FEDERAL COURT OF AUSTRALIA

Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd (No 2) [2019] FCA 2215

ORDERS

THE COURT ORDERS THAT:

1.    The documents discovered by Otsuka Pharmaceutical Co., Ltd and Bristol-Myers Squibb Company pursuant to orders made on 5 September 2019 be produced to Generic Health Pty Ltd for inspection.

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

ORDERS

THE COURT ORDERS THAT:

1.    The documents discovered by Otsuka Pharmaceutical Co., Ltd and Bristol-Myers Squibb Company pursuant to orders made on 5 September 2019 be produced to Generic Health Pty Ltd for inspection.

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

REASONS FOR JUDGMENT

YATES J:

INTRODUCTION

1    Discovery was given by Otsuka Pharmaceutical Co., Ltd (Otsuka) and Bristol-Myers Squibb Company (BMS) (together, Otsuka/BMS) in relation to applications by them to amend two pleadings styled, in each case, Response to Statement of Particulars of Claim for Damages. The context in which the pleadings were filed is explained in Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd [2019] FCA 230 and Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd (No 3) [2020] FCA 222. In essence, Otsuka/BMS had obtained an interim injunction against Generic Health Pty Ltd (Generic Health) in patent infringement proceedings. Ultimately, the relevant claims of the patent were found to be invalid. Generic Health is claiming compensation from Otsuka/BMS pursuant to undertakings as to damages that Otsuka/BMS had given.

2    The effect of the amendments is to withdraw two admissions: first, an admission that, if not for the interim injunction that had been granted, Generic Health would have obtained PBS listing for the identified products (the GH products) on 1 April 2012; secondly, an admission that, if not for the injunction, Generic Health would have commenced to sell the products on the PBS market on 1 April 2012.

3    Otsuka/BMS objected to inspection of the documents discovered by Generic Health. They claimed that the documents were covered by legal professional privilege. Generic Health disputed that claim, arguing that privilege had been waived.

4    On 11 September 2019, I heard argument on that question in advance of the amendment applications and rejected the claim of privilege. These are my reasons for that ruling.

The discovered documents

5    The discovery that was given responded to two categories of documents that were the subject of orders made by a Registrar of the Court on 5 September 2019:

1.    All documents recording any reasons of BMS and/or Otsuka for:

a.    making the admissions in paragraphs 28, 29, 30 and/or 31(a) of the Response;

b.    maintaining those admissions, and created during the period 14 July 2018 to 14 September 2018.

2.    All documents recording any reasons of BMS and/or Otsuka for seeking to withdraw or amend the admissions made in paragraphs 28, 29, 30 and/or 31(a) of the Response and created in the period of 19 October 2018 to 17 April 2019.

6    The documents that were discovered originated from 2018. There were no documents whose existence was contemporaneous with the making of the admissions. The parties accepted that there was no need for me to inspect the documents in order to rule on the question of waiver.

Submissions

7    In support of their amendment applications, Otsuka/BMS served an affidavit made by their then solicitor, Mr Kerr. In that affidavit, Mr Kerr said that, prior to the decision in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556; 136 IPR 8 (Sigma v Wyeth), he was not aware that the claim by Generic Health would require consideration of the extent of the possibility and probability of Generic Health listing the GH products on the PBS and launching them, at risk, on 1 April 2012. He said that he was concerned to avoid an argument, based on Sigma v Wyeth, that the admissions should be read as accepting that there was:

… a 100% possibility/probability that Generic Health would have launched [the GH products] at risk and would have obtained PBS listing on 1 April 2012 …

8    Generic Health submitted that, given the context in which Mr Kerr’s affidavit was served (an application to amend pleadings by withdrawing admissions), Mr Kerr’s statement must be understood as an assertion by Otsuka/BMS that, in making the admissions, they were acting under a misapprehension as to their effect or, at least, making admissions they did not intend to make.

9    Mr Kerr then deposed to some of Otsuka/BMS’s reasons for wishing to withdraw the admissions. I say “some” because Mr Kerr prefaced this part of his affidavit by saying:

BMS and Otsuka’s reasons include the following: …

10    Mr Kerr then listed a number of factual propositions, mixed with submissions, standing as Otsuka/BMS’s reasons. These propositions and submissions appeared to be directed to putting in contest, or at least heavily qualifying, the facts that Otsuka/BMS had admitted.

