sigma would be free to supply on the private market.

388    Griffith Hack’s file note of the same meeting also does not mention any cross-undertaking from Wyeth, which is consistent with the view that what was being devised was a strategy to avoid any interlocutory injunction by Sigma agreeing not to apply to list its products on the PBS and Wyeth agreeing not to try to restrain Sigma from supplying its products on the private market only. Otherwise the file note records what Sigma’s plans and expectations had been before it became aware of the method patent and notes, as Sigma submitted:

Gilbert + Tobin (G + T) were acting for Wyeth. “[copyright] issue on PI likely to be thrown in”. “[D]ifficult for Wyeth to get an int[erlocutory] inj[unction] in relation to the [copyright] issue” and it “should be fixed by spring session of Parliament”.

389    This confirms Sigma’s awareness of the copyright issue and that the issue, in any event, would not have had any effect on Sigma’s plans.

390    The note also recorded:

- don’t take orders

- earliest it might be is 4 weeks.

- need to know by 1 May re PBS listing.

391    In other words, until Sigma had decided what to do about PBS listing it should not take orders from pharmacists and it would not know Wyeth’s position for at least four weeks.

392    There can be no doubt from this and other evidence that Sigma believed that the only chance it had of avoiding being restrained altogether by an interlocutory injunction was not to have its products listed on the PBS. Sigma was thus never in fact called upon to consider if it would list its products on the PBS if no interlocutory injunction was sought on 22 May 2009.

393    Sigma’s fears of Wyeth seeking interlocutory relief were well-founded. On 12 March 2009 Gilbert & Tobin, Wyeth’s solicitors, wrote to Sigma saying that “Wyeth is concerned that the supply and use of the EVELEXA XR Products may infringe the [method patent] and in those circumstances it may have the right to obtain relief from the Federal Court in relation to such infringement”. As Sigma also noted:

On 19 March Sigma was served with various affidavits filed by the Wyeth Parties in a preliminary discovery application brought by the Wyeth Parties against the TGA in respect of potential infringement of the Patent. Those affidavits included definitive statements about the Wyeth Parties’ intentions to seek an interlocutory injunction to restrain asserted infringement of the Patent.

394    Another Griffith Hack file note of 20 March 2009 says “if have to give undertaking not to list on PBS”. This means if Sigma had to undertake not to seek PBS listing in order to avoid an interlocutory injunction, it would do so. Beyond this, the note is neutral. It does not mean, as Wyeth would propose, that this also would have been Sigma’s position if Wyeth had not prosecuted its application on 22 May 2009. It also does not mean that Sigma had decided to proceed with its PBS listing unless restrained by an interlocutory injunction. The note is recording only a strategy for the purpose of trying to avoid an interlocutory injunction. As Sigma said, what can be inferred is that PBS listing remained “on the table”. The note also records “Sigma needs advice on prospects of success to decide what to do”. As Sigma said, this is inherently plausible although I would not go so far as to say the advice “drove its decision-making”. But the advice was in fact an important factor and, it may be inferred, legal advice would remain an important factor after 22 May 2009.

395    The legal advice from Griffith Hack was received on 30 March 2009. Sigma stressed those parts of the advice which recorded that an “interlocutory injunction is expected to be filed by Wyeth shortly regarding importation and supply in Australia by Sigma of capsules containing venlafaxine hydrochloride” and:

It appears likely that Sigma products would infringe at [sic] some of the granted claims … However, in view of the strong grounds for invalidity of these claims, the difficulty of proving infringement of at least some of these results based claims and non-infringement of at least some of the claims, several important ‘balance of convenience’ factors weight in Sigma’s favour.

396    Wyeth emphasised that this advice as to “strong grounds for invalidity of these claims” related to the context of an interlocutory injunction and not final relief, and referred to Mr Ellis’s evidence that he understood this to be so. Consistent with my reasoning above about the likely unreliability of evidence about what a person would have done or recommended nine years ago, I am also of the view that evidence of this kind is inherently unreliable even if it is on one view contrary to the interests of the party calling the witness. Mr Ellis seems a paradigm example of this unreliability despite my view that he was giving honest evidence as carefully as he could. For example, Mr Ellis struck me as a cautious man. In his affidavit he gave evidence including the following:

(1)    “I also recall that in March or April 2009 I undertook rough calculations as to what Sigma’s damages exposure was likely be if it launched on the private market and also listed on the PBS so as to trigger the mandatory price drop. I recall that these calculations took into account Wyeth’s lost profits arising from the mandatory price drop and the sales lost to Sigma, as well as the profits that Sigma would make. I cannot now recall the figures that I calculated but I recall that they were significant”.

(2)    “Although I assessed that Sigma’s damages exposure if it listed on the PBS and triggered the mandatory price drop would be significant, I considered that Sigma’s risk of having to pay out damages was low given that the prospects of revoking the ‘586 Patent were high… On that basis, I believed that Sigma should proceed to launch EVELEXA XR at risk and list on the PBS if it could avoid an interlocutory injunction and I made my view known to Mr de Alwis”.

(3)    “I also understood that if Wyeth sought an interlocutory injunction the prospects of Sigma being able to avoid the anticipated interlocutory injunction without undertaking not to list on the PBS (in exchange for the usual undertaking) were slim. Accordingly, I thought it was sensible for Sigma to take the approach of planning to launch in the private market first and then list on the PBS only if, and when, it was free to do so. I understood that to be the approach that was being taken throughout April and May 2009”.

(4)    “If Wyeth had not sought an interlocutory injunction, I expect that I would have taken any remaining necessary steps to assist Sigma to continue with its original plan, which was to launch EVELEXA XR privately in May 2009 and list on the PBS on 1 August 2009. I would have discussed the commercial and legal risks with Mr Condon, Ms Morgan and Mr de Alwis, and taken direction from Mr de Alwis. At that time, I considered that Sigma had high prospects of revoking the patent and therefore that the risk of having to pay damages was low. If Wyeth had not sought an interlocutory injunction, I would have considered that it was likely that Wyeth had obtained advice that the ‘586 Patent may be invalid and that it would be unlikely to succeed in an infringement action against Sigma. At that time, the ultimate decision would have been made by Mr de Alwis”.

397    In his oral evidence, Mr Ellis, for example, said that:

I formed the view fairly early on that we had a high chance of success, and that continued to improve – my confidence continued to improve as we became aware and were advised by our both legal and technical experts.

I can vividly recall my confidence building and certainly being comfortable with the evolution that happened in terms of our confidence of being successful.

I pushed him [Sigma’s lawyer] further and I said what do you feel our chances of success are and he said 80 per cent.

I think he said it was “my best estimate was 80 per cent”.

I interpreted it to be very low risk, that we had a high probability of winning… I saw that as being a low risk.

The 80 per cent, what was that referring to? Revocation of the patent.

In the final hearing? Yes.

And you give some evidence to say the decision as to whether or not to PBS list after interlocutory hearing or after May you say was ultimately a decision for Mr De Alwis? It was.

But you know that he would have had to go to the board, wouldn’t you? He should have gone to the board.

He should have gone to the board. He would have needed to go to the board, as you understood it, to seek an approval in relation to taking a risk of more than $100 million? That’s what should – in that scenario, that’s what should happen.

398    Thus, apart from Mr Ellis having said PBS listing was Mr de Alwis’s decision when in fact he believed Mr de Alwis should have gone to the board, the overall impression from Mr Ellis’s evidence is that he was confident that Sigma would ultimately be successful, believed the risk of Sigma having to pay Wyeth damages of over $100 million was low, and thus would done all he could to facilitate PBS listing and supply under the PBS if not for the Sigma interlocutory injunction. Yet there was one piece of evidence which Mr de Alwis gave about Mr Ellis which I accept. Mr de Alwis said:

I can recall a number of discussions we had internally with Mr Ellis, myself and Ms Morgan. I got to a stage where I felt that Mr Ellis, in particular, was – was seeking to take an easy option or saying let’s not launch this, because we avoid all this hassle.

Now, you said today you felt Mr Ellis, in particular, was seeking to take an easy option or saying, “Let’s not launch this because we avoid all this hassle.” Do you remember saying that this morning? Yes.

His view was you shouldn’t launch at all, wasn’t it? Sorry, his view was

His view was you shouldn’t launch at all private or otherwise? Yes. That was his view, yes, which I disagreed with.

And that was his view, having heard whatever the lawyers had said to him, as you understood it? Well, I know it was his view. But, at the end of the day, it was not a decision he was going to make.

That was his view because he thought it was too risky, as you understood it? He didn’t tell me the reasons why. He just thought that it was, you know – my perception, rightly or wrongly, was that he was trying to find an easier course of action than go through what we had to go through in order to launch.

399    As I have said, I formed the view that Mr Ellis was an honest and careful witness. But his evidence about what he believed at the time and would have done is irreconcilable with Mr de Alwis’s evidence about what Mr Ellis did do and say at the time. I do not consider that this part of Mr de Alwis’s evidence was false. First, irrespective of the fact that he was no longer employed by Sigma, Mr de Alwis was not inclined to concede any point against his perception of Sigma’s interest. Second, the evidence accords with the overall impression which I formed of Mr Ellis as a cautious man. The best explanation for the inconsistency, in my view, is that Mr Ellis’s beliefs about what he thought at the time have been largely shaped by hindsight, particularly the knowledge that Sigma was ultimately successful. The entire period between 2009 (the period to which Mr Ellis’s evidence relates) and 2011 (when Sigma was successful in the Full Court) is so long ago that even the evidence of an honest and careful witness like Mr Ellis about what he believed and said at the time is unreliable. When the task is to go further and say what the witness would have done eliminating the effect of hindsight, the task is almost impossible even for a witness like Mr Ellis.

400    I would not describe Sigma’s other main witness about what he would have done but for the interlocutory injunction, Mr de Alwis, as a careful witness and, perhaps, not even an honest witness. Apart from the matters discussed above, including his proven willingness to lie to the face of Sigma’s auditors about his criminal conduct, I note the following which I consider support the inference that Mr de Alwis was not a credible witness when it came to any contested issue (or issue he perceived might be contested):

(1)    Despite the obvious importance of Sigma not being stuck holding $3 million of stock it could not sell, this does not feature as one of Mr de Alwis’s key concerns in his 2015 affidavit.

(2)    In his 2015 affidavit Mr de Alwis said that in mid-April 2009 he believed the strategy of not listing on the PBS to avoid an interlocutory injunction was a good approach because, amongst other things, if the Court ultimately found in favour of Sigma it would be able to list its products on the PBS and recoup its losses from Wyeth for being kept out of the PBS market when, in fact, Mr de Alwis had been advised in conference with senior counsel that it was unlikely that such recoupment would be possible if Sigma voluntarily undertook not to seek PBS listing to enable it to launch at least on the private market.

(3)    Although he said in his 2015 affidavit that he would instruct Mr Ellis and Ms Morgan to obtain legal advice about Sigma’s prospects of success in the revocation proceedings and the damages which Sigma would face if unsuccessful for the purpose of presenting that information to the board, he appears in his affidavit to have assumed that irrespective of the exposure he would have recommended a launch on the PBS at risk and that the board would have treated the decision as an “operational” one for him, because the board was not experienced with generics and had never acted contrary to is recommendation. This lack of apparent care about what the exposure might be is irreconcilable with the contemporaneous evidence where Mr de Alwis was concerned to limit Sigma’s risk even on a private market launch.

(4)    In any event, as noted, Mr de Alwis’s evidence about what he would have done assumed he would have received a judgment from the Federal Court effectively advising him that the method patent was so likely to be invalid, that interlocutory relief should not be granted. For example, Mr de Alwis said:

In presenting the decision to list EVELEXA XR on the PBS, I would have put forward to the Board the ‘best’ and ‘worst’ case scenarios, with the worst case scenario including the potential damages which Sigma would be required to pay if Sigma was not ultimately successful in revoking the Patent. I would have emphasised that the risk of the worst case scenario eventuating was extremely low, given that the Court's refusal to grant an interlocutory injunction sent a very clear message that the Patent was likely to be invalid, a message which Arrow Group had also consistently communicated to Sigma. I also would have emphasised the importance of obtaining a first-mover advantage, keeping Sigma's promises to pharmacies to list on the PBS if an injunction against Sigma were not granted and maintaining the morale of Sigma's sales representatives.

I believe there was a high probability that the Board would have accepted without objection my proposed course of action to launch EVELEXA XR at risk.

This evidence cannot be given weight because it assumes a fact (a Federal Court judgment in 2009 to the effect the method patent is invalid) which cannot be assumed for the purpose of the required analysis. Having expressed these views in 2015, Mr de Alwis was unlikely to alter his views when confronted with different assumptions.

(5)    Mr de Alwis repeated his views about most of the board being “relatively new” to generics but Sigma had taken over Arrow’s substantial generics portfolio in December 2005. It is also apparent that a decision to launch at risk on the basis of PBS listing and supply, in Sigma’s mind, would have exposed it to an extremely large claim for damages. For a company with a policy and history of not risking patent infringement, which had planned its launch to coincide with the expiry of the compound patent, the idea that the decision would have been that of Mr de Alwis or that the directors of a publicly listed company would not bring their own independent scrutiny to bear is untenable. As Wyeth submitted:

Mr de Alwis would have gone to the SPL’s Board so that it could determine whether or not it was willing for SPAL to launch on the PBS market at risk. The evidence is clear that the approval of the Board was required: “I had to prepare a paper to the board where I justified my decision”. Whether Board approval is characterised as a condition precedent or a condition subsequent to a proposed course of action or “decision” is irrelevant to the substantive requirement of Board approval.

(6)    Despite my view that Mr de Alwis must have known at the time at least that Sigma had decided to not proceed with PBS listing whether or not Wyeth gave a cross-undertaking, Mr de Alwis was prepared to describe contemporaneous Sigma documents to that effect as a mistake or wrong in order to shore up the evidence he had given that Wyeth giving a cross-undertaking was always fundamental to Sigma’s decision. The reality is that Sigma would hardly have withdrawn its PBS listing application as Mr de Alwis had instructed be done on or about 31 March 2009 when he decided the launch should be confined to the private market without Wyeth having given a cross-undertaking (as was the case) if the cross-undertaking was seen to be necessary (in contrast to desirable once it had been conceived of). Yet Mr De Alwis was determined to stick to his version of events as recreated in 2015, saying (contrary to the fact) that “our offer to Wyeth was always conditional to getting a cross-undertaking from them” and this requirement appeared “in every single letter” (when it did not).

(7)    Mr de Alwis’s attempt to explain his comment recorded in one of the file notes of the 31 March 2009 conference about keeping the discounts small to limit Sigma’s exposure as not reflecting his contemporaneous concern about the amount of risk he was prepared to expose Sigma to, but instead being about his “desire to minimise the cost to the company in the event that we had to pay damages”, involves a distinction without a difference and discloses Mr de Alwis’s unwillingness to concede what must have been obvious at the time.

(8)    Despite having said in his 2015 affidavit that he would have instructed Mr Ellis and Ms Morgan to obtain legal advice including about Sigma’s potential damages exposure Mr de Alwis would not agree that in or around 2009, assuming no interlocutory injunction, he did not have sufficient information of this kind and instead said he “could have made a decision with what I had, but there was no down side to seeking further information”.

(9)    Mr de Alwis said that “we felt the probability of losing that case was, based on the advice I had got, was very small” but even the most bullish verbal advice Sigma received put the chance of success at around 80%. Given the potential liability, a 20% risk of losing could not have been seen at the time as “very small”.

401    These matters weigh heavily against accepting anything Mr de Alwis said about what he would have done or believed would have occurred if not for the interlocutory injunction.

402    To the extent Mr Heine gave evidence about what Sigma would have done if not the subject of the interlocutory injunction, no more need be said than my general observations about the inherent unreliability of such evidence and the fact that, in contrast to Mr de Alwis (and, to some extent, Mr Ellis) Mr Heine’s role within Sigma does not indicate that he would have been involved in the process of informing the board of Sigma’s options other than, perhaps, being a source of information for Mr Ellis and Mr de Alwis. As a result, these aspects of Mr Heine’s evidence also should not be given weight.

403    To return to the chronology of events, the idea that Mr Ellis dissected the legal advice into advice about Sigma’s prospects of establishing the method patent was prima facie invalid for the purpose of the interlocutory injunction hearing in contrast to invalid for the purpose of the final hearing is incredible. As would be expected by people like Mr Ellis given his role, the advice is framed in terms of prospects of success and in the context of the immediately pressing issue of Wyeth seeking an interlocutory injunction. It is not the kind of advice that would have been relied upon for Sigma to decide whether or not to list on the PBS. But it did convey that there were grounds upon which the method patent was likely to be invalid. Thus, this was said:

(1)    Inventive step: “[w]e consider that inventive step is the preferred ground on which to base a successful challenge to the validity of AU 2003259586… We therefore consider that a successful challenge under this ground is likely providing expert opinion is obtained to support the above position”; and

(2)    Fair basis: “[w]e recommend challenging the patent on the ground of fair basis because we consider the method claims covering amendments filed on 20 December 2006 are not fairly based on the matter described in the complete specification as originally filed”.

404    On 31 March 2009 there was a conference with senior counsel. Wyeth contended that the file notes of that conference disclose that Sigma had decided not to launch on the PBS market, was prepared to give an undertaking to that effect, and had decided to launch on the private market only. So much may be accepted at least in the context of Sigma’s wish to avoid being restrained on an interlocutory basis from supplying its products at all. But it is also apparent that the legal advice Sigma received was there were “good grounds” that the method patent was invalid. One of the file notes records “unlikely the court will allow Sigma to recoup loss if forego listing on PBS. Not a lot of precedent”. In other words, if Sigma volunteered not to seek PBS listing in order to enable its private market launch, it was unlikely Wyeth would be required to give an undertaking to compensate Sigma for any loss Sigma might suffer as a result of its voluntary actions.

405    Other important aspects of this evidence include that part of one of the file notes says “impact of not launching is very significant – particularly not launching on PBS (fully)” and that “launching with a private prescription basis, discount less attractive, wants to launch ASAP”. In other words, not being able to PBS list and PBS supply would have a substantial impact on Sigma and confining the launch to the private market would mean that the discount Sigma could offer pharmacists would be less attractive. One of the notes also recorded this:

If defeat int[erlocutory] inj[unction]: can go to market at risk earlier

- but is likely on private market.

406    Sigma submitted that read in the context of the earlier advice given by Griffith Hack and recorded in contemporaneous documents the statement “is likely on private market” can only mean that Sigma was being advised (again) that in practical terms it would need to undertake not to list on the PBS in order to avoid being enjoined from selling altogether. I disagree. In my view, the note was recording that it was likely Sigma’s launch would be confined to the private market even if it was not enjoined. Further, the same note discloses that one powerful reason Sigma wanted to launch on the private market was because it was holding $3 million of stock and that it had no concern about such a launch (on the private market) at risk because its liability would be confined to the stock it sold and would not extend to the price reduction in Efexor-XR which PBS listing would cause. Sigma’s immediate interest in the face of an anticipated interlocutory injunction was to try to salvage its first mover advantage by being the first generic to the market, albeit the private market only. But even for its proposed private market launch, Sigma is recorded as having noted that it wanted to keep its discounts “small” to limit its exposure to a damages claim from Wyeth. Moreover, these views about confining its exposure are attributed in the file note to Mr de Alwis, not the cautious Mr Ellis. I should also note here that in one of his contemporaneous affidavits from 2009 Mr de Alwis said Sigma would not encourage pharmacists to sell Sigma’s products at below the general co-payment contribution and expected pharmacists to sell Sigma’s products at the same price as Efexor-XR. Given that Mr de Alwis’s evidence related to a private market launch only by this stage, this supports my view that Sigma was concerned to limit its potential exposure to a damages claim from Wyeth despite believing it had good prospects of having the method patent declared invalid.

407    In other words, far from Sigma being willing to expose itself to a very substantial damages claim if it triggered a 12.5% price drop on Efexor-XR and supplied on the PBS, Sigma wanted to ensure that it was not left holding $3 million worth of stock it could not supply at all, was willing to forego PBS listing to ensure it could do so and, even for its private market launch, wanted to confine its exposure to damages by ensuring the discounts it offered were small. This was so despite Sigma believing that it had good prospects of establishing the method patent was invalid. This contemporaneous evidence confirms my view that Sigma’s witnesses were giving evidence as a result of the overwhelming effect of hindsight – a risk which in the generics’ case is accentuated by reason of the facts that their plans to launch on the PBS were created before they became aware of the method patent, they ultimately succeeded in 2011 and the time between 2009 to 2011 and the date on which the witnesses were asked to attempt to re-create what they believed and would have done (in 2015 at the earliest) is simply too long after the events for the evidence to be reliable.

408    The evidence that Sigma was concerned to limit its exposure to liability even on a confined private market launch is contemporaneous evidence which tends to suggest that it is unlikely that Sigma would have been willing to trigger a 12.5% price drop by listing on the PBS had there been no interlocutory injunction. The argument that the risk might be greater but so would be the reward overlooks the fact that Sigma already believed the risk to be low because it had good prospects of invalidating the method patent. The relevant point is not so much that Sigma “gave up on” PBS listing (it did give up on PBS listing as a method to try to avoid an interlocutory injunction), but that the contemporaneous records show a company that, understandably, did not want to be stuck holding $3 million worth of stock (which was not a mere risk, but a fact) and despite believing it had good prospects of invalidating the method patent was going to ensure that even its planned private market launch did not increase its exposure to damages claim by Wyeth by offering aggressive discounts. It is this kind of company which existed and would have existed even if Wyeth had not sought an interlocutory injunction on 22 May 2009.

409    It is true, as Sigma said, that:

there was no need for Sigma to make a final decision whether or not to list on the PBS before the injunction hearing – the logical time to finally make that decision would have been if, and after, it managed to avoid the looming injunction and then only if, contrary to what it had been led to expect was the likely position, it was still free to list on the PBS.

410    My point is that it is not obvious that the kind of company which believes it has good prospects of having the method patent declared invalid yet is concerned not to engage in aggressive discounting for even a confined private market launch because it wants to limit its exposure to potential damages is the kind of company that but for the interlocutory injunction would have been willing to trigger the 12.5% price drop on Efexor-XR in the face of the method patent and the litigation. This would be particularly so if the company could, by launching on the private market: (i) resolve its immediate problem of holding $3 million of stock, (ii) be the first generic to market, (iii) confine its exposure to lost sales to Wyeth by not triggering the 12.5% price drop, and (iv) confine its exposure to damages for those lost sales by keeping its discounts small. In contrast, in the hypothetical world, this company would be confronted with an opportunity for PBS listing and supply but an attendant risk if unsuccessful of liability not only for the 12.5% automatic price drop of Efexor-XR, but all of the price drops associated with Wyeth attempting to compete with Sigma’s generic products.

411    On 1 April 2009 Sigma filed an application to have the method patent revoked. It received legal advice not to launch on the private market as planned until the proceedings for revocation were filed as this would be seen to be coming to the Court with clean hands. It is apparent from the file note of 1 April 2009 that it was also seen as important to present Sigma as a company whose policy and history was not to infringe patents. The file note discloses, as I accept to be so, that Sigma saw venlafaxine as the “jewel in the crown” of its generic portfolio and the most significant product for Sigma in the last four years and that its first to market opportunity was important and unquantifiable whereas Wyeth’s damage was quantifiable and “even triggering the 12.5% price reduction is quantifiable, …just not reversible”. I would not take this last observation as evidence of Sigma changing its interlocutory injunction strategy or as undermining Sigma’s desire not to be exposed to a damages claim any larger than it could possibly avoid whilst enabling it to dispose of its $3 million of stock and be first to market. It is a lawyer’s observation about the importance to an interlocutory injunction of evidence relevant to the balance of convenience.

412    Further communications between the lawyers followed.

413    On 14 April 2009 Griffith Hack wrote to Wyeth’ lawyers saying that Sigma was intending to import and supply its products from 1 May 2009 but would undertake not to “make any application for listing of the EVELEXA XR products on the Schedule of Pharmaceutical Benefits, unless it has provided your client with 30 days’ notice prior to making such application for listing”. I agree with Wyeth that it is most likely the letter was framed in this way (recalling that Sigma had already applied for PBS listing on 2 March 2009) because Sigma had decided to withdraw its PBS listing application. I agree with Sigma that this decision was taken in order to try to forestall an interlocutory injunction restrain all supply by Sigma but it also discloses that Sigma was not of the mindset of “PBS supply or nothing”. I do not accept Sigma’s contention that “Sigma was evidently positioning itself to try to get in a position where it could list on the PBS before the validity issue was determined”. This contention is inconsistent with Sigma’s strategy albeit that the strategy was focused on avoiding an interlocutory injunction.

414    On 21 April 2009 Mr Ellis spoke with Griffith Hack and confirmed to Mr de Alwis and others that the legal advice was to “wait until close of business today and if there has been no response from Wyeth activate our launch plans as a private tomorrow”. This is also consistent with Sigma having decided to withdraw its PBS listing application as part of its interlocutory injunction strategy. On the same day, 21 April, Gilbert + Tobin responded noting that it was “not clear from the terms of the undertaking above whether you client intends to apply for listing of the EVELEXA XP products on the PBS on 1 August 2009” and requiring undertakings not to launch until “final resolution of…revocation action and any infringement action brought by our client”. The letter said that if the undertakings were not given Wyeth would commence proceedings for infringement including an application for interlocutory relief.

415    Mr Ellis then instructed Griffith Hack that Sigma was “[h]appy to give undertaking in relation to PBS not to seek listing until completion of the revocation proceedings” and “[w]e…give Wyeth until 28 April to commence interlocutory proceedings”. Wyeth is correct to point out that none of the events so far involved Sigma seeking a cross-undertaking from Wyeth in exchange for Sigma undertaking not to list on the PBS. Again, I find the evidence of witnesses about how important this always was from Sigma’s perspective unconvincing because it is inconsistent with the contemporaneous records. Having voluntarily decided it was going to withdraw its PBS listing application in order to try to avoid being restrained from a private market launch and having been advised in conference with senior counsel that Sigma would not be entitled to a cross-undertaking from Wyeth if Sigma volunteered not to list on the PBS, the far more likely position is that Sigma was working on the assumption it could not obtain any such undertaking at this point and, importantly, it was willing not to try to obtain PBS listing on that basis (that is, no cross-undertaking). The asserted importance of the undertaking from Wyeth is another example of hindsight under the pressure of litigation many years after the event. As we will see, Sigma subsequently thought it worthwhile to try to obtain a cross-undertaking, to which it might be said, why not, but it is plain that Sigma’s decision not to list on the PBS to try to avoid being enjoined altogether was not contingent on such a cross-undertaking.

416    I also do not accept Sigma’s contention that as Sigma had always planned to launch on the private market first (on 1 May 2009) and then to launch on the PBS market after obtaining PBS listing on 1 August 2009, I should infer that Sigma’s plans had not changed because of its discovery of the method patent. This is wishful thinking of a high order. The contemporaneous evidence shows that Sigma had changed its plans. To avoid an interlocutory injunction, Sigma was willing to give up PBS listing until the proceedings were finally resolved. The subsequent letter from Sigma’s lawyers to Wyeth’s lawyers of 22 April 2009 raising the cross-undertaking for the first time does not suggest anything different. In my view, Sigma had changed its position and was willing to volunteer not to list on the PBS whether or not it obtained a cross-undertaking from Wyeth because its real object to was to try to safeguard the private market launch so it would not be stuck with $3 million of stock and would still be the first generic to market. The 22 April 2009 letter, which introduced a requirement for a cross-undertaking from Wyeth, in my view, was an attempt to obtain what Sigma knew would be unobtainable. Sigma had already decided to withdraw its PBS application of its own volition. But I do not consider there is anything improper in Sigma having sought a cross-undertaking. At worst it is regrettable that the letter did not disclose the true position that Sigma had already applied for PBS listing and would withdraw the application but there are many possible explanations for the error. Trying to get a cross-undertaking for a voluntary undertaking not to list on the PBS could not be improper in circumstances where Sigma’s decision not to seek PBS listing was in anticipation of an interlocutory application to restrain it from supply of any kind.

