Commonwealth of Australia v Sanofi (Formerly Sanofi-Aventis) & Ors [2023] HCATrans 184 (18 December 2023)

Last Updated: 18 December 2023

[2023] HCATrans 184

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S90 of 2023

B e t w e e n -

COMMONWEALTH OF AUSTRALIA

Applicant

and

SANOFI (FORMERLY SANOFI‑AVENTIS)

First Respondent

SANOFI‑AVENTIS US LLC

Second Respondent

BRISTOL‑MYERS SQUIBB INVESTCO LLC

Third Respondent

Application for special leave to appeal

EDELMAN J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON MONDAY, 18 DECEMBER 2023, AT 9.30 AM

Copyright in the High Court of Australia

____________________

EDELMAN J: In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR J.T. GLEESON, SC appears with MS F.T. ROUGHLEY, SC and MS M.F. CARISTO for the applicant. (instructed by Corrs Chambers Westgarth)

MR J.C. SHEAHAN, KC appears with MR J.J. HUTTON, SC and MR S. FITZPATRICK for the respondents. (instructed by Jones Day)

EDELMAN J: Mr Gleeson and Mr Sheahan, this is the only oral hearing from the December special leave list. As the parties may have gathered from the note that has been sent by the Court, the provisional view of the panel and the Court is that the questions concerning the legal rules for the assessment of damages on an undertaking as to damages are matters of public importance which may not be settled, however, without restricting any of the matters that you wish to address, the Court does have some concerns about whether an appeal in this matter would be an appropriate vehicle to decide these issues, and we would be very grateful for your submissions on these and any other matters that you wish to address. Yes, Mr Gleeson.

MR GLEESON: Thank you, your Honours. I rely upon the affidavit of Mr Korbel, if I might, at page 351. Coming directly to your Honour’s question, if I could ask the Court to go, please, to page 389, we have set out the pleading as to the facts. Do your Honours have page 389?

EDELMAN J: Yes.

MR GLEESON: That sets out the pleading of the facts as to the factual world and the counterfactual world, and I will take them in turn. Paragraphs 62, 63 and, consequent upon that, 65, were a pleading as to the factual world, which is not in dispute, namely that the grant of the restraints prevented Apotex from listing clopidogrel on the PBS prior to 1 May 2010, that is paragraph 62 to 63, and consequent upon that, at paragraph 66, clopidogrel was not permitted to move to the relevant part of the Register, and over the page, at a minimum, the 12.5 per cent price drop for clopidogrel did not occur.

That part of the case as to the factual world leads to the loss to the Commonwealth in the order of several hundreds of millions of dollars. The dispute is as to the counterfactual world, in particular, paragraphs 64 and 65, would Apotex have sought the listing but for their restraints. I will take the factual issues, if I might, your Honours, under the three steps that we contend for following the judgment of Justices Mason and Stephen in Ansett.

Step one is the Commonwealth had to explain why Apotex would have listed but for the injunction and lead some evidence from which the Court could reach that conclusion. In the present case, the reason put forward by the Commonwealth and the evidence was simple: Apotex was an aggressive generic company with a business model in attacking what it perceived to be weak patents in order to obtain a first mover advantage, and in doing so it would work up its case for patent revocation and it would fight injunction actions, and if it could defeat interlocutory injunctions it would get onto the market seeking to make tens of millions of dollars in profit, albeit at the risk that if it ultimately lost in the patent revocation suit, it would pay damages.

The evidence that the Commonwealth led to establish that prima facie case at step one is summarised in a single paragraph at page 320 of the book, our paragraph 17. It involves six facts from the actual world from which the reason I have just identified follows. Of those six facts, the only one seriously in dispute is the second fact, namely, that there was evidence that Dr Sherman reconfirmed the plan in late June.

EDELMAN J: Do you accept the trial judge and the Full Court’s reasoning that Dr Sherman’s reconfirmation was essential for the Commonwealth to have established a prima facie case?

MR GLEESON: Not in the slightest, because the essential thing to establish the case was what Mr Catterns said to the court, to Justice Gyles, and what Mr Millichamp said on oath. If I could just refer your Honours to those and then come back to the reconfirmation. At page 283, paragraph 295, you have Mr Millichamp’s sworn affidavit, and if I could read the second sentence:

However, it is –

Apotex’s:

intention to apply for listing of its clopidogrel –

product:

at the next available opportunity, which is by 1 December 2007.

Now, that was an unqualified, unequivocal statement on oath as to intention, and what your Honours will see over the page at paragraph 298, by what can only be described as a contorted process of reasoning, is that the Full Court found it was consistent with that statement on oath that the true position was that Mr Millichamp knew that Apotex had not made a decision to launch, in fact, Mr Sherman was going to defer his decision until after they saw the result of the injunction application. So, that is what Mr Millichamp said. In terms of what Mr Catterns said to the court, if your Honours have page 256 ‑ ‑ ‑

EDELMAN J: Just before we do, were there not findings, or certainly documentary evidence, that as late as 27 June, Mr Millichamp was saying that the plan to launch would still be subject to Dr Sherman’s advice or approval?