11    Generic Health submitted that, in this part of his affidavit, Mr Kerr could only have been acting on communications he had received from Otsuka/BMS as their solicitor and that, by deploying their reasons for seeking the amendments in this way, Mr Kerr had exposed their communications on these matters in a way that was inconsistent with the continued maintenance of the privilege they claimed in respect of the discovered documents.

12    Otsuka/BMS also served an affidavit by Mr Emmerig, whose firm had been retained by Otsuka/BMS in a related claim for compensation brought by the Commonwealth of Australia against Otsuka/BMS. In his affidavit, Mr Emmerig put forward his understanding of the significance of Sigma v Wyeth. He argued that there was a proper basis to contest the facts that Otsuka/BMS had admitted. He specifically raised the effect of the admissions in a way that suggested that Otsuka/BMS had not intended to admit that it was certain that, if not for the interim injunction that had been granted, the GH products would have been listed on the PBS on 1 April 2012 and Generic Health would have sold them on that date. He argued, therefore, that Otsuka/BMS would be prejudiced if they were not permitted to withdraw their admissions.

13    Generic Health submitted that the only sensible way to understand this part of Mr Emmerig’s affidavit was that Otsuka/BMS were asserting, through their solicitor, that they had not made the admissions with the intention that they be taken as expressing certainty that, but for the interim injunction that had been granted, the admitted events would have occurred. In short, they were asserting that they had intended to make admissions of a different character.

14    Generic Health then took me to the submissions that Otsuka/BMS had filed in support of their amendment applications. The submissions contended that the “forensic landscape” had changed since the decision in Sigma v Wyeth. They advanced that part of Mr Emmerig’s affidavit to which I have referred, including as to how the admissions might be interpreted. In particular, the submissions advanced the proposition that, as the forensic landscape had changed, Otsuka/BMS’s submissions might be interpreted differently from the way in which they were initially intended to be given. Generic Health submitted that these submissions laid open to scrutiny the advice that Otsuka/BMS must have been given in making and maintaining the admissions and, now, in seeking to withdraw them.

15    Generic Health took me to the principles with respect to waiver of privilege discussed in Macquarie Bank Limited v Arup Pty Limited [2016] FCAFC 117 (Macquarie Bank) at [24] – [32], commencing with the guiding principle stated in Mann v Carnell (1999) 201 CLR 1 at [29] that waiver of the privilege may be express or implied and that:

… [w]hat 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.

16    The Full Court in Macquarie Bank accepted that the correct approach to the question of waiver was stated in Ferella & Anor v Official Trustee in Bankruptcy (2010) 188 FCR 68 at [65]:

… However, the question is not simply whether the holder of the privilege has put that person’s state of mind in issue but whether that person has directly or indirectly put the contents of the otherwise privileged communication in issue … Indeed, even the fact that the holder of the privilege makes clear that the advice was relevant or contributed to a particular course of conduct would not be sufficient to waive the privilege unless, possibly, the contents of the legal advice (and not merely the fact of the advice) are specifically put in issue by relying on the contents of the advice to vindicate a claimed state of mind …

17    Generic Health drew particular attention to the Full Court’s acceptance in Macquarie Bank of the following observations in Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236:

48     ... It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege. In this respect, it may be sufficient that the client is making assertions about the client's state of mind, in circumstances where there were confidential communications likely to have affected that state of mind.

18    Generic Health also drew my attention to Stuart v Rabobank Australia Ltd [2017] FCA 284 at [15] and [18] for the proposition that service of a witness statement or an affidavit can constitute conduct that is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.

19    Further, Generic Health directed my attention to Apotex Pty Ltd v Les Laboratoires Servier [2008] FCA 1466; 79 IPR 100 at [17] – [19] for the proposition that, by advancing its solicitor’s reasons for making an application on that party’s behalf, the party can be taken as advancing its own reasons for that application, through the instrumentality of the solicitor.

20    Otsuka/BMS submitted that, properly understood, Mr Kerr’s affidavit was only advancing his (Mr Kerr’s) state of mind and his reasons why, in light of the decision in Sigma v Wyeth, the admissions will present difficulties for Otsuka/BMS so far as the onus of proof is concerned. In support of this submission, Otsuka/BMS referred to the way in which Generic Health had framed some of its written submissions that had been filed for the purpose of the amendment applications. These submissions criticised Otsuka/BMS for actively resisting the exposure of their reasoning and appeared to confine the reasons expressed by Mr Kerr as his reasons alone.