417    Sigma submitted this:

the letter of 22 April 2009 is not consistent with Sigma having given up on PBS listing prior to determination of the validity of the Patent. If it had given up, why was it insisting on a cross-undertaking as to damages? Such an undertaking would have been of no value to it.

418    In my view, given its belief that Wyeth would succeed in enjoining it from any supply on an interlocutory basis if it did not undertake not to seek PBS listing, Sigma had given up on PBS listing prior to determination of the validity of the method patent. It was seeking a cross-undertaking because its decision was a result of the rightly anticipated interlocutory injunction application. But Sigma’s decision was not irrevocable. If Wyeth did not seek an interlocutory injunction, Sigma could revisit its decision.

419    It will be apparent that I do not accept Sigma’s submission that:

None of the documents referred to above give even the slightest impression that, absent the looming Sigma Interlocutory Injunction, Sigma would have even considered, let alone decided, to give up on its PBS listing.

420    The documents did suggest that even if Wyeth failed to obtain an interlocutory injunction, it is likely Sigma’s launch would be confined to the private market. I accept that this is an indication only, but it undermines Sigma’s apparent case thesis that but for the interlocutory injunction it would have blithely proceeded to PBS listing and supply on 1 August 2009 as it had originally planned.

421    In a letter of 24 April 2009 Wyeth’s lawyers noted the undertaking about the PBS but conveniently ignored the requested cross-undertaking and noted also the lack of any undertaking about the private market launch. Sigma’s lawyers, on the same day, repeated that Sigma’s undertaking was conditional on a cross-undertaking. On 28 April 2009, Wyeth’s lawyers notified Sigma’s lawyers that as Sigma had not undertaken not to launch at all it would be commencing proceedings for infringement of the method patent including a claim for interlocutory relief.

422    On 29 April 2009 Sigma decided that it would proceed with a private launch only which meant that the PBS listing application then had to be withdrawn. Sigma also adjusted its launch material. That material identified why the launch was to be private only noting:

1.    Wyeth’s key formulation patent expired December 2008.

2.    Sigma commenced legal proceedings against Wyeth to invalidate additional divisional patent.

3.    Sigma has provided an undertaking not to launch on PBS until proceedings are resolved.

423    As with everything else that has occurred and no matter what Mr Ellis said in oral evidence this was in the context of the anticipated interlocutory injunction. Again, however, it is revealing that Sigma did not see PBS listing as essential to its position. It believed it could move its $3 million of stock and be first to market without PBS listing. It was also evidently willing to give up PBS listing to avoid being enjoined altogether whether or not Wyeth gave a cross-undertaking.

424    On the same day, Mr Beveridge sent an email to numerous people within Sigma, including Mr Ellis, Mr Heine, Mr Smith and Ms Morgan saying:

We are launching Evelexa-XR as a private prescription immediately.

The sales team will be taking orders from tomorrow, and we have no plans at this stage to apply for PBS [listing]. Please take whatever steps are require to load this product as a private prescription item as CSO contribution will not be claimed on Evelexa-XR. It is very important that pharmacy under no impression that this item is a PBS item and we are only supplying as a private prescription medication.

Stock will arrive in the country towards the end of May, and the team will be putting the product on back-order as orders are taken during May for dispatch at a later date.

425    This is consistent with the conclusions reached above and inconsistent with Sigma’s case theory. This said, the decision of 29 April 2009 does not make good Wyeth’s case because Sigma would have been free to re-visit its decision from 22 May 2009 but for the interlocutory injunction.

426    As noted, Wyeth filed its cross-claim for infringement and interlocutory relief on 1 May 2009. On the same day Sigma launched its products on the private market. It took orders from pharmacists between 1 and 22 May 2009.

427    Griffith Hack provided further advice to Sigma on 5 May 2009. The advice remained that Sigma had strong grounds for challenging the validity of the method patent. Again, there is no reason to infer that Sigma would have read the advice as being about the concept of prima facie invalidity for the purpose of an interlocutory injunction even though the interlocutory injunction was the context. I generally accept the evidence from the Sigma witnesses that they understood that they had good prospects of the method patent being declared invalid. I consider that they also understood that litigation is an inherently risky process and that having good or strong prospects did not mean that it was certain or guaranteed Sigma would succeed. After all, Sigma believed it had good prospects early on but was still determined not to give other than small discounts in the private market in order to limit its exposure to Wyeth.

428    Sigma’s preparedness to launch at risk on the private market in circumstances where it would otherwise be holding $3 million of stock says little if anything about whether it would be prepared to apply again for PBS listing after 22 May 2009 (assuming Wyeth had not prosecuted its application for interlocutory relief on that day). The risks involved in PBS listing and supply would be of a different order entirely. For the reasons given above I do not accept any of the evidence to the extent it suggested that Sigma would have simply proceeded to seek PBS listing as originally planned if on 22 May 2009 Wyeth had not prosecuted its application for interlocutory relief.

429    One, it is clear that Mr de Alwis would have had to take such a decision to the board of the ultimate parent company. The boards of the subsidiaries were the same as that of the parent. Sigma’s submission that Mr de Alwis would have made such a decision personally are untenable in light of all of the evidence. Mr de Alwis’s evidence as a whole can only be understood as saying that he would have formed a view based on information he would have obtained and would have taken his view to the board which he expected to accept his recommendation because it had not rejected any operational decision he had made in the past.

430    Two, despite Mr de Alwis’s cavilling in oral evidence it would have been necessary to identify in some detail not only the potential profits from a PBS listing and supply compared to private market supply but also the potential exposure to Wyeth from the 12.5% price drop in Efexor-XR over the eight year life of the method patent as well as the lost sales to Wyeth at the margins Wyeth could have been expected to be garnering (which given the evidence of the different business models of originators and generics would be expected to be materially greater than Sigma’s margins). And a lawyer asked in 2009 to give legal advice knowing it was to be used by a board deciding whether or to seek PBS listing and trigger a 12.5% price drop in Efexor-XR would have ensured that the advice was subject to all the usual caveats one sees in the advices which Griffith Hack in fact gave.

431    What this means is that Sigma was never going to get legal advice saying anything other than it had good prospects of success or that its prospects of success were strong but litigation is an inherently risky endeavour. Further, Sigma was always going to be told that the amount it could hope to make by PBS listing would be dwarfed by the amount Wyeth would lose and that its potential liability on PBS listing and PBS supply would not be confined to what Sigma made but would most likely extend to Wyeth’s losses – of Wyeth’s sales of Efexor-XR at Wyeth’s margins before the 12.5% price drop and any further discounting by Wyeth to compete with Sigma. This is the reality that is not confronted squarely in the evidence of Sigma’s witnesses because of the confounding effect of the passing of the best part of a decade and hindsight.

432    Sigma’s private market launch appears to have been treated as an operational decision which Mr de Alwis was free to make and did make. But as I have said, the evidence that a decision to list on the PBS and supply under the PBS would have been taken by Mr de Alwis to the board is overwhelming. This also discloses the fundamental difference between taking steps to ensure that Sigma was not stuck with $3 million of stock knowing that the discounts and thus potential exposure to Wyeth could be kept confined (which Sigma did and which I consider a rational business decision in the circumstances Sigma was in) and the obtaining of a listing on the PBS and PBS supply triggering the 12.5% price reduction in Efexor-XR (which would have confronted Sigma with entirely different issues from those raised by the anticipated interlocutory injunction).

433    On 8 May 2009 Sigma belatedly withdrew its application for PBS listing. Mr de Alwis intended this to occur as early as his decision not to launch on the PBS on 31 March 2009 and instructed that it be done at least around 29 April 2009 but the withdrawal of the application appears to have been overlooked until 8 May 2009. In its letter to the Department of Health Sigma said:

[Sigma] wish to advise that we will not be able to supply the above products under the Pharmaceutical Benefits Scheme from 1st August 2009 (PBS listing date) due to legal reasons. The products will be available as Private Script Items from June 2009.

Therefore, Sigma wishes to withdraw the application dated 2nd March 2009 for 1st August 2009 PBS listing for the above products.

Please find attached to this letter the completed PBS Notification form required under Section 99AEG.

434    Section 99AEG is the provision of the National Health Act which makes it an offence for the responsible person for a guaranteed brand not to notify the Minister as soon as reasonably practicable if “during the guaranteed period for a guaranteed brand of a guaranteed item, the responsible person for the guaranteed brand of the guaranteed item forms the belief that the person will fail to supply, or will be unable to supply, the guaranteed brand of the guaranteed item in the period”. While the “guarantee period” would not have commenced until the day of PBS listing, Sigma’ letter reflects its view that the anticipated interlocutory injunction would prevent it from supplying the products as required.

435    On 11 May 2009 Griffith Hack wrote to Wyeth’s lawyers saying:

I am instructed by my client, Sigma Pharmaceuticals (Australia) Pty Limited that an application to list its venlafaxine hydrochloride on the Pharmaceutical Benefits Register was made shortly after obtaining the ARTG registration of its EVELEXA XR product on 26 February 2009.

I am instructed a subsequent decision was made by my client to withdraw the application to list the product on the Pharmaceutical Benefits Register but that, through inadvertence, that withdrawal was not communicated to the relevant authority. My instructions are to the effect that the withdrawal of the application has now been formally communicated to the relevant authority.

I reconfirm my client’s commitment to the undertaking previously communicated to you which is to the effect that our client does not intend to make application to list EVELEXA XR on the Pharmaceutical Benefits Register until final resolution at trial of our client’s revocation proceeding and your client’s cross-claim for infringement or until further order of the Federal Court.

436    The lack of importance of a cross-undertaking is apparent from the fact it is not mentioned in this letter. The lack of mention is not a mistake. In my view, the evidence discloses that Sigma had decided not to PBS list whether or not Wyeth gave a cross-undertaking because it thought this gave it a chance of avoiding being enjoined altogether when it needed to sell its $3 million of stock on the private market. The sporadic attempts to obtain a cross-undertaking were opportunistic but not improper because Sigma was acting in the context of an anticipated interlocutory injunction. Sigma had not decided, outside the context of an anticipated interlocutory injunction, that it would not PBS list. Thus, I do not accept Wyeth’s submission that Sigma’s “decision not to cause its generic venlafaxine products to list on the PBS until the final resolution of the proceeding was entirely independent of the SPAL Interlocutory Injunction”. And I do not consider the issue of the cross-undertaking by Wyeth resolves what Sigma would have done but for the interlocutory injunction.

437    Sigma’s private market launch of a generic version of a PBS listed product when no PBS listing of the generic product could be anticipated was unprecedented. Mr Heine says he was confident of success. Sigma also had a $3 million incentive to sell its products and thus, as might be expected, brought to bear all of its experience in its unprecedented private market only strategy.

438    I should record here that it is apparent that Sigma did not and would not have given weight to any of the public health interest arguments that Wyeth raised. To explain, pharmacists have ethical obligations under which in the event of conflict with their own interest, the interest of the patient must come first. Insofar as prescription medicines are concerned this means that in practice pharmacists do not substitute a patient from an originator brand to a generic if the pharmacist believes that substitution would be contrary to the patient’s interest. As generic products are bioequivalent to and cost less than originator brands usually it would only be contrary to a patient’s interest to suggest substitution if there is a risk that the patient’s compliance with medicine taking requirements may be undermined, for example, by confusion. It does not take much to imagine that some patients may have trouble keeping track of their medicines if they are used to taking one brand and are substituted to another brand with a different name and appearance. The evidence indicates that pharmacists generally would not attempt to switch such a patient to a generic. Depression requiring medication such as Efexor-XR is also a serious illness where pharmacists would not want to create a risk of lack of compliance with medication taking or confusion. As such, pharmacists generally would take care not to switch a patient suffering such a condition to a generic if it would create the risk of non-compliance or confusion. The evidence also indicates that, for obvious reasons of continuity of medicine taking and compliance, pharmacists prefer to switch a patient to a generic only once. Pharmacists try to avoid more than one switch because of the non-compliance and confusion risks.

439    These circumstances led Wyeth to contend that in the context of a generic drug for depression facing patent infringement proceedings, pharmacists would be reluctant to switch patients to the generic due to the risk of having to switch the patient back again to the originator brand (that is, if the generic product was found to infringe the patent and the generic product had to be removed from the market). I do not accept that a generic company such as Sigma (or the other generics) would have given this consideration separate from their consideration of their overall prospects of market success (which, in Sigma’s case, were and would have been subsumed into its need not to be stuck holding $3 million of stock). As explained later, in any event, the significance of pharmacists’ ethical obligations should not be given too much prominence. The real risk which would motivate pharmacists not to switch a patient is confusion. If that risk existed and could not be ameliorated through discussion with the patient the pharmacist would be unlikely to switch the patient regardless of the particular illness the medication was treating. Excluding that risk and assuming the no brand substitution box was not ticked on the prescription (which prevents switching), the pharmacist would have no ethical constraint preventing them from raising with the patient the issue of switching to a cheaper bioequivalent generic. The patient would then be able to decide on substitution. As the pharmacist Mr Chami said, as long as there was no negative impact on treatment, providing patients with their medication at the cheapest possible price is generally in the patient’s interest because “the cost of medicines can be a significant contributor to non-compliance by patients”.

440    From Mr Chami’s evidence, and the other evidence from various witnesses about pharmacists, I do not consider that pharmacists would attempt to predict the outcome of patent litigation. If a supplier such as Sigma was offering a product, the pharmacist would assume that the product would be likely to continue to be available. They would not feel constrained in offering the generic version because of a fear that the generic product might become unavailable due to patent litigation. As such, they would treat the product as they would any generic product, encouraging switching if it was in their financial interest and would not negatively impact on the patient’s treatment because the patient also has an interest in being offered the cheapest brand of the bioequivalent medicine available.

441    The result of this digression is this. Sigma launched its products on the private market without giving this issue any apparent consideration. It must also be inferred that it would not have given any weight to this concern about pharmacists not being able to switch patients to its products on an ethical basis because of the possibility (which Sigma thought to be low) of them having to be switched back. Indeed, none of the generics gave any weight to this concern. Its relevance must be confined to the likely success of supply rather than the likelihood of supply by the generics.

442    Wyeth would have it that because Sigma’s success was surprising (yet, according to Wyeth was also somehow simultaneously “underwhelming”), it should be inferred for that reason that Sigma misled pharmacists about PBS listing. As will be explained later, the evidence does not support any such inference.

443    While Sigma’s private launch was not reaching the levels it had budgeted for in its revised forecasts (which were aggressive), the evidence indicates that it was having far more success than might be expected for an unprecedented strategy. As Sigma submitted the evidence shows that:

As at the date of the Interlocutory hearing on 22 May 2009, Sigma had taken significant and concrete steps and invested considerable time and money in preparing for the Evelexa XR launch. This included having purchased $3,316,357 of Evelexa XR Products that would have to be written off if an injunction were to be granted

Mr de Alwis emailed Mr Beveridge, copying in Mr Smith and Mr Heine, on the morning of 21 May 2009, noting that a low stock on hand report recorded “$5.1 million of Evelexa orders in the system already!! Great boost to sales as this will go out in May.” The private prescription launch was evidently perceived as a success by senior management right up to the hearing of the Sigma Interlocutory Injunction.

444    Even if Wyeth’s description of the private market strategy having sold 53,000 units from a stock of 327,000 units and obtained orders from only 2300 out of the 3000 targeted pharmacies is accepted, there can be no doubt that Sigma was committed to its private market supply, was doing everything it could to achieve its sales targets in the private market, and was enjoying a considerable measure of success for the short period it was on the market.

The effect of the interlocutory injunction on Sigma?

445    The hearing before Sundberg J was on 22 May 2009. It must be hypothesised that on that date Wyeth did not press its application for interlocutory relief. In fact, Wyeth did so and Sundberg J granted the interlocutory orders on 3 June 2009. As noted, the injunction restrained Sigma, pending the determination of the proceeding, from marketing, taking orders for, selling, supplying, offering to supply or otherwise exploiting in Australia the products listed on the ARTG 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 Wyeth.

446    Wyeth would have it that the injunction did not prevent Sigma from obtaining PBS listing because irrespective of the injunction Sigma had made plain that it did not intend to list its products on the PBS pending final resolution of the proceeding. It may be accepted that the focus of the evidence and the hearing before Sundberg J was Sigma’s private market supply because Sigma had said it undertook not to list on the PBS. As I have explained, whether this was conditional on a cross-undertaking from Wyeth or not (and I do not consider it was) is not determinative. If, as must be posited, Wyeth simply did not apply for an interlocutory injunction on 22 May 2009 not because it accepted Sigma’s offer (which it did not) but for reasons unknown, it is inconceivable that Sigma would not have revisited a strategy that it developed in response to the anticipated interlocutory injunction.

447    It may be accepted that the interlocutory injunction did not in terms prevent Sigma from seeking PBS listing. But it cannot be doubted that the operation of the order had this effect. Sigma would not revisit PBS listing because being restrained from marketing, taking orders for, selling, supplying, offering to supply or otherwise exploiting in Australia meant that PBS listing would serve no practical purpose other than to unnecessarily expose Sigma to a claim for damages by Wyeth for triggering a 12.5% price drop. It is artificial in the extreme for Wyeth to suggest that the injunction did not prevent Sigma from seeking listing on the PBS. The operation of the interlocutory injunction prevented Sigma from continuing to sell its products on the private market. It prevented Sigma from exercising any of the rights that registration of its products on the ARTG gave it. As a result, Sigma had no occasion to re-consider whether to seek PBS listing of its products.

448    But for the interlocutory injunction Sigma would have had all of the options afforded by ARTG registration. It could have continued with its private market supply. It could have re-considered its position about applying for PBS listing depending on the success or otherwise of its private market supply. Even if it had decided not to again apply for PBS listing, it could continue to monitor the situation and make its decisions accordingly. Given that it had taken substantial effort for Sigma to obtain its ARTG registrations, it is my view that all of these opportunities had value and all were lost as a result of the interlocutory injunction. That is, on the balance of probabilities (in fact, as a certainty), Sigma suffered losses of opportunity of some value by reason of the operation of the interlocutory injunction.

449    For the reasons given, I do not accept Wyeth’s submissions that Sigma necessarily would have made the same decision but for the interlocutory injunction as it made in anticipation of the interlocutory injunction. If Wyeth had not applied for interlocutory relief on 22 May 2009 Sigma would have immediately re-considered its decision to withdraw its PBS listing application. For that purpose, I consider Sigma would have sought further legal advice. The lawyers would have been asked to advise both about prospects of success and Sigma’s potential exposure. As foreshadowed, I do not think any reasonable lawyer (and Griffith Hack, Sigma’s lawyers, were reasonable and had relevant expertise) knowing that the advice would be relied upon for such a serious decision would have gone further than saying that Sigma’s products infringed the method patent but there was a good or strong prospect of the Court declaring the method patent invalid. Any such advice also would have been qualified to the requisite degree to the effect that all litigation is inherently risky, not all events in litigation can be anticipated, the risk of Sigma not succeeding in having the method patent revoked could not be described as trivial, negligible or insignificant, and that if Sigma succeeded an appeal by Wyeth would be expected. At the same time, the advice would have made it clear that the risks associated with sales on the private market were of a different order of magnitude from those associated with PBS listing. For private market sales, Sigma could be liable for more than its own profits due to Wyeth having a likely greater margin than Sigma and the possibility Wyeth would discount in response to Sigma’s entry, but liability would largely be related to Sigma’s own sales. On PBS listing, the price of Efexor-XR would drop by 12.5% for the life of the method patent. Sigma’s potential liability would not be related to its own sales but would relate to Wyeth’s previous 100% of sales at the higher price. There would also be a greater likelihood of Wyeth having to discount its products further to compete with Sigma, including the risk of Wyeth cannibalising Efexor-XR sales by itself introducing a generic version of Efexor-XR. All of those risks would have been taken into account by the lawyers and would have been exposed in the advice. As Wyeth contended, Sigma would have been advised that if it obtained PBS listing and triggered the 12.5% price reduction and supplied on the PBS and if the method patent was not invalid Sigma would be exposed to a damages claim of over $100 million.

450    Wyeth submitted that:

(1)    “Once he obtained the required advice Mr de Alwis would have taken the decision to Sigma’s board which comprised eight highly regarded and well qualified individuals”.

I agree. This was the effect of Mr de Alwis’s evidence even on the basis of his assumption that he would have had the benefit of a judgment from Sundberg J to the effect the method patent was invalid (which he would not have had).

(2)    “Sigma called only one board member, Mr de Alwis, a convicted criminal”.

I agree but this does not mean I am unable to draw inferences about what the board might have decided to do from time to time having regard to the objective contemporaneous evidence and circumstances.

(3)    “Mr de Alwis gives no evidence as to what he would have done in the absence of any interlocutory application for an injunction. His counterfactual evidence only addresses a circumstance in which the interlocutory injunction application was heard and refused on the basis that the method patent was so likely to be invalid that Wyeth could not be granted interlocutory relief”.

I agree.

(4)    “The counter-factual evidence Mr de Alwis gave exposed that he perceived it to be of critical importance to any hope of persuading the board to approve a PBS listing, that there be an interlocutory judgment to the effect that the method patent was invalid. Absent such a clear indication from the Court, the inference is that he could not have persuaded the board to approve a PBS listing”.

I agree. As Wyeth said, the fact Mr de Alwis’s evidence was framed in this way weighs heavily against a conclusion that Sigma would have sought to list its products on the PBS after 22 May 2009 so as to trigger the 12.5% price reduction in Efexor-XR.

(5)    “The contemporaneous evidence that in fact Mr de Alwis was concerned to limit Sigma’s exposure damages in a private launch as reflected in the Griffith Hack file note of 31 March 2009 (“If lose, only lose the amount they sold. Keep discounts small so on worst case, not a large exposure”) is contraindicative of a preparedness to expose the company to the even greater price drop risk of a PBS listing”.

I agree. Again, as Wyeth said, this weighs heavily against a conclusion that Sigma would have sought to list its products on the PBS after 22 May 2009 so as to trigger the 12.5% price reduction in Efexor-XR.

451    Wyeth submitted that, as a result, Sigma would not have taken the commercially irrational approach of exposing itself to a liability in excess of $100 million given the financial pressure it was under, its history and policy of taking on only negligible risks of legal liability, and its decision not to obtain PBS listing but instead to confine its launch to the private market and try to obtain an early final hearing.

452    Sigma submitted that Sigma’s perception that it had “strong grounds” to invalidate the method patent and the magnitude of the perceived commercial opportunity presented by Evelexa XR and its importance to Sigma in achieving its budget would favour PBS listing notwithstanding an appreciation of damages exposure by reason of the alleged infringement of the method patent.

453    In my view, as the evidence discloses, Sigma’s immediate concern when confronted by the method patent was not being stuck with $3 million of stock. This is why it adopted the strategy it did for the interlocutory injunction. Had it been determined to implement its original plan despite becoming aware of the method patent, it would not have given up the PBS listing opportunity so readily no matter what it thought of its prospects of success at an interlocutory hearing. Further, the short-term benefit of “achieving its budget” would not have outweighed the enormity of the potential exposure of PBS listing. In contrast, not having wasted $3 million provided a compelling incentive for the commercially rational decision to still be the first generic to the market but confine supply to the private market and thereby confine Sigma’s likely exposure to damages to sales lost by Wyeth to Sigma albeit at Wyeth’s likely greater margin.

454    It should also be noted that, unlike Alphapharm, Sigma was not concerned at that time that Wyeth might switch patients to Pristiq for the purpose of de-listing Efexor-XR. As will be seen, even though it believed Wyeth would do this, Alphapharm was still not willing to risk being the first to list its products on the PBS. Sigma did not hold this concern and, as a result, it would not have weighed in Sigma’s consideration of the competing opportunities and risks in mid-2009.

455    Sigma submitted that Sigma regarded Evelexa XR as a very important opportunity and understood that it would lose a substantial part of the benefit if it did not list on the PBS. This is true but it overlooks the enormity of the potential exposure and the fact that the private market gave Sigma a way of selling the $3 million of stock it held and being the first generic on the market in circumstances where Sigma would know that if another generic took the risk of PBS listing Sigma could always re-apply for PBS listing itself. And if no generic took that risk, again, Sigma would have given itself the best chance of selling the $3 million of stock and would still be the first generic on the market.

456    Sigma submitted that the critical question whether Mr de Alwis would have been deterred by the litigation was not explored with him. It did not need to be given that the evidence he gave assumed that Sundberg J would have refused to grant an interlocutory injunction on the ground that the method patent was prima facie invalid, thus giving Mr de Alwis confidence that Sigma’s legal advice was right. The assumption is unfounded. In any event, I have explained above why the hypothetical evidence, and particularly that of Mr de Alwis, is unreliable.

457    If Sigma had to prove on the balance of probabilities that but for the Sigma interlocutory injunction it would have sought and obtained PBS listing so as to supply under the PBS then I would have found that Sigma had failed to discharge that burden of proof. Apart from the unreliable non-contemporaneous evidence of the witnesses, the evidence, properly assessed, does not support the inference that it is more likely than not Sigma would have sought PBS listing after 22 May 2009 if in so doing Sigma would be the first to list its generic products on the PBS and would trigger the 12.5% price reduction which would have been perceived to expose it to such enormous potential liability (as would have been the case at this time).

458    Sigma’s contrary submissions that PBS listing was more likely than not seem to me to be divorced from the reality with which Sigma would have been confronted. It had purchased $3 million of stock and was understandably desperate not to be left holding it. It believed that it could sell the stock on the private market and thereby limit its exposure to Wyeth and thus was willing to withdraw its PBS listing application. When confronted with the method patent, it almost immediately developed this manifestly commercially sensible strategy and was willing to implement it before Wyeth took any unequivocal step. If free to re-consider its position from 22 May 2009 because Wyeth withdrew its application for interlocutory relief on that day, Sigma would still have believed it could sell its $3 million of stock on the private market. It would still be the first generic on the market and thus obtained the “first mover” advantage it wanted. It would have known that if another generic did obtain PBS listing, it could then re-apply for PBS listing itself without being the one who had triggered the 12.5% price reduction and thus without such enormous potential exposure to Wyeth. Even given its belief that it had good or strong prospects of success of having the method patent revoked, Sigma would have known from further legal advice that the risk of failing in the litigation could not be eliminated and could never be negligible, trivial or insignificant.

459    Confronted with the magnitude of the potential exposure and without the assumed benefit of a judgment from Sundberg J to the effect that the method patent was invalid, in my view it is not likely that Mr de Alwis would have recommended to Sigma’s board in favour of PBS listing. Even if he had done so, he would have presented all the information to the board and the board would have made its decision in light of all of that evidence. The idea that it is more likely than not that the board would have taken the risk of seeking PBS listing before the final judgment in the circumstances with which it would have been confronted is neither manifestly commercially rational conduct nor readily reconcilable with the objective contemporaneous evidence.

