FEDERAL COURT OF AUSTRALIA

Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd (No 3) [2020] FCA 222

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to Otsuka/BMS to withdraw paras 28, 29, 30 and 31(a) of the Response to Statement of Particulars of Claim for Damages filed in Generic Health’s enforcement proceedings, and to file an amended Response to Statement of Particulars of Claim for Damages in the form annexed to their interlocutory application dated 17 April 2019.

2.    Otsuka/BMS pay Generic Health’s costs thrown away by reason of the amendments sought.

3.    Otsuka/BMS pay the costs of the application to amend.

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

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to Otsuka/BMS to withdraw paras 30, 31, 32 and 33(a) of the Response to Statement of Particulars of Claim for Damages filed in Generic Health’s enforcement proceedings, and to file an amended Response to Statement of Particulars of Claim for Damages in the form annexed to their amended interlocutory application dated 17 September 2019.

2.    Otsuka/BMS pay Generic Health’s costs thrown away by reason of the amendments sought.

3.    Otsuka/BMS pay the costs of the application to amend.

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

REASONS FOR JUDGMENT

YATES J:

Introduction

1    Otsuka Pharmaceutical Co., Ltd (Otsuka) and Bristol-Myers Squibb Company (BMS) (together, Otsuka/BMS) seek to amend their Response to Statement of Particulars of Claim for Damages filed in proceeding NSD 121/2012 (the primary proceeding) on 20 July 2017 in response to a Statement of Particulars of Claim for Damages filed by Generic Health Pty Ltd (Generic Health) on 15 June 2017.

2    The context in which these documents were filed is explained in Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd [2019] FCA 230 at [1] - [17] and need not be repeated in these reasons, save to note that Generic Health claims compensation pursuant to undertakings as to damages given by Otsuka/BMS in patent infringement proceedings in which Otsuka/BMS obtained an interim injunction against Generic Health on 22 March 2012 (the interim injunction).

3    Otsuka/BMS also seek to amend their Response to Statement of Particulars of Claim for Damages taken to have been filed on 20 July 2017 in proceeding NSD 837/2015, which was an appeal from the judgment given in the primary proceeding (the appeal proceeding), in response to a Statement of Particulars of Claim for Damages filed by Generic Health on 18 July 2017. Generic Health claims compensation pursuant to undertakings as to damages given by Otsuka/BMS in the appeal proceeding in which the interim injunction was continued (they obtained a stay of an order made in the primary proceeding lifting the injunction.)

4    I will refer to Generic Health’s claims for compensation in the primary proceeding and the appeal proceeding as Generic Health’s enforcement proceedings. I will refer to Otsuka/BMS’s Response to Statement of Particulars of Claim for Damages filed in the primary proceeding and their corresponding Response to Statement of Particulars of Claim for Damages filed in the appeal proceeding as the Responses.

5    On 21 June 2018, approximately one year after the commencement of Generic Health’s enforcement proceedings, the Commonwealth of Australia filed claims for compensation in the primary and in the appeal proceeding (the Commonwealth’s enforcement proceedings) to which Otsuka/BMS have responded by filing, in each proceeding, a document styled Points of Defence.

6    In its Statements of Particulars of Claim for Damages filed in the primary proceeding and the appeal proceeding, Generic Health alleges that, by reason of the interim injunction that was granted, and continued pending the determination of Otsuka/BMS’s appeal, it was restrained from importing, marketing, taking orders for, selling, supplying, offering to supply or otherwise exploiting certain products (the GH products) in Australia from 22 March 2012 until 21 September 2016. It further alleges that, during this period, it was restrained from listing the GH products under the Pharmaceutical Benefits Scheme (PBS) maintained by the Commonwealth under the National Health Act 1953 (Cth). It further alleges that, if not for the interim injunction, it would have obtained PBS listing for the GH products on 1 April 2012 and commenced to sell those products on the “PBS market” on 1 April 2012.

7    In their Responses, Otsuka/BMS admit these allegations.

8    In the Commonwealth’s enforcement proceedings, the Commonwealth makes similar allegations—in particular, allegations that, if not for the interim injunction, Generic Health would have obtained PBS listing of the GH products on 1 April 2012 and, from no later than that date, supplied those products in competition with Otsuka’s relevant PBS products.

9    In their Points of Defence filed in the Commonwealth’s enforcement proceedings, Otsuka/BMS deny these allegations.

10    The decision referred to at [2] above was given in the Commonwealth’s enforcement proceedings and concerned the question whether Otsuka/BMS’s denials should be struck out on pleading grounds or as an abuse of the Court’s process (the Commonwealth’s strike out application) having regard to the admissions which Otsuka/BMS had made in Generic Health’s enforcement proceedings. I held that Otsuka/BMS’s denials should not be struck out, and dismissed the application. At that time, I observed that Generic Health’s enforcement proceedings were separate and distinct from the Commonwealth’s enforcement proceedings and that each set of enforcement proceedings would be determined on the particular issues formulated for determination by the pleadings that were filed and on the evidence that was to be adduced: see at [29] – [33] of that decision.

