FEDERAL COURT OF AUSTRALIA
MERCK SHARP & DOHME (AUSTRALIA) PTY LTD
MERCK SHARP & DOHME (AUSTRALIA) PTY LTD
DATE OF ORDER:
THE COURT ORDERS THAT:
2. The respondent/cross-claimant pay the applicants’/cross-respondents’ costs of the application for privilege.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 On 30 August 2019 leave was granted to the applicants (Merck) to issue a Notice to Produce to the respondent (Wyeth): Merck Sharp & Dohme Corporation v Wyeth LLC  FCA 1421. That Notice has now been issued and Wyeth asserts a claim of legal professional privilege in respect of documents falling within the Notice’s categories. Merck challenges that claim, and the parties have filed written submissions in support of their respective positions and asked that the question be determined on the papers (privilege application). By agreement, the parties have determined that it is not necessary for the Court to view Wyeth’s confidential schedules of the documents in respect of which privilege is claimed, or the documents listed in them. There is no dispute that the documents listed in the schedules are, subject to any waiver, entitled to the benefit of privilege. In Merck Sharp I explained the context of the Notice. In these reasons, familiarity is assumed with that judgment and with the abbreviations used therein.
2 By way of background, in 2017 Merck filed proceedings seeking revocation of three patents, one of which is the container patent. Wyeth brought a cross-claim against Merck for threatened infringement of certain claims of those patents by the intended sale of Merck’s proposed vaccine. The trial was completed in February 2019 and judgment is reserved. However, in June 2019 Wyeth filed an application for leave to amend its proceedings to add an allegation that claim 9 of the container patent would also be infringed by Merck’s proposed vaccine.
3 Wyeth relies on the affidavit evidence of Mr Hamer in support of its amendment application. I have summarised the broad effect of this evidence in Merck Sharp at ,  and . The Notice was served having regard to the issues raised by the content of the Hamer affidavits, and the waiver of privilege arguments arise in the same context.
4 The documents in respect of which a claim of privilege is made fall within the following categories:
(1) Any documents created on or before 13 November 2017 recording consideration of whether to, and/or the basis for the decision not to, allege infringement by the applicants in Australia of the surfactant claims;
(2) Any documents created after 13 November 2017 recording consideration of whether to seek to allege infringement by the applicants in Australia of claim 9 and/or to file the Interlocutory Application on 25 June 2019;
(3) All documents (including but not limited to file notes and memoranda) recording or evidencing:
(a) the communication between Mr Hamer and Ms Reddy referred to in paragraph 14 of the affidavit of Richard William Hamer sworn 13 August 2019 (Hamer 2);
(b) communications between Ms Reddy and the external service provider after March 2018 in relation to the formulation of the applicants’ 15 valent vaccine (referred to in paragraph 14(c) of Hamer 2).
5 Wyeth does not dispute that there has been a waiver of privilege in respect of the communication between Mr Hamer and Ms Reddy falling within category (3)(a) of the Notice. It also accepts that there has been a similar waiver in respect of the conversation between Mr Hamer and Mr Islam in  of Mr Hamer’s first affidavit sworn on 23 July 2019 (Hamer 1). Otherwise, it contends that the affidavit material does not involve any waiver with the consequence that documents falling within categories (1), (2) and (3)(b) are protected by legal professional privilege.
6 In Hamer 1, Mr Hamer explains how, by the time of the trial in December 2018, Wyeth came to sue Merck for infringement of some of the claims of the container patent, but not claims 9, 10 or 11, that are for an invention for a vaccine incorporating a surfactant (surfactant claims). He says:
 On 13 November 2017, Wyeth filed and served a notice of cross-claim and statement of cross claim in the Proceedings... Wyeth did not allege that the MSD parties had threatened to infringe [the surfactant claims]...because there was, in my opinion, no adequate basis to make such an allegation. The state of my knowledge, the state of Pfizer’s knowledge, and the reason for my conclusion that there was no proper basis to allege that [Merck] had threatened to infringe any of the surfactant claims, is described in more detail below.
7 He describes various matters concerning his state of knowledge in relation to the prospect of bringing a suit in relation to the surfactant claims from before 13 November 2017, when the cross-claim was filed, until 25 June 2019, when the amendment application was made. This includes evidence about the specific nature of the investigations he had made, and the results of his investigations that enabled him to form a view in relation to the availability of a claim against Merck. Under the heading “Pfizer’s knowledge”, at  in Hamer 1, he gives evidence on information and belief from his instructor, Mr Islam:
(c) At all relevant times, Mr Islam intended that Wyeth should assert infringement of each claim of the Container Patent for which there as a proper basis to assert infringement, and he relied on Allens to determine what claims of the Container Patent could be properly asserted under Australian law.
8 The evidence so advanced is to demonstrate that Mr Hamer advised his client that there was no proper basis for suing on the surfactant claims until 25 June 2019, and that his client relied upon that advice.
9 This application concerns the production of documents under a Notice to Produce, and accordingly the common law relevant to waiver applies. In Mann v Carnell  HCA 66; 201 CLR 1, Gleeson CJ, Gaudron, Gummow and Callinan JJ held as follows:
29. …Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is “imputed by operation of law”. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. … What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.
10 In DSE (Holdings) Pty Limited v Intertan Inc  FCA 384; 127 FCR 499, Allsop J (as the Chief Justice then was) said:
58. …It is sufficient to understand, I think, that in most undue influence cases (and in Thomason when its circumstances are appreciated) the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication...