460    Sigma submitted that Mr de Alwis gave effectively unchallenged evidence as to how he assessed the risk of the litigation concluding that “taking all those into account, and also based on the advice I had received, concluding that the probability of losing such a case was low, I felt very comfortable to go ahead with it”. This, however, was a reference to the private market launch and, yet again, Mr de Alwis has left out of his account the pressure he must have felt for Sigma not to be left holding the $3 million of stock. As I have said, Mr de Alwis’s evidence is not a reliable foundation for any inference in Sigma’s favour for all of the reasons already given.

461    Sigma discounted what it described as Mr Ellis’s confused evidence which is fair enough and involves no criticism of Mr Ellis, but then sought to bolster its case by reference to Mr Heine’s evidence when Mr Heine had no decision-making role in respect of PBS listing or not. The same observation applies to Ms Morgan. As I have said, I am not suggesting Mr Ellis, Mr Heine or Ms Morgan were being untruthful. But their evidence about what Sigma would have done or they would have done about PBS listing is immaterial and, as with nearly all of the hypothetical evidence, is unreliable.

462    Sigma submitted that Wyeth asked the Court to find that the board would have intervened to thwart the plans of Sigma’s senior management without any evidence to that effect in circumstances where is no suggestion that the board was not aware of what was going on. However, for the purpose of seeking a PBS listing in the face of the method patent and litigation the board would not have been intervening. It is clear that Mr de Alwis would have taken the issue to the board (which had the same members as Sigma’s parent).

463    However, because I do not consider that Sigma had to prove that it would have listed its products on the PBS it is necessary to consider the possibility it would have done so. Given the evidence to which I have referred, I consider the likelihood of Sigma deciding to re-apply for PBS listing to be relatively low but not merely speculative. Overall, I consider that there was a real chance that Sigma’s board might have given more weight to what would have been perceived as the good prospects of having the method patent declared invalid than the magnitude of the perceived financial risk if the method patent was not declared invalid.

464    Assigning a specific percentage to this possibility is not a straightforward task. The best way to explain my conclusions on the whole of the evidence is to consider the range of real possibilities. Having particular regard to the fact that Sigma would have been the first mover into the generic market, considered venlafaxine to be a rare significant opportunity for it and, on the evidence, needed a “win” in respect of venlafaxine, I am not persuaded that the chance of PBS listing was merely speculative or less than 1%. A 1 in 20 or even 1 in 15 prospect of PBS listing, in my view, is too low and would be below the bottom end of the range. A 1 in 3 or even a 1 in 4 prospect of PBS listing, in my view, is too high and would be above the top end of the range. The range which may be inferred to be reasonable from the evidence therefore lies between these two extremes. Given the considerations to which I have already referred supporting a more liberal approach to compensation, I have concluded that I should accept a figure towards the top end of my range of reasonable inference from the evidence. On this basis, I conclude that there was a 20% chance that Sigma would have re-applied for PBS listing of its products.

465    In respect of the 20% possibility of Sigma having re-applied for PBS listing, there is also a timing issue. On my approach, Sigma would have been re-considering its position (which was that it was undertaking the supply of its products on the private market) from 22 May 2009. To do so, it would need to obtain comprehensive legal advice which would take some time to prepare. To obtain a PBS listing on 1 August 2009, Sigma would have to have re-applied by 1 May 2009. This would have been impossible. It follows that the 20% possibility of applying for PBS listing would have led to listing on 1 December 2009. To obtain PBS listing on 1 December 2009 Sigma would have had to apply by 1 September 2009. This would have been achievable and should be applied to the Sigma 20% possibility. The issue whether the Minister’s delegate would have PBS listed Sigma’s (or any generic’s product) before the first instance judgment about the method patent will be considered separately.

466    As a result, the 20% possibility of Sigma having applied for PBS listing operates in respect of a potential PBS listing on 1 December 2009. For the period from the date of Sigma’s actual launch of its products on the private market (1 May 2009) to 1 December 2009 it must be inferred that Sigma would have continued to supply its products on the private market. In the circumstances I have identified but for the interlocutory injunction there was no chance that Sigma would have decided to cease supplying its products on the private market unless the venture ultimately proved to be financially unfeasible. The $3 million of stock it was holding would have compelled it to continue with its private market supply. Sigma needed a “win” in the market. It had the opportunity to be the first to market albeit on the private market and had $3 million of stock to move. I consider that the chance of Sigma having not continued is private market supply should be assessed to be less than 1% and thus disregarded. Thus for the period from 1 May 2009 to 1 December 2009 the hypothetical fact of Sigma continuing private supply is to be treated as certain (100%).

467    Given my conclusion about the 20% prospect of Sigma having applied for PBS listing in time for its products to be listed on 1 December 2009, it follows that from that time there would have been an 80% probability of Sigma continuing with its private market supply of its products but for the Sigma interlocutory injunction.

468    As I have said if, contrary to my view, Sigma’s conduct in anticipation of the Sigma interlocutory injunction should be disregarded, the practical effect is that the notional PBS listing date would be 1 August 2009 and not 1 December 2009.

469    I have concluded below that the prospect of another generic first obtaining PBS listing should be disregarded. In case this is incorrect I note my view that if another generic obtained PBS listing for its products before Sigma then the dynamic would have changed. Sigma would believe that the first generic to obtain listing alone would be responsible for the 12.5% price reduction. Sigma would also have known that the first mover advantage it had obtained by launching on 1 May 2009 might well be undermined. The motivation to protect its first mover advantage would have been overwhelming weighed against the perceived risk of ultimate liability to Wyeth which, under this hypothesis, would not include liability for the 12.5% price reduction. In any such case, Sigma would almost certainly have decided that it could not afford not to be in the PBS market despite the risk of increased exposure from increased sales and discounting. In the event of another generic listing on the PBS first, I would assess the probability of Sigma having then applied for PBS listing to be an effective certainty (100%). I can see no chance that Sigma would have been prepared to see its first mover advantage undermined if another generic had obtained PBS listing and thus removed from Sigma the perceived risk of liability for the 12.5% price reduction of Efexor-XR. Even if its private market supply had sustained losses, the prospect that Sigma would not have applied for PBS listing as soon as possible to commence supply under the PBS, in the event of another generic having obtained PBS listing, must be assessed to be so negligible (less than 1%) that it should be disregarded.

470    In respect of the private market supply, as noted, Wyeth contended that Sigma’s strategy would have ultimately failed and that it would not have ordered any more stock than the $3 million it held, in effect, because the pharmacists who purchased stock would not have understood that PBS listing was not anticipated in the reasonably foreseeable future, would not have been able to sell the stock purchased, and ultimately would have been looking to Sigma to replace the stock with equivalent value products the pharmacists could sell (which, according to Ms McTavish, was Sigma’s policy). This aspect of the argument concerns the value of the opportunity Sigma lost which I will deal with separately in the context of the industry, econometric and accounting evidence.

Further observations

471    The assessment above does not factor in the potential actions of Wyeth, other generics or the Department’s response to an application for PBS listing. I deal with those issues separately.

472    I am satisfied that no anticipation by Sigma of what Wyeth might do in competitive response to Sigma’s supply or otherwise would have weighed on Sigma’s mind. Nor would any concern about the Department’s potential response to an application to list the products on the PBS have been taken into account by Sigma. Further, but for the interlocutory injunction, Sigma would have been able to give the required assurance of supply on PBS listing and would have no reason to be concerned about the statutory guarantee of supply provisions (a matter also discussed separately below).

Summary of interim conclusions - Sigma

473    My interim conclusions about Sigma, accordingly, may be summarised as follows:

(1)    Sigma has proved on the balance of probabilities that it suffered the loss of an opportunity of some value associated with the ARTG registration of its products because the injunction prevented it from exercising, from time to time and as it saw fit, the rights associated with ARTG registration. The value of this opportunity depends on the probabilities and possibilities of what Sigma would or might have done.

(2)    If Sigma needed to prove on the balance of probabilities that it would have re-applied for PBS listing of its products but for the interlocutory injunction, then Sigma has failed to prove that putative fact.

(3)    If Sigma needed to prove on the balance of probabilities that it would have continued with its supply of its products on the private market but for the interlocutory injunction, then Sigma has proved that putative fact.

(4)    If, as I consider, Sigma does not need to prove (2) or (3) because it has proved (1) on the balance of probabilities, then the probabilities and possibilities are as follows:

Between 1 May and 1 December 2009

(a)    Sigma would have re-applied for PBS listing in time for listing on 1 August 2009 for the purposes of supply under the PBS: 0%.

(b)    Sigma would have continued its supply its products on the private market: 100%.

(c)    Sigma would not have continued its supply of its products: 0%.

From 1 December 2009

(d)    Sigma would have re-applied for PBS listing by 1 September 2009 in time for listing on 1 December 2009 or at some later time before the Full Court judgment in October 2011 for the purposes of supply under the PBS: 20%.

(e)    Sigma would have continued to supply its products on the private market after 1 December 2009: 80%.

(f)    Sigma would not have continued to supply its products on the private market from 1 May 2009: 0%.

(5)    If another generic had obtained PBS listing on 1 August or 1 December 2009 or thereafter the probabilities and possibilities are:

(a)    Sigma would have re-applied for PBS listing for the purposes of supply under the PBS as soon as it could: 100%.

(b)    Sigma would not have re-applied for PBS listing for the purposes of supply under the PBS as soon as it could: 0%.

The sale of Sigma

Facts and contentions

474    Wyeth contended that in or about October 2010 Sigma ceased to be a person who could be adversely affected by the Sigma interlocutory injunction because of events connected to the sale of shares in Sigma to Aspen Asia Pacific Pty Ltd. It contended in the alternative that Sigma ceased to be such a person on 28 January 2011 when it transferred its ARTG registrations to Sigma Company Limited in connection with the sale of shares in Sigma to Aspen Asia.

475    The relevant facts are these. In August 2010 Aspen Pharmacare Holdings Limited reached an in-principle agreement with Sigma Company Limited that Aspen Pharmacare’s subsidiary Aspen Asia Pacific Pty Ltd would purchase all of the shares in Sigma Company Limited’s subsidiary, Sigma. This transaction was completed on 31 January 2011 pursuant to a share sale agreement.

476    I published reasons for judgment to the parties on 23 September 2010 to the effect that the method patent was valid and infringed or threatened to be infringed by the generics for the purpose of them identifying any confidential matters. In late October 2010 Sigma informed Aspen Asia that it proposed to offer an undertaking in exchange for interlocutory orders pending an appeal restraining Wyeth from making any application to de-list Efexor-XR from the PBS, marketing or allowing any other person to market any generic venlafaxine product, and applying to amend the method patent otherwise than in this Court. This prompted Aspen Asia to propose in an email of 5 November 2010 an arrangement whereby Sigma Company Limited would “retain the risks and rewards associated with the Wyeth litigation as if it does so and is successful, then it will have an asset (in the form of the product) which it will either be entitled to sell or commercialise on a royalty basis through a third party distributor, which may or may not be Aspen”. This was said in the email to reflect Aspen’s policy of not being litigious and its focus on its core business.

477    As part of a restructuring in anticipation of the sale of shares in Sigma to Aspen Asia, on 28 January 2011 Sigma transferred its ARTG registrations for Evelexa XR to its parent company, Sigma Company Limited.

478    The share sale agreement between Sigma Pharmaceuticals Limited, Sigma Company Limited, Aspen Pharmacare Holdings Limited and Aspen Asia Pacific Pty Ltd reflected an arrangement under which, in effect and to the extent relevant, all of Sigma’s generic pharmaceuticals business would be transferred as part of the share sale other than in respect of two products which were the subject of litigation, one of which was Sigma’s venlafaxine products. Pursuant to the restructuring arrangements the products themselves (given the transfer of the ARTG registrations from Sigma) and risks and rewards of the Excluded Litigation would remain with Sigma Company Limited.

479    Accordingly, cl 1.1 contains definitions of Excluded Litigation (defined to include the Wyeth Litigation), Excluded Product (defined to include the Venlafaxine Products), Excluded Product Registrations (defined to include the Venlafaxine Product Registrations), and Litigation Benefits (defined to mean any amount or benefit received or to which a Group Company or Remaining Group Company becomes entitled).

480    By cl 11.3(a)(i) Sigma Company Limited as Vendor “will have control of the Excluded Litigation”.

481    By cl 11.3(e), all Litigation Benefits for the Excluded Litigation, whether realised before or after completion, belong to the Vendor, Sigma Company Limited. By cl 11.3(f) the Purchaser, Aspen Asia, must pay to the Vendor, Sigma Company Limited, “immediately following receipt by [Sigma]…the amount of any Litigation Benefits in respect of the Excluded Litigation”.

482    Clause 11.7 records that pursuant to a restructure deed all Excluded Product Assets will be held by the Vendor or a Remaining Group Company “and that after Completion neither the Purchaser nor any Group Company will have any right or interest in respect of those assets”.

483    As I understand it, Wyeth’s reference to October 2010 as the date on which Sigma ceased to be a person who could be adversely affected by the Sigma interlocutory injunction is intended to reflect the date on which the parties entered into the share sale agreement. Wyeth submitted that Sigma was not a person adversely affected by the Sigma interlocutory injunction after October 2010 because:

a claim pursuant to the SPAL Undertaking only has content when linked to the “Excluded Product Assets”, including the Wyeth Litigation; it attaches to and runs with those assets. But in this case SPAL (now owned by Aspen) divested itself of the risks and rewards associated with the Wyeth Litigation.

484    Sigma’s response was to focus on the terms of the share sale agreement. Sigma submitted that:

Importantly, the definition of “Excluded Product Assets” does not purport to pick up every right associated in any way with, relevantly, the Venlafaxine Products and Venlafaxine Product Registrations, but is confined to the “Intellectual Property Rights” in the Venlafaxine Products, the “Venlafaxine Product Registrations” and “all product dossiers and other records relating wholly or predominantly to any of the [Venlafaxine Product Registrations] or other assets referred to in paragraphs (a) to (d) inclusive of this definition”.

By cl 11.7 the Purchaser (AAP) acknowledged that all Excluded Product Assets would be held by the Vendor (SCL) and/or a “Remaining Group Company” (defined to mean other subsidiaries of SCL not being sold to AAP) and that “after Completion neither the Purchaser nor any Group Company (defined to mean subsidiaries of AAP) will have any right or interests in respect of those assets”.

Accordingly, although the Share Sale Agreement contemplated that Sigma’s intellectual property rights in Evelexa XR would be assigned to SCL or a subsidiary of SCL, it did not contemplate an assignment away from Sigma of its choses in action – including its rights against the Wyeth Parties in the present proceedings. Indeed, it is perfectly clear that the Share Sale Agreement cannot have effected such an assignment because Sigma was not party to it.

That is further confirmed by the specific provisions of the Share Sale Agreement dealing with the present proceedings. “Wyeth Litigation” was defined to mean the present proceedings. “Excluded Litigation” was defined to include the “Wyeth Litigation”. By cl 11.3 the parties acknowledged and agreed that the Vendor (SCL) was to have “control of the conduct of the Excluded Litigation” (cl 11.3(a)). By clauses 11.4(b)-(c) read together with cl 11.5, SCL agreed to indemnity SCL in respect of any losses, liabilities and so forth in the Wyeth Litigation.

Wyeth places reliance on clauses 11.3(e) and (f) of the Share Sale Agreement, which provide:

“(e)    All Litigation Benefits in respect of each Litigation, if realised:

(i)    before Completion, will belong to the Vendor; or

(ii)    on and from Completion, will belong to the Purchaser,

except:

(iii)    to the extent such benefits relate to Liability of a Remaining Group Company for which it is not indemnified in respect of the Litigation under this agreement; and

(iv)    that all Litigation Benefits in respect of the Excluded Litigation, regardless of whether those benefits are realised before, on or after Completion, will belong to the Vendor.

(f)    To give effect to the principles set out in clause 11.3(e):

(i)    the Purchaser must pay to the Vendor, immediately following receipt by SPAL [being Sigma] (or any other Group Company), the amount of any Litigation Benefits in respect of the Excluded Litigation;

(ii)    the Vendor must pay to the Purchaser, immediately following receipt by any Remaining Group Company, the amount of any Litigation Benefits in respect of the Litigation to the extent these belong to the Purchaser under clause 11.3(e); and

(iii)    the Purchaser must pay to the Vendor, immediately following receipt by any Group Company, the amount of any Litigation Benefits in respect of the Litigation to the extent these belong to the Vendor under clause 11.3(e).”

Those clauses confirm that Sigma remains the proper party to bring the claim on the Sigma Undertaking in these proceedings. It is apparent from cl 11.3(f)(i) that Sigma – referred to as SPAL in the Share Sale Agreement – was anticipated to realise the “Litigation Benefits” (if any) of the Venlafaxine Litigation and AAP was obliged to pay to SCL “the amount of” any such benefits upon their “receipt” by Sigma. The word “belong” in cl 11.3(e) can only sensibly be read as reflecting an intention that, as between AAP and SCL, SCL was to be entitled to the “Litigation Benefits”. Its precise legal effect (including whether it creates or contemplates a trust in favour of SCL in respect of Litigation Benefits realised in these proceedings, or merely a personal obligation on the part of AAP to pay an equivalent amount to SCL) does not matter because it only affects the position as between SCL and AAP.

Critically, cl 11.3(e) plainly does not purport to assign, and in any event could not be effective to assign, Sigma’s rights against the Wyeth Parties under the Sigma Undertaking or otherwise in these proceedings to any other person. Contrary to the Wyeth Parties’ submission, AAP’s obligation to pay over to ACL the amount of any “Litigation Benefits” under cl 11.3(f)(i) realised by Sigma does not mean Sigma is not the proper party to claim for, and receive, those benefits – rather, the contractual provisions confirm that it is.

485    Sigma submitted that Wyeth’s alternative argument relating to the 28 January 2011 date was also misconceived. According to Sigma:

Wyeth’s submission assumes that the approach taken to the Evelexa XR ARTG registrations in late October and November 2010 in the actual world would also have been taken in the counterfactual scenario where Sigma had been on the market selling Evelexa XR (either the private market only or also listed on the PBS) since May 2009. That is not the correct approach.

Conjecturing as to what would have happened in respect of a single component of a large and complex business transaction in late 2010 is exceedingly difficult. It is, however, properly understood as being part of the exercise of quantifying Sigma’s loss. It is something the Court must attempt even though it involves a high degree of speculation and uncertainty. Difficulty in quantifying Sigma’s loss is no reason to deny it recovery...

While acknowledging that the exercise is difficult and requires speculation about the actions that would have been taken by both AAP and SCL, Sigma submits that, having regard to Mr Ziman’s evidence and the objective probabilities as established by the contemporaneous documents (most importantly, the terms of the Share Sale Agreement that were actually negotiated…), the likelihood is that the Evelexa-XR ARTG registrations would not have been transferred away from Sigma. Alternatively, Sigma submits that there is a greater than negligible chance that the Evelexa-XR ARTG registrations would not have been transferred away from Sigma and that chance must be taken into account in quantifying Sigma’s loss…

The short point is that if Evelexa-XR had been on the market in October-November 2010 it would have been commercially rational – both for ACL and AAP – for the Evelexa-XR ARTG registrations to remain with Sigma, so that it could continue to sell Evelexa-XR, with AAP appropriately protected from litigation risk by indemnities and Sigma appropriately compensated by a payment conditional on it succeeding in the litigation. Such an arrangement would have been possible and consistent with the commercial objectives of the parties in the real world.

486    Sigma relied on three matters said to support these conclusions.

487    First, while Sigma accepted that it was clear from Mr Ziman’s evidence that Aspen Asia would not have accepted any financial risk from the Wyeth litigation he also said that:

…if there was a contracted outcome whereby Aspen was completely protected from any such liabilities, I may have recommended Evelexa XR still be included in the Transaction, thus leaving Aspen with no damages/liability exposure. However, given that the negotiation of a complex transaction has number of moving parts, it is difficult to speculate now what would have occurred.

488    Second, Sigma submitted that the terms of the share sale agreement also indicated what might have occurred. In particular, cl 11.8 provided that if the Wyeth litigation was settled or judicially determined in such a way that the Venlafaxine Products could be commercialised “without risk of suit for breach of patent or other Intellectual Property Rights (as agreed by the parties, each acting reasonably)” then Aspen Asia and Sigma Company Limited would negotiate in good faith a sale of the Excluded Product Assets in respect of the Venlafaxine Products which would have included a transfer of the ARTG registrations for Evelexa XR from Sigma Company Limited to Aspen Asia. Sigma Company Limited could do what it wished with the Venlafaxine Products only after 60 days from the failure of such negotiations. According to Sigma, this discloses that the parties had the common objective, if possible, of ensuring that the Evelexa XR products were kept as part of Sigma’s generic portfolio of products. To this should be added that:

…if Evelexa XR had been on the market the approach taken in the real world would not have been open. Sigma ceasing to sell Evelexa XR after 18 months on the market would have been disastrous for both Sigma, pharmacies and patients... It would therefore have been necessary for the parties to devise an arrangement whereby:

(a)    Sigma was able to continue selling Evelexa XR;

(b)    Aspen was protected from the litigation risk which, it must be accepted, from 8 November 2010 onwards would have included the risk relating to an undertaking in support of a stay of the Sigma Final Injunction to keep Evelexa XR on the market; and

(c)    SCL received monetary compensation for Evelexa XR.

489    Third, Sigma submitted that “any number of arrangements could have been devised which enabled the three objectives identified above to be realised”, including making part of the purchase price for Sigma payable only on a successful outcome of the Wyeth litigation and an indemnity from Sigma Company Limited if the outcome was not successful. Sigma Company Limited gave an equivalent kind of indemnity under cll 11.4(d) and 11.5 of the share sale agreement.

490    Wyeth contended to the contrary that Mr Ziman’s evidence that “Aspen was and is generally risk averse to material known legal and financial exposures. In that counterfactual situation I would not have agreed that Aspen carry this risk exposure for this product (Evelexa XR)” indicated that the Sigma interlocutory injunction made no difference to the arrangements and agreements about the sale of shares in Sigma.

Discussion

491    In my view, the October 2010 date is immaterial but not for the reasons Sigma gave.

492    Sigma’s submissions may be accepted insofar as they accurately explain the effect of the share sale agreement and record that nothing in that agreement means that Sigma is not a proper claimant on the undertaking Wyeth gave as the price of the Sigma interlocutory injunction. Wyeth’s points are to a different effect and involve different considerations.

493    The relevant point which answers Wyeth’ first contention about October 2010 being a cut-off date for any potential adverse effect on Sigma is this. While the agreements and arrangements reflected the common intention of the parties to the share sale agreement that the ARTG registrations for Evelexa XR would be transferred from Sigma to Sigma Company Limited and that Sigma Company Limited would retain the risks and rewards of the Wyeth litigation, nothing in those agreements and arrangements prevented Sigma from exercising the rights of supply of Evelexa XR which the ARTG registrations gave to Sigma at any time before the transfer of the registrations. Wyeth did not identify anything in the agreements and arrangements which would have had that effect before the transfer of the ARTG registrations on 28 January 2011. I am unable to identify anything which would have had that effect. The thing which prevented Sigma from exercising its rights of supply remained the Sigma interlocutory injunction. Accordingly, the adverse effect of the Sigma interlocutory injunction on Sigma remained at least until 28 January 2011.

494    Sigma’s approach to the 28 January 2011 date involves more difficult considerations. I have found that if not for the Sigma interlocutory injunction the relevant hypothesis involves an 80% probability that Sigma would have been selling its Evelexa XR products on the private market and a 20% possibility that it would have applied for and obtained PBS listing of Evelexa XR on 1 December 2009 so that from that date it would have been supplying the products under the PBS. As a result of the Sigma interlocutory injunction, however, it was prevented from supplying the products on and from 22 May 2009. This fact, of non-supply, is the context within which the arrangements and agreements in respect of the sale of shares in Sigma to Aspen Asia were negotiated and concluded.

495    Wyeth’s approach to Mr Ziman’s evidence cannot be accepted. Mr Ziman explained in his second affidavit that he had misunderstood the question that was put to him (hardly surprising, in my view). In proposing what Aspen Asia would have done if the Sigma interlocutory injunction had not been granted and Sigma had been selling Evelexa XR since May 2009, he had assumed that “there was no litigation in any form with regards to Evelexa XR” and Sigma, the company being acquired “had no exposure to any form of patent or financial liability whatsoever (contingent or otherwise) by including Evelexa XR in the acquisition basket”. In my view, this confirms the difficulty in asking a witness to give evidence about what could or might have occurred but for the interlocutory injunction. Mr Ziman’s misunderstanding is not apparent on the face of his first affidavit yet the effect of his evidence had it not been corrected would have been to ignore the existence of the method patent and the litigation which is impermissible. In his second affidavit Mr Ziman corrected his misunderstanding and added in another fact which existed (and which, despite Generic Health’s submissions to the contrary, cannot be wished away). That fact is that on 8 November 2010 I made orders in accordance with my conclusions that the method patent was valid, Sigma had infringed and was threatening to infringe the method patent, and granted final injunctions. Mr Ziman said in his second affidavit:

I now understand that the hypothetical situation being put to me was that [Sigma] would have been found guilty of patent infringement in November 2010 ie approximately two (2) months before the Transaction closed and therefore Aspen would have known that [Sigma] was potentially exposed to damages liability of many millions of dollars.

496    Mr Ziman then said this:

Aspen was and is generally risk averse to material known legal and financial exposures. In that counterfactual situation I would not have agreed that Aspen carry this risk exposure for this product (Evelexa XR).

However, if there was a contracted outcome whereby Aspen was completely protected from any such liabilities, I may have recommended Evelexa XR still be included in the Transaction, thus leaving Aspen with no damages/liability exposure. However, given that the negotiation of a complex transaction has a number of moving parts, it is difficult to speculate now what would have occurred.

497    What is Sigma’s claimed loss on and from 28 January 2011? As I understand it, the claim is that as a result of the Sigma interlocutory injunctions it did not supply Evelexa XR, because it did not supply Evelexa XR the context within which the negotiations about the sale of Sigma occurred would have been different and, had they been different there is a chance that Sigma would have retained the ARTG registrations so that Sigma’s loss of opportunity to supply Evelexa XR continued after 28 January 2011.

498    The first difficulty is that the required focus remains the effect of the Sigma interlocutory injunction on Sigma, relevantly, supplying the Evelexa XR products “whether by itself, its directors, officers, servants, agents or otherwise”. The Sigma interlocutory injunction thus changed one thing only – the fact of supply of Evelexa XR. It did not change the fact of the existence of the method patent. It did not change the fact of the existence of the litigation. It did not change the fact that I found in favour of Wyeth and against Sigma and made orders accordingly on 8 November 2010. The arrangements and agreements would still have been negotiated in the context of all of these matters. Sigma’s submissions do not confront these matters or the fact that the negotiating parties, which did not include Sigma itself, were free to reach whatever deal they chose. The Sigma interlocutory injunction could not and did not act upon the terms of the deal that was reached about the sale of the shares in Sigma.

499    The second difficulty is that the evidence does not support the suggestion that the approach of Aspen Asia was in any way influenced by the issue of the supply or non-supply of Evelexa XR. Aspen Asia’s approach thus had nothing to do with the Sigma interlocutory injunction. Its approach was based on the existence of the litigation. It may be accepted that it would have been possible for any number of different arrangements and agreements to have been negotiated for the sale of shares in Sigma. The fact is all of the approaches which Sigma has identified in its submissions were available irrespective of the Sigma interlocutory injunction but the one taken involved the ARTG registrations for Evelexa XR being transferred from Sigma to Sigma Company Limited.