MR GLEESON: Exactly, your Honour, and that is why the point I am coming to as to the reconfirmation, the document that Justice Nicholas never referred to and that the Full Court failed to deal with properly is the 28 June email. So, your Honour, if I could just complete what Mr Catterns said, at page 256 it is set out at the end of paragraph 176:

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.

So, I take your Honours to those two paragraphs because your Honour’s first question to me was, do we stand or fall on 27, 28 June. My answer to that is, the very best evidence from the actual world of intention – and this is one of the rare cases where you have it – are statements on oath from a witness, unchallenged, and statements from learned senior counsel on instructions, never suggested to be in any way false or misleading, as to what the intention was. Then can I come to your Honour’s question.

JAGOT J: Mr Gleeson, it may be relevant that the statement of Mr Catterns is a contemporaneous statement as at 18 September 2007, that is, at the relevant time, and that that postdates the two events that the Full Court and primary judge referred to that postdated June 2007, namely that the hearing date would be earlier than anticipated, that is, in April 2008, and quite probably possible that the judgment would be earlier than anticipated, because of Justice Gyles’ impending retirement, but also that the listing date would be later than anticipated, that is, that the listing on the PBS could not be earlier than April 2008. And then those two facts, as I understand it, were known to Dr Sherman by 14 September 2007, according to the evidence, that is, before 18 September 2007, the date of the hearing. That is in contradistinction to Mr Millichamp’s evidence, which is hypothetical retrospective evidence, as I understand it.

MR GLEESON: Yes.

JAGOT J: It comes from much later.

MR GLEESON: Two responses, your Honour. The first is, yes, we embrace the fact that the so‑called two new events were known to Dr Sherman, and one finding to that effect from the primary judge is at page 83, paragraph 280. That is the first of them being known. Over the page, at page 84, the second of them was known, which was on the very first directions hearing, 13 September, Justice Gyles had contemplated “an early final hearing”. So, when Mr Catterns made the statement to the court it was in the knowledge of what is said to be the two intervening developments.

Secondly, your Honour, could I indicate that Mr Millichamp, that he swore the evidence that I took you to at page 283, in his 17 September 2017 affidavit. Your Honour is correct, that is one of the affidavits formed for the purpose of this proceeding, however, he had sworn to the same effect before Justice Gyles, which I can show you at page 97 at paragraph 332.

JAGOT J: That is what I was trying to find, and had not succeeded, I have to say. So, paragraph 332.

MR GLEESON: Yes. His first affidavits:

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 –

And the next paragraph, his third affidavit was made in response to the Spirit application.

EDELMAN J: Mr Gleeson, there does – I mean, that paragraph and some of the discussion in the Full Court does seem to suggest that, tacitly, almost a possibility that Apotex was almost encouraging Sanofi to apply for an injunction so that Apotex would get the benefit of an undertaking as to damages. It would be covered under that undertaking without having to run the risks of launching.

MR GLEESON: Your Honours, in my short time left, there are two questions in the frame. Could I take your Honour’s latest question second. Your Honour’s previous question I still have not answered, which is what happened on 28 June and why does that matter? It is not central to our case, for the reasons I have just put to your Honours, but to see the document, if you would, it is page 369, and it is the email of Thursday, 28 June, where it commences from Mr Millichamp:

Hello Stephen,

. . . as per instructions from Barry the plan . . . is as follows –

And then paragraph 3 is the critical part of the plan which Barry has confirmed. The reason this part of the case, it is a small but important part, has gone so wrong, is if your Honours were to go to the Full Court judgment at page 288, in one of the five places where the Court referred to this central part of our argument, they set out the email, they underlined “as per instructions from Barry”, and they underlined paragraph 3, and the “emphasis in original” means emphasis in the original Commonwealth submissions.

They say in the next paragraph, it does not matter, for the reason we have given at 141, and if you go to paragraph 141 on page 243, the court says the email does not take the case anywhere because it only tells us about “Mr Millichamp’s enthusiasm for launch”, but what the court has failed to refer to, remarkably, are the critical words “as per instructions from Barry”. We know they failed to refer to that, because if you go back to 137, where they extract from the email, the critical part of the email record has not referred to “as per instructions from Barry”.

EDELMAN J: Mr Gleeson, just one question, then Justice Jagot has another question for you. If you have a look at page 75, paragraph 246, it seems, from the email that was sent by Mr Millichamp – this is only the previous day – the plan is only “to launch subject to” Dr Sherman’s further advice or approval. What changed between 27 June and 28 June?

MR GLEESON: What changed from these documents was that Dr Sherman gave the direct instruction to Mr Millichamp that he recorded in the document at 369. That is what changed. Can I come to your Honour’s other question, which is important. If we are correct in our three‑step approach, the Commonwealth proves step one in spades: there was a reason to list and launch absent an injunction. The question on step two was: did Sanofi put forward an alternative reason supported by some evidence of value as to why Apotex would not have listed even without the injunction?

