FEDERAL COURT OF AUSTRALIA

Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543

ORDERS

THE COURT ORDERS THAT:

1.    The application for compensation filed on 1 April 2013 be dismissed.

2.    The applicant and the respondents exchange written submissions (limited to five pages in length) in relation to the question of costs of the application by 4.00pm, 8 May 2020.

3.    The applicant and the respondents exchange written submissions in reply (limited to four pages in length) by 4.00pm, 19 May 2020.

4.    The contents of the paragraphs in the Reasons for Judgment specified in the Schedule to these orders (“the specified paragraphs”) not be further published or disclosed except in accordance with inter partes arrangements previously agreed with Apotex Pty Ltd or prior orders of this Court in relation to the disclosure of any document referred to in any of the specified paragraphs.

5.    Subject to any further order or direction, order 4 shall operate until 4.00pm, 12 May 2020 after which time neither order 4 nor any other non-publication or confidentiality order made in this proceeding shall prevent any person from publishing or disclosing the contents of any of the specified paragraphs.

6.    For the avoidance of doubt, nothing in these orders, or any other non-publication or confidentiality order made in this proceeding, shall prevent any person from publishing or disclosing any part of the reasons for judgment not contained in the specified paragraphs.

7.    Any application to vary order 4 or 5 shall be made by way of interlocutory application which (together with any affidavit upon which the party seeking such an order seeks to rely) must be filed and served by 4.00pm on 7 May 2020.

8.    Any interlocutory application filed pursuant to order 7 be fixed for hearing at 9.30am on 12 May 2020 before Nicholas J.

SCHEDULE

Paragraphs [227], [234], [296], [311], [550], [551]

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

REASONS FOR JUDGMENT

NICHOLAS J:

INTRODUCTION

1    Clopidogrel is a medication which inhibits blood platelet aggregation (ie. the formation of blood clots). It is a drug that, in Australia, can only be prescribed by medical practitioners. It is usually prescribed to patients who have suffered a heart attack or stroke, are at risk of suffering a heart attack or stroke, or who suffer from some other condition that is treated by prescription of a blood platelet aggregation inhibitor. It is a “blockbuster” drug that generated worldwide annual sales equivalent to more than US$1 billion revenue for the Sanofi group of companies (“the Sanofi Group”) and the Bristol-Myers Squibb group of companies (“the BMS Group”).

2    Clopidogrel, in the form of hydrogen sulfate, has been supplied in Australia in tablet form by Sanofi Australia Pty Ltd (“Sanofi Australia”) under the brand name Plavix and also by Bristol-Myers Squibb Australia Pty Ltd (“BMS Australia”) under the brand name Iscover. Both products were registered on the Australian Register of Therapeutic Goods (“ARTG”) on 2 December 1998 and listed on the Pharmaceutical Benefits Scheme (“PBS”) on 1 November 1999.

3    There is a global co-marketing arrangement in place between the Sanofi Group and the BMS Group in relation to the marketing and sale of clopidogrel around the world. In Australia, these arrangements provided for co-marketing of clopidogrel by Sanofi Australia under the Plavix brand and by BMS Australia under the Iscover brand.

4    An essential step that must be taken before a drug can be marketed and supplied in Australia is to obtain approval from the Secretary of the Department of Health (“Department”) or a Delegate in the Therapeutic Goods Administration (“TGA”) for registration on the ARTG.

5    Clopidogrel products sponsored by Apotex Pty Ltd (“Apotex Australia”) were registered on the ARTG on 21 August 2007. The effect of these registrations was to allow Apotex Australia to supply such products under the brand names “Genrx Clopidogrel”, “Chemmart Clopidogrel” and “Terry White Chemists Clopidogrel” in blister packs, and “Apo-Clopidogrel” in blister packs and bottles.

6    After a sponsor secures ARTG registration, an application can be made to list the registered brand on the PBS. The PBS listing of a brand of pharmaceutical item usually provides a substantial benefit to the supplier or sponsor, essentially because the Commonwealth subsidises, often heavily, the cost of supplying PBS listed medicines to patients. PBS listing was an essential component of Apotex Australia’s plan to launch its generic clopidogrel products in Australia.

7    On 16 August 2007 Apotex Australia, which was until 20 September 2007 called GenRx Pty Ltd, commenced a proceeding in this Court against Sanofi-Aventis (“Sanofi”) (“the patent proceeding”) in which it sought an order revoking Australian Patent No 597784 for clopidogrel (“the Patent”) registered in the name of Sanofi. On 17 September 2017 Sanofi filed a cross-claim against Apotex Australia in the patent proceeding seeking injunctive and other relief for threatened infringement of the Patent.

8    The Patent was for the dextro-rotatory enantiomer of methyl alpha-5 (4,5,6,7-tetrahydro (3,2-c) thieno pyridyl) (2-chlorophenyl)-acetate, (commonly known by the non-proprietary name “clopidogrel”), a process for its preparation, and pharmaceutical compositions containing it.

9    Some drugs can be produced in different salt forms which may have advantages over their parent molecules. In particular, a drug salt may be more stable or easier to administer than its non-salt parent molecule, even though they are therapeutically equivalent. Claim 1 of the Patent encompassed clopidogrel in all of its pharmaceutically acceptable salts. Each of claims 2 to 5 covered particular forms of salt. The active pharmaceutical ingredient in Plavix and Iscover and Apotex Australia’s generic clopidogrel products is clopidogrel hydrogen sulfate which is the compound specified in claim 3.

10    In early September 2007, Apotex Australia applied for PBS listing of its clopidogrel products from 1 December 2007. It was soon after informed that its application had been lodged too late for its clopidogrel products to be listed on 1 December 2007. This led Apotex Australia to withdraw the application. The next available date for a listing of a first generic brand of clopidogrel, which would result in a change to the price of the existing listed brands of the drug (ie. the Plavix and Iscover brands), was 1 April 2008. An application for listing on that date had to be made by 1 December 2007.

11    On 25 September 2007 Sanofi obtained from Gyles J an interlocutory injunction (“the interlocutory injunction”) against Apotex Australia restraining it from infringing the Patent (including) by importation or sale of pharmaceutical products which had clopidogrel as their active ingredient. The interlocutory injunction was expressed to operate until the determination of the proceeding or further order. Sanofi gave the usual undertaking as to damages to the Court in support of the interlocutory injunction.

12    Apotex Australia also gave to the Court an undertaking (“the first Apotex undertaking”) that it would not apply to list its clopidogrel products on the PBS until the determination of the proceeding or further order. Sanofi did not give any undertaking as to damages in return for the first Apotex undertaking.

13    On 20 February 2008 Spirit Pharmaceuticals Pty Ltd (“Spirit”) also commenced a proceeding (“the Spirit proceeding”) against Sanofi, Sanofi-Aventis US LLC (“Sanofi US”), and Bristol-Myers Squibb Investco LLC (collectively “Sanofi BMS” or “the Sanofi BMS companies”) seeking revocation of the Patent. On 7 March 2008 Gyles J ordered that the two proceedings be heard together.

14    The trial of the patent proceeding before Gyles J commenced on 28 April 2008. Reasons for judgment were published by his Honour on 12 August 2008. Final orders were made by his Honour on 19 August 2008 revoking various claims of the Patent. Importantly, however, Gyles J found that claims 2 to 5 were valid including, in particular, claim 3 which was directed to clopidogrel as hydrogen sulfate. His Honour granted Sanofi a final injunction on 19 August 2008 (“the final injunction”) restraining Apotex Australia from infringing that claim. His Honour also noted in the relevant minute of order that Apotex Australia was released from the first Apotex undertaking. There was an appeal filed by Apotex Australia and a cross-appeal filed by the Sanofi BMS companies against his Honour’s orders. An appeal and a cross-appeal were also filed against Gyles J’s orders in the Spirit proceeding.

15    On 15 September 2008 various interlocutory undertakings were given to a Judge of the Court (Moore J) to operate until further order or the determination of the appeal. The appeal was heard by the Full Court of the Federal Court (Bennett, Emmett and Middleton JJ) in February 2009. On 29 September 2009 the Full Court delivered its reasons for judgment in the appeal. On 13 October 2009 the Full Court made orders allowing Apotex Australia’s appeal and setting aside the final injunction. The Full Court also ordered that the Patent be revoked.

16    Further undertakings were provided to the Full Court by the Sanofi BMS companies and Apotex Australia pending the determination of an application made by Sanofi for special leave to appeal to the High Court. That application was heard and refused on 12 March 2010. The first generic clopidogreneric clopidogrel product to be listed on the PBS was the clopidogrel Sandoz brand of clopidogrel products by Sandoz Pty Ltd (“Sandoz”) on 1 April 2010. Apotex Australia’s clopidogrel products were not listed on the PBS until 1 May 2010.

17    On 4 May 2010 Apotex Australia and two related entities, Apotex Inc (“Apotex Canada”) and Apotex Research Private Limited (“ARPL”) filed a notice of motion in the patent proceeding seeking orders against the Sanofi BMS companies for the payment of compensation pursuant to the various undertakings given to the Court in support of the interlocutory injunction and other undertakings that Apotex Australia subsequently gave to the Court which I will refer to in greater detail later in these reasons.

18    The compensation claims made by Apotex Australia, Apotex Canada and ARPL were discontinued by those companies by a notice of discontinuance filed on 7 November 2014 pursuant to a settlement deed entered into between those companies and Sanofi BMS companies on 4 November 2014 (“the Settlement Deed”).

19    In this proceeding, which was commenced by interlocutory application filed in the patent proceeding on 11 April 2013 (ie. more than three years after the High Court refused special leave), the Commonwealth, as applicant, seeks orders requiring the Sanofi BMS companies to pay to it compensation for the loss said to have been suffered by the Commonwealth as a result of Apotex Australia having been prevented from supplying its generic clopidogrel products in Australia and obtaining a PBS listing of such products on 1 April 2008.

20    The Commonwealth contends that the interlocutory injunction granted by Gyles J had the effect of delaying significant reductions in the payments it was obliged to make to pharmacists under the PBS for the supply of Plavix and Iscover and a number of related combination products between 2008 and 2014.

21    The cost to the Commonwealth of subsidising the supply of clopidogrel under the PBS in the financial year ended 30 June 2008 was approximately $171 million, making clopidogrel the third most heavily subsidised prescribed drug available under the PBS during that financial year. The Commonwealth contends that the listing of Apotex Australia’s clopidogrel brands on the PBS on 1 April 2008 would have triggered an automatic and immediate statutory reduction of 12.5% to the existing listed prices for Plavix and Iscover with the ex-manufacturer price for Plavix and Iscover reduced from $64.94 a pack to $56.82. In addition, the Commonwealth contends that there would have been a further 2% statutory price reduction on 1 August 2009, and further price reductions from 1 April 2010 arising from the operation of the system of mandatory price disclosure that was introduced into the National Health Act (1953) (Cth) (“NHA”) with effect from 1 August 2007.

22    The total amount of compensation claimed by the Commonwealth is approximately $325 million excluding interest and costs. Of this, approximately $51 million relates to mandatory price reductions that would have automatically taken effect on 1 April 2008 had Apotex Australia obtained and maintained a PBS listing of its clopidogrel products with effect from that date. The balance of the claim relates to further price reductions that the Commonwealth says would have occurred when the first of the relevant price disclosure price reductions would have first taken effect from 1 April 2010.

23    The loss claimed by the Commonwealth consists of the difference between:

    the amount paid by the Commonwealth in respect of the supply of clopidogrel products under the PBS and the Repatriation Pharmaceutical Benefits Scheme (“RPBS”) since 1 April 2008; and

    the amount that would have been paid by the Commonwealth in respect of the supply of those products under the PBS and the RPBS since 1 April 2008 if Apotex’s clopidogrel products had been listed on the PBS from that date.

24    There are three different components that make up the difference claimed by the Commonwealth (exclusive of interest):

    a total of $50,718,312 in respect of mandatory statutory price reductions that would have occurred on 1 April 2008 and 1 August 2009;

    a total of $215,922,465 in respect of price disclosure price reductions that would have occurred between 1 April 2010 and 31 December 2014;

    a total of $58,307,301 in respect of payments made by the Commonwealth in respect of clopidogrel with aspirin combination products in the period 1 December 2009 to 31 March 2016.

25    Much of the evidence in the proceeding is concerned with the issue of whether Apotex Australia’s clopidogrel products would have been listed on the PBS on 1 April 2008 but for the interlocutory injunction granted by Gyles J.

26    There are two specific questions that arise in relation to that issue. The first is whether the evidence establishes that Apotex Australia would have applied for a PBS listing of its clopidogrel products by 1 December 2007 so that they would be listed on the PBS from 1 April 2008. The second question is whether the Minister, or a Delegate, would have accepted such an application and listed those products on the PBS with effect from 1 April 2008.

27    It is common ground that both questions are to be decided on the balance of probabilities. It is also common ground that if either of these questions is answered in the negative, then the Commonwealth’s application for compensation must fail.

28    Another issue concerns the first Apotex undertaking whereby Apotex Australia undertook not to apply for a PBS listing of its clopidogrel products until the determination of the patent proceeding. As previously mentioned, this undertaking was not supported by any cross-undertaking as to damages. For reasons that will be further explained, Sanofi BMS contends that the existence of the first Apotex undertaking is fatal to the Commonwealth’s case because it was the first Apotex undertaking rather than the interlocutory injunction that prevented Apotex Australia from applying to list its clopidogrel products on the PBS.

29    Another issue concerns the final orders made by Gyles J on 19 August 2008. There is a contest between the parties as to the significance to be attributed to those orders in the counterfactual analysis. The Commonwealth contends that the appropriate counterfactual analysis (which the parties referred to as the “continuous supply counterfactual”) requires that it be assumed that:

    there was no interlocutory injunction or final injunction preventing Apotex Australia from supplying its clopidogrel products;

    Apotex Australia’s clopidogrel products had been listed on the PBS since 1 April 2008 and had been on the market from or shortly before that date.

30    There is an issue between the parties as to whether that is the appropriate counterfactual analysis and, even if it is, whether Apotex Australia would have continued supplying its clopidogrel products once the outcome of the trial before Gyles J became known.

31    There is also an issue as to whether, in what Sanofi BMS contended was the appropriate counterfactual analysis (which the parties referred to as the “interrupted supply counterfactual”) the Commonwealth would have responded to any cessation of supply by not only delisting the Apotex clopidogrel products from the PBS, but also by restoring the ex-manufacturer price for Plavix and Iscover to the level that it was before the 12.5% statutory price reduction took effect on 1 April 2008, which is the date on which the Commonwealth says Apotex Australia’s clopidogrel products would have been listed but for the interlocutory injunction.

32    There is a further issue as to what effect the listing of Apotex Australia’s clopidogrel products on the PBS on 1 April 2008 may have had on price negotiations between the Commonwealth and Sanofi Australia and BMS Australia in relation to the clopidogrel with aspirin combination products sold by Sanofi Australia under the CoPlavix brand and by BMS Australia under the DuoCover brand.

33    Other issues that arise in the proceeding include the questions whether the Commonwealth was a person adversely affected by the operation of the interlocutory injunction, whether the Commonwealth, as a body politic, has suffered any compensable loss or damage, and whether any such loss or damage was a direct and reasonably foreseeable consequence of the interlocutory injunction.

34    There are a number of other matters that were relied upon by Sanofi BMS in support of their contention that the Commonwealth’s claim to compensation should be rejected (either in whole or substantial part) on discretionary grounds. The matters relied upon included the Commonwealth’s delay in bringing its application, whether considered either alone or in combination with what Sanofi BMS contended would have involved, in any counterfactual scenario in which Apotex’s clopidogrel products were launched by Apotex Australia in March or April 2008, an infringement by Apotex Australia of Sanofi Australia’s copyright in product information documentation, and an infringement of Sanofi’s Canadian Patent No 1336777 (the “Canadian Patent”) by Apotex Canada.

35    Other issues in the proceeding are relevant to the quantum of the Commonwealth’s damages claim. The principal question to be decided in relation to quantum is what market share Apotex Australia was likely to have captured had it continuously supplied its clopidogrel products from 1 April 2008.

THE PHARMACEUTICAL BENEFITS SCHEME

Listing of a medicine on the PBS

36    The PBS is a scheme for subsidising medicines. It is not necessary for a medicine sold in Australia to be listed on the PBS. Medicines that are not listed on the PBS are not subsidised and are known as either “private prescriptions” or “over-the-counter medicines”. Clopidogrel products have been subsidised on the PBS since 1 November 1999.

37    The PBS legislation is found in Pt VII of the NHA. Relevantly, s 85(1) provides: “Benefits shall be provided by the Commonwealth, in accordance with this Part, in respect of pharmaceutical benefits”. Section 85(2) provides that the drugs and medicinal preparations in relation to which Part VII applies are “declared by the Minister, by legislative instrument” pursuant to one of the limbs of that subsection.

38    Section 85(2AA) empowers the Minister by legislative instrument to revoke or vary a declaration under s 85(2) in relation to a drug or medicinal preparation. However, before doing so the Minister must obtain the advice in writing of the Pharmaceutical Benefits Advisory Committee (“PBAC”) in relation to the proposed revocation or variation: s 85(2AB). The PBAC is established by s 100A of the NHA. Its functions include making recommendations to the Minister from time to time as to the drugs and medicinal preparations which it considers should be made available as pharmaceutical benefits under Part VII: s 101(3A). PBAC is required to give consideration to the effectiveness and cost of therapy when making such recommendations: s 101(3A).

39    The relevant legislative instruments are referred to as “Listing Instruments” and are made or amended monthly. Listing Instruments do not record the price paid by the Commonwealth to dispensers, but dispensed prices under the PBS are included in a document published by the Department of Health called the Schedule of Pharmaceutical Benefits (“PBS Schedule”). The PBS Schedule is updated monthly to incorporate revisions made in or to the Listing Instruments.

40    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. However, there are no requirements in the NHA 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. At the relevant time, an application for listing a generic brand was not required to be considered by the PBAC. Such applications were referred to the Pharmaceutical Evaluation Branch (“PEB”) of the Department for consideration.

41    For any applications to list generics which would result in a change to the price subsidised by the Commonwealth for a drug, there were, at the relevant time, three application deadlines and three listing dates (1 April, 1 August and 1 December) each year. Applicants seeking to list a generic brand were required to furnish to PEB 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” form; a completed “Request for Price Alteration” 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 approved by the TGA, if applicable; a copy of the primary pack label or final artwork; and written assurance that stock of the product will be available on the proposed date of listing in the PBS Schedule.

42    Applicants usually also provided a completed form entitled “Notification of Responsible Person under National Health Act 1953” which, from 1 April 2008, confirmed that the applicant was the responsible person under s 84AF seeking a determination from the Minister. They also had to request the TGA to provide to the PEB a statement indicating that it is appropriate for an equivalence indicator to be shown in the PBS Schedule and against which other brands (ie. a statement of bioequivalence of the generic brand with the existing listed brands).

43    Applicants were also instructed to contact the Director, Pharmaceutical Pricing and Estimates Section, of the PEB in relation to the pricing of the new brand, and to check the “reference pricing groups” document to determine whether the 12.5% price reduction policy may affect the drug for which the application is being made.

44    The Commonwealth submitted that, in practice, applicants seeking PBS listing for a generic brand of a pharmaceutical item already listed on the PBS were approved as a matter of course subject to them complying with the administrative requirements referred to above. It further submitted that if PEB requested a Delegate to list a generic brand by executing the relevant Legislative Instrument, the Delegate invariably did so. The Commonwealth also submitted that from 1 August 2007, the question of whether the generic brand seeking listing might be the subject of a patent (or the subject of any patent infringement or revocation proceedings) was not relevant and not considered by the Delegate. It also submitted that assurances of supply were taken at face value. I will return to these submissions later in these reasons.

The 2007 Amendments

45    Important changes were made to the NHA by the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007 (Cth) (“the 2007 Amendment Act”). The 2007 Amendment Act received royal assent on 28 June 2007 and these changes (“the 2007 Amendments”) took effect from 1 August 2007. Relevantly, the changes made provision for the creation of the F1 and F2 formularies and various mandatory price reductions that would occur (inter alia) when a pharmaceutical item moved from F1 to F2. From 1 August 2007 to 30 November 2010 F2 was further divided into Part A of F2 and Part T of F2: see s 84AD. On 1 December 2010 Part A and Part T were merged resulting in a singular F2 formulary.

46    According to the Second Reading Speech for the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007 (Cth) in the House of Representatives (“the Second Reading Speech”):

One of the main changes proposed in this bill is the separation of PBS medicines into two formularies – F1 and F2 – each with different pricing arrangements. Medicines where there is only a single brand listed will be referred to as F1. It will contain both on-patent and off-patent medicines that are not substitutable with other brands or medicines. With this formulary, there will be no mandatory price reductions, and existing price linkages will be retained within this group. This means that single-brand medicines will retain their higher prices until they become subject to competition, providing companies with a greater certainty about the prices of these medicines. This allows the Australian government to ensure these medicines remain subsidised by the PBS, hence continuing their availability at affordable prices. Medicines where there are brands listed and groups of medicines that are interchangeable between patients will be referred to as F2.

47    Since 1 August 2007, the listing of a new brand of an existing listed pharmaceutical item has various price consequences. The listing of the new brand of a pharmaceutical item (eg. a generic version of the listed pharmaceutical item) triggers an automatic and immediate 12.5% price reduction: ss 99ACH. While there are various exceptions to this, it is common ground that none of them are relevant for the purpose of the present proceeding. Prior to 1 August 2007, the listing of a new brand of pharmaceutical item did not automatically trigger a 12.5% price reduction; whether or not such a price reduction would be imposed was a matter left to the discretion of the Minister or Delegate.

48    It appears that a 12.5% reduction was never imposed prior to 1 August 2007 where the generic supplier chose to launch its new brand “at risk” (ie. in circumstances where the pharmaceutical item was within the scope of an unexpired patent owned by the innovator of the pharmaceutical item). However, the 12.5% discount was imposed if the patent had expired or the generic brand was to be supplied by or with the licence of the owner of the patent. Hence, the 12.5% discount applied to what were referred to in the industry as “autogenerics” or “pseudogenerics” which were generic products marketed by or with the licence of the innovator. From 1 August 2007, the 12.5% price reduction was imposed automatically when the first generic brand was listed on the PBS irrespective of whether or not it was launched at risk.

49    From 1 August 2007, the NHA imposed supply obligations with respect to newly listed brands: see Part VII Div 3C which include those provisions that relate to what is usually referred to as the “guarantee of supply”. According to the Second Reading Speech the guarantee of supply would:

… guarantee the supply of all new brands listed on the PBS from 1 August 2007 and the already listed medicines for which price reductions are offered to all patients who require these medications. This will significantly help patients on these medications, as the guarantee of supply period will be 24 months, or until another new brand is listed, or a further price reduction is offered for another already listed medicine. Any company which believes that it will be unable to supply, or has failed to supply, will be required to notify the minister. A criminal penalty will apply for failure to notify the minister. There is also a $33,000 fine for a corporation.

Companies which fail to supply or which are unable to supply may have that brand or other brands on the PBS delisted or they may be refused the listing of new brands. These tough measures introduced with respect to noncompliance with the new price disclosure and supply guarantee measures are another advantage for patients, as they aim to ensure that companies adhere to their commitments. Patients have a right to know that the prices that they are paying for their medications are truly reflective of manufacturing costs. They also have a right to have a continual, guaranteed supply of medications available to them. Patients do not need the added stress of costs often incurred by having to change their medications because they are too expensive or unavailable. These reforms aim to further ensure patients’ quality of life by increasing the accountability and compliance of companies which supply the medication.

50    Section 99AEB provided, subject to some specific exceptions, that the responsible person for a newly listed brand (“the guaranteed brand”) “must supply” that medicine for 24 months beginning on the day that the brand is listed on the PBS: see ss 99AEC-99AED. If the responsible person failed to supply, or was unable to supply the brand (as defined by ss 99AEE and 99AEF respectively), or forms the belief that they will fail to supply or be unable to supply, then they must notify the Minister as soon as possible: s 99AEG. Failure to notify the Minister in accordance with the requirements of ss 99AEG is a criminal offence.

51    Importantly, s 99AEB provided that the period of the guarantee of supply (ie. “the guaranteed period”) might end sooner than it otherwise would in a number of situations including upon the listing of another generic brand of the same pharmaceutical item. Hence, if the innovator of the pharmaceutical item obtained a listing of an autogeneric product in response to the prior listing of a generic brand then the guarantee of supply in respect of that generic brand would no longer apply to it. It follows that the relevant guaranteed period might last for considerably less than 24 months.