11    By the amendments they now seek to make, Otsuka/BMS wish to withdraw the admissions they have made in Generic Health’s enforcement proceedings and bring their Responses in those proceedings into line with the Points of Defence they have filed in the Commonwealth’s enforcement proceedings. The present question is whether leave should be granted to permit that to be done.

12    This question arises against the background that, for a significant period of time, Otsuka/BMS were represented by one firm of solicitors in Generic Health’s enforcement proceedings and another firm of solicitors in the Commonwealth’s enforcement proceedings. The reason for separate representation has not been explained, but it seems to have been the circumstance that has led to Otsuka/BMS taking opposite positions in Generic Health’s enforcement proceedings and the Commonwealth’s enforcement proceedings in relation to the allegations I have noted at [6] and [8] above. On 27 August 2019, Otsuka/BMS changed their representation in Generic Health’s enforcement proceedings and are now represented in those proceedings and the Commonwealth’s enforcement proceedings by one firm of solicitors. I will refer to Otsuka/BMS’s former solicitors in Generic Health’s enforcement proceedings as Otsuka/BMS’s former solicitors or, simply, the former solicitors.

13    Generic Health opposes Otsuka/BMS’s applications to amend.

The evidence

14    The solicitor for Otsuka/BMS, Mr Emmerig, has made an affidavit, sworn on 2 September 2019, in which he has deposed to his belief that there is a proper basis for Otsuka/BMS putting in issue the counterfactual allegations that, but for the interim injunction that was granted (and continued), Generic Health would have sought and obtained PBS listing of the GH products on 1 April 2012 and would have commenced to sell those products on the PBS market on that day.

15    The steps in Mr Emmerig’s reasoning, and the facts which Otsuka/BMS would seek to prove and the submissions it would seek to make, are as follows:

(a)    Generic Health anticipated that it would be restrained from infringing the patent in suit. It understood that the balance of convenience weighed strongly in favour of originator brands and courts had routinely granted interim injunctions in favour of protecting patent rights. Mr de Alwis, Generic Health’s General Manager, was aware in February 2012 that a generic competitor had been restrained from supplying its aripiprazole products by an order made by the Court on 20 October 2009.

(b)    On 14 February 2012, Generic Health’s Managing Director, Mr Upiter, sent an email to Mr de Alwis stating that Generic Health’s worst case scenario (i.e., if Otsuka/BMS were unsuccessful in obtaining interim injunctive relief but successful in obtaining final injunctive relief) was a liability to them for the “the 16% price drop which could apply for anywhere from 4 months to 24 months at a best estimate”, equating to $1.5 million to $9 million, plus litigation costs. Mr Emmerig argued that this email suggests that Generic Health may have been proceeding on the misunderstanding that the automatic 16% statutory price reduction could easily or routinely be reversed, thus limiting Generic Health’s liability exposure. Generic Health sought approval from its board members to list the GH products on the PBS on 1 April 2012 on the basis of this understanding of Generic Health’s potential liability. On 14 February 2012, a communication was sent to Generic Health’s board seeking approval to apply to list the GH products on the PBS on the basis that a 16% price reduction would be reversed within three to four months, and exposure to liability would only be for a limited period of time.

(c)    At the time, Generic Health was unprofitable. Its accounts suggest that it would not have been in a position to carry an exposure of liability to Otsuka/BMS had the statutory price reduction been triggered.

(d)    At the time, Generic Health had liquidity concerns.

(e)    In Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556; 136 IPR 8 (Sigma v Wyeth), Jagot J held that a claim for compensation on an undertaking as to damages, such as in the present case, should be considered on a “loss of opportunity” basis. This requires the Court to assess the extent of the probability or possibility that PBS listing would have been sought and obtained for the products in question.

16    As to the last-mentioned matter, Mr Emmerig argued that, unless the Court was 100% certain that Generic Health would have sought and obtained PBS listing and commenced to supply the GH products on 1 April 2012, it must discount the amount of compensation sought by Generic Health to reflect the extent of the probability or possibility that PBS listing and supply would have taken place. He expressed concern that, if Otsuka/BMS were not allowed to make the amendments they seek, Generic Health might argue that Otsuka/BMS are precluded from making submissions regarding the extent of that probability or possibility. Mr Emmerig argued that Otsuka/BMS’s admissions had been made approximately 15 months before the decision in Sigma v Wyeth had been given. He contended that they would be unfairly prejudiced if they were precluded from arguing, consistently with the reasoning in that case, that Generic Health’s claim for compensation should be discounted.