What you struggle to find anywhere in these hundreds of pages is a clear articulation of what that alternative reason is, but it may be what is adverted to in your Honour’s question. What the Full Court seems to have hinted at – and it is only a hint – is if you go to paragraph 90 of the Full Court, on page 228, the first matter, this is the idea that Apotex might have been gaming the court, that is, sending Mr Catterns and Mr Millichamp up to court on oath and as counsel to tell the court Apotex intended to list when, in truth, what Apotex really wanted was to lose the application and get restrained and then have protection under the undertaking.

Now, if that was being put forward as the alternative reason, it is a bizarre reason, for the obvious points that I will now make. The first is it involved misleading the court. It involved telling the court, my intention is to list, if not restrain, whereas my true intention is that if you refuse the injunction, I will not list. Now, that is enough reason – sorry, your Honour.

JAGOT J: Sorry to interrupt you, Mr Gleeson, I apologise. When you say “on oath” and you took us to Mr Millichamp’s early affidavits, first, second and third, did those affidavits predate or postdate 28 June? We do not have a very good chronology, so it is quite hard to work out ‑ ‑ ‑

MR GLEESON: Your Honour, they postdated. They were prepared immediately before the interlocutory injunction, so they are dated September.

JAGOT J: They are actually dated September?

MR GLEESON: They are dated September, because the whole case was prepared in a week for the interlocutory injunction, and they were the affidavits, and ‑ ‑ ‑

BEECH‑JONES J: Mr Gleeson, sorry, do you mean September 2007?

MR GLEESON: Yes.

JAGOT J: Yes, not 2017.

MR GLEESON: And Mr Millichamp said, we intend to list and launch, and he put forward the usual balance of convenience evidence – these are all the benefits we will get if we can get onto the market, et cetera. But coming back to your Honour Justice Edelman, just contemplate, apart from the absurdity of misleading the Court, contemplate the folly of the strategy, because if Justice Gyles had done what Apotex asked for and refused the injunction on Mr Catterns’ solemn proffer of $50 million security, what did Apotex then have to do the next day, if the true intent was, we are not prepared to take the risk of listing? They would have to send someone back up to court and say, terribly sorry, your Honour, we have wasted your time for three days, we do not intend to provide security, please injunct us. So, that is one limb of the absurdity.

But contemplate the other limb of the absurdity. Assume they are unsuccessful and the injunction is granted, and they are supposedly gaming the system by planning to claim on the undertaking as to damages, three years down the track, if they are successful. On this theory, that would require them to mislead the court three years down the track, because an Apotex witness would have to turn up and say we intended to list and launch when they never intended it at all.

So, your Honours, they are the simple, objective assessments of the facts that arise once one looks at the uncontested material I have taken you to and one corrects one error in respect to the 28 June email. Once that is done, the Court will be able to determine whether the three‑step approach recommended and adopted by Justice Mason is the correct one, or whether we are instead in some world of common law causation.

If I might be permitted to say, this case falls into that fairly narrow category of ASIC v Hellicar, where the case raised enormous factual complexity at first instance on appeal, but once attention was paid to a single factual error – in that case, failure to advert to the minutes; in this case, failure to advert to the 28 June email – plus the objective probabilities from statements made to a court, the rest of the factual complexity disappears, and the legal issues may be ‑ ‑ ‑

EDELMAN J: Mr Gleeson, can I ask you, then, about Full Court paragraph 189. The Full Court expresses the view there that there is a volume of material relied upon by the Commonwealth which the Full Court did not consider to be material. In light of that submission that you have just made, does that mean that the Commonwealth does not challenge that conclusion and your proposed ground 2 would not open up a consideration of any of the evidence other than the question of retrospective use of an actual circumstance?

MR GLEESON: It is primarily that, but we are saying that the 28 June email, which was not referred to by the trial judge and never properly addressed by the Full Court, is material that was absolutely central to the trial judge, and that is part of what we are proposing to address by the grounds of appeal.

EDELMAN J: I understand that, but suppose that you are right on your first step, but wrong on your second step, so that there was an evidentiary basis at the second stage. Then, the Court would need to consider at least your second ground of appeal, but it would need to consider all of the evidence, if your second ground is right, would it not? It would need to revisit all of those factual complexities that you have referred to.

MR GLEESON: No, your Honour, for the reason I said to your Honour Justice Jagot. The primary attention is given to what happened in court on a particular day in September 2007. And so, on that, applying the Ansett approach, the Commonwealth would succeed. Your Honour?

BEECH‑JONES J: I was just going to say – so, your point is, you say, factually, the case could be resolved by looking into the events that happened, with the counterfactual being a relatively narrow inquiry? Is that where we get to?

MR GLEESON: Yes, the counterfactual being one of those cases where one has the evidence from the factual world of what was said to a court about intention, about the very matter that governs the counterfactual, and that never being displaced by the opposing party, particularly given we are in equity.

EDELMAN J: And that would all be wrapped up in your ground 1, then, would it not?

MR GLEESON: Your Honour, it is most likely that ground 1 would permit us to put the argument I have sought to summarise this morning, but we are not proposing, if leave were granted, to be taking the Court through thousands of emails. The case is essentially about the 28 June email and behaviour to Justice Gyles on a given day in court. And then, if anything put, to answer that.