21    Similarly, Otsuka/BMS advanced Mr Emmerig’s affidavit as expressing his personal views, not their views, as to how they would be prejudiced if the admissions were not withdrawn.

22    Further, Otsuka/BMS submitted that nothing contained in the written submissions filed on their behalf in relation to the amendment applications should be read as stating their state of mind or anything about how they have interpreted the admissions.

23    Otsuka/BMS submitted that nothing in Mr Kerr’s affidavit, Mr Emmerig’s affidavit or their written submissions filed in respect of the amendment applications referred to the fact of legal advice, let alone the contents of legal advice.

Reasons

24    No officer came forward from Otsuka or BMS to give evidence to support the amendment applications and, in particular, the withdrawal of the admissions. This was left to their solicitors, Mr Kerr and Mr Emmerig. However, at the time of the argument on waiver, it was clear that Otsuka/BMS were not going to read Mr Kerr’s affidavit in the amendment applications. They had nevertheless deployed that affidavit by filing and serving it on Generic Health. Otsuka/BMS did not contend that a waiver of privilege could not arise from that event. What they did contend was that, in making his affidavit, Mr Kerr was expressing his personal views, not their views.

25    I do not accept that submission. It is contrary to the express statement in Mr Kerr’s affidavit that he was advancing Otsuka/BMS’s reasons for seeking the amendments to withdraw the admissions. Apart from his express statement that he was advancing their reasons, the overall tenor of Mr Kerr’s affidavit was that, as their solicitor, he was speaking on their behalf to explain that there had been a change in circumstances from when they had made their admissions which meant that, now, their admissions would be understood in a way in which they did not intend them to be understood. This is illustrated by the following statements in his affidavit:

21    The claimants in Sigma v Wyeth did not open their cases on the basis that their loss should be assessed in accordance with the framework set out by Jagot J [in Sigma v Wyeth] …

22     I also understand that the Federal Court Proceeding No. NSD 1639/2007 Apotex Pty Ltd v Sanofi-Aventis & Ors, the only other proceeding that has reached a final hearing concerning a claim for damages by generic suppliers pursuant to the usual undertaking as to damages, the claimant (being the Commonwealth) expressly disavowed any analysis of their damages on a loss of opportunity basis. …

23    Accordingly, prior to the Sigma v Wyeth decision, I was not aware that the claim by Generic Health would require a consideration of the extent of the possibility and probability of Generic Health launching/PBS-listing the GH Products … at risk on 1 April 2012. …

24    I am concerned to avoid any argument that, as a result of the Sigma v Wyeth decision in October 2018, BMS and Otsuka’s existing admissions should be read, incorrectly in my view, as admissions that there was a 100% possibility/probability that Generic Health would have launched the GH Products at risk and would have obtained PBS listing on 1 April 2012, or should be read as otherwise foreclosing any argument at trial on the extent of such possibility/probability. …     

26    Although in these passages Mr Kerr spoke of his understanding, his awareness and his concerns, I am unable to read them as saying anything other than that these were Otsuka/BMS’s reasons, and reflect their state of mind, based on Mr Kerr’s advice to them. The implication I draw is that Mr Kerr was saying, on Otsuka/BMS’s behalf, that their admissions had been made deliberately, having regard to Mr Kerr’s understanding of the basis on which claims for compensation had been advanced before the decision in Sigma v Wyeth and that, in making the admissions, Otsuka/BMS were not intending to admit that it was certain that PBS registration of the GH products would take place, and sale of the products would commence, on 1 April 2012. Further, I understand Otsuka/BMS to be saying, through Mr Kerr, that the decision in Sigma v Wyeth marked a new development and departure from previous practice (as Mr Kerr understood it) which meant that, now, the admissions had a significance which they had not intended them to have when they made them, and might be misunderstood.

27    Although not addressed directly in the affidavit, these passages bespeak the existence of communications between Otsuka/BMS and their solicitors containing legal advice on these matters, including the basis on which the admissions were intended to be given. The substance of those communications is revealed by the affidavit as one reason why the amendments withdrawing the admissions should be allowed.

Conclusion and disposition

28    The disclosures in Mr Kerr’s affidavit are sufficient for me to hold that any legal professional privilege which attached to the communications in the discovered documents has been waived. It is not necessary for me to deal with the effect of Mr Emmerig’s affidavit in this regard. The documents should be produced to Generic Health for inspection.

Associate:

Dated:    28 February 2020