17    In correspondence directed to Generic Health’s solicitors on 2 April 2019, Otsuka/BMS’s former solicitors stated that, prior to the decision in Sigma v Wyeth:

…BMS and Otsuka were not aware that the claim by Generic Health would necessarily require a consideration of the extent of the possibility and probability of Generic Health launching/PBS-listing at risk on 1 April 2012. However, having regard to Sigma v Wyeth, it would now be necessary for Generic Health in order to establish the extent of any loss, to prove the extent of such possibility and probability, regardless of whether or not BMS and Otsuka are withdrawing the admissions. BMS and Otsuka’s current admissions should not be taken as an admission that Generic Health had a 100% possibility and probability of obtaining PBS listing of the GH Products. There would be potentially a significant difference in the quantum of Generic Health’s damages depending on where that possibility and probability is between 0% - 100%, or even between 51% - 100%.

18    The former solicitors continued:

… BMS and Otsuka now have reason to believe that Generic Health may have difficulty discharging the onus of proving that it would have launched/PBS-listed at risk as at 1 April 2012.

19    At this juncture, I pause to note two matters. First, for the reasons discussed at [48] – [50] below, I find it difficult to accept that, prior to the decision in Sigma v Wyeth, Otsuka/BMS were not aware that the claim by Generic Health would necessarily require a consideration of the possibility and probability of Generic Health “launching/PBS-listing at risk” on 1 April 2012. Secondly, I do not accept the proposition that, notwithstanding the admissions made, it remained incumbent on Generic Health to prove the extent of the possibility or probability that Generic Health would have obtained PBS listing for the GH products on 1 April 2012. The inescapable fact is that the relevant facts have been admitted. They are no longer the subject of proof. Having been admitted, they are removed from contest and, for legal liability purposes, are taken to be facts. Thus, the occasion for assessing them according to possibilities or probabilities does not arise. Further, when considering the legal effect of the admissions, it is idle to ruminate the reasons for making them.

20    The former solicitors also argued that it was “entirely appropriate” that Otsuka/BMS should seek to amend the Responses after the decision in Sigma v Wyeth. They said that it was not appropriate for Otsuka/BMS to do so while the Court’s decision referred to at [2] above was pending because, had the Commonwealth’s strike-out application succeeded, Otsuka/BMS would have been required to bring their Points of Defence in the Commonwealth’s enforcement proceedings into line with the Responses in Generic Health’s enforcement proceedings.

21    It is ironic (to say the least) that, having successfully advanced the argument in the Commonwealth’s strike out application that it was entirely legitimate to maintain their admissions in Generic Health’s enforcement proceedings whilst pleading denials in the Commonwealth’s enforcement proceedings, Otsuka/BMS now wish to change their pleadings in Generic Health’s enforcement proceedings to withdraw their admissions.

22    The correspondence in evidence reveals that, as at August 2018, some months before the Commonwealth filed its strike out application, Otsuka/BMS’s former solicitors were giving “some thought to a strategy to reconcile [Otsuka/BMS’s] position in relation to the Generic Health claim and the Commonwealth claim” or, as one email put it, “to balance the GH and Commonwealth claims”. The strategy they recommended was to accept that, subject to an argument that the Commonwealth would not have approved PBS listing for the GH products, Generic Health would have obtained that listing and launched the products on 1 April 2012. However, Otsuka/BMS would dispute that Generic Health would have continued to supply, at risk, for the entirety of the period for which, in fact, the injunction was in place. (It will be apparent that the scenario under consideration was a counterfactual where no interim injunction had been granted and supply had commenced.)

23    Otsuka questioned this recommendation and suggested that denying the fact that (but for the interim injunction) Generic Health would have obtained PBS listing for the GH products on 1 April 2012 “seems a good position for [Otsuka/BMS] against both GH claim and Commonwealth claim”.

24    It is clear from this correspondence that Otsuka was concerned that it had adopted inconsistent positions in Generic Health’s enforcement proceedings and the Commonwealth’s enforcement proceedings. It canvassed the position of seeking to withdraw its admissions in Generic Health’s enforcement proceedings in parallel with defending the Commonwealth’s strike out application. Further correspondence shows a desire on Otsuka’s part for Otsuka/BMS’s former solicitors (who at that time were still acting for Otsuka/BMS in Generic Health’s enforcement proceedings) and their current solicitors (who were then only acting for Otsuka/BMS in the Commonwealth’s enforcement proceedings) to explain how this inconsistency could be maintained or, alternatively, to address how the inconsistency could be resolved. The correspondence shows that Counsel’s advice at the time was that Otsuka/BMS’s prospects of withdrawing its admissions in Generic Health’s enforcement proceedings were “low” as there was no evidence of a change in circumstances that would justify the change in position. This opinion was expressed in circumstances where Otsuka/BMS had adduced affidavit evidence from Mr Emmerig in the Commonwealth’s strike out application that the allegations concerning PBS listing and the supply of the GH products on the PBS market on 1 April 2012 (as alleged in the Commonwealth’s enforcement proceedings) were contestable.