JAGOT J: That 28 June email point, though, stands in one context in ground 1, where you have two evidentiary onuses, and possibly in another context in ground 2, where, as I understand it, ground 2 is independent of ground 1, that is, you say you could win on, they did not discharge their evidentiary onus at all, because it is mere speculation to think about – Dr Sherman might have changed his mind, it does not rise above speculation, therefore there is not material sufficient to discharge the evidentiary onus. If that is wrong, then you are in ground 2, as I understand it. Does not the 28 June 2007 email then have to be weighed along with everything else in ground 2? I am not saying I am hostile to that, I am just saying, is that not the fact?

MR GLEESON: That is probably the case, your Honour.

BEECH‑JONES J: How long ‑ ‑ ‑

JAGOT J: And is that not – Justice Beech‑Jones is probably going to ask, how long does that all take?

BEECH‑JONES J: That was my question.

MR GLEESON: Your Honour, this appeal will be concluded comfortably within two days. I will be frank, we will be asking, if leave is granted, for 30 pages in‑chief and 30 for Mr Sheahan, and short extension for reply.

JAGOT J: Yes.

MR GLEESON: We will have a chronology, which will give the Court what is sadly missing from the Full Court’s judgment, which is actually how the case unfolded chronologically. You will have that as an annexure to our submissions, it will be one of those rare cases where a chronology might be of some considerable use in this Court, and the mysteries will disappear. Your Honours will have seen from this judgment, the Full Court’s judgment, it is, with respect, a very difficult judgment to work through, because each part of our case appears to be addressed about five different times, and then each time, there is a cross‑reference back to where it was addressed somewhere else.

But once you simplify it down to step one, step two, step three, you follow it through chronologically, the Commonwealth did establish a prima facie case, there was never an alternative reason put forward by Sanofi that required it to be weighed against it – step two. If you ever got to step three, the Commonwealth case prevailed on the objective probabilities proven from conduct in the real world. That is the Commonwealth’s case. It was that simple. May it please.

EDELMAN J: Thank you, Mr Gleeson. Yes, Mr Sheahan.

MR SHEAHAN: Your Honours, can I start with the 28 June 2007 email, which is sometimes called item 29 by the Full Court, which appears to have become – five words of it appear to have become critical. Five words in one email out of a 45‑volume court book. Now, the Commonwealth wants to say that those five words are evidence of a fresh and irrevocable instruction to launch at risk by Dr Sherman to Mr Millichamp, either directly or indirectly, between 1.59 pm on 27 June and 10.28 pm on 28 June.

Now, there are many problems with this. The first of them is that I think, contrary to my learned friend might have indicated, Mr Millichamp, who did give evidence in this trial, never suggested there was any such instruction. Mr Millichamp’s evidence was that in his thinking about launching – and there was no dispute that he was an enthusiast for launching at risk – his evidence was that he was authorised to do so in February. The trial judge rightly rejected that.

Secondly, there were numerous emails in that 32 and a half hour period which might have contained such an instruction. They were all in evidence, so far as we know. None disclosed such an instruction. Many, it is true, were redacted for privilege, but an instruction would not be privileged, even if the surrounding text was.

Thirdly, if this was a fresh instruction or reconfirmation, as our learned friends put it, it was directed to circumstances that were subsequently overtaken by events in September, the delay in the PBS listing to April 2008 and the acceleration of the trial to April 2008, with the trial judge necessarily giving judgment by August.

BEECH‑JONES J: Mr Sheahan, could I just stop you there. Just looking at the 28 June email, you say Mr Millichamp did not give evidence of the specific instructions from the person referred to as “Barry”?

MR SHEAHAN: Yes, he did not say ‑ ‑ ‑

BEECH‑JONES J: Right. Did he give instructions – I thought significant reliance was placed by your side on the last words, “Barry has made it clear”.

MR SHEAHAN: We did rely on that, but that language ‑ ‑ ‑

BEECH‑JONES J: Yes, did he give evidence about that?

MR SHEAHAN: To be honest, your Honour, I cannot now recall.

BEECH‑JONES J: It seems to me, either Barry gave the instructions and said the words in the last sentence – it kind of cuts both ways, does it not?

MR SHEAHAN: Now, the last sentence is – your Honour is looking at page 367?

BEECH‑JONES J: At 369:

Barry has made it clear that he does not want –

MR SHEAHAN: That is ‑ ‑ ‑

BEECH‑JONES J: Sorry, it is a similar copy. Yes. Page 367 is good – the second‑last sentence of the email.

MR SHEAHAN: Yes. So, that accurately records Mr Sherman’s instructions, which are recorded in earlier emails, there is no doubt about those. Mr Sherman did not want to waste money on a launch if they were going to be subsequently restrained. That was an important factor in weighing up what was one of the Commonwealth’s significant arguments at the trial and on appeal, which was that a lot of effort went into preparing for launch.

The Full Court and the trial judge both rightly concluded that that effort did not amount to anything, because it did not involve any risk of wasted expense. But that instruction is not the same as the instruction referred to – or that the Commonwealth seems to rely on, or seems to say was the instruction referred to in the first sentence. They are completely different.