52    If during the guaranteed period the responsible person failed to supply, or was unable to supply the guaranteed brand on one or more occasions, it was open to the Minister to cancel the PBS listing for that brand or any other listed brand of the responsible person. The Minister could also refuse to list any other brands of the responsible person on the PBS. Those and other actions that could be taken by the Minister are fully described in s 99AEH(2). Section 99AEH(3) refers to various matters that the Minister may take into account when considering what action to take pursuant to s 99AEH(2) which include:

    the number of times the responsible person failed to supply, or was unable to supply the guaranteed brand;

    the period in which those failures or inabilities occurred;

    the duration of those failures or inabilities;

    the reasons for those failures or inabilities; and

    whether those reasons are, in the Minister’s opinion, reasonable.

53    In the event that the Minister exercises the power under s 99AEH revoking or varying a determination under s 85(6) to issue a Listing Instrument in relation to a brand of a pharmaceutical item then there are various actions that he or she may also take to ameliorate the effects that were triggered by the listing of that brand. These include making a determination under s 99AEI to increase the price of a brand of a pharmaceutical item and, under s 99AEJ, restoring a pharmaceutical item to F1 where the requirements of that section are satisfied.

Combination items on the PBS

54    The Act provides for the listing of pharmaceutical items that contain more than one drug. Under s 84 a “combination item” is a pharmaceutical item that has a drug that contains at least two other drugs, at least one of which is a PBS listed drug. The medicine containing the drug clopidogrel with aspirin is a combination item.

55    Since 1 August 2007, combination items where there is only one listed brand have not been allocated to either F1 or F2: see s 85AB(5). The Department maintains a (non-statutory) list of combination items known as the Single Brand Combination Drug list (“SBCD list”).

Co-marketed pharmaceutical items

56    Whether two or more brands of a pharmaceutical item are co-marketed brands for the purpose of the Act is determined by reference to s 84AE. Co-marketing involves two responsible persons, usually the innovator and one of its licensees, co-marketing a pharmaceutical item for which there is no generic competition under different brands.

57    As at 1 August 2007 co-marketed brands of a pharmaceutical item, including combination items, were treated as if they were one brand of the pharmaceutical or combination item: s 84AE(1).

Assurance of supply

58    As previously mentioned, applicants for a PBS listing of a new brand of a pharmaceutical item are required to provide what is referred to as an “assurance of supply”. The assurance of supply (unlike the guarantee of supply) is a purely administrative requirement imposed by the Department; there is nothing in the NHA that requires that it be given as a condition of listing. The form of the assurance of supply required from an applicant prior to listing on the PBS has evolved over time. From June 2005 to December 2006, the PBAC Guidelines required applicants to provide to the Department written assurance that stock of the product would be available on the proposed listing date. Since December 2006, the Department has required applicants to provide a written assurance that sufficient stock of their brand of the relevant pharmaceutical item would be available on the proposed date of listing to meet anticipated demand.

Payment by the Commonwealth for listed products

59    The amount a patient pays for pharmaceutical products subsidised under the PBS is usually set by the NHA. The amount paid by patients (referred to as the “Patient co-payment”) for clopidogrel has always been capped. The general co-payment as at 1 April 2008 was $31.30 and the concessional co-payment as at that date was $5.00. The amount of the co-payments is adjusted each year. By 1 January 2016 the general co-payment was $38.30 and the concessional co-payment was $6.20.

60    The remainder of the cost of a PBS-subsidised product is paid by the Commonwealth directly to the dispenser. Section 99 provides that a pharmacist or approved medical practitioner who has supplied a pharmaceutical benefit is “entitled to be paid by the Commonwealth … an amount equal to the Commonwealth price of the pharmaceutical benefit as at the time of the supply” (or, if certain conditions are satisfied, an amount based on the Commonwealth price), where the “Commonwealth price” is as defined in s 84(1).

Setting of the AP2P and AEMP and price reductions under the PBS

61    Section 85AD empowers the Minister and the responsible person for a listed brand of a pharmaceutical item to agree the appropriate maximum price for sales of the brand of the pharmaceutical item by wholesalers or manufacturers to approved pharmacists. At all material times, price agreements existed between the Minister and Sanofi Australia (and its predecessors) and BMS Australia (and its predecessors) in respect of the clopidogrel products Plavix and Iscover respectively. The price agreed, until 30 September 2012, was known as the AP2P (ie. the approved price to pharmacists) and since that date, the AEMP (ie. the approved ex-manufacturer price).

62    The AP2Ps and AEMPs set in price agreements can be, and were, reduced by virtue of statutory provisions that did not require new agreements to be executed. These provisions are found in Div 3A and Div 3B of Part VII of the NHA.

63    There are three kinds of price reductions to the AP2P/AEMP under the NHA that are relevant: statutory price reductions, negotiated price reductions (as also known as “administrative price reductions”) and statutory price disclosure price reductions (“PDP reductions” or “PDPR”).

12.5% statutory price reduction on first listing of a generic

64    Pursuant to s 99ACB, upon the listing of the first generic brand of an existing listed drug, the AP2P of the existing brand of the drug would be reduced by 12.5% (with the price of the first generic also set at the same level).

65    As at 31 March 2008, the AP2P for a pack of clopidogrel was $69.82; the effect of a 12.5% reduction on 1 April 2008 would have been to reduce it to $61.09. A reduction in the AP2P would not have affected the dispensing fee for clopidogrel (which was a fixed dollar amount) but would have reduced the amount paid under the dispenser mark-up, as this was a percentage of the AP2P.

Other statutory price reductions

66    In 2008, once a mandatory 12.5% statutory price reduction took effect, further 2% price reductions automatically followed on nominated days. As at 1 April 2008, these were 1 August 2008, 1 August 2009 and 1 August 2010: s 99ACI. The third 2% price reduction would only occur if there was no prior price disclosure price reduction resulting from the listing of the first generic brand. Amendments made to the NHA in 2010 provided that these 2% reductions also occur on 1 February 2011 in certain circumstances: (see s 99ACF, s 99ACIA and Schedule 2 of the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2010 (Cth)).

67    From 2008 if a combination item was listed on the PBS and recorded on the SBCD list, and a listed component drug of the combination item became subject to a statutory price reduction, including under s 99ACB, then pursuant to s 99ACC the existing price for the combination item ceased to have effect the day before the statutory price reduction took effect and the Minister could then agree a new price for the brand(s) of combination item.

Negotiated (administrative) price reductions

68    In addition to changes to AP2Ps and AEMPs dictated by statute, it is also possible for the Minister and the responsible person to agree a price change for a particular listed brand. This occurred twice in respect of clopidogrel.

69    The first occasion was on 1 February 2009, when the listing conditions for clopidogrel were expanded to cover a new therapeutic use. The Pharmaceutical Benefits Pricing Authority (“PBPA”) determined that a reduction in the price of clopidogrel would be a reasonable offset for the increased sales that would result from the extended listing conditions, and sent letters to Sanofi Australia and BMS Australia suggesting price reductions. Each of Sanofi Australia and BMS Australia agreed to a 3% reduction in price.

70    The second occasion was on 1 December 2011, when Alphapharm Pty Limited (“Alphapharm”) negotiated a 20% price reduction with the Minister. The Minister invited the responsible persons of other listed brands to agree to similar reductions or risk having their brands delisted. Sanofi Australia and BMS Australia agreed a corresponding price reduction.

Price disclosure price reductions

71    Between 1 August 2007 and 30 November 2010, a new generic brand that was listed on the PBS was subject to mandatory price disclosure requirements under s 99AD: see s 99ADD. Regulations specified information that had to be supplied to the Department, which used the information to calculate what is known as the Weighted Average Disclosed Price (“WADP”) for a pharmaceutical item (or group of pharmaceutical items with the same listed drug and same manner of administration): see s 99ADB(4)-(6) and reg 37F of the National Health (Pharmaceutical Benefits) Regulations 1960 (Cth).

72    WADP was calculated according to a formula which took into account the volume of sales of the particular brands the subject of price disclosure and 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 plus the applicable wholesale mark-up.

73    The responsible person for existing listed brands could elect to comply with the price disclosure requirements for those brands: s 99ADE. Once made, the election could not be revoked by the responsible person 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 activated the PDPR regime was varied or revoked: s 99AEL.

74    On 23 March 2010 BMS Australia elected to participate in the PDPR regime for Iscover before the listing of the first generic clopidogrel product took effect on 1 April 2010. Sanofi Australia elected to participate for Plavix on 28 April 2010.

75    If the WADP as 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 Reg 37C. The effect of the PDPR regime was, therefore, to impose mandatory price reductions aimed at ensuring that the subsidy paid by the Commonwealth under the PBS for a particular drug more closely reflected the price actually paid for that drug by pharmacists. The earliest date on which a PDP reduction can take effect is two years after the PDP reduction regime is activated by the listing of a generic product.

76    If Apotex Australia’s clopidogrel products had been listed on 1 April 2008, all listed clopidogrel products would have moved from F1 to F2 on that date. In fact this did not occur until 1 April 2010 when Sandoz’s clopidogrel products were first listed on the PBS. PDP reductions consequent upon that listing did not occur until 1 April 2012, that being the earliest date that such price reductions could have taken effect. There was a 32.62% reduction in the AEMP (from $58.07 to $39.13) that took effect on 1 April 2012. Subsequent reductions took place on 1 August 2013, 1 April 2014 and 1 October 2014, at which point the AEMP reduced to $10.17.

The Repatriation Pharmaceutical Benefits Scheme

77    The RPBS is a subsidy scheme administered by the Department of Veterans’ Affairs for eligible veterans, war widows/widowers and their dependants. The pricing and reimbursement arrangements for the supply of pharmaceutical benefits under the PBS are automatically translated across to the RPBS. However, under the RPBS, the patient generally never pays more than the concessional rate of the patient co-payment.

ARTG REGISTRATIONS FOR GENERIC CLOPIDOGREL

78    Records produced by the TGA that are in evidence show that both Sandoz and Spirit applied for ARTG registration of generic clopidogrel products about twelve months after Apotex Australia commenced the patent proceeding. Applications were made by other generic suppliers in 2009 and 2010. As the following table shows, Sandoz’s clopidogrel products were the first to be registered after Apotex on 20 November 2009:

79    The evidence does not show why any of these other generic suppliers did not apply for ARTG registration any sooner than they did. In particular, it is not possible to say on the evidence whether any of them was deterred by the existence of the Patent and the prospect of being sued by Sanofi were they to have entered the market for clopidogrel in Australia or whether there is some other explanation for them not applying for ARTG registration sooner than they did. What is clear, however, is that, based on the ARTG application dates, no generic supplier apart from Apotex Australia could have obtained a PBS listing of a generic clopidogrel product on 1 April 2008.

THE PRINCIPAL PROCEEDING BETWEEN APOTEX AND SANOFI

Commencement of the patent proceeding

80    Apotex Australia commenced the patent proceeding by an originating application filed on 16 August 2007 seeking orders revoking the Patent. On 17 September 2007 Sanofi filed a defence and cross-claim.

81    By its cross-claim, Sanofi sought two separate injunctions, on a final basis, and also on an interim basis pending the determination of the proceedings. The first injunction sought by Sanofi (proposed order 1 in the cross-claim) was an injunction which, in broad terms, restrained manufacture and supply. The second injunction sought by Sanofi (proposed order 2 in the cross-claim) was an injunction restraining Apotex Australia from “taking any steps to obtain listing of any of the [Apotex Australia] Clopidogrel products under the pharmaceutical benefits scheme maintained by the Commonwealth under the National Health Act 1953 (Cth) [ie, the PBS]”.

The interlocutory hearing

82    The interlocutory hearing before Gyles J took place on 18 September 2007. The evidence includes the transcript of the hearing before his Honour and of a brief hearing on 25 September 2007 when his Honour made the interlocutory orders.

83    In its written submissions dated 18 September 2007 in support of its claim for interlocutory relief, Sanofi stated that it offered the usual undertaking as to damages in respect of both of its proposed interlocutory injunctions including that which would have prevented Apotex Australia from taking steps to list its clopidogrel products on the PBS.

84    During the course of the hearing before Gyles J on 18 September 2007, his Honour indicated that he did not see any proper basis on which the Court could prevent Apotex Australia from taking steps to list its clopidogrel products on the PBS. Senior Counsel for Apotex Australia, Mr DK Catterns QC, stated that his client’s position was that, if the Court was minded to restrain supply, “the question of needing to restrain us from doing anything with the PBS or restraining the PBS doesn’t arise”. That statement prompted the following exchange between his Honour and Mr Catterns QC:

    MR CATTERNS:    We would be prepared, if your Honour is against us and grants an injunction against us from selling, we will not apply to the PBS during the period of that restraint with liberty to apply.

    HIS HONOUR:    Yes. All right.

    MR CATTERNS:    Because, in short your Honour, it’s pointless for us, the question of needing to restrain us from doing anything with the PBS or restraining the PBS doesn’t arise. If your Honour were against us…

    HIS HONOUR:    Why would that be, why would that be, because - - -

    MR CATTERNS:    It’s of no value to us, your Honour. We don’t want to get listed, to be candid, we don’t want to be listed on the PBS if we can’t sell. It would damage our friends by bringing their price down twelve and a half per cent.

    HIS HONOUR:    Yes, that’s a risky thing anyway.

    MR CATTERNS:    Yes, it will only damage our friends, it’s of no benefit to us, and we will make enemies in the industry.

    HIS HONOUR:    Yes. All right. I’m not inquiring really why, I just want to know what the situation is.

    MR CATTERNS:    So, your Honour, we would be happy to – if your Honour, we would be unhappy, but if your Honour makes an injunction against us selling, we would agree on an appropriate undertaking that would fix that up.

    HIS HONOUR:    Yes. All right. Thank you.

85    This exchange is relied upon by the Commonwealth to show that, were it not for Gyles J’s decision to grant an interlocutory injunction, Apotex Australia would never have proffered the first Apotex undertaking not to take steps to list its clopidogrel products on the PBS.

86    On 21 September 2007, Gyles J published reasons for concluding that an interlocutory injunction should be granted provided that the undertaking as to damages was adequately secured. His Honour said in his reasons at [15]:

I am not satisfied the damages would be an adequate remedy if Sanofi succeeds in the suit, notwithstanding the offer on the part of GenRx to adequately secure a very substantial amount to cover any reasonable likely assessment of damages and offering other undertakings to ameliorate the effect of commencing to trade. It is put on behalf of Sanofi that the assessment of damages would be difficult, if not impossible, for reasons spelled out in detail with some force. No doubt the assessment of damages would be a formidable exercise but I am not persuaded that it would be as complex as suggested. It should not be all that difficult to assess the effect on the incumbent of a new entrant who would have to keep clear records of what took place. I do not see that task as being any more complex in principle than working out the damages which Sanofi would have to pay GenRx under the undertaking for damages for keeping it out of the market if revocation succeeds. However, I am much influenced by the effects of disturbing the status quo, particularly as it relates to the operation of the PBS. A new entrant in this field would have an effect which may be both unpredictable and irreversible. There is also likely to be interference with the trade patterns of Sanofi with its customers, both wholesale and retail, that may not be detectable or measurable in money terms. Sanofi has built up a considerable trade since 2003, and the establishment to go with it, as GenRx looked on. Temporary disturbance of that status quo is not justified …

87    His Honour’s observations in this paragraph were largely based on evidence from witnesses who made affidavits for Sanofi including, in particular, Mr Lindsay and Mr Dick which explained, amongst other things, the potential price effects if Apotex Australia were to obtain a PBS listing of its clopidogrel products and the losses Sanofi would suffer if the injunctive relief sought by it was not granted. Those losses would arise, according to their evidence, from a statutory reduction in the price to pharmacists for clopidogrel, the erosion of Sanofi’s clopidogrel sales to pharmacists and the erosion of Sanofi’s sales of other drugs to pharmacists. Mr Lindsay’s and Mr Dick’s evidence was also relied upon by Sanofi to show that the statutory price reductions may not be reversed (even if Sanofi succeeded at the trial) and that Sanofi’s potential losses were unpredictable and unquantifiable.

88    As the Commonwealth’s submissions in the present case correctly pointed out, all of that evidence concerning potential loss was predicated on the assumption that, if the interlocutory relief sought by Sanofi was not granted, Apotex Australia would obtain a PBS listing for its products.

Gyles J’s orders of 25 September 2007

89    On 25 September 2007 his Honour published his revised reasons for judgment which he had delivered orally the previous week. His Honour’s reasons for judgment show that he was satisfied that there was a substantial issue to be tried as to the validity of the Patent, but that he considered that the balance of convenience weighed in favour of granting an interlocutory injunction. It is apparent from the 25 September 2007 transcript that the parties had reached agreement with respect to the interlocutory relief that should be granted in light of his Honour’s reasons for judgment delivered orally the previous week. This included agreement in relation to the form of undertakings that were to be provided to the Court by both Apotex Australia and Sanofi.

90    The minute of the orders made by Gyles J on 25 September 2007 includes a notation of undertakings given to the Court on that date by Sanofi and Apotex Australia, an interlocutory injunction restraining Apotex Australia from infringing the Patent, and an order requiring Sanofi to provide security. Other orders made by his Honour provided for security, pleadings, discovery, the filing and service of affidavit evidence, and a final hearing before his Honour fixed to commence on 28 April 2008 for a period of two to three weeks.

91    It was common ground before me that by reason of s 72 of the Constitution, Gyles J’s appointment as a Judge of the Court expired on 22 August 2008. This is a matter that would most likely have been known to the parties’ legal representatives who would have understood that since the trial was to be before Gyles J, his Honour would be required to deliver judgment on or before that date.

92    Relevantly, the minute of orders made on 25 September 2007 state:

UPON the Respondent/Cross-Claimant undertaking to the Court to:

(a)    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 the operation of Order 1 set out below or any continuation (with or without variation); and

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

THE COURT:

1.    ORDERS that, pending the determination of the proceedings or further order, the Applicant/Cross-Respondent whether by itself, its directors, officers, servants, agents or otherwise, be restrained from infringing Australian Letters Patent No 597784 (the Patent) and, in particular, from engaging in the following acts within the patent area (as that term is defined in Patents Act 1990 (Cth)), without the license or authority of the Respondent/Cross-Claimant:

(a)    making, selling or otherwise disposing of the products known as GenRx Clopidogrel, Apo-Clopidogrel, Chemmart Clopidogrel and Terry White Chemists Clopidogrel or any other pharmaceutical composition the active ingredient of which is clopidogrel bisulfate, a compound claimed in claims 1, 3, 10 and 11 of the Patent (collectively, the GenRx Clopidogrel Products);

(b)    offering to make, sell or otherwise dispose of the GenRx Clopidogrel Products;

(c)    using or importing the GenRx Clopidogrel Products;

(d)    keeping the GenRx Clopidogrel Products for the purpose of doing any of the acts described in sub-paragraphs (a) to (c) above;

(e)    authorising other people to engage in any of the acts described in sub-paragraphs (a) to (d) above.

2.    NOTES that the Applicant/Cross-Respondent undertakes to the Court that, pending the determination of the proceedings or further order, it will not, whether by itself, its directors, officers, servants or agents or otherwise, take any steps to obtain listing of any of the GenRx Clopidogrel products under the pharmaceutical benefits scheme maintained by the Commonwealth under the National Health Act 1953 (Cth).

93    There are six important points to make about this order and various undertakings.

94    First, the interlocutory injunction referred to in numbered paragraph 1 of the orders operated “pending the determination of the proceedings or further order”. In the events that happened, the interlocutory injunction operated in accordance with its terms until final orders were made by Gyles J on 19 August 2008 at which time it ceased to operate.

95    Secondly, paragraphs (a)-(e) of the interlocutory injunction did not include, among the specified activities in respect of which Apotex Australia was expressly restrained, taking steps to list on the PBS. Nevertheless, the description of the particular acts in the interlocutory injunction is preceded by the general words “… be restrained from infringing …” the Patent and it is clear that the scope of the restraint could extend beyond the infringing activities specified in subparas (a)-(e) to the order.

96    Thirdly, although the interlocutory injunction restrained Apotex Australia from infringing the Patent, it would not have been an infringement of the Patent for Apotex Australia to apply to list its clopidogrel products on the PBS. This proposition derives from the Full Court’s decision in Warner-Lambert Company LLC v Apotex Pty Ltd (2017) 249 FCR 17 (“Warner-Lambert”) in which it was held that a person who makes an application to list a pharmaceutical product on the PBS does not thereby “exploit” a patented invention. It was Apotex Australia’s contention at the interlocutory hearings on 18 and 25 September 2007, and at the hearing on 19 August 2008 at which the form of the final orders was debated, that taking steps to obtain a PBS listing of a pharmaceutical product was incapable of constituting an act of patent infringement. But until the Full Court’s decision in Warner-Lambert was published, the correctness of that proposition was open to debate.

97    Fourthly, the undertaking given to the Court by Apotex Australia referred to in numbered paragraph 2 of the orders specifically prevented Apotex Australia from taking any steps to list its clopidogrel products on the PBS until the determination of the proceeding or further order. Importantly, however, that undertaking was not supported by any undertaking as to damages by Sanofi. The minute of order shows that Sanofi’s undertaking as to damages required it to submit to an order for compensation in favour of any person adversely affected by the operation of the interlocutory injunction but not the undertaking given to the Court by Apotex Australia. This is a critical point to which I will return.

98    Fifthly, the undertaking as damages given to Gyles J permitted the Court to make an order for compensation that “it may consider just … to any person whether or not a party, adversely affected by the operation of [the relevant order] …”. This language reflected the form of what by that time had become the usual undertaking as to damages that an applicant is required to give in this Court in return for an interlocutory injunction.

99    Sixthly, the usual undertaking as to damages given to Gyles J was given by Sanofi but not by Sanofi US or BMS. Neither of those entities was a party to the patent proceeding at that time and neither of them was bound by the undertaking as to damages given to his Honour by Sanofi.

Gyles J’s orders of 19 August 2008

100    At the time of granting the interlocutory injunction, Gyles J fixed the matter for a final hearing commencing 28 April 2008. The trial before Gyles J commenced on that date. Apotex Australia did not contest infringement. The principal issue in dispute was the validity of the Patent.

101    Reasons for judgment were published by Gyles J on 12 August 2008. His Honour upheld the validity of claims 2-5 of the Patent, but found the other claims to be invalid. His Honour held (inter alia) that claim 3 (which covered clopidogrel bisulfate, which was the active ingredient in Apotex Australia’s clopidogrel products) was valid.

102    On 14 August 2008, the proceeding was again before Gyles J for argument regarding the form of final orders. At the hearing on that date, Sanofi sought a final injunction restraining supply of Apotex Australia’s clopidogrel products, in terms similar to the interlocutory injunction, and also a final injunction restraining Apotex Australia from taking any steps to obtaining a PBS listing of those products. The latter form of injunction was sought by Sanofi on the basis that a listing would require a guarantee of supply which would constitute offering to sell and, therefore, an exploitation of the invention.

103    Apotex Australia resisted the making of a final injunction restraining the taking of steps to list on the PBS, and sought a release from the first Apotex undertaking, on the basis that taking such steps would not constitute exploitation. Gyles J refused to grant the injunction sought by Sanofi in respect of PBS listing and granted Apotex Australia the release it sought from the first Apotex undertaking. The transcript of the hearing before his Honour on 14 August 2008 clearly suggests that his Honour doubted that by applying for a PBS listing of its clopidogrel products, Apotex Australia would infringe the Patent.

104    Apotex Australia also sought from Gyles J a stay of the final injunction pending the determination of its appeal or, alternatively, an undertaking from Sanofi in lieu of such a stay allowing the final injunction to operate on condition that, if so directed, Sanofi would pay compensation to Apotex Australia for any damage suffered by it in the event its appeal was successful with the final injunction being discharged: see Minnesota Mining & Manufacturing Company v Johnson & Johnson Limited [1976] FSR 139 at 145 per Buckley LJ. It is apparent that Gyles J (quite understandably) regarded this as an exceedingly ambitious application given that Apotex Australia had been restrained by the interlocutory injunction since 25 September 2007. His Honour indicated that Apotex Australia’s application for a stay of the permanent injunction should be made to the Full Court.