25    The correspondence discloses why Otsuka/BMS made the admissions in Generic Health’s enforcement proceedings. At the time that Otsuka/BMS filed the Responses, the view had been taken, on advice from Otsuka/BMS’s former solicitors, that, on the evidence available at the time of the trial of the primary proceeding and immediately following that time in the course of the interlocutory application in the appeal proceeding to stay the lifting of the interim injunction granted in 2012, it was “almost certain” that Generic Health would have obtained PBS listing of the GH products on 1 April 2012, and commenced supply in the PBS market on that day. It is to be noted that, at that time, Generic Health had not filed any evidence in support of its claims in its enforcement proceedings.

26    Otsuka/BMS’s former solicitors reviewed this assessment after Generic Health had filed its first tranche of lay evidence in Generic Health’s enforcement proceedings in May 2018. This apparently included evidence that, in the former solicitors’ view, supported the admissions that Otsuka/BMS had made. The former solicitors considered that, although there were deficiencies in that evidence, it was more likely than not that Generic Health would prove the admitted allegations on the balance of probabilities. For that reason, Otsuka/BMS did not seek to withdraw their admissions at that time.

27    In considering these facts, it is important to bear in mind that Generic Health’s enforcement proceedings were commenced approximately one year before the Commonwealth’s enforcement proceedings and, hence, well before Otsuka/BMS’s current solicitors became involved in pleading Otsuka/BMS’s defence in the latter proceedings. It can be seen that the pleading of the Responses in Generic Health’s enforcement proceedings, and the pleading of the Points of Defence in the Commonwealth’s enforcement proceedings, derive from the different perspectives, held by different lawyers at different points in time, as to how the same allegations of fact should be treated on the evidence that was available at the time the respective pleadings were formulated and filed on Otsuka/BMS’s behalf. This is, perhaps, the peril of seeking legal advice and assistance on the same question from different sources at different times.

28    Mr Emmerig was cross-examined on his affidavit and on the correspondence to which I have referred.

The amendments

29    There are two amendments that are particularly relevant to these applications.

30    First, Otsuka/BMS wish to amend the Responses: (a) by withdrawing the admission that, if not for the interim injunction, Generic Health would have obtained PBS listing of the GH products on 1 April 2012, and (b) by pleading instead that they do not know and cannot admit that allegation. In connection with that amendment, they also wish to aver the following facts:

The respondents … say that:

(a)    the claims of Australian Patent No. 2005201772 “Substituted carbostyril derivatives as 5-HT1A receptor subtype agonists” (the Patent) remained continuously unrevoked from the date when the Patent was granted (being a date prior to these proceedings) until 4.00pm on 21 September 2016;

(b)    the Patent was granted pursuant to the Patents Act 1990 (Cth), which provides for exclusive rights of exploitation by the patentee and for an application for the revocation of a patent to be determined through proceedings in the Federal Court of Australia:

     PARTICULARS

     Patents Act 1990 (Cth) ss 13 and 138;

(c)    offering to sell or otherwise dispose of, importing, or keeping for the purpose of offering to sell or dispose of the GH Products, or authorising other persons to engage in said conduct, without the licence or authority of Otsuka, in the period between 22 March 2012 and 21 September 2016 would have constituted infringement of the Patent if it were not revoked, and would have caused substantial economic harm to the Respondents;

(d)    the Applicant held not such licence or authority in respect of the Patent from the First Respondent at any material time;

(e)    upon the listing of the GH PBS Products, the Applicant would have had an obligation:

(i)    to supply those products, pursuant to s 99AEB of the National Health Act 1953 (Cth) (the NHA); and

(ii)    to notify the Minister of any inability to supply those products, pursuant to s 99AEG of the NHA;

(f)    the listing of the GH PBS Products on the PBS would have triggered an automatic price reduction, causing substantial economic harm to the Respondents;

(g)    in the premises, an application for listing of the GH PBS Products on the PBS and subsequent supply of those products, prior to the revocation of the Patent on 21 September 2016, would have exposed Generic Health to the risk of substantial damages;

(h)    Generic Health anticipated that it would be restrained from infringing the Patent;

(i)    Generic Health sought approval from its board members to list the GH PBS Products on the PBS on 1 April 2012 on the erroneous basis that:

(i)    the automatic price reduction could be easily or routinely reversed;