BEECH‑JONES J: I see. Sorry, I interrupted you.

MR SHEAHAN: Thank you. The fourth point is that the Apotex subsequently, after 28 June, sent a letter to customers which was inconsistent with a final decision having been made up to that point. So, on 17 August 2007, your Honours will see this referred to in the Full Court at application book 234, at the bottom of the page, they sent a letter which:

included the statement that ‘the decision whether to launch these products will be delayed until the outcome of that application –

That is to say, for interlocutory relief:

has been determined’.

Will be delayed. Fifth and finally, the Full Court did give careful consideration to this email in the context of the arguments that were based on it, and your Honours will see at paragraphs 137 to 143, and then again in a different context at 313 to 316. They did not see it as significant, and for good reason.

JAGOT J: Could I just say, sorry, Mr Sheahan, that the statement at 118 – I mean, maybe there is a contextual difference there, but obviously, if they are restrained, they are not going to launch. They know they have a hearing, so does that not just mean that we wait until we know whether we are restrained or not? It is not a, we will never launch at risk, it is a – I mean, if we are enjoined, we cannot launch.

MR SHEAHAN: Quite, your Honour, but that is what it did not say. It did not say, we will launch if we can and we will know that when we have the outcome of the interlocutory injunction, what it said was the decision whether to launch will be made when we know the outcome. And both the trial judge and the Full Court agreed that in context, that was difficult to reconcile with the proposition that there had been an irrevocable decision to launch at risk at that time. That was not the impression that was being conveyed to the customers.

JAGOT J: But you have that on 17 August, and then you have Mr Catterns standing up on 18 September, and presumably Mr Millichamp’s affidavits, which I have not seen, but they are sometime in September.

MR SHEAHAN: They are, but Mr Millichamp was acknowledged to be an avowed enthusiast for launching at risk, point number one. Point number two, Mr Millichamp was almost certainly the source of Mr Catterns’ instructions. Point number three, something glossed over by our learned friends, the decision point for launching at risk was not September, it was not the day that they were in court arguing about interlocutory arrangements, it was ‑ ‑ ‑

JAGOT J: No, they had to get listing, they were not going to launch without a PBS listing, that is clear.

MR SHEAHAN: So, the decision point was in December.

JAGOT J: Yes, because they had to lodge – yes.

MR SHEAHAN: Things that would impact on the ultimate decision would include, one might think, a cold‑blooded assessment of what was in play, when the evidence was that Apotex’s internal assessments – now, some of these were done later, but the numbers do not relevantly change – showed that the outcomes were asymmetrical, that is to say, the revenue that Apotex might gain in the four months if it were to launch and then have to stop again would be a small fraction of the damages it would have to pay Sanofi in respect of that four months – Sanofi of being restrained.

One of Apotex’s internal officials described the damages as “ruinous”, so that when they came, in advance of the trial judge’s final orders to consider whether they would, if not restrained, seek to launch at risk, the answer was no.

EDELMAN J: Mr Sheahan, did the United States proceedings shed any light on the decision?

MR SHEAHAN: They do. So, this is another factor, because Apotex claimed that its aggressive posture, as my learned friends put it, was evidenced by the posture in the United States launching, as they said, at risk, but the trial judge and the Full Court correctly held that it was not, in truth, a launch at risk in the United States because of the arrangements that had been made with Sanofi in relation to dividing up the proceeds. They could launch profitably, or at least not at cost, in the United States, so it was not a launch at risk.

BEECH‑JONES J: It was a launch at some risk.

MR SHEAHAN: Modest, because the agreement was that they would give up half the revenue, and this is low‑margin business, your Honour.

BEECH‑JONES J: The letter that you referred to is set out in full at pages 78 to 79, the letter sent to the customers, at page 79. The relevant passages are at the top of page 79.

MR SHEAHAN: Yes.

BEECH‑JONES J: I must say, read in context, it appears to me to be saying to the customers, well, if we are injuncted we cannot launch, but it is all in context.

MR SHEAHAN: It is all in context. Now, if I can – and that highlights the point, which we think is correct, with respect, that an appeal would require a detailed examination not just of the reasons of the Full Court in relation to this email dealing with – or this message to customers, but the critical 28 June email, and in addition, all the other factual material that was relied upon in order to undermine the Commonwealth’s case that it should be found that it had discharged its ultimate persuasive burden, on the balance of probabilities, that Apotex would have launched at risk.

That takes me back to what is really our first point on ground 1, which is that it raises a false issue. It raises a false issue because the Full Court and the trial judge ultimately addressed that question. All of these pages are devoted to a scrupulous investigation of whether the Commonwealth had ultimately discharged its burden of proving, on the balance of probabilities, that Apotex would have launched despite the risk of ruinous damages. All of that ‑ ‑ ‑

BEECH‑JONES J: Mr Sheahan, in terms of the suggested three‑stage tests, assuming that was the correct analysis, how did the Full Court’s findings meet that in terms of the supposed evidential onus on your client?