500    The focus must remain the effect of the Sigma interlocutory injunction. Whether or not Sigma was supplying Evelexa XR, it is apparent that Aspen Asia’s sole focus was the risks associated with the litigation. The deal which was done reflected its response to those risks at the time. Nothing in the evidence supports the suggestion that the deal that was done, at least to the extent it involved the transfer of the ARTG registrations to Sigma Company Limited, was because of the fact that the Sigma interlocutory injunction had prevented the supply of Evelexa XR. As a result, it cannot be inferred, speculated or assumed that the Sigma interlocutory injunction had any effect on the agreements and arrangements about Evelexa XR.

501    The third difficulty is that Sigma’s posited “disaster” depends on the premise that if Sigma had been selling Evelexa XR for 18 months, the only choice would have been between Sigma continuing to sell Evelexa XR and Evelexa XR not being sold at all. Leaving aside the effect of the final injunctions which I granted, the deal that was done discloses that these would not have been the only choices available. Clause 11.8 of the share sale agreement recognises that the ARTG registrations gave Sigma Company Limited an asset which it could commercialise, including by transfer to third parties depending on the outcome of the litigation. This would have been the same position irrespective of the Sigma interlocutory injunction. Further, the “disastrous” consequences identified by Sigma if Evelexa XR ceased to be available altogether is not mentioned by Mr Ziman as relevant in any way to what would or might have occurred, confirming that from Aspen Asia’s perspective the only relevant issue was and would have been the risks of the litigation.

502    The fourth difficulty is that Sigma’s submissions about this issue traverse the same kind of territory as the submissions of Generic Health about the possibility that if not for the interlocutory injunctions it might have been able to reach agreements about supply with other generics at an earlier time. I concluded that these kinds of losses would not be a direct and natural consequence of the interlocutory injunctions. They would not be losses which arise in the usual course of things as a result of the interlocutory injunctions. As such, they are too remote to be compensable. The same conclusion must be reached about Sigma’s claimed losses after 28 January 2011. As noted, the parties to the Sigma share sale agreements and arrangements were free to reach whatever negotiated outcome they chose. The Sigma interlocutory injunction did not constrain their negotiating positions in any way. Sigma was not a party to those negotiations but was the subject-matter of them. Sigma had no role to play in the negotiations. The deal that was done reflected the “mere unrestricted volition” of the negotiating parties (as in Chaplin v Hicks [1911] 2 KB 786 at 792-793). As a result of the deal, Sigma no longer held the ARTG registrations. Accordingly, it could no longer lawfully supply the products and thus could not be adversely affected by the Sigma interlocutory injunction. Alternatively, in common with my conclusion about the claims of Generic Health based on other generics, I consider Sigma’s claimed losses after 28 January 2011 are too remote to be recoverable or, if not too remote, should not be the subject of any order for compensation as a matter of discretion in the circumstances I have described.

Conclusions

503    For these reasons I also consider that Sigma’s claim to the extent that it extends beyond 28 January 2011 should not be accepted.

Alphapharm’s case

Alphapharm

504    Alphapharm is an Australian-based company which manufactures and supplies pharmaceutical products in Australia and exports Australian-made pharmaceuticals to other countries around the world. Alphapharm is part of the Mylan group of companies whose parent company is Mylan Inc in the United States. It was one of Australia’s largest suppliers of generic products, with an estimated total market share of all generic products of around 40%. It counted about 38% of all pharmacists as Alphapharm “supporters”, meaning that the pharmacies purchased all of Alphapharm’s products.

Alphapharm’s claims

505    Alphapharm claims to have been adversely affected by all three interlocutory injunctions. As noted, the Sigma interlocutory injunction was granted on 3 June 2009, the Alphapharm interlocutory injunction on 25 August 2009, and the Generic Health interlocutory injunction on 10 November 2009.

506    As will become apparent, Alphapharm’s pleadings and submissions were extraordinarily complicated and convoluted (and in my view unnecessarily so).

507    For example, it is not apparent to me how the Generic Health interlocutory injunction could have had any adverse effect on Alphapharm (or at least not any adverse effect which was not also an effect of the Alphapharm interlocutory injunction). Insofar as Alphapharm is concerned, the Generic Health interlocutory injunction is a distraction. It cannot be material one way or another. Alphapharm sought to make it material by presenting a multiplicity of hypothetical probabilities and possibilities if the various interlocutory injunctions had not been sought or granted. For example, according to Alphapharm if the Generic Health interlocutory injunction had not been granted, then the Sigma interlocutory injunction and the Alphapharm interlocutory injunction would have been discharged. It then posits when such discharge would have occurred and what would have occurred on discharge of the interlocutory injunctions.

508    None of this was necessary or helpful. As a result, I have had to spend time rejecting numerous submissions of Alphapharm when ultimately I accept that if Sigma was supplying its products on the private market there is a high likelihood that Alphapharm would have followed suit and if Sigma (or another generic) had obtained PBS listing first then, again, there is a high likelihood that Alphapharm would have done so at the first opportunity thereafter.

Mr Hurley

509    Alphapharm’s principal witness was Mr Hurley, a former Executive Director of Alphapharm who gave evidence in 2009 for the purpose of defending the Alphapharm interlocutory injunction and evidence about these claims.

510    I have explained above that I consider the hypothetical evidence is likely to be unreliable for numerous reasons. Mr Hurley’s evidence discloses the problems with evidence of this kind. Mr Hurley’s evidence also disclosed other issues which diminish the weight which his evidence should be given about contested issues.

511    Mr Hurley gave unconvincing evidence to the effect that his position between 2008 (when Alphapharm was unaware of the method patent and proposed to obtain PBS listing and only supply to pharmacists under the PBS) and 2009 (when Alphapharm became aware of the method patent, decided it was unwilling to trigger the price reduction in Efexor-XR by obtaining PBS listing, and instead decided to confine its launch to the private market) changed. Mr Hurley accepted that his view in 2008 was that pharmacists would have no interest in the private supply of a generic when the originator product was PBS listed. He said his view changed in 2009. Because pharmacists would then know they could not obtain a PBS listed product from Alphapharm he believed that pharmacists would be interested in Alphapharm’s private supply of Enlafax XR despite Efexor-XR being PBS listed.

512    His evidence that his position in fact changed was unpersuasive. Mr Hurley could not suggest that pharmacists would have any interest in such a product in 2008 because Mr Hurley had prepared a document at that time which disclosed his view that if Alphapharm tried to supply before PBS listing of its products it would achieve “minimal sales” because the PBS subsidy would not be available. No doubt this is why Alphapharm never had in mind a two stage, private then PBS launch, as Sigma had proposed. Consistent with his own document, Mr Hurley said:

It was my view that in 2008 and up to the time that we realised that we weren’t going to get PBS listing in 2009, that pharmacists would not be interested in buying private prescription products prior to the PBS launch.

513    Minimal sales on the private market, of course, would be contrary to Alphapharm’s interests in this case as it accepts that it would not have sought PBS listing before any other generic had obtained PBS listing. Mr Hurley did not accept that insofar as his state of mind was concerned at least nothing in fact changed in 2009. Mr Hurley’s explanations for his allegedly changed view included:

Something changed, in that we couldn’t achieve a PBS launch of venlafaxine, so we had to find an alternate strategy.

they [pharmacists] would understand that they could not get a PBS listed product for venlafaxine. We would present them with an opportunity where they could make a margin, a higher margin than they did on Efexor. And, you know, that was what we did. We presented profit opportunities to pharmacies and the pharmacists, we believed, would come in and take that strategy on board.

514    After an adjournment requested by Alphapharm’s counsel relating to an objection to a question of Mr Hurley about the same issue, Mr Hurley agreed that the view he held in 2008 that pharmacists would have no interest in a private supply of venlafaxine unless the product would shortly be listed on the PBS was also the view he held in 2009. I do not doubt this was Mr Hurley’s view in 2009. The strength of this view is apparent from other material which disclosed that Alphapharm believed that Sigma’s sales representatives must have been leading pharmacists to believe Sigma’s products would be PBS listed for Sigma’s private supply to be succeeding (as it apparently was). As Mr Hurley later said about pharmacists, “[t]hat’s the world they live in. Everything is PBS listed”.

515    Mr Hurley prepared a document about Sigma’s private market supply saying that Alphapharm should “make it clear to our customers that Sigma’s action is likely to fill them up with stock that is not currently ‘a’ flag [that is, PBS listed] and, as a result, can’t be substituted”. This document continued “[t]he purchase risk sits with the pharmacist. They may care to ask Sigma if they will refund them for costs, not replacement stock, if it turns out they are significantly delayed or unable to substitute the Sigma brand”, and “[p]harmacists should remember they have previously been bitten by Alendro, and Sigma’s venlafaxine offer may place pharmacists in a similar position”. The document also said “Alphapharm’s registration could allow us to launch our venlafaxine XR. However, our position is not to launch at present. It is our view that it is in the best interests of our pharmacy customers not to serve venlafaxine XR until we can confirm a PBS date”.

516    Despite this, when the topic again arose during his evidence on the following day, Mr Hurley gave this evidence:

We weren’t going to list on the PBS unless somebody else did it first. So we changed our strategy and decided to develop a private market strategy. That is what has changed.

These private markets still remained the same, didn’t it? I don’t understand your question.

Well, what I’m suggesting to you is – I won’t go back and put it again. I will do it a last time. If there was a risk they couldn’t shift it in a private market in May, the same risk obtained in July and August, so far as you were concerned. Do you agree or not? No, I think that we’re mixing up situations here. In May, the risk was if the product was not listed on the PBS on a promise of being listed on the PBS, then it would be a problem for the pharmacists because they may commit to a lot of stock on the basis of that belief that it’s going to be listed. In August, we would go to them with a totally different offer.

Let’s assume, on your answer there, they commit to stock. The stock – the reason they would be stuck with it is because they couldn’t move it in a private market? We believed that in July/August they could have moved it in a private market.

But nothing had changed about the private market in July or August compared to the private market in May, had it? Only the mindset we would have to convince the pharmacists about the mindset and how they were to approach the patients.

So it was really your change of mind, not the change of ? This is

what you thought the pharmacists might do? But this is what – this is what we do. I mean, Alphapharm took the substitution rate up over five years, nearly double the substitution rate in the market, through training and education of pharmacists. That’s what we did.

517    As best as I can explain it, it seemed that Mr Hurley did not want to say anything that might support Wyeth in establishing that Alphapharm’s private market launch of its products in July 2009 was not genuine. As will be explained, this concern was unnecessary because the primary issue is what Alphapharm would or might have done if not for the Alphapharm interlocutory injunction. What Alphapharm did in July 2009 is not necessarily what it would have continued to do if not for the Alphapharm interlocutory injunction.

518    I consider that the facts are these. Alphapharm was extremely concerned that during the anticipated litigation Wyeth would implement a strategy of encouraging doctors to switch patients from Efexor-XR to Pristiq (a compound which was patent protected) and then de-list Efexor-XR from the PBS, which would mean that no generic venlafaxine brand could be listed on the PBS. Alphapharm also believed private market supply of a generic when the originator brand was PBS listed would not be in the best interests of pharmacists and would be unlikely to succeed (a not unreasonable view given this kind of supply was unprecedented). But Alphapharm had to launch its products on the private market in any event because otherwise it had no chance of getting what it wanted from Wyeth, which was an undertaking from Wyeth not to de-list Efexor-XR as part of the price Wyeth would have to pay to obtain an interlocutory injunction. Knowing as it did that Wyeth would obtain an interlocutory injunction if it applied for it, whether private market supply would have succeeded or not was simply not critical for Alphapharm. There was no need for Alphapharm to give serious consideration to whether private market supply would succeed or not. Faced with the method patent and Wyeth’s allegations of infringement, Alphapharm knew that it could get what it wanted if it launched on the private market (an undertaking from Wyeth not to de-list Efexor-XR as the price of an interlocutory injunction as well as an undertaking as to damages) and would be restrained quickly by an interlocutory injunction from continuing its private market supply. Alphapharm’s concerns about the problems confronting private market supply were thus not material to its strategy. Further, insofar as pharmacists were concerned, Alphapharm’s policy was “sale or return” (that is, return with a refund) so Alphapharm was also not risking its relationship with its customers by doing what it did. This is why, as we will see, there is not a single piece of paper about Alphapharm’s launch, not a single document recording Alphapharm’s projections or budget for the launch, or even a document recording a single order from the launch.

519    Adding weight to these inferences is the fact that Alphapharm knew it would not seek PBS listing unless and until another generic obtained PBS listing. It was thus dependent on the decision-making of another generic and had no control over that decision-making. If Efexor-XR did not remain PBS listed, everything Alphapharm had done would have been wasted and the substantial opportunity it believed existed after expiry of the compound patent would be lost. Ensuring Efexor-XR remained PBS listed was fundamental for Alphapharm’s long-term interests.

520    I will return to the issue in more detail, but should say now that contrary to Wyeth’s contentions none of this means that Alphapharm was engaged in a sham (which is the only meaning I can give to Wyeth’s contention that the launch was not “genuine”). Alphapharm did launch its products on to the private market albeit in a confined manner and in the expectation (and, indeed, given the circumstances as they existed, I would infer hope) of being quickly restrained so it could obtain the undertakings it wanted. Alphapharm’s beliefs, intentions and strategies are relevant to what Alphapharm would have done if confronted by everything as it was in 2009 but for the interlocutory injunctions, but this does not mean that if Wyeth had not sought the interlocutory injunction against Alphapharm that Alphapharm would have continued with a confined private market supply, unsupported by any budgets, marketing, training or the like. What is obvious that, but for the interlocutory injunctions, Alphapharm would have been confronting a venture which it had never attempted before and had serious concerns about and that Alphapharm did not see Sigma’s example as any comfort because it thought Sigma’s sales representatives might have been holding out the carrot of PBS listing to pharmacists.

521    It should also be apparent from this why Alphapharm’s preclusion arguments about its supply of its products should not be accepted. In a case claiming equitable compensation under Wyeth’s undertaking, Wyeth cannot fairly be prevented from making the case that Alphapharm’s launch was the result of forensic considerations and does not represent what it would have done had the Alphapharm interlocutory injunction not been granted.

522    The other point which should be recorded immediately is that Wyeth’s contention concerned Alphapharm alone. It did not suggest, and nor could it, that Alphapharm’s lawyers did anything other than properly act on the instructions they received from Alphapharm. Alphapharm submitted that this of itself should put paid to Wyeth’s contention that Alphapharm’s launch was not genuine but I do not doubt Mr Hurley was well able to understand the effect of legal advice, formulate strategies to suit what he perceived to be in Alphapharm’s best interests and give instructions to Alphapharm’s lawyers accordingly.

523    For example, Mr Hurley agreed that any launch of an Alphapharm product involved the preparation of written material. He then appears to have appreciated where this line of questioning was heading because the fact is there is not a single document relating to Alphapharm’s private market launch of its products in July 2009. Mr Hurley then clarified that there would be written material if “sales representatives were launching the product” but not necessarily if sales managers did so because they could be given verbal instructions. This exchange ensued:

Even sales managers needed to know (a) what the product was which was being sold, didn’t they? Sales managers can be – there are fewer of them. They’re more in tune with the environment. And you can talk to them and communicate verbally. You don’t necessarily have to put things in writing.

You have to show them something, wouldn’t you? Not necessarily.

A picture of the product? Not necessarily.

Are you answering these questions in the way you are because you know that not a single piece of paper was produced in relation to the Alphapharm private launch? Yes, that’s true.

So there’s not one single piece of paper to confirm, is that right, that there was, in fact, any private launch of venlafaxine by Alphapharm? I don’t know whether there was a single sheet of paper or not, but there was no promotional material or written material provided to the sales manager.

You say that’s normal, do you? No. I’m saying that in this situation, we were trying to keep it close.

524    Again, I consider that Mr Hurley was concerned to shore up Alphapharm’s case.

525    In his affidavit from 2009 Mr Hurley referred to Alphapharm having received one order as a result of its private market launch. The order was not annexed to his affidavit. It has never been produced. Mr Hurley agreed that a company like Alphapharm kept records of orders but appeared incapable of agreeing to some basic propositions which he must have believed would be contrary to Alphapharm’s interests. This evidence was given:

So may we take it in the ordinary course if an order was received, there would be a document recording the order? There may or may not be put in the system at that time. The order was received by a sales manager. He may have not put it in the order system.

It’s not like going into a grocery shop and say, “Can I have a packet of Smarties”. That’s not how you order these sort of products, they are not verbal orders, are they? In the circumstance we are talking about here where he is sitting across the customer from key customers, with a leadership customers, they may, in fact, give him a verbal order.

And then it’s up to the sales manager and go back and potentially put it in the system.

526    Not annexing an order to an affidavit defending an application for an interlocutory injunction is one thing. The evidence in this case, that no such order can be found, is another. This evidence then emerged:

May we take it you don’t remember looking at a document before you saw that affidavit recording an order? Well it depends on your definition of an order. You are saying an order is something that is recorded in our computer system. I am saying an order is something that can be verbally given to a sales manager who is having further negotiations with the customer to maybe try to increase that order.

So it may not have even been a firm order. Is that right? I understand at that time, it was a firm order.

And that’s an understanding based on what somebody told you? Yes.

Do you remember who it was who told you? I – the key account manager for Chemist Warehouse. I think it might have been Tim Burrows.

What did he say to you? That he had received an order for – I think it was eight thousand five hundred and something thousand dollars.

On what terms? Did he tell you what the terms were, date of delivery? Was it dependent on PBS? No. It wasn’t dependent on PBS listing. There was no communication about PBS listing when we talk to the customers about private launch.

How do you know? You weren’t there? Because that was an instruction.

Who gave to whom? I gave to the sales managers.

How do you know they followed it? Well, that was their own – the responsible people within the company, and that’s why I restricted the launch to the sales managers because they could communicate more effectively with the customers and more likely to follow direction.

527    The important point for present purposes is that Mr Hurley disclosed none of this in his affidavit in 2009. In 2009 he represented that an order had been received. On the basis of the evidence that Alphapharm has no record of any such order and that Mr Hurley appears to have been relying on a conversation alone, I would not accept that Alphapharm in fact received an order in 2009.

528    When asked whether any modelling of Alphapharm’s private launch had been done, Mr Hurley said “I may have done it on a scrap of paper” but “I wouldn’t keep such things”. This was a launch which Mr Hurley described in his affidavit in 2009 in these terms:

Alphapharm launched Enlafax through a process by which four of its National Account Managers informed eleven key customers in verbal discussions of the availability of Enlafax XR. Under my supervision, the Account Managers were instructed to advise those customers that Enlafax XR would not be immediately listed on the PBS, but that it would be a non-PBS, or a "private launch".

529    The idea that Alphapharm would launch a product to 11 key customers without recording what results it expected to obtain from the launch other than on a scrap of paper which would not be retained is untenable. This confirms that Alphapharm’s launch on the private market to its 11 key customers bore no resemblance to what would ordinarily be understood to be a launch of a new generic product by a generic company in the expectation of significant profits. None of these matters were conveyed in Mr Hurley’s 2009 affidavit.

530    Mr Hurley’s tendency to convey incomplete or inaccurate material when he thought it in Alphapharm’s interests to do so is also apparent from the fact that he gave instructions for Alphapharm’s first PBS listing application to state that “we will forward as soon as possible, or by the 15th January 2009 at the latest, the following documents in support of our application”, which included the TGA approval and thus ARTG registration of the products. However, Alphapharm did not know it would receive TGA approval by 15 January 2009. Mr Hurley was “very hopeful” and “pushing hard” for that to occur, which may be accepted. But he knew of the difficulties Alphapharm was experiencing in achieving TGA approval of its products and nevertheless instructed that a clear representation be made to the Department on a serious matter, that Alphapharm would be able to forward such an approval by 15 January 2009 at the latest, when he could not possibly have been certain this would be so. Alphapharm could not do so and thus its PBS listing application lapsed.

531    Mr Hurley also said in in his 2009 affidavit, I infer at a time when he believed the legal advice would not be disclosed, that:

Once Alphapharm became aware of the Method Patent, it determined that the patent was invalid and not infringed by its proposed product. Accordingly, Alphapharm took steps to convince Wyeth that its product did not infringe. Ultimately Alphapharm commenced proceedings seeking to have the Method Patent revoked.

532    In the context of Alphapharm’s claims under the undertakings, the legal advice has now been disclosed. The summary of the advice was in fact to this effect:

There are several arguments against the validity of the broad method claims of the Method Patent, but we can anticipate potentially plausible counter-arguments to most of them. We rate the prospects of demonstrating invalidity, based on the information we have considered, and without having spoken to an independent expert, as better than even. In other words, although there are certainly lines of attack on the validity of the broad method claims, the vagaries of patent litigation are such that there is a substantial risk that Alphapharm will not be able to invalidate the method claims.

533    When shown the advice, without having been reminded of what he said about it in 2009, Mr Hurley gave this evidence:

you didn’t understand, but the – according to this advice, at least, that Alphapharm could proceed in relation to validity on anything other than that it was potentially finely balanced issue. Mallesons thought Alphapharm had the better of the argument but the vagaries of litigation were unpredictable? Yes.

Is that a reasonable summary? Yes.

534    In short, what Mr Hurley said about the advice in his 2009 affidavit bears little resemblance to the advice Alphapharm had in fact been given.

535    Mr Hurley instructed Alphapharm’s lawyers to send a letter to Wyeth’s lawyers on 8 July 2009 saying that Alphapharm “intends to begin supplying Enlafax XR shortly”. At the time Alphapharm had no stock in the country but Mr Hurley was keen to point out in oral evidence that it could have shipped stock in very quickly (a fact which I accept). Mr Hurley instructed that a further letter be sent on 17 July 2009 saying that Alphapharm had “today launched its products”. I have explained above the circumstances in which these instructions were given (namely, Alphapharm knowing it had to get Wyeth into court so that it could obtain the undertakings it wanted and hoping to be restrained quickly, so it did not matter whether the private market supply would succeed or not).

536    The relevant point for present purposes is that despite this, Mr Hurley repeatedly refused to agree to the obvious proposition that in order to achieve his objective of getting Wyeth to undertake not to de-list Efexor-XR, Alphapharm needed to get Wyeth into court. These exchanges occurred:

And what I’m suggesting to you is you understood that you needed to get Wyeth into court in order to extract from them the one protection you really wanted, namely, a protection against delisting. That’s right, isn’t it? That was an outcome of the interlocutory injunction, yes.

But that was what you understood you needed – I will put it again. You understood you needed to get Wyeth into court to secure the one protection you thought you really needed, namely, it was an undertaking from Wyeth not to delist. Do you agree? I agree that that was an outcome of it. Yes.

What I’m putting to you is you understood you needed to get Wyeth into court in order to get that protection? I would have preferred to launch the product and take the product to market and generify the product. I didn’t want an interlocutory injunction.

You would have preferred to have got that protection without having to go to court; that’s right? You would have preferred to get the protection of an undertaking from Wyeth not to delist without going to court? I don’t think they would give us such an undertaking, no.

Without it being a condition of interlocutory relief? I presume so.

And see, what I’m suggesting to you is what you were told by the lawyers was that in order to get an undertaking from Wyeth not to delist, you would have to persuade Wyeth that you were going to launch and get them take you to court and secure an interlocutory injunction. You understand what I’m saying? I understand what you’re saying.

And do you agree with me? Part of it.

Which part? That the advice was that if the interlocutory injunction was sought in the court, that we could get a guarantee or a potential guarantee not to delist venlafaxine from the PBS or Effexor from the PBS.

That was only likely to happen if you could persuade Wyeth that you were actually going to launch, as you understood it? I don’t know that.

what I’m suggesting to you is you were only going to get the guarantee if you could persuade Wyeth that you were actually going to launch because that would get Wyeth into court and you could get the undertaking from them. You understood that, didn’t you? I – do I have a document that says that? I don’t understand necessarily that. I mean, Wyeth could have sought an interlocutory injunction without us attempting to launch.

Don’t worry about what documents you may have or may not have. I’m just going you whether you agree with me with this proposition: you understood, I suggest, that Wyeth needed to be persuaded that you were threatening to launch in order to get Wyeth into court so you could achieve from them the undertaking not to delist. Do you agree with that? I don’t know that I understood that I had to convince Wyeth that I was going to launch for them to seek an interlocutory injunction.

Can I suggest to you you did understand that. You don’t agree with me? I don’t recall understanding that.

So it’s a possibility, you don’t deny you had that understanding but you don’t simply recall having that understanding? Yes.

537    I am prepared to accept that Mr Hurley did not recall what he understood in 2009, but I do not doubt he understood in 2009 that the only way of getting Wyeth to undertake not to de-list Efexor-XR was for Alphapharm to threaten and, if necessary, launch its products to prompt an interlocutory injunction application by Wyeth. But what is presently relevant is Mr Hurley’s repeated refusals to engage with the questions being put to him and preference to state nothing more than that if the method patent did not exist and Wyeth did not assert infringement of it Alphapharm would have done what it originally intended to do which was to apply for PBS listing and supply its products under the PBS (which I do not doubt but is irrelevant).

538    Mr Hurley’s evidence in response to questions about other aspects of the interlocutory injunction hearing in 2009 also appeared to be self-serving (or Alphapharm-serving). Ms Braithwaite of Wyeth gave affidavits in support of Wyeth’s interlocutory applications. In her affidavit about Alphapharm she noted that despite Alphapharm saying to Wyeth it had launched its products Wyeth’s sales representatives and other sources of information were unaware of “any commercial activity in the marketplace associated with Alphapharm’s Enlafax XR products”. When asked only if he understood Ms Braithwaite was saying that Wyeth had seen no evidence of Alphapharm attempting to sell its products, Mr Hurley volunteered this:

The representation that was made for the Alphapharm product was made to the key account groups at head office level, firstly, and therefore, you know, the chat around pharmacies may have been limited at that point of time. Secondly, Wyeth’s sales representatives, I would submit, would be GP sales representatives which were bobbing in and out of pharmacy without any particular relationship with the pharmacists and may not have got a truthful or a reasonable response from a pharmacy.

539    The more likely explanation is that Alphapharm’s launch consisted of the minimum activity it believed it could conduct whilst still being able to say that it had launched its products.

540    There was also evidence about Mr Hurley’s approach to serious commercial dealings in respect of instructions to Alphapharm’s lawyers resulting in letters of 31 July and 6 August 2009. In those letters Alphapharm said that it would undertake not to apply to list its products on the PBS unless it was possible to do so without triggering the 12.5% price reduction in Efexor-XR in exchange for Wyeth undertaking not to de-list Efexor-XR from the PBS. This exchange occurred, which again discloses the self-serving quality of much of Mr Hurley’s evidence and a lack of appreciation that what he saw as standard commercial operating mode others might see as approaching sharp practice:

And over the page, second paragraph from the top of that page. So, again, would you agree there’s an emphasis coming from the Alphapharm side through Mallesons on that delisting undertaking? Yes, there’s a trade-off against committing not to – for Alphapharm not to list on the PBS.

Yes, which you weren’t going to do anyway? They didn’t know that.

I beg your pardon? Wyeth wouldn’t have known that.

And you weren’t going to tell them? Of course not.

You weren’t going to tell them because you wanted to extract the undertaking not to delist; that’s right? No.

I beg your pardon? No, I wouldn’t discuss with anybody whether I was going to list a product – a competitor whether I was going to list a product on the PBS.