(ii)    the automatic price reduction would be reversed within 3-4 months; and

(iii)    Generic Health’s exposure to liability to the Respondents would be very limited;

(j)    Generic Health was unprofitable during the Injunction Period;

(k)    Generic Health had liquidity concerns during the Injunction Period;

(l)    if, in the absence of the Interlocutory Injunction, the Minister had been required to make a determination under section 85 of the NHA whether to list the GH Products on the PBS prior to the Patent being revoked:

(i)    the Minister would have been obliged to take into account, as a mandatory relevant consideration, the capacity of Generic Health to supply the GH PBS Products and meet the supply guarantee obligations under s 99AEB of the NHA;

(ii)    further or in the alternative, the Minister would have been obliged to take into account, as a mandatory relevant consideration, the fact that the listing of the GH Products would be inconsistent with, and impose on Generic Health obligations that were inconsistent with, the Patents Act 1990 (Cth).

31    Secondly, Otsuka/BMS wish to amend the Responses: (a) by withdrawing the admission that, if not for the interim injunction, Generic Health would have commenced to sell the GH products on the PBS market on 1 April 2012, and (b) by pleading instead that they do not know and cannot admit that allegation.

32    Otsuka/BMS contend that the averments quoted in [30] above, if established, would tell against the probability or possibility that PBS listing and sale of the GH products on the PBS market on 1 April 2012 would have occurred.

33    Otsuka/BMS wish to make other amendments, but these are not the focus of debate between the parties and can be put to one side for the purpose of disposing of the present applications.

Relevant principles

34    The withdrawal of admissions made in pleadings is governed by r 26.11 of the Federal Court Rules 2011 (Cth), which provides that, absent consent, a party cannot withdraw an admission or any other plea that benefits another party, in a defence or subsequent pleading, without leave of the Court. The parties accept that the Responses are pleadings for the purpose of this rule.

35    In Jeans v Commonwealth Bank of Australia Ltd [2003] FCAFC 309; 204 ALR 327 (Jeans), the Full Court rejected the notion that there was a rule of practice dictating the circumstances in which a court would allow an admission to be withdrawn. Their Honours said (at [18]) that, when considering whether an admission could be withdrawn, the Court has:

… a broad discretion to weigh up all matters with the overall question being to ensure that there was a fair trial.

36    In Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] FCA 1390, Finn J at [4] adopted the following observations of Debelle J in Centrestate Exports Pty Ltd v Amarantos Shipping Co Ltd [2005] SASC 158 at [32], which are consistent with the acceptance by the Full Court in Jeans of the existence of a broad discretion that is to be exercised having regard to all the circumstances of the case:

The overriding consideration is the interests of justice. The Court will not lightly permit a party to withdraw an admission where the other party has acted to its detriment on the admission or is otherwise prejudiced by the withdrawal. It is plainly necessary to have regard to all relevant factors including the nature and importance of the admission, the circumstances in which the admission was made, whether the admission was made deliberately or inadvertently, the reason given for the application to withdraw, the detriment or prejudice which might be caused to the other party and the stage which the proceedings have reached, and whether the admission is contrary to the facts. The list of relevant factors affecting the Court’s decision will plainly vary from case to case.

37     In considering the withdrawal of an admission made in pleadings, the Full Court in Celestino v Celestino (unreported, Spender, Miles and Von Doussa JJ, 16 August 1990) quoted at 7 the following statement of principle by Bowen LJ in Cropper v Smith (1884) 26 Ch D 700 at 710 – 711:

… the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases... or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party … as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have it corrected, if it can be done without injustice, as anything else in the case is a matter of right.

38    As to that principle, the Full Court said at 8:

The statement of principle assumes that an error or mistake by or on behalf of the party seeking the amendment has been demonstrated. Where the proposed change involves the withdrawal of an admission, a further matter arises for consideration. In Langdale & Anor v. Danby [1982] 1 WLR 1123 Lord Bridge of Harwich, speaking for the House of Lords, said at 1134 that in the absence of clear evidence to the contrary, a court is entitled to assume that counsel who makes an admission in the course of the conduct of a trial, has satisfied himself that the admission was, on his client’s version of the facts, a proper admission to make. In our opinion a court, and other parties to litigation, are similarly entitled to make that assumption about admissions made by solicitors on their client’s behalf in the course of litigation whether in pleadings or in correspondence. For this reason, where leave to withdraw an admission is sought, a court will require an explanation for the making of the admission. The explanation must be a sensible one based on evidence of a solid and substantial character: Langdale v. Danby at 1134; Hollis v. Burton [1892] 3 Ch. 226; and Cumper v. Pothecary (1941) 2 K.B. 58 at 70.

39    There is no doubt that the admissions made in the present case were made formally and on advice, apparently after due consideration of the material then available to Otsuka/BMS.