MR SHEAHAN: They found that we had discharged any relevant onus, and the circumstances that were pointed to included things that we have spoken about already: that final judgment in the matter would occur much more quickly than expected; that Apotex PBS listing would occur much slower than expected; that when you looked at Apotex’s investigation of the risk/reward associated with listing at risk, they were heavily in favour of not listing, and in the United States it had not launched at risk. When it got the opportunity here, which it did after the Full Court’s judgment, it did not launch at risk. This is a live real‑world experiment: does Apotex launch at risk in respect of this molecule in this country? Answer: no.

EDELMAN J: Mr Sheahan, on that point, then, would you accept, then, that proposed ground 2 really just adds only one factor to all of the facts that would need, then, to be considered in relation to ground 1 in any event?

MR SHEAHAN: In terms of facts, that may be right. That may be right, yes. So, we would say, in our submission, ground 1 involves a re‑examination of 150-odd paragraphs of factual material dealt with by the Full Court and the trial judge.

EDELMAN J: What is the notice of contention that you have foreshadowed, and how does that relate to the examination of those facts?

MR SHEAHAN: One aspect of the notice of contention is engaged by these facts, and that is what might be called the directness ground, but it is not fact‑heavy. The other aspects of the notice of contention are quite different.

BEECH‑JONES J: That is a statutory construction. Is that the ground that says that the statute excluded the undertaking. Is that the effect of it?

MR SHEAHAN: That is one. The others that were relied upon below included, really, a cascading series of arguments, including, very prominently, that the Minister or the Minister’s delegate would not have listed the drug even if Apotex had sought to list because there was then an extant declaration of the Federal Court that my client, Sanofi, had patent rights in respect of that drug and there were statutory obligations requiring a guarantee of supply, so Apotex would not have been able to guarantee supply in the fact of that declaration, and then there are others.

Those matters raise a whole raft of additional complexities. The Court might think, well, we can just deal with Mr Gleeson’s first point and send all the rest of it back to the Full Court, which has not dealt with these other matters, for them to be reinvestigated over another four days in the Full Court of the Federal Court.

EDELMAN J: The directness issue would be wrapped up with the legal issue, would it not? I mean, there has been a long debate about whether directness is a causal requirement or a remoteness requirement, where it comes from and how it relates to third parties, and so on.

MR SHEAHAN: We accept that, your Honour. We accept that. Ground 1, in our respectful submission, once you understand that its destination, which the Commonwealth accepts, if one looks at its reply submissions at paragraph 5, it accepts that it, throughout, bears the persuasive burden. It is that burden that was addressed by the Full Court and the primary judge, and it was that burden that it was held the Commonwealth did not discharge. In fact, the Full Court concluded that there was abundant evidence to support the trial judge’s conclusion that it was not discharged, at paragraph 230 of the Full Court’s reasons. They said at 189:

the evidence strongly points to the correctness of the trial judge’s conclusion.

And they concluded their own lengthy judgment by saying that the trial judge’s reasons, as a whole, represented:

a most thorough and searching excavation of the very complicated factual questions which the case generated.

It is plain – notwithstanding our learned friend’s oral submissions – from paragraph 17 to 26 of their special leave application, and the numerous paragraphs of the Full Court judgment that are referred to there, that what they ask this Court to do is to repeat that exercise. Can I make one further point about ground 1 to highlight its insignificance. The applicant wishes to raise a point about evidentiary onus, in substance. The best was to think about evidentiary onus is to interpolate a jury into the process.

Now, the way Wigmore described the difference between persuasive and evidentiary onus was this: the important practical distinction is that the risk of non‑persuasion operates when the case has come into the hands of the jury, while the duty of producing evidence implies a liability to a ruling by the judge disposing of the issue without leaving the question to the jury’s deliberations. The classic example would be whether provocation should be left to the jury, for example.

Here, there is no issue that the Court could dispose of without leaving it to the trier of fact. There was not some issue other than whether Apotex would launch at risk of ruinous damages. The position will be different, and our learned friends would have a basis for talking about this if Sanofi’s case, for example, were that after PBS listing, Apotex’s drug would have been cancelled promptly because its excipient ingredients turned out to be carcinogenic. That would raise a really interesting and vital question about evidentiary onus. There is none here because it was a single question addressed by the primary judge and the Full Court.

The issue that they seek to raise would make it necessary for this Court to deal with all this material is a completely false one, in our respectful submission. So too is the second ground, and it can be made plain quite shortly. If your Honours look at the way it is formulated, at page 316 of the appeal book:

Does equity require a claimant for compensation to lead direct hindsight evidence, or is it prepared to draw inferences about what a person would likely have done –

That question is answered. It is answered directly and it is answered, consistently with our learned friends’ submissions in the Full Court’s judgement at page 266 of the appeal record, in paragraph 217(a). The burden of the Full Court’s judgment is that the trial judge, having gone through the same exercise, and they quote his paragraph – relevantly, it is at two paragraphs in this judgment on the previous page, at paragraphs 212 and 214, was that the documentary record, as carefully analysed by them, did not permit an inference in favour of the Commonwealth as to what was likely to happen. Your Honours will note, in 214, what the trial judge said was:

I am not prepared to infer, based on the 20 February 2007 email –

The one Mr Millichamp actually relied upon as the basis for his authority to launch at risk ‑ ‑ ‑

EDELMAN J: I am sorry, Mr Sheahan, I may be missing the point, but how does that negate the point about the difficulties in use of hindsight evidence?