541    It is not that Alphapharm was obliged to let Wyeth know its intentions. It is that in giving his evidence Mr Hurley appears to have seen nothing even potentially amiss with Alphapharm seeking to obtain a valuable benefit from Wyeth based on what might have been a misapprehension about Alphapharm’s intentions confirmed and perhaps even induced by Alphapharm. This observation does not involve any criticism of Alphapharm’s lawyers. Alphapharm alone knew what is intentions were and the lawyers acted on Alphapharm’s instructions. The observation also does not involve any criticism of the terms of the letter.

542    There was then this exchange, which again shows Mr Hurley consistently answering questions by adding comments in a manner which served Alphapharm’s interests:

And what I want to suggest to you you understood the only leverage you had over Wyeth to extract from them an undertaking to delist was a threat to privately launch. Did you – do you understand what I’m saying? I understand what you’re saying.

And do you agree with me that that’s what you understood was the only leverage you had out of – over Wyeth to get a delisting undertaking – no delisting undertaking? No, I would prefer that Wyeth didn’t issue an interlocutory injunction, and we could get on in the marketplace and sell privately.

543    Apart from it being gratuitous, I do not accept that this was Mr Hurley’s preference in the actual circumstances with which Alphapharm was confronted in 2009. While his undoubted preference would be for the method patent and the anticipated infringement litigation not to exist so Alphapharm could seek PBS listing and supply under the PBS in the ordinary course, given the strength of his concern about Wyeth switching patients to Pristiq and de-listing Efexor-XR (let alone his belief that private market supply would probably be unsuccessful), the unavoidable inference is that his preference in 2009 given that the method patent did exist was for Alphapharm to do what it needed to do to get Wyeth into court, where the inevitable result would be for Alphapharm to be restrained, and Alphapharm could get the undertakings it wanted.

544    Mr Hurley’s evidence about how the products were launched to the 11 key customers also exposed difficulties. Mr Hurley refused to accept that he knew it was inevitable or highly probable that if Alphapharm launched Wyeth would apply for an interlocutory injunction (despite it having done so in respect of Sigma) but was forced to agree that he thought this was probable. This evidence was then given:

Did you say to the key customers, “Now, our – we have been told that we have to threaten to launch in order to get Wyeth into court. That’s why we are approaching you”? Of course not.

You didn’t say that? Of course not.

Did you tell them that, “We want you to acquire some product but, look, they’re almost – they’re probably going to injunct us, and we won’t be able to supply them”. Did you tell them that? Of course not.

Of course not? No.

Wouldn’t it be misleading to approach the customers, if you didn’t tell them that? We wanted to launch the product privately in the market to our key customers, and that’s what we – that was our undertaking at that point of time. I’m not talking about the legal case or injunctions.

But presumably, if you were engaging in a proper private launch, you would be telling them, “We are offering to supply you a product”? Yes.

All right? Yes.

So at the same time as the – let’s assume those words were coming out of the mouth of a sales representatives for one of these 11 key customers ? Yes.

You knew that it was probable ? Probable.

that there would be an injunction application, and if there was, the inevitable outcome was that the sales representative would not be able to honour what he was saying to the one of the 11 key customers, namely, “We will supply product”? Yes.

And what you say that you let – you sent people out into the marketplace to convey the message of an offer of supply without letting the key customers know that it was highly likely that the supply would not be able to be provided? Of course we didn’t say that to them.

Can I suggest – I suggest to you this idea of a private launch just didn’t happen in the way you suggest? I suggest to you that it did.

See, what I want to suggest is you understood that you needed to have some sort of launch in order to trigger an interlocutory injunction application, but it wasn’t a serious endeavour to try and sell a product? It was, because we approached our key customers, our major customers. We didn’t approach small pharmacies in the back of nowhere. This was the head office of our major customers.

Well, if they were key customers, they might understand your predicament and understand if you gave them a full explanation as to why you were approaching them? They would understand the predicament the product wasn’t going to be listed on the PBS.

545    What Alphapharm’s sales managers were instructed to say to the 11 key customers say will remain a mystery, but whatever was said I consider that it did not result in a firm order for the products. Mr Hurley gave this evidence:

Your evidence is that this private launch proceeded for a period of middle of July to about 25 July, which is about – 25 August, about six weeks? Yes.

On the working assumption that they could return it if they couldn’t move it and they weren’t told that there was an impending injunction application and they may not be able to sell it. That’s your evidence to the court? Yes.

And with all those – in all those circumstances, according to your evidence you managed to get just one order? Yes.

Of $8,512 which I think the price was $16, you assumed? Yes.

That is 532 units? Is it? Okay.

546    When asked how this was to be reconciled with his estimate first given in 2009 that Alphapharm’s maximum market penetration if no other generics were in the market was 13.9% of the total market, Mr Hurley said that Alphapharm had not “applied any marketing program against this, at this point of time”. This again discloses that what Alphapharm did in 2009 is not a guide to what it would or might have done but for the interlocutory injunctions.

547    In conclusion, Mr Hurley’s evidence about contested issues or what he perceived might be contested issues contained so many difficulties that, contrary to Alphapharm’s submissions, it cannot be given weight. As a result, it is not fruitful to deal in detail with Alphapharm’s submissions to the extent they relied on Mr Hurley’s evidence about contested issues. His evidence is not a reliable foundation for any inference about a contested issue.

Evaluation of the probabilities and possibilities

548    Alphapharm was unaware of the method patent when it decided to pursue the opportunity it perceived would exist to supply generic extended release venlafaxine products on expiry of the compound patent in December 2008. In September 2007 Alphapharm applied for ARTG registrations for its products, which were to be sourced directly by Alphapharm from Pharmathen. In the ordinary course Alphapharm proposed to apply for its products to be listed on the PBS after they had been registered on the ARTG and to supply its products only under the PBS. Unlike Sigma, Alphapharm did not plan to launch its products in two stages, first on the private market for a period of some months, to be followed by PBS listing and supply under the PBS. To this end Alphapharm applied for PBS listing on 1 December 2008 but this application lapsed because Alphapharm had not obtained ARTG registration of its products. Because Alphapharm believed that the only impediment to its plans was the compound patent scheduled to expire in December 2008 it did not need to seek the approval of Mylan to apply for PBS listing because it did not perceive its launch to be at risk.

549    To obtain ARTG registrations for its products Alphapharm was required to submit a bioequivalence study. It did so and, after substantial time, effort and expense, obtained ARTG registrations for its Enlafax XR products, 150mg and 75mg, on 30 April 2009.

550    In late March 2009, however, Alphapharm became aware of the method patent.

551    Alphapharm accepted that once it became aware of the method patent there was no prospect that it would have been the first to apply to list its generic products on the PBS. It was not willing to trigger the 12.5% price reduction of Efexor-XR by being the first to obtain PBS listing or by obtaining PBS listing at the same time as any other generic. Alphapharm could hardly contend to the contrary given that in his 2009 affidavit Mr Hurley had said that because Wyeth alleged that Alphapharm’s products infringed the method patent:

Alphapharm has decided that it cannot proceed with a PBS listing which would lead to a 12.5% price reduction being required of Wyeth under the PBS. Were Wyeth to be successful in these proceedings, the possibility that Alphapharm may have to compensate Wyeth for that price reduction represents a significant commercial threat to Alphapharm and an amount which would exceed the likely profits which could be made from sales of Enlafax.

552    It will be apparent that it was the mere allegation of infringement which caused Alphapharm not to seek PBS listing, which has nothing to do with the interlocutory injunctions.

553    Wyeth submitted this:

The evidence of Alphapharm’s Chief Executive Officer at the relevant time, Mr Montgomery, is also specific on this point. He did not want Alphapharm to trigger the 12.5% price reduction for being the first generic listed on the PBS (or indeed be an “equal first generic” and share that responsibility with other suppliers), “and so [he] would not have caused Alphapharm to proceed to list on the PBS”. Mr Montgomery quantified the extent of the risk at “12.5 million per year until patent expiry” (based on annual sales of $100 million and the mandatory price reduction of 12.5%). The Method Patent was not scheduled to expire until 2017, meaning that the potential exposure was in the order of $100 million. Mr Montgomery’s position was, therefore, that even a proportion of that amount was an unacceptable level of exposure.

554    Perhaps uniquely in terms of the generics’ evidence about PBS listing, Mr Montgomery’s evidence accords with commercial rationality. The fact that he assessed the potential liability of PBS listing to be in the order of $100 million also undermines Mr de Alwis’s unconvincing attempts to avoid this proposition. Further, it supports my conclusions that the evidence (particularly of Mr de Alwis and Mr Upiter) that Sigma and Generic Health would have sought PBS listing but for the interlocutory injunctions should not be accepted. The fact that Sigma stood to gain more benefit than Alphapharm from PBS listing may be accepted but confronted with a potential $100 million exposure, this evidence about Alphapharm’s position in 2009 is strong contemporaneous evidence of the reasoning process of a commercially rational decision-maker.

555    The chance that Alphapharm would have sought PBS listing of its products at any time before the Sigma interlocutory injunction, accordingly, depends on Sigma or some other generic having first obtained PBS listing. To foreshadow further conclusions below about Generic Health and other generics having sought PBS listing at any time earlier than they did, I consider that Alphapharm’s prospect of having sought PBS listing for its products before the Full Court’s judgment in October 2011 depends solely on the possibility that Sigma might have obtained PBS listing on 1 December 2009. It necessarily follows that if Alphapharm needed to prove that it would have listed its products on the PBS at any time before it in fact did so on the balance of probabilities, Alphapharm’s claim based on PBS listing and supply of its products must fail. If, as I consider to be so, the prospect of Alphapharm applying for PBS listing after Sigma had obtained PBS listing is the relevant issue then that prospect must be assessed along with Alphapharm’s claim that in any event it would have supplied its products on the private market but for the interlocutory injunctions.

556    I accept Wyeth’s proposition that contrary to Alphapharm’s submissions it “is clear that Alphapharm had not previously undertaken a private launch of a product that was PBS listed by the innovator”. Wyeth provided a convenient summary of the evidence disclosing Alphapharm’s concerns about private market supply and what Sigma was doing which I adopt as follows:

(a)    An email chain dated 4 May 2009 (originating with a pharmacist and reaching upper levels of Alphapharm management, including Mr Hurley) contained commentary on SPAL’s private market offer, which was critical of Alphapharm’s competitor for using language that “conjures up the image of PBS listing” where none was imminent, and suggested that “Pharmacists should be asking [SPAL] specifically when PBS listing will be”.

(b)    An email dated 5 May 2009 from a State Sales Manager to her sales team members suggested that they tell Alphapharm’s customers to ask SPAL questions directed to the true nature of its private launch, which presumably it was hoped would make the take-up of an offer from SPAL less appealing:

1.    What is the date for Sigma[’]s product to be PBS listed?

2.    Who carries the risk associated with any inventory should the product not be PBS listed?

3.    Is the product A flagged?

(c)    A document that was prepared for Alphapharm sales representatives emphasised that “Sigma is selling this product into Pharmacy with NO confirmation of a PBS listing. (You may care to ask your customer if Sigma can confirm or promise a date for PBS listing)” and, in contrast, stated that “Alphapharm’s registration could allow us to launch our ENLAFAX-XR, however our position is not to launch at present. It is our view that it is in the best interests of our Pharmacy customers not to sell ENLAFAX_XR until we can confirm a PBS date”.

(d)    An Alphapharm “coaching tool” for sales representatives (which was distributed in early May 2009), similarly stated that “Alphapharm could have also launch[ed] our ENLAFAX-XR today however we took the decision not to launch as it is our view that it is in the best interest of our Pharmacy customers not to sell in the stock until we are able to confirm a PBS date. That way you are able to best manage your stock and prepare to substitute EFEXOR XR aggressively when the time comes”.

(e)    An email chain dated 13 May 2009, which originated with an Alphapharm sales representative and was escalated by a State Sales Manager to the Director of the Medical Division (Mr Robert Richardson), included bemusement at the idea that SPAL would structure a private offer to substitute a PBS listed product (“However stupid that seems!”), and an encouragement of patience in the face of SPAL’s efforts (“I am frustrated by this as well, but we are following a strategy that we believe is correct, so it is important we hang in there”).

557    The strategy that Alphapharm believed to be correct at this time, May 2009, was not to move immediately to private market supply without knowing when PBS listing could be obtained. This necessarily would have been Alphapharm’s position under any relevant hypothesis because Wyeth did not seek the interlocutory injunction against Sigma until 22 May 2009. Even if Wyeth’s threats to seek interlocutory relief could all be disregarded (which I do not accept), this would have been Alphapharm’s position because at the time it believed that what Sigma was doing was contrary to the best interests of pharmacists and would give Sigma no longer-term advantage because the pharmacists would be stuck with stock they could not sell.

558    The following propositions by Wyeth should also be accepted about Alphapharm’s change of mind in July 2009 to launch its products on the private market, all of which are in stark contrast to Alphapharm’s usual practice when launching a new product:

(a)    First, there was no strategy document setting out the benefits and challenges for the unprecedented private launch, or addressing the circumstances that had caused Alphapharm to reconsider the stance it had taken in the face of its principal competitor’s marketing efforts over several months….

(b)    Second, no modelling was done of the financial impact of a private launch of venlafaxine….

(c)    Third, there was no promotional documentation produced to support sales representatives or sales managers in altering the message that had been conveyed on Alphapharm’s behalf in the period up to and including May 2009…

(d)    Fourth, there was no documentary record of a positive reception from pharmacy customers to Alphapharm’s supposed change of position, and valuable private market offer. In particular, there are no documents or records substantiating any order placed in response to the verbal offers said by Mr Hurley to have been made by Alphapharm’s sales managers

559    Wyeth also noted that Mr Montgomery’s evidence was that all launches at risk required Mylan’s approval but there is no evidence that Alphapharm sought or obtained Mylan’s approval for its 2009 private market launch. Alphapharm submitted that this proposition could not be advanced by Wyeth because it was not put to Mr Montgomery or Mr Hurley. I disagree. Mr Montgomery and Mr Hurley did say that all launches at risk required Mylan’s approval but this evidence was evidence about the general policy position. They did not suggest that they had sought and obtained Mylan’s approval for what occurred in July 2009. There is no evidence of any of the kind of information that Mr Montgomery identified as necessary to submit to Mylan for approval for an at risk launch when, had approval been sought and obtained, such evidence would be expected in the ordinary course. Mr Montgomery said that the process from 2007 when Mylan acquired Alphapharm was “a more comprehensive, formal process for the approval of product launches by Alphapharm” than previously and, in particular at risk launches “required that Alphapharm set out the risks and benefits of the launch”. There is no evidence suggesting this occurred in 2009.

560    Wyeth submitted that:

the evidence before the Court does not support a finding that in mid-2009 Alphapharm was preparing to make, or had made, a private launch of its generic venlafaxine as a serious commercial endeavour. On the contrary, the absence of documentary support for the case Alphapharm now seeks to advance undermines the veracity of that core contention.

561    If by “serious commercial endeavour” Wyeth means an endeavour in the hope that the supply could continue unrestrained by Wyeth and in the expectation that Alphapharm would make material profits from the endeavour, I agree. This does not mean, however, that Alphapharm necessarily would have taken the same approach if on 22 May 2009 Wyeth had not sought an interlocutory injunction against Sigma and, as relevant on my approach, on 14 August 2009 had not sought the interlocutory injunction against Alphapharm. At least one reason for this is that Sigma would have been selling its products on the private market leading to a high likelihood of increasing queries from Alphapharm’s customers about Alphapharm’s position and associated commercial pressure on Alphapharm.

562    Alphapharm’s first order for generic venlafaxine products from Pharmathen was made on 22 May 2008 which pre-dates Alphapharm’s discovery of the method patent. A second version of the order form (which removed a dosage strength for which Alphapharm did not receive ARTG approval) re-scheduled delivery for 4 July 2009. That order must have been deferred on Alphapharm’s instructions before 4 July 2009 (and thus before Alphapharm was subject to an interlocutory injunction) because the products under that order did not arrive until 20 December 2011. It is not clear whether the order was deferred before or after 22 May 2009. If before it was not caused by Wyeth having sought interlocutory relief against Sigma on 22 May 2009. Nor was it caused by the Sigma interlocutory injunction granted on 3 June 2009 and it could not have been caused by Wyeth seeking the Alphapharm interlocutory injunction on 14 August 2009 or the operation of that interlocutory injunction which was granted on 25 August 2009. Mr Williams, Vice President Global Business Development of Pharmathen, said in an affidavit that “Alphapharm advised Pharmathen that it was not in a position to take delivery of the Product due to litigation with Wyeth”.

563    I consider it overwhelmingly likely that the order was deferred because of the mere existence of the method patent and anticipated litigation rather than the Sigma interlocutory injunction (let alone the operation of the Sigma interlocutory injunction which had nothing to do with Alphapharm’s products). But, as will be explained, this does not mean that Alphapharm’s claim for the products it had to destroy must fail. It means only that Alphapharm did not have stock available for immediate supply to pharmacists when it launched its products in July 2009 and would not have had stock available then irrespective of the interlocutory injunctions. But for the Alphapharm interlocutory injunction, however, Alphapharm would have been free to consider its position from time to time in response to circumstances and necessarily would have done so given Sigma’s continuing private market supply up to 1 December 2009.

564    Wyeth submitted that:

Alphapharm’s contentions that it did in the real world make, and would in the counterfactual world have made, a genuine attempt to launch its generic venlafaxine products on the private market should be rejected. Both contentions fail on the evidence, which rises no higher than self-serving assertion by Mr Hurley, not properly corroborated by documentary evidence, and contradicted by a careful reading of Mr Montgomery’s evidence.

565    I have already accepted above that what Alphapharm did in 2009 was not done in the hope that the supply could continue unrestrained by Wyeth and in the expectation that Alphapharm would make material profits from the endeavour. As such, I agree that it is not a reliable evidentiary foundation for what Alphapharm would or might have done if on 22 May 2009 Wyeth had not sought an interlocutory injunction against Sigma and on 14 August 2009 had not sought an interlocutory injunction against Alphapharm so that Sigma would have been continuing its private market supply with apparent success.

566    Alphapharm submitted that six matters supported the inference that it would have continued to sell Enlafax XR privately.

567    Alphapharm said that:

First, on 19 June 2009 Alphapharm filed proceedings NSD 596 of 2009 seeking revocation of the Method Patent. That indicates a firm intention to sell Enlafax XR and the belief that the Method Patent was invalid.

568    It may be accepted that this indicates a firm intention to sell Enlafax XR if the method patent was declared invalid. It does not say anything about Alphapharm’s intentions before such a declaration.

569    Alphapharm said that:

Second, Alphapharm contested the application for the AII [the Alphapharm interlocutory injunction]. It is a necessary premise of Wyeth’s submission that Alphapharm would not have sold Enlafax XR even in the absence of the AII, that Alphapharm went to the expense of contesting the AII without intending to sell Enlafax XR.

570    However, Alphapharm needed to contest the interlocutory injunction in order to ensure that its primary concern that Wyeth not de-list Efexor-XR would be addressed by Wyeth giving undertakings to that effect. Sigma had not obtained such an undertaking. Alphapharm had tried and failed to negotiate a deal to this effect with Wyeth. There would be no incentive for Wyeth to offer an undertaking not to de-list Efexor-XR unless it was forced to do so. From Alphapharm’s perspective, the only way to force Wyeth to do so was to defend the interlocutory injunction application.

571    Alphapharm said that:

Third, Mr Hurley’s understanding that Alphapharm’s assessment that the Method Patent was invalid and not infringed was vindicated in so far as invalidity was determined by the Full Court.

572    Vindication by the Full Court cannot be relevant to what Alphapharm would or might have done in 2009. In any event, on 7 May 2009, a file note of a discussion with Alphapharm’s lawyers says “much better non-infringement” than the lawyers had initially believed due to the hydrogel technology argument, but another file note of the same meeting records a need to “ask a formulator”. A file note of 28 May 2009 records no more than that “we say non-infringement” but this was “not necessarily enough to outweigh” Wyeth’s case for an interlocutory injunction as the Court would not want to deal with that argument in the context of an interlocutory injunction, and the result may be different from the Sigma interlocutory injunction due to “good non-infringement/validity” but “can’t guarantee”. Another file note of the same meeting records only that there was an “arguable”, “strongly arguable even” case that the method patent was invalid. Subsequently, Alphapharm had counsel’s advice that the arguments would not avoid an interlocutory injunction. In any event, it may be accepted that by July 2009 Alphapharm believed it had a good case of non-infringement and invalidity of the method patent but the legal advice it received, as would be expected, never suggested that it was certain to succeed and was always subject to the kind of caveats that lawyers routinely include in advice given the inherent risks and uncertainties of litigation.

573    Alphapharm said that:

Fourth, Alphapharm was sufficiently confident in its assessment that the Method Patent was invalid, such that even after being unsuccessful on this ground at first instance, it went to the considerable expense of pursuing an appeal

574    Again, this says little if anything about what Alphapharm would or might have done in 2009 but for the interlocutory injunctions.

575    Alphapharm said that:

Fifth, after being successful on the appeal, Alphapharm immediately commenced selling Enlafax XR, and listed Enlafax XR on the PBS on the first available date, namely 1 April 2012, notwithstanding that an application for special leave had been foreshadowed and filed by Wyeth. In that period, the Court would infer from the fact of selling on the private market and listing on the PBS that Alphapharm was prepared to and did place itself at risk of being liable to Wyeth for damages for patent infringement in the event that the High Court granted special leave to appeal and allowed the appeal.

576    As discussed elsewhere, this risk is of a different kind altogether from the risk as it existed and would have existed in 2009. Alphapharm had the benefit of a fully reasoned judgment from the Full Court. It knew that there was no right of appeal. It would have rightly assessed the risk after the Full Court’s judgment as negligible or trivial which it could not have done in 2009 (and the same will be said for Generic Health which put a similar submission).

577    Alphapharm said that:

Sixth, Alphapharm’s position in relation to the risk of damages is inherently plausible. Alphapharm’s position, apparent from its evidence filed in these proceedings and by inference from the objective steps that it took in the course of the litigation, reflects a nuanced cost benefit analysis which indicated that the benefit of selling Enlafax XR, including making PBS sales, outweighed the cost/risk in circumstances where Alphapharm did not trigger the 12.5% price drop by being the first generic to list.

578    In fact, and as explained, Alphapharm did no cost-benefit analysis of its 2009 launch at all but if not for the interlocutory injunctions I consider it would have done so as part of an overall analysis of what it should do. If the Sigma interlocutory injunction had not been sought on 22 May 2009 then I cannot imagine that Alphapharm would have conducted itself as it did in July 2009 with its confined private market launch of its products, with no modelling, no analysis, no written documents, no marketing, and as I have said no serious expectation that it was undertaking a commercial endeavour that would continue or yield material profits.

579    If, as I consider, the seeking of the Sigma interlocutory injunction cannot be disregarded then while Alphapharm would have acted as it did up to 14 August 2009 it must also be posited that on 14 August 2009 Wyeth did not prosecute its claim for interlocutory relief against Alphapharm. In other words, Alphapharm would have been in the same position one way or another albeit a month or two earlier but for the Sigma interlocutory injunction. That is, it would have to decide what to do in circumstances where Wyeth asserted infringement, was litigating to that end on the basis it would claim final injunctions and damages against Alphapharm, Alphapharm was not willing to take the risk of PBS listing and believed that private market supply (as Sigma would have been undertaking) would not be in the interests of its customers, and Alphapharm could not negotiate a deal with Wyeth about not supplying in exchange for undertakings including an undertaking by Wyeth not to de-list Efexor-XR.

580    Before discussing this central issue of what Alphapharm would have done in these circumstances I need to deal with some of Alphapharm’s other submissions. Alphapharm submitted that exhibits 44, 45 and 46 would not have existed but for Wyeth seeking the Sigma interlocutory injunction. These are the documents disclosing Alphapharm’s concerns about what Sigma was doing. They are dated around 13 May 2009. The Sigma interlocutory injunction hearing was on 22 May 2009 and the Sigma interlocutory injunction was not granted until 3 June 2009. Contrary to Alphapharm’s submissions, it follows that there is no relevant hypothesis available before 22 May 2009. There is only what in fact occurred. Submissions to this effect overlook the fact the sole focus of the undertakings is the operation of the interlocutory injunctions. While I have been prepared to take into account the seeking of the interlocutory injunction on the day each was heard, the focus of the undertakings on the operation of the interlocutory injunctions must always be kept in mind.

581    Alphapharm submitted this:

Further, the circumstances in May 2009 were significantly different from the circumstances that Alphapharm faced in the real world after 3 June 2009. After the SII [Sigma interlocutory injunction] had been granted, it was certain that Sigma would not PBS list in the short or medium term. As Alphapharm was not willing itself to trigger the 12.5% price reduction, it was also then a certainty that Alphapharm would not PBS list in the short or medium term unless another generic PBS listed, and there were none on the horizon at that time to Alphapharm’s knowledge.

582    I accept that after 3 June 2009 and when it obtained counsel’s advice Alphapharm would have known that it had no real prospect of avoiding an interlocutory injunction if Wyeth sought one.

583    Alphapharm submitted that:

Although a private launch with no immediate prospect of a PBS listing was not the optimal outcome for both Alphapharm and pharmacists, in Alphapharm’s judgment that option was much better than no launch at all.

584    This assumes that Alphapharm in fact made such a judgment in 2009 when I do not accept that it did. Alphapharm, as noted, did no analysis at all before its 2009 launch, I infer because it knew that it would not be supplying for long.

585    Alphapharm’s submissions about its mid-2009 launch were unconvincing. I deal with the material points below, but none of this means that Alphapharm’s case must fail.

586    Mr Hurley did not give “clear evidence about his recollection of Alphapharm receiving orders for its generic venlafaxine products and that those orders were not dependent on Alphapharm listing its products on the PBS. He recalled one order of which there is no record in circumstances where Alphapharm had no product available and could not give a supply date.

587    Alphapharm also submitted this:

To take an example, Wyeth’s position at all times has been that it could not maintain an interlocutory injunction against one generic if another generic was on the market. Accordingly, in the counterfactual that no interlocutory injunction was sought or obtained against Sigma, Wyeth would never have sought, still less obtained, an interlocutory injunction against Alphapharm. Thus, in that counterfactual the detailed correspondence between Mallesons and Gilbert + Tobin would never have occurred.

588    This, however, assumes away far too much given that the undertakings under which compensation is sought concern only the operation of the interlocutory orders.

589    Alphapharm submitted that “if Alphapharm’s private market launch was merely some kind of ruse, it could have achieved such a ruse without exposing itself to the potential embarrassment of selling to its 11 key customers. The ruse could presumably have been achieved by going to one minor customer”. I have already said that what Alphapharm did was not a ruse or sham but that does not mean it was undertaking a serious commercial endeavour to supply its products in the expectation of being able to continue to do so for material profit.

590    Alphapharm submitted that:

there is absolutely no evidentiary basis for the suggestion that Mallesons (or any other adviser) ever told Alphapharm “that we have to threaten to launch in order to get Wyeth into court”. No such suggestion was put to Ms O’Connell, who was cross-examined. Alphapharm’s legal advice which raises the issue of seeking those undertakings from Wyeth, was given in a context where it was assumed that Wyeth would seek an interlocutory injunction against Alphapharm. There was no suggestion in that legal advice that Alphapharm should induce Wyeth to seek an interlocutory injunction.