The submissions

40    Otsuka/BMS advance six reasons why leave to amend should be granted:

(a)    The admissions go to a matter which is not within Otsuka/BMS’s knowledge and on which they would have been entitled to put Generic Health to proof. Otsuka/BMS developed this line of argument by contending that the present application is best seen as an application to run an argument not presently pleaded rather than the withdrawal of an admission of fact: see Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd [2016] NSWSC 728 (Ryde Developments) at [22] – [23].

(b)    The “forensic landscape” has changed as a result of the decision in Sigma v Wyeth, which was decided after pleadings in Generic Health’s enforcement proceedings and the Commonwealth’s enforcement proceedings had closed.

(c)    The allegations that have been admitted are contestable and can, therefore, be seen to be genuinely in dispute.

(d)    The allegations that have been admitted in Generic Health’s enforcement proceedings will be in contest in the Commonwealth’s enforcement proceedings.

(e)    Otsuka/BMS’s decision to withdraw the admissions has been adequately explained.

(f)    No substantial unfair prejudice will be visited on Generic Health should the proposed amendments be allowed.

41    As I have said, Generic Health opposes Otsuka/BMS’s applications to amend. It submits that, contrary to their submission, Otsuka/BMS have not given a straightforward and transparent account as to why the admissions were made in the first place. Generic Health contends that this circumstance is exacerbated by Otsuka/BMS’s reliance on the decision in Sigma v Wyeth as an explanation for seeking to withdraw the admissions now.

42    In this connection, Generic Health points out that it has always pleaded a loss of opportunity case. Further, it submits that there is no suggestion in the evidence that Otsuka/BMS did not intend to make unqualified admissions in any event. Generic Health submits that it does not assist Otsuka/BMS’s applications to advance, now, the hypothetical nature of the facts they have admitted.

43     Further, Generic Health submits that, at the hearing of the Commonwealth’s strike out application, Otsuka/BMS positively advanced a case, in support of their position in those proceedings, that they had removed from the field of contest in Generic Health’s enforcement proceedings the facts covered by the admissions they had made, and that it was entirely legitimate for them to have done so. This was at a time when Otsuka/BMS had full appreciation of the admissions they had made in Generic Health’s enforcement proceedings and knowledge of the decision in Sigma v Wyeth.

44    Thus, Generic Health submits, Otsuka/BMS cannot justify their present applications on the basis that the decision in Sigma v Wyeth had been given after they had pleaded the Responses.

45    Generic Health also relies on Otsuka/BMS’s delay in making the present applications. It submits that, when Otsuka/BMS filed their Points of Defence in the Commonwealth’s enforcement proceedings in August 2018, they were presumably in possession of facts which enabled them to plead denials of the relevant facts. It submits that, if they wished to withdraw their corresponding admissions in Generic Health’s enforcement proceedings, they should have acted at that time. Generic Health submits that it was not appropriate for Otsuka/BMS to await the outcome of the Commonwealth’s strike out application as an excuse for not doing so.

46    Generic Health submits further that a withdrawal of the admissions now will occasion delay in the proceedings. It submits that it will be necessary for it to adduce evidence in support of the facts that would be in issue. It submits that it is no answer to say that it has already filed affidavit evidence that bears upon those facts when a withdrawal of the admissions will require it to adduce sufficiently detailed evidence of the relevant facts.

Consideration

47    I do not accept that the “forensic landscape” in this case changed with the decision in Sigma v Wyeth, in the sense that, for the first time, Otsuka/BMS were met with an unforeseen and new legal development, or were otherwise alerted to the fact that they had to meet a case for damages assessed on a loss of opportunity basis. From its inception, Generic Health’s claim against Otsuka/BMS has been particularised as, in part, a loss of opportunity case. The appendix to Generic Health’s Statements of Particulars of Claim for Damages provides the following particulars:

1.    Loss of the opportunity:

(a)    to be the first entrant into the market in Australia for generic products containing aripiprazole by selling its GH Products from 1 April 2012;

(b)    to have the GH PBS Products listed on the Schedule of Pharmaceutical Benefits pursuant to the Pharmaceutical Benefits Scheme (“PBS”), from 1 April 2012;

(c)    to be the first generic pharmaceutical company to sell generic products containing aripiprazole in the PBS market by selling the GH PBS Products in Australia from 1 April 2012;

(d)    to sell the GH Products during a period when sales of Respondents’ Registered Aripiprazole Products were higher in volume than on and from 1 December 2016;

(e)    to penetrate the market for other generic products and to sell additional products;

(f)    to sell to new customers (such as pharmacies or pharmacy buying groups); and

(g)    to strengthen relationships with existing customers.