MR SHEAHAN: The way our learned friends have formulated the special leave point is that something in the Full Court judgment stands for the proposition that you need to have direct hindsight evidence. The Full Court says the opposite.

JAGOT J: No, I do not so read it that way. Is not the concern that the way it is posed at 217 is answered at 221, where you get into this rather odd thing about the only inference available. They could only win if the only inference available was that Dr Sherman would have decided to launch at risk on 1 April 2008, which seems to drift away from the balance of probabilities, even if you are in step three.

MR SHEAHAN: In what your Honour put to me, the critical words are “seems to”. We agree that the word “only” in those two paragraphs – that paragraph and another one – is a little bit ill‑advised on the part of the Full Court, but what is plain from what they had said in 217 is that they were looking at a test of likelihood. Is it likely that Dr Sherman would have decided to launch at risk in direct evidence of Dr Sherman’s likely disposition? And they quoted, at 214, the trial judge saying:

Dr Sherman was likely to have instructed –

and all that is happening in the use of that language ‑ ‑ ‑

BEECH‑JONES J: Mr Sheahan, is not – firstly, the ultimate question is Apotex – is not what Mr Catterns told the court direct evidence?

MR SHEAHAN: Your Honour, it is important evidence, and it was considered by the trial judge ‑ ‑ ‑

BEECH‑JONES J: But is it not direct? Apotex’s senior counsel telling the court, we are going to launch?

MR SHEAHAN: It is direct evidence, but it has the limitations that I mentioned to your Honours earlier. First, likely based on the evidence that he had, which was Mr Millichamp’s affidavits up to that point. Those affidavits suppressed the fact that the actual decision‑maker was not Mr Millichamp. They just glossed over Dr Sherman’s role completely and proceeded on the basis that he was the one who could and would give instructions.

EDELMAN J: Was there evidence as to whether it was Mr Millichamp or Dr Sherman who was providing Mr Catterns with his instructions?

MR SHEAHAN: No, your Honours, and there could not be, because it would be privileged. The second thing is that when Mr Millichamp came along actually to give evidence in this trial, he said he relied on his February instructions from Dr Sherman as the basis for believing that he could instruct and cause Apotex to launch at risk with no further advice from Dr Sherman, the position that the courts did not accept after a careful examination of the facts.

JAGOT J: Mr Sheahan – sorry, Mr Sheahan, maybe this is dropping to the bottom line too quickly, and I know we are out of time, but assuming that the applicant’s issues, the directness issue and the statutory construction issue are all in play but not any other counterfactual issue such as the Minister would not have listed anyway, or whatever it be, you are dropping down, you are cascading, but those other issues are in play. You said the directness issue is not fact‑heavy, the statutory construction issue is obviously a pure question of construction, whether the TGA Act does or does not exclude all this. How long do you say it would take?

MR SHEAHAN: If we confine it to those three issues, my best estimate is that it would take longer than two days. I am conscious of the fact that when this matter was set down in the Full Court, I think my learned friends originally suggested 10 days for the whole catastrophe, as it were. It was completed in fact in seven, and with a lot of discipline on both sides, but a lot of these – the statutory construction question has not been addressed by this Court, as well as addressed by another Full Court. In our submission, two days will not do it, three days will.

JAGOT J: Three days will. All right. Sorry, I did not mean to cut you off, if there was more you were wanting to say.

MR SHEAHAN: No, I was responding to Justice Beech‑Jones’ question about misinterpreting statements in direct evidence, and in a sense, they kind of are, but there was a lot of evidence about the limitations that would, properly understood, attach to the significance that you would give to what is said at that time.

EDELMAN J: Yes, thank you, Mr Sheahan. Unless there is – I realise you have used up the 20 minutes, but obviously we are being a little flexible with the timing, if there is anything else that you wish to say that is important.

MR SHEAHAN: I have covered the main points, your Honours.

EDELMAN J: Yes, thank you, Mr Sheahan. Yes, Mr Gleeson.

MR GLEESON: Your Honours, we would adhere to our estimate of two days. Most of the notice of contention issues would not be before your Honours because they have not yet been reached by the Full Court. The directness issue will not detain you terribly long, factually. To the extent there is said to be a statutory construction issue, if it is the one that this Court refused special leave on a number of years ago, as we have referred to in our reply, this Court has not been given any reasons why it should reopen that refusal of special leave.

Secondly, the answer to your Honour Justice Beech‑Jones’ question is that if the three‑step approach or something like it is correct, it has not been followed or addressed by the Full Court and it therefore is both a perfect vehicle to look at the question and, if we are correct on it, to win the appeal.