591    This submission conflates a number of matters. One, I agree it was not and could not be suggested that Alphapharm’s lawyers suggested Alphapharm should induce Wyeth to seek an interlocutory injunction. Two, an interlocutory injunction would not be ordered absent a real threat of allegedly wrongful conduct. While a party may consent to such orders being made against it, orders would not be sought or made without evidence of a genuine threat. Everything Alphapharm’s lawyers said must have been premised on that fundamental proposition. In 2009 Alphapharm would have known or assumed that if it could not negotiate a deal with Wyeth about not de-listing Efexor-XR it had to present a credible threat of allegedly wrongful conduct before Wyeth could or would move for interlocutory relief and thus Alphapharm could address the risk which was its primary concern, of Wyeth de-listing Efexor-XR.

592    Alphapharm submitted that:

the objective implausibility of Alphapharm undertaking such a complicated strategy of a ruse, and the seriousness of the allegation, tends strongly against it being true. It is a serious allegation to suggest that Alphapharm knowingly instructed its solicitors to misrepresent the position to Wyeth in relation to its launch plans in the letter of 22 July 2009 for strategic reasons. There can be no suggestion that Alphapharm’s solicitors would have knowingly participated in making misleading statements (and no such proposition was put to Ms O’Connell, the responsible partner in 2009, in the course of her cross-examination), and nor is there any basis for thinking that Alphapharm would have kept its solicitors less than fully informed about its true plans.

593    Alphapharm is not to be criticised for responding to Wyeth’s contentions and Wyeth did contend that Alphapharm’s launch in July 2009 was not genuine. As discussed, however, Wyeth’ description is a mischaracterisation. Alphapharm did what it did. It said it launched its products and it did so. However, I consider that it must be inferred that it did not necessarily do so expecting that it would be able to continue to do so in that confined and artificial manner for the purpose of making a profit. That inference is not only objectively plausible but in my view unavoidable on the evidence. As noted, it had no budget, no training material for pharmacists, and no marketing. However, what it did was not a ruse or sham and thus issues of misrepresentation and seriousness of the allegation do not arise.

594    Alphapharm submitted that:

In Ms Braithwaite’s affidavit of 30 July 2009, she says:

“I am aware from my knowledge that Alphapharm is also an established and significant manufacturer of generic medicines in Australia and has a large salesforce, divided into three teams that market to retail pharmacists, doctors and hospitals. As such it also has the capacity to quickly achieve significant market share for venlafaxine products as are discussed in paragraph 56 of my first affidavit, with the consequences which are discussed in paragraphs 57 and following of my first affidavit.”

In her affidavit of 12 August 2009, prepared by her after reading Mr Hurley’s affidavit of 10 August 2009 and learning that there was a private market only launch in which 11 key customers had been contacted, and only one order had been finalised, Ms Braithwaite nevertheless maintained her evidence from her 28 July 2009 affidavit that Alphapharm’s private market activities would cause Wyeth irreparable harm unless Alphapharm was restrained… In other words, Wyeth’s evidence, prepared in the knowledge of and in response to Alphapharm’s evidence that it had contacted 11 key customers, was that Alphapharm’s anticipated private sales would cause Wyeth irreparable harm. Indeed, Ms Braithwaite expressly contested Mr Hurley’s proposition that on the private market launch Alphapharm would be likely to attract a maximum of 30% of the non-concession market. Ms Braithwaite maintained the view in her earlier evidence that Alphapharm could achieve half of the total market.

595    As will be explained later, Ms Braithwaite’s evidence is important but this aspect of it is difficult to follow. For present purposes, it is sufficient to say that it must be inferred that Ms Braithwaite was assuming that Alphapharm would engage in a full-scale commercial supply of its products in 2009 if not restrained, despite her apparent belief that Alphapharm’s launch was not of that kind (as it was not), and that other generics would then also enter the market. Ms Braithwaite also plainly did not consider that a private market supply was likely to fail. To the contrary, she believed it would succeed in taking significant market share from Wyeth.

596    Further, Wyeth had to assume that Alphapharm was or if not restrained would be engaged in a serious commercial endeavour and that if there were no generic competition Alphapharm was operating on the basis that it could achieve a maximum market share of 13.5%. This was what Mr Hurley said in his 2009 affidavit. It cannot be doubted that if this occurred Wyeth’s belief that it would suffer irreparable harm was reasonable. This does not mean that the evidence now available is to be disregarded.

597    Alphapharm submitted that:

Despite Wyeth being willing to put an incomplete picture to Mr Hurley in cross-examination as to what Ms Braithwaite might have thought, Ms Braithwaite was never called. The Court can safely assume that had she been called, Ms Braithwaite would not have advanced what is now put as Wyeth’s case. The appropriate inferences include that Ms Braithwaite would not have indicated that she had been misled about the scope of Alphapharm’s private launch plans, but rather that (as her affidavits said in 2009) she considered that a launch to 11 key customers and the taking of one order was the first stage of an activity which, if not enjoined, would lead to extensive sales on the private market by Alphapharm.

598    This again must be unravelled. In 2009 Ms Braithwaite had no option other than to believe that Alphapharm was or if not restrained would be engaged in a serious commercial endeavour and that if there were no generic competition Alphapharm was operating on the basis that it could achieve a maximum market share of 13.5%.

599    Alphapharm submitted this:

Wyeth’s contention is audacious and wrong. By that contention, Wyeth seeks to impeach the judgment it obtained on the interlocutory application, without calling a single witness who swore an affidavit on the interlocutory application to suggest that in light of new facts known to them, the evidence they gave in support of the interlocutory application would have been different.

600    I do not agree that this has anything to do with impeaching the Alphapharm interlocutory judgment. It was not a sham for Alphapharm to tailor its launch of its products to the circumstance of knowing it would be restrained. Its launch was not a hoax or sham. However, it was not what it would have done but for the anticipated interlocutory injunction against it. Alphapharm did what it did and Wyeth and the Court acted on that basis. In 2009 Alphapharm was never called upon to decide what it should do but for the interlocutory injunctions. This is a matter of inference from the evidence. Evidence about Alphapharm’s strategies, beliefs and intentions in 2009 is part of that evidence. Alphapharm’s suggestion that Wyeth should have called Ms Braithwaite to say what evidence she would have given in 2009 if she knew in 2009 about all of the evidence now available concerning Alphapharm’s strategies, beliefs and intentions in 2009 is particularly baffling. One, the starting point for this kind of analysis is that Wyeth did not seek the interlocutory injunction on 14 August 2009. Two, Alphapharm’s approach in 2009 was based on the correct belief that it would be restrained. What it would have done but for the interlocutory injunctions is not necessarily the same as what it did. As such, this kind of evidence, in effect what would Ms Braithwaite now says she would have said in 2009 if she knew in 2009 about the evidence available only now, is irrelevant.

601    Alphapharm referred to various aspects of Mr Hurley’s evidence as if they all supported the proposition that he had decided a full-scale commercial supply on the private market would be in Alphapharm’s best interests. In fact, the evidence quoted was directed to Alphapharm’s preference not to have to confront the litigation. Even the last piece of evidence that, “I would have preferred to launch the product and take the product to market and generify the product. I didn’t want an interlocutory injunction”, is not evidence that Mr Hurley wanted to supply on the private market only. What he undoubtedly wanted was to be able to “generify” venlafaxine by PBS supply in the ordinary course but he could not do that because of the litigation (rather than the anticipated interlocutory injunction).

602    Alphapharm submitted that:

Wyeth approaches the matter as though Alphapharm acted by unitary motivation. In fact, like all sophisticated and well advised commercial parties, Alphapharm had several motivations. The primary, and most compelling motivation, as indicated by Mr Hurley’s answers extracted above, and as reflected in any rational commercial assessment of the situation before and after it knew about the existence of the Method Patent, was to enter the market both privately and on the PBS. After Sigma was enjoined, and it became clear Alphapharm would not list on the PBS, its primary motivation was to sell privately (and to list on the PBS once another party had listed).

603    I agree that multiple motivations are likely. Otherwise, however, this submission is simply wrong. Alphapharm’s rational commercial assessment after the method patent was that it was not going to seek PBS listing unless and until another generic had obtained PBS listing. It also made no rational commercial assessment about its private market launch in 2009 because it did not have to, knowing (as it did) that it would be quickly restrained. Accordingly, its primary motivation in fact was not and could not have been to supply on the private market. Its primary motivation in fact was to commence supply on the private market to prompt Wyeth into seeking interlocutory relief so that it could argue that the price of any interlocutory injunction should be for Wyeth not only to give the usual undertaking as to damages but also to undertake not to de-list Efexor-XR. If interlocutory relief had not been sought on 14 August 2009, however, Alphapharm would then have had to re-consider its position having regard to all of the circumstances at that time. Alphapharm would have been in the same effective position (albeit earlier in time) had Wyeth not sought the Sigma interlocutory injunction on 22 May 2009.

604    Alphapharm submitted that:

Mr Hurley was cross-examined further to the effect that fighting the interlocutory injunction from Alphapharm’s point of view had the potential to serve two useful purposes for Alphapharm, one of which was said to be extracting an undertaking in relation to delisting Efexor XR in a form which Alphapharm wanted. Mr Hurley candidly admitted that was a relevant purpose. It was neither improper nor unexpected to attempt to make the best of an adverse situation in which interlocutory relief was sought against the company and was likely to be granted. However, it was never put to Mr Hurley that the cross-undertaking not to delist was the sole useful purpose of Alphapharm fighting the interlocutory injunction, and his answer at T582.1 – 11 could not be so taken, particularly in light of his answer at T582.20 which rejected the second suggested useful purpose offered by the cross examiner. Further, Mr Hurley consistently gave evidence of the kind he gave at T582.25 – 27:

But I’m suggesting your defence of the interlocutory injunction proceedings, as you understood it, wasn’t because you had any serious intention to pursue in any concerted fashion a private launch?---We did have that intent.

Again, there is no reason why that evidence would not be accepted, and every reason why it would be accepted, having regard to its consistency with Mr Hurley’s contemporaneous sworn affidavit evidence in 2009.

On any view, Alphapharm’s primary purpose of contesting the interlocutory application was the prospect, however slim, that Alphapharm would succeed in resisting the interlocutory injunction and be free to sell Enlafax XR on the private market (in the absence of a competitive generic product), even if the legal reality was that it was highly likely not to succeed.

605    I agree that Alphapharm did not act improperly. I disagree that it had to be put to Mr Hurley that Alphapharm’s sole purpose in commencing private supply was to extract the undertakings. Wyeth’s focus, properly, was on Alphapharm’s real, substantial or moving purpose. I have also explained why Mr Hurley’s evidence is unreliable. Apart from this, the submission is internally inconsistent. Alphapharm’s primary purpose would hardly have been private market supply of its products if, as the submission appears to accept, it knew that it was going to be restrained from doing so. It is for this reason, as I have said, that the evidence of what Alphapharm did in 2009 is not a reliable foundation for inferring what it would or might have done but for the interlocutory injunctions other than to the extent that it shows that Alphapharm would not have been the first to apply for PBS listing and, unlike Sigma, had concerns about supplying its products on the private market pending the resolution of the litigation.

606    There are other inconsistencies between Alphapharm’s submissions and Mr Hurley’s evidence. As noted, Mr Hurley refused to acknowledge that he knew that it was inevitable, certain or even highly probable that Wyeth would seek interlocutory relief if Alphapharm commenced the private supply of its products. Mr Hurley would accept only that the thought this was “probable”. Yet Alphapharm submitted, as was the fact, that “there is no doubt that Wyeth was aggressively asserting its purported legal rights”. In this context, Mr Hurley’s insistence that he did not think it was inevitable, certain or even highly probable that Wyeth would seek interlocutory relief if Alphapharm commenced the private supply of its products did not enhance the apparent reliability of his evidence about issues he perceived to be in contest.

607    Alphapharm submitted that “Wyeth’s present contention seems to be that anything short of Alphapharm consenting to the injunction, in the light of the advice it had received, evidences a collateral purpose”. This is not Wyeth’s contention. Nor is it my conclusion. Indeed, the whole notion of “collateral purpose”, to my mind, is a distraction. So too is the issue whether the launch was “genuine”. If not a sham (which it was not), it is not clear what this means. In any event, Wyeth is entitled to contend that, but for the interlocutory injunctions, Alphapharm would not have supplied its products at all, just as Alphapharm is entitled to contend to the contrary. And both are entitled to refer to all available evidence in support of their contentions and to argue that the evidence supports different inferences about Alphapharm’s strategies and intentions in 2009.

608    Alphapharm submitted that:

The flaw at the heart of Wyeth’s approach of unduly focusing on litigation strategy and ignoring the underlying commercial motivation is pointed out in the English decision of AstraZeneca Ab v KRKA dd Novo Mesto [2015] EWCA Civ 484 (Court of Appeal). In that case, the recognition by a generic party of the legal reality that an injunction would be granted, to the point of consenting to the interlocutory injunction, did not deprive the party of any right to recover. That was a litigation decision which did not undermine the underlying commercial motivation of the party, which was to get onto the market. Here Alphapharm contested the interlocutory injunction, and legitimately sought to obtain concessions from Wyeth that were necessary to preserve to the extent possible the commercial benefit that might eventuate at the conclusion of the litigation. That is incapable of undermining Alphapharm’s primary commercial motivation to get on the market.

609    There is no doubt Alphapharm wanted to preserve the potential for PBS supply of its products pending the resolution of the litigation which depended on Wyeth not de-listing Efexor-XR. The issue, however, is not what Alphapharm’s commercial position would have been but for the method patent and the litigation. The answer to that question is obvious in that but for the method patent and the litigation Alphapharm would have supplied its products on the PBS as soon as it could have done so and would not have bothered with private market supply. The issue is what Alphapharm’s commercial position would have been in the face of the method patent and the litigation and but for the interlocutory injunctions (or, in my view, but for the Alphapharm interlocutory injunction). My conclusion is that what Alphapharm did in 2009 was directed to ensuring Wyeth did not de-list Efexor-XR so that the commencing of private supply of its products must be understood as a means to achieve that end and not as reflective of its commercial motivations in the face of the method patent and the litigation. This conclusion is not inconsistent with the Alphapharm interlocutory injunction. It engages none of the doctrines of preclusion on which Alphapharm relied. And it does not mean Alphapharm was perpetrating a sham on Wyeth.

610    Alphapharm submitted that:

The matters set out in Mr Hurley’s first affidavit state the sworn evidence of Mr Hurley in 2009, upon which he was not challenged in 2009. They are divorced from and unaffected by the present forensic contest. They provide a reliable framework for the court to find that in the absence of the AII [Alphapharm interlocutory injunction], Alphapharm would have continued to make private sales and listed on the PBS as soon as it could do so without triggering the 12.5% price drop.

611    Things Mr Hurley said in his affidavit in 2009 (for example, about the legal advice and the order Alphapharm received) have been exposed to be inaccurate or materially incomplete. Things he said in affidavits thereafter are unreliable for the reasons given. In these circumstances, where he would not have expected to be tested on his 2009 affidavit because it concerned an interlocutory application only and where Alphapharm had its own forensic objectives in 2009, it is difficult to give weight to any of Mr Hurley’s evidence.

612    Alphapharm referred to a series of matters it said all supported the inference that but for the interlocutory injunctions it would have supplied its products privately and obtained PBS listing provided another generic had obtained it first. The matters, most of which have been discussed above, are:

(a)    Alphapharm made an application for registration of Enlafax XR on the ARTG in or around September 2007, in three strengths, 37.5mg, 75mg and 150mg;

(b)    the application for registration on the ARTG was delayed by the fact that the TGA did not accept Alphapharm’s request for a bio-study waiver on the 37.5 mg Enlafax XR product, and as a result the ARTG listing was not complete when the Molecule Patent expired in December 2008;

(c)    however on 1 December 2008, Alphapharm applied for listing of Enlafax XR on the PBS on 1 April 2009, and indicated that Alphapharm would forward as soon as possible the approval letter from the TGA, and by no later than 15 January 2009;

(d)    as at 1 January 2009, the Molecule Patent had expired, Mr Hurley was not aware of any other Patent potentially preventing the launch of Enlafax XR, and he anticipated that Alphapharm would obtain TGA and PBS approvals and launch Enlafax XR on the PBS on 1 April 2009;

(e)    by 15 January 2009, the TGA approval had not been provided and accordingly the first PBS application effectively lapsed on that day – Alphapharm did not receive an ARTG registration for the Enlafax XR products until the end of April 2009, following a decision to abandon the 37.5 mg strength product which was delaying the application;

(f)    in March 2009, in the course of Wyeth’s preliminary discovery application against the Department, Mr Hurley became aware that Wyeth was the owner of the Method Patent and was attempting to obtain information about the identity of those who had registered generic venlafaxine products on the ARTG, which enlivened for him the risk of Alphapharm being liable for damages arising from the 12.5% price decrease if Alphapharm was the first to list on the PBS, and Enlafax XR infringed the Method Patent;

(g)    given he understood the market was worth about $100 million in annual sales, a liability of 12.5% of that figure per year was a very high risk when weighed against the returns Alphapharm could potentially expect from sales of its own product;

(h)    however, Mr Hurley considered that if another generic company had already listed on the PBS and triggered the price decrease, Alphapharm would not be potentially liable for those “price reduction” damages on the originator’s own product, but only for sales lost by the originator to Alphapharm;

(i)    Mr Hurley formed the view that Wyeth was likely to take steps to assert its patent through legal action, irrespective of Alphapharm’s view of the validity or otherwise of Wyeth’s patent;

(j)    in March 2009, Mr Hurley became aware that Sigma had filed revocation proceedings in respect of the Method Patent, which caused Mr Hurley to consider that there was a reasonable likelihood that Sigma had filed an application for PBS listing prior to 1 May 2009 for a 1 August 2009 listing date;

(k)    on 4 May 2009, Alphapharm received a letter from Wyeth’s lawyers, Gilbert + Tobin, regarding Enlafax XR, and informing Alphapharm that Wyeth had filed a cross-claim against Sigma for infringement of the Method Patent, and that Wyeth was seeking an interlocutory injunction against Sigma;

(l)    the Gilbert and Tobin letter of 4 May 2009 asserted infringement of the Method Patent by Enlafax XR, and sought an undertaking that Alphapharm would refrain from importing supplying or offering to supply the Enlafax XR products in Australia, with the threat that Alphapharm would be sued for patent infringement, including an application for interlocutory relief, unless that undertaking was provided;

(m)    on 1 June 2009, Alphapharm sent a letter to the PBS enclosing a PBS listing application, requesting listing on 1 August 2009. Whilst Mr Hurley was unable to locate the final version of the letter of 1 June 2009, he was able to locate a draft, which is Exhibit MH-20, and the version of the letter received by the Commonwealth conforms with the substance of MH-20;

(n)    importantly for present purposes, the letter of 1 June 2009 made it clear that Alphapharm’s application for PBS listing was:

made on the condition that it can be withdrawn by Alphapharm prior to 1 August 2009 without triggering a price reduction of 12.5% for the originator product, should Alphapharm consider that withdrawal necessary.

This condition is critical to Alphapharm. If the PBS is not able to accept the application on that condition, please inform us immediately”;

(o)    while the application was filed out of time to achieve listing on 1 August 2009, the condition is consistent with Alphapharm having not yet made a decision as to whether it would be willing to trigger the 12.5% price reduction, but confirms that it was reserving to itself the ability to withdraw the application if it decided it did not wish to do so;

(p)    on or shortly after 3 June 2009, Mr Hurley became aware of the SII [Sigma interlocutory injunction], as a result of which it became obvious to him that Sigma would not trigger the price decrease on 1 August 2009 as any application it may have submitted would now have to be withdrawn, and that if no other generic company had applied for PBS listing on that date, and Alphapharm proceeded to list on that date, Alphapharm’s listing would have been the sole trigger of the 12.5% price decrease; and

(q)    Mr Hurley formed the view very shortly after becoming aware of the SII, that it would not be advisable for Alphapharm to trigger the 12.5% price drop by being the first, or equal first, to list an extended release venlafaxine product on the PBS.

613    As already discussed, these matters disclose that but for the method patent and the litigation Alphapharm would have proceeded with its proposed PBS listing and supply of its products. These matters also disclose Alphapharm’s unwillingness, faced with the method patent and the litigation, to be the first generic to list its products on the PBS due to the fear of being liable to Wyeth for the 12.5% price reduction. These matters do not show that but for the interlocutory injunctions Alphapharm would have been willing to accept the risks of liability associated with supply or that Alphapharm would have pursued supply, particularly not mere private supply when it perceived this to be unprecedented and contrary to the best interests of pharmacists (and, I infer, potentially contrary to its own interests given its sell or return policy). Rather, if confronted by the circumstances that would have existed but for the interlocutory injunctions Alphapharm would have to have done what it did not have to do in 2009 – assess all of the potential risks and benefits it might hope to obtain by supply, private supply only if no other generic obtained PBS listing and under the PBS if and when another generic obtained PBS listing. Alphapharm could do so on only the basis of legal advice of its prospects and exposures and advice about its likely market success, as well as with Mylan’s approval for a launch at risk (which, tellingly, I infer it did not obtain in 2009 because it knew it would shortly be restrained and thus, in truth, its launch was not at risk in any material sense).

614    I will not deal with all of Alphapharm’s other submissions about Mr Hurley’s evidence. I have given sufficient reasons already for rejecting that evidence. What is now relevant is to record that irrespective of my views about the reliability of his evidence I have no doubt that, in common with the relevant people at Sigma (and Generic Health), Mr Hurley knew his business well and knew how to formulate strategies which would be in the best interests of Alphapharm given that Alphapharm’s business was making profits from supplying generic products in a highly competitive market.

615    Otherwise, I accept Alphapharm’s submissions that the following matters would be relevant to what Alphapharm would or might have done but for the interlocutory injunctions:

(1)    Sigma was Alphapharm’s biggest competitor and Alphapharm had received questions about its intentions from pharmacists aligned to it given Sigma’s private market supply;

(2)    “…if Sigma was able to offer a full range of products including venlafaxine, but Alphapharm was not, Sigma would have an opportunity to take customers and business from Alphapharm” because of the practice of generics to bundle products and the nature of the market in which many pharmacists were wholly aligned with one or other generic (in the sense that the pharmacist or group of which the pharmacist was part would buy all of a generic’s range and hold only some products from other generics). I accept that the risk that Alphapharm might lose ground to Sigma if Sigma continued with its private market supply (or PBS supply if Sigma obtained PBS listing) would be a very important factor in Alphapharm’s consideration of its positon;

(3)    if Sigma launched a venlafaxine product and Alphapharm did not, it was less likely that patients who were satisfied on Sigma’s product would switch to an alternative generic” at some later time; and

(4)    “it was…important to Alphapharm to be seen as a market leader” so that if Sigma was supplying venlafaxine on the private market Alphapharm would have to give real consideration to its position about private market supply (and equally if Sigma was supplying venlafaxine under the PBS after PBS listing, Alphapharm would have to give real consideration to its position about PBS listing and PBS supply). This is particularly so in circumstances where Sigma and Alphapharm were both large competitors with extensive sales forces and also were months ahead of their nearest competitor in obtaining ARTG registrations (Generic Health, which was a small player and not in a comparable position to Sigma or Alphapharm in terms of capacity to penetrate the market).

616    These are the objective contemporaneous circumstances in which Alphapharm would have found itself in mid-2009 but for the interlocutory injunctions. The only material difference between my approach (the operation of the Alphapharm interlocutory injunction alone may be disregarded) and the generics’ approach (even the threat of the interlocutory injunctions must be disregarded) is one of timing, the relevance of which effects the notional PBS listing dates.

617    While I also accept that if “both Alphapharm and Sigma had been on the PBS in 2009, this would have created a thriving PBS market for generic venlafaxine which would have made it nearly commercially impossible for Wyeth to remove Efexor XR from the PBS”, we know that Alphapharm was dependent on Sigma or another generic first obtaining PBS listing before it would consider obtaining PBS listing for the purpose of PBS supply.

618    Alphapharm also referred to Mr Hurley’s evidence that “an additional benefit of a private market launch was that it would have been difficult for Wyeth to withdraw Efexor XR from the PBS as part of its strategy to switch the market to Pristiq, because Wyeth would have effectively given up any patients that were prescribed venlafaxine to generic venlafaxine”. In other words, PBS listing and the associated 12.5% price reduction, which created such an enormous exposure for the first generic to obtain PBS listing, was not essential to achieving the objective of making it difficult for Wyeth to de-list Efexor-XR. No doubt Alphapharm would have preferred for it be impossible for Wyeth to do so, but this is exactly the kind of strategic thinking I would expect such a person as Mr Hurley to have considered if Alphapharm had not been restrained on 14 August 2009. I thus accept that its fear of Wyeth switching patients to Pristiq provided Alphapharm with some incentive to proceed with private market supply on a commercial basis if not enjoined.

619    However, I do not accept that the fact that Mr Joscelyne prepared financial forecasts between 22 April and 28 April 2009is a powerful contemporaneous indicator that in the absence of the interlocutory restraints Alphapharm would have sold Enlafax XR on the venlafaxine market with the expectation of reaching those forecasts”. As noted, the forecasts assumed PBS supply. Alphapharm decided it would not pursue PBS supply because of the method patent and anticipated litigation. Accordingly, in the absence of the interlocutory injunctions, it cannot be the case that Alphapharm would have sold its products on the private market with the expectation of reaching those forecasts. The evidence relates only to Alphapharm’s intentions and expectations leaving aside the method patent and the litigation, which is an impermissible hypothesis.

620    What I do accept is that but for the interlocutory injunctions Mr Hurley would have obtained similar forecasting from a person such as Mr Joscelyne about private market supply but did not do so before the launch in mid-July 2009 because he knew Alphapharm would be restrained. This confirms that the mid-July 2009 launch was far from Alphapharm’s usual practice and bears no resemblance to what Alphapharm would have done but for the interlocutory injunctions. But for the interlocutory injunctions, before any private market launch or before any “ramping up” of private market supply after mid-July 2009, Alphapharm would have financially modelled the expected outcomes over the longer-term on the basis that if it wished to compete with Sigma it would have to bring to bear all of its expertise and capacities.

621    Mr Montgomery, Alphapharm’s CEO, made decisions in conjunction with Alphapharm’s senior leadership team the most senior member of which (apart from Mr Montgomery) was Mr Hurley. Mr Montgomery said:

…it was Mark Hurley and I who primarily drove the strategy and execution of the project. Mark Hurley was heavily involved in the decisions I made regarding venlafaxine, and he and I liaised very closely together on this project. I respect Mark’s strategic decision-making very highly. It was not just a matter of me taking notice of his views on such matters either - Mark and I discussed these types of decisions extensively with each other; we talked through the factors relevant to the decision, we debated them and, ultimately, we nearly always ended up coming to a common view.

622    Mr Montgomery assumed that if the method patent was valid Wyeth’s damages would be greater than Alphapharm’s profits whether or not Alphapharm had triggered the 12.5% price reduction (which it would not do). Again, I accept this and consider it discloses the position any commercially experienced decision-maker would have reached.

623    Mr Montgomery said that:

after Mylan acquired Alphapharm in 2007, a more comprehensive, formal process for the approval of product launches by Alphapharm was introduced. Any launch which was considered to carry a risk of legal proceedings being brought against Alphapharm was considered to be "at risk". All at risk launches required Mylan approval. When seeking Mylan approval for an at-risk launch, it was required that Alphapharm set out the risks and benefits of the launch. On the risk side, the proposal which Alphapharm would put to Mylan assumed that Alphapharm would launch and sell its product, and that it would not be prevented from doing so by a Court injunction. Thus the risk, as I understood it, and which Alphapharm assumed when putting its proposal to Mylan, was Alphapharm's exposure, if it was subsequently found liable for infringement of a third party's patent rights, to having to pay the patentee's damages, or handing over Alphapharm's profits.