48    These particulars could not have escaped Otsuka/BMS’s attention.

49    Although sub-paras 1(b) and (c) of the appendix refer to the “loss of opportunity” to obtain PBS listing, and the “loss of opportunity” to sell the GH products on the PBS market from 1 April 2012, paras 30 and 31(a) of the Statement of Particulars of Claim for Damages filed in the primary proceeding, and paras 32 and 33(a) of the Statement of Particulars of Claim for Damages filed in the appeal proceeding, plead unconditional “facts”, not simply “opportunities”. Despite a submission by Otsuka/BMS in oral argument to the contrary, I do not think that these allegations take their colour from sub-paras 1(b) and (c) of the appendix, such that Otsuka/BMS should be taken as having admitted no more than the existence of opportunities, as opposed to facts simpliciter. If opportunities alone have been admitted, it is difficult to understand why the present applications to withdraw the admissions have been made. Indeed, the correspondence to which I have referred makes it abundantly clear that Otsuka/BMS understood that they had admitted unqualified facts, not simply the existence of opportunities.

50    Further, the correspondence shows that Otsuka/BMS were troubled by the contrary positions they had adopted in Generic Health’s enforcement proceedings and the Commonwealth’s enforcement proceedings, well before the decision in Sigma v Wyeth, and had asked their legal advisers to provide a strategy whereby the contrary positions could be reconciled or “balanced”. Therefore, the motivation to bring the present applications was already in existence by the time the decision in Sigma v Wyeth was given and, I would also add, before the hearing of the Commonwealth’s strike out application.

51    I do not accept (as seems to be suggested) that there is always difficulty in admitting a counterfactual allegation because of its hypothetical nature. Much will depend on the allegation that is made and, for example, the circumstances of human experience and knowledge, and the conjunction of time and events, attending the allegation. Thus, it may be well within the grasp of a party to litigation to reach an informed view on whether a counterfactual allegation can be admitted. Mr Emmerig was challenged along these lines in his cross-examination and, in oral submissions, Generic Health advanced the proposition that hypothetical facts can properly be admitted when seen in the context of known historical facts. I accept that submission. I have already remarked on the significance of the legal effect of the admissions: see [18] above.

52    I am not persuaded that the present applications are best seen, as in Ryde Developments, as applications to run an argument not presently pleaded rather than the withdrawal of an admission. In Ryde Developments, at [22], Ball J saw the allegations in respect of which admissions had been made as involving a complicated mixed question of law and fact that was not so much within the knowledge of the defendant as a matter for submission and legal interpretation. The admitted facts in the present case are not of that character. That said, I accept (as I did in Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd [2019] FCA 230 at [31]) that an admission made in pleadings is of a different character to an admission made in other contexts: Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 86 per Mason CJ and Brennan J.

53    The simple fact of the present case is that Otsuka/BMS find themselves in a difficult position from which they wish to extricate themselves. The difficulty is of their own making. They have acted on inconsistent advice in their defence of the respective enforcement proceedings as to what facts should, and what facts should not, be put in issue. In Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd [2019] FCA 230, I observed (at [35]):

It is not for me to speculate on why, apparently contrary to their own forensic interests, Otsuka/BMS have chosen not to put Generic Health to proof of those alleged facts. To adopt the remarks of Jenkinson J in Stohl Aviation v Electrum Finance Pty Ltd (1984) 5 FCR 187 at 202, this would be an unprofitable collateral inquiry.

54    The evidence now shows why that decision was made. I do not criticise that decision or the basis on which it was made. It is, however, a decision from which Otsuka/BMS wish to resile, even though they accept that it was a decision deliberately taken. They wish to secure, in Generic Health’s enforcement proceedings, the same advantage they already enjoy in the Commonwealth’s enforcement proceedings. Nothing else has changed in the “forensic landscape.”

55    In the course of my reasons in Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd [2019] FCA 230 I remarked (at [36]) that it appeared that the alleged facts of PBS listing and sale of the GH products on the PBS market on 1 April 2012 were genuinely in dispute. This was because Otsuka/BMS advanced its case as one of genuine dispute and the Commonwealth did not seek to gainsay that proposition.

56    In the present applications, Generic Health disputes the soundness of the case theory that Otsuka/BMS now wish to advance against it, but I do not understand Generic Health to go so far as to say that this theory is not one that has been genuinely raised. Certainly, Mr Emmerig was not challenged in cross-examination with the proposition that he did not hold a genuine belief, as Otsuka/BMS’s solicitor, that there was a proper basis to put the relevant facts in issue, although in oral argument Generic Health did submit that some of the propositions in Mr Emmerig’s reasoning are no more than speculation, thereby casting in doubt whether there are known facts to support the entirety of that case theory. I will not comment on that other than to say that, looking at the matter objectively, I do not think it can be said that the case theory that Otsuka/BMS now wish to advance in Generic Health’s enforcement proceedings is so bereft of reason or substance that it has no or negligible prospects of success. Put another way, in light of the matters advanced in Mr Emmerig’s affidavit, I do not think it could be said at the present time that the counterfactual that is pleaded by Generic Health with respect to PBS listing and the sale of the GH products on the PBS market on 1 April 2012 does not raise a properly contestable, and therefore triable, issue.