105    On 19 August 2008 Gyles J made orders declaring that claims 2, 3, 4 and 5 of the Patent were valid and that Apotex Australia’s clopidogrel bisulfate products infringed claim 3. The final injunction granted by his Honour was in these terms:

The Applicant/Cross-Respondent whether by itself, its directors, officers, servants, agents or otherwise, be restrained from infringing claim 3 of the Patent and, in particular, from engaging in the following acts within the patent area (as that term is defined in Patents Act 1990 (Cth)), without the license or authority of the Respondent/First Cross-Claimant:

(a)    making, selling or otherwise disposing of the products known as GenRx Clopidogrel, Apo-Clopidogrel, Chemmart Clopidogrel and Terry White Chemists Clopidogrel, each being pharmaceutical compositions the active ingredient of which is clopidogrel bisulfate, or any other pharmaceutical composition the active ingredient of which is clopidogrel bisulfate, a compound claimed in claim 3 of the Patent (collectively, the Apotex Clopidogrel Products);

(b)    offering to make, sell or otherwise dispose of the Apotex Clopidogrel Products;

(c)    using or importing the Apotex Clopidogrel Products;

(d)    keeping the Apotex Clopidogrel Products for the purpose of doing any of the acts described in sub-paragraphs (a) to (c) above;

(e)    authorising other people to engage in any of the acts described in subparagraphs (a) to (d) above.

106    Thus, the terms of the final injunction granted on 19 August 2008 (“the final injunction”) was in similar terms to the interlocutory injunction except that it was no longer expressed to operate until further order or the determination of the proceeding and was also expressed in terms which only restrained infringement of claim 3 of the Patent.

107    His Honour also ordered that claims 1, 6 to 9, 10 and 11 be revoked. That order was stayed until the final determination of any appeal subject to Sanofi providing a number of undertakings including “… not to threaten any person other than the Applicant in these proceedings or the Applicant, Spirit Pharmaceuticals Pty Ltd, in Federal Court Proceeding No. NSD 214 of 2008 with infringement of [those] claims ...”.

108    Gyles J also recorded, by a note included in the minute of orders, that the undertaking given by Apotex Australia to the Court on 25 September 2007 (ie. the first Apotex undertaking) ceased to have effect.

The undertakings given to Moore J on 15 September 2008

109    On 19 August 2008 Apotex Australia filed an appeal from Gyles J’s judgment and orders against (inter alia) the final injunction granted by his Honour based on claim 3. For reasons not clear from the evidence, Sanofi US and BMS were joined as second and third respondents to Apotex Australia’s appeal. On 8 September 2008 the Sanofi BMS companies filed a cross-appeal.

110    On 15 September 2008 Moore J made the following order by consent:

1.    Upon the parties giving the undertakings noted in paragraphs 2 and 3 below, the security in the sum of A$40 million provided by the First Respondent pursuant to paragraph 3 of the orders made by Gyles J on 25 September 2007 in Federal Court of Australia Proceeding No NSD 1639 of 2007 remain in place pending the final determination of this appeal, as security for such compensation, if any, as the Court may consider should be paid to the Appellant should it be found to have been adversely affected by any of:

(a)    paragraph 1 of the orders made by Gyles J on 25 September 2007 in Federal Court of Australia Proceeding No NSD 1639 of 2007;

(b)    paragraph 2 of the orders made by Gyles J on 19 August 2008 in Federal Court of Australia Proceeding No NSD 1639 of 2007; and

(c)    the undertakings of the Appellant noted in paragraph 3 below.

111    His Honour also noted the following undertakings that were given to the Court by Apotex Australia (the appellant) and the Sanofi BMS companies (the respondents):

2.    The Respondents undertake to the Court to:

(a)    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 the operation of any of paragraph 1 of the orders made by Gyles J on 25 September 2007 in Federal Court of Australia Proceeding No NSD 1639 of 2007, paragraph 2 of the orders made by Gyles J on 19 August 2008 in Federal Court of Australia Proceeding No NSD 1639 of 2007 and the undertakings of the Appellant noted in paragraph 3 below, or any continuation of any of them (with or without variation); and

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

3.    The Appellant undertakes to the Court that, pending the final determination of this appeal or further order:

(a)    it will not, whether by itself, its directors, officers, servants or agents or otherwise, take any steps to obtain listing of any of the Apotex Clopidogrel Products (as defined in paragraph 2(a) of the orders made by Gyles J on 19 August 2008 in Federal Court of Australia Proceeding No NSD 1639 of 2007) under the pharmaceutical benefits scheme maintained by the Commonwealth under the National Health Act 1953 (Cth);

(b)    it will not, whether by itself, its directors, officers, servants or agents or otherwise:

(i)    infringe any of claims 1, 6, 7, 8, 9, 10 and 11 of Australian Letters Patent No 597784;

(ii)    take any steps to obtain listing of clopidogrel or any salt of clopidogrel under the pharmaceutical benefits scheme maintained by the Commonwealth under the National Health Act 1953 (Cth).

112    The only order made by Moore J is that recorded in paragraph 1 of the minute of orders which, in substance, preserved the security previously given by Sanofi in support of its undertakings as to damages given to Gyles J on 25 September 2007 and 19 August 2008 and the various additional undertakings provided by the Sanofi BMS companies to Moore J as recorded in paragraph 2 of the minute of order.

113    It will be necessary to say more about the effect of these undertakings later in these reasons but it is worth noting a few key points at this stage.

114    The form of orders and undertakings of 15 September 2008 were in a form agreed between Apotex Australia and the Sanofi BMS companies. The agreed undertakings prevented Apotex Australia, until the determination of the appeal or further order, from supplying clopidogrel or any salt of clopidogrel including those within the scope of the claims held invalid by Gyles J. This is likely to have been important to Sanofi because the final injunction granted by Gyles J and his Honour’s other orders left Apotex Australia free to make and supply a clopidogrel product using a different clopidogrel salt as the active ingredient.

115    The agreed undertakings also prevented Apotex Australia from taking any steps to have any clopidogrel product listed on the PBS until the determination of the appeal or further order.

116    The agreed undertakings required each of the Sanofi BMS companies to pay compensation, if so directed by the Court, to any party adversely affected by the interlocutory injunction granted by Gyles J on 25 September 2007, the final injunction granted by his Honour on 19 August 2008, and the various undertakings given to Moore J by Apotex Australia referred to in paragraph 3. These included the undertaking not to take steps to have any clopidogrel product listed on the PBS.

117    An important point to note in relation to the agreed orders and undertakings of 15 September 2008 is that they did not include any undertaking as to damages in respect of the first Apotex undertaking given by Apotex Australia to Gyles J on 25 September 2007. Although paragraph 3 of the agreed orders and undertakings is an undertaking not to take any steps to obtain a PBS listing of any of Apotex Australia’s clopidogrel products, clopidogrel or any salt of clopidogrel, this undertaking was essentially forward looking in the sense that it could only apply to activities engaged in from the time the undertaking took effect, which was when it was proffered to and accepted by Moore J.

118    Although it must now be accepted that taking steps to apply for a PBS listing of a pharmaceutical product the supply of which infringes a patent does not constitute an act of infringement, it does not follow that the Court lacked power to accept undertakings from Apotex Australia forbidding it from taking such steps. The Court has power to receive undertakings from parties in settlement of a dispute where they are reasonably related to the subject matter of the proceedings before the Court: Thomson Publications (Australia) Pty Ltd v Trade Practices Commission (1979) 40 FLR 257 at 280 per Deane and Fisher JJ. The same is also true of the undertakings as to damages given by the Sanofi BMS companies in relation to the various undertakings referred to in paragraph 3 of the minute of order of 15 September 2008.

119    It was submitted by Sanofi BMS that the undertaking given by BMS should be construed as permitting the making of an order for the payment of compensation in respect of any loss or damage suffered by a person adversely affected by the interlocutory injunction from the date the undertaking was given but not any loss or damage suffered before then. In support of that submission it was suggested that the undertaking (at least in so far as it applied to BMS) could not be construed as applying to any loss or damage suffered prior to the date it was given in the absence of clear language to that effect.

120    The language of the undertaking is in my opinion clear. It is not open to the narrow construction for which Sanofi BMS now contend. Nor do I see any reason why the clear language of the undertaking should be read down. I should also note that there was no suggestion in either the submissions or the evidence that the undertaking was intended by any of the Sanofi BMS companies to have some limited operation that depended on whether a claimant’s alleged loss or damage was suffered before or after the date the undertaking was given.

The Full Court’s orders of 13 October 2009

121    Apotex Australia’s appeal against the judgment of Gyles J was successful. On 13 October 2009 the Full Court (Emmett, Bennett and Middleton JJ) held that all of the claims of the Patent were invalid. The Full Court ordered (inter alia) that the final injunction granted by Gyles J be vacated and that the Patent be revoked. These orders were stayed to allow the Sanofi BMS companies to seek special leave to appeal to the High Court.

122    The minute of orders made by the Full Court (which was expressed to be by consent) includes paragraphs 1-7 as follows:

1.    ORDERS that, subject to order 4 below, orders 1, 2, 3 and 11 of the orders made by his Honour Justice Gyles on 19 August 2008 be vacated.

2.    ORDERS that, subject to order 4 below, Australian Patent Number 597784 (the Patent) be revoked.

3.    ORDERS that order 4 of the orders made by his Honour Justice Gyles on 19 August 2008 be vacated.

4.    ORDERS that, upon the Respondents / Cross-Appellants giving the undertakings noted in paragraph 7 of these orders and agreeing to provide the security referred to in paragraph 6 of these orders, Orders 1 and 2 be stayed:

  a.    initially for a period of 28 days; and

b.    if an application for special leave to appeal to the High Court of Australia is lodged by the Respondents / Cross-Appellants, until the determination of the special leave application by the High Court of Australia; and

c.    if special leave is granted and a Notice of Appeal is filed by the Respondents / Cross-Appellants, until the determination of that appeal by the High Court of Australia,

    provided that if the Respondents / Cross-Appellants fail to provide the security referred to in paragraph 6 of these orders by the date specified in paragraph 6, the stay in respect of Orders 1 and 2 will immediately lapse.

5.    ORDERS that the security referred to in order 1 made by Moore J on 15 September 2008 remain in place until further order.

6.    ORDERS that the Respondents / Cross-Appellants provide by 3 November 2009 to the Appellant / Cross-Respondent additional security in the sum of A$X, either by way of a cash deposit into a joint account or by way of bank guarantee or irrevocable standby letter of credit or any combination of these, pending the determination of the amount of compensation, if any, that the Court may consider should be paid to the Appellant / Cross-Respondent should it be found to have been adversely affected by order 4 of these orders, paragraph 1 of the orders made by Gyles J on 25 September 2007 in Federal Court of Australia Proceeding No NSD 1639 of 2007, paragraph 2 of the orders made by Gyles J on 19 August 2008 in Federal Court of Australia Proceeding No NSD 1639 of 2007, or the undertakings of the Appellant noted in paragraph 3 of the orders made by Moore J on 15 September 2008.

7.    NOTES that the Respondents / Cross-Appellants undertake to the Court to:

a.    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 the operation of any of order 4 of these orders, paragraph 1 of the orders made by Gyles J on 25 September 2007 in Federal Court of Australia Proceeding No NSD 1639 of 2007, paragraph 2 of the orders made by Gyles J on 19 August 2008 in Federal Court of Australia Proceeding No NSD 1639 of 2007, the undertakings of the Appellant noted in paragraph 3 of the orders made by Moore J on 15 September 2008; and

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

123    The effect of the Full Court’s order 1 was to vacate the declarations made by his Honour and also the final injunction restraining infringement of claim 3. The Full Court’s order 4 provided for a stay of order 1 in aid of an application for special leave to appeal subject to the Sanofi BMS companies providing the undertakings noted in paragraph 7 and the additional security referred to in paragraph 6 of the orders.

124    It is common ground that the conditions imposed in relation to security were complied with and, as a consequence, the stay granted by the Full Court took effect. The effect of the stay was that the final injunction granted by Gyles J restraining infringement of claim 3 remained in force until the determination of the Sanofi BMS companies’ special leave application.

125    Paragraphs 6 and 7 of the Full Court’s orders referred to the interlocutory injunction granted by Gyles J on 25 September 2007 and the final injunction granted by his Honour on 19 August 2008. However, as previously mentioned, the former order ceased to have effect when his Honour granted the final injunction on 19 August 2008.

126    In accordance with the Full Court’s orders the discharge of the final injunction granted by Gyles J (as provided for in paragraph 1) was stayed (as provided for in paragraph 4) pending the determination of any application for special leave to appeal made by the Sanofi BMS companies.

127    The orders and undertakings of 13 October 2009 were made by consent. Like those of 15 September 2008, they reflected the terms of a compromise made between Apotex Australia and the Sanofi BMS companies.

128    There are two further points to make in relation to the Full Court’s orders of 13 October 2009.

129    The first is that the undertakings as to damages were again given by the Sanofi BMS companies in relation to the interlocutory injunction and the final injunction granted by Gyles J, but not the first Apotex undertaking given to Gyles J by Apotex Australia on 25 September 2007. It follows that the first Apotex undertaking has never been supported by way of any cross-undertaking as to damages given to the Court by Sanofi or the other Sanofi BMS companies at any stage of the proceeding before Gyles J or the subsequent appellate proceedings. From this it may be inferred that at no stage did any of the Sanofi BMS companies agree to submit to an order for the payment of compensation in respect of loss arising out of the first Apotex undertaking. By contrast, they did agree to do so in respect of the undertaking to the same general effect that was provided by Apotex Australia to Moore J on 15 September 2008.

130    The second point is that the effect of the stay granted by the Full Court in paragraph 4 of its orders ensured that the undertakings given to Moore J on 15 September 2008, including Apotex Australia’s undertaking not to take steps to obtain a listing of any clopidogrel product on the PBS, remained in place until the determination of the Sanofi BMS companies’ application for special leave.

The Special Leave Application

131    On 12 March 2010 the Sanofi BMS companies’ application for special leave to appeal was refused by the High Court. In accordance with the terms of the Full Court’s order, the stay of its orders ceased to operate as soon as the High Court pronounced its order. From that moment on Apotex Australia was free to sell its clopidogrel products and to take steps to have them listed on the PBS.

132    Apotex Australia commenced taking orders for its clopidogrel products on 12 March 2010 and received its first shipment from ARPL on 23 March 2010. Apotex Australia’s clopidogrel products were listed on the PBS on 1 May 2010 which was, as previously mentioned, one month after Sandoz became the first generic supplier to obtain a PBS listing of generic clopidogrel.

THE CLAIMS FOR COMPENSATION

The Apotex companies’ discontinued claims

133    On 4 May 2010 Apotex Australia, Apotex Inc and ARPL (“the Apotex companies”) filed a notice of motion applying for orders requiring the payment of compensation under the various undertakings given to the Court by the Sanofi BMS companies. The amount of compensation eventually claimed by the Apotex companies was slightly in excess of $138,000,000.

134    The Apotex companies’ application for compensation was settled by the Apotex companies and Sanofi BMS companies in accordance with the Settlement Deed dated 4 November 2014. In accordance with the terms of the Settlement Deed, the Apotex companies filed a notice of discontinuance of their claims on 7 November 2014.

135    The Settlement Deed was the subject of a previous judgment by me declaring that clause 6 was partly unenforceable: see Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2017] FCA 382. Clause 6 of the Settlement Deed provided:

6.    ASSISTANCE TO OTHERS

Otherwise than by compulsion of law, the [the Apotex companies] agree not to voluntarily assist in any way or encourage:

(a)    the Commonwealth in relation to the Commonwealth Compensation Claim by way of waiving any claim for legal professional privilege that any or all of the Applicants may have, or releasing any third person from any obligation of confidence in respect of information relevant to the Commonwealth Compensation Claim or the Apotex Compensation Claim, or by the provision of documents;

(b)    any third person in a claim against any of the Respondent Parties in connection with the Undertakings as to Damages by way of waiving any claim for legal professional privilege that any or all of the Applicants may have, or releasing any third person from any obligation of confidence in respect of information relevant to the Apotex Compensation Claim, or by the provision of documents.

136    I found that clause 6 was contrary to the public interest because of its strong propensity to prevent or hinder the Commonwealth’s legal representatives’ efforts to interview various witnesses who had been employed by the Apotex companies. It was on that basis that I granted a declaration that clause 6 was unenforceable in so far as it prevented the Apotex companies from releasing any witness or prospective witness from any obligation of confidence in respect of the information relevant to the Commonwealth’s claim for compensation.

137    I was not satisfied that clause 6 was unenforceable to the extent that it prevented the Apotex companies from waiving legal professional privilege or providing documents to the Commonwealth. As I said at [83]:

[83]    I am not persuaded that cl 6 is otherwise contrary to the public interest in so far as it relates to the Commonwealth’s claim. There was no attempt by the Commonwealth in its submissions to explain why cl 6 was contrary to public policy in so far as it prevents Apotex from waiving legal professional privilege or providing documents. It may be accepted that in these two respects cl 6 may cause the Commonwealth some difficulties if it is assumed that Apotex would agree to waive privilege or provide documents were it not for cl 6. But that does not provide a sufficient basis for holding that cl 6 is contrary to public policy in so far as it prevents Apotex from taking either of those steps. Litigation is usually conducted on the assumption that one party will not assist an opposing party by voluntarily waiving legal professional privilege or voluntarily providing documents unless the first party is of the view that it is in its interests to take either of those steps. The difficulties facing the Commonwealth are not out of the ordinary.

138    I went on to state that it was a matter for each of the relevant witnesses (ie. those who had previously made an affidavit or expert report filed by the Apotex companies) to decide whether he or she wished to participate in any interview with the legal representatives acting for the Commonwealth. It was not suggested by the Commonwealth in its final submissions in the present application that clause 6 (or any other relevant provision of the Settlement Deed) prevented it from speaking with or calling any witness or potential witness. In particular, it was not suggested that clause 6 prevented the Commonwealth from calling Dr Sherman as a witness.

The Commonwealth’s claim

139    The Commonwealth filed its interlocutory application seeking compensation from Sanofi BMS on 11 April 2013. The interlocutory application filed by the Commonwealth seeks orders for the payment of compensation with interest pursuant to the undertakings given by Sanofi to Gyles J on 25 September 2007, the undertakings given by the Sanofi BMS companies to Moore J on 15 September 2008, and the undertakings given by the Sanofi BMS companies on 13 October 2009.

140    The Commonwealth’s claim is pleaded in its Amended Points of Claim (“CAPOC”). The CAPOC makes reference to the “Restraints” which are defined to comprise:

(a)    the interlocutory injunction granted by Gyles J on 25 September 2007;

(b)    the final injunction granted by Gyles J on 19 August 2008;

(c)    the second Apotex undertaking given by Apotex Australia to Moore J on 15 September 2008; and

(d)    the stay granted by the Full Court on 13 October 2009 of its order also made on that date vacating the final injunction.

141    There is also reference in paragraph 11 of the CAPOC to the first Apotex undertaking given to Gyles J on 25 September 2007 (but which is not one of the “Restraints” as defined) whereby Apotex Australia undertook not to take any steps to have its clopidogrel products listed on the PBS pending the determination of the proceeding or further order. Paragraphs 8 and 11 of the CAPOC alleges:

8.    On 18 September 2007, Apotex informed the Court, in effect, that, if the Court were to grant the injunction sought by Sanofi-Aventis, Apotex would undertake not to take steps to list certain products (set out in subparagraph 9(a) below) under the Pharmaceutical Benefits Scheme (PBS) established under the National Health Act 1953 (Cth) (NHA). The Court was informed by Apotex that it adopted this position because listing of those products under the PBS would have obliged Apotex to supply them (which it could not do if the injunction sought by Sanofi-Aventis were to be granted).

…

11.    On 25 September 2007, as a direct consequence of the grant of the Interlocutory Injunction and as previously foreshadowed to the Court (see paragraph 8 above), Apotex gave an undertaking to the Court that, pending the determination of the proceedings or further order, it would not, whether by itself, its directors, officers, servants or agents or otherwise, take any steps to obtain listing of any of the Apotex Clopidogrel Products under the PBS (First Apotex Undertaking).

142    Paragraphs 62-65 of the CAPOC allege as follows:

Effect of the Restraints

62.    By reason of the matters referred to in paragraphs 6 to 25 above, Apotex was restrained from making, selling or otherwise disposing of, offering to make or sell, using or importing, the Apotex Clopidogrel Products from 25 September 2007 to 12 March 2010 (Injunction Period).

63.    By reason of the matters referred to in paragraphs 6 to 25 and 62 above, Apotex was prevented from obtaining the listing of any of the Apotex Clopidogrel Products on the PBS with a listing date prior to 1 May 2010.

64.    If not for the Restraints during the Injunction Period:

(a)    Apotex would have sought PBS listing for the Apotex Clopidogrel Products on or by 1 December 2007; and

(b)    Apotex would have obtained PBS listing for the Apotex Clopidogrel Products on 1 Apri12008.

65.    Further to paragraph 64 above, if not for the Restraints during the Injunction Period:

(a)    from no later than 1 April 2008, the Apotex Registered Clopidogrel Products (or some of them) would have competed with PLAVIX and ISCOVER; and

(b)    for the purposes of the NHA (Part VII, Division 3B), the difference between the Weighted Average Disclosed Ex-Manufacturer Price and the approved ex-manufacturer price (calculated in accordance with NHA ss 99ADB and 99ADH) in respect of each brand of clopidogrel would have been at least 10% on one or more of:

(i)    a prescribed day in 2010; and/or

(ii)    a prescribed day in 2011; and/or

(iii)    a prescribed day in 2012.

(strikethrough/underlining omitted)

143    Paragraph 64 specifies what the Commonwealth alleges Apotex Australia would have done if not for the existence of the Restraints (ie. apply for a PBS listing of the Apotex clopidogrel product by 1 December 2007 and obtain such a listing on 1 April 2008). It is not alleged that, if not for the Restraints, Apotex Australia would have applied for a listing on any subsequent listing date.

144    Paragraph 66 pleads what the Commonwealth alleges were the adverse effects suffered by it as a result of the existence of the Restraints as follows:

Adverse effects suffered by the Commonwealth

66.    By reason of the effect of the matters referred to in paragraphs 62 to 65 above and in the context of the matters set out in paragraphs 32 to 57 above:

 (a)    clopidogrel did not move to Part A of F2 on 1 April 2008;

(b)    a statutory reduction of 12.5% to the Approved Price to Pharmacists (referred to in sub-paragraph 45(c) above):

(i)    did not take effect in respect of clopidogrel on 1 April 2008; and

   (ii)    was deferred until 1 April 2010;

(c)    a further statutory reduction of 2% to the Approved Price to Pharmacists (referred to in sub-paragraph 45(d) above) did not take effect in respect of clopidogrel on one or more of:

(i)    1 August 2009; and

(ii)    1 August 2010;

(d)    the statutory price disclosure regime referred to in paragraphs 45(e) to 46 above did not take effect with respect to clopidogrel on 1 April 2008 such that the Commonwealth did not receive the benefit of a price reduction on one or more of the following:

(i)    a prescribed day in 2010; and/or

(ii)    a prescribed day in 2011; and/or

(iii)    a prescribed day in 2012.

It is the common ground that 1 April and 1 August were “prescribed days” for each of the 2010, 2011 and 2012 years.

145    Paragraphs 67, 68 and 69 then plead matters relied upon by the Commonwealth in support of its claim based on the clopidogrel with aspirin combination products marketed in Australia by Sanofi Australia under the CoPlavix brand and by BMS Australia under the DuoCover brand since about 1 December 2009 when they were listed on the SBCD List.

67.    By reason of the effect of the matters referred to in paragraphs 62 to 65 above and in the context of the matters set out at paragraphs 32 to 61 above:

(a)    the Approved Price to Pharmacists applicable to COPLAVIX and DUOCOVER from the date of listing on the PBS did not reduce to reflect:

(i)    a statutory reduction of 12.5% to the Approved Price to Pharmacists for clopidogrel having taken effect on 1 April 2008 (referred to in sub­paragraph 66(b) above); and/or

(ii)    a statutory reduction of 2% to the Approved Price to Pharmacists for clopidogrel having taken effect on 1 August 2009 (referred to in sub­paragraph 66(c) above);

(b)    the NHA s 99ACC (referred to in paragraph 53 above) did not apply to COPLAVIX and DUOCOVER during the period 1 December 2009 to 31 March 2010 (inclusive) at all;

(c)    the NHA s 99ACC (referred to in paragraph 53 above) did not apply to COPLAVIX and DUOCOVER from 1 April 2010 to 30 September 2011 (inclusive) to the same effect as would have been the case but for the Restraints; and

(d)    the Commonwealth did not receive the benefits of one or more new price agreement(s) commencing in respect of COPLAVIX and DUOCOVER:

(i)    on one or more of NHA s 99ADH reduction days that would have applied to clopidogrel but for the Restraints (or any of them) (see sub-paragraphs 47(c) and 66(d) above); and/or

(ii)    on 1 August 2010 (see sub-paragraphs 45(d) and 66(c) above).