624    Accordingly, it must be inferred (contrary to the fact) that Mr Montgomery and Mr Hurley would have had available to them all relevant information about the potential risks and benefits to Alphapharm of whatever decision Alphapharm would or might have been contemplating. In this regard, unless and until another generic obtained PBS listing Alphapharm would not be contemplating PBS listing. Because of the overwhelming likelihood (indeed, the certainty in my view) that Sigma would be supplying on the private market, a necessary inference is that Alphapharm would be contemplating private market supply. And indeed it was in fact. There is no reason to infer that there was any chance Alphapharm would have acted differently from how it did act which was to do nothing until 22 May 2009 because at that time it believed that Sigma’s private market supply was not in the best interests of pharmacists and, in effect, may ultimately fail once pharmacists worked out that no PBS listing was to be forthcoming in the near future.

625    If Wyeth had not applied for interlocutory relief against Sigma or it, Alphapharm would have had to carry out the full risk-benefit analysis needed for Mylan to review any private market launch. Mr Montgomery and Mr Hurley would have decided what to recommend to Mylan based on the circumstances at the time and the results of the analysis in the context of Alphapharm being and wishing to remain a leader in a highly competitive market.

626    In contrast to Mr Hurley, Mr Montgomery was not subject to extensive cross-examination. In particular, his opinions about what he was likely to have recommended and his beliefs about Mylan’s likely decision-making were not directly challenged. While I still prefer to give the most weight to the objective contemporaneous evidence, Mr Montgomery appears to possess a capacity unique amongst the witnesses called by the generics, to give evidence about hypothetical facts which makes sense in the context the generics would have been in but for the interlocutory injunctions.

627    As noted, Mr Montgomery would not have recommended to Mylan that Alphapharm be the first generic to obtain PBS listing due to the potential exposure to liability to Wyeth in the order of $100 million if Alphapharm triggered the price reduction in Efexor-XR. Mr Montgomery also would not have recommended that Alphapharm risk listing on the same day as another generic for this reason. In other words, he would not permit Alphapharm to apply for PBS listing unless and until another generic had obtained PBS listing. As a result, he would not have sought Mylan’s approval for any launch “at risk” based on Alphapharm being the first generic to obtain PBS listing of its products. This was so irrespective of the strength of legal advice about Alphapharm’s prospects of having the method patent declared invalid or its products not infringing the method patent. As discussed, this position not only reflects Alphapharm’s evidence in 2009 but also commercial sense. It is powerful evidence of what a responsible decision-maker would have done in 2009 in all of the circumstances including the drive to compete and make profits from the supply of generic products.

628    Mr Montgomery said that if Sigma had obtained PBS listing then he would have recommended to Mylan that Alphapharm also apply for PBS listing because:

(a)    Alphapharm’s exposure to damages would be lower because it would not have been responsible for triggering the 12.5% price reduction for Wyeth products;

(b)    as Alphapharm would have been later in the market than Sigma, Sigma would have captured a greater market share and hence Alphapharm’s damages exposure (in terms of the sales it would have taken from Wyeth) would have been lower than if Alphapharm had been the first to enter the market; and

(c)    at the time, he believed that Wyeth was undertaking a deliberate strategy of undermining the market for venlafaxine by promoting Pristiq and putting no promotion into Efexor.

629    Mr Montgomery considered that in these circumstances:

there was a better than even chance that Mylan would have accepted my recommendation to launch Enlafax XR and list it on the PBS after Sigma had definitely listed its product on the PBS and been responsible for triggering the 12.5% statutory price reduction.

630    If, however, Alphapharm could not apply for PBS listing because Sigma (and no other generic) had first obtained PBS listing, Mr Montgomery said he would have sought Mylan’s approval for a private supply of Alphapharm’s products at risk involving, in effect, a ramping up of the launch in July 2009 to a full-scale commercial supply on the private market. Mr Montgomery believed that, in these circumstances, “there was a high likelihood that Mylan would have accepted my recommendation to conduct a private launch of this kind”.

631    But for the interlocutory injunctions I consider that the position would have been this. Alphapharm would still have deferred its first May 2008 order of stock because of the mere existence of the method patent and the litigation. At this time it would have still considered Sigma’s private market supply unprecedented and likely to leave pharmacists with stock they could not sell because Alphapharm considered that pharmacists would not be interested in purchasing generic venlafaxine for private market supply given that Efexor-XR was PBS listed. Alphapharm would still have its sale or return with a refund policy so would have been concerned to financially model the likely costs and benefits of a private market supply of venlafaxine. It would still have decided that by reason of the mere existence of the method patent and the litigation it would not under any circumstances risk triggering the 12.5% price reduction in Efexor-XR by being the first generic to obtain PBS listing of its products or obtaining PBS listing at the same time as another generic. As such, it would not apply for PBS listing until another generic had obtained PBS listing. Its focus, as a result, would be Sigma’s continuing private market supply and its apparent success.

632    Alphapharm’s immediate response to Sigma’s continuing private market supply would have been exactly the same as Alphapharm’s actual response to Sigma’s private market supply before 22 May 2009. Alphapharm would consider it unprecedented and likely to leave pharmacists with stock they could not sell. However, it would not have considered the issue of likely success in the terms framed by Wyeth relating to the ethical obligations of pharmacists. Confronted by Sigma’s ongoing private supply of Sigma’s product from May 2009 onwards, however, Alphapharm necessarily would have been forced to confront the question whether or not it should continue with its view that only PBS supply would be sensible. Showing the same care for its own commercial interests as it had consistently demonstrated, Alphapharm would ensure that it made the best informed decision it could on the basis of up to date and comprehensive legal and financial advice including advice about the potential success of private market supply if Alphapharm brought to bear all of its expertise and about its potential exposure to Wyeth. The legal advice, which would have been to the general effect that Alphapharm had good prospects of success at least in respect of the invalidity of the method patent, would have made clear that the prospects could not be put any higher than good and that litigation is inherently risky.

633    Alphapharm was not and would not have been in the same position as Sigma which was effectively driven to supply on the private market due to the $3 million of stock it had purchased. Alphapharm had purchased stock (far less than Sigma) but had deferred delivery in circumstances where payment was not due until delivery. Further, Alphapharm had never planned to supply on the private market only whereas Sigma had always planned on private market supply followed by PBS supply within three months. The change in position for Alphapharm was thus greater than it was for Sigma. Alphapharm also doubted that Sigma’s apparent success reflected supply on the basis of no PBS listing in the reasonably foreseeable future and was determined that it should not do what it thought Sigma may well be doing (that is, supplying on the basis that the carrot of PBS listing was reasonably foreseeable). Alphapharm also knew it would not be the first to market as Sigma had already gone to the market, but the evidence shows that the earlier a generic can make it to the market the better its prospects of securing market share and being the second to market would have been important to Alphapharm. Alphapharm was not subject to the same kinds of general financial pressures to which Sigma was subject but Alphapharm no doubt also wanted a “win” in the sense that a company in a highly competitive industry always wants a win. Sigma had also committed itself to a full-scale supply of its products on the private market whereas Alphapharm had not.

634    Taking into account all of the circumstances identified, I consider that there is one factor which would have outweighed all others from Alphapharm’s perspective in any hypothetical analysis. It is that Sigma would have been continuing to supply pharmacists on the private market when Alphapharm also would have been able to do so. To my mind, in the context of this industry and Alphapharm’s place within it, this fact alone would have made it highly likely that Alphapharm would have decided it needed to compete with Sigma so that Mr Montgomery would have made the recommendation to Mylan that Alphapharm enter the private market. In circumstances where Alphapharm would have been advised that its ultimate prospects of not being liable to Wyeth were good albeit not without risk and Sigma was continuing to supply, Alphapharm would have perceived there to be a strong imperative for it also to supply its products on the private market. While Mylan would have been the final decision-maker, faced with these circumstances, it is difficult to conclude that Mylan would not have approved a launch at risk on the private market to enable Alphapharm to compete with Sigma.

635    I accept that I cannot exclude the possibility that Alphapharm’s assessment might have been that there was a real risk that it might not be able to interest pharmacists in private market supply of its venlafaxine products if, as Alphapharm would have insisted, its sales representatives made clear to pharmacists that it could not be assumed that PBS listing would be achieved in the foreseeable future due to the patent litigation. I do not consider, however, that Alphapharm would have been deterred by the prospect of pharmacists having to switch patients back to Efexor-XR if the method patent was valid and infringed by Alphapharm’s products. Nor, as I have said, do I accept that pharmacists would have given weight to this risk. What must be accepted is that, confronted by continuing supply by Sigma, Alphapharm would perceive a strong commercial need for it to compete given that it had ARTG registrations and could supply its products by arrangement with Pharmathen. What must also be accepted is that Alphapharm would have taken steps to put itself in the best position it could to maximise its chances of success using all of its capacities to do so. As noted, Mr Hurley’s capacity for strategic thinking cannot be doubted. Given its sales and marketing resources and experience, Alphapharm would have been able to put forward a strong case to Mylan to support entering the market in competition with Sigma. Mylan thus would have made its decision on this basis.

636    As a result, I would assess the likelihood of Alphapharm, with Mylan’s approval, committing to or scaling up its mid-July private market launch to be 90%. I accept that the possibility Alphapharm would not have done so cannot be excluded as merely speculative as Alphapharm might have considered the prospects of successful private market supply not worth the continuing effort or might have failed to persuade Mylan to approve the full-scale commercial supply on the private market because it seemed to be contrary to conventional wisdom in the generic industry. In my view, however, the prospect that Alphapharm would have ceased further supply from that date would not be assessed to be higher than 10%. The success or otherwise of this private market venture would have been assessed on a continuous basis but some short-term losses would not have caused Alphapharm to cease supply if Sigma was continuing to supply.

637    In terms of the timing issue, Alphapharm in fact launched its products on a confined basis on 17 July 2009. The hearing of the Alphapharm interlocutory injunction occurred on 14 August 2009. In these circumstances and consistent with the discussion above to the effect that it is the Alphapharm interlocutory injunction alone which had a potential adverse effect on Alphapharm relevant to the terms of the undertakings, it should be inferred that there would have been a 90% probability that Alphapharm would have been supplying its products on the private market on a full scale commercial basis from 14 August 2009. As will be explained below, the econometric analysis assumes that Alphapharm commenced supply of its products on the private market on 22 July 2009. In the overall context of this matter and given that Alphapharm in fact launched on 17 July 2009, I consider it appropriate to adopt the start date for commercial supply to the private market by Alphapharm of 22 July 2009.

638    In respect of PBS listing, Alphapharm would not have applied for PBS listing until another generic had obtained PBS listing. However, if another generic had obtained PBS listing then Alphapharm would have known that it was not going to be responsible for the 12.5% reduction in the price of Efexor-XR, would have been concerned to protect its competitive position, and would still believe the risk of liability to Wyeth was low. Again, these objective circumstances also accord with Mr Montgomery’s assessment that he would have been willing to recommend to Mylan PBS listing and PBS supply in these circumstances.

639    I have concluded above that there was a 20% chance that Sigma would have applied for PBS listing in time to obtain PBS listing of its products on 1 December 2009. If this conclusion is maintained (as it must be for this hypothesis), there must also then have been a substantial prospect that Alphapharm would have applied for PBS listing as soon as possible after 1 December 2009. Mr Montgomery considered that the prospect of Mylan approval for a PBS listing application to be “better than even”. Given the objective circumstances, I consider the prospect highly likely. I cannot accept that, in such a case, Alphapharm would merely continue private market supply, allowing Sigma to reap the rewards of PBS supply.

640    Having regard to the objective circumstances, on these hypothetical facts, I would assess the likelihood of Mylan approving Alphapharm seeking PBS listing for the purpose of PBS supply to be high. If Alphapharm was on the private market, my estimate is that there was a 90% probability that in the event of another generic first obtaining PBS listing Alphapharm also would have applied for PBS listing as soon as it could thereafter for the purpose of PBS supply and a 10% possibility that it would not have done so but elected instead to continue with its private market supply.

641    If Alphapharm had not been supplying its products on the private market, I would still estimate the probability of it having applied for PBS listing in the hypothesised circumstances as high given my view that the material factors which would have weighed on Alphapharm’s mind were the need not to trigger the 12.5% price reduction (which would be irrelevant on this hypothesis) and the competitive need to enter the market against Sigma and be early to do so compared to other generics (which would be the driving factors on this hypothesis). In these circumstances, I would estimate the probability of it having applied for PBS listing in the hypothesised circumstance of Alphapharm not supplying its products on the private market to be 80% and the probability of it having continued not to supply its products to be 20%.

642    In respect of the timing issue relating to PBS listing for Alphapharm, on the basis of the 20% chance of Sigma having applied for and obtained PBS listing on 1 December 2009, it should be taken that the probabilities discussed above relate to Alphapharm’s products being been added to the PBS list on 1 March 2010 (reflecting a three month period from a posited application date of 15 December 2009 as referred to in paras 24 and 25 of the statement of agreed facts). Alphapharm had already applied for PBS listing of its products before it became aware of the method patent. It would have immediately become aware of PBS listing of Sigma’s products. There is no reason to think Alphapharm would not have been able to submit its listing application by 15 December 2010 which would have enabled it to obtain PBS listing of its products on 1 March 2010. As noted, if Alphapharm’s mere anticipation of an interlocutory injunction because of Wyeth’s threats or the Sigma interlocutory injunction may be disregarded (contrary to my view), then the prospect of Alphapharm obtaining PBS listing would operate from the earlier date of 1 December 2009 because, on this approach, it would have had to confront Sigma obtaining PBS listing on 1 August 2009, rather than 1 December 2009.

643    As with Sigma, Alphapharm would not have been concerned its products might not be listed on the PBS. It would not have been concerned by the need to give an assurance of supply and would have done so. It would have no concern about the statutory guarantee of supply provisions. Further, no anticipation of what Wyeth might do in competitive response to generic supply or otherwise would have weighed on Alphapharm’s mind.

Summary of interim conclusions – Alphapharm

644    My interim conclusions about Alphapharm, accordingly, may be summarised as follows:

(1)    Alphapharm has proved on the balance of probabilities that it suffered the loss of an opportunity of some value associated with the ARTG registration of its products because the injunction prevented it from exercising, from time to time and as it saw fit, the rights associated with ARTG registration. The value of this opportunity depends on the probabilities and possibilities of what Alphapharm would or might have done.

(2)    If Alphapharm needed to prove on the balance of probabilities that it would have re-applied for PBS listing of its products so as to be the first generic to obtain PBS listing but for the interlocutory injunctions, then Alphapharm has not proved (or sought to prove) that putative fact.

(3)    If Alphapharm needed to prove on the balance of probabilities that it would have supplied or ramped its supply of its products on the private market but for the interlocutory injunctions, then Alphapharm has proved that putative fact.

(4)    If, as I consider, Alphapharm does not need to prove (2) or (3) because it has proved (1) on the balance of probabilities, then the probabilities and possibilities are as follows:

(a)    Alphapharm would have re-applied for PBS listing before another generic had PBS listed its products: 0%.

(b)    Alphapharm would have supplied its products on the private market from the assumed date of 22 July 2009: 90%.

(c)    Alphapharm would not have supplied its products on the private market from the assumed date of 22 July 2009: 10%.

(5)    Assuming Sigma had obtained PBS listing on 1 December 2009 the probabilities and possibilities are:

(a)    if Alphapharm was supplying its products on the private market (the 90% probability):

(i)    Alphapharm would have re-applied for PBS listing for the purposes of supply under the PBS as soon as it could (in my view, in time to obtain PBS listing by 1 March 2010): 90%; and

(ii)    Alphapharm would not have re-applied for PBS listing for the purposes of supply under the PBS as soon as it could but would have continued to supply its products on the private market: 10%;

(b)    if Alphapharm was not supplying its products on the private market (the 10% possibility) :

(i)    Alphapharm would have re-applied for PBS listing for the purposes of supply under the PBS as soon as it could (in my view, in time to obtain PBS listing by 1 March 2010): 80%; and

(ii)    Alphapharm would not have re-applied for PBS listing for the purposes of supply under the PBS as soon as it could but would have continued not to supply its products: 20%.

Value of destroyed products

645    The other aspect of Alphapharm’s claim relates to the value of the stock it ordered in 2008 which it received in 2011, part of which had to be destroyed due to the limited shelf life of the products. Alphapharm submitted this about the products it ordered:

The Court would find that Alphapharm paid Pharmathen on 18 November 2009 and 29 January 2010, during the currency of [the Alphapharm interlocutory injunction]. That undoubtedly evidences a loss suffered by Alphapharm, given that the product was not delivered until 2011, by which time portions of that delivery were too close to their expiry dates to sell. The fact that Alphapharm may not have been strictly contractually obliged to pay Pharmathen prior to delivery, if commercially it decided to do so, does not prevent it from suffering loss in that respect. Any amounts it paid early discharged its liability to Pharmathen. The proportion which it paid representing destroyed stock is recoverable by Alphapharm. Alphapharm paid Pharmathen 450,725 Euro for 77,322 packs of 75mg and 150mg venlafaxine (including packaging costs). 43,273 packs (55.96%) were destroyed due to the need to defer delivery of the stock to 20 December 2011 and the fact that the stock that had been ordered in 2008 had limited shelf life. Alphapharm should be awarded compensation to reflect that loss.

646    As discussed, the interlocutory injunctions operated until 8 November 2010. The final injunctions operated from that date until the Full Court’s orders in November 2011. As a result, on one view, the operation of the final injunctions caused this loss to Alphapharm. But for the final injunctions, Alphapharm would have been able to obtain delivery of its products 12 months earlier than it did when, I would infer, it would not have had to destroy any products due to their shelf life. However, this view overlooks the operation of the Alphapharm interlocutory injunction which is the relevant question. The final injunctions, on analysis, are nothing more than a subsequent potential cause of the loss. But for the Alphapharm interlocutory injunction, I have found that there was a high likelihood that Alphapharm would have supplied its products on the private market. It necessarily follows that Alphapharm would have re-visited its decision to defer delivery and would have received the products it ordered in 2008 in or about August 2009 when there was no risk of it having to destroy any products due to their shelf life.

647    Accordingly, another adverse effect of the Alphapharm interlocutory injunction was that Alphapharm could not take delivery of the products it had ordered in or about August 2009 when it would not have had to destroy any products. Alphapharm should be compensated for this additional loss. The most practical approach is simply to allow for 90% of the cost of the destroyed products having regard to my conclusions above. This amount will have to be calculated in Australian dollars.

Generic Health’s case

Generic Health’s claims

648    Generic Health claims to have been adversely affected by all three interlocutory injunctions in terms of the lost opportunities of sales of Generic Health’s generic venlafaxine products, sales to Sigma of Sigma’s generic venlafaxine products, and sales to Apotex, Sandoz and Ascent of generic venlafaxine products under arrangements by which those companies ultimately obtained their own or had assigned to them one or more of Generic Health’s ARTG registrations.

649    As discussed, I consider that these different claims involve different considerations of causation of loss. For its own products, the ARTG registrations gave Generic Health all rights associated with such registration which could be held, exercised or transferred from time to time as Generic Health saw fit. The Generic Health interlocutory injunction prevented the exercise of those rights. Generic Health thus necessarily lost an opportunity of some value as a result of the operation of the Generic Health interlocutory injunction whether or not it would have exercised those rights. As such, loss of an opportunity of some value has been proved on the balance of probabilities.

650    In contrast, by the Sigma interlocutory injunction, Generic Health lost the opportunity to supply Sigma under its supply contract with Sigma, but that opportunity only had value if there would have been some additional supply under that contract. As such, the putative fact of some additional supply to Sigma must be proved on the balance of probabilities. Proof of this fact depends on what Sigma would have done which I have found would have been to continue its private market supply and the likely success of Sigma’s continuing private market supply.

651    In common with Alphapharm, Generic Health’s case was unnecessarily convoluted. In particular, from Generic Health’s perspective, the Alphapharm interlocutory injunction cannot have caused any direct adverse effect on Generic Health. In common with the purported effect of the Sigma interlocutory injunction on Alphapharm, all the Alphapharm interlocutory injunction did to Generic Health was make it anticipate that Wyeth would apply for interlocutory relief against Generic Health and would succeed if it did so, which is one of the ordinary exigencies of litigation which cannot be disregarded. Again, however, only the practical difference this makes is to the timing of any notional PBS listing by Generic Health (1 December 2009 rather than, as I have concluded, 1 March 2010).

Some uncontroversial facts

652    The following summary includes extracts from Generic Health’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.

653    Generic Health was a relative newcomer to and a minor player in the generic pharmaceuticals industry, having been founded by Mr Upiter in 2004. In 2009 it had 8 sales representatives who would visit around 200 pharmacies each year, a much smaller product range than Sigma and Alphapharm, and relationships with fewer pharmacies across this smaller product range. Given its limited product range in 2009 Generic Health could not have supplied any pharmacist with all of its generic product requirements. As such, it was not a “first-line” supplier in the same sense as Sigma and Alphapharm.

654    Generic Health was also unprofitable. As Wyeth submitted:

For the June 2008 financial year, Generic Health’s gross loss was $740,118 and its EBITDA (earnings before interest, tax, depreciation, amortisation) was negative $4,511,059. For the June 2009 financial year, Generic Health’s gross profit was $980,362 (a shortfall of $1,201,876 from a budgeted gross profit of $2,182, 258) and its EBITDA was negative $3,050,795. In the month of June 2009 alone, Generic Health had made a gross loss of $235,586 (a shortfall of $467,726 from a budgeted gross profit of $252,138). For the June 2010 financial year, Generic Health’s total gross profit was $1,870,101 (a shortfall of $167,444 from a budgeted total gross profit of $2,037,546) and its EBITDA was negative $852,009. The 2010 financial management accounts noted that there were “very difficult trading conditions.”

655    As Wyeth also noted, Generic Health was being confronted by liquidity concerns. The board papers for a meeting on 28 April 2009 recorded:

Cash flow on working capital requirements

As communicated to the board earlier, discussions with NAB have failed to secure an increase in the amount of working capital available for the company. The company is required to repay $200,000 to NAB in order to reduce the amount of working capital available from $1.5m to $1.3m. This payment was made at the end of March.

A further repayment of $500,000 is due at the end of June 2009, and no directions has [sic] been provided by the bank as to whether or not this payment will be required to be made or allowed to be deferred.

…We also assume that no further repayments will be required to be repaid to NAB. In other words, the cash flow projections assume the NAB continues to provide a working capital facility of at least $800,000 to December 2009.

The future liquidity of the company is dependent on the availability of the $3 million working capital facility for Max Pharma.

656    Mr Upiter said that Generic Health’s assets were subject to a charge or other security in favour of NAB and that in referring to the company’s future liquidity being dependent on the provision of $3 million he meant that the company might be forced into insolvency but for that capital injection. The source of the funds was Lupin, a shareholder (and from 2010 the owner) of Generic Health.

657    The expiry of the compound patent represented a significant opportunity for Generic Health which was struggling to establish itself in the highly competitive generic pharmaceuticals market which in 2009 was dominated by, amongst others, Sigma and Alphapharm. Generic Health did not know about the method patent and applied for registration on the ARTG of its various venlafaxine products in April 2008 hoping to achieve registration by proving the bioequivalence of its products by 1 May 2009, to be followed by an application to list on the PBS and PBS listing on 1 August 2009. All of these dates turned out to be over-optimistic and necessarily would have been irrespective of the interlocutory injunctions.

658    On 7 January 2009 Generic Health ordered products from Pharmathen, the supplier to it of its proposed Generic Health venlafaxine products, conditional on ARTG registration. In fact, Generic Health’s products were not registered on the ARTG until 6 August 2009. Because a product cannot be listed on the PBS until has been registered on the ARTG, Generic Health could never have achieved its goal of PBS listing on 1 August 2009. The best Generic Health could have done was to apply for PBS listing by 1 September 2009 to obtain PBS listing on 1 December 2009. The possibility of Generic Health obtaining PBS listing on 1 August 2009, accordingly, may be disregarded.

659    In July 2008 Generic Health agreed an amendment to its existing supply agreement with Sigma to include Evelexa XR as a product to be supplied by Generic Health to Sigma. On 1 August 2008 Generic Health entered into an agreement with Alembic for the manufacture and supply to it of Evelexa XR for the purpose of sale to Sigma. In September 2008 Generic Health entered into an agreement with Sigma and Alembic about good manufacturing practice (or GMP) for Sigma’s Evelexa XR products. On 2 September 2008 Generic Health ordered three strengths of Evelexa XR from Alembic for supply to Sigma, receiving the formal order from Sigma for those products on 4 September 2008. On 12 February 2009 Generic Health received a further purchase order from Sigma and itself issued a purchase order to Alembic for that quantity of Evelexa XR. Generic Health invoiced Sigma on 23 February 2009. On 28 February 2009 Generic Health also received an invoice from Alembic. Both of these invoices were paid and no claim is made in these proceedings by Generic Health in respect of its payment to Alembic. Sigma placed a third order on 11 March 2009.

660    Mr Upiter became aware of the method patent in April 2009 as a result of Sigma filing its application to revoke the method patent which occurred on 1 April 2009.

The competing cases – preliminary points

661    In common with its approach to Sigma’s position, Wyeth contended that the steps Generic Health took in anticipation of launching its products and to supply to Sigma were immaterial because they were done in ignorance of the method patent and that when it became aware of the method patent Generic Health changed its plans and would have done so irrespective of the interlocutory injunctions.

662    This, however, is an over-simplification. Insofar as Generic Health is concerned what must be posited is that on 22 May 2009 Wyeth did not prosecute its application for an interlocutory injunction against Sigma, on 14 August 2009 Wyeth did not prosecute its application for an interlocutory injunction against Alphapharm, and on 10 November 2009 Wyeth did not prosecute its application for an interlocutory injunction against Generic Health. Otherwise, I accept that the litigation must be assumed to be as it was in fact. Sigma filed proceedings to revoke the method patent on 1 April 2009. Wyeth filed a cross-claim for infringement including for interlocutory relief against Sigma on 1 May 2009. Alphapharm filed proceedings to revoke the method patent on 19 June 2009. Wyeth filed a cross-claim for infringement including for interlocutory relief against Alphapharm on 23 July 2009. Generic Health filed proceedings to revoke the method patent on 6 October 2009. Wyeth filed a cross-claim for infringement including for interlocutory relief against Generic Health on 9 November 2009 (noting that, on 15 October 2009, the sale of Wyeth to Pfizer was completed). All of these things occurred and cannot be disregarded. The Generic Health interlocutory injunction was made without contest by Generic Health on 10 November 2009. It is this which must be disregarded.

663    In these circumstances, it cannot be said that the steps Generic Health took before becoming aware of the method patent are immaterial. For one thing, I have found it certain that Sigma would have continued with its private market supply if on 22 May 2009 Wyeth had not prosecuted its application for interlocutory relief against Sigma. Accordingly, Generic Health would have continued to supply Sigma with Evelexa XR under its agreement with Sigma, the volume of supply depending on Sigma’s degree of success in converting patients from Efexor-XR to Evelexa XR. For another, Generic Health had obtained ARTG registration of its products by 6 August 2009 and from that time had all of the rights afforded by ARTG registration. As for Sigma and Alphapharm, the Generic Health interlocutory injunction on 10 November 2009 prevented the exercise of those rights which necessarily involved a lost opportunity of some value.