(italics in original)
11 In Commissioner of Taxation v Rio Tinto Limited  FCAFC 86; 151 FCR 341, the Full Court (Kenny, Stone and Edmonds JJ) said after a broad survey of the relevant cases:
52. These authorities show that, where issue or implied waiver is made out, the privilege holder has expressly or impliedly made an assertion about the contents of an otherwise privileged communication for the purpose of mounting a case or substantiating a defence. Where the privilege holder has put the contents of the otherwise privileged communication in issue, such an act can be regarded as inconsistent with the confidentiality that would otherwise pertain to the communication.
12 The holder of the legal professional privilege in the documents produced in relation to the categories is Wyeth. It is Wyeth’s acts and omissions that must be considered in deciding whether it has expressly or impliedly waived privilege, or whether those acts or omissions are inconsistent with the maintenance of privilege: Rio Tinto at .
13 The question is whether in resisting production of the documents, reliance on the evidence of Mr Hamer is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect: Mann at . In my view it is.
14 Mr Harmer’s affidavits did not merely refer to legal advice received without disclosure of its content (cf Kirby J in Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd  HCA 15; 70 ALRJ 603 at 607). They make a broader disclosure that the legal advice given by Mr Hamer, on the basis of the information that he had available to him during the continuum of time from prior to the commencement of the proceedings until June 2019, precluded a conclusion that Wyeth could properly bring a suit for the infringement of the surfactant claims, and that he had advised Wyeth to that effect. The evidence is given with Wyeth (and Pfizer’s) authority and in support of the amendment application to explain why Wyeth did not include claim 9, or any surfactant claim, in the proceedings prior to that point in time. Having adopted this approach, in my view it is inconsistent to claim legal professional privilege with respect to the communications between Wyeth and Mr Hamer concerning his opinion, Wyeth’s instructions, and related material: Mann at .
15 Contrary to the submissions advanced on behalf of Wyeth, the position in Gloucester Shire Council v Fitch Ratings, Inc (No 2)  FCA 248 is not directly analogous. There, contrary to the view expressed above, Wigney J found that there was no express or implied disclosure of the advice given to the client: see , ,  and .
16 Nor do I consider, to the extent that it matters, that the legal position is relevantly different in the present case to that considered by Bennett J in Apotex Pty Ltd (ACN 096 916 148) v Les Laboratoires Servier  FCA 1466; 79 IPR 100. Although in that case the question of waiver was considered in the context of an application brought to amend a patent under s 105 of the Patents Act 1990 (Cth), her Honour applied the common law relevant to waiver of privilege in a manner that was not relevantly affected by the fact, recorded at  of her reasons, that it was incumbent upon Servier, as the amending party, to put forward correct reasons for the amendment of its case. That is analogous to the present case, Wyeth having adopted the position that it would explain its delay by reference to the lack of knowledge on the part of Mr Hamer.
17 Privilege is claimed in categories 1 and 2 in respect of documents recording consideration of whether to and/or the basis for the decision not to allege infringement by Merck in Australia of the surfactant claims. Wyeth submits that nowhere has it expressly or impliedly waived privilege by disclosing the content of any such privileged communications. This submission mischaracterises the basis upon which the waiver in the present case operates. The question is not restricted to whether or not there has been a literal disclosure of the content of a document, but encompasses the broader question of whether in light of the Hamer affidavits, it would be inconsistent to maintain the confidentiality which the privilege protects in relation to the issue raised: Rio Tinto at . I consider that it would be, because having disclosed the reasoning given by Mr Hamer in his affidavits and relied upon it as its own reasoning, Wyeth now claims legal professional privilege over communications between itself and Mr Hamer concerning Mr Hamer’s opinion, Wyeth’s instructions, and Wyeth’s reasons for making the amendment application. In doing so, an inconsistency arises between reliance on the affidavit evidence, and thereby laying the contents of the communications open to scrutiny, and the maintenance of the confidence. As the Court observed in DSE (Holdings) at , the inconsistency is informed by the forensic unfairness of allowing the claim to proceed without disclosure of the communication: see also Apotex at .
18 Accordingly, Wyeth has waived legal professional privilege in relation to the documents that fall within categories 1 and 2. Wyeth submits that the scope of any waiver of privilege in the present case should not extend to legal professional privilege going to advice given more generally, such as the strength of the amendment application, the likelihood of its success, the consequences of making or not making the application, and issues concerning the validity of the patent or other patents in suit. There is force in this submission. It is not necessarily the case that the waiver extends to the whole of the contents of documents that fall within the Notice to Produce: see CSL Ltd v Novo Nordisk Pharmaceuticals Pty Ltd  FCA 671; 87 IPR 134 (Jessup J) at .
19 To the extent that the contents of the documents sought contain privileged material going beyond that which is identified in categories 1 and 2, then they may be redacted in accordance with paragraph 5 of the Orders made on 13 September 2019 and paragraph 3 of the Orders made on 18 September 2019, which anticipate that documents or parts of documents that are not responsive to the Notice may be removed or redacted. In my view sub-paragraph 14(c) of Hamer 2 does not disclose the contents of privileged material. Accordingly, I do not consider that the waiver extends to documents within that sub-paragraph, as set out in category 3(b) of the Notice.
20 In the result, the claim for legal professional privilege in respect of the documents identified in paragraphs 1 and 2 the Notice fails, but succeeds for paragraph 3(b). Wyeth must pay Merck’s costs of the application.
21 The Orders of the Court are that:
(1) Wyeth’s claim for legal professional privilege in respect of documents falling within paragraphs 1 and 2 of the Notice to Produce issued on 30 August 2019 be dismissed;
(2) Wyeth pay Merck’s costs of the application.
Dated: 1 October 2019