68.    In the alternative to paragraph 67 above, if, but for the Restraints (or any of them) COPLAVIX and DUOCOVER would have been listed on F2 on 1 December 2009, then, by reason of the matters referred to in paragraphs 62 to 65 and in the context of the matters set out at paragraphs 32 to 61 above:

(a)    the Approved Price to Pharmacists applicable to COPLAVIX and DUOCOVER from the date of listing on the PBS did not reduce to reflect:

(i)    a statutory reduction of 12.5% to the Approved Price to Pharmacists for clopidogrel having taken effect on 1 April 2008 (referred to in sub­ paragraph 66(b) above); and/or

(ii)    a statutory reduction of 2% to the Approved Price to Pharmacists for clopidogrel having taken effect on 1 August 2009 (referred to in sub­ paragraph 66(c) above);

(b)    the Commonwealth did not receive the benefits, in respect of payments for the supply of COPLAVIX and DUOCOVER, of a price reduction on 1 August 2010 (referred to in sub-paragraphs 45(d) and 66(c) above).

69.    By reason of the matters referred to in paragraphs 66 to 68 above:

(a)    the Commonwealth has suffered, and will continue to suffer, loss, being amounts paid (or payable) under the PBS and RPBS which would not have been paid (or would not be payable) if the listing and supply of the Apotex Registered Clopidogrel Products under the PBS had not been subject to the Restraints; and

(b)    the amount of the Commonwealth’s loss is the difference between:

(i)    the amount actually paid or payable by the Commonwealth in respect of the supply of clopidogrel products under the PBS or RPBS since 1 April 2008; and

(ii)    the amount that would have been paid or payable in respect of the supply of clopidogrel products under the PBS or RPBS since 1 April 2008 if the listing and supply of the Apotex Registered Clopidogrel Products under the PBS had not been subject to the Restraints.

146    The Commonwealth’s alleged loss in respect of the combination products is the difference between the price it agreed to pay in May 2009 and the price the Commonwealth alleges it would have agreed to pay in the counterfactual world. In the real world, the combination products were the subject of a PBAC recommendation that had the effect that the price of clopiodgrel with aspirin was to be no higher than the price of clopidogrel, subject to adjusting for different pack sizes.

147    It is common ground that 1 April 2010 was the first possible date on which listed clopidogrel products could have been the subject of a price disclosure price reduction if a generic clopidogrel product had been listed on 1 April 2008. However, the Commonwealth’s case is that if a generic clopidogrel product had been listed on 1 April 2008, then by around 31 July 2009 it would have known whether a price disclosure price reduction would occur on 1 April 2010 and, in those circumstances, it would have sought to postpone any agreement in relation to the price for the combination products until it could negotiate a price that took account of the forthcoming price reduction, the amount of which would have been ascertainable in or about July 2009.

WITNESSES

The Commonwealth

148    A number of the witnesses called by the Commonwealth were employed by Apotex Australia, Apotex Canada or ARPL. Many of the affidavits made by those witnesses had been prepared and filed before those companies discontinued their damages claims. The most important of these witnesses (“the Apotex witnesses”) was Mr Roger Millichamp who was, at all relevant times, the managing director of Apotex Australia.

149    Mr Millichamp was the subject of a detailed cross-examination which involved a substantial challenge to his credit, the most significant aspect of which related to the Commonwealth’s failure to call evidence from his superiors within the Apotex group of companies and what was put to him as a deliberate effort on his part to conceal the identity of the actual decision-maker who would have determined if Apotex Australia would apply for a 1 April 2008 PBS listing of its clopidogrel products if no interlocutory injunction had been granted.

150    Another of the Apotex witnesses called by the Commonwealth was Mr Gordon Fahner who was, at all relevant times, the Senior Vice-President of Business Operations and Finance at Apotex Canada. Mr Fahner gave evidence concerning the financial capacity of Apotex Canada and related entities to provide security in relation to any award of damages that might be made in favour of Sanofi against Apotex Australia in the counterfactual scenario in which no interlocutory injunction was granted on terms that required Apotex Australia to provide such security.

151    Another of the Apotex witnesses who was called by the Commonwealth was Mr Rajesh Goel, the Corporate Finance Controller of ARPL, who gave evidence concerning manufacturing capabilities at its facility in Bangalore, India, and the ability of ARPL to supply Apotex Australia with clopidogrel products in the event that, in any relevant counterfactual analysis, it were to be assumed that Apotex Canada would have been unable to do so due to the existence of Sanofi’s Canadian Patent. His evidence was of no real consequence in light of the submissions ultimately advanced by Sanofi BMS in relation to the Canadian Patent.

152    Leaving aside Mr Millichamp, the most significant witness called by the Commonwealth was Ms Felicity McNeill. She is a senior Commonwealth public servant who is experienced in exercising various statutory powers under the NHA. Her evidence was relied upon by the Commonwealth in support of its counterfactual analysis both in relation to the continuous supply counterfactual and the interrupted supply counterfactual and, in particular, whether the Apotex clopidogrel products would have been listed on the PBS on 1 April 2008, and whether the 12.5% statutory price reduction triggered by any such listing would have been reversed once Gyles J made his final orders. She also gave evidence, as did Mr Phillip Spann, in relation to the question of delay and the Commonwealth’s involvement in earlier patent proceedings involving a PBS listed medicine.

153    Another witness called by the Commonwealth was Ms Philippa Horner who is also a senior Commonwealth public servant and Principal Legal and Policy Adviser to the Health Products Regulation Group of the Department. Her evidence was primarily directed to the copyright issue. Although Ms Horner’s evidence provided some useful background in relation to the use of innovators’ copyright material in the product information documents prepared by generic suppliers of bioequivalent or biosimilar products, her evidence was uncontentious and of no real consequence in light of the submissions ultimately advanced by Sanofi BMS in relation to the copyright issue. This is also true of evidence given for the Commonwealth by Dr Mariana Coghlan, Mr David Pearson and Mr Andrew Korbel.

154    There was evidence given by a number of witnesses called by the Commonwealth directed to establishing the quantum of its alleged loss including payments made by the Commonwealth in respect of clopidogrel and clopidogrel with aspirin under the PBS and the RPBS up to 31 December 2016. The quantum of the payments made by the Commonwealth was ultimately not a matter of dispute and it is unnecessary to refer to the detail of the evidence given on that topic.

155    The Commonwealth relied on the evidence of Mr John Montgomery, a former CEO of Alphapharm and an Adjunct Professor of Pharmacy at the University of Technology, Sydney. Mr Montgomery is an expert in the market for generic brands of pharmaceuticals in Australia and he gave evidence concerning the estimated market share that Apotex Australia would have achieved in the Australian clopidogrel market if the Apotex clopidogrel products had been listed on the PBS on 1 April 2008. He also gave evidence in relation to the likely discounts that would have been applied in the Australian clopidogrel market in both the continuous supply counterfactual and the interrupted supply counterfactual.

156    The Commonwealth also relied on the evidence of Mr Andrew Ross, a partner at Korda Mentha, who has expertise in valuation and accounting. He gave evidence in respect of the quantification of the Commonwealth’s loss.

157    I will comment on some aspects of the evidence of Mr Millichamp, Ms McNeill and Mr Montgomery when I turn to consider it in more detail. But as to all other witnesses who were cross-examined (whether called by the Commonwealth or Sanofi BMS) I should record that I did not see any reason to think that any of them was doing anything other than giving their evidence honestly, and to the best of their recollection and belief.

Sanofi BMS

158    Of the 35 witnesses who gave evidence for Sanofi BMS, 24 of them gave evidence that solely related to the subsistence and ownership of copyright in product information documents relating to Sanofi’s clopidogrel products. None of these witnesses was cross-examined. The Commonwealth ultimately accepted that copyright subsisted in these documents and that it was at all relevant times owned by Sanofi Australia.

159    Two important witnesses called by Sanofi BMS were Mr Jeremy Moulding, the former General Manager of Sanofi Australia, and Mr Paul Lindsay, the former Director of Public Affairs of Sanofi Australia. Mr Lindsay made an affidavit that was read at the interlocutory hearing before Gyles J in August 2007 which was again read at the hearing of the present application. More recent affidavits made by him were also relied upon by Sanofi BMS. That evidence, and evidence given by Mr Allan Dick, Mr Robert Wilson and Mr Paul Sim, was directed to showing how, for the purpose of the relevant counterfactual analysis, Sanofi Australia was likely to have responded to entry by Apotex Australia into the clopidogrel market in 2008 as part of a “generic defence strategy” involving the launch of an autogeneric product, and price discounting of Sanofi’s existing clopidogrel products.

160    The evidence of Mr Sim, a former Pricing Manager of Sanofi Australia, was primarily concerned with the clopidogrel with aspirin products and what recommendations he would have made to Mr Moulding (and others) in order to mitigate the effects of any subsequent price disclosure reductions with respect to clopidogrel that might flow through to Sanofi’s clopidogrel with aspirin combination products in the counterfactual scenario in which the Apotex clopidogrel products were listed on the PBS on 1 April 2008.

161    Sanofi BMS also called evidence from Dr Kim Sweeny, Principal Research Fellow at the Victoria Institute of Strategic Economic Studies, Victoria University, who has expertise in the PBS and the market for generic pharmaceuticals in Australia. He gave evidence concerning the market share achieved by generic manufacturers for drugs other than clopidogrel for which a first generic equivalent was listed on the PBS between 1 August 2007 and 31 December 2010 and what he considered to be useful “comparator molecules”.

162    Evidence was also given by Mr Michael Hobbs concerning generic market share and factors affecting generic substitution and generic market share. Mr Hobbs, who provides consultancy services in the pharmaceutical industry, has many years of experience working for both innovators and generic suppliers of PBS listed pharmaceuticals.

163    Sanofi BMS also relied on evidence given by Mr Terrence Potter. Mr Potter is an accounting expert who responded to the evidence given by Mr Ross. Mr Potter and Mr Ross were able to agree upon an extensive set of damages calculations that could be applied across a range of different counterfactual scenarios.

Failure to call witnesses

164    Sanofi BMS made a number of submissions in relation to the failure of the Commonwealth to call evidence from relevant decision-makers including, in particular, Dr Bernard (Barry) Sherman and Ms Diana MacDonell (who I shall for convenience refer to as the “missing witnesses”) and whose evidence was said to be of direct relevance to the counterfactual analysis including as to what Apotex Australia and the Commonwealth would have done if no interlocutory injunction had been granted restraining Apotex from supplying its clopidogrel products.

165    I will refer to the specific submissions that were made when considering the hypothetical events in which the missing witnesses were likely to have been involved had those events occurred. However, it is first necessary to refer to some of the relevant authorities.

166    The principle of law with which I am concerned is commonly known as the rule in Jones v Dunkel (1959) 101 CLR 298. The principle was considered in Payne v Parker [1976] 1 NSWLR 191 (Hutley, Glass and Mahoney JJA) in an appeal against the jury verdict for the defendant in a medical negligence case. The judgment of Glass JA (who was in dissent) is widely recognised as correctly stating the relevant legal principles: see, for example, Manly Council v Byrne & Anor [2004] NSWCA 123 at [53] per Campbell JA (with whom Beazley JA and Pearlman AJA agreed).

167    After referring to Lord Mansfield CJ’s well-known dictum in Blatch v Archer (1774) 1 Cowp 63 at p 65; 98 ER 969 at p 970 that “… all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted” and various other authorities, Glass JA said at 200-201:

From these various sources it is possible, I believe, to deduce the following propositions:

(1)    The rule is a principle of the law of evidence whereby a particular form of reasoning is authorized.

(2)    The reasoning which is permissible involves the treatment of a failure to adduce evidence as a reason for increasing the weight of the proofs of the opposite party or reducing the weight of the proofs of the party in default: … The principle may be invoked for a deficiency in the evidence either of a party bearing the legal onus of proving an issue, or of a party bearing the evidentiary burden only: … If the failure is of the latter kind, the direct evidence of the party with the onus of proof can be more readily accepted, and inferences in his favour may be more confidently drawn: Jones v. Dunkel. If the failure is of the former kind, a consonant formulation would be that the direct evidence of the party carrying the onus may be more readily rejected, and the inferences for which he contends may be treated with greater reserve. The default “brings a great slur on his cause”: …

(3)    The failure to call a particular witness is merely one instance of evidentiary deficiency which brings the principle into operation. Other instances are the failure to adduce any evidence at all: … the failure to produce a particular document, and the failure to prove a particular fact: [Wigmore on Evidence, 3rd ed. (1940) Vol II, par. 285].

168    His Honour referred at points (4)-(5) to the operation of the principle in the context of trial by judge and jury. His Honour then turned to consider in more detail the conditions attaching to the operation of the principle as follows at 201-202:

…

(6)    Whether the principle can or should be applied depends upon whether the conditions for its operation exist. These conditions are three in number: (a) the missing witness would be expected to be called by one party rather than the other, (b) his evidence would elucidate a particular matter, (c) his absence is unexplained.

(7)    The first condition is also described as existing where it would be natural for one party to produce the witness: Wigmore, par. 286, or the witness would be expected to be available to one party rather than the other: … or where the circumstances excuse one party from calling the witness, but require the other party to call him: … or where he might be regarded as in the camp of one party, so as to make it unrealistic for the other party to call him: … or where the witness' knowledge may be regarded as the knowledge of one party rather than the other: … or where his absence should be regarded as adverse to the case of one party rather than the other: … It has been observed that the higher the missing witness stands in the confidence of one party, the more reason there will be for thinking that his knowledge is available to that party rather than to his adversary: … If the witness is equally available to both parties, for example, a police officer, the condition, generally speaking, stands unsatisfied. There is, however, some judicial opinion that this is not necessarily so: … Evidence capable of satisfying this condition has been held to exist in relation to a party's foreman: … his safety officer: … his accountant: … his treating doctor: …

(8)    According to Wigmore, par. 285, the second condition is fulfilled where the party or his opponent claims that the facts would thereby be elucidated. Under other formulations, the condition is made out when the witness is presumably able to put a true complexion on the facts: Jones v. Dunkel, might have proved the contrary: … would have a close knowledge of the facts: … or where it appears that he had knowledge: … I would think it insufficient to meet the requirements of principle that one party merely claims that the missing witness has knowledge, or that, upon the evidence, he may have knowledge. Unless, upon the evidence, the tribunal of fact is entitled to conclude that he probably would have knowledge, there would seem to be no basis for any adverse deduction from the failure to call him.

(9)    The third condition is satisfied if no explanation is offered for the absence of the witness, or the tribunal thinks that the explanation given is unsatisfactory. The explanation tendered may be that the witness is ill, overseas, dead or refuses to waive his privilege: Wigmore, par. 286.

(some citations and footnotes omitted)

169    Sanofi BMS submitted that the Commonwealth’s failure to call the missing witnesses gives rise to a number of deficiencies in the evidence which, in the absence of any evidence from them, allows the Court to more readily reject the evidence that the Commonwealth relies on to make good the evidentiary gap including, in particular, the evidence of Ms McNeill. That submission is correct in so far as it goes. The real question is whether the conditions attracting the operation of the Jones v Dunkel principle are satisfied.

170    The three conditions that must be fulfilled before the rule can operate concern, first, the relationship of the party to the missing witness and (inter alia) whether the missing witness would be expected to be available to one party rather than the other; second, whether it appears that the missing witness is likely to have knowledge of the relevant facts; and, third, whether any satisfactory explanation has been given by the relevant party in respect of its failure to call the missing witness.

171    In the present case the evidence that Sanofi BMS says could have been given by the missing witnesses primarily relates to their state of mind and what each of them would have done in the relevant counterfactual scenario.

172    If the relevant conditions are satisfied, it will be open to the Court to infer that any evidence the missing witnesses may have given would not have assisted the Commonwealth’s case: see, for example, Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 (“Air Express”) per Gibbs J at 314 and Brandi v Mingot (1976) 12 ALR 551 at 559-560 per Gibbs ACJ, Stephen, Mason and Aickin JJ. It may also be open to the Court to draw an inference unfavourable to the Commonwealth’s case that the Court might not have been willing to draw if the relevant conditions had not been satisfied. As Heydon J said in ASIC v Hellicar (2012) 247 CLR 345 at 432 [232]:

… two consequences can flow from the unexplained failure of a party to call a witness whom that party would be expected to call. One is that the trier of fact may infer that the evidence of the absent witness would not assist the case of that party. The other is that the trier of fact may draw an inference unfavourable to that party with greater confidence.

His Honour went to say at 443-444 [256]:

… the greater the failure of a party bearing the onus of proof to call available witnesses with valuable evidence to give, the harder it is to satisfy that onus. … The cases illustrate nothing more than Dawson J’s observation: ‘When a party’s case is deficient, the ordinary consequence is that it does not succeed’ [Whitehorn v The Queen (1983) 152 CLR 657 at 682].

173    In the present case the Commonwealth submitted that none of the three conditions referred to by Glass JA in Payne v Parker was satisfied. I will consider the correctness of that submission when considering each of the counterfactual scenarios to which the missing witnesses’ evidence was said by Sanofi BMS to be relevant.

LEGAL PROFESSIONAL PRIVILEGE

174    I have previously referred to clause 6 of the Settlement Deed which prevented Apotex Australia or Apotex Canada from waiving legal professional privilege in documents relating to the Commonwealth’s claim for compensation at least in so far as doing so may have assisted or encouraged the Commonwealth in relation to its claim. The Commonwealth’s challenge to the validity of that aspect of clause 6 was unsuccessful. In the result, neither Apotex Australia nor Apotex Canada was able to waive legal professional privilege in relation to any document relevant to the Commonwealth’s claim without risk of breaching clause 6 of the Settlement Deed.

175    There were many claims of legal professional privilege made by Apotex Australia and Apotex Canada particularly in relation to documents relevant to the question of whether Apotex Australia would have applied for a PBS listing of its clopidogrel products with effect from 1 April 2008 but for the interlocutory injunction. Some of the documents which I refer to in my analysis of the evidence on that issue include portions that have been redacted on the ground of legal professional privilege. Some of these redactions have been made to highly significant communications that are of direct relevance to the question of what Apotex Australia would have done had there been no interlocutory injunction.

176    Of course, no inference is to be drawn on account of legal professional privilege having been claimed. Nevertheless, it is important to note that the claims for legal professional privilege that have been made create a situation in which a number of written communications that are highly relevant to a central issue in the proceeding have been produced in incomplete form. In respect of some of these communications I cannot be satisfied that the relevant document, in its redacted form, conveys an accurate or sufficiently complete picture of the author’s state of mind or how the document was likely to be understood by a recipient in its unredacted form. This necessarily affects what weight may be given to various documents and what Mr Millichamp had to say about some of them in his evidence.

THE RELEVANT LEGAL PRINCIPLES

Air Express Ltd

177    In Air Express a company (the claimant) which was added as defendant in an action for breach of contract brought by the plaintiff in the High Court applied for damages pursuant to an undertaking as to damages. The undertaking had been given by the plaintiff on the grant of an ex parte interim injunction to restrain the original defendants to the action, the Commonwealth and the Secretary of the Department of Transport, from issuing permission to the claimant to import freighter aircraft into Australia. The undertaking as to damages was extended in favour of the claimant when it was added as a defendant and the interim injunction was continued until the suit was disposed of or further order.

178    Aickin J, who heard the application for damages, was not satisfied that the Secretary would have issued the permission even if the interlocutory injunction restraining him from doing so had not been continued, and rejected the application on that basis.

179    Aickin J said at 266-267:

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. No doubt the view as expressed in the two decisions of the Court of Appeal does not constitute a rigid rule and circumstances may sometimes require a different approach. However it will in my opinion be seldom that it will be just or equitable that the unsuccessful plaintiff should bear the burden of damages which were not foreseeable from circumstances known to him at the time.

His Honour continued at 268:

It is important in all cases, and particularly in the present case, to bear in mind the distinction adverted to in many of the cases (e.g. per Myers C.J. in Newman Bros. Ltd. v. Allum; S.O.S. Motors Ltd. (In liq.) [No. 2] [[1935] N.Z.L.R. Suppl., at p.18]) between damages flowing from the injunction and damages flowing from the litigation itself. There may not in every case be any difference between the two but, where there is a difference, it is essential that the damage flowing from the litigation should not be confused with the damage flowing from the interlocutory injunction. This is necessarily required by the form of the undertaking itself.

180    His Honour found that it was probable that the Minister would not have issued the written permission while the litigation was continuing and that it was not the continuation of the injunction which brought about such damage as the claimant may have suffered, but the litigation itself.

181    On appeal, Barwick CJ expressed his agreement with Aickin J’s reasons.

182    Gibbs J said at 311-312:

The object of requiring a plaintiff who seeks an interlocutory injunction to enter into an undertaking of this kind is to attempt to ensure that a defendant will receive compensation for any loss which he suffers by reason of the grant of the injunction if it appears in the event that the plaintiff was not entitled to obtain it. The insistence upon the giving of an undertaking is a very important, if not an essential, means of preventing injustice from being done by the court when it makes an order at an interlocutory stage, before the rights of the parties have been finally determined. The court has a discretion not to enforce such an undertaking, but unless the defendant has been guilty of conduct that would render it inequitable to enforce the undertaking it would seem just, speaking generally, that a plaintiff who has failed on the merits should recompense the defendant for the damage that he has suffered as the result of the making of the interlocutory order. 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: see Smith v. Day [(1882) 21 Ch.D. 421, at p. 430.] and the cases cited in Kerr on Injunctions, 6th ed. (1927), p. 667, and Halsbury, 4th ed., vol. 24, par. 1077. However, in the present case the question is not whether loss caused by an injunction was a natural consequence of making it, but whether any loss which the appellant suffered was caused by the making of the injunction.

…

In a number of authorities the court has distinguished between loss which was caused by the injunction and loss which arose from the litigation: see Bingley v. Marshall [(1863) 9 L.T.N.S. 144, at p. 145]; Gault v. Murray [(1892) 21 OR 458, at p. 462]; Douglass v. Bullen [(1913) 12 DLR 652, at p. 655] and Newman Bros. Ltd. v. Allum, S.O.S. Motors Ltd. (In liq.) [No. 2] [[1935] N.Z.L.R. Suppl. 17, at p. 18]. 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.

183    Stephen J said at 319-320:

But a plaintiff who sues for an injunction and obtains interlocutory relief, giving an undertaking to the court as the price of that relief, commits no wrongful act, no breach of contract or of duty when, at the trial, he fails to obtain any perpetual injunction. If, as a result of the grant of interlocutory relief, the defendant has been harmed there will, however, have been injustice and, an undertaking having been given, the court will thereby have been armed with jurisdiction, otherwise lacking, to right that injustice and compensate the defendant for the harm done to him.

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.

184    Mason J, who dissented, did not agree that it should be inferred that the applicant’s loss was caused by the litigation rather than the injunction. However, his Honour said at 324-325:

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.

185    It is apparent from these passages from the reasons of Gibbs, Stephen and Mason JJ that their Honours were each of the view that the interim injunction in relation to which the claim on the undertaking as to damages was made had to be a cause of the relevant damage. Gibbs J said that the making of the order must be a cause without which the damage would not have been suffered. Stephen J said that the grant of the order must be shown to be the causa sine qua non of the damage. Mason J spoke to the need for the claimant to show that his damage would not have been suffered but for the injunction. This test, which is sometimes referred to as the sine qua non test or, more often, the “but for” test, is concerned with the question whether a defendant’s conduct (or in this case the interlocutory injunction) is a cause in fact of the plaintiff’s (or in this case the Commonwealth’s) damage.

186    Even when the “but for” test is satisfied, it remains necessary to determine whether the cause in fact is also the cause in law. This is because not all causes which satisfy the sine qua non test will entail legal responsibility. It is in this context that expressions such as “direct cause”, “proximate cause”, “effective cause” and “supervening cause” come into play: see McGregor H, McGregor on Damages (19th ed, Sweet & Maxwell, 2014) at 114-115 and see also March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 (“March”) at 515-517 per Mason CJ, at 522-523 per Deane J.