57    Having made these remarks, there are four other matters I should address.

58    First, the limited extent of the admissions should be acknowledged. This is not to diminish their importance. But it must be recognised that they go only to the fact of PBS listing and first sale of the GH products on the PBS market on 1 April 2012. There are many other facts in Generic Health’s counterfactual case that it will need to prove to establish the extent of the loss of opportunity it alleges. As I remarked in Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd [2019] FCA 230 at [35], even if Otsuka/BMS’s admissions were to remain, it does not follow that Generic Health would not seek to adduce evidence concerning the admitted matters in any event, when developing its counterfactual case. Indeed, in light of the matter I have mentioned at [26] above, Otsuka/BMS’s former solicitors certainly thought that the affidavit evidence filed by Generic Health in May 2018 supported the admitted facts. (I note that, although the existence of this evidence is alluded to in Mr Emmerig’s affidavit, the evidence itself is not before me on these applications.)

59    Secondly and relatedly, Generic Health does not point to any particular prejudice if leave to withdraw the admissions were to be granted. Obviously, the burden of proof of the matters covered by the admissions would shift to it, but Generic Health does not say that it has acted on the admissions in such a way, or that circumstances have changed since the admissions were made, that it cannot now meet that burden.

60    Thirdly, absent any particular prejudice to Generic Health, it would be rational to permit Otsuka/BMS to bring its defence in Generic Health’s enforcement proceedings into line with its defence in the Commonwealth’s enforcement proceedings on these two matters.

61    Fourthly, although Generic Health’s enforcement proceedings have been on foot for some time, it has consistently failed to meet deadlines for filing its lay affidavit evidence in chief. It has been granted considerable indulgences in that regard. On the last occasion it sought such an indulgence, it sought time to address what (new) Senior Counsel perceived to be gaps in its counterfactual case, specifically whether, in the relevant period, the GH products would have been the only (relevant) generic products on the market. The period for putting on that evidence has been suspended pending the delivery of judgment in the present applications. Thus, there would be ample opportunity for Generic Health to address, by evidence, the presently admitted facts. While I accept that case management considerations are relevant to the discretion I am asked to exercise, I think that Generic Health makes too much of the argument that there will be additional delay if the admissions are withdrawn, given that it has been the principal contributor to the delay that has occurred already.

62    Although one might feel little sympathy for the predicament in which Otsuka/BMS find themselves, and although Generic Health would be deprived of a forensic advantage it presently enjoys, I am nonetheless persuaded that, in light of the matters I have discussed above, the better decision, and the appropriate exercise of discretion, is to permit Otsuka/BMS to withdraw the admissions they have made and to file their proposed amended Responses.

63    Finally, in oral submissions, Generic Health raised a question about the candour with which Otsuka/BMS have made the present applications. In this connection, the evidence reveals the canvassing of various forensic options for advancing and presenting the present applications. In the end, and for whatever reason, Otsuka/BMS did adduce in evidence the correspondence passing between themselves, their current solicitors and their former solicitors on the question of amendment. Thus, the knowledge of the various actors who were involved in that question from time to time, the options canvassed and the recommendations made, have been revealed to, and are before, the Court. I am not persuaded that those communications raise a sound discretionary reason for refusing to permit the amendments that are sought.

Disposition

64    Leave should be granted to Otsuka/BMS to withdraw paras 28, 29, 30 and 31(a) of the Response to Statement of Particulars of Claim for Damages filed in Generic Health’s enforcement proceedings, and to file, in the primary proceeding, an amended Response to Statement of Particulars of Claim for Damages in the form annexed to their interlocutory application dated 17 April 2019.

65    Leave should also be granted to Otsuka/BMS to withdraw paras 30, 31, 32 and 33(a) of the Response to Statement of Particulars of Claim for Damages filed in Generic Health’s enforcement proceedings, and to file, in the appeal proceeding, an amended Response to Statement of Particulars of Claim for Damages in the form annexed to their amended interlocutory application dated 17 September 2019.

66    In their submissions, Otsuka/BMS accept, as they must, that they should pay Generic Health’s costs thrown away by reason of the amendments that are sought. In my view, even though they have been ultimately successful, Otsuka/BMS should also pay the costs of the applications to amend, having regard to the facts I have recorded, and the findings I have made, at [22] – [26] above.

Associate:

Dated:    28 February 2020