Thirdly, you have not received any satisfactory answer as to why Mr Catterns’ statement at page 256 was not both direct evidence of intention and unqualified evidence of intention against which the Commonwealth had clearly succeeded at step one and Sanofi had not provided an alternative reason at step two. In addition, you have not heard from Mr Sheahan any answer to the conundrum that Apotex would have been in if they were making a statement of unqualified intention to the court whereas in truth they were reserving the ability to act in the exact opposite manner.

Mr Sheahan said you did not have to make a decision until the last day of listing. That is true as to when you put in your listing application, but you had to come back to Justice Gyles with your $50 million in security within no more than 28 days, or perhaps 14 days, depending on the precise terms of Mr Catterns’ offer. In other words, Apotex could not wax and wane over the next few months and think about the balance of commercial risk and reward. Having told the Court what its intention was, it had to follow through with it within a matter of days or do the unthinkable.

Can your Honours just imagine coming back to Justice Gyles, if you were Mr Catterns or his replacement, saying: terribly sorry, we have wasted three days of your time, we never intended to list and launch, please give us mercy, relieve of us our $50 million undertaking, injunct us now. It would be the most bizarre behaviour to contemplate. As to 28 June, for the reasons put in‑chief, it will be important but not decisive.

EDELMAN J: Mr Gleeson, just to raise one issue about that, is that the correct counterfactual in any event? Even if one were to assume that there was no plan, effectively, to obtain insurance by obtaining an undertaking as to damages, would not the proper counterfactual be either being injuncted or not being injuncted, nothing in between?

MR GLEESON: Yes, the correct counterfactual is not being injuncted, but in the world that Sanofi is hinting at but not full‑bloodedly addressing, Justice Gyles refuses the injunction. At that point, the logic is supposed to be, they are not really prepared to run the risk of launching at risk, because they are worried about the damages if they do not revoke the patent. Therefore, they are now under an undertaking or an order to provide $50 million in security, they have to come back to Justice Gyles and be relieved of that undertaking. That is the bit that has never been confronted.

Your Honour Justice Beech‑Jones’ question – if we go back to page 369, it is clear from the opening words, which the Full Court ignored, that the instructions from Barry cover the whole of the plan that follows, 1, 2, 3, 4, 5, 6, and the last sentence makes clear that Barry has also made a comment about when to start the production. So, the plan is locked in in 1 to 6. The implementation question is, do we start making the packaging now, or do we wait until we find out if we have defeated the injunction, which is our plan. That is made clear if your Honours go over to page 376.
Mr Millichamp, the next day, says he was not clear enough to Mr Hass. Barry’s plan:

We are not requesting launch stocks to be made –

immediately, but read the next bit:

The scenario I referred to was in the event that we avoid the imposition of an injunction . . . We will be free to sell . . . and after, if we are successful. In the instance that we are successful we will need stock ready for a December PBS listing . . .

. . . Thus if we are successful we will go ahead and launch (the bisulphate salt).

If we are not successful in avoiding an injunction then the matter will go to final trial which could be a year . . . away. That’s why Barry does not want us to make stock right now and incur unnecessary expense.

So, Barry was approving every aspect of this plan. For those reasons, we submit the matter remains an appropriate vehicle for important questions of law which your Honours know involve hundreds of millions of dollars to the public benefits system, to the Commonwealth treasury in this case. There is a later case reserved out of the Federal Court which involves the same issues, and the integrity of the entire PBS depends upon getting these legal questions right.

May it please the Court.

EDELMAN J: Thank you, Mr Gleeson. The Court will adjourn for a short time to consider the course that it will take.

AT 10.28 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.29 AM:

EDELMAN J: There will be a grant of special leave in this matter. The Court will list the matter based on the estimates of the parties that it may be completed within two days but might extend to a third day. Mr Gleeson, you seek orders amending the page limit of submissions to 30 pages?

MR GLEESON: Yes, your Honour, and I would also seek if, during the day, the parties could speak with the Registry about any other amendments to the usual timetable. What I have in mind is we would seek a common book of further materials which should in fact be settled by consent between the parties before the written submissions go on so that all submissions refer to a single, chronological bundle of documents, and depending whether the matter is listed in the April or the May sittings, or later, indeed, the submissions timetable can then match that expectation.

JAGOT J: Is it also possible – sorry, Justice Edelman, I was just wondering if it was possible if there could be a common chronology.

MR GLEESON: Yes, I had that in mind, your Honour, that we might try to do both of those steps first, perhaps by early February, and then the submissions would then go on by reference to two common sets of documents.

EDELMAN J: With the chronology indexed by reference to the joint book of materials?

MR GLEESON: Yes.

EDELMAN J: Yes. Mr Sheahan?

MR SHEAHAN: In general terms, that sounds satisfactory, although if your Honour Justice Edelman’s last point is to achieve fruition, it will take longer than until early February.

EDELMAN J: Yes. The parties can liaise with the Registry as to a timetable for the provision of those documents, and the Court makes an order amending the limit of pages for submissions in chief to 30 pages.

MR GLEESON: May it please the Court.

EDELMAN J: Thank you. The Court will now adjourn to 3.30 pm on Monday, 5 February 2024.

AT 10.41 AM THE MATTER WAS CONCLUDED