187    There is one other matter arising out of the High Court’s decision in Air Express that I must address. Senior Counsel for Sanofi, Mr Sheahan QC, submitted that, for the purpose of determining the cause of the Commonwealth’s loss, it was necessary to consider whether the loss claimed would have been suffered by it had no interlocutory injunction been sought or granted. In particular, Mr Sheahan QC submitted that it was necessary for the Commonwealth to show what loss would have been suffered by the Commonwealth had Sanofi not made any application for an interlocutory injunction. In support of this submission Mr Sheahan QC drew attention to what was said by Mason J in Air Express in the penultimate sentence of the passage at 324-325 which I have previously set out.

188    The point now under consideration assumes significance in Sanofi’s submissions because, while there was much evidence directed to the question of how Apotex Australia would have acted if the interlocutory injunction had not been granted, the evidence did not establish how Apotex Australia would have acted in the event that Sanofi had not made any application for an interlocutory injunction.

189    I do not accept Mr Sheahan QC’s submission as to the effect of what Mason J said on this point in Air Express. It does not seem to me that his Honour was suggesting that the question of recoverability on the undertaking had to be assessed by reference to a hypothetical scenario (or counterfactual) in which the interlocutory injunction that had in fact been granted was never sought. I think it is clear from the final sentence in the relevant passage that his Honour considered that the “but for” analysis was to be undertaken by reference to the interim injunction granted in that case and not the application for the interlocutory injunction. On that basis, I would not regard the absence of any evidence from the Commonwealth as to how Apotex Australia would have acted in the event that Sanofi had not applied for an interlocutory injunction as fatal to the Commonwealth’s case.

European Bank

190    Certain of Aickin J’s observations in Air Express at 266-267 were approved by French CJ, Gummow, Hayne, Heydon and Kiefel JJ in European Bank Limited v Robb Evans of Robb Evans & Associates (2010) 240 CLR 432 (“European Bank”). Their Honours said at 439 [15]-[18]:

[15]    The undertaking as to damages and its origins in equity practice of the nineteenth century, if not earlier, were explained by Aickin J in Air Express [(1981) 146 CLR 249 at 260-261] and by Gleeson CJ, Gummow, Kirby, Hayne and Crennan JJ in Mansfield v Director of Public Prosecutions (WA) [(2006) 226 CLR 486 at 497-499 [30]-[34]]. The authorities discussed in Mansfield included Russell v Farley [(1881) 105 US 433 at 438], where Bradley J had explained the requirement of the undertaking as a response to the anxiety entertained by the court that otherwise its interlocutory order might lead to damage for which there could be no redress except by an order for costs.

[16]    In Air Express, Mason J said that there was little to be gained from an examination of the authorities dealing with causation of damage in contract, tort and other situations; the Court was better advised to look to the purpose which the undertaking as to damages is to serve and to identify the causal connection or standard of causal connection which is most appropriate to that purpose [(1981) 146 CLR 249 at 324].

[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. See also R v Medicines Control Agency; Ex parte Smith & Nephew Pharmaceuticals Ltd [1999] RPC 705 at 714], 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.

191    Their Honours went on to consider the findings made by the primary judge in that case, (Gzell J) which they said were of great importance and not disturbed by the New South Wales Court of Appeal. One of these was that, but for the interlocutory order made in that case, the appellant would have converted the relevant funds from United States dollars to Euros. The High Court held that this was an advantage the appellant would have enjoyed were it not for the existence of the interlocutory order for which it was entitled to recover compensation. Their Honours said at 442-443 [28]-[29]:

[28]    The appropriate outcome in this case was to be reached by the following path.

[29]    On the inquiry before Gzell J the first question was “What is the loss that is now alleged?”, the second “Did that loss flow directly from the order of 18 May 2004?” and the third “Could the loss sustained have been foreseen at the time of that order?” The inquiry presented by the third question is an inquiry as to whether a loss of the kind actually sustained could have been foreseen. Contrary to the submission by the respondent, Mr Evans, the inquiry is not as to whether the actual loss suffered was foreseen at the time the undertaking was given. In the present case there was a finding by the primary judge, as indicated above, that the loss directly flowed from the order and his Honour further found that the loss could have been foreseen. That result should not have been disturbed.

(emphasis original)

192    The focus of the High Court’s attention in European Bank was on the foreseeability of the appellant’s loss at the time the relevant undertaking as to damages was given. Although their Honours expressly approved of the statement by Aickin J in Air Express to which I have referred, nothing was said by the High Court in European Bank to suggest that the “but for” test which Gibbs, Stephen and Mason JJ each required the claimant to meet was not generally applicable. Nevertheless, it is also true that the High Court in European Bank cautioned that the process of assessment of compensation should not be constrained by a rigid formulation. In my opinion this caution would extend to the rigid application of the “but for” test of causation.

193    The “but for” test as it is applied to the assessment of causation in the field of negligence resulting in personal injury was the subject of detailed consideration by the High Court in March. As Mason CJ said at 516:

The “but for” test gives rise to a well-known difficulty in cases where there are two or more acts or events which would each be sufficient to bring about the plaintiff's injury. The application of the test “gives the result, contrary to common sense, that neither is a cause”: Winfield and Jolowicz on Tort, 13th ed. (1989), p. 134. In truth, the application of the test proves to be either inadequate or troublesome in various situations in which there are multiple acts or events leading to the plaintiff's injury: see, e.g., Chapman v. Hearse; Baker v. Willoughby [[1970) AC 467]; McGhee v. National Coal Board; M’Kew (to which I shall shortly refer in some detail). The cases demonstrate the lesson of experience, namely, that the test, applied as an exclusive criterion of causation, yields unacceptable results and that the results which it yields must be tempered by the making of value judgments and the infusion of policy considerations.

194    Deane J said at 522:

For the purposes of the law of negligence, the question of causation arises in the context of the attribution of fault or responsibility whether an identified negligent act or omission of the defendant was so connected with the plaintiff's loss or injury that, as a matter of ordinary common sense and experience, it should be regarded as a cause of it (cf. Barnes v. Hay [(1988) 12 NSWLR 337, at p 339]). The “but for” (or “causa sine qua non”) test may well be a useful aid in determining whether something is properly to be seen as an effective cause of something else in that sense. In particular, the test will commonly exclude causation for the purposes of the law of negligence if the answer to the question it poses is that the accident which caused the injuries would have occurred in the same way and with the same consequences in any event: see, e.g., Duyvelshaff v. Cathcart & Ritchie Ltd. [(1973) 47 ALJR 410, at pp 414-417,419; 1 ALR 125, at pp 134-135, 138, 142-143]. There are however, in my view, convincing reasons precluding its adoption as a comprehensive definitive test of causation in the law of negligence.

Gaudron J agreed with the reasons of both Mason CJ and Deane J.

195    McHugh J spoke at 532 of the need to apply the “but for” test in “a practical commonsense way”.

196    Applying the reasoning in Air Express and European Bank to the present case, the following questions must be addressed in relation to the Commonwealth’s claims:

    Would the relevant loss have been sustained but for the grant of interlocutory injunction?

    Did such loss flow directly from the interlocutory injunction?

    Could loss of the kind sustained have been foreseen at the time the interlocutory injunction was granted?

FACTUAL ANALYSIS

The Apotex Group

197    At all material times, the Apotex group of companies has been a very substantial manufacturer and distributor of generic medicines worldwide. The principal operating company in the group is Apotex Canada. It was founded in 1974 and became the largest Canadian owned pharmaceutical company.

198    The Apotex group operated in Australia through Apotex Australia which was known as GenRx until 20 September 2007, and is now known as Apotex Pty Ltd. Mr Roger Millichamp was appointed Managing Director of Apotex Australia on 1 March 2006.

199    Dr Bernard Sherman was co-founder of Apotex Canada, its CEO and Chairman, and the ultimate controller of the Apotex group, including Apotex Canada, Apotex International Inc (“Apotex International”), Apotex Corporation (“Apotex US”) and Apotex Australia.

200    Mr Millichamp reported to Mr Michael Weingarten from about March 2006 to about June 2007 and thereafter to Mr Andrew Kay. Until his departure in about June 2007 Mr Weingarten was the Vice President of Sales at Apotex Canada. Mr Kay, to whom Mr Weingarten reported, was the President of Apotex International. Mr Kay remained in that position until late 2008 or early 2009 around which time he left the Apotex group. Both Mr Weingarten and Mr Kay were based at the head office in Canada (“Apotex HQ”) and they reported ultimately to Dr Sherman.

Proceedings in Canada and the USA

Canada

201    On 10 March 2003, Apotex Canada commenced the process of seeking to obtain a Notice of Compliance (“NOC”) from the Canadian Minister of Health for a generic version of clopidogrel bisulfate tablets. On 28 April 2003, Sanofi and related entities initiated a proceeding in the Federal Court of Canada seeking an order prohibiting the Canadian Minister of Health from issuing a NOC to Apotex Canada in respect of its clopidogrel bisulfate product until expiry of Sanofi’s Canadian Patent.

202    On 21 March 2005, the Federal Court of Canada granted an order of prohibition which prevented issuance of such a NOC to Apotex Canada. Apotex Canada appealed to the Federal Court of Appeal. On 22 December 2006, the Federal Court of Appeal dismissed Apotex Canada’s appeal from the judgment of the Federal Court of Canada preventing issuance of a NOC.

203    On 5 July 2007, Apotex Canada was granted leave to appeal against the judgment of the Federal Court of Appeal to the Supreme Court of Canada. However, on 6 November 2008 the Supreme Court of Canada dismissed that appeal.

204    On 8 June 2009, Sanofi and related entities commenced an action for patent infringement against Apotex Canada and various of its related entities. The relief claimed included declaratory, injunctive and pecuniary relief in respect of what was alleged to be infringements of Sanofi’s Canadian Patent by the Apotex entities that were involved in manufacturing clopidogrel products in Canada for export to other countries. On 6 December 2011 the Federal Court of Canada held that each of the claims of the Canadian Patent were invalid and, consequently, a patent infringement proceeding brought by the Sanofi entities against the Apotex entities was dismissed.

205    However, on 24 July 2013 that judgment was set aside by the Federal Court of Appeal which held that the patent was valid and infringed. The Apotex entities then sought from the Supreme Court of Canada special leave to appeal which was granted on 30 January 2014. Their appeal to the Supreme Court of Canada was discontinued on 3 November 2014 pursuant to a Settlement Deed dated 4 November 2014 entered in between the Sanofi and Apotex entities.

USA

206    On 21 November 2001, Apotex Canada, through its US affiliate Apotex US, filed an application with the United States Food and Drug Administration (“FDA”) seeking approval to sell generic clopidogrel bisulfate tablets in the United States.

207    On 21 March 2002, Sanofi and BMS (“the Sanofi BMS entities”) filed a claim in the United States District Court for the Southern District of New York against Apotex Canada and Apotex US (“the Apotex entities”) for infringement of Sanofi’s US Patent No 4847265 (“US Patent”) for clopidogrel. The Apotex entities filed a counterclaim alleging that the US Patent was invalid and unenforceable.

208    On 20 January 2006, the FDA gave final approval to the Apotex entities’ application to sell clopidogrel bisulfate tablets in the United States.

209    On 17 March 2006, the Apotex entities and the Sanofi BMS entities reached an agreement to settle their litigation. That agreement was subject to approval by the Federal Trade Commission and a consortium of US state attorneys-general. In early May 2006, the state attorneys-general informed the parties that they would not approve the settlement agreement.

210    On 26 May 2006, the parties reached an amended settlement agreement. On 28 July 2006, the parties were informed by the state attorneys-general that the states objected to and would not approve the amended settlement agreement.

211    The amended settlement agreement permitted any party to declare that there had been “regulatory denial” if the required regulatory review had not been completed by 31 July 2006. It also provided for litigation between the parties to resume in the event of such regulatory denial.

212    On 31 July 2006, the Apotex entities declared that there had been regulatory denial. The Sanofi BMS entities then sought a temporary restraining order to prevent the Apotex entities from launching their generic clopidogrel bisulfate product in the United States. On 4 August 2006, the District Court denied relief.

213    On 8 August 2006, the Apotex entities launched their clopidogrel bisulfate product in the United States. On 15 August 2006, the Sanofi BMS entities filed a motion seeking a preliminary injunction restraining the Apotex entities from infringing the US Patent and an order recalling all of the products that had been manufactured and distributed since the 8 August 2006 product launch by the Apotex entities.

214    On 31 August 2006, the District Court granted the Sanofi BMS entities a preliminary injunction preventing further supply by the Apotex entities of their clopidogrel products, but refused to order a product recall. The Apotex entities sought a stay of the preliminary injunction, which was denied on 21 September 2006 by the District Court. An appeal brought by them against the decision to grant the preliminary injunction was dismissed on 8 December 2006.

215    On 19 June 2007, the District Court held that Sanofi’s US Patent was not invalid or unenforceable and granted a final injunction restraining Apotex Canada from further infringement of the US Patent. Apotex Canada filed an appeal to the United States Court of Appeals for the Federal Circuit, which affirmed the District Court’s decision on 12 December 2008.

216    On 24 July 2009, the Apotex entities filed a petition for a writ of certiorari in the Supreme Court of the United States which was denied on 2 November 2009.

217    On 19 October 2010, the United States District Court awarded Sanofi US$442,209,362. Those damages were calculated under clause 14(ii) of the amended settlement agreement which established a limit on the damages that Sanofi could recover from the Apotex entities for infringement of Sanofi’s US patent. The damages awarded represented 50% of the Apotex group’s net sales. Thus, the Apotex group retained US$442,209,362 of net sales, and had to pay the same amount to the Sanofi and BMS entities. This represented the realisation of the worst-case scenario that the Apotex group faced at the time it elected to launch in the USA. It also reflected a highly favourable outcome for Apotex which, were it to have launched clopidogrel in the USA in the absence of the amended settlement agreement, could have resulted in an award of damages greatly in excess of that amount.

218    Contrary to a suggestion made in the Commonwealth’s opening submissions, I do not think the US launch was genuinely “at risk” in the sense those words were used in the evidence and submissions. Apotex’s exposure depended not on how much profit Sanofi lost, but how much profit Apotex made. Apotex knew what its worst case would be in the US (as a percentage of its profit) should the validity of the US Patent be upheld.

Would Apotex would have applied to list its clopidogrel products from 1 April 2008?

219    In early 2006, Apotex Australia began exploring the possibility of launching a generic clopidogrel product in the Australian market. At that time there were no generic clopidogrel products registered on the ARTG or listed on the PBS in Australia.

220    Beginning in March 2006 when he took up his position as Managing Director, Mr Millichamp required his senior management team to prepare regular launch forecasts and plans for all key Apotex Australia generic product launches (including for clopidogrel) generally covering a three-year period following launch. These included calculations of possible market share, discounts to be offered by Apotex Australia, and forecasts as to the amount of stock needed.

221    Mr Millichamp sent an email on 2 May 2006 to Karen McTavish (Apotex Australia’s Supply Chain Manager) in which he stated with reference to clopidogrel “[c]learly we are keen to get to market as soon as we can with this molecule”. The email is heavily redacted. Appended to Mr Millichamp’s email was an email from Mr Michael Ascnzo, whose position is shown as Analyst, Product Selection, Apotex International. The whole of Mr Ascnzo’s email is also redacted.

222    On 16 May 2006 Marnie Peterson, Assistant Marketing Manager with Apotex Australia provided to Mr Millichamp what she described as an updated forecast model in respect of clopidogrel.

223    On 19 June 2006, Mr Weingarten sent to Dr Sherman forecasts of net margins for the first three years supplying clopidogrel in Australia assuming a “launch date” in October 2007. Mr Weingarten said:

The information contained above outlines a very conservative scenario, with [Apotex Australia] taking 20% generic segment market share. The reality is, assuming that we have a solid patent strategy, that we should be the only generic on the market on approval in October 2007. I would like your advice on how to proceed, in order to ensure that we are able to launch, on approval, in Australia.

224    On the same day, Dr Sherman responded to Mr Weingarten’s email as follows:

By then [October 2007] the litigation should be over in both US and Canada. If we win, we will launch at risk in Australia on approval. If we lose in US and Canada, we will not launch.

225    At that point in time, therefore, it appears to have been Dr Sherman’s intention to launch at risk once TGA approval was obtained (expected to be obtained by October 2007) but only if Apotex succeeded in the litigation that was pending in the United States and Canada.

226    On 27 June 2006, Apotex Australia (then still known as GenRx) submitted a dossier for its generic clopidogrel products to the TGA for acceptance as of 30 June 2006. That was the earliest possible date following the expiry of the five year “data exclusivity” period, during which Sanofi Australia (as submitter of the original data supporting the quality, safety and efficacy of the originator product for registration on the ARTG) could have objected to the TGA relying upon that data in order to evaluate the generic products.

227    On 1 January 2007, Apotex Canada and Apotex Australia entered into a Transfer Pricing & Indemnity Agreement in respect of clopidogrel (“the TPI Agreement”). It recited that “Apotex will supply the Product” – defined as “the generic pharmaceutical product Clopidogrel” – “to GenRx to market and sell the Product in the [Australia]” and provided that Apotex Canada would defend, indemnify and hold Apotex Australia harmless against, inter alia, any claims, damages, liabilities or obligations which Apotex Australia “may suffer, incur or become liable for as a result of or in connection with any claim asserted against [Apotex Australia] to the extent such claim is based upon a contention that the manufacture of the Product by [Apotex Canada] for distribution and sale by [Apotex Australia] in [Australia] infringes the patent or other intellectual property rights of [Sanofi and/or its affiliates] or any other third party in [Australia]”. The TPI Agreement also gave Apotex Canada “the sole right to determine if the parties will or will not commence legal proceedings to challenge any third party patent which may affect the sale of the Product in [Australia]”.

228    On 15 February 2007, Mr Millichamp sent an email to Mr Weingarten (who was at the time Mr Millichamp’s immediate superior) stating:

As you know we expect TGA approval for clopidogrel in July / August of this year. Our current understanding is that we should wait to see if we launch depending on the outcome (successful or not) of Canadian and US litigation.

[redacted]

[redacted] The potential upside to the Australian business is huge if we can launch.

[redacted]

229    On 20 February 2007, Dr Sherman sent an email to Mr Weingarten and Mr Ivor Hughes. Mr Hughes was a lawyer who appears to have worked closely with Apotex Canada’s senior management (including Dr Sherman) providing advice on intellectual property and litigation strategy in respect of Apotex’s operations in Canada, the USA and Australia. Dr Sherman’s email which he copied to Mr Millichamp, stated:

Plan is as follows:

[redacted]

2. In May or June, we will file suit in Australia to invalidate the patent. [redacted]

3. We will then advise Sanofi that we will launch unless they move for and obtain an injunction, in which case they will have to give an undertaking for our damages.

4. If they do not give an undertaking for our damages and do not get an injunction, we will launch.

230    Although the first step in the plan has been redacted for privilege, the remaining three steps were to commence proceedings against Sanofi to revoke the Patent at or about the time Apotex Australia obtained ARTG registration for its clopidogrel products (then thought to be May or June 2007), to notify Sanofi that Apotex Australia intended to launch those products on the Australian market unless restrained by an interlocutory injunction, and to launch at risk if not restrained.

231    There was some cross-examination of Mr Millichamp that focused on the language used in point 4 to describe the conditions that would trigger the launch at risk. However, in my view the message conveyed was clear. According to this email, Dr Sherman was, at this stage, intending to have Apotex Australia launch at risk in the event that Sanofi did not obtain any interlocutory injunction. The email also reflects a clear awareness on Dr Sherman’s part of the requirement for Sanofi to give an undertaking as to damages in return for any interlocutory injunction that it may obtain.

232    By 20 February 2007 the plan for clopidogrel in Australia no longer depended on the outcome of the litigation in Canada or the United States. By that date, the Federal Court of Appeal in Canada had already dismissed Apotex Canada’s appeal from the decision preventing the issuance of a NOC, and the US Court of Appeal had dismissed the Apotex entities’ appeal against the preliminary injunction granted by the US District Court on 31 August 2006.

233    In an email sent by Mr Kay to Mr Steven Lydeamore concerning clopidogrel on 13 April 2007, Mr Kay stated that “Australia is first up and Barry’s instruction is to attempt to launch at risk and then invalidate”. It is not clear whether the “launch at risk” referred to in this email was one that would involve a PBS listing for a generic clopidogrel product. In any event, it is apparent that Mr Kay understood at that time that Dr Sherman was proposing to “attempt to launch at risk” in Australia before a final hearing at which the validity of the Patent would be determined.

234    On 22 June 2007, after the US District Court gave its decision of 19 June 2007 upholding the validity of Sanofi’s US Patent, Mr Millichamp sent an email to Mr Kay. Up until that point, Mr Millichamp had reported to Mr Weingarten, but Mr Millichamp commenced to report to Mr Kay directly after Mr Weingarten suffered a heart attack. Mr Millichamp’s email referred to a recent discussion he had with Mr Kay with regard to clopidogrel and it explained Apotex Australia’s recommendation that it launch a range of clopidogrel products in Australia. Mr Millichamp’s email included the following:

Our recommendation is that we should launch for the following reasons:

1)    Commercial rationale – A launch of a product like Clopidogrel personifies everything that Apotex stands for as a company.

•    Apotex/ GenRx has positioned itself as an organisation that is prepared to involve itself in litigation and fight to bring high quality and cost effective medicines to the market as soon as possible.

•    We have been first to market with Perindopril, Perindopril / Idapamide, Carvedilol and Meloxicam – We want to build on our credibility and success to date by, in this case, launching a “blockbuster” molecule.

•    We strongly believe that if we handle the communication appropriately (which we will) a launch of Clopidogrel will only serve to build our reputation, enhance our credibility and most importantly gain us significant incremental business through the acquisition of new customers. As recently as yesterday we were asked by a major customer (API) for whom we are tendering to win their business, if we will continue to bring products to market whilst challenging patents as they see that as a major reason to trade with us and support our business.

•    The financial upside from the launch of the molecule itself is considerable notwithstanding [sic] the additional sale of products in the rest of our portfolio that we will gain as our customer base expands.

•    Scenario 1 – no Authorised Generic Launch – 35% Market share – discount 50% (after 12.5% price drop) – Year 1 net margin at Management price = 20,077,236 AUD

•    Scenario 2 – Authorised Generic launch – 17% Market share – discount 60% (after 12.5% price drop) – Year 1 net margin at Management price = 9,751,800 AUD

…

235    The email included some projected sales figures for each of the two scenarios discussed.

236    It is important to note that Mr Millichamp’s email was heavily redacted for privilege. However, what the disclosed portions of Mr Millichamp’s email do not disclose is any consideration of the financial impact on Apotex Australia or Apotex Canada were the validity of one or more of the relevant claims to have been upheld. I will return to this issue shortly when considering email correspondence exchanged between Mr Millichamp and Mr Kay in late July 2008 as to how Apotex Australia should respond in the event that Gyles J found in favour of Apotex Australia and refused Sanofi final injunctive relief.

237    On 22 June 2007, Mr Kay sent an email to Mr Millichamp asking him for some additional information including “a timetable scenario of events going forward, registration date, launch, PBS listing, visibility to Sanofi etc”. Mr Millichamp sent an email to Mr Kay on 25 June 2007 providing the following additional information:

Our expected timetable of events going forward is as follows:

* Registration (ARTG) approval date - Expected towards the end of July, latest early August (Please note however that the TGA have been surprising us and approving our dossiers earlier than expected. Gabapentin 600mg and 800mg tablets are likely to be approved 3 months ahead of our expected timing).

* We propose launching to the trade, by taking orders, on the day that we appear on the ARTG i.e. have regulatory approval.

* We propose notifying Sanofi of our planned launch by applying to revoke their patent either on the same day that we launch or a few days earlier. The idea is to notify Sanofi as soon as we know for sure that we can launch, i.e. when we know that TGA approval will be granted but not give Sanofi time to try and block our initial launch efforts.

* We will submit our application for PBS listing once we are sure that no injunction will be imposed by the courts (PBS listing is granted roughly three months after initial application).We will, of course, have to get to court before we know this outcome. If we apply for PBS listing as soon as we launch we will trigger the 12.5% price drop and Sanofi will argue that pricing has been dropped and therefore their damages cannot be readily measured, will cause irreparable harm and the decision cannot be reversed etc.

When we get to court we will need to let the judge know that we plan to PBS list. In court the idea, in relation to the 12.5% drop and further launch activities, is that we will argue that damages are an adequate remedy, give undertakings that we will record all sales, and provide a bank guarantee in order to pay costs and damages in the event that we are not successful at final trial. We will have to give a bank guarantee that is effective in Australia, but supported by Apotex, as GenRx have no assets or profits at this stage in this jurisdiction to prove that we can pay out in the event of a Sanofi success.