664    Generic Health would be in the same position as Sigma and Alphapharm in other respects. It would not know why Wyeth had not sought interlocutory relief against Sigma, Alphapharm or itself. Its lawyers would know that there might be many reasons for Wyeth not to have done so. Wyeth would have made it clear to Sigma, Alphapharm and Generic Health that Wyeth maintained the method patent was valid and would prosecute its proceedings for infringement against them.

665    The facts as they existed and as I consider they would have existed (as described above for Sigma and Alphapharm) must be considered in this context.

666    Apart from this, the different claims of Generic Health under the different interlocutory injunctions must be kept in mind. To the extent it claims for the lost opportunity to supply Sigma, it is the operation of the Sigma interlocutory injunction which is relevant. To the extent it claims for the lost opportunity to supply its own products, it is the Generic Health interlocutory injunction which is relevant, although Generic Health also seeks to claim under the Alphapharm interlocutory injunction for an adverse effect in having made decisions as a result of that interlocutory injunction (an approach I consider impermissible but with which I deal below on the facts). The relevant point presently is that it is the adverse effect of each interlocutory injunction which must be kept in mind.

Mr Upiter

667    Generic Health’s principal witness, Mr Upiter, is in no different position from the other witnesses giving hypothetical evidence. For all of the general reasons already given, Mr Upiter’s evidence about what he would have done and recommended in 2009 is unreliable.

668    There were other problems with Mr Upiter’s evidence. It is apparent that he did not have access to all of the relevant documents when preparing his affidavits. He said in his first affidavit that he planned for Generic Health to apply for PBS listing despite being aware of the method patent because he believed that Generic Health’s products did not infringe the method patent as they were based on hydrogel technology (unlike Sigma’s products but in common with Alphapharm’s products). However, the contemporaneous documents show a far more nuanced and changing picture than Mr Upiter presented in his affidavit. Mr Upiter’s affidavit expressed the view that he would be “happy” for Generic Health to trigger the 12.5% price drop because he believed Generic Health’s products did not infringe the method patent so the risk to Generic Health was “very low”. It necessarily follows that contemporaneous documents about the perceived risk of infringement over time are relevant, yet Mr Upiter expressed opinions without having seen all such documents.

669    The way in which Mr Upiter’s affidavits were prepared made it impossible to know what documents he had seen at what time. As a result, Mr Upiter could not recall what documents he had seen before preparing his first affidavit and what additional documents he had seen when preparing his second affidavit. He had seen some but by no means all relevant documents. He had more documents available when he provided his second affidavit, some years after his first affidavit. He then looked at yet more documents before giving evidence. As a result, the process by which his affidavits were prepared undermined his potential to give reliable evidence about what he knew and believed at the time, let alone what he thought he might have done or said at the time had circumstances been different from what they were.

670    Mr Upiter also could not recall the “timing” of things which is an important part of the context. He could not recall what he thought about various important documents at the time and was capable only of attempting to reconstruct from the documents themselves. In particular, I infer that when preparing his affidavits he had (unsurprisingly) forgotten that the legal advice to Generic Health about non-infringement changed after the Alphapharm interlocutory injunction. His attempts to suggest that in his second affidavit when he used the expression “fall foul” (that Generic Health would not “fall foul” of the method patent) he did so deliberately to cover both non-infringement and invalidity due to confusion about the two and their timing were unconvincing. Until he saw the email of 26 August 2009 which disclosed that the non-infringement advice had changed (from good to not good prospect of success for Generic Health), the sole focus of his evidence was non-infringement. Confronted with the email, invalidity then emerged. I infer that having forgotten and then been reminded that the advice about non-infringement changed, Mr Upiter was concerned in oral evidence that his affidavit not be exposed as a reconstruction based on incomplete documents. This kind of evidence further undermined Mr Upiter’s reliability as a witness.

671    Mr Upiter also said that:

As a result, after I became aware of the Method Patent, I recommended to the board of Generic Health that it continue with its preparation to launch the GH Venlafaxine Products and the board agreed with that recommendation. I can recall that after discussion of the board in or around early June 2009, the board agreed with my recommendation. However, this was on the proviso that it would have final approval prior to an “at risk” launch being made.

672    The contemporaneous records are by no means as clear as Mr Upiter suggests.

673    According to Mr Upiter, he recommended that Generic Health not launch its products once the Alphapharm interlocutory injunction was granted because the products both used hydrogel technology and he “concluded that if Alphapharm was unsuccessful in resisting the injunction application brought against it, then Generic Health would no doubt also be restrained”. The contemporaneous records disclose a more complex picture than this, however.

674    Mr Upiter said that if Sigma and Alphapharm had not been subject to interlocutory injunctions then the opportunity and the risk for Generic Health would have been bigger as it would have been the only generic to have a PBS listed extended release venlafaxine product. This evidence does not follow from the facts. He acknowledged that “there certainly would have been some discussion or evidence put around the size of the opportunity and – and the risks that the company would – would have been taking in that scenario” and that the decision would have been that of the board. As Mr Upiter put it:

I certainly would have brought to the attention, as I said, a commercial opportunity, so the size – the size of the market. I would have made estimates as to what the market share that we would have gained would have been and, therefore, commercial return for the company. I would have presented what our buying price was, our selling price would have been and, therefore, some type of profitability calculations. I would have presented some type of the marketing plan in that scenario. And I would also have presented some estimates of the type of the quantum of damages, that if – if we – if we were not successful in eventually defending the patent or defending our position in the patent, what those were – would likely be.

675    Subsequently, it emerged that Mr Upiter also would have appreciated that if Generic Health was the first to list its products on the PBS not only would it be responsible for triggering the 12.5% price drop of Efexor-XR and consider that it would be liable for that price drop if the method patent was valid, but also that it knew that it would enjoy the advantage of being the only generic to have a PBS listed extended release venlafaxine product for only a short period as other generics would then also seek to list on the PBS without the risk of being responsible for triggering the 12.5% price reduction. In other words, Mr Upiter’s advice to the board would have been that if the method patent was valid Generic Health would then be solely responsible for triggering the 12.5% price reduction over the life of the method patent if it sought and obtained PBS listing on 1 December 2009 and, at best, would have enjoyed its status as having the only generic product on the PBS until the next PBS listing opportunity.

676    Mr Upiter accepted that he would have obtained further legal advice and prepared detailed information about the potential benefits and risks to Generic Health for the board to consider (including that if Generic Health listed its products on the PBS first, other generics would also be likely to seek to list their products on the PBS) and that his own views, both as to what he would have recommended to the board and decided as a director, may be qualified or influenced by this exercise and that he had not done this exercise before giving his evidence. Despite this, Mr Upiter refused to accept the proposition that not having done the exercise then or now for the purpose of preparing his evidence it was difficult for him to say what he would have done in 2009. Instead Mr Upiter said:

I don’t think it’s difficult as to how I would have reacted, because my position was clear then. I know how I would have reacted. I was constantly focused on balancing those risks and my view that I formed was that it was worth going ahead with this launch, despite not having gone and prepared each of those three pieces of paper. I was informed to an extent on all of those matters around the risks, the potential upside. As a managing director of a generics company, having analysed these numbers in deciding on spending the money on a product like this, I was well aware of the market potential of this product and I was aware of the type of market penetration that we could get. So in my mind it was very clear what the potential gain was, if not to an number in an order of magnitude, the risks in an order of magnitude would have been clear to me at that time, and the advice that I had been given had gotten me to form the view that we had very strong chances in the patent case, and for those reasons I’m confident about what I would have done.

677    The unreliability of this evidence, in my view, is clear. One, it is being given by a person who formed his plans before being aware of the method patent. Two, it is being given by a person who knows that in 2011 the method patent was held to be invalid. Three, it is being given by a person nearly a decade later. Four, it is being given by a person who had not seen all of the relevant documents which show that some of his key premises, particularly about Generic Health’s products not infringing the method patent because they used hydrogel technology, were not accurate. Five, it is being given by a person who disclosed a willingness to tailor his oral evidence to suit what he perceived to support what he had said in his affidavits and thus Generic Health’s case.

678    Again, for these reasons, inferences about rational commercial behaviour informed by the objective contemporaneous evidence and in light of all of the circumstances as they existed are a better guide to what would have occurred but for the interlocutory injunctions than Mr Upiter’s unreliable evidence nearly a decade after the events and with the benefit of hindsight that the Full Court in 2011 would find the method patent to be invalid.

Generic Health’s own products

679    In April 2009 Generic Health would have been in the same position it was in fact in at that time. Thus, Generic Health would have become aware of the method patent and the Sigma proceedings and would have done what it did, which was for the board to consider its position as the board did on 28 April 2009. The board paper records that:

Sigma has begun patent revocation proceedings against the innovator (Wyeth) and an additional directions hearing is scheduled for 1st May 2009. Alphapharm’s strategy is unclear at this point.

        

The company is evaluating the implications of a number of options as below:

1.    Monitor Sigma’s progress and defer any decision either to launch or join patent revocation proceedings.

2.    Join Sigma in revocation proceedings and share costs/benefit. This could cost Generic Health anywhere from $250,000 to $450,000 and could potentially be funded by selling Sigma our “right” to supply this product to a third party (currently in discussion with Genepharm and Sandoz). Patent revocation proceedings could take anywhere from 12 to 24 months to resolve in the courts. If Generic Health chooses to sell product while pursuing revocation proceedings, the company would also need to ensure sufficient funds are available to defend against an infringement case simultaneously.

3.    Negotiating a commercial deal with the innovator.

Venlafaxine is forecast to contribute $50,000 per month to GM on average between July and December 2009 with an expected cash outlay of around $500,000 for stock in July 2009.

It should also be noted that as Generic Health has facilitated the manufacture and importing of Sigma’s brand of Venlafaxine, the company may be sued for infringement once the product arrives in Australia. The product is currently being held in Singapore under instruction from Sigma.

Recommendation

    That the board members provide any input or comments on the matter.

680    Of particular relevance here are two matters. First, it is apparent that Generic Health’s parlous financial state was relevant to its capacity to respond to circumstances. It had to consider carefully expenditure of as relatively little as $250,000 to $450,000 and in so doing had to consider how it might fund that limited expenditure (by, for example, selling Sigma the right to supply to others, a right which, it should be noted, would depend on ARTG registration of Generic Health’s products). In oral evidence Mr Upiter agreed that $250,000 to $450,000 was a significant amount of money for Generic Health. Second, Mr Upiter, no doubt informed by the financial realities, had little immediate appetite for a fight with Wyeth. The immediate suggestions he made included “wait and see” and negotiating a deal with Wyeth.

681    Generic Health submitted that:

Three points should be made about the forecast. First, it was short term. Secondly, an additional $50,000 per month in gross margin in that period was very significant for Generic Health given its financial position at the time. Thirdly, it was likely to have been conservative. By this point the original timeframe which was based on TGA approval in March 2009 had been proven to be overly optimistic. In a situation where by April, TGA approval still had not been obtained, there is a reasonable prospect that the forecast sales from July 2009 to December 2009 assumed only, or predominantly, private sales on the footing that the next available PBS date was probably November or December of that year. The short-term forecast was not purporting to quantify the full extent of the benefits expected by Generic Health.

682    These propositions may be accepted. My point is that despite the undoubted importance of the opportunity venlafaxine represented to Generic Health, Mr Upiter’s recommendation to the board was not to the effect that the opportunity was of such importance that Generic Health should simply plough on with its plans made before it became aware of the method patent. His recommendations were measured and shaped by the fact that Generic Health had little money to spare and that a fight with Wyeth would mean Generic Health would have to spend money it did not have readily available.

683    The board minutes for the 28 April 2009 meeting record:

Discussion held on the status of venlafaxine registration and patent registration and various options open to the company, it was agreed the best option seemed to be to align with Sigma to invalidate the patent together and this option should continue to be pursued. It was also felt the company should wait until the company’s brand is approved by the TGA before deciding any litigation strategy.

684    Consistent with my general approach, the fact that Generic Health may be anticipating an interlocutory injunction at this stage (which is unclear) does not mean that these matters may be disregarded. Generic Health would have been in the same position on 28 April 2009 as it was in on that date. Further, the minutes reflect the fact that without ARTG registration of its products Generic Health held nothing of value it could assign or exploit (leaving aside its contract with Sigma).

685    As noted, Wyeth cross-claimed against Sigma for infringement on 1 May 2009 and also sought interlocutory relief. This occurred and cannot be disregarded. It is to be assumed, however, that on 22 May 2009 Wyeth did not press its application for interlocutory relief and thus Sundberg J did not grant the Sigma interlocutory injunction on 3 June 2009.

686    Generic Health’s next steps, to check if it was using the same or a different formulation from Sigma, would have been taken by Generic Health in any event. Generic Health would have wanted to know if there was available to it an argument that appeared not to be available to Sigma, that Generic Health’s products did not infringe the method patent as they used hydrogel technology. Similarly, Generic Health would have believed it to be “good news” that its products to be sourced from Pharmathen used hydrogel technology because the specification for the method patent, arguably, disavowed hydrogel technology.

687    This would have been relevant to Generic Health irrespective of the Sigma interlocutory injunction because Generic Health would still have been confronted by the fact that Wyeth was pursuing its infringement proceedings against Sigma. Knowing, as it did through its connection with Lupin, the steps Wyeth had taken internationally to enforce the method patent, Generic Health would have anticipated that it too would be confronted by infringement proceedings if and when it obtained ARTG registration and was in a position to supply its products.

688    Generic Health submitted that the important point about these actions is that:

Wyeth had acted to restrain Sigma and was therefore likely to act to restrain Generic Health. The focus is on avoiding an injunction. There is no suggestion in that email exchange that Generic Health should or would not supply because of the existence of the patent or the threat of damages.

689    In my view, as I have said, whether or not Wyeth had applied for interlocutory relief on 22 May 2009 Generic Health would have explored the issue of its likely exposure to an infringement suit by Wyeth including the risk of an interlocutory injunction. It might well think that the risk of an interlocutory injunction was low if Wyeth had not sought interlocutory orders against Sigma on 22 May 2009 but it would still know that Wyeth was very likely to bring an infringement suit against it if and when Generic Health was in a position to supply its products. As such, the hydrogel technology issue would have been just as relevant albeit that Generic Health’s focus may have been its exposure to final relief in the form of a final injunction and damages rather than an interlocutory injunction. However, in any realistic hypothetical, as in fact, Generic Health was not yet in a position to supply as it did not have ARTG registration so (consistent with the board’s decision) it was not required to decide what it would do at this time.

690    Mr Upiter sent an email to the board on 18 June 2009 saying:

Based on our discussion with solicitors today, our strategy for Venlafaxine would rely on our ability to avoid an injunction. In this case we must be able to show an ability to pay damages and quarantine profits until the outcome of the revocation proceedings. Obviously, Wyeth will challenge our ability to do this based on the fact that we are not yet profitable and will not benefit via the venlafaxine sales as these will be quarantined.

We would therefore need to seek some type of loan against the quarantined profits. The loan would be further supported by a penal convertible note or charged over the business in the event that the case is lost or quarantine profits are required to be paid to Wyeth. The risk for the lender is mitigated largely due to the fact that the loan only comes into place if the injunction is not granted. If the injunction is not granted the courts have obviously found a very strong case for invalidity.

Our case would also be based on limiting the overall market size by focusing on private scripts, thereby limiting the maximum lost profits to about $5 million.

We are waiting on further information from the solicitors on the strategy…

691    It is apparent that this email anticipates an interlocutory injunction application by Wyeth against Generic Health. This would have been the same irrespective of the Sigma interlocutory injunction and, as discussed, cannot be disregarded as a matter of principle. The dire financial position of Generic Health is also apparent which also would have been the same irrespective of the Sigma interlocutory injunction.

692    Apart from this, it is notable that Generic Health immediately conceived of the same strategy as Sigma to confine Wyeth’s potential lost profits, being private market supply rather than PBS supply.

693    It may be accepted that uppermost in Generic Health’s mind at this time was avoiding an interlocutory injunction but, as with Sigma and Alphapharm, this does not mean what occurred is irrelevant or tainted. What occurred shows at least three things.

694    First, Generic Health (like Sigma and Alphapharm) was acting in a commercially rational manner to protect itself as best it could from an anticipated interlocutory injunction.

695    Second, Generic Health (like Sigma and Alphapharm) did not consider PBS listing and supply had to be achieved at any cost.

696    Third, (like Sigma and Alphapharm) Generic Health believed that PBS listing would involve potential liability to Wyeth of a different order of magnitude compared to private supply.

697    This concordance between the generics is unsurprising. Although Generic Health was in a different market position from Sigma and Alphapharm these companies all knew the business. They understood the benefits and risks. Their managers were canny strategists keenly aware of risk-reward analysis. Confronted by the method patent and the litigation (anticipated or actual) none of them simply ploughed on determined to obtain PBS listing. They all immediately appreciated that being the generic which triggered the 12.5% price reduction in Efexor-XR involved a risk of potential liability to Wyeth of an entirely different kind from the risk associated with supply of their products on the private market.

698    Mr Upiter met with Generic Health’s solicitors, Middletons, on 18 June 2009. A file note of that meeting records that Generic Health was not profitable, the generics market was highly competitive, Generic Health was not growing as fast as it would like so it “needed new products and fast”, and venlafaxine was “one product we need”. In this sense, Generic Health was in a similar position to Sigma but, of course, stood to gain far less than Sigma might from venlafaxine because of Sigma’s size, product range and arrangements with pharmacies. It also cannot be doubted that Alphapharm’s drive to obtain a “win” would have been no different, despite its less parlous financial position.

699    In another email of 18 June 2009 Mr Upiter advised Middletons that the cost to Generic Health under two options should be looked at. The email said that in respect of the private only launch “we would expect to earn $2m GP [gross profit] from direct sales and a further potential $1m from an increase in sales of other products”. In respect of the PBS and private launch the email said “[i]f we sell on PBS and privately we would likely be selling with other generic players, but have access to the whole market. In this case we expect we would earn between $2.5m and $3.5m GP from direct sales and probably minimal from increased sales of other products”.

700    This email discloses an important fact. Generic Health’s upside from PBS supply was not as great as might be expected because it was a much smaller supplier than Sigma or Alphapharm and, as noted, it also knew that if obtained PBS listing the other generics would also be supplying on the PBS. Generic Health submitted that given Generic Health’s poor financial position the difference in potential benefit would have been “very significant”. The total difference is $500,000 gross profit. I accept this was a significant amount for Generic Health but this needs to be measured against the fact that Generic Health knew being the first to obtain PBS listing would have exposed it to a risk of liability of around $100 million. As should be apparent, even believing the risk of liability to be low the relativities of benefit and risk involve an enormous disparity.

701    The matter was put before the board again on 23 June 2009. The board papers record the fact of the Sigma interlocutory injunction, the anticipation of ARTG registration of Generic Health’s products within three weeks, and that the strategy was to “build a case supporting the argument that Generic Health is likely to be able to sell and is likely to avoid being injuncted [sic]”, and that this case would be presented to Wyeth before Wyeth was aware of the ARTG registration of Generic Health’s products. The options presented were “move to sell and face an injunction hearing”, reach a commercial outcome with Wyeth, and withdraw from any further activity. A solicitor was to be engaged with the focus being an approach to Wyeth for a commercial outcome with the “risks and costs” of each option to be analysed. A table identifying outstanding legal matters identified the Wyeth method patent and that Generic Health’s exposure “may be significant”.

702    Generic Health submitted that as it would struggle to pay any amount of damages to Wyeth, the materiality of Generic Health’s appreciation that it could be exposed to significant damages should not be over-estimated. In effect, what was being put is that Generic Health might as well have exposed itself to the maximum extent given that even a relatively small liability to Wyeth most likely would have exceeded its capacity to pay. This is an unpersuasive submission. It assumes that the board members of Generic Health were willing to expose the company to potential liabilities it had no hope of paying. It thus assumes that the board members were willing to disregard the kind of obligation that would attach to a director of a company which was already at risk of insolvency and which was considering exposing the company to a risk which, if it crystallised, would be certain to make the company insolvent. Wyeth noted that directors in such a positon would be bound to consider the interests not only of the company but also of existing and future creditors: Kinsela v Russell Kinsela Pty Ltd (In liq) (1986) 4 NSWLR 722 at 730; Nicholson v Permakraft (NZ) Ltd (in liq) [1985] 1 NZLR 242 at 249; Lewis (as liquidator of Doran Constructions Pty Ltd) v Doran [2005] NSWCA 243; (2005) 219 ALR 555 at [145]; Sunburst Properties Pty Ltd (In Liq) v Agwater Pty Ltd & Ors [2005] SASC 335 at [154]-[155]; Jeffree v National Companies & Securities Commission (1989) 15 ACLR 217 at 221 citing Winkworth v Edward Baron Development Co Ltd [1987] 1 All ER 114 at 118. Whether the directors would have been aware of the precise legal implications or not, they would have known that the continued existence of the company may depend on the decision they made. They would have known that their decision-making would be exposed to close scrutiny in the event of insolvency. They would have known that their personal reputations in the industry may depend on what occurred.

703    Wyeth correctly stressed the importance of Mr Upiter’s evidence as follows:

Mr Upiter agreed that he understood at the relevant time that as a Director, that the question of solvency of any company was an important matter and that “where the solvency of the company was at risk, to take into account the interests of creditors”. Mr Upiter also agreed that “there was a risk that a director might become personally liable for taking a decision which causes the company to … go insolvent, but there may be a defence to that [claim]”. He acknowledged that it was, however, “a risk which any director in 2010, as far as [he was] concerned, would have to take into account”.

Mr Upiter also agreed that “from a reputational point of view [he] regarded it as important, as [his] own reputation as a director, not to be a director of a company which ultimately was forced into insolvency” as “it might affect your ability to get directorships on other companies” and “may even affect your ability to attract investment if you were to set up a future company.” He also accepted that “taking a decision which might result in a company becoming insolvent … might … have a negative impact on creditors” and “a negative impact on employees” (“who may have long service leave entitlements”) and “could have a negative impact on trade creditors” and “shareholders who might lose their investment”.

704    As Wyeth also noted:

Lupin was a shareholder and creditor of the company for a facility of $3 million. The Directors representing Lupin had an interest in that shareholding and that debt not being set at nought. The other Directors were investors in the company themselves. Again, they had a clear interest in their shareholding not being rendered worthless by a commercially irrational decision and plainly they had no interest in exposing themselves to personal liability.

705    This was disclosed in Mr Upiter’s second affidavit. There were eight members of Generic Health’s board. Mr Upiter explained:

Dr Mumtaz, Mr Dhawan and Mr Sharma were nominees of Lupin Pharmaceuticals, a global generic pharmaceutical company, which was a large minority shareholder in Generic Health in 2009. The other members of the board were investors in Generic Health.

706    In this context, to see what actually happened, which is Generic Health consistently taking positions which effectively exposed it to no risk at all, is instructive. The positions actually taken by Generic Health are irreconcilable with the submission that its parlous financial state meant that but for the interlocutory injunctions it would have risked its existence on not infringing the method patent or the method patent being invalid. The fact that Generic Health was in dire financial circumstances may be accepted. But it was managing and had been managing since 2004. It had liquidity issues but was not at immediate threat of insolvency. To knowingly take an existential risk when it could be avoided by confining its supply to the private market or by not supplying its products until the finalisation of the litigation would be conduct of a different kind from anything that Generic Health had previously done. No doubt this explains why Mr Upiter’s first suggestion to the board involved exactly the same strategy as Sigma adopted, to confine supply to the private market.

707    The board minutes record that the issue was discussed on 23 June 2009 and:

…concerns were highlighted about limiting the company’s potential upside to only the private market. It was also considered necessary to consider further whether a second legal opinion should be required based on the importance of the case.

The board resolved to set up a committee comprising GU [Mr Upiter], VD [Vinod Dhawan, another Lupin nominee] and SM [Dr Mumtaz, a Lupin nominee] to review the strategy and decide on costs.

It was agreed that legal fees should be capped…

Board members agreed that the company should hold off sublicensing to other parties…to ensure the company’s strategy regarding Venlafaxine is not constrained in any way…

708    The board, it seems, was not as keen as Mr Upiter on immediately adopting the strategy of avoiding an interlocutory injunction by confining the supply to the private market. Generic Health said this showed the board’s appetite for risk and was inconsistent with the board not being willing to launch in the face of an exposure to damages, but the fact is the board made no decision at this time. It did not resolve to seek PBS listing immediately on the ARTG registration of its products. Rather, and as might be expected from commercially rational decision-makers, it wanted legal advice. If Generic Health had a voracious appetite for risk and was as determined to proceed with PBS listing and supply as now suggested, it would not have taken the cautious and commercially rational approach it did. It is understandable that Generic Health required formal legal advice because this was the responsible thing to do and Dr Mumtaz, one of the Lupin representatives on the board, believed that in the USA the disavowal of hydrogel technology would have meant that the Generic Health products would not infringe the method patent.

709    Generic Health’s position would have been the same irrespective of the Sigma interlocutory injunction. The board would have wanted formal legal advice before making any decision. In any event, the issue here (and up to this point) is Generic Health’s supply of its own products which was not subject to the operation of the Sigma interlocutory injunction. Thus, everything that happened is to be taken as having happened. Nothing may be disregarded or discounted as immaterial.

710    Middletons gave written advice on 29 June 2009. Middletons said that Generic Health “has very good prospects of establishing that [its venlafaxine product] does not infringe” the method patent but it was likely that Wyeth would seek an interlocutory injunction and would obtain it because Generic Health could not prove it would be able to compensate Wyeth should it be held to infringe the method patent. Middletons recommended a strategy to obtain an undertaking as to damages from Wyeth without Generic Health contesting interlocutory relief and to seek to have the issue of non-infringement by Generic Health determined separately and speedily. Insofar as Generic Health’s own products are concerned, this is the same advice Middletons would have given disregarding the Sigma interlocutory injunction. If the Sigma interlocutory injunction may be disregarded for this purpose, Middletons would not know if Wyeth would or would not seek interlocutory relief against Generic Health. Further, it would still have been in Generic Health’s interests not to contest any interlocutory application by Wyeth and to seek an early hearing on the issue whether it infringed the method patent or not given the belief that there were very good prospects Generic Health’s did not infringe.

711    What is important here is that this strategy involved Generic Health negotiating an undertaking as to damages from Wyeth in exchange for Generic Health not supplying its products in Australia pending a final hearing which, it believed, would result in a finding that its products did not infringe the method patent. This is the strategy of a company that did not have the money for an interlocutory fight it did not think it could win and which, at the time, was focused on proving that its products did not infringe the method patent. This has nothing to do with the Sigma interlocutory injunction. It is a strategy that Generic Health came up with in its own interests which would have been the same irrespective of the Sigma interlocutory injunction.

712    Generic Health acted in accordance with this advice and also would have done so irrespective of the Sigma interlocutory injunction. Through its solicitors, and more than once, it then asserted to Wyeth that its products did not infringe the method patent. It also asserted that it intended shortly to begin supply of its products in Australia albeit that in fact the board had not decided to do so. Its purpose in so doing was to get Wyeth to give an undertaking to pay Generic Health compensation if Generic Health’s products did not infringe the method patent. It also wanted confirmation from Wyeth that Generic Health’s products did not infringe the method patent because that would remove the risks associated with supply.

713    Mr Upiter was criticised for giving instructions to send letters which said that the company was