* It is difficult to forecast the amount that we would have to put up as a bank guarantee but we estimate that it could be in the range of 50 -70 Million AUD (for one year’s damages) depending on what Sanofi argues in court.

* We would not propose continuing with launch activities i.e. takings orders and supplying stock if we do not gain PBS listing. Our sales will be very low, virtually zero without PBS reimbursement. In this case we would continue with our patent revocation case but not apply for PBS listing and so not trigger the 12.5% price reduction. We will of course be notifying our customers when we launch that this is a high risk launch and subject to legal action so that they are not misled if we are not able to deliver stock for a considerable time.

Andrew, this is what we are planning but if there is a different approach that is proposed from your side we will be happy to take that advice and recommendation.

238    There are a number of observations to make in relation to this email from Mr Millichamp to Mr Kay.

239    First, the email is consistent with other evidence which indicates that Apotex Australia had no real interest in launching and marketing its clopidogrel products unless it could obtain a PBS listing for them. I am satisfied there would have been no significant market for the Apotex Australia clopidogrel products in Australia unless they could be supplied to pharmacists at prices that were subsidised under the PBS and that there would have been no commercial benefit to Apotex Australia if it were to market its clopidogrel products in Australia in the absence of a PBS listing.

240    Secondly, in his email Mr Millichamp foreshadowed the need for Apotex Canada to facilitate the provision of a bank guarantee to secure any costs and damages that might ultimately be payable to Sanofi in the event Apotex Australia was not successful at trial. Mr Millichamp said that the amount of the bank guarantee could be in the range of A$50 to A$70 million dollars in respect of “one year’s damages”. Beyond that indication, there is nothing in Mr Millichamp’s email to show that he had undertaken any analysis of Apotex’s financial exposure if it were to launch its clopidogrel products, obtain a PBS listing for them, but later see its challenge to the validity of the Patent fail.

241    On the same day Mr Millichamp sent his email, Mr Kay sent an email to Dr Sherman which included the following:

Would you please re-confirm or otherwise our approach in Australia.

We expect TGA approval for our application July / August this year.

Upon grant we will move towards launch and initiate revocation proceeds of the enantiomer patent.

[redacted]

We shall pursue a PBS re-imbursement listing, this will trigger a 12.5% price cut for the product in the market if we are not injuncted and able to sell.

[redacted]

The cost of pursuing revocation are likely to be up to $2m. [redacted]

[redacted]

Utilising the HBr salt under development will require a new dossier and filing and a delay of some 18 months.

Do you want us to continue to launch and to invest in the revocation proceedings?

242    Mr Kay’s email to Dr Sherman of 25 June 2007 is also heavily redacted for privilege. It was followed by other email communications on that date, over which privilege was claimed by the Apotex parties, involving Mr Hughes, Mr Peter Chalk (Apotex Australia’s lawyer), Mr Millichamp, Mr Baxter, and Dr Jeremy Desai. Mr Baxter was the next most senior officer within the Apotex group after Dr Sherman.

243    On 27 June 2007, Mr Kay sent a further email to Dr Sherman (copied to, amongst others, Mr Baxter, Mr Millichamp and Dr Desai) asking him to “advise” when he had “decided whether to pursue revocation of the enantiomer patent, and if you wish us to move to launch at risk”. This is a significant communication because it reflects an understanding on the part of Mr Kay that it was necessary, or at least desirable, to obtain confirmation from Dr Sherman as to his intention with respect to Australia and whether or not Apotex Australia should seek to revoke the Patent and “launch at risk”.

244    Dr Sherman responded to Mr Kay’s email on 27 June 2007 at 4.44am at what appears to be Australian time, but privilege has been claimed over the whole of its contents. The email was addressed to (amongst others) Mr Kay and Mr Hughes. It was also copied to Mr Millichamp, Ms Keast (Apotex Australia’s Regulatory Affairs Manager), Mr Baxter and Dr Desai.

245    Dr Sherman sent a supplementary response to the same people a little under 30 minutes later at 5.12am. Apotex Australia has also claimed privilege over the whole of that communication so it is not possible to know what Dr Sherman said in that email in answer to Mr Kay’s emails to Dr Sherman of 25 and 27 June 2007. Later that morning Mr Millichamp sent an email to some of his colleagues in Apotex Australia with the subject “Clopidogrel in Australia” appending copies of the email correspondence of 22, 25 and 27 June 2007 and saying nothing more than “FYI – game on!!!”

246    The evidence also includes an email sent from Mr Millichamp to Mr Haas on 27 June 2007 at 1.59pm. Again, it has been heavily redacted for privilege but it includes the following:

[redacted]

[redacted] If we are successful in avoiding an injunction we will plan to launch subject to Barry’s further advice / approval.

If anything changes I’ll let you know.

247    Appended to Mr Millichamp’s email was a copy of Dr Sherman’s email of 27 June 2007 sent at 5.12am. It is therefore clear that Mr Millichamp had already received that email at the time of sending his email to Mr Haas.

248    Mr Millichamp’s email to Mr Haas suggests that at the time it was sent it was Mr Millichamp’s understanding that even if Apotex Australia was successful in avoiding an interlocutory injunction, the launch of a generic clopidogrel was subject to Dr Sherman’s further advice or approval. That is not consistent with the understanding that Mr Millichamp claimed to have held at this time based on Dr Sherman’s email of 20 February 2007. On the contrary, it reflects an understanding on Mr Millichamp’s part that even if the application for the interlocutory injunction was successfully resisted by Apotex Australia, Mr Millichamp would still need to consult with Dr Sherman (either directly or more likely through Mr Kay or Mr Baxter) for the purpose of obtaining Dr Sherman’s authority to proceed with a product launch.

249    Mr Millichamp was cross-examined by Mr Sheahan QC on the email to Mr Haas as follows:

MR SHEAHAN: Now, what you were indicating to Mr Hass, I suggest, was that the final decision to launch, even if you were successful in avoiding an injunction, would be a decision made by Dr Sherman at that time; correct? ––– And I think the thinking was that Dr Sherman gave the initial instructions. Andrew Kay had then clarified things with Dr Sherman. Again, we need to show him respect. If there was anything we needed to go to him with, we would. But, if there was no change on the instructions he had given, we would just move ahead.

So do you say to his Honour that what – the only possibility you’re addressing here is that after having informed Canada of your success on the interlocutory injunction, then, out of the blue, as it were, they might indicate to you that they had had a change of heart? ––– Very unlikely.

…

MR SHEAHAN: You were saying that it’s very unlikely that out of the blue Canada would – having been told of your success – just send you a message saying, “We’ve changed our mind.” You agree? ––– I agree with that.

…

And because that scenario was unlikely, what I want to suggest to you is that that is not the scenario you were addressing in this email by saying:

    We plan to launch subject to Barry’s further advice/approval

You were addressing another possibility, weren’t you? ––– It’s – in – in retrospect I – or in – in hindsight or in – I can’t actually remember what scenario I was discussing here. It’s to Steven Hass [sic]. I guess I’m just covering all angles and just saying look, subject to Barry’s further advice/approval – it’s a – it’s almost a throwaway line. But you know, there could be a scenario, I guess, where Barry could change his mind. I mean, I ..... think he would. But – it would be very unlikely.

What you were addressing here, I suggest, was your intention to confirm the instructions that you had after a successful interlocutory proceeding, to make sure that Canada still wanted to proceed at risk in Australia? ––– It’s an email to the – I already had the instructions on what to do and had already explained to my boss – this is another email to somebody in production, and I’ve just put that comment in there. I never at any stage would – I think it would be very, very unlikely indeed that Barry would ever change his mind. And it’s only to Steven Hass [sic], who actually is a personal friend of mine. And I put that – put that line in there – I didn’t think that I would have to go through another round of approval with – with – with Barry.

250    I found this evidence most unconvincing. In my view it was largely non-responsive and evasive. Mr Millichamp was not asked whether he believed that Dr Sherman was unlikely to change his mind, but he was at pains to emphasise how unlikely it was that Dr Sherman would do so (“very, very unlikely indeed”). The suggestion that Mr Haas was his personal friend, or that he was only “Stephen Haas” or “somebody in production” does not explain why the launch was said by Mr Millichamp to be subject to Dr Sherman’s “further advice / approval”.

251    I do not accept the explanation given by Mr Millichamp concerning his email to Mr Haas. In particular I do not accept that the relevant statement was a “throw away” line or that Mr Millichamp was merely seeking to “cover all angles”. Nor do I accept that it was unlikely that Dr Sherman would change his mind. On Mr Millichamp’s own evidence, Dr Sherman had already changed his mind in that the revocation/launch strategy for Australia was originally predicated on a successful outcome of the litigation in the US and Canada. In my view, the terms of Mr Millichamp’s email are more likely than not to be correct in so far as they suggest that Dr Sherman had not finally committed to a launch at risk in Australia and that it would be necessary for Mr Millichamp to obtain final approval to launch at risk in the event that no interlocutory injunction was granted.

252    On 8 August 2007, Mr Haas sent an email to Mr Millichamp, Dr Sherman and Mr Kay (amongst others) concerning clopidogrel in Australia which sought information in relation to manufacturing requirements in the event that Apotex Australia required stock of clopidogrel if it were to obtain a PBS listing of its products on 1 December 2007. Mr Kay responded by email sent the same day to (among others) Mr Haas, Mr Millichamp and Dr Sherman. The email is significant because, in my view, it indicates that Mr Kay was not expecting that Apotex Australia would be successful in its efforts to resist an application for an interlocutory injunction. Mr Kay said:

The current plan is to put Sanofi on notice of our intention to launch and so invite them to seek an interlocutory against us launching. We are assuming that this will be successful and are thus not planning to launch at this stage. I’m not sure why this information has not reached you.

253    Mr Kay would have appreciated that it would be necessary for Sanofi to give an undertaking as to damages in the event that it obtained an interlocutory injunction.

254    Several minutes after Mr Kay sent his email, Dr Sherman replied to it stating: “We should put Sanofi on notice ASAP. Who is taking care of it?” Dr Sherman’s email does not express any view as to the likelihood of Apotex Australia successfully resisting the application for an interlocutory injunction, but does not express disagreement with what Mr Kay said in his email. Mr Kay responded to Dr Sherman’s email the following day but the whole of his response has been redacted for privilege.

255    On the basis of the emails exchanged between Mr Kay and Dr Sherman on 8 August 2007, and in the absence of evidence to the contrary, I infer that neither Dr Sherman nor Mr Kay were expecting that Apotex Australia would be successful in resisting an application for an interlocutory injunction by Sanofi.

256    On 14 August 2007, Mr Millichamp signed a certificate under s 26B(1) of the Therapeutic Goods Act 1989 (Cth) (“the TG Act”) on behalf of Apotex Australia, by which Apotex Australia certified that “acting in good faith, it believes on reasonable grounds that it is not marketing, and does not propose to market, clopidogrel hydrogen sulphate in a manner or circumstance that would infringe a valid claim of a patent that has been granted in relation to the therapeutic good”. That certificate was provided to the TGA on 15 August 2007.

257    On 15 August 2007, Apotex requested the TGA to provide a statement regarding bioequivalence in respect of its clopidogrel products which it would later need to provide to the PBAC in support of its application for a PBS listing of those products.

258    On 16 August 2007, Apotex Australia commenced the patent proceeding seeking an order revoking the Patent.

259    On 17 August 2007, Apotex Australia received letters from the TGA confirming approval and registration of Apotex Australia’s clopidogrel products on the ARTG effective from 21 August 2007. On the same day Mr Millichamp wrote to Sanofi Australia notifying it that Apotex Australia had obtained an ARTG registration for its clopidogrel products, that it had applied to the Federal Court of Australia for an order revoking the Patent, and that it was preparing to launch its clopidogrel products into the Australian market in the near future.

260    On 17 August 2007, Mr Millichamp also provided a letter to the sales team at Apotex Australia suggesting that it could be circulated by them to customers which is in fact what subsequently occurred. The letter stated:

GenRx Pty Ltd obtained registration of clopidogrel 75mg (as hydrogen sulfate) tablets under the provisions of the TGA on 17th August 2007. We intend to launch this product into the Australian market in the near future, initially using the brands GenRx Clopidogrel, Chemmart Clopidogrel and Terry White Chemists Clopidogrel. However, before launching these products we need to take the actions outlined below:

°    GenRx has applied to the Federal Court of Australia for an order to revoke Sanofi-Aventis's patent covering clopidogrel and its pharmaceutically acceptable salts (Australian Patent No. 597784) and notified Sanofi-Aventis of our intention to begin marketing and selling clopidogrel 75mg (as hydrogen sulfate) tablets in Australia.

°    Sanofi-Aventis may respond to our application for revocation of its patent and signalled intention to launch by applying for an interim injunction to prevent us from launching our product into the Australian market. Of course, we would vigorously defend any such application. However, if they do this, we will not seek PBS listing for clopidogrel or take orders from pharmacists until the outcome of that application has been determined. This interim injunction application process would normally be decided in the next one or two months.

°    Assuming Sanofi-Aventis do apply for an interim injunction, then the decision whether to launch these products will be delayed until the outcome of that application has been determined (one or two months). We will continue to keep you informed of the status of the proceedings.

Regardless of the outcome of Sanofi-Aventis application for an interim injunction (should they make one), we will continue with our challenge to the validity of the clopidogrel patent before the Federal Court of Australia. We anticipate that the revocation proceedings for Australian Patent No. 597784 would be likely to proceed to trial within approximately 12-18 months.

261    Apotex Australia submitted an application to list its clopidogrel products on the PBS with effect from 1 December 2007. The application was dated 1 September 2007 but was not received by PBAC until 4 September 2007.

262    Ms Keast said in the letter enclosing the application form and related documentation:

As discussed last week, at this time GenRx Pty Ltd provides an assurance that supplies of this product will be available as per listing in the Schedule of Pharmaceutical Benefits from the date of listing on 1 December 2007, dependent on possible litigation. We will confirm supply by or before 12th October 2007 as discussed.

We would like to confirm that if we wish to defer or withdraw this application that we can do so without triggering the 12.5% price decrease providing we notify you in writing by or before the 12th October 2007. This application is lodged on the basis that this understanding is correct. If our understanding is incorrect, please inform us at your earliest convenience as this may affect whether we proceed with the application at this time.

263    Ms Keast’s letter indicates that the PBAC would permit an application for a PBS listing to be withdrawn after it had been submitted. In the case of Apotex Australia’s application for the 1 December 2007 PBS listing, this would have had to be done by 12 October 2007 (ie. approximately six weeks prior to the PBS listing date).

264    The application was withdrawn by Apotex Australia on 4 September 2007 after it was advised by PBAC that it had been received after the 1 September 2007 deadline for lodgement of applications for PBS listings on 1 December 2007. Having missed that deadline, it was not possible for Apotex Australia to obtain a PBS listing of its clopidogrel products before 1 April 2008. The deadline for filing an application for a listing on that date was 1 December 2007. I infer that it would have been open to Apotex Australia to withdraw an application filed on that date by 14 February 2008 or thereabouts.

265    On 6 September 2007, Apotex Australia provided Sanofi with an undertaking not to have its clopidogrel product listed on the PBS until the outcome of Sanofi’s application for interlocutory relief had been determined provided that any such application was commenced and determined by 11 October 2007.

266    The patent proceeding was listed for the first directions hearing before Gyles J on 13 September 2007. At that directions hearing, counsel for Apotex Australia proffered an undertaking to provide security in the sum of A$50 million for any damages and costs that might ultimately be awarded in favour of Sanofi. Gyles J raised the possibility of fixing the proceeding for a final hearing to take place within the next six months. A trial in six months was much sooner than Mr Millichamp had until this time anticipated. He had previously understood that the trial was likely to occur in somewhere between 12 and 18 months’ time.

267    Later that day Mr Millichamp reported to Mr Kay that “as it stands today, we give undertakings (attached) turn up in court next Tuesday and we will know where we stand by the end of next week. Our plan is to launch to customers (take orders) immediately, assuming that we are free to sell, and then supply product in early 2008 for an April PBS listing”. He also said “We are comfortable with the undertakings as we have essentially given them before. The key difference is of course the amount of the Bank guarantee. As you will know we have foreshadowed a sum of this magnitude in previous correspondence”. Mr Kay replied that “The undertakings look routine so do not present a problem” and “I had presaged the likely bank guarantee with Barry and Craig, and from Gord’s [ie. Mr Fahner’s] response it does not look an issue”.

268    Mr Kay questioned whether anyone else had a TGA approval or PBS listing and stated that the only concern was “a pre-emptive competitor launch … given we are 7 months from launch”. Mr Millichamp replied that no-one else had a product on the ARTG and, “[a]s a result no company, apart from us, can get a PBS listing yet”. He also stated that “[o]ur strategy will be to launch ASAP, assuming no injunction, and ensure we sell in stock and lock in customers to optimize our revenues and block any potential competition for as long as we can”.

269    On 13 September 2007, Mr Paddy Smith (Chief Financial Officer of Apotex Australia) sent an email to Mr Fahner, copying Mr Kay, Mr Adams and Mr Millichamp regarding the bank guarantee. He explained:

As the market for Clopidogrel is considerably larger than that for Carvedilol, and the introduction of the GenRx product will result in a 12.5% price reduction for the product sold by Sanofi, then the amount of damages is potentially much larger. The amount is AUD50 million. Senior Management of Apotex are aware of and have previously approved this amount (see emails below and attached).

…

Should the Court find in our favour, this will be BIG news in Australia! We would wish to start taking orders for the product quite rapidly, so we would be keen to finalise the bank guarantee in less than 28 days (we cannot take orders until we comply with all the requirements of the undertaking).

The process would be (I suggest) similar to last time: a L/C from Toronto Dominion to NAB (our bank in Australia); on the back of which the NAB would issue a bank guarantee to Sanofi. (We have to involve an Australian bank as the Court will not accept a guarantee from anything other than an Australian based bank).

The purpose of this email is to set this process in motion.

270    Mr Fahner responded that same day to Mr Smith’s email stating, “we will start the ball rolling to ensure the availability for an L/C in case it happens”. The same day, Dr Sherman sent an email to people in Apotex Canada including Dr Desai, Mr Caccamo and Mr Haas, stating “[w]e may be launching in Australia soon” and asking whether “the inventory of tablets that we have on hand for US [is] saleable in Australia. i.e. can we repackage for Australian launch?” Mr Haas informed Dr Sherman that he was looking into this and that Apotex Australia had been “unable to get listed in the PBS book for December”. He also told Dr Sherman that “[t]he formulation submitted to Australia is identical to that of the USA”, and that approved shelf life was two years. Dr Sherman responded, asking “When were the tablets made? What is expiry dating? I expect that the tablets are in fact good for years. What is required to extend expiry dating for Australia to 3 years?” Mr Haas provided a response that appears to suggest that the US product would have had an expiry date of 29 August 2008 which (I infer) would not be sufficient for retail sale in Australia after 1 April 2008. On 17 September 2007, Ms Keast advised Rekha Panchal, who was part of the regulatory affairs team of Apotex Canada, of the stability data that would be required to support a three year expiry date.

271    On 14 September 2007, Mr Smith sent an email to Mr Corkery of National Australia Bank (“NAB”) referring to a meeting that Mr Smith had with NAB that afternoon to discuss the arrangements relating to the bank guarantee. Also on 14 September 2007, Ms Peterson emailed Mr Haas attaching the artwork for clopidogrel packaging.

272    On 17 September 2007, Sanofi filed its defence and cross-claim against Apotex Australia alleging infringement of the Patent. The cross-claim included the claim for interlocutory injunctive relief. On 18 September 2007, Gyles J heard the application for the interlocutory injunction. At the hearing, Apotex offered security of A$50 million, to be increased as appropriate “as the proceeding progresses”. Apotex also offered to maintain comprehensive accounting records of all clopidogrel products sold. During the course of the hearing, Mr Catterns QC was explicit and direct in stating that Apotex would apply for listing as at 1 April 2008 if there was no interlocutory injunction.

273    Following the hearing, Mr Millichamp reported to Dr Desai that Apotex Australia would learn the outcome of the interlocutory hearing in a few days and that:

…

Even if we get an injunction imposed I am very confident that we will win at final trail [sic]. In that case we will obviously seek damages (a large amount).

We are of course hoping that we get some great news on Friday that we are free to sell. We certainly did everything we possibly could do to prove that damages would be an adequate remedy.

Fingers crossed!!!!

274    On 19 September 2007, Mr Smith sent Mr Fahner an email informing him that Apotex Australia would know within about 24 hours whether it would need to provide a bank guarantee in the amount of A$50 million. Mr Smith said:

We will have 28 days to put this into place (if required), but as previously advised, we would like to complete this asap, as we cannot begin to take orders until we have the guarantee in place. And as this would be a major event in the Australian generic market, to be able to get maximum positive impact of the ruling (if in our favour), it is important that we begin taking orders as soon as possible.

275    On 21 September 2007, Gyles J delivered oral reasons as to why an interlocutory injunction restraining infringement of the Patent should be granted. His Honour published his revised written reasons on 25 September 2007. I have previously set out the terms of the interlocutory injunction granted by his Honour, the undertaking as to damages given by Sanofi in relation to that interlocutory injunction, and the undertaking given to the Court by Apotex Australia that was not supported by an undertaking as to damages from Sanofi.

276    In cross-examination Mr Millichamp’s evidence was that he had received from Dr Sherman by the email of 20 February 2007 instructions to get Apotex’s clopidogrel products on the market as soon as practical and proceed to launch at risk. He also said that he understood that he needed to take whatever action was appropriate to launch the product at risk. In particular, Mr Millichamp said:

I had instructions to try and launch at risk at the interlocutory stage in 2007. So that’s why we had the interlocutory fight [sic], because we were trying to get on the market as soon as we practically could and launch at risk. And at that period in time, I had instructions to do that, and I was implementing the plan of action to do that.

277    Mr Millichamp’s evidence was that it was not necessary for him to seek any further instructions from Dr Sherman before launching at risk, and that the instructions contained in the 20 February 2007 email were all that he required by way of authority or approval from Dr Sherman for Apotex Australia to launch its clopidogrel products at risk in Australia.

278    There were two related developments in September 2007 which could have led Dr Sherman to conclude that it might be preferable not to launch at risk even if Gyles J was to have refused the interlocutory injunction.

279    The first of these occurred in early September when Apotex Australia became aware that its application to list its clopidogrel products on the PBS on 1 December 2007 had been filed too late for that to occur, and that the earliest possible date for a PBS listing was 1 April 2008. Mr Millichamp advised Mr Kay of this fact in an email sent on 4 September 2007. The email, which was not copied to Dr Sherman, states:

We have had a conversation with the Pricing and PBS listing Department of Health and Ageing.

The new guidelines on the 12.5% price drop and timings for PBS listing have resulted in us being unable to get listed in the PBS book for December.

In the event that we are successful in defending against an application for interlocutory relief from Sanofi the earliest time that we can get PBS reimbursement is now April 2008. In this case we will require stock in Australia towards the end of February / Start March 2008 assuming that we are able to launch.

We please request that the supply team remain on standby to supply us if we are successful in the initial stages of our litigation. The timing has just moved back three months later than originally communicated.

280    This information appears to have been conveyed to Dr Sherman by email from Mr Haas on 14 September 2007.

281    The second development occurred on 21 September 2007 when Gyles J published his reasons for refusing the interlocutory injunction. At the directions hearing on 13 September 2007 his Honour had said that he thought that there should be an early final hearing of the proceeding, but it was only after his Honour indicated he would grant the interlocutory injunction that he confirmed when the final hearing would take place. On 21 September 2007 his Honour informed the parties that the proceeding would be fixed for final hearing before himself commencing on 28 April 2008 (ie. in approximately six months’ time).

282    Since the application for the relevant PBS listing did not need to be filed before 1 December 2007 to obtain a listing on 1 April 2008, there was no reason why Apotex Australia had to make any final decision in relation to PBS listing before 1 December 2007. Even then, it still would have been possible for Apotex Australia to withdraw any such application at any time up to 14 February 2008 or thereabouts.

283    It was put to Mr Millichamp in cross-examination that there was no particular urgency about making a final decision to launch at risk. He gave the following evidence:

MR SHEAHAN: Having regard to that time gap, there was plenty of opportunity for a further decision to be made about whether or not to launch at risk? ––– A decision had already been made to launch at risk. That’s why we were having an interlocutory fight [sic].

…

To put it slightly differently, on the assumption that Dr Sherman had given you clear instructions, there was plenty of time for him to change his mind in that period, if he saw a reason to do so; correct? ––– Well, I don’t see why he would change his mind, bearing in mind he said if an injunction wasn’t granted we would launch.

HIS HONOUR: That’s not what you’ve been asked? ––– But was the – I guess the question was, was there time for him to change his mind. Is that the question? After the – after an interlocutory hearing, whichever way it would be, was there time for Dr Sherman to make – to change his mind. Is that – is that the question?

MR SHEAHAN: Yes? ––– He could change his mind.

Mr Millichamp, you’re the businessman, not me, but I had – would you agree that it is common sense with decisions that are, potentially, critical to the future of a business, that you would make them at the latest possible point in time, so that you could make them with the benefit of the most up-to-date information? ––– That’s a very good question, by the way. I’m just thinking how to – how I would answer that properly, or appropriately. Key strategic decisions, as to whether or not to launch a product, whether to litigate, whether to invest huge amounts of capital expenditure, etcetera, etcetera, are made relatively earlier on, if I can characterise it in that way. And as litigation moves along, or as capital projects move along, or as other business decisions, IT implementations move along, etcetera, there are variations to the decision, or to – to – variations to the activities and the actions that take place after the key strategic decision is made. I think that’s probably the best way I can characterise it. So make a key decision and then tactical changes will be made, as part of the process, as – as matters change.

HIS HONOUR: Could – I mean, one matter that would have borne on your thinking, perhaps – and I’m asking – is at what time there was going to be a final hearing of your case? ––– Your Honour, absolutely. We – we were trying to get a – a final hearing as early as possible.

And what if the judge had said, “I can give you a final hearing in December”, for example? ––– After the interlocutory in September?

Yes? ––– We would be delighted with that, because we wanted to have a hearing as practically possible [sic].

But would that – my question is, would that not bear on the question of whether or not you would launch? ––– Sorry - - -

At risk. At risk? ––– Is that – that’s assuming, your Honour, that we – no - - -

There was no injunction? ––– Well, we – we would – we would, almost certainly, still absolutely launch – launch at risk. It’s actually, probably, better for us, because if there’s going to be – if decisions were finally going to be against us, we would know earlier rather than later what the outcome was.

…

So another consideration might be the amount of security that the judge ordered that you provide in the event that there was no injunction granted? ––– That – yes. The amount of – that would be a consideration. And, as your Honour will have seen, we – we proffered $50 million. That is a consideration.

The amount, though? ––– Yes. The amount is a consideration. I mean, we – we – we thought 50 million would be sufficient as an initial sum. And I can’t remember the terms, but with liberty to increase that as time goes by.

All right? ––– But it is part of the decision-making process. Yes.

284    Mr Millichamp’s evidence based on the hypothetical proposition that there could be a final hearing in December 2007 to the effect that “… we would almost certainly … launch at risk” seems to me to assume that this would be Dr Sherman’s instruction to him in such circumstances. It does not explain why Dr Sherman would have wished to launch at risk before the final hearing in the event that it was scheduled to occur in the very near future, and in the same month as the next available PBS listing date. The risks of doing so were substantial if Apotex Australia were to launch at risk in such circumstances given the possibility that, in the event that it failed to persuade the trial judge that the Patent was invalid, it could find itself having to cease any further sales following the grant of a final injunction shortly after obtaining a PBS listing that triggered a price reduction that might not be reversed or, at least, might not be reversed for some significant period of time.

285    It is important to recall that it was the PBS listing that was likely to give rise to what would have been perceived by Apotex Australia at the time to be a substantial exposure for damages which Sanofi may later seek to recover from Apotex Australia if it was successful at the final hearing.

286    In the absence of evidence from Dr Sherman, I am not persuaded that he would have authorised a launch at risk in circumstances where an interlocutory injunction had been refused, but a final hearing was fixed to commence on 28 April 2008. The advice previously communicated by Mr Millichamp in his letter of 17 August 2007 was that a trial was to take place within approximately 12 to 18 months. In the absence of evidence to the contrary I infer that Apotex Canada was also acting on this understanding until no earlier than 13 September 2007.

287    The evidence is, in my view, consistent with Dr Sherman having deferred any final decision as to whether to launch at risk until after the outcome of the interlocutory application was known. The fact that he may not have expected Apotex Australia to be successful in its opposition to the interlocutory injunction suggests that he did not consider it necessary to make any final decision until such time as there was a decision in Apotex Australia’s favour.

288    In its written communications with pharmacists, Apotex Australia had not committed itself to launching in the event no interlocutory injunction was granted. But by publicly resisting the interlocutory application Apotex Australia would be signalling to the market its intention to aggressively contest the validity of the Patent. There was therefore some advantage to be gained in resisting the interlocutory application even if Dr Sherman was later to decide, based on an up to date risk/reward analysis, that it would be undesirable for Apotex Australia to launch at risk.

289    It is not possible to know how Dr Sherman would have reacted to news that the proceeding had been fixed for hearing on 28 April 2008 in the hypothetical situation in which no interlocutory injunction had been granted. He may well have wanted to know how long the final hearing would take and how long it may take for Gyles J to deliver his judgment. Had Dr Sherman asked, he would most likely have been told that his Honour would cease to hold his judicial office from 22 August 2008 (unless he retired sooner) and that he would need to deliver judgment before then.

290    I do not think there is any doubt that Mr Millichamp was eager to launch at risk. He believed that if Apotex Australia could get its clopidogrel product on the market in early 2008 followed by a PBS listing on 1 April 2008 then it would lead to a substantial increase in sales. However, his evidence shows that he was heavily focused on the positive consequences of getting to market quickly, but much less focused on the negative consequences of doing so, and the potential financial consequences should the challenge to the validity of the Patent fail.

291    The evidence provides no information as to the legal advice that informed any assessment of the strength of the case for invalidity or the extent of Apotex Australia’s exposure in the event that the challenge to the validity of the Patent failed. Statements in Mr Millichamp’s oral evidence to the effect that “we always believed that all of the claims of the patent were invalid” are not persuasive in circumstances where any legal advice upon which such a belief was based is not in evidence particularly in circumstances where the validity of the US Patent had already been upheld by the US District Court in a decision that was later affirmed on appeal.

292    The risk/reward calculations that were later performed in July 2008 are revealing because they show what Apotex Australia perceived its financial exposure to Sanofi could be if it successfully resisted Sanofi’s application for an interlocutory injunction and then proceeded to launch its clopidogrel products in Australia with the benefit of PBS listing from 1 April 2008.

293    In late July 2008, several weeks before the final judgment was handed down by Gyles J, Mr Millichamp sought instructions from Mr Kay as to how Apotex Australia should respond to a favourable decision from Gyles J holding the Patent invalid. Mr Millichamp sent an email to Mr Kay seeking instructions from “Apotex HQ” on how to proceed in that event:

If we are successful we need to make a decision on whether or not to launch at risk of the Full Court reversing the judgment on appeal. It is inevitable that Sanofi will try and appeal the judgment if they lose.

Our preferred position here is of course to launch, i.e. start to take orders immediately on the day judgment is handed down, if we win our case.

Our potential exposure to damages will be in the range of 166 M AUD if Sanofi were to prevail on the Full Court appeal. Please see the attached spreadsheet which indicates the summary calculations we have used to estimate the damage we may have to pay if we lost on appeal.

As we will only have a maximum of one to two days notice before we know the date of the judgment we need to be clear of Apotex HQ position now so that we can plan a potential launch strategy and secure a major commercial advantage if we win.

Could you please let us know if Apotex HQ is comfortable for us to launch at risk of Full Court reversal on Sanofi appeal knowing the potential risk of damages should Sanofi prevail.

294    The spreadsheet attached to Mr Millichamp’s email contained the assumptions and calculations which produced the A$166 million damages exposure. The elements of the “downside” analysis included:

    the effect of the 12.5% statutory price reduction that would result from the listing of a first generic clopidogrel product (calculated to the end of the patent term in February 2013);

    a period of lost sales to Sanofi over 18 months (the time it was assumed the appeal process would take);

    a market share assumption for Apotex Australia of 17.5%; and

    a profit margin assumption for Sanofi of 90%.

295    The spreadsheet also included an “upside” analysis of the profits that Apotex Australia forecast it would make if it were in the market selling clopidogrel for a three year period.

296    The calculations showed that Apotex Australia’s A$166 million exposure to Sanofi would be more than fivefold greater than the profits that Apotex Australia was expecting to make on the sale of its clopidogrel products if it were to have launched them immediately following a successful outcome before Gyles J.

297    Mr Millichamp’s email indicates that it was Apotex Australia’s preferred position to launch if it was to win the case. However, as the evidence makes clear, whether or not to launch in those circumstances was not his decision to make. Mr Smith sent an email to colleagues on 4 August 2008 which was copied to Mr Millichamp in which he said:

If the Court finds in our favour, then it is likely we will launch but it is not an automatic decision. In this situation, the innovator (Sanofi) would inevitably appeal - and that may require Apotex to give guarantees against possible damages should we lose the appeal. The numbers are very large and this will not be a decision made in Australia!

298    It is clear that the general understanding within Apotex Australia was that Sanofi would appeal against any judgment given in favour of Apotex Australia and that any decision to launch Apotex’s clopidogrel products in Australia prior to the determination of the appeal would have to be made by Apotex Canada.

299    Mr Kay’s initial reaction to Mr Millichamp’s request for instructions appears in Mr Kay’s 28 July 2008 email to Mr Baxter. Even on the assumption that Gyles J would find in Apotex Australia’s favour, Mr Kay’s view was that “we need to see the judgement first” and that “if we chose to launch the potential exposure if Sanofi win at appeal exceeds $150m”.

300    Mr Baxter responded to Mr Kay’s email later that day by asking:

How are damages assessed in Australia? Is it our profits, or their losses? Would there be any punitive damages?

Mr Baxter would have appreciated that Sanofi’s losses would prove to be far greater than Apotex’s profits if damages ever had to be assessed in Australia.

301    Mr Baxter’s response was sent by Mr Kay to Mr Millichamp with a request for an answer to Mr Baxter’s questions. Almost the whole of Mr Millichamp’s response to Mr Kay’s request is redacted for privilege. However, it can be inferred that Mr Millichamp obtained legal advice which he then conveyed to Mr Kay. While it is not appropriate to speculate about the content of the legal advice that was provided, it would have been readily apparent to any competent legal advisor at this time that Apotex Australia would have a substantial exposure to Sanofi for compensatory (but not punitive) damages for patent infringement calculated by reference to Sanofi’s loss of profits. As I have explained, this is different from the position that existed in the US when the Apotex entities launched their clopidogrel products on the US market on 8 August 2006 and the terms of the amended settlement agreement applied.

302    On 6 August 2008 Mr Kay sent an email to Mr Millichamp in which he said:

I wonder if the best outcome would be that we win at first instance, [Sanofi] appeal and the injunction remains in place pending appeal. That way, we don’t expose ourselves to potentially ruinous damages, but would collect damages off [Sanofi] for the further period of being off the market in the event the SA appeal fails.

303    That email was sent at a time when Mr Kay had received both Mr Millichamp’s risk/reward calculations and Mr Millichamp’s answers to Mr Baxter’s questions. It is not clear to what extent he had by this point discussed the matter with Mr Baxter although it is clear that at that time Mr Baxter was yet to respond to Mr Millichamp’s response to Mr Baxter’s questions.

304    On 10 August 2008 Mr Millichamp sent an email to Mr Baxter and Mr Kay advising that the judgment was to be handed down on 12 August 2008. A part of the email has been redacted for privilege. However, Mr Millichamp clearly understood that there was a possibility that Apotex Australia may be successful. This gave rise to what he referred to as the “Million’s [sic] of Dollar” question:

The “Million’s of Dollar” question of course is how big is the risk of us losing on appeal? If we are successful tomorrow we will try and reach a view on this although it is likely to be very difficult indeed to predict an outcome with any degree of surety.

305    It is apparent that what Mr Millichamp proposed was that Apotex Australia would take time to consider any judgment given in its favour with a view to forming a view as to the likely outcome of any appeal by Sanofi. Mr Millichamp recognised that it would be difficult to come to any firm view as to the likely outcome of any such appeal.

306    Mr Kay sent another email to Mr Millichamp on 12 August 2008 which he copied to Mr Baxter. As previously mentioned, Gyles J published his reasons for decision on 12 August 2008. Mr Kay’s email to Mr Millichamp and Mr Baxter was sent on the day (but before) judgment was delivered. Mr Kay said:

As discussed last week my view is that in the event of our success and should [Sanofi] decide to appeal we should in some way allow the injunction to continue, and seek damages should any appeal fail to go [Sanofi’s] way.

307    There are two short points to make about Mr Kay’s email.

308    First, it is apparent that what may have been a quite tentative view held by Mr Kay on 6 August 2008 had developed into a firm view by 12 August 2008 that Apotex Australia should not launch until Sanofi’s appeal had been decided.

309    Secondly, Mr Kay’s remarks suggest that he saw a benefit in obtaining an undertaking as to damages against which a claim might later be made despite his view that the risk that Apotex Australia may have to pay very substantial damages weighed against launching clopidogrel in Australia while any appeal by Sanofi remained unresolved. This appears to me to reveal an intention to use the undertaking as to damages as a means of having Sanofi underwrite the decision not to launch.

310    A similar risk/reward analysis to that undertaken in July 2008 was undertaken by Apotex Australia following the Full Court’s decision at the end of September 2009 finding in favour of Apotex Australia.

311    Adopting some different assumptions (a 40% Apotex Australia market share, a period of lost sales to Sanofi exceeding four years, and updated market size and pricing information), the figures showed a potential exposure to Sanofi of more than $650 million. In that analysis the Sanofi damages figure was more than sevenfold greater than the Apotex Australia profit figure.

312    The Commonwealth submitted that Apotex Australia had in June 2007 estimated that one year worth of potential damages to Sanofi would be in the range of A$50 million to A$70 million. These figures appear in Mr Millichamp’s email to Mr Kay of 25 June 2007 in which Mr Millichamp provided an estimate of the amount of the bank guarantee that may need to be established.

313    The bank guarantee estimate was expressed to relate to damages in respect of a period of one year and not Apotex Australia’s total exposure in respect of any loss that Sanofi may have suffered beyond that period. The risk/reward analysis prepared in July 2008 specified a figure of just over $52 million as a loss that would be suffered in the first year following launch of Apotex Australia’s clopidogrel products based on an initial 12.5% price reduction and a 17.5% loss of market share. That figure, which is at the lower end of the June 2007 estimate, did not take into account price reductions triggered in subsequent years by the PBS listing of the Apotex Australia clopidogrel products or any profits that would be lost by Sanofi in the second or subsequent years.

314    Sanofi’s loss was likely to have exceeded the $52 million estimate by a substantial margin if Apotex Australia was to have obtained PBS listing on 1 April 2008 and it was not finally established until 2009 or 2010 (following any appeals) that the Patent was valid. Much of that loss would have been referable to the 12.5% statutory price reduction. Needless to say, whether or not Apotex would be legally liable for that loss was at that time (and is perhaps still) open to debate, but it is apparent that Apotex Australia was proceeding on the basis that it could be liable for the financial impact on Sanofi of the 12.5% price reduction should it be held that the Patent was valid and infringed.

315    In cross-examination Mr Millichamp was questioned as to what he had told Apotex Canada about Apotex Australia’s potential exposure to Sanofi for damages in the event that it launched at risk and was ultimately unsuccessful in the patent proceeding. In particular, when asked whether he had informed Apotex Canada that the potential exposure could be between $100 million to $200 million, he said he could not recall whether he mentioned those figures but said that “… certainly they were aware there was a huge exposure, or a very substantial exposure”.

316    During the course of his cross-examination Mr Millichamp said that “… the Apotex position is that we always try and push the boundaries, we always try and get on the market at the earliest time possible for our commercial advantage and we always believed that all of the claims of the patent were invalid …”. The views he expressed in July 2008 predicated on the assumption that Apotex Australia would succeed before Gyles J at trial appear to be inconsistent with that claim. This point was taken up with Mr Millichamp in cross-examination as follows:

MR SHEAHAN: Mr Millichamp, you said to his Honour that Apotex always tries to get on the market as soon as possible – correct – that’s what you just said? ––– Yes.

Right. You didn’t do that after the decision of the Full Court, did you?--- ..... the Full Court being?

The Full Court of the Federal Court in the proceedings - - -? ––– The year - - -

- - - concerning - - -? ––– Sorry. The year - - -

- - - 2009 – the end of 2009? ––– No, we didn’t do it on then – then, but – so, I should rephrase that. Can I rephrase the point to - - -

HIS HONOUR: Yes. Go on? ––– Your Honour, can I rephrase the point? Your Honour, when we look at the patent – and I apologise for, perhaps, misleading you and not being clear in my response to you. When we look at the patent landscape and the opportunity to launch a product at risk and challenge a patent in Australia, clearly we’ve done the work up-front and looked at our probabilities of success, based on either non-infringement or invalidity and our negotiating position with the other party. And on that basis, we will make the decision to challenge, to try and get on the market as soon as we practically can. And your Honour may be aware that in 2006, we got in the market with perindopril erbumine at risk pending initial trial. We also got on the market with Carvedilol pending a trial. And our intention was to get on the market as early as possible with clopidogrel. Now, we ended up having an interlocutory injunction, as was just covered, and being kept off the market, but for the injunction, we would have tried to launch, just like we did with Carvedilol, just like we did with perindopril, and, in the past, we also tried with alendronate, but was the subject of an injunction as well. So when I mentioned to your Honour we always try and launch on the market as soon as practically possible, I was referring to the early stages of the litigation. Now, over a period of time, depending on the interlocutory injunction, the decision that’s handed down then, the first instance judgment and the reasons that are handed down then and any appeal and any subsequent – or special leave application to the High Court, the scenario and the risk profile will change over time, but at the outset, when we decide to launch at risk or challenge a patent the idea is to get on the market as early as practicably possible.

317    I did not find this evidence persuasive. The evidence does not suggest that the business case for Apotex Australia launching its clopidogrel products in August or September 2008 followed by PBS listing from 1 December 2008 would have been significantly less attractive to Apotex Australia than a launch at risk in February or March 2008 followed by a PBS listing from 1 April 2008. In his email to Mr Kay, Mr Millichamp had referred to the opportunity to get the Apotex clopidogrel product to market following a successful outcome before Gyles J as “a major commercial advantage if we win” and indicated that a product launch immediately after judgment in Apotex’s favour was Apotex Australia’s preferred position.

318    One matter of concern is Mr Millichamp’s statement that “… in 2006, we got in the market with perindopril erbumine at risk pending initial trial”. It is clear that Mr Millichamp was seeking to compare Apotex’s launch of that compound, at risk, and the proposed launch of clopidogrel at risk. However, there are two basic differences between perindopril erbumine and clopidogrel in this context; first, the compound patent for perindopril erbumine had already expired by the time Apotex launched its own product in November 2006; second, the relevant pharmaceutical item had already been the subject of a 12.5% administrative price reduction on 1 August 2006, three months prior to the listing of Apotex’s perindopril erbumine product on 1 December 2006.

319    It is true that there was litigation in 2006 brought against Apotex Australia that related to perindopril erbumine. However, this litigation was based on an allegation that Apotex Australia had engaged in misleading and deceptive conduct (not patent infringement) and was dismissed by Heerey J with no order as to costs on 30 November 2006: see Servier Laboratories (Australia) Pty Ltd v GenRx Pty Ltd [2006] FCA 1763. There was a further proceeding commenced in February 2007 in which it was alleged by Les Laboratories Servier (“Servier”) that Apotex Australia had infringed Australian Patent No 606992 by manufacturing and supplying Apotex’s perindopril erbumine products. What became of that proceeding is not apparent from the evidence. There was another proceeding brought by Apotex Australia against Servier related to two different patents. What connection they had with perindopril erbumine is also not apparent from the evidence. In any event, what is clear is that by the time Apotex Australia’s perindopril erbumine products were listed on the PBS, the price of the innovator’s products had already been reduced by 12.5%.

320    So far as Mr Millichamp’s reference to carvedilol is concerned, the listing of Apotex’s generic products on the PBS did not result in a 12.5% price reduction of the innovator’s products. An application for an interlocutory injunction brought by the innovator against Apotex Australia was refused. The Judge hearing the application (Emmett J) was satisfied that the launch of the Apotex product was “less than likely” to result in a 12.5% price reduction: see Roche Therapeutics Inc v GenRx Pty Ltd (2007) 71 IPR 546 at [100]. There is no evidence to suggest that the listing of the Apotex products resulted in any such price reduction.

321    The Commonwealth submitted that it was not appropriate to use the July 2008 and September 2009 analyses for the purposes of drawing inferences as to whether or not Apotex Australia would have listed on the PBS from 1 April 2008 but for the interlocutory injunction. In essence, it submitted that the circumstances existing at those later dates were different from those that it faced in August 2007.

322    I accept that the July 2008 and September 2009 risk/reward analyses addressed different circumstances from those that existed in August 2007. Nevertheless, those analyses and Apotex Canada’s ultimate response to them tends to contradict the assertion made in Mr Millichamp’s oral evidence that Apotex tries to get on the market as soon as possible.

323    An important matter when assessing the veracity of Mr Millichamp’s evidence on this topic is that the discussion that occurred in July 2008 concerning risk/reward were predicated on the assumption that Apotex Australia would be successful at the trial. Mr Kay’s view that it might be better if the injunction remained in place (presumably through the operation of a stay of the trial judge’s final orders) reflects a decidedly timid approach and one that is not consistent with the bullish corporate philosophy espoused by Mr Millichamp in his evidence.

324    Another important matter when assessing the veracity of Mr Millichamp’s evidence on this topic is that the profit forecasts forwarded to Mr Kay by Mr Millichamp in his email of 22 June 2007 incorporated two scenarios that essentially mirrored the first two of the three scenarios included in the July 2008 analysis. The first of these scenarios assumed that there would be no authorised generic, that there would be a 12.5% price drop on PBS listing, and that Apotex Australia would take a 35% market share. The second assumed that there would be one authorised generic, a 12.5% price drop on PBS listing and that Apotex would take a 17% market share. The additional (third) scenario included in the July 2008 analysis assumed two authorised generics, a 12.5% price drop and an 8.5% market share to Apotex Australia. The forecast profit in the additional scenario was slightly over half of that for the second scenario, but was still substantial. However, in all three scenarios the potential exposure arising out of a claim for damages by Sanofi greatly exceeded the forecast profit.

325    According to his affidavit evidence, Mr Millichamp considered that it was highly unlikely that either Sanofi or BMS would have sought to launch an autogeneric clopidogrel product until after the patent proceeding had been finally determined and any rights of appeal by Sanofi against an unsuccessful outcome had been exhausted. Admittedly, that was merely Mr Millichamp’s perception of how Sanofi and BMS would have responded to the launch by Apotex Australia of a generic clopidogrel product prior to the final determination of the proceeding before Gyles J and any appeal against findings of invalidity. In any event, that appears to have been his view at all the relevant times and was later put forward in his affidavit evidence as his expert view based on his experience in the industry. As he said in his affidavit with reference to the period 2008 and 2009:

In my experience, it is very unlikely that [S]anofi and BMS Australia would have taken any steps during that time, that is, while the litigation remained on foot, to jeopardise the Australian market for PLAVIX and ISCOVER, for example, by discounting prices to any significant degree, which would have resulted in a larger reduction in the AP2P as a result of price disclosure (assuming sanofi voluntarily chose to disclose its prices) or by launching other competing generic products which would have triggered the 12.5% price drop in the AP2P for clopidogrel (if they had been PBS listed before Apotex's products) and also been subject to mandatory price disclosure. These actions would have had long term impacts on the market, in the sense that they would have either triggered the 12.5% drop in the AP2P, or at least potentially affected it via the price disclosure calculations, and these price changes could not have been reversed even if [S]anofi had ultimately been successful in removing the Listed Apotex Clopidogrel Products from the market and withdrawn its own generic product from the market. In addition, launching a competing generic product is something that in my opinion, based on my experience, an originator will only do after careful consideration because their new generic brand will devalue the market for the originator brand, not just through its potential impact on the AP2P, as I have described above, but because the originator needs to discount their own generic product to differentiate it from the originator brand. This causes a shift in sales away from the originator brand and therefore a loss of value and market share to the originator brand.

326    It is not necessary for present purposes to determine whether Sanofi and BMS would have responded to the launch of generic clopidogrel products by Apotex Australia in the way that Mr Millichamp expected. What is significant is that the second and third scenarios described in the 2007 and 2008 analyses were considered to be unlikely because it was expected that Apotex Australia would not face any competition from autogeneric clopidogrel products for so long as the patent proceeding (including any appeal) remained on foot. I do not think that there is any doubt that Mr Millichamp would have understood this to allow Apotex Australia a significant period of time during which to capture market share in the absence of any competition from an autogeneric product.

327    Mr Millichamp made an affidavit on 14 August 2008 by which time he would have read Mr Kay’s email of 12 August 2008 and Gyles J’s reasons for judgment of 12 August 2008. This affidavit, at least on its face, was prepared for the purpose of providing evidence in support of an application by Apotex Australia for a stay of the final injunction restraining Apotex Australia from infringing claim 3 of the Patent which Gyles J had by this time already held to be valid. I say on its face because I do not consider this was the outcome that Apotex Australia was actually seeking or working towards at the time Mr Millichamp made the affidavit. The affidavit was most likely prepared for the purpose of extracting additional undertakings from Sanofi that would provide Apotex Australia with the opportunity to make a claim for compensation in relation to losses that it could later claim it had suffered by reason of the final injunction that Gyles J subsequently granted in the event that it was set aside on appeal.

328    While Mr Millichamp’s affidavit includes a statement suggesting that the commercial advantage available to Apotex Australia may have already been eroded significantly, it clearly conveys the impression (without stating in so many words) that Apotex Australia desired to launch its clopidogrel as soon as possible and that it wanted the final injunction stayed pending the determination of an appeal to enable it to do so. And yet, evidence to which I have previously referred shows that Mr Millichamp’s immediate superior, Mr Kay, would have strongly preferred to see the permanent injunction continue until such time as any appeal from Gyles J’s judgment had been determined. Mr Kay’s view no doubt reflected his assessment of Apotex Australia’s financial exposure in the event that there was a launch of the Apotex clopidogrel products before any appeal from Gyles J’s judgment had been determined.

329    There is nothing in Mr Kay’s communications with Mr Millichamp to suggest that Mr Kay believed that the value of the commercial opportunity available to Apotex had diminished significantly since September 2007 or that there had been some fundamental shift in any risk/reward calculus which would have justified Apotex Australia launching at risk in early 2008 (with a PBS listing on 1 April) but not late 2008 (with a PBS listing on 1 December).

330    In his affidavit of 14 August 2008 Mr Millichamp explains what the consequences for Apotex Australia would be in the event that a final injunction was not stayed. He referred to the possibility of other generic clopidogrel products entering the market with different salts of clopidogrel not covered by claim 3 with the result that Apotex Australia would lose what Mr Millichamp referred to as its first mover market advantage. However, as at that date, no other generic supplier (including Spirit) had obtained ARTG registration for any clopidogrel product. The deadline for applying for a PBS listing on 1 December 2008 was 1 September 2008. In the circumstances, it is difficult to see how Apotex Australia’s opportunity to secure the first mover advantage was significantly diminished and I do not think it was. It should also be recalled that according to Mr Millichamp’s July 2008 email to Mr Kay, Apotex Australia’s preferred position was to launch.

331    Mr Sheahan QC submitted that Mr Millichamp was an unreliable witness who had deliberately sought to mislead the Court. Central to this submission were various affidavits made by Mr Millichamp which were said by Mr Sheahan QC to have conveyed the impression that the decision to launch at risk in Australia was one for Mr Millichamp to make. As Mr Sheahan QC correctly observed, it was only in Mr Millichamp’s affidavit of 7 July 2017 (which was the seventh affidavit made by him in the proceeding) that he made any reference to Dr Sherman. It was submitted that the failure to make any mention of Dr Sherman in any of the earlier affidavits made by Mr Millichamp was part of a deliberate attempt by him to conceal the identity of the principal decision-maker who would ultimately decide whether Apotex Australia would launch its clopidogrel products at risk.

332    In considering this submission it is important to examine some of Mr Millichamp’s early affidavits in context. The first two were made prior to the interlocutory hearing before Gyles J at a time when Sanofi and its witnesses were positively asserting that Apotex Australia would launch its clopidogrel products at risk in the event that no interlocutory injunction was granted. I would not read anything into Mr Millichamp’s failure to make any mention of Dr Sherman in his first two affidavits in those circumstances.

333    Mr Millichamp’s third affidavit was originally made in support of Apotex Australia’s opposition to Spirit’s application to have its proceeding heard with Apotex Australia’s proceeding. It did not provide an occasion for Mr Millichamp to make any reference to Dr Sherman’s role as the principal decision-maker within the Apotex group of companies.

334    The fourth affidavit was that made on 14 August 2008 explaining why there should be a stay of any permanent injunction granted by Gyles J. Once again, I do not see that affidavit as one in which Mr Millichamp should reasonably have been expected to say anything about Dr Sherman’s decision-making role within the Apotex group. Although there are criticisms that might be made in relation to that affidavit, not mentioning Dr Sherman’s role in the Apotex group is not one of them.

335    However, the position in relation to Mr Millichamp’s fifth affidavit is somewhat different. It was an affidavit made on 9 April 2011 that was specifically prepared in support of the claims made on the various undertakings as to damages, not only by Apotex Australia, but also Apotex Canada and ARPL. Nothing is said in that affidavit about Dr Sherman’s decision-making role in the Apotex group. In this affidavit, Mr Millichamp stated that it was his intention in August, and the early part of September 2007, that Apotex would obtain PBS listing of Apotex’s clopidogrel products with effect from the earliest possible date and that he would have begun marketing and selling those products as soon as Apotex Australia was sure that PBS listing would be obtained. He also stated that if the interlocutory injunction had not been granted, and Apotex Australia had been able to launch its products in preparation for PBS listing on 1 April 2008, he would have instructed his sales team to begin marketing and pre-selling those products from on or around 1 January 2008.

336    Mr Millichamp’s sixth affidavit was an affidavit made on 30 April 2013 which, for the most part, replied to affidavits filed by Sanofi’s witnesses. This affidavit did not refer to Dr Sherman’s decision-making role in the Apotex group although, given its general subject matter, I do not think there was any reason why it should have done so.

337    The seventh affidavit filed by Mr Millichamp was made on 7 July 2017. It is the first affidavit in which Mr Millichamp provides any information as to Dr Sherman and his decision-making role and the fact that there could be no launch at risk in Australia without his approval.

338    The submission that Mr Millichamp deliberately sought to mislead the Court in relation to Dr Sherman’s decision-maker role is not a submission I would accept unless it was clearly supported by the evidence. I do not think it is. However, there were aspects of Mr Millichamp’s oral evidence (to which I have previously referred) that I regard as unsatisfactory. He also seemed inclined to volunteer evidence (which I give little weight) as to Dr Sherman’s state of mind in what appeared to me to be a conscious effort to make up for the lack of any direct evidence from Dr Sherman himself. That said, although I did not regard Mr Millichamp as an entirely satisfactory witness, I do not accept the submission that he deliberately sought to mislead the Court.

339    Mr Millichamp’s cross-examination confirmed, as he had acknowledged in his affidavit of 7 July 2017, that Dr Sherman was the key decision-maker who would have had to give his approval before there could be any launch at risk of Apotex’s clopidogrel products in Australia. In cross-examination Mr Millichamp asserted that Dr Sherman had given such approval in the email of 20 February 2007 and that it contained an instruction from Dr Sherman to try to launch at risk in 2007. Mr Millichamp went on to suggest that the same email provided him with all the authority he needed to cause Apotex Australia to launch at risk and that this constituted the authority he would have relied upon had Gyles J refused to grant the interlocutory injunction.

340    I do not accept that the 20 February 2007 email was an instruction on which Mr Millichamp would have considered himself entitled to act in late 2007 without reverting, either directly or indirectly, to Dr Sherman for the purpose of obtaining confirmation of that instruction and the necessary final approval from him authorising a launch at risk. The suggestion that Mr Millichamp did not need to obtain any further approval from Dr Sherman before launching at risk is, in my view, inconsistent with the email correspondence between Mr Kay and Dr Sherman and Mr Millichamp and Mr Haas.

341    Nor do I consider that the email sent by Dr Sherman on 20 February 2007 is persuasive evidence as to what Dr Sherman’s thinking may have been eight or nine months later. The 20 February 2007 email was sent prior to any decision by the US District Court in relation to the US Patent. Some of the developments that subsequently occurred in 2007 were expected; the ARTG registration of Apotex’s clopidogrel products was one of these. However, the coincidence of events that would have led to both a PBS listing on 1 April 2008 (in the counterfactual scenario in which no interlocutory injunction was granted) followed by the commencement of the trial of the patent proceeding (as actually occurred) later that month was a result of developments that could not have been anticipated until about the time the interlocutory application was determined.

342    As previously mentioned, the Commonwealth called evidence from a number of employees, or former employees, of Apotex Canada and ARPL. Mr Fahner, the Senior Vice-President of Business Operations and Finance at Apotex Canada, is a senior employee of Apotex Canada, but not someone who would have had any direct involvement in deciding whether or not to launch the Apotex clopidogrel products at risk in Australia. What is significant for present purposes is that he made a number of detailed affidavits that were read by the Commonwealth (including one affidavit made some months after the Apotex companies discontinued their own claims for compensation) and also travelled from Canada to Australia to make himself available for cross-examination. Mr Goel and, of course, Mr Millichamp, were witnesses who worked for one of the Apotex companies, who made affidavits in support of the Commonwealth’s case. Mr Goel travelled from India to Australia for cross-examination.

343    Sanofi BMS submitted that the Commonwealth’s failure to call Dr Sherman should lead the Court to infer that his evidence would not have assisted the Commonwealth’s case. This brings me to the question whether, in respect of Dr Sherman, the three conditions referred to by Glass JA in Payne v Parker are satisfied.

344    In this case I would have expected Dr Sherman to have been available to the Commonwealth rather than to Sanofi BMS. Contrary to a submission made by the Commonwealth, I think it would be quite unrealistic to have expected Sanofi BMS to have called Dr Sherman in its defence of the Commonwealth’s claim. Apotex Canada and Sanofi BMS were at relevant times trade rivals engaged in significant litigation in at least three jurisdictions. The US litigation culminated in a judgment in favour of Sanofi BMS against members of the Apotex group (including Apotex Canada) for in excess of US$442 million. In Australia, the Apotex companies made claims against Sanofi BMS in excess of A$138 million under the same undertakings as to damages upon which the Commonwealth’s case is based. And in Canada, Apotex Canada was found to have engaged in infringement of Sanofi’s Canadian Patent on what was likely to have been a significant scale by manufacturing and exporting clopidogrel products for the US market. In my view it would be unreasonable and contrary to common sense to have expected Sanofi BMS to call Dr Sherman.

345    The fact that Apotex Canada made Mr Fahner available to make an affidavit for the Commonwealth and to travel to Australia for cross-examination raises the obvious question of why the Commonwealth did not seek to call evidence from Dr Sherman on an issue of critical importance to its case. In circumstances where Mr Fahner, a senior executive at Apotex Canada, was called by the Commonwealth, it seems to me it would be reasonable to expect it to have also called Dr Sherman to give direct evidence of his state of mind at relevant times by affidavit and, if required, orally either in person or perhaps, by video link if he was unwilling or unable to travel to Australia.

346    There was no evidence called by the Commonwealth that would provide any explanation as to why it did not call Dr Sherman or what attempts, if any, it made to call him. I am mindful that Dr Sherman was, at the time of the trial, based in Canada. However, as I have mentioned, this did not prevent the Commonwealth calling Mr Fahner or other Apotex group executives resident overseas to give evidence in support of its case.

347    I conclude that Dr Sherman was a witness who I would have expected to have been available to the Commonwealth and who would have had a close knowledge of relevant facts. In circumstances where the Commonwealth’s decision not to call Dr Sherman was wholly unexplained, I infer that the Commonwealth chose not to call him because it considered that his evidence would not have assisted its case.

348    I am not prepared to infer, based on the 20 February 2007 email, or any of the subsequent correspondence in evidence which was said to justify the drawing of such an inference, that Dr Sherman was likely to have instructed Mr Millichamp to procure the listing of Apotex’s clopidogrel products with effect from 1 April 2008.

349    In my opinion, the Commonwealth’s case suffers from an evidentiary deficiency which cannot be made good by drawing inferences from correspondence written by Dr Sherman in the lead up to the hearing of the interlocutory application. In particular, I do not think it can be inferred that if Dr Sherman had known that the trial of the patent proceeding would commence in the same month that Apotex Australia obtained a PBS listing of its clopidogrel products (triggering a 12.5% statutory price reduction), that he would have, in those circumstances, authorised Apotex Australia to obtain such a listing before judgment was delivered or, at least, until the trial had concluded (by which time he and his colleagues and his legal advisers may have had a clearer view of the strength of Sanofi’s case).

350    I should add that I do not regard Mr Fahner’s evidence as to the capacity of Apotex Australia to provide security as a condition of avoiding an interlocutory injunction as relevant to any issue in the case. The critical question for present purposes is whether Apotex Australia would have applied for PBS listing in the absence of the interlocutory injunction. The question whether it would have been required to provide security as the price of avoiding an interlocutory injunction does not arise in the counterfactual analysis which presupposes that there was no entitlement to the interlocutory injunction that was granted. It would be incorrect, as a matter of principle, to instead presuppose that there was no interlocutory injunction if, and only if, Apotex Australia was able to provide security.

351    In the result, I am not persuaded that Apotex Australia would have sought and obtained a PBS listing of its clopidogrel products from 1 April 2008 even if the interlocutory injunction had not been granted. It follows that the Commonwealth’s claim for compensation must be dismissed.

352    Given that conclusion, it is unnecessary for me to decide any of the other issues that were the subject of evidence and submissions in the case. However, given the extent of the evidence and submissions, and the possibility that the case will go further, I have also made findings in relation to other key issues. The first of these is whether, if Apotex had applied for a PBS listing of its clopidogrel products from 1 April 2008, the Minister or Delegate would have decided to list those products on the PBS from that date.

Would the Minister or the Delegate have listed Apotex’s clopidogrel products on 1 April 2008?

353    By the time they made their final submissions, Sanofi BMS did not contend that Apotex Australia would not have complied with the formal requirements of an application for listing from 1 April 2008. I find that, had Apotex Australia decided to proceed to apply for and obtain a PBS listing from that date, it would have prepared and lodged an application that complied with all relevant administrative requirements. A more difficult question is whether the Minister or her Delegate would have approved any such application.

354    Sanofi BMS contended that the evidence does not establish that the Minister or her Delegate would have accepted Apotex Australia’s application for listing if it is assumed that a listing with effect from 1 April 2008 would have occurred in the same month that the infringement proceeding brought by Sanofi against Apotex Australia was to be heard by Gyles J and that the Minister or her Delegate would have been aware of that fact. In fact, Sanofi BMS went so far as to contend that for the Commonwealth to have listed Apotex’s clopidogrel products in those circumstances would have involved an unreasonable exercise of the relevant statutory discretion.

355    The Commonwealth did not accept that Sanofi BMS’ counterfactual analysis was accurate. I will return to consider the arguments raised in response to it shortly. However, on the assumption that I was to find that it would be appropriate to assume for the purpose of the counterfactual analysis that the listing application would have been made in circumstances where the Minister or her Delegate would have known that the infringement proceeding was to be heard by Gyles J in April 2008, the Commonwealth contended that Apotex Australia’s products would still have been listed from 1 April 2008. The principal evidence relied upon in support of that contention was given by Mr Lindsay, Mr Moulding and Ms McNeill.

Sanofi’s counterfactual analysis

356    There are a number of points to make in relation to the counterfactual analysis relied upon by Sanofi in support of its contention that the Minister or her Delegate would not have listed Apotex Australia’s clopidogrel products on the PBS from 1 April 2008.

357    Sanofi’s counterfactual analysis involved two possible scenarios.

358    The first scenario was one in which Sanofi, on becoming aware of Apotex Australia’s application to list from 1 April 2008, would have lobbied the Minister with a view to persuading her to refuse Apotex Australia’s application. As I understood the submission, Sanofi contends that it would have pointed to the fact that there was a trial of the patent proceedings imminent with a final judgment to follow some four or five months thereafter, and that this would have justified the Minister in rejecting Apotex Australia’s application apparently on the basis that Sanofi’s products would otherwise be the subject of an immediate 12.5% price reduction upon listing of the Apotex Australia products, and that there was some doubt as to whether or not Apotex Australia could comply with either its assurance of supply or the guarantee of supply.

359    For reasons explained in greater detail below, I am not persuaded that Sanofi would have lobbied the Minister in the manner suggested. I am satisfied that Sanofi was of the view that unless it could obtain an interlocutory injunction that had the effect of preventing Apotex Australia from applying for a PBS listing, then Apotex Australia would proceed to apply for such a listing and that it was, to borrow an expression used by Mr Brereton SC in his cross-examination of Sanofi’s witnesses, “all but inevitable” that such an application would have been approved.

360    There was some evidence given by Sanofi’s witnesses to the effect that they would have sought to lobby the Minister. I did not find that evidence persuasive. To my mind it was the product of hindsight and does not reflect what was likely to be the thinking of Sanofi’s senior management at the time. Importantly, there is no contemporaneous evidence to suggest that Sanofi planned to lobby the Minister in the event that it failed to obtain the interlocutory relief it sought. The first time it was suggested that it would have done so was in affidavits made by Sanofi’s witnesses more than seven years later.

361    Although it was not put to Sanofi’s witnesses that lobbying for a rejection of Apotex’s application was futile, I am satisfied based on the oral evidence given by Mr Lindsay and Mr Moulding (discussed below) that they were unlikely to have sought to lobby the decision-maker essentially on the basis that it was their belief at the time that unless Apotex Australia was restrained from lodging its application for a 1 April 2008 listing, it was almost certain that the application would be approved by the relevant decision-maker.

362    The second scenario postulated by Sanofi assumed that Apotex would have, when making its application for listing from 1 April 2008, disclosed to the Minister or the Delegate the existence of the patent proceeding, the date of the trial, and the fact that there was likely to be a final judgment not later than the end of August 2008. According to Sanofi, the substance of the disclosure by Apotex Australia would have been to the following general effect:

We believe we will be able to supply on 1 April for two years but whether in fact we will be able to do so will depend upon the outcome of a patent trial to be heard in April and likely to be decided not later than the end of August. There is also the possibility that between now and then Sanofi will apply for an interlocutory injunction, if it hadn’t already.

363    In developing its submissions in relation this counterfactual analysis, Sanofi returned to the submission (which I have previously rejected) that it must be assumed, when determining what was likely to have happened if Apotex Australia had applied for a PBS listing from 1 April 2008, that no interlocutory injunction had been applied for by Sanofi. The significance of this point for present purposes is that Sanofi’s counterfactual analysis assumes that (whether informed by Sanofi or Apotex Australia) the Minister or her Delegate would have approached the exercise of the discretion under s 85(6) on the understanding that Sanofi had not made any application for an interlocutory injunction, and that Sanofi may yet do so.

364    I do not accept that this is the appropriate counterfactual analysis. An essential point that must be included in the counterfactual analysis is that Sanofi had made an application for interlocutory relief that had been refused. The possibility that Sanofi would not have sought interlocutory relief is in my opinion so remote as to be fanciful. Not only did Sanofi make such an application, but I am satisfied that it would have understood that not applying for the interlocutory relief at the earliest opportunity after it first became aware of Apotex’s intentions was not a serious option if it was to have any chance of preventing Apotex Australia from obtaining a PBS listing for its clopidogrel products which would have a significant impact on Sanofi Australia’s profits.

365    It was further submitted by Sanofi that for the purposes of the relevant counterfactual analysis it should be assumed that Apotex would only have made a conditional listing application with a qualified assurance of supply in the same form that it made on 1 September 2007. The justification for assuming that Apotex would have made another conditional application seems to be that, in the counterfactual scenario postulated by Sanofi, the possibility that Sanofi might make an application for an interlocutory injunction restraining Apotex from applying to list from 1 April 2008 would still exist (because on Sanofi’s analysis no such application should be taken to have been made) and that the application to list from 1 April 2008 should therefore be assumed to be attended by the same uncertainty as that which had been lodged by Apotex on 1 September 2007.

366    I do not think that is the correct approach. One does not assume for the purpose of the counterfactual analysis that there is no interlocutory injunction, but that there might well be one at any minute. On the other hand, and contrary to a submission made by the Commonwealth, no particular assumptions should be made as to the reasons why no interlocutory relief was obtained. It would not be appropriate to assume, for example, that interlocutory relief was withheld based on the strength of the invalidity case.

367    What is in my opinion critical is that, in the appropriate counterfactual analysis, it is to be assumed that the opportunity for Sanofi to obtain an interlocutory injunction restraining Apotex Australia from either supplying its clopidogrel products, or applying to list them on the PBS from 1 April 2008, was foreclosed.

368    At the very least this means that, for the purpose of the relevant counterfactual analysis, it may be assumed that it would have been open to Apotex Australia to inform the relevant decision-maker (if it considered it necessary or desirable to do so) that there was no serious prospect of Sanofi obtaining any interlocutory relief that would prevent Apotex Australia proceeding with an application to list its products on the PBS from 1 April 2008. But on no view should it be assumed that Apotex Australia would have had to inform the relevant decision-maker that it faced the prospect of an interlocutory hearing that might at any minute culminate in an interlocutory injunction preventing it from supplying its clopidogrel products.

369    There is a logical inconsistency in Sanofi’s counterfactual analysis which assumes that the relevant decision-maker would know that Gyles J had fixed the matter before himself for a trial in April 2008 and that, having regard to his imminent retirement, there would need to be a final judgment by August 2008, but not that an interlocutory injunction had previously been refused. Any counterfactual analysis that assumes that Sanofi might at any time obtain an interlocutory injunction preventing Apotex Australia from supplying its clopidogrel products involves a hypothetical scenario that would never have eventuated in the real world.

Mr Lindsay’s evidence

370    At the time of the interlocutory hearing before Gyles J, Mr Paul Lindsay was employed by Sanofi Australia as its Director of Public Affairs. He held that position from July 2006 until July 2010. By September 2007 he had considerable experience working in the pharmaceutical industry and maintaining a thorough knowledge of the operation of the PBS. He made an affidavit in September 2007 that was relied on by Sanofi at the interlocutory hearing in which he described the PBS system and the effect of the 2007 Amendments in some detail.

371    In his affidavit Mr Lindsay described the price changes that would be triggered in the event that Apotex Australia’s clopidogrel products were listed on the PBS from 1 April 2008 including the various mandatory price reductions that would result from such a listing and the price disclosure reductions that would be due to take effect from 1 April 2010.

372    Mr Lindsay’s affidavit does not suggest that he gave any consideration to the possibility that the Minister might decline to list Apotex Australia’s clopidogrel products from 1 April 2008 if no interlocutory injunction was granted. In fact the interlocutory hearing before Gyles J appears to have been conducted on the clear understanding common to both parties that in the event that Apotex was not prevented from making application to list its clopidogrel products from 1 April 2008 then that application would be approved.

373    During his cross-examination Mr Lindsay agreed that, at the time he made the affidavit, he believed that if Sanofi did not obtain an interlocutory injunction to restrain Apotex from selling its clopidogrel products, it was “all but inevitable” that Apotex would apply to list on the PBS, and that it was also “all but inevitable” that Apotex would obtain a PBS listing of its clopidogrel products from 1 April 2008.

374    In an affidavit made by Mr Lindsay in 2016, he stated that if Apotex had not been restrained in September 2007 from listing its products on the PBS, he would have recommended to the General Manager of Sanofi Australia (Mr Moulding) that the company engage with the Minister to request that she exercise her discretion not to list Apotex’s clopidogrel products on the PBS on the basis that:

    the listing of Apotex’s products on the PBS would result in those products infringing Sanofi’s patent; and

    the validity or otherwise of Sanofi’s patent had not yet been determined by the courts.

375    Mr Lindsay said in the same affidavit that this request would most likely have taken the form of a letter to the Department prepared by him (or someone who reported to him) and signed by him or the General Manager.

376    There are several points to note about Mr Lindsay’s written evidence on this topic. The first is that, as previously mentioned, it is not a matter raised in any of his prior written evidence. Secondly, and more importantly, he does not explain why in his view the mere existence of a patent proceeding would be a matter that might result in the Minister declining to accept an unconditional application for the listing of Apotex’s clopidogrel products from 1 April 2008. Thirdly, Mr Lindsay’s 2016 affidavit says nothing about the finer details of the Sanofi BMS’ counterfactual analysis as developed in their written and oral submissions with regard to either the April trial date or the anticipated